11 ms·

Rent is an amazingly effective means of redistributing wealth upwards. I have easily paid over £100k rent in my life, always to people substantially richer than

by adwhit 9y ago

Rent is an amazingly effective means of redistributing wealth upwards. I have easily paid over £100k rent in my life, always to people substantially richer than I am. Always enjoyed this Churchill quote - from 1909! Roads are made, streets are made, services are improved, electric light turns night into day, water is brought from reservoirs a hundred miles off in the mountains -- and all the while the landlord sits still. Every one of those improvements is effected by the labor and cost of other people and the taxpayers. To not one of those improvements does the land monopolist, as a land monopolist, contribute, and yet by every one of them the value of his land is enhanced. He renders no service to the community, he contributes nothing to the general welfare, he contributes nothing to the process from which his own enrichment is derived.

deleted 9y ago
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raverbashing 9y ago
Municipal tax based on the value of the property, due every year But then again, if people they can't afford the rent, they won't pay (or they find different arrangements), landlords who think their tenants have infinite money are in for a (bad) surprise
refurb 9y ago
I guess it depends where you live. Not all landlord make money on their property. I've had two landlords so far that lost money on their properties due to a combination of falling home prices and a depressed rental market. It was actually a wealth transfer from them to me!
- vermontdevil 9y ago
  They may have lost money but they got their $ elsewhere (tax write offs etc)
  - refurb 9y ago
    The tax write offs helped, but they still shouldered most of the loss. And we're not talking a few thousand, but rather $100K+. As a renter, it was great to just be able to pack my stuff up, turn in the keys and let them deal with the financial implications.
    - whathaschanged 9y ago
      You're talking about imaginary money. Had they only owned the place where they lived, there is no profit or loss that matters.
      - pc86 9y ago
        You obviously don't own a home. There absolutely are financial implications for the value of your home dropping after you buy it. A) An already illiquid asset is more illiquid. Not only do you need to find someone willing to buy it, you either need to pay to sell it, or find someone willing to pay above market. B) Decreased access to capital. HELOCs are one of the few ways the middle class has to access six figures of credit easily and cheaply, and this is eliminated when banks won't go above 60-80% LTV but you live in a house with $x with a mortgage balance of 1.5x.
        kazinator 9y ago
        Regarding A, do banks ever make "margin calls" when homes drop in value? I mean, force people to sell even though those people have an income and are making mortgage payments? (If so, why, when the mortgage income, if it continues, is worth more than what they can get from the foreclosure?)
        khedoros1 9y ago
        I can't speak for every situation, but I know that my mortgage doesn't include any terms like that. The bank could foreclose and sell the property only if I stopped making mortgage payments. I think that what you're describing would be termed a "technical default", and would require a clause called an "affirmative covenant".
mindcrime 9y ago
So what's your point? Do you want to eliminate rent? Should people who either can't afford to purchase a house, or who simply don't want to, be forced into homelessness? Personally I've paid over $115,000 in rent over the past 12 years, but I don't begrudge my landlord their money. I attained utility in exchange for the rent I paid, and have no problem with the arrangement. Not, of course, to say that I'm happy when rent goes up. But it's a conscious choice I make to live this way, not some sort of exploitation. He renders no service to the community, he contributes nothing to the general welfare Housing isn't a service that contributes to the general welfare? I call bollocks.
- toomuchtodo 9y ago
  No, no one is advocating for eliminating rent. I (EDIT: removed "We") am advocating for tilting the scales back towards labor though. * No depreciation allowance on rental property that is almost always going to appreciate [1] * No 1031 exchanges, deferring capital gains forever [2] * No mortgage interest deduction, which encourages the wealthy to bid up real estate since their leverage is tax advantaged. [3] * Co-Ops acquiring property for renting to citizens when possible [4] [1] https://www.biggerpockets.com/blogs/2728/41560-understanding-rental-property-depreciation-and-recapture-tax https://www.biggerpockets.com/blogs/2728/41560-understanding... [2] https://en.wikipedia.org/wiki/Internal_Revenue_Code_section_1031#Summary https://en.wikipedia.org/wiki/Internal_Revenue_Code_section_... [3] https://www.theatlantic.com/business/archive/2017/05/shame-mortgage-interest-deduction/526635/ https://www.theatlantic.com/business/archive/2017/05/shame-m... [4] http://www.yesmagazine.org/people-power/in-berlin-a-model-for-creative-and-affordable-housing-20170412 http://www.yesmagazine.org/people-power/in-berlin-a-model-fo... EDIT: @ mcbruiser3: When I say "we" (which I removed above), people who share my progressive political view that people/humans/"labor" should be treated with priority over capital and rentseeking.
  - mindcrime 9y ago
    Fair enough! Coops acquiring property for renting to citizens when possible Yes, this sounds like a good idea. As a Libertarian, I like this model because it is compatible with private property rights, and doesn't demand some sort of government intervention.
savanaly 9y ago
