[xtracto]

I wholeheartedly agree with this. My opinion is that governments should tax 2nd, 3rd and further housing so as to prevent people from accumulating residential buildings.

If you want to live of your rents, buy a commercial or industrial building, speculate with that. But residential construction should be protected to ensure each household is able to buy one with the average country salary.

[energy123]

A bad idea in isolation, because it forces people to store all their net worth into their main tax free house, causing people to squat in gigantic houses that they don't need or want. I've seen this distorted behavior in people I know.

We should reward the person who lives in a normal house below their means, and buys an apartment as an investment (which is private capital into new construction that wouldn't have happened if they didn't do it), then rents it out, which increases stock on the rental market, and decreases rental yields.

If you want to tax ALL housing the same, including people's only house, then sure, go for it. Or better yet, tax all land ownership. Just don't distort people's behavior by making a special exception for their main house.

[cassianoleal]

> store all their net worth into their main tax free house

If you take speculation out of the housing market, storing net worth in your main house becomes a lot less attractive.

[Esophagus4]

Which was the way housing was for many years.

A house used to be viewed as a consumable good a hundred years ago, not an appreciating asset. (Before the New Deal commoditized mortgages)

[mothballed]

At least in USA, since pretty much the absolute beginning, anyone with any wealth tried to gobble up the absolute most amount of land they could. Both as a form of wealth and a productive input. This has been less so in the past century though as agriculture has become smaller part of the economy.

[kelipso]

That should be highly discouraged since land is a scarce resource. Property should be taxed exponentially with respect to how much you already own.

[bpt3]

Why?

Presumably you mean desirable land is scarce, which is true by definition, but land in the US is far from scarce.

[croon]

Your entire argument rests on housing being a speculative investment. The thread is about envisioning a scenario where that isn't the case.

If someone lives in a modest house and have further assets, there are many many (speculative) stores for that net worth that isn't housing.

[gdulli]

Why would someone want all their net worth in real estate properties rather than diversify with other investments, which if they wanted to could also still include the real estate sector?

[energy123]

For tax efficiency. The US, UK and many other countries have variations on this theme that the house you live in is taxed less than stocks, bonds or second properties.

This creates a distortion where people buy the biggest house they can afford, because everything else gets taxed.

[Esophagus4]

From people I know: they aren’t aware of / comfortable with traditional financial instruments, so they just buy houses and have the rest in a savings account.

Their houses aren’t even “investments” to them, they’re lifestyle properties that also may increase in value.

[sidewndr46]

This, 100x over. You invest 1 million USD in a house. The house loses 90% of it's value. You still own the house. You can live in it, hopefully you get some benefit from the investment, even if it has no market value.

You invest 1 million USD in the stock market. It loses 90% of it's value. You basically have nothing but a tax write off on future gains.

[Esophagus4]

But at least with owning stocks, I can vote in a bunch of proxy things every so often… which will keep me busy so I don’t have to think about all the money I lost :)

I guess the housing equivalent would be an HOA, but honestly I would rather lose 90% of my money than sit through an HOA meeting…

[sidewndr46]

I'm guessing this is a joke, but my advice would be not to purchase property subject to the tyranny of an HOA

[Ntrails]

> people to squat in gigantic houses that they don't need

In the Uk, at least, stamp duty is an obvious and infuriating driver of either buying big early or never downsizing. I did the former, parents do the latter.

Easy to solve the incentive problem yet we never will

[petesergeant]

In theory I agree with everything but I’ll point out that:

> But residential construction should be protected to ensure each household is able to buy one with the average country salary

is political suicide, because you’re giving every voter with existing property a haircut on money they believe they already have, that they’ve usually borrowed to buy, and that they’ve financially planned on appreciating. Per Jean-Claude Juncker, “ We all know what to do, we just don’t know how to get re-elected after we’ve done it”

[xtracto]

I understand, but what if you establish a 10/20 year increasing taxation scheme. Plus some decreasing tax incentive to sell residential property.

You tell people: You have 20 years to sell your second/third residential properties, even at a good tax premium. But in 20 years you MUST have sold or you Will pay lots.of.taxes.

Edit: anyhow... I dont pretend to try to solve this complex issue in a couple of HN comments. It's just a general sentiment I have that the.only way to remove speculation from residential property is by government mandate.

