this post was submitted on 01 Oct 2023
713 points (98.5% liked)
Personal Finance
3861 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 2 years ago
MODERATORS
you are viewing a single comment's thread
view the rest of the comments
view the rest of the comments
Put a hard stop to the purchasing of homes by corporations/businesses and people with no intention of living in them.
You should need proof of intention to live in the home within a reasonable amount of time after the purchase in order to make the sale. The flipping of homes for profit by those with cash and more money is a detriment to the market and the american dream for the rest of the population trying to get a foothold.
The problem isn't necessarily flipping houses, if the ones doing the flipping really are improving the property and are able to refurbish old properties to be more appealing. If they put in the work, they deserve to make money off of that - but they only make their money if they sell.
The problem is corporations who buy up housing stock, with no immediate plans to resell. They view houses like a commodity, and if they constrain supply in certain areas they can artificially create profit. This profit, though, comes at the expense of everyone who is looking for a home at the time.
I think the solution is for localities to step in and crank up property taxes for residential units that are not either occupied or actively on the market. Once a company keeps a property off the market for a year, make it much more painful for them to hold it for another year.
House flippers are incentivized not to make good, long term, sustainable, or efficient home improvements. Their only incentive is to make a house more sellable upon initial inspection, house flipping is a bad practice I would argue far more often than not.
The problem is housing as an investment like a stock. They should be commodities.
I spent the last year looking for a house to buy, and since it took me a year I got to see many of the shit-bucket houses I was looking at (since they were in my price range) get bought up and "flipped" - which usually amounted to just some paint slapped on everything and those fucking grey fake wood vinyl planks that everybody loves these days put down everywhere - and then resold for absurd prices. I respect people that do a good job of renovating houses, but most of these flippers aren't doing that.
I'm in no position to buy a house, but I like to browse and dream, and my mindset at this point is basically--give me an honest old house that hasn't been renovated since 1970...at least I can SEE the problem-spots (cracked this or that, stains, etc.) and make a plan on how to tackle them.
Like, my gut feeling when I see that horrible silver-blue color scheme anything flipped/"renovated" in the past few years is to run as fast as I can. You can't plan, you don't know what you'll have to tackle, it's all hidden under fresh paint or flooring. Is there mold? Who knows. Water damage? Who knows. Old pipes/electrical/etc. that need fixing? Who knows, the signs that might have given you a clue were hidden or pulled out. It's all a big mystery.
Hey I like the grey wood floor look lol
Inherently, flipping houses is about increasing the price of the home. This directly relates to the article by making more houses further out of range of more people.
Houses with issues might not be able to be financed by a mortgage. So a company/individuals will fix the issues, then resell the house to someone who can now get an FHA loan for it.
FHA loans have strict requirements on the condition of the house in order to give funding.
If someone does work on the house, they should get paid for their efforts.
Hard agree. Also they can slap a really big transfer tax on non-owner occupied as well.
Non-owner occupied properties already aren't eligible for the capital gains exclusion. I guess we could make unoccupied houses subject to regular income tax instead of capital gains tax rates would further discourage empty houses. That, and higher property taxes would probably be enough.
I live in a high property tax area and even though prices have gone up, it's nowhere near as crazy as other parts of the country.
All agreed except the localities bit. These smaller cities councilmen are too cheap to bribe. A $1,000 check will have them hanging on your every word. I've seen it with my own eyes. Probably best bumped up to state level.
But yes, we should ban corporations at some well-defined point. I mean, what if I incorporate myself? Now I can't buy another house?
To add, the corps buying up housing are also the ones that have the most potential to back housing builders, but since they're buying up stock to artificially decrease supply, then they're deincentivized to support builders. I really wish these big corps had some sort of for each unit you buy, you must build a unit within the next 2 years.
Good point! That's a great idea.
Higher taxes is just a cost of doing business which is passed on to other tenants, be it long or short term rentals, even if housing stock is temporarily held - though I don’t disagree that such a vacancy tax is a good.
GP was right - forbid corporations from owning any residential property if 4 or fewer units and greater than four unless the building is wholly owned.
On the tax side, add a purchasing tax of 15-25%, 90% of which is rebated at closing for non-corporations who have not received the rebate in the previous 24 months. That targets flippers and property-bros willing to go naked on liability.
