6 ms·

Without regressing to another ad-infinitum housing discussion, real estate involves two markets: rentals/living, and ownership. Some people want to own their o

Without regressing to another ad-infinitum housing discussion, real estate involves two markets: rentals/living, and ownership. Some people want to own their own home and live in it (owner occupiers); these people however compete with investors who are seeking to rent it out. While investors don't directly affect the rentals market (as you'd expect an owner-occupier to not be a renter), they do push the price of housing, because housing becomes more of an investment (competing against everything else with zero / negative interest rates). Progressive taxes on investors can mitigate this and make home ownership more affordable. First property, no tax. Second property, 1% of its land value charged annually. Third property: 2% of its land value, etc...

mattmanser 5y ago
Then you just get thousands of holding companies.
- wizzwizz4 5y ago
  So be really aggressive about associating holding companies with their owners for the purposes of this tax.
- postingawayonhn 5y ago
  You can just use a simpler land tax system. Owner occupier properties exempt. Investor owned properties X% per year.
  - Ekaros 5y ago
    I wonder wouldn't it be just simpler to ban private land ownership in cities.
    - imtringued 5y ago
      This idea is slightly better than a land value tax but implementing it is a financing nightmare. You'll have to spend the entire government budget on buying all private plots of land.
    - mattmanser 5y ago
      A significant number of people need, for various reasons, to rent.
  - iso1210 5y ago
    Or just have a simple X% per year no matter who owns it
    - postingawayonhn 5y ago
      That should work to lower prices but will also increase costs for home owners. If the goal is to increase home ownership rates then giving them an advantage in the market can help.
      - iso1210 5y ago
        You could distribute the money raised as either tax cuts to income tax, or just as a flat dividend to every citizen. If a person owns an average house and pays $10k in tax, their dividend would return $10k - so no loss. If they own 5 average houses and pay $10k per house in tax, they'd pay $50k and their dividend would return $10k, so would have to pay $40k more
- imtringued 5y ago
  The point of a progressive land value tax is to relieve individuals not corporations. Corporations can simply get the maximum rate.
mnd999 5y ago
You’re forgetting investors who don’t want to rent property. They just by new properties, keep them empty and pristine and profit of the rising market value of the asset. Sounds crazy but it’s definitely a thing in London. It should attract very high taxes to make it unviable but of course it doesn’t.
- theli0nheart 5y ago
  This goes right back to supply. Real estate prices don’t exist in a vacuum; ultimately someone will buy said property who wishes to live there and will have decided so due to it being the best of all options.
- notanzaiiswear 5y ago
  It surely is already very expensive to leave an apartment empty as it is. There also seem to be special circumstances and laws in London. But lets assume the worst, that it is all just pure evil capitalist speculation: even that is not necessarily bad. They try to anticipate future demand. So they anticipate that in the (near) future, somebody will need that apartment even more urgently than the people looking for housing right now. So it is better to keep it available for those people in the future. Think about keeping ICU units ready for future Covid patients for an analogy. So what if the speculators are right, and the future buyers really have a higher need than the current ones? Also I think if there really is just speculation, especially foreign investors, why not build cheap houses and sell them to the speculators for a lot of money? Nobody will ever live there (according to the anti-capitalists), anyway. Seems like a good way to make money for a country.
- leppr 5y ago
  It's common in my city as well. The reason is tenants can stop paying and are protected by law enforcement from being evicted. That's not even talking about straight up squatters. This makes renting out often non-economically viable, when adjusting for risk.
- asdfasgasdgasdg 5y ago
  These evil bogeymen are something people believe are very common, but I can't find any solid data on their prevalence in London. People also claim these guys are ruining NYC real estate, but our vacancy rates are below 5%, and most of the places that are vacant are not long term vacant.
notanzaiiswear 5y ago
I don't follow your logic. In both cases, home ownership or rental, you need one house per interested party. Why should one be more expensive than the other? And why should politics decide for people whether they should rent or buy, I mean, why push them in one direction or the other?
- HappyTypist 5y ago
  If you make residential investment more expensive (through taxes), you will have less interested investors. This reduces the number of interested parties for home ownership, which means that the remaining parties (i.e. owner occupiers) pay cheaper prices. Taxes are often used to discourage behaviour society believes to have negative externalities. For example: tobacco excise taxes; and also in the other direction (e.g. concessions for long term capital gains; which is supposed to encourage 'investment').
  - imtringued 5y ago
    Yeah in this case investors are punished for investing into space inefficient single family homes. Multiple apartments on a plot reduce the tax burden of the land value tax. So big investors will primarily invest in multi family housing. In general taxes are regressive and people want to avoid them. If you tax regressive behavior the most, people will stop doing it.
sagichmal 5y ago
> Progressive taxes on investors can mitigate this and make home ownership more affordable In Germany home ownership is not seen as strictly positive in the same way it is in the US for example. Many, perhaps even the majority, of Germans go their whole lives as renters.
qeternity 5y ago
It’s not two markets. It’s one market with two different models (like cars: buy vs lease). There is an arb between the two markets which should hold them in tandem on a risk adjusted basis.
sudosysgen 5y ago
That's just not true. Many people just want to live. They will rent or buy. Housing supply is housing supply. There is scarce distinction in real life between rental and occupier owned housing.

