6 ms·

Supply side markets work when they defeat the power of hoarding. Pick any market, and if sitting on the item makes you money in the long term, rather than putti

Supply side markets work when they defeat the power of hoarding. Pick any market, and if sitting on the item makes you money in the long term, rather than putting it to use then you have a monopoly problem of some sort. For a market to work, it must always be the case that using the item to cause some socially useful economic flow to happen is more profitable than sitting on it, or trading your hoard with other hoarders. Ideally you go bust quickly if you sit on it, much as you would with perishable goods. When you apply that view to housing services you find that the power to exclude is the hoard that needs defeating. Keeping an apartment empty and outside the housing services supply market should be cripplingly expensive. Ask yourself this. What's the market force that drives rent prices down and is it equivalent in force to that which drives rent prices up? People need housing to live, but housing only needs people if there is a chance of a profit.

skybrian 8y ago
Calling it "hoarding" doesn't seem right unless there are both high vacancy rates and strong demand. How often is that the case?
- ToFundorNot 8y ago
  Currently? at least Vancouver, and possibly Toronto. I don't know about other markets. It's roughly 4.3% of Vancouver's housing stock[1] Toronto has roughly 23% [2] of its for sale stock vacant, unfortunately there have been no openly published numbers on total vacancies. [1]https://www.cbc.ca/news/canada/british-columbia/empty-homes-tax-not-helping-rental-crisis-generating-millions-more-for-vancouver-report-1.4925994 https://www.cbc.ca/news/canada/british-columbia/empty-homes-... [2]https://www.narcity.com/ca/on/toronto/news/a-shocking-number-of-houses-in-toronto-are-completely-empty-heres-why https://www.narcity.com/ca/on/toronto/news/a-shocking-number...
stickfigure 8y ago
Keeping an apartment empty ... should be cripplingly expensive. It is? I mean, if you owned an apartment that could rent for $3000/mo, then keeping it empty is a direct reduction of your income by $3000/mo. The problem seems to be that offering an apartment under a rent control regime creates an opportunity cost, so maybe the owner thinks it's worthwhile to "spend" $3k/mo to achieve a future return some other way.
- amscanne 8y ago
  This was one of the key points in the episode: rent control changes this. It's not about the landlords, it's about the tenants. If you've rented a rent-controlled apartment for a long time, even if it's huge (because you rented it when you had a large family), then it is not cripplingly expensive to hold on to it when your needs change. It is cheaper, in fact, for you to hold on to your 6 bedroom apartment, though you use just one room, than it would be to swap it for a one bedroom apartment because you'd lose the rent control price. (See the example of Nat Sherman.)
  - njepa 8y ago
    In markets that rely on rent control as a mechanism for affordable housing, you can usually exchange rent controlled units.
  - Plasmoid2000ad 8y ago
    Rent control doesn't have to work this way, for example right now in Ireland. Rent control is associated with the Unit, not with the tenant. If you move to another rent controlled Unit, there's very limited situations where the landlord can increase the rent beyond the limits. A big problem is probably once you've implemented rent control, changing the system later becomes increasingly more difficult the longer it's been in place... as someone is always going to lose out.
    - gnicholas 8y ago
      > Rent control is associated with the Unit, not with the tenant. If you move to another rent controlled Unit, there's very limited situations where the landlord can increase the rent beyond the limits. In a city with rent controls, however, finding another unit that is the right size and has rent control is not easy (because everyone is hanging onto their units — and in some cases illegally subletting them). This becomes a self-perpetuating cycle, where there is a decreased supply of available units, which makes it less likely that people in rent-controlled units will dare to venture out and look for another unit that is a better fit in terms of size/location/etc.
