I am beyond skeptical on this point. The young and dynamic people responsible for a city’s soul generally can’t afford to buy (I would guess, I have no data)
You wouldn't be skeptical if you spent an extended period of time in a city mostly occupied by these "young and dynamic people". Hong Kong is a good example.
Agreed, I always equate the soul of a city/neighborhood to having multi generational culture. Cleaning up Brooklyn and putting a bunch of hipsters there didnt give it soul...
One possible consequence of limiting the market is that it could lower the price of buying real estate. Hopefully, that should make it accessible to younger buyers.
There has been similar systems in place in France and Sweden, and probably other European countries. Usually, they are targetting financing system: you can borrow money at a rebated cost if you do not rent it for a period of five to ten years.
The intended consequences are more people being able to afford a house and home ownership has increased with most policies that I can think of. There are some consequences: rental contracts are very hard to find in Stockholm for instance, but those hardly seem unintended.
People need housing, this limits renting, which affects the supply of housing. In the end, when supply goes down, it usually doesn't make something more attainable.
Thats only a first order approximation, but it seems plausible to me.
It depends what part of "a city's soul" you choose to look at; and how stable your city's long term rental market is.
The local bands, and dances full of pretty single people? Mostly young people have the time and inclination for that, and they're less likely to be homeowners as you say.
But the volunteer coach of the children's football team, or the people who organise the annual artists' open studio? You can't take those sorts of responsibilities if you're moving away in a year or two, you'd almost be handing it over to someone else before you'd finished having it handed over to you!
Of course, hypothetically there's no reason a person renting a house can't rent it for 5 years or more - just in my country, that's rarely how it works out.
With 10 year and higher waiting lists for affordable renting in the Netherlands, many people stay in their rental home for their entire working life once they've finally got one.
Evidence to support this? I have never found this to be true - heavily owner-occupied towns tend to be sleepy suburbs whereas the economic powerhouses of city centers are almost always very renter-heavy.
And because, especially these days, (at least some) cities disproportionately attract single people who mostly rent and then buy a house in the suburbs when they start a family.
IMO you have this backwards. It's much easier to get a mortgage to buy property in sleepy suburbs, so people can and do buy houses there to live in them, then have to commute to work.
It's almost impossible for most people working in soulful / desirable / economic powerhouse locations to get a mortgage on a property there, so you see lots of wealthy investors take up the properties there and rent-seek to make themselves even richer.
That's before we even mention the children factor.
Rent-seeking as an economic term doesn’t just mean that someone buys property with the intention of renting it out. It also has the requirement that the “rent seeker” then employs a social or political power structure to force users/customers into renting with no benefit.
I’m not thrilled about renting, but neither do I want to gamble on purchasing housing in an expensive market when I may have to leave my job or even the state. My landlord is taking that risk with her capital and therefore deserves to be rewarded for it.
I think it can work fine so long as there are sufficient protections for renters. Rent control, long term contracts etc. I understand that this is the case in Germany.
Unfortunately this works by making property less attractive to investors, who are the people with a large amount of capital, who typically are those people who have influence over the political classes...
This. Scotland recently introduced indefinite tenancies and I'm extremely interested as a young professional and investor to see the impact it has long term. Funnily enough Corbyn wants to introduce it in England and everyone is up in arms. They keep comparing it to the German market forgetting that it's already a thing in Scotland.
You poor soul, come home! Joking aside it's still too early to see the effects of the new tenancy. I suspect it'll make properties harder to get for less attractive tenants and that there'll need to be incentives for landlords to take on such tenants in future. Probably still a net positive but we'll see.
Vienna, a city that regularly tops the list of the world's most livable cities [1], has 80% rental rate [2]. Most German cities are dominated by rental, e.g. Berlin.
A huge chunk of the Viennese flats are publicly owned.[1] I think it's very hard to replicate for other cities. It's the result of decades of social democratic governance.
Two things they do really well: Keeping rent prices low by "dumping" and preventing ghettoisation by creating affordable housing in every district, not just some crappy areas.
This is nonsense. I've rented for 10 years now and I love my city just as much as anyone. Buying doesn't really make a ton of sense at these prices so I don't, but I don't see how I am less engaged than an owner. Hell, I actually go to city hall and write my council regularly…
This law may work for it's intended purpose, but it's an unconscionable violation of property rights. I worry that our statistician's approach to legislation is hastening our times' abandonment of principle, and that we're sacrificing any particular individual's good to the good of faceless society.
I worry that by the time the faceless particular individual´s have finished littering the entire planet because they can´t be bothered to care for anybody else, there won´t be a society.
Except society isn’t faceless. It’s our friends and neighbors. It’s our cousins and coworkers.
I’m more than willing to give up a bit of my extremely affluent lifestyle if it would genuinely help those around me who haven’t had the same economic opportunities as me.
> I’m more than willing to give up a bit of my extremely affluent lifestyle if it would genuinely help those around me who haven’t had the same economic opportunities as me.
I'm not. I'll actually spend resources to inhibit others, pull the ladder up. So to speak.
Good for you being honest. You help deluded people realize the social community ideology isn’t necessarily a universal trait. Takes a lot of social conditioning to be unraveled to understand nobody really knows if the majority care about one another or are just concerned about themselves.
>I’m more than willing to give up a bit of my extremely affluent lifestyle if it would genuinely help those around me who haven’t had the same economic opportunities as me.
All well and good. It's fine and commendable to personally sacrifice but when you start advocating for stripping property rights from other people to do it, it stops being a personal sacrifice and more of an imposition on others' freedom.
What about unintended backfire consequences of this law: people who own a place and are traveling, unable to put their places on airbnb because of this law and thus leaving vacant houses anyways and constricting short-term rental supply?
> I’m more than willing to give up a bit of my extremely affluent lifestyle if it would genuinely help those around me who haven’t had the same economic opportunities as me.
But, this law does deny others the same economic opportunities as you. If you've lived in your older home and want to rent it out and move elsewhere, you are allowed to. However, your younger cousins who are buying just now (and thus considering newer homes) will not. Thus, this law simply protects the old guard while throwing the young people under the bus in the name of screwing the rich. Congratulations!
Actually the house owner doesn't own the ground the house is build on. But the city remains owner ("leasehold"). Hence they can add restrictions and terms before you are allowed to build/use the land.
Why should property rights be the same for a commercial enterprise as someone's actual home? Not sure about unintended consequences on this one, but I would rather have a law be in place to allow more home ownership over more investment properties. As someone who grew up in a rental, and rented for the first 10 years, I see the benefits in home ownership.
I'm sorry, but while I agree with you that it's a violation of property rights, and that concerns me, it isn't in hope of a good faceless society.
I live in Spain, and the mediterranean coast is completely flooded with investors and foreigners buying property they don't live in, nor they rent for locals. Most of this places are now faceless, souless, tourist traps.
My sister inherited a flat in Ibiza, just in the city center, and I wouldn't go to live there no matter what. Nice for a week visit before foreigners flood in, though.
Same happend with Barcelona. Locals are being pushed out of the center and there has been years since it doesn't give the same feel as it used to, not to mention that everything feels designed as franchised for foreigners, expensive and increasingly soulless. They retain the architecture so that saves the look & feel of Barcelona, but it isn't anything similar of what used to be.
Same with the andalusian coast. More and more towns get investor's money for building resorts and all kind of crap.
I'm seeing this getting a little traction in my city, and I'm pretty worried. If that flood of money comes here to hit the property market, I won't be able to match the demand and I'll lose my lifestyle, and be forced to move somewhere else, at least to the outskirts of the city. So if my city council comes with a mechanism to prevent that, I'm gonna be on board, you can be sure of that.
> If that flood of money comes here to hit the property market, I won't be able to match the demand and I'll lose my lifestyle, and be forced to move somewhere else, at least to the outskirts of the city. So if my city council comes with a mechanism to prevent that, I'm gonna be on board, you can be sure of that.
You can buy a house now, instead of renting. This way, changes of property values are no longer a concern (unless property taxes are significant in Spain).
I considered it many times, but I'd be very stretched out on money (I won't save that much compared to my current rent, and I'll have to put a lot of money upfront). Also, there's the problem of getting a mortgage, and prices being expensive for our salaries. Decent flats are +200k here. If the same flats were about ~150k I'd give it a thought, but 200k is too much for this place.
There's no unlimited supply of land. And there's a limited distance that citizens can travel before that impacts their lifestyle or behavior.
Also, if you wanted to build higher buildings to accommodate more people in the same space, good luck doing that in a city center, because there's no space for such thing.
> Also, if you wanted to build higher buildings to accommodate more people in the same space, good luck doing that in a city center, because there's no space for such thing.
I have seen a three story building knocked down in Hong Kong and a 20 story building rise in its place without any damage to the structural integrity of its neighbours. Engineers are really good at building things if they’re allowed to do so, even under significant constraints.
The problem is not a technical one, but a legal one. There are very few empty buildings in most euro cities, and people is typically reluctant to get out because of the hassle it causes them.
If there is a run down and empty building, then sure, but you won't find many.
It can only decrease. As in someone buys an existing lot, knocks down the house and builds a new house on it. Or a house burns down, or any other house destroying event.
The law doesn't mandate building apartments either, so if the same people who build/buy houses as rental properties are unwilling/unable to invest in apartments (because building a 400-person complex is a lot more expensive than a house), then rental property supply can only be constrained by this law or concentrated into the hands of management companies (who have a vested interest in constraining supply)
Furthermore, I'm not completely convinced that restricting rental property ownership to property management companies who can afford to build apartment complexes is inherently more equitable than letting a middle class person with good credit buy an extra house and rent it out. Where I'm from originally (Alberta), it was common for electricians/plumbers/tradesmen to buy an extra property with a combination of credit and wages and maintain it. It's a relatively simple and time-tested path for moving from working/lower middle class to being upper middle class or even wealthy.
The limiting factor is, roughly speaking, wages. Assuming landlords actually want to rent their properties out, the rents will go up to the maximum people can afford/are willing to pay - I'm not sure the distinction matters - and then go no further.
(And it's possible they are already at that level, or near enough. It is after all the price point that a seller always tries to hit...)
I think the correct solution to fighting housing speculation is increase property valuation to real world prices, eliminate extra taxes on vacant apartments, and drastically increase (to about 5% - 7% of valuation every year) the property taxes on everyone.
Two main thoughts here. First I love that municipalities are thinking creatively about the housing crisis. Second, I’m curious to see how policies like this end up playing out in practice. I can think of a bunch of negative outcomes such as rental properties degenerating and home builders getting less work.
In the end we can’t know what’s going to work until the experiment plays out which to my first point is why it’s very encouraging to see so many places trying different policies.
People generally care that the property provides income, not that it’s in good condition. Higher rents can cause a depression in renovations, because the higher rent increases the opportunity cost of doing renovations. This is quite visible in some cities.
This is very obviously not going to work out well. This policy means the total rentable property supply will now not increase and only decrease for X years based on this policy. Rents are going to spike throughout the city.
Trying to mess with the free market like this almost always has a bunch of unintended consequences and rarely works as intended.
It’s possible that the rental market will favour non-new properties and that houses currently needing restoration will find new owners who will invest, in order to rent them more easily (and at a higher price).
I don’t think it’s obvious how this will turn out at all. What you state is one possible outcome, but it’s not clear that is what will happen.
1) rental properties can still be built, they just have to be designated as such before their construction is approved
2) the price limits were designed to still make it possible to profitably build a new house, so the market will still produce new homes (maybe at a different rate)
3) they also put in place quotas for low, middle, and upper priced housing, guaranteeing a varied supply on the market.
4) middle income families will no longer need to compete with people buying investment rental homes, meaning they will be more able to buy affordable homes. This frees up rental property elsewhere in the system for someone else.
Housing markets are almost never free markets. It’s quite rare to see a completely free market for where and what kind of housing is built. This is at least an attempt to make sure that entire part of the population isn’t left out of owing a home. Maybe it works, maybe it doesn’t. That’s the great part of government — if it doesn’t work, those in charge can be replaced by the citizens. I’m interested to see where the experiment goes.
As someone who has just bought in another European city with high demand for housing , this sounds great on the surface level, but again the devil is in the details.
> It’s not yet been clarified, for example, how long an owner would have to occupy their home before being able to rent it out.
My GF has had offers of a years work in Melbourne and we have talked about it saying, it would be nice to do. Right now it would be easy to rent our place out, but it would be impossible if the rule stated that you must live in the place for 5 years.
Job offer overseas might be too good to turn down. A regulation like this would then deny this couple a potentially big improvement in their quality of life because there would be no income mobility for them. They would be unable to rent their place to go try out a potentially life changing opportunity in a different country. Regulations like these always end up having unintended consequences and hurting random people like this.
I can understand the dilemma if you intend to go to Melbourne and "test the waters" and potentially want to move back again. But if you move to Melbourne permanently, I would expect you to sell your house in the EU.
Just yesterday I came across one listing that worked out to 11,000 euro / sq meter. At that price there are very few rental options that would still work.
Crazy, I did some analysis on large cities in the Randstad in june/july last year. Amsterdam was by far the most expensive, but the most expensive house in price / sq meter was "only" ~9,000 euro / sq meter
Yep, I scraped address, price and size from the house overview pages. I ended up with data from Funda going back ~3 months (so April, May & June) of all the 'gemeentes' in provinces of Utrecht, Zuid-Holland and Noord-Holland.
Like most selective political actions in a market, I suspect this has good intent but will produce predictably counter-productive outcomes. The intent is obviously to "make housing more affordable", but they're only restricting one part of the market, and that part is "newly built" homes. What about the real estate market that is simply "homes"? So if newly built houses cannot be rented out anymore, and a large driver of building homes is this customer base of "landlords", what will happen to the rate of building, and the price of older homes?
It doesn't seem like a stretch to assume that the building rate will go down, and prices on older estates not affected by the law will go up. Unless the law is applied broadly across any and all estates, the end result will simply be, best case, that the market adjusts: worst case, that you end up with very unwanted and negative economical effects that no-one predicted.
