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I think that's a good criticism. It assumes that rent demand would be perfectly elastic in response to the step-up in property tax, but I'm not sure if that hol

by gen220 3y ago

I think that's a good criticism. It assumes that rent demand would be perfectly elastic in response to the step-up in property tax, but I'm not sure if that holds provided you pick a high enough differential tax. If a family is paying $3k/month to rent out a $800k single-family home, and we tax the landlord 15% the value on the home, could he find a family to pay $13k/month in rent (covering the tax)? I think this would just cause the value of the home to crater, to come closer to a reality that tolerates $3k/month-ish rent. To the point where the property value is low enough that the resident family can just buy a property.

r00fus 3y ago
If we're talking about rent-seeking corporations also being subject to the tax, then it would also prevent them from seeing the same returns and perhaps There's also a bill out there that would simply preclude hedge funds ownership of single-family homes: https://www.housingwire.com/articles/democrats-introduce-bills-to-ban-hedge-funds-from-single-family-housing-market/ https://www.housingwire.com/articles/democrats-introduce-bil... The combination of taxing rented property + reducing corporate ownership would do wonders for affordability. It would also stall or crater any retirement/dynastic wealth plan based on renting SFH properties.
- gen220 3y ago
  Corporate entities are an obvious scapegoat, that we should definitely preclude from SFH (and MFH) ownership, and I'm sure that bill would be really popular among the electorate. In most locales, from what I've seen, it's the retirement/dynastic wealth folks who are squeezing supply – they've been in this game for 30+ years and have a big head start on the PE firms. Crafting a bill with popular support that targets those folks is going to be a bit more challenging, because these people are not all terribly extractive, and a lot of up and coming people still actively aspire to become those people. In my observation, the younger and less gainfully employed / marketably skilled these people are, the more extractive they are. As such, I think it's a matter of time before we hit a breaking point. There's precedent for this in American history, where we've had dramatic step-changes to property law in response to varying-degrees-of-obvious injustice. I don't know if my generation will develop the political will to enact it, but it does feel inevitable that it'll happen in the next 80 years. It's either that, or we've become an effectively-feudal and urban society – which feels less likely, to me.
  - r00fus 3y ago
    I stand by my point - removing the massive upward pricing pressure from corporate entities will cause the market to balance itself much more readily even with the dynastic wealth grifters. Over the past 5 years, I have gotten no shortage of "cash buyer offers" for our property, and I have no doubt the counterparty in almost all of those cases were corporations. Remove that, and the lack of upward pricing pressure will force a reversion to the mean, which makes it more costly/risky to seek rents.
JumpCrisscross 3y ago
> and we tax the landlord 15% the value on the home, could he find a family to pay $13k/month in rent (covering the tax)? At that rate they'd sell. That would lower purchase home prices. But there is plenty of primary residential demand, so not by much. Unless that family has $100k+ for a down payment (and good credit, and a long-term outlook towards staying in the area, and all their paperwork in order), they're not in the running to buy it. After that one-time transfer of housing stock from landlords to residents, you'd be back in the same situation: more demand than supply. Moreover, this would be something one could anticipate. So if Santa Cruz passed this law, I would help my parents pull together the cash to move there. Because once the supply surge is absorbed, you're likely to make money on the return to business as usual.
- gen220 3y ago
  I guess I'm not very inclined to believe that there is more primary residential demand than there is real estate. I think the renter population is the most straightforward proxy for primary residential demand. Those are people who are actually paying to live there. Because they go to UCSC, work, have kids, whatever. We know the rental population is 60% of the actual SC housed population. Of that, maybe 80% have primary residential demand (students, etc. might make up the balancing 20%). So that's ~50% primary residential demand. I'm sure that some proportion of the housing stock that belongs to non-renting people belongs to people who are residents, but I'm relatively bearish on that. Even if only 25% are vacation homes, second homes, etc. that leaves us with a marginal 30% primary residential demand and a cumulative primary residential demand of 80%. So for every 100 homes there's demand for 80. On surging. I'd say if you want to move your family to Santa Cruz as resident owners, we would love to have you. If you can afford to pay more than the people who already live here and are paying rent, I agree that's a shit situation. I guess you could ban nonresident buyers for the first N years or something? That might be one degree of complexity too far, but I agree that's a shortcoming that one should have a plan for. I think it's really difficult to enact these kinds of programs at the municipal level – it really has to be done at the state level. You'd still end up with weird border scenarios, where you have a 80% resident homeowner utopia on one side of the border with nevada, where all the labor for that town reside in 80% renter dystopia on the other side.

