“Private equity firms should not be allowed to own all the land” isn’t a particularly radical policy proposal
“I own one home, and am buying a house”
“That makes you an investor”
“No that’s whack. When I buy a third - buying while owning two - then I will be an investor”
You have an off-by-one error.
(I’m speaking only of the investors that buy to rent extract, I have no insight into the flippers)
Why should that be a thing? More cheesy obfuscation games to protect some random a-hole?
These rich who don’t want to be on the hook for other’s healthcare sure make a lot of demands of everyone else.
Covid just taught us we can stand to shed a few million and be fine. Purge the rich.
If no one else is on the hook for my life story fuck theirs.
The fourth estate, the one that we ostensibly trust to hold power to account, again very conveniently, does not generally have that standing, FOIA excepted.
You know, all that good stuff.
Why let the rentier class grow any larger than they already are?
It's not like there is an oversupply of desirable housing. And even if there were an oversupply, the answer isn't to incentivize the rich to get richer.
- a well off family who buys a 2nd home to make sure their kids are set
- a group of well off investors who pool funds, buys a 2nd home, with intention to "flip" it in the next 1-2 years and make 10%
Both are "investors", but I'd like to think the 1st are trying to build a better future, whereas the 2nd are just arbitraging.
Like what are you going to do with your 5th home???
Just pay a 75% tax when you do.
If you can find places to make money with those taxes, have at it.
But you’ll stop messing with normal people’s attempts to buy a house for the most part.
If you move a lot, or want to be able to move easily and explore different cities or even neighborhoods within a city, renting is way easier than if you'd have to go through the hassle of buying.
What sucks is when private companies start owning too many houses and they have unfair advantages over regular folks. For example, they have teams of lawyers.
I completely agree, we need homes for rent at reasonable rates.
But I forgot that a lot of the homes that were purchased for investing were purchased to rent out. A 75% tax on the profits from sale wouldn’t help. If it’s 75% on all profits, including rental income, it’ll destroy the rental market.
I can’t think of a decent answer off the top of my head. My suggestion was glib, but it was meant for the pretty easy case of just flipping.
Trying to control how many houses are purchased versus rented, and how you determine a reasonable rent or prevent that from being abused, is a lot harder.
If someone’s a billionaire and wants to play around by buying houses? Is that any better than an investment company doing it for the market?
How do you tell the difference between a rich person buying their third vacation home and buying a house they intend to sell for profit in a year or two through speculation?
Of course, on the other side, I’m aware of companies that own some company housing to let their employees use. How do you tell that from investing?
Maybe since they weren’t really doing it to make money they wouldn’t really care that the tax would be high when they sold it if they made a big profit.
It all gets really sticky. No special taxes gains on your primary residence, may be a lower tax (that 75% of what’s er) on a secondary residence.
But pretty quickly if you have that many houses personally you can probably afford to pay a high tax on gains. You’re not really what we want to optimize the market for anyway.
I just guessed at a big number. Maybe it should be 50%. Maybe it should be 90%. I have no idea. It seems like it should be legal, there have got to be cases where it might be useful. Buying and flipping houses from dilapidated neighborhood by turning it into something better.
I’m at the age where I wouldn’t mind a house. But they’re all gigantic, expensive, or both in my area. I have no idea how a normal family is ever supposed to afford one.
And unlike Boomers, corporations can live forever. Permanently raising the ladder.
That may be an aggregate and long term effect, but i’ve never seen anyone actually motivated by something like that.
At least not statistically.
People with excess money (often dentists, doctors, middle managers, small business owners, etc), who don’t trust stocks or the banks, are buying houses because they think they can rent them to people for cashflow in the future (aka not have to eat dogfood!), or rent them out now to other people for money. People that otherwise couldn’t be in these houses, or those people would be buying them instead.
Aka put their money to work.
IMO, people doing that right now are going to lose their shirts, but that is risk/reward. I could be wildly wrong.
I would prefer they deregulate the living shit out of constructing additional housing so all the small money can get into that (i.e. something productive instead of literal rent seeking) instead but I am not hopeful.
First, states like RI are already making incremental steps toward it (they have started taxing non owner occupied non rented properties above a threshold, mainly to get the billionares with fancy waterfront vacation real estate to either live in the places or rent them out). It's only a matter of moving that stuff down the economic ladder.
