[kstrauser]

Getting rid of the law of supply and demand is like getting rid of Boyle’s law. Legislate whatever you want but the behavior those laws model will still exist.

I prefer to think of it this way. I like my markets free as in GPL, not free as in BSD. That is, I want the market itself to be free with limitations on the participants that keep them from taking it for themselves.

[mcmcmc]

This is moronic. Economic theory is a self-reinforcing veneer of soft science studying observed human behavior with wild variance between different cultures, geographic markets, and individual people.

The "laws of supply and demand" are not empirical laws of physics. They are general principles with well-known exceptions and flaws of their own. You should lay off the microdosing.

[kstrauser]

Supply & demand is such a basic emergent property of, well, anything involving life as we know it, that I have a hard time imagining opposition to it.

If a vendor anywhere in the world has more stock than their customers want, the price goes down. If more people want it than the vendor can provide, the price goes up. If there's more food than animals that want to eat it, animals eat their fill and the rest rots. If there are more animals than food, each spends increasing effort developing strategies to get more than their neighbors.

Now, if someone claims they can prove that demand increasing by X results in prices increasing by exactly Y, I'm with you. There are too many variables to make that predictable. But the basic idea behind it? That's pretty fundamental.

[mcmcmc]

Emergent property != laws of physics yet to be broken. All I meant was equating economic principles to empirically proven scientific theory is deeply misleading. I agree with your last paragraph. I liken it to the saying, “all models are wrong, but some are useful.”

[pchristensen]

Microeconomics (including supply, demand, elasticity, etc) is pretty reliable. Macroeconomics has a lot of uncertainty and social science squish.

[JumpCrisscross]

> "laws of supply and demand" are not empirical laws of physics

Game theory is mathematics, not science. You can derive the basics of supply and demand from game theory.

Economics is a soft science. But so is history and, I'd argue, a good deal of computer science.

[warkdarrior]

> You can derive the basics of supply and demand from game theory.

You can derive supply and demand from game theory once you make some assumptions about preferences, costs, rationality of players, etc., all of which are non-mathematical, mostly empirical concepts.

[enriquec]

to anyone even remotely studied in economics - this is astoundingly ignorant. And the hubris is incredibly cringey. Please provide a counter example to the soft science law of supply and demand?

[mcmcmc]

Giffen goods

[enriquec]

Nope

[colechristensen]

Uh, you're reading the wrong thing about it. Fixing supply and demand means things like punishing vacancies with taxation, promoting construction with tax breaks, and removing the demand by severely limiting rent seeking real estate investors.

[pchristensen]

And promoting construction by making it legal to build housing. Probably the biggest, most direct action that could be taken.

[kstrauser]

Amen.

[kstrauser]

Are you sure that’s what they meant? I’m completely on board with everything you describe (and liberating the market from the people monopolizing it for their own benefit). I’ve heard way too many people arguing that we should do away with supply/demand, as though it were a regulation we should repeal, and didn’t understand it as an inherent property of the system.

[BeetleB]

I follow the RE space, and have done some RE investments (albeit mild ones - I don't own homes to rent or anything like that).

> punishing vacancies with taxation

Outside of tourist spots, this will hurt more than it will help. Most RE investors lose money on vacancies (it's literally a line item in their expenses) and work hard not to have them. They definitely do not make more money by artificially limiting supply that way. I assume you're targeting rich folks who own multiple homes (and do not rent them)? They're what - less than 5% of all vacancies? Perhaps less than 1% in many cities?

Almost everyone I know who purchases houses/apartments to rent them would get out of the business if vacancies were taxed - they operate these properties on a narrow margin - most of their "profit" is due to depreciation benefits and gaining equity from the payments the renters are making (and in a minority of cases, property value growth).

It may sound like if they sell, that's a good thing (more people can buy their offloaded property), but a lot of houses would also go out of circulation, because these people often buy distressed homes that banks won't give a loan on - and they renovate them, bring them up to code, etc.

I suppose if you could tax vacancies only for those that are not trying to rent them - sure. I'm on board.

> promoting construction with tax breaks

There are plenty of these, although it varies from location to location. But it's a pretty common RE investment strategy to go for these, as the tax savings can be very significant. People pool their money for a down payment on a construction loan (be it for an apartment complex or office building), build it, and are required to hold it for a number of years to get the tax breaks.

Of late, the push has been in the other direction - states/cities are removing some of these tax breaks - not sure why - perhaps they weren't as effective as they thought?

> and removing the demand by severely limiting rent seeking real estate investors.

There are ways to do this that may not be popular. The main one would be to remove fixed interest mortgages. Most developed countries don't have them - that's why plenty of foreigners buy in the US market.

Another is to allow property taxes to track actual property values (i.e. remove the cap on increase in property taxes). You can imagine how unpopular this will be for SF residents.

Remove tax benefits like bonus depreciation or accelerated depreciation.

Remove tax benefits that allow one to count RE losses against their W-2 income (it's tricky to do it, but possible for AirBnB investors).

Basically, just remove most tax benefits :-) The majority of RE investors get in it for tax benefits, not appreciation, and not that much even for cash flow (cash flow is fairly pathetic in most cases - getting $200/mo is considered good).

[JumpCrisscross]

> Most RE investors lose money on vacancies (it's literally a line item in their expenses) and work hard not to have them

Plenty of landlords would rather a unit in a building go empty for longer than compromise on rent in a way that weakens their negotiating position with the other units. (Also, with lenders.)

The argument for taxing vacancies is city taxes are often set on the assumption of occupancy. A vacant unit doesn't contain a tax-paying worker. The vacancy tax adjusts for that.

> Remove tax benefits like bonus depreciation or accelerated depreciation

Agree.

