I like basically all of this, but he falls down at the end where he says essentially "we either screw the workers without houses or the workers with houses" and then stops writing. What about...
I like basically all of this, but he falls down at the end where he says essentially "we either screw the workers without houses or the workers with houses" and then stops writing. What about taxing the wealthy and further subsidizing home ownership for first time homebuyers? It still doesn't solve the challenge of the housing market being wildly inflated, but it does avoid the false zero sum game he's set up.
Even the framing specific to home ownership is a false target. It doesn't matter where your wealth is. If you have too much wealth, it should be redistributed. Disparity is bad for society. For...
Even the framing specific to home ownership is a false target. It doesn't matter where your wealth is. If you have too much wealth, it should be redistributed. Disparity is bad for society. For some that may look like taxes on homes. For others, it may look like taxes on capital gains or income. The target is excessive wealth not the specific kinds of wealth you happen to possess at one point in time.
Real estate becoming an investment happens because it's desirable and durable. To make prices go down, society would have to "destroy value" somehow. One way It happens "naturally" is if the...
Real estate becoming an investment happens because it's desirable and durable. To make prices go down, society would have to "destroy value" somehow.
One way It happens "naturally" is if the neighborhood becomes less desirable on its own. But even though you could better afford to live there, how much do you want to live in a bad neighborhood? There are already lots of cheaper but less desirable places to choose from in the US.
Another way to reduce prices might be to raise property taxes a lot. But although the price of the house would be less, it probably wouldn't be any more affordable, due to the tax. (The property tax acts something like rent.)
There are some locations like flood zones where it would especially be in society's interest to discourage people people from living there. Not allowing people to get a mortgage would probably do a lot to depress prices. But you can see how much people fight milder versions of that sort of thing. How much more when there doesn't seem to be a good reason to do it?
This discounts the concentration of wealth and the use of housing as a speculative market. Providing incentives and discounts to those who are using housing to live and penalizing those who are...
This discounts the concentration of wealth and the use of housing as a speculative market. Providing incentives and discounts to those who are using housing to live and penalizing those who are using it for profit would depress prices significantly because they are currently propped up by this particular kind of use and people who have excessive wealth.
Yes, speculation plays a role sometimes, and we saw in 2008 what happens when the music stops. But I don't think housing needs to be an investment for prices to get too high. If wealthy people...
Yes, speculation plays a role sometimes, and we saw in 2008 what happens when the music stops. But I don't think housing needs to be an investment for prices to get too high. If wealthy people want to live somewhere and they can't buy then they'll rent, and prices will still go up. After all, who buys fancy cars, flies first class, and stays in fancy hotels? These aren't investments.
I have a great local example of this. There's a place in Richmond, CA called Atchison Village, which has some interesting restrictions on buying one of the properties there, but most relevant to...
I have a great local example of this. There's a place in Richmond, CA called Atchison Village, which has some interesting restrictions on buying one of the properties there, but most relevant to our discussion is that it has to be your primary residence. The price of purchasing one of those houses was, for a long while, less than half the cost of purchasing similar housing without those controls. But with the price of housing continuing to skyrocket all around them, even with those restrictions the price has recently nearly normalized as compared to the free market housing nearby. There's such a pressure for more housing that people are desperate, and they don't really care that the comparative profit from reselling will be lower, they just need a place to live.
This reminds me of a blog I read that's about finding rental property to invest in. Apparently one metric that investors will look for is a favorable (lower) price-to-rent ratio. They said the...
This reminds me of a blog I read that's about finding rental property to invest in. Apparently one metric that investors will look for is a favorable (lower) price-to-rent ratio. They said the best places for buying rental property were pretty far from the big cities.
It would make sense that as prices go up, some investors get out (cashing in) and investors don't want to buy rental property there anymore. Until rents catch up? It seems like there are a lot of variables.
But it seems like if properties with these restrictions go for the same price as properties without them, that means it's not speculative investment causing the problem there, anymore.
If you want to control price inflation, taxation is the answer. One approach might be that property tax rates increase drastically with the number of properties owned. People who buy houses to...
If you want to control price inflation, taxation is the answer. One approach might be that property tax rates increase drastically with the number of properties owned. People who buy houses to actually live in pay affordable rates, people (or companies) who buy houses to rent (or as holiday homes) pay more.. and more.. and more... Public sector property portfolios are exempt, obviously, to gradually transfer the rental market back to society rather than predatory investors, where rent can be capped and controlled easily.
Always appreciate a Georgist. A quick primer for the newcomers: Taxing unimproved land (as one of the primary taxes) means profiteers need density to combat the hefty tax. The tax being targetted...
Always appreciate a Georgist. A quick primer for the newcomers:
Taxing unimproved land (as one of the primary taxes) means profiteers need density to combat the hefty tax. The tax being targetted to be reasonable for small homeowners but making it hard to profit off of landlordship. Most proposals offer tax breaks for your primary residence, such that the hardest burden is placed on those seeking to profit from land ownership.