I'm all for this. And I am "part of the problem " as I own 2 houses in 2 different states, and rent one at a freaking high rent price, because the market in that area is crazy.

[bell-cot]

Yes, and for any unit of gov't which is funded by property taxes, there's a second edge on that razor blade. Spiraling residential home values yield spiraling property tax revenues. And there are a whole lot of beneficiaries who feel entitled to their ever-growing cuts of the resulting gov't spending.

[bpt3]

Just make it easier to build houses. It's like the Bitter Lesson, but for regulation-loving progressives.

Also, buying or building and operating an apartment complex isn't speculation in general, unless you consider basically any financial investment speculation.

[Steve16384]

Several UK councils now charge double council tax (the monthly tax you pay for having a house) on second homes, exemptions notwithstanding.

[Ekaros]

I am against "speculation" on any sort of real estate. On other hand I am not against real estate investments. And I don't think single family housing deserves any kind of special treatment.

I see no reason why someone providing capital to build a building and then renting it out to cover cost of that capital, maintenance and building cost is unreasonable or bad thing.

Issue really is when market is manipulated to keep prices going up beyond inflation or normal changes in demand. That really ruins everything. Real estate shouldn't really appreciate at all over time beyond inflation.

[CodingJeebus]

> I see no reason why someone providing capital to build a building and then renting it out to cover cost of that capital, maintenance and building cost is unreasonable or bad thing.

The problem is the scale of investment. For example, 3 companies own 19,000 houses, or 11% of the rental market, in the Atlanta, GA area[0]. The market is being "manipulated" in that investors with vast amounts of cash are outbidding folks trying to buy a primary residence, and by owning tens of thousands of homes, you exert a measure of control over the housing supply (i.e. "manipulation").

I don't believe that companies should have the ability to own so many houses, and the easiest way to curb this is to progressively tax investment property to the point that isn't financially feasible to own tens, let alone thousands, of homes.

0: https://news.gsu.edu/2024/02/26/researchers-find-three-compa...

[Ekaros]

Limiting what companies can own would lead to increased demand for rental properties thus increased rents. Making the renters who are unable or willing to buy to have to pay increasing amounts of money. I do not see how that would fix housing in anyway.

I think forcing people to buy home is worse than some party owning lot of homes.

[senordevnyc]

3 companies own 19,000 houses, or 11% of the rental market

11% of the single family rental market. There are 200k rental apartments in Atlanta too.

[bpt3]

No, the easiest way to curb this is to make it easier to build homes so that supply is closer to the level of demand, not create even more policies that will reduce supply.

Controlling 11% of the rental market is not enough to manipulate it, and that's one of the most concentrated markets in the US if I remember correctly. It's not an actual issue. If those 3 companies are in fact colluding, use the existing laws against that to prosecute them instead of inventing more counterproductive policies.

[bpt3]

When you ban "speculation" on an asset class, you're just telling owners (including creators) of that asset class that they will make less money if and when they sell.

Setting aside the "I know it when I see it" definition of speculation used by most people that changes as needed during a discussion and all the negative side effects that come with that, is telling people who produce a scarce asset that they will make less money when they sell it a good idea, or a bad idea?

Why do you assume that prices increasing faster than inflation is manipulation, and what is the definition of "normal changes in demand"?

Real estate historically hasn't appreciated faster than inflation over time. Supply constraints, historically low interest rates, and a couple other factors have changed that in a number of areas in the last couple decades, but not all. The Rust Belt is a prime example, yet for some reason that isn't relevant in these discussions.

[Taronar]

Lets say a transaction has 2 parties that want to extract value (builder, buyer) if there are 3 parties now everyone needs to make money. (builder, speculator, buyer) middle mans ALWAYS increase prices and add little to no value to the actual GDP of a country. They do offer financing, but a financing value of lets say 500k vs a construction value of 500k the construction value has more weight because it is fully finanical vlaue. the 500k investment might be part of a money multiplier which puts strain on the financial system. Speculators ALWAYS drive up prices. Just look at any field Private equity has touched.

[skillina]

"Speculators" are not built-in middlemen, they are competing on bids with the buyer. Perhaps there could be some policy put in place to level the playing field between an owner-occupant who will bring mortgage-related red tape and an institutional investor who can make an immediate cash purchase, waive inspections, etc.

[horsawlarway]

I'm going to suggest that the "buy" case actually has far more interested parties trying to extract money.

