They are generally called non-primary residency taxes, and they're definitely a thing, and definitely getting more publicity, and most definitely need to become much stronger and more widespread.
We have these in BC - they were adopted in response to overseas real estate investment (and other factors) driving the Vancouver housing market insane. Canada also has a number of programs that make property purchase for new homeowners more affordable by waving some taxes and allowing interest free borrowing from your retirement fund. So the fight to keep housing affordable for everyone is a difficult one.
One of the issues is that when these sorts of policies initially roll out you tend to see a contradictory effect of sudden spiking in prices as a lot of people who were on the fence suddenly decide to add to the housing market demand - but over time these policies tend to settle in a place where thing are more affordable.
The other issue is that the renewal period for first time home owner benefits is quite long, so if you are exiting a long term relationship or trying to pick yourself up after bankruptcy you can be forced to enter the market as if you were a well established asset holder.
"but over time these policies tend to settle in a place where thing are more affordable."
I seriously doubt that to be true in a low supply situation. In the Netherlands, the government reduced real estate transfer tax from 8% to 2%, and sometimes even 0%. This should make houses more affordable to newcomers.
Another well intended measure was for older people to share their wealth to their children via early inheritance, tax free.
The market simply adds this discount and extra start capital to the price "room". In a situation of perpetual scarcity, the price will rise to the maximum people can afford/borrow.
And with "people", I mean only the buyers. It doesn't matter if 90% of the population is priced out of the market if the richest 10% is still enough people to buy up all supply.
This last bit is most worrisome, because it means that even the nuclear instrument of increasing interest rates is unlikely to resolve the issue. The interest cannot be jacked up much because that would bankrupt the middle class. A minor tweak will be no issue at all for the richest 10%, so the price will not come down.
Increasing supply in a dense and popular area isn't a structural solution. Not only does it meet a lot of resistance, new demand will forever continue to outpace the constraint of delivering new supply.
Which is why I believe in reorganizing demand. These dense areas are dense because it gives people access to jobs and education. If we reorganize that into a more sane distributed way, we truly address the problem.
> Canada also has a number of programs that make property purchase for new homeowners more affordable by waving some taxes and allowing interest free borrowing from your retirement fund
Some further flaws in the system: I was shocked to find out that the new home buyers tax credit only applies to homes under $500k - which in vancouver means it only applies to a handful of small condos. It's also not poolable, so two first-time buyers going in on a $501k condo are disqualified.
I thought Cambridge, MA has a great system — the first $250k of any property value is tax free (or at least it was 10 years ago), and property taxes then only go above that. It had the effect of making property taxes cheap for small home, allowing lower income people to have more affordable housing over the long term.
Homestead exemptions like that are common in most states.[0]
Cambridge does have a lower than average residential property tax rate, mostly due to how much commercial development they have. I still wouldn't point to Cambridge as a particular success in terms of affordable housing though.
> but over time these policies tend to settle in a place where thing are more affordable.
Could you point me at some more reading that talks about this? The increase in prices makes perfect sense to me, but I don't really have a good handle on why things would come back down.
Non primary is one thing - but perhaps the thing that needs to be gone after is commercial residential (as in, if you have more than x properties). Or commercial ownership of single family homes. There is a difference between owning a 10 unit apartment and owning 10 single family homes.
Many places have a (small) rebate for owner-occupied real estate. Cambridge, MA is one; I get a break for living in my house as a primary residence.
Edit to add: I looked up the exemption calculation. It excludes up to $432,666 from the assessed value. Multiply that exclusion by the rate of 0.00585 ($5.85 per $1K per year) and the exclusion reduces a homeowner's taxes by $2,531.10/yr.
We have that in Michigan. Non-homestead property taxes. All it does is make apartments more expensive for renters. The cost is just passed on to the renter.
This, this will be actual result. "Just add more taxes" === the renters pay that delta.
Scale it per property === take the average of taxes / homes, pass it along to the renter.
About the only way I can the cost not getting passed to the renter is for a "the government" to set the rental prices as if the home was under a rolling 30-year mortgage, taking into account PITI. Adding a property tax on top of that ONLY to the property owner, maybe exponentially per property owned, could curb companies like Blackrock.
That being said, I have very faith that a "the government" could do this efficiently/correctly/at all. Trying to trace down umbrella corps and whatnot would be cat and mouse. The US government can't even figure out who is cheating on their taxes as it stands.
Raising property taxes on SFH rentals, but not apartments will make apartments more attractive. Sure, renting a house has advantages, but those advantages have a price, and how many renters are going to be willing to pay 40% more per square foot for a SFH over an apartment.
At some point, even an expensive mortgage is a better deal.
Apartments are great, we should incentivize apartments. They are high density and can be built in a variety of sizes.
Apartments are great, unless you want a yard, a large family, to let your parents[-in-law] move in so you can take care of them, a large dog, more than two cats, more pets than the property owner has arbitrarily decided to allow, equity, a barbecue, frequent parties, or the ability to not have to pay rent or a mortgage someday. Buying apartments is not the norm, nor are ones large enough for a family with more than 1 or 2 kids.
