Amen to this. Two case studies from the UK I've been thinking about recently:
1) Visiting London and spending time in South Kensington - walking back to hotel at night, only about 30% of houses had any lights on. Suggestion is the others are effectively uninhabited, and a search on RightMove shows properties sell for £20-£30m for a 4/5 bed. This isn't normal Londoners, it's outside investment.
2) Cornwall, where I live - an insane house price rise over lockdown as city dwellers aim for the beautiful bits of the country. Literally no way now you could afford your first home round here on minimum wage, and some towns have a high (>50) % holiday or second homes.
It's an untenable situation. I think my generation (I'm nearly 50) are probably the last to be able to afford their own home on anything other than a massive wage.
Round here in Cornwall the jobs are things like surf instructor, supermarket worker, barperson, etc. That's not gonna stretch to the local house prices.
Another Cornishman here (Par). The financial destitution and how much harder they have to work for the same things I do in the South East is unsustainable. Cornwall has Luther to the right politically and that’s because there’s been some useful scapegoats. Now those scapegoats have been slain and things are getting worse not better I hope we’ll see policies that are focused on root cause issues instead of ideology (left or right). Property is an obvious example. Dormant second home now means the Cornish rent or live in low quality new build accommodation (hello Wainhomes) but when communities are hollowed out and empty through winter local businesses fail and the destitution affects even the pretty locations. Those people wonder what happened to the quaint fishing village their second home is in. Why is cafe closed, the nearest shop a supermarket that is a 30 min drive away. Why is their a drug problem? Why are the pins all boarded up etc etc. I hope Cornwall and it’s political representatives can act before the bust comes and find a balance between tourism and building sustainable local businesses in different sectors. The obvious place to start is accommodation. If people cannot put a roof over their head how can a community function least of all an economy.
Unfortunately, the British press and all the wealthy people with second homes still have Brexit as a scapegoat for why cafes and shops in tourist destinations can't find staff. Never mind the fact that AirBNB and second homes have pushed up house prices and rents to the point that it's impossible to live there on the kind of pay those jobs have, according to the media it's all the fault of Brexit driving away the foreign workers who had to do the jobs because all the Brexit-voting morons who were brainwashed into blaming the EU are too lazy to do them.
> spending time in South Kensington - walking back to hotel at night, only about 30% of houses had any lights on.
South Kensington is a bit of a curiosity.
It is predominantly bordered by Chelsea and Knightsbridge.
Chelsea is Russian country, if you are a wealthy Russian, Chelsea is the place to be. Unless you are a Russian oligarch, in which case there are one or two spots a bit further away where you can splash super serious cash on rarer properties.
Knightsbridge is wealthy Arab country, when it gets too hot in the Middle East summer, they flock to Knightsbridge with their imported Ferraris to stay in their London houses.
But South Kensington is a bit different. Its not attractive to the Russians or Arabs. Not many of the properties there remain single occupant, they've been mostly subdivided in to individual flats or re-purposed for office (or educational use ... there are lots of cram-schools, colleges and nurseries round there).
What about Notting hill, a bedsit can go for 2000 quid per week there, it's in Kensington.
Average London rent prices are 1600 quid, that is before council tax, internet and the dreaded tv licence.
A more granular overview is
Location Studio One bedroom
Kensington and Chelsea £1,427 £2,062
Islington £1,383 £1,565
Tower Hamlets £1,398 £1,547
Westminster £1,371 £2,113
Lambeth £1,240 £1,595
One bedroom is not sufficient to raise a family, I think that's safe to say.
So let's move on to the 2 and 3 bedroom properties
These are before council tax and other costs, which are gonna be laughed at by oligarchs but they do count for normal people.
The new houses nnextto Westfield shopping centre cost around 2000 quid before council tax , zone 3 classic houses with a garden go for 1500 before council tax.
its really bad in all London, unless you make 50k after taxes and most devs don't make that money there.
t
Yeah a lot are not residential, a lot of those that are are subdivided into flats, and a chunk of those that remain may just not be occupied outside term time or during a pandemic.
But mostly it's that they're not residential to begin with. Many more are linked to an embassy, restaurants, clubs, nurseries, storage, etc. than you'd realise from 'walking back to hotel at night'.
Not sure why the amen is applicable to Dutch cities. I'll take the local perspective from Amsterdam as an example, but it applies more broadly to the other cities as well here.
Regarding point 1:
There's no real issues with long-term vacancies (the municipality already has laws in-place which fine owners of vacant homes), typically sits between 1 and 2%. That should obviously go down to 0 as much as possible, but it's clear that (1) the problem has an extremely minor effect on the market, (2) it's not exclusively caused by investors, a lot of them are pied-a-terres or homes owned by temporary migrants working abroad and (3) the problem of vacant homes that can be attributed to investors, can be addressed in many other ways than a total ban.
In other words, not an effective or suitable policy on this point.
Regarding point 2:
The price increases aren't caused by investors in Amsterdam, studies have shown this over and over again. If buy-to-let is banned, rental supply drops, rental prices go in overdrive, and there'll be more pressure to buy under any circumstance. The have-nots who're unable to buy will be even worse off. There's no magical panacea to a lack of sufficient supply.
You mention a couple points around 2nd homes, which are fair. I think in a world where there isn't enough housing for everyone, we should at minimum disincentivize owning second homes that go unused most of the time. But apart from the fact that Amsterdam is the capital, a working town, not a place where people have second homes that they enjoy on the weekend, this policy doesn't address 2nd homes at all. You're not banned from buying and owning a 2nd home in Amsterdam after this policy goes into effect.
In other words, an entirely ineffective policy regarding point 2.
Studies have shown that in the Netherlands only a tiny part of the rapidly increasing price is due to shortage and the majority due to investers. The exact opposite of what you say.
I'm not saying you are wrong. I'm saying that what you pose as established facts are highly debated in the Netherlands at the least.
Both supply and demand are incredibly constrained: building new houses is slow and not exactly being stimulated by the government, whereas demand is fixed because people need a place to live.
Property rental is an extremely attractive investment opportunity. Demand is guaranteed and due to the low cost of obtaining money it is basically risk-free. Even at near-zero rent you'll still make a profit - as long as the housing market doesn't crash.
On the other hand mortgages always carry some risk, and banks are aware of this. There are quite strict limitations on the amount you are allowed to borrow. This directly means that individuals will always be outbid by investors.
This directly results in price increases. Individuals are now no longer able to buy a home, forcing them to rent. Landlords, in turn, are happy to let you rent a property which you wouldn't be able to afford because it is way easier to evict you. And because demand is higher than supply, they'll happily increase the price. Rent prices are already in overdrive.
So now you're paying €1200 in rent instead of €800 in mortgage payment - for the same property.
Banning buy-to-let would result in a sale of the properties currently being rented out - which means a drop in the housing price. Rental supply will drop, but those houses don't magically disappear! People who previously were unable to get a mortgage can now suddenly afford to buy instead of rent. This lowers the demand for rentals, which decreases rent.
People don't need landlords - they need homes. With the exception of a very small number of short-term rentals, landlords provide zero value. Removing them from the equation decreases the prices for everyone.
The Netherlands is just too rich that it is working against itself. We have created a society where every person wants their own house- 17 million people 10 million houses. And the Netherlands is a magnet for migrants- compared to most of the world the streets are paved with gold.
And no matter how much the prices go up people can and will pay. Unless there's a mayor economic recession things will not get better.
Your first point is a misleading anecdote given there's actually data on this. The amount of empty homes in London is at a historical low [1]. Broadly, cities with the highest amount of empty homes tend to have the most affordable housing, because obviously that indicates there's more than enough housing to go round.
> The Square Mile has the highest percentage of empty homes in the entire country, fresh data states.
> Some 42.4 properties per 1,000 sit unused in the City of London, leaving it top of the charts and the only London authority to feature in the nationwide top 10.
> Data compiled by insurer Admiral also shows that as many as 29,242 London homes have been unoccupied for at least six months, to a collective value of roughly £15 billion.
> walking back to hotel at night, only about 30% of houses had any lights on.
I wish a data scientist at utilities (water, electricity and gas) providers pick up this line and provide some statistics on this. I wish also that city-services companies (e.g. Electricity/water/parking service provider) can collaborate to provide better and justified policy making.
I did similar studies based on open data to provide insights on road/sidewalk optimization usage, and I still see value in collaboration with policy makers.
Pirates tried to investigate the situation from this angle only to be publicly shamed for being commies, spying on people. They only wanted district aggregate statistics.
Punitively heavy land taxes on non-primary dwellings solves this overnight. It also raises a lot of capital that can be used to provide services in the area.
Unfortunately the wealthy tend not to want to be taxed and they're not averse to fighting back. They've learned that they need to lobby even small local tax-raising authorities to obstruct these kinds of actions. In Wales, local authorities are allowed to raise a local tax premium of up to 100% on holiday homes [1], but few, if any, charge a premium of more than 50%, even in affected areas considered to be in crisis. There's also a loophole that a second home can be declared as a holiday rental property business, without any real intention of letting it out. Welsh authorities work hard to police this by asking to review evidence of lettings (I know this as I own a legit holiday rental property in an affected area) but the enforcers need extra funding to police the tax dodgers.
