That has not very much to do with money though. There are many ways to allocate scarce resources, such as rationing. Even if money is used, the mere fact of scarcity doesn't define the price of something. Silver is also finite, but it still costs $2.50 a gram and not $25000 a gram. Land was always finite but was still much cheaper in the past.
The main contributor to the price here is financialization. The more money the average buyer can raise for one of the scarce things, the more they cost. Nobody wins from this except the banks, so perhaps it should be more regulated.
Building regulations are also a problem. Legalize whatever you feel is the minimum safety standard of homeless encampment or slum, and watch house prices crash overnight, since prices are set at the margins and a lot of people (including me) would be happy to find a way to work with simple concrete box if it was cheap and secure, but it's not legal to build those.
You're getting at the problem but you still don't understand the essence. Land is special because you can't make more of it. Even the Netherlands don't count since what they did is considered an 'improvement'.
Yes, you still need to solve the problem with 'money', or more accurately a tax. That tax is based on the assessed land value using market knowledge, but it would ideally be set to drive down the price of land to zero. However since we don't live in a world of spherical cow, tax would be set below that ideal to avoid land abandonment.
This is not even new by the way. The crisis we face is the same as in the 19th century when Land Value Tax and Georgism was proposed.
I like Georgism just fine but you don't need it to solve this problem; LVTs are just a prompt align people's incentives with upzoning and increased supply. Instead of doing that (it's not going to happen), you can just outlaw the municipal measures that are used to restrict supply.
Okay, but institutional investors didn’t create that fact of reality, and I don’t think they’re responsible for the fact that people want to live in or near cities either (instead of the middle of nowhere, which remains dirt cheap). If they’re not holding significant stock, what effect are they having on scarcity?
You overly complicate the situation by targeting one type of actors. If you look at comment around this story, people propose complicated mechanism to hack at the problem instead of looking at the root causes.
It's just land ownership isn't being taxed properly, no matter who owns the land. We homeowners get a free lunch from economic growth and price appreciation of real estate while penalizing capital investment.
The solution is simple if not necessarily easy to implement. Tax land and at a high enough rate, and exclude building and improvements. We'll reap bigger benefits if we reduce taxes on income and capital and eventually phase it out.
Don't tax land, because that will force homeowners to prematurely sell and move into cardboard boxes on the street. Tax gains when selling at a higher rate.
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.
Landlord, or property management, is a job, same as any other job you might have. The problem is not owning multiple properties, but not paying enough taxes on land. Otherwise, landlords benefit from the free lunch that comes with economic growth and real estate price appreciation, which is true for every homeowners in this country.
IF you want affordability? Tax land.
Doesn't matter who owns them. Your grandma or wall street.
A landlord owns the property. Property managers operate the property. Sometimes these are the same people (in mom and pop scenarios), but typically and at scale they certainly are not.
Property management is a job. Landlording is not. It is simply owning an asset.
Landlords have to allocate capital to fixing and improving the house, as well as taking care of insurance and taxes. Also, assuming that they're not living in the house and the value of the home goes up, they're taxes will rise whenever an appraiser reassesses their home value.
All improvements are excluded from a land value tax, which actually means improvements are even more incentivized.
Yes that is correct if you occupy land while your community makes it more and more valuable, you should not get wealthier and wealthier for no reason. All of that should be taxed away.
So when you build a sewage farm on your back 40 you should get wealthier (while your neighbors thank you because their land tax went down), but if someone snaps a photo of your area that goes viral on {THE PLATFORM DU JOUR} thus making your county more popular and driving up a bidding war for postage stamp sized lots of land (leading to the land being valued at a higher rate than it was a year before) you suddenly have a massive tax bill because "we noticed you are living in a popular county" and the benefits of living in a popular place should be taxed away? Or do we need some kind of a standard for "more valuable" that deals only with tangible things? And if so, which tangibles?
> All improvements are excluded from a land value tax, which actually means improvements are even more incentivized.
I'm not sure what this applies to with regards to my original comment. Improvements, insurance, and taxes are capital expenditures which need to be managed. This was to counter that landlording "is simply owning an asset."
