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A Growing Problem in Real Estate: Too Many Too Big Houses

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Re: A Growing Problem in Real Estate: Too Many Too Big Houses

#51

Post by TheOtherHobbes »

tomatocracy wrote: post #44
pjc50 wrote: post #41

Earlier quoted context omitted.

The UK also has Stoke-on-Trent giving away houses for £1 in a desperate attempt to unblight the place. The UK's problem is not so much lack of houses (although the planning system really doesn't help) as a combination of over-financialisation and over-centralisation. People believe that all the high-paying employment, entertainment, and oligarch money is in London. It's also the default destination for immigrants. As…

It’s largely internal migration driving that effect in the UK, not external migration or financialisation. Children go to university and never come back. The good jobs ARE largely in London and the South East, and people follow their friends creating a network effect too. It’s also not new - it’s been going on since the end of the Second World War pretty much.

The jobs are in London, but so are the costs. In terms of living expenses, the cost/benefit ratio for other cities is much higher.

The real benefit of London is the networking and the culture. There's a lot of both - more so than elsewhere.

Whether it's worth the insane housing costs is debatable.

Re: A Growing Problem in Real Estate: Too Many Too Big Houses

#52

Post by TheOtherHobbes »

tomatocracy wrote: post #48
NeedMoreTea wrote: post #11

Earlier quoted context omitted.

That was one of the advertising, rather than real justifications for getting rid of the rates - which was on ownership rather than occupation, and replacing it with first the poll tax - and we know how popular that was. Then council tax. It was nothing other than a massive subsidy for the most wealthy as the top band is reached so early - it's only slightly less regressive than the poll tax was. The Tory campaigns we…

Part of the idea of the ‘poll tax’ was also to increase accountability of local government by making it more transparent - ‘why do you charge twice what the neighbouring council does?’ Council tax actually is relatively progressive when you consider that council tax benefit is also part of the system. Very few areas have a large number of band H homes - parts of central London do, but even there you might be surprise…

The difference between a multi-million pound mansion owned by an offshore holding company on behalf of a billionaire and sort-of-okay almost affordable housing is usually only a few hundred pounds a year.

And accountability has clearly not been improved in any way.

In fact billionaires rarely pay council tax at all because councils rarely chase them. There's no point sending bailiffs to an empty property protected by professional security owned by a company with an offshore address that's effectively immune to any form of legal action.

Re: A Growing Problem in Real Estate: Too Many Too Big Houses

#53

Post by simonh »

imgabe wrote: post #29

Why is this a problem? Some very rich people become a little bit less rich. None of them seem to be in danger of falling into penury over only getting $1M for their house instead of $2M. Sounds like the supply and demand working the way they're supposed to.

Loss of wealth is never good for anyone. Start with the waste of resources – money was spent on pointless construction and creation that have much lower value than expected. Empty unsold houses benefit no one. Those resources could have been used productively for long term benefit. It’s in all of our interests to discourage the waste of resources like that and encourage productive uses.

Then there’s the re-allocation of resources to cover the loss. If a couple make a loss of $1m selling a house, then they may need to liquidate $1m of savings to cover the loss, withdrawing that capital from the cycle of investment in productive economic activity. Interest and profits on investment don’t come from nowhere, they’re generated from the productive activities those investments support. Now there is less capital available to do useful economic work.

Re: A Growing Problem in Real Estate: Too Many Too Big Houses

#54

Post by NeedMoreTea »

tomatocracy wrote: post #48
NeedMoreTea wrote: post #11

Earlier quoted context omitted.

