That's a good question about the enforcement. You'd really only care about the most trafficked dense areas to live in, so gated communities should be less of an issue unless the whole city is made of urban sprawl neighborhoods. If it turns out to be hard to catch, the penalty should take into account the likelihood of getting caught, such that the expected reward from cheating is still negative.
If you're out of the country for an entire year and you want to keep your house empty during an housing crisis, you seem like exactly the kind of person this tax should be levied on. Either rent your home to someone else for the year, or pay the penalty for contributing to the housing crisis.
Or just institute a land value tax, which would automatically penalize all those housing-cost-driving behaviors plus a bunch more (like owning a single-family home or a parking lot in the middle of Downtown) without needing a bunch of loophole-prone narrow ad-hoc taxes on each individual situation.
Just need to disincentivise using housing for investment. For example a tax penalty for 2nd home, with higher penalties for subsequent home. Have federal level zoning control to disallow nimbyism. Penalize airbnb in areas that have housing shortages with higher taxes.
> Whatever the city charges, the wealthy will pay.
Just a thought... Make the annual penalties rise exponentially with each passing year for any home with sub-50% annual occupancy. At the very least, the ratcheting will provide extremely high tax revenues after a few years, so that absentee owners can subsidize govt affordable housing efforts.
I really think that New York City needs to institute _massive_ tax penalties for people who don't reside in their apartments as a primary residence. I know that our property taxes are already high, but just about everywhere else has
big incentives for residing in your property.
There's a lot of apartments in manhattan that are only lived in ~4 weeks a year and aren't rented out otherwise. I wouldn't be opposed to a higher tax rate for those properties. They're effectively jacking up other people's rents and making them have to commute from farther away.
We have a similar tax in Paris, France.
Tips: it doesn't work (in current design).
Plenty of room for improvement, either around the full renting subject (ex: lowering barriers to set up a new contract between landlord and renter, to remove some laws which overprotect some renters) or around this particular subject (decreasing time before the tax, increase tax, increase control or fine, or even more violent solution (huge fine, jail, etc))
Note that I don't know what would be the most efficient
Cities need to fund themselves through real estate rather than income taxes. Tax “the person who could live in a place” rather than “the person who does live in a place”. For actual residents, it’s a wash, but it severely penalizes the investment crowd.
I think this strategy would also tax unoccupied housing. Because if it's unoccupied, you're a de facto nonresident.
The broader idea is to tax absentee landlords and pied a terres, in favor of the people who actually live in the city. Moral justification of the tax is that if you want to profit off a community's residents while not living amongst them, you have to pay differentially higher taxes for the right (which would presumably benefit the civic life of those residents).
I would have said "tax whatever behavior you want to discourage":
1. tax unoccupied houses as punishingly as you'd tax pot or alcohol; in touristic places, such as Tahiti and Thailand, they went even further and outlawed land ownership for non-citizens; otherwise, they'd be covered with ultra-luxury villas occupied one month per year.
2. tax resale profits heavily as well: you do not want the competition of investors who might not even bother to rent their investment.
3. if you want people to own their place, tax landlord benefits aggressively enough, so that they'd rather invest on other financial products. But I don't think you want that: there are many useful jobs which don't pay enough to buy a house in a capital city.
4. raise interest rates. Or more realistically, introduce fiscal measures which simulate higher interest rates on mortgages, instead of simulating lower ones through tax breaks. Beyond a certain number of years, a mortgage doesn't make sense anymore, as you pay back interests only during additional years, no principal. This "certain number of years" is determined by the effective interest rate. Encouraging longer mortgages is encouraging higher prices.
5. review the welfare housing system. In many places, and I seem to believe London is one of them, you have market housing for wealthy people, council housing for poor people, and nothing in between for middle classes. There's no interest in building a city with only super-rich and super-poor people.
