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There is a long-term capital gains tax break for holding a certain number of years. However with real estate you can sell one property and use the money to buy

There is a long-term capital gains tax break for holding a certain number of years. However with real estate you can sell one property and use the money to buy another within a certain amount of time and not have a taxable event. (See https://www.irs.gov/businesses/small-businesses-self-employed/like-kind-exchanges-real-estate-tax-tips https://www.irs.gov/businesses/small-businesses-self-employe... )

irq11 8y ago
So it’s worse than having a policy that is neutral on flipping: our tax system actually encourages it. We shoud tax short term capital gains on property at 100 percent. Nobody should be able to profit by driving up the cost of housing.
- wutbrodo 8y ago
  I'm surprised to see you downvoted so heavily; I thought HN was generally familiar with Georgism (which I'm pretty much a full-throated supporter of), and what you're suggesting is a softer version of Georgism (limited to short term gains). The principle behind capitalism is that you create value and get a portion of the value thereby created as income/return. Land value appreciation very much doesn't fall into this category, unlike every other investment in which 1) the capital serves an allocative purpose and 2) is being put into productive use by someone else. Land value gains are generally extractive (and destructive, through the inefficiency it introduces) of the wealth created by nearby economic activity. I know someone who bought a bought a house in Beverly Hills in the 70s for $30k: forty years and a ~million dollars of value growth later, they sold it and collected four decades of extraction from the economic activity of the area around them. There's no universe in which this is sensible policy, and as you rightly point out, encouraging it through tax policy is even more insane. I think it's something about homeownership that makes people hyper-defensive about this topic and unable to think clearly. I can't say I relate, given that my dad's career (and an outsize portion of his portfolio) in real estate doesn't prevent me from seeing the issue clearly.
  - mbrumlow 8y ago
    Nobody drove the price up. It was simple supply and demand. If more people want to live in a area -- for whatever reasion -- the amount somebody will play will go up. Why should somebody not be able to take advantage of that? What if they simply wanted to move two streets over? But now could not because the somebody thinks it's unfair that housing prices whent up. But your other points are messy. People in the cominity are building that value over time by being good citizens of the region. Had they been bad citizens nobody would have moved in and continued the process of building the cominity. It also cost a ton of money to keep your house in proper working order with also increases the demand and again raising the value of the proeprty. I have so much more to say but I am replying on a phone and I can't stand it. Phones are horrible. There is no universe where somebody could buy a house for 30k and forty years later be told even though they sold it for millions that they gave to give it all back - and then try to find another house for 30k. God I hope I read your post wrong.
    - irq11 8y ago
      “Supply and demand” has two sides. You can ameliorate demand distortions while also building. They’re not mutually exclusive. If someone wants to or needs to own for a short term, a sensible policy is to ensure that they don’t profit from their whims.
    - wutbrodo 8y ago
      The only claim I made about "driving the price up" was that local economic growth drove the value up. Ie, the productive value of the land increased because the local economy grew (this includes living, since everyone but remote workers have dependencies between home and work locations). This isn't incompatible with supply and demand at all, and from your comment, you don't appear to have understood my comment at all.
  - irq11 8y ago
    When it comes to housing, HN is filled woth rigid ideologues who will tolerate no opinion that doesn’t exactly agree with that of the hive-mind (i.e. if prices are high, the only solution is to build more; demand distortions do not exist.) Everything else is censored by downvoting.
- gowld 8y ago
  flipping houses isn't driving up the cost of housing. The costs go up for other reasons. Flipping is simply trading, aka providing liquidity in exchange for taking volatility risk.
  - dragonwriter 8y ago
    > flipping houses isn't driving up the cost of housing. Yes it is. > Flipping is simply trading, Usually, not: flipping is typically short-timeline buy-improve-sell cycles (that is, it's exploiting market irrationality where certain improvements add more to market clearing price than they cost to add.) This does bring up prices.
  - notSupplied 8y ago
    Since there aren't many easy ways of shorting housing (besides rather exotic securities), speculative activity usually distorts prices upwards more so than it does down.
gnicholas 8y ago
Note that the ability to roll over gains only applies to investment properties. You can’t use this in conjunction with the $250k/500k exclusion for the sale of a primary residence.
irq11 8y ago
I’ll say it again: it’s absolutely irrational that we encourage flipping through our tax system. Short-term capital gains on housing should be taxed at 100%. Really tired of the HN thought-police censoring ideas by downvote. If you disagree, reply and make an argument.

