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Comment by mamonster | Hacker News Reader

Well when you say "human right" and a government insists that home ownership is something they will focus on as a human right in their program, to a finance person what you are really saying is "this asset has a free put option attached to it". And having a backstop like that is a very sought after feature for speculators. It isn't the only area where speculators take advantage of it( for example energy generation is another area with a built in backstop), but it is the biggest one.

What would be your proposed solution to this problem, as in how would you remake the real estate market in the US? And perhaps more importantly, how coherent is your solution with the US as it is today?

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The poster above you (whittingtonaaon) proposed raising taxes on secondary, tertiary, etc. homes. That makes sense to me but "investors" looking for easy prey would surely hate on such solution. It's not like no one could have thought of this until now.

I do not say this with the US in mind.

Most money in real estate isn't made on selling people 2nd homes. Unless I misunderstood your comment and you think corporations and investors shouldn't be able to own more than a single home at once(so landlord abolishment)?

Raising taxes doesn't "abolish" anything, it may make it less lucrative, but that's a far cry from "abolishment"

Depends to what level they are raised, of course. Making something prohibitively expensive and then saying "hey look you can still technically do it, it's just not worth your time and you have to really execute everything perfectly" is not super different from just saying you can't do it.

Right, but unless somebody states that is the type of tax they are looking for, it is not appropriate to presume that is what they mean without further information. It seems pretty clear that a primary residence, one secondary home that is used for family vacations at least some of the time, one building/ piece of land that is actively used for a personally operated business, and all other real estate are each distinct categories that should receive different incentives and disincentives from the state - unless you are against governance, but that is another conversation altogether.

I personally think that primary residences should have a 100% homestead exemption, because I don't think you should have to rent your home from the State. And to make up that percentage of income, other real estate should be taxed a little higher. At the same time, there should be intelligent programs in place to make it easier to reach the point where you can own that first home. This last point would undoubtedly work best if there were either financial and/or statutory restrictions on ownership of residential real estate for investment purposes. So, in principle, it makes perfect sense as part of a larger goal of promoting home ownership. The conversation of how to best do this is of course more complex and there are many factors that need to be balanced - more than anything because high taxes raise rents, which would point towards regulation as an important part of the best way of dealing with this.

What possible justification is there for landlording? No-one can make new space and all owned land was stolen from the commons.

How do you propose we would — systematically — provide housing to people who, for whatever reason, are not in a position to buy? Should housing be bifurcated into government-provided housing for renters and privately-owned housing for those fortunate enough to have the money and stability to buy? Would you like to live in government housing, or would you prefer to keep the investor-owned rental option, but have them pass a bunch of new taxes onto their customers? Or maybe, just maybe, realize that property rentals are a necessary service that is handled pretty well by the private markets and that landlords are no more or less deserving of earning a profit for the service they provide and risk they take on?

>How do you propose we would — systematically — provide housing to people who, for whatever reason, are not in a position to buy? Should housing be bifurcated into government-provided housing for renters and privately-owned housing for those fortunate enough to have the money and stability to buy?

So...council estates? Subsidized housing is a thing we have.

>realize that property rentals are a necessary service that is handled pretty well by the private markets and that landlords are no more or less deserving of earning a profit for the service they provide and risk they take on?

Landlords don't create added value. I'm skeptical that it is a necessary service; housing is necessary, but is renting housing necessary? Why would that be?

A house costs more than some people have. Without a rental market, those people become homeless or completely dependant on government. Neither is desirable.

Without the profit incentive, what developer would build a multi unit apartment building to achieve higher density living in cities?

I'd say a house costs more than almost anyone has; it's why people need to take out loans to purchase them. That said, without a rental market the price of houses goes way down. As a result, the people that cannot afford houses then are mostly the same people that cannot currently afford rent. This is because the mortgage payment and insurance for a home is actually lower than the monthly rent. If the top value were lower, it would be a safer risk for a bank but because it's so high, people don't have that access to credit.

A developer still has a profit incentive; mostly the same one they have now, actually. They sell the apartments.

So you have a city like Los Angeles or NYC. You convert all housing to single family homes. Can more people of fewer people live there now?

Why would you convert all housing to single family homes? Do people not own apartments for some reason?

>That said, without a rental market the price of houses goes way down.

I see that you are saying you would simply sell the apartments instead now. What is the solution for (e.g.) new grads who do not have a down payment yet? Why aren't tenants currently pooling their money, purchasing the properties they live at and converting it to a Tenancy in Common?

I do not think prices will drop without a rental market. Prices might even increase because you are making the market much less efficient. It will also make building new units more difficult as there will almost always be a holdout in the building.

> Landlords don't create added value. I'm skeptical that it is a necessary service; housing is necessary, but is renting housing necessary? Why would that be?

There are many cases where this isn’t true. Many (most) residents in urban areas are transient. They stay for a couple of years, get married, then move to the suburbs or another city to start a family.

There are a bunch of other reasons why someone wouldn’t want to stay in a location for a long period of time.

