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Comment by briandear | Hacker News Reader

If they own a house, they are paying taxes, so they do have significant skin in the game. They pay property taxes despite not using the local schools or most other city services.

As far as not allowing housing as a speculative financial investment, there are some significant unintended consequences there.

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The problem with absenteeism is that while taxes are still being paid to maintain city services, the city doesn't function correctly, because there's weak street life.

Here's an article about the struggles of retailers in Vancouver's Coal Harbour neighbourhood, which has estimates of around 20-25% empty housing.

https://www.theglobeandmail.com/real-estate/at-vancouvers-co...

Vancouver has a vacancy tax, which strikes me as a really good idea to avoid these problems. Does anyone know why these aren't more popular?

I can imagine they're difficult to enforce.

Enforcement? People gaming the system so it doesn’t look unoccupied?

I agree with you that it seems like a good idea. However, the vacancy tax is still in its infancy, so we've yet to fully understand its effectiveness or side-effects. A big issue around the housing discussion in Vancouver is the lack of data and amount of misinformation being injected into the discussion.

The Netherlands has a system where vacant properties may be occupied by squatters after they've been empty for a year. There's an active squatting scene in Amsterdam, particularly OT301 (an abandoned cinema, now an arts centre).

If the vacancies drive away business, which weakens street life, then would not the low street life drive down real estate prices?

Nope.

Just ask the people in London who live among all the empty properties that have been bought by various Russian oligarchs or other people who want to exfiltrate their wealth from the countries where they "acquired" it.

The tenant covers all the taxes and costs through his rent.

So the property is being occupied, which I don't think they have a problem with. The issue is wealthy investors are coming in, buying up property at above market rate, and then letting it sit empty and driving up the price higher since there is less sellers on the market.

Doesn't matter if it's rented or not, it drives the price up either way.

If it’s rented out to a local or sold to a local, the ratio of buildings to locals is the same. Supply or demand (or things outside this context such was wages) has to change for prices to change.

You assume that the ratio of buildings to locals is the sole input for real estate prices.

If an external rentier enters the market and realizes yield, other rentiers will follow. This increases demand for housing assets, not necessarily housing utility. this is the problem they are trying to solve.

Foreign buyers increase the supply of cash. It drives buy prices up, which in turns drives rent up slightly.

No, they do not, they only cover a portion. As the owner of a New Zealand investment property...

In NZ, ROI on property is targeted to be around 8% [3]. The owner will take that ROI either in capital increase or in rent. [2]

If the property is appreciating, the rents will be allowed to slow down. If the property stops appreciating, then the rents increase to maintain the ROI. The entire market is targeted at 8%, particularly the property management companies.

Changing the property tax rules changes this equation, with a shift to higher rents.

New Zealand is trying everything to remove demand from the housing market. They first brought in new deposit rules (20% min for owner occupier[4], higher for investment properties 35%+[5]), now they've brought in foreign ownership legislation. It might affect the rate of capital increase, but that will only shift the ROI equation towards rental increases.

The government is looking at building more housing (FINALLY), but they are finding that all the regulations (houses with heating and insulation cost more!) means they can't do it for less that 600-650k [1].

[1] https://www.interest.co.nz/property/95345/housing-minister-s...

[2] https://www.interest.co.nz/saving/rental-yield-indicator

[3] https://www.yourinvestmentpropertymag.com.au/expert-advice/l...

[4] https://sorted.org.nz/guides/home-buying/buying-a-first-home...

[5] https://www.rbnz.govt.nz/education/at-a-glance-series/lvr-re...

Weird.. you can build a house in the upper midwest USA for 200k. That's land + all of the regulations etc... Condos should be cheaper per unit too. But like everywhere there is a construction labor shortage. I would hope that the kids gets into construction, at least as a summer job or something while pursuing education.

Finding young unskilled apprentices for construction work is easy, finding experienced skilled journeymen is hard because most of them leave the field during each construction bust.

You just can’t make a career out of construction with the current boom and bust way the cycle is going.

You can absolutely have a career in construction, as I know many people who have.

The challenge is health. It's a very demanding line of work where you have to carry weight, wake up in the early morning and work in the cold. People don't want to work like that. It's very hard on the body and you're broken when you reach your 50's.

I think a lot of things can be improved here with technology both in materials and for doing the actual work where the risk is lower so your body isn't completely shot.

It's almost like that problem would be partially solved if the US had a system where you could get healthcare without needing it to be tied to full-time employment.

It's not just an insurance problem. I assume accidents are already covered as part of your construction work.

When you are in your 20's. You fall from a ladder, break some bones, you heal and get back on your feet one year later. When you are in your 50's, you are more fragile and less resilient, same thing happens, you might never be able to work again. It's brutal.

Eh I don't really buy it... HVAC techs, plumbers, electricians, earthwork, even carpenters/framers can all find work outside of construction booms. And you can move towards prefab as much as possible as well if you are deeply concerned..

The land in Auckland is driving the value. It's a lovely climate, great city to live in, stable economy and government and open the water. There simply isn;'t much of that sort of living around.

A 2.4M 2x4 costs almost 10 NZD here. And that is the cheapest lumber.

There are huge markups in the local market on building materials due to a duopoly. It is cheaper to fly to Australia buy NZ made siding there and ship it to NZ than to buy it locally.

huh... sounds like an opportunity to ship over some containers from China.

This makes no sense. Rents are not linked to the costs of property. They are fixed to as much as local people can pay for a home, roughly 50% of typical household income everywhere in the developed world.

The ROI is the +appreciation + rent - expenses.

If the property depreciates you have least return on investment. There is nothing you can do about it. You can't increase rent to compensate, people can't pay more rent. Your reasoning is absurd, if you could increase rent you should be doing that right now already.

