6 ms·

There's also increasing a lot of supply. Without building. The biggest problem in the country is that investment capital is swooping in any buying any valuable

There's also increasing a lot of supply. Without building. The biggest problem in the country is that investment capital is swooping in any buying any valuable property up and re-selling it for a lot more OR renting it out for a lot. Because investment is just buying everything for cash, they don't really care. We need a massive tax on investment property, something that'll require the house to become completely unaffordable to re-sell, so investing will have negative returns due to taxation. Then suddenly a ton of houses will fly back on the market because investors will be trying to dump inventory. ALSO property taxes can help: If you live in a house, your property tax is identical to today. If you don't, your property tax is say 10x'd. Being a real-estate investor won't be very lucrative. Meanwhile this won't affect regular homebuyers since they won't have this tax.

mgraczyk 4y ago
On the face of it, this makes no sense. Vacancy rates are incredibly low everywhere in the US, and what you're describing would push prices down as much as up.
- Justsignedup 4y ago
  The weird part is, in New York vacancy is because the rent is so high or the price is so high that investment firms are unwilling to let people live there for fear that it'll drive down prices. They rather make 300% gains on 70% of their properties and let 30% go vacant, than let those 30% get sold/rented and let all prices drop to normal rates.
  - colinmhayes 4y ago
    NYC vacancy rate is 4.5% against all time lows of around 3%. There is not a vacancy crisis there.
crooked-v 4y ago
> and re-selling it for a lot more OR renting it out for a lot See, you're almost at the real problem: why is that a good investment in the first place? Because there isn't enough housing stock. If there was, investors wouldn't be able to leverage it like that.
- Justsignedup 4y ago
  Soooooort of. Space is finite. Sure we have a ton of unused space, but space near harbors, is a premium. New York City cannot expand, not without a massive rail infrastructure. Anything that "brings in more space" in any shape or form requires a really solid investment in rail. But unfortunately this is not something the US can do effectively.
  - crooked-v 4y ago
    Look at the neighborhoods outside of Manhattan and you'll see plenty of places already near transit stations that could easily double or triple capacity just by putting in townhouses or triplexes.
  - prottog 4y ago
    New York City, even Manhattan, is not terribly dense compared to other major world cities. You can see in this map[0] that vast swathes of Manhattan are occupied by buildings 10 stories or less. [0]: https://mangomap.com/mango-chris/maps/11955/The-Buildings-of-Manhattan https://mangomap.com/mango-chris/maps/11955/The-Buildings-of...
    - thatfrenchguy 4y ago
      most of Paris is less than 10 stories, yet it's a dense city as well.
      - crooked-v 4y ago
        Paris is the best example of how you can get very high density without actually needing very large buildings, just by being extremely consistent about having apartments and condos be the default mode of urban construction.
    - _ccdg 4y ago
      How dense do we want it to be? Density becomes misery after a certain point. Manhattan isn't dense enough, we're showing, but do you enjoy taking a crowded train during rush hour? Have you ever been to a supermarket where the entire inside is one long line of people pulling items into their baskets as they go, ending up in another line where numbers are called to registers. How about a big apartment building with 10 apartments on the floor, with at least one neighbor per weekend having a party, and half the people letting their doors slam whenever they come and go at night or early morning? Folks, good news for you - one unit will be available soon, I'm happy to add a vacancy to this delightful city as I age out of it. Density is not one size fits all. A walkable city guy my whole life, my mental health has taken a real beating. Density is for the young, that's the bottom line. Anyone who is a light sleeper or doesn't enjoy going out a lot at night is just taking one for the team.
PopAlongKid 4y ago
>We need a massive tax on investment property, something that'll require the house to become completely unaffordable to re-sell, so investing will have negative returns due to taxation. Or far easier, just eliminate the Section 1031 like-kind exchange (U.S. tax provision that allows tax on realized gains on investment property to be deferred indefinitely). There's really no policy justification for it since long term capital gains already have a favorable tax rate, and in fact like kind exchanges for personal (non-real-estate) property have already been recently eliminated.
- lsllc 4y ago
  The big banks & investment funds will figure a way around it, meanwhile individuals and small businesses trying to grow will struggle. I know people who've used a 1031 exchange to sell a smaller location and move to a bigger/better version of the same. How about limiting 1031 exchanges to small business(es) (for some definition of small businesses that's actually meaningful).
  - lotsofpulp 4y ago
    > The big banks & investment funds will figure a way around it What does this mean? How would they be able to postpone paying capital gains tax if the government said they had to pay capital gains tax at time of sale? How about eliminating it, removing an avenue for corruption and extra costs for auditing said avenues for corruption, and giving cash to someone if the goal is for the government to help someone?
    - lsllc 4y ago
      The same way that Trump, Bezos et. al. seem to be able to avoid paying taxes on most of their wealth, in that they generally find a way to recover profits without it being considered "income". https://www.propublica.org/article/billionaires-tax-avoidance-techniques-irs-files https://www.propublica.org/article/billionaires-tax-avoidanc... All I'm saying is that by eliminating the 1031 exchange, I suspect it'll hurt far more individuals and small businesses (resulting in stifled growth) and the "big boys" will simply use some other vehicle to continue avoid the taxes.
deleted 4y ago
[deleted]
mellavora 4y ago
So the interesting question is how much of this private equity money is investing on the hope that house prices continue to rise? so when house prices flat-line, their investment thesis is fried. Obviously the clever PE funds have a way to deal with this. But not all of them are clever, and the question is which one(s) are going to blow up? It isn't The Big Short, but there is a systemic risk from the PE investment
iknowSFR 4y ago
Investment groups aren’t in it for the resell. They’re incentivized to hold the asset as they’re leveraging against it to buy more homes. Selling assets is pretty uncommon in SFR for this very reason. The game is more about cash flow to service their debt. That means rent rates. Selling the homes has a 2 part effect: reduced your cash flow to service your debt and further forced asset sales that were bought with debt. If you really want to get homes back into the retail market, you have to target the cash flow.
dec0dedab0de 4y ago
I think I agree, except I think it should explicitly be a vacancy tax. We need investors who buy builds to manage and rent out to residents and businesses. Investors who buy buildings to avoid inflation are a problem. I know many local buildings that have been vacant, but available for rent for over 15 years. That tells me that they are asking for too much. They need an incentive to rent it out cheaper, or sell, or forfeit the land. Most (all?) real estate ownership chains go back to someone just putting down a fence anyway, if you essentially abandon a part of a town you should lose the right to claim it as your own. But I do think the local municipalities should make these rules for themselves instead of being mandated by the state.
dionidium 4y ago
These kinds of shenanigans only make sense to me once you have exhausted every other option and given that it's currently illegal to build apartments on the majority of parcels in the United States I'd say that we've mostly been busy foreclosing options, not exhausting them.
theptip 4y ago
This is also complex though; REITs are one of the biggest builders of new housing stock in the US, so you'd reduce creation of supply (and therefore put upward pressure on prices) if you broadly tax this sort of investment. I think you need to do some careful calculations to be sure that this nets out as a positive effect on housing prices. I think it's clearly problematic for investors to be holding properties vacant as a speculative investment, and we should definitely tax that (probably at the local level) so heavily that the neighbors are happy to have someone contributing so much while not being a drain on services. It's not clear to me what % of housing stock is actually being held back like this though. In the middle you have the house-flip; buy property, improve it, sell it for a profit. AFAIK most of the time this involves actually doing work on the property, rather than just sitting on it and waiting for the value to appreciate; in that case a real service is being provided, as many families don't want to buy a house and have to wait to improve it themselves. So again, if you don't target your proposed tax well enough, you might actually decrease supply at the mid-/high-end of the market and therefore put upwards not downwards pressure on housing prices. To be clear I'm not arguing against making any investigation into the policy you propose, just suggesting that it's more nuanced than you appear to be stating.

