Comment by dymk
Comment by dymk 3 days ago
“Private equity firms should not be allowed to own all the land” isn’t a particularly radical policy proposal
Comment by dymk 3 days ago
“Private equity firms should not be allowed to own all the land” isn’t a particularly radical policy proposal
They don’t provide any concrete evidence for how they classify “mom and pop” (to be fair i haven't had the time to read the original paper). It’s standard operating procedure to split investment properties between many subsidiaries to limit the financial splash damage. It’s mostly a legal fiction because the property managers are directors of multiple corporations managing dozens of properties, but the courts haven't cracked down on it yet. I’m suspicious of whatever statistics they use to classify investors.
(I’m speaking only of the investors that buy to rent extract, I have no insight into the flippers)
LLCs need to declare the beneficial owner(s), which is supposed to give transparency and KYC to corporate structures like that.
Not when they’re funneled through states like Wyoming and Nevada which an enormous amount of them are… both have very good privacy laws protecting the owners identity. Often times there will be a local LLC which is owned by (at least one) separate out of state LLC in Nevada or Wyoming obfuscating who the true owners are. There’s a whole industry behind this.
Shit even if not something like that, 5 homes in the middle quintile in my city would be around 2.4 million dollars. That's the entire net worth of a middle class family at the end of their earning years, including their house. The only people whose mom and pop have that kind of money to invest are rich folks. It's just as much a problem as the other thing in practical terms.
1 home qualifies you as an invrestor? So I’m an investor? That definition is whacked it should be at least 2 homes.
“I own no homes, and am buying a home”
“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.
That was my mom and pop in the 80s they bought about one house a year. Empty derelict houses purchased from the city for between $1000 and $15,000. The city provided matching grants to fix them up. Also the city paid the rent for the Cambodian and Vietnamese migrants that came here to live. My parents invested the organization and literal sweat equity to fix up these homes.
I'm sorry I have zero sympathy for anyone who owns three homes. Fuck em
I feel there's a major distinct difference between;
- 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.
Intent doesn't matter; you can justify about any horrible behavior imaginable by saying you're looking after your family. I resent the commodification of housing and the destabilizing effects it has across society. Where's the upside?
Who needs more than two? You can only live in one at a time.
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.
There’s nothing wrong with investing by buying homes.
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.
Yeah, we definitely still need homes to be available for rent.
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 was suggesting that as a way to prevent purchasing homes to resell for more money. I actually meant it as a tax on the profits from a sale of a house.
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.
A few or dozens, but not a large fraction of a city by one entity. The tax should be progressive and aggregate with ultimate holding companies/investors so they can't just gamify limits by creating a bunch of shell and holding companies.
There’s lots wrong with buying up homes for investing so that prices of homes go up and people can’t afford homes. It’s some kind of flawed myopic morality that says there’s nothing wrong with it.
They buy homes for investing with the expectation that prices soon rise, owing to demand and low interest rates, and inelastic supply. If you fix the supply issue then it would be moot.
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.
A lot of people over the last few decades have invested in electronics and computer manufacturing, and today electronics and computers are cheaper than they have ever been. If we’re going to have a theory about why housing is expensive it’s going to have to be deeper than just the idea that investing in something makes the price go up.
the key word is manufacturing. the article is talking about buying homes, not building them. if all those people would invest into building new homes as opposed to buying existing ones then the comparison would make sense and maybe the price of homes would indeed go down.
Absolutely. I think one of the biggest problems in discourse around housing is this idea that housing “investment” can only ever about buying existing assets.
People aren’t “buying up homes for investing so that prices of homes go up and people can’t afford homes.”
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 am not saying it’s their motivation, but it is the end result. And since that is the end result, it is immoral.
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.
You're completely missing the point of the comment you're replying to, though.
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.
You are completely missing the point of my comment though. I am saying it’s immoral to buy property in excess in the first place. So it should be discouraged, disincentivized, or made illegal, yes, and there are plenty of ways to do it, and sure, that is one of them.
As I said in another comment, there may be situations I’m not thinking of where this would be beneficial. For example buying up extremely dilapidated properties and flipping them for much more money after fixing them up.
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.
Or maybe have such a large housing supply that supply drives down profits to where large investors look elsewhere.
I don't think you understand who the tax hurts in that case. If investors can pass that tax off to a renter, than this type of policy just hurts renters. It seems similar to rent to control its great if you own a house but you ultimually create a shortage that has a lot more slient unknown victims. The real solution is to just build more housing in places people want it so that renting it becomes insanely cheap because there is a glut of supply. It also drives the cost of houses down but I think that might be for the better despite hurting my bottom line as a single family house owner
The nuance needed is in taxing progressively in relation to how many other properties are owned in aggregate by ultimate shareholders/holding companies and forbidding gamification tricks like putting every house into its own trust.
