I live in Canada, but we have the same issues.

It's going to be a very interesting cross-generational political battle. The sheer number of "normal people" who own investment properties and AirBNBs now is extraordinary. I know people scraping by working average jobs that own multiple units. Meanwhile, the younger generation can't buy a home.

We've normalized the idea that real estate can't lose and everyone should own multiple properties, and we can't come back from that without one side suffering a ton of pain.

The way to fix this is painful but it is to revoke all incentives and to make people put down 25-50% as down payments. It will cool the market to near absolute zero short term but it will help long term in keeping housing to actually be housing.

Now that doesn't mean the incentives aren't skewed. But I don't think landlords buying their 20th house are getting the same benefits as a first time buyer.

The big one being taxpayer funded 30 year fixed rate mortgages, and subsidizing the existence of 0% and 5% downpayment mortgages.

>Your interest on your mortgage is tax free,

Literally 90% of US tax filers do not benefit from this, since it requires itemizing.

>the government offers cash back, etc.

I have not heard of this.

There are a variety of state, local and sometimes federal tax credits or down payment assistance for new home buyers.

I have no idea what "the governments offers cash back" means; but certainly the mortgage interest tax deduction is only available for homes in which you actually live for at least part of the year - it's not available for rental properties.

You can deduct mortgage interest as an expenses if you're renting a property, but that's exactly the same as any other loan used for a business activity and not specific to real-estate.

There may be additional tax benefits that accrue to a business that is paying interest, but that’s separate from personal deductions.

Then there'll be plenty of stock.

I wonder, though, what percentage of buyers this would affect. Lots of houses are behind purchased now with 100% down.

> That should drive down our prices

No, in Canada, foreign owned properties make up a tiny percentage of the total, so banning it doesn't actually have any impact. Works as future protection for sure, but that's all.

The "foreign investors" are a convenient strawman that hides bigger underlying problems.

Given we already have chronic undersupply, shouldn't the default position be to prioritize citizens and others who can demonstrate a greater need?

Of course, a major answer to this problem is to simply ban non-americans from buying american property, but that will implode real estate and hurt a lot of homeowners.

That is the voting middle-upper class. The majority are voters. And they won't want any of that.

You can’t have your cake and eat it too. Homeowners need to get hurt in order for housing to be more affordable. Housing taking up huge chunks of earnings is a terrible state of affairs for citizens and the economy.

Why solve a problem when you can just nuke it, right?

I hang out with AirBnB investor folks. There's a simple solution that works: Require the owner live on the property. Every AirBnB investor will skip the city/county if that is the rule, but still leaves room for legitimate residents to make some money (e.g. rent out the basement, etc). The latter isn't taking housing away from anyone - for most owners it's not economical to convert the basement to make it a long term rental.

If people bought their houses anticipating high rental income to make ends meet, that's a separate problem, and less bad than "people are becoming homeless because there are too few housing units".

It's not like the inventory of lots for sale doubles -- it stays exactly the same, but some of those lots increase in price because the ADU adds value.

> When a house with an ADU will reliably fetch 20% more than one without, then eventually all houses on the market will have ADUs, with the consequence that people buying will need to depend on short term rental income in order to make their mortgage.

If you significantly increase the number of units available via ADUs, then there's a lot more options to rent, and the demand to purchase houses goes down, bringing the prices down.

If the number of properties with ADUs doesn't go up enough to have that effect, then STR via ADUs will not significantly impact the housing market.

The reality is that if every house in the city had an ADU, most of them will not be used for STR, as the demand for STR isn't that high. They bring in a lot of money precisely because there aren't many options. If every house in LA suddenly had an ADU, you wouldn't get a proportionate increase in visitors. There will be an equilibrium point.

This is also ignoring the pain involved in building an ADU on an existing property. Depending on the locale, it can more than double your property taxes. Most existing homeowners will not build an ADU. Too much hassle, with uncertain income - most AirBnB hosts don't make much money via AirBnB - it's a fairly active investment and requires a lot of time/coordination.

Why would demand to purchase houses go down? People aren't buying houses because they can't find rentals. People buy houses because they want to be homeowners.

One classic example is the case of a very popular event happening in a small market that is otherwise unremarkable. Say, the Masters golf tournament: for about two weeks a year, Augusta, GA, is full of non-locals. Many residents will take vacation during this time and rent their home out to golf fans from around the world. Very few people want to rent a home in Augusta any other time of year. (It's also small enough that you're not required to fill out any additional tax forms, just report the income.)

Another is the case of a home that, for whatever reason, will not sell in the current market but would reasonably be expected to in relatively short order. A brief, 3- to 6-month rental for, e.g., a family that is constructing a new home that is not yet ready but who have sold their existing home and need somewhere to live is an excellent use.

Like I said, somewhat niche uses, but it's worth keeping in mind that there can be legitimate, minimally-distorting uses.