[colechristensen]

>Also, the argument for taxing vacancies is city taxes are often set on the assumption of occupancy. A vacant unit doesn't contain a tax-paying worker. The vacancy tax adjusts for that.

Also important for commercial vacancies. The rent is too high, costs for commercial goods and services (and especially food and entertainment) is inflated by inflated rent so restaurants and consumer businesses can't stay open because they can't afford to pay the rent and lower prices to attract customers at the same time. And yet a huge proportion of the commercial space is just empty.

A vacancy tax makes up for that missing tax revenue from a running business and also just raises the quality of life for the people of your city by giving them opportunities for things to do and lowering the bar for entry into running a business.

[gs17]

>Plenty of landlords would rather a unit in a building go empty for a little longer than compromise on rent

Yep, I watched my last apartment (which I left partially because the rent went up to an unreasonable price) sit vacant for several months and laughed at how he could have made much more money if he compromised slightly on rent (which he seems to eventually given in to, so his greed only served to lose him money and not get the price he wanted).

[kstrauser]

Our previous landlord evicted us to "rent it to her sister". We saw it listed for rent at a higher price soon after, and then it sat empty for 4 years. That did my heart good.

[BeetleB]

> Plenty of landlords would rather a unit in a building go empty for longer than compromise on rent in a way that weakens their negotiating position with the other units. (Also, with lenders.)

In my experience: A tiny minority (for housing - not sure about commercial). This is one of those cases where selection bias applies. As most landlords really hate vacancies, the ones you do see are the tiny few that don't. And because they let them be vacant for months, it adds to the selection bias. They perhaps own most/all of the property, so the vacancy cost is miniscule (only property tax).

I do know the bulk of landlords are fussy about the type of consumer they get (e.g. decent credit rating, etc), and will allow for longer vacancies to get them - the rationale being that a bad occupant costs more than the vacancy charge - especially in tenant friendly states like California (extremely expensive to evict).

Keep in mind - the bulk of them don't own the properties outright - they are paying a loan. In a place like where I live, they may need to pay $2000/mo on a property that they rent out for $2300/mo. That $300/mo is a very slim-to-nonexistent profit margin once you account for costs. If it goes vacant for a month, they are losing over 6 months of net revenue. When you factor in the costs, it may well be closer than a year's worth of gain. The property doesn't appreciate much here, so they're not gaining in that fashion. Now when an eviction takes 4 months to execute, you can do the math on how they may prefer a 1 month vacancy to a bad tenant.

Really: Get rid of fixed interest mortgages and you'll discourage rent seeking behavior. Most are playing the long game: They'll accept a net loss of, say, $100-200/mo because they know their costs are (relatively) fixed, and in, say, 5 years the rents will have gone up enough to break even or yield a small profit. Keep it up for the next 30 years and they've made good money (and had a tenant pay for all the equity).

If you want to discourage rent seeking, discourage the main incentive: The cheap loan.

[JumpCrisscross]

> A tiny minority

Of landlords altogether, sure. Counting by unit in high-demand locations, unclear.

> property doesn't appreciate much here

You're describing a stable housing market. Those aren't where RealPage is accused of making mischief.

[pc86]

Taxes on vacant rental units means they'll be sold sooner, and increases the odds they'll be sold to an occupant instead of a speculator. I am a capitalist above basically anything else but that sounds great to me (and I already own a home and will likely never move again).

> Almost everyone I know who purchases houses/apartments to rent them would get out of the business if vacancies were taxed

Yes, you've successfully articulated the point. In an actual free market where supply can be added easily with minimal headache, buying an asset to rent it back is perfectly fine. In something like the housing marketing, buying a home specifically to rent it out is bad whether it's one unit or one thousand because supply is already artificially constrained. The end of that line is BlackRock buying up thousands of homes and materially hurting Americans. The fact that some random person with a few million in inheritance can make money in the interim is irrelevant.

> but a lot of houses would also go out of circulation, because these people often buy distressed homes that banks won't give a loan on - and they renovate them, bring them up to code, etc.

It's pretty easily to exclude vacant homes with open permits that are actively being renovated or with 203(k) loans, or to provide revenue-neutral tax breaks. This is a legitimate criticism but it means you address the criticism, it doesn't mean the original goal is bad or impossible.

> There are ways to do this that may not be popular. The main one would be to remove fixed interest mortgages.

We should definitely remove fixed-interest mortgages for non-owner occupied purchases.

[colechristensen]

>> Almost everyone I know who purchases houses/apartments to rent them would get out of the business if vacancies were taxed

>Yes, you've successfully articulated the point.

And the goal. Why raise taxes on vacancies? To push out owners whose primary goal is to leach out a few percentage points above loans they can get or to sit on property while it appreciates in value (while harvesting tax benefits on the depreciation of the structures they maintain to a minimum because _margins_)

There just shouldn't be a class of people whose business is harvesting tax benefits and arbitrage of trust by banks.

[BeetleB]

> We should definitely remove fixed-interest mortgages for non-owner occupied purchases.

Just as with single payer health care: While it works very well in other countries, people in the US will insist it will fail here. :-)

[pc86]

There are legitimate concerns or arguments against a single national government-run healthcare system covering 330 million people in 50 different states (medicare/caid notwithstanding, basically all healthcare is regulated state by state and not federally).

I don't know anything arguing that adjustable-rate mortgages will "fail" in the US (we have them already), especially focused specifically toward/against non-owner occupied properties, just that it would negatively affect them and they don't want to do it.

[gs17]

> because these people often buy distressed homes that banks won't give a loan on - and they renovate them, bring them up to code

There could easily be exemptions to a vacancy tax to allow for, or even encourage, renovating a home.