- 8y ago
solatic 8y ago
> Keeping an apartment empty and outside the housing services supply market should be cripplingly expensive. Jerusalem tried this. Lots of apartments owned by wealthy foreign landlords who only occupy the apartments once or twice a year, if that, on holiday, transforming large sections of the city into ghost neighborhoods. https://www.timesofisrael.com/jerusalem-ups-ghost-apartment-taxes-as-housing-costs-soar/ https://www.timesofisrael.com/jerusalem-ups-ghost-apartment-... It hasn't worked. Odds are that the tax on empty apartments simply isn't high enough. So the question is, how do you determine the tax rate to make it adequately "crippling" to absentee owners? Should it be some factor of the property's value? Won't matter, it'll be factored in as part of the cost. Should it be some kind of wealth tax? Not really possible, since as foreign owners, most of their wealth is located abroad. It makes sense on paper but it's fairly difficult to carry out in practice.
- true_religion 8y ago
  Zoning should take into account rental status. So an area can be zoned for primary home ownership or home rental. Thus if you have your secondary unoccupied residence in that zone, then it would be a zoning violation so you must live in it or rent it out.
  - solatic 8y ago
    Most of the ghost homes are owned by foreigners for whom that is their sole residential property in Israel. Penalizing the purchase of additional units is ineffective. Furthermore, even if you could figure out a way to set up zoning regulations to achieve these aims, how would you penalize violations? Fines are just factored into the cost of ownership, just like the taxes on empty apartments.
    - true_religion 8y ago
      If you continue to commit a business zoning violation then your business is taken away or obstructed. As far as the government is concerned what follows is just normal beaurocracy
- 8y ago
alexgmcm 8y ago
I would much prefer a land value tax and relaxation of regulations preventing new construction (in London you can't build in certain areas/over a certain height because of Protected Views [1], which seems utterly bizarre, as if maintaining views is more important than sufficient housing) [1] https://en.wikipedia.org/wiki/Protected_view https://en.wikipedia.org/wiki/Protected_view
- ukoki 8y ago
  How about just taxing the profits of house sales exorbitantly? Eg 70% tax on profits of house sales unless you are a UK resident and it's your only home. This way it's still worth buying housing with the intention of leasing it, but buying housing just to sit on it will be drastically less profitably.
  - rzwitserloot 8y ago
    There are 2 kinds of home owner. In the netherlands we have a saying: "Little house, little tree, little animal" (huisje, boompje, beestje). It means: Family life in a suburban home with a pet, a kid or two, a house with a garden, a car on the porch, a stable job, and the home is yours, you're paying off your mortgage, and you'll grow old with a nice nest egg in the form of having built up actual ownership, converting your salary into paying off the mortgage in the timespan of your career. That's one kind of home owner. Of particular note is that at least in The Netherlands, and I bet in the UK too, the government likes this image. Most citizens do too. So, there are tax breaks for paying off mortgages and such. The other kind buys as many houses as they can, converts it to crappy rent and because the dream, and the government's policies, are somehow trying to marry the mutually exclusive notions of 'anybody should be able to afford a starter house' and 'all houses should be good investments, giving you more return than just sticking that money in a bank someplace', rent is really high because the competition of just buying a house is really expensive too. I bet that it is politically virtually impossible to attempt to deal a