One of the key reasons this is better than regular propety taxes is that the tax is set for the unimproved value of the land. It matters not if you have a 100-unit condo or a single family home on a 1-acre property, the tax is the same.
This creates all sorts of positive incentives. One of which would be that businesses with massive parking lots would be at a disadvantage relative to ones that had smaller ones.
This is true. But buy-to-rent and buy-to-invest is a significant problem and perhaps by mitigating that, it would be enough. It would certainly help, if nothing else.
This is true. But buy-to-rent and buy-to-invest is a significant problem and perhaps by mitigating that, it would be enough. It would certainly help, if nothing else.
Buying to rent just creates rental units in the market. If there is enough supply of well managed rental units it shouldn’t have meaningful impacts on housing prices. The critical thing is always...
Buying to rent just creates rental units in the market. If there is enough supply of well managed rental units it shouldn’t have meaningful impacts on housing prices. The critical thing is always just that there needs to be more housing of the quality that people actually need. Which means with access to a functioning economy with opportunities for work and social/community life.
Buying to rent creates landlords, and landlords are necessarily exploitative because they exist to profit from an essential-to-life need, that of shelter. We don't need landlords. We do need...
Buying to rent creates landlords, and landlords are necessarily exploitative because they exist to profit from an essential-to-life need, that of shelter. We don't need landlords. We do need places people can rent, but that's why local authorities should own large property portfolios.
Also yes, in an ideal world buying to rent wouldn't be profitable but it currently is. Lots of people renting who would like to buy but can't because investors buy up any property the second it hits the market. Dealing with that problem is a fast and easy step along the way to fixing housing supply.
That’s only because housing is scarce. If supply kept up with demand they wouldn’t be able to do that. It’s the scarcity that creates the conditions for exploitativeness. I own a house now and,...
Also yes, in an ideal world buying to rent wouldn't be profitable but it currently is. Lots of people renting who would like to buy but can't because investors buy up any property the second it hits the market.
That’s only because housing is scarce. If supply kept up with demand they wouldn’t be able to do that. It’s the scarcity that creates the conditions for exploitativeness.
landlords are necessarily exploitative because they exist to profit from an essential-to-life need, that of shelter
I own a house now and, TBH, I miss renting. Buying was the right move financially, but I really miss just being able to call a super to fix shit and having a property management company maintain the grounds and organize social events. I was in a rent controlled building before and felt like I got plenty out of the exchange with the property management company, including having someone as a go between to enforce communal norms among neighbors (like telling people to stop smoking weed in the hallways).
If “local authorities” own all the rental stock then I don’t see how we’re solving any of the problems. The “local authorities” just become your landlord, only they’re a monopoly and you now have all the standard challenges of landlording with the intransigence and indifference to service/quality that comes from being a monopolist laid on top of it.
When local authorities own housing they have a strong incentive to keep those houses in good condition because they're interested in minimising long term costs - repairing problems early is...
When local authorities own housing they have a strong incentive to keep those houses in good condition because they're interested in minimising long term costs - repairing problems early is cheaper than letting them get worse; plus rent can be easily controlled because they're not operating as for-profit landlords. Them having a monopoly doesn't make any difference. It's the difference, again, between running a service and operating a business. Societies aren't businesses, you can't apply the same rules to them. Providing housing as a service is no different to providing healthcare or education or library services or whatever. Local councils do those things just fine, despite being a monopoly. Private enterprise never deliver services, because they're not service providers - they are businesses. The private sector consistently shows that it cannot be trusted with life-essential services.
I don't miss renting at all. I like being able to paint my walls whatever colour I want; put in work to make the place better without the risk of being booted out the next week; not having some spotty oik come around every six months to make sure I've done the cleaning and best of all I really like not handing over my money to some dude who inherited my house from his daddy and has done nothing to earn a penny of that money. If I need something fixing I just fix it myself or call a tradie to do it for me. I've never lived anywhere where the renting agency has organised social events, I'm not sure that's something that happens here.
This hasn't been borne out by empirical evidence. The institution's interests and the incentives of the people managing the institutions are not always aligned. If you have turnover in management,...
When local authorities own housing they have a strong incentive to keep those houses in good condition because they're interested in minimising long term costs - repairing problems early is cheaper than letting them get worse
This hasn't been borne out by empirical evidence. The institution's interests and the incentives of the people managing the institutions are not always aligned. If you have turnover in management, or supervision of the housing authority is viewed as a stepping stone to bigger career moves, then the administrator's incentive is to keep costs low in the present and kick the long-term costs over for a future manager superintendent to get dinged for.
plus rent can be easily controlled because they're not operating as for-profit landlords.
You can also just control rents with rent control. But that's a suboptimal method, and better managed by just building enough housing to keep up with demand.