This would take all the single family and duplexes off the rental market and make a ton of people homeless. No thanks. There's enough people homeless in this country due to drug and alcohol issues.
We do need to have an exception for those who need to buy through a corporation in order to protect their privacy, especially with the rise of professions such as streaming.
Those professions aren't going to be going anywhere anytime soon.
Rather than a hard stop, I think it would be a good idea to significantly increase taxes on real estate no one is actively living in, and use the proceeds to subsidize construction of new housing.
This seems to be the most reasonable. Disincentiivize multiple property ownership rather than outright ban it. The ones who can eat the cost will pay taxes and the rest will just bow out of the market.
But housing is a need and people will keep paying any price to not be homeless, this feels like it leads to massive corporations still owning all of them and paying large taxes they can eat short term and raise to massive prices of rent. Maybe they dump some stock but I'm just not sure it does much other than diversify smaller investors that used property for assets
Then the taxes aren't high enough. That's an easy fix. It's one of those times the state doesn't want to optimise the rate for total tax earned but to make paying it for any length of time actually prohibitive. Make it so that they can't possibly raise rents high enough to cover those taxes and they'll understand quickly.
The other side of the equation is a bit harder, and that's housing overstock: Companies will be sitting on housing they can't rent out due to lack of demand for housing. One idea would be to allow them to lease homes out to municipalities for literally nothing but tax forgiveness and the municipalities can use that to house the left-over homeless, unemployed, etc. Call it a half write off. Oh those leases need sensible minimum durations, I'd say five years is a good start.
You can easily make smaller investors be hit significant less by it by scaling the tax to the number of vacant housing units. Own a second home you rent out and spend four months finding a renter you like? Fine, pay ten bucks. Do that to 1000 housing units? Pay 10000 bucks for each.
Yes, those kinds of rates are right-out financial violence. That's the point: The state has to step in as the larger bully to keep the small ones in check to avert market failure.
Your argument falls flat once you remember that there is in fact plenty of homeless people and there will always be those who will choose not to pay irregardless of logic or desire of self preservation. And while yes, any privatization of housing isn't really any good, but you don't have to make it impossible for them to make money off of it. You just play their own logic against them and keep it just on the line where they will ultimately go for something else to profit off of other than housing as their returns and infinite growth will eventually lead them into microscopic margins so any variability becomes a threat to the bottom line.
An alternative is to replace property tax with a land tax. That way instead of penalizing people for building more housing, they are penalized for holding onto land that could be used to house more people (or whatever other use is in mind).
Nah tax the fuck outta landlords
There should also be taxes on rental properties beyond the first to prevent the "hoard and rent" cycle
I disagree, because that would disincentivize housing. I think the price of housing is mostly just a function of how much of it is on the market. Wealth inequality is also a problem but should be addressed in other ways.
As an aside, the tax should also apply to commercial real estate so there is an incentive to convert offices to apartments.
take the houses, take the landlord's wealth they scalped, then fix it.
Landlords don't "scalp wealth". The income they earn is from working their job. Just like anyone else who is self employed.
removed working how? sitting there and collecting passive income? Are you fucking stupid?
How about being civil instead of name calling?
No
It’s gotten out of control. I would say one in ten houses in my neighborhood are airBNBs.
It's disgusting because airbnbs in my area can have 50% occupancy and do better than a long term, meaning for about 180 days of the year that housing is just artificially decreased supply.
$200/night * 15 days = $3k/mo
I live in a touristy area and literally everything is getting turned into AirBnBs. It’s a huge problem because the people who actually live here have nowhere to live now
If you want to operate an airbnb in Berlin you need a hotel license (unless you actually live in the thing at the same time, or only do it for I think about a month a year, say when you're on vacation). Long story short the city isn't giving out any licenses in areas with high rent pressure, which is basically all of Berlin.
But those things are highly regional, there's plenty of villages in the alps with an absurd amount of tourist accommodation compared to the number of regular inhabitants, but they also don't have any industry but family farms and tourism. If you own something on Sylt and somewhere else you're paying sky-high secondary residence taxes (rich fucks don't rent they just buy holiday homes).
