I hope the book is thrown at them as harshly as possible.
Claw back those earnings and put it into funds to clean up the mess that has been made
I also learned recently that the realtor lobby has fought hard to keep the mortgage interest tax deduction which helps home owning persons but hurts everyone else.
Why am I able to use my single rental as a tax shelter? Because of decades of tax lobbying that has made real estate a fantastic investment. But has it helped the average family looking to get a home? To stop being beholden to the whims of the rental market? Has it spurred on builders to build homes? Have these lobbies lobbied local governments against NIMBY policies? F no. By keeping supply high and benefiting from high interest rates they bank — myself included — on renters without the means to buy a home or come up with the down payment to stay renters for even longer.
And don’t get me started on the BS and corruption in the title industry. Why the f does it cost 1500 to 2000 to do a damn title search? And related to that why the f is the seller paying the buyer’s agent a commission? Wtf did the buyers agent do?
Abolish the mortgage interest tax deduction and scale back all the tax breaks that make real estate so speculation friendly. Get rid of 1031 exchanges. Disallow real estate trusts all these tax haven things must go.
The UK system is pretty bad, but you can choose to spend somewhere between about £1500 and £5000 to sell a £500k home, about about £1-2k to buy one (including conveyancing fees)
The US seems to be an order of magnitude more?
There are a lot of home owners that try to sell their home themselves. It can be done.
So if you don't want to pay a realtor, then don't use them.
Why complain about using a service you aren't being forced to use.
The US seem to charge an average 5.4% - over twice the price.
Realtors ARE a good idea. They should be helping you navigate a process that most people will only do once or twice in their life and is very complicated and full of pitfalls. However they've used their industry lobbying to carve out a very comfortable position and then stopped doing the thing everyone wanted them to do.
MLS is a service company, and Realtors are a trademark group.
Perhaps they have what some might call monopoly on the market.
Technically, you can list your property without MLS or without using a trademarked 'Realtor'. There are other agents that aren't 'Realtor'.
It's like complaining that Google isn't listing your ads for free.
Just like Google owns search, so you have to pay them to get listed.
Rent seekers and middle-men will always revert to their ways of bottom feeding.
We were planning on moving. My kids had "adopted" this outdoor cat, giving her food and (outdoor) shelter. We were moving in November, and I figured that cutting her off just as the weather turned would be rather hard on her. So I was trying to find a new home for her.
I ran into a neighbor that I had talked to maybe a total of five times. I asked him if he wanted a cat. He said, "No, but I want your house." He had wanted to buy our house when he moved into the neighborhood, but hadn't been able to afford it then.
So we did a private sale, without a realtor. That cat saved me about $20,000 in realtor fees, so I figured we could keep her.
So, yeah. You're not forced to use them. You can find a buyer (or seller) yourself. You can use Homie or something like it, at least in some places. I just normally don't have the time to do that kind of thing, so I normally use a realtor.
It's not just the US. In Germany, it can be up to 7.14% of the purchase price (depends on the state [1])... so for a 750k unit you're looking at 53k of realtor fees alone, and anything between 3.5-6.5% of sales tax [2], 1.5% for title fees (notary + land register), and on top of that fees from the bank for the credit line... so for that unit you're paying at least 115k in taxes and fees alone. It's nuts, and yet people complain nobody is buying houses any more.
[1] https://www.immobilienscout24.de/wissen/verkaufen/maklerprov...
And 6%? Try ~1.5%
You are describing people buying real estate. Rental Property owners, buy real estate to rent.
Realtors are in the transaction of buying/selling real estate.
Different Roles.
> Why am I able to use my single rental as a tax shelter?
The tax deduction is only available on your primary and secondary residences. (Where secondary here refers to a second home, not a third, etc.) You don't get to claim a primary or secondary residence mortgage interest deduction on your rental properties, because you aren't living there.
This arose out of a previous law that generally allowed for the deduction if interest on all loans because it was administratively unfeasible to differentiate between business and personal interest expense (or so said the wisdom at the time). Even today, business interest expenses are generally deductible. This is wholly separate from the mortgage interest deduction, which is for owner-occupied homes.
Going further, why should anyone get to exclude a quarter of a million dollars on capital gains when they sell their home?
Furthermore, for homes purchased after 2017, the personal mortgage interest deduction has been capped on $750,000 of mortgage debt (first and second home only, combined). [1]
Given the boosted standard deduction, thus isn't a major difference.
If you're going to pick a windmill to tilt at, there are much larger structural issues in US housing. As mentioned elsewhere: zoning that precludes new unit construction, SFH zoning for areas that would support denser development, etc.
[0] https://www.irs.gov/businesses/small-businesses-self-employe...