Societies aren't businesses, you can't apply the same rules to them. Providing housing as a service is no different to providing healthcare or education or library services or whatever.
I'm not applying business rules. I'm applying basic "it takes resources to maintain stuff" and "people need to have incentives to dedicate resources" rules. Healthcare, education, and library services are pretty woefully underfunded by governments in basically every country that doesn't have gobs of oil money to throw at it. If rich people can opt out of a system, they will leverage the political system to underfund the stuff they're opting out of. This is a pretty iron-clad law of public services. They intrinsically have free-rider and collective action problems that present extremely difficult governance challenges to rein in.
Bureaucrats are good at making sure people follow rules. Entrepreneurs are good at finding supply to meet demand. It makes a lot more sense for markets to provide housing (with financial incentives and seed capital to get over start-up costs if needed) and for bureaucrats to make sure it's up to standard and in compliance with rules about being decently habitable.
I don't miss renting at all. I like being able to paint my walls whatever colour I want; put in work to make the place better without the risk of being booted out the next week; not having some spotty oik come around every six months to make sure I've done the cleaning and best of all I really like not handing over my money to some dude who inherited my house from his daddy and has done nothing to earn a penny of that money. If I need something fixing I just fix it myself or call a tradie to do it for me. I've never lived anywhere where the renting agency has organised social events, I'm not sure that's something that happens here.
I don't relish being liable for appliances breaking, party walls from neighbors being damaged, water damage, and a host of other expenses that don't get covered by homeowner's insurance. And then having to wrangle with homeowner's insurance to actually cover repairs is a whole other headache that winds up being a lot more complicated than simply "calling a tradie." Every rental agreement I've had has also allowed me to paint the walls as long as I paint them back to a neutral color when I move out, which I view as more of a courtesy to the next tenant than a "landlord is being a dick for no reason" thing.
I have never heard of a landlord spot checking to make sure I'm cleaning the house. That's insane. I've had good relationships with my individual landlords, who by and large, owned an expensive house in the city but had to move to the burbs for more space and family needs and didn't want to give up the property in the hopes they'll be able to return from exile in the suburban gulag some day. They generally loved the house they were renting out, tried to be very careful about who they rented to because they wanted to be able to trust them with it, and gave me pretty broad leeway to do whatever I wanted as long as I didn't break anything. In fact, it was generally easier for me to just call a plumber or an AC repair guy for fixes and deduct the cost off my rent than it is for me to deal with my insurance company now. As long as I provided an invoice they didn't really argue.
There were only two times I remember one landlord asking me not to do something. One was wall mount a TV, and that was due to safety concerns around drilling holes in the brick-work and having doubts that a ~120 year old house's brick could support the weight reliably. The other was to replace the front door with something that was a standard size so we could weatherize it better, and that was something he wanted to do but the historic preservation laws in the city blocked him.
Aside from them I've gone with corporate landlords, who are generally pretty fastidious about compliance with tenant protection laws, which my city has some of the strictest in the country.
On your first points we're never going to agree so it's not really worth any further discussion. Inspections to make sure you're not wrecking the joint and are keeping it in reasonable condition...
On your first points we're never going to agree so it's not really worth any further discussion.
I have never heard of a landlord spot checking to make sure I'm cleaning the house. That's insane.
Inspections to make sure you're not wrecking the joint and are keeping it in reasonable condition are absolutely standard in the UK. The landlord or their agent can't just rock up any time and let themselves in, there has to be reasonable notice given but all rental properties have regular inspections. My last place they went around with a checklist and anything different from the previous visit was noted - wear and tear as well as damage or unauthorised changes. It works for tenants as well as landlords, because the landlord can't turn around at the end of a tenancy and say "this carpet is wrecked, you're not getting your deposit back" when the tenant can point to inspections showing the carpet getting gradually more damaged over time and claim reasonable wear and tear.
I mean it's not just a blithe matter of opinion. I'm speaking as a person with a degree in public policy management. There's a lot of economics and political science reasons why publicly managed...
On your first points we're never going to agree so it's not really worth any further discussion.
I mean it's not just a blithe matter of opinion. I'm speaking as a person with a degree in public policy management. There's a lot of economics and political science reasons why publicly managed housing is extremely difficult to pull off.
The best model is probably Singapore, where the government gets units built through bidding out to construction companies and then contracts with management companies to manage the large properties once built. It's probably the only system that has actually been satisfactory at ensuring ample supply of affordable, middle-class, family-friendly housing in a dense and in-demand urban context. That's clearly not the sort of fully state-managed housing scheme you're talking about. And places where that has been what people pursue have simply not worked very well. There is always some combination of undersupply (sometimes quite severe) or mismanagement.
They have an extremely competent and capable bureaucratic machine that's diligent about inspections and regulation. This is something a lot of other countries just don't really have, in part because they're a little too enamored of 'local control' and using these govt. positions as patronage chits.