If this is true, why is the return on owning land not better than the return on the stock market, at least in the estimation of most economists? Unless you have some comparative advantage in owning/administering to land, it's not actually such a sweet deal relative to normal investing. Owning land is "free money" in that you tie up your wealth and in exchange get interest. Same deal with owning stocks. Land isn't special, nor is it really helpful to view it as a "redistribution of wealth upwards" in my opinion.
- sp332 9y ago
  http://www.investopedia.com/ask/answers/060415/what-average-annual-return-typical-long-term-investment-real-estate-sector.asp http://www.investopedia.com/ask/answers/060415/what-average-... "By any measurement, the real estate sector has outperformed the overall market, even factoring in the drastic collapse in housing prices during the 2008 financial crisis." (I'm not an expert but I recall hearing that much of the recovery from the recession went to real estate owners.)
  - savanaly 9y ago
    Granted, every investment vehicle under the sun will have its ups and downs. It's a plausible case that real estate is worth having for its purported counter cyclical properties in some sort of advanced and complicated investment portfolio. From none of that does it follow that owning real estate is some sort of reverse scam where the owners are reaping incredible and reliable riches off the backs of the poor renters as the person I was replying to implied.
- mistermann 9y ago
  Because this truism is based on a long period of history, whereas real estate blowing most every other investment out of the water especially when you consider you're usually working on 90% leverage, is a relatively recent phenomenon. I continue to be of the opinion that a major driver of this is the rise of China.
mcbruiser3 9y ago
I love how some folks complain about paying rent as if they have no choices, as if they're somehow indentured servants or serfs beholden to the landed gentry or something. The truth is you do have choices, even in tough times. Find a way to save money for a down payment and buy some property. Maybe even become a landlord yourself.
- underwoodley 9y ago
  Sorry, the truth is that many people simply don't earn enough to save money for a down payment.
  - mcbruiser3 9y ago
    sorry, the truth is that not everyone has a right to own a home. life choices, man, they make a difference. edit: who is downvoting this? does someone out there actually believe everyone has a right to own a home? like as in, the government should give everyone homes? wtf?
- francisofascii 9y ago
  Well, people have to live somewhere. And it is fair to complain if you think the land holders who came before them are not paying enough property tax, which seems to have caused the housing prices to get so high. "Every proprietor owes to the community a ground rent for the land which he holds" - Thomas Paine
- khedoros1 9y ago
  If you've got a way to save up some 10's of thousands of dollars for a down payment in a reasonable time, and be able to pay the mortgage for the loan, that doesn't sound like "tough times" to me. I bought 7 years ago, when the market in my area was at its lowest. Saving for years, on an income significantly above median (for the area), I was just able to afford a down payment on a starter home. Most people in my area make less than me, and the market has significantly picked up. My next door neighbor just sold their place, smaller and less upgraded than mine, for about 1.5x what I paid for mine. And the people that couldn't pay 2/3 that price 7 years ago should have just tried harder to save up to afford it now, right?
pc86 9y ago
And what you received in exchange for that was a lifetime of not being homeless, having no maintenance or (immediate or direct) tax responsibilities, and the freedom to leave without having to sell an expensive, illiquid asset.
- deleted 9y ago
  [deleted]
- matt_wulfeck 9y ago
  If you bought your home 5 or 6 years ago, then your mortgage is most likely lower than the market rent for it. I have friends in this exact situation. New job and moving in 30 days. Off to a property management company where somebody else will pay the mortgage for you.
billmalarky 9y ago
> He renders no service to the community, he contributes nothing to the general welfare, he contributes nothing to the process from which his own enrichment is derived. The value landlords provide is the assumption of risk. The premium you pay to rent is in exchange for vastly limiting your exposure to said risk. This is why offloading the risk onto creditors (ie purchasing real estate with borrowed money under an LLC) is so lucrative. You reap all of the rewards of property ownership, but none of the downside. In a failure scenario your creditors are on the hook, not you. I should probably add that banks are not stupid and it is very difficult, but not impossible, to get a loan for real estate investment under an LLC.
- vkou 9y ago
  > The value landlords provide is the assumption of risk. The premium you pay to rent is in exchange for vastly limiting your exposure to said risk. In hot housing markets, the value they provide is having access to the capital necessary to own property. A 30 year old hairdresser in Seattle isn't renting because they don't want to deal with risk - they are renting because they can't save up a $XY,000 downpayment, and tie their entire salary into interest payments. Mind you, the capital requirements for property ownership are pretty insane, and our low interest rates really don't help matters any (Home prices have ballooned, in part, thanks to them.)
  - deleted 9y ago
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  - chimeracoder 9y ago