The article states that "It’s not yet been clarified, for example, how long an owner would have to occupy their home before being able to rent it out" -- in my opinion the problem here is not where you draw the line, the problem is the drawing of the line. It will only create synthetic movements in the market and I don't think it will help in achieving the stated goal at all.
If one were inclined to be cynical, one could even assume that like with most political proposals, there are those who stand to gain from this, and they may be sponsoring it. Namely: whoever owns "old" real estate in Amsterdam. Is it also cynical to believe that politicians may know that this will not help, but are more interested in looking like they are "doing something about it", rather than resolving the issue, causing economical loss for property owners? The stated beneficiaries of this proposal are those weak in buying power claiming the "right" to live in a certain place without being priced out -- normally not a group with huge political leverage.
The key problem is the rich buying property for literal rent-seeking to become even richer.
This drives prices up for homes in the city to a point that only if you are in a relationship and over 30 you might be able to buy your first 'home'.
There may be downsides to the measures proposed, but the fun part of government is that you can learn, change and adapt. Because you write the rules, you can change and you can use this ability to create a better living environment for people, which is the ultimate end goal.
> The key problem is the rich buying property for literal rent-seeking to become even richer.
This key problem is in no way solved by the political proposal, as "the rich" can move to buy older real estate instead.
> This drives prices up for homes in the city to a point that only if you are in a relationship and over 30 you might be able to buy your first 'home'.
The reason that prices are going up is because a lot of people want to spend a lot of money for the real estate, so in the end you must take a moral stand regarding who owns the right to live and/or own real estate in the city, and what this right is based on. Long term consistency is key here, because short lived stabs at the market like this one will not make any difference apart from creating volatility.
As soon as you create economical impediments to achieve your "moral", or "political" goals, you must ask yourself questions almost like a penetration tester: how would I exploit this law if I wanted to stand to gain from it economically? There's almost always a way, and unless you take this into account before creating the law, you're just making the problem worse, and more complicated (normally the same thing).
> the fun part of government is that you can learn, change and adapt
Government shouldn't be having fun with laws. They should be enacting laws that are thoroughly studied, where the possible outcomes are weighed against eachother to minimize risk and maximize the odds of success. Of course you always need to evaluate and adapt, but this proposal is sloppy to say the least, perhaps even malicious.
Let them have older real estate. That pie isn't growing. The point is that the rich can't dominate the entire market any more, there is a class of housing reserved for the middle class
Giving the rich a monopoly on a fixed tier 1 subset of real estate in a market with huge demand is not how you solve affordable housing to the "local" middle class. It will create synthetic incentives, and escalate prices on all real estate as demand seeps over into black or grey markets. Changes like these need to be across the board, or not happen at all.
This isn't "giving the rich a monopoly", it is restricting their existing monopoly by declaring a type of housing (newly constructed sfhs) out of their reach.
But the middle class of today will be the rich of tomorrow, and not allowing them to rent out their own homes when they move means that basically they are prevented access to the same mechanisms of wealth creation that made today's rich people rich.
This law literally helps out rich people and hurts low income people.
Low income people can't buy a house. They can only afford to rent. This law would criminalize the ability of poor people to live in the city, and it would do so to help the wealthy home owners.
Complete nonsense. First of all, homeowners aren't wealthy. Landlords are wealthy. The law says that wealthy landlords have to keep their hands off of brand new houses for a certain period of time so that homeowners can have a crack at it (therefore lowering prices, since rental profit isn't a consideration)
This does nothing to prevent anyone from renting apartments, condos, or houses built over five years ago.
Poor people aren't the ones renting brand-new construction. The renters of new houses are going to be people who could have and would have bought the house, if super rich landlords weren't jacking up prices.
Ok, so you are seriously going to argue that a person who rents new apartment isn't going to be significantly less wealthy than someone who purchases a new home?
Do you see the obvious contradiction here?
All this law does is take away poor people's ability to rent a home, that will instead be sold to a wealthy home owner.
If you can afford to purchase a new home then you are way way more wealthy than someone who can only afford to rent that same home.
> As you know with security, it's very difficult to predict in advance how flaws/loopholes will be exploited.
Not always. This law has some very obvious loopholes that I would be very surprised if they weren't abused, should it ever become reality.
> So the key thing here is to setup a society and government that can quickly respond + adapt and fix loopholes.
Nobody's saying that this is a bad thing, and it doesn't in any way require badly thought out laws like this one.
> some theoretical discussions about 'markets'
"Some theoretical discussion" is exactly what is missing in this proposal, which is why it's so badly thought out and will miss the mark, to nobody's benefit but the property owners of what politicians arbitrarily decide is "old" real estate.
Build more housing, lots and lots more housing. Central Paris is beautiful and it’s almost uniformly dense eight story walk ups. Build new cities. It’s not like the Dutch haven’t built commuter cities around Amsterdam before. Do it again, taking account of the lessons learned from places like Almere.
Sydney is a great example of where that doesn’t work. There’s a crane every 100 meters here and everyone but people with loads of money or rich foreigners is priced out.
We've already tried this, it doesn't work. Housing is valued exclusively by the value of the housing around it. Building more housing raises the value (and therefore the cost) of all nearby housing, and does so continuously until the economy resets.
So, if you are a private equity firm, you love this, because it's a guaranteed safe place to park tons and tons of money.
But if you are a human who needs to buy housing to survive, more housing hurts you, because it drives the "fair-market value" for all nearby housing higher, making any specific unit less affordable to you personally. Paradoxically, the more housing construction happens, the less likely a person can actually get housing.
---
There isn't a "just supply vs demand" on housing, because supply isn't fungible, and (with the exception of perhaps California), the demand is not primarily driven by people, but by private equity. You can't out-build private equity, no matter how many cranes hit the sky, because (currently) the act of taking the loan to begin construction generates more of the private equity that you are trying to outbuild. To fix housing, you have to fix equity first, because (in most but not all cities) the finances are the problem, not some huge influx of new residents.
"We'll just out-build these high prices" is the housing equivalent of "we'll lose money on each transaction, but make up for it in volume".
> We've already tried this, it doesn't work. Housing is valued exclusively by the value of the housing around it. Building more housing raises the value (and therefore the cost) of all nearby housing, and does so continuously until the economy resets.
Really? Maybe I'm being overly simplistic, but surely building enough dwellings to exceed the immediate demand would lead to prices dropping?
Could you point towards some links to learn more about this?
> Maybe I'm being overly simplistic, but surely building enough dwellings to exceed the immediate demand would lead to prices dropping?
I thought Toronto was doing a good enough job at building lots of housing, and it still hasn't worked.
The issue is that in order to actually have prices dropping, you need to overbuild by a bit. But prices dropping is an undesirable outcome for real estate developers, who are almost exclusively responsible for building new housing in a city. Naturally they don't want to shoot themselves in the foot, so they will only ever build as much as to satisfy the current demand, but not quite, and try hard not to exceed it.
Even with government-issued social housing, there's no way to solve this: as long as there's any space for developers in a market, their new supply is going to adapt elastically to just underserve current demand.
The only thing that has practically lead to supply-related price drops is an irrational boom followed by a realization that developers have actually (unintentionally!) overbuilt this time. Unfortunately, irrational booms are also accompanied by prior fast price increases and a lot of pain on all sides, so we probably shouldn't advocate for one.
So, I'm not sure what a good solution is to actually provide more supply than needed and have prices dropping, but the free market is not it. Especially as real estate developers get better with forecasting demand.
Maybe demographics will help a bit in 20 years or so.
Instead of building more housing, build more narrow-gauge electrified commuter railway lines and stations--with large multistory parking garages adjacent in the US, and maybe bike lockers attached in the EU.
If you make everywhere effectively closer to everywhere else, there is more competition for "good location", and landowners can't charge as much for any specific spot. Or at least they can't until demand goes up again.
I dont think that matters. The only time you care about existing city architecture is when youre building a tram. Most trams use standard gauge and that works fine.
Tunnel width does not depend directly on the gauge but on the loading gauge, i.e. the size of the car. That is generally wider than would be required by the gauge.
On the other hand, using the same gauge as other rail means you can run trains across both old and new infrastructure.
If your model of the property market is correct then you should be able to reliably make enormous amounts of money by investing in real estate investment trusts with exposure to the appropriate property markets or construction or construction materials companies that are publicly traded.
There’s nothing special about private equity that gives it better access to markets like property.
“We’ll just out-build these prices” is the equivalent of “Charge more” when the problem is that you, a consultant, are too busy. If you keep doing it for long enough the problem goes away. Tokyo has grown by 1.5m people since 2001. House prices and rent have been basically flat throughout. Have the metropolitan areas you’re talking about added about 100,000 people a year for almost two decades?
> We've already tried this, it doesn't work. Housing is valued exclusively by the value of the housing around it.
Not sure about the claim that this has been tried. Most cities where building housing is happening are having rents increase at much lower rates than cities like SF that refuse housing construction.
Moreover if we didn’t just focus on private construction and returned to pre 1980s style construction of massive public housing projects, it seems likely to me that supply and demand could start working and hold rents steady or reduce them. (E.g. something interesting I saw on this recently https://twitter.com/RottenInDenmark/status/11080317257523363... )
Instead of public housing most anti-housing activity seems to be focusing on failed policies like rent controls.
If people are just building investment properties to park money that sit empty of course that's not going to help things, it's not really increasing the supply if no one lives there and no one can rent it. They might as well be building a statue or some non-housing object.
That doesn't mean actually increasing the housing supply is a bad idea. Heck, maybe they could have a tax on vacant units to try to force those investment properties that are already built on to the rental market. Or if that's too hard to enforce, raise the property taxes enough where vacant units look undesirable as an investment.
I don't know about the speculative investment market, but at least for the rental market demand is people. I think there are very few people just renting a place with the intention of leaving it unoccupied forever. If there were affordable rental properties everywhere, I think it would be less of a problem even if real estate investments remained expensive.
It is very difficult to predict in advance how flaws will be exploited but you should at least think very hard about how they might be exploited before announcing a policy. You should ideally have thought about it enough that you have the policy ready when you announce it and can explain and justify it, including all the details.
Good policy beats discretion reliably and consistently for reasons of dynamic consistency. If you find yourself announcing a policy when you don’t even have the details ready you are doing it half assed. You certainly haven’t had tax lawyers or economists with expertise in mechanism design look over your policy proposals. You are an unserious person, making policy up on the fly, floating trial balloons while running off your mouth, a Trump or AOC.
Cities don’t exist for rich people to exploit but if you build less housing than there is demand for the richest will, on average, get more of what’s available than the poorer.
> The reason that prices are going up is because a lot of people want to spend a lot of money for the real estate
Hum. No. People don't want to spend a lot. But the whole system is built so owners can extract rent either from rentals or from buyers to which banks will lend enough money to meet the seller's price.
Yes, that’s what happens in a market where supply is growing slower than demand. Prices go up. See levels.fyi for an example of this in the market for software engineers.
> The fact that prices are going up proves this is not true.
No. Prices go up because demand is higher than supply and people are forced to live somewhere (as in "reasonably near their work") and are therefore forced to spend lots of money on this. They wouldn't do so if they did not have to.
> This key problem is in no way solved by the political proposal, as "the rich" can move to buy older real estate instead.
I suspect this proposal has less to do with protecting middle class people's ability to be home owners, and has more to do with preventing perverse incentives around real estate development from having a long-term negative impact on Amsterdam's housing stock.
For instance: look at what's happening in Toronto. There are a massive number of high-end, 1-br condos being built because that's the type of property which makes sense as an investment instrument. Large swaths of the renting population are not served by that type of property, but investors are the customer for real-estate development, so that's what gets built.
> Large swaths of the renting population are not served by that type of property, but investors are the customer for real-estate development, so that's what gets built.
It all comes down to the same discussion: what are the inherent rights of a native population when compared to foreign capital owners. It's subjective. Your opinion could be anywhere between "money buys you property rights" to "land is owned by living on it" and you wouldn't be objectively wrong in any case, since you're making a moral argument.
The problem appears when a moral argument should enter legal and political reality. When you look at this proposal through the lens of "what will be achieved", it's hard to be optimistic.
> Your opinion could be anywhere between "money buys you property rights" to "land is owned by living on it" and you wouldn't be objectively wrong in any case, since you're making a moral argument.
Even that sort of moral argument is short-sighted because natives benefit a lot by investments by foreign capital owners, specially in real estate.
> It all comes down to the same discussion: what are the inherent rights of a native population when compared to foreign capital owners. It's subjective.
Indeed it is, and in an honest democracy a question of this importance would be voted on in a referendum. But before doing that you'd first want the public to be informed of the facts. But in Canada the government won't even do that - we have no idea how much property is being purchased by foreign investors directly, or via proxy friends/relatives who have obtained Canadian citizenship.
> There are a massive number of high-end, 1-br condos being built because that's the type of property which makes sense as an investment instrument.
And the funny thing is that the value of those properties comes to a large degree purely out of the overall rise in real estate prices, not because they satisfy the basic human need of a shelter. I wonder what the price of these properties will do when a real estate crisis hits. They are clearly not a place where people actually want to live.
> The reason that prices are going up is because a lot of people want to spend a lot of money for the real estate...
No. Real estate is 80% driven by finance and tax policy.
The condo craze is just like the big box and franchises hotel boom a 15 years ago. Lots of money flows in, and the buildings get sold when they start losing money around the 15 year mark when depreciation catches up. Many of the marginal “luxury condos” will be shitty rentals in the 2030s when maintenance becomes a problem, and you’ll see them rapidly go down market.
By that time, the money will have moved on the the next thing, and we’re all stuck with the mess.
Bankrupt condo associations and people with underwater mortgages walking away. For the rental units, the profits tank, so the landlords tighten the screws on opex, and they aren't "luxury" anymore.
