The recent Vancouver tax changes have worked, I suspect/hope we'll start seeing that repeated in every city thats had it's life sucked out
It's hard to imagine how we can have it both ways: If the government effectively insures real estate against loss, then investors (i.e., people with money) will take advantage of that, increase demand, and raise the price of the investments (i.e., houses you and I want to buy).
> It seems that we made a pact with the devil by positioning housing as an
> investment asset. By doing so, we've encouraged people to commit a very large
> fraction of their net worth into a rather illiquid asset, tying their financial
> fates to the future assessment of that asset. As a result, protecting the price
> and appreciation of this asset has come to overshadow the other crucial roles
> that housing plays in our society.
> If I bought shares in AAPL at $50 (now
> $100+) and someone comes along asking that AAPL let them buy some shares for
> say, $65, I'm obviously not going to be happy since the value of my investment
> is under threat. This is the kind of reaction we've unfortunately promoted for
> ourselves. It didn't have to be this way, as other countries have shown us.
> But now that we're here, it's hard to imagine a way to turn back time.
This housing situation is the most fucked up thing I know of, and I just cannot think of any happy answers to solve these problems for the benefit of everyone in society - it seems any and every decision will favor one party and fuck the other.
Markets are efficient.
As to the concept of a market externality, I'm not sure I understand the question. If you just mean "uncaptured incentives", well surely there are myriads. But the bigger point is that this is not a simple solution. You cannot re-solve the maths as per a case of omitted variable bias.
The reason that this is so may be intuively grasped with an example. Let us posit that rent-seeking is a behavioral consequence of 'opportunistic' principals. And that rent seeking public policy architects are inevitable, because our politician is opportunistic (qua politician--behavioral assumption).
OK, but now I've just made mess for EMH, and this is why EMH has an 'H' in its name. Because general economic theory requires that we assume away several things we just introduced. And if you understand EMH you understand why having opportunistic, strongly authorized, unrestrained public policy makers is a problem. Namely, (1) they hold private information (outside emh); and (2) they are free to play zero-sum dynamic games with market participants; and (3) they can charge economic rents by implementing a 'protection racket' scheme whereby donor/lobbyists avoid (large) zero-sum losses by taking (smaller) zero-sum losses that benefit the policy holder (so called diversions).
It's like a capital gains tax versus a wealth tax. The latter has way more impact then the former.
There was a software / techical business of some sort in one corner, but I don't think I saw anyone else.
(Thank you AirBNB)
The thanks to AirBNB was as an aside. I think we rented AirBNB but to be honest not sure; might have been one of the many other under the radar holiday house schemes available in Italy and other places.
However the phenomenon under discussion clearly makes something like AirBNB possible -- and good luck to them.
Whether it is an upside or downside overall -- I do not know.
(I have now upvoted both of your comments)
Fair amount of stubborn older people living their, not much ability for a young Italian to take on the task of buying a residence. I spent time there, in a house that reminded me of Fightclub, mostly with Iraqis. No Italians.
Can you elaborate on the Vancouver tax change? I have not heard about this.
http://www.theglobeandmail.com/news/british-columbia/bc-to-t...
The tax is new and was enacted just before August so the impacts are still uncertain.
Simply require proof of residency in the property (or an active lease agreement / market listing) to qualify for a tax break. Otherwise, if you're parking-and-holding-without-using, you get slapped with a higher tax rate.
http://www.theglobeandmail.com/news/british-columbia/bc-prof...
The Mayor of Vancouver is also interested in taxing non-occupancy and in the same special session of the legislative assembly that passed the 15% foreign buyer tax the Province granted the City of Vancouver (but not others) the powers to tax non-occupancy. It can be pretty involved to find out occupancy and the City has limited means so it'll be interesting to see if that goes anywhere.
The cynical answer to this by the way is that there's a Provincial election in early 2017, so in the near term appearing to address the problem is more important than addressing the problem in an effective way.
That would be much more difficult to enforce. You'd have to hire people to walk around knocking on doors or have neighbours snitching on each other. No thanks.
http://www.businessinsider.com/foreign-billionaire-tax-break...
Empty buildings are not ideal though (though its still better than less investment). I think maybe there should be a requirement to rent out your investments if it's in a high density area.
This causes it to make more sense to not rent it out.
Situated as it is, in Britain, London is a long way from being such a city. More's the pity.
Some investors buy flats and keep them empty and in bubble wrap for a couple of years until prices increase, then sell. Not "buy-to-let" investors, but "buy-to-sell"!
It would be more of a nuisance - the tenants need registering, then you have to pay taxes, for what gain?
It's not even worth their time to do that much, apparently, since the houses in question are sitting empty in a high-rent area.
Also, it's risk. They can fuck up the place, and if their rent is not much, then the insurance will be more than the rent.
If the tenant refuses to move out (despite the landlord serving notice correctly) you can usually get that resolved in 2-3 months at most: 1 month to get a court date, 1 month to give the tenant time to comply with what the court orders, and 1 month to get a bailiff to physically remove them (if it comes to that).
(Source: I'm from London, and I've signed several leases as both a landlord and as a tenant. I've once gone to court to evict a tenant who had stopped paying rent, and the matter was resolved in <2 months from first filling in the court paperwork)
This does not happen in cities where it's easy to build more homes in desirable areas. They have lower price-to-rent ratios because prices are determined by the value of the rental income stream. We can make it easy to build more homes in every city by repealing laws that push lower income families out of desirable places—that's what density restrictions were invented to do.