Exactly. Imagine if the supply of new cars dropped through the floor and prices shot up, especially for used cars.
Oh wait, this actually happened during the pandemic and nobody was like, "oh this is good, people's car equity is going up!" because with things that aren't houses people have a saner view of finances.
Hah, so this becomes the same trap as thinking that way about a primary home. Do they have a plan for selling to realize their gains? Do we get to look forward to car-equity lines of credit or reverse car loans where people try to have their cake and eat it?
Now imagine people start trying to ban car companies from making new cars, because they'll probably just be luxury cars for brogrammers anyway, plus more cars means less parking availability!
I'd be interested to see more of what the likes of Singapore do, especially for larger metropolitan areas. As I understand it, and I could be way wrong here, but I think there's a government office that buys and sells properties, but with restrictions on price and who can buy through the schema. Anyone else is totally free to conduct private property transactions, but get slapped with an almost-unmanageable property tax, making it more economical to go through official channels. This then lets the government rather than the market set the fair rate for a particular house in a particular area.
You might also be interested in checking out Sweden’s public housing policies. They vary slightly from one municipality to the next, but an interesting concept overall.
Sweden Public housing is terrible. You get in the queue at 16/18 and maybe maybe when you're 30 you can get a nice 2 rooms apartment on the suburbs. Except if you managed to either buy someone's contract illegally, or use family connections to get in front of the queue. If you are a recent immigrant there is basically no point going in the queue and you will be forced to expensive second hand contract and move every year as they expire.
And then there's no logic to prices. You will get something cheaper in your 50s because you waited so long that you can finally get a nice spacious apartment for no money at all in the city center, while a student will have to pay more than that to get a shitty corridor room in the suburbs. Real life example: a friend paying 6000kr for a room in the suburbs as a student vs a 40yo lady with a good income paying the same for a 2 bedroom appartment in the center (market rent for second hand contracts for such a flat is about 19 000kr). And then you have newly built public housing in the suburbs that has prices 2-3 times more expensive than the old ones in the center for the same size, but those you can get without waiting whereas the old ones need more than 20 years of queue to get.
It is probably the most broken system in Sweden, but it kind of seems to be by design to be honest. I would actually have liked a well functioning and supplied public housing market, compared to the annoying parts of the private market in most countries, but swedish rules have just made it a nightmare instead
It is the same system in Denmark. It started out with good intentions but has now been skewed to create more inequality.
The property tax in some new areas even in the suburbs is more than or only slightly less than the total rent in the some social housing in the center of the city. Some of these areas do not even have public heating.
It has become reverse socialism, steal from the poor and subsidise the rich.
The reason why the price between the student apartment and the regular apartment differs so much has a lot more to do with when they were built. The 2 room bedroom apartment was likely built during a time when building was much cheaper. Student apartments on the other hand are usually much newer.
I'm not sure about Denmark or Sweden, but when I was living in England a few years back, the right-wing tabloid press used housing policy as basically a cudgel to drive voters into the arms of right-wing politicans. The basic story they seemed to run every few weeks was some immigrant (preferably Middle-Eastern) family who got a free house that was denied to locals. This kind of story was what drove a lot of voters into the mess of Brexit that they're still in.
Public housing in Singapore is affordable if you win the ballot for a new unit. Otherwise the secondary market is allowed to float and basically the only restriction is that they must be sold to Singaporeans (i.e. citizens or permanent residents). I don't think it's really done much to curb the exuberance, there's plenty of talk of flipping these units once the minimum occupancy period (5 years) is up.
This was an explicit goal of housing policy in the US 100 years ago. Read any text from that time period and you will see that housing was viewed as an investment and the foundation of wealth. Policy was therefore supportive of this view.
It's time we revisited this now that the country looks very different.
- For one, there is a large trend towards urbanization which changes the makeup of the country.
- The 30 year fixed-rate mortgage and mortgage interest deduction (now capped, and less impactful given higher standard deduction amounts) have been a large contributor to housing values being distorted from normal market prices.
- Throw in low interest rates, widespread speculation, financialization of real estate (ABNB, loanmls.com, etc)
you end up with a human right being divvied up by institutions, speculators, and an aging wealthy populace that has no interest in sharing the pie.
“The 30 year fixed-rate mortgage and mortgage interest deduction (now capped, and less impactful given higher standard deduction amounts) have been a large contributor to housing values being distorted from normal market prices.”
I’m not sure how much of a factor that is - here in Australia our house price : household income ratio is, if anything, even more deranged than it is in the US, and 30 year fixed rates are unheard-of here - maybe 2 year fixed rates at certain times, but usually most mortgages are variable (and usually at higher rates than in the US).
The 30 year fixed-rate mortgage and mortgage interest deduction...have been a large contributor to housing values being distorted from normal market prices.
That should be easy to test. Hardly any other country has 30 year fixed rate mortgages and lots of countries have far lower mortgage interest deduction. Would be interesting to measure the distortions in those countries and compare to the US.
Canada has no mortgage interest deduction and feels it has a real problem with vacant/investment housing (particularly in Toronto or Vancouver). Given that it’s adjacent to the us this should give you useful data. But I think a big problem is that more housing would result in lower house values which would bother the crap out of oldies and conservatives.
It’s a retirement piggy bank that you can tap via HELOC.
After certain age, reverse mortgages become a potential new source of income, so in short term one would be interested in rapid appreciation of underlying property.
With the exception of people who are landlords for the purposes of mutual aid. We rented a room out for a bit, but only charged "what you could pay" with a hard upper cap of "what it costs is to maintain the unit".
We have people live with us for free, for in kind services, or paying whatever they could afford and still be saving money.
I've lived in shared; government subsidised; private association, and private-landlord housing. Currently have mortgaged home. As someone who has never had a problem in the private sector, quite the opposite, why shouldn't private landlords exist?
(Personally, my beef is with private utility companies, but even so....).
I don't understand this at all. There are certainly plenty of problems in the housing market, but the existence of landlords isn't one of them. Even if you ignore the substantial amount of work it takes to actually maintain a property, find and deal with tenants, the basic tenets of capitalism still apply: somebody has to allocate capital in a speculative manner to predict future needs.
It is very easy for a landlord to lose their shirt in even conservative investments. Landlords justify their rate of return due to the financial risk and the cost of capital. My parents lost a lot of money buying and renting property. You can lose money due to tenants destroying property, you can lose money due to insufficient occupancy, and you can lose money by the value of the house going down.
Some folks (myself among them) view the idea that because someone started wealthy they should be able to get more wealthy simply because they can leverage their existing wealth to be a negative thing.
Sure, there are cases where small landlords are beneficial in providing liquidity. But the big corporate firms being able to leverage their existing assets to buy more units seems antithetical to the goal of "we should eliminate homelessness" to me.
Financial leveraging is risk. You can lose your principal. Investors pay for building new homes too.
Speculators do need to get burned periodically to correct bubbles though. Especially now. Making money because you bought sooner than someone else could (practically enshrined in the California constitution) is not really adding value so on average should not pay off any better than inflation.
As your second paragraph is saying, "risk" isn't inherently valuable. That's also what the GP is saying, you just might disagree on the situations it applies to.
Yes in that the situations they refer to account for all investment of any kind being "a bad thing", while I criticize certain govt policies. But other than that, same page yes.
Rent goes up. That should cause more players to enter the market and more homes to be available. Doesn't happen.
The market is so distorted with regulation on building that homes become out of reach of normal people. Losing money in a market isn't a sign that the market is working properly.
Though even if you were to let capitalism take it's course the natural settling point for the price of a house might be such that a large percentage of people are homeless. That's not good for society.
Yes. At some point large swaths of US populace will be asked to choose between housing, food and life saving drugs in an ultimate rent-seeking race of the 21st century.
Hopefully, at some point people will finally say "enough is enough" and make the necessary constitutional corrections.
Rent had been extremely low for a long while. Much less than mortgage and a smaller fraction of the tenant's income. 20 years ago it was generally 40x rule: 40 times monthly rent should not be grater than the gross income or, alternatively, rent should not exceed 30% of gross income. 10 years ago many landlords switched to 25% and, even, of the net income in some cases.