I don't dispute your underlying point that punitive taxes are a big part of the solution, but I take issue that it's an easy or overnight fix unfortunately because of the interests aligned against imposing them.
Yes and no. Yes, your proposal can solve the problem for sure. No, you just can hardly implement it anytime soon.
I'm in Australia and Labor lost last election just because they were swearing to remove so called NG(Negative-Gearing, which allows the property investors to offset their income with losses from investment property) before the ballot day, despite NG itself is actually a bizarre idea: why would tax payers cover the asses of the property investors and what's more, in fair amount of NG claims, the so claimed losses were not actually rendered but rather losses in accounting term. If you opt to a different accounting method, they were actually making a profit.
So your proposal will for sure hurt those vested interests, and I would expect it be very hard to pass the parliament. It's great to see Dutch cities actually made that far, I'll keep my eyes wide open to see what's next for them.
> Round here in Cornwall the jobs are things like surf instructor, supermarket worker, barperson, etc. That's not gonna stretch to the local house prices.
That was the case. A colleague of mine, originally from St Just, moved to London for work as so many have to do. Another from near Cockermouth did the same. Both now work remotely full time from their 'home towns' on decent wages.
Covid has done wonders for local communities - good jobs are now available for people without having to move across the country.
https://www.rightmove.co.uk/properties/112353359 for example is under £300k. Assuming you got it for 300k (asking price is 285k) with a 15k deposit you're looking at £1,278.19 a month with nationwide on a 30 year rate, well within the range of a couple earning £35k each, which is a reasonable
Now sure if you didn't get the education to get a decent job. Hell even on 25k each, Nationwide can lend upto £275k for a first time buyer - just need that deposit.
For a small village of less than 5,000 people nowhere near any sort of city or population centre, this seems like a lot. £1,278/month is well outside the range for a lot of working class and even middle class families. The median gross salary in Cornwall was £27,223 in 2020.
I'm baffled by your comment to be honest; not very long ago I could buy a house in Bristol for the same or less.
Median post-tax household income in the UK is £30k. So, £25k each is roughly £20k post-tax, so you're looking at the top 30% of households.
Admittedly this includes households including people who are "retired" but I think that's reasonable as plenty of people have to keep working even though they're receiving a pension.
> Now sure if you didn't get the education to get a decent job. Hell even on 25k each, Nationwide can lend upto £275k for a first time buyer - just need that deposit.
This horrifies me. Even the slightest increase in interest rates will ruin a huge number of home owners.
On the other hand, home ownership in the UK isn’t normal either. It’s only since the 50s or perhaps 60s that the average person has been able to afford a home. And then again in the 80s with council houses sold off to tenants.
The real problem is how much the bank earns off the interest it charges you throughout your life while it had to do what?... create new money from nothing into the money supply with special permissions given to it by the government. This is why housing is so expensive to begin with. This bullshit needs to stop.
Note, this targets anyone buying houses to rent out. It does not (like london considered) tax un-lived-in houses.
This is just a weird bandaid. Mostly trying to blame landlords for this housing crisis when mortgage tax credits, and scarcity due to weird eco regulation shenanigans are to blame.
I moved here years ago and was having doubts if it's the right time to buy at these insane property prices. A coworker said "I know some people who've been holding out for fair housing prices since 1949, they are still waiting".
Vacant properties in London are a red herring. Last time I checked official number they accounted for 1% of the housing stock, bearing in mind that a number of properties are always being refurbished at any given time. In general it does not make sense to keep a property empty unless perhaps it is an extreme luxury one.
South Kensington is one of the most expensive area of London and not representative at all. Whatever happens there does not affect the average person, and quite of few of the grand houses there are also actually offices.
In any case, it is not true that 30% of homes are empty there. Apparently the City of London (i.e. the square mile, not London as a whole) has the highest rate in the country and that is still only about 4% [1].
In Cornwall the issue is quite different: The area is very attractive for second homes and, at the same time, it is the second poorest region in all of Northern Europe. This means that local resident have a very low purchasing power and indeed cannot compete with people from London and the South East. I think that they are starting to implement restrictions in some areas in order to give priorities to buyers who will occupy the property as their main residence in order to keep second homes in check.
The median price for a property in London is £600K, the average is over £1M today.
That means that normal people cannot afford to buy anything in London even with HTB which is a terrible policy the people who can afford to use it are already in the top percentiles.
A £600K property as a first time buyer requires you to have about £100K to get on a property ladder.
10% deposit for a 90% LTV mortgage is £60K, stamp duty is £17,500 (£20K from end of Sep 21) that’s already ~£80,000 then you have mortgage fees, legal fees, furnishing costs (since new builds don’t even come with blinds)…
The average salary in London is £41K, that leaves you with take home pay of about £30K after tax (if you have no student loans).
So a house hold of two people living in London has about £60K per year if both earn the average pay, £25K or more of which would go to rent per year, another £4000 will go to various utility bills and council tax, another 5-5.5K would go for travel (assuming you live within zone 1-4), then you have food, clothing and other living expenses, so if you are somehow lucky and can save up £10K per year that’s 10 years to save up enough for a median property which is most likely a 54 sq/m flat.
Add kids to this mix and well you are royally fucked.
That is a complex problem, though. The main issue is land investment that effectively prevents or greatly limits potential new construction. With new construction thwarted even modest growth over time causes extreme prices per unit.
Preventing properties from being treated as bidding chips or bonds issued this could greatly improve the situation, but without addressing land use and land banking then the lack of new construction will continue to unbalance property markets.
Similar situation for York -- tourist hotspot, a large chunk of the local jobs in tourism/customer service, retail, food service etc.
Article in the local press in the last year (which I obviously can't find now) found that something like 95% of the properties on sale were unaffordable on the median wage of a local resident.
And then you get articles like this one: https://yorkmix.com/york-is-the-norths-property-hotspot-as-i...
Funny thing is, this article happens to be a total submarine -- I recognise the development they're describing, it's been there for years and has not sold well (totally overpriced) -- this article and others like it are just an attempt to drum up further demand.
Really frustrating that when we have so many people needing housing, homes are built entirely with the objective of selling them to people who already have homes elsewhere!
First houses should have priority over second houses please.
Wages have been stagnant for decades while the cost of living has increased... and now housing has become a privilege.
Yes, there are "rich foreigners" and some corporations are strategically acquiring the places and spaces where high rent can be extracted. But what has driven housing cost in the market of individual homes is simply that some citizens can afford to borrow at low rates, and other citizens are seizing the opportunity to realise gains that they could not attain through a lifetime of work, wage increases, and other investing.
It is grim to work for years and have nothing else to show for it.
Young families, workers, the elderly, and the poor will be unable to afford even tenancy in the big cities. (To turn dark for just a moment, we only really seem to have a plan for the elderly.) The future control of crucial urban voting-blocks in Western democracies will be in the hands of landlords.
The governments are to blame. If conventional mortgages were capped to 1 per person. And a minimum of 80% ltv was required. Then houses would be cheaper.
Instead the government is letting people put low money down, low interest rates, and buy up many houses at once. That of course inflated housing costs.
This is desperately needed. And not just in the major cities; this is happening in every Dutch town. Amsterdam may have prices beyond absurd, but the whole nation is burdened by this problem.
In the street I live in the capital of the northern province of Fryslân (Frisia) most homes are owned by their inhabitants, but in the past few years we've seen several houses being bought by small-time investors (who already own their own home of course, are financially well on their way, and are looking for ways to save their saving from low interest rates and inflation), who charge renters four times what my fellow homeowners and I pay for mortgage.
You never get to know the renters, because they are really only here for as long as nothing better comes along (like buying a house or social housing), and who can blame them?
Meanwhile maintenance of these houses is minimal, because the market won't really reward proper upkeep at this point; they can always sell the house for an insane price tomorrow.
It's really upsetting to see my younger colleagues stuck renting a flat, while I own my house having even paid of the vast majority of the mortgage simply because I had the luck of buying it in 2013 (a major dip in the market where paying less than the listed price was common).
For the good of society we need to put a stop to this type of speculation on the housing market.
When I was living in NL I knew a guy who had a mortgage for a house in Australia, a mortgage on a house in Groningen and then he was looking to get another mortgage for a house in Den Haag.
Banks don't seem to cooperate internationally or even nationally; he never told the banks he has mortgages already.
While banks may not check this on signing, they'll certainly check it when you start defaulting.
This really is the worst advice ever. It's a sure way to get you in Real Trouble when shit hits fans. This is not legal advice either, btw. Just someone who read the tiny letters in the mortgage contracts.
You’re right, banks don’t cooperate internationally in this area, but it cuts both ways no?
How can one get a mortgage in Holland without being a resident/having income declared there?
The bank will not loan a foreign resident in those circumstances. Did he pay taxes in all those countries?