    > A 30 year old hairdresser in Seattle isn't renting because they don't want to deal with risk - they are renting because they can't save up a $XY,000 downpayment, and tie their entire salary into interest payments. If you're talking about cities like Seattle, the reason that a 30-year-old hairdresser would have a difficult time purchasing a place is because prices have been pushed absurdly high due to two factors: a) a housing shortage (primarily in the SF Bay Area, but Seattle has similar problems, and the SF housing problems spill over into other nearby cities) b) speculative purchasing by foreign entities The second point is less relevant Seattle than it is to nearby Vancouver - and nowhere is it more true than in New York City - but it still has a huge inflationary impact on property values in a way that doesn't benefit any local residents at all (the properties are used as places to park money by people who don't live there, and may never even have visited the US).
vkou 9y ago
If I understand correctly, in the United Kingdom, there are no property taxes. Instead, there are council taxes - but they are paid by the tenant, not the landlord! Now, while most of the rest of the world has property taxes, I would argue that they are far too low.
- pjc50 9y ago
  Yeah, it's a stupid situation. There's a property transaction tax, "stamp duty", which can be surprisingly high ( http://www.knightfrank.co.uk/stamp-duty-calculator http://www.knightfrank.co.uk/stamp-duty-calculator ) but of course that really ends up protecting incumbents rather than taxing them.
  - neilparikh 9y ago
    Why would you want to tax sales of property? That just makes the market more illiquid, as well as making it more expensive to increase density (because you now to pay an extra a fee if you want to buy a single family house to replace with an taller building).
    - pjc50 9y ago
      Yes, it's a bad idea. It used to be a small tax on high-value transactions only, but just recently it has been greatly increased. The UK could do with a proper property tax, but since homeownership is the national religion that's not going to happen.
quickthrower2 9y ago
The £ sign tells me you are trapped in the overpriced housing country, forced to watch Kirstie Allsop be all smug about house prices. I wonder what if lots of people said f the rent, f the prices let's just go travelling, live in a caravan, enjoy life. Settle in an affordable country. Not be a sheep toiling away to pay for someone else's Ferrari.
- cbarker3 9y ago
  I (European) have toyed with that idea but found camping sites very expensive. And the prices would go up if everyone did that. There are sites that compare caravan vs. cheap flat and the cheap flat comes out ahead (Europe again). The fundamental issue is that land prices are too high and every square inch is owned by someone.
bko 9y ago
I don’t think many landlords get rich from rent but housing appreciation. Real estate cap rates are generally very low, especially in places where rents are high. Take nyc for example. If you look at what someone pays for rent and take an estimate as to what the apartment is worth and estimate mortgage and taxes you’ll see that the rent often doesn’t even cover the mortgage. For instance in manhattan you can get a cheap studio for maybe 2,200 a month. That studio would cost easily 600k, and at 4% interest (higher for investment property) the monthly payment not including taxes and maintenance is nearly 3k. That’s not even mentioning other barriers like the fact that a condo would likely be double the price and a co op would likely prevent you from renting and require a large down payment.
- bmmayer1 9y ago
  Sure, but to make money on housing appreciation you also run the risk of losing money on housing depreciation. Given that owning property is a risk, it's not a fair characterization to look at landlords as some sort of leech on society that just get rich at the expense of everyone else. That's survivorship bias looking at only the successful landlords and ignoring the real risk involved in owning property.
  - dba7dba 9y ago
    > Given that owning property is a risk, it's not a fair characterization to look at landlords as some sort of leech on society that just get rich at the expense of everyone else. Every landlord I've paid rent to or some acquaintances of mine who own rental properties seem to all have more than a few rental properties. And I've never seen/heard of rental property owners going bankrupt. Yes some do, but they do so because they stretched themselves way too thin. It's an anecdote but pretty much any family that seems to live well without the breadwinner working 70-80 work week as a doctor/lawyer seem to have rental properties. It is the most stable/lucrative use of one's wealth. It's been that way for a long time.
bmmayer1 9y ago
This comment doesn't stand up to scrutiny. There aren't a lot of available statistics on how wealthy landlords are, but for instance, according to a San Francisco property owners survey[1], median income for landlords is $90k, only 15% higher than the overall San Francisco median income ($77k). And of course a software engineer's median income in San Francisco is higher ($92k). Either way, there is little evidence that in one of the hottest real estate markets in the country, landlords would be 'substantially' richer than tenants on average. Of course, income is only a component of wealth--no doubt the property owned is worth quite a bit--but, according to the same report, at least 75% of these landlords are still paying mortgages on their properties, and over 10% spend more than their rental income on their mortgages! Since most landlords borrow money to buy property, then attempt to sell access to that property profitably over time, they are more like entrepreneurs than the land baron 'monopolists' portrayed by the Churchill quote above. This isn't wealth redistribution in any direction. It's a trade. Renters get access to property without having to own it. Owners, if they are smart and/or lucky, can profit from property, but of course take a substantially larger up front risk. And, I would be remiss if I didn't point out that Winston Churchill was from one of the wealthiest British aristocratic (read: rentier landowning) families and was born in the family home, this palace[2]. [1] http://sfrb.org/sites/default/files/FileCenter/Documents/1887-SFLandlordSurveyReportFinal.pdf http://sfrb.org/sites/default/files/FileCenter/Documents/188... [2] https://en.wikipedia.org/wiki/Blenheim_Palace https://en.wikipedia.org/wiki/Blenheim_Palace