This had been supported by the rapid capital gains: when your house appreciates more than its payment every month any rent you can collect on it is pure profit. It's gone now and the rent again has to pay the mortgage+insurance+taxes+maintenance on the greatly appreciated property. Building more a year ago was expensive because of shortages of everything from labor to raw materials. Lumber used to be more expensive than steel, which also was not cheap. So anything that had been built then cannot really be rented cheaply because the units are expensive. Building more now is expensive because the shortages are still there, prices of everything are up because of inflation and, most importantly, credit is expensive so everything that is being built now cannot be rented cheaply too because units are still more expensive and the credit is much more expensive.
The market works but it's never been intended to protect you from the economy being ran into the ground.
Landlords would be a net benefit if land were, for them, a liability rather than an asset. They would be paid for providing a service rather than monopolizing a natural resource.
Roughly 60-80% of your rent is a tithe to the owner of a 4 billion year old chunk of dirt. Dirt made valuable by all of the humans surrounding it.
People who provide valuable services like teaching, serving food, providing medicines, etc. People who get a 0% of your rent but who nonetheless will drive it up if they do their jobs really well.
It absolutely kills me that there are approximately 30 empty homes for every homeless person in the States. (Roughly 550k homeless and roughly 16M vacant homes.)
Investors are part of the problem, but by no means the only part. Anything that reduces investor speculation on housing and returns units to the rental or purchase markets is ok by me.
Every time I hear this statistic it drives me insane.
I really wish there was an exponential property tax based on the number of properties that someone or some entity owns. I don’t think it would actually be feasible to implement, but I wish something like it existed.
Owning one property? Reasonable/cheap property tax. Own two properties? Pretty expensive property taxes. Own three properties? Eye watering property taxes. Own more than three? Truly insane property taxes.
I Wonder if there are some simple legal solutions to this.
Like only individuals and non-profits are allowed to own houses or you can only own a property if you are registered as a resident of the city.
I like the sliding scale tax idea but I think the firms would just find ways to continually invest in new properties and use that to dodge tax until a point where they offshore :(
I could just leave a PC on mining some random coin to ensure there was always a bit of power going on. Likewise leave a tap slowly going. Cheaper than any tax most likely.
Well you either tax them such that the owners can still afford them, so no material change in ownership ratios, or you make them unaffordably high and you punish people for being successful in life.
If you feel that taxes are punishments then we can't really have much of a discussion. Taxes are meant for wealth redistribution. They are what prevent kings and lords.
Second homes and vacation homes should be unaffordable. They are a luxury.
That's the thing: taxes should NOT be about wealth redistribution - that's Marxist thinking. They should be about financing basic public services, like justice system, military, or possibly healthcare and education.
Disagree with all but your last sentence. Taxes are a necessary evil to pay for things we require as a society (e.g. police, schools). They are a burden on citizens, particularly the poor.
As for the comment about kings and lords, I suppose you're not familiar with the story of Robinhood...
If you think taxes are a punishment for success in life, I assume you support toll roads, pay for your snow removal from city street and rent your police and fire protection? Or are you only concerned about the impact on your success not anybody else’s?
Taxes aren’t a binary thing! I think overly high taxes are a punishment for success, and a fair level of tax is necessary for a good and fair society.
I’m British, I think our society is better than the US due to things like social services, the NHS, etc. What is being discussed here is way outside the realm of British (and definitely American) way of taxation and public/social services.
You have to look
at the intention of the tax - as per this discussion - is not about wealth distribution but about enforcing a policy by trying to free up existing homes for the homeless.
In the advocates ideal position there would almost never be any money collected from this tax because it would make a second home or holiday home unaffordable. If people truly want the homeless to all be homed then why not use tax money to build more homes in better locations for those that need them? In the US, UK, and most other countries there is massive amounts of available real estate (could be via building up or building out). The issue here is more than finding a house. Who is going to pay the power, water, rates, insurance, furnishings, transport costs etc (those Martha Vineyard homes are not a great location for homeless trying to work).
Why not? Does anyone deserve such homes if there is people who could permanently live in them? Or maybe some reasonable cost involved let's say 20% a year.
Should I be able to get a free home if I refuse to pay rent? What if I can work, but refuse to, should I get a free home? Instead of taking my home, why not build them their own new home.
If it's not vacant, it's someone's primary residence which is recorded, but also the landlords will have receipts and be taxed. If there is a vacant unit, the landlord's income with be smaller than expected and can be used to ask the landlord to attest to the occupancy of their units.
You can go wherever you want. The house isn’t going anywhere, it’s still registered as yours and you still pay taxes for it, with a discount if you designate it as your primary residence.
People will just tear down the extra building rather than paying the tax.
This happened in Switzerland, where towns with more vacancies were assigned a higher number of refugees. In order to avoid this the towns demolished the empty buildings.
I don't think this is an issue that can be solved by authoritarian thinking. If politicians do something people don't like, people will vote them out next time around.
You don't need to overcomplicate things by draconianly taxing corporate entities if you implement the land value tax, which taxes land, but not property, and set the rate at a high appropriate level.
That's what the georgism advocate.
The problem of property as investment is not so new as a problem.
For my part, I am against the over ever evolving taxation schemes such as setting property tax sky high to deter speculators but not homeowners, without addressing the root cause of the current crisis.
First, homeowners are still incentivized to support housing supply restriction. Second, improvement on said properties are disincentivized. Which is why you want to tax land, but not property.
This is a systematic problem, not going to be solved by merely targeting a small part of the landowning population.
> Like only individuals and non-profits are allowed to own houses or you can only own a property if you are registered as a resident of the city.
As a renter, I’m not a fan of this. The worst landlords I’ve had have been local and the best has been a corporation based in another city.
The problem of vacant apartments is that as long as there’s a shortage of housing in places people want, housing that has been built will increase in value. If we reduce the artificial constraints on building more housing, it will also remove the incentive to leave housing vacant.
I've seen some calculations suggesting that the speculators will buy up anything at this point. It's impossible to build enough. Partly because buying up new houses protects the investment into the already owned.
Also, what makes you think the market is not working and new houses are not being built at the highest possible pace? Given the prices, that would be a sensible assumption, no?
I haven’t seen those calculations but I’m very skeptical. The reason people are profitably able to invest in housing is that it is scarce. If the supply increased, housing would no longer be a desirable investment.
> what makes you think the market is not working and new houses are not being built at the highest possible pace
There’s a lot of political pressure by existing homeowners not to green light additional housing in their neighborhoods, because it would bring the price of the homes they already own down. There are a number of high-density projects in NYC and SF that have been blocked by these efforts.
> it is a misrepresentation, as a lot of those "empty" homes are awaiting a buyer.
Which means as a society we've chosen to value the liquidity of the housing market (something that I think is really good!) over the basic dignity and needs of human beings (something that I think is even more important!).
That's a societal choice. In a society that absolutely has enough wealth to shelter and feed every person, the fact that we've chosen not to is simply a disgrace. That people die in the cold in America is a moral failing. If we were a poor nation, and couldn't afford otherwise that would be one thing. But we aren't, and it's simply a choice that we make to let people die in the cold.
I made a proposal above (though, you’ll also not that I said I thought my proposal was unlikely to be workable in practice).
But, if you review what I wrote, you’ll note I never proposed anything close to what you asked about.
My actual proposal would be this: we should invest heavily in a housing first approach to homelessness at both the federal and state level. We should invest in this as a priority, as if it will save lives because it will.
Along with that, we should invest in mental health and addiction treatment programs as a supplement.
We should tax the fuck out of the rich to do so in a revenue neutral way.
BTW, the government has built housing for the poor many times. They're called "The Projects". Usually they wound up being demolished after a few years.
Very few people ever paid 91%. The reason was there were all sorts of tax shelters available at the time. This resulted in a lot of misallocation of resources. A lot of personal expenses could also be written off as a business expense, the most infamous of those was the "three martini lunch".
Reagan, in his deal to reduce the top marginal tax rates, also eliminated a vast swath of tax shelters and tax deductions.
More generally, the government consumed much less of the GDP in the 50s than it does today.
Taxes aren’t really bad for the rich in California. Ya, they are higher than normal, but most people who think they are excessive just don’t understand how marginal tax rates work.
I have two houses: one in England, one in France. I live in one during the year and one in The summer. Neither one is an investment. They’re both our home. Combined, they would sell for less than a cheap house in Southern California.
Why do you want me to pay extra property tax because my home is split in two?
