Lending != Selling. You’re looking only at the sale, and ignoring the loan. Lending is an extremely good way of earning a profit.
My approach does not stop renting by fiat. I would double property taxes, and provide a commensurate owner-occupant credit, so the tax rate on your dwelling doesn’t increase, or even reduces. I would statutorily adjust that rate and credit, targeting an owner-occupancy rate of 85%.
The investment market is going to be focused on figuring out how to get a renter’s name on the deed so they can get that credit.
Meanwhile, an onsite landlord, living in one unit of a duplex, triplex, or quadplex is able to underbid any offsite landlords for his remaining units.
A land contract is a sale. So is a private mortgage. I don’t want to be condescending here, but it’s not unreasonable to expect that you know what those terms mean when you use them as examples. Your regime also expects that the seller carry the note (which in every or almost every jurisdiction is how a land contract works now–it’s almost indistinguishable from a mortgage as a matter of law–and in any jurisdiction where I’m wrong about this, it’s worse for the buyer anyway). If the seller is put in a position where you’re trying to incentivize them to sell, demanding that they bear additional risk and cost isn’t going to do that. I also assume you understand that this scenario increases the likelihood that the seller is the one left holding the bag if the bad credit purchaser defaults. Is it fair to assume the purchaser has bad credit? Yes, because purchasers with excellent credit and assets can already buy property now.
Doubling property taxes doesn’t get you the result you want either. It just hurts the small owners, because property tax doesn’t care how many properties you own; it only cares about the property to which it’s attached. Large corporations don’t care about a doubled property tax, because they can just eat it and raise the rents. They’re already colluding to fix rents, and that’s the whole problem. Tax credit for an occupier? Terrific. We’ll put the CEO in the penthouse, put the rest of the C suite in our other penthouses downtown, and use the extra cash for stock buybacks.
What’s actually needed is a wealth tax. Don’t penalize someone for owning a nice house. Penalize them for owning thirty houses.
Now, I agree in principle that more people should be able to own land, and I also agree that the current situation in which land is being increasingly concentrated in the hands of fewer ultra-rich entities is unsustainable (and heinous, besides). But the “if you’re currently a landlord, you should be forced to sell your property to whoever you might otherwise rent it to” just doesn’t work. You simply can’t make it attractive enough, because you can’t change the reality that most renters just can’t afford to buy the property. If they could, the problem wouldn’t exist. If I own valuable property, there’s no magic hand-waving you can do that is going to make me want to sell to someone who can’t afford it, because I know they can’t afford it! All putting their name on the deed does is ensure that the property gets sold when they default on the note, and whoever’s holding the note has to cry foreclosure (and guess what? That does cost money and labor to the mortgagee, since the defaulting buyer is probably bankrupt/judgment proof).
So I’ll just turn the place into a hog farm instead. Now instead of renting the house I inherited from the last generation to another family while I wait for my kids to grow up (a situation I expect to find myself in within the next decade or two), I’m instead going to find another way to make it valuable. There’s no universe in which I’m going to sell it. I feel like that kind of scenario accounts for a lot of the upper middle class in the next fifty years, all else being the same. Putting those folks in the same boat with the corporate landlords is shooting your agenda in the foot.
A private mortgage involves a sale, but a private mortgage is the loan associated with the sale, and not the sale itself. The sale of the property may not be particularly lucrative, but the loan certainly can be, especially with subprime loans that commercial lenders won’t touch.
also assume you understand that this scenario increases the likelihood that the seller is the one left holding the bag if the bad credit purchaser defaults.
Buyer/borrower defaults, lender/seller forecloses and sells the property again. Seller isn’t holding the bag. Seller is holding the house.
Hog farm
You keep talking about a hog farm. Under my scheme, to avoid the higher non-occhpant tax on residential properties, you would have to rezone. I’ve never found anywhere that will allow you to rezone from residential to agricultural, so you’d have to go to commercial or industrial to avoid the residential tax hike, but the property taxes on commercial and industrial are considerably higher than residential, and both are currently declining in value. Out of the frying pan, into the fire.