This is a classic fallacy trotted out every time someone suggests taxing the rich/corporations/landlords more.
"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.
I disagree that consider the effects on supply and demand that taxes have is simplification or ignoring real economics is fallacy?
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.
I agree with you. But let’s just say the comment you’re replying to is correct. They’ll pass it on to their renters.
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.
But that's the intended outcome, isn't it? The proposal is to increase supply of housing for sale by decreasing of supply of housing to rent.
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?
I’m a bit concerned that not allowing this it all would have some sort of perverse effect that I’m not for seeing.
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.
I was being sarcastic. taxes are rarely a good solution to our ills, because you are enabling tyranny from the gvt. And yes there are places/situations where taxes have exceed 100%.
I suggest that any tax on multiple home purchases should scale, and be different depending on whether or not an individual or a corporation is doing the buying.
I wonder about that.
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.
Distorting markets like that tend to have unforeseen deleterious side effects that just make things worse.
For example: rent control
"Markets" exist because they are a thing people find useful. If people can't afford shelter and participate in the "market" of leveraging property because they are being pushed out by a soulless outgrowth of "line go up" thinking, then the "market" has failed and needs to be fixed until it is useful for people again.
Sure, but if the price of housing is too high then price controls won't fix it either. You'd end up with no availability, or a decades-long waitlist for rent-controlled apartments like Stockholm.
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.
>Sure, but if the price of housing is too high then price controls won't fix it either. You'd end up with no availability
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.
It's not the fault of private capital firms that local governments have essentially outlawed building new homes in many areas. The solution should be focused on restricting the ability of localities to do this, not restricting the ability of companies to buy real estate.
Yeah I agree with this here. Its simply to hard to build housing and the number permits and zoning restrictions have lead to localized housing shortages where people want to live. Its simply a difficult poltical issue to solve because most of the time zoning is handled at the local level and old people who have houses attend town hall meetings where zoning is discussed (if seldomly ever). Homeowners who have treated housing as a speculative centeralized asset have little to gain in allowing the market fixing itself.
> It's not the fault of private capital firms
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.
Deciding who gets to buy what is known as central economic planning. It doesn't have a good track record.
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.
Hallelujah. Shout it from the rooftops!
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!"
The government constantly tries to repeal the Law of Supply & Demand. That never works.
“Ground rents are a species of revenue which the owner, in many cases, enjoys without any care or attention of his own. Ground rents are, therefore, perhaps a species of revenue which best bear to have a particular tax imposed upon them.”
“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.
So basically remove all regulations and everything will fix itself automatically? This kind of wishful thinking is ludicrous, and it's insane how common it is. Markets have issues that need to be addressed through regulations, unless we want a return to the Gilded Age.
> So basically remove all regulations and everything will fix itself automatically?
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.
> 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...
> The Gilded Age was a time of great prosperity in the US.
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.
> The Gilded Age was a time of great prosperity in the US.
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.
If you want cash poor people to compete with cash rich private equity in the housing market without banning PE completely, you need to make it cheaper for cash poor people to borrow money. That too isn’t a particularly radical policy proposal. A lot of countries across the world do it with positive outcomes.
You could go the other direction -increasing the borrowing cost of purchasing a home for investment to ensure that borrowers with less capital can still afford homes in the same market.
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.
NINJA loans were loans for people with no income and no jobs. What I’m proposing is cheaper access to cash for first time homebuyers. You’d still have to be credit worthy.
How about we start with no home-based deductions for corporations. The means depreciation, vacancy, any sort of loss is not tax deductible for a corporation. If a corporation owns 100 homes, it may cost them nothing (or close to nothing) to keep 10 (or more) of those homes vacant, because they can simply deduct the costs from those vacant homes from the massive profits they are reaping on the other 90 and lower their tax burden.
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.
Why not?
Are PE firms worse landlords than mom-and-pop landlords?
Moderned, industrialized PE? Absolutely worse, yes.
i wish we could think bigger than the lesser of two evils.
Americans hear any limitations on greed or anything that would benefit society as "communism".
Private equity shouldn't be able to own housing. It should be like new highways and tolls, you get to charge until you make up for your investment, but then people who live there or the government should own it.
Want to keep your toll business? Build more housing.
If it's so important, then my take is that the government should step in and make sure it happens and in some orderly way.
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.
If there are people that cannot afford housing, I would prefer for the government to give those people money rather than interfering with the resource-allocation system on which everyone relies. Prohibiting certain kinds of investors from investing in housing would be an example of interfering.
> Prohibiting certain kinds of investors from investing in housing would be an example of interfering.
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?
> Of those, mom-and-pop investors, or those who own between 1 and 5 homes, account for 85% of all investor-owned residential properties, while those with between 6 and 10 properties account for another 5%.