Comment by MBCook 3 days ago
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.
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.
Housing is expensive in large part because of how illiquid supply is. This is in large part because the fixed compliance costs of doing work upon "land near cities" is high. I'm not talking the $50 permit. I'm talking the $50-500k worth of engineering and lawyers and whatnot you need to bulldoze a 1-family and put in an N-family even in a place zoned for it. You typically wind up going rounds with the city at every step just because while you're nominally allowed to do whatever it is you have to bicker over everything like parking and setbacks and whatnot that are nebulously defined for the purpose of allowing the .gov to extract concessions. This is why only big money 5-over N apartments get built. When you have a ton of fixed costs nothing less makes sense.
People don’t live in land, they live in floorspace.
We can manufacture as much floorspace as we need. We can even manufacture floorspace in factory!
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.
When everyone gets sick of it and votes for punitive taxes on residential property that is not owner occupied.
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.
At some point the number of vacancies (for renting) causes enough cash flow issues people go bankrupt, or the number of non-investor buyers drops enough that it’s clear it’s just an investor bubble and investment value tanks.
Real estate always goes through these cycles.
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.
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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.
They’ll mostly be leaving the houses to their kids, I’d think. Unless they’ve already pulled all the equity out with HELOC spending.
Investor money may just soak it all up though, especially as certain policies make other avenues less stable.
And unlike Boomers, corporations can live forever. Permanently raising the ladder.
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.