blow to the 'huisje, boompje, beestje' owners even if it makes perfect socio-economic sense. So, seeing that as a political impossibility, you're looking for a way to somehow tax only the second category and also doing it in a way that lobbyers of the second category can't misconstrue your plan to get the first category on board. I bet this is extremely hard to do: It's all one market, after all. If the second category is taxed into oblivion, their demand will cease to exist, which means house prices, also the house prices of the 'huisje boompje beestje' folks will fall drastically. This will do excellent things to the affordability of rent, but it makes those career folks edgy, to say the least. It'll take quite a while for sufficient generational turnover (and 'the youths' need to vote A LOT more. Even if it does not matter at all; politicians are incentivised to chase policies that benefit those who vote) for me to believe any law that will screw over HBB folk is going to pass.
pizzazzaro 8y ago
In spite of their crutch upon Freidman-ite economics, this is one of those rare cases where Chicago boys rely on all the evidence rather than cherry-picking and thus turning a potential hard-science into BS. A more ideal solution is to add subsidized competition. Remember how all the Republicans were railing about Obamacare's public option, about how no competition for that could ever make money? Well, force these SOBs to get creative. Also, can we please limit our housing to humans and just banks that exist in our country? And not imvestment banks? Im getting tired of trying to buy a house, only to find some Israeli, European, Chinese, etc bank bought it, - or Bear Stearns - and will bring it back to market in 6 months at a 30% price increase for the effort of mowing the lawn. Or worse, if that investment bank buys an apartment building or old hotel. They'll just "renovate" mostly with paint, start up a building management company, add in bougie things like concierge services, and then try to charge double the market rate. If my future home is your investment property? I see very clearly how much you're making off me. And I'm considering other options purely out of spite.
- JetSpiegel 8y ago
  > Also, can we please limit our housing to humans and just banks that exist in our country? I would argue at least in cities this would solve most problems. Humans must be either the owners or the tenants, and banks must put all their houses on the market within 1 year of a ownership/tenancy change, or face expropriation.
asdffdsa 8y ago
If you decide to continue renting solely due to the artificially low price, isn't that hoarding? The tenant literally sitting in the item (living in an apartment) like the man who kept renting a 6-bedroom apartment for $300/month has the power to exclude, and a hoard that needs defeating. Is rent control a good tool to fix hoarding?
DuskStar 8y ago
> Supply side markets work when they defeat the power of hoarding. Pick any market, and if sitting on the item makes you money in the long term, rather than putting it to use then you have a monopoly problem of some sort. > For a market to work, it must always be the case that using the item to cause some socially useful economic flow to happen is more profitable than sitting on it, or trading your hoard with other hoarders. Ideally you go bust quickly if you sit on it, much as you would with perishable goods. Agreed! > When you apply that view to housing services you find that the power to exclude is the hoard that needs defeating. Keeping an apartment empty and outside the housing services supply market should be cripplingly expensive. Aaand you've lost me. IMO it's not the people keeping an apartment empty and off the market that are the issue - they're suffering a loss for this, equivalent to the rent. No, the people 'hoarding' are, essentially, the NIMBYs. It costs me nothing to prevent you from building 1000 apartments to replace a parking lot in Downtown LA, but that lowers the value of my house (reduced demand) so I'm going to make it as legally difficult as possible - that sort of thing.

