
UN report lays bare the waste of treating homes as commodities - miraj
https://www.theguardian.com/housing-network/2017/feb/28/un-report-lays-bare-the-waste-of-treating-homes-as-commodities
======
valuearb
This is crazy.

"In such markets, the value of housing is no longer based on its social use.
Properties are equally valuable regardless of whether they are vacant or
occupied, so there is no pressure to ensure properties are lived in. They are
built with the intention of lying empty and accumulating value, while at the
same time, homelessness remains a persistent problem."

A home lying empty has a negative return (due to maintenance and operating
costs, still have to water lawns, repair weather damage, etc). A home being
rented has a higher return. There is simply no reason from an investors
perspective to leave a home empty unless you can't find a renter who will
cover their costs, or you are trying to sell it.

It's people like the author of this study that created the housing bubble in
the US. They pushed to lower lending requirements, and pushed to have the US
Government assume more risk so more easy money was available for housing
purchases. With Fannie Mae and Freddie Mac, the US hasn't had a free market in
housing for 70 years.

And worse, Fannie Mae and Freddie Mac are integrally connected to both
political parties, offering huge payouts to retiring politicians or their
friends in return for their support. Google the ex-DNC chairman who made
$100M+ as chairman of Fannie Mae's board.

~~~
objclxt
> There is simply no reason from an investors perspective to leave a home
> empty unless you can't find a renter who will cover their costs

Right now the four bed house next door to me in San Francisco is empty, and
has been empty for the past three years - it's worth $4 million, and is owned
by a family based in mainland China. On one occasion a representative of
theirs stopped me in the street and asked if my home was for sale (fortunately
for me my landlord decided it wasn't).

And when I lived in London I saw equally empty properties - new build flats
worth millions of pounds completely deserted.

> A home lying empty has a negative return (due to maintenance and operating
> costs, still have to water lawns, repair weather damage, etc).

Not if the value of the home increases greater than the negative
pressures...which it very much has been in many cities.

> A home being rented has a higher return. There is simply no reason from an
> investors perspective to leave a home empty unless you can't find a renter
> who will cover their costs

Tenants have their own problems. They have rights, homes are harder to
liquidate with a tenant in, and you may decide it's just not worth the hassle.
If you're expecting the property value to increase 50% over the next few years
the income a tenant would be providing you is a relative pittance.

~~~
valuearb
Again, you are pointing out that the real problem is with restrictive rental
regulations. If you can't easily require a renter to leave at the end of their
lease, you would never rent your home, even if you didn't plan to live in it
for a few years.

But again, you get the appreciation whether you rent or not. It's in an
investors best interest to rent, as long as they don't have to give up control
of the property doing so.

~~~
tobtoh
In Australia, you can terminate a lease without issues if you intend to sell
the property or move in yourself.

However, in Melbourne, it's estimated (from water usage analysis) that 20% (1)
of investor owned properties are vacant (4.8 per cent of greater Melbourne's
total housing stock and 18.9 per cent of all investor-owned housing stock).

So I don't believe the 'restrictive rental regulations' are primarily to
blame.

Anecdotally, the inner-city 2 bedroom house (worth around A$1.5M) behind where
I live has been unoccupied ever since I moved in ten years ago! I'm as baffled
as you that people do this!

(1) [http://www.afr.com/real-estate/almost-20pc-of-melbournes-
inv...](http://www.afr.com/real-estate/almost-20pc-of-melbournes-
investorowned-homes-empty-20151203-glee9q)

------
tankenmate
And in the extreme you have cases like Vancouver which introduced their Empty
Homes Tax, unoccupied residential properties that are unoccupied attract a 1%
of value tax. I would suggest at least a 2% tax as that matches the IMF's
usual inflation target. I would also suggest that the money raised is spent on
subsidising affordable housing. But home owners vote far more often than the
poor or homeless so they don't want to see the last 30 years of value gains go
down the toilet (let alone a margin call if they go underwater).

~~~
valuearb
The Empty Homes Tax is crazy. There is zero reason for an investor to leave a
home empty, you still get the benefit of appreciation when you are making
rental income. Its foolish not to rent in that case.

Cases where homes are vacant are far more likely to be former residents who
moved for one reason or another but still want to keep their house. Usually
they want to stay in their own home when they make frequent visits. Sometimes
they plan to move back and don't want the hassle of renters in their personal
home.

I for example may be forced to take an out of state job, but I'm never selling
the home my children grew up in unless I'm forced to. So I may rent it, or
not, depending upon how long I think we will be out of state.

Taxing people to force them to rent isn't going to solve much, and is
offensive. The real problem is zoning, NIMBYism, and things like that. You
want cheaper rents, zone to build more housing, and deal with the greater
congestion you brought to your town.

~~~
pdelbarba
Counterpoint: why should people not be slightly disincentivized from owning
two homes when they only need one?

Even further, I personally think that people should be disincentivized from
renting their homes as well (though not in a way that would just be passed to
the renter, ie tax). I live in a college town that suffers from extremely low
inventory because housing values keep going up and there's never a shortage of
people willing to rent so nobody sells anything, they just keep it and pay a
property management company to rent it out.

~~~
loeg
Transaction costs for selling a house are around 10%. So it pays in a big way
to reduce the number of housing transactions you make.

~~~
pdelbarba
Fair point, but this doesn't really answer the question. Also, following this
tangent, would it be reasonable to attempt to decrease the transaction costs
to drive up inventory (carrot vs stick)?

