I don't know how regulators can look at this number of vacancies and conclude that yes, the taxation on property with vaccancies is as high as it should be.
I am really a proponent of the Chinese system. I’m a real estate investor and this “free market” isn’t going to last much longer since owning vacant homes will net you more than virtually anything else you could do legally. Real Estate is a free money machine, and it won’t stop until we adopt realistic government controlled system.
> Real Estate is a free money machine, and it won’t stop until we adopt realistic government controlled system.
Real Estate will stop being a free money machine when the government stops artificially restricting housing supply with single-use, single-family zoning.
It won't. Zoning is stupid and harmful in the US. But real-estate will always be rising in value. There is no way to make more land. And land you do nothing to gains value from others around you improving their own land.
A land value tax that ignores the value of improvements on the land would make a dent. Freeloaders who buy a lot just to sell it later would see their gains evaporate. So land holders would seek to actually improve their land.
Land increases in real value (beyond inflation) aswell. This is due to people building roads nearby, schools nearby, nicer houses nearby, etc. It's effectively the old adage 'location location location'.
Currently another big driver of land value is zoning. But it isn't the only one. And until society starts degrading hard, the other drivers aren't going to slow down either. maybe with an exception for suburbia where the roads will need replacement even though the area doesn't raise enough tax revenue to pay for the replacement roads.
Real-estate does not increase in value in Japan. Land might increase in value, but the developments depreciate. Agree that land value tax is much better than property tax.
I agree that we should relax residential zoning laws but it does feel pretty naive to think the free market alone will solve this. I doubt everyone being adequately housed is even the optimal state of the free market.
The Soviet Union had chronic housing shortages. Multiple families would live squeezed together in one small apartment. The waiting list to get your own took years and years.
It's kind of funny how Chinese communists tried to build enough concrete prefabs not only for people to be housed but also for people who want to invest and it backfired spectacularly.
The investor class is simply insatiable and you can't just satisfy the demand because it's always growing beyond all reason.
You need to curb investors interest in real estate.
Ok, I have an idea, lets stop printing new money directly into the housing market through the federal reserve. Without it, there is no guarentee that a house will appreciate, in fact most homes would be considered depreciating assets. The cost of homes would plung 80, maybe 90%, and housing would be radically more affordable. Id be totally hosed, but I would find that a reasonable compromise.
> Ok, I have an idea, lets stop printing new money directly into the housing market through the federal reserve.
So basically ban buying residential real estate on credit. That's a start.
It would have interesting sideffects. One of them would showing clearly to the masses how unaffordable houses actually already are.
Unfortunately rents would go up in the short term from increased demand from people who'd otherwise get a loan. So the rich people would keep buying them raising the prices till the new equilibrium is reached.
Eventually rents would settle at how much people who rent can pay without starving and house prices would settle at whatever's the price of whatever asset that yields similar returns.
I don't think it would be at 10% of today's prices
The Netherlands doesn't have the US kind of weird zoning laws, yet we're still suffering a housing crisis.
The power is simply way too skewed in favor of gigantic companies with coffers that are infinitely deep when you compare them to any individual looking for housing. They can buy dozens of building at a time and completely eek out individuals looking for a home for themselves and their families, and what can anyone do about it?
Imo corporations should be legally barred from owning residential property of any kind, and there should be limits to what an individual can own for themselves as well, be it at the neighbourhood/district/city/state/country level. The overwhelmingly large majority of people need no more than a single home, the only people this kind of rule would affect negatively are the ones that aren't struggling in the first place.
> it won’t stop until we adopt realistic government controlled system.
Are you aware that the government is the entity preventing housing from being built in many cities?
I don't think zoning should be abolished or anything but clearly the regulations the US has now, at least, are incorrect and restrict supply far too much.