You may recall 2008, when this phenomena happened with single-family homes. Condos are much more fickle investments.
Note that in the Netherlands you can't just "walk away" from a mortgage. If the bank sells your house and the yield isn't enough to pay for the mortgage, you're still on the hook for the rest.
After 2008 the housing market just more or less closed down. Nobody was selling as their mortgage was under water, so they just stayed where they were.
The problem is demand being sufficiently high compared to supply to cause prices that consume most of peoples’ spending abilities.
Even if we removed the concept of ownership, which is the only way to remove rent seeking behavior, how are we going to address the limited supply in the face of extreme demand?
The long term structural solution in my opinion is to create more desireable places to live. This involves significant wealth transfers from already wealthy places to investing in infrastructure, education, communities in other locations, thereby increasing the supply of desirable places to live. That’s really the only way prices can be brought down in real terms.
More regulations to "fix" problems that earlier regulations caused. The only winner is the politicians, who can hire more friends in the ever growing public bureaucracy.
Isn't it ultimately a side effect of a decade of extremely low interest rates, world wide? If bonds were yielding something closer to their historical norms, buying and renting out homes wouldn't be nearly as attractive to institutional funds.
You nailed it. It’s cheap to borrow money and if you have a large deposit you can get a mortgage which your tenants will be paying off. Then you buy another. In Australia you can actually write the interest off as a tax expense. So it lowers your taxable income. With enough maintenance and repairs receipts and a few properties you’ll pay fuck all tax. Awesome way for people with money to make more money.
Ironically, although literally they are seeking rent they are not necessarily, economically speaking, literal rent-seekers. The economists' abuse of language remains an unfolding tragedy.
Economic rent seeking is characterised by seeking a cut of the profits without creating any new value. If you buy a new house and rent it out, you have just caused new wealth to be created and you are recovering the capital costs, so a reasonable argument can be mounted that it isn't technically rent seeking.
If you want to clamp down on rent seeking, the best and potentially only reasonable way is a land tax, so people can't profit off controlling an irreplaceable asset that doesn't require maintenance.
> This drives prices up for homes in the city...
One of several factors. Credit availability is also a big deal.
> Economic rent seeking is characterised by seeking a cut of the profits without creating any new value. If you buy a new house and rent it out, you have just caused new wealth to be created and you are recovering the capital costs, so a reasonable argument can be mounted that it isn't technically rent seeking.
These houses already exist though. What new wealth is being created by purchase with intent to rent vs purchase with intent to occupy vs the builder offering the building for rent?
> What new wealth is being created by purchase with intent to rent vs purchase with intent to occupy vs the builder offering the building for rent?
There is value being created here in the market for risk, flexibility, and capital allocation. Residents who prefer to rent rather than take on the commitment of ownership also capture some of this surplus.
If someone doesn't have enough money to buy a house, they can move in and rent it. They get to live in a house that is nicer than what they can afford right now.
I don't know much about the housing market, but arguing from theory, if the new build market is restricted to _only_ people who can afford to buy a house, that might be a much smaller group of people than individuals who want to live in the area but just cannot afford the cost of building a house. Renting is good for that not-enough-to-buy group.
For example, I couldn't afford to live in a city if I had to own my own home. I don't have that much money on hand. I'd rather rent land from a landlord than money from a bank. At least the landlord is carrying the risk.
well... when your renting you know that your rent payment is the top of what you will pay a month. If you own the house, you also need to pay its taxes, repairs, upgrades, etc.. so it makes sense that you must pay more than just the mortgage payment to rent, its less risk.
The "wealth" created is that there is a new house up for rent, and thus more options for those who want to rent.
The advantage of renting compared to buying is that you can occupy an house for a limited amount of time without being financially exposed to changes in the value of the house, without having to find a new buyer when you move out and without needing upfront capital or credit to buy it (there are of course also disadvantages to renting, so some prefer to buy instead).
Not sure about Amsterdam, but property prices in Vancouver and Toronto are heavily driven by the middle class over-extending themselves on credit with a little help from “The Bank of Mom” on the down payment.
Sure, the wealthy are buying to, but based on average debt levels, it’s mostly people who can’t afford it.
The Toronto and Vancouver markets are in territory that is shocking and in Vancouver's case, literally numerically impossible to sustain without constant infusions of external capital.
Houses provide rental income. Whether you get that as money (by renting out) or consume it in kind doesn't matter.
At the most successful, this proposal would leave rents the same, but lower house prices. Ie it would artificially give people rich enough to own a house an especially attractive high yielding instrument.
That's the optimistic case (a learning process for government).
I think the pessimistic case is that foreigners+investors make convenient scapegoats, the public has reasonable demands but will fall for plans that sound good on paper and don't work, and entrenched interests ensure that the actual root causes will never be fixed.
If you think about it, if 8 households want 5 housing units, there's just no way it can be affordable to all 8. Not by paying the 8 more, not by discouraging renting or owning, not by prohibiting investment etc.
The only things I can think of that could actually solve the root cause are:
1) Build more housing
2) Increase the housing available somehow without building more (tax units that are left empty, allow renting places that weren't allowed before).
3) Decrease the demand for housing. Maybe try to drive high-paying jobs away, or try to raise the minimum wage high enough that business go under.
Otherwise I just don't see anything else that could work, without creating some special class that gets affordable housing while everyone else doesn't (maybe the lucky people win government lotteries or inherit rent controlled apartments).
> The key problem is the rich buying property for literal rent-seeking to become even richer.
Well, no. The only reason they can expect the rent is because the tenant is unable to buy. If there were more housing that was within reach to be bought, then rents would go down, and the landlords would find themselves unable to rent profitably, and would thus sell the home at the market rate.
As with all affordable housing 'issues', the answer is to build more housing.
I agree that most such policies are naive or populist and won't achieve their actual objectives, but...
The default supply-demand dynamic doesn't generally apply to urban real estate. Supply is very slow to react to market changes, and is limited by all sorts of things that aren't price. In a lot of cities, prices (within reason) don't really affect supply at all.
First, building takes time and houses last a long time, so supply is unlikely to grow by more thana couple of % pa. Second, most of the space is taken and/or limited by planning, not price. Changing planning policies and improving transport is what actually gets a city with 250k houses to 300k.
Often, you'll find that people don't actually want the city to change/grow much and prevent it politically
The upshot is that is a supply-insensitive-to-demand market (the opposite of the cocaine market, economics teachers like for examples). If demand goes up, prices go up. Supply stays about the same. The inverse is that if price is held artificially low, this doesn't really dampen supply much.
Imagine manhatten house prices doubled tomorrow. How much extra housing do you think this would lead to?
All that said, this sounds like cheap politics. Developers complaining? That's probably a political point in amsterdam. It tick the do something box. Upper middle class people will get their new house a little cheaper (less competition). The new neighborhoods will be more middle class (and ethincally dutch), because owner occupiers tend to be these things. The rental market will be marginally tighter, as this grows the own/rent ratio a little.
> Imagine manhatten house prices doubled tomorrow. How much extra housing do you think this would lead to?
A lot. Rising prices would encourage the development of non-NYC cities. As those cities developed, some portion of Manhattanites and those thinking of moving to Manhattan would choose to move to the new cities. As the new city develops further, Manhattan becomes that much less attractive as a place to work until such time as Manhattan RE prices again drop / fail to rise, and vacancy rates increase. Vacant units = extra housing.
Economic mumbo jumbo isn’t the only consideration for policy like this.
Economic policy has left so much capital sitting around doing nothing that even marginal developments that are ultimately money losers are getting built everywhere.
Local governments ultimately are accountable to the people, and it’s appropriate for them to think about the impact on the civic space of these developments, that are often ultimately bad for the community.
Real estate is among the sketchiest of industries, and in the US at least almost all commercial projects are implicitly subsidized by the government. IMO anything that extracts value from developers is a good thing.
If the demand for houses from people who want to buy them to live in is greater than the supply of houses, nothing. The houses will still be built and sold, just to different people.
Not necessarily true. If the rate of return is changed some people who would have invested their money this will not. Properties might come to the market later because it’s not worth it to pay the premium to have workers come in on Saturday for example. Developers will be less willing to pay extra for legal services to get through the planning process faster. I’m sure there are other similar effects I’m missing as an outsider to property development.
This is already something well-known in the Dutch housing market though. It is known as "zelfbewoningsplicht" (self-occupation.. duty?, e.g. the contract you signed when buying the house stipulates that you, or your direct family have to live in it yourself/themselves). It is usually enforced by "woningcorporaties" (social housing corporations?) with a social mandate and does result in lower prices for the houses/appartements that have it. The odd thing here is that it's now municipalities that are enforcing it on _all_ housing, rather than just on designated social housing. It will be interesting to see the effects though.
Regulation are introduced for their intended positive consequences, but they usually also have unintended negative consequences.
Here you posit that the global balance will be negative, but your supposition is mostly based on the assumption that regulating the free market has always net bad consequences. Which is a point of view which has been pushed VERY strongly in the last decades, but which only the most idealogical anarcho-capitalists can fully believe: try to have no regulation in, eg, food production, and people start dying.
As for this measure: we can all agree that it will depress prices for new homes, and increase prices for older homes. Is this going to be a net positive or negative for the middle class who wants to live in Amsterdam? It depends a lot on the price sensitivity of the construction of new homes. I suppose that planners in the city know more about this than me, and maybe you, and did their own projections. If they go on, we'll see the results.
The “old” property owners will have to price their properties to compete with cheap, modern, newly-built housing though. That’s absolutely in line with the end goal.
You also have to bear in mind that a significant chunk of properties in NL is owned by housing associations, this new rule only applies to individuals.
I have no comment on if this is good or bad, I am just curious how laws like this get passed in the first place. You would assume that most home owners would not be in favor of something like this, as it obviously would seek to decrease the value of their property by reducing the potential acquirers. The only thing that would make sense is if in Amsterdam, most voters rent vs own.
I don't understand who would vote for this. I mean if you are a renter this means rents will go up, and house prices probably won't go down enough to make them affordable.
> You would assume that most home owners would not be in favor of something like this, as it obviously would seek to decrease the value of their property by reducing the potential acquirers.
It's obvious even from the headline that this "ban" only applies to newly built homes, meaning that if you own an "older" home (whatever the definition of that ends up being), this does not apply to you. So in a perverted sense, being an Amsterdam home owner may be beneficial, since the politicians are rigging the market to your advantage, if you are an "older" home owner.
As for renters of these "older" homes, I'd say the outcome is fairly predictable: your rent will skyrocket as the demand for your landlords real estate increases, unless there are already other political tools in place to cap rents.
A minority of the electorate is contemplating selling or renting a newly-built house in the near future. Most of not all Amsterdamers’ are living the consequence of having house prices rising beyond what they can afford; many complain about foreigners moving in and not making the effort to acclimate.
But there have been long (decade+) stretches when I actively did not want to own. I was single, or I knew my family size would change and didn't want to buy a huge house, or I knew I would only be in the market for a few years.
The transaction costs of buying and selling each time would have been probably 5-10% of the total price of the house (broker fee, mortgage fees, inspections, etc). It simply would not have made sense to buy and sell a house every time I moved.
Having plenty of rentals available made it easy to move to where I needed to be, in a house size that made sense (neither too big nor small), in a cost-effective way.
The answer of "don't move so much" cuts income mobility. I moved to the SF Bay Area because it offered higher salaries. And it wouldn't solve the issue of family size changing.
(I haven't yet done the reverse -- which is to rent out the house I now own, but if I get a job offer somewhere else it'd be silly to force a sale to make it impossible for me to come back.)
There was a thread a few days ago about a lawsuit against the National Association of Realtors, who are usually the largest part of these transaction costs.
They don’t need to. But it seems rather unfair to say that people with decent income but who can’t (or don’t want to) access large amounts of capital must have an artificially reduced selection.
Imagine if it was flipped around: new houses cannot be sold, and can only be rented out. Would that be reasonable?
I totally understand why people dislike speculators who buy houses and let them sit empty. I get why they dislike investors who buy properties and put them out for short-term rentals like AirBnB. But getting upset at long-term rentals? Why? Lots of people rent, for many good reasons. Especially poorer people. What’s so terrible about serving that market? If you think the landlords are making too much money, bring prices down by increasing the supply i.e. the exact opposite of this plan.
We have something similar here in Singapore. You cannot rent or sell a new HDB for 5 years. And you cannot rent to non-citizen / non-pr till it’s 10 years old. I would say it works but that’s only because the market is entirely different here.
In France, a lot of cities propose "accessible housing" which can be brought with a zero interest, or nearly zero interest, loan.
The condition usually is, if you buy it, you cannot rent it for 5 to 10 years. It does allow for more housing that are owned and not rented and avoid excessive investment.
One of the drawbacks though is, since it only apply to building that have been build with help from the city (has far as I know), it can sometimes, if done poorly, create slum with huge bloc of social housing. Nowadays, they usually try to spread the construction more through out the city and make more diverse building to avoid this.
It's funny because this could be used as an argument for either side. People who are frustrated that buying a home is too expensive because investors want to buy them to rent would also want ownership of their home (that they rent).
At best this will do nothing, at worst the unintended consequence is a spike in rental prices. The root of the problem is supply and demand, and they're not willing to look at that. Increasing supply means highrises and more building permits, and reducing demand means restricting immigration, both highly toxic subjects.
Lot of countries prevent foreign persons or institutions to own real estate for 100%. There has to be a local partner who owns the place for at least 50.1%
This is much more effective than adding a law which can never cover all edge cases. And there are a lot of those which make it possible to buy property anyway even with the new law in place.
Interesting to read this, it seems like there are already some rules that make renting a bit more difficult and less attractive.
I'd like to share a few points about what makes buying a house in Amsterdam (and the Netherlands in general) interesting:
- Amsterdam is growing and becoming the de fact European capital (english, tech jobs, etc) so it's growing a lot, and real estate prices are up
- Interest rates are very low (~2% on 30years fixed, if interests go down we can refinance after 5 years). So no risk of going up, and no risk of missing out when going down.
