4 ms·

You could limit over-consumption of the existing supply by differentially property-taxing nonresident homeowners. That would lower property values + rents real

by gen220 3y ago

You could limit over-consumption of the existing supply by differentially property-taxing nonresident homeowners. That would lower property values + rents real quick. According to this site [1] the percentage of renters in SC in 2017 was 60%. [1]: https://noplacelikehome.ucsc.edu/makings-of-a-crisis/ https://noplacelikehome.ucsc.edu/makings-of-a-crisis/

jeffbee 3y ago
That's backwards because it would torpedo the economy of building and operating rental apartments. You really want the opposite: a special tax for owner-occupiers.
- gen220 3y ago
  Fine, you could limit the tax to buildings identified as single and multi-family homes? Most of those 60% are not living in rental apartments. What it would do is reduce the property value of existing real estate supply (by making expected cash flow from renting far less profitable), effectively forcing nonresident owners to sell their buildings to would-be renters, who would now be able to afford a mortgage on their homes. My thesis, fwiw, is that there's actually a sufficient supply of housing, it's just cornered with artificially inflated prices by people who treat housing as an investment vehicle rather than, well, housing.
- scottyah 3y ago
  "Existing supply" has nothing to do with building the apartment rentals, though the apartment operations economy would get hit and they might have to actually do some work somewhere. I believe the parent comment is about how many houses are stagnant because the owners have long since moved out, don't want to do any upgrades, and just cash checks from the next generation that has nowhere to buy since all the houses are rented out. I'm a bit bitter because there's so much of this around where I live, and it's just sad they're systemically incentivized to keep the next generations renting forever.
  - bluGill 3y ago
    Existing supply has a lot to do with building new. It is a very important input in the consideration if you will build. Too many vacant units and you are at risk of values going down and not making your investment work. Too few vacant units and you know there is demand so you should build.
fasthands9 3y ago
Not sure if this is being facetious, but California has prop 13 which means your property taxes cannot go up more than 2% per year. It would be great if a new prop was passed which reversed it, but polling on reversing it is always very unpopular since homeowners are very consistent voters.
- gen220 3y ago
  Yea, I used to live in CA and am all-to-aware of the distortions of Prop 13. I'm more giving a theoretical solution to the problem I observe in many US metro areas, rather than something that would specifically work for California tomorrow. FWIW, as more and more California homeowners become non-residents of California (moving to other states such as Florida, Nevada in retirement is fairly common), I think Prop 13 will gradually become less popular among the actual voting-eligible population of CA. But this will take decades, I imagine. It just benefits far too few at the expense of too many to stay law forever.
  - fasthands9 3y ago
    I hope you are right but am skeptical. Only because older and wealthier people are very consistent voters - and "don't raise taxes on ordinary homeowners" seems to be very popular as a populist message as well, even among people who are likely to never own a home.
    - gen220 3y ago
      You're very right to be skeptical. Increasingly, "homeowner" is becoming strongly associated with class, especially in urban and suburban California. Eventually the older/wealthier people pass away and the younger people wonder why they can't afford a home, even though they work the same job that their landlord's grandma did. The demographics of prop 13 support are pretty interesting. The slope for prop 13 support is overall trending negative as time goes on, but the "intercept" is still quite high. Hence my statement that I think we're still a few decades away from it becoming a common rally cry for voters – whereas today it's a third rail. FWIW this tax would also explicitly not affect "ordinary" homeowners. I think the main issue is that people are not imaginative enough to dream of a progressive property tax, since it's not progressive today.
paddy_m 3y ago
Another way of looking at it is that single family houses "over-consume" land. There are vacancies in the vertical space above most homes that far exceeds the vacancies created by absentee owners.
nrr 3y ago
Is lowering property values a favorable outcome?
- JumpCrisscross 3y ago
  > Is lowering property values a favorable outcome? It's probably untenable alongside local democracy. Instead, zero real appreciation seems like a reasonable target.
- bluGill 3y ago
  For individuals no. For society long term to a point. Lower property values allow young people to get an affordable place to live and leaves them money leftover for other things they want to do. However it is negative for those who already own. There is probably some minimum value as well that you don't want to go below - but I don't know how you would figure that out.
  - nrr 3y ago
    I think my hangup is that there's a conflation between a property's value (which, right now, is some appraisal of a parcel given nearby comparable parcels by some metric) and a home's acquisition price. In the SFH case, they might be inexorably linked, but for justifying more dense options, it's the ever increasing value of land that makes the case to densify. It's mostly a matter of how densely you can continue rebuilding in order to hit a price target at that point. This is roughly the Japanese model.