- danharaj 9y ago
  I don't think medians are the right thing to look at here. The majority of individual landlords will be small-time, but it's the behavior and impact of the largest landlords that is important.
- underwoodley 9y ago
  You didn't challenge the statement to GP made, but one he didn't make. He didn't say that landlords are vastly richer than workers. He said that landlords make little or no contribution to the general welfare. Your own comment points out that in SF, the median landlord makes roughly what the median software developer makes. But a software developer in the Bay Area is one of the most productive workers on the planet, with a literally unparalleled opportunity to generate value, both for the company he works for, and for global society/consumers in general. In contrast, the landlord does not produce anything.
model_m_warrior 9y ago
Just proving that Churchill wasn't right about everything.
oconnor663 9y ago
Do you not also buy food and clothing from companies owned by people richer than you? I feel like the main difference with rent is that the owners aren't that much richer than we are, and sometimes we meet them face-to-face, so the relationship is more comprehensible.
- xtacy 9y ago
  While that's technically correct, rent is often at least one order of magnitude more than the cost for food and clothes.
carradjm 9y ago
https://en.wikipedia.org/wiki/Georgism https://en.wikipedia.org/wiki/Georgism That quote is the exact reason that land needs to be taxed at a much higher rate than it's currently taxed. Notice I say "land", so that doesn't include anything built on that land. The value of land is directly tied to the desirability of the land around it. Land in Manhattan is more valuable than land in the middle of South Dakota because of all the network effects of other people (and the government) building things in Manhattan.
- chimeracoder 9y ago
  > That quote is the exact reason that land needs to be taxed at a much higher rate than it's currently taxed. Notice I say "land", so that doesn't include anything built on that land. > > The value of land is directly tied to the desirability of the land around it. Land in Manhattan is more valuable than land in the middle of South Dakota because of all the network effects of other people (and the government) building things in Manhattan. I'm glad you mentioned Manhattan. Land-value taxes encourage property owners (or aspiring property owners) to take actions to decrease the value of land, in order to make it cheaper to acquire and maintain (read: pay taxes on) that land. Those actions have significant network effects, much more so than actions that increase (or decrease) property values, by definition: the value of land is more strongly correlated with the value of neighboring land than the values of properties are. Taken to the extreme, this will cause massively capitalized institutions to blight land - and, in some cases, even buy up land for the specific purpose of blighting it and reducing its value (thereby reducing the value of neighboring land). That results in a massive wealth transfer from the poor and middle class to wealthy institutions - namely banks and universities with large endowments, though sometimes wealthy individuals too. I'm glad you mentioned Manhattan, because it's one place where this exact practice already happens in a very public and visible way. It happens in Manhattan even without the existence of specific tax incentives to encourage this behavior because the economics of real estate in the area (along with other aspects of real estate acquisition in NYC) make it profitable for institutions like NYU and Columbia to do this[0]. If you started taxing land at a higher value than the property that sits on the land, it would make it lucrative for "smaller" institutions (ie, other well-capitalized institutions) to start doing it as well. [0] NYU and Columbia are two of the top three holders of real-estate in the city, by value. They have both engaged in this practice in very visible and documented ways.
VeronicaJJ123 9y ago
Yes, but you need to realize that land plays a crucial role in our environment and rich people are in a better position to utilize resources with attention to environment than poor people. All the zoning laws that make rents high are actually good for environment and help us fight climate change.
tehwebguy 9y ago
Did they not have property tax in England?
rsync 9y ago
"Always enjoyed this Churchill quote - from 1909!" (long quotation from 4 years prior to the 16th amendment[1]) This is not an accurate assessment of the present state of affairs. Rental income in the United States is taxed at the federal and state level and rental licenses (as well as other licensing) is levied at the local level. This is not to mention the property taxes that are paid by the landlord - which can be significant. Your landlord is contributing to the general welfare in a great many ways. [1] https://en.wikipedia.org/wiki/Sixteenth_Amendment_to_the_United_States_Constitution https://en.wikipedia.org/wiki/Sixteenth_Amendment_to_the_Uni...
- jdavis703 9y ago
  The renter actually pays the property tax, it's included in the rent that is charged. There are very few landlords who rent out their property for less than the cost of property tax. Further many residential properties are owned by LLCs and other corporations that allow them to lock in low taxes by never selling the actual property, but merely the holding company of the property.
  - rsync 9y ago
    "Further many residential properties are owned by LLCs and other corporations that allow them to lock in low taxes by never selling the actual property ..." I think you are talking about prop 13 and the ability of corporate entities to benefit from the provisions of prop 13 which I agree, is completely insane. But prop 13 is limited to California and I know of no other states that have anything comparable.