Second, all the "people oughta hang for this" quality legal precedent that enables. If you own a parcel and the government passes a bunch of laws saying you can't do things to the parcel going forward without jumping through economic non-starter sized hoops is that not a taking? They're basically forcing you to sell out to a developer big enough to jump through the hoops like in that supreme court case, only instead of a named developer it's basically a class of developers. And that's considered "not a taking". Straight up taxation is even less of a taking by comparison.
I'd be much more in favor of the taxation if it weren't for all the laws preventing small time land owners and speculators from developing on a scale and budget that befits them but if new punitive taxes get passed without rolling back all sorts of other regulation it's probably very bad for them.
Real estate always goes through these cycles.
I’m sure every person and corporation has some reason for buying homes in excess, but it’s still wrong because homes and land are limited resources that people need to live.
And every month, a percentage of that useable and desirable land comes up for sale, meaning it’s previous owner occupiers are voluntarily moving, and a new owner, if they chose, could redeploy the land in a way that provides homes to many more people, while not evicting anyone.
Unfortunately, each of these cities has also made it illegal for this transition to happen, mandating that the only way you’re allowed to build larger buildings, (if at all) is by demolishing another large (and occupied) building first.
We should change that!
Electronics are made in a factory. Houses are expensive because land near cities and work is scarce.
We can manufacture as much floorspace as we need. We can even manufacture floorspace in factory!
The parent comment suggests that the cost of investing is not high enough. Moreover, they suggest that it should not only be a higher cost, but that this cost should be redistributive.
So I guess I’m a little cautious about just making it flat out illegal. I don’t know enough about the market to know if that would really be a problem.
So I suggested a tax high enough to make it extremely undesirable to do. I figure the net effect will be to stop it.
30% of homes are not sitting empty, cities have a low vacancy rate. Often they rent out and we want low rents too.
He solution is building more or having fewer people on the market for a home through low immigration, and only the former seems politically viable.
"Oh, you can't do that, they'll just pass on the costs to consumers and keep their margins the same! Really, when you raise taxes on the wealthy, the only people you're hurting are the little people!!"
But evidence doesn't bear that out. Real economics are more complex than that, and especially given how things are right now, people can't afford more expensive homes, so trying to pass on additional costs is going to sharply reduce your available market.
Ok. Good.
That’s why we have to make it high enough. If you put a 10% tax on them they’ll just raise rents 10% (or more). I agree.
If you put a 75% tax on them, they’ll have to charge so much money that they’ll have a very hard time getting renters at all. Pretty soon that property is useless to an investor, but can be sold to a normal person and work just fine.
—
My suggestion was actually designed for just buying houses in hopes of reselling them. Buying them for rentals had not occurred to me, but I do know that’s a very common thing. It should have.
If the tax is high enough that you can’t make the business case work out, they won’t do it. And since it doesn’t apply to home owners on a primary residence that house is still perfectly good for anyone who would like to live there.
The cost of investment increases, so to keep the profits investors increase the rent, less people can afford it so the demand for rent decreases and investors sell houses. The supply of housing increases (I agree this is quite convoluted way to increase housing supply) and prices drop. Top cohort of renters can now afford to buy a house, and the bottom cohort is... fucked?
My only point was that its a supply issue not really a tax issue. Houses already have tax on them called property tax its small yes but the reason investors are buying houses is not because the tax is small but because the demand for them is extremely high and the supply is very low. Adding a tax does not in any way fix the demand imbalance. This is why things like price controls only create shortages the problem is that its impossible to build houses because of nimbism.
A Tax doesn't make more houses exist even without investors there isn't enough houses because of local zoning and protesting prevents cheap housing from entering the market. A Tax that does not solve this problem still means that there are to many people buying / renting chasing to few houses.
Make it 100.
I’m not in the real estate industry so I’m sure there’s things I don’t know about.
So I picked a really big number to dissuade it, but left open the possibility.
For example: rent control
Which doesn't really matter because they don't need to be "protected" in any capacity. Removing their ability to purchase those homes, and letting it get sorted between the people who are "outlawing building homes" and those who want to move there makes more sense.
In this case, by restricting who can buy, you're reducing the demand for housing. Less demand means lower prices. Lower prices mean fewer homes will be built, meaning less supply.
A better scheme would be to lower the costs of home construction by reducing regulations and taxes on them.
The issue with housing affordability is that the market is often prevented from responding to high demand and low supply by regulation. SF is very restrictive with permitting housing construction, despite the incredibly high rents. It's not that the market forces are failing to incentivize housing construction, it's that developers are prevented from responding to market demand.
You're assuming a baseline of a functional market system.
