[SketchySeaBeast]

The rebuttal you're probably going to hear about this is how this will inordinately punish the private citizen buying a second home as an investment property. We do ultimately need some amount of rentals and those need to be affordable - if the investment property has the hell taxed out of that's going straight to the renter. I say this in an effort to try to point out it's a complicated issue, I in no way support the current large investor predatory housing market.

[nicoburns]

> The rebuttal you're probably going to hear about this is how this will inordinately punish the private citizen buying a second home as an investment property.

Why would it be desirable to encourage private citizens to use property as an investment? I mean, they'd perhaps need to be a one-time easing to ensure that people who have already planned their retirement around such a scheme aren't completely fucked over. But long term it seems to me that there's no downside to this being punished.

[acuozzo]

> But long term it seems to me that there's no downside to this being punished.

It would punish people who need/want to move now, but don't want to sell their current home at a loss or can't sell their home due to market conditions, etc.

Landlord(s)-by-necessity, if you will.

[ericmay]

You can avoid elements of the proposal by the OP by selling and moving and then claiming the new primary residence like you do now.

I don't think we should care if someone has to sell their current home at a loss due to market conditions because taken to its logical conclusion you're saying people shouldn't lose money which to have a functioning economy you have to reject.

[tzs]

> I don't think we should care if someone has to sell their current home at a loss due to market conditions

But they are only selling at a loss because under the proposal they would be heavily taxed if they wanted to hold on to the house and rent it out while they wait for the market to get better.

> taken to its logical conclusion you're saying people shouldn't lose money which to have a functioning economy you have to reject

No, they are saying that you should let people decide when they want to sell instead of making them sell when they will take a loss. That doesn't mean they won't lose money when they sell. It just means they can decide based on market conditions when to sell--which is what you want if you want a well functioning economy.

[ericmay]

> But they are only selling at a loss because under the proposal they would be heavily taxed if they wanted to hold on to the house and rent it out while they wait for the market to get better.

Then don't sell, or don't rent it out, or just deal with it? I'm not sure why we should further subsidize homeowners.

> No, they are saying that you should let people decide when they want to sell instead of making them sell when they will take a loss. That doesn't mean they won't lose money when they sell. It just means they can decide based on market conditions when to sell--which is what you want if you want a well functioning economy.

Apply this same reasoning to stocks and let me know if you still agree with it.

[GauntletWizard]

A Well Functioning economy is the last thing that the people proposing punitive rental taxes want.

[nicoburns]

You could potentially not apply the punitive taxation so long as only one house is owned, regardless of whether they are actually living in it (so renting one property while renting another one would be fine).

[Eddy_Viscosity2]

This would be easy to make exceptions for. Say a year to sell your previous home before the extra tax rate kicks in. But you can't stack them and do it again and have two homes you just moved out of, then three and four. Just one.

[weard_beard]

Because the financial inefficiencies produced by individual owners currently take the place of trillions of dollars of subsidized housing that would be paid by the government to institutional investors to build and maintain housing affordable to teachers, retail workers, police, and firemen that institutional investors DON'T WANT TO OWN MAINTAIN OR BUILD.

I am an individual property investor. I'm a landlord of a single 2-flat up-down duplex. I don't make as much money as I COULD make if I had endlessly deep pockets. It was sold to me by another individual real estate investor who owned and maintained it for 25 years.

Do you know why he sold it? He wanted to buy a luxury property that he would make more profit on and require less maintenance.

Without individual investors with limited pools of money investing in lower margin properties, simply hoping to augment a retirement account or 401k...

Affordable housing would cease to exist.

[runnerup]

> Affordable housing would cease to exist.

Because the guy you bought it from would have torn down the valuable house and then the kit would be left empty forever?

That makes no sense. The unit would exist either way.

[weard_beard]

Institutions used to invest in 2 and 4 unit affordable housing. They’ve spent the last 30 years selling it. To suckers like me.

Now they want it back? They don’t want to own it. They want to flip it.

Rents (just to pay the mortgage) go up. The profit is in institutions pocket. The ongoing maintenance sits where it always has. Individual landlords.

And yes, if an institutional owner can't make 250k profit with a kitchen remodel and a couple buckets of slate grey exterior paint, they do tear it down. And replace it with a luxury unit at twice the local real estate price. It sits empty until the area gentrifies. Or they leave a vacant dirt lot for 10 years. See Chicago.

[nicoburns]

Why would governments subsidise institutional investors rather than simply buying and renting out the housing themselves? (which could be done at cost) I am sympathetic to the idea that individual landlords are better than large profit making businesses though.

[weard_beard]

Because governments don't want to be landlords. They don't want to have to orchestrate painting, drywall, gutters, electrical, plumbing, evictions, improvements, picking out tile, providing services that tenants grouped together with limited income might need like domestic abuse resolution and support, job training, food box distribution.

