A company buying thousands of homes and then milking workers through rent for decades seems unethical.
While I do not have a solution, I think this is an issue we should work on
If anything, rents indicate true cost compared to mortgage costs which can accurately signal for more (or less) construction needed. In the US, ownership costs are masked by subsidizing interest rates, loan repayment periods, down payment amounts, and mortgage interest tax deductions. Also, property tax limits subsidize existing owners.
There is a bit of a conflict in the mechanics of democracy with zoning laws and taxes, with existing owners having an incentive to limit supply, especially in booming markets. It’s a very tough problem to solve, but making clear the costs of all the subsidies would help.
Not the other way around.
The real problem is that zoning is decided at the local level; local turnout is not very high, so it doesn’t take that many concerned homeowners to overthrow someone who is too pro-growth. And usually local municipalities are balkanized subsets of the region, who want all the upside of regional growth but none of the downside. In the most extreme example, the Bay Area, this leads to lots of permits for job expansion in small localities but not for housing, since residents need a lot more in the way of services.
It would be much more healthy to have zoning laid out at the state or regional level, but regional level governments don’t even really exist in the American context, and only a few cities in America have continued annexing suburban areas into the 21st century.
Hence removing the subsidies or at least making explicit the cost of subsidies, so people are incentivized to go out and vote for increases in supply. Another option is to hand over ownership to government and make everyone do land leases to make them participate in the market and therefore vote the “right” way. Not a perfect solution of course.
Not just zoning, soooooo much shit would be better done at the regional level because it would allow the urban areas to do what they think is best for them without pissing off the rural areas (or needing their approval) and vise versa.
This is why the Land Value Tax is such an effective solution to this problem. It's fair, economically efficient and reduces inequality:
There’s really not. All extant democracies recognize private property, with certain limits for the public interest. Zoning is an extreme imposition on private property rights, of a sort that ordinarily would only be consciences in light of equally compelling public interests. Unfortunately, we had a few bad Supreme Court decisions at the height of white panic about desegregation that normalized such impositions. You’d hesitate greatly before taxing someone half the value of their property, but local governments think nothing of eliminating half the value (or more) of private property through zoning or historical preservation ordinances.
The only places with no protections were medieval societies and their resultant immense inequality.
There was very little urban home ownership until twentieth century incentives and regulation directly changed that. Efforts made by people like FDR, William Beveridge and influenced by Keynes who would all be called vociferously denounced as socialist today.
So unless we want to return to that historic lack of home ownership, those are the kinds of policies needed. This because the eventual outcome of an uncontrolled hosing market is as problematic as an uncontrolled market is to climate.
I rented in a larger city last year. Had I bought instead of renting I would have had transaction costs that would be 3x the amount I paid in rent. Not only that, if something broke in the apartment I had someone I could call to take care of it. I didn't even have to think through the logistics of getting contractors to my apt and getting bids on jobs.
Not all landlords are slumlords.
The real estate agent wants between 2% and 3% of the actual value of the building from both the seller and the buyer.
Taxes (unless it is a "first house" designed and actually used as your "primary residence" AND provided that you are not going to resell it within 5 years, in which case will be around 2% of nominal value) will be around 9% of nominal value (usually much lower than market value). Then there is the notary fees.
So, example, you buy an apartment paying it 200,000 Euro, something that would be rented between 600 and 800 Euro/month (if you are lucky):
Estate agent (buying) 6,000 (0.03x200,000)
Taxes (buying) 10,800 (0.09x120,000)
Notary 2,000
Estate agent (re-selling) 6,000 (0.03x200,000)
That is 24,800 Euro to which you add the equivalent of 1 year land tax probably some 800 Euro, and some repairs/refurbishing making it more than 26,000 Euro (and without considering what the 226,000 Euro could have produced if invested).
Compare this with 12x800=9600
Maybe it is not exactly 3x, but it is at least 2.5x.
