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Comment by weberc2 | Hacker News Reader

Forgive my ignorance, but if you're investing in property, don't you have "skin in the game"? Presumably it's in your interest that the community thrives, because that will help drive up property values (increasing your ROI)? This is just my naive intuition, so please correct me.

EDIT: Downvoters, what gives? Just asking a question...

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Skin in the game means participating in the community and the local economy.

An investor doesn't buy groceries at the local store, doesn't go to local music venues etc.

They help out the construction industry and the FIRE (finance, insurance, real estate) industry, but local neighbourhoods weakly benefit.

Investor pays property tax without using any of it's benefits.

No they don’t, their tenants pay the property tax. I own a rental property in New Zealand (not out of choice, long story) and the rates are paid from the rent. I don’t chuck in the extra $120/month from my other income.

Investors fight for lower rates, while people who live in the places want better services.

That's not what "skin in the game" means, and presumably these properties are being rented, in which case the renters are still buying groceries, etc.?

Again, I'm not advocating for foreign investors; just trying to understand the problem.

The properties may not be being rented. Due to data that showed a notable amount of vacant properties Vancouver, another area with high amounts of foreign capital infusion enacted a vacant property tax.

Even if these properties are being rented out, persons with foreign capital buying power that exceeds that of locals have a distortionary and, from the point of view of a local, a negative impact on the real estate market, as they are able to out compete locals and bid up the price of housing. A person which may have normally been able to buy a home can no longer buy, and now has to devote more of their income to renting from a foreigner. Why would any local support this state of affairs?

At a high level "skin in the game" means involvement and having some commitment. That can mean monetary involvement or otherwise and I'd use the broader definition. An absentee foreign buyer has tenuous involvement in a city beyond the impact of their foreign capital. Sure they've risked their capital on an investment, but from a locals point of view they have no real personal stake in the community.

The problem is when rich investors buy properties to hold, but don't actually rent them out to people. This in turn reduces the number of apartments available to the people that need them, and just drives prices artificially upwards.

And the property tax doesn't cover the costs to the society when the property owner doesn't participate in the society.

What they're actually doing is increasing the difficulty for local buyers by increasing demand and pushing up prices, and taking money away from them while simultaneously lining the pockets of existing property owners.

Foreign owners are likely to move at least a portion of this money overseas, which takes it out of the local economy, reduces the ability of residents to innovate by taking financial risks etc etc.

Some people just want a roof over their head without paying rent to a landlord and being subject to their whims.

So the issue is that foreign investors are significantly driving up the cost of real estate, making home ownership prohibitively expensive for locals? Has anyone quantified the impact in various regions?

That's the issue, and no.

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