[mapt]

Tax property values.

We could talk about the merits of Georgeism but honestly let's set that aside - conventional property taxes are sufficient here. Most of Manhattan apparently has <1% annual property tax, and the eclectic sometimes regressive way it's calculated in NYC is suggestive of corruption. These asset bubbles can only inflate because the owners make nearly as much money sitting on a vacant property as they make with tenants, so they borrow approximately All The Money to dump it into real estate. Property taxes are not just a necessary evil to keep the schools running and the garbage collected (cough), they're a tiny fractional "decommodification" of property as asset, because the money collected from the owners is spent on the residents. Most of this money passes through directly into higher rents, and we shouldn't care about that, because it's spent on the residents (if the residents don't want good public services, literally hand them a check, direct redistribution). This punishes vacant properties appreciably, and pushes them back into the market.

The ecosystem of debt and bank collateral that has grown around near-zero property taxes has strongly encouraged high vacancy rates, because the banks directly demand that what rents be collected, are high enough to justify the collateral valuation, but don't actually demand that rents be collected.

Set property values to the rate of inflation (depending on your preferences, CPI or local COL or local selling prices or S&P), and you have fully "decommodified" housing without lining the landlords up against the wall and shooting them, an option that is increasingly popular.

[bberenberg]

Am I understanding your point correctly as you hoping that an increase in tax rates drives property values down enough thay aggregate tax amounts are reduced?

The practical rental math in NYC is simple. Buy a $1M coop in a building with near zero costs. HOA will be at least 2k per month with the majority of that being property taxes. Thats your base rent. If you have a loan, add that to the base. You will not get cheaper rent until you drive aggregate taxes or interests rate down. There isn’t a huge profit margin on rents in NYC. I looked at a unit next door, and if we wanted to have rents break even on mortgage we would need to offer 85% cash up front. Im on the board of our coop, so I see how all of our financials function and same for prior buildings.

[robhlt]

Your coop building is on the unfair side of the "eclectic sometimes regressive" property tax calculation the parent comment mentions. Large (10+) multi-family rental properties are taxed at a much higher rate than single-family and 2-4 family properties. Correcting this imbalance would lower property taxes on your coop building while still raising overall tax revenue for the city.

[bberenberg]

We have 36 units in our coop iirc, so we are “large”. Generally I think our taxes are fairly reasonable. I just don’t think there is any reasonable solution here that isnt focused on a simple triangle:

- Build more, destroy short term value of existing owners

- Lower taxes, hurt short term city functioning

- Lower interest rates, drive up inflation

The only “fun” solution IMO is cut taxes and cut jobs programs that don’t deliver city value. DOE is a welfare scheme at this point.

[mapt]

NYC is home to ~half of the co-op housing in the United States. This is a relatively unusual arrangement. Co-ops generally forbid renting / subletting, they practically ban REITs, new resident-owners go before a board to get approval. They should be considered the same as owner-occupied housing, and for long-term owner-occupied houses where the asset value isn't a big deal, higher property taxes are on average a wash - they pay higher amounts for higher levels of public services. Perhaps your $2k/month goes to $3k/month but transit becomes free, trash collection becomes effective, and the schools become better. Or in the alternate universe your $2k a month goes to $3k a month and then we hand residents a $12k check at the end of the year.

Either way, vacancy gets punished, landlords can't treat the city's housing like gold boullion, and the price of housing is fractionally more tied to the cost of living than the future economic outlook in potentia.

Picture a conventional Ponzi scheme operating in the Lower East Side, which has scaled to be 30% of the city's economy. Whole industries have risen up around this scheme, it's essentially printing money in a way that seems like it might be legal if you squint, and you're not trying to regulate/tax it. It's growing so fast that it's actually causing problematic inflation for the rest of the city.

Can you afford to let it grow unchecked, indefinitely?

[bell-cot]

> Most of Manhattan apparently has <1% annual property tax, and the eclectic sometimes regressive way it's calculated in NYC is suggestive of corruption.

While NYC has never lacked for rot and corruption, those really aren't needed - or even particularly useful - for something like this.

As soon as you've got any sort of law / regulation / status quo that benefits a class of well-to-do people, there will be intense pressure to maintain that situation. Vs. the opposition - honest reformers, idealists, the poor, whoever - even if they're far more numerous, just never seem to have the zeal / focus / attention span / whatever to correct the problem.

[gjsman-1000]

> just never seem to have the zeal / focus / attention span / whatever to correct the problem

Mainly because, bluntly, the people who have the most zeal, attention span, talent, and focus... aren't in the group.

