this post was submitted on 07 Mar 2024
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Not American, but I would add some severe roadblocks to anything that makes basic housing an "investment".
Here here.
FYI, it's "hear, hear" as in, hear this, hear this.
Heir heir
Hair hair
Har har
Add in an office for a publicly owned rail system.
It’s pretty simple, just have a new real estate investment tax that is only levelled on residential properties you own but do not reside in, and that tax needs to be set at a rate higher than the property market is expected to gain. E.g. (with made-up numbers) if the property market gains 5% value per year on average, set the tax rate at 10% of the value per year. There’s an insanely slim chance you can still make money on the investment, but 99+% of investors would dump their properties immediately, leading to a massive crash where average people could suddenly afford to buy the home they’ve been renting.
Ooh ooh I love these.
Wouldn't this have the effect of increasing rent by 10% of the cost of the property each year?
A policy this significant would cause a market crash so massive that it would entirely reshape the market. I don’t think any of us could genuinely guess how it will work out.
My hope is that it would cause a crash so significant that essentially all owned properties that are not lived in enter the market, causing homes to be sold for insanely low prices in order to avoid paying taxes, causing rates of home ownership to skyrocket. The government then needs to buy up anything leftover to rent as social and affordable housing to low-income people who can’t afford a mortgage at that time. Crashing house prices also mean that the value of these taxes drops in absolute terms as well.
Then we have a situation where everyone who has a stable income owns a home, and those who can’t will rent directly from the government at extremely affordable rates. Homes are the object we as humans own that we regularly lease to one another the most - particularly for profit or capital gain. It’s super weird and it needs to stop.
The main issue is that economists would shit their pants because so much GDP growth is locked up in our property markets. It would cause at least a recession, if not a depression, and depending on which country did it, the effects could ricochet throughout the global economy such as during the GFC.
Well, you're right about the epic market crash, also right that it's unpredictable, but then you go on to predict a bunch of things which seem extremely unlikely to me.
The thing is, a "crash" is not just a lowering of prices until everyone can afford the repayments on a house.
The kind of crash you're taking about here is more like a market failure. Yes all banks would become insolvent but that's kind of like saying the toilets on the titanic became "out of order" when it sank.
You'd basically revert to subsistence farming. Everyone living in a community of more than a few hundred would die of starvation or disease. Mexico, China, or Russia would roll in to permanently "provide aid".
What you say also seems extremely unlikely to me, given that humans who have sufficiently advanced to the state we live in now will be unwilling to accept subsistence lifestyle.
I didn’t predict anything; you’ll note I said that this is what I would hope happens.
I’m not talking about a market failure; I’m talking about trying to take away the whole concept of a ‘market’ applying to residential real estate altogether. Because it’s so intertwined with the value of our economies, taking it away will cause a significant, permanent shrinking of GDP and other economic measures, and I think that’s appropriate given the circumstances we’re in now.
It’s a big and bold move, and as I’ve said before none of us can be exactly sure how it would pan out, but nothing is gained in life if nothing is ventured. We need to try something. I say this as someone who is lucky enough to be able to have a mortgage: it’s inherently unfair that my fellow citizens have to miss out on that opportunity.
Sorry, I meant that subsistence agriculture would be the only possible lifestyle, not a chosen one.
Each of us are talking about a crash or collapse of completely different magnitude.
At the risk of sounding too preppy, I think societal collapse is absolutely possible due to what we might think is a fairly minor supply chain interruption.
Regardless, it's a moot point. No one is going to crash the economy so you can buy a house I'm sorry.
I think you might have missed where I said this:
Oh well that's completely different then.
Your retarded suggestion to bring about societal collapse is still retarded.
The problem with that is there is a very clear policy purpose and interest in making housing an investment - the vast vast majority of people will eventually own a home, and it is a forced savings vehicle because people are REALLY bad at saving for retirement. Even if you fix our lack of a social safety net, home ownership is generally seen as a public good because it encourages people investing more in and caring about their community, being willing to pay higher taxes to support more services, etc. It's not a no brainer to make housing an investment (there are arguments against in a society with a good social safety net), but it is very purposeful through good public policy. It has little to do with the recent (very recent, relatively) buying up of single family homes by investment banks, etc, despite people implying all the time it's some secret cabal and shadowy wealthy figures doing it for their own benefit. Everyone sees conspiracies everywhere these days.