It sounds like hold this view that anybody who owns anything is necessarily evil. But most of us are just people living their lives as best we can.
Land is finite, desirable land even more so. You can summer in France but you can pay more to do so than if you lived there year round. Call it an incentive, not a punishment, if you want.
But I do pay more. I had to purchase an entire house and pay taxes on it.
There is no shortage of houses here in farmland France or up in rural north England[1], which explains why houses are cheap enough that you can buy two of them. That’s the housing market working like it’s supposed to. Why does it need punishing or incentivising?
[1] there are towns within a few miles with hundreds of boarded up row houses that you could get for a few thousand pounds if you like. Our village in France is surrounded by fields as far as you can see in two directions. If you want to come live here, you can (and people often do) buy a small piece of that land and build a house.
More per house. There's no natural law saying taxes need to be equal per house, or that they need to be commensurate with services consumed by those living in them. Taxes (and tax breaks) are also used to incentivize behavior, which is the answer to your original question of "why".
Your home isn’t split in two. You have two homes, one of which stands empty at any given time. That’s what they’re arguing against, some people owning multiple houses while others are homeless. They’re not saying it should be impossible, just more expensive.
But anybody with a spare bedroom is doing the same thing by your logic. Nobody is in the kitchen right now. You monster.
The solution isn’t to stick homeless people in every available space. It’s to build places for them to live.
In your case, if your hypothetical homeless person wants to live on my street, he can buy one of the three homes currently for sale there, for the same price mine would sell for. How about we at least wait to see if he buys one of those before you go kicking me out of mine?
Exactly, the effect of such a law would be to incentivize building mansions. And the savvy owners may even go the route of forming collectives of mansion owners.
Therefore each owner only owns one massive house that friends can use part of and spends most of the time at other friends massive houses.
You jest about the kitchen and rooms, but the 80s saw a shift away from communal boarding options while reducing mental health treatment. There's a portion of the housing market that should have a communal kitchen, bathroom.
San Francisco has started building these again as startup incubators, but that's not the only target market
The slope isn’t that slippery. It’s not unreasonable to consider a home as an indivisible unit.
> if your hypothetical homeless person wants to live on my street, he can buy one of the three homes currently for sale there, for the same price mine would sell for.
Haha oh those silly homeless people, they should just buy houses, right?
> Why do you want me to pay extra property tax because my home is split in two?
This is like asking why I want to make sure everyone gets a slice of cake before you go for a second slice.
I absolutely have nothing against you having two properties, but while homeless people exist in these societies, I absolutely think it should be expensive for you to do so. If we get to a place where homelessness doesn't exist, then I'd absolutely want you to be able to own a second property at no financial penalty.
> It sounds like hold this view that anybody who owns anything is necessarily evil.
I never said any such thing. I described adding taxes to a behavior that I think leads to a bad social outcome.
There are lots of things that I think we should tax as a means of changing behavior without saying someone who engages in those behaviors is evil.
Frankly, I don't know why you'd have this perception from my comment, but it's certainly not accurate. I own things! I don't think it's evil. There are lots of activities that I personally do that I think should be taxed at a higher rate.
I own a home, and think my property taxes should be higher. I own a business, and think my business taxes should be higher. Just because I advocate for higher taxes on things I personally do, doesn't lead me to believe I'm evil.
"I don’t think it would actually be feasible to implement, but I wish something like it existed."
It's feasible (in some contexts), and has been implemented in Wales in recent years [0] (though not exponential, there's nothing stopping it from progressing that way).
There used to be reduced taxes on second homes, recently changed to 100%, and now changing to max 300% (set by councils).
They've also closed a number of loopholes to stop owners passing these homes off as dysfunctional businesses (listed to let without taking any lettings).
There's a large disparity in wealth over a relatively short physical distance, resulting in a large number of homes in "idyllic" but poor areas being bought as second homes and spending the majority of the year empty.
They've also moved to a land transaction tax that makes the second home purchase more expensive [1].
I'm not saying they are pulling the ladder up, and good to see these initiatives being put in place, but they don't necessarily solve the issue with existing vacant second houses which most likely have benefited from the lax taxation over the years combined with increasing property values.
Abandoned homes aren't the same as vacant homes. Most cities have low double digit vacancy rates. Whatever city you live in, odds are good there are units sitting vacant while people are homeless.
Someone did an analysis and the true number of vacant homes someone can move into is like 10% of that figure.
You figure the houses vacant because they’re sold/rented and waiting for move in, those under renovation, those where people have died and waiting to settle estate, etc and it’s 80-90% of that figure.
> Roughly 550k homeless and roughly 16M vacant homes.
> Someone did an analysis and the true number of vacant homes someone can move into is like 10% of that figure.
If that 10% figure from the analysis of San Fransisco applies to the entire country (and I recognize it may not), then the 550k homeless would be compared to 1.6M homes, or still ~3x the number of houses we would need to house every homeless person in the country. That 3x gives us a fair amount of wiggle-room, for the analysis not being replicable across the country.
My main point is not that we should seize an arbitrary number of houses and house homeless people in them, but rather that homelessness is both a choice that we've made as a society and as government policy.
We absolutely have the wealth that we could choose not to have homelessness in the country. And it's a stain on our society that we choose to have homelessness.
Well, as you point out, assuming the SF stats apply to the entire US is a stretch.
But regardless, do you think the only reason why people are homeless is because they can't afford a home? They did a survey in SF and 60%+ were homeless due to mental health and/or drug and alcohol issues.
Housing First approaches have found much better outcomes for mental health treatment, and addiction treatment.
It’s so hard to address mental health issues with a population that’s homeless. Simple things like weekly visits with a therapist become much much more difficult. Keeping medication safe and secure is much more feasible when someone has stable housing.
You’re absolutely right that housing people won’t necessarily fix all their problems. But it makes those other problems much easier to address, and leads to better outcomes [1].
And it can drive down other costs (like healthcare costs specifically) to the point that it’s cheaper [2].
There are some percentage of those 550K homeless who just need a home, but it's much lower than 50%. If you've seen a homeless person screaming at their reflection in a car window and then punching it repeatedly until their hand seems broken you will realize that that particular person's problem is not the lack of a housing structure.
Having a roof + support is one of the fundamental parts of treating mental health however.
Can't just shove them in a house and all good, but its a fundamental part of treatment along with social programs. Without stability it's tough to change much in someone's life.
It sounds like what is needed is a holistic solution that provides both accommodation and other support services all in one.
Agree just because a property is vacant it doesn’t make that property suitable for anyone. Does it need ground maintenance. Does it need furniture. Is it in a very high cost of living area. Is it near where homeless people and their associated support groups and family are. Etc
As anyone who's ever tried to study any complex phenomenon in a rigorous way knows, determining causality is fraught. But I think it's fair to say that most mental illnesses are exacerbated by living in stressful and uncertain conditions, and having shelter is a basic need no matter how crazy you are. Thus, this seems like a poor argument against providing housing
But basic shelter is frequently available but ask homeless individuals why they don't use it. It can be unsafe, even trying to learn about the shelter or queuing up for access is unsafe as these areas are frequently overrun by dangerous elements for vulnerable populations. Ask hotel owners how it worked being forced to house homeless during the pandemic and various other times.
This is a complex issue no doubt, but it is the height of nativity to think we can use existing underutilized housing stock to solve or even help the existing homeless crisis. We have frequently tried it with poor results and poor outcomes. It is very very very hard to meaningfully address the existing homeless epidemic, which is intimately tied up with the opioid, general drug, and mental health epidemics, none of which we have any reasonable answers for.
On the contrary, we've found as you actually build housing, prices go down (or at least rise more slowly) and homelessness goes down.
This argument is a variant of letting the perfect be the enemy of the good. You can improve the lot of many long before you need to solve all addictions.
This sounds a lot like what we're trying is solutions that put the people the state is helping under their power and observation and do not give them ownership, autonomy, or any sense of stability surrounding their living situation. I'm not surprised that this kind of intervention often leads to abuse, nor that it's not desired by most people affected
Greater than 50% of your comment is given to an embellished anecdote that is not, in fact, representative of the majority of homeless people.
You'd do better to stick to facts, like most homeless people are recently homeless and locals, and homeless rates correlate well with housing availability/prices.
