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Comment by eru | Hacker News Reader

This is really, really stupid. It reeks of economic illiteracy.

If you think foreign investor cause harm, just estimate how much harm it is, and tax them accordingly. Why would you ban them?

Taxing is almost always more economically efficient than banning.

You can even pay out (part of) the tax take to the people you think are harmed.

(In general, a land value tax for everyone would be a good idea. But if political reasons dictate that only foreigners should be taxed, so be it. Still better than a ban.)

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It's not about the "economy", it's about people being able to buy a roof over their head. Foreign investors simply don't belong in that space at all.

Exactly, and I honestly wish there were measures to fine owners that have empty homes as well. Many people would disagree with me, but to me it's not about economics. We need a way to fight the idea of hoarding homes, a basic human right, as being an "investment".

In Norway a kommune (local authority) can institute a boplikt, a duty of residence. This means that if you purchase a house in that area it must become your principal residence.

So it's not at all possible to rent a home in these places?

Yes it is possible. But the house is then treated as a business asset which is different from a second home. I don't know the details.

Look into land value taxes.

I would advise against specifically fining empty homes, because then you have to define what an empty home is; and that will have lots of weird grey areas.

That being said: fining/taxing is still better than banning.

If there was enough supply there wouldn't be a problem. No one hoards cars, boats, airplanes or anything else because they think that they can corner the market and raise prices. Housing is only special because not enough is built. It's only possible to "hoard" because every 1 off the market is less for everyone else. A fixed pie. Like bitcoin. If the bitcoin supply was infinite no one would think about collecting them.

You can't have enough supply of housing, because for housing location matters a lot.

There's only so much room in the center of the capital, and making more costs a titanic amount of effort. Even that runs out eventually, as you can only build so high.

Otherwise, why would we be having a problem? Move to Serbia and buy an apartment for $40K.

Until Canadian city centres look like Singapore, I don't think you can claim that you can't build more.

Serious question, what should I consider before moving to Serbia and buying an apartment for $40k?

Well, just a few things that come to mind:

* Speaking the language -- in some places they don't speak much English, and certainly don't do official paperwork in it.

* Local laws

* Safety

* How much stuff you need is going to be nearby

* Internet access

* Local culture

* Employment

* Friends and family

Like, I don't know much about Serbia (just looked up where housing is cheap), but from what I hear I could get a pretty good deal if I moved to Russia -- they're desperate for tech workers and offering some very good perks regarding mortgages and so on. But on the other hand, is living in Russia that good of a deal right now? I don't think so.

They've got a bad government, slow and very restricted internet access, a not terribly pleasant society overall in my impression, and the economy is circling the drain due to all the sanctions.

some nitpicking: internet in Russia is very fast and stable. But you are right when you say "restricted". The retarded government tries to ban some websites.

How fast of a connection can you get?

I'm on 1Gbps fiber, and can get 10G/10G fiber for cheap at my home right now, and just finished with the preparations.

My internet provider provides bandwidth up to 800 Mbit, I use the 200 Mbit package

Generally location, services and availability of work... Might even have services, but no work... That is for Finland. Like I see 32k€ for 3 bedroom house, with relatively big plot. 2km from "town" center... What explains it is area losing population.

Houses are non-fungible, making the whole comparison absurd. They occupy 3D space in a fixed location.

Until we develop Star Trek teleportation I cannot replace my apartment with a cheaper one 1000km away.

That's why hoarding real estate is exploitation of people's basic needs.

It's easier and cheaper to produce more cars. Boats are irrelevant since they're not a necessity, a house is, a car is in certain cities.houses being already scarce, and hoarding them makes it worse, because it makes them even less affordable.

> Foreign investors simply don't belong in that space at all.

How much is this a problem?

Further, this does not (IIRC) apply to folks to have permanent residence status or folks here on things like student visas.

So how many never-set-foot-in-Canada people are buying properties?

