1. It's clearly used for money laundering and hiding money from hostile governments. In Europe, this is a huge factor in the London real estate market.
2. Cities die when people can't afford to live in them. This is exacerbated by restricting supply to simply park money. Often the ultra-wealthy buy a place where they'll spend 3 days a year because they like that place (eg NYC). In doing so, they're contributing to making that place worse. This behaviour should have a cost;
3. There are cities around the world that have pockets that are essentially vacant because of (2). Condos in Manhattan have a notoriously low occupancy rate. I've heard Tel Aviv has this issue as well. There are many others;
4. In many places it's more profitable tp produce (unoccupied) ultra-luxury property. A lot of the building in NYC is north of $4000/square foot. That's... insane.
5. Property taxes in NYC, as one example, are highly regressive. a $1m condo may have property tax of $1200/month. A $100m apartment may only incur $16k/month in property tax. The counterargument is that the more expensive apartment uses just as many services. Personally I think subsidizing ultra-luxury property is just bad.
Some jurisdictions (eg Vancouver) have tried to punitively tax "non-working" real estate, which is to say real estate that sits vacant. I don't think this has had much impact and it's probably really easy to game (eg rent it out to a family member notionally).
My philosophy is that:
1. Ultra-luxury properties are generally speaking bad for a city. They take up a disproportionate amount of space and tend to add nothing to the city. It's fine that they exist but we shouldn't be subsidizing their construction and continued existence;
2. Providing rental units for people who live in the city is a better use of capital than parking foreign money. As such, both parking money and foreign investment should be taxed at a higher rate. Local landlords are better than remote landlords (since those local landlords are part of the city).
Personally I think that if you own property in NYC, for example, then the state and city of New York gets to tax your income as if you were a resident. LLCs to hold property are the obvious dodge so these need to be taxed punitively.
People are waking up to this slowly. Globalization of capital is destroying the ability of local populations to purchase real estate in the places they themselves live. Multiple cities in Europe, even outside of London, are suffering from extreme Airbnbnization, where buildings are pricing out locals just because it's 3x to 10x more profitable to build them for airbnbs.
I'm curious where in Europe has a 10x difference between short term and long term rent. This suggests an Airbnb unit renting for $100/night (and maintaining 100% occupancy all year) could only rent to a local long term renter for ~$300/month?
Just checked for Barcelona. A few years back, I remember checking a studio for 300 euros. But now, although the average price per night is 50 euros, I could still find a few places with 100+ euros. This is obviously a rough calculation and doesn't take into account the pandemic effects on prices either.
My philosophy is, whatever is bad, make people pay so much for it, that it will be (net-)positive. If they still do it, what's the problem?
> 1. Ultra-luxury properties are generally speaking bad for a city. They take up a disproportionate amount of space and tend to add nothing to the city. It's fine that they exist but we shouldn't be subsidizing their construction and continued existence;
I am not so sure about the first part, but I agree with the second. The proposal I made would in fact be a slightly progressive tax. I have no problem someone buys a $10million apartment in NYC and keeps it for a holiday in a year, if it say, costs $1 million in taxes per year and pays for a lot of other apartments, public transit, etc...
> 2. Providing rental units for people who live in the city is a better use of capital than parking foreign money. As such, both parking money and foreign investment should be taxed at a higher rate. Local landlords are better than remote landlords (since those local landlords are part of the city).
I have to disagree here. On two counts.
First, parking foreign money can be utilised to provide rental units who live in the city. We "only" have to frame the laws and tax code accordingly, and who cares then, what nationality the money has.
I also have to disagree on the assertion that local landlords are better than remote ones.
Local ones may care for the city, or they care more about earning more money, and know all the tricks in the book. Remote ones may not care much about the city, but they also may simply have no idea of the local market, and do not want any trouble.
You may guess, how my experiences were in that regard.
I think, we should not tax/punish people based on our prejudice we may have on them, but formulate a tax code, which punishes "bad behaviour" regardless of the nationality of the actor.
> I have no problem someone buys a $10million apartment in NYC and keeps it for a holiday in a year, if it say, costs $1 million in taxes per year and pays for a lot of other apartments, public transit
aka, you want a wealth tax that you yourself are not subject to, in order to pay for services that you yourself _do_ utilize. Implied here is that these services would be paid for by such a wealth tax, and thus, your own tax is either reduced, or used to pay for even more services which you can utilize.
This is just another way to frame a selfish desire, but making it sound good because it targets somebody rich. A populous opinion imho.
Tax should be levied fairly. Wealth tax is not a fair tax. The current tax system is pretty progressive, and there just needs to be patches to the loopholes, rather than institute wealth tax, which just causes inconveniences for the wealthy at best, and causes them to move their wealth at worst (leading to worse economic outcomes).
> aka, you want a wealth tax that you yourself are not subject to, in order to pay for services that you yourself _do_ utilize.
Ah, classical ad hominem. And on top of that based on assumptions about an pseudonymous person, which is often a difficult thing on the internet. I do have property in an area, where I am probably considered _relatively_ rich. Not in the range of the example, mind you, but I think the same should, in fact, apply to me.
If people buy property like that, they want (or should want) to buy it _because_ it is where it is. So, they (or should I say, we) do profit from those services even when not there, because they do contribute to the community, where we took a stake in.
What is the point in having an apartment in Paris/NYC/London if all that is left are tourists?
> This is just another way to frame a selfish desire, but making it sound good because it targets somebody rich. A populous opinion imho.
Popular, probably. That would be great in a democracy. "Targeting", "because they are...". Nice way of framing trying to invoke the feeling of persecution and the classical "democracy is wolves and a lamb deciding who to have for lunch".
Being rich (and I fall in more in that category than poor) does not require protection. The ones with more luck on their side can contribute more than those with less. I certainly can. It shouldn't be by charity, but the necessary obligation of doing your part in society.
> Tax should be levied fairly. Wealth tax is not a fair tax.
I wouldn't say it is a wealth tax, it is a luxury tax. And yes, that affects more the wealthy. You can have all your wealth invested in fonds, companies, etc... and it wouldn't affect you.
On a semi-related note: Why is a wealth tax not fair? Is it fairer to tax the way to become rich over being rich? I would argue the other way around.
> The current tax system is pretty progressive, and there just needs to be patches to the loopholes, rather than institute wealth tax, which just causes inconveniences for the wealthy at best, and causes them to move their wealth at worst (leading to worse economic outcomes).
If it is a inconvenience at best, then I fail to see how it is unfair. It would be ideal, if it is just that.
And regarding moving their wealth, that is the beauty of it: You can't move your $10 million apartment in NYC.
Ideally, it should be net-zero for people living there.