this post was submitted on 28 Jun 2023
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Housing becomes less affordable because suddenly rent has to cover the owner's profit as well as the cost of the mortgage. No one is going to invest in housing if there is no profit, and they are going to do what they can to make the profit as high as possible.
A landlord is essentially a middleman between the mortgage holder and the resident. Renting can make sense, especially for people who are not living somewhere for a long time, but currently people are renting simply because there is no way they can afford to buy a house.
There's nothing saying rent has to cover the owner's expenses.
If no one rents a home, the owner must either: leave the home empty, or lower the rent. Either way, if the home loses money, a rational investor has to sell. Enough people selling causes prices to drop.
I guess what I'm saying is that taxing people who own multiple properties extra is a really weird fix.
Wouldn't building more homes be a better long term solution?
Doesn't the investor get to list the loss as a tax write-off?
The investor can always wait. There's a housing crisis, so people need somewhere to live.
We need to do both. Addressing the issue from the supply side and demand side makes sense.
Write-offs are only applicable if some other part of the business is making money
If the entire business is owning a few properties and they are all in the red, there's nothing to write off against
For small-scale landlords the loss would count against their regular income. For professional landlords, they probably have other properties.
I'm not 100% certain on the details, but yes. A landlord can reduce their taxes on other income but that doesn't mean they aren't still losing money.
That's only true if the expected increase in value covers the cost in carrying the property. If property values don't increase dramatically over time, waiting just loses money.
Exactly what I'm saying. Demand is, for the most part, inelastic. Each person requires some amount of space. Owning multiple properties that are occupied satisfies housing demand as much as each person owning their own home. As far as I figure, only vacant homes artificially inflate home prices/rent.
I don't mean to say that people should be stuck renting forever. Everyone should have the opportunity to own their home.
As we said above, the renter has to cover the costs of the property, plus the landlord's profit.
That's just not how rent works. Tenants don't care what the landlord's expenses are. If a home is priced above what people are willing to pay, it'll sit empty.