- 0 cash down necessary
- low cost of buying. We bought a "first time buyer package" for ~3000 euros which included real estate agent, notary, building inspection and financial evaluation. Only other expense we had was 500 euro fee for our mortgage.
- Practically no real estate tax (0.03789% of the official listed value)
- Prices are ~200-300k for a nice 1bedroom, 300-500 for nice 2 bedrooms. Prices seem reasonable compared to salaries.
So, in most cases, going from renting to buying a similar property is definitely worth it. You'll pay about the same monthly (all included).
To note, the buying market is pretty competitive (similar to SF) where people often over-big 10-20% on the asking price. I've gone to multiple open house, and helped ~5 other friends buy a place, and most buyers you see are young professionals / young families, and doesn't look like the market is saturated by landlords / investors.
Now, we looked into moving and renting our place in case we decide not to sell it:
- Can't rent on our mortgage
- We need to take a commercial mortgage, ~doubling the interest rate to 5%. This increase makes the monthly cost above what we would rent the place for
Those 2 last points to me make it clear that it's already pretty hard to just exploit the cheapness of buying/investing in properties and renting them (I looked myself to buy more properties and rent).
So this rule surprises me a little because the current housing market is already pretty regulated against renting and very supportive to buying. We definitely see much more owners, and much younger, than what we've seen on average in other cities we've lives (SF, NYC, Paris, Montreal).
I'm happy for you to have embarked on the journey of owning your home, but 0% downpayments and what sounds like an increasingly heating up market (people overbidding the asking price) should be a sign to be careful. Make sure to keep the 15-20% cash that is usual for downpayments in a liquid form in case there is a downturn. The people worst hit by real estate crises are those who take advantage of these "easy" ownership offers and then neglect to keep a cash buffer in case their mortgage goes into negative equity.
Like when the economy crashes and you lose your job.
It’s amazing to me that only 11 years ago the world say one of the worst housing crashes in a century, yet people think “it’s different this time” and keep pouring money into an already overheated asset.
I agree with you but it depends on the market I guess. Europe doesn't have a housing/mortgage that is as volatile and "extreme capitalist" as the US. Much more regulations around banking here.
Maybe you mean not any more? If I remember correctly, Ireland housing got absolutely hammered in a way that was at least as bad as the worst areas of the US (Miami, Las Vegas) back in 2008.
That's untrue and bad advice. The reality is that it depends (from country and bank), but often banks will have a margin call clause in the contract. In my experience they almost always have such a clause to cover their own ass. They'll not use it for relatively self contained cases, but when the shit hits the fan and there's a 2008 style downturn, they will, because they want to protect their balance sheets.
This clause will then hit you at the worst possible time, when the economic situation is just bad everywhere and you'll be expected to prop up your mortgage, only you can't if you have no cash and nobody will lend you because you are in negative equity.
If banks in your country do not have the ability to make margin calls while simultaneously making 0% down loans, you should probably think twice about putting your money there, because the moment they go belly up, your savings will be gone. Or, if your gov't guarantees savings, then expect massive inflation.
Downturns in the Amsterdam housing market are incredibly rare. My wife and I bought my first (her second) house in 2008, and a month after we bought it, the news said that for the first time in ages, housing prices in Amsterdam were dropping.
Despite that, we never had any trouble. Even during the crisis, house prices didn't drop much, they just spent more time on the market. We had been careful enough to make sure that in a pinch, my wife would have been able to pay the mortgage on her own (my income would have been too small for that), but even if we would have had to sell our house, I doubt we'd have lost a crippling amount on it (and the house we'd have bought instead would probably have been cheaper too).
After the crisis, things quickly recovered and we sold out house with €100k profit in 2017. (Of course our new house was more expensive too.)
The main risk he have, is that part of our mortgage is not automatically getting paid off. So even after our mortgage runs out, we'll still have some debt left unless we pay extra. These mortgages are now illegal: all mortgages need to paid off in a predictable manner, to ensure houses don't go too far under water even when the market goes down.
We have always overbid (but never too much) for the houses we bought, and when we sold, buyers also always overbid. It's how the market works here, I guess.
What you say is all true, but nothing of what you said is enough to displace the investors walking in and paying 20% over asking price in cash. And there are plenty.
I’ve recently learned that a whole building next to North Line terminal was taken off the market and sold wholesale to investors.
The problem is not the petty burgeois pulling a little speculative profit (oh well, there’s also that, see Airbnb) but the mega funds buying off whole block at a time because they can
I don't know the data, but you are probably right. Although at the same time Amsterdam has very little large buildings, so I don't know how much those large building increasing prices would put a lot of stress on the market overall.
It's a real "melting pot" and is very very desirable as a place to live. It's the center of youth and technology culture, lots of hacker spaces. There's huge youth communities, public garden projects, lots of alternative communities. I love visiting there and if I moved anywhere in Germany that would probably be the place. I have a lot of friends who moved there. Apparently one of the strongest start up cultures in Europe as well.
So, in most cases, going from renting to buying a similar property is definitely worth it. You'll pay about the same monthly (all included).
As someone who owns in SF, this is definitely not the case here.
For a $1.5M home in SF, the total monthly outlay includes mortgage ($5,557 @ 3.75% with 20% down), property taxes ($1,454), property insurance ($2,250) for a grand total of $9,262 per month. You could rent the same house for $6,000 per month. And that doesn't even include expected maintenance ($625 per month) and opportunity cost of your $300,000 down payment ($1,250 @ 5%). So grand total, you're spending over $11,000 per month or $5,000 more than the cost of renting.
The reason for this is appreciation. If you're house goes up in value by 5% per year, that $75,000 that more than covers the extra $60,000 you're paying over renting. Question is - will it keep going up that much?
yeah I know. We are planning to come back to the bay area in the next few years, and real estate is definitely the #1 issue we have. More expensive to buy, much more expensive to maintain (taxes, etc)
Probably because a lot of those people bought the same house for $600,000 10 years ago. Their monthly cost is likely less than rent.
I know someone who bought a house 5 years ago and rented it out. She had to cough up $1,000 per month to pay all expenses. Rent has now caught up so she's breaking even.
In the rest of the US where housing prices aren’t as inflated, it can actually be cheaper to own.
It might possible that most of the people in SF who own property have owned it for a long time. So for someone buying a house now, they would be paying a ton of money. If you bought the house more than 10 years ago, when prices were much lower, your mortgage would be much more reasonable and the monthly costs you would be paying would be less than what people are renting for currently.
Hence complaints of NIMBYism. The lack of new development in SF drives housing and therefore rental prices upwards, and so if you owned property before the bubble, you can now charge rent at the modern, high rental costs while paying a mortgage based on the lower pre-housing crisis prices. You could easily be pulling in thousands of dollars a month this way with a single rental property. So lots of people are now have a big incentive to fight against new development.
I guess you are in a high-income bubble. The average per-citizen income in Amsterdam is € 28,700. That gives you a max mortgage of 130k. I was able to find a 29 square meter studio for that amount, just outside the A10 ring.
So, an average income in Amsterdam gives you access to one single property currently on the market of 29 square meter.
I am indeed very high income compared to the average (dual income working for a US company) but I believe what you say here is true for most markets? If 2 average income citizen want to buy a house, that gives them access to 260k mortgage, which offer access to property.
But yes, Amsterdam indeed is an expensive market. The different with a lot of other places is that outside of the city is still very affordable and liveable (lots of public transport, safe, etc). Unlike most big cities.
While not perfect it's absolutely commendable, compare this to the borderline criminal state of real estate market in places like the UK or Vancouver where foreign investors and corrupted politics destroyed and alienated the middle class population...Imho real estate should be absolutely outside the possibility of speculation and 'investment', a house is for a family/person to own and live in not some mega conglomerate side business of rip off rental and overinflated selling prices.
The UK is awful. Worse than American cities. No property tax, non existent/weak tenant laws, and renters have to pay the council taxes (in the US the owner is usually responsible for all HOA and taxes). The deposit protection schemes seem more designed to benefit landlords too.
Totally agree, most of them are hard assed companies with no morals and very loose practices.
One place I used to rent from tried to swindle my deposit for "repairs" of things that were clearly just standard wear and tear over the years.
I argued till I was blue in the face and they eventually agreed with me on most of the things and agreed to "refund" me. They messed up somehow and transferred me 2x my initial deposit, normally I would absolutely let them know about their mistake but as they messed me around for months I didn't say a word and kept it. Suprise suprise they went out of business a few months later
Depending on the local laws, the 2x return of your deposit may not have been a mistake. They may have been legally obligated to return 2x of the deposit amount because they failed to return your correct deposit amount within a certain number of days.
Taxes and HOA just get rolled up into the rent. It's not like those aren't already impacting the price because the landlord must be the one to pay the money.
There are still important second order effects. Making those the responsibility of the renter makes it harder to comparison shop (remember what it used to be like buying plane tickets when everybody just showed the base fare?) and it means the renter bears the risk of any sudden increase in those costs.
That is the downside. The upside is renters have better insight into how voting to raise/lower taxes will affect their rent. In the US that is all rolled into rent, and as a result renters happily vote to raise the taxes in the area they live without realizing that it will come back in rent increases eventually. (though there is some time lag as other economic factors affect how much rent can be raised)
In the UK, yes. The owner is responsible for council tax when a property is empty. This varies across the country, it could be totally zero rated when the property is empty and unfurnished, or it could be that you have to pay entirely. Where I live, landlords can get one month free in any 12 month period for empty (no residents) and unfurnished (except for white goods) properties.
"However, some economists think that the worker bears almost the entire burden of the tax because the employer passes the tax on in the form of lower wages. The tax incidence is thus said to fall on the employee."
Yeah it feels a lot like the feudal system still exists in some small way with our rental system. Revenge evictions are common enough to be a well known problem. In public discourse the right of the landlord to do whatever they like with their tenancy agreements dominates and other viewpoints are still often marginalised, typically with whinges about difficult tenants and the apparent right of landlords to an early retirement while they leech off their tenants' work. A disproportionate number of MPs are landlords. Even Tony Blair made a killing from his own buy-to-let portfolio.
The last apartment I rented (15 years back) had an interesting mechanism for this: The rent was about $2000 but they applied something they called a "subsidy" of $400 off per month. Basically if you pissed them off they could immediately raise your rent by $400 per month to drive you out.
For the landlord side: Renting out my one house in London after I bought another one to live in (across the country). I had tenants who flat out refused to pay their rent after a few months living there. This went on for several years, and it took legal battles and numerous court fees to evict them. None of which they turned up to contest.
Before they left, they plastered globs of lard on the walls, and destroyed the kitchen floor and wall by rigging the water pipes to constantly overflow down the outside wall.
I was not allowed to enter the property to inspect it, nor was I allowed to "harass them" by speaking to them face-to-face, because they didn't want me to. I was powerless.
Yes, they lost their deposit, but I was out of pocket tens of thousands, which I basically couldn't afford. I maxed out my credit cards and bank account overdrafts. Even selling the house, it took me nearly 5 years to get back to zero.
I'm not saying that UK law is worse for landlords, but the laws aren't particularly on the side of landlords either.
I'm sure he/she means nepotism/graft/corruption getting the landlord extrajudicial favors.... though their comment seems a bit out of place in this context.
It's not even entirely a problem caused by the law, beobab also just didn't know the full extent of their rights as a property owner. Tenent protections are strong but they wouldn't have stopped beobab from getting them out sooner and inspecting the property for damage.
I did learn valuable lessons, yes. Not that lesson, though. That's a lesson that you might need to unlearn. It will hold you back from trying anything on your own cognizance.
I learned a lot about contracts. I learned a lot about tenant laws. I learned a lot about insurance. I learned that if you have a cleaner employed in the houses you rent, then you have a legal right to enter the property to "inspect their work". I learned a lot about different types of people.
I did not learn any way, shape or form, that "having connections to government" would have made my efforts any easier.
I take it you don't acknowledge the need for short or long-term rentals, either by migrant workers or low-income households who have no access or interest in taking home loans.
That only means that the state should not have the right to evict a homeowner from their private property, not that you have the right to live in someone else's home at someone else's expense.
The reality is that there are a lot of people who can't afford to own their own property.
The council/govenment simply cannot house everyone, and the population is growing faster than the rate new houses are built.
Private landlords actually solve a lot of people's problems by renting their properties out to said people. And the contract that is signed between the tenant needs to be a win-win situation for it to work.
Specifically speaking for people who are renting. The 'win' for them is that they have a place to stay, they do have a choice where they stay. If they want to stay in a 3 bed house, they'll need to pay whatever rate that rent is going for.
One problem is that some tenants try renting in a property they simply cannot afford. So when it's time to pay rent, they take advantage with the system and refuse to pay. It's actually really difficult to evict people from your rented properties even though they signed and agreed to a contract.
The 'win' for landlords is that they get rent. If you're a good tenant who looks after the property and pay rent on time, imagine that there is a problem with the property and the landlord doesn't get it fixed or refuses to get it fixed then really the tenants should aim to look for somewhere else to live. The landlord will lose out on a good loyal tenant.
I don't think its fair to claim that all landlords are parasites. Tenants can be horrible, landlords can be horrible, but unless the agreement is a win-win situation for everyone. Somebody is going to have a bad time.
I sometimes hear people muse about buying a house to rent it out, because it seems such easy money. I would never be able to do that, because renting out property is a real job with real risks and responsibilities, and it's not a job that I want.
I might rent out a house to a friend of a friend, but certainly not to a complete stranger.
I was going down that path a few years back, until I realized that after property tax and maintenance, it would be like taking on an extra part time job and only getting about $10K per year in return. And that's assuming they don't destroy the place.