Of course, if we're going to say that home ownership is "good" and keep doing all the tax incentives for it, we do need to stop corporations speculating and driving up housing costs, and could do so by some targeted taxes on unoccupied properties in the same portfolio. But there's an argument to be made that that's a relatively small portion of the problem, since a lot of our housing stock issues can be traced back to single family zoning issues, as well as road and highway funding leading to suburban sprawl and unaffordable newly developed subdivisions while cheaper starter homes don't exist anymore...but either way affordable housing stock just hasn't kept up.
Agree a thousand percent. Some ideas:
No corporate home ownership
If multiple properties are owned they must be run as a non-profit
Move to a land-value tax so that holding undeveloped land as an investment is not viable.
I live in a rural area. Surrounding my humble 2 bedroom home are a few acres of rocks and cliffs that are vacant land with a well I have to run a small pump to get water from. The county already taxes me on this vacant unbuildable land as separate property.
I live a very simple life and make just under median income so not rolling in money by any means. If i were to get taxed on this undeveloped land as an investment it would make it unaffordable for me and I'd have to sell for less than I could afford a new home. How is this preventing land hoarding?
Yeah that is a good question. It is meant to tax strictly the value of the land. So undeveloped rural land will be taxed very low, vs say undeveloped urban land. The idea is to incentivize productive land use of more valuable land so that as the value of the land goes up, it becomes untenable not to put it to use. In your case, it the land is unbuildable then then the tax would be quite low, even if things to get built up around you. This is just the tip of the iceberg of an economic theory called Georgism, that I am still wrapping my head around.
it's been a while since I've heard about it, but iirc LVT generally evaluates and decides on taxes based on proximity to other developments, so undeveloped land or poor density land that is close to more developed housing, is taxed more heavily, while land out in the boonies isn't taxed very heavily. it's supposed to incentivize development in more desirable places to live, and naturally eliminate situations in which higher value plots end up getting bought up by rich people for their whims.
at the same time, it's still a solution that's ultimately relying on the free market to maximize their profit margins, and that being good for society, it's just decreasing the relative profit margins for each plot of land through higher taxes. it still retains harmful forms of development, it just, potentially, eliminates them more naturally, compared to explicit bans.
It would still work with a heavily regulated market. And in my opinion would need to be paired with zoning regulations and environmental policy. For example a stretch of wilderness that happens to be on top of a vein of coal would have the same value and tax as the same land without the coal if regulations prevent coal mining, adjusting incentives away from the most harmful uses.
Edit: grammar
It would still work in a heavily regulated market, yeah, but the thing with georgism is that it tends to be advertised as a kind of one-size-fits-all solution to the housing market, as a highly sought after "single tax" or "perfect tax". If you look at the historical ties of georgism which I also kind of struggle to remember, I think I remember that being kind of, the thing about it, was that it was aligned with like, the dominant labor parties, but was kind of seen as too moderate and singularly committed of a position.
So, the tax itself is cool, and agreeable, but the georgists as a kind of, party, and georgism as a philosophy built around a singular tax, I'm still not sure about. I'm skeptical of silver-bullet solutions, which is what georgism is often made out to be. It also gives me bad vibes because anytime I hear someone talking so highly about some obscure 19th or 20th century political philosophy, it gives me the same alarm bells as people who want to be rhodesian infantrymen, or people who want to be dengists, or shit like that. I dunno. Henry george was an interesting and prescient dude but he was also in many ways a product of his time, I think. Here's marx talking about him in a letter I haven't read, might interest you I guess.
Good point about people speaking 'highly about some obscure 19th or 20th century political philosophy' ringing certain alarm bells. I certainly share your skepticism. I wouldn't call myself a 'Goergist'. I do think LVT is worth looking into when trying to solve land-hoarding and wealthy entities treating property as an investment portfolio at the expense of families in need of homes.