Doubling property taxes doesn’t get you the result you want either. It just hurts the small owners, because property tax doesn’t care how many properties you own; it only cares about the property to which it’s attached. Large corporations don’t care about a doubled property tax, because they can just eat it and raise the rents
Tax rate isn’t just doubled. It’s statutorily increased so long as owner occupancy rate is below 85%. To keep their margins, they will need very high rental rates and very high occupancy rates, and those two are inversely correlated. The higher the rent, the more pressure they have to buy. Meanwhile, all these former landlords are looking for someone to put on a deed so they can save on their taxes.
Such a tax will decimate returns on institutional investors. They’ll jump ship quickly, throwing their dollars at the next highest return.
No, the investors who stay in the industry will turn to private lending, or convert their rental units to condos, which can be sold instead of rented.
The hog farm is a hypothetical example. Getting hung up on it doesn’t change the reality that there are alternative uses of property that don’t require new zoning. In places where they don’t exist they will be made to exist, because people will sooner burn down their properties than give them away.
And you’re now suggesting that instead of renting, property owners should hold the notes on subprime mortgages? Your position is “If you’re creditworthy enough to own a second home, you should be forced to sell it to someone who can’t afford it and carry a note yourself at tremendous risk that an American bank knows better than to hold.” You were alive in 2008, right? You want a Depression? That’s how you get a Depression. When you find yourself advertising subprime mortgages in order to make your scheme work, don’t you think that might be a good time to reevaluate?
The seller isn’t holding the house when the buyer defaults. The seller is holding the house, the buyer’s damages to the house, the cost of the foreclosure, and the cost of deficiency litigation against the defaulting buyer who is probably judgment-proof, and that’s assuming the seller doesn’t also lose the house at foreclosure, since a foreclosure is a public sale. So the seller carries all of the risk while the unqualified buyer gets the equity. I don’t even own any land to rent, but fuck that. I’d sooner let it sit empty. The only people making money in that environment are real estate lawyers.
And none of this even considers that currently, a creditworthy seller statistically has given her own mortgage on the rental property in the first place, and that means the seller can’t finance the house herself because she can’t transfer good title to anyone without paying off her own note first. That’s a problem that doesn’t exist for, you guessed it, landlords. That scenario exists to currently enable people to buy second homes and generate wealth for their families, and it’s impossible in your regime in which apparently the upper middle class should not exist at all.
The bottom line is that your scheme is a disaster. I don’t say that to be mean. It’s just out of touch with economic reality. People can’t afford houses, and forcing landlords to sell their land doesn’t make people able to afford it. Credit and lending isn’t made up. It’s based on actual risk assessment, and forcing landlords to bear that risk while also losing their land isn’t a transfer of wealth to vulnerable populations or younger generations. It’s an erasure of wealth by procedure, bureaucracy, and waste.
And the owner-occupier thing? You know people can lie about their residency and building occupancy, right?
Your scheme, if implemented, would not solve the housing crisis. It targets the wrong people, it’s economically indefensible, and most importantly, it destroys class solidarity thay would otherwise exist between small landowners and renters. The only thing you might accomplish is a tremendous wave of violence, because I think I can speak for a lot of Americans here:
I have been tremendously, exceedingly fortunate and privileged to buy land. I wish everyone were so fortunate. I worked very hard for it. Other members of my family have also, and as much as I dread it, eventually I may inherit a second home that has been in my family for generations and was paid for by decades of backbreaking labor by my ancestors. When that day comes, I may rent one of these properties until my son is old enough to live there with his family. That’s the entirety of my retirement and investment strategy. My savings will simply not be enough on their own.
And your scheme suggests instead that I should be forced to sell to someone who may well fail to pay for it. No thanks. That’s a nonstarter, and it’s a nonstarter for everyone whose story even remotely resembles mine. In my part of the world, that’s the story of every house in the county. Your scheme doesn’t work for the simple reason that people here would sooner overthrow the government than let it stand.
I will never deed these properties away. They are paid for with my family’s blood. If you want to take the land from me or anyone similarly situated, you’re going to have to do it with guns.
