>>Someone's still paying for the house flipping.
Of course they are - even in the case of 'flipping', they are at least working to add value. Barring complete incompetence, the repaired and upgraded place is MORE valuable.
>>By definition the flipper makes a margin between what they paid, the repairs, and the price they get at the end.
NO; there is nothing 'by definition' about it. While investors all desire to make a profit, many actually lose money, either due to poor planning and/or execution of upgrades or just ill-timed market downturns. The RISK of loss is reason to justify a profit. Moreover, SQUATTERS ADD ANOTHER RISK that almost guarantees a loss — even if they do zero damage and somehow the costly eviction process is free, the loss of time itself costs money.
>>So why should we encourage house flipping instead of having howners buy the damaged property and pay for a renovation company ? Housing wise the end result is the same, minus the flipping.
YES, I agree, this would be better. However, the result is not necessarily the same. While many flippers have poor or overly trendy tastes so that their upgrades don't add value, individual homeowners are even more unskilled. Plus, people upgrading buildings for a first or second living bring advantages and economies of scale, including buying materials at trade and/or bulk prices vs retail prices, ability to employ workers more efficiently across multiple properties at once, etc. OTOH, the homeowners have the advantage of caring more because they'll live there.
But notice, BOTH of these are ONLY MADE WORSE option by squatters. An investor may take a loss on one of a bunch of properties due to a squatter. But a homeowner who buys a run-down home to upgrade and move into, can be bankrupted by a squatter. Now, you have two homeless families, no just one.
There is simply no justification for giving people the right to steal other's property just by breaking and entering.
If we want to make a process, perhaps akin to found valuables, whereby someone can claim a property, and the previous owner must show that s/he is actively working to upgrade it, I could support that.
I might even support some kind of people can move in, but must cause no damage and move out when caught; a kind of 'no harm — no foul' rule could be reasonable. But, just "gee that looks empty, let's move in, and we have rights greater than the owner!", is a hard NO.