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The Empty Homes Tax is crazy. There is zero reason for an investor to leave a home empty, you still get the benefit of appreciation when you are making rental i

The Empty Homes Tax is crazy. There is zero reason for an investor to leave a home empty, you still get the benefit of appreciation when you are making rental income. Its foolish not to rent in that case. Cases where homes are vacant are far more likely to be former residents who moved for one reason or another but still want to keep their house. Usually they want to stay in their own home when they make frequent visits. Sometimes they plan to move back and don't want the hassle of renters in their personal home. I for example may be forced to take an out of state job, but I'm never selling the home my children grew up in unless I'm forced to. So I may rent it, or not, depending upon how long I think we will be out of state. Taxing people to force them to rent isn't going to solve much, and is offensive. The real problem is zoning, NIMBYism, and things like that. You want cheaper rents, zone to build more housing, and deal with the greater congestion you brought to your town.

EliRivers 10y ago
There is zero reason for an investor to leave a home empty, you still get the benefit of appreciation when you are making rental income. Its foolish not to rent in that case. All that does is apply the label "foolish" to all the people who buy up property and leave it empty. It seems they don't care about being labelled foolish by the likes of the HN community; they still do it. Perhaps they have different motivations or perspectives on this.
- valuearb 10y ago
  Sure, there are "speculators" and almost exclusively speculation is foolish. It seems great though during a bubble. The best real estate investors who make the real money over the long haul buy properties where the net rents (after maintenance costs) pay for the purchase costs. Then appreciation is simply gravy.
  - zzalpha 10y ago
    Sure, there are "speculators" and almost exclusively speculation is foolish. And yet they do it, and in doing so are driving up home prices in many markets across the globe... which is the core thesis of this article. Your style of argumentation, where you state what people should do, and use that as the basis for ignoring the actual facts, is incredibly ineffective. I understand you have an idealized model of the way capitalism and real estate work. That idealized model does not, in fact, align with reality. In reality, real estate speculation is in fact a real thing, that happens in real places all over the world. So long as demand causes prices to rise significantly faster than those assets depreciate, this type of speculation will happen. Your personal value judgments regarding people engaged in such speculation don't, in fact, cause those people to not exist.
    - valuearb 10y ago
      In fact, there is little evidence many investors don't rent a their investment properties. Stories about how them are almost exclusivily in areas where landlord/renter laws are so onerous in favor of tenants that there are risks in renting if you want to be able sell the property any time soon. But in areas without those laws, no one is going to give up an additional income stream that will increase their returns substantially.
      - deleted 10y ago
        [deleted]
pdelbarba 10y ago
Counterpoint: why should people not be slightly disincentivized from owning two homes when they only need one? Even further, I personally think that people should be disincentivized from renting their homes as well (though not in a way that would just be passed to the renter, ie tax). I live in a college town that suffers from extremely low inventory because housing values keep going up and there's never a shortage of people willing to rent so nobody sells anything, they just keep it and pay a property management company to rent it out.
- icebraining 10y ago
  If some people stopped renting in your town to sell their house, wouldn't some renter be left out as well? Isn't that just an indication that there aren't enough houses to go around?
  - pdelbarba 10y ago
    Assuming there was a body of renters that could afford houses in the area, the changeover would be net zero. That said, you're right that there's a housing shortage in general.
- loeg 10y ago
  Transaction costs for selling a house are around 10%. So it pays in a big way to reduce the number of housing transactions you make.
  - pdelbarba 10y ago
    Fair point, but this doesn't really answer the question. Also, following this tangent, would it be reasonable to attempt to decrease the transaction costs to drive up inventory (carrot vs stick)?
    - loeg 10y ago
      To answer the question: landlording does provide a service. You can afford a place to live without having a down payment's worth of assets. This is useful for a big chunk of the population. If you make landlording not profitable or too risky, rental stock decreases and rents rise on the remaining stock. I do think it would make sense to attempt to decrease transaction costs in order to increase market liquidity and efficiency. Unfortunately, there are some hard physical minimum costs in there that are pretty significant (evaluation, moving, legal stuff). But perhaps realtor premiums could be reduced. To actually get prices to come down, you need to increase supply. We're not getting any more land, but there's clearly plenty of space, at least in the US. But cities are popular right now and it's hard to imagine that changing soon. As far as housing stock, upzoning/increased density can contribute to supply and lower prices.
jcranmer 10y ago
> There is zero reason for an investor to leave a home empty, you still get the benefit of appreciation when you are making rental income. Maybe the investor doesn't want to deal with having to do maintenance on the property, having to learn the local regulations on letting properties or renter's rights, deal with issues with unruly renters, etc. If there really were no reason for investors to leave homes empty, than why is that precisely what many investors do?
antisthenes 10y ago
Taxes are theft, regulation is bad. Are you a libertarian, by any chance?