Inspections to make sure you're not wrecking the joint and are keeping it in reasonable condition are absolutely standard in the UK.
Yeah it's mentioned in the lease that they have the right to inspect with due notice. But generally it was a scheduled once in 6 months thing, but they were also just doing maintenance checks on the HVAC, spraying for pest control, etc. This is all stuff I have to do myself now. These are mostly pretty old buildings that have had multiple lives and renovations so they have to be quite diligent about maintenance.
My experience with landlords makes me believe I absolutely don't want landlords as my landlord. Also, which government services? It's a bit misleading to just say "government" as if that were one...
My experience with landlords makes me believe I absolutely don't want landlords as my landlord.
Also, which government services? It's a bit misleading to just say "government" as if that were one thing. Plenty of state services are run extremely well. In the UK, the DWP administers the benefits system with >97% accuracy regarding fraud. My bank can't manage that.. The NHS had, until recent funding cuts, some of the best health outcomes in the world. The library service in my county is absolutely outstanding. The gov.uk design service produces some of the most usable and accessible web design I've ever seen. A couple of my friends work for the security services and while they can't talk about exactly what they do, they are highly capable and motivated people who I sincerely doubt are doing a bad job.
We could make it more targeted than that. Make a progressive tax for increasing number of properties. Low if you only own one, moderately accessible for 2, and exponential from there on out....
Another way to reduce prices might be to raise property taxes a lot. But although the price of the house would be less, it probably wouldn't be any more affordable, due to the tax. (The property tax acts something like rent.)
We could make it more targeted than that. Make a progressive tax for increasing number of properties. Low if you only own one, moderately accessible for 2, and exponential from there on out. Couple that with incentive programs with low interest rates for first time buyers (not talking about the programs we already have, but reducing interest rates to 1-3% for first time buyers).
We have levers to pull that won't crash the market and can make housing more accessible. But they largely disperse wealth and that's "unamerican".
There's so many ways around that. Most investors already have a separate LLC for each property, and so you'd have to really dig into what was meant by "owning a property" in ways that doesn't...
There's so many ways around that. Most investors already have a separate LLC for each property, and so you'd have to really dig into what was meant by "owning a property" in ways that doesn't catch up other organizations that own plenty of real estate for purposes other than landlording.
Sorry, you didn’t actually say this, but when you talked about a progressive tax on people owning multiple properties, I was thinking of them owning more units. If a landlord owning a big building...
Sorry, you didn’t actually say this, but when you talked about a progressive tax on people owning multiple properties, I was thinking of them owning more units. If a landlord owning a big building with lots of units results in a tax penalty then going condo would be one way to avoid it.
On the other hand, if the tax is based on number of properties then there would be incentive to invest in a big apartment building versus multiple smaller buildings.
An obvious way to destroy value is to decrease scarcity. In general (of course, a lot in the middle of downtown Tokyo is not), land is a depreciating asset in Japan, for instance, which generally...
An obvious way to destroy value is to decrease scarcity. In general (of course, a lot in the middle of downtown Tokyo is not), land is a depreciating asset in Japan, for instance, which generally causes there to be more renters as home ownership is not a "guaranteed" return on investment, you actually need to use the land to do something first. I think we're still far from saturing the Earth land-wise, especially in countries like the US.
At the extreme, you can continue to destroy land value via supply by extra-terrestrial expansion.
This seems like the only actual solution. Everything else that gets proposed is either ineffective, or so minor it doesn’t matter. Either build faster, or reduce population growth. This is...
This seems like the only actual solution. Everything else that gets proposed is either ineffective, or so minor it doesn’t matter. Either build faster, or reduce population growth.
This is unpopular though because it’s much harder to build faster than it is to bike shed over how many properties you should be allowed to own.
Arguably building more housing does destroy value somewhat, not just through eliminating scarcity, but also by changing in-demand low rise neighborhoods with less desirable mid or high rise...
Arguably building more housing does destroy value somewhat, not just through eliminating scarcity, but also by changing in-demand low rise neighborhoods with less desirable mid or high rise neighborhoods. This functionally makes that specific type of housing more rare and more valuable.
I was thinking that it sounds funny to say that building new housing "destroys value" since existing houses don't change. But there's a way it makes sense. This is like what happens when a stock...
I was thinking that it sounds funny to say that building new housing "destroys value" since existing houses don't change. But there's a way it makes sense. This is like what happens when a stock drops because a competitor enters the market. One thing that might make a business valuable is that it has a "moat," some kind of special advantage that prevents competitors from entering the market.
For the property owners in a neighborhood, the "moat" keeping prices high includes anything that prevents more housing from being built nearby, so the "value" is in part about the lack of competitors.
Well, most of what people value (and are willing to pay for) comes from what people expect will happen. If you knew a house was going to be demolished in a year, it wouldn't be worth nearly as...
Well, most of what people value (and are willing to pay for) comes from what people expect will happen. If you knew a house was going to be demolished in a year, it wouldn't be worth nearly as much to live there.