> In the street I live in the capital of the northern province of Fryslân (Frisia) most homes are owned by their inhabitants, but in the past few years we've seen several houses being bought by small-time investors (who already own their own home of course, are financially well on their way, and are looking for ways to save their saving from low interest rates and inflation), who charge renters four times what my fellow homeowners and I pay for mortgage.
specifically the last part:
> small-time investors who charge renters four times what my fellow homeowners and I pay for mortgage
But what about maintenance costs though? Those costs are very high, definitely 4x the cost of the mortgage! /s
In the long term, the ethically right answer seems pretty clearly to me to be a land value tax [0]. But due to encouragement of home ownership [1], that's not going to democratically tenable in a lot of countries for 20+ years. Unfortunate situation.
[0] In 1879, a man asked "How come all this new economic development and industrialized technology hasn't eliminated poverty and oppression?" That man was Henry George, his answer came in the form of a book called Progress & Poverty, and this is a review of that book - https://astralcodexten.substack.com/p/your-book-review-progr...
I'm not sold on the Economist article. I do believe in home ownership. The idea that a person spends a lifetime in the same home and community is a good one. We're tribal creatures, and you want a tribe -- you want people to know their neighbors, have community BBQs, and live in real communities. You want enough of a vested interest in municipal politics that democratic structures work. You want kids growing up with the same friends in school.
The flips side can be pretty dark too. For example, there are are plenty of stories of poorer communities, especially African American tenant ones, being broken up and priced out by gentrification of rental markets.
Ownership is less economically efficient, but much more resilient. Once a mortgage is paid off, you've always got a roof overhead. You just need to earn enough for food, clothing, and medicine.
I think the trick would be to implement significant differences in land tax based on:
* a home you live in; versus
* an individual investment property (e.g. if you own 2-3 homes); versus
* an institutional investment property (e.g. investment fund owns hundreds of homes)
I don’t think the article is saying ownership is a bad thing in itself, but that the vast resources that have been poured into promoting and subsidising it have had some pretty undesirable consequences.
Here in the UK we have started imposing tax penalties on buy to rent that disincentivizes owning more than one or two rental properties. The problem with punishing institutional investors is it would take huge amounts on investment out of the housing market, just as we have a massive need for more housing. We need more houses for people to buy and more new housing available to rent. Rental properties by themselves aren’t a problem, it’s taking houses out of individual ownership and transferring them to the rental sector that’s the problem.
To be 100% completely honest, home building needs to be one of our basic skills taught in school. That along with chopping down the building codes for small homes to be extremely simple. I'm not saying we support shanty homes everywhere, but the problem we have is that investors are buying up all the perfect homes and most homes are perfect homes. Maybe we should have less than perfect homes that aren't valued so high and sought out by investors that live in China.
Ownership is important, it's a personal investment. For millenials all of our money is going to the boomers etc we rent from, those of which who do own property (because I know many of them don't) make it big on buying when house prices were actually reasonable, then downsize their house in London and get a nice big house build in Spain to retire to.
When millenials reach retirement age, a house, as for all previous generations, is the best option for financial security for retirement/end of life. Fewer and fewer of us will have that option I think.
Unfortunately “community barbecues” oftentimes meant “barbecues with people who are exactly like me and who think exactly like I do”, an attitude which has had a pretty corrosive effect on democracy in the near past.
Homeownership is a great ideal. Letting people work towards having a place to live without paying rent is great for independence.
What is stupid is promoting Homeownership as a personal investment for the individual home-owner. A home is already a great thing to own financially, because it 'produces' not having to pay rent. There is no need to also have it pay 5% a year for people who have 100% leverage (which is very common in the Netherlands for mortgages).
But politicians get lots of votes by making the current middle class richer for owning homes. Nevermind that it is bad long-term as people have been saying for the last 20 years.
Just a note that 100% leverage would mean that you’re borrowing against 100% of the portion of the asset you bought to purchase more of the asset. I.e. you put 50% money down and borrowed to buy the other 50%.
A typical 20% down-payment in the US gets you 400% leverage (you used your 20% ownership 4 times over in order to purchase the other 80%).
5% down gets you 1900% leverage.
If you put $50000 down (5%) on a $1M home, it rises by 1% ($10000) and you sell it, then you just made a 20% return on your initial investment. You were leveraged 1900%, and so you got a return 1900% above what you would have without borrowing any $. Nobody serious advises that kind of leverage on any asset except for real-estate, AFAIK.
In a perfect market where there was always enough housing and rental units to supply the demand, rent would just end up settling at the same price as owning. See price vs rent index.
Land ownership tax doesn't work because land is a basic need. You have to exist somewhere. The problem isn't ownership of land, it's excessive ownership of land. Ownership of land beyond need into greed. You can easily design land ownership tax like income tax where people who own more pay more. People who own enough for their family are not taxed at all and if you want more you pay a lot more.
Of course there is the usual issue of the definition of "enough" but those kind of questions are solved all the time in parliaments. This all or nothing behavior is what harms the prospect of land tax.
Well, when people talk about wealth taxes those are always above a certain threshold. I am perfectly fine with taxing excessive ownership of land. We don't need the theoretically perfect utopia. We need something that is good enough to give us another 80 years of peace.
Sounds like you haven’t heard much if the theory behind LVT.
For example one way it aligns incentives is pressuring land to be put to more productive use. Aka if someone can’t afford the taxes they might have to sell it to someone who can and likely that second entity will build more units on the land which utilizes the land more efficiently. Not in every instance perhaps but enough to matter. Its a way of forcing communally central land to be put to good use and for the profitability to feed back into the community.
We have straight property tax in Cambridge(ma United States). If you live if your unit they’ll reduce the value that is taxed (by about 400000$ Or about $2500)
I’m not sure it’s helped, but it might be worse without it.
It would certainly be better than nothing. You can then add some sort of capital gains on primary residences so taxes will be paid on sale not during use.
It seems to me that a LVT eventually leads to 100% of the land being owned by the super wealthy in dense areas. It's a state sponsored transfer of wealth. It still results in a middle-man that leeches money from renters, and the taxes would most likely be passed onto them.
In this case, why not just be direct and have the land owned by the state, and have density requirements for use of that land based on population of the area?
LTV won’t work in the UK land ownership is way too concentrated and leaseholds give land owners an easy tool to transfer the cost to the leaseholders.
London and other metropolitan areas still have a lot of low income housing in very high value areas, there are current/former council houses in Westminster and Kensington and Chelsea for example that sit on land worth billions.
LVT in the UK would likely just increase cost of ownership for leaseholders which would make flats in cities even more expensive (and since many newly developed terraced, detached and townhouses also come as leasehold these days even buying a house won’t help) and just push for further gentrification as housing like this https://en.m.wikipedia.org/wiki/Hallfield_Estate would become economically non-viable.
>LVT in the UK would likely just increase cost of ownership for leaseholders which would make flats in cities even more expensive
Increasing the cost of ownership makes it more expensive to speculate on real estate which would drive prices down. The most speculative assets have no maintenance costs.
On the contrary, a land value tax is often proposed to discourage sprawl. Since a land value tax is the same whether you leave a lot vacant or build a single family home or a multi family home, it encourages density and leads to less sprawl.
It’s a nice theory but it would involve tossing people out of their homes because they can’t afford the tax. If you make an exception for them, then the entire system is defunct because it’ll just be a web of exceptions that just create a “housing elite” that is exempt from the rules.
The easier thing is just make is easier to build more housing, denser if needed, to fulfill demand.
Well, you don't have to make "tossing people out of their homes" a horrifying experience. If the eviction process on your primary residence granted you 3 years to pay the tax then it would be exceedingly unlikely that anyone would get kicked out because of a sudden real estate boom or bust.
As a concession the debt can be reassessed at any time during those 3 years. If there is a boom that makes the tax excessive followed by a bust that reduces the value of the land by 50% then your tax bill would also go down by 50%.
>The easier thing is just make is easier to build more housing, denser if needed, to fulfill demand.
Who’s getting tossed out of homes? If they own any part of it, they can sell their land at its new higher value and pocket their share of the gains. Then the can either move into a nearby newly redeveloped multi-unit building (increased efficiency as incentivized by LVT) or they can move further out to land with the same low value on which they used to live in a detached home.
This same type of thinking drives me crazy in CA where Prop 13 exists because someone might have to move because they’ve made a million dollars in house value (simply by existing) that they might have to realize.
Property tax increases when you improve the property, and land value tax does not. Therefore, property tax creates a disincentive to improve property, and land value tax creates an incentive to improve property.
In contrast to the property tax, the land value tax only taxes the value of the land, not the value of the buildings. A land value tax is always the same regardless of whether the land is undeveloped, a single-family house or an apartment building. A property tax, on the other hand, encourages the former and discourages the latter. A property tax encourages urban sprawl, a land value tax does not.
I don't understand how this would work. How do people rent? Obviously many people can't or do not wish to own their house for any number of reasons. Who will own houses that are rented? I used to live in Amsterdam as an expat, and rented from a landlord who owned several homes in Amsterdam. Would she not be able to own and rent these homes under this scheme?
The social housing system seemed to be abused when I was there. I had a number of Dutch friends still living in social housing places they'd rented as students on very low incomes, and were still renting 10 years later. For the same 300 euro per month, when they were now earning 6-7000 euro/month. I could never understand why this wasn't means tested continually.