Yeah, and allegedly the super-efficient government controlled system has built on the order of 4 bn houses for 1.5 bn Chinese. This might be the largest and most costly housing bubble in history, and I believe it happened partly because China is terrified of letting its banks fail. If you think the "Greenspan put" is a thing, just wait till you hear about the PBOC put.
The Chinese system restricts foreign nation state actors from buying everything so they will not be able to do what China is doing to the US. The US has only just started writing policies to address that (for example: [1]), probably because for so many decades Americans wanted to believe that China was an ally, or at least a well meaning business partner. China proves that capitalism doesn't work by destroying it.
China is not doing anything to the US, western countries were willing to hide the black money of countries before as it helped their economies. As China and other countries got richer the amount of money those people started bringing and putting into the real estate of western cities in the world exploded. The property market crash of 2008 and low interest rates made the situation worse. Now people in the west are crying about property prices but if they stopped allowing in black money from countries they would not face the problem they do. If they can find out about terror financing etc then they for sure can find all the corruption and black money coming into their countries/cities.
China is doing the same in the EU. In european capitals, they are buying up the properties, increasing the rents and pushing out young couples from renting flats for a reasonable price. There are districts in Budapest where all flats are owned by chinese people. How does it help the EU economies, if they are leasing without contract, without tax, without anything illegally? They came every month, you pay in cash, no trace (but this applies to 99% of hungary renting, so it's the issue with the current rental system), they aren't even injecting money into the economy this way. And it's getting ridiculous that 26-28 year old people cannot rent a flat by themselves and have to resort to renting a single room only for 30-40% of their salaries.
It's not china ie chinese government doing it but rather Chinese people purchasing residential properties. Chinese government is interested more in stuff like ports, airports/infrastructure. In actual fact China would prefer the money it's population is spending abroad is spent at home specially since the COVID slow down has slowed it's economic growth. So china restricts money going out of its borders now western countries could help China block it but that would be helpful to Chinese communist government so they don't and that is resulting in their own citizens getting priced out of their own cities.
At least in regards to the US, no one can really know that. The Chinese government technically doesn't own anything in the US anymore. The alarm is being raised because supposedly private Chinese enterprise includes ownership of significant American food production (e.g. largest pork manufacturer), farm land, homes near military facilities, etc. Those are strategically sound holdings for national defense in both countries. Suburbs are built on farm land, etc. It's very difficult to decouple real estate from national defense, really.
That said, "Chinese people" don't own all that much in the US overall when compared with other countries. China is being singled out because they have been caught spying repeatedly. They stood and burned their embassy and refused to allow firefighters in. There is military posturing. They are invading American airspace over the US mainland. All these combined paint such purchases in a suspicious light at the very least.
There's enough evidence to know that the Chinese government is funding at least some of the purchases. It could be most of these purchases. No one can know for sure, not even the individual buyers themselves. Only the Chinese government knows.
In the US this term is used to distinguish a country's government from its people. It refers specifically to a person or enterprise acting at the direction or as part of a country's government or military, as opposed to a private citizen. That's an important distinction in a country obsessed with protecting civil rights where nationality is a protected class. Under US law, preventing the purchase of a house based on national origin is unconstitutional. But if they are acting on behalf of a foreign government... You get the idea.
Should be a formula that keeps increasing the tax liability per empty month, so eventually the owner has to dump it for zero or give it back to the government.
You want a number of empty units in your city so that if you want to move there is a place to move to. No empty units means someone does without. You don't want too many empty units of course. some is needed.
this price fixing is partially about units not even for rent which is a different problem you don't want. (but you want some units not for rent while they remodel)
Obligatory Georgism callout, but a high land value tax would solve this issue. Landlords would be forced to put the property to productive use, and it discourages the kind of speculative land holding that these companies are engaging in.
It wouldn't get passed on. Without land value tax, holding real estate is a good enough investment on its own that rent prices can be left artificially inflated. LVT puts pressure on landlords to actually earn back the value of the property to avoid losing money. In practice, that means offering competitive pricing.