That’s an attitude that can only exist for small landowners. Maybe we should try a scheme that doesn’t put them on the same footing with institutional investors. I really don’t like being on the same side of an issue as an investment bank. --but I like it a lot more than your plan to set the middle class back a hundred years.
And you’re now suggesting that instead of renting, property owners should hold the notes on subprime mortgages?
By and large, renters already have subprime credit. Landlords are already taking the risk on renters who would be subprime borrowers. That’s how they are making their money: exploiting people who don’t have the savings or income to qualify for lending.
Landlords aren’t taking on any additional risk by lending to them vs renting to them. They are actually reducing their risk, as the same person as a buyer has more to lose than they would as a renter. Further, a stable mortgage payment becomes more affordable over time, as the borrower’s income increases.
and that’s assuming the seller doesn’t also lose the house at foreclosure, since a foreclosure is a public sale.
That’s the stupidest thing you’ve said. Yes, it’s a public sale, and the beneficiary of that sale is the lender. The first bid at a foreclosure sale is always the lender, who bids what they are owed, including the foreclosure costs.
The only way the seller loses the house is if someone over bids them (or they are too stupid to bid the full amount they are owed) But if they are overbid, they receive the proceeds from the sale, and are made whole.
You don’t get to talk about damage to the property: landlords have the same risk. The cost and process of a foreclosure is similar to that of an eviction, and the higher interest rate the buyer is paying more than covers it. Further, you’re ignoring mortgage insurance that buyers would have to pay for as well.
And the owner-occupier thing? You know people can lie about their residency and building occupancy, right
Sure. That would be tax fraud. Property taxes are public records. Anyone can look up who was claiming what. Including the actual occupant of the property you say you live in, or the neighbor you pissed off. And when they look it up, you’re on the hook for all the credits you claimed.
I’d sooner let it sit empty.
That attitude is a problem. You are contributing to the problem. You should be financially discouraged from this problematic course of action.
, it destroys class solidarity thay would otherwise exist between small landowners and renters.
There is no class solidarity between renters and landowners, nor should there be. The relationship of landowner to renter is the same as the relationship between tick and dog, fly and horse, mosquito and human.
Much like “impoverished child” or “battered spouse”, “renter” is a class that should not exist, and for much the same reason.
Solidarity between the people you describe is best achieved by converting the renters into landowners.
Lending != Selling. You’re looking only at the sale, and ignoring the loan. Lending is an extremely good way of earning a profit.
My approach does not stop renting by fiat. I would double property taxes, and provide a commensurate owner-occupant credit, so the tax rate on your dwelling doesn’t increase, or even reduces. I would statutorily adjust that rate and credit, targeting an owner-occupancy rate of 85%.
The investment market is going to be focused on figuring out how to get a renter’s name on the deed so they can get that credit.
Meanwhile, an onsite landlord, living in one unit of a duplex, triplex, or quadplex is able to underbid any offsite landlords for his remaining units.
A land contract is a sale. So is a private mortgage. I don’t want to be condescending here, but it’s not unreasonable to expect that you know what those terms mean when you use them as examples. Your regime also expects that the seller carry the note (which in every or almost every jurisdiction is how a land contract works now–it’s almost indistinguishable from a mortgage as a matter of law–and in any jurisdiction where I’m wrong about this, it’s worse for the buyer anyway). If the seller is put in a position where you’re trying to incentivize them to sell, demanding that they bear additional risk and cost isn’t going to do that. I also assume you understand that this scenario increases the likelihood that the seller is the one left holding the bag if the bad credit purchaser defaults. Is it fair to assume the purchaser has bad credit? Yes, because purchasers with excellent credit and assets can already buy property now.
Doubling property taxes doesn’t get you the result you want either. It just hurts the small owners, because property tax doesn’t care how many properties you own; it only cares about the property to which it’s attached. Large corporations don’t care about a doubled property tax, because they can just eat it and raise the rents. They’re already colluding to fix rents, and that’s the whole problem. Tax credit for an occupier? Terrific. We’ll put the CEO in the penthouse, put the rest of the C suite in our other penthouses downtown, and use the extra cash for stock buybacks.