So, one way to destroy value is to change what people expect.
It's not zero sum. The value doesn't go anywhere, you're just not as rich as you thought.
I think there are a few policies I would like to see forwarded in my own country WRT housing. Encourage housing as a resource and not a financial product by heavily taxing additional owned...
I think there are a few policies I would like to see forwarded in my own country WRT housing.
Encourage housing as a resource and not a financial product by heavily taxing additional owned properties. You could probably have a scheme where an organisation can apply for 'Residential Landlord' status, that comes with a fat property audit to assure quality of domicile but reduces the tax penalty.
If people are disincentivised to purchase property for any reason other than need, you're reducing demand without killing anyone or creating slums, hopefully resulting in lower prices.
Ensure a certain proportion of all rented accomodation in your country is centrally owned social housing that cannot be purchased by private individuals. This probably means the state buying out properties as people sell up following the implementation of 1).
This social housing should not be used directly to make money for the local authority, but should instead just cover the upkeep and maintenance on quality, but not flashy, rented accomodation. The purpose of these houses is to ensure that the state can attack problems like homelessness more effectively. Maybe make it law that every development has X% of the units sold to the state at construction?
I believe the role of social housing is not just to provide housing to low-income families, it should serve as the absolute worst quality rented accomodation that can be accepted; that doesn't mean it should be bad housing, just that it should meet a minimum standard below which you cannot rent a place out.
Disallow rent raising above inflation + x%; for context in my home city in 2022 we experienced an average rent increase of 40%, compared to the 10% or so UK inflation figure.
I mentioned the Singapore example in another comment chain, and they actually do this the opposite way. The state builds housing units and then has kind of “lease-to-own” schemes for families to...
Ensure a certain proportion of all rented accomodation in your country is centrally owned social housing that cannot be purchased by private individuals.
I mentioned the Singapore example in another comment chain, and they actually do this the opposite way. The state builds housing units and then has kind of “lease-to-own” schemes for families to take ownership of them. They also have controls on how high above your own purchase price you can sell the property for when you move.
Their expectation is that most people should not own their homes forever, but they do want people to have some skin in the game in terms of the upkeep and value of the property and to be able to build and monetize equity they get on their homes. The whole thing is kind of designed for people to be able to scale up and down their housing needs as they progress through life (smaller units for singles, bigger ones for families, mid sized ones for retirees) with pretty generous grants for first time home buyers.
If there is need for more housing, they simply build more. No draconian controls on ownership or bureaucracy to support long term maintenance required.
I like basically all of this, but he falls down at the end where he says essentially "we either screw the workers without houses or the workers with houses" and then stops writing. What about taxing the wealthy and further subsidizing home ownership for first time homebuyers? It still doesn't solve the challenge of the housing market being wildly inflated, but it does avoid the false zero sum game he's set up.
Even the framing specific to home ownership is a false target. It doesn't matter where your wealth is. If you have too much wealth, it should be redistributed. Disparity is bad for society. For some that may look like taxes on homes. For others, it may look like taxes on capital gains or income. The target is excessive wealth not the specific kinds of wealth you happen to possess at one point in time.
Real estate becoming an investment happens because it's desirable and durable. To make prices go down, society would have to "destroy value" somehow.
One way It happens "naturally" is if the neighborhood becomes less desirable on its own. But even though you could better afford to live there, how much do you want to live in a bad neighborhood? There are already lots of cheaper but less desirable places to choose from in the US.
Another way to reduce prices might be to raise property taxes a lot. But although the price of the house would be less, it probably wouldn't be any more affordable, due to the tax. (The property tax acts something like rent.)
There are some locations like flood zones where it would especially be in society's interest to discourage people people from living there. Not allowing people to get a mortgage would probably do a lot to depress prices. But you can see how much people fight milder versions of that sort of thing. How much more when there doesn't seem to be a good reason to do it?
This discounts the concentration of wealth and the use of housing as a speculative market. Providing incentives and discounts to those who are using housing to live and penalizing those who are using it for profit would depress prices significantly because they are currently propped up by this particular kind of use and people who have excessive wealth.
Yes, speculation plays a role sometimes, and we saw in 2008 what happens when the music stops. But I don't think housing needs to be an investment for prices to get too high. If wealthy people want to live somewhere and they can't buy then they'll rent, and prices will still go up. After all, who buys fancy cars, flies first class, and stays in fancy hotels? These aren't investments.
I have a great local example of this. There's a place in Richmond, CA called Atchison Village, which has some interesting restrictions on buying one of the properties there, but most relevant to our discussion is that it has to be your primary residence. The price of purchasing one of those houses was, for a long while, less than half the cost of purchasing similar housing without those controls. But with the price of housing continuing to skyrocket all around them, even with those restrictions the price has recently nearly normalized as compared to the free market housing nearby. There's such a pressure for more housing that people are desperate, and they don't really care that the comparative profit from reselling will be lower, they just need a place to live.