> But all landlords would pay the tax, and none of them would want to lower prices below their own costs.
This is true ...
> If it becomes impossible to rent properties profitably, then eventually there would just be fewer rentals available.
But this is a leap that doesn't apply to the Georgist scheme. A key feature of the scheme is that taxes on buildings (possibly among other taxes) are removed in favor of the land value tax. It's true that if the tax on some piece of land increases sufficiently, it will eventually become impossible to profitably charge rents on existing buildings on that land--but improving existing buildings or building some superior building (for example, a new building with more units than a pre-existing building) allows landlords to continue profiting.
If the current landlords don't want to improve buildings there, they can sell the land to someone who will. And it's clear that someone will, because if there's enough demand for the land that the land value tax makes it unprofitable to sit on it without improving it, someone is going to want to do something more with it.
The reason we don't already have a Georgist-style economy is quite obvious, of course: the homo sapiens landlordicus is a very soft, squishy, vulnerable subspecies. If they had incentives to improve their properties and thereby possibly even work as hard as the rest of the human species, they might well go extinct. And no one wants that.
That would require removing the zoning restrictions that prevent the construction of new housing.
But here's the rub: if you remove those restrictions, you don't need to change the taxes. Even with current taxes, people will build more housing units, if they're allowed to and they can make money from it.
Land value tax can't be passed on to tenants. Whether or not a tax can be passed on depends on the elasticity of supply. The supply of land is fixed, so land value taxes reduce the price of land, and generally also reduce the price of rent as a result.
Yes, but adopting Georgism would mean eliminating income taxes as well. In principle most people should end up paying less in taxes (because they don’t live in a densely–populated area, or because they live in a dense area but are in an apartment instead of a house on a whole acre), while the overall tax revenue stays the same.
I lived in floor 30 of a “luxury” skyscraper in Seattle built after ~2015. We had an algorithm for pricing according to the landlord and the class action letter we received. Amazing water views and city views. Clearly desirable housing in a city flush with rich people and a massive housing shortage. I was the only occupant on the floor and the only tenant at the time ever to live in that unit. They tried to raise my rent like $1000/m when lease was up. We paid it since we had just gotten a raise. Next lease renewal was about $1000 again and we moved out because $2k extra was just too far above comparable units nearby. They literally offered us a Starbucks gift card to stay. We could see the other vacant units listed on the buildings website and they were always priced way above comparable units in neighboring buildings.
Oh and to directly answer your question, I’m guessing the building was never more than half full. The mail room was never full, and the parking garage had about 20/100 spots in use.
Thanks for the details! I'm asking because the overall rate is historically super low, and that kind of behavior from the landlords seems ... bananas - to use the terminus technicus. (But of course, maybe during ZIRP it was not a problem to try to experiment with various crazy - and inhumane - pricing schemes.)
The data you showed says there were 7 million units held off-market. My building had only a few hundred tops.
I wonder if there is more to the story though. I think that the building would be less desirable if it was full. Skyscrapers already have long lines for elevators, and common spaces get a lot of wear and tear from so many people in small areas. I wonder if they keep it below capacity while they can charge a “newness premium”, and once that fades they add extra units to the market to increase revenue.
those held off market usually means summer houses and the like.
and just natural turnover - people moving, outgrowing their home (or on the other end when someone leaves the home, or pass away) - leads to a vacancy of millions of homes. people usually harp about this a lot, and I also think it would be good to get people into homes, even if temporary, faster. but the effective solution is land value tax, and high density. everything else is just bad and worse trade-offs (like rent control and various machinations with 'affordable' units, and so on).
regarding highrises, I noticed that they mostly look the worst when they are new. everyone is moving in, elevators are full of scratches. there's a lot of ongoing construction (inevitably there will be someone from a hundred tenants, who wants to change something). and then eventually it settles into some steady state. ... so this forced cycling or whatever this management company did is just 120% WTF to me.
