this post was submitted on 24 Aug 2023
741 points (88.5% liked)
Personal Finance
3749 readers
2 users here now
Learn about budgeting, saving, getting out of debt, credit, investing, and retirement planning. Join our community, read the PF Wiki, and get on top of your finances!
Note: This community is not region centric, so if you are posting anything specific to a certain region, kindly specify that in the title (something like [USA], [EU], [AUS] etc.)
founded 1 year ago
MODERATORS
you are viewing a single comment's thread
view the rest of the comments
view the rest of the comments
A property tax would just pushed onto renters like mortgages already do. A vacancy tax would not have a renter to push onto.
Landlords would still probably factor it in, so I think assuming a base vacancy rate of 1-2 months months per year would be wise. That way, there is time for normal maintenance between tenants, and if it adds up over a few years they'd have time for major repair after a long time tenant leaves, but it would still incentize not leaving the house vacant unless absolutely necessary.
Most vacancy taxes around the world only kick in after a period of vacancy, say 6 months.
Sure, but it pushes it onto wealthier people more, since generally cost of property scales with income. It would also discourage vacancy even more, which would put more properties on the market, and it would probably push property values down because the long-term cost of ownership is higher. Likewise, cities and states tend to get their income from property taxes, so they could reduce sales taxes to account for it, and sales tax is much more regressive on the poor.
So I think it would be a net benefit.
You do realize this discussion is about the housing crisis right? The one caused by the available units being below the demand for them, causing prices to rise?
Punishing landlords for vacancies won't materially help things, the only real solution there is zoning changes to encourage more construction of higher density housing instead of lower density housing. We can only build so many housing units in a given year, so we should be focusing on higher density instead.
But we're not talking about zoning in this thread, we're talking about taxation.
Vacancy rates are really low for residential property pretty much across the board, at least relative to the last few decades. So there's not a lot we can do just by changing the costs for vacancies. The reason I suggest increasing property taxes is for a few reasons:
Since we have a limited capacity to build new housing, we should encourage building the types of housing that will resolve the crisis. Penalizing vacancies just encourages landlords to fill vacancies ASAP instead of renovating properties, whereas increasing property taxes should encourage more dense construction.
I'm sorry, I misread your post, and completely missed the last line (it was a long day). I thought you were arguing against this suggestion.
I agree, taxes aren't a huge part of the solution, and incentivizing high-density housing (as well as making them more palatable)is a bigger part of it.
The housing crisis cannot be solved by taxes. They are irrelevant.
This is basic economics, supply and demand. Reducing demand will affect prices, and incentivizing not having vacant properties will increase supply.
This is not the complete solution, but it will have some effect. And thinking there is a single complete solution is as wrong as thinking that the suggestions in this article are that complete solution.
Changing taxes won't do anything as they don't affect the property market much. The only real solution is to build more. But to build more, construction should be deregulated. But that will make landlords in the government poorer so that will never happen.
I have rarely seen deregulation where money is to be made working out well for the average person. Feel free to look up the history of the FDA for a taste of what unregulated markets can look like. That said, yes, changing regulations for urban planning will be necessary to have a meaningful impact on the housing problem, and yes, most politicians have very good financial reasons to not let that happen.
You can check deregulation history in Europe and what benefits it brought like cheap and quality flights, cheap and quality railways, etc. I don't know what FDA is, but if something is wrong, then the market is over regulated.
They were the people who said you couldn't sell bread with sawdust in it, or lie about your bread having sawdust in it. Which is what America dealt with before regulations.
Other fun considerations are things like phossy jaw, a fatal condition caused by companies forgoing safety at a cost of 1% of their revenue, until regulations were imposed.
Certainly, there is a such thing as too much regulation, but too little is also demonstrably bad.
Why would anyone buy bread with sawdust? I think the US problem is not the lack of regulation, but that people like shit.
There are three mistakes you're making in those two statements, and an indication that you made a fourth.
What makes you think false advertising or doctoring food with cheap filler is an exclusively American thing? I gave two before, here's another that is both more recent and not in America: Chinese Milk Scandal.
Why would you assume the people buying bread with sawdust knew it had sawdust in it? Do you suppose it was listed in the ingredients, or do you imagine the people who are buying the cheapest bread they can find have the time, means, or knowledge to determine their food is in fact doctored?
You pose questions like it's unlikely that something would ever happen when being provided with knowledge that that thing did in fact happen. At this point I can only assume you're trolling or willfully ignorant.
I mean even without sawdust modern American bread is not really a bread...
Why stop at a vacancy tax?
We should go full georgism.
Losses during the vacancy period would just be accounted for by bumping up the rent on tenants a bit. If you expect an average vacancy to cost you $1200, you'll just increase rent by $100 a month.
Sure, you could accept the loss, but if you're okay with that lower profit margin, you'd have already decreased the rent by that same $100.
It assumes the owner is planning to fill up the house sooner rather than later. It would punish those who are just sitting on empty houses for an extended period of time because no renter would want to pay the extended vacancy for that extended period, and progressively gets worse with each added time period.
I'm not hugely against vacancy taxes really, but they need to be well-targeted to not affect the occasional bit of bad luck or renovation. Otherwise, the only way it actually helps the market is if it causes enough previously withheld supply to enter the market, and most expensive cities don't actually have all that many vacancies. NYC is at something like 5%, which included units between tenants and those under renovation. Sure, there's the occasional billionaire with an empty penthouse, but compared to the millions of renters looking for normal housing, there really aren't that many rich oligarchs hoarding housing for fun and games.
Its why i think of they did, there should be a minimum amount of months, and then applies after the amount of time.
If the landlord can increase rent by $100 and the market will bear that, why is the lack of a vacancy tax stopping them? Landlords charge the maximum that the market can bear.
All landlords have occasional vacancies, so a vacancy tax would increase the costs that all landlords bear, at least slightly. Landlords will name the highest price that won't cause renters to simply choose an alternative. If there is no cheaper alternative because the entire market is being affected, they simply have to find a way to deal with it.
Many vacancy taxes already exist all around the world. There is not a single one that taxes normal short vacancies. It is just false that this increases costs for all landlords. The vast VAST majority of landlords will never pay it.
On the other hand, the increase in supply due to the tax can be noticeable, which has a much bigger effect lowering prices.