What’s actually needed is a wealth tax. Don’t penalize someone for owning a nice house. Penalize them for owning thirty houses.
Now, I agree in principle that more people should be able to own land, and I also agree that the current situation in which land is being increasingly concentrated in the hands of fewer ultra-rich entities is unsustainable (and heinous, besides). But the “if you’re currently a landlord, you should be forced to sell your property to whoever you might otherwise rent it to” just doesn’t work. You simply can’t make it attractive enough, because you can’t change the reality that most renters just can’t afford to buy the property. If they could, the problem wouldn’t exist. If I own valuable property, there’s no magic hand-waving you can do that is going to make me want to sell to someone who can’t afford it, because I know they can’t afford it! All putting their name on the deed does is ensure that the property gets sold when they default on the note, and whoever’s holding the note has to cry foreclosure (and guess what? That does cost money and labor to the mortgagee, since the defaulting buyer is probably bankrupt/judgment proof).
So I’ll just turn the place into a hog farm instead. Now instead of renting the house I inherited from the last generation to another family while I wait for my kids to grow up (a situation I expect to find myself in within the next decade or two), I’m instead going to find another way to make it valuable. There’s no universe in which I’m going to sell it. I feel like that kind of scenario accounts for a lot of the upper middle class in the next fifty years, all else being the same. Putting those folks in the same boat with the corporate landlords is shooting your agenda in the foot.
A private mortgage involves a sale, but a private mortgage is the loan associated with the sale, and not the sale itself. The sale of the property may not be particularly lucrative, but the loan certainly can be, especially with subprime loans that commercial lenders won’t touch.
Buyer/borrower defaults, lender/seller forecloses and sells the property again. Seller isn’t holding the bag. Seller is holding the house.
You keep talking about a hog farm. Under my scheme, to avoid the higher non-occhpant tax on residential properties, you would have to rezone. I’ve never found anywhere that will allow you to rezone from residential to agricultural, so you’d have to go to commercial or industrial to avoid the residential tax hike, but the property taxes on commercial and industrial are considerably higher than residential, and both are currently declining in value. Out of the frying pan, into the fire.
Tax rate isn’t just doubled. It’s statutorily increased so long as owner occupancy rate is below 85%. To keep their margins, they will need very high rental rates and very high occupancy rates, and those two are inversely correlated. The higher the rent, the more pressure they have to buy. Meanwhile, all these former landlords are looking for someone to put on a deed so they can save on their taxes.
Such a tax will decimate returns on institutional investors. They’ll jump ship quickly, throwing their dollars at the next highest return.
No, the investors who stay in the industry will turn to private lending, or convert their rental units to condos, which can be sold instead of rented.
The hog farm is a hypothetical example. Getting hung up on it doesn’t change the reality that there are alternative uses of property that don’t require new zoning. In places where they don’t exist they will be made to exist, because people will sooner burn down their properties than give them away.
And you’re now suggesting that instead of renting, property owners should hold the notes on subprime mortgages? Your position is “If you’re creditworthy enough to own a second home, you should be forced to sell it to someone who can’t afford it and carry a note yourself at tremendous risk that an American bank knows better than to hold.” You were alive in 2008, right? You want a Depression? That’s how you get a Depression. When you find yourself advertising subprime mortgages in order to make your scheme work, don’t you think that might be a good time to reevaluate?
The seller isn’t holding the house when the buyer defaults. The seller is holding the house, the buyer’s damages to the house, the cost of the foreclosure, and the cost of deficiency litigation against the defaulting buyer who is probably judgment-proof, and that’s assuming the seller doesn’t also lose the house at foreclosure, since a foreclosure is a public sale. So the seller carries all of the risk while the unqualified buyer gets the equity. I don’t even own any land to rent, but fuck that. I’d sooner let it sit empty. The only people making money in that environment are real estate lawyers.