>If you've seen a homeless person screaming at their reflection in a car window and then punching it repeatedly until their hand seems broken you will realize that that particular person's problem is not the lack of a housing structure.
Spending a decade without a housing structure and self medicating away the depression that comes with it is precisely how you end up like that.
I don't see a problem with these real estate developers that are building and managing large apartments complexes themselves. Seems like they're doing a lot to add supply at the lower end. Even if they do maintain a certain vacancy rate.
My neighbor's house is empty, as he just moved out. It's for sale, and it's far easier to prep a house for sale when empty. As soon as they finish the prep, a for sale sign will go up. Then it will sit empty till it is bought, and will then sit empty until closing and the new owner will move in.
It may sit for a month or 6 waiting for a buyer.
Now, multiply this by all the turnover in the housing market, and there will be many "empty" homes at any one time.
The wait just means there is low liquidity i.e. the spread is wide. They could sell it this minute if they offered it for 100$ but they are in "no rush" so they are willing to wait. Opendoor is trying to solve this by pretty much being a market maker for homes. This comment is independent of "should the housing market be more liquid" just a general "markets" comment
In my area, homes sell over a weekend and typically the owner lives in them until closing basically. The open houses are nearly always done with the owners’ stuff still in the house. The houses sit empty for maybe a week. Is it really that common for a seller to move out while it is trying to be sold? Such a person would need a lot of money to do so.
That was true in my neighbourhood as well, up until a few month ago. Now I know two or three people around me that have moved and have been trying to sell their houses for months and aren't even getting low ball bids.
But even if you manage to sell your house within 24 hours of putting it on the market without having to do any work on it, there can still be a few months lag between you actually moving out and the new owner moving in.
If you're moving, it's kinda hard to buy a new house the same day you sold the old house.
In the car dealer business, cars usually sit for a month on the dealer's lot before they sell. Car dealers hate that, because they borrow money to put the inventory on the lot, and pay interest on that money.
It's the same for house sellers. Leaving a house vacant cost thousands of dollars a month. Sellers aren't letting it sit vacant for fun. When I've sold a house, I was painfully aware of the vacancy costs, and always tried to price it to get it sold ASAP.
I have a hard time reconciling this comment. If you gave each homeless person a house/apartment, in what way wouldn't you have solved homelessness? Are you saying many/most of them would abandon, destroy or otherwise not use those houses?
Maybe many would not destroy or abandon more like neglect or facilitate illicit activities. There is a lot of social work to be done but no one wants to pay for it.
There were (I think still are in many places) projects where municipality in Europe would create social housing and putting let's say "not that lucky people" in one place does not help but creates its own problems. Where just providing flats was not enough because later no one had time do social work or money to pay social workers.
I can say as a kid I was living in such a project, all of the "normal-city" people would refer to us as "special place" or "street of magic". Many people made their lives better or at least make it stable there. Some managed to burn down their flats creating problems for their neighbors. Then there was loads of shady stuff going on.
Many people--perhaps the majority, even--are not homeless simply because they ran out of money to pay for housing; instead, they are homeless because they made life choices that led to them not being able to hold a job and pay for housing, or they have mental health issues that make it difficult for them to participate in a society where only those best able to adapt can afford good housing.
I like wording as in my opinion you managed to write it in a way where people are not to blame for their choices.
Yes they made choices in life that led them to not be able to hold a job and pay for housing - but to say it was "bad choices" one need context of their lives to judge that and in addition it might be the case that choice was made for them and they could not do much about it.
Reducing what you call investor speculation us very likely to also reduce investment in building houses. I want house builders to speculate on building homes. The profit incentive drives to create more homes. This is a good thing.
A fun thought experiment - imagine a fantasy society with no credit. Everyone who can buys a house based on their wealth.
Introduce a bank into the picture, making loans. How does that change the situation? It might not cause more houses to be built, because the physical situation hasn't changed. but it does mean that everyone ends up having to spend a lot of time working for the bank because it ends up that people with access to credit end up in a bidding war to try and buy houses.
We've tried very low interest rates in the west for a long time now. There is a dire shortage of hard evidence that it has helped people to own houses. Credit unwinds are painful in the short term, but in the long term I don't think it will be a major problem. Profound sadness for the people who were caught out with debt in the near future though.
> We've tried very low interest rates in the west for a long time now. There is a dire shortage of hard evidence that it has helped people to own houses.
It hasn't helped because it is more profitable to get money on a loan to pay back later — that is, enter a short position against the currency and pay back later when it is cheaper to do so.
Loans are granted proportionally to entities based on their wealth, so companies and rich people are more likely granted bigger lump sums, which they use to invest in real estate among other things, than people on regular or minimum wage.
So, during low interest rates, more loans are given out, wealthy entities buy real estate with the easy money, leaving everybody else to live on the scraps and/or creating an abusive rental market, unless there is strong housing laws enforced by the government. If there aren't, you have situations like London, where most of the city centre is empty flats bought by rich foreign investors, and actual citizens are driven further away into the suburbs, in an rental market that becoming more and more unaffordable.
IMO there is no economical solution to the housing crisis, because loans always favour the wealthy, and they're always in look for investment products; real estate is one of the safest.
Timing is everything. Being able to buy a house and live in it before you can pay for it is a substantial benefit. This is what loans do. There's no reason why it wouldn't cause houses to be built earlier than they would otherwise.
I thought this was interesting:
> Bricks — actual bricks, not stacks of cash — are another common savings mechanism, especially for working-class Argentinians. The value of bricks is fairly stable, and they’re useful to a family building out their house. Argentina doesn’t have a mortgage industry, and thus buying a pallet of bricks each time you get a paycheck is an effective way to pay for your home in installments.
> (Bricks aren’t fully monetized, in that I don’t think people buy bricks and then sell them later, so people only use this method of saving when they actually have something they want to use the bricks for.)
> As you can imagine, there are challenges that come with saving in wads of $100 bills or stacks of bricks. For one thing, they take up a lot of space. Worse, your life savings are also at constant risk of theft, damage, and fire. If something does happen, the bills are not insured or protected by any institution; they’re just gone.
Although that is a desirable use case; the important question to me is whether that is actually what is happening. I'm from Australia and our housing case is much worse than in most of the world. I know a lot of people who have enormous mortgages, and I can swear to the fact that none of the money they borrowed went to construction. They were paying to queue-jump people more like me who refuse to deal in debt.
Which I can respect. But I think debt avoidance strategies will win out in the long term, on average. Unless they cheat and use debt to get ahead, then get it discharged by some political trick.
I expect it has been made practically illegal to build new apartment blocks in desirable locations. There isn't a lot of construction relative to the amount of debt being handed out.
“But I think debt avoidance strategies will win out in the long term, on average.”
I agree with you, but you have to be prepared for the long term being longer than a human lifespan. For example, house prices in the Netherlands were arguably at bubble levels for almost the entire 18th century.
The purpose of low interest rates was never to help people own houses. It was to enable governments and corporations to paper over bad decisions by kicking the can down the road.
Tricon, as mentioned in the article, is publicly traded, owns houses in the US south, some of which are newly constructed, and has $1B to buy more houses once interest rates drop. So there’s institutional investors standing to profit if interest rates drop and if rents continue to increase. Seems like investors think it’s a good idea for them
> It might not cause more houses to be built, because the physical situation hasn't changed.
That’s an extraordinary leap.
The entire purpose of pooled capital is to enable more productive investment.
Sure, if the very premise of the system is negated in step one the results of your analysis of the system will be different. But your argument is sort of like saying what if water wasn’t wet.
In a free market what you say would also be my position, but we've got a non-free market where the people who own the military are jamming credit into the system like a cook stuffing a chicken and distorting the risks.
We've seen interest rates well below the levels where investment needs to be productive. We've seen that the risk for a highly correlated drop in asset prices is being assumed by taxpayers and/or people vulnerable to inflation (the most recent example is the madness of the stock market shrugging off the effect of COVID policies). There is an interesting question to consider about what happens when that sort of distortion hits a market. In Australia the cases of high debt I've seen haven't generally been linked to construction.
I mean it’s not like we haven’t tried this. Without loans normal people don’t buy houses. At least not early in careers. How exactly would a regular wage earner save enough to compensate people for the thousands of hours of embedded labor it takes to build a house in a reasonable time? Where do they live in the meantime?