This reminds me of a blog I read that's about finding rental property to invest in. Apparently one metric that investors will look for is a favorable (lower) price-to-rent ratio. They said the best places for buying rental property were pretty far from the big cities.
It would make sense that as prices go up, some investors get out (cashing in) and investors don't want to buy rental property there anymore. Until rents catch up? It seems like there are a lot of variables.
But it seems like if properties with these restrictions go for the same price as properties without them, that means it's not speculative investment causing the problem there, anymore.
If you want to control price inflation, taxation is the answer. One approach might be that property tax rates increase drastically with the number of properties owned. People who buy houses to actually live in pay affordable rates, people (or companies) who buy houses to rent (or as holiday homes) pay more.. and more.. and more... Public sector property portfolios are exempt, obviously, to gradually transfer the rental market back to society rather than predatory investors, where rent can be capped and controlled easily.
Also, land tax
Always appreciate a Georgist. A quick primer for the newcomers:
Taxing unimproved land (as one of the primary taxes) means profiteers need density to combat the hefty tax. The tax being targetted to be reasonable for small homeowners but making it hard to profit off of landlordship. Most proposals offer tax breaks for your primary residence, such that the hardest burden is placed on those seeking to profit from land ownership.
One of the key reasons this is better than regular propety taxes is that the tax is set for the unimproved value of the land. It matters not if you have a 100-unit condo or a single family home on a 1-acre property, the tax is the same.
This creates all sorts of positive incentives. One of which would be that businesses with massive parking lots would be at a disadvantage relative to ones that had smaller ones.
Well-off people who buy houses to live in (like software developers in Silicon Valley) can drive up prices too.
This is true. But buy-to-rent and buy-to-invest is a significant problem and perhaps by mitigating that, it would be enough. It would certainly help, if nothing else.
Buying to rent just creates rental units in the market. If there is enough supply of well managed rental units it shouldn’t have meaningful impacts on housing prices. The critical thing is always just that there needs to be more housing of the quality that people actually need. Which means with access to a functioning economy with opportunities for work and social/community life.
Buying to rent creates landlords, and landlords are necessarily exploitative because they exist to profit from an essential-to-life need, that of shelter. We don't need landlords. We do need places people can rent, but that's why local authorities should own large property portfolios.
Also yes, in an ideal world buying to rent wouldn't be profitable but it currently is. Lots of people renting who would like to buy but can't because investors buy up any property the second it hits the market. Dealing with that problem is a fast and easy step along the way to fixing housing supply.
That’s only because housing is scarce. If supply kept up with demand they wouldn’t be able to do that. It’s the scarcity that creates the conditions for exploitativeness.
I own a house now and, TBH, I miss renting. Buying was the right move financially, but I really miss just being able to call a super to fix shit and having a property management company maintain the grounds and organize social events. I was in a rent controlled building before and felt like I got plenty out of the exchange with the property management company, including having someone as a go between to enforce communal norms among neighbors (like telling people to stop smoking weed in the hallways).
If “local authorities” own all the rental stock then I don’t see how we’re solving any of the problems. The “local authorities” just become your landlord, only they’re a monopoly and you now have all the standard challenges of landlording with the intransigence and indifference to service/quality that comes from being a monopolist laid on top of it.
When local authorities own housing they have a strong incentive to keep those houses in good condition because they're interested in minimising long term costs - repairing problems early is cheaper than letting them get worse; plus rent can be easily controlled because they're not operating as for-profit landlords. Them having a monopoly doesn't make any difference. It's the difference, again, between running a service and operating a business. Societies aren't businesses, you can't apply the same rules to them. Providing housing as a service is no different to providing healthcare or education or library services or whatever. Local councils do those things just fine, despite being a monopoly. Private enterprise never deliver services, because they're not service providers - they are businesses. The private sector consistently shows that it cannot be trusted with life-essential services.
I don't miss renting at all. I like being able to paint my walls whatever colour I want; put in work to make the place better without the risk of being booted out the next week; not having some spotty oik come around every six months to make sure I've done the cleaning and best of all I really like not handing over my money to some dude who inherited my house from his daddy and has done nothing to earn a penny of that money. If I need something fixing I just fix it myself or call a tradie to do it for me. I've never lived anywhere where the renting agency has organised social events, I'm not sure that's something that happens here.
This hasn't been borne out by empirical evidence. The institution's interests and the incentives of the people managing the institutions are not always aligned. If you have turnover in management, or supervision of the housing authority is viewed as a stepping stone to bigger career moves, then the administrator's incentive is to keep costs low in the present and kick the long-term costs over for a future manager superintendent to get dinged for.
You can also just control rents with rent control. But that's a suboptimal method, and better managed by just building enough housing to keep up with demand.