And none of this even considers that currently, a creditworthy seller statistically has given her own mortgage on the rental property in the first place, and that means the seller can’t finance the house herself because she can’t transfer good title to anyone without paying off her own note first. That’s a problem that doesn’t exist for, you guessed it, landlords. That scenario exists to currently enable people to buy second homes and generate wealth for their families, and it’s impossible in your regime in which apparently the upper middle class should not exist at all.
The bottom line is that your scheme is a disaster. I don’t say that to be mean. It’s just out of touch with economic reality. People can’t afford houses, and forcing landlords to sell their land doesn’t make people able to afford it. Credit and lending isn’t made up. It’s based on actual risk assessment, and forcing landlords to bear that risk while also losing their land isn’t a transfer of wealth to vulnerable populations or younger generations. It’s an erasure of wealth by procedure, bureaucracy, and waste.
And the owner-occupier thing? You know people can lie about their residency and building occupancy, right?
Your scheme, if implemented, would not solve the housing crisis. It targets the wrong people, it’s economically indefensible, and most importantly, it destroys class solidarity thay would otherwise exist between small landowners and renters. The only thing you might accomplish is a tremendous wave of violence, because I think I can speak for a lot of Americans here:
I have been tremendously, exceedingly fortunate and privileged to buy land. I wish everyone were so fortunate. I worked very hard for it. Other members of my family have also, and as much as I dread it, eventually I may inherit a second home that has been in my family for generations and was paid for by decades of backbreaking labor by my ancestors. When that day comes, I may rent one of these properties until my son is old enough to live there with his family. That’s the entirety of my retirement and investment strategy. My savings will simply not be enough on their own.
And your scheme suggests instead that I should be forced to sell to someone who may well fail to pay for it. No thanks. That’s a nonstarter, and it’s a nonstarter for everyone whose story even remotely resembles mine. In my part of the world, that’s the story of every house in the county. Your scheme doesn’t work for the simple reason that people here would sooner overthrow the government than let it stand.
I will never deed these properties away. They are paid for with my family’s blood. If you want to take the land from me or anyone similarly situated, you’re going to have to do it with guns.
That’s an attitude that can only exist for small landowners. Maybe we should try a scheme that doesn’t put them on the same footing with institutional investors. I really don’t like being on the same side of an issue as an investment bank. --but I like it a lot more than your plan to set the middle class back a hundred years.
Either way I think we’re done here. Take it easy.
By and large, renters already have subprime credit. Landlords are already taking the risk on renters who would be subprime borrowers. That’s how they are making their money: exploiting people who don’t have the savings or income to qualify for lending.
Landlords aren’t taking on any additional risk by lending to them vs renting to them. They are actually reducing their risk, as the same person as a buyer has more to lose than they would as a renter. Further, a stable mortgage payment becomes more affordable over time, as the borrower’s income increases.
That’s the stupidest thing you’ve said. Yes, it’s a public sale, and the beneficiary of that sale is the lender. The first bid at a foreclosure sale is always the lender, who bids what they are owed, including the foreclosure costs.
The only way the seller loses the house is if someone over bids them (or they are too stupid to bid the full amount they are owed) But if they are overbid, they receive the proceeds from the sale, and are made whole.
You don’t get to talk about damage to the property: landlords have the same risk. The cost and process of a foreclosure is similar to that of an eviction, and the higher interest rate the buyer is paying more than covers it. Further, you’re ignoring mortgage insurance that buyers would have to pay for as well.
Sure. That would be tax fraud. Property taxes are public records. Anyone can look up who was claiming what. Including the actual occupant of the property you say you live in, or the neighbor you pissed off. And when they look it up, you’re on the hook for all the credits you claimed.
That attitude is a problem. You are contributing to the problem. You should be financially discouraged from this problematic course of action.
There is no class solidarity between renters and landowners, nor should there be. The relationship of landowner to renter is the same as the relationship between tick and dog, fly and horse, mosquito and human.
Much like “impoverished child” or “battered spouse”, “renter” is a class that should not exist, and for much the same reason.
Solidarity between the people you describe is best achieved by converting the renters into landowners.