The rebuttal you're probably going to hear about this is how this will inordinately punish the private citizen buying a second home as an investment property. We do ultimately need some amount of rentals and those need to be affordable - if the investment property has the hell taxed out of that's going straight to the renter. I say this in an effort to try to point out it's a complicated issue, I in no way support the current large investor predatory housing market.
My remark about "not hitting people who own one property which is their primary residence" doesn't say anything about second or third property owners. I'm against harassing two-property owners with taxes and even three. Some people have reasons for living in two places and don't want to rent: they have their things there. (I think I said something to that effect in my original comment.)
I'm with you about the undesirability of these investment firms who hog up properties; the tax structure could easily be set up to squeeze them out, while encouraging the small owner rentals: people who have two or three places.
These firms are basically parasites who contribute to the housing problem as much as home flipping speculators. It should be entirely unprofitable for someone to have like twelve properties. We simply cannot have that in cities where affordability is spiraling out of control.
Maybe once upon a time chains of managed condo buildings and such owned by big companies wasn't a problem; it could be high time to crack down on it.
Ok, so my choice of wording is poor, but I'm not trying to do a devil's advocate take, I'm trying to talk about the breadth of the issue. What would you like to see with this? Do you think people should own second rental properties? If so, what does "a substantially higher rate" mean to you that stops investors with deep pockets from investing but not regular people? If people shouldn't own a second property, then why not flagrantly tax them? But then where do renters go?
This can be fixed somewhat by excluding primary residence from such taxes (essentially a tax-free allowance of 1). This cuts at hoarding real estate as investment, is a nice extra tax on people buying second homes, and doesn't (directly) affect 99% of homeowners who only ever own one house.
I'm not sure I support land taxes etc. but this at least deals with your objection.
well yes, but you're still allowing cheap second house, but not third. This means more middle class people can buy an investment home, but they will have to stop there, discouraging landlords with a huge stock of houses. You don't want to discourage investment in houses, just oligopolies/monopolies on the housing stock, and also unoccupied houses.
What we really need is a huge tax writeoff for primary homes. Own a second home? Owe massive taxes on it. Company owns thousands of homes? Massive taxes on every single one of them.
There's a massive homelessness problem in the USA right now. Lots of people are struggling to buy their first homes. I suspect it would take a long time (and involve lots of loopholes) to completely ban investor-owned properties... but I would support that as well.
Counterpoint: why should people not be slightly disincentivized from owning two homes when they only need one?
Even further, I personally think that people should be disincentivized from renting their homes as well (though not in a way that would just be passed to the renter, ie tax). I live in a college town that suffers from extremely low inventory because housing values keep going up and there's never a shortage of people willing to rent so nobody sells anything, they just keep it and pay a property management company to rent it out.
We already have the concept of a primary residence. I'd strongly support laws that impose fast-ramping tax burdens on further ownership. Possibly with a more modesty burden for a second home—say, a family purchasing one to pass to children, or preparing for retirement—but I don't feel that there's any acceptable reason for owning several homes.
"Second homes" isn't targeted. Many (most?) second homes aren't investments-- they're vacation homes, in places which aren't hot markets, and will almost certainly lose money compared to just sticking it in a broad market ETF (even with the home leveraged via a mortgage).
> I know that's not a direction most people agree on (hitting real estate as an investment),
Most states have substantially lower and/or increase restricted property taxes for a single owner occupied home, so I don't think you can say that taxing investment properties at a higher rate than owner occupied properties a direction people don't agree on, generally. (California is weird in that it restricts tax increases for all properties, including commercial).
One problem you run into is that most investment properties are rented out and increased taxes on them will be passed onto the tenants, so any increased taxes on these properties is arguably regressive since the tenants tend to be a lower income part of the population.
I appreciate your honesty. Here are some negative effects of this:
* Costs:
If the wealthy people are allowed only one house and one other rental, they will build a huge house and rental in a really expensive area, and forego building rental stock in cheap areas. So that means that poorer people will be hurt as there will be less rental stock available to them. Now, you can say, let them buy condos! But a lot of people are not ready for owning their own condo the moment they move out of their parents house, or if they are just spending a summer somewhere, or they have an internship in a different city, etc. E.g. even though the U.S. has an insanely high homeownership rate (probably too high) there is still a good 30% of the population that needs shorter term housing than the commitment of buying a place, but longer term housing than a hotel. And now they wont have that option, or it will be much more expensive for them as the rental stock is large, expensive units in highly desirable areas, and there are fewer of them.
