Housing is at the root of many of the rich world’s problems (2020)

> Banks are also much more forgiving when it comes to down-payment, when they know it's going to be a rental, and you already have other rentals as collateral.

I don't think that's true. The interest rate on your loan will be more expensive if it's an investment property and the LTV requirements are more strict.

Interesting. I assumed counties/cities are relatively free to set property tax rates according to their budget, and the city needing to compete with other cities is what keeps them relatively in line.

Yes, in my experience, the naïve interpretation is right 80% of time and it is always best to start from a naïve explanation of a process.

US politicians serve the rich only because they think that donations will help them win. Make the donations irrelevant - "rich" will loose the political power. How to make the donations irrelevant - go to vote, especially if you are poor and powerless. Convince your friends to vote. And not for a president, but for a local mayor, city council, judge etc.

A couple ideas for how to fix some real estate problems:

1. A zoning rule that requires home owners to live in the owned home. This would prevent remote/foreign money from meddling with local housing in particular areas, and prevents big corps from buying up all the homes and forcing people to lease them out. Some people want to lease though, so that's why I think it's more appropriate as a zoning tool for particular areas than as a city or state-wide law. Maybe this could manifest as a leasing tax. (As an aside, in the US this wouldn't work for typical apartment buildings, however maybe we should consider apartment owning model like they have in Japan...)

2. Ban NDAs for real estate leases, period. They just allow for shenanigans like lying about how much a property was leased for in the past. NDAs are usually a cancer but I admit they can be useful in certain contexts; real estate is not a valid context for NDAs.

3. You can only deprecate the improved value, not the value of the land. "The land beneath a building does not deprecate, whereas the value of the building should." -- a good idea by huevosabio that I saw in this thread.

4. Owners pay taxes on the claimed lease value, regardless of current occupancy. This would disincentivize owners from just sitting on dozens of properties refusing to lease because nobody wants to pay their unrealistic exorbitant rates. This is a plague in New York at the moment, where all the owners are playing a game of chicken with the economy to try to artificially prop up their building valuations by pretending that the supply/demand curve doesn't exist even in the face of record breaking unoccupancy (is that a word?).

I disagree that the 1031 exchange laws are detrimental to society. In fact, I would argue that their existence boosts the rate of development and increases housing supply in the US.

Firstly, why does the government deserve to tax these transactions at all? These landlords are already taxed on their income from their jobs, pay property taxes, pay taxes on all the products they buy. The government is extracting plenty of wealth from its citizens, why on earth would we demand more of people just for being successful in real estate? Will the government put their money to better use than these people spending it themselves on products and services? I think anyone who engages with public sector projects and services knows that the government does not efficiently spend money.

Let's imagine a world where 1031 exchanges are banned. What happens? Wealthy investors no longer sell properties at the same rate. What's the point? If my apartment building is cash flowing every year, and I'm stuck paying a huge capital gain tax on the sale, I'll just hold it for life and enjoy the cash flow. The rate of real estate transactions would collapse overnight, killing all of the jobs connected to it from appraisers, to brokers, to investment firms and wealth advisors. Now, not only does the government get less tax revenue because overall real estate transactions and taxable events are diminishing, but there is less incentive to build new projects.

The appetite of 1031 exchange buyers is one of the driving factors in development of new commercial real estate projects in the market! The profit motive spurs growth. Look at the Opportunity Zone legislation of 2017, a once in a lifetime chance to defer and eliminate capital gains as long as you are investing those gain dollars into real estate development in blighted areas. This tax incentive alone has generated hundreds of thousands of new residential units on the market that would never have been built without the tax incentive. Taxing real estate more would only slow growth, if we want people to take the time, effort and risk to build more housing units in the US, we need to incentivize them with less taxes.. not more.