[1] https://www.irs.gov/publications/p936#en_US_2022_publink1000...
The landlord charges what they believe they can charge.
That's set by market rates in your local area (or cartels like RealPage [0] et al.).
And that's set to homogenize returns with national rental alternatives.
And that's set by alternative options to invest of capital.
If you +5% to the costs of operating rental property, by removing a deduction, rents are going to go up.
And focusing on commercial mortgage interest deductions is ridiculous, as they're accounted for in the exact same way as every other business: expenses deducted from income.
[0] https://www.propublica.org/article/yieldstar-rent-increase-r...
I’ll concede to you on the costs flowing to renters in the sense that if ownership costs go up for all owners rents would follow.
I still think as a category the asset is far too tax advantaged at the expense of the poor or the non-home owning to the detriment of society as a whole.
To me, the biggest problem is the lack of affordable capacity available for primary residence buyers at desired price points.
Which means increasing inventory.
Which means (1) upzoning for density (as most desired locations are land-constrained) & (2) preventing that new inventory from being constructed-as or repurposed-into rentals.
To (2), I'd love to see more efforts to increase costs on large landlords. E.g. a limited-number token system, effectively capping the % of rental properties in an area, with tokens regularly (re-)auctioned off to the highest bidder.
If a giant corporation wants to be a landlord, they shouldn't be able to corner the market.
How does a landlord paying less tax require them to pass that benefit to the renter? Is the assumption that absent this money rent would be higher? If the amount returned to the landlord increased would the rent decrease proportionally or is this just the wishful thinking of trickle down?
I don't think we're either purely supply- or demand- constrained in Houston, TX. But I do think that a massive number of rental properties are using cartel-based pricing in the form of YieldStar software. This distorts the market just enough by preventing price drops in large amounts of properties in less desirable areas, which props up demand in more desirable areas.
This only works if large companies like Greystar and Knightvest and Post own both expensive high-end properties where they need strong ROI, and inexpensive crappy properties where they can take a lower ROI because the capital outlay per unit was a smaller % of their total assets. If both the shitty apartment and expensive apartment rent for $1,400/month, the shitty apartment might go vacant but it didn't cost much in the first place. Meanwhile the expensive apartment costs the same $1,400/mo so people say "that's a bit too much for me to really afford but I can't find anything cheaper and this is the nicest one at that price".
Without YieldStar's price distortion, the expensive apartment might still be $1,400 but the shitty apartment would likely be $800/mo. Enough people would move from the nice apartments to the shitty ones that the nice apartments would eventually have to lower their price a bit to maintain target occupancy rates.
I think this tax deduction is insane, but it's notable that this kind of deduction on interest doesn't exist in Canada and other western countries, but we have in many cases far far worse housing price inflation than the US. So it's not really the culprit.
It's really very simple. When people are buying a home, they are really buying a loan, not a home. 9/10 home buyers buy the home to fit the maximum loan the bank will approve them for. 15 years of insanely low interest rates means demand for those loans was crazy high, so the price of the thing that backed the loan -- the property -- also skyrocketed. Yes the tax break in the US likely worsens that, but it's certainly not the explanatory factor on its own. A large percentage of home buyers have no ability or intent to ever fully pay out their mortgages (and standard "financial advice" during low interest times was not to bother). So the commodity you're "buying" is not a house, but the loan itself, a long term rental arrangement with a bank.
Now that rates are returning to normal levels, I hope to see that level out or fall. But there are strong lobbying pressures to prevent that. There's a whole generation that sees interest rates lower than 5% as normal/expected. Which is pretty crazy, really.
Capital gains exemption on primary residence probably also plays a role. I personally think that exemption should only apply on a portion of the resale value below a certain threshold. That would help put a downward pressure on price inflation.
But the core problem is that there is the most powerful voting demographic explicitly does not want this. Most baby boomers and much of the middle class are relying on the $$ in their properties to retire, because western countries have on the whole dismantled the concept of pensions and a financially secure retirement.
What you're saying is correct, but it's worth noting that as of 2017 the number of tax returns claiming mortgage interest deduction went from 20% to 8% https://www.brookings.edu/articles/chipping-away-at-the-mort...
The reason being the increase in standard deduction, and more people opting for that vs going the itemized route. It's unclear how the current (or next) administration feels about the mortgage interest deduction, but it could be the last days of it.
> Get rid of 1031 exchanges
An exchange involves a sale followed by a subsequent purchase. Without the 1031 treatment the seller just might hold forever, which is probably the opposite of what you're trying to achieve.
I also didn’t know that re the standard deduction taking down the amount of folks that take the deduction. Hmmm
Feeding on the young.