by gen220 3y ago

r00fus 3y ago

If we're talking about rent-seeking corporations also being subject to the tax, then it would also prevent them from seeing the same returns and perhaps There's also a bill out there that would simply preclude hedge funds ownership of single-family homes: https://www.housingwire.com/articles/democrats-introduce-bills-to-ban-hedge-funds-from-single-family-housing-market/ https://www.housingwire.com/articles/democrats-introduce-bil... The combination of taxing rented property + reducing corporate ownership would do wonders for affordability. It would also stall or crater any retirement/dynastic wealth plan based on renting SFH properties.

gen220 3y ago
Corporate entities are an obvious scapegoat, that we should definitely preclude from SFH (and MFH) ownership, and I'm sure that bill would be really popular among the electorate. In most locales, from what I've seen, it's the retirement/dynastic wealth folks who are squeezing supply – they've been in this game for 30+ years and have a big head start on the PE firms. Crafting a bill with popular support that targets those folks is going to be a bit more challenging, because these people are not all terribly extractive, and a lot of up and coming people still actively aspire to become those people. In my observation, the younger and less gainfully employed / marketably skilled these people are, the more extractive they are. As such, I think it's a matter of time before we hit a breaking point. There's precedent for this in American history, where we've had dramatic step-changes to property law in response to varying-degrees-of-obvious injustice. I don't know if my generation will develop the political will to enact it, but it does feel inevitable that it'll happen in the next 80 years. It's either that, or we've become an effectively-feudal and urban society – which feels less likely, to me.
- r00fus 3y ago
  I stand by my point - removing the massive upward pricing pressure from corporate entities will cause the market to balance itself much more readily even with the dynastic wealth grifters. Over the past 5 years, I have gotten no shortage of "cash buyer offers" for our property, and I have no doubt the counterparty in almost all of those cases were corporations. Remove that, and the lack of upward pricing pressure will force a reversion to the mean, which makes it more costly/risky to seek rents.

JumpCrisscross 3y ago

> and we tax the landlord 15% the value on the home, could he find a family to pay $13k/month in rent (covering the tax)? At that rate they'd sell. That would lower purchase home prices. But there is plenty of primary residential demand, so not by much. Unless that family has $100k+ for a down payment (and good credit, and a long-term outlook towards staying in the area, and all their paperwork in order), they're not in the running to buy it. After that one-time transfer of housing stock from landlords to residents, you'd be back in the same situation: more demand than supply. Moreover, this would be something one could anticipate. So if Santa Cruz passed this law, I would help my parents pull together the cash to move there. Because once the supply surge is absorbed, you're likely to make money on the return to business as usual.

gen220 3y ago
I guess I'm not very inclined to believe that there is more primary residential demand than there is real estate. I think the renter population is the most straightforward proxy for primary residential demand. Those are people who are actually paying to live there. Because they go to UCSC, work, have kids, whatever. We know the rental population is 60% of the actual SC housed population. Of that, maybe 80% have primary residential demand (students, etc. might make up the balancing 20%). So that's ~50% primary residential demand. I'm sure that some proportion of the housing stock that belongs to non-renting people belongs to people who are residents, but I'm relatively bearish on that. Even if only 25% are vacation homes, second homes, etc. that leaves us with a marginal 30% primary residential demand and a cumulative primary residential demand of 80%. So for every 100 homes there's demand for 80. On surging. I'd say if you want to move your family to Santa Cruz as resident owners, we would love to have you. If you can afford to pay more than the people who already live here and are paying rent, I agree that's a shit situation. I guess you could ban nonresident buyers for the first N years or something? That might be one degree of complexity too far, but I agree that's a shortcoming that one should have a plan for. I think it's really difficult to enact these kinds of programs at the municipal level – it really has to be done at the state level. You'd still end up with weird border scenarios, where you have a 80% resident homeowner utopia on one side of the border with nevada, where all the labor for that town reside in 80% renter dystopia on the other side.