mgraczyk 4y ago

On the face of it, this makes no sense. Vacancy rates are incredibly low everywhere in the US, and what you're describing would push prices down as much as up.

Justsignedup 4y ago
The weird part is, in New York vacancy is because the rent is so high or the price is so high that investment firms are unwilling to let people live there for fear that it'll drive down prices. They rather make 300% gains on 70% of their properties and let 30% go vacant, than let those 30% get sold/rented and let all prices drop to normal rates.
- colinmhayes 4y ago
  NYC vacancy rate is 4.5% against all time lows of around 3%. There is not a vacancy crisis there.

crooked-v 4y ago

> and re-selling it for a lot more OR renting it out for a lot See, you're almost at the real problem: why is that a good investment in the first place? Because there isn't enough housing stock. If there was, investors wouldn't be able to leverage it like that.

Justsignedup 4y ago
Soooooort of. Space is finite. Sure we have a ton of unused space, but space near harbors, is a premium. New York City cannot expand, not without a massive rail infrastructure. Anything that "brings in more space" in any shape or form requires a really solid investment in rail. But unfortunately this is not something the US can do effectively.
- crooked-v 4y ago
  Look at the neighborhoods outside of Manhattan and you'll see plenty of places already near transit stations that could easily double or triple capacity just by putting in townhouses or triplexes.
- prottog 4y ago
  New York City, even Manhattan, is not terribly dense compared to other major world cities. You can see in this map[0] that vast swathes of Manhattan are occupied by buildings 10 stories or less. [0]: https://mangomap.com/mango-chris/maps/11955/The-Buildings-of-Manhattan https://mangomap.com/mango-chris/maps/11955/The-Buildings-of...
  - thatfrenchguy 4y ago
    most of Paris is less than 10 stories, yet it's a dense city as well.
    - crooked-v 4y ago
      Paris is the best example of how you can get very high density without actually needing very large buildings, just by being extremely consistent about having apartments and condos be the default mode of urban construction.
  - _ccdg 4y ago
    How dense do we want it to be? Density becomes misery after a certain point. Manhattan isn't dense enough, we're showing, but do you enjoy taking a crowded train during rush hour? Have you ever been to a supermarket where the entire inside is one long line of people pulling items into their baskets as they go, ending up in another line where numbers are called to registers. How about a big apartment building with 10 apartments on the floor, with at least one neighbor per weekend having a party, and half the people letting their doors slam whenever they come and go at night or early morning? Folks, good news for you - one unit will be available soon, I'm happy to add a vacancy to this delightful city as I age out of it. Density is not one size fits all. A walkable city guy my whole life, my mental health has taken a real beating. Density is for the young, that's the bottom line. Anyone who is a light sleeper or doesn't enjoy going out a lot at night is just taking one for the team.