We have tried subsistence living models. It’s not better.
The problem isn’t that access to capital exists it’s the combination of excess capital with drastically restricted supply due to anti building policies, as well as general unequal distribution of resources.
>It might not cause more houses to be built, because the physical situation hasn't changed. but it does mean that everyone ends up having to spend a lot of time working for the bank
You mean interest payments? The principal goes to the previous home owner, not the bank.
>We've tried very low interest rates in the west for a long time now. There is a dire shortage of hard evidence that it has helped people to own houses.
You are contradicting yourself. You just said introducing banks means paying fees to the banks instead of spending the money on housing. Now you say that lowering fees paid to the bank doesn't help? You have to pick one or the other.
It is pretty obvious. Lower interest rates make building new houses cheaper. The monthly cost of housing went down with lower interest rates but houses also got bigger and zoning restrictions got worse. Since buildable land has a shrinking supply, its price went up!
> You just said introducing banks means paying fees to the banks instead of spending the money on housing. Now you say that lowering fees paid to the bank doesn't help? You have to pick one or the other.
Those two statements can be consistent with each other. If we pick on the US because that is the default economic canary, you can see that very low interest rates [0] hasn't had a sustained impact on home ownership rates [1]. So, obviously, excessive amounts of credit hasn't helped with home ownership even as the rate of interest went low. It isn't much of a stretch from there to say that giving the banks all that extra help hasn't assisting matters.
There is a market level of credit that would be extended, but the system has been purposefully pushed to provide much more than that.
It’s early, I thought I read that prices were down 30%. It’s the activity of home purchases by companies. To be honest the remainder is still absolutely too much.
The basic pattern is that new investor homes can't even be rented. The investor rather chooses to keep it in pristine condition and sell it later at a much higher price. At least in big German cities, this is what I heard.
Investor-only home purchases should be regulated or taxed out of existence. There are at least two such homes in my neighborhood. They're just sitting there empty, slowly degrading I'm sure, while people are doing everything to try and get in a home.
There should be different zoning and taxes for different types of homes. A primary residence only zone for example. There is a huge difference between primary residents and vacation/rental homes and their role in society.
In the same way "ride sharing" is a loophole to have a taxi company without the regulations, Airbnb found a loophole for running a hotel company without the regulations.
The homes rented out for days at a time should not count toward the housing supply and only be allowed on designated areas just like hotels.
I honestly believe that the grandparent comment didn't have such intent in mind.
However, even though OP likely didnt have such intentions, I agree with your overall assessment of what would happen. If their proposal was implemented on scale, it would have naturally ended up in a situation that you are describing. And for that reason (+a lot of other unwanted second-order effects others have mentioned), I am definitely not into the idea of such zoning at all.
that's an uncharitable response; poster explicitly mentioned short term rentals and vacations homes being problematic, not all renters as you've stated
Some places tax empty homes more, which seems like the real problem. If you have it rented all the time, potentially to low income tenants, I'm fine with it paying normal rates.
I’ve personally seen houses get purchased (sight unseen) by “investors” (some money launderers, some who actually intend to flip but can’t), then those homes sit empty for long enough to become unliveable. Unseen leaks, infestation, whatever.
If we’re lucky it gets bought in a tax sale and renovated, but it’s just as likely to get torn down and not rebuilt. That whole process depresses the area, causes costs to neighbours, and of course removes that property from the rental market entirely.
But why would any investor do that? Rational people want their investments to appreciate in value, not depreciate.
As for you seeing "money launderers", that's quite strange. Money laundering is a serious crime. People who perpetrate it generally prefer to keep quiet on the matter, they don't go around advertising what bad boys they are. How did you know the people buying some houses were "money launderers".
But let's say you knew somehow and they did as you say. Even for money launderers, it does not make sense to sink money in some properties that will end up being torn down. The whole point of money laundering is to transform money of a criminal provenance into "clean money" that can be used to do stuff, not into run down properties.
The short answer is that they have good intentions but can’t follow through.
There’s an unsettling pattern I’ve personally seen at least twice over the past few decades: For some reason an area becomes “hot”. The first ones in are the seasoned investors. They buy for less than what they can resell for. Maybe they buy a dozen properties and reno-flip them. Prices go up because now more seasoned investors are coming in paying a bit more because they know there’s still profit to be made. Now two other demographics come in: less savvy investors and “small” investors (putting their life savings on the plan of getting a return or at least some ongoing rental income). Both of these are paying even more than round 2 because there are a lot of these types of investors and they’re racing to get a piece. In the 2008 era people were even (successfully!) flipping empty lots attached to contracts to start building in the next 5 years.
Let’s get down the specifics with an example: In “phase 3”, a smaller investor buys a 4-plex sight-unseen. They live in the Caribbean and the property is in a small town. They bought because the area was “hot” with rents of 1200 for a 1 bedroom.
What they don’t find out until later is that:
- The rents are way inflated due to a depressive housing crunch
- There is no major source of income in the area to sustain these rents
- The building was unliveable. Major issues such as large cracks in the foundation, mold, and rotted floors.
- The town had not taken action to condemn it simply because the old owner had wiggled through the system. (They went in to action within weeks of it changing hands.)
And here’s an unexpected killer: There are no contractors to hire to do the work required.
They didn’t plan for the funds needed to do those repairs even if they didn’t have to overspend to pull a company off another contract.
End result: They jumped for a property and lost their money. It thankfully went up on a tax sale a few years later and is being taken over by a local community group.
In the example you've provided, it looks like the town has benefited from the money launderer buying the property, didn't it? The bad actor was the previous owner, who "wiggled through the system" (i.e. both the town and the guy were corrupt). The new owner may have been a bad guy in other parts of the world, but didn't have the connections in this town, and didn't know what strings to pull. The town condemned the house, which ended up being taken over buy some good guys, so happy end.
In that case it wasn’t a money launderer, but you’re probably right that the old owner and the town were corrupt. As for the end being happy: We’ll see. There is a lot of work and a lot of cost ahead.
This all happened because of a strange economic imbalance. Essentially zero interest rates made money basically free to the wealthy. Homes are a special commodity as everyone needs one and land use regulations limit quantity. Thoughtfully regulating land so there is always at least some available nearby for residential development can ease that pressure. Zero interest rates were never sustainable and have contributed to a global asset bubble that includes housing and various other economic sectors.
We don't need some special rules against investor home ownership. Simply maintaining reasonable fiscal and land use policies should be enough to restore a reasonable balance.
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[ 3.1 ms ] story [ 158 ms ] threadWe stop thinking about housing as something everyone needs and start thinking about making sure we get ours before others do.
Oh wait, this actually happened during the pandemic and nobody was like, "oh this is good, people's car equity is going up!" because with things that aren't houses people have a saner view of finances.
https://darrenong.sg/blog/a-complete-guide-to-buy-a-property...
And then there's no logic to prices. You will get something cheaper in your 50s because you waited so long that you can finally get a nice spacious apartment for no money at all in the city center, while a student will have to pay more than that to get a shitty corridor room in the suburbs. Real life example: a friend paying 6000kr for a room in the suburbs as a student vs a 40yo lady with a good income paying the same for a 2 bedroom appartment in the center (market rent for second hand contracts for such a flat is about 19 000kr). And then you have newly built public housing in the suburbs that has prices 2-3 times more expensive than the old ones in the center for the same size, but those you can get without waiting whereas the old ones need more than 20 years of queue to get.
It is probably the most broken system in Sweden, but it kind of seems to be by design to be honest. I would actually have liked a well functioning and supplied public housing market, compared to the annoying parts of the private market in most countries, but swedish rules have just made it a nightmare instead
The system is meant to benefit long-term residents at the cost of everyone else. It's not there to provide a general housing subsidy.
The property tax in some new areas even in the suburbs is more than or only slightly less than the total rent in the some social housing in the center of the city. Some of these areas do not even have public heating.
It has become reverse socialism, steal from the poor and subsidise the rich.
It's time we revisited this now that the country looks very different.
- For one, there is a large trend towards urbanization which changes the makeup of the country.
- The 30 year fixed-rate mortgage and mortgage interest deduction (now capped, and less impactful given higher standard deduction amounts) have been a large contributor to housing values being distorted from normal market prices.
