If you tax the profits then there is no amount of rent increase that would fix that. Every added penny would go to the state and there would be no incentive to raise rents beyond their operating cost. Sure, there's incentive to commit fraud, but that's always the case. We always need a healthy audit and punishment system to close loops.
> Every added penny would go to the state and there would be no incentive to raise rents beyond their operating cost.
There would also be no incentive to be a landlord, so the units would get converted to condos, no more would be built and anyone who can't afford a down payment is homeless.
You also have rather a problem when it comes to operating costs, because when the mortgage debt is most of the value of the property, most of the rent is going to loan interest, which is a legitimate operating expense. But if they can't keep anything in excess of operating expenses then there would be no reason to pay down principal to reduce operating expenses (i.e. interest), so all the buildings would be on interest-only loans and rents would be just as high but the profits would go to the lenders.
>There would also be no incentive to be a landlord, so the units would get converted to condos
This is what I'm after. If too extreme then a tax point that sets the desired ratio of individual vs corporate owned housing units. That ratio should be 100% individual owned imo but I'd be happy with people at least legislating something on the issue.
>most of the rent is going to loan interest, which is a legitimate operating expense
Then don't tax payments on principal or interest.
>rents would be just as high but the profits would go to the lenders
But we would have successfully cut out a middleman with means, motivation, and opportunity to squeeze via anticompetitive practices. Having individuals negotiate rates with a bank is a much better situation than facing price fixed rents.
I'm still granting that some amount of fees be charged to the tenants for shared resources (hallways, elevators, etc), so there is room for some money to be made, but that too should be closely monitored.
> This is what I'm after. If too extreme then a tax point that sets the desired ratio of individual vs corporate owned housing units. That ratio should be 100% individual owned imo but I'd be happy with people at least legislating something on the issue.
There are tons of people who simply don't have hundreds of thousands of dollars to buy a condo and don't have good enough credit to get a loan. They need somewhere to live, so they rent.
And converting units to condos doesn't really reduce prices, because you still have the same number of residents and the same number of housing units. To lower prices you have to increase supply, the actual number of housing units, not just how people are paying for them.
> Then don't tax payments on principal or interest.
Now the landlord puts all the profit into principal to avoid the tax until the building is paid off, then sells it and buys another one. And if that isn't allowed then you're back to paying down principal being pointless and the rent stays high but goes to the lender.
> But we would have successfully cut out a middleman with means, motivation, and opportunity to squeeze via anticompetitive practices. Having individuals negotiate rates with a bank is a much better situation than facing price fixed rents.
The incentive is still there, you just move it around. The landlord still wants scarcity because they want the market value of their building to increase, because they can profit by borrowing more against the increase in value or by selling it to another landlord who takes a bigger loan. And now you've made the banks even more in favor of real estate prices going up because they get more interest now and loan amounts are closer to property values so they have more risk of defaults if property values go down.
> I'm still granting that some amount of fees be charged to the tenants for shared resources (hallways, elevators, etc), so there is room for some money to be made, but that too should be closely monitored.
This is the same problem as cost-plus pricing. Normally businesses want to reduce costs, now you've given them the incentive to waste as much money as possible so their cut seems like a reasonable percentage and award contracts to cronies etc.
The problem is not that landlords charge rent. The problem is that landlords lobby to restrict housing supply -- and so do homeowners, because they want home values to go up once they already own one.
>There would also be no incentive to be a landlord, so the units would get converted to condos, no more would be built and anyone who can't afford a down payment is homeless.
You missed the second half of this sentence, which is the downside of the tradeoff.
>Then don't tax payments on principal or interest.
Mortgage payments are already tax deductible, and one of the biggest perks for owning a home.
>Having individuals negotiate rates with a bank is a much better situation than facing price fixed rents.
Renters are a Group that are already unprofitable to lend to, so banks would reject most and hike rates higher for the rest.
Your proposal only makes sense if landlords provide no service, but this isnt true. Just like how a bank makes a % interest for taking risk and providing capital that owners wont, landlords do the same thing. Landlords get paid a profit to take on risk and long term liability (to the bank), and again provide capital.
In short, banks loan cash to landlords because they are more credit worthy and take on liability. They in tern loan a home to renters, who have worse credit and much less liability.
It is all about paying a premium for others to take financial risk.
