Reply to The Daily episode on the housing crisis

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[quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous]Solutions to "crisis":

-- Ban foreign ownership of real estate
-- Eliminate all federal tax deductions on homes that aren't people's primary residences

Once you realize that our country is set up to benefit corporations and the wealthy, you'll realize that the "crisis" is intentional and works to their benefit.[/quote]

Even just banning all foreign-owned rentals and limiting the amount of rentals any owner/company can own (except for apartment buildings) would be a great start.[/quote]

What is the mechanism to pass laws such as these, when land ownership in the US is generally regulated at the city/county level?[/quote]

At the federal level the mechanism will always be taxes. Creating onerous taxes on foreign-owned residential investment properties would effectively kill this market -- many foreign investors are buying these properties explicitly for the tax benefits (a lot of write-offs available to landlords).[/quote]

What percentage of real estate in the US do you think is foreign owned?[/quote]

Supposedly it is between 2-3% and clustered in cities like NYC, LA, SFO.
[/quote]

Right, so marginal.  People want to believe there are magic bullets other than "build a lot of new housing", for various reasons.  Beyond pure NIMBYism, I think it's the long time frames involved. One thing to note- rents in DC have not gone up that much the last 5 years because of the number of new buildings that have come on line and added to supply.  Problem is that there will be a donut hole in a couple of years as all the deals stopped from 2022-2024 because of financing and construction costs don't keep filling the supply.[/quote]

I am the person who suggested taxing foreign-owned residential investment properties more heavily and I just want to note that I agree with you -- the primary solution is building more housing especially in and near major cities. I just think you can also address the issue of foreign-investment at the same time. While the total amount of foreign-owned residential investment properties is only 2-3% it is a larger share within these large city and it absolutely HAS had a negative impact on housing markets in these cities (it's also just inefficient -- a lot of these foreign-owned units sit empty for much of the year which is frustrating in places like NYC and SF where space is at a premium).

I also look at the activity of hedge funds and I do think we should be worried about HFs invading the real estate space in ways that could be very bad for the overall market. Changing the rules on the way we tax investment properties now could be a useful way to keep HFs from screwing with the market later. If you have any experience with HFs mucking around in your industry you'd understand why this is something we need to be very concerned with. For them it's all just dollars on a page and the negative externalities of their choices are irrelevant even when they are very bad for both people who work in these industries and people who rely on them (see i.e. healthcare and elder care and veterinarians and dentists).[/quote]

This I do agree with, and I have zero problem with revising the tax code significantly to deal with these issues generally, not just in real estate. But good luck with that with the structure and incentives of the US Senate.[/quote]

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