PopAlongKid 4y ago

>We need a massive tax on investment property, something that'll require the house to become completely unaffordable to re-sell, so investing will have negative returns due to taxation. Or far easier, just eliminate the Section 1031 like-kind exchange (U.S. tax provision that allows tax on realized gains on investment property to be deferred indefinitely). There's really no policy justification for it since long term capital gains already have a favorable tax rate, and in fact like kind exchanges for personal (non-real-estate) property have already been recently eliminated.

lsllc 4y ago
The big banks & investment funds will figure a way around it, meanwhile individuals and small businesses trying to grow will struggle. I know people who've used a 1031 exchange to sell a smaller location and move to a bigger/better version of the same. How about limiting 1031 exchanges to small business(es) (for some definition of small businesses that's actually meaningful).
- lotsofpulp 4y ago
  > The big banks & investment funds will figure a way around it What does this mean? How would they be able to postpone paying capital gains tax if the government said they had to pay capital gains tax at time of sale? How about eliminating it, removing an avenue for corruption and extra costs for auditing said avenues for corruption, and giving cash to someone if the goal is for the government to help someone?
  - lsllc 4y ago
    The same way that Trump, Bezos et. al. seem to be able to avoid paying taxes on most of their wealth, in that they generally find a way to recover profits without it being considered "income". https://www.propublica.org/article/billionaires-tax-avoidance-techniques-irs-files https://www.propublica.org/article/billionaires-tax-avoidanc... All I'm saying is that by eliminating the 1031 exchange, I suspect it'll hurt far more individuals and small businesses (resulting in stifled growth) and the "big boys" will simply use some other vehicle to continue avoid the taxes.

deleted 4y ago

[deleted]

mellavora 4y ago

So the interesting question is how much of this private equity money is investing on the hope that house prices continue to rise? so when house prices flat-line, their investment thesis is fried. Obviously the clever PE funds have a way to deal with this. But not all of them are clever, and the question is which one(s) are going to blow up? It isn't The Big Short, but there is a systemic risk from the PE investment

iknowSFR 4y ago

Investment groups aren’t in it for the resell. They’re incentivized to hold the asset as they’re leveraging against it to buy more homes. Selling assets is pretty uncommon in SFR for this very reason. The game is more about cash flow to service their debt. That means rent rates. Selling the homes has a 2 part effect: reduced your cash flow to service your debt and further forced asset sales that were bought with debt. If you really want to get homes back into the retail market, you have to target the cash flow.

dec0dedab0de 4y ago

I think I agree, except I think it should explicitly be a vacancy tax. We need investors who buy builds to manage and rent out to residents and businesses. Investors who buy buildings to avoid inflation are a problem. I know many local buildings that have been vacant, but available for rent for over 15 years. That tells me that they are asking for too much. They need an incentive to rent it out cheaper, or sell, or forfeit the land. Most (all?) real estate ownership chains go back to someone just putting down a fence anyway, if you essentially abandon a part of a town you should lose the right to claim it as your own. But I do think the local municipalities should make these rules for themselves instead of being mandated by the state.

dionidium 4y ago

These kinds of shenanigans only make sense to me once you have exhausted every other option and given that it's currently illegal to build apartments on the majority of parcels in the United States I'd say that we've mostly been busy foreclosing options, not exhausting them.

theptip 4y ago

This is also complex though; REITs are one of the biggest builders of new housing stock in the US, so you'd reduce creation of supply (and therefore put upward pressure on prices) if you broadly tax this sort of investment. I think you need to do some careful calculations to be sure that this nets out as a positive effect on housing prices. I think it's clearly problematic for investors to be holding properties vacant as a speculative investment, and we should definitely tax that (probably at the local level) so heavily that the neighbors are happy to have someone contributing so much while not being a drain on services. It's not clear to me what % of housing stock is actually being held back like this though. In the middle you have the house-flip; buy property, improve it, sell it for a profit. AFAIK most of the time this involves actually doing work on the property, rather than just sitting on it and waiting for the value to appreciate; in that case a real service is being provided, as many families don't want to buy a house and have to wait to improve it themselves. So again, if you don't target your proposed tax well enough, you might actually decrease supply at the mid-/high-end of the market and therefore put upwards not downwards pressure on housing prices. To be clear I'm not arguing against making any investigation into the policy you propose, just suggesting that it's more nuanced than you appear to be stating.