- Throw in low interest rates, widespread speculation, financialization of real estate (ABNB, loanmls.com, etc)
you end up with a human right being divvied up by institutions, speculators, and an aging wealthy populace that has no interest in sharing the pie.
I’m not sure how much of a factor that is - here in Australia our house price : household income ratio is, if anything, even more deranged than it is in the US, and 30 year fixed rates are unheard-of here - maybe 2 year fixed rates at certain times, but usually most mortgages are variable (and usually at higher rates than in the US).
That should be easy to test. Hardly any other country has 30 year fixed rate mortgages and lots of countries have far lower mortgage interest deduction. Would be interesting to measure the distortions in those countries and compare to the US.
If they were young, I'd understand. If they are aging... what's in it for them? A hope that cryogenics will come good?
After certain age, reverse mortgages become a potential new source of income, so in short term one would be interested in rapid appreciation of underlying property.
We have people live with us for free, for in kind services, or paying whatever they could afford and still be saving money.
It is very easy for a landlord to lose their shirt in even conservative investments. Landlords justify their rate of return due to the financial risk and the cost of capital. My parents lost a lot of money buying and renting property. You can lose money due to tenants destroying property, you can lose money due to insufficient occupancy, and you can lose money by the value of the house going down.
Sure, there are cases where small landlords are beneficial in providing liquidity. But the big corporate firms being able to leverage their existing assets to buy more units seems antithetical to the goal of "we should eliminate homelessness" to me.
Speculators do need to get burned periodically to correct bubbles though. Especially now. Making money because you bought sooner than someone else could (practically enshrined in the California constitution) is not really adding value so on average should not pay off any better than inflation.
Rent goes up. That should cause more players to enter the market and more homes to be available. Doesn't happen.
The market is so distorted with regulation on building that homes become out of reach of normal people. Losing money in a market isn't a sign that the market is working properly.
Though even if you were to let capitalism take it's course the natural settling point for the price of a house might be such that a large percentage of people are homeless. That's not good for society.
Hopefully, at some point people will finally say "enough is enough" and make the necessary constitutional corrections.
This had been supported by the rapid capital gains: when your house appreciates more than its payment every month any rent you can collect on it is pure profit. It's gone now and the rent again has to pay the mortgage+insurance+taxes+maintenance on the greatly appreciated property. Building more a year ago was expensive because of shortages of everything from labor to raw materials. Lumber used to be more expensive than steel, which also was not cheap. So anything that had been built then cannot really be rented cheaply because the units are expensive. Building more now is expensive because the shortages are still there, prices of everything are up because of inflation and, most importantly, credit is expensive so everything that is being built now cannot be rented cheaply too because units are still more expensive and the credit is much more expensive.
The market works but it's never been intended to protect you from the economy being ran into the ground.
Roughly 60-80% of your rent is a tithe to the owner of a 4 billion year old chunk of dirt. Dirt made valuable by all of the humans surrounding it.
People who provide valuable services like teaching, serving food, providing medicines, etc. People who get a 0% of your rent but who nonetheless will drive it up if they do their jobs really well.
Investors are part of the problem, but by no means the only part. Anything that reduces investor speculation on housing and returns units to the rental or purchase markets is ok by me.
I really wish there was an exponential property tax based on the number of properties that someone or some entity owns. I don’t think it would actually be feasible to implement, but I wish something like it existed.
Owning one property? Reasonable/cheap property tax. Own two properties? Pretty expensive property taxes. Own three properties? Eye watering property taxes. Own more than three? Truly insane property taxes.
Especially for vacant properties
I could just leave a PC on mining some random coin to ensure there was always a bit of power going on. Likewise leave a tap slowly going. Cheaper than any tax most likely.
Second homes and vacation homes should be unaffordable. They are a luxury.
Taxes that are too high transition the outcome from wealth redistribution to punishment.
As for the comment about kings and lords, I suppose you're not familiar with the story of Robinhood...
I’m British, I think our society is better than the US due to things like social services, the NHS, etc. What is being discussed here is way outside the realm of British (and definitely American) way of taxation and public/social services.
You have to look at the intention of the tax - as per this discussion - is not about wealth distribution but about enforcing a policy by trying to free up existing homes for the homeless.
In the advocates ideal position there would almost never be any money collected from this tax because it would make a second home or holiday home unaffordable. If people truly want the homeless to all be homed then why not use tax money to build more homes in better locations for those that need them? In the US, UK, and most other countries there is massive amounts of available real estate (could be via building up or building out). The issue here is more than finding a house. Who is going to pay the power, water, rates, insurance, furnishings, transport costs etc (those Martha Vineyard homes are not a great location for homeless trying to work).
Should I be able to get a free home if I refuse to pay rent? What if I can work, but refuse to, should I get a free home? Instead of taking my home, why not build them their own new home.
This happened in Switzerland, where towns with more vacancies were assigned a higher number of refugees. In order to avoid this the towns demolished the empty buildings.
I don't think anyone is recommending we reimplement failed efforts, line for line.
That's what the georgism advocate.
The problem of property as investment is not so new as a problem.
For my part, I am against the over ever evolving taxation schemes such as setting property tax sky high to deter speculators but not homeowners, without addressing the root cause of the current crisis.
First, homeowners are still incentivized to support housing supply restriction. Second, improvement on said properties are disincentivized. Which is why you want to tax land, but not property.
This is a systematic problem, not going to be solved by merely targeting a small part of the landowning population.
As a renter, I’m not a fan of this. The worst landlords I’ve had have been local and the best has been a corporation based in another city.
The problem of vacant apartments is that as long as there’s a shortage of housing in places people want, housing that has been built will increase in value. If we reduce the artificial constraints on building more housing, it will also remove the incentive to leave housing vacant.
I know it’s a crazy idea, so go easy on me.
Also, what makes you think the market is not working and new houses are not being built at the highest possible pace? Given the prices, that would be a sensible assumption, no?
And no, investors won't buy up all the houses. Blackrock's massive home buying fund was <1% of the total value of the housing market.
The headline says "Investor home purchases drop 30%".
> Partly because buying up new houses protects the investment into the already owned.
That doesn't work. See the latest news on cryptocurrencies.
> what makes you think the market is not working and new houses are not being built at the highest possible pace
There’s a lot of political pressure by existing homeowners not to green light additional housing in their neighborhoods, because it would bring the price of the homes they already own down. There are a number of high-density projects in NYC and SF that have been blocked by these efforts.
It's because while the statistic may be correct, it is a misrepresentation, as a lot of those "empty" homes are awaiting a buyer.
Which means as a society we've chosen to value the liquidity of the housing market (something that I think is really good!) over the basic dignity and needs of human beings (something that I think is even more important!).
That's a societal choice. In a society that absolutely has enough wealth to shelter and feed every person, the fact that we've chosen not to is simply a disgrace. That people die in the cold in America is a moral failing. If we were a poor nation, and couldn't afford otherwise that would be one thing. But we aren't, and it's simply a choice that we make to let people die in the cold.
I made a proposal above (though, you’ll also not that I said I thought my proposal was unlikely to be workable in practice).
But, if you review what I wrote, you’ll note I never proposed anything close to what you asked about.
My actual proposal would be this: we should invest heavily in a housing first approach to homelessness at both the federal and state level. We should invest in this as a priority, as if it will save lives because it will.
Along with that, we should invest in mental health and addiction treatment programs as a supplement.
We should tax the fuck out of the rich to do so in a revenue neutral way.
That's what California does, and the homeless problem in CA just gets worse.
Is capital gains taxed at the same rate as income?
Then we aren’t taxing the fuck out of the rich.
Does the Federal government and the State of California provide stable housing to every homeless person in the state?
Well, then, what’s why the problem is getting worse.
Actually tax the rich, and actually provide housing first. Until then, we haven’t tried my proposal.
https://www.caltax.org/caltax-resources/california-tax-facts...
https://taxfoundation.org/publications/federal-tax-rates-and...
BTW, the government has built housing for the poor many times. They're called "The Projects". Usually they wound up being demolished after a few years.
https://en.wikipedia.org/wiki/Subsidized_housing_in_the_Unit...
Reagan, in his deal to reduce the top marginal tax rates, also eliminated a vast swath of tax shelters and tax deductions.
More generally, the government consumed much less of the GDP in the 50s than it does today.