Years ago, before BC brought in it's foreign buyer tax it was a problem. Local builders were literally opening up sales offices in Taiwan, Hong Kong and other major cities in Asia.

We know it was a significant issue because the government actually shared the data, and it showed some alarming trends.

What is remarkable here in contrast is that the Federal government hasn't shared any data at all. (Ironically when they were elected in 2015 they promised "evidence based decision making" ..haha)

I would not try to immigrate into a country in which I don't have a place to live, so this essentially is an anti-immigration, "Canada for the Canadians, Foreigners out" policy in my book.

Is it really? I would imagine that many immigrants don't buy homes outright before immigrating. Most immigrants I know rent out the first few years and start saving.

Not being able to buy a place to live ≠ not having a place to live.

Plenty of Canadian-born people rent.

"People being able to buy a roof over their head" is the economics of housing

Foreigners are people to.

Would taxing do anything in this specific case? Foreign investors are already willing to pay millions in a single home just for it to lay empty, from what I read in this thread. Why would some fixed (even if progressive) tax on top of that change the demand?

It should be possible to make home purchases economically irrational for undesirable purchasers. For example, you could impose a draconian property tax on all non-owner occupied residential properties.

Financial investors and money launderers look at homes as illiquid, stable assets. They expect that they can extract their millions with a few week’s time, perhaps with gains from continued inflation. If they lose a significant portion of that value over the duration they hold the asset, it stops making sense.

A punitive tax like this should be pegged to some other “safe” asset. Perhaps a basket of national bonds from the G20. Ensure that taking residential inventory off the market produces a substantially worse return than those other options.

If you don’t want to kill domestic land lords, make it trivial for a citizen to apply for a waiver. Just know that the investor types will be motivated to subvert this system. Strongly recommend you have real jail time penalties for doing so. Financial folks hate real prison.

Presumably if it was high enough they would move onto other investments that are comparatively more profitable when accounting for the tax. It would have to be a heck of a tax to keep up with how Canadian house prices have been inflating recently though.

Yeah, that seems the crux of the problem: price rising is exponential, a fixed tax can't offset it.

There are two effects:

First, as you mention, taxing clamps down on demand.

Second, taxes bring revenue.

You are worried that the first effect won't kick in. But that's not a problem at all: just keep jacking up taxes either until it does kick in, or you can afford to make everyone in Canada a billionaire from the second effect.

(Incidentally, this is very similar to worries that a central bank won't be able to create inflation.

That also is a good problem to have: keep purchasing assets with newly printed money until you either have the desired inflation, or you managed to buy the rest of the world for the cost of some ink and paper.)

If you tax them 100% you can take that money and build equivalent government housing on the next lot over.

Lots take up physical space. This space is not infinitely extensible. The next lot over will be farther from the city center.

Hypothetical example: Tax it 100,000,000%. Turn a $1 house into a $1,000,000 house. Do you think they'd still want it? That's the power of taxation to change behaviour. (of course a real tax can be whatever is needed to "get the job done", it doesn't need to be ridiculous). If you don't want empty houses, tax empty houses (though as a distracting aside, the idea that empty houses is a big problem has also been fairly thoroughly debunked, but that's another discussion that it's important rn)

Other than an ideological argument of preferring taxes over outright bans, I feel like the effect is the same. If foreign investors are indeed the ones pushing price up orders of magnitude above inflation, they clearly don't care about prices increasing tenfold. So it seems the tax would have to be insanely huge to actually achieve the same effect.

And honest question: why do we want foreign investors buying homes anyway? I understand buying commercial locations, but not residences.

> Other than an ideological argument of preferring taxes over outright bans, I feel like the effect is the same.

Taxes also provide revenue.

And they allow people to make their own choices.

If you think that having a foreign investor own a house causes Canadians to feel a collective 1 million CAD of pain per year, then it's only fair to give the foreign investor the chance to pay off the Canadian pain.