Designations. That's how. Some houses are built and intended to be rented out to people. These houses are constructed entirely by companies (or people) for that purpose alone.
Other houses are meant to be for purchase, and purchase only. If you purchase a house like this and then rent it out, that should be considered breaking the intended designation.
So if you as an individual want to own multiple houses to rent out, you need to find houses with that designation and that are for sale. Alternatively, you need to find ground with the "rental housing"-designation and build a house or multiple houses on there.
You can do this in a collective of individuals, too.
And people who currently own multiple houses that were not meant to be rented out (but are rented out to other people) would need, by law, to either sell those properties (the current renter should get the first option on the house's current market value price).
And honestly, I feel that the people renting houses that were never meant for rental should get a discount. And that discount should come out of the pockets of the government.
And yes, I'm a Dutch citizen. I know that means my tax money is going to help these people buy their houses a little cheaper at my expense. I'm fine with that as it would create a healthier housing market for everyone. That's exactly what my tax money is for.
So the solution to government interference in the market (by preventing adequate building from occurring) is yet more interference, and that interference will by fiat somehow lower prices, but without dramatically increasing supply.
Thanks. What if I purchase a home, to live in. Then I take a job overseas and move for 2-3 years. Must I sell the house rather than rent it out on a short term basis?
> And people who currently own multiple houses that were not meant to be rented out (but are rented out to other people) would need, by law, to either sell those properties (the current renter should get the first option on the house's current market value price).
What is the 'would need' referring to, your ideal situation, current law, or proposed law? If it's any of the last two, I don't think you're correct but I'd be happy to read any references you may have to substantiate this.
This is one of those terribly myopic and symbolic policies that the Netherlands (despite generally one of the best governed countries in the world) keeps falling for.
Studies have shown over and over again that investors aren't causing the price increases in the Netherlands. Prices won't improve much.
Renting is going to take a beating, which is already an extremely small sector in the Netherlands, among the smallest in Europe. Remaining rental stock will be priced like crazy, pushing everyone desperately into a decision to buy. Due to systemic shortages that's not possible, exacerbating the gap between haves (who bought) and have-nots (who must keep renting).
Various studies have also shown a rental market is extremely important for labour mobility. Transient workers can't just move cities/regions in pursuit of jobs, when the rental market is completely destroyed and the only alternative is to buy a home and be stuck to that location for years (due to the friction and transaction costs of buying over renting).
> Would she not be able to own and rent these homes under this scheme?
She would, but she'd be unable to buy more off the market to rent out, unless they were already buy-to-let stock previously.
> I could never understand why this wasn't means tested continually.
Me neither. It seems like the least controversial thing that the left and the right should have agreement over: rich people not getting subsidised social housing. Things are getting better though, there's now means testing and accelerated rental price increases (up to a maximum) if your income is assessed as too high. But the new policy still way, way too generous to a class of rich people, while there's poor people waiting in line for 10 years in Amsterdam.
As above, you are presenting as a fact that investors aren't causing increasing prices. And as above, that is both uncited and, at the very least, a highly debatable 'fact'.
Even if not the only cause (is there ever just one isolated cause in economics), investing certainly is a big part.
> It seems like the least controversial thing that the left and the right should have agreement over: rich people not getting subsidised social housing.
The argument I've heard in Germany is that it's a good idea to have more socially mixed housing projects, so people who moved in as students are allowed to stay when they work full time. Initially they had to pay an extra fee ("Fehlbelegungsabgabe" = erroneous occupancy fee, but even with that it was much cheaper than regular housing), which was removed at some point.
Means testing would force medium-rich people to live on the streets (or with their parents), since there are no rental houses available between 700 and 1200 euro/month (that is, between social housing and the liberalized sector), and not all of them will be able to buy a home with the current prices.
This is called scheefwonen – which roughly translates to "crooked living" – and has been a point of attention for several decades at least, more or less as long as I can remember.
It's a bit of a difficult problem, because you don't really want to kick people out of their house just because they have a better-paying job, and especially in the current climate these people don't really have anywhere to go; €7k people will probably manage, but €4k/month will have a harder time finding something affordable.
I agree that evictions is an extreme measure and to be used as a last resort. I think it should be part of the policy instruments to be used, under the right circumstances. e.g. if you make 1.5x the wage that would give you a right to a social home, averaged over 3 years, then you get a 2 year period to move out.
That means you won't move out until 5 years after you've started earning more, and if your earnings were temporarily high, you get to stay. But if you're consistently earning a ton, you have to leave.
That's not so crazy considering that there's people who're low-income on a 10y waiting list for the home you'd be occupying, there has to be a mechanism that makes you have to leave. Yes it's hard to find something great at 3-4k, but it's even harder for someone at 2k who's 'spot' you're occupying. That could be limited to 5 years.
Everyone has a hard time finding a place, but why are some rich getting subsidised indefinitely at the expense of some poor?
But apart from evictions, I've never understood why we can't simply have dynamic rental rates adjusted to the market rate. I know people who live in Zuid for 500 a month in a home that's 1500 market rate, and their household income is 3x the average. Why can they not be made to pay 1500 to the social housing association? When they move out, the home reverts back to the subsidised rate for a low-income family.
I understand this can't be done on old contracts with no contractual clauses that make this possible, contracts are contracts after all. But we've had this situation for many years, and new contracts still allow the possibility of consequence-free scheefwonen. That's pretty absurd to me.
> Obviously many people can't or do not wish to own their house for any number of reasons
"Those reasons" being that the price of real estate in Amsterdam has grown exponentially in recent years.
Some large but unknown number of apartments here have vanished into private investments where no one lives or AirBNB etc where no one lives for more than a few days.
If houses in Amsterdam were reserved for people _living_ in Amsterdam, there would be a significant increase in supply, and therefore a significant decrease in prices, which right now, are such that your average Amsterdam worker can't live here.
> The social housing system seemed to be abused when I was there.
Still is, but I see this as rational calculation on the part of the Gemeente (municipality, these are much more powerful here).
Those apartments aren't palatial. Most of the time, people just naturally move out, maybe a few years late, but why force people onto the street when they're just getting started?
Some number of people do go on for years, but they calculate that it's better to have a more relaxed system, not to cause grief by going after a few freeloaders, and to spend their efforts on building brand-new public housing.
---
I had to get over 30 years of NYC living when I moved here. But the Gemeente is pretty smart. There's a reason for most everything, often a good reason, and they are constantly tuning.
Sure, I have complaints, but generally if I wonder why something is there or what's going to happen in terms of public works, I say, "What would a competent person do?" That almost never worked in NYC.
----
Did you know they're talking about banning cruise ships from part of the river IJ, raising the river bed there by 4 meters so they can put a bike path underneath it? And by gum, they might just do that.
> I could never understand why this wasn't means tested continually.
They've started some degree of means testing a few years ago: the maximum allowed rent increase on social/rent-controlled houses can now depend on income. This was controversial legislation for privacy reasons (it involves giving landlords information about tenant incomes every year).
I guess this is only for new sales. The point is that there is plenty of people wanting to buy a home in Netherlands, they just can’t pay the same price as investors. With this law the seller will have to lower the price till some person who wants to live there can afford it
We had housing cooperation's for a century until they were forced by consecutive right wing governments to sell their houses, and thus ruining a system that was well working, except for rich friends of the right wing government to speculate with the housing system, which is taking place now.
One of the dumbest things to do with government owned land is to sell it. You get a quick injection of cash and then the money runs out just as quickly. Meanwhile the land keeps going up in value forcing the government to subsidize housing for low income earners. If the government kept the land it could lease it out at reasonable rates and have an ongoing income stream.
And before that we had woningbouw verenigingen. Non profits ran by their tenants. Something like: God fearing church goers wouldn't stand for hard working newly wed couples not getting a home.
I live in social housing (in the UK), and could easily afford to buy or rent non-social... and I was already in that situation when my current tenancy started.
You could say I abuse it, and I agree in principal. However, I'm only abusing it because social housing is scarce. The solution is to build more, and I do my bit by voting for a government that would probably do that.
If they ever decided to make it means tested, and my tenancy was at risk, I would just buy the house.
Making use of any scarce resource intended for the poor, while you're rich, because it's so scarce, is beyond backwards... I have trouble being generous and playing devil's advocate because I simply can't see the argument you're making.
This move is well appreciated. Currently, I own a house in oudegracht, Utrecht. It is very terrible situation here. All the apartments in and around me are all the time rented out as airbnb. During peak of pandemic, it was pretty much a ghost town.
The housing prices have skyrocketed due to covid, but all these all-cash investor are jumping and swooping in the apartments, holding it for a while and passing it to the next person. Some of the people, even have to pay around 50k euros over the asking price to buy it.
Because of the rising prices, the annual property tax to be paid also increases dramatically. People blame the low interest rate, but based on what I am seeing and heard from other people, it is investors all over the globe investing in properties in Amsterdam, Utrecht, Rotterdam etc.
> All the apartments in and around me are all the time rented out as airbnb. During peak of pandemic, it was pretty much a ghost town.
