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Uh, you're reading the wrong thing about it. Fixing supply and demand means things like punishing vacancies with taxation, promoting construction with tax brea

Uh, you're reading the wrong thing about it. Fixing supply and demand means things like punishing vacancies with taxation, promoting construction with tax breaks, and removing the demand by severely limiting rent seeking real estate investors.

kstrauser 2y ago
Are you sure that’s what they meant? I’m completely on board with everything you describe (and liberating the market from the people monopolizing it for their own benefit). I’ve heard way too many people arguing that we should do away with supply/demand, as though it were a regulation we should repeal, and didn’t understand it as an inherent property of the system.
pchristensen 2y ago
And promoting construction by making it legal to build housing. Probably the biggest, most direct action that could be taken.
- kstrauser 2y ago
  Amen.
BeetleB 2y ago
I follow the RE space, and have done some RE investments (albeit mild ones - I don't own homes to rent or anything like that). > punishing vacancies with taxation Outside of tourist spots, this will hurt more than it will help. Most RE investors lose money on vacancies (it's literally a line item in their expenses) and work hard not to have them. They definitely do not make more money by artificially limiting supply that way. I assume you're targeting rich folks who own multiple homes (and do not rent them)? They're what - less than 5% of all vacancies? Perhaps less than 1% in many cities? Almost everyone I know who purchases houses/apartments to rent them would get out of the business if vacancies were taxed - they operate these properties on a narrow margin - most of their "profit" is due to depreciation benefits and gaining equity from the payments the renters are making (and in a minority of cases, property value growth). It may sound like if they sell, that's a good thing (more people can buy their offloaded property), but a lot of houses would also go out of circulation, because these people often buy distressed homes that banks won't give a loan on - and they renovate them, bring them up to code, etc. I suppose if you could tax vacancies only for those that are not trying to rent them - sure. I'm on board. > promoting construction with tax breaks There are plenty of these, although it varies from location to location. But it's a pretty common RE investment strategy to go for these, as the tax savings can be very significant. People pool their money for a down payment on a construction loan (be it for an apartment complex or office building), build it, and are required to hold it for a number of years to get the tax breaks. Of late, the push has been in the other direction - states/cities are removing some of these tax breaks - not sure why - perhaps they weren't as effective as they thought? > and removing the demand by severely limiting rent seeking real estate investors. There are ways to do this that may not be popular. The main one would be to remove fixed interest mortgages. Most developed countries don't have them - that's why plenty of foreigners buy in the US market. Another is to allow property taxes to track actual property values (i.e. remove the cap on increase in property taxes). You can imagine how unpopular this will be for SF residents. Remove tax benefits like bonus depreciation or accelerated depreciation. Remove tax benefits that allow one to count RE losses against their W-2 income (it's tricky to do it, but possible for AirBnB investors). Basically, just remove most tax benefits :-) The majority of RE investors get in it for tax benefits, not appreciation, and not that much even for cash flow (cash flow is fairly pathetic in most cases - getting $200/mo is considered good).
- gs17 2y ago
  > because these people often buy distressed homes that banks won't give a loan on - and they renovate them, bring them up to code There could easily be exemptions to a vacancy tax to allow for, or even encourage, renovating a home.
- pc86 2y ago
  Taxes on vacant rental units means they'll be sold sooner, and increases the odds they'll be sold to an occupant instead of a speculator. I am a capitalist above basically anything else but that sounds great to me (and I already own a home and will likely never move again). > Almost everyone I know who purchases houses/apartments to rent them would get out of the business if vacancies were taxed Yes, you've successfully articulated the point. In an actual free market where supply can be added easily with minimal headache, buying an asset to rent it back is perfectly fine. In something like the housing marketing, buying a home specifically to rent it out is bad whether it's one unit or one thousand because supply is already artificially constrained. The end of that line is BlackRock buying up thousands of homes and materially hurting Americans. The fact that some random person with a few million in inheritance can make money in the interim is irrelevant. > but a lot of houses would also go out of circulation, because these people often buy distressed homes that banks won't give a loan on - and they renovate them, bring them up to code, etc. It's pretty easily to exclude vacant homes with open permits that are actively being renovated or with 203(k) loans, or to provide revenue-neutral tax breaks. This is a legitimate criticism but it means you address the criticism, it doesn't mean the original goal is bad or impossible. > There are ways to do this that may not be popular. The main one would be to remove fixed interest mortgages. We should definitely remove fixed-interest mortgages for non-owner occupied purchases.
  - colechristensen 2y ago
    >> Almost everyone I know who purchases houses/apartments to rent them would get out of the business if vacancies were taxed >Yes, you've successfully articulated the point. And the goal. Why raise taxes on vacancies? To push out owners whose primary goal is to leach out a few percentage points above loans they can get or to sit on property while it appreciates in value (while harvesting tax benefits on the depreciation of the structures they maintain to a minimum because _margins_) There just shouldn't be a class of people whose business is harvesting tax benefits and arbitrage of trust by banks.

kstrauser 2y ago

Are you sure that’s what they meant? I’m completely on board with everything you describe (and liberating the market from the people monopolizing it for their own benefit). I’ve heard way too many people arguing that we should do away with supply/demand, as though it were a regulation we should repeal, and didn’t understand it as an inherent property of the system.

pchristensen 2y ago

And promoting construction by making it legal to build housing. Probably the biggest, most direct action that could be taken.

kstrauser 2y ago
Amen.

