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> Properties are bought up to be flipped, added to the short term rental market, and/or bought as secondary/tertiary homes. I have several friends in the contr

> Properties are bought up to be flipped, added to the short term rental market, and/or bought as secondary/tertiary homes. I have several friends in the contracting/home services industry. The stories I hear about home flippers buying houses, asking for the cheapest paint/flooring/light fixture work possible, and then relisiting the homes with a 50% markup are wild. It seems a lot of people got into flipping homes around the start of the pandemic and lucked into one of the sharpest real estate market increases in a long time. They assume it's an easy way to make a lot of money with their interior design skills, but really they would have profited just as much or more if they just sat on the home from 2020 to late 2021 and sold it after the market went up. I generally don't think outright bans work because the binary solutions become controversial and prone to political manipulation and stalling. Increasing taxes on these speculative transactions is the way to solve this, I think. Simply eliminating the 1031 exchange that allows investors to defer tax liabilities on real estate investments would make a huge, immediate change in the velocity of speculation. The real estate lobby would go ballistic at the proposal, but I think it needs to be done ASAP. It doesn't make sense that real estate investors get such special tax treatment.

amluto 4y ago
I would like to see the 1031 exchange become available for people who intent to occupy their properties. It makes no sense that someone could own and live in a home for 50 years, want to trade for a smaller home, and be unable to afford the taxes.
- rhino369 4y ago
  You get a 250,000-500,000 exemption for a home you actually live in for 2 years.
  - amluto 4y ago
    Tell that to someone who lives in a perfectly ordinary, well maintained single family house in what is now an expensive part of the Bay Area that would sell for $3.5M, and whose basis is essentially zero. If they want to move to a nice condo selling for $2M, they can probably squeak by, but most of that $1.5M gain will disappear. This is a problem for people who want to move. But, and this is mostly speculation, this is bad for everyone else too. It makes the market less liquid, which means that people are less likely to live where they want. It also reduces the incentive to build the kinds of units people want to live in. Suppose you want to build 100 nice condos. It’s harder to sell them to existing homeowners, and, in turn, those owners’ homes don’t go on the market. With fewer houses on the market, a smaller stream of buyers with lots of money can keep buying houses at unreasonable prices, and the market prices get pushed up.
- ericd 4y ago
  Better would just be making gains due to inflation tax-free - it makes no sense that capital gains aren't indexed to inflation. Tax the real gains, not the nominal ones.
sharemywin 4y ago
That's a problem with taxes in general for capital. why don't they have a tax exemption where I can defer paying taxes until I switch jobs and as long as I switch to a like kind job I can defer even more.

amluto 4y ago

I would like to see the 1031 exchange become available for people who intent to occupy their properties. It makes no sense that someone could own and live in a home for 50 years, want to trade for a smaller home, and be unable to afford the taxes.

rhino369 4y ago
You get a 250,000-500,000 exemption for a home you actually live in for 2 years.
- amluto 4y ago
  Tell that to someone who lives in a perfectly ordinary, well maintained single family house in what is now an expensive part of the Bay Area that would sell for $3.5M, and whose basis is essentially zero. If they want to move to a nice condo selling for $2M, they can probably squeak by, but most of that $1.5M gain will disappear. This is a problem for people who want to move. But, and this is mostly speculation, this is bad for everyone else too. It makes the market less liquid, which means that people are less likely to live where they want. It also reduces the incentive to build the kinds of units people want to live in. Suppose you want to build 100 nice condos. It’s harder to sell them to existing homeowners, and, in turn, those owners’ homes don’t go on the market. With fewer houses on the market, a smaller stream of buyers with lots of money can keep buying houses at unreasonable prices, and the market prices get pushed up.
ericd 4y ago
Better would just be making gains due to inflation tax-free - it makes no sense that capital gains aren't indexed to inflation. Tax the real gains, not the nominal ones.

sharemywin 4y ago

That's a problem with taxes in general for capital. why don't they have a tax exemption where I can defer paying taxes until I switch jobs and as long as I switch to a like kind job I can defer even more.