One Way to Lower High Housing Prices

Two recent articles decry the stratospheric cost of housing in London. That’s not just a problem for London, but cities like New York and Miami, where high end properties are more an investment vehicle than a place to live. Unfortunately, as both those article note, these extravagant housing investments not only drive up housing costs, but they also depress the local neighborhood economies, since the owners rarely live in them.

There’s a very simple way to eliminate this problem: impose an annual tax of twenty percent of the property’s value if it is not the owner’s primary residence. There are lots of places this should not be done, since housing isn’t a scarce resource. But in London, New York, San Francisco, Boston, and so on, housing is a very scarce resource, and hoarders–that’s what they are–should be penalized heavily.

Oddly enough, I don’t think anyone is going to propose this however…

This entry was posted in Housing, Taxes. Bookmark the permalink.

6 Responses to One Way to Lower High Housing Prices

  1. Chris G says:

    > There’s a very simple way to eliminate this problem: impose an annual tax of twenty percent of the property’s value if it is not the owner’s primary residence.

    Absolutely. Implementing a sales tax on sales greater than X could also help. (X = $500k? $1M?) Sales tax might prove easier to collect. I can imagine the uber-rich lawyering up to argue primary residence.

  2. BobTerrace says:

    So now you propose telling people how to use the property they own. How many days is sufficient? 182? 300? 94? Are they allowed to go on a long vacation? Are you next going to tell them how they can use their bedrooms?

    Also, those who buy the high end will not be phased one bit by increased taxes, so your goal of owners in residence is a failure.

    • Bob,

      I’m not telling anyone how to use their property: we already identify primary domiciles for tax purposes–that’s nothing new. It’s no more telling someone how to use their property than all sorts of investment incentives in the tax code are, but rather than lowering taxes, this would increase.

      I assure you someone who buys a $20 million property largely as an investment vehicle will be far less likely to do so if it costs them $4 million/yr.

  3. Creative disincentives may be all that’s left when it comes to temporarily stalling the insatiable appetites of the affluenza brigade. It seems that lower housing prices after 2008 resulted in a fortuitous yard-sale for the “investors.” Now that prices have resurfaced and/or surged in boom towns, the “we can haz” flipping factions are busy working on creating another supply-side bubble.

  4. elkern says:

    Primary Residence should also be easy to determine from Voter Registration. For Snowbirds in my region (1/2 yr in FL, 1/2 yr in New England), they can take their pick as far as I’m concerned – but they must pick. That choice determines Voting, Taxes, etc.

    I like this idea, with a few caveats:
    1. I think the % is too high, but that’s just quibbling. 1-10% should be plenty.
    2. Rental housing would be exempt? unless unoccupied? for how long? (details get ugly)
    3. Loopholes would be found, dug, or baked in. Married couple, each owns one home?

  5. mike says:

    In the city of Malden, MA (and other surrounding cities like Somerville) we’ve gone the other way – homeowners get a property tax break (in Malden it’s 30%!) if the home is their primary residence for the entire year.

Comments are closed.