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The cause of the problem is that real estate is a good investment asset. The way to solve the problem is making it a bad investment asset. The best way to do

The cause of the problem is that real estate is a good investment asset. The way to solve the problem is making it a bad investment asset. The best way to do it is to tax real estate progressively. The more you own, the higher percentage of its value you must pay every year. That taxation scheme would make investors drop millions of houses on the market like a hot potato. Prices would tank. This might cause issues with real estate as mortgage collateral. So that needs to be reformed first. Bank would need to be forced by law to accept swapping collateral for another of the same value. Regardless of the current price of the collateral and its replacement. They should also be forced to consider mortgage fully paid once they decide to end the loan and take posession of the collateral. Also no bailouts. Banks are companies. Superpower of companies is that they can die. Let them.

pas 3y ago
that's the effect, the cause is that supply did not keep up, and that's caused by all kinds of restrictions and disincentives against high-density and corresponding cities (this stretched out populations, increased overall costs) just as white flight completely turned cities inside out (negating a lot of their economic benefits) the resistance to even gradual "citification" of SFH suburbs further pushed costs up
- scotty79 3y ago
  It's impossible for the supply to keep up for the demand for investment vessel. China has already built 3 times the number of the apartments that are needed to house the entire population and the demand still outpaces the supply.
  - pas 3y ago
    nah, Chinese real estate bubble bursted, because demand collapsed (despite the prices kept low due to municipalities financing a large part of their budget through land sales, and banks were incentivized to issue a lot of mortgages, and that's how Credit Suisse run into a wall)
    - scotty79 3y ago
      I'm not sure how the latest data looks but crash is a strong word. https://www.business2community.com/wp-content/uploads/2023/11/chinas-property-market-collapses.jpeg.webp https://www.business2community.com/wp-content/uploads/2023/1... It seem like it barely stopped (paused?) growing. Which is reasonable given more widespread awareness that what's being built is of lower and lower quality. Which is also natural given that supply is provided to satisfy investors not honest residential demand.
hackerlight 3y ago
But rents are also high. High rents aren't caused by investors. Rents are caused by too many people wanting to live somewhere versus a small number of dwellings. It's the pigeon hole principle, which you can't solve by reducing investors. Also, let's think about unintended consequences. A lot of housing starts happen only because of investor capital. Given the existence of a rental crisis, if you inadvertently reduce housing starts, it might backfire and put upwards pressure on rents. But yes, you are right that prices would go down with your proposal, all else equal. But it is not a full solution until you also have a way to increase the number of dwellings to solve the rental crisis.
- scotty79 3y ago
  Of course high rents are caused by the investors. After all, rents are huge part of the return on their investment and also huge factor in determining the asset price. Solution to rental crisis is the reduction of what percentage of people rent vs buy. With a flood of cheap properties on the market more people would consider buying. Also they'd need smaller mortgages so they could be easier to acquire.
  - hackerlight 3y ago
    > After all, rents are huge part of the return on their investment and also huge factor in determining the asset price. Yes, rents are part of their ROI. That does not mean asset prices cause rents. Rents cause asset prices by impacting investment demand. Rents provide a soft bound on asset prices because investors demand a certain ROI, else they will allocate capital in other markets. We're getting the direction of causality mixed up. > Solution to rental crisis is the reduction of what percentage of people rent vs buy. No. If we have N renters competing for 0.8*N rental properties near their workplace, and we convert half of them into buyers, you're left with 0.5*N renters competing for 0.3*N properties. If anything you have made the problem worse for renters (although you have improved the situation for buyers).
    - scotty79 3y ago
      Higher rents inflate asset prices, but higher asset prices also inflate rents because buying becomes too expensive and rents can safely grow because people who can't buy must rent. Direction of causality goes both ways. It's positive feedback loop that's barely contrained by any reality. That's why it seems to run away towards infinity despite only small changes in supply and demand. There's no good solution to your example because there's simply too few properties. Some people will become homeless. The same number in each scenario. It hard to tell how much total rent will be transferred in each scenario because competition for rentals is harder in second one but 0.5N properties have zero rent.
randerson 3y ago
The tax change would have to be made gradually to avoid a shock to the system, and it could exclude primary residences so that middle-class homeowners aren't punished. Just incentivizing the wealthy to offload their pied-à-terres would free up plenty of housing stock.
- scotty79 3y ago
  The progression can start at zero. Even if you own up to 3 residential properties it still could be zero. What it must do is incentivise largest owners who hold the most properties to sell them.
bdastous 3y ago
A land value tax would be a more efficient way to fairly distribute the benefits of land.
- scotty79 3y ago
  Sure, but progressive land tax to discourage large ownership.