skybrian 8y ago

Calling it "hoarding" doesn't seem right unless there are both high vacancy rates and strong demand. How often is that the case?

ToFundorNot 8y ago
Currently? at least Vancouver, and possibly Toronto. I don't know about other markets. It's roughly 4.3% of Vancouver's housing stock[1] Toronto has roughly 23% [2] of its for sale stock vacant, unfortunately there have been no openly published numbers on total vacancies. [1]https://www.cbc.ca/news/canada/british-columbia/empty-homes-tax-not-helping-rental-crisis-generating-millions-more-for-vancouver-report-1.4925994 https://www.cbc.ca/news/canada/british-columbia/empty-homes-... [2]https://www.narcity.com/ca/on/toronto/news/a-shocking-number-of-houses-in-toronto-are-completely-empty-heres-why https://www.narcity.com/ca/on/toronto/news/a-shocking-number...

stickfigure 8y ago

Keeping an apartment empty ... should be cripplingly expensive. It is? I mean, if you owned an apartment that could rent for $3000/mo, then keeping it empty is a direct reduction of your income by $3000/mo. The problem seems to be that offering an apartment under a rent control regime creates an opportunity cost, so maybe the owner thinks it's worthwhile to "spend" $3k/mo to achieve a future return some other way.

amscanne 8y ago
This was one of the key points in the episode: rent control changes this. It's not about the landlords, it's about the tenants. If you've rented a rent-controlled apartment for a long time, even if it's huge (because you rented it when you had a large family), then it is not cripplingly expensive to hold on to it when your needs change. It is cheaper, in fact, for you to hold on to your 6 bedroom apartment, though you use just one room, than it would be to swap it for a one bedroom apartment because you'd lose the rent control price. (See the example of Nat Sherman.)
- njepa 8y ago
  In markets that rely on rent control as a mechanism for affordable housing, you can usually exchange rent controlled units.
- Plasmoid2000ad 8y ago
  Rent control doesn't have to work this way, for example right now in Ireland. Rent control is associated with the Unit, not with the tenant. If you move to another rent controlled Unit, there's very limited situations where the landlord can increase the rent beyond the limits. A big problem is probably once you've implemented rent control, changing the system later becomes increasingly more difficult the longer it's been in place... as someone is always going to lose out.
  - gnicholas 8y ago
    > Rent control is associated with the Unit, not with the tenant. If you move to another rent controlled Unit, there's very limited situations where the landlord can increase the rent beyond the limits. In a city with rent controls, however, finding another unit that is the right size and has rent control is not easy (because everyone is hanging onto their units — and in some cases illegally subletting them). This becomes a self-perpetuating cycle, where there is a decreased supply of available units, which makes it less likely that people in rent-controlled units will dare to venture out and look for another unit that is a better fit in terms of size/location/etc.
8y ago

solatic 8y ago

> Keeping an apartment empty and outside the housing services supply market should be cripplingly expensive. Jerusalem tried this. Lots of apartments owned by wealthy foreign landlords who only occupy the apartments once or twice a year, if that, on holiday, transforming large sections of the city into ghost neighborhoods. https://www.timesofisrael.com/jerusalem-ups-ghost-apartment-taxes-as-housing-costs-soar/ https://www.timesofisrael.com/jerusalem-ups-ghost-apartment-... It hasn't worked. Odds are that the tax on empty apartments simply isn't high enough. So the question is, how do you determine the tax rate to make it adequately "crippling" to absentee owners? Should it be some factor of the property's value? Won't matter, it'll be factored in as part of the cost. Should it be some kind of wealth tax? Not really possible, since as foreign owners, most of their wealth is located abroad. It makes sense on paper but it's fairly difficult to carry out in practice.

true_religion 8y ago
Zoning should take into account rental status. So an area can be zoned for primary home ownership or home rental. Thus if you have your secondary unoccupied residence in that zone, then it would be a zoning violation so you must live in it or rent it out.
- solatic 8y ago
  Most of the ghost homes are owned by foreigners for whom that is their sole residential property in Israel. Penalizing the purchase of additional units is ineffective. Furthermore, even if you could figure out a way to set up zoning regulations to achieve these aims, how would you penalize violations? Fines are just factored into the cost of ownership, just like the taxes on empty apartments.
  - true_religion 8y ago
    If you continue to commit a business zoning violation then your business is taken away or obstructed. As far as the government is concerned what follows is just normal beaurocracy
8y ago

alexgmcm 8y ago

I would much prefer a land value tax and relaxation of regulations preventing new construction (in London you can't build in certain areas/over a certain height because of Protected Views [1], which seems utterly bizarre, as if maintaining views is more important than sufficient housing) [1] https://en.wikipedia.org/wiki/Protected_view https://en.wikipedia.org/wiki/Protected_view