IANAL if you have the refusal to pay in writing (even text message) then surely it's a straightforward matter to evict them via section 8 notice, if you have kept up your end of the tenancy agreement, or section 21 and wait 2 months then court? Also, if you suspected that "Structural damage that requires urgent attention" had occurred, then you are able to enter the property to carry out inspections/repairs without notice (Housing Act 1988), otherwise you need to give them minimum of 24hrs notice.
As a landlord in the UK you have tons of power, while it's great you didn't abuse them, why you didn't exercise these legal rights when these people abused your property?
Let's just say I would have done things very differently if I knew then what I know now. I learned a LOT in the whole process. I was a lot more naive back then, and could have done a lot of things a lot better.
£100k for a 2 bed terrace 30 minutes from Manchester and Leeds [0]. £78k for a 2 bed house [1] 35 minutes from Manchester and Liverpool, under an hour from Birmingham, and on HS2
I'm going to call you out on the tenants remaining in the property for "several years". That simply wouldn't happen unless you didn't follow the procedure to evict them.
UK laws are very much in the favour of the landlord.
That's a reasonable call, and to be fair to the tenants; it might have been less than I remember. I haven't got the details to hand, so I can't check.
But without going into detail, I definitely buried my head in the sand too much, and they did pay a small amount at one stage to make me think it might be okay. It was sixteen years ago now, and I've thankfully forgotten a lot of it.
I do remember that I had to restart the whole process when it was thrown out because a date was wrong on a letter. I wasted a whole heap of time trying to get the judge to reverse that decision rather than moving on and starting again.
Anyway, like I said, I was very naive back then, and made lots of mistakes.
"It was sixteen years ago now, and I've thankfully forgotten a lot of it."
Sorry you've had such crap tenants. 16 Years is a long time, and the laws could have changed on this in this time. So there is a good chance you are both right!
I want to come to this persons defense and say that if you own a single property and don't know rental laws really really well, you can get screwed over pretty easy. As with any field, the people who know the rules can screw over the ones that don't.
People that rent out a single property and then work a day job are running on a lot of trust and luck.
What I meant is that you shouldn't enter into an investment scheme and act like a victim because it blew up in your face. Nobody is going to cry over the poor, poor landlords
I bought just before the '07 crash with a 95% LTV. The value of the flat dropped 40% overnight.
4 years later when I had to move for work and family reasons, we were still in negative equity, so we had to rent it out. Fortunately we had good tenants, and the income just about covered the costs including the interest on the mortgage (which we could offset against tax, can't do that now), which was a good job as we ourselves were paying far more in rent elsewhere. Fortunatly we'd gone for an interest-only tracker mortgage, as we needed everything we were paying into savings to pay the rent on where we were actually living.
Eventually sold in 2016 for the price we paid 9 years earlier
I’m sorry you had to go through this. Alas, this can happen in most civilized countries that protect renters. We rent out an appartment in Austria, and had a similar, but less devastating situation. In the end, public welfare paid up for them, because they did live on welfare. Interestingly, the eviction failed because the renters just „forgot“ to move everything out of the apartment, and over the next 2y, welfare paid all dues because they couldn’t find a cheaper stay for them. Then, they moved out on their own.
The obvious answer for this problem is for the major housebuilders to adopt a 'build to rent model' rather than 'build to sell'.
It would eliminate the need for a middleman who is often borrowing money to fund the purchase himself, adding further inefficiencies to an already inefficient business model.
The prospect of builders becoming long-term landlords may also incentivize them to build a house that will last the course of the tenancy?
Best comment here. Sydney AU has the same problem. The government is addicted to stamp duty and doesn’t want to do anything about the negative gearing and other handouts for the rich baby boomers. The situation is completely fucked up.
Stamp duty is exactly backwards. They shouldn't tax transactions (that usually improve economic efficiency almost by definition), but they should tax holding land.
Negative gearing is a special kind of Australian crazy. Must be the drop bear bites.
So those who don't have the cash up front or credit to buy a house are SOL, so as migrant workers who made the mistake of looking for a job somewhere in the jurisdiction.
I don’t think the intention is to reduce rentals, just to stop prices from going up.
That said, you need very little cash at hand to buy a house in the Netherlands (in fact, a few years back you needed < €0), there’s no upfront payment. Credit is cheap (~2%) and abundant.
> I don’t think the intention is to reduce rentals, just to stop prices from going up.
The legislation described in TFA is quite literally designed to cut off the introduction of newly built houses in the rental market, including investments in real estate focused on that market segment.
TFA disagrees with you: "Amsterdam’s proposed laws wouldn’t stop new rental housing from being built—according to the city’s proposal, that housing would simply have to be proposed and approved as rental property in the first place."
Quite the opposite in fact. TFA is quite clear on how their aim is to stop new housing units to be used for rentals, and they even force an arbitrary process to approve exceptions to the ban by enabling local polititians to approve specific projects they may see as acceptable.
Nevertheless, the goal is quite clear: raise barriers to the introduction of rental properties.
The rule is for koopwoningen only - houses built for sale (owner-occupied). The market here is quite regulated and new builds have to provide a mix of owned, rented and social housing units. The limitation will just prevent the owned units from shifting to rentals as an investment.
No, you are misreading or misrepresenting what the article says. The measure is meant to stop houses that are meant for people to purchase and live in to be bought by investors to rent them out. The reason for that is that those investors are reducing the supply houses available for purchase, and driving the prices up.
Rental homes are still available for rent. Nothing changes there. The city invests a lot in affordable rental houses. That's not going to change. They just want to stop investors and speculators from snatching up the available houses.
Not really. With a slightly above modal salary, I can get a mortgage of roughly 180K, if I didn't have a student debt. A house, on average, will cost somewhere in the region of 300K this year.
Not that rent is more affordable though. Most not rent-controlled places require you to have a yearly income of around 50 times the monthly rent, which ensures it's nigh impossible to get any sort of decent place on a single income.
Of course, all of this is near the larger cities. In the countryside, you could probably get the same sort of place for two-thirds the money. However, you'd probably be travelling at least 1.5 hours one-way to your work.
No, they just rent a house that was actually meant for rental from a professional landlord, rather than an overpriced rental from an absentee landlord.
What is the difference between a professional landlord and an absentee landlord? Aren’t all landlords absentee and aren’t all landlords going to charge market rent?
Someone who rents out a house on one side of the country and then goes to live on the other side of the country, is not available to his tenants when they need him. Also, if this is the only house he owns, he's likely not an experienced landlord and may have no idea how to provide the services that his tenants need and deserve.
You could heavily regulate rentals and/or make rentals a service the government provides. That's how we fixed this problem for Water, Electricity, and Natural Gas.
> Amsterdam’s proposed laws wouldn’t stop new rental housing from being built—according to the city’s proposal, that housing would simply have to be proposed and approved as rental property in the first place.
We managed to solve the issue of "everyone needs water & electricity" by making them government services (or in some locales, private services required to service everyone). It's not a perfect system but it's certainly better than what we're doing with housing.
> We managed to solve the issue of "everyone needs water & electricity" by making them government services (or in some locales, private services required to service everyone).
Private services are still not public services, and paying private companies to follkw public service contracts has nothing in common in providing a publix service through a public institution.
The problem is that in Vancouver they're selling it... in Hong Kong, setting up real estate offices and recruiting foreign real estate agents sell the product outside the city.
There's no local demand for the housing at the prices that they want to get, so they have to go outside the city. This of course inflates demand and buyers with incomes beyond local Vancouver incomes crowd out locals.
Restricting home ownership as investment while not restricting apartment property investment or commercial property investment doesn't make things more fair.
It just puts property investment out of reach of the average middle class person and restricts social mobility.
e.g. a high-school drop-out plumber can afford to buy a house and rent it out based on just wages/credit, but he likely can't afford to do that with an apartment building.
“Homes” includes apartments. Commercial properties are, well, commercial, and don’t need any regulation of this kind since the goal is to ensure that people have access to housing.
Some people can't afford the transaction costs associated with buying and selling real estate every year or few. Clamping down on rentals hurts the economically weak.
Your xenophobia is showing, blaming "foreigners". Absentee landowners with vacant properties are a problem. Landlords are a valuable service provider in an economy.
I didn't read any xenophobia in the parent, only anger at speculative investment. It happens that investment firms from china and the middle east are very active.
Yeah a bit of context on Dutch society: people here truly believe in equality. Amsterdam, no matter how crazy hip it is, must remain open to all levels of society.
The government is given a mandate by the People to do whatever it takes to make sure Amsterdam doesn't turn into a millionaire playground. If that means violating capitalism and property rights they will do so without hesitation.
Are you saying it should be illegal to rent property?
Moreover, have you considered who is going to benefit from the Amsterdam law? Existing landlords! It’s rentseeking (literally) on the part of landlords who don’t want competition!
Yeah but it gets housing built - which is the only thing that ultimately help affordability in the long run. Vancouver is building rapidly and developing rough neighbourhoods into pleasant ones. Sure, that is difficult on those who have had cheap rent in slum areas but that is the cost of improvement. I'm a long time Vancouver downtown resident who got "priced out" of the market. As far as I can tell policies that encourages construction at all prices of the market improve a city the most.
The three problems I see with prohibiting renting are:
1) It doesn't solve the problem of affordable housing.
2) If the owner leaves the property vacant instead of renting, it makes the problem worse.
3) The less well off usually rent instead of buying, so prohibiting it disadvantages them.
While it's presently the trend to blame foreigners and/or investors for economic problems, I don't think this will end anywhere good.
If you have 8 households who want to live in 5 houses, there is no way to make them affordable to all 8. Full stop. Not with paying all 8 more. Not with rent controls. Not by making everyone own, or everyone rent. It's totally impossible.
The trend now seems to be that affordable housing will be allocated to a lucky few who win a government lottery. Whether this is a politically superior outcome to building more (and allowing the character of the neighborhood to change) is subjective.
Prohibiting renting will create downward pressure on property prices and make them more affordable. If you can't rent a property, then it is worthless to you other than as a straight-up investment. If Amsterdam paired this with an unoccupied-residence tax then it would probably drive prices low enough for all housing to be owned by occupants (since housing would be worthless otherwise).
If Amsterdam went even further and subsidized/required lenders to approve 0% down home ownership then they could likely fully solve the problem.
Yes, some people would still be priced out, but the equilibrium price under ideal circumstances would result in all units being owner-occupied (almost certainly at a lower monthly payment than renting would entail - there is less demand on the buy side since landlording and speculation are discouraged, and with 0% down financing nobody would be priced out of ownership due to lack of capital).
Why would the monthly payment be lower than renting? People are usually willing to pay more on mortgages than renting, since they get a house after 30 years or so (and of course, the person who is willing to pay the most gets the house).
Let's say 3 people are willing to pay $1500, $1600, and $1700/mo in rent. For owning, they are willing to shift an extra $1000/mo from saving in the stock market to home equity, paying $2500, $2600, $2700. There is only one house available.
For owning, the seller can charge a price where the mortgage works out to $2700/mo. The person willing to pay $2700 gets the house, and the others are priced out.
Now lets say a landlord comes in. He offers $2800/mo to buy it to rent.
The max he can rent it for is $1700/mo, so he does that. The same person gets the house, and the same people are priced out.
In every case, the price that is charged is determined by who can pay the most. Unless people are willing to pay less to own the house, I can't think of why the monthly mortgage payment would ever be lower than renting.
What a policy prohibiting renting actually seems to do, is force people to shift their (monthly) savings into real estate speculation as a condition of living there. There are some downsides to this. If the local economy is bad and you lose your job, it's likely your home value may not be good either. And people without substantial monthly savings to shift will be at a disadvantage.
The biggest argument I've seen in favor of encouraging home ownership, is that people cut back on spending in order to make their mortgage payment, and as a result save more overall (by building home equity savings instead of spending). But that's a pretty different outcome than making housing affordable.
1) Agreed. None of this increases the total housing stock, perhaps even lowers it. Limiting renting may reduce demand from investors, reduce prices below the rate you'd find in a market without rent-restrictions, and thereby reduce the incentive for new construction. That's mostly why I'm not a fan, particularly because there are already many subsidies and distortions in the Dutch housing market.
2) On paper not a problem. There's a law against vacancy in Amsterdam, you can and should get fined. But I have my doubts about enforcements, although they have a monitoring system in place.
3) Not sure how I feel about this one, there's another argument to be made as well that rent-restrictions have a price-dampening effect and may make purchasing possible for a group who'd otherwise be forced to rent in perpetuity. Plus very low-incomes do have substantial opportunities, more than half the housing stock is social housing in Amsterdam. But agreed, this policy can be unfavourable as well, it's just not necessarily always the case.
Housing stock has to increase, rent-restrictions don't help with that. And secondly Amsterdam has to cooperate more with neighbouring municipalities and regional transport infrastructure to spread the demand around. This latter part is really difficult, but if you don't solve this problem and create ever-centralising appeal in concentrating everything in Amsterdam, you can never outbuild the demand. At some point, people must be enticed to not live in Amsterdam. That requires investments into jobs, schooling, amenities etc outside of Amsterdam, as well as good infrastructure to connect it all.
Making sure that building enough affordable housing is possible for developers to begin with is of course not something that a NIMBY backed city council would ever do.
A flavour of this exists in Ireland, where the Government help to buy scheme offers up to €20,000 towards your new build house purchase if you are a first time buyer and commit to living in your home for the first 5 years.
Indeed. Canada does the same. “Let’s make it easier for people to buy a home!”, “Oh wow! Home prices have really gone up, let’s make it even easier!”, repeat.
375 comments
[ 3.4 ms ] story [ 441 ms ] threadA city of renters is a soulless city; less people are long-term invested and no one really buys into the community they live in.
I am beyond skeptical on this point. The young and dynamic people responsible for a city’s soul generally can’t afford to buy (I would guess, I have no data)
The intended consequences are more people being able to afford a house and home ownership has increased with most policies that I can think of. There are some consequences: rental contracts are very hard to find in Stockholm for instance, but those hardly seem unintended.
