Real-Estate Frenzy Overwhelms Small-Town America: ‘I Came Home Crying’
wsj.com
wsj.com
Have any places tried implementing residency laws requiring the owners of a home to actually spend some minimum out of time there? I imagine that the existing homeowners would oppose such a law, since it would reduce the pool of potential buyers, and thus the values of their own homes. And I imagine there's other collateral damage that would result from that kind of half-baked rule. But there is something gross to me, maybe illogically so, about wealthy investors crowding out young families who would actually ... use the house.
Screw taxing...make it illegal for any person or entity to own more than say, 2 houses. Maybe 3? Downvote away, but real estate investors are real scum. Invest in literally anything else.
Taxes are a simpler and more effective though. Ideal solution is a land tax on comparable sales price of the estate less some portion of replacement cost of non-obsolete fixed capital improvements.
If there is a lot large enough for 10 houses worth millions in the middle of the city next to publicly maintained infrastructure, investors might be able to avoid the cap by rendering the units uninhabitable, removing toilets, etc.
Land and property taxes do not have to be flat taxes. They are easy to make distributive by adding an X% deduction on the first $Y in tax payments per resident per billing period that they resided in the same jurisdiction that the parcel is located.
State governments can reform property tax system by appointing state commissioners to chair a state board of equalization attended by local assessors to reappraise property values at the state level. When this was done in the Progressive Era, states found large areas of land held by railroad corporations and barons which were not being taxed at all and put them on the tax rolls.
The federal government can also introduce a national property tax by amending and reintroducing the direct tax collected under James Madison. Any increase in direct land or property tax burden can be offset by distributive offsets for permanent residents or cuts to regressive taxes such as sales taxes and payroll taxes.
Imagine if businesses eventually buy -all- housing. You can tax them 10000%, they'll just pass it on to renters.
I feel like we're slipping back to feudal times.
No, that's incorrect.
For vacant, obsolete, uninhabitable, and undeveloped properties there are no tenants. There is no one to pass the tax on to. In order to acquire cash to pay the tax the owners without tenants must either sell off excess properties at lower prices or lower leases to attract more tenants.
The land fraction of real estate value is already monopoly price. Without direct property and land tax, and no public carrying cost, investors could hold properties off the market forever to maximize sales price and surplus extracted from buyers. Imposing a higher public carrying cost does not give them additional leverage to hold out for higher prices, it does the opposite decreases the time they can afford to hold properties off the market. And a pure land value tax which fully exempts replacement cost of improvements would also create zero market barrier to supplying new homes and instead reduce market barrier by making land more plentiful.
And with a distributive tax it should also be clear that real estate investment trusts and foreign direct investors aren't getting the tax deduction because they aren't a permanent resident.
U.S. has relied on levying direct property taxes at higher rates than other nations to prevent overaccumulation since early 1700s. If direct taxes weren't successful at reducing overaccumulation then the U.S. would never have become a superpower.
Generally with most indirect taxes like sales taxes where the tax can be shifted the businesses which remain open rarely lobby against them once they are put in place. But in every age of history the large land holders have regular complained about direct taxes on landed property, precisely because they are much more difficult to shift.
This means that for example families with children will be able to compete against companies and rich baby boomers.
Obviously this most recent spike is probably connected to exodus from the major cities due to covid, but the trend has been happening for years, maybe a full decade now. The best I can tell, this is yet another example of our economy becoming increasingly imaginary. Again, naively you would expect people to buy houses to LIVE IN, and other people to BUILD those homes so they could be sold to the first group of people. But in the recent past it seems the housing market has joined an ever-growing list of things like crypto, Game Stop stock, and who knows what else; a perverse wonderland where everything is detached from reality and rampant, delusional speculation rules the day.
The difference is, no one needs crypto, or Game Stop shares, so if crazy people want to monopolize them, fine. People DO need places to live. Many can't afford one even under good conditions. And now yet another thing ordinary people need has been stolen from them by the rich, fenced and moated off, never to be seen again. Meanwhile food prices are going up and up and up, while portions get smaller and smaller. Inflation looks ready to explode. And soon, Covid will (hopefully) be over. Which means the "pause" that was put on everything will go away. No more government assistance to ease things. No more "coming together" to fight the common enemy. You may thing there's strife online and off now, but when we "go back to normal," in a few months, or a year, a whole ton of salt is going to be ground into the waiting wound, and this housing shortage will be at the top of a long, long list of grievances. 2020 was nothing compared to what's coming.
We’re living in a world where politicians aren’t fighting the international housing crisis, and I think the only meaningful way you can do so is by nations coming together and forming a Breton Woods type era of agreement to establish the world over what housing rights look like and what restrictions companies, REITs, builders, and landlords have so as to prevent neofeudalism from continuing to proliferate.
Classical economics says only half the real estate asset price corresponds to actual capital. The land-fraction of real estate value is a monopoly price. The capitalized ground-rent increases the scarcer land becomes. Investors maximize asset gains by holding out for high prices as possible.
> The system isn't self-healing anymore. It's jammed up
The fictitious capitalization of ground-rent into asset prices has caused problems since classical antiquity. This is business as usual and everyone should know how this works by now.
> but the trend has been happening for years, maybe a full decade now
North American land speculation goes back to 1600-1700s and John Law's Mississippi company. It caused lots of problems during westward expansion. There is typically a real estate bubble and crash every 18 years since 1840s.
Cycle can be interrupted with financial regulation, central bank window guidance to discourage credit creation for speculative asset purchases, and special taxes.
Ideally we'd want state governments to appoint commissioners to chair equalization boards to redo land valuations at state level, introduce a federal direct land tax on comparable sales price of estates less replacement cost of improvements, increase realization of real estate asset gains taxes, requires brokers to appraise replacement cost of improvements separately from comparable sales price, and cap mortgage guarantees by federal GSEs at 200% of replacement cost of non-obsolete fixed capital improvements whenever that is lower than comparable sales price.
[1] https://www.strongtowns.org/journal/2019/3/6/non-glamorous-g...