In no particular order:

- Financing company

- Realtor x 2 (both seller and buyer)

- loan servicing company (may or may not be the financing company)

- Insurance companies (multiple, depending on how financing is achieved, everything from property itself, to title, to PMI)

- Appraisers

- Home inspectors

- Closing attorneys

- County tax office

- City tax office

Basically... there's a reason that renting is the right call if you're not buying to hold for at least 5 years, ideally 10.

---

There absolutely is speculation in housing markets, but at least in the markets I'm familiar with - it's not really the landlords who are renting houses that are doing the speculation. It's the folks who buy up 100+ houses in depressed/low-income neighborhoods during recessions and then sit on empty property for years.

[skillina]

The difference is that all those parties serve a necessary function. We could debate the tax office - arguably the function of a transaction tax is precisely to deter speculation or sales for short-term use.

Some speculators serve a necessary function but many do not. In my area it's not uncommon to see homes listed where the last sale was ~6 months ago and it's clear they just slapped some paint on it, replaced appliances in ways that are not generally to my taste, and then doubled the asking price.

[horsawlarway]

Yes, and those people aren't landlords renting the property.

So I'm not certain how to tie that back to the original discussion about not needing a special case to handle people accumulating multiple residential buildings.

--

Side note - I don't see this case pretty much anywhere (and I'm literally in the process of looking at homes). I do see cases where a home sold 6 months to a year ago and the new price is ~10% higher, and I do see cases where a home sold in 2021/2022 and now the price is 2x higher.

But what I don't see any of is doubled sales price in a 6 month window with just a new coat of paint.

So I'm not certain how this is relevant at all given it's non-existent in any of the markets I'm looking at.

[staticassertion]

I assume that increasing the taxes would just lead to higher rents, right?

[bananaflag]

Which would favour people with fewer houses, which don't have to pay the increased taxes and so their rents could be lower.

So the 2nd, 3rd house taxes could be relatively low but for the 10th they would be ginormous.

[Esophagus4]

There are very few people with that many houses anyway.

These people do not affect rents in any meaningful way.

> Small investors who owned between one and five properties held 87% of the single-family homes owned by investors; those owning six to 10 properties owned another 4%

https://www.prnewswire.com/news-releases/real-estate-investo...

[reactordev]

Possibly but it would also create more private equity reits that would build and operate these multi-family units. There isn’t a clean solution without making it illegal for companies to own single-family homes.

[cestith]

You’d have to have exceptions to that. Many new homes are built as whole subdivisions, then sold to initial residential owners. Banks won’t lend on homes they can’t foreclose on as collateral, and banks are companies. Mortgage companies are for this purpose the same as banks.

Some companies buy and update homes then resell them. They don’t all do a cheap flip with a massive markup. Neither do all of them hold them long term to charge high rents. That seems like something that should probably be regulated rather than outright banned.

Beyond single-family homes, it’s very rare for someone to build an apartment building with all of the units already sold. In fact, most are not coops or condos and are rented long term. Those rents also keep going up. A big part of that is how hard it is to get a new complex, especially a mid-rise or high-rise building, permitted to build.

[reactordev]

Incorrect about the builders. It would force builders to hold capital instead of borrowing. It would make banks able to have an asset in collateral for the loan to the person, that they can then sell. Builders already cut corners to pocket money from loan differences, we should probably put a stop to that.

I think there’s a difference between a bank company “owning” a deed vs a PE company holding it for speculation and rent squeezing. You are right though that there has to be a system to hold inventory and we made Fannie Mae and Freddy Mac macro-economic instruments instead of those inventory stewards.

[naasking]

Speculation is not really the issue, most of the issues are around regulations limiting construction.

If you wanted to incentivize home buying for young families, then the demographic that needs the most incentives are old people whose kids moved out decades ago. Every single person I know has two aging parents living in 4 or 5 bedroom homes by themselves, my own included. I know people are sentimental about the homes they grew up in, but this is the biggest lever you could move: hike property taxes on properties with unused occupancy.

If you want to keep the home in the family, then this encourages the parents to give the home to one of their kids who actually need it because they're starting a family of their own.

[boringg]

How do we feel about cottages or summer homes for people who live in poor weather climates? Is that a luxury that should be universally condemned? I woulnd't think those qualify as speculative but more like lifestyle money pits from what I have heard.