I'm not applying business rules. I'm applying basic "it takes resources to maintain stuff" and "people need to have incentives to dedicate resources" rules. Healthcare, education, and library services are pretty woefully underfunded by governments in basically every country that doesn't have gobs of oil money to throw at it. If rich people can opt out of a system, they will leverage the political system to underfund the stuff they're opting out of. This is a pretty iron-clad law of public services. They intrinsically have free-rider and collective action problems that present extremely difficult governance challenges to rein in.
Bureaucrats are good at making sure people follow rules. Entrepreneurs are good at finding supply to meet demand. It makes a lot more sense for markets to provide housing (with financial incentives and seed capital to get over start-up costs if needed) and for bureaucrats to make sure it's up to standard and in compliance with rules about being decently habitable.
I don't relish being liable for appliances breaking, party walls from neighbors being damaged, water damage, and a host of other expenses that don't get covered by homeowner's insurance. And then having to wrangle with homeowner's insurance to actually cover repairs is a whole other headache that winds up being a lot more complicated than simply "calling a tradie." Every rental agreement I've had has also allowed me to paint the walls as long as I paint them back to a neutral color when I move out, which I view as more of a courtesy to the next tenant than a "landlord is being a dick for no reason" thing.
I have never heard of a landlord spot checking to make sure I'm cleaning the house. That's insane. I've had good relationships with my individual landlords, who by and large, owned an expensive house in the city but had to move to the burbs for more space and family needs and didn't want to give up the property in the hopes they'll be able to return from exile in the suburban gulag some day. They generally loved the house they were renting out, tried to be very careful about who they rented to because they wanted to be able to trust them with it, and gave me pretty broad leeway to do whatever I wanted as long as I didn't break anything. In fact, it was generally easier for me to just call a plumber or an AC repair guy for fixes and deduct the cost off my rent than it is for me to deal with my insurance company now. As long as I provided an invoice they didn't really argue.
There were only two times I remember one landlord asking me not to do something. One was wall mount a TV, and that was due to safety concerns around drilling holes in the brick-work and having doubts that a ~120 year old house's brick could support the weight reliably. The other was to replace the front door with something that was a standard size so we could weatherize it better, and that was something he wanted to do but the historic preservation laws in the city blocked him.
Aside from them I've gone with corporate landlords, who are generally pretty fastidious about compliance with tenant protection laws, which my city has some of the strictest in the country.
On your first points we're never going to agree so it's not really worth any further discussion.
Inspections to make sure you're not wrecking the joint and are keeping it in reasonable condition are absolutely standard in the UK. The landlord or their agent can't just rock up any time and let themselves in, there has to be reasonable notice given but all rental properties have regular inspections. My last place they went around with a checklist and anything different from the previous visit was noted - wear and tear as well as damage or unauthorised changes. It works for tenants as well as landlords, because the landlord can't turn around at the end of a tenancy and say "this carpet is wrecked, you're not getting your deposit back" when the tenant can point to inspections showing the carpet getting gradually more damaged over time and claim reasonable wear and tear.
I mean it's not just a blithe matter of opinion. I'm speaking as a person with a degree in public policy management. There's a lot of economics and political science reasons why publicly managed housing is extremely difficult to pull off.
The best model is probably Singapore, where the government gets units built through bidding out to construction companies and then contracts with management companies to manage the large properties once built. It's probably the only system that has actually been satisfactory at ensuring ample supply of affordable, middle-class, family-friendly housing in a dense and in-demand urban context. That's clearly not the sort of fully state-managed housing scheme you're talking about. And places where that has been what people pursue have simply not worked very well. There is always some combination of undersupply (sometimes quite severe) or mismanagement.
They have an extremely competent and capable bureaucratic machine that's diligent about inspections and regulation. This is something a lot of other countries just don't really have, in part because they're a little too enamored of 'local control' and using these govt. positions as patronage chits.
Yeah it's mentioned in the lease that they have the right to inspect with due notice. But generally it was a scheduled once in 6 months thing, but they were also just doing maintenance checks on the HVAC, spraying for pest control, etc. This is all stuff I have to do myself now. These are mostly pretty old buildings that have had multiple lives and renovations so they have to be quite diligent about maintenance.
My experience with government services makes me believe I absolutely don’t want the government as my landlord.
My experience with landlords makes me believe I absolutely don't want landlords as my landlord.
Also, which government services? It's a bit misleading to just say "government" as if that were one thing. Plenty of state services are run extremely well. In the UK, the DWP administers the benefits system with >97% accuracy regarding fraud. My bank can't manage that.. The NHS had, until recent funding cuts, some of the best health outcomes in the world. The library service in my county is absolutely outstanding. The gov.uk design service produces some of the most usable and accessible web design I've ever seen. A couple of my friends work for the security services and while they can't talk about exactly what they do, they are highly capable and motivated people who I sincerely doubt are doing a bad job.