pas 3y ago

that's the effect, the cause is that supply did not keep up, and that's caused by all kinds of restrictions and disincentives against high-density and corresponding cities (this stretched out populations, increased overall costs) just as white flight completely turned cities inside out (negating a lot of their economic benefits) the resistance to even gradual "citification" of SFH suburbs further pushed costs up

scotty79 3y ago
It's impossible for the supply to keep up for the demand for investment vessel. China has already built 3 times the number of the apartments that are needed to house the entire population and the demand still outpaces the supply.
- pas 3y ago
  nah, Chinese real estate bubble bursted, because demand collapsed (despite the prices kept low due to municipalities financing a large part of their budget through land sales, and banks were incentivized to issue a lot of mortgages, and that's how Credit Suisse run into a wall)
  - scotty79 3y ago
    I'm not sure how the latest data looks but crash is a strong word. https://www.business2community.com/wp-content/uploads/2023/11/chinas-property-market-collapses.jpeg.webp https://www.business2community.com/wp-content/uploads/2023/1... It seem like it barely stopped (paused?) growing. Which is reasonable given more widespread awareness that what's being built is of lower and lower quality. Which is also natural given that supply is provided to satisfy investors not honest residential demand.

hackerlight 3y ago

But rents are also high. High rents aren't caused by investors. Rents are caused by too many people wanting to live somewhere versus a small number of dwellings. It's the pigeon hole principle, which you can't solve by reducing investors. Also, let's think about unintended consequences. A lot of housing starts happen only because of investor capital. Given the existence of a rental crisis, if you inadvertently reduce housing starts, it might backfire and put upwards pressure on rents. But yes, you are right that prices would go down with your proposal, all else equal. But it is not a full solution until you also have a way to increase the number of dwellings to solve the rental crisis.

scotty79 3y ago
Of course high rents are caused by the investors. After all, rents are huge part of the return on their investment and also huge factor in determining the asset price. Solution to rental crisis is the reduction of what percentage of people rent vs buy. With a flood of cheap properties on the market more people would consider buying. Also they'd need smaller mortgages so they could be easier to acquire.
- hackerlight 3y ago
  > After all, rents are huge part of the return on their investment and also huge factor in determining the asset price. Yes, rents are part of their ROI. That does not mean asset prices cause rents. Rents cause asset prices by impacting investment demand. Rents provide a soft bound on asset prices because investors demand a certain ROI, else they will allocate capital in other markets. We're getting the direction of causality mixed up. > Solution to rental crisis is the reduction of what percentage of people rent vs buy. No. If we have N renters competing for 0.8*N rental properties near their workplace, and we convert half of them into buyers, you're left with 0.5*N renters competing for 0.3*N properties. If anything you have made the problem worse for renters (although you have improved the situation for buyers).
  - scotty79 3y ago
    Higher rents inflate asset prices, but higher asset prices also inflate rents because buying becomes too expensive and rents can safely grow because people who can't buy must rent. Direction of causality goes both ways. It's positive feedback loop that's barely contrained by any reality. That's why it seems to run away towards infinity despite only small changes in supply and demand. There's no good solution to your example because there's simply too few properties. Some people will become homeless. The same number in each scenario. It hard to tell how much total rent will be transferred in each scenario because competition for rentals is harder in second one but 0.5N properties have zero rent.

randerson 3y ago

The tax change would have to be made gradually to avoid a shock to the system, and it could exclude primary residences so that middle-class homeowners aren't punished. Just incentivizing the wealthy to offload their pied-à-terres would free up plenty of housing stock.

scotty79 3y ago
The progression can start at zero. Even if you own up to 3 residential properties it still could be zero. What it must do is incentivise largest owners who hold the most properties to sell them.

bdastous 3y ago

A land value tax would be a more efficient way to fairly distribute the benefits of land.

scotty79 3y ago
Sure, but progressive land tax to discourage large ownership.