BeetleB 2y ago

I follow the RE space, and have done some RE investments (albeit mild ones - I don't own homes to rent or anything like that). > punishing vacancies with taxation Outside of tourist spots, this will hurt more than it will help. Most RE investors lose money on vacancies (it's literally a line item in their expenses) and work hard not to have them. They definitely do not make more money by artificially limiting supply that way. I assume you're targeting rich folks who own multiple homes (and do not rent them)? They're what - less than 5% of all vacancies? Perhaps less than 1% in many cities? Almost everyone I know who purchases houses/apartments to rent them would get out of the business if vacancies were taxed - they operate these properties on a narrow margin - most of their "profit" is due to depreciation benefits and gaining equity from the payments the renters are making (and in a minority of cases, property value growth). It may sound like if they sell, that's a good thing (more people can buy their offloaded property), but a lot of houses would also go out of circulation, because these people often buy distressed homes that banks won't give a loan on - and they renovate them, bring them up to code, etc. I suppose if you could tax vacancies only for those that are not trying to rent them - sure. I'm on board. > promoting construction with tax breaks There are plenty of these, although it varies from location to location. But it's a pretty common RE investment strategy to go for these, as the tax savings can be very significant. People pool their money for a down payment on a construction loan (be it for an apartment complex or office building), build it, and are required to hold it for a number of years to get the tax breaks. Of late, the push has been in the other direction - states/cities are removing some of these tax breaks - not sure why - perhaps they weren't as effective as they thought? > and removing the demand by severely limiting rent seeking real estate investors. There are ways to do this that may not be popular. The main one would be to remove fixed interest mortgages. Most developed countries don't have them - that's why plenty of foreigners buy in the US market. Another is to allow property taxes to track actual property values (i.e. remove the cap on increase in property taxes). You can imagine how unpopular this will be for SF residents. Remove tax benefits like bonus depreciation or accelerated depreciation. Remove tax benefits that allow one to count RE losses against their W-2 income (it's tricky to do it, but possible for AirBnB investors). Basically, just remove most tax benefits :-) The majority of RE investors get in it for tax benefits, not appreciation, and not that much even for cash flow (cash flow is fairly pathetic in most cases - getting $200/mo is considered good).

gs17 2y ago
> because these people often buy distressed homes that banks won't give a loan on - and they renovate them, bring them up to code There could easily be exemptions to a vacancy tax to allow for, or even encourage, renovating a home.
pc86 2y ago
Taxes on vacant rental units means they'll be sold sooner, and increases the odds they'll be sold to an occupant instead of a speculator. I am a capitalist above basically anything else but that sounds great to me (and I already own a home and will likely never move again). > Almost everyone I know who purchases houses/apartments to rent them would get out of the business if vacancies were taxed Yes, you've successfully articulated the point. In an actual free market where supply can be added easily with minimal headache, buying an asset to rent it back is perfectly fine. In something like the housing marketing, buying a home specifically to rent it out is bad whether it's one unit or one thousand because supply is already artificially constrained. The end of that line is BlackRock buying up thousands of homes and materially hurting Americans. The fact that some random person with a few million in inheritance can make money in the interim is irrelevant. > but a lot of houses would also go out of circulation, because these people often buy distressed homes that banks won't give a loan on - and they renovate them, bring them up to code, etc. It's pretty easily to exclude vacant homes with open permits that are actively being renovated or with 203(k) loans, or to provide revenue-neutral tax breaks. This is a legitimate criticism but it means you address the criticism, it doesn't mean the original goal is bad or impossible. > There are ways to do this that may not be popular. The main one would be to remove fixed interest mortgages. We should definitely remove fixed-interest mortgages for non-owner occupied purchases.
- colechristensen 2y ago
  >> Almost everyone I know who purchases houses/apartments to rent them would get out of the business if vacancies were taxed >Yes, you've successfully articulated the point. And the goal. Why raise taxes on vacancies? To push out owners whose primary goal is to leach out a few percentage points above loans they can get or to sit on property while it appreciates in value (while harvesting tax benefits on the depreciation of the structures they maintain to a minimum because _margins_) There just shouldn't be a class of people whose business is harvesting tax benefits and arbitrage of trust by banks.