Institutions don't want to be in this business either. My wife works for one of the largest ones in the midwest, and trust me, they value the land and developments much more than the rents. Government subsidy is AN incentive to maintain the above services at the MINIMUM viable and provable state to get their handout, but they are NOT landlords.

Like McDonalds isn't a food company.

They are real estate developers.

And the experience of living in a 2-flat or a 4-flat is VERY different from a unit in a 500 person building.

The ONLY way institutions would be willing to provide affordable housing would be a constant squeeze on tenants and government and every lever possible to try to make the margins meet that of a luxury apartment. It never will.

And middle to low income families WILL SUFFER. A lot.

Read this, but replace "burgers" with "rent": https://1851franchise.com/why-is-mcdonalds-considered-a-real...

When given the option of direct cash payments to folks who need it, or giving that cash to an ineffectual corrupt business interest to fail to solve the problem in perpetuity... In America we always choose the later. Especially government.

[nicoburns]

> Because governments don't want to be landlords.

Plenty of governments do want to be landlords. If yours doesn't then perhaps you should consider electing a different one.

> They don't want to have to orchestrate painting, drywall, gutters, electrical, plumbing, evictions, improvements, picking out tile.

Why not? Governments ultimately want to serve there electorate. If there electorate wants decent quality affordable housing, then why would a government not want to provide that. Conceptually it's no different to the government running say a police force.

> providing services that tenants grouped together with limited income might need like domestic abuse resolution and support, job training, food box distribution.

Then don't group together tenants with limited income! You don't necessarily even need to group together government owned/run properties at all. There's no reason why a regular house on a regular street couldn't be government owned/run, mixed in with others that are privately owned.

Why are you assuming that government properties or tenants of government properties would be any different to privately owned properties or tenants of private landlords? That's only the case when the government only provides housing as a last resort, but if the government took a wider role in housing many of those problem would go away as the tenants would just be the general population.

[weard_beard]

> Then don't group together tenants with limited income! You don't necessarily even need to group together government owned/run properties at all. There's no reason why a regular house on a regular street couldn't be government owned/run, mixed in with others that are privately owned.

This model was tried in the 70's by institutional affordable housing real estate developers. IMHO this is a great model. Refugees and middle class engineers living side by side sharing schools and pot lucks. It is now anathema to the affordable housing model. I don't know why, but where large affordable housing portfolios had 100s of such properties in their portfolio, they now have 5. Don't know why.

[lotsofpulp]

>Institutions don't want to be in this business either. My wife works for one of the largest ones in the midwest, and trust me, they value the land and developments much more than the rents.

The rent is what determines the value of the land and developments.

>Government subsidy is AN incentive to maintain the above services at the MINIMUM viable and provable state to get their handout, but they are NOT landlords.

This subsidy can directly be given to people as cash. No need for a middleman to take a cut.

[SketchySeaBeast]

Ultimately some people do need a place to rent to live. I saw someone else suggest that rentals are only allowed in apartments, maybe that solves this, but rentals are a vital part of the housing equation.

[nicoburns]

Right, but people don't need to be making money out of that. I think you could set the tax rates so that people basically break even (make a small profit) from renting a house out, and they actually lose money if they hold on to a house they're not renting out (with some carefully worded time-limited exceptions for houses under renovation). That would drive down house prices sharpish!

You could also allow the state to step in as owners of rental housing where private landlords aren't making enough rental houses available. And if the state actually built houses for rental you likely wouldn't need as harsh taxation because the rental prices would drop purely through the increased supply.

[crazygringo]

Of course people need to be making money off it.

Nobody would ever rent to tenants if there weren't profit in it. Take away the profit and all the tenants who need to rent are totally out of luck because nobody has any reason to rent to them. :(

Same as mortgages wouldn't exist if banks didn't make a profit off them.

[danaris]

> Take away the profit and everybody who needs to rent is out of luck.

How does that follow?

Take the situation as it exists today—X amount of "housing units" exist, and Y of those "housing units" are owned by investors as rental properties.

Now, change the situation so that it becomes unprofitable to own properties you are not occupying. All X of those housing units still exist. They won't be destroyed (well, maybe a few will, but not enough to seriously change the calculations), and if it's not profitable to rent them, it's going to be even less profitable to hang onto them sitting empty.

What happens in that scenario? Well, they should be sold.

Who would they be sold to? People who need a place to live (because no one's going to be buying them as investment or rental properties anymore).