Investors made up 20% of buyers in the last quarter across major metro areas: https://therealdeal.com/2022/06/15/investors-seize-record-sh.... Historically they’ve made up much less than that. Housing prices are skyrocketing where I live in exurban Maryland, and in Eugene Oregon where my wife is from, but there’s no investors to be seen in those places. I’m not certain what the cause is, but I’d suspect it’s two decades of central bank policies dumping cash into the economy.

Correct. This article has the receipts:

https://www.vox.com/platform/amp/22524829/wall-street-housin...

And the conclusion is worth sharing:

> The role of institutional investors is still being studied, but the popularity of the narrative strikes at something dangerous: People want a convenient boogeyman and when they get it, they often ignore the structural problems that are harder to combat. Housing undersupply is the result of decades of locals opposing new home building. It’s not something that can be blamed on Wall Street greed and the nefarious tinkering of a private equity firm. And that’s a much harder truth to stomach.

A huge part of the problem is the NIMBYs.

Also one of the largest investors, Accel, totally didn't own Trulia, which was totally not bought by Zillow. And Zillow totally isn't a major advertiser on Vox[0].

[0] https://www.vox.com/ad/16158882/zillow-zestimate-explained

Just off the top of my head, in a town of 100K, I can pretty easily think of 100's of homes that were not built because of NIMBYs.

Also, did you miss the bit where Zillow got their asses handed to them because they screwed up and lost a lot of money?

Where's my check? Should I contact Accel? If I'm owed money pro-rata vs. Vox's readership, I should be able to buy a new car with the money.

Or they all don't believe it's the investors because they're right and that's what the data says.

[1] https://www.vox.com/22789296/housing-crisis-rent-relief-cont...

But I don't think we should blame the central bank for the low interest rates anymore than we should blame a thermostat for running the heater all the time during an unprecedented cold spell. The central bank if anything was probably not keeping interest rates low enough for the last two decades considering how low the employment to prime age population ratio and inflation were. Interest rates are just especially low compared to historical standards because of the sovereign wealth funds, growing inequality, reduced population growth, and Asia becoming much richer with crazy savings rates.

I have several friends in the contracting/home services industry. The stories I hear about home flippers buying houses, asking for the cheapest paint/flooring/light fixture work possible, and then relisiting the homes with a 50% markup are wild. It seems a lot of people got into flipping homes around the start of the pandemic and lucked into one of the sharpest real estate market increases in a long time. They assume it's an easy way to make a lot of money with their interior design skills, but really they would have profited just as much or more if they just sat on the home from 2020 to late 2021 and sold it after the market went up.

I generally don't think outright bans work because the binary solutions become controversial and prone to political manipulation and stalling. Increasing taxes on these speculative transactions is the way to solve this, I think.

Simply eliminating the 1031 exchange that allows investors to defer tax liabilities on real estate investments would make a huge, immediate change in the velocity of speculation. The real estate lobby would go ballistic at the proposal, but I think it needs to be done ASAP. It doesn't make sense that real estate investors get such special tax treatment.

This is a problem for people who want to move. But, and this is mostly speculation, this is bad for everyone else too. It makes the market less liquid, which means that people are less likely to live where they want. It also reduces the incentive to build the kinds of units people want to live in. Suppose you want to build 100 nice condos. It’s harder to sell them to existing homeowners, and, in turn, those owners’ homes don’t go on the market. With fewer houses on the market, a smaller stream of buyers with lots of money can keep buying houses at unreasonable prices, and the market prices get pushed up.

I also don't know what a "short term rental" is, that would devastate beach areas that rent out homes to tourists. I don't think that's a viable solution.

Housing prices have not gone up in any major way in a few major industrialized countries, Japan, Korea, Germany. You know what they did? They built more housing. Building in San Francisco, New York, etc is near impossible, especially if you aren't connected. Communities often vote against new housing because a) they don't want certain people in their area and b) we've wrongly viewed housing as an investment vehicle and more housing hurts values.

I get tired of bringing it up but I lived in a Tokyo apartment, 5 walk minutes from a train station, 10 min walk to a large park, nice schools, very quite area though just 5 minutes walk to lots of restaurants. 750 sq ft, 4th floor with elevator, 15 year old building (at the time). Rent was (at the exchange rates of the time) $860/month. Inflation adjusted that’s $1,075 which can’t gets you a spare bedroom in first tier American cities.

At the time Tokyo had no restrictions on short term rentals nor on foreign investment or property investing or any kind.

Tokyo’s big secret is that they let developers build apartment buildings.

We can discourage investments simply with more equitable property taxes. Currently, more expensive apartments are taxed at a much lower rate than cheaper ones.

https://www.bloomberg.com/graphics/2021-new-york-property-ta...

https://www.airbnb.com/s/New-York--NY/homes?adults=1&place_i...

A neighboring city of my suburb has large swathes of ranchy style homes on half an acre, those can easily be converted to triplexes or at least large family homes rather than tiny 3 bedrooms. We don't want to discourage investors from that sort of development.

However, we do want to discourage investors from 'flipping' homes and riding up appreciation, or even worse, investors buying houses that just sit empty.