[bell-cot]

Somewhat. 99%-ish of adult humans will show far more zeal, focus, attention span, etc. on any "Issue X", if both they and their peers have a whole lotta money riding on Issue X.

Then there's the problem of late-stage capitalism's whole "Those who have the most gold should make most of the rules. Especially rules about who is entitled to how much gold. And double especially if they're obsessed with nothing beyond more-is-better gold hoarding."

Ignoring the morality, that optimization leads to the sort "Rich get richer, poor get poorer, God obviously only loves the rich, desperately poor people resort to desperate measures" instabilities and violence that made Europe an often-horrible place from the Napoleonic Wars through WWII.

[mschuster91]

> These asset bubbles can only inflate because the owners make nearly as much money sitting on a vacant property as they make with tenants, so they borrow approximately All The Money to dump it into real estate.

The problem is, as long as the stonk based US pension system keeps flooding dozens of billions of dollars a month into the markets, there will always be enough money to flow into REITs and driving up prices, even for vacancies.

Now, introducing (or adequately hiking) property taxes has the problem it may cost the REITs a bit of their profits - but it will be a nasty issue for individual families and small shops, and the large stores will just pass on the cost to customers because even with that, they will still be cheaper than small stores.

Vacancy taxes sound good on paper, because they - if done well - only hit REITs that hope for value gains and other unproductive uses of rare real estate (like Chinese and Russians parking wealth in Western real estate so it can't be seized by the government). The issue with them is a second order effect. If made painful enough to be worth the effort and actually force landlords to either rent out if need be at a lower price or sell, again if need be at a lower price. That however immediately forces REITs to write off significant chunks of the asset value (if rented out) or, even worse, actually realize a loss on the books (if selling).

Unfortunately, the markets really, really do not like either of these two things happening, we've seen that during Covid and the hard pushback against remote working that followed.

I have said it before, and I will say it again: the US pension system being so laser focused on stock and asset markets is going to fry its host society alive, because what needs to be done for society to survive cannot be done because too much pensioner wealth would be wiped out.

[mapt]

Vacancy taxes are, to my understanding, nearly impossible to administer effectively without approaching them formally as normal property taxes that have some kind of out. Lying about when the unit got vacated is basically expected, while creating a new resident out of whole cloth and filing taxes for them including a Residency Benefit Transfer is a bunch of easy to detect felonies†, and understood as such by everyone. Spend the money on better schools/roads/park and even this isn't practical.

†Modulo accomodations for undocumented immigrants

[polnurfer]

Tax more

[gjsman-1000]

Ever heard of the tale of the goose that laid golden eggs?

Imagine progressively feeding the goose less, so as to have a greater profit margin on the golden eggs it laid. No particular percentage of feed reduction seemed too harmful, until one day it died unexpectedly.

[silverquiet]

This sounds like private equity, except they'd also demand that the goose increase egg production by 10% per quarter.

[ceejayoz]

Just to be clear on the analogy, the goose is the tenants, and the person feeding it less every day is the landlord class?

[gjsman-1000]

The golden goose is the landlords who develop and maintain housing, the withholding of feed excessive taxation.

[ceejayoz]

But aren't the tenants feeding the goose, in that case? With rent?

It feels like you've left some important people out.

[mapt]

a certain share A of the prospective benefit of housing is in potential asset price appreciation, and a certain share B is in the utility value of the home.

The systems that contribute towards A are mutually reinforcing, vicious spirals in a neoliberal capitalist world. Just like in the art world, there is no hard objective value to vacant housing, and many purchases are made on debt. It's worth whatever the last guy paid, and so the banks will loan you 80% (or more) of whatever the last guy paid. This is a form of money creation. We have collectively bid up the housing stock, completely separated from the utility value, at a rate we generally expect to be competitive to loaning real operating businesses money to invest in actual operations.

If you tax ALL of the prospective value, and price sinks down all the way to B, you can still have profitable private housing development in a steady state. Unmet demand is a thing that exists. Yes getting to B overnight probably represents a crash in your overall asset investment picture, but getting 1/10th of the way there, locally, less so. Phasing it in over time, less so. If you're expecting 5% and you get 4.5% that's still a return.

The thing about this type of redistribution is, it's just a way better more functional economy than the idea of conventional price setting with the addition of rent control, or than the status quo. Rent control tears incentive structures and makes willing landlords into unwilling landlords who are instructed to be creative in how miserable they make their tenants; Its supposed goal of affordability simply shifts costs from older tenants to newer tenants. The status quo where property taxes are very low and so A is significantly greater than B simply doesn't establish those incentives of mutually agreeable economic exchange to a great degree in the first place. "I bought a house as an investment. Rent it out? I mean... there are upsides and downsides."