That was one of the advertising, rather than real justifications for getting rid of the rates - which was on ownership rather than occupation, and replacing it with first the poll tax - and we know how popular that was. Then council tax. It was nothing other than a massive subsidy for the most wealthy as the top band is reached so early - it's only slightly less regressive than the poll tax was. The Tory campaigns we…

Part of the idea of the ‘poll tax’ was also to increase accountability of local government by making it more transparent - ‘why do you charge twice what the neighbouring council does?’ Council tax actually is relatively progressive when you consider that council tax benefit is also part of the system. Very few areas have a large number of band H homes - parts of central London do, but even there you might be surprise…

So it was alleged. The exact same transparency was there in the domestic rates, as the levy was on property value. Rates had one big advantage - houses don't move around much. The overheads of collection are minimal.

The truth, of course was removing a tax on the wealthier, and drastically cutting the amount of revenue councils were able to raise locally. A good part of how we ended up with one of the most centrally controlled systems there is. Westminster decides how much funding councils get, council tax tops up a little of it. A "blessed" council can charge lower taxes through receiving higher central funding.

A welfare benefit that only some are eligible for and requires retrospective claim does not make a tax progressive. Especially with how broken the welfare system has become for those needing to claim whilst working. The absolute numbers matter little.

Re: A Growing Problem in Real Estate: Too Many Too Big Houses

#55

Post by TheOtherHobbes »

rcar1046 wrote: post #40
Vizarddesky wrote: post #23

Are we supposed to be sympathetic to the “problems” these people are facing selling their overpriced real estate? My only regret is that they’re not getting screwed over harder.

You wish hardship upon them because...why exactly?

Because in real terms it may not be real hardship so much as inconvenience - unless they're hugely indebted, which then makes it a much bigger problem for everyone.

But also because done the right way, it could help alleviate real hardship elsewhere.

Re: A Growing Problem in Real Estate: Too Many Too Big Houses

#56

Post by pjc50 »

tomatocracy wrote: post #44
pjc50 wrote: post #41

Earlier quoted context omitted.

The UK also has Stoke-on-Trent giving away houses for £1 in a desperate attempt to unblight the place. The UK's problem is not so much lack of houses (although the planning system really doesn't help) as a combination of over-financialisation and over-centralisation. People believe that all the high-paying employment, entertainment, and oligarch money is in London. It's also the default destination for immigrants. As…

It’s largely internal migration driving that effect in the UK, not external migration or financialisation. Children go to university and never come back. The good jobs ARE largely in London and the South East, and people follow their friends creating a network effect too. It’s also not new - it’s been going on since the end of the Second World War pretty much.

London's population dropped for a long period after the war: https://www.washingtonpost.com/news/worldviews/wp/2015/01/07...

> The good jobs ARE largely in London

Well, yes. Each individual is only doing what's best for their circumstances. What I'm questioning is whether this is how it has to be, this centralisation, and whether good jobs could be distributed round the country a bit more by some policy choices.

Re: A Growing Problem in Real Estate: Too Many Too Big Houses

#57

Post by pjc50 »

simonh wrote: post #53
imgabe wrote: post #29

Why is this a problem? Some very rich people become a little bit less rich. None of them seem to be in danger of falling into penury over only getting $1M for their house instead of $2M. Sounds like the supply and demand working the way they're supposed to.

Loss of wealth is never good for anyone. Start with the waste of resources – money was spent on pointless construction and creation that have much lower value than expected. Empty unsold houses benefit no one. Those resources could have been used productively for long term benefit. It’s in all of our interests to discourage the waste of resources like that and encourage productive uses. Then there’s the re-allocation…

> If a couple make a loss of $1m selling a house, then they may need to liquidate $1m of savings to cover the loss

This doesn't make sense?

Firstly, the point at which the capital was withdrawn from savings was the time the house was built - savings turned into a physical capital asset. That house has lost value, but that doesn't affect liquidity.

Secondly, there's a global capital glut to start with - that's why interest rates are so low and people are building McMansions.

Re: A Growing Problem in Real Estate: Too Many Too Big Houses

#58

Post by pjc50 »

tomatocracy wrote: post #48
NeedMoreTea wrote: post #11

Earlier quoted context omitted.