> Yes that is correct if you occupy land while your community makes it more and more valuable, you should not get wealthier and wealthier for no reason. All of that should be taxed away.
Why assume that the landlord isn't getting the brunt of the cost for making the community more valuable? I don't think there's a strong case for saying a property manager is a job while denying landlording being one. Assuming landlording is completely passive is as far-fetched as thinking that property management is completely passive (both may require irregularly tasks to be performed or require no involvement in the ideal case).
While we don't want to tax a landowber's capital investment and improvements, most of the land value is due to the agglomeration effect of the surrounding land. So land value is mostly not an individual owner's own work, but the sum total of the community's efforts and entrepenural spirits.
>but the sum total of the community's efforts and entrepenural spirits.
More like "was too rural or too poor in the 70s/80s/90s to indulge in the then trendy policy like zoning the crap out of themselves and passing a bunch of ordinances more akin to country club rules thereby making incremental growth and development actually possible in the 2010s and 2020s"
Because most development today seems to correlate with whether or not that particular policy bullet got dodged than culture or spirit or anything like that.
> Landlords have to allocate capital to fixing and improving the house, as well as taking care of insurance and taxes.
These costs aren’t that high though, compared to rent. 3 months of rent covers a year of property taxes where I live. Major repairs are about a couple months rent. There is still another half year of rent that’s pure profit. Then they raise your rent every year, demonize rent increase caps, and then vote for reduced housing builds. I find it very difficult to accept them. If I had the money and the capital I absolutely would own a dozen homes and rent it all out, you would make insane money. Not to mention the mortgage costs being so low during ZIRP days. At the rate of AI coming for SWE jobs, landlords seem untouchable.
> 3 months of rent covers a year of property taxes where I live. Major repairs are about a couple months rent. There is still another half year of rent that’s pure profit.
Fair. Mortgage during the ZIRP days and prior was really low though. A 3K mortgage then is like a 6-7K mortgage now. And home insurance is also relatively low, I pay like 1.5K for the whole year. Point is, it’s a great way to make money and that is why people become landlords.
> Point is, it’s a great way to make money and that is why people become landlords.
If it is, why not do it and become rich too?
It's not really a particularly good way to make money. I've run the numbers on hundreds of properties over the last two decades and I've yet to find a scenario where I could buy something and rent it out with enough profit to be worth the hassle. You'll be much better off investing in some index fund instead.
If I had the capital I absolutely would have. It’s a bit worse now but any property you bought pre-covid (at least in big cities) can be rented out for more than what mortgage costs. I remember looking at houses in the Bay Area and the monthly mortgage would be 3K while you can rent it out for 4-5K. Anyone who owned property in the 90s and early aughts are absolutely rolling in it. You can invest the profits in an index fund on top of it.
I bought a house in the Bay Area in the 90s and the mortgage was well over $3K (remember interest was over 7%) and an equal house back then was renting for $1300 (my rent at the time for a 3br house in south San Jose).
Try to run the numbers for any property you like. Remember to include taxes and insurance and maintenance. Just to break even is not easy and then you'll have to work for free on the maintenance. Or pay a rental management company, which is another 8-10% taken from the rent.
Your house now can be rented for 4-5K a month if not more, you have no mortgage. Your property taxes are capped at purchase price due to Prop 13. All said and done can’t you net like 35-40K or so per year on a single home?
I agree that buying a home and immediately putting it up for rent would put you underwater these days but during ZIRP times rent and mortgage weren’t too far from each other.
> Your property taxes are capped at purchase price due to Prop 13.
BTW this is a common myth but not true. Property taxes are set by purchase price in year zero when you buy it. Every year after that, they go up 2% compounding.
That's not the full story because the city/county can also add any extra fees they like, and raise them, prop13 does not apply. My taxes go up by well over 2% every year.
> All said and done can’t you net like 35-40K or so per year on a single home?
If you can find yourself a free house somehow, that feels about right. But how do you get yourself a free house? If you have to buy it, now you have a mortgage, and the math no longer works.
The only people I know who profitably rent out homes are those who inherited a home with no debt. In that case, yes it works.