Rents are definitely linked, until discretionary income for the local people goes to zero they can still pay more. Housing prices also affect mortgage payments, which rise in tandem.

Looking it up, I see USA is somewhere around 30% of income [1] as housing cost, while NZ is about 17% [2]. Seems to indicate there is room to grow under tight supply conditions.

[1] https://www.businessinsider.com/how-to-save-more-money-2017-...

[2] https://www.stats.govt.nz/information-releases/household-inc...

As another New Zealander with an investment property I thought the government closed the loss-making rental loophole s few years back. You can’t use rental losses to offset personal tax so why would you rent at a loss?

http://taxpolicy.ird.govt.nz/news/2018-03-29-issues-paper-lo...

Not yet, but soon. They did tighten up the rules around businesses that _never_ make a profit a while ago (I seem to remember).

CONSULT YOUR ACCOUNTANT.

About the insulation thing, to be clear, it's just a heat pump and a certain R number in the floor and ceiling (correct me if I'm wrong). Pumps cost <5k to install and insulation isn't that much more if done while building. Double glazing isn't mandatory either.

What I'm trying to say is walking into a house here in winter still doesn't feel like a place in say, Northern Europe. I don't think it's that onerous.

Sources: Partners brother in law is a builder, parents just had heat pumps installed, our landlord just installed underfloor insulation and it's currently 12 degrees C in the house.

In many countries, property taxes are local and don't go to schools (which have funding from income taxes i.e. from the state).

So it's not like the foreign investors are beneficial in any way, besides maybe paying their bit of water/electricity/police costs (and if they only pay their share, then why bother accomodating all the volatility to house prices they bring?)

Yes this is true in NZ - property taxes here ("rates") pay for roads, water, street lighting, that sort of thing. Not schools, police, or other stuff done by central govt.

Also property taxes here are not tied directly to house valuations - there's a fixed component, plus a component that's calculated from your valuation divided by the sum of the valuations of ALL the properties in the city. That means that if everyone's valuations are doubled your taxes don't change, if your house value goes up faster than the average you do pay more, if it goes up more slowly your taxes go down.

To add to that - the valuations include both the land and the property, and they are itemised.

Yes, what is the target problem really?

Do you want to ban vacant or mostly vacant housing stock for its constriction of housing supplies? Why only foreign owned? Don't vacant holiday or investment homes of residents have the same impact?

Do you also want to ban renter occupied homes where a landlord is profiting excessively? How do you define excessive? Why only foreign landlords? Don't domestic landlords have the same impact? Don't investment trusts have the same impact, regardless of who owns the shares? Or is there a problem with your tax system, so the foreign-consumed profits are not taxed at the source?

If you dislike speculative investment, shouldn't you really dislike renter occupied homes where the landlord isn't profiting? They might accept a tenant at a partial loss, as long as it costs less than holding the property vacant, but this behavior depends on their speculative expectation that the future value is worth the holding costs. It is not sustainable for rent to be lower than the total holding costs (taxes, maintenance, depreciation, risk).

It is interesting to imagine a strict owner-occupation requirement. Nobody can own a home they don't live in as primary residence. Obviously, that means nobody can own a second home unless you zone some special vacation-home areas. And nobody can become a landlord, owning and operating rental properties. No person and no corporation nor trust. Ignoring the obvious disaster of how to get there from here, how would such an economy work? Does everybody at every income level get access to financing to buy their own home? It's hard to define a similar rule for commercial properties, since corporations can fractionally live in many places and it will be hard to define a minimum occupation density to distinguish real use of a commercial property from token use of a speculative holding. The same problem applies to wealthy home owners---what's the difference between a huge estate/mansion and an apartment building other than resident density?

At the other extreme, what about a strict public-owner requirement? What if every property had to be owned by a trust available on open markets? Everyone could buy into shares of every trust, and everyone would pay rent to some trust owning their residence. Everyone could benefit from real estate investment whether they have enough assets to own 1/100, 1, or 100 homes. Independently, they would decide what kind of housing and cost are best for them. What would happen to rents and property values...?

Why only foreign owned? Don't vacant holiday or investment homes of residents have the same impact?

This happened in BC, Canada. It’s a popular spot for vacation homes for Canadians, this they get slammed with a tax as well.

Govt backed down and created exemptions for large swaths of BC.

way less than poeple living there. Unless there is some sort of a unique land value tax

Like property tax?

Ya, property taxes should act against such behavior, but many places like Vancouver lack one. Not sure about NZ, but it seems like property taxes are more of an American thing.

Edit: oops, Canada does have a property tax, and New Zealand has something like it. So it’s just Australia (on first residences) and the UK that don’t. Well, China also. I’ll take my downvotes gracefully.

We pay property tax in Ontario.

Homeowners do pay property tax in Vancouver:

https://vancouver.ca/home-property-development/property-tax....

There are property taxes here in New Zealand, known as ‘rates’.

You can look up what they are for a property and get an idea of the property value on local government websites.

https://www.aucklandcouncil.govt.nz/property-rates-valuation...

They are absolutely minimal though, works out to about 0.23% of value (aware that’s not the only component) for us in Auckland.

Yeah, this is a relatively important metric for both investing but also affordability. It shows that there is an apples to oranges comparison in housing prices across markets (discounting currency differences).

When calculating the affordability of a home, the total monthly cash flow requirements (housing costs as a percentage of income) are critical. I live in an area where the rates are 10x that of Auckland. A $600k home valuation requires a ~$250 weekly rate commitment vs only about $27 in Auckland - a significant difference. It's still an expensive home by any metric, but considerably more affordable.

From a speculation perspective, an investor in Auckland can sit on a very expensive property with almost no cash flow burden, reducing the need to even rent.

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