Municipalities are required to house everyone so the situation doesn't even begin to be comparable to the US. Ballpark a shabby dorm room to yourself as the minimum, bath and kitchen might be shared, washing machine will almost invariably be. In Berlin there's about 27k living in those shelters, about 2k are sleeping rough, and that's as a metropolis smaller cities tend to have zero. None of that includes people crashing on somebody else's couch, but it does include apartment burned down and you don't want to pay for a hotel until you find something new kind of situations.
The official term is "emergency accommodations" and they're supposed to be short-term, hence also the low standards, but we haven't built enough social housing in ages and the stuff that got build constantly stops to be social housing as municipalities cheaped out and simply tacked "X% of units as social housing for 30 years" onto building permits, which leads to municipalities push come to shove having to rent hotel rooms and eat the difference.
The whole situation could be solved within a decade if we re-instituted the social housing programmes of the 50s, and you can't do it as one-off investment as construction companies aren't willing to increase their own capacity for a short-term boom.
Side note: Berlin had a referendum to expropriate all landlords who have more than 3k units, it passed, but wasn't 100% binding and politics is dragging its feet implementing it, including the social democrats. With legalities out of the way though they're now starting one that would be immediately applicable law.
The reasoning of the socdems isn't even completely wrong, "we should build instead of expropriate" but MFers don't seem to understand that people are out for blood. If the people want to expropriate something you can say your bit that you think that there's better solutions but fucking do it. Especially in the east.
And, no, the landlords won't get compensated at market rates. The whole thing is possible because for landlords housing units are means of production and Article 15, Berlin doesn't even have to show it's for the public good. Eminent domain type stuff is Article 14, 15 is way stronger and there because the constitution was deliberately written to be compatible with democratic socialism.
ATL had a pretty good program at one point. If you made $60k, you could buy a $250k house with the requirement that you would be the primary resident for the first year.
What's even better is that the comparables in the area were all $450k, so 3 years later, all of the homes got valued around $500-600k.
Just levy additional taxes on the homes that aren't owner occupied and make it less attractive to investors.
Make owning more than two homes illegal.
Give current owners/holders of more than 2 homes 20 years to sell any extra homes beyond those two, if they don't, the extra homes automatically default to state ownership (and then are later sold to disabled, underemployed and low income people at a massive discount.
This would garantee a certain amount of deflation, which could be dolled out by the government as needed whilst resolving the housing crisis.
That's like making more than 2 children per familyillegal. Or having more than 2 pets illegal. Or having more than 2 shirts illegal.
Start restricting what people can own and that makes America like North Korea.
Making it illegal is a tough process. Punishing people doesn't work, kind of like punishing companies. The smart ones will find crazy loopholes (example: "gift" houses to family members).
Many countries do the opposite, where they give bonuses and rebates to your first house.
I understand your need to be critical, and concerns about stability, but I don't think we're talking about whether it will be a "tough process" (boo hoo) or what "the smart ones" will do (it's a fallacy that wealthy equates to intelligent, see Elon Musk and others)... And if we're discussing making something illegal than I'm assuming in the realm of discussion we can also close loopholes (such as limiting gifting to family members and people with less than two homes)... So I think when you re-read the title of the article we're commenting on, I think you'll find your objections all cater to situations and edge cases that are all smaller and less important than the problem we're looking for a solution for.
So I'm not seeing any substantial objections other than political unwillingness to do the tough process which may ultimately need to be done. Because letting the basic necessities become a weapon of class war seems to be the alternative, and I'm not saying that from any Marxist motivations, but instead I'm saying out of concerns for National Security.
Once something economic becomes subject to class war, it starts to be subject to foreign powers, and can be used as a soft form of pre-warring.
Let's say for instance, China and Russia are willing to buy homes on mass and refuse to to rent or sell them? Well, all of a sudden you start to see society become fragile and decline... And who says this hasn't already been trialed in some degree, and what if this was done with farms and food production.
Correct and accurate market regulations is becoming more of a concern for National Security and prosperity.
Most western countries need something like the GI Bill, which funded the construction of over 2.7 million homes. That was a tough process too. But everyone realized it was an important one too.
its maddening there are plenty of homes out there completely empty
well that doesn't sound like free market capitalism!