What you mention around Airbnb shouldn't be addressed through a buy-to-let ban, but an airbnb or short-term rental ban, which already exists in various forms. If there's problems with enforcement, address that. The ghost-town you described happened regardless of airbnb but due to literal lockdown measures that affected everyone, in particular the local population, you don't see the effect anymore despite tourists still largely staying away.
> Because of the rising prices, the annual property tax to be paid also increases dramatically.
No that's not correct. Typically Dutch municipalities tax based on what they need. If they need 1 million, they'd charge 1% of 100 in property values, or 2% of 50 million in property values. Price increases don't translate into higher property taxes.
In fact, in Utrecht property tax rates decreased by about 22% in the past 6 years, due to increasing home prices.
Of course there is inflation, in absolute terms the number is increasing. But what you're describing isn't happening. I own a home in Utrecht, too.
Many studies in the Netherlands have shown investors aren't the cause of the price increases, I don't think this policy will solve things. It'll just relieve some pressure on the buying market and put extra pressure on the rental market.
> People blame the low interest rate
Yes, these people are economists, including the Dutch Central Bank, the AFM, every bank, every professor, in countless studies. The effect is clear and obvious.
it is the interest rate - because the price of property is related to the cost of money (aka, interest rate).
Investors are merely looking for returns, with as low risk as possible. When property is priced low compared to the rate, you must expect this to happen.
>it is the interest rate - because the price of property is related to the cost of money (aka, interest rate).
You can manufacture more cars and houses as you get more money. It clearly is related to the fact that land yields a risk free return regardless of what you use to price it.
In that sense money and land is an NRA. A non reproducible asset. Low interest rates break the NRA property of money which is perfectly ok if inflation is also low. Rather than holding onto money unproductively they simply switch to holding land unproductively. The solution is to introduce a holding fee onto land.
I may be biased because I moved recently to the Netherlands and looking to buy our first home and stop paying rent.
But, the house prices are crazy out here. I work in tech and my wife is an academic. We earn what is definitely above market average, and it looks like we cannot afford most houses we find in the area where we are renting now(well outside Amsterdam).
At this juncture, at least temporarily, investors who are looking to buy up properties and make money out of it need to be stopped by regulations. This is for the greater good. Investors can always find other avenues to invest. But, people need reasonable housing prices.
This is becoming a problem in farmlands too. Young farmers are unable to buy farmlands, they are forced to lease from huge landowners. It is zero risk investment for these big landowners. Farmers do all the work, put in all the investment like tools (except the land) - landowners simply collect rent. Some of these people own hundreds of thousands of acres (Bill Gates, for example).
This is an ugly situation. This is not sustainable. At some point, we'd have a few hundred super wealthy people/corporations owning much of the desirable land and property. Everyone else would become just a peasant/tenant living in tiny apartments working all our lives just so we can have a tiny roof over our heads. This isn't hyperbole - one look at BlackRock should give us an idea in the direction this problem is going.
This kind of system was sustained for thousands of years in many different cultures, so I wouldn't exactly call it unsustainable. I would very much call it ugly and undesirable though.
My point here is that there is no guarantee that this will be solved just because it's "unsustainable". I don't understand why people aren't literally protesting on the street; we did so in the 70s and 80s ("geen woning geen kroning") and the situation was a lot less bad back then.
Oh, I know! We can give them the land for free, but instead we get to collect a tax on their produce. Of course they cannot leave this arrangement without immediately paying for all the land.
While buying the house in early 2019 I consulted Woz portal and saw that the price (of the house I was planning to buy) had increased 300% over ~8 year period. A constant lunch table discussion used to be how crazy housing prices were even back in 2018-19. So the market was already hot even before the pandemic, but now it's reached mania levels!
Better late than never. The housing market in the Netherlands is currently terrible. I’ve “fled” the country for the next few years. Hoping that would be enough time for the market to get healthy again. It’s just insane that we made it this easy for people who were well off to begin with to profit. Just sold a house, the profit I got from buying and selling that house alone makes me nauseous. Makes me wonder why I work at all. Can imagine corporate investors are milking it for all its worth.
Is it better in neighboring countries?. There was a discussion [1] about controlled rent market few days ago, it seems that the problem is related to growth.
There is a better way - raise the real rate. Cheap loans along with endless printing has basically made fiat useless as a medium to store value, the only reason fiat exists now is as a medium to exchange goods/services. Here the Fed has been buying over 100B of mortgage based securities a month. This got to stop. For all the talks about
Wealth inequality, I don’t understand how politicians fail to understand this basic thing.
I hope ECB and other central bankers realizes how they are fucking up an entire generation before it’s too late.Negative rates is only going to make things worse.
I don't think it's an issue of inflation. Inflation has been super low for the past decade or more. Everything else is cheap, it's just housing that's expensive. It's a combination of scarcity and speculation leading to more artificial scarcity. Make it less attractive for speculators and build more houses.
Ok, you decreased monopoly rents but you also raised the cost of everything that isn't a monopoly. You will now pay more interest on your car. Companies pay more interest and pass the cost of interest onto you through more expensive products and services.
The truth is that you didn't even make housing cheaper. You still pay $1000 per month for 30 years. Higher interest rates just mean more of your money goes to the bank in the form of interest payments rather than into home equity.
>Cheap loans along with endless printing has basically made fiat useless as a medium to store value,
I don't understand this logic. Fiat currency is created by the promise that someone will work for you. If you never redeem that promise it is worthless. You cannot store labor the same way you can store gold. All saving money does is create room for investments today. If those investments never happened then you saved for naught. You denied yourself of the value of your money and yet you have the audacity to blame others for it.
>I hope ECB and other central bankers realizes how they are fucking up an entire generation before it’s too late.Negative rates is only going to make things worse.
What negative interest rates do is force you to face the fact that you are not utilizing the promise and that money, just like grain decays over time. You are letting people sit unemployed unable to live up to their potential.
What "fucked up" an entire generation is the utilization of money as a time machine. Let's imagine a simple money system. $1 = 1 pound of grain. The grain standard. Grain decays over time. Therefore $1 appreciates exactly at the rate at which grain decays. The farmer storing grain has to pay the maintenance cost of holding onto it while the person with the money has none of the costs. Everyone will start hoarding money while they get to watch the real world decay. If you put a holding fee onto money that matches the decay rate of grain then people will be forced to spend their money on something that is more durable than grain like giant pyramids that survived for 4000 years.
In The Netherlands I don’t think this would make a big difference around the major cities as there is a huge housing shortage and this will stay the same at least for the next 10 years, probably more much longer.
Scarcity was always a problem. Even in 90s and early 00s there was a lot of posters about housing shortage. But prices we’re rather stable. In a healthy housing market, you expect the property values to not grow over real interest rate. Which was the case back then.
This would lead to a steep collapse of property prices and force new homeowners who have just scraped together enough for a deposit into negative equity. This would drive a lot of anger against it (all amplified by the media/ultrawealthy who would be furious too) even if it were the right thing to do long term.
The only time I could see this happening would be in the case the value of the dollar fell off a cliff due to externally triggered emergency.
Yeah this is the narrative that is always played every time there is a talk about even slightest increase in interest rate. When politicians and news media alike play this narrative this gives people signal that house prices can never go down. I know a couple who is one layoff away from defaulting their mortgage, but they bought a house with mortgage 60% of their income since they think housing prices can never go down.
Assuming you are able to afford your mortgage in the first place and want to live in the house for distant future, why is repricing in due to rate change a problem anyway?
The main problem which this won't solve is the lack of space. There is a little land in NL so you can't grow endlessly and new districts would also put additional burden on infrastructure. People want to live close to major transport connections and/or big cities. You just can't build more and faster without considering the whole picture.
Readit News
1) Visiting London and spending time in South Kensington - walking back to hotel at night, only about 30% of houses had any lights on. Suggestion is the others are effectively uninhabited, and a search on RightMove shows properties sell for £20-£30m for a 4/5 bed. This isn't normal Londoners, it's outside investment.
2) Cornwall, where I live - an insane house price rise over lockdown as city dwellers aim for the beautiful bits of the country. Literally no way now you could afford your first home round here on minimum wage, and some towns have a high (>50) % holiday or second homes.
It's an untenable situation. I think my generation (I'm nearly 50) are probably the last to be able to afford their own home on anything other than a massive wage.
Round here in Cornwall the jobs are things like surf instructor, supermarket worker, barperson, etc. That's not gonna stretch to the local house prices.
South Kensington is a bit of a curiosity.
It is predominantly bordered by Chelsea and Knightsbridge.
Chelsea is Russian country, if you are a wealthy Russian, Chelsea is the place to be. Unless you are a Russian oligarch, in which case there are one or two spots a bit further away where you can splash super serious cash on rarer properties.
Knightsbridge is wealthy Arab country, when it gets too hot in the Middle East summer, they flock to Knightsbridge with their imported Ferraris to stay in their London houses.
But South Kensington is a bit different. Its not attractive to the Russians or Arabs. Not many of the properties there remain single occupant, they've been mostly subdivided in to individual flats or re-purposed for office (or educational use ... there are lots of cram-schools, colleges and nurseries round there).