If you prefer, unless there is a huge increase in house value in the (short) period of ownership, the breaking even point is past more than three years.
I am not following you, in the example I posted there is no "lawyer" (corrupt or belonging to a cartel or not) involved (as normally there are no lawyers involved in "normal" real estate transactions).
What I posted ar only usual fees and taxes.
https://www.brickunderground.com/blog/2015/03/closing_costs
So the cost to buy/sell a $1mm apartment could be in the range of $110,000 after broker fees and all taxes are accounted for. An apartment at that price would rent for maybe $4k for month, though that will rise at a faster price over 30 years than a fixed mortgage + common charges. Unless the value rises at a pace much faster than the rate of inflation, you're going to lose money if you don't hold on to the place for a few years. See this fun calculator to find the inflection point:
https://www.nytimes.com/interactive/2014/upshot/buy-rent-cal...
So if all the landlords costs do not rise all that much, why do they feel justified to raise rents sometimes well over 10% a year? The only reason is to fatten the wallet by milking the tenants, and we've hit a point where in some cases the working class has to commute 4 hours a day in desperate effort to find a job that pays the exorbitant rent.
Providing homes for rent is a service provided to people that they can pay for if they want to make use of it. An economic transaction involves an exchange for money. It is not milking someone. Is a grocery store milking you for food you buy?
A house has value. The people who built it had to feed themselves and their families. Land has value. It is not free. I have to pay expensive annual property taxes to maintain ownership. The services a bank provides are not free. Living expenses are a real thing and even if you can't afford it then someone else is going to have to pay for your housing.
And if you derive any rental income from the land value whatsoever, you are milking money from something valuable you did not create and did not make valuable. It's a purely parasitic form of value extraction from something that isn't free.
This is why the value of land improvements (e.g. having a nice house) should be untaxed, separated from the value of the land while the rental value of the land should be taxed at 100%.
And, until we do do that, we shouldn't pretend that rent isn't largely (i.e. ~60%) parasitic value extraction.
Then consider the "value" of an empty lot, the archetype of land in itself. Its _price_ is based solely on the the _value_ that those near it produce. A high productivity region increases the value of neighboring empty lots. The lots themselves have produced nothing and whatever price they command is solely a drain on the productive part of the economy.
>Is a grocery store milking you for food you buy?
Value added by building or improving a resource like food or a structure is fundamentally different and obviously needs to be compensated and encouraged. But profit from an unchanged property is entirely a zero-sum gain moving wealth from productive parts of an economy to unproductive.
monthy rent = 0.3(minumum hourly wage * 160 hours) * n bedrooms; with studios being n = 0.5
That way if landlords want to lobby for higher profit margins, the only way to do it would be to also ensure the working class can actually afford to supply those higher profit margins for the landlords.
'Foreigners who have studied or worked in China for a minimum of one year are permitted to buy property. ... Unfortunately, a foreigner can only own one property and it has to be residential. Again, the foreigners are banned from renting the property as you are supposed to use it for dwelling purposes.'
There is so much draconian regulations of foreign bank account holding all around the world, but none regulating foreign possessions of the said bank. Same for real estate.
The problem with this in the UK was that the stock of council housing became immensely valuable and as soon as we had a right wing government they started to sell it off. Selling it off created home owners (who are more likely to vote for that government) and raised "free" money which could be given out in tax cuts, so it was a natural target.
In the UK an alternate system - housing associations (HA) - survived a little bit better. Here the houses are either built with public money and handed to a housing association (a private trust) or built by the HA. The HA then rents them out on similar terms to council houses. Because they aren't publicly owned the government couldn't sell them off. Except that because some HAs built using government loans or assistance the government was able to extend the right of tenants to buy to those homes too.
This takes away the incentive to sell off public goods for their own short term profit.
Preventing people from making money by investing in real estate just means housing shortages are less effectively filled.
That's essentially what rent control does, and economists are almost unanimous about the harm it has done to housing affordability: