> Additional property tax if you do not live in your home fulltime.

In states I've lived in with property tax there is a homestead exemption for the house you live in. In my current state that's about twice the tax.

The effect: Rent goes up to cover the tax and margin is added, so the rent goes up more than the tax.

>Rich investors and companies effectively get to buy homes at a discount vs average joes.

Usually the difference is that the big investor bought the property at lower price, and your rent is based on the lower valuation. Annual rent increases are usually are much lower than market increases - there's a lot of value in keeping a tenant year over year.

> The effect: Rent goes up to cover the tax and margin is added, so the rent goes up more than the tax.

Well-established effect and it applies to everything. A huge portion of all technological improvement/productivity gains and nearly all public investment money ultimately accrues to land rents which we then later just call "the cost of living."

https://en.wikipedia.org/wiki/Henry_George_theorem

You are right to call this out, and is why the legislation for this idea will require a lot of thought. But the important part of this idea is that only the "big" landlords will have a significant increase in cost.

In order for the economy to function there has to be ~ SOME ~ landlords. In my experience the random people that rent out their second property are usually good landlords, whereas the massive players treat people poorly. If this tax were implemented well, the latter group would be taxed more forcing them to stay honest. The small landlords would have a competitive pricing advantage over the big players, which should go a long ways to keep rents fair.

As long as costs are marked up and passed on to the consumer, this is a non starter. Also, government charging more taxes just gets paid by the consumer. Money is fungible. Small landlords have significant advantages in their being able to be more agile, use different rent structures (i.e. rent to own, short term, barter, etc, leverage owner elbow grease to get more profit). The key is to make sure the big guys don't have a financial advantage.

> In my experience the random people that rent out their second property are usually good landlords, whereas the massive players treat people poorly.

I don't think there's really all that much of a difference. Small landlords have low cash problems (slow repairs, stupid disputes on damage deposits, etc...). Big landlords have policy and bureaucracy problems (we forgot you were disabled and removed the ramp from the deck, we evicted the wrong property).

> Rich investors and companies effectively get to buy homes at a discount vs average joes.

Suppose you had $100,000 in cash, and buy a house for $100,000. You'll not be paying 5% interest on a mortgage. But if you did not buy the house, you would be investing that $100,000 for a 5% return.

So, you're either paying 5% on the mortgage, or foregoing 5% return for investing that money.

The rich person is not getting a discount.

This is a good point, and I was curious to see exact numbers on the invest vs be a landlord opportunity cost.

The rich person gets to rent the house, while the "newly weds" are living in it. And most importantly - the house itself will appreciate in value at a rate near 5%

Assuming they both buy a $500k house w/ a 20% down payment and a 5% loan. Realistically the young couple would get a worse rate but lets say they both get 5%. Monthly payment is $2,522.29 w/ taxes and insurance lets call it $3000 a month.

The newly weds are just eating that entire cost every month for 30 years, whereas the Rich landlord rents it out. After a quick and dirty Zillow search lets assume $3500 a month rent to start, so he's making $500 a month profit on an asset thats already increasing in value 5% ish per year.

So, with these assumptions: - Home cost increases 2% a year - Rental price increases 3% a year - Home value increases 5% a year

Total rental profit is $537k Final home value is $1.56 M Total Loan cost: $873k

Bringing the landlords return on 100k to be $1.224M in profit over 30 years (Final sell price - total loan cost + rental profit assuming they stuff it under a mattress). Whereas $100k at a 5% yearly return will be ~$430k

disclaimer: Im not the best with Excel and ive never actually bought property so im sure there are flaws in my math.

> And most importantly - the house itself will appreciate in value at a rate near 5%

or 0.7% ... or 20% ... or ... -2.3% ... or ...

Couple things to add. First, rates are much lower when you’re leveraging 10,000 homes at 3:1. That allows you to purchase 20,000 additional homes, which isn’t something the normal individual can do. Second, most of this borrowing was done during the 0% interest days and when rates went up after Covid, a lot of the operations grinded to a halt. Third, there’s no regulatory environment for rent rates and rate increases.

> First, rates are much lower when you’re leveraging 10,000 homes at 3:1

What interest rate do you think rich people are getting?

As for the Covid interest rates, those were available to everyone.

Third, we're talking about buying houses, not renting.