One bedroom is not sufficient to raise a family, I think that's safe to say.
So let's move on to the 2 and 3 bedroom properties
Location Ttwo br 3Wbr swestmisnster£ 2,920 £4,152 Camden £ 2,254 £2,880 Kensingtonelsea £3,030 £4,938 Islington £1,934 £2,487
Hammersmith a 1,922 £2,653
Sorry for the formatting.
Cheapest
BBexley£. 1,105 £1,281 Havering £1,120 £1,384 Redbridge £1,293 £1,589 Sutton £ 1,163 £1,498 Waltham Forest £1,364 £1,649
These are before council tax and other costs, which are gonna be laughed at by oligarchs but they do count for normal people.
The new houses nnextto Westfield shopping centre cost around 2000 quid before council tax , zone 3 classic houses with a garden go for 1500 before council tax. its really bad in all London, unless you make 50k after taxes and most devs don't make that money there. t
But mostly it's that they're not residential to begin with. Many more are linked to an embassy, restaurants, clubs, nurseries, storage, etc. than you'd realise from 'walking back to hotel at night'.
Regarding point 1:
There's no real issues with long-term vacancies (the municipality already has laws in-place which fine owners of vacant homes), typically sits between 1 and 2%. That should obviously go down to 0 as much as possible, but it's clear that (1) the problem has an extremely minor effect on the market, (2) it's not exclusively caused by investors, a lot of them are pied-a-terres or homes owned by temporary migrants working abroad and (3) the problem of vacant homes that can be attributed to investors, can be addressed in many other ways than a total ban.
In other words, not an effective or suitable policy on this point.
Regarding point 2:
The price increases aren't caused by investors in Amsterdam, studies have shown this over and over again. If buy-to-let is banned, rental supply drops, rental prices go in overdrive, and there'll be more pressure to buy under any circumstance. The have-nots who're unable to buy will be even worse off. There's no magical panacea to a lack of sufficient supply.
You mention a couple points around 2nd homes, which are fair. I think in a world where there isn't enough housing for everyone, we should at minimum disincentivize owning second homes that go unused most of the time. But apart from the fact that Amsterdam is the capital, a working town, not a place where people have second homes that they enjoy on the weekend, this policy doesn't address 2nd homes at all. You're not banned from buying and owning a 2nd home in Amsterdam after this policy goes into effect.
In other words, an entirely ineffective policy regarding point 2.
I'm not saying you are wrong. I'm saying that what you pose as established facts are highly debated in the Netherlands at the least.
I'm on mobile, so finding English studies is hard. Maybe parent author could cite some of the studies (s)he mentions? https://www.eigenhuis.nl/huis-kopen/starters/artikelen/beleg...https://www.kadaster.nl/-/opkomst-particuliere-investeerders...
Both supply and demand are incredibly constrained: building new houses is slow and not exactly being stimulated by the government, whereas demand is fixed because people need a place to live.
Property rental is an extremely attractive investment opportunity. Demand is guaranteed and due to the low cost of obtaining money it is basically risk-free. Even at near-zero rent you'll still make a profit - as long as the housing market doesn't crash.
On the other hand mortgages always carry some risk, and banks are aware of this. There are quite strict limitations on the amount you are allowed to borrow. This directly means that individuals will always be outbid by investors.
This directly results in price increases. Individuals are now no longer able to buy a home, forcing them to rent. Landlords, in turn, are happy to let you rent a property which you wouldn't be able to afford because it is way easier to evict you. And because demand is higher than supply, they'll happily increase the price. Rent prices are already in overdrive.
So now you're paying €1200 in rent instead of €800 in mortgage payment - for the same property.
Banning buy-to-let would result in a sale of the properties currently being rented out - which means a drop in the housing price. Rental supply will drop, but those houses don't magically disappear! People who previously were unable to get a mortgage can now suddenly afford to buy instead of rent. This lowers the demand for rentals, which decreases rent.
People don't need landlords - they need homes. With the exception of a very small number of short-term rentals, landlords provide zero value. Removing them from the equation decreases the prices for everyone.
The CIA even lists the Dutch housing market as the largest risk factor in the stability of the Dutch housing market.
"The WILD Dutch housing market and our home buying flop | American in the Netherlands"
https://youtu.be/dFXsfeEEVAM
This seems to contradict your earlier claim that:
> the municipality already has laws in-place which fine owners of vacant homes
And no matter how much the prices go up people can and will pay. Unless there's a mayor economic recession things will not get better.
[1] https://i.imgur.com/jX1OpmS.png
> The Square Mile has the highest percentage of empty homes in the entire country, fresh data states.
> Some 42.4 properties per 1,000 sit unused in the City of London, leaving it top of the charts and the only London authority to feature in the nationwide top 10.
> Data compiled by insurer Admiral also shows that as many as 29,242 London homes have been unoccupied for at least six months, to a collective value of roughly £15 billion.
* https://www.citymatters.london/vacant-homes-city-london/
I wish a data scientist at utilities (water, electricity and gas) providers pick up this line and provide some statistics on this. I wish also that city-services companies (e.g. Electricity/water/parking service provider) can collaborate to provide better and justified policy making.
I did similar studies based on open data to provide insights on road/sidewalk optimization usage, and I still see value in collaboration with policy makers.
Punitively heavy land taxes on non-primary dwellings solves this overnight. It also raises a lot of capital that can be used to provide services in the area.
I don't dispute your underlying point that punitive taxes are a big part of the solution, but I take issue that it's an easy or overnight fix unfortunately because of the interests aligned against imposing them.
[1] https://gov.wales/welsh-government-announces-three-pronged-a...
So your proposal will for sure hurt those vested interests, and I would expect it be very hard to pass the parliament. It's great to see Dutch cities actually made that far, I'll keep my eyes wide open to see what's next for them.
That was the case. A colleague of mine, originally from St Just, moved to London for work as so many have to do. Another from near Cockermouth did the same. Both now work remotely full time from their 'home towns' on decent wages.
Covid has done wonders for local communities - good jobs are now available for people without having to move across the country.
https://www.rightmove.co.uk/properties/112353359 for example is under £300k. Assuming you got it for 300k (asking price is 285k) with a 15k deposit you're looking at £1,278.19 a month with nationwide on a 30 year rate, well within the range of a couple earning £35k each, which is a reasonable
Now sure if you didn't get the education to get a decent job. Hell even on 25k each, Nationwide can lend upto £275k for a first time buyer - just need that deposit.
I'm baffled by your comment to be honest; not very long ago I could buy a house in Bristol for the same or less.
Admittedly this includes households including people who are "retired" but I think that's reasonable as plenty of people have to keep working even though they're receiving a pension.
https://www.ons.gov.uk/peoplepopulationandcommunity/personal...
This horrifies me. Even the slightest increase in interest rates will ruin a huge number of home owners.
On the other hand, home ownership in the UK isn’t normal either. It’s only since the 50s or perhaps 60s that the average person has been able to afford a home. And then again in the 80s with council houses sold off to tenants.
This is just a weird bandaid. Mostly trying to blame landlords for this housing crisis when mortgage tax credits, and scarcity due to weird eco regulation shenanigans are to blame.
Pepperidge farms remembers.
South Kensington is one of the most expensive area of London and not representative at all. Whatever happens there does not affect the average person, and quite of few of the grand houses there are also actually offices.
In any case, it is not true that 30% of homes are empty there. Apparently the City of London (i.e. the square mile, not London as a whole) has the highest rate in the country and that is still only about 4% [1].
In Cornwall the issue is quite different: The area is very attractive for second homes and, at the same time, it is the second poorest region in all of Northern Europe. This means that local resident have a very low purchasing power and indeed cannot compete with people from London and the South East. I think that they are starting to implement restrictions in some areas in order to give priorities to buyers who will occupy the property as their main residence in order to keep second homes in check.
[1] https://www.cityam.com/15bn-worth-of-london-homes-sit-empty-...
That means that normal people cannot afford to buy anything in London even with HTB which is a terrible policy the people who can afford to use it are already in the top percentiles.
A £600K property as a first time buyer requires you to have about £100K to get on a property ladder.
10% deposit for a 90% LTV mortgage is £60K, stamp duty is £17,500 (£20K from end of Sep 21) that’s already ~£80,000 then you have mortgage fees, legal fees, furnishing costs (since new builds don’t even come with blinds)…
The average salary in London is £41K, that leaves you with take home pay of about £30K after tax (if you have no student loans).
So a house hold of two people living in London has about £60K per year if both earn the average pay, £25K or more of which would go to rent per year, another £4000 will go to various utility bills and council tax, another 5-5.5K would go for travel (assuming you live within zone 1-4), then you have food, clothing and other living expenses, so if you are somehow lucky and can save up £10K per year that’s 10 years to save up enough for a median property which is most likely a 54 sq/m flat.
Add kids to this mix and well you are royally fucked.
Preventing properties from being treated as bidding chips or bonds issued this could greatly improve the situation, but without addressing land use and land banking then the lack of new construction will continue to unbalance property markets.
You did explicitly say houses but possibly the area is quieter and less inhabited out of term time.
And then you get articles like this one: https://yorkmix.com/york-is-the-norths-property-hotspot-as-i... Funny thing is, this article happens to be a total submarine -- I recognise the development they're describing, it's been there for years and has not sold well (totally overpriced) -- this article and others like it are just an attempt to drum up further demand.
Really frustrating that when we have so many people needing housing, homes are built entirely with the objective of selling them to people who already have homes elsewhere!
First houses should have priority over second houses please.
Dead Comment
Yes, there are "rich foreigners" and some corporations are strategically acquiring the places and spaces where high rent can be extracted. But what has driven housing cost in the market of individual homes is simply that some citizens can afford to borrow at low rates, and other citizens are seizing the opportunity to realise gains that they could not attain through a lifetime of work, wage increases, and other investing.
It is grim to work for years and have nothing else to show for it.
Young families, workers, the elderly, and the poor will be unable to afford even tenancy in the big cities. (To turn dark for just a moment, we only really seem to have a plan for the elderly.) The future control of crucial urban voting-blocks in Western democracies will be in the hands of landlords.
Instead the government is letting people put low money down, low interest rates, and buy up many houses at once. That of course inflated housing costs.
In the street I live in the capital of the northern province of Fryslân (Frisia) most homes are owned by their inhabitants, but in the past few years we've seen several houses being bought by small-time investors (who already own their own home of course, are financially well on their way, and are looking for ways to save their saving from low interest rates and inflation), who charge renters four times what my fellow homeowners and I pay for mortgage.
You never get to know the renters, because they are really only here for as long as nothing better comes along (like buying a house or social housing), and who can blame them?
Meanwhile maintenance of these houses is minimal, because the market won't really reward proper upkeep at this point; they can always sell the house for an insane price tomorrow.
It's really upsetting to see my younger colleagues stuck renting a flat, while I own my house having even paid of the vast majority of the mortgage simply because I had the luck of buying it in 2013 (a major dip in the market where paying less than the listed price was common).
For the good of society we need to put a stop to this type of speculation on the housing market.
This really is the worst advice ever. It's a sure way to get you in Real Trouble when shit hits fans. This is not legal advice either, btw. Just someone who read the tiny letters in the mortgage contracts.
Deleted Comment
How can one get a mortgage in Holland without being a resident/having income declared there? The bank will not loan a foreign resident in those circumstances. Did he pay taxes in all those countries?
specifically the last part:
> small-time investors who charge renters four times what my fellow homeowners and I pay for mortgage
But what about maintenance costs though? Those costs are very high, definitely 4x the cost of the mortgage! /s
[0] In 1879, a man asked "How come all this new economic development and industrialized technology hasn't eliminated poverty and oppression?" That man was Henry George, his answer came in the form of a book called Progress & Poverty, and this is a review of that book - https://astralcodexten.substack.com/p/your-book-review-progr...
[1] https://www.economist.com/leaders/2020/01/16/home-ownership-...
The flips side can be pretty dark too. For example, there are are plenty of stories of poorer communities, especially African American tenant ones, being broken up and priced out by gentrification of rental markets.
Ownership is less economically efficient, but much more resilient. Once a mortgage is paid off, you've always got a roof overhead. You just need to earn enough for food, clothing, and medicine.
I think the trick would be to implement significant differences in land tax based on:
* a home you live in; versus
* an individual investment property (e.g. if you own 2-3 homes); versus
* an institutional investment property (e.g. investment fund owns hundreds of homes)
Here in the UK we have started imposing tax penalties on buy to rent that disincentivizes owning more than one or two rental properties. The problem with punishing institutional investors is it would take huge amounts on investment out of the housing market, just as we have a massive need for more housing. We need more houses for people to buy and more new housing available to rent. Rental properties by themselves aren’t a problem, it’s taking houses out of individual ownership and transferring them to the rental sector that’s the problem.
The sad reality is that people want their own BBQ and not really mix with their neighbours. That’s what poor people have to put up with, so to speak.
When millenials reach retirement age, a house, as for all previous generations, is the best option for financial security for retirement/end of life. Fewer and fewer of us will have that option I think.
What is stupid is promoting Homeownership as a personal investment for the individual home-owner. A home is already a great thing to own financially, because it 'produces' not having to pay rent. There is no need to also have it pay 5% a year for people who have 100% leverage (which is very common in the Netherlands for mortgages).
But politicians get lots of votes by making the current middle class richer for owning homes. Nevermind that it is bad long-term as people have been saying for the last 20 years.
A typical 20% down-payment in the US gets you 400% leverage (you used your 20% ownership 4 times over in order to purchase the other 80%).
5% down gets you 1900% leverage.
If you put $50000 down (5%) on a $1M home, it rises by 1% ($10000) and you sell it, then you just made a 20% return on your initial investment. You were leveraged 1900%, and so you got a return 1900% above what you would have without borrowing any $. Nobody serious advises that kind of leverage on any asset except for real-estate, AFAIK.
Of course there is the usual issue of the definition of "enough" but those kind of questions are solved all the time in parliaments. This all or nothing behavior is what harms the prospect of land tax.
For example one way it aligns incentives is pressuring land to be put to more productive use. Aka if someone can’t afford the taxes they might have to sell it to someone who can and likely that second entity will build more units on the land which utilizes the land more efficiently. Not in every instance perhaps but enough to matter. Its a way of forcing communally central land to be put to good use and for the profitability to feed back into the community.
I’m not sure it’s helped, but it might be worse without it.
https://www.cambridgema.gov/departments/finance/propertytaxi...
In this case, why not just be direct and have the land owned by the state, and have density requirements for use of that land based on population of the area?
London and other metropolitan areas still have a lot of low income housing in very high value areas, there are current/former council houses in Westminster and Kensington and Chelsea for example that sit on land worth billions.
LVT in the UK would likely just increase cost of ownership for leaseholders which would make flats in cities even more expensive (and since many newly developed terraced, detached and townhouses also come as leasehold these days even buying a house won’t help) and just push for further gentrification as housing like this https://en.m.wikipedia.org/wiki/Hallfield_Estate would become economically non-viable.
This relationship has always reminding me of medieval surfdom, i think it's deeply unfair and rigged and needs to be abolished.
Increasing the cost of ownership makes it more expensive to speculate on real estate which would drive prices down. The most speculative assets have no maintenance costs.
Current ubran policies in the western world, coupled with the normalization of remote working already do this to some extent.
Deleted Comment
The easier thing is just make is easier to build more housing, denser if needed, to fulfill demand.
As a concession the debt can be reassessed at any time during those 3 years. If there is a boom that makes the tax excessive followed by a bust that reduces the value of the land by 50% then your tax bill would also go down by 50%.
>The easier thing is just make is easier to build more housing, denser if needed, to fulfill demand.
That's the entire goal behind the land value tax.
This same type of thinking drives me crazy in CA where Prop 13 exists because someone might have to move because they’ve made a million dollars in house value (simply by existing) that they might have to realize.
If anything, it might end up being lower tax on residential housing, and much higher on commercial/retail.
The social housing system seemed to be abused when I was there. I had a number of Dutch friends still living in social housing places they'd rented as students on very low incomes, and were still renting 10 years later. For the same 300 euro per month, when they were now earning 6-7000 euro/month. I could never understand why this wasn't means tested continually.
Other houses are meant to be for purchase, and purchase only. If you purchase a house like this and then rent it out, that should be considered breaking the intended designation.
So if you as an individual want to own multiple houses to rent out, you need to find houses with that designation and that are for sale. Alternatively, you need to find ground with the "rental housing"-designation and build a house or multiple houses on there.
You can do this in a collective of individuals, too.
And people who currently own multiple houses that were not meant to be rented out (but are rented out to other people) would need, by law, to either sell those properties (the current renter should get the first option on the house's current market value price).
And honestly, I feel that the people renting houses that were never meant for rental should get a discount. And that discount should come out of the pockets of the government.
And yes, I'm a Dutch citizen. I know that means my tax money is going to help these people buy their houses a little cheaper at my expense. I'm fine with that as it would create a healthier housing market for everyone. That's exactly what my tax money is for.
What could possibly go wrong??
So private companies are allowed to engage in rent-seeking behavior but individuals aren't?
What is the 'would need' referring to, your ideal situation, current law, or proposed law? If it's any of the last two, I don't think you're correct but I'd be happy to read any references you may have to substantiate this.
Studies have shown over and over again that investors aren't causing the price increases in the Netherlands. Prices won't improve much.
Renting is going to take a beating, which is already an extremely small sector in the Netherlands, among the smallest in Europe. Remaining rental stock will be priced like crazy, pushing everyone desperately into a decision to buy. Due to systemic shortages that's not possible, exacerbating the gap between haves (who bought) and have-nots (who must keep renting).
Various studies have also shown a rental market is extremely important for labour mobility. Transient workers can't just move cities/regions in pursuit of jobs, when the rental market is completely destroyed and the only alternative is to buy a home and be stuck to that location for years (due to the friction and transaction costs of buying over renting).
> Would she not be able to own and rent these homes under this scheme?