EliRivers 10y ago

There is zero reason for an investor to leave a home empty, you still get the benefit of appreciation when you are making rental income. Its foolish not to rent in that case. All that does is apply the label "foolish" to all the people who buy up property and leave it empty. It seems they don't care about being labelled foolish by the likes of the HN community; they still do it. Perhaps they have different motivations or perspectives on this.

valuearb 10y ago
Sure, there are "speculators" and almost exclusively speculation is foolish. It seems great though during a bubble. The best real estate investors who make the real money over the long haul buy properties where the net rents (after maintenance costs) pay for the purchase costs. Then appreciation is simply gravy.
- zzalpha 10y ago
  Sure, there are "speculators" and almost exclusively speculation is foolish. And yet they do it, and in doing so are driving up home prices in many markets across the globe... which is the core thesis of this article. Your style of argumentation, where you state what people should do, and use that as the basis for ignoring the actual facts, is incredibly ineffective. I understand you have an idealized model of the way capitalism and real estate work. That idealized model does not, in fact, align with reality. In reality, real estate speculation is in fact a real thing, that happens in real places all over the world. So long as demand causes prices to rise significantly faster than those assets depreciate, this type of speculation will happen. Your personal value judgments regarding people engaged in such speculation don't, in fact, cause those people to not exist.
  - valuearb 10y ago
    In fact, there is little evidence many investors don't rent a their investment properties. Stories about how them are almost exclusivily in areas where landlord/renter laws are so onerous in favor of tenants that there are risks in renting if you want to be able sell the property any time soon. But in areas without those laws, no one is going to give up an additional income stream that will increase their returns substantially.
    - deleted 10y ago
      [deleted]

pdelbarba 10y ago

Counterpoint: why should people not be slightly disincentivized from owning two homes when they only need one? Even further, I personally think that people should be disincentivized from renting their homes as well (though not in a way that would just be passed to the renter, ie tax). I live in a college town that suffers from extremely low inventory because housing values keep going up and there's never a shortage of people willing to rent so nobody sells anything, they just keep it and pay a property management company to rent it out.

icebraining 10y ago
If some people stopped renting in your town to sell their house, wouldn't some renter be left out as well? Isn't that just an indication that there aren't enough houses to go around?
- pdelbarba 10y ago
  Assuming there was a body of renters that could afford houses in the area, the changeover would be net zero. That said, you're right that there's a housing shortage in general.
loeg 10y ago
Transaction costs for selling a house are around 10%. So it pays in a big way to reduce the number of housing transactions you make.
- pdelbarba 10y ago
  Fair point, but this doesn't really answer the question. Also, following this tangent, would it be reasonable to attempt to decrease the transaction costs to drive up inventory (carrot vs stick)?
  - loeg 10y ago
    To answer the question: landlording does provide a service. You can afford a place to live without having a down payment's worth of assets. This is useful for a big chunk of the population. If you make landlording not profitable or too risky, rental stock decreases and rents rise on the remaining stock. I do think it would make sense to attempt to decrease transaction costs in order to increase market liquidity and efficiency. Unfortunately, there are some hard physical minimum costs in there that are pretty significant (evaluation, moving, legal stuff). But perhaps realtor premiums could be reduced. To actually get prices to come down, you need to increase supply. We're not getting any more land, but there's clearly plenty of space, at least in the US. But cities are popular right now and it's hard to imagine that changing soon. As far as housing stock, upzoning/increased density can contribute to supply and lower prices.

jcranmer 10y ago

> There is zero reason for an investor to leave a home empty, you still get the benefit of appreciation when you are making rental income. Maybe the investor doesn't want to deal with having to do maintenance on the property, having to learn the local regulations on letting properties or renter's rights, deal with issues with unruly renters, etc. If there really were no reason for investors to leave homes empty, than why is that precisely what many investors do?

antisthenes 10y ago

Taxes are theft, regulation is bad. Are you a libertarian, by any chance?