by adwhit 9y ago

deleted 9y ago

[deleted]

raverbashing 9y ago

Municipal tax based on the value of the property, due every year But then again, if people they can't afford the rent, they won't pay (or they find different arrangements), landlords who think their tenants have infinite money are in for a (bad) surprise

refurb 9y ago

I guess it depends where you live. Not all landlord make money on their property. I've had two landlords so far that lost money on their properties due to a combination of falling home prices and a depressed rental market. It was actually a wealth transfer from them to me!

vermontdevil 9y ago
They may have lost money but they got their $ elsewhere (tax write offs etc)
- refurb 9y ago
  The tax write offs helped, but they still shouldered most of the loss. And we're not talking a few thousand, but rather $100K+. As a renter, it was great to just be able to pack my stuff up, turn in the keys and let them deal with the financial implications.
  - whathaschanged 9y ago
    You're talking about imaginary money. Had they only owned the place where they lived, there is no profit or loss that matters.
    - pc86 9y ago
      You obviously don't own a home. There absolutely are financial implications for the value of your home dropping after you buy it. A) An already illiquid asset is more illiquid. Not only do you need to find someone willing to buy it, you either need to pay to sell it, or find someone willing to pay above market. B) Decreased access to capital. HELOCs are one of the few ways the middle class has to access six figures of credit easily and cheaply, and this is eliminated when banks won't go above 60-80% LTV but you live in a house with $x with a mortgage balance of 1.5x.
      - kazinator 9y ago
        Regarding A, do banks ever make "margin calls" when homes drop in value? I mean, force people to sell even though those people have an income and are making mortgage payments? (If so, why, when the mortgage income, if it continues, is worth more than what they can get from the foreclosure?)
        khedoros1 9y ago
        I can't speak for every situation, but I know that my mortgage doesn't include any terms like that. The bank could foreclose and sell the property only if I stopped making mortgage payments. I think that what you're describing would be termed a "technical default", and would require a clause called an "affirmative covenant".

mindcrime 9y ago

So what's your point? Do you want to eliminate rent? Should people who either can't afford to purchase a house, or who simply don't want to, be forced into homelessness? Personally I've paid over $115,000 in rent over the past 12 years, but I don't begrudge my landlord their money. I attained utility in exchange for the rent I paid, and have no problem with the arrangement. Not, of course, to say that I'm happy when rent goes up. But it's a conscious choice I make to live this way, not some sort of exploitation. He renders no service to the community, he contributes nothing to the general welfare Housing isn't a service that contributes to the general welfare? I call bollocks.

toomuchtodo 9y ago
No, no one is advocating for eliminating rent. I (EDIT: removed "We") am advocating for tilting the scales back towards labor though. * No depreciation allowance on rental property that is almost always going to appreciate [1] * No 1031 exchanges, deferring capital gains forever [2] * No mortgage interest deduction, which encourages the wealthy to bid up real estate since their leverage is tax advantaged. [3] * Co-Ops acquiring property for renting to citizens when possible [4] [1] https://www.biggerpockets.com/blogs/2728/41560-understanding-rental-property-depreciation-and-recapture-tax https://www.biggerpockets.com/blogs/2728/41560-understanding... [2] https://en.wikipedia.org/wiki/Internal_Revenue_Code_section_1031#Summary https://en.wikipedia.org/wiki/Internal_Revenue_Code_section_... [3] https://www.theatlantic.com/business/archive/2017/05/shame-mortgage-interest-deduction/526635/ https://www.theatlantic.com/business/archive/2017/05/shame-m... [4] http://www.yesmagazine.org/people-power/in-berlin-a-model-for-creative-and-affordable-housing-20170412 http://www.yesmagazine.org/people-power/in-berlin-a-model-fo... EDIT: @ mcbruiser3: When I say "we" (which I removed above), people who share my progressive political view that people/humans/"labor" should be treated with priority over capital and rentseeking.
- mindcrime 9y ago
  Fair enough! Coops acquiring property for renting to citizens when possible Yes, this sounds like a good idea. As a Libertarian, I like this model because it is compatible with private property rights, and doesn't demand some sort of government intervention.

savanaly 9y ago

If this is true, why is the return on owning land not better than the return on the stock market, at least in the estimation of most economists? Unless you have some comparative advantage in owning/administering to land, it's not actually such a sweet deal relative to normal investing. Owning land is "free money" in that you tie up your wealth and in exchange get interest. Same deal with owning stocks. Land isn't special, nor is it really helpful to view it as a "redistribution of wealth upwards" in my opinion.