Rentals absolutely make sense in this situation.

>Landlords don't create added value. I'm skeptical that it is a necessary service

Subdividing your land and making it available to others is valuable. The world without that is all single family homes.

> How do you propose we would — systematically — provide housing to people who, for whatever reason, are not in a position to buy? Should housing be bifurcated into government-provided housing for renters and privately-owned housing for those fortunate enough to have the money and stability to buy?

Without speculators leeching off of them, 20 year old two bedroom units would cost less than they currently rent for each year.

Make property investors actually invest something by only allowing profit or rent on land that has been recently improved.

Landlords do not provide a service.

They take otherwise-purchasable properties off the market, then make money off preventing other people from owning them in perpetuity.

Some landlords also offer property management services, but that is a separate field entirely. It would be fairly easy for an apartment building to consist of entirely owner-occupied units, who could then join together in a co-op to either put individual local contractors on retainer for things like plumbing, electrical, and miscellaneous repair services, or find a one-stop-shop company to hire for it.

Why would landlords hate such a system. They can trivially pass on any tax to renters and have the incentives to figure out the loopholes in the tax code. It’s already common for single unit corporations to own rental properties.

Instead of taxing based on who owns the land, tax how it’s used. That way more units will be built increasing supply.

But then you’ll run into the real problem, not landlords, regular home owners who largely have a revealed preference to live on giant plots of land, in big houses far from multi unit dwellings. They’ll continue to use restrictive zoning to limit supply and keep prices up.

If it's taxed at least 100% of its land value +100% of its rental value they'll sell pretty quick.

Why not just pass a law saying only individuals can own property and they can only own one?

Because that means apartment buildings become illegal?

Homeownership is all well and good, but sometimes you really do just need a place to live for a year or two, and having to do a full-fledged real estate transaction at each end of that period is a lot of friction.

The tax the poster proposed was a de facto ban which was my point. But even then it wouldn’t work because some land is more desirable than others and by encumbering land ownership you encourage those that own the more desirable land to extract as much value as possible.

The thing we are dancing around in this thread is do landlords largely determine the housing prices. I think not. I think it’s supply constraints and government subsidized mortgages. These are largely issues driven by regular home owners not landlords.

How so? It's a fairly common model for each individual apartment to have their own owner, and a body corporate run by the owners manage common areas.

I like a system whereby individuals can own between one and a bit and three somewhere (including provision for commercial property where large facilities need to rent many people's fungible extra-property rights in some way). Mentioning 100% tax is just to head off idiotic straw men about passing the tax on to renters.

Also allowing benefiting from or even rent seeking on only the increased value of very recent property improvements (like taxing at the value it held 5 years ago with some buy-or-sell challenge type provision to prevent undervaluing).

Implement a Land-Value Tax, as per Henry George's vision. All of the rent from land speculation will be returned to communities. Relatively easier to implement than other solutions (we already have assessors to determine the value of land + property) and should be an easy sell to most Americans, as most would see their tax burden drop dramatically.

> What would be your proposed solution to this problem, as in how would you remake the real estate market in the US?

Higher capital gains tax for investment properties to discourage speculation.

The rationale being that it’s perfectly fine to own investment real estate as long as it’s being occupied. Short term speculation incentivizes unrented property (look at any city in East Asia). Incentivizing longer holding periods makes it more likely that the property will be used to extract rents (that is, actually house people, which is what you want).

Very simple.

Any residence you don't live in as your only exempt residence for at least 2 years out of 5 is taxed at 100% pa. Any land with above median value is taxed at a progressive rate if you do live on it.

Any commercial building you don't work in for a similar period is taxed at 20%

You want to develop? Fine. Just have to make sure someone else owns or will own the land/strata before you start and charge them for the development.

You want to rent out a building? Fine. Put it on someone else's land and if they don't renew the lease you have to remove it or give up claim to it.

Most developers would not accept those terms. That's a proposal for predictable project losses. It's far less risk to own the project and land, seek institutional and similarly deep pocketed financing, then to suffer the fickle stinginess of a multitude of strata members. The developers who accept those terms will be looking to cut corners.

There are plenty of projects that are sold before they are started, and no reason the transaction would have to go the way you're claiming.

As long as at least one person is willing to assign their land claim to the project it could continue without that portion taxed, and acquiring or renting the claims would not have to be coupled to funding.

Modelling land as a fungible commodity that you're allowed to have as much as you want of is stupid and is just gifting a large portion of the productive output of society to those privileged enough to take on debt and those with the magic loan wand. There are plenty of other systems historically and currently that aren't as insane.

Pre-sales always include broad sweeping allowances for variances in final cost; for instance, folks who pre-bought condos two or three years ago are just starting to get sticker shock now that the final price has hit them, thanks to skyrocketing materials cost. The price they agreed to pay, with those variances they agreed to.

Without the assurance that someone else would shoulder the risk the builders would have walked away. Like they do in China, and where they have to demolish half finished towers because the builders dropped out and none will take it on.

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