Thats only a first order approximation, but it seems plausible to me.
The local bands, and dances full of pretty single people? Mostly young people have the time and inclination for that, and they're less likely to be homeowners as you say.
But the volunteer coach of the children's football team, or the people who organise the annual artists' open studio? You can't take those sorts of responsibilities if you're moving away in a year or two, you'd almost be handing it over to someone else before you'd finished having it handed over to you!
Of course, hypothetically there's no reason a person renting a house can't rent it for 5 years or more - just in my country, that's rarely how it works out.
It's almost impossible for most people working in soulful / desirable / economic powerhouse locations to get a mortgage on a property there, so you see lots of wealthy investors take up the properties there and rent-seek to make themselves even richer.
That's before we even mention the children factor.
I’m not thrilled about renting, but neither do I want to gamble on purchasing housing in an expensive market when I may have to leave my job or even the state. My landlord is taking that risk with her capital and therefore deserves to be rewarded for it.
Unfortunately this works by making property less attractive to investors, who are the people with a large amount of capital, who typically are those people who have influence over the political classes...
Even simple things like not being able to charge random fees makes it much easier to compare two or more properties on level terms.
[1] https://mobilityexchange.mercer.com/Insights/quality-of-livi...
[2] https://www.theguardian.com/society/2017/dec/12/vienna-housi...
Two things they do really well: Keeping rent prices low by "dumping" and preventing ghettoisation by creating affordable housing in every district, not just some crappy areas.
[1] http://milwaukeeclt.org/2017/07/10/how-vienna-ensures-afford...
A city of renters is a city of dynamic ideas, young people, and social movement.
I’m more than willing to give up a bit of my extremely affluent lifestyle if it would genuinely help those around me who haven’t had the same economic opportunities as me.
I'm not. I'll actually spend resources to inhibit others, pull the ladder up. So to speak.
Good for you, though.
All well and good. It's fine and commendable to personally sacrifice but when you start advocating for stripping property rights from other people to do it, it stops being a personal sacrifice and more of an imposition on others' freedom.
What about unintended backfire consequences of this law: people who own a place and are traveling, unable to put their places on airbnb because of this law and thus leaving vacant houses anyways and constricting short-term rental supply?
But, this law does deny others the same economic opportunities as you. If you've lived in your older home and want to rent it out and move elsewhere, you are allowed to. However, your younger cousins who are buying just now (and thus considering newer homes) will not. Thus, this law simply protects the old guard while throwing the young people under the bus in the name of screwing the rich. Congratulations!
It's by no means that, and learn how to spell the fucking word before you use it incorrectly.
Moron.
I'm sorry, but while I agree with you that it's a violation of property rights, and that concerns me, it isn't in hope of a good faceless society.
I live in Spain, and the mediterranean coast is completely flooded with investors and foreigners buying property they don't live in, nor they rent for locals. Most of this places are now faceless, souless, tourist traps.
My sister inherited a flat in Ibiza, just in the city center, and I wouldn't go to live there no matter what. Nice for a week visit before foreigners flood in, though.
Same happend with Barcelona. Locals are being pushed out of the center and there has been years since it doesn't give the same feel as it used to, not to mention that everything feels designed as franchised for foreigners, expensive and increasingly soulless. They retain the architecture so that saves the look & feel of Barcelona, but it isn't anything similar of what used to be.
Same with the andalusian coast. More and more towns get investor's money for building resorts and all kind of crap.
I'm seeing this getting a little traction in my city, and I'm pretty worried. If that flood of money comes here to hit the property market, I won't be able to match the demand and I'll lose my lifestyle, and be forced to move somewhere else, at least to the outskirts of the city. So if my city council comes with a mechanism to prevent that, I'm gonna be on board, you can be sure of that.
You can buy a house now, instead of renting. This way, changes of property values are no longer a concern (unless property taxes are significant in Spain).
Also, if you wanted to build higher buildings to accommodate more people in the same space, good luck doing that in a city center, because there's no space for such thing.
I have seen a three story building knocked down in Hong Kong and a 20 story building rise in its place without any damage to the structural integrity of its neighbours. Engineers are really good at building things if they’re allowed to do so, even under significant constraints.
If there is a run down and empty building, then sure, but you won't find many.
Housing cannot simultaneously be affordable to everyone and a good investment. Society needs to pick one and write laws accordingly.
Furthermore, I'm not completely convinced that restricting rental property ownership to property management companies who can afford to build apartment complexes is inherently more equitable than letting a middle class person with good credit buy an extra house and rent it out. Where I'm from originally (Alberta), it was common for electricians/plumbers/tradesmen to buy an extra property with a combination of credit and wages and maintain it. It's a relatively simple and time-tested path for moving from working/lower middle class to being upper middle class or even wealthy.
(And it's possible they are already at that level, or near enough. It is after all the price point that a seller always tries to hit...)
At 7.2%, the doubling period is about ten years.
This should cool down the market.
In the end we can’t know what’s going to work until the experiment plays out which to my first point is why it’s very encouraging to see so many places trying different policies.
Why would that be the case unless the property was losing money. Typically people care about properties that provide an income.
Trying to mess with the free market like this almost always has a bunch of unintended consequences and rarely works as intended.
1) rental properties can still be built, they just have to be designated as such before their construction is approved
2) the price limits were designed to still make it possible to profitably build a new house, so the market will still produce new homes (maybe at a different rate)
3) they also put in place quotas for low, middle, and upper priced housing, guaranteeing a varied supply on the market.
4) middle income families will no longer need to compete with people buying investment rental homes, meaning they will be more able to buy affordable homes. This frees up rental property elsewhere in the system for someone else.
Housing markets are almost never free markets. It’s quite rare to see a completely free market for where and what kind of housing is built. This is at least an attempt to make sure that entire part of the population isn’t left out of owing a home. Maybe it works, maybe it doesn’t. That’s the great part of government — if it doesn’t work, those in charge can be replaced by the citizens. I’m interested to see where the experiment goes.
"I Will Do Anything to End Homelessness Except Build More Homes:" https://www.mcsweeneys.net/articles/i-will-do-anything-to-en....
There is no need for "creative" solutions; this is a straightforward supply-demand mismatch.
> It’s not yet been clarified, for example, how long an owner would have to occupy their home before being able to rent it out.
My GF has had offers of a years work in Melbourne and we have talked about it saying, it would be nice to do. Right now it would be easy to rent our place out, but it would be impossible if the rule stated that you must live in the place for 5 years.
This is not uncommon.
I like it here, so the plan wouldn't be to sell, but it would be nice to experience Australia for a year. But then again, plans can change.
https://imgur.com/a/lrV9C5I
It doesn't seem like a stretch to assume that the building rate will go down, and prices on older estates not affected by the law will go up. Unless the law is applied broadly across any and all estates, the end result will simply be, best case, that the market adjusts: worst case, that you end up with very unwanted and negative economical effects that no-one predicted.
The article states that "It’s not yet been clarified, for example, how long an owner would have to occupy their home before being able to rent it out" -- in my opinion the problem here is not where you draw the line, the problem is the drawing of the line. It will only create synthetic movements in the market and I don't think it will help in achieving the stated goal at all.
If one were inclined to be cynical, one could even assume that like with most political proposals, there are those who stand to gain from this, and they may be sponsoring it. Namely: whoever owns "old" real estate in Amsterdam. Is it also cynical to believe that politicians may know that this will not help, but are more interested in looking like they are "doing something about it", rather than resolving the issue, causing economical loss for property owners? The stated beneficiaries of this proposal are those weak in buying power claiming the "right" to live in a certain place without being priced out -- normally not a group with huge political leverage.
This drives prices up for homes in the city to a point that only if you are in a relationship and over 30 you might be able to buy your first 'home'.
There may be downsides to the measures proposed, but the fun part of government is that you can learn, change and adapt. Because you write the rules, you can change and you can use this ability to create a better living environment for people, which is the ultimate end goal.
This key problem is in no way solved by the political proposal, as "the rich" can move to buy older real estate instead.
> This drives prices up for homes in the city to a point that only if you are in a relationship and over 30 you might be able to buy your first 'home'.
The reason that prices are going up is because a lot of people want to spend a lot of money for the real estate, so in the end you must take a moral stand regarding who owns the right to live and/or own real estate in the city, and what this right is based on. Long term consistency is key here, because short lived stabs at the market like this one will not make any difference apart from creating volatility.
As soon as you create economical impediments to achieve your "moral", or "political" goals, you must ask yourself questions almost like a penetration tester: how would I exploit this law if I wanted to stand to gain from it economically? There's almost always a way, and unless you take this into account before creating the law, you're just making the problem worse, and more complicated (normally the same thing).
> the fun part of government is that you can learn, change and adapt
Government shouldn't be having fun with laws. They should be enacting laws that are thoroughly studied, where the possible outcomes are weighed against eachother to minimize risk and maximize the odds of success. Of course you always need to evaluate and adapt, but this proposal is sloppy to say the least, perhaps even malicious.
Low income people can't buy a house. They can only afford to rent. This law would criminalize the ability of poor people to live in the city, and it would do so to help the wealthy home owners.
This does nothing to prevent anyone from renting apartments, condos, or houses built over five years ago.
Poor people aren't the ones renting brand-new construction. The renters of new houses are going to be people who could have and would have bought the house, if super rich landlords weren't jacking up prices.
Do you see the obvious contradiction here?
All this law does is take away poor people's ability to rent a home, that will instead be sold to a wealthy home owner.
If you can afford to purchase a new home then you are way way more wealthy than someone who can only afford to rent that same home.
So the key thing here is to setup a society and government that can quickly respond + adapt and fix loopholes.
Cities don't exist for rich people to exploit. They are the places where we live our lives, the focus is quality of life.
Not some theoretical discussions about 'markets'.
Not always. This law has some very obvious loopholes that I would be very surprised if they weren't abused, should it ever become reality.
> So the key thing here is to setup a society and government that can quickly respond + adapt and fix loopholes.
Nobody's saying that this is a bad thing, and it doesn't in any way require badly thought out laws like this one.
> some theoretical discussions about 'markets'
"Some theoretical discussion" is exactly what is missing in this proposal, which is why it's so badly thought out and will miss the mark, to nobody's benefit but the property owners of what politicians arbitrarily decide is "old" real estate.
We've already tried this, it doesn't work. Housing is valued exclusively by the value of the housing around it. Building more housing raises the value (and therefore the cost) of all nearby housing, and does so continuously until the economy resets.
So, if you are a private equity firm, you love this, because it's a guaranteed safe place to park tons and tons of money.
But if you are a human who needs to buy housing to survive, more housing hurts you, because it drives the "fair-market value" for all nearby housing higher, making any specific unit less affordable to you personally. Paradoxically, the more housing construction happens, the less likely a person can actually get housing.
---
There isn't a "just supply vs demand" on housing, because supply isn't fungible, and (with the exception of perhaps California), the demand is not primarily driven by people, but by private equity. You can't out-build private equity, no matter how many cranes hit the sky, because (currently) the act of taking the loan to begin construction generates more of the private equity that you are trying to outbuild. To fix housing, you have to fix equity first, because (in most but not all cities) the finances are the problem, not some huge influx of new residents.
"We'll just out-build these high prices" is the housing equivalent of "we'll lose money on each transaction, but make up for it in volume".
Really? Maybe I'm being overly simplistic, but surely building enough dwellings to exceed the immediate demand would lead to prices dropping?
Could you point towards some links to learn more about this?
I thought Toronto was doing a good enough job at building lots of housing, and it still hasn't worked.
The issue is that in order to actually have prices dropping, you need to overbuild by a bit. But prices dropping is an undesirable outcome for real estate developers, who are almost exclusively responsible for building new housing in a city. Naturally they don't want to shoot themselves in the foot, so they will only ever build as much as to satisfy the current demand, but not quite, and try hard not to exceed it.
Even with government-issued social housing, there's no way to solve this: as long as there's any space for developers in a market, their new supply is going to adapt elastically to just underserve current demand.
The only thing that has practically lead to supply-related price drops is an irrational boom followed by a realization that developers have actually (unintentionally!) overbuilt this time. Unfortunately, irrational booms are also accompanied by prior fast price increases and a lot of pain on all sides, so we probably shouldn't advocate for one.
So, I'm not sure what a good solution is to actually provide more supply than needed and have prices dropping, but the free market is not it. Especially as real estate developers get better with forecasting demand.
Maybe demographics will help a bit in 20 years or so.
If you make everywhere effectively closer to everywhere else, there is more competition for "good location", and landowners can't charge as much for any specific spot. Or at least they can't until demand goes up again.
Tunnel width does not depend directly on the gauge but on the loading gauge, i.e. the size of the car. That is generally wider than would be required by the gauge.
On the other hand, using the same gauge as other rail means you can run trains across both old and new infrastructure.
There’s nothing special about private equity that gives it better access to markets like property.
“We’ll just out-build these prices” is the equivalent of “Charge more” when the problem is that you, a consultant, are too busy. If you keep doing it for long enough the problem goes away. Tokyo has grown by 1.5m people since 2001. House prices and rent have been basically flat throughout. Have the metropolitan areas you’re talking about added about 100,000 people a year for almost two decades?
Not sure about the claim that this has been tried. Most cities where building housing is happening are having rents increase at much lower rates than cities like SF that refuse housing construction.
Moreover if we didn’t just focus on private construction and returned to pre 1980s style construction of massive public housing projects, it seems likely to me that supply and demand could start working and hold rents steady or reduce them. (E.g. something interesting I saw on this recently https://twitter.com/RottenInDenmark/status/11080317257523363... )
Instead of public housing most anti-housing activity seems to be focusing on failed policies like rent controls.
That doesn't mean actually increasing the housing supply is a bad idea. Heck, maybe they could have a tax on vacant units to try to force those investment properties that are already built on to the rental market. Or if that's too hard to enforce, raise the property taxes enough where vacant units look undesirable as an investment.
