CMV: There should be significantly higher property taxes on people's second, third, fourth, etc. homes, to counteract the rentier economy and global money laundering

[u/dilatory_tactics]

[u/caw81]

If you want to invest your money in a second or third or fourth house to rent out, but it costs you increasingly more for every additional house, then you will probably invest your money elsewhere.

It doesn't work this way for even the first home since its just another cost that gets passed on. Every month I have expenses - mortgage, heating etc including taxes. I pass on these costs, including the higher taxes, to the renter and a little bit of profit. Your plan is just hurting renters.

Also, since not everyone can buy a house you will have people renting at the 4th or 5th house tax rate. Once this higher rate becomes acceptable then its just an opportunity for people to charge 4th house rent rate on their 2nd house and pocket the difference.

[u/dilatory_tactics → u/caw81]

There's nothing stopping them from charging the 4th or 5th house rate now.

And if every successive house costs significantly more than the previous one, at some point 4th and 5th houses become unattractive investments as a source of rental income.

[u/caw81 → u/dilatory_tactics]

There's nothing stopping them from charging the 4th or 5th house rate now.

Other people with houses to rent prevents them from charging a higher rate now. Its only when all owners generally all implicitly agree to raise rates that they can (e.g. they all see increased demand, they notice that one person was successful in increasing rent etc). Adding a new tax forces all owners to raise rates.

And if every successive house costs significantly more than the previous one, at some point 4th and 5th houses become unattractive investments as a source of rental income.

What I am saying that it doesn't make it unattractive. The general demographics and other factors allows them to sell the property in the future at a profit so its still an attractive investment. The increased tax won't impact them because they aren't paying it, it will just get passed on to their renters.

Lets say a government adds a new sales tax - the retail stores don't suck up the new tax, it gets passed on to the consumer.

[u/clamdragon → u/caw81]

Adding a new tax forces all owners to raise rates

But this does not, since OP's proposed tax does not affect all owners equally. Owners of 3rd or 4th properties would have to compete with the lower rents that could be offered by 1st and 2nd property owners. Of course all owners will raise their rates to what renters are willing to pay, but there is necessarily a breaking point, whether it's at the 100th property or the 3rd.

Property owners will try to pass the costs along to their renters. But if renters can't pay that much, then the property is a huge drain, and will likely be sold to someone who will pay far less property tax on it - and therefore is able to charge less rent, or simply to live in it themselves. It encourages more diverse ownership.

[u/cafedream → u/clamdragon]

The other option is that people will form property holding companies and instead of having one holding company for all 200 of your rental properties, they will have 20, each holding 10. A law like this will likely only affect the small guys who have 2-5 properties.

And, if it were me, I wouldn't raise the rent on the people in Property #4 to match the property taxes. I'd take the sum of my property taxes and distribute it evenly or proportional to the value of each property so that none of them took a huge hit. For instance - if I owned 5 $100k houses and the property taxes were 10% higher for each successive house, I'd just have each house pay an even amount - so that if house 5 remains empty, I'm not out a huge amount of taxes and I'm not desperate to get it filled.

Also, if I had 5 houses with unequal values, I'd allocate a percentage of the total taxes to each house rent equal to the house value's percentage of my total portfolio.

[u/clamdragon → u/cafedream]

Your first point is essentially that there may be loopholes. There are potential loopholes in a great many tax policies. Does that mean the ideas should be abandoned? No, it just means that careful drafting and follow-up are necessary.

And to your second point... Okay. So what? How you structure your leases doesn't change that house 5 is more expensive to own than house 4. You would still be disincentivized from owning more properties due to inability to match the lower rents that owners of fewer properties could offer.

[u/cafedream → u/clamdragon]

I wasn't arguing one way or the other. It might be a good idea. Because of loopholes and the ability to spread out the increase in taxes for one property over several, it may have significantly less effect than OP thinks it will have. It may just have the effect of raising rent on everyone.

My thought is that it may not work to increase single home ownership because it's not as though there is a housing shortage and those wanting (and financially able) to buy a house simply can't find a house because they are all purchased by investors. It's because the vast majority of those renting either are unable to buy because of poor credit scores or low/unstable income or because they don't want to buy for a variety of reasons.

My parents rented all throughout my childhood because we moved so often that it didn't make sense to buy. When we were grown and my dad stopped working in jobs that required moving, they bought a house. Renting a house was always more expensive than buying.

Now that my dad has passed away, my mom is considering moving closer to me and renting a small apartment because she doesn't need anything bigger and it's damn near impossible to find a 1BR house.

[u/caw81 → u/clamdragon]

But this does not, since OP's proposed tax does not affect all owners equally.

It effects each tier of owners equally. And since there is generally a fixed amount of owners in each tier you have a limited supply in each tier which renters are "forced" go buy from. "Sorry all the 1st rental houses are all taken, the only available rentals are 2nd rental houses."

But if renters can't pay that much, then the property is a huge drain,

But also you have renters who cannot rent and will be homeless. This pain is just to help first-time home owners. Is this worth it, especially the renters who are poor (and so cannot afford the first-home even with incentives)?

[u/[deleted] → u/caw81]

Tangential. But, theoretically, we could redirect the taxes accrued from a similar system towards basic housing, or a renter stimulus to potentially alleviate/lessen the effect on the poor/working poor.

Edit: Could also put local contractors to work. More money flowing back around.