I have two houses: one in England, one in France. I live in one during the year and one in The summer. Neither one is an investment. They’re both our home. Combined, they would sell for less than a cheap house in Southern California.
Why do you want me to pay extra property tax because my home is split in two?
It sounds like hold this view that anybody who owns anything is necessarily evil. But most of us are just people living their lives as best we can.
There is no shortage of houses here in farmland France or up in rural north England[1], which explains why houses are cheap enough that you can buy two of them. That’s the housing market working like it’s supposed to. Why does it need punishing or incentivising?
[1] there are towns within a few miles with hundreds of boarded up row houses that you could get for a few thousand pounds if you like. Our village in France is surrounded by fields as far as you can see in two directions. If you want to come live here, you can (and people often do) buy a small piece of that land and build a house.
More per house. There's no natural law saying taxes need to be equal per house, or that they need to be commensurate with services consumed by those living in them. Taxes (and tax breaks) are also used to incentivize behavior, which is the answer to your original question of "why".
The solution isn’t to stick homeless people in every available space. It’s to build places for them to live.
In your case, if your hypothetical homeless person wants to live on my street, he can buy one of the three homes currently for sale there, for the same price mine would sell for. How about we at least wait to see if he buys one of those before you go kicking me out of mine?
Therefore each owner only owns one massive house that friends can use part of and spends most of the time at other friends massive houses.
San Francisco has started building these again as startup incubators, but that's not the only target market
> if your hypothetical homeless person wants to live on my street, he can buy one of the three homes currently for sale there, for the same price mine would sell for.
Haha oh those silly homeless people, they should just buy houses, right?
This is like asking why I want to make sure everyone gets a slice of cake before you go for a second slice.
I absolutely have nothing against you having two properties, but while homeless people exist in these societies, I absolutely think it should be expensive for you to do so. If we get to a place where homelessness doesn't exist, then I'd absolutely want you to be able to own a second property at no financial penalty.
> It sounds like hold this view that anybody who owns anything is necessarily evil.
I never said any such thing. I described adding taxes to a behavior that I think leads to a bad social outcome.
There are lots of things that I think we should tax as a means of changing behavior without saying someone who engages in those behaviors is evil.
Frankly, I don't know why you'd have this perception from my comment, but it's certainly not accurate. I own things! I don't think it's evil. There are lots of activities that I personally do that I think should be taxed at a higher rate.
I own a home, and think my property taxes should be higher. I own a business, and think my business taxes should be higher. Just because I advocate for higher taxes on things I personally do, doesn't lead me to believe I'm evil.
> You can be charged an extra amount of Council Tax (a ‘premium’) if your home has been empty for 2 years or more.
> You can be charged up to 4 times your normal Council Tax bill if your home has been empty for 10 years or more.
It's feasible (in some contexts), and has been implemented in Wales in recent years [0] (though not exponential, there's nothing stopping it from progressing that way).
There used to be reduced taxes on second homes, recently changed to 100%, and now changing to max 300% (set by councils).
They've also closed a number of loopholes to stop owners passing these homes off as dysfunctional businesses (listed to let without taking any lettings).
There's a large disparity in wealth over a relatively short physical distance, resulting in a large number of homes in "idyllic" but poor areas being bought as second homes and spending the majority of the year empty.
They've also moved to a land transaction tax that makes the second home purchase more expensive [1].
I'm not saying they are pulling the ladder up, and good to see these initiatives being put in place, but they don't necessarily solve the issue with existing vacant second houses which most likely have benefited from the lax taxation over the years combined with increasing property values.
0: https://gov.wales/new-tax-rules-second-homes
1: https://gov.wales/land-transaction-tax-guide
https://www.businessinsider.com/abandoned-houses-detroit-201...
https://anytimeestimate.com/research/most-vacant-cities-2022....
Edit: even in supply constrained cities like Seattle, there are ~10 vacant units for ever homeless person.
100% true and while I appreciate your perspicacity, this will not resolve the issue.
Seattle has a vacancy rate of 3.6% according to your cited source. Cities need a supply of vacant homes, lest we all become New York (vacancy rate 1.4%): https://www.bloomberg.com/news/features/2022-02-18/looking-t...
As I mentioned elsewhere in this thread, the only way out of this is to build more homes.
Yeah...
P.S. Not sure why one would pick San Francisco for seasonal use?!
P.S. 2 Let's see how the empty home tax works out https://www.jdsupra.com/legalnews/voters-approve-san-francis...
You figure the houses vacant because they’re sold/rented and waiting for move in, those under renovation, those where people have died and waiting to settle estate, etc and it’s 80-90% of that figure.
It’s really dishonest.
There was much outrage, until the IRS said that the reason was that 50% of corporations lost money. Corporations are taxed on profits, not losses.
> Someone did an analysis and the true number of vacant homes someone can move into is like 10% of that figure.
If that 10% figure from the analysis of San Fransisco applies to the entire country (and I recognize it may not), then the 550k homeless would be compared to 1.6M homes, or still ~3x the number of houses we would need to house every homeless person in the country. That 3x gives us a fair amount of wiggle-room, for the analysis not being replicable across the country.
My main point is not that we should seize an arbitrary number of houses and house homeless people in them, but rather that homelessness is both a choice that we've made as a society and as government policy.
We absolutely have the wealth that we could choose not to have homelessness in the country. And it's a stain on our society that we choose to have homelessness.
But regardless, do you think the only reason why people are homeless is because they can't afford a home? They did a survey in SF and 60%+ were homeless due to mental health and/or drug and alcohol issues.
Building more houses won't fix that.
Housing First approaches have found much better outcomes for mental health treatment, and addiction treatment.
It’s so hard to address mental health issues with a population that’s homeless. Simple things like weekly visits with a therapist become much much more difficult. Keeping medication safe and secure is much more feasible when someone has stable housing.
You’re absolutely right that housing people won’t necessarily fix all their problems. But it makes those other problems much easier to address, and leads to better outcomes [1].
And it can drive down other costs (like healthcare costs specifically) to the point that it’s cheaper [2].
[1] https://www.ncbi.nlm.nih.gov/pmc/articles/PMC2916946/
[2] https://www.bluecrossmafoundation.org/publication/preventive...
Can't just shove them in a house and all good, but its a fundamental part of treatment along with social programs. Without stability it's tough to change much in someone's life.
Agree just because a property is vacant it doesn’t make that property suitable for anyone. Does it need ground maintenance. Does it need furniture. Is it in a very high cost of living area. Is it near where homeless people and their associated support groups and family are. Etc
This is a complex issue no doubt, but it is the height of nativity to think we can use existing underutilized housing stock to solve or even help the existing homeless crisis. We have frequently tried it with poor results and poor outcomes. It is very very very hard to meaningfully address the existing homeless epidemic, which is intimately tied up with the opioid, general drug, and mental health epidemics, none of which we have any reasonable answers for.
This argument is a variant of letting the perfect be the enemy of the good. You can improve the lot of many long before you need to solve all addictions.
You'd do better to stick to facts, like most homeless people are recently homeless and locals, and homeless rates correlate well with housing availability/prices.
Spending a decade without a housing structure and self medicating away the depression that comes with it is precisely how you end up like that.
I don't see a problem with these real estate developers that are building and managing large apartments complexes themselves. Seems like they're doing a lot to add supply at the lower end. Even if they do maintain a certain vacancy rate.
It may sit for a month or 6 waiting for a buyer.
Now, multiply this by all the turnover in the housing market, and there will be many "empty" homes at any one time.
Gotta love that oh-so-efficient market.
That was true in my neighbourhood as well, up until a few month ago. Now I know two or three people around me that have moved and have been trying to sell their houses for months and aren't even getting low ball bids.
But even if you manage to sell your house within 24 hours of putting it on the market without having to do any work on it, there can still be a few months lag between you actually moving out and the new owner moving in.
In the car dealer business, cars usually sit for a month on the dealer's lot before they sell. Car dealers hate that, because they borrow money to put the inventory on the lot, and pay interest on that money.
It's the same for house sellers. Leaving a house vacant cost thousands of dollars a month. Sellers aren't letting it sit vacant for fun. When I've sold a house, I was painfully aware of the vacancy costs, and always tried to price it to get it sold ASAP.
Interestingly realtors houses stay on the market longer and sell for more than their customer’s houses …
It is much more complex problem. Homeless people need more help than just giving them flat or even a room.