> I don't think I've ever heard of a politician even talking about that though
You have to consider that legislative members tend to own property and tend to be baby boomers. They are far removed form the experiences that younger generations have to deal with - from their perspective, their home value can go up 20% in 2 years and that will be rationalized as a normal market. They are not talking about it because they are benefiting financially, and talking about may make them hurt financially. This will change, baby boomers cannot live forever even though they behave as though no future generations exist.
It won't change. After the boomers come the millennials, and I believe there's still a generation in between (generation Y?).
Many of them may have been just in time to snatch a house from the market, and they see their home value go up. None of them are going to advocate for super high taxes on their "unjust" gains nor will they give a discount to future buyers. They will maximize the return just like everybody else would.
It's not boomer behavior, it's human behavior. Boomers were just lucky to get in earlier. The only annoying thing about some boomers is that they don't acknowledge their luck, and insist it was all due to their hard work or brilliance.
The school going generation always wants a revolution, a redesign of society. To fix its flaws, to make it more fair. It's easy to want to change everything if you have no responsibility or anything to lose. But then they grow up and have skin in the game, and they'll be just like everybody else, protecting whatever wealth they have.
Consider that many boomers were hippies when they were young, rejecting even the notion of personal property. Now they own almost all property. The 21st century version of hippies are even better at managing progressive optics whilst taking in top 1% salaries.
Most baby boomers (the ones getting all the blame) usually own one house, that they live in... even if the value goes up, they need a place to live in, and the high prices are pretty much everywhere, people actually want to live. The only ones profiting from baby boomers are their kids when they inherit the houses.
Politicians are probably getting paid of by companies investing in housing and buying up hundreds or thousands of houses, because the price increases make it more profitable than many other investments, and (unless there's some legislative action) makes the investment safer than most other high-profit ones (eg. cryptocurrencies).
> even if the value goes up, they need a place to live in, and the high prices are pretty much everywhere, people actually want to live. The only ones profiting from baby boomers are their kids when they inherit the houses.
This leaves out one major factor: they need somewhere to live but that doesn't mean it needs to be the same real-estate market or size. Someone who sells a house large enough to have a family in a major market and retires to a cheaper market can see a very comfortable return. Probably nowhere near enough to make up for the other impacts of the policies people voted for to drive up their home value but it's harder to get people to give equal weight to different factors when one of them will show up directly in their personal bank account.
This would be true, if someone old sold a house in san francisco and bought a house in bumfuck alabama...
But considering that people tend to move to a few urban locations, the house prices in eg. florida got very expensive too... yes, they earn a bit more, but I don't believe that single house owners, moving from SF to FL (or wherever) are causing the housing crisis.
It's also true if you sell a house in San Francisco and move to South Florida, or North Carolina, or all of the other places millions of people do exactly what I described. Retirees don't need massive houses, to minimize commutes to downtown, or being in the best school district, which opens up many options which other people might pass up. If your goal is “on the beach in South Beach”, yes, it'll cost a fortune but if your goal is “near the beach, any beach” you have plenty of options for well under $100k.
I don't disagree that this isn't driving the housing crisis — my point was simply that it's not like many older people aren't strongly in favor of the housing market staying high until they can cash out, because for many people their home equity is the largest component of their retirement plan and they aren't interested in continuing to need to deal with the maintenance required by a single-family house.
Whenever people say anything complex can be fixed easily with legislation, I'm pretty sure they don't have a clue.
These types of issues are never easy to fix, because they're cause by many factors that have taken years to form. There are no easy legislative fixes in practice. They only exist in theory.
another thing you can do is raise the interest rate on the mortgage for investment properties. This is already done somewhat but they could increase it quite a bit. Can't really pass the cost onto the renter either because the market supply/demand dynamics sets the rental rates, not the owner.
I mentioned the idea in another thread... but yeah... 0% property tax on your first property and primary residence, 1% on the second, 2% on the third...
Still makes it possible to own several houses/apartments (eg. summer home), but makes it impossible to do at a scale that those companies do.
Own a bunch of shell companies that own a single property each.
Real estate ownership is a mess. It can be nearly impossible for people to figure out who actually owns property if the entity buying wishes to remain secret.
Maybe, but a lot of people have legitimate reasons for holding their home in a trust.
If the savings are great enough, it would make sense to pay someone to "own" the house, with a contract saying that they must act at your direction. This isn't some crazy idea either, that's basically the approach that's already taken by these same people that hide their identities through shell companies. The "owner" of the shell company is some random B'zean who is paid to be a rubber stamp.
Then renters can afford the larger rents, and after the dust settles all you've done is take money from one of the state's pockets and put it in another, no?
The problem is the financialization of housing in the first place. You have to figure out a way to reverse that. Making speculation illegal probably isn't feasible, but could you require that renters earn equity offsetting some portion of rental profits?
I don't think I've ever heard of a politician even talking about that though.