sp332 9y ago
http://www.investopedia.com/ask/answers/060415/what-average-annual-return-typical-long-term-investment-real-estate-sector.asp http://www.investopedia.com/ask/answers/060415/what-average-... "By any measurement, the real estate sector has outperformed the overall market, even factoring in the drastic collapse in housing prices during the 2008 financial crisis." (I'm not an expert but I recall hearing that much of the recovery from the recession went to real estate owners.)
- savanaly 9y ago
  Granted, every investment vehicle under the sun will have its ups and downs. It's a plausible case that real estate is worth having for its purported counter cyclical properties in some sort of advanced and complicated investment portfolio. From none of that does it follow that owning real estate is some sort of reverse scam where the owners are reaping incredible and reliable riches off the backs of the poor renters as the person I was replying to implied.
mistermann 9y ago
Because this truism is based on a long period of history, whereas real estate blowing most every other investment out of the water especially when you consider you're usually working on 90% leverage, is a relatively recent phenomenon. I continue to be of the opinion that a major driver of this is the rise of China.

mcbruiser3 9y ago

I love how some folks complain about paying rent as if they have no choices, as if they're somehow indentured servants or serfs beholden to the landed gentry or something. The truth is you do have choices, even in tough times. Find a way to save money for a down payment and buy some property. Maybe even become a landlord yourself.

underwoodley 9y ago
Sorry, the truth is that many people simply don't earn enough to save money for a down payment.
- mcbruiser3 9y ago
  sorry, the truth is that not everyone has a right to own a home. life choices, man, they make a difference. edit: who is downvoting this? does someone out there actually believe everyone has a right to own a home? like as in, the government should give everyone homes? wtf?
francisofascii 9y ago
Well, people have to live somewhere. And it is fair to complain if you think the land holders who came before them are not paying enough property tax, which seems to have caused the housing prices to get so high. "Every proprietor owes to the community a ground rent for the land which he holds" - Thomas Paine
khedoros1 9y ago
If you've got a way to save up some 10's of thousands of dollars for a down payment in a reasonable time, and be able to pay the mortgage for the loan, that doesn't sound like "tough times" to me. I bought 7 years ago, when the market in my area was at its lowest. Saving for years, on an income significantly above median (for the area), I was just able to afford a down payment on a starter home. Most people in my area make less than me, and the market has significantly picked up. My next door neighbor just sold their place, smaller and less upgraded than mine, for about 1.5x what I paid for mine. And the people that couldn't pay 2/3 that price 7 years ago should have just tried harder to save up to afford it now, right?

pc86 9y ago

And what you received in exchange for that was a lifetime of not being homeless, having no maintenance or (immediate or direct) tax responsibilities, and the freedom to leave without having to sell an expensive, illiquid asset.

deleted 9y ago
[deleted]
matt_wulfeck 9y ago
If you bought your home 5 or 6 years ago, then your mortgage is most likely lower than the market rent for it. I have friends in this exact situation. New job and moving in 30 days. Off to a property management company where somebody else will pay the mortgage for you.

billmalarky 9y ago

> He renders no service to the community, he contributes nothing to the general welfare, he contributes nothing to the process from which his own enrichment is derived. The value landlords provide is the assumption of risk. The premium you pay to rent is in exchange for vastly limiting your exposure to said risk. This is why offloading the risk onto creditors (ie purchasing real estate with borrowed money under an LLC) is so lucrative. You reap all of the rewards of property ownership, but none of the downside. In a failure scenario your creditors are on the hook, not you. I should probably add that banks are not stupid and it is very difficult, but not impossible, to get a loan for real estate investment under an LLC.

vkou 9y ago
> The value landlords provide is the assumption of risk. The premium you pay to rent is in exchange for vastly limiting your exposure to said risk. In hot housing markets, the value they provide is having access to the capital necessary to own property. A 30 year old hairdresser in Seattle isn't renting because they don't want to deal with risk - they are renting because they can't save up a $XY,000 downpayment, and tie their entire salary into interest payments. Mind you, the capital requirements for property ownership are pretty insane, and our low interest rates really don't help matters any (Home prices have ballooned, in part, thanks to them.)
- deleted 9y ago
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- chimeracoder 9y ago
  > A 30 year old hairdresser in Seattle isn't renting because they don't want to deal with risk - they are renting because they can't save up a $XY,000 downpayment, and tie their entire salary into interest payments. If you're talking about cities like Seattle, the reason that a 30-year-old hairdresser would have a difficult time purchasing a place is because prices have been pushed absurdly high due to two factors: a) a housing shortage (primarily in the SF Bay Area, but Seattle has similar problems, and the SF housing problems spill over into other nearby cities) b) speculative purchasing by foreign entities The second point is less relevant Seattle than it is to nearby Vancouver - and nowhere is it more true than in New York City - but it still has a huge inflationary impact on property values in a way that doesn't benefit any local residents at all (the properties are used as places to park money by people who don't live there, and may never even have visited the US).