6. create tax incentives to encourage companies to move their HQ at least 25km out of center city, so that their employees will consider moving in the suburbs. Try to encourage the first movers to move to a couple of concerted locations, so that new centers reach a critical level of attractiveness, to carry shops and services with them.
My philosophy is, whatever is bad, make people pay so much for it, that it will be (net-)positive. If they still do it, what's the problem?
> 1. Ultra-luxury properties are generally speaking bad for a city. They take up a disproportionate amount of space and tend to add nothing to the city. It's fine that they exist but we shouldn't be subsidizing their construction and continued existence;
I am not so sure about the first part, but I agree with the second. The proposal I made would in fact be a slightly progressive tax. I have no problem someone buys a $10million apartment in NYC and keeps it for a holiday in a year, if it say, costs $1 million in taxes per year and pays for a lot of other apartments, public transit, etc...
> 2. Providing rental units for people who live in the city is a better use of capital than parking foreign money. As such, both parking money and foreign investment should be taxed at a higher rate. Local landlords are better than remote landlords (since those local landlords are part of the city).
I have to disagree here. On two counts.
First, parking foreign money can be utilised to provide rental units who live in the city. We "only" have to frame the laws and tax code accordingly, and who cares then, what nationality the money has.
I also have to disagree on the assertion that local landlords are better than remote ones.
Local ones may care for the city, or they care more about earning more money, and know all the tricks in the book. Remote ones may not care much about the city, but they also may simply have no idea of the local market, and do not want any trouble.
You may guess, how my experiences were in that regard.
I think, we should not tax/punish people based on our prejudice we may have on them, but formulate a tax code, which punishes "bad behaviour" regardless of the nationality of the actor.
The economic middle road is to penalize the externality. If a community is concerned about non-resident property owners, they might consider taxing them at a higher rate and longer-term full-time residents at a lower rate. I don't know if there's anywhere that actually does this, however.
Write it into the law that self-dealing to evade taxes is fraud, if that even needs to be spelled out. Also, vacant properties would count as vacant whenever they are not productively occupied, even if there is an active lease. Have a city inspector perform periodic spot checks, like how health/fire/etc codes are enforced. Fines for violations scale with the property's assessed value, rather than being defined as flat dollar amounts.
I think most people would be fine with people owning one vacation home or cabin but would find more than that excessive. An alternative would be looking at local housing demand and taxing according to local need of housing, but that would be pretty messy and prone to loopholes and corruption.
Taxation shouldn't be used as a tool to modify behavior. That's actually the exact opposite of good tax policy. Taxes should be broad based, with few exemptions, to raise the needed revenue while minimizing side effects.
The distortions in housing markets are often partially caused by tax policy, and those areas should be addressed (tax deductions for mortgage interest for example). Other than that, it's best to actually deal with the root problem: outdated zoning laws.
It would likely be more popular to institute a land-ownership tax that includes leased properties and exempts up to 80 acres, plus 10 additional acres for each additional person if the size of your household exceeds 8, but only for land in the same county/parish as your official domicile, or within a 50 mile radius of it.
In theory, that would allow rents extracted from the local economy by (presumably non-voting) absentee landlords to be recovered.
A straight ban on absentee ownership would simply lead to workaround legal arrangements, such as strawman purchasers who can then turn around and sign a 99-year "peppercorn" lease to the true buyers. You would be playing whack-a-mole with evasion tactics and corporate shell games.
If you just introduce an economic penalty, people would only evade/avoid to the extent that it produces a profitable bottom line. Rich people and foreigners could still buy up all the available local property, but they would at least have to pay to keep it unavailable to the local market.
I’d heavily tax un-rented properties. If property is not being actually used for housing it should be expensive to keep it. Administration should disincentive hoarding of houses.
If you're out of the country for an entire year and you want to keep your house empty during an housing crisis, you seem like exactly the kind of person this tax should be levied on. Either rent your home to someone else for the year, or pay the penalty for contributing to the housing crisis.
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