ukoki 8y ago
How about just taxing the profits of house sales exorbitantly? Eg 70% tax on profits of house sales unless you are a UK resident and it's your only home. This way it's still worth buying housing with the intention of leasing it, but buying housing just to sit on it will be drastically less profitably.
- rzwitserloot 8y ago
  There are 2 kinds of home owner. In the netherlands we have a saying: "Little house, little tree, little animal" (huisje, boompje, beestje). It means: Family life in a suburban home with a pet, a kid or two, a house with a garden, a car on the porch, a stable job, and the home is yours, you're paying off your mortgage, and you'll grow old with a nice nest egg in the form of having built up actual ownership, converting your salary into paying off the mortgage in the timespan of your career. That's one kind of home owner. Of particular note is that at least in The Netherlands, and I bet in the UK too, the government likes this image. Most citizens do too. So, there are tax breaks for paying off mortgages and such. The other kind buys as many houses as they can, converts it to crappy rent and because the dream, and the government's policies, are somehow trying to marry the mutually exclusive notions of 'anybody should be able to afford a starter house' and 'all houses should be good investments, giving you more return than just sticking that money in a bank someplace', rent is really high because the competition of just buying a house is really expensive too. I bet that it is politically virtually impossible to attempt to deal a blow to the 'huisje, boompje, beestje' owners even if it makes perfect socio-economic sense. So, seeing that as a political impossibility, you're looking for a way to somehow tax only the second category and also doing it in a way that lobbyers of the second category can't misconstrue your plan to get the first category on board. I bet this is extremely hard to do: It's all one market, after all. If the second category is taxed into oblivion, their demand will cease to exist, which means house prices, also the house prices of the 'huisje boompje beestje' folks will fall drastically. This will do excellent things to the affordability of rent, but it makes those career folks edgy, to say the least. It'll take quite a while for sufficient generational turnover (and 'the youths' need to vote A LOT more. Even if it does not matter at all; politicians are incentivised to chase policies that benefit those who vote) for me to believe any law that will screw over HBB folk is going to pass.

pizzazzaro 8y ago

In spite of their crutch upon Freidman-ite economics, this is one of those rare cases where Chicago boys rely on all the evidence rather than cherry-picking and thus turning a potential hard-science into BS. A more ideal solution is to add subsidized competition. Remember how all the Republicans were railing about Obamacare's public option, about how no competition for that could ever make money? Well, force these SOBs to get creative. Also, can we please limit our housing to humans and just banks that exist in our country? And not imvestment banks? Im getting tired of trying to buy a house, only to find some Israeli, European, Chinese, etc bank bought it, - or Bear Stearns - and will bring it back to market in 6 months at a 30% price increase for the effort of mowing the lawn. Or worse, if that investment bank buys an apartment building or old hotel. They'll just "renovate" mostly with paint, start up a building management company, add in bougie things like concierge services, and then try to charge double the market rate. If my future home is your investment property? I see very clearly how much you're making off me. And I'm considering other options purely out of spite.

JetSpiegel 8y ago
> Also, can we please limit our housing to humans and just banks that exist in our country? I would argue at least in cities this would solve most problems. Humans must be either the owners or the tenants, and banks must put all their houses on the market within 1 year of a ownership/tenancy change, or face expropriation.

asdffdsa 8y ago

If you decide to continue renting solely due to the artificially low price, isn't that hoarding? The tenant literally sitting in the item (living in an apartment) like the man who kept renting a 6-bedroom apartment for $300/month has the power to exclude, and a hoard that needs defeating. Is rent control a good tool to fix hoarding?

DuskStar 8y ago

> Supply side markets work when they defeat the power of hoarding. Pick any market, and if sitting on the item makes you money in the long term, rather than putting it to use then you have a monopoly problem of some sort. > For a market to work, it must always be the case that using the item to cause some socially useful economic flow to happen is more profitable than sitting on it, or trading your hoard with other hoarders. Ideally you go bust quickly if you sit on it, much as you would with perishable goods. Agreed! > When you apply that view to housing services you find that the power to exclude is the hoard that needs defeating. Keeping an apartment empty and outside the housing services supply market should be cripplingly expensive. Aaand you've lost me. IMO it's not the people keeping an apartment empty and off the market that are the issue - they're suffering a loss for this, equivalent to the rent. No, the people 'hoarding' are, essentially, the NIMBYs. It costs me nothing to prevent you from building 1000 apartments to replace a parking lot in Downtown LA, but that lowers the value of my house (reduced demand) so I'm going to make it as legally difficult as possible - that sort of thing.