* Ways to bypass it:
Of course it's a bit impractical. Wealthy people in the US will just buy up apartments in Europe or Asia, and wealthy people there will buy up apartments here. So this just creates a class of really remote landlords, because you've made it illegal to be landlord in your own nation.
Also, corporations will buy up apartments -- REITs. But maybe you will ban REITS, which means much of the drivers of more housing are taken off the picture and they focus on building offices only, exacerbating the imbalance between office space and housing.
OK, we did the downsides.
* Benefits:
Well, someone who owns 2 apartment buildings, their own mansion, and 100 million in equities will now own 0 apartment buildings, 1 rental mansion, their own mansion, and 150 million in equities. How is this a better world? And here, I am assuming full compliance.
Point being, I see the benefit as being purely symbolic. Like you have this law passed, and the existence of the law is its own reward. I don't think this is a good way of doing public policy. In fact, it's extremely disempowering to be even turning the legislative process into a LARP. It's a kind of learned helplessness to use the power of the state as therapy instead of to actually solve social problems. Banning plastic straws is one example of this.
Now if you want to say, "Hell let's abolish private ownership of capital", then at least that is going to make a difference and not just be a symbolic thing. It is an honest attempt to get at the root of the issue. But I think people understand this specific attempt is a bad idea, so what they are doing is retreating to these weird little symbolic acts, instead of searching for the next big idea. And I'm not picking on you -- I see this a lot. Just ordinary conversation, and people say "We should ban X", and it's a little worrying how ready people are to ban random things as a form of satisfying some inner unease, due to feeling powerless to address the real, underlying things.
It bans buying or renting. Our rental market is already very distorted because most rentals fall under regulations except for people just above modal incomes.
That already leaves a gap for people not poor enough to be allowed regulated rent, and too poor to get an 700 a month mortgage, who are forced to rent at 900 a month.
If you want to hurt pure investors, tax un-lived in housing.
But really, we need to kill the mortgage tax credit for any new homes. That will reduce the value of land because it offers less tax benefits. At the same time, currently interest is low so it will barely effect new entrants.
The key is to make houses worth a bit less. Homeowners are just going to have to suffer a slight dip after amazing gains for the last decades.
This proposal is a slippery slope to economic disaster. First, restricting ownership rights—foreign or domestic—distorts the market, disincentivizes investment, and ultimately harms those it claims to help by reducing the supply of housing. Second, treating homes purely as shelter ignores the reality that property is also an investment and a key component of individual wealth and economic freedom. Imposing heavy taxes on those owning more than one home would not only penalize success but also discourage rental market contributions, exacerbating the housing shortage. The real solution lies in encouraging development and reducing bureaucratic barriers to increase housing supply, not in draconian measures that trample on property rights and stifle economic growth. Let’s not replace a market-driven approach with a command economy that history has repeatedly shown to fail.
Most housing discussions seems to avoid one of the main reason driving the prices up, their treatment as an investment vehicle.
Residential housing should not be used as an investment vehicle. Period. Its primary purpose is to allow families to own and live in the house. Mandating that can eliminate the rich landlords/foreign investors buying houses just for investment, stabilize the demand and drive down the prices.
One way to mandate that could be progressive property tax based on how many properties you already own with a max cap on number of allowed residential properties one can own. This might decrease incentive to build new housing for developers, but can be solved by temporary tax breaks for building new housing.
One big thing that could help address the problem is make buying a second home as difficult as borrowing to start a business or getting margin on a trading account. As it is, they are treated as any other primary home purchase because the government backs the loans. The government should not be in the business of propping up second home prices. The reason so many people are able to buy and hold multiple homes is because it's so easy to leverage 5x or even far more. Most margin investment accounts can only leverage 2x. This ease of getting highly leveraged on a home is also the only reason that homes as an investment outperforms the market. Because a 1% increase actually equates to a 5% ROI if you put 20% down on the house.
Would you object to a graduated tax that gets applied to your existing mortgages in addition to an outright ban on new purchases of secondary properties within the metro area? I'd be fine with it.
I don't any reason why we shouldn't do that. It discourages people in your position from hanging on to multiple residences, and it levels the playing field a bit, at least until some equilibrium is reached in which existing and incoming demand approximate the available stock and pace of development.
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