She would, but she'd be unable to buy more off the market to rent out, unless they were already buy-to-let stock previously.
> I could never understand why this wasn't means tested continually.
Me neither. It seems like the least controversial thing that the left and the right should have agreement over: rich people not getting subsidised social housing. Things are getting better though, there's now means testing and accelerated rental price increases (up to a maximum) if your income is assessed as too high. But the new policy still way, way too generous to a class of rich people, while there's poor people waiting in line for 10 years in Amsterdam.
Source(s), please.
Even if not the only cause (is there ever just one isolated cause in economics), investing certainly is a big part.
That is an exceptional claim that requires exceptional evidence.
The argument I've heard in Germany is that it's a good idea to have more socially mixed housing projects, so people who moved in as students are allowed to stay when they work full time. Initially they had to pay an extra fee ("Fehlbelegungsabgabe" = erroneous occupancy fee, but even with that it was much cheaper than regular housing), which was removed at some point.
It's a bit of a difficult problem, because you don't really want to kick people out of their house just because they have a better-paying job, and especially in the current climate these people don't really have anywhere to go; €7k people will probably manage, but €4k/month will have a harder time finding something affordable.
That means you won't move out until 5 years after you've started earning more, and if your earnings were temporarily high, you get to stay. But if you're consistently earning a ton, you have to leave.
That's not so crazy considering that there's people who're low-income on a 10y waiting list for the home you'd be occupying, there has to be a mechanism that makes you have to leave. Yes it's hard to find something great at 3-4k, but it's even harder for someone at 2k who's 'spot' you're occupying. That could be limited to 5 years.
Everyone has a hard time finding a place, but why are some rich getting subsidised indefinitely at the expense of some poor?
But apart from evictions, I've never understood why we can't simply have dynamic rental rates adjusted to the market rate. I know people who live in Zuid for 500 a month in a home that's 1500 market rate, and their household income is 3x the average. Why can they not be made to pay 1500 to the social housing association? When they move out, the home reverts back to the subsidised rate for a low-income family.
I understand this can't be done on old contracts with no contractual clauses that make this possible, contracts are contracts after all. But we've had this situation for many years, and new contracts still allow the possibility of consequence-free scheefwonen. That's pretty absurd to me.
"Those reasons" being that the price of real estate in Amsterdam has grown exponentially in recent years.
Some large but unknown number of apartments here have vanished into private investments where no one lives or AirBNB etc where no one lives for more than a few days.
If houses in Amsterdam were reserved for people _living_ in Amsterdam, there would be a significant increase in supply, and therefore a significant decrease in prices, which right now, are such that your average Amsterdam worker can't live here.
> The social housing system seemed to be abused when I was there.
Still is, but I see this as rational calculation on the part of the Gemeente (municipality, these are much more powerful here).
Those apartments aren't palatial. Most of the time, people just naturally move out, maybe a few years late, but why force people onto the street when they're just getting started?
Some number of people do go on for years, but they calculate that it's better to have a more relaxed system, not to cause grief by going after a few freeloaders, and to spend their efforts on building brand-new public housing.
---
I had to get over 30 years of NYC living when I moved here. But the Gemeente is pretty smart. There's a reason for most everything, often a good reason, and they are constantly tuning.
Sure, I have complaints, but generally if I wonder why something is there or what's going to happen in terms of public works, I say, "What would a competent person do?" That almost never worked in NYC.
----
Did you know they're talking about banning cruise ships from part of the river IJ, raising the river bed there by 4 meters so they can put a bike path underneath it? And by gum, they might just do that.
They've started some degree of means testing a few years ago: the maximum allowed rent increase on social/rent-controlled houses can now depend on income. This was controversial legislation for privacy reasons (it involves giving landlords information about tenant incomes every year).
You could say I abuse it, and I agree in principal. However, I'm only abusing it because social housing is scarce. The solution is to build more, and I do my bit by voting for a government that would probably do that.
If they ever decided to make it means tested, and my tenancy was at risk, I would just buy the house.
The housing prices have skyrocketed due to covid, but all these all-cash investor are jumping and swooping in the apartments, holding it for a while and passing it to the next person. Some of the people, even have to pay around 50k euros over the asking price to buy it.
Because of the rising prices, the annual property tax to be paid also increases dramatically. People blame the low interest rate, but based on what I am seeing and heard from other people, it is investors all over the globe investing in properties in Amsterdam, Utrecht, Rotterdam etc.
What you mention around Airbnb shouldn't be addressed through a buy-to-let ban, but an airbnb or short-term rental ban, which already exists in various forms. If there's problems with enforcement, address that. The ghost-town you described happened regardless of airbnb but due to literal lockdown measures that affected everyone, in particular the local population, you don't see the effect anymore despite tourists still largely staying away.
> Because of the rising prices, the annual property tax to be paid also increases dramatically.
No that's not correct. Typically Dutch municipalities tax based on what they need. If they need 1 million, they'd charge 1% of 100 in property values, or 2% of 50 million in property values. Price increases don't translate into higher property taxes.
You can see a video of how Utrecht does it, on their own website: https://bghu.nl/belasting/ozb
In fact, in Utrecht property tax rates decreased by about 22% in the past 6 years, due to increasing home prices.
Of course there is inflation, in absolute terms the number is increasing. But what you're describing isn't happening. I own a home in Utrecht, too.
Many studies in the Netherlands have shown investors aren't the cause of the price increases, I don't think this policy will solve things. It'll just relieve some pressure on the buying market and put extra pressure on the rental market.
> People blame the low interest rate
Yes, these people are economists, including the Dutch Central Bank, the AFM, every bank, every professor, in countless studies. The effect is clear and obvious.
Airbnb is probably paying off various government officials around the world to make sure the laws are friendly to them.
it is the interest rate - because the price of property is related to the cost of money (aka, interest rate).
Investors are merely looking for returns, with as low risk as possible. When property is priced low compared to the rate, you must expect this to happen.
You can manufacture more cars and houses as you get more money. It clearly is related to the fact that land yields a risk free return regardless of what you use to price it.
In that sense money and land is an NRA. A non reproducible asset. Low interest rates break the NRA property of money which is perfectly ok if inflation is also low. Rather than holding onto money unproductively they simply switch to holding land unproductively. The solution is to introduce a holding fee onto land.
But, the house prices are crazy out here. I work in tech and my wife is an academic. We earn what is definitely above market average, and it looks like we cannot afford most houses we find in the area where we are renting now(well outside Amsterdam).
At this juncture, at least temporarily, investors who are looking to buy up properties and make money out of it need to be stopped by regulations. This is for the greater good. Investors can always find other avenues to invest. But, people need reasonable housing prices.
This is an ugly situation. This is not sustainable. At some point, we'd have a few hundred super wealthy people/corporations owning much of the desirable land and property. Everyone else would become just a peasant/tenant living in tiny apartments working all our lives just so we can have a tiny roof over our heads. This isn't hyperbole - one look at BlackRock should give us an idea in the direction this problem is going.
My point here is that there is no guarantee that this will be solved just because it's "unsustainable". I don't understand why people aren't literally protesting on the street; we did so in the 70s and 80s ("geen woning geen kroning") and the situation was a lot less bad back then.
I think we can call these people serfs.
[1] https://www.bbc.com/news/business-58317555
I hope ECB and other central bankers realizes how they are fucking up an entire generation before it’s too late.Negative rates is only going to make things worse.
Ok, you decreased monopoly rents but you also raised the cost of everything that isn't a monopoly. You will now pay more interest on your car. Companies pay more interest and pass the cost of interest onto you through more expensive products and services.
The truth is that you didn't even make housing cheaper. You still pay $1000 per month for 30 years. Higher interest rates just mean more of your money goes to the bank in the form of interest payments rather than into home equity.
>Cheap loans along with endless printing has basically made fiat useless as a medium to store value,
I don't understand this logic. Fiat currency is created by the promise that someone will work for you. If you never redeem that promise it is worthless. You cannot store labor the same way you can store gold. All saving money does is create room for investments today. If those investments never happened then you saved for naught. You denied yourself of the value of your money and yet you have the audacity to blame others for it.
>I hope ECB and other central bankers realizes how they are fucking up an entire generation before it’s too late.Negative rates is only going to make things worse.
What negative interest rates do is force you to face the fact that you are not utilizing the promise and that money, just like grain decays over time. You are letting people sit unemployed unable to live up to their potential.
What "fucked up" an entire generation is the utilization of money as a time machine. Let's imagine a simple money system. $1 = 1 pound of grain. The grain standard. Grain decays over time. Therefore $1 appreciates exactly at the rate at which grain decays. The farmer storing grain has to pay the maintenance cost of holding onto it while the person with the money has none of the costs. Everyone will start hoarding money while they get to watch the real world decay. If you put a holding fee onto money that matches the decay rate of grain then people will be forced to spend their money on something that is more durable than grain like giant pyramids that survived for 4000 years.
The only time I could see this happening would be in the case the value of the dollar fell off a cliff due to externally triggered emergency.
Assuming you are able to afford your mortgage in the first place and want to live in the house for distant future, why is repricing in due to rate change a problem anyway?