I don't know about the speculative investment market, but at least for the rental market demand is people. I think there are very few people just renting a place with the intention of leaving it unoccupied forever. If there were affordable rental properties everywhere, I think it would be less of a problem even if real estate investments remained expensive.
Good policy beats discretion reliably and consistently for reasons of dynamic consistency. If you find yourself announcing a policy when you don’t even have the details ready you are doing it half assed. You certainly haven’t had tax lawyers or economists with expertise in mechanism design look over your policy proposals. You are an unserious person, making policy up on the fly, floating trial balloons while running off your mouth, a Trump or AOC.
Cities don’t exist for rich people to exploit but if you build less housing than there is demand for the richest will, on average, get more of what’s available than the poorer.
Hum. No. People don't want to spend a lot. But the whole system is built so owners can extract rent either from rentals or from buyers to which banks will lend enough money to meet the seller's price.
The fact that prices are going up proves this is not true.
No. Prices go up because demand is higher than supply and people are forced to live somewhere (as in "reasonably near their work") and are therefore forced to spend lots of money on this. They wouldn't do so if they did not have to.
I suspect this proposal has less to do with protecting middle class people's ability to be home owners, and has more to do with preventing perverse incentives around real estate development from having a long-term negative impact on Amsterdam's housing stock.
For instance: look at what's happening in Toronto. There are a massive number of high-end, 1-br condos being built because that's the type of property which makes sense as an investment instrument. Large swaths of the renting population are not served by that type of property, but investors are the customer for real-estate development, so that's what gets built.
It all comes down to the same discussion: what are the inherent rights of a native population when compared to foreign capital owners. It's subjective. Your opinion could be anywhere between "money buys you property rights" to "land is owned by living on it" and you wouldn't be objectively wrong in any case, since you're making a moral argument.
The problem appears when a moral argument should enter legal and political reality. When you look at this proposal through the lens of "what will be achieved", it's hard to be optimistic.
Even that sort of moral argument is short-sighted because natives benefit a lot by investments by foreign capital owners, specially in real estate.
Indeed it is, and in an honest democracy a question of this importance would be voted on in a referendum. But before doing that you'd first want the public to be informed of the facts. But in Canada the government won't even do that - we have no idea how much property is being purchased by foreign investors directly, or via proxy friends/relatives who have obtained Canadian citizenship.
And the funny thing is that the value of those properties comes to a large degree purely out of the overall rise in real estate prices, not because they satisfy the basic human need of a shelter. I wonder what the price of these properties will do when a real estate crisis hits. They are clearly not a place where people actually want to live.
No. Real estate is 80% driven by finance and tax policy.
The condo craze is just like the big box and franchises hotel boom a 15 years ago. Lots of money flows in, and the buildings get sold when they start losing money around the 15 year mark when depreciation catches up. Many of the marginal “luxury condos” will be shitty rentals in the 2030s when maintenance becomes a problem, and you’ll see them rapidly go down market.
By that time, the money will have moved on the the next thing, and we’re all stuck with the mess.
What mess would that be? A wealth of cheap condos in a market flooded by companies liquidating their investment?
You may recall 2008, when this phenomena happened with single-family homes. Condos are much more fickle investments.
After 2008 the housing market just more or less closed down. Nobody was selling as their mortgage was under water, so they just stayed where they were.
Even if we removed the concept of ownership, which is the only way to remove rent seeking behavior, how are we going to address the limited supply in the face of extreme demand?
The long term structural solution in my opinion is to create more desireable places to live. This involves significant wealth transfers from already wealthy places to investing in infrastructure, education, communities in other locations, thereby increasing the supply of desirable places to live. That’s really the only way prices can be brought down in real terms.
Have some trust in the market.
Ironically, although literally they are seeking rent they are not necessarily, economically speaking, literal rent-seekers. The economists' abuse of language remains an unfolding tragedy.
Economic rent seeking is characterised by seeking a cut of the profits without creating any new value. If you buy a new house and rent it out, you have just caused new wealth to be created and you are recovering the capital costs, so a reasonable argument can be mounted that it isn't technically rent seeking.
If you want to clamp down on rent seeking, the best and potentially only reasonable way is a land tax, so people can't profit off controlling an irreplaceable asset that doesn't require maintenance.
> This drives prices up for homes in the city...
One of several factors. Credit availability is also a big deal.
These houses already exist though. What new wealth is being created by purchase with intent to rent vs purchase with intent to occupy vs the builder offering the building for rent?
There is value being created here in the market for risk, flexibility, and capital allocation. Residents who prefer to rent rather than take on the commitment of ownership also capture some of this surplus.
I don't know much about the housing market, but arguing from theory, if the new build market is restricted to _only_ people who can afford to buy a house, that might be a much smaller group of people than individuals who want to live in the area but just cannot afford the cost of building a house. Renting is good for that not-enough-to-buy group.
For example, I couldn't afford to live in a city if I had to own my own home. I don't have that much money on hand. I'd rather rent land from a landlord than money from a bank. At least the landlord is carrying the risk.
The advantage of renting compared to buying is that you can occupy an house for a limited amount of time without being financially exposed to changes in the value of the house, without having to find a new buyer when you move out and without needing upfront capital or credit to buy it (there are of course also disadvantages to renting, so some prefer to buy instead).
Sure, the wealthy are buying to, but based on average debt levels, it’s mostly people who can’t afford it.
http://www.rbc.com/newsroom/reports/rbc-housing-affordabilit...
The Toronto and Vancouver markets are in territory that is shocking and in Vancouver's case, literally numerically impossible to sustain without constant infusions of external capital.
At the most successful, this proposal would leave rents the same, but lower house prices. Ie it would artificially give people rich enough to own a house an especially attractive high yielding instrument.
In practice, it will be even worse.
I think the pessimistic case is that foreigners+investors make convenient scapegoats, the public has reasonable demands but will fall for plans that sound good on paper and don't work, and entrenched interests ensure that the actual root causes will never be fixed.
If you think about it, if 8 households want 5 housing units, there's just no way it can be affordable to all 8. Not by paying the 8 more, not by discouraging renting or owning, not by prohibiting investment etc.
The only things I can think of that could actually solve the root cause are:
1) Build more housing
2) Increase the housing available somehow without building more (tax units that are left empty, allow renting places that weren't allowed before).
3) Decrease the demand for housing. Maybe try to drive high-paying jobs away, or try to raise the minimum wage high enough that business go under.
Otherwise I just don't see anything else that could work, without creating some special class that gets affordable housing while everyone else doesn't (maybe the lucky people win government lotteries or inherit rent controlled apartments).
Well, no. The only reason they can expect the rent is because the tenant is unable to buy. If there were more housing that was within reach to be bought, then rents would go down, and the landlords would find themselves unable to rent profitably, and would thus sell the home at the market rate.
As with all affordable housing 'issues', the answer is to build more housing.
The default supply-demand dynamic doesn't generally apply to urban real estate. Supply is very slow to react to market changes, and is limited by all sorts of things that aren't price. In a lot of cities, prices (within reason) don't really affect supply at all.
First, building takes time and houses last a long time, so supply is unlikely to grow by more thana couple of % pa. Second, most of the space is taken and/or limited by planning, not price. Changing planning policies and improving transport is what actually gets a city with 250k houses to 300k.
Often, you'll find that people don't actually want the city to change/grow much and prevent it politically
The upshot is that is a supply-insensitive-to-demand market (the opposite of the cocaine market, economics teachers like for examples). If demand goes up, prices go up. Supply stays about the same. The inverse is that if price is held artificially low, this doesn't really dampen supply much.
Imagine manhatten house prices doubled tomorrow. How much extra housing do you think this would lead to?
All that said, this sounds like cheap politics. Developers complaining? That's probably a political point in amsterdam. It tick the do something box. Upper middle class people will get their new house a little cheaper (less competition). The new neighborhoods will be more middle class (and ethincally dutch), because owner occupiers tend to be these things. The rental market will be marginally tighter, as this grows the own/rent ratio a little.
A lot. Rising prices would encourage the development of non-NYC cities. As those cities developed, some portion of Manhattanites and those thinking of moving to Manhattan would choose to move to the new cities. As the new city develops further, Manhattan becomes that much less attractive as a place to work until such time as Manhattan RE prices again drop / fail to rise, and vacancy rates increase. Vacant units = extra housing.
Economic policy has left so much capital sitting around doing nothing that even marginal developments that are ultimately money losers are getting built everywhere.
Local governments ultimately are accountable to the people, and it’s appropriate for them to think about the impact on the civic space of these developments, that are often ultimately bad for the community.
Real estate is among the sketchiest of industries, and in the US at least almost all commercial projects are implicitly subsidized by the government. IMO anything that extracts value from developers is a good thing.
If the demand for houses from people who want to buy them to live in is greater than the supply of houses, nothing. The houses will still be built and sold, just to different people.
Here you posit that the global balance will be negative, but your supposition is mostly based on the assumption that regulating the free market has always net bad consequences. Which is a point of view which has been pushed VERY strongly in the last decades, but which only the most idealogical anarcho-capitalists can fully believe: try to have no regulation in, eg, food production, and people start dying.
As for this measure: we can all agree that it will depress prices for new homes, and increase prices for older homes. Is this going to be a net positive or negative for the middle class who wants to live in Amsterdam? It depends a lot on the price sensitivity of the construction of new homes. I suppose that planners in the city know more about this than me, and maybe you, and did their own projections. If they go on, we'll see the results.
You also have to bear in mind that a significant chunk of properties in NL is owned by housing associations, this new rule only applies to individuals.
An interesting sidenote is this comment from one of the municipal administrators:
> It would be even better if we could also apply this rule to existing housing, but we think that requires the law to be changed.
Dutch source: https://nos.nl/artikel/2275897-amsterdam-wil-verbod-op-verhu...
The status quo seems like a given, but it's maintained by actions too.
We choose everyday not to change it, and this choice often produces outcomes that are counter productive.
To not change things is literally a conservative programme, and this usually serves the interests of the wealthy.
It's obvious even from the headline that this "ban" only applies to newly built homes, meaning that if you own an "older" home (whatever the definition of that ends up being), this does not apply to you. So in a perverted sense, being an Amsterdam home owner may be beneficial, since the politicians are rigging the market to your advantage, if you are an "older" home owner.
As for renters of these "older" homes, I'd say the outcome is fairly predictable: your rent will skyrocket as the demand for your landlords real estate increases, unless there are already other political tools in place to cap rents.
But there have been long (decade+) stretches when I actively did not want to own. I was single, or I knew my family size would change and didn't want to buy a huge house, or I knew I would only be in the market for a few years.
The transaction costs of buying and selling each time would have been probably 5-10% of the total price of the house (broker fee, mortgage fees, inspections, etc). It simply would not have made sense to buy and sell a house every time I moved.
Having plenty of rentals available made it easy to move to where I needed to be, in a house size that made sense (neither too big nor small), in a cost-effective way.
The answer of "don't move so much" cuts income mobility. I moved to the SF Bay Area because it offered higher salaries. And it wouldn't solve the issue of family size changing.
(I haven't yet done the reverse -- which is to rent out the house I now own, but if I get a job offer somewhere else it'd be silly to force a sale to make it impossible for me to come back.)
If you're close to the center, it's more expensive.
What kind of area do you live in Scotland?
Imagine if it was flipped around: new houses cannot be sold, and can only be rented out. Would that be reasonable?
I totally understand why people dislike speculators who buy houses and let them sit empty. I get why they dislike investors who buy properties and put them out for short-term rentals like AirBnB. But getting upset at long-term rentals? Why? Lots of people rent, for many good reasons. Especially poorer people. What’s so terrible about serving that market? If you think the landlords are making too much money, bring prices down by increasing the supply i.e. the exact opposite of this plan.
One of the drawbacks though is, since it only apply to building that have been build with help from the city (has far as I know), it can sometimes, if done poorly, create slum with huge bloc of social housing. Nowadays, they usually try to spread the construction more through out the city and make more diverse building to avoid this.
I'd like to share a few points about what makes buying a house in Amsterdam (and the Netherlands in general) interesting:
- Amsterdam is growing and becoming the de fact European capital (english, tech jobs, etc) so it's growing a lot, and real estate prices are up - Interest rates are very low (~2% on 30years fixed, if interests go down we can refinance after 5 years). So no risk of going up, and no risk of missing out when going down. - 0 cash down necessary - low cost of buying. We bought a "first time buyer package" for ~3000 euros which included real estate agent, notary, building inspection and financial evaluation. Only other expense we had was 500 euro fee for our mortgage. - Practically no real estate tax (0.03789% of the official listed value) - Prices are ~200-300k for a nice 1bedroom, 300-500 for nice 2 bedrooms. Prices seem reasonable compared to salaries.
So, in most cases, going from renting to buying a similar property is definitely worth it. You'll pay about the same monthly (all included).
To note, the buying market is pretty competitive (similar to SF) where people often over-big 10-20% on the asking price. I've gone to multiple open house, and helped ~5 other friends buy a place, and most buyers you see are young professionals / young families, and doesn't look like the market is saturated by landlords / investors.
Now, we looked into moving and renting our place in case we decide not to sell it: - Can't rent on our mortgage - We need to take a commercial mortgage, ~doubling the interest rate to 5%. This increase makes the monthly cost above what we would rent the place for
Those 2 last points to me make it clear that it's already pretty hard to just exploit the cheapness of buying/investing in properties and renting them (I looked myself to buy more properties and rent).
So this rule surprises me a little because the current housing market is already pretty regulated against renting and very supportive to buying. We definitely see much more owners, and much younger, than what we've seen on average in other cities we've lives (SF, NYC, Paris, Montreal).
It’s amazing to me that only 11 years ago the world say one of the worst housing crashes in a century, yet people think “it’s different this time” and keep pouring money into an already overheated asset.
It’s going to be interesting!
This clause will then hit you at the worst possible time, when the economic situation is just bad everywhere and you'll be expected to prop up your mortgage, only you can't if you have no cash and nobody will lend you because you are in negative equity.