[seba_dos1]

Usually when something like that is proposed seriously it isn't supposed to start from the second home already, but a bit further as there's very little social benefit in excessively taxing a flat inherited from your grandma waiting for your children to grow up either.

[OptionOfT]

Allow me to flip that around. Should people in places like Phoenix be priced out of the market because a significant amount of people have a winter home there?

[dzhiurgis]

So people who want to rent are forced to live in commercial buildings?

Some people need to rent and some will never be able to of want to buy property. This is taxing them even more.

If we do something like this it should come from financial system. Like already you need 30% deposit when you buy investment property in NZ. Perhaps we should only give rental loans to new builds only.

[Markoff]

no problem, main apartment will be written in my name, 2nd in my wife's name, 3rd in my son's name, 4th in my daughter's name and for others I will just set up companies

this proposition literally solves nothing

and for the record I own one real estate, which I bought without mortgage and live there with my family

[therealdrag0]

What a funky way to address a supply problem. Just build more housing!

[Henchman21]

Lots of people in the thread pontificating about tax shelters, net worth, good investment strategies.

I suggest you do those things while homeless. Let me know how it goes.

[PLenz]

This is an indirect way to get at what we really need: a wealth tax. Don't treat the symptom, treat the disease.

[flowerthoughts]

Or unoccupancy tax. Forcing landlords to let at the price renters are willing to give will probably do some to reduce rent levels.

Same goes for commercial, but in that case, I'd even suggest forefeiture if you are not reducing requested rent within a year of vacancy. Let someone else take over if you overspent.

[bpt3]

Where does this misguided theory that there are vacant homes in desirable areas come from?

All data indicates it's not the case, as well as common sense.

[flowerthoughts]

Fair question.

For homes, I don't know if there are. But I think taxes should be levied in line with incentives. If you place a wealth tax on property ownership, the only tangible thing that will happen is rents going up to offset. Since the tax applies to all landlords, it will be the closest thing to rent inflation.

What you really want to avoid is homes built but sitting empty. Whether that's a builder who can't sell at asking price, or a landlord not getting the rent they want doesn't matter. If the city sold a lot to you, they did so for improving home supply, not the developer's profits.

For commercial, my opinion was based on Louis Rossman's YouTube channel about New York. The hypothesis there is that loans are based on property value, which are tied to requested rent. Asking for a lower rent might mean they have to put up more collateral, which they can't. So they keep asking for high rates and leave it vacant.

[bpt3]

> For homes, I don't know if there are.

Generally, there aren't any meaningful number of completely vacant homes in desirable areas in major cities. The caveats are there for cities like Miami where there are a significant number of second homes, cities like Detroit and Baltimore that have failed in some sense and experienced major population loss at some point, and rural areas that also have been experiencing population loss for some time.

I don't have a problem with vacation homes and most Americans don't seem to either, but if you do, okay.

The areas with declining population aren't really relevant to the discussion IMO, other than it's cheap housing that exists as a counterpoint to the people who claim no cheap housing exists.

> But I think taxes should be levied in line with incentives. If you place a wealth tax on property ownership, the only tangible thing that will happen is rents going up to offset. Since the tax applies to all landlords, it will be the closest thing to rent inflation.

I agree.

> What you really want to avoid is homes built but sitting empty. Whether that's a builder who can't sell at asking price, or a landlord not getting the rent they want doesn't matter.

Sure, but that's not a problem today. Builders aren't sitting on homes for extended periods of time, and landlords aren't leaving units empty for extended periods of time either. They are already disincentivized from doing so by existing carrying costs, so they don't.

> If the city sold a lot to you, they did so for improving home supply, not the developer's profits.

They presumably did it to generate revenue for the city, though there isn't much buildable city-owned land in most municipalities.

> For commercial, my opinion was based on Louis Rossman's YouTube channel about New York. The hypothesis there is that loans are based on property value, which are tied to requested rent. Asking for a lower rent might mean they have to put up more collateral, which they can't. So they keep asking for high rates and leave it vacant.

The commercial market is completely different than residential. Loan durations are shorter, terms are different, and there are many other factors that differ.

That analysis can't be applied to the residential market.

[scoofy]

Your logic misses the point. To make housing a non-investment, we need to tax the investment returns on houses. This mean taxing capital gains on all houses, not just 2nd and 3rd homes.