    - bluGill 3y ago
      Only partially. Building a 100 story high rise is only reasonable if property values are very high - there is presumably high demand for that area and thus density, and the high values mean you have to spread the cost across a lot of people to make it affordable for anyone. Even in very low demand small towns though there is demand for some density - a 3 story apartment will often exist in those towns and have no problem renting to people who want/need to live in the small town but don't want a single family for whatever reason. These smaller low rise buildings are the cheapest housing possible - they are small enough that they don't need expensive elevators and the like, though of course they don't make sense in high property value areas. Which is to say that even on the low end of property value density can be justified to some extent.
JumpCrisscross 3y ago
> by differentially property-taxing nonresident homeowners. That would lower property values + rents real quick. Need to find the case study, but the precedent for this is rents go up. There are more barriers to housing than the price. Better strategy is taxing unoccupied housing.
- foogazi 3y ago
  > but the precedent for this is rents go up If rents CAN go up why wouldn’t they just go up absent the tax hike ?
  - JumpCrisscross 3y ago
    > why wouldn’t they just go up absent the tax hike ? Competition. The hike is symmetrical to a collusion agreement as it’s uniformly applied.
- gen220 3y ago
  I think this strategy would also tax unoccupied housing. Because if it's unoccupied, you're a de facto nonresident. The broader idea is to tax absentee landlords and pied a terres, in favor of the people who actually live in the city. Moral justification of the tax is that if you want to profit off a community's residents while not living amongst them, you have to pay differentially higher taxes for the right (which would presumably benefit the civic life of those residents).
  - JumpCrisscross 3y ago
    > idea is to tax absentee landlords and pied a terres, in favor of the people who actually live in the city The point is taxing "absentee landlords" means taxing the people who rent from them. These sorts of policies sound clever, but they don't change the supply nor demand, and so just wind up raising housing prices more. There isn't a loophole around supply and demand other than rationing, i.e. a community board deciding who can and cannot move in. (The answer is always white people.)
abeppu 3y ago
This is already a thing. Santa Cruz (and I think a bunch of places in CA?) have an a rule that lowers the assessed value of your property for tax purposes if it is your primary residence. However: - the size of the benefit is small - my understanding is there is very little effort to confirm these for small owners https://www.santacruzcountyca.gov/Departments/AssessorsOffice/PrimaryFunctionsandResponsibilities/Exemptions.aspx https://www.santacruzcountyca.gov/Departments/AssessorsOffic...
- toss_me_sc 3y ago
  It is $65/year. Compare this to Somerville, MA where it is 35% a year
- gen220 3y ago
  Yep! I'd rather explicitly + differentially tax vs offer a tax credit for homeownership. Providing a revenue vs a debit against revenue. And to your point about the benefit being small, I'd suggest the tax should be fairly punitive. Not enough to make profiting off a rental impossible, but to make it barely beat, idk, inflation. I've even thought about the idea of making it lever-up depending on the cumulative number of months you lease the property for. 12 months = X, 24 months = 2X, 36 months = cap of 3X, where 3X is that magically-painful amount that makes it almost impossible to make a >5% Internal Rate of Return.
bluGill 3y ago
Are you trying to kill rentals, or are you trying to kill empty houses. Killing rentals is bad for anyone who find owning is not the best option for them. To own a house/condo you need a large down payment, then you need to pay maintenance fees (some of this can be personal labor if you are able), and worse if you move soon you need to sell. Buying a place can be a great idea for some, but for others it is wrong. Most of us will go through different phases in life and odds are until you are 25 or 30 years old renting is clearly the best decision, but after that many of us settle down in a location where we are likely to live for the rest of our life and buying starts to make sense for many. There are a few houses in the world when some rich foreigner has bought the house and leaves it vacant. However so far all data I've seen suggests the number of people doing this is tiny (it is generally a stupid investment)
- scottyah 3y ago
  It depends on where you live I suppose, in So Cal houses are such a good investment that just holding gets you gains near the SP500, and I've seen a few surpass their engineering salaries by renting out 2-3.
- gen220 3y ago
  Not trying to kill rentals, I'd have the tax only applied to single-family and multi-family homes, not apartment buildings. I agree that a supply of quality rental housing is an essential part of a healthy housing system. I think anybody who intends to be a long-term resident (5+ years) shouldn't be financially excluded from residential homeownership because nonresidents (who maybe used to be residents) bought up all the local property, when it was more affordable 20-40 years ago. I'm trying to tax the intersection of nonresidency and single/multi-family homeownership, which includes empty houses and the many rentals.
- yterdy 3y ago
  >Are you trying to kill rentals Yes. I've paid more than 100% of the presumed costs of owning the rental unit I'm in, and have recently received a rude awakening as to my rights to the property whose equity I have fully funded for five years. It's a scam.

