[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.

[danaris]

> 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.

That still doesn't follow.

The total amount of housing stock will not change, and nor will the total amount of people needing housing of whatever type (besides some movement on the margins of both).

There is no reason to believe that, in an environment where renting is no longer a viable option, everyone will just shrug their shoulders and say, "Well, I guess all of this is necessarily going to be long-term purchase property, handled exactly the same way we handled homeownership before this change—big closing costs and all."

Yes, obviously, by definition, if renting is not an option, people who want to rent will be out of luck—but that doesn't mean that the people who want to rent today would have no viable options for housing after such a change took place. I don't know exactly what the solution would look like, because it would depend heavily on what specific changes we made that made renting properties out no longer viable, but it's really not that hard to imagine them.

[nicoburns]

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

Or you have social (government owned) rental housing.

[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?