mattmanser 5y ago

Then you just get thousands of holding companies.

wizzwizz4 5y ago
So be really aggressive about associating holding companies with their owners for the purposes of this tax.
postingawayonhn 5y ago
You can just use a simpler land tax system. Owner occupier properties exempt. Investor owned properties X% per year.
- Ekaros 5y ago
  I wonder wouldn't it be just simpler to ban private land ownership in cities.
  - imtringued 5y ago
    This idea is slightly better than a land value tax but implementing it is a financing nightmare. You'll have to spend the entire government budget on buying all private plots of land.
  - mattmanser 5y ago
    A significant number of people need, for various reasons, to rent.
- iso1210 5y ago
  Or just have a simple X% per year no matter who owns it
  - postingawayonhn 5y ago
    That should work to lower prices but will also increase costs for home owners. If the goal is to increase home ownership rates then giving them an advantage in the market can help.
    - iso1210 5y ago
      You could distribute the money raised as either tax cuts to income tax, or just as a flat dividend to every citizen. If a person owns an average house and pays $10k in tax, their dividend would return $10k - so no loss. If they own 5 average houses and pay $10k per house in tax, they'd pay $50k and their dividend would return $10k, so would have to pay $40k more
imtringued 5y ago
The point of a progressive land value tax is to relieve individuals not corporations. Corporations can simply get the maximum rate.

mnd999 5y ago

You’re forgetting investors who don’t want to rent property. They just by new properties, keep them empty and pristine and profit of the rising market value of the asset. Sounds crazy but it’s definitely a thing in London. It should attract very high taxes to make it unviable but of course it doesn’t.

theli0nheart 5y ago
This goes right back to supply. Real estate prices don’t exist in a vacuum; ultimately someone will buy said property who wishes to live there and will have decided so due to it being the best of all options.
notanzaiiswear 5y ago
It surely is already very expensive to leave an apartment empty as it is. There also seem to be special circumstances and laws in London. But lets assume the worst, that it is all just pure evil capitalist speculation: even that is not necessarily bad. They try to anticipate future demand. So they anticipate that in the (near) future, somebody will need that apartment even more urgently than the people looking for housing right now. So it is better to keep it available for those people in the future. Think about keeping ICU units ready for future Covid patients for an analogy. So what if the speculators are right, and the future buyers really have a higher need than the current ones? Also I think if there really is just speculation, especially foreign investors, why not build cheap houses and sell them to the speculators for a lot of money? Nobody will ever live there (according to the anti-capitalists), anyway. Seems like a good way to make money for a country.
leppr 5y ago
It's common in my city as well. The reason is tenants can stop paying and are protected by law enforcement from being evicted. That's not even talking about straight up squatters. This makes renting out often non-economically viable, when adjusting for risk.
asdfasgasdgasdg 5y ago
These evil bogeymen are something people believe are very common, but I can't find any solid data on their prevalence in London. People also claim these guys are ruining NYC real estate, but our vacancy rates are below 5%, and most of the places that are vacant are not long term vacant.

notanzaiiswear 5y ago

I don't follow your logic. In both cases, home ownership or rental, you need one house per interested party. Why should one be more expensive than the other? And why should politics decide for people whether they should rent or buy, I mean, why push them in one direction or the other?

HappyTypist 5y ago
If you make residential investment more expensive (through taxes), you will have less interested investors. This reduces the number of interested parties for home ownership, which means that the remaining parties (i.e. owner occupiers) pay cheaper prices. Taxes are often used to discourage behaviour society believes to have negative externalities. For example: tobacco excise taxes; and also in the other direction (e.g. concessions for long term capital gains; which is supposed to encourage 'investment').
- imtringued 5y ago
  Yeah in this case investors are punished for investing into space inefficient single family homes. Multiple apartments on a plot reduce the tax burden of the land value tax. So big investors will primarily invest in multi family housing. In general taxes are regressive and people want to avoid them. If you tax regressive behavior the most, people will stop doing it.

sagichmal 5y ago

> Progressive taxes on investors can mitigate this and make home ownership more affordable In Germany home ownership is not seen as strictly positive in the same way it is in the US for example. Many, perhaps even the majority, of Germans go their whole lives as renters.

qeternity 5y ago

It’s not two markets. It’s one market with two different models (like cars: buy vs lease). There is an arb between the two markets which should hold them in tandem on a risk adjusted basis.

sudosysgen 5y ago

That's just not true. Many people just want to live. They will rent or buy. Housing supply is housing supply. There is scarce distinction in real life between rental and occupier owned housing.