There were (I think still are in many places) projects where municipality in Europe would create social housing and putting let's say "not that lucky people" in one place does not help but creates its own problems. Where just providing flats was not enough because later no one had time do social work or money to pay social workers.
I can say as a kid I was living in such a project, all of the "normal-city" people would refer to us as "special place" or "street of magic". Many people made their lives better or at least make it stable there. Some managed to burn down their flats creating problems for their neighbors. Then there was loads of shady stuff going on.
Yes they made choices in life that led them to not be able to hold a job and pay for housing - but to say it was "bad choices" one need context of their lives to judge that and in addition it might be the case that choice was made for them and they could not do much about it.
Introduce a bank into the picture, making loans. How does that change the situation? It might not cause more houses to be built, because the physical situation hasn't changed. but it does mean that everyone ends up having to spend a lot of time working for the bank because it ends up that people with access to credit end up in a bidding war to try and buy houses.
We've tried very low interest rates in the west for a long time now. There is a dire shortage of hard evidence that it has helped people to own houses. Credit unwinds are painful in the short term, but in the long term I don't think it will be a major problem. Profound sadness for the people who were caught out with debt in the near future though.
It hasn't helped because it is more profitable to get money on a loan to pay back later — that is, enter a short position against the currency and pay back later when it is cheaper to do so.
Loans are granted proportionally to entities based on their wealth, so companies and rich people are more likely granted bigger lump sums, which they use to invest in real estate among other things, than people on regular or minimum wage.
So, during low interest rates, more loans are given out, wealthy entities buy real estate with the easy money, leaving everybody else to live on the scraps and/or creating an abusive rental market, unless there is strong housing laws enforced by the government. If there aren't, you have situations like London, where most of the city centre is empty flats bought by rich foreign investors, and actual citizens are driven further away into the suburbs, in an rental market that becoming more and more unaffordable.
IMO there is no economical solution to the housing crisis, because loans always favour the wealthy, and they're always in look for investment products; real estate is one of the safest.
I thought this was interesting:
> Bricks — actual bricks, not stacks of cash — are another common savings mechanism, especially for working-class Argentinians. The value of bricks is fairly stable, and they’re useful to a family building out their house. Argentina doesn’t have a mortgage industry, and thus buying a pallet of bricks each time you get a paycheck is an effective way to pay for your home in installments.
> (Bricks aren’t fully monetized, in that I don’t think people buy bricks and then sell them later, so people only use this method of saving when they actually have something they want to use the bricks for.)
> As you can imagine, there are challenges that come with saving in wads of $100 bills or stacks of bricks. For one thing, they take up a lot of space. Worse, your life savings are also at constant risk of theft, damage, and fire. If something does happen, the bills are not insured or protected by any institution; they’re just gone.
https://www.freethink.com/hard-tech/crypto-argentina-black-m...
Which I can respect. But I think debt avoidance strategies will win out in the long term, on average. Unless they cheat and use debt to get ahead, then get it discharged by some political trick.
I agree with you, but you have to be prepared for the long term being longer than a human lifespan. For example, house prices in the Netherlands were arguably at bubble levels for almost the entire 18th century.
That’s an extraordinary leap.
The entire purpose of pooled capital is to enable more productive investment.
Sure, if the very premise of the system is negated in step one the results of your analysis of the system will be different. But your argument is sort of like saying what if water wasn’t wet.
We've seen interest rates well below the levels where investment needs to be productive. We've seen that the risk for a highly correlated drop in asset prices is being assumed by taxpayers and/or people vulnerable to inflation (the most recent example is the madness of the stock market shrugging off the effect of COVID policies). There is an interesting question to consider about what happens when that sort of distortion hits a market. In Australia the cases of high debt I've seen haven't generally been linked to construction.
We have tried subsistence living models. It’s not better.
The problem isn’t that access to capital exists it’s the combination of excess capital with drastically restricted supply due to anti building policies, as well as general unequal distribution of resources.
You'd have to arrange something with the builders to pay in arrears, essentially getting a loan from them.
Land value however is 100% propped up by loans.
You mean interest payments? The principal goes to the previous home owner, not the bank.
>We've tried very low interest rates in the west for a long time now. There is a dire shortage of hard evidence that it has helped people to own houses.
You are contradicting yourself. You just said introducing banks means paying fees to the banks instead of spending the money on housing. Now you say that lowering fees paid to the bank doesn't help? You have to pick one or the other.
It is pretty obvious. Lower interest rates make building new houses cheaper. The monthly cost of housing went down with lower interest rates but houses also got bigger and zoning restrictions got worse. Since buildable land has a shrinking supply, its price went up!
Those two statements can be consistent with each other. If we pick on the US because that is the default economic canary, you can see that very low interest rates [0] hasn't had a sustained impact on home ownership rates [1]. So, obviously, excessive amounts of credit hasn't helped with home ownership even as the rate of interest went low. It isn't much of a stretch from there to say that giving the banks all that extra help hasn't assisting matters.
There is a market level of credit that would be extended, but the system has been purposefully pushed to provide much more than that.
[0] https://www.aboutinflation.com/_/rsrc/1307805149788/interest...
[1] https://dukewarner.com/wp-content/uploads/2020/05/home-owner...
In the same way "ride sharing" is a loophole to have a taxi company without the regulations, Airbnb found a loophole for running a hotel company without the regulations.
The homes rented out for days at a time should not count toward the housing supply and only be allowed on designated areas just like hotels.
However, even though OP likely didnt have such intentions, I agree with your overall assessment of what would happen. If their proposal was implemented on scale, it would have naturally ended up in a situation that you are describing. And for that reason (+a lot of other unwanted second-order effects others have mentioned), I am definitely not into the idea of such zoning at all.
I’ve personally seen houses get purchased (sight unseen) by “investors” (some money launderers, some who actually intend to flip but can’t), then those homes sit empty for long enough to become unliveable. Unseen leaks, infestation, whatever.
If we’re lucky it gets bought in a tax sale and renovated, but it’s just as likely to get torn down and not rebuilt. That whole process depresses the area, causes costs to neighbours, and of course removes that property from the rental market entirely.
As for you seeing "money launderers", that's quite strange. Money laundering is a serious crime. People who perpetrate it generally prefer to keep quiet on the matter, they don't go around advertising what bad boys they are. How did you know the people buying some houses were "money launderers".
But let's say you knew somehow and they did as you say. Even for money launderers, it does not make sense to sink money in some properties that will end up being torn down. The whole point of money laundering is to transform money of a criminal provenance into "clean money" that can be used to do stuff, not into run down properties.
The short answer is that they have good intentions but can’t follow through.
There’s an unsettling pattern I’ve personally seen at least twice over the past few decades: For some reason an area becomes “hot”. The first ones in are the seasoned investors. They buy for less than what they can resell for. Maybe they buy a dozen properties and reno-flip them. Prices go up because now more seasoned investors are coming in paying a bit more because they know there’s still profit to be made. Now two other demographics come in: less savvy investors and “small” investors (putting their life savings on the plan of getting a return or at least some ongoing rental income). Both of these are paying even more than round 2 because there are a lot of these types of investors and they’re racing to get a piece. In the 2008 era people were even (successfully!) flipping empty lots attached to contracts to start building in the next 5 years.
Let’s get down the specifics with an example: In “phase 3”, a smaller investor buys a 4-plex sight-unseen. They live in the Caribbean and the property is in a small town. They bought because the area was “hot” with rents of 1200 for a 1 bedroom.
What they don’t find out until later is that:
- The rents are way inflated due to a depressive housing crunch
- There is no major source of income in the area to sustain these rents
- The building was unliveable. Major issues such as large cracks in the foundation, mold, and rotted floors.
- The town had not taken action to condemn it simply because the old owner had wiggled through the system. (They went in to action within weeks of it changing hands.)
And here’s an unexpected killer: There are no contractors to hire to do the work required.
They didn’t plan for the funds needed to do those repairs even if they didn’t have to overspend to pull a company off another contract.
End result: They jumped for a property and lost their money. It thankfully went up on a tax sale a few years later and is being taken over by a local community group.
Did I get the story right?
We don't need some special rules against investor home ownership. Simply maintaining reasonable fiscal and land use policies should be enough to restore a reasonable balance.