> during ZIRP times rent and mortgage weren’t too far from each other
Low interest helps, for sure, but the numbers still didn't work out.
The rates only briefly dipped below 3% during the pandemic. Let's say you got the timing right and got a 3% mortgage for 1.2M. The payment is still a bit over $5K/mo. That's just the mortgage, add insurance + taxes + maintenance. On a home you can rent out for maybe 4K-4.5K/mo. Losing money every month.
I've been running these numbers every few months for the last two decades hoping to follow the common advice to buy rental property and become rich. But it has always been cash flow negative no matter what the rents and interest rates have been.
Only advice I have is go inherit a free house, that can be profitable.
Pretty insightful details actually, I’ll rethink some of my positions. But I can’t imagine these bigger landlords taking that much of a hit, especially with multiple properties. Like let’s say I bought a home before meeting my significant other who also has a home - then I only need one place and I can rent out the other. Once both are paid off you have significant leverage. I don’t think you necessarily need a “free” house
The landlord of most of the United States is the American people since American public pension plans are some of the largest holders in these funds that purchase single family homes.
People act as if this is due to 'private greed'. It's not. American public pension plans are underfunded and need more returns. Thus they turn to the private markets, who offer them that which they are seeking to purchase. The market is heavily distorted by these public players whose policy and aims are not constrained by the market but by public policy.
If you tax land the only thing you will end up with is higher rents. You are punishing the wrong people.
Want to punish the right people? Cut taxes so that people can save cash faster, afford houses earlier and stop renting from their landlords.
Build more actually-affordable housing, too. Not these blocks of luxury apartments with swimming pools that nobody uses. (See HDB, Singapore -- that’s what the US needs more of)
Land is taxed but improvements are not. That tax is not passed down because landlords are already charging the highest price they can.
The tax simply redirect the unearned income to the public coffer which are either spent on public investment that further increase land value or redistributed as citizen's dividend.
Meanwhile landlords are free to construct as many buildings as they can without being penalized by higher taxes.
Empty lot, parking lots, and self storage facilities would be penalized because they wouldn't generate enough income to cover taxes on land, leading to more efficient utilization of land, as improvements are no longer penalized.
> Empty lot, parking lots, and self storage facilities would be penalized because they wouldn't generate enough income to cover taxes on land, leading to more efficient utilization of land
Right, so the city would be nothing but luxury (to maximize income to pay those taxes) high rise apartments packed tight every block.
No parks, no playgrounds, no soccer fields, no sports courts, no bike trails, no dog parks... none of the things that make living in an area pleasant. Also, no low income housing. Because none of those maximize "efficiency" (measured only in dollars) of every square inch of land.
Life is not pleasant if maximizing value extraction is the one and only #1 criteria. This is what land value tax misses.
Incorrect. Parks and other amenities raise land value. They would be an investment by the city to raise land value in a given area. People do not want to live in soulless concrete jungle. They want to live in a society full of amenities such as theater, parks, train station, basketball courts, etc.
Also, "luxury" housing cause what economists called "filtering", in which new construction are occupied by the upper strata of income, which means they pay for the cost. As housing age, this naturally becomes more affordable to the lower strata. This of course, depend on sufficient housing stock. Otherwise the inverse will happen.
Also, you only need to cover the cost of paying the land value tax to keep it, not to generate the maximum amount of revenue for that plot of land.
We are not talking about value extraction here, but making sure that landowners work for their keep, while the unearned income/economic rent that would otherwise goes to them is returned to society, because the value of the land is largely determined by the agglomeration effect, the sum total of the community's effort and entrepreneurial spirit. Otherwise, your private effort as individuals would flow to landowners reaping the benefit of increased land value, hence appreciation in real estate price.
I am responding to the comment I quoted, namely: "parking lots, and self storage facilities would be penalized because they wouldn't generate enough income to cover taxes on land".
So if a LVT has the explicit goal of eliminating things like parking lots and self storage units because those don't generate enough income to pay for the taxes, then what hope do things like playgrounds and parks have to continue existing.. they generate far less income than a self storage facility.
Parks and playgrounds increase the land value of the surrounding community. That results in higher LVT.
That creates a virtuous cycle for the local government who is administering those taxpayer paid amenities, same as other form of infrastructure and amenities.
That feels like wishfull thinking. What I see around me in practice is government doing all they can to sell off public lots (like parks) to developers to tear down the park and build another luxury condo. More tax revenue, more money in the government pocket, some bribes under the table, another loss of quality of life in the neighborhood.
> Under the tax scheme described, the reverse is true.
Explain how.. In a dense urban area, with LVT, that lot that held a park will bring even larger tax revenue when the city sells it off to a developer. Having the tax be based on maximum potential usage will only increase the temptation to sell it off and remove yet another park from the people.
I think this assumes politicians who care about subjectives like quality of life, and who are able to think in long-term sustainable city finances instead of just maximizing what they can grab in current fiscal year. We don't have any such politicians in power in the US.
> Landlord, or property management, is a job, same as any other job you might have.
Let's ignore property management for now and focus on landlords (i.e. people who own homes and collect rent from the people who live in the homes). That is very much not the same as any other job. Most jobs do not consistent entirely of literally rent-seeking.
>Most jobs do not consistent entirely of literally rent-seeking.
First off you're using "rent seeking" wrong, it's a specific economic term that means something else.
But using your definition....
There's entire industries built around renting capital investments. Sometimes purely, like rental equipment. Sometimes the investmentents are so expensive they come with the labor to operate them (the way many buildings have a building manager and a desk person). Many industrial transactions are structured basically the same way as commercial rent.
> First off you're using "rent seeking" wrong, it's a specific economic term that means something else.
It is a specific term, but it means: taking control of a limited resource (e.g. housing), most typically by ownership, that you do not have any direct use for, and then seeking revenue by then renting it to other people who actually want to use it (e.g. live in it).
Which, not suprisingly, is precisely what landlords are doing.
And also not surprisingly, those "entire industries" would be rent-seeking if the resources they rent out were limited. However, that does not apply to rental equipment, for example (though there are a few specific exceptions in the case of extremely expensive, very complex and/or very large equipment).
>Which, not suprisingly, is precisely what landlords are doing.
The bulk of the political will for this garbage doesn't come from landlords. Landlords want more, more, more. There literally aren't enough landlords in this country for that.
It comes from existing homeowners who are not landlords and don't want a bunch of high(er than them) turnover housing near them let alone cheaper housing because of the "neighborhood character" or whatever. Basically got mine fuck you.
And this is enabled with the remainder of the political will being provided by a select number of unconscionably ignorant non property owners who have insane takes about how the government should manage all this, be deeply involved in this, immensely scrutinize any sort of property development, etc, etc, all of which is to the benefit of megacorp landlords and developers and the detriment of the small time guys who own a number of properties you can count on one hand with a sum total of units you can count on two or thereabouts who make up the overwhelming majority of landlords on a unit basis and if even a small percent of them added a little bit of capacity would be a huge amount.
> However, that does not apply to rental equipment, for example (though there are a few specific exceptions in the case of extremely expensive, very complex and/or very large equipment).
They don't rent seek the literal equipment. They rent seek your ability to use it without a bunch of thugs showing up with a "stop or else" proposition. You can literally buy a car crusher on Alibaba but you can't open a junkyard in my state without a permit that they have a well known hospital-esque "we only allow X to exist overall" system for, assuming your town doesn't outlaw the business outright.
Once again, this is all to the benefit of big business for whom a few million bucks of donations to the right stuff and work directed at the right firms as needed to get a variance (i.e. pay the law away) for their billion dollar dildo manufacturing plant or whatever whereas the guy who wants to, IDK, take his HVAC bending business to the next level, open a second site and get into process equipment is shit outta luck because without greasing palms he can't afford to the government will hem and haw about every goddamn detail and prevent anything from happening. And the existing industrial plant that got in before the rules is laughing its way to the bank the whole time, well, right up until it gets regulated all the way to China but that's a different problem.
Your view of the world we live in is extremely different from mine. I don't think it is remotely correct, but hey, that's just, like, my opinion. I hope you find some peace in the midst of your experience.
