Create a race to the bottom in the rental market
Create a race to the bottom in the rental market
Not sure if this counts as politics or not; let me know.
One major brick in the toilet tank of the rental market is apparently investors just 'parking their money' in properties and leaving them vacant longterm, with an eye to selling them later at an inflated price - with rental income being not worth the hassle.
Some people have suggested a tax on vacant properties to give more incentive to rent them out.
Good idea, but I say we go one better.
- Put a hefty tax on all properties that aren't owner-occupied.
- Give a rebate for renting them out, proportional to the percentage above or below the average rental for comparable properties.
If you charge above-average rent, you get a small rebate.
If you charge average rent, you get a medium rebate.
If you charge below-average rent, you get a large rebate. This could even exceed 100%, using the funding from the other categories.
People chasing the large rebate will drive the average down over time, ate viola, we have a race to the bottom and the consumers reap the benefits.
There's probably a dozen reasons why this wouldn't work, but I like it anyway.
Housing costs, rental or purchase, are only resolved by supply and ending real estate's position as an investment vehicle.
That means large scale public housing investment to the point that it actively devalues property on a capital value bases. Rental yields are already a poor investment on their own. That leaves the "just park the money" crowd with a simple choice: sell now or watch it depreciate.
11are only resolved by supply
Eh, I don't agree. Supply is super important, and we definitely need to see a lot more of it. We need a doubling or tripling of the amount of government housing. We need zoning regulations to allow medium density at least in all cases. We need higher density in inner suburbs and near train stations.
But regulation protecting tenants is also useful. Vienna is probably the gold standard, with multiple different tiers of pricing regulation for different kinds of property and different needs. Other kinds of non-price regulation, like bans on no-grounds evictions, protections for tenants on quality and repairs, and rights to make minor modifications, are also important regulation. These go very well hand-in-hand with a levy like OP proposes, because the levy stops an owner from throwing up their hands and saying "I don't want the tenant to have these rights, so I just won't bother renting it out."
There's also just the simple fact that even with the very best of intentions, increasing supply is a years-long endeavour. Price controls can be done right now and take near-immediate effect. In a crisis, we can't afford to wait around for the long-term solution. We need something that works right now, in addition to addressing the root cause.
2
You’re effectively proposing government subsidized housing as well as a direct tax on rental income. As in the landlords are encouraged to charge less for rent because the government is chipping in by covering a percentage of their tax, resulting in lower rents for tenants. Under this system, people’s taxes would pay for everyones rent.
Not a bad idea. In fact, it probably exists somehow already under some governments.
3Well, not quite.
The only subsidy would come from the taxes raised in the first place, so it would be revenue-neutral.
Raise taxes on every non-primary-residence, hand them back again if they're rented out.
My only proposal is to skew that handing-back to favour those that rent below the market rate, dragging the market down with them.
1
This is dependent on the government wanting to unwind the housing ponzi we’re currently in. Given how many of our pollie and their friends own investment properties I have major doubts over their appetite to do anything.
3I can’t agree with a rebate for charging above average. Why should our tax money go towards giving them more money for ripping us off.
I’d possibly tolerate a rebate for below average, but I wouldn’t support it.
2Because renting it out for a lot is better than tying up the market; at least it'll soak up some rich idiot.
Also it's not our money - it's coming off the new tax.
3So, a common suggestion I've seen (and even made) in the past is to put a levy on un-occupied homes. But one problem with this is enforcement: how do you tell it's unoccupied?
Well, OP here has the solution. Flip the burden of proof around. Charge everyone, but if you can demonstrate that you have a tenant, you get that charge waived.
Then, OP adds further nuance to it. Instead of being a binary "rented/unoccupied", there are tiers. Start with unoccupied at maximum tax. Down to minimum (potentially zero or even negative tax) for below-market rent. It's just all described in terms of starting with an automatic levy of a certain amount, with rebates on that levy to get you to the desired rate.
2
I like this plan. I think the only thing that would stop it would be that politicians are property investors too...
1You must be reading Kant and Hegel recently?
-1Do you have any data about investors leaving properties untenanted because it's "not worth the hassle"?
I'm an accountant. I've never seen or heard of an investor doing that. Your costs are similar whether or not the property is tenanted. If you're paying for or holding the house it doesn't make any sense not to rent it.
-1I have lived in apartments in Western Sydney and in Newcastle that had less than half the apartments in the block tenanted.... yet none advertised. I do not know the motivations of the owners. But it is quite common, in my experience. Perhaps they have no one pass through their doors for six months at a time or more for another reason, but I cannot think of one.
1Primary sources, no - just a lot of people talking about it everywhere I go.
Certainly there seem to be vastly more dwellings than households - why do you think that is?
1I don't really know what you mean by that - vastly more dwellings than households.
Think through it logically, if you owned a house, paid for everything, why would you forego the $30k, $40k, or $50k rent? The answer is simply that you wouldn't.
As I said, I work in this space. There's no hidden cache of empty houses.
Aside from a few isolated cases of offshore investors it's not really a thing.
0