First it was for money laundering but now (in addition) increasingly it’s “regular people” in foreign countries who are seeing each neighbourhood explode in popularity, thinking that if they buy the rental income is how they will feed their families. They have no idea that the prices are simply inflated and unsustainable, let alone that they are most likely buying an unliveable property sight unseen.

The net result is that each speculative group is boosting the other as they race for the sky and leave all the renters on the ground.

Currently:

“For years, foreign money has been coming into Canada to buy residential real estate,”

“This has fuelled concerns about the impact on costs in cities like Vancouver and Toronto and worries about Canadians being priced out of the housing market in cities and towns across the country.”

These are direct quotes from our Prime Minister Justin Trudeau. In addition, he's hoping that a plan to ban foreigners from purchasing residential real estate will get him re-elected. There may not be hard data YET, but it's clear that what the govt sees is in line with what we the public see.

As for what we the public see:

- Foreigners flying in to major airports, then taking taxi cabs to small towns and remote properties with the intent to purchase. And we're not talking one or two, we're talking about enough that taxi drivers are talking about how concerned they are about the pattern

- Properties that have been un-sellable for years suddenly being purchased by foreign investors sight-unseen as the market heats up in that specific area

- Rental properties being taken off the market: first purchased, then renos started and never finished

- Residential houses (including house hacks and house rentals) being taken off the market by being purchased and held (in the past these kinds of properties were owned by holding companies that had a vested interest in making sure they do not have any more transactions and therefore fly under the radar, but more recently people are buying and holding until a future time where they can sell for more): A for sale sign goes away but no one ever moves in.

- Property values going down when a buyer purchases a property then fails to hire a property manager (resulting in the house falling in to disrepair). Turns out they had no idea that there are no local property managers and it's just communities of people doing favours for each other.

As for how that explains

> exploding house prices in small towns 2 and 3 hours outside of major cities, where vacancies are hitting record lows

Foreign investors aren't looking at proximity to cities, they're looking at what areas 'are hot'. They're typically overpaying which urges everyone to overpay, and we still have all the expected real estate purchases: people who want to escape the city after earning their down payments, new home buyers, domestic investors (including speculators), and so-on.

The result is higher and higher prices being paid for less and less properties. Vacancies have severely dropped because in multiple local areas that are on my radar (either I'm there, have talked to someone there, or have contacts there) mainly because the number of places to rent have been reduced.

Drive through New Delhi’s suburbs and the towns nearby and you’ll see vast empty towers. Many have been on the block for years without any price cuts.

Property prices have been largely stagnant and have underperformed inflation for a decade. Even now, the prices are beyond the reach of the vast majority of working Indians.

NYC bans short term rentals in multi family buildings already, unless the host is also staying there and not renting the whole apartment. So the short term rental restrictions probably do help, but it is hard to compare nyc to more suburban and rural areas

Most of the housing stock in NYC are co-ops, which have fairly strict rules about renting out units. Condos are significantly more expensive to purchase, and there is pretty much nothing you can purchase right now that would yield positive cash flow given how pricey real estate is even with rents so high.

Airbnb is technically banned in NYC, and while I'm sure there continue to be illegal Airbnbs I don't see many listings myself that are for the entire unit as opposed to a room if it isn't a monthly rental.

Here, let me do the legwork for you, this one shows 413 stays:

https://www.airbnb.com/s/New-York--New-York--United-States/h...

Instead, only allow short term rentals where the owner is present. This means multi family units or rooms in houses or apartments.

As for taxing them, it’s a nice idea but AirBnB is already not paying hotel taxes.

As for vacancy taxes, I’m more skeptical just because this hasn’t seemed to have worked anywhere it’s been tried (eg Vancouver).

We just need to stop being so friendly to people parking money in residential real estate with punitive taxation and restrictions.

Airbnbs are legitimate demand. We just need over-supply now. The government should be able to step in.

There are a lot of things that 1 person can do that are essentially harmless but when a hundred million people do at the same time can cause huge social and ecological damage.

They are very useful for victims of domestic abuse where there are no shelters available and other things like people working on short assignments - sure they could get a hotel, but for small business competing with big tax avoiding corporations is often an only way to make it work. Also people not always want to commit to long term rental if they don't know area or they change jobs often.

> 2. Huge increase in short term rental taxes to the point where it's barely profitable

These taxes will be moved on to the renters, so it will make crisis worse.

3. Adjustable property taxes based on vacancy. Something like a 5x property tax multiple for 50% vacancy and scaling down to 1x for 5% vacancy.

This could work to an extent, but you'll find corporations hiring fake tenants if it makes financial sense.

I think the crux of the matter is that residential property is treated like a legitimate investment. We should start from banning pension funds and other funds from investing in such packages - they drive prices up, as they want properties at any cost and tax property flippers.

I feel like we'd have non-anecdotal evidence about this somewhere. Nationwide, the number of investor buyers is 15%. Foreigners, the other boogeyman is below 5%

A vacancy tax can be trivially avoided. Would there be an exception for renovation? Again, easy to game.

Cranking this up may be a way to reduce rentals and investment properties.

You need to look elsewhere for the cause of the problem.