by gen220 3y ago

jeffbee 3y ago

That's backwards because it would torpedo the economy of building and operating rental apartments. You really want the opposite: a special tax for owner-occupiers.

gen220 3y ago
Fine, you could limit the tax to buildings identified as single and multi-family homes? Most of those 60% are not living in rental apartments. What it would do is reduce the property value of existing real estate supply (by making expected cash flow from renting far less profitable), effectively forcing nonresident owners to sell their buildings to would-be renters, who would now be able to afford a mortgage on their homes. My thesis, fwiw, is that there's actually a sufficient supply of housing, it's just cornered with artificially inflated prices by people who treat housing as an investment vehicle rather than, well, housing.
scottyah 3y ago
"Existing supply" has nothing to do with building the apartment rentals, though the apartment operations economy would get hit and they might have to actually do some work somewhere. I believe the parent comment is about how many houses are stagnant because the owners have long since moved out, don't want to do any upgrades, and just cash checks from the next generation that has nowhere to buy since all the houses are rented out. I'm a bit bitter because there's so much of this around where I live, and it's just sad they're systemically incentivized to keep the next generations renting forever.
- bluGill 3y ago
  Existing supply has a lot to do with building new. It is a very important input in the consideration if you will build. Too many vacant units and you are at risk of values going down and not making your investment work. Too few vacant units and you know there is demand so you should build.

fasthands9 3y ago

Not sure if this is being facetious, but California has prop 13 which means your property taxes cannot go up more than 2% per year. It would be great if a new prop was passed which reversed it, but polling on reversing it is always very unpopular since homeowners are very consistent voters.

gen220 3y ago
Yea, I used to live in CA and am all-to-aware of the distortions of Prop 13. I'm more giving a theoretical solution to the problem I observe in many US metro areas, rather than something that would specifically work for California tomorrow. FWIW, as more and more California homeowners become non-residents of California (moving to other states such as Florida, Nevada in retirement is fairly common), I think Prop 13 will gradually become less popular among the actual voting-eligible population of CA. But this will take decades, I imagine. It just benefits far too few at the expense of too many to stay law forever.
- fasthands9 3y ago
  I hope you are right but am skeptical. Only because older and wealthier people are very consistent voters - and "don't raise taxes on ordinary homeowners" seems to be very popular as a populist message as well, even among people who are likely to never own a home.
  - gen220 3y ago
    You're very right to be skeptical. Increasingly, "homeowner" is becoming strongly associated with class, especially in urban and suburban California. Eventually the older/wealthier people pass away and the younger people wonder why they can't afford a home, even though they work the same job that their landlord's grandma did. The demographics of prop 13 support are pretty interesting. The slope for prop 13 support is overall trending negative as time goes on, but the "intercept" is still quite high. Hence my statement that I think we're still a few decades away from it becoming a common rally cry for voters – whereas today it's a third rail. FWIW this tax would also explicitly not affect "ordinary" homeowners. I think the main issue is that people are not imaginative enough to dream of a progressive property tax, since it's not progressive today.

paddy_m 3y ago

Another way of looking at it is that single family houses "over-consume" land. There are vacancies in the vertical space above most homes that far exceeds the vacancies created by absentee owners.

nrr 3y ago

Is lowering property values a favorable outcome?

JumpCrisscross 3y ago
> Is lowering property values a favorable outcome? It's probably untenable alongside local democracy. Instead, zero real appreciation seems like a reasonable target.
bluGill 3y ago
For individuals no. For society long term to a point. Lower property values allow young people to get an affordable place to live and leaves them money leftover for other things they want to do. However it is negative for those who already own. There is probably some minimum value as well that you don't want to go below - but I don't know how you would figure that out.
- nrr 3y ago
  I think my hangup is that there's a conflation between a property's value (which, right now, is some appraisal of a parcel given nearby comparable parcels by some metric) and a home's acquisition price. In the SFH case, they might be inexorably linked, but for justifying more dense options, it's the ever increasing value of land that makes the case to densify. It's mostly a matter of how densely you can continue rebuilding in order to hit a price target at that point. This is roughly the Japanese model.
  - bluGill 3y ago
    Only partially. Building a 100 story high rise is only reasonable if property values are very high - there is presumably high demand for that area and thus density, and the high values mean you have to spread the cost across a lot of people to make it affordable for anyone. Even in very low demand small towns though there is demand for some density - a 3 story apartment will often exist in those towns and have no problem renting to people who want/need to live in the small town but don't want a single family for whatever reason. These smaller low rise buildings are the cheapest housing possible - they are small enough that they don't need expensive elevators and the like, though of course they don't make sense in high property value areas. Which is to say that even on the low end of property value density can be justified to some extent.