> What interest rate do you think rich people are getting?

Depends how rich. Banks have long been known to offer below market or even zero interest loans to the richer segments in exchange for/in the hope of securing other business from them.

> in exchange for/in the hope of securing other business from them.

I.e. they'll be paying the market rate one way or another.

"For a portion of their business, or their company's business". While they get a 0% interest loan to buy their $10M home, or whatever.

Funded, effectively, by you and me, subsidizing this as customers of the same financial institution.

An intelligent investor wouldn't buy it outright, they'd get a mortgage with a lower than average interest rate. The appreciation of the home will cover the interest rate over the long run and the interest rate is a small price to pay for keeping most of that $100,000 liquid for other investments.

A finance person will mortgage the house if the mortgage interest rate is less than the investment returns elsewhere. If the mortgage interest is higher, he'll buy it cash.

Aren’t you forgetting something, like hmm, rent and appreciation?

I'm talking about both parties buying a house, not renting it. The appreciation would be the same for both scenarios.

Except they do, as the original comment already said. The rich “person” has cash and access to much cheaper credit, is buying multiple properties, not paying the bills and earning rent, the other will have a mortgage.

> The rich “person” has cash and access to much cheaper credit, is buying multiple properties, not paying the bills and earning rent, the other will have a mortgage

Rich people do not have cash, as they invest it all. (That's how they became rich.) Rich people do not get away with not paying their bills. Rich people do not earn rent on the house they are living in. Rich people do not get better mortgage rates because they are rich. They get credit-scored like everyone else. Bankers want to charge as much interest as possible.

The original comment said “Rich investors and companies” which is why I put “people” in quotes when replying. This is not about homeowners in different income brackets.

This seems to depend an awful lot on your conception of a "rich person".

My wife and I have owned (at separate times) a couple of rental properties over the years due to various life circumstances (we no longer do). Both properties were valued in the mid $200k range. While being even in that situation certainly makes us unusually fortunate, it gave us no access to cheaper credit.

Now, I appreciate that there is a version of a "rich person" who does. But the GP's example wasn't specifically restricted in that way.

With today requirements for accounting, somebody with economics background could tell what would be wrong with following solution?:

If you house owned by commercial entity - taxes are payed from full value, but the valuation to any collateral/derivative goes by something like (0.75x)^l, where l how many levels deep (counting ownership levels). For example it house is in some sort collateral/derivate/indirect ownership mix with 4 levels deep, it can only valuated as 0.31x value (you can only account as it is worth 1/3). In my mind it should reduce attractiveness for speculative buying.

That sounds nice, but I think that increased tax will just be passed down as higher rent.

Higher rent means more people will opt to buy. That's not necessarily a bad thing in perspective. Assuming the other side effect is a decrease in costs due to a lower profit margin.

I believe your comment is operating under the assumption that people are merely choosing to rent over buying because it's the more economically wise choice. That's not how things work in reality. Many people want to buy but cannot put up the initial costs.

I fit the description of someone who has the cash to make a down payment, but if I were to buy the property I currently rent, I would be paying $1000 more a month.

> Many people want to buy but cannot put up the initial costs.

This, monthly rent actually costs more here in Ireland than what you would pay monthly for mortgage.

Many things cost less when you pay for 40 years up front

More people opting to buy means house prices go up.

There's no free lunch. The more friction, taxation, and tariffs you add to the housing market, the higher prices go for both renters and home purchasers.

If rent is higher, how will people save for a down payment?

That is a good point, and this tax would need to be well thought out. I specifically would increase the tax rate the more properties an entity owns (Not a lawyer so IDK how to treat one guy owning 10 companies as 1 entity the right way). That way smaller local landlord's can still exist (and keep rental prices competitive), but massive orgs will be forced to sell properties. The idea is to create a disincentive for hoarding properties in supply constraint markets.

The problem is not owning multiple properties, but untaxed land ownership. There's a prexisting solution for what you want to solve. It's called the Land Value Tax, which imposes a tax on land, but not on buildings and other improvement.

Property tax has a known problem of taxing improvement in addition to land, which constrict urban development. Plus, imposing additional property tax means improvements are further penalized, which means efficient land ownership are penalized.

You should look up Georgism and read up on what they have to say. It's a reaction to the 19th century economic condition but it very much apply to our 21st century situation and even more relevant today.