vkou 9y ago

If I understand correctly, in the United Kingdom, there are no property taxes. Instead, there are council taxes - but they are paid by the tenant, not the landlord! Now, while most of the rest of the world has property taxes, I would argue that they are far too low.

pjc50 9y ago
Yeah, it's a stupid situation. There's a property transaction tax, "stamp duty", which can be surprisingly high ( http://www.knightfrank.co.uk/stamp-duty-calculator http://www.knightfrank.co.uk/stamp-duty-calculator ) but of course that really ends up protecting incumbents rather than taxing them.
- neilparikh 9y ago
  Why would you want to tax sales of property? That just makes the market more illiquid, as well as making it more expensive to increase density (because you now to pay an extra a fee if you want to buy a single family house to replace with an taller building).
  - pjc50 9y ago
    Yes, it's a bad idea. It used to be a small tax on high-value transactions only, but just recently it has been greatly increased. The UK could do with a proper property tax, but since homeownership is the national religion that's not going to happen.

quickthrower2 9y ago

The £ sign tells me you are trapped in the overpriced housing country, forced to watch Kirstie Allsop be all smug about house prices. I wonder what if lots of people said f the rent, f the prices let's just go travelling, live in a caravan, enjoy life. Settle in an affordable country. Not be a sheep toiling away to pay for someone else's Ferrari.

cbarker3 9y ago
I (European) have toyed with that idea but found camping sites very expensive. And the prices would go up if everyone did that. There are sites that compare caravan vs. cheap flat and the cheap flat comes out ahead (Europe again). The fundamental issue is that land prices are too high and every square inch is owned by someone.

bko 9y ago

I don’t think many landlords get rich from rent but housing appreciation. Real estate cap rates are generally very low, especially in places where rents are high. Take nyc for example. If you look at what someone pays for rent and take an estimate as to what the apartment is worth and estimate mortgage and taxes you’ll see that the rent often doesn’t even cover the mortgage. For instance in manhattan you can get a cheap studio for maybe 2,200 a month. That studio would cost easily 600k, and at 4% interest (higher for investment property) the monthly payment not including taxes and maintenance is nearly 3k. That’s not even mentioning other barriers like the fact that a condo would likely be double the price and a co op would likely prevent you from renting and require a large down payment.

bmmayer1 9y ago
Sure, but to make money on housing appreciation you also run the risk of losing money on housing depreciation. Given that owning property is a risk, it's not a fair characterization to look at landlords as some sort of leech on society that just get rich at the expense of everyone else. That's survivorship bias looking at only the successful landlords and ignoring the real risk involved in owning property.
- dba7dba 9y ago
  > Given that owning property is a risk, it's not a fair characterization to look at landlords as some sort of leech on society that just get rich at the expense of everyone else. Every landlord I've paid rent to or some acquaintances of mine who own rental properties seem to all have more than a few rental properties. And I've never seen/heard of rental property owners going bankrupt. Yes some do, but they do so because they stretched themselves way too thin. It's an anecdote but pretty much any family that seems to live well without the breadwinner working 70-80 work week as a doctor/lawyer seem to have rental properties. It is the most stable/lucrative use of one's wealth. It's been that way for a long time.

bmmayer1 9y ago

This comment doesn't stand up to scrutiny. There aren't a lot of available statistics on how wealthy landlords are, but for instance, according to a San Francisco property owners survey[1], median income for landlords is $90k, only 15% higher than the overall San Francisco median income ($77k). And of course a software engineer's median income in San Francisco is higher ($92k). Either way, there is little evidence that in one of the hottest real estate markets in the country, landlords would be 'substantially' richer than tenants on average. Of course, income is only a component of wealth--no doubt the property owned is worth quite a bit--but, according to the same report, at least 75% of these landlords are still paying mortgages on their properties, and over 10% spend more than their rental income on their mortgages! Since most landlords borrow money to buy property, then attempt to sell access to that property profitably over time, they are more like entrepreneurs than the land baron 'monopolists' portrayed by the Churchill quote above. This isn't wealth redistribution in any direction. It's a trade. Renters get access to property without having to own it. Owners, if they are smart and/or lucky, can profit from property, but of course take a substantially larger up front risk. And, I would be remiss if I didn't point out that Winston Churchill was from one of the wealthiest British aristocratic (read: rentier landowning) families and was born in the family home, this palace[2]. [1] http://sfrb.org/sites/default/files/FileCenter/Documents/1887-SFLandlordSurveyReportFinal.pdf http://sfrb.org/sites/default/files/FileCenter/Documents/188... [2] https://en.wikipedia.org/wiki/Blenheim_Palace https://en.wikipedia.org/wiki/Blenheim_Palace