That was one of the advertising, rather than real justifications for getting rid of the rates - which was on ownership rather than occupation, and replacing it with first the poll tax - and we know how popular that was. Then council tax. It was nothing other than a massive subsidy for the most wealthy as the top band is reached so early - it's only slightly less regressive than the poll tax was. The Tory campaigns we…

Part of the idea of the ‘poll tax’ was also to increase accountability of local government by making it more transparent - ‘why do you charge twice what the neighbouring council does?’ Council tax actually is relatively progressive when you consider that council tax benefit is also part of the system. Very few areas have a large number of band H homes - parts of central London do, but even there you might be surprise…

> ‘why do you charge twice what the neighboring council does?’

It turns out that most council costs are things they are statutorily obliged to do, and rate rises are capped by the government, so council tax rates are largely an indicator of the ratio of taxpayers (including businesses) to service users.

Re: A Growing Problem in Real Estate: Too Many Too Big Houses

#59

Post by imtringued »

eertami wrote: post #7
Blackstone4 wrote: post #4

We have a similar issue in the UK since there are large houses being occupied by older couples whose children have left. Since annual property taxes are low (~4k - we call it council tax) and tax on buying property (stamp duty) is high, there is no incentive to move to a smaller place.

Equating council tax with property tax is extremely misleading imo. For the benefit of people not from the UK: Council tax is effectively a bill for services & utilities paid by the occupier. Cost differs slightly based on overall property value but that's not super helpful for renters. Property taxes would be levied on the owner, and be directly tied to house value. For what it's worth I believe we desperately need…

>Property taxes would be levied on the owner, and be directly tied to house value.

That is awful, why would you ever want to introduce such a regressive policy? Higher density construction generally costs more than low density construction. Each floor adds more cost because you need proper ventilation, elevators, stairs, etc. Therefore an apartment will be taxed more despite having the same number of square feet/meter. Despite this, apartments still make sense economically if the land value is high but if you're burdening them with yet another heavy tax then people will shift to single family homes instead.

Then there is the fact that you should never tax someone for improving their house. Oh you installed solar panels on the roof for $30,000? Lets tax that! The solar panels are no longer a net gain. Homeowners no longer have a reason to improve their homes. Imagine someone working on his house in his free time. At that point you're taxing someone's free time. How backwards is that?

Stop taxing property value. It's regressive. It's a moral hazard. It doesn't work.

If you want to tax something, then tax the land those buildings are sitting on.

Bonus content:

And since for some reason grandmas are the most important members of a gentrifying city we can even take a look at what happens when they get priced out from a property tax vs a land tax.

Grandma sells her overpriced home because she can't afford the property tax: She can't move into an apartment because the apartment is taxed even more than the home she left.

Grandma sells her overpriced home because she can't afford the land tax: She can move into an apartment because the apartment is taxed less than the home she left.

Re: A Growing Problem in Real Estate: Too Many Too Big Houses

#60

Post by gdfasfklshg4 »

Blackstone4 wrote: post #16
eertami wrote: post #7

Earlier quoted context omitted.

Equating council tax with property tax is extremely misleading imo. For the benefit of people not from the UK: Council tax is effectively a bill for services & utilities paid by the occupier. Cost differs slightly based on overall property value but that's not super helpful for renters. Property taxes would be levied on the owner, and be directly tied to house value. For what it's worth I believe we desperately need…

I feel that it was not "extremely misleading" within the given context which referenced older couples in larger properties. In this case, they are the ones typically paying the council tax. I agree with you that the UK needs property taxes to be paid for by the owners. This would help reduce speculation and encourage utilisation of the existing housing stock. But as another post has mentioned, objections include "thi…

> But as another post has mentioned, objections include "think of the old people who are worth $1m+ in property but would have to move out because they have low income"....boohoo...

Cruel. There are plenty of old people that are able to keep living in their existing home because it is familiar but would be unable to live independently in another home.

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