irq11 8y ago

So it’s worse than having a policy that is neutral on flipping: our tax system actually encourages it. We shoud tax short term capital gains on property at 100 percent. Nobody should be able to profit by driving up the cost of housing.

wutbrodo 8y ago
I'm surprised to see you downvoted so heavily; I thought HN was generally familiar with Georgism (which I'm pretty much a full-throated supporter of), and what you're suggesting is a softer version of Georgism (limited to short term gains). The principle behind capitalism is that you create value and get a portion of the value thereby created as income/return. Land value appreciation very much doesn't fall into this category, unlike every other investment in which 1) the capital serves an allocative purpose and 2) is being put into productive use by someone else. Land value gains are generally extractive (and destructive, through the inefficiency it introduces) of the wealth created by nearby economic activity. I know someone who bought a bought a house in Beverly Hills in the 70s for $30k: forty years and a ~million dollars of value growth later, they sold it and collected four decades of extraction from the economic activity of the area around them. There's no universe in which this is sensible policy, and as you rightly point out, encouraging it through tax policy is even more insane. I think it's something about homeownership that makes people hyper-defensive about this topic and unable to think clearly. I can't say I relate, given that my dad's career (and an outsize portion of his portfolio) in real estate doesn't prevent me from seeing the issue clearly.
- mbrumlow 8y ago
  Nobody drove the price up. It was simple supply and demand. If more people want to live in a area -- for whatever reasion -- the amount somebody will play will go up. Why should somebody not be able to take advantage of that? What if they simply wanted to move two streets over? But now could not because the somebody thinks it's unfair that housing prices whent up. But your other points are messy. People in the cominity are building that value over time by being good citizens of the region. Had they been bad citizens nobody would have moved in and continued the process of building the cominity. It also cost a ton of money to keep your house in proper working order with also increases the demand and again raising the value of the proeprty. I have so much more to say but I am replying on a phone and I can't stand it. Phones are horrible. There is no universe where somebody could buy a house for 30k and forty years later be told even though they sold it for millions that they gave to give it all back - and then try to find another house for 30k. God I hope I read your post wrong.
  - irq11 8y ago
    “Supply and demand” has two sides. You can ameliorate demand distortions while also building. They’re not mutually exclusive. If someone wants to or needs to own for a short term, a sensible policy is to ensure that they don’t profit from their whims.
  - wutbrodo 8y ago
    The only claim I made about "driving the price up" was that local economic growth drove the value up. Ie, the productive value of the land increased because the local economy grew (this includes living, since everyone but remote workers have dependencies between home and work locations). This isn't incompatible with supply and demand at all, and from your comment, you don't appear to have understood my comment at all.
- irq11 8y ago
  When it comes to housing, HN is filled woth rigid ideologues who will tolerate no opinion that doesn’t exactly agree with that of the hive-mind (i.e. if prices are high, the only solution is to build more; demand distortions do not exist.) Everything else is censored by downvoting.
gowld 8y ago
flipping houses isn't driving up the cost of housing. The costs go up for other reasons. Flipping is simply trading, aka providing liquidity in exchange for taking volatility risk.
- dragonwriter 8y ago
  > flipping houses isn't driving up the cost of housing. Yes it is. > Flipping is simply trading, Usually, not: flipping is typically short-timeline buy-improve-sell cycles (that is, it's exploiting market irrationality where certain improvements add more to market clearing price than they cost to add.) This does bring up prices.
- notSupplied 8y ago
  Since there aren't many easy ways of shorting housing (besides rather exotic securities), speculative activity usually distorts prices upwards more so than it does down.

gnicholas 8y ago

Note that the ability to roll over gains only applies to investment properties. You can’t use this in conjunction with the $250k/500k exclusion for the sale of a primary residence.

irq11 8y ago

I’ll say it again: it’s absolutely irrational that we encourage flipping through our tax system. Short-term capital gains on housing should be taxed at 100%. Really tired of the HN thought-police censoring ideas by downvote. If you disagree, reply and make an argument.