How much are they going to be sold for? The amount these people are willing and able to pay. Why would they be sold for significantly more than they would be rented out for before? Sure, some current owners would be in denial and unwilling to accept that they'd lose a bunch of money on it (or maybe, as nicoburns suggests, there would be some kind of one-time bailout/incentive/whatever to make sure that the current owners would sell, and wouldn't lose their shirts). But while it would certainly change the economics of the situation somewhat from what they are today, and it would take our society a few years to reorganize around it, ultimately, I don't believe removing the middleman landlord class from the equation would harm the people who are currently renting in the long term. Indeed, I think it would benefit them, because instead of being in a situation where they're basically guaranteed to have a significant portion of their earnings siphoned off purely to be allowed to have a place to exist, they would be building up equity in something through those payments...and once they finished paying the purchase price, they would own the place, no longer have to make payments, and be able to sell it on when they decided it was time to move.

[crazygringo]

> What happens in that scenario? Well, they should be sold.

Exactly. They'll be sold to people who will live in them, and they won't be rented anymore.

So if you want to move to a city for two years for a temporary job contract and rent a house... you literally can't. Because nobody will rent to you, because all the houses are occupied by owners living in them. Which is a disaster for rental demand.

Remember that a lot of people want to rent. They prefer to rent instead of buy, for various reasons from flexibility to it just making more financial sense for various reasons.

This is why if you take away the profit from renting, people who want to rent will be out of luck.

[SketchySeaBeast]

What stops the landlord from raising the rent? All the landlords will be under the same pressure, so rent should rise universally.

[jfghi]

They do that anyways.

[Ekaros]

I never understood why apartments should be treated any different from houses. Any other good reason apart from selfish, I deserve to get own house?

[kahrl]

Nobody said "the hell" taxed out of anything. Conversation is completely shut down by these dumb Devil's advocate takes before anyone talks details such as a graduated tax rate.

[SketchySeaBeast]

Ok, so my choice of wording is poor, but I'm not trying to do a devil's advocate take, I'm trying to talk about the breadth of the issue. What would you like to see with this? Do you think people should own second rental properties? If so, what does "a substantially higher rate" mean to you that stops investors with deep pockets from investing but not regular people? If people shouldn't own a second property, then why not flagrantly tax them? But then where do renters go?

[bcrosby95]

>> substantially higher rate

Is a nice way of saying "tax the hell out of it".

[flavius29663]

> punish the private citizen buying a second home as an investment property

Second property should be taxed a little bit more. 3rd much more, 4th much much more etc.

> has the hell taxed out of that's going straight to the renter

That can be said about anything that has taxes on it: it goes back to punish the final consumer, but in the end it's worth trying to correct the market, be it cigarettes or homes for investment.

[SketchySeaBeast]

I suppose the difference there is that by and large people who find the new tax too onerous can reduce their cigarette consumption or even stop smoking altogether, but people can't just stop renting their home.

[flavius29663]

well yes, but you're still allowing cheap second house, but not third. This means more middle class people can buy an investment home, but they will have to stop there, discouraging landlords with a huge stock of houses. You don't want to discourage investment in houses, just oligopolies/monopolies on the housing stock, and also unoccupied houses.

[affinepplan]

> how this will inordinately punish the private citizen buying a second home as an investment property.

Good. Properties should not be investments.

[SketchySeaBeast]

As I've said in other places - rental properties will always be required. Not everyone is in a position where they can or should own their own home.

[hooverd]

Public developer to the rescue.

[forgotusername6]

The government should provide housing in those cases.

[SketchySeaBeast]

The government takes over the entirety of the rental market? There's over 100 million people in the United States who rent.

[forgotusername6]

The government should step in when the rental market is failing to deliver for the people i.e. when rents become unaffordable due to lack of supply. They can step in with zoning law changes but they can also step in with direct competition.

[njarboe]

Maybe works in some countries. Government housing in the US is awful.

[dixie_land]

Then let the market decide not the government

[itake]

Maybe we should just end the home rental market. You either rent an apartment or buy a house.

[vlunkr]

What if there are no apartments in your area? Or you have a large family but can’t get a mortgage at the moment?

There are plenty of legitimate reasons to rent a home.

[itake]

cities should build them and setup public transit at them.

[vlunkr]

Ideally yes, but it’s a massive undertaking.

[harshalizee]

That would be disastrous for families with multiple kids. They may not be able to afford to buy, but able to rent. Forcing them all into an apartment can be chaotic.

[itake]

At least in Seattle, renting an apartment is cheaper than owning a home.

[acuozzo]

If it were ended, then what would happen to homeowners who need to move now, but can't sell their home due to market conditions?

[itake]

They still face that decision in the current system. Even if you tried to keep the property, you are still losing time and money.

Some people are also just unlucky on market timing.

[zeroonetwothree]

That seems terrible for consumers

[itake]

Why?

[larsiusprime]

> If the investment property has the hell taxed out of that's going straight to the renter

Not if you exempt the value of the building from taxation and focus the tax exclusively on the value of the underlying land. This has been empirically demonstrated in multiple studies:

http://gameofrent.com/content/can-lvt-be-passed-on-to-tenant...

[UncleMeat]

Why is this bad? Private citizens buying up property to extract rents is also a problem.