If you have widespread price-fixing between landlords (say, via everyone using the same algorithm service that gives everyone the same recommendation) then rent control isn't introducing a price fix, it's just changing the level of price fixing.
If you can only rent for $X000, but the rent price is fixed to at least $X500, then for you, there might as well be no availability - the landlord is leaving the place vacant due to the price-fixing.
This is called a cartel. The trouble with cartels is enforcing it. Cartel members cheat all the time by selling for less than the cartel price in order to get a larger share of the market. The setup is unstable as the incentives are much like the Prisoner's Dilemma.
Markets are powerful tools--perhaps the most powerful tool we have to shape human interactions. But too many people believe in a sort of market gospel ("Supply Side Jesus"); that market forces are as inevitable and inflexible as the force of gravity. In reality, policy choices shape markets and careful market design can deliver politically-favorable outcomes.
Markets work for us, not the other way around. "You shall not crucify mankind upon a cross of gold!"
I didn't say that. I said "rent control". And yes, remove all regulations on rent.
> unless we want a return to the Gilded Age
The Gilded Age was a time of great prosperity in the US.
In aggregate, sure. (At least compared to times prior.)
How the prosperity was distributed, OTOH...
Consider Jeff Bezos. He was roundly criticized for the profligacy of spending $80 million for his wedding. But look at it another way. He spread the wealth around by paying artisans, workers, craftsmen, photographers, travel agents, hotels, restaurateurs, etc.
Wealth has a distribution in any economy, and the actual distribution is a consequence of the economic system which itself is the aggregate of specific policy decisions.
It's trickled up by regulatory capture, cheating the political system, gerrymandering, and grants to ensure the property class pay little or no taxes and get socialism for the rich while suppressing wages, expanding undocumented workers and 13a exception prison slave labor, encouraging austerity, and neoliberalism.
Now, from a higher level of abstraction, would you rather $80M worth of work be done toward inflating balloons and setting tables for some megarich fuck's wedding? Or would you rather they be doing something that's actually improving society? (And maybe is more fulfilling to them).
No, wrong. Totally wrong. It was a time of immense inequality.
Oddly enough, these days are even worse than then in terms of income and wealth ratios, but different in absolute effects of penury.
Oh ok, so you have a totally wrong understanding of history. Neoliberalism's strongest solider, I see.
You do realize that the average American back then was working insanely long hours -when there was work at all- for meager wages, in horrendous conditions? Perhaps that's what you want to do with your life? Not me.
> remove all regulations on rent.
How would removing all regulations on rent improve this situation? You'd just make landlords even more powerful than they already are. What would prevent them from charging as much as they can get away with, ensuring their tenants remain poor forever? They are knowns to collectively price gouge.
You could temporarily make the situation better by getting rid of these laws and regulations, but over time they would just come back because in a free market the players that get such policies implemented get richer and win.
“As soon as the land of any country has all become private property, the landlords, like all other men, love to reap where they never sowed and demand a rent even for its natural produce.”
“A tax upon ground-rents would not raise the rents of houses. It would fall altogether upon the owner of the ground-rent, who acts always as a monopolist, and exacts the greatest rent which can be got for the use of his ground.”
“The sea in the neighbourhood of the islands of Shetland is more than commonly abundant in fish, which make a great part of the subsistence of the inhabitants. But in order to profit by the produce of the water, they must have a habitation upon the neighbouring land. The rent of the landlord is in proportion, not to what he can make by the land, but to what he can make both by the land and water. It is partly paid in sea-fish.”
Karl MArx? No, Adam Smith.
As a hypothetical, you could tax their purchase at the same rate at which they're borrowing and use the funds to back loan guarantees for new/lower income purchasers.
The point is to impair the ROI for multi-home purchasers without limiting upside in the market.
The average person who owns a second home for rental purposes is highly motivated to get that home rented out, even if it means lowering the rent to attract a renter, because it can be financially ruinous to pay for the taxes and an upkeep if it stays empty.
Are PE firms worse landlords than mom-and-pop landlords?
Want to keep your toll business? Build more housing.
Cost cutting in my town for profits that go away just drains the local's pockets. If you want free market rules to apply, then profits going out of the town/city should be taxed harder to promote local businesses and community.
Note that I did not propose forbidding investment, just having rules to help make sure final ownership ends in people (who ideally live there and don't own other 10+ homes).
I'm just making sure that investments don't fuel a system where regular people can't own, but only rent forever, paying past the investment and a healthy interest for their lending, planning and doing service.
Why do road and other infrastructure investments can get these limited profit kind of terms for governments, but housing can't get similar ones for the people?