People assume that renting out property is rent-seeking literally only because they both have the word rent in them.
I would note that people don't use the word rent-seeker (or parasite) when it comes to banks renting out money. I assume this is partly because banks use the word `loan` and partly because referring to bankers as parasites would be a little too close to dog-whistle antisemitism.
> People assume that renting out property is rent-seeking literally only because they both have the word rent in them.
It's not a coincidence that they have the same word in them. It's literally just the same word with the same definition and etymology in both cases. Rent is a payment demanded by property owners from people who want to make productive use of that property.
But rent-seeking isn't renting. They're different terms that don't have anything to do with each anymore.
> Rent-seeking is the act of growing one's existing wealth by manipulating public policy or economic conditions without creating new wealth. (https://en.wikipedia.org/wiki/Rent-seeking)
> people who own homes and collect rent from the people who live in the homes). That is very much not the same as any other job.
Why are you thinking of it as a job? Is putting money into the stock market a job? Owning property to rent out isn't a job, and that's perfectly fine. People make money off non-jobs all the time.
No. If you want affordability, make the government efficient and tax people LESS.
The government steals half of my money, half of my landlord's money, and I have to pay my landlord’s income and property tax in addition to my own income tax.
This is why I still cannot afford a home even though I work in a senior role in AI. After paying all those damn taxes and everyone else’s taxes there is almost nothing left.
I’d imagine it’s less taxes and more you want to buy a nice house in the Bay Area where a lot of people are high earners and would be driving up prices on the low supply.
Yes and for some weird reason, the bay and all the nice places to live are all single-family and expensive as hell. Just build some soviet or Chinese style apartment blocks and give people housing like Singapore does its not that hard. This is not a democrat or republican issue, it is a have versus have-not issue.
The logical conclusion is that the residents of these desirable areas like the bay / San Diego / Seattle / DC actually want housing prices to stay high.
Building giant apartments would change the vibe of the Bay though, and my guess is some of people who want to live there also want to live in it as it is now and not what it would be with high rise apartments etc. There’s probably a way to do it well, but it’s a pretty heavy lift versus doing nothing, which is the current status quo.
Also doesn’t help there’s a lot of red tape as the other commenter mentioned.
I mean.. some people would prefer to live next to a forest or grassland, but nope, houses were built there, because people needed somewhere to live. Now that's not enough, and larger buildings are needed, and that includes socialist buildings.
I live in a former socialist country (well, part of a country, the country does not exist anymore), and when we needed more housing, we designated the land in the city to be for housing, ie. large socialist buildings. Then 1990s came, no more socialism, capitalism now, and no more large building projects, no new neighborhoods. So now, we have cows and cornfields in what would be prime realestate because the government won't change the zoning, all three neighbors there complain and apartments that used to be 120k eur maybe 20 years ago are now close to 500k eur.
If you want to live next to cows, move to a village, thousands want apartment buildings there, to live in a city.
Repealing all the bullcrap from the last 50yr that makes that artificially expensive to the point of being a non starter if not outright illegal is the hard part.
But practically speaking, heart disease remains the #1 cause of death due to bottlenecks in care delivery: e.g., 46% U.S. counties have no cardiologists, providing guideline-recommended preventive care would require ~27 hours per doctor per day, and incentives are misaligned (health systems profit when hospital beds are full, not from prevention).
Supposed that we have an incentive aligned health care system. What would that look like?
I think one outcome is that the healthcare system eventually expands due to population growth and less death. Accidents happen, rare cases become more common, even as we get good at fixing or preventing them.
Came here to recommend this book. It is fantastic. There are nine other games covered besides Stardew Valley. Some are great, some not so great, but the stories behind each one are excellent.
I regularly do improv every week, which is essentially improvised live theater. So some time is spent not watching youtube or some sort of electronic intermediaries.
Which is actually pretty odd, because improvisational comedy as we know it today is younger than the film industry.
Don't let perfect be the enemy of good. It doesn't need to be 100% effective, just need to be effective enough that it reduces the size of the problem to a manageable size.
Then you can manage the special cases with specialists.
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