this post was submitted on 21 Jan 2024
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That should be separate & regardless of rent (or no rent), but rent is income and should be treated as such.
If rent was taxed at 95% we would see much less inflation pressures & more homeowners.
We would see construction grinding to a halt and owners not bothering to rent out their flats anymore because it wouldn't be worth the trouble.
Ofc construction would continue just as it did for thousands of years - and because of the exact same reasons rents can get that high: people just need to live somewhere. Homes have intrinsic value and are necessary regardless of monetary value.
It's not like the housing market didn't exist before the value increase in the western world (so in the last 70 years).
There would however be less investments into homes, less financial incentive to build extra homes you don't intend to use personally. So yes, fewer places to rent, more homeowners. And secondary market would function just as good, people move around all the time, needs change over ones life, etc - buying and selling would be easier. Prices would still vary a lot, but would reflect the majority (more democratic prices?).
You just showed why prices would go up if rent were taxed that way (and why the prices are so high at the moment). No one thinks a small flat is worth 1500โฌ/month (or what have you), but they need a place to live near their job. So they'll pay whatever it costs. Same with deregulated health care, like in the US.
Also, for what it's worth. Even without the construction costs and without any profit margin landlords must pay for home repairs. I don't think 5% would even cover that
Taxes absolutely don't effect market prices in such cases/markets. Because if your are saying that rent taxes would just fall on tenants (basically increasing rent) then landlords are stupid now because they could obviously charge more rent.
It's like saying McDonald's paying employees more would result in pricier burgers - it simply wouldn't bcs McD is already charging the absolute max it can in given circumstances. It would however lower their profit margin. And still, anything resulting in real profit is still worth doing (that's why we have McD franchises in Europe too). Or like saying giving a tax exemption to McD would lower the price or burgers - it wouldn't, price is market determined and not in direct correlation with costs or taxes.
Where what your are saying is true is in markets with cost-based prices (ie minimal/competitive profit margins). In case of real estate that would mean the majority of rent wound go in repairs or upgrades. Which is not true for the last century, but RE yields are determined and tracked based on rent. So if I want to double my property's value & have to double the rent. And since people need to live somewhere, they have to pay. If yields are not above market (like 10y local govies), money moves out of RE and into financial markets.