danharaj 9y ago
I don't think medians are the right thing to look at here. The majority of individual landlords will be small-time, but it's the behavior and impact of the largest landlords that is important.
underwoodley 9y ago
You didn't challenge the statement to GP made, but one he didn't make. He didn't say that landlords are vastly richer than workers. He said that landlords make little or no contribution to the general welfare. Your own comment points out that in SF, the median landlord makes roughly what the median software developer makes. But a software developer in the Bay Area is one of the most productive workers on the planet, with a literally unparalleled opportunity to generate value, both for the company he works for, and for global society/consumers in general. In contrast, the landlord does not produce anything.

model_m_warrior 9y ago

Just proving that Churchill wasn't right about everything.

oconnor663 9y ago

Do you not also buy food and clothing from companies owned by people richer than you? I feel like the main difference with rent is that the owners aren't that much richer than we are, and sometimes we meet them face-to-face, so the relationship is more comprehensible.

xtacy 9y ago
While that's technically correct, rent is often at least one order of magnitude more than the cost for food and clothes.

carradjm 9y ago

https://en.wikipedia.org/wiki/Georgism https://en.wikipedia.org/wiki/Georgism That quote is the exact reason that land needs to be taxed at a much higher rate than it's currently taxed. Notice I say "land", so that doesn't include anything built on that land. The value of land is directly tied to the desirability of the land around it. Land in Manhattan is more valuable than land in the middle of South Dakota because of all the network effects of other people (and the government) building things in Manhattan.

chimeracoder 9y ago
> That quote is the exact reason that land needs to be taxed at a much higher rate than it's currently taxed. Notice I say "land", so that doesn't include anything built on that land. > > The value of land is directly tied to the desirability of the land around it. Land in Manhattan is more valuable than land in the middle of South Dakota because of all the network effects of other people (and the government) building things in Manhattan. I'm glad you mentioned Manhattan. Land-value taxes encourage property owners (or aspiring property owners) to take actions to decrease the value of land, in order to make it cheaper to acquire and maintain (read: pay taxes on) that land. Those actions have significant network effects, much more so than actions that increase (or decrease) property values, by definition: the value of land is more strongly correlated with the value of neighboring land than the values of properties are. Taken to the extreme, this will cause massively capitalized institutions to blight land - and, in some cases, even buy up land for the specific purpose of blighting it and reducing its value (thereby reducing the value of neighboring land). That results in a massive wealth transfer from the poor and middle class to wealthy institutions - namely banks and universities with large endowments, though sometimes wealthy individuals too. I'm glad you mentioned Manhattan, because it's one place where this exact practice already happens in a very public and visible way. It happens in Manhattan even without the existence of specific tax incentives to encourage this behavior because the economics of real estate in the area (along with other aspects of real estate acquisition in NYC) make it profitable for institutions like NYU and Columbia to do this[0]. If you started taxing land at a higher value than the property that sits on the land, it would make it lucrative for "smaller" institutions (ie, other well-capitalized institutions) to start doing it as well. [0] NYU and Columbia are two of the top three holders of real-estate in the city, by value. They have both engaged in this practice in very visible and documented ways.

VeronicaJJ123 9y ago

Yes, but you need to realize that land plays a crucial role in our environment and rich people are in a better position to utilize resources with attention to environment than poor people. All the zoning laws that make rents high are actually good for environment and help us fight climate change.

tehwebguy 9y ago

Did they not have property tax in England?

rsync 9y ago

"Always enjoyed this Churchill quote - from 1909!" (long quotation from 4 years prior to the 16th amendment[1]) This is not an accurate assessment of the present state of affairs. Rental income in the United States is taxed at the federal and state level and rental licenses (as well as other licensing) is levied at the local level. This is not to mention the property taxes that are paid by the landlord - which can be significant. Your landlord is contributing to the general welfare in a great many ways. [1] https://en.wikipedia.org/wiki/Sixteenth_Amendment_to_the_United_States_Constitution https://en.wikipedia.org/wiki/Sixteenth_Amendment_to_the_Uni...

jdavis703 9y ago
The renter actually pays the property tax, it's included in the rent that is charged. There are very few landlords who rent out their property for less than the cost of property tax. Further many residential properties are owned by LLCs and other corporations that allow them to lock in low taxes by never selling the actual property, but merely the holding company of the property.
- rsync 9y ago
  "Further many residential properties are owned by LLCs and other corporations that allow them to lock in low taxes by never selling the actual property ..." I think you are talking about prop 13 and the ability of corporate entities to benefit from the provisions of prop 13 which I agree, is completely insane. But prop 13 is limited to California and I know of no other states that have anything comparable.