This should be the top comment IMO. Land Value Tax, coupled with much saner zoning laws and removing artificial restrictions on safe building proposals, would be the 1-2-3 move to resolving many of the worst aspects of the housing issues we face, as well as resolve many of the worst aspects of owning a home, IE having to defer proper maintenance simply to avoid a big tax adjustment

From what I understand this is a big problem on the west coast (and I agree with what you are saying).

This thread is interesting, as we are all naturally biased towards problems in our own area, and I'm learning some interesting nuances affecting other parts of the country. I live in Chicago / Midwest that has more land and residential high-rises, but our tax problem is a nightmare.

> I specifically would increase the tax rate the more properties an entity owns (Not a lawyer so IDK how to treat one guy owning 10 companies as 1 entity the right way).

Very hard to make this work, people find complex ways around it; e.g. “I don’t own that property, it is owned by an LLC which is owned by a trust whose beneficiary is an LLC owned by another trust of which I’m one of the dozen individual beneficiaries”. Close that loophole, someone will cook up an even more obscure one.

Long term these non-occupants will sell as other properties are being purchased by x-renters.

It depends on the state, but that is largely kind of already the case. At least in my state you get a significant deduction to your property taxes if it is your primary residence.

Property taxes are directly and immediately translate into higher rent.

Making rent more expensive doesn't make ownership cheaper, just makes it more attractive relative to renting.

Property taxes do not directly translate into rent, the % of the tax that is on the land value of the property can't be passed on, because the supply of land is inelastic.

https://www.astralcodexten.com/p/does-georgism-work-part-2-c...

Yes & no. Higher costs can obviously be passed onto consumers, but higher taxes make things a less attractive investment, too. The higher your costs regardless of whether a unit is occupied or not, the less interesting it is an an investment.

> If I were to try and buy the condo I rent, due to interest rates, taxes, and HOA's I would be paying $1000 more per mo

... and you would be building equity.

So you pay less and get less, right?

You're thinking this is a sign that you are being cheated. It seems to me that it's a sign you're getting a better deal by renting so that's beneficial to you.

You lumped a bunch of factors together (interest rates, HOA, taxes) that don't do much for your argument. You would pay less taxes than the landlord in most jurisdictions, because the unit would be owner-occupied. Do you think the landlord isn't paying HOA assessments? Sure they are. The landlord has a loan at 3% because they bought in 2021. You're offered 6.5% because you're buying in 2026. I'm not convinced it's worth my pity.

But you'd have an asset you own at the end of that period, and your mortgage payments wouldn't go up over time whereas rent likely would.

It'd be simpler to just have a high LVT and treat it as a credit instead of deductible.

Opportunity cost means makes purchasing with a mortgage wiser than buying cash. $1000/month more for a few years is nothing compared to the property value increase of a $1M property

Where I live, condo's do not increase in value much due to HOA fees and taxes.

I just plugged in some numbers using (estimated) purchase price, taxes, HOA for the unit I'm in now, and it would cost me a little over $1M over 30 years to own a $300,000 1br apt.

See my other reply about what it costs to own a house.

The stock market goes up more than the housing market. When considering the return on investment for a house, remember the property taxes, insurance costs, maintenance costs, repair costs, 6% real estate commissions, and so on.

Of course of course.

1) Is already how things work. Every single municipality I've ever seen in the US offers an owner-occupancy tax abatement.

2) Would just inflate home prices.

> 2) Would just inflate home prices.

That depends on demand. If no one wants to buy homes at the prices offered, prices will drop.

Additional property tax? Do you have any idea what property taxes are like in places like NJ, NY? It's 2-3% of the value, sometimes assessed at sales value. People buy despite this because they like an area or a school system. If you raise it more, rest assured that only the rich will have the right to buy. It's as regressive as it gets, your proposal.

I mentioned this in another comment but - this thread is interesting as it shows the differences in housing policies / issues in different parts of the country. I'm from the Midwest / Chicago where we have a lot more land to work with so the policies are slightly different.

That being said, it sounds like a land value tax might be a better approach to my first suggestion. Regardless, this would not effect people that truly "own and live in their only house"

Key adjustment to your first proposal: the additional property tax should also be waived when having long-term renters/occupants.