(Also gray areas around bans are annoying: you have to draw the line of eg who qualifies as a foreigner and what qualifies as owning somewhere. And there's bound to be some weird corner cases and loopholes that people with expensive lawyers can work around.

The reward for finding the loopholes is immense, because there's a discontinuity in the law.

If you have a tax, you have a finer grained instrument. So you can eg charge people in proportion to how much time they spent out of Canada. Instead of going 51% out: you are banned to 49%: everything is fine, the tax can vary gradually.)

Off by a few zeros. Humbly thought I might put that out there in the word problem.

The tax could be an "empty house" tax, so there would be an incentive to get a tenant.

Alternatively, the tax could be targeted at negating profit from value increase, so that you pay higher tax on profit from sale of property (possibly with a deduction you can apply when buying another one within some reasonable timeframe, so that normal homeowners aren't affected).

I would advise against 'empty house' taxes. They just create lots and lots of grey areas.

Also don't tax transactions: you don't mind if people are buying and selling property. What you mind is foreigners (or others) _holding_ property. So tax that.

Transaction taxes are economically inefficient, because they impede the re-shuffling of assets to the best use.

Look into 'land value tax' for more detail.

Explain how would you tax them effectively then, since they are foreign.

Every time I talk about taxing the rich, I'm stormed by people calling me economically illitterate and telling me it's impossible as the rich will always find a loophole.

So if you think they can find loopholes on the ban, why couldn't they find loopholes on new taxes? They do already and very effectively.

Why would it be hard if they are foreign? They literally have a substantial asset in your country.

As an aside, bans are also very exploitable. Can't buy cause you're foreign? Put it in your cousin's name. Buy or start a tiny company that will technically own it. Get some kind of visa, maybe one that you can get because you have lots of $. etc.

A % tax on the cost of the property would be pretty simple. Can't buy without paying the tax up front. It's usually the more complicated taxes that have exceptions to rules that are exploitable. It's hard to find exploits in simple rules.

Yes. Look at land value taxes.

Btw, I would _not_ charge a transaction tax. Charge them every year for holding the property. (Eg charge whoever holds the property on New Year, the market will do the rest.)

That way you don't impede transactions.

I mean yes but then you'd also hit your population, unless you restrict the tax to non-citizens, but then foreign investors can still use some sort of a front man or other loopholes.

Hitting the local population with this particular tax is fine from an economic point of view.

Just use the tax take to finance local goods and service and to lower other local taxes.

Targeting foreign investors is both difficult and morally wrong. You want to target speculators (landlords) regardless of nationality.

And it's easy to implement: tax houses not owner-occupied very heavily.

I am not super familiar with real estate markets. Has the empty house tax helped in any way?

Even if it is not the best solution, is there any huge downside to that ban?

BC brought in a speculation tax that was effectively an empty house tax (you avoided the tax if you rented your house). In its first year, beyond whatever monies it made, it also added about 8000+ units to the market. Now you only get that surge one time, but hey that's not nothing, and beyond that the market seems to have reoriented slightly toward less development of apartments for sale, and more purpose built rental apartments.

https://bc.ctvnews.ca/11-000-condos-added-to-metro-vancouver...

Are there any empty house taxes that charge a significant amount of money? 5% would barely get you into the same range as price growth.

You only have to make it less attractive than other countries.

How do you tax foreign investors only, if they can set up subsidiaries and use dirty tricks anyway?

You're gonna penalize the local market as well.

I'm just asking about empty house taxes. Which also doesn't really need to be foreigner-only.

Also if a company owns a house then make it pay the maximum penalty rate when it's empty. Subsidiary problem solved.

That's why I am suggesting not singling out foreigners in the first place.

Use the tax you collect to finance local goods and services (and to reduce other local taxes).

So local pay the tax and get something in return. Non-residents pay the same tax, but don't get the local goods and services; just because they aren't there. And all without any complicated rules.

I’d be very interested to read an analysis of this. Seems like the best solution to me.

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