That already exists in a way - there's the concept of a primary residence tax deduction, which is (more or less) what the name sounds like.

It varies widely by jurisdiction, (not just country, but state and local government as well), but the idea of trying to differentiate residents from landlords in tax policy is nothing new.

People might try to get around this by forming corporations or trusts that hold max one property each. There is really no need to count how many other properties someone holds. Just do a re-assessment every year and ratchet up the assessed value on all housing that the owner does not occupy, including vacant property and renter-occupied. Seems a lot simpler.

Another idea that just jumped to my mind: why not tax any capital gains on property sales by 100%? Of course, deduct the inflation over the time the property was held by the owner, and in case the value of the property was increased by e.g. upgrading it, also deduct these costs and 5% margin for this investment... that would essentially disallow property investment.

Homes are made for living and profits should be made by living in the property or by renting it out.

This is how it works in Canada: principle residence has no capital gains on sale.

If you move to a new place, and don't sell the old one, then you have to change its status and the clock starts ticking on any price appreciation after the status change. Further if you rent out part of the structure (e.g., basement), then you have to pro-rate a status change of the property (generally proportional to surface area) and declare rental income.

Are you referring to the almost comically small property tax reduction for primary residences? Or to the mortgage interest deduction?

Yes, but for most people, that's not really a benefit. It's possible to exclude the first few hundred thousand of capital gains taxes on a primary residence anyway. So even without the step-up basis, the tax burden on these properties would be tiny.

Property taxes are a much more significant form of taxation than capital gains. And would be even without any preferential treatment.

That is something that could be done, to a degree.

You can increase transfer taxes and offer a partial refund over the course of some number of years, provided that the home has the homeowner exemption in place.

Increase the property tax rate while also increasing the homeowner exemption so that the total tax paid is the same as it was before.

Etc.

It's too easy for the ultra-rich to find loopholes in any rules. If there is a tax on homeownership, they will simply not own any home but will own some corporate entity that own the asset. See ? No secondary residence. Just an investment in a corporation that happens to home a bunch of houses.

I would expect that any legal resident of the US would be exempt from such a tax, not just citizens, if they weren't, I would have a problem with the tax even if it had the desired affect of lowering housing prices. But again, I want to stress that I don't have the knowledge to determine this.

As to what other countries should do, I have no idea. Certainly I believe they have every right to determine that for themselves. I believe some countries do have varying requirements or limits on foreign land/RE ownership. Perhaps I am mistaken.

I don’t think so. Your stats [1] are just for percent of all dwellings, many of those homes are owned by large corporations that then lease them out. If you limited it owning a single home, I think it would be significantly less, more like a 25% exemption by volume(probably less by value) this is backed up by [2] which says home ownership is around 56%. I’m fairly sure more individuals/families than you’d think own more than one home in the state.

You answered your own question, but to add more context the answer isn't "For many types of property" but for most people the answer is an emphatic yes. For the vast majority of people the only piece of property they own in this sense is their home, and if they cannot pay the property taxes on that, the state sells it on tax sale. So yes, absolutely, we already do this.

The fact that ownership of businesses is exempt from this is part of the inequitable structure of our laws that benefits the wealthy at the expense of everyone else. Because the primary property of the wealthy is currently exempt from property taxes (we only tax the gains, not the assets themselves), but the primary property of the middle class is taxed.

That sort of means testing isn't required (and would be open to system-gaming / perverse incentive creation anyway). You just apply capital gains tax to all properties with the exception of one primary residence per person, and you could even cap the primary-residence exemption at the median value of a home in a particular area. So if you own property and rent it out rather than living there yourself, it gets taxed as an investment, period.

So that this cost isn't just passed on to renters, you should make the rental payments for your primary residence tax deductible, again perhaps capped at a median level so as not to perversely encourage higher rents.

I think you could construct a tax regime that was revenue neutral pretty easily this way.

This has been tried. The problem is, the people who can afford to drop $2M+ on house and land for a home they barely visit are not going to be phased by a 10% value tax.

It would tax house owners less than people who had same amount of money but didn't buy house and kept money in bank. If both house owner and renter had $1000 in bank, they would lose the same.

It's feasible (in some contexts), and has been implemented in Wales in recent years [0] (though not exponential, there's nothing stopping it from progressing that way).

There used to be reduced taxes on second homes, recently changed to 100%, and now changing to max 300% (set by councils).

They've also closed a number of loopholes to stop owners passing these homes off as dysfunctional businesses (listed to let without taking any lettings).

There's a large disparity in wealth over a relatively short physical distance, resulting in a large number of homes in "idyllic" but poor areas being bought as second homes and spending the majority of the year empty.

They've also moved to a land transaction tax that makes the second home purchase more expensive [1].

I'm not saying they are pulling the ladder up, and good to see these initiatives being put in place, but they don't necessarily solve the issue with existing vacant second houses which most likely have benefited from the lax taxation over the years combined with increasing property values.

0: https://gov.wales/new-tax-rules-second-homes

1: https://gov.wales/land-transaction-tax-guide

I'm not sure I support land taxes etc. but this at least deals with your objection.

In the context of property used as a residence, I'm suggesting that property taxes produce undesirable effects, and that other forms of taxation might potentially work better.

>Let’s say we put a huge tax on all real estate that isn’t a primary residence

Because cottages are a traditional part of life here and real estate is one of the only ways to make real money for someone with some capital in the middle class.

I don't see why, at least in an area with any sort of constrained land supply, it is desired to keep old people in the same home (I can see same community, not same home).

From a land efficiency standpoint, where single family homes and apartments/condos both exist, you'd generally want to incentivize:

* childless folks (young people, empty nesters) in smaller homes (apartments, condos)

* families with children in larger homes (single family homes)

Property taxes are a powerful incentive to encourage people that become empty nesters to move to smaller locations. The lack of incentive to do this is part of why Bay Area single family home prices are surging - older demographics aren't selling their homes to families that really want to own for stability reasons.

(note: For the curious, in CA, Prop 13 doesn't per se create a disincentive as it allows moving the tax base to a new property for those older than 55 - but its presence removes what would be a strong incentive (cut taxes by moving). A strong tax disincentive to move though is capital gains tax structure on housing).