We could make it more targeted than that. Make a progressive tax for increasing number of properties. Low if you only own one, moderately accessible for 2, and exponential from there on out. Couple that with incentive programs with low interest rates for first time buyers (not talking about the programs we already have, but reducing interest rates to 1-3% for first time buyers).
We have levers to pull that won't crash the market and can make housing more accessible. But they largely disperse wealth and that's "unamerican".
There's so many ways around that. Most investors already have a separate LLC for each property, and so you'd have to really dig into what was meant by "owning a property" in ways that doesn't catch up other organizations that own plenty of real estate for purposes other than landlording.
Aren't there lots of small property owners already, though? I'm not sure that converting buildings to condos changes things all that much.
Was this intended for my response? I'm confused on the condos part.
Sorry, you didn’t actually say this, but when you talked about a progressive tax on people owning multiple properties, I was thinking of them owning more units. If a landlord owning a big building with lots of units results in a tax penalty then going condo would be one way to avoid it.
On the other hand, if the tax is based on number of properties then there would be incentive to invest in a big apartment building versus multiple smaller buildings.
An obvious way to destroy value is to decrease scarcity. In general (of course, a lot in the middle of downtown Tokyo is not), land is a depreciating asset in Japan, for instance, which generally causes there to be more renters as home ownership is not a "guaranteed" return on investment, you actually need to use the land to do something first. I think we're still far from saturing the Earth land-wise, especially in countries like the US.
At the extreme, you can continue to destroy land value via supply by extra-terrestrial expansion.
I agree. Schemes that increase the amount of housing are attacking the problem directly.
This seems like the only actual solution. Everything else that gets proposed is either ineffective, or so minor it doesn’t matter. Either build faster, or reduce population growth.
This is unpopular though because it’s much harder to build faster than it is to bike shed over how many properties you should be allowed to own.
Arguably building more housing does destroy value somewhat, not just through eliminating scarcity, but also by changing in-demand low rise neighborhoods with less desirable mid or high rise neighborhoods. This functionally makes that specific type of housing more rare and more valuable.
Or you just build more housing with access to the neighborhood amenities people want to keep up with demand.
I was thinking that it sounds funny to say that building new housing "destroys value" since existing houses don't change. But there's a way it makes sense. This is like what happens when a stock drops because a competitor enters the market. One thing that might make a business valuable is that it has a "moat," some kind of special advantage that prevents competitors from entering the market.
For the property owners in a neighborhood, the "moat" keeping prices high includes anything that prevents more housing from being built nearby, so the "value" is in part about the lack of competitors.
Yeah destroys is the wrong term generally I guess, because it’s adding value to society. Just destroying the value of the homeowner’s asset portfolio.
Well, most of what people value (and are willing to pay for) comes from what people expect will happen. If you knew a house was going to be demolished in a year, it wouldn't be worth nearly as much to live there.
So, one way to destroy value is to change what people expect.
It's not zero sum. The value doesn't go anywhere, you're just not as rich as you thought.
Yes of course.
I think there are a few policies I would like to see forwarded in my own country WRT housing.
Encourage housing as a resource and not a financial product by heavily taxing additional owned properties. You could probably have a scheme where an organisation can apply for 'Residential Landlord' status, that comes with a fat property audit to assure quality of domicile but reduces the tax penalty.
If people are disincentivised to purchase property for any reason other than need, you're reducing demand without killing anyone or creating slums, hopefully resulting in lower prices.
Ensure a certain proportion of all rented accomodation in your country is centrally owned social housing that cannot be purchased by private individuals. This probably means the state buying out properties as people sell up following the implementation of 1).
This social housing should not be used directly to make money for the local authority, but should instead just cover the upkeep and maintenance on quality, but not flashy, rented accomodation. The purpose of these houses is to ensure that the state can attack problems like homelessness more effectively. Maybe make it law that every development has X% of the units sold to the state at construction?
I believe the role of social housing is not just to provide housing to low-income families, it should serve as the absolute worst quality rented accomodation that can be accepted; that doesn't mean it should be bad housing, just that it should meet a minimum standard below which you cannot rent a place out.
Disallow rent raising above inflation + x%; for context in my home city in 2022 we experienced an average rent increase of 40%, compared to the 10% or so UK inflation figure.
I mentioned the Singapore example in another comment chain, and they actually do this the opposite way. The state builds housing units and then has kind of “lease-to-own” schemes for families to take ownership of them. They also have controls on how high above your own purchase price you can sell the property for when you move.
Their expectation is that most people should not own their homes forever, but they do want people to have some skin in the game in terms of the upkeep and value of the property and to be able to build and monetize equity they get on their homes. The whole thing is kind of designed for people to be able to scale up and down their housing needs as they progress through life (smaller units for singles, bigger ones for families, mid sized ones for retirees) with pretty generous grants for first time home buyers.
If there is need for more housing, they simply build more. No draconian controls on ownership or bureaucracy to support long term maintenance required.