JumpCrisscross 3y ago

> by differentially property-taxing nonresident homeowners. That would lower property values + rents real quick. Need to find the case study, but the precedent for this is rents go up. There are more barriers to housing than the price. Better strategy is taxing unoccupied housing.

foogazi 3y ago
> but the precedent for this is rents go up If rents CAN go up why wouldn’t they just go up absent the tax hike ?
- JumpCrisscross 3y ago
  > why wouldn’t they just go up absent the tax hike ? Competition. The hike is symmetrical to a collusion agreement as it’s uniformly applied.
gen220 3y ago
I think this strategy would also tax unoccupied housing. Because if it's unoccupied, you're a de facto nonresident. The broader idea is to tax absentee landlords and pied a terres, in favor of the people who actually live in the city. Moral justification of the tax is that if you want to profit off a community's residents while not living amongst them, you have to pay differentially higher taxes for the right (which would presumably benefit the civic life of those residents).
- JumpCrisscross 3y ago
  > idea is to tax absentee landlords and pied a terres, in favor of the people who actually live in the city The point is taxing "absentee landlords" means taxing the people who rent from them. These sorts of policies sound clever, but they don't change the supply nor demand, and so just wind up raising housing prices more. There isn't a loophole around supply and demand other than rationing, i.e. a community board deciding who can and cannot move in. (The answer is always white people.)

abeppu 3y ago

This is already a thing. Santa Cruz (and I think a bunch of places in CA?) have an a rule that lowers the assessed value of your property for tax purposes if it is your primary residence. However: - the size of the benefit is small - my understanding is there is very little effort to confirm these for small owners https://www.santacruzcountyca.gov/Departments/AssessorsOffice/PrimaryFunctionsandResponsibilities/Exemptions.aspx https://www.santacruzcountyca.gov/Departments/AssessorsOffic...

toss_me_sc 3y ago
It is $65/year. Compare this to Somerville, MA where it is 35% a year
gen220 3y ago
Yep! I'd rather explicitly + differentially tax vs offer a tax credit for homeownership. Providing a revenue vs a debit against revenue. And to your point about the benefit being small, I'd suggest the tax should be fairly punitive. Not enough to make profiting off a rental impossible, but to make it barely beat, idk, inflation. I've even thought about the idea of making it lever-up depending on the cumulative number of months you lease the property for. 12 months = X, 24 months = 2X, 36 months = cap of 3X, where 3X is that magically-painful amount that makes it almost impossible to make a >5% Internal Rate of Return.

bluGill 3y ago

Are you trying to kill rentals, or are you trying to kill empty houses. Killing rentals is bad for anyone who find owning is not the best option for them. To own a house/condo you need a large down payment, then you need to pay maintenance fees (some of this can be personal labor if you are able), and worse if you move soon you need to sell. Buying a place can be a great idea for some, but for others it is wrong. Most of us will go through different phases in life and odds are until you are 25 or 30 years old renting is clearly the best decision, but after that many of us settle down in a location where we are likely to live for the rest of our life and buying starts to make sense for many. There are a few houses in the world when some rich foreigner has bought the house and leaves it vacant. However so far all data I've seen suggests the number of people doing this is tiny (it is generally a stupid investment)

scottyah 3y ago
It depends on where you live I suppose, in So Cal houses are such a good investment that just holding gets you gains near the SP500, and I've seen a few surpass their engineering salaries by renting out 2-3.
gen220 3y ago
Not trying to kill rentals, I'd have the tax only applied to single-family and multi-family homes, not apartment buildings. I agree that a supply of quality rental housing is an essential part of a healthy housing system. I think anybody who intends to be a long-term resident (5+ years) shouldn't be financially excluded from residential homeownership because nonresidents (who maybe used to be residents) bought up all the local property, when it was more affordable 20-40 years ago. I'm trying to tax the intersection of nonresidency and single/multi-family homeownership, which includes empty houses and the many rentals.
yterdy 3y ago
>Are you trying to kill rentals Yes. I've paid more than 100% of the presumed costs of owning the rental unit I'm in, and have recently received a rude awakening as to my rights to the property whose equity I have fully funded for five years. It's a scam.