Despite that, we never had any trouble. Even during the crisis, house prices didn't drop much, they just spent more time on the market. We had been careful enough to make sure that in a pinch, my wife would have been able to pay the mortgage on her own (my income would have been too small for that), but even if we would have had to sell our house, I doubt we'd have lost a crippling amount on it (and the house we'd have bought instead would probably have been cheaper too).
After the crisis, things quickly recovered and we sold out house with €100k profit in 2017. (Of course our new house was more expensive too.)
The main risk he have, is that part of our mortgage is not automatically getting paid off. So even after our mortgage runs out, we'll still have some debt left unless we pay extra. These mortgages are now illegal: all mortgages need to paid off in a predictable manner, to ensure houses don't go too far under water even when the market goes down.
We have always overbid (but never too much) for the houses we bought, and when we sold, buyers also always overbid. It's how the market works here, I guess.
I’ve recently learned that a whole building next to North Line terminal was taken off the market and sold wholesale to investors.
The problem is not the petty burgeois pulling a little speculative profit (oh well, there’s also that, see Airbnb) but the mega funds buying off whole block at a time because they can
Again I don't know, so you are probably right.
I would argue this is more true for Berlin, since it has English, tech jobs and the government of the biggest European national economy.
As someone who owns in SF, this is definitely not the case here.
For a $1.5M home in SF, the total monthly outlay includes mortgage ($5,557 @ 3.75% with 20% down), property taxes ($1,454), property insurance ($2,250) for a grand total of $9,262 per month. You could rent the same house for $6,000 per month. And that doesn't even include expected maintenance ($625 per month) and opportunity cost of your $300,000 down payment ($1,250 @ 5%). So grand total, you're spending over $11,000 per month or $5,000 more than the cost of renting.
The reason for this is appreciation. If you're house goes up in value by 5% per year, that $75,000 that more than covers the extra $60,000 you're paying over renting. Question is - will it keep going up that much?
Edit: updated with actual numbers.
I know someone who bought a house 5 years ago and rented it out. She had to cough up $1,000 per month to pay all expenses. Rent has now caught up so she's breaking even.
In the rest of the US where housing prices aren’t as inflated, it can actually be cheaper to own.
Hence complaints of NIMBYism. The lack of new development in SF drives housing and therefore rental prices upwards, and so if you owned property before the bubble, you can now charge rent at the modern, high rental costs while paying a mortgage based on the lower pre-housing crisis prices. You could easily be pulling in thousands of dollars a month this way with a single rental property. So lots of people are now have a big incentive to fight against new development.
So, an average income in Amsterdam gives you access to one single property currently on the market of 29 square meter.
But yes, Amsterdam indeed is an expensive market. The different with a lot of other places is that outside of the city is still very affordable and liveable (lots of public transport, safe, etc). Unlike most big cities.
One place I used to rent from tried to swindle my deposit for "repairs" of things that were clearly just standard wear and tear over the years.
I argued till I was blue in the face and they eventually agreed with me on most of the things and agreed to "refund" me. They messed up somehow and transferred me 2x my initial deposit, normally I would absolutely let them know about their mistake but as they messed me around for months I didn't say a word and kept it. Suprise suprise they went out of business a few months later
Example: 21 days for some areas
Also, what happens when a property is vacant? Do taxes revert to the owner, or do they not get paid?
(Basically, a landlord bears the economic burden of a land value tax.)
"However, some economists think that the worker bears almost the entire burden of the tax because the employer passes the tax on in the form of lower wages. The tax incidence is thus said to fall on the employee."
This is much closer to reality than the contrary
The last apartment I rented (15 years back) had an interesting mechanism for this: The rent was about $2000 but they applied something they called a "subsidy" of $400 off per month. Basically if you pissed them off they could immediately raise your rent by $400 per month to drive you out.
Before they left, they plastered globs of lard on the walls, and destroyed the kitchen floor and wall by rigging the water pipes to constantly overflow down the outside wall.
I was not allowed to enter the property to inspect it, nor was I allowed to "harass them" by speaking to them face-to-face, because they didn't want me to. I was powerless.
Yes, they lost their deposit, but I was out of pocket tens of thousands, which I basically couldn't afford. I maxed out my credit cards and bank account overdrafts. Even selling the house, it took me nearly 5 years to get back to zero.
I'm not saying that UK law is worse for landlords, but the laws aren't particularly on the side of landlords either.
It seems like if you had the appropriate connections to government, this process would've been easier?
I learned a lot about contracts. I learned a lot about tenant laws. I learned a lot about insurance. I learned that if you have a cleaner employed in the houses you rent, then you have a legal right to enter the property to "inspect their work". I learned a lot about different types of people.
I did not learn any way, shape or form, that "having connections to government" would have made my efforts any easier.
Can you elaborate? Help us to understand your point of view.
I take it you don't acknowledge the need for short or long-term rentals, either by migrant workers or low-income households who have no access or interest in taking home loans.
That only means that the state should not have the right to evict a homeowner from their private property, not that you have the right to live in someone else's home at someone else's expense.
The council/govenment simply cannot house everyone, and the population is growing faster than the rate new houses are built.
Private landlords actually solve a lot of people's problems by renting their properties out to said people. And the contract that is signed between the tenant needs to be a win-win situation for it to work.
Specifically speaking for people who are renting. The 'win' for them is that they have a place to stay, they do have a choice where they stay. If they want to stay in a 3 bed house, they'll need to pay whatever rate that rent is going for.
One problem is that some tenants try renting in a property they simply cannot afford. So when it's time to pay rent, they take advantage with the system and refuse to pay. It's actually really difficult to evict people from your rented properties even though they signed and agreed to a contract.
The 'win' for landlords is that they get rent. If you're a good tenant who looks after the property and pay rent on time, imagine that there is a problem with the property and the landlord doesn't get it fixed or refuses to get it fixed then really the tenants should aim to look for somewhere else to live. The landlord will lose out on a good loyal tenant.
I don't think its fair to claim that all landlords are parasites. Tenants can be horrible, landlords can be horrible, but unless the agreement is a win-win situation for everyone. Somebody is going to have a bad time.
https://news.ycombinator.com/newsguidelines.html
I might rent out a house to a friend of a friend, but certainly not to a complete stranger.
The goal is to have a property pad off by tenants in 20-30 years so you have a nice nest egg to add to your 401K.
Best investment are certain multi-unit properties - thats where the math works the best.
As a landlord in the UK you have tons of power, while it's great you didn't abuse them, why you didn't exercise these legal rights when these people abused your property?
[0] https://www.rightmove.co.uk/property-for-sale/property-69983... [1] https://www.rightmove.co.uk/property-for-sale/property-80308...
UK laws are very much in the favour of the landlord.
But without going into detail, I definitely buried my head in the sand too much, and they did pay a small amount at one stage to make me think it might be okay. It was sixteen years ago now, and I've thankfully forgotten a lot of it.
I do remember that I had to restart the whole process when it was thrown out because a date was wrong on a letter. I wasted a whole heap of time trying to get the judge to reverse that decision rather than moving on and starting again.
Anyway, like I said, I was very naive back then, and made lots of mistakes.
Sorry you've had such crap tenants. 16 Years is a long time, and the laws could have changed on this in this time. So there is a good chance you are both right!
4 years later when I had to move for work and family reasons, we were still in negative equity, so we had to rent it out. Fortunately we had good tenants, and the income just about covered the costs including the interest on the mortgage (which we could offset against tax, can't do that now), which was a good job as we ourselves were paying far more in rent elsewhere. Fortunatly we'd gone for an interest-only tracker mortgage, as we needed everything we were paying into savings to pay the rent on where we were actually living.
Eventually sold in 2016 for the price we paid 9 years earlier
https://news.ycombinator.com/newsguidelines.html
It would eliminate the need for a middleman who is often borrowing money to fund the purchase himself, adding further inefficiencies to an already inefficient business model.
The prospect of builders becoming long-term landlords may also incentivize them to build a house that will last the course of the tenancy?
Developers (who hire builders) go to market for finance - they don't have the funds lying around.
Those financiers want a quickish (< 3/5 yrs) return, not a long term investment(20+ years).
Negative gearing is a special kind of Australian crazy. Must be the drop bear bites.
That said, you need very little cash at hand to buy a house in the Netherlands (in fact, a few years back you needed < €0), there’s no upfront payment. Credit is cheap (~2%) and abundant.
The legislation described in TFA is quite literally designed to cut off the introduction of newly built houses in the rental market, including investments in real estate focused on that market segment.
Where I live, to cut down a tree, you can get it approved by council. The problem is, they do not approve any applications.
Quite the opposite in fact. TFA is quite clear on how their aim is to stop new housing units to be used for rentals, and they even force an arbitrary process to approve exceptions to the ban by enabling local polititians to approve specific projects they may see as acceptable.
Nevertheless, the goal is quite clear: raise barriers to the introduction of rental properties.
Rental homes are still available for rent. Nothing changes there. The city invests a lot in affordable rental houses. That's not going to change. They just want to stop investors and speculators from snatching up the available houses.
Not that rent is more affordable though. Most not rent-controlled places require you to have a yearly income of around 50 times the monthly rent, which ensures it's nigh impossible to get any sort of decent place on a single income.
Of course, all of this is near the larger cities. In the countryside, you could probably get the same sort of place for two-thirds the money. However, you'd probably be travelling at least 1.5 hours one-way to your work.
What problem would that solve? Certainly not any of the problems covered by the article.
> Amsterdam’s proposed laws wouldn’t stop new rental housing from being built—according to the city’s proposal, that housing would simply have to be proposed and approved as rental property in the first place.
>Imho real estate should be absolutely outside the possibility of speculation and 'investment'
Private services are still not public services, and paying private companies to follkw public service contracts has nothing in common in providing a publix service through a public institution.
There's no local demand for the housing at the prices that they want to get, so they have to go outside the city. This of course inflates demand and buyers with incomes beyond local Vancouver incomes crowd out locals.
It just puts property investment out of reach of the average middle class person and restricts social mobility.
e.g. a high-school drop-out plumber can afford to buy a house and rent it out based on just wages/credit, but he likely can't afford to do that with an apartment building.
Your xenophobia is showing, blaming "foreigners". Absentee landowners with vacant properties are a problem. Landlords are a valuable service provider in an economy.
The government is given a mandate by the People to do whatever it takes to make sure Amsterdam doesn't turn into a millionaire playground. If that means violating capitalism and property rights they will do so without hesitation.
Moreover, have you considered who is going to benefit from the Amsterdam law? Existing landlords! It’s rentseeking (literally) on the part of landlords who don’t want competition!
1) It doesn't solve the problem of affordable housing.
2) If the owner leaves the property vacant instead of renting, it makes the problem worse.
3) The less well off usually rent instead of buying, so prohibiting it disadvantages them.
While it's presently the trend to blame foreigners and/or investors for economic problems, I don't think this will end anywhere good.
If you have 8 households who want to live in 5 houses, there is no way to make them affordable to all 8. Full stop. Not with paying all 8 more. Not with rent controls. Not by making everyone own, or everyone rent. It's totally impossible.
The trend now seems to be that affordable housing will be allocated to a lucky few who win a government lottery. Whether this is a politically superior outcome to building more (and allowing the character of the neighborhood to change) is subjective.
If Amsterdam went even further and subsidized/required lenders to approve 0% down home ownership then they could likely fully solve the problem.
For rents, if 8 people want 5 units, the rent will be high enough that 3 people are priced out.
For owning, if 8 people want 5 units, the mortgage payment will be high enough that 3 people are priced out.
I fail to see any difference.
I do think that discouraging unoccupied properties is a good idea though.
Let's say 3 people are willing to pay $1500, $1600, and $1700/mo in rent. For owning, they are willing to shift an extra $1000/mo from saving in the stock market to home equity, paying $2500, $2600, $2700. There is only one house available.
For owning, the seller can charge a price where the mortgage works out to $2700/mo. The person willing to pay $2700 gets the house, and the others are priced out.
Now lets say a landlord comes in. He offers $2800/mo to buy it to rent.
The max he can rent it for is $1700/mo, so he does that. The same person gets the house, and the same people are priced out.
In every case, the price that is charged is determined by who can pay the most. Unless people are willing to pay less to own the house, I can't think of why the monthly mortgage payment would ever be lower than renting.
What a policy prohibiting renting actually seems to do, is force people to shift their (monthly) savings into real estate speculation as a condition of living there. There are some downsides to this. If the local economy is bad and you lose your job, it's likely your home value may not be good either. And people without substantial monthly savings to shift will be at a disadvantage.
The biggest argument I've seen in favor of encouraging home ownership, is that people cut back on spending in order to make their mortgage payment, and as a result save more overall (by building home equity savings instead of spending). But that's a pretty different outcome than making housing affordable.
2) On paper not a problem. There's a law against vacancy in Amsterdam, you can and should get fined. But I have my doubts about enforcements, although they have a monitoring system in place.
3) Not sure how I feel about this one, there's another argument to be made as well that rent-restrictions have a price-dampening effect and may make purchasing possible for a group who'd otherwise be forced to rent in perpetuity. Plus very low-incomes do have substantial opportunities, more than half the housing stock is social housing in Amsterdam. But agreed, this policy can be unfavourable as well, it's just not necessarily always the case.
Housing stock has to increase, rent-restrictions don't help with that. And secondly Amsterdam has to cooperate more with neighbouring municipalities and regional transport infrastructure to spread the demand around. This latter part is really difficult, but if you don't solve this problem and create ever-centralising appeal in concentrating everything in Amsterdam, you can never outbuild the demand. At some point, people must be enticed to not live in Amsterdam. That requires investments into jobs, schooling, amenities etc outside of Amsterdam, as well as good infrastructure to connect it all.
https://wolfstreet.com/2019/03/21/billions-in-toronto-real-e...
Completely short-sighted.