~~~
loeg
To answer the question: landlording does provide a service. You can afford a
place to live without having a down payment's worth of assets. This is useful
for a big chunk of the population. If you make landlording not profitable or
too risky, rental stock decreases and rents rise on the remaining stock.

I do think it would make sense to attempt to decrease transaction costs in
order to increase market liquidity and efficiency. Unfortunately, there are
some hard physical minimum costs in there that are pretty significant
(evaluation, moving, legal stuff). But perhaps realtor premiums could be
reduced.

To actually get prices to come down, you need to increase supply. We're not
getting any more land, but there's clearly plenty of space, at least in the
US. But cities are popular right now and it's hard to imagine that changing
soon. As far as housing stock, upzoning/increased density can contribute to
supply and lower prices.

------
Houshalter
Taxing empty properties might help a bit. But it doesn't address the root of
the problem. That housing has become such a scarce resource it can be treated
as a commodity. We have the technology to build denser and higher. There's no
economic reason that housing should cost much more than the cost of
construction. Which should only get cheaper with time, as technology improves.
Certainly not more expensive.

But this doesn't happen. Why? Because the people commoditizing homes want to
protect their investment. The scarcer housing is, the more money they make.
It's an incredibly perverse system. It hurts the poor especially. Even the
middle class ends up losing most of their income to it. It leads cities to
stagnate instead of grow.

~~~
valuearb
You are missing the bigger pictures. Housing costs are directly related to the
cost of land, which is much higher in dense urban areas. The other driver
isn't "commoditizing" homes, no individual owner can affect the market price
of similar homes by not renting it. It's land use regulation, and rental
regulations.

The NIMBYs in every city want tight land use controls to restrict the
construction of new housing that would impact the value of their homes. The
renters want tons of regulations demanding things from landlords the renters
can't get by contract.

In NY or SF renting a home means giving a renter a massive amount of control
over it. Evicting them when their lease expires and you want to sell or move
back can be a nightmare. So the rental regulations are keeping homes off the
market.

~~~
toomuchtodo
I propose the following solutions:

1\. A building's minimum height is dictated by the demand in the area; your
existing building can stay, but if you want to bulldoze and rebuild as a
developer, you must build up if the local real estate demand dictates so (I
don't have enough experience to determine how you'd calculate demand, perhaps
trailing rents for the last 24 months?).

2\. Renters rights remain in place, with the government providing subsidies
and relocation assistance when necessary (funded by a special property tax on
non-owner occupied units).

An equilibrium can be reached, but the idea of "property rights" will need to
change a bit, with the understanding that a healthy neighborhood is more
important to society than you having full control of your property (which is
already the case, considering zoning laws and what not).

~~~
wbl
Get rid of maximum heights and FAR and 1 is solved automatically.

------
awinter-py
I think the article means 'assets', not commodities. They're saying investment
in real estate is leading to (a) long commutes for poor people and (b) empty
houses causing commercial blight.

Thought it was going to be about how cookie-cutter apartment buildings tend to
have nice fixtures but thin walls & inefficient heating/cooling.

~~~
RodericDay
the idea that everyone with a nest-egg should run out and buy property, any
property, and expect it to go up in price, seems "commodity-like" to me

~~~
awinter-py
there was a commodity bubble in the 00s, but not every asset bubble is in
commodities.

------
RichardHeart
Their link to the report is broken.
[http://www.ohchr.org/EN/Issues/Housing/Pages/HousingIndex.as...](http://www.ohchr.org/EN/Issues/Housing/Pages/HousingIndex.aspx)
is more recent and inclusive of the 2014 report.

The title of the original article is malformed. The problem of the empty homes
is that they aren't treated as commodities. Commodities are synonymous with
low margin and exchangeability with like kind. If homes were seen like normal
depreciating commodities, and less like the special snowflake, all legislation
must cause them to rise in price gifts to the capital class, they'd be less of
a problem.

Thus, homes if actually treated like commodities should exhibit less of the
problems the empty homes in this article describes. Artificially
cheap/government subsidized credit for home purchase has distorted the housing
market, as it has now also done to education. I hope the next bubble they blow
up is in healthcare.

~~~
rlongstaff
This is the correct link to the report: [http://daccess-
ods.un.org/access.nsf/Get?Open&DS=A/HRC/34/51...](http://daccess-
ods.un.org/access.nsf/Get?Open&DS=A/HRC/34/51&Lang=E)

The UN has a bizarre and archaic document management system that it is
difficult to link to (and to search, for that matter).

------
xforteversilov
Land Value Taxation. Stop taxing property, and tax land value and land
ownership instead and most of these problems go away.

This might be more of a hard-sell than basic income though.

[https://en.wikipedia.org/wiki/Georgism](https://en.wikipedia.org/wiki/Georgism)

~~~
valuearb
Terrible solution to an fake problem.

~~~
mjevans
As an alternative reason or explanation for why taxing "land" instead of
property built on the land:

The idea is to tax based on the //potential// value of the area to society, so
that realizing that value to society is incentivezed. I suspect a real
application of this would examine the difference in value to society and apply
more 'incentive' (tax proportionally more of the missing value) the further
from actual value to society a piece of land is.

~~~
jdmichal
How does this not end with all existent small owners being strong-armed into
selling out to capital-heavy investors who can afford to build 20-story
towers? Or is the point that it explicitly does not protect them, because they
are "under-utilizing" the property?

I'd expect that such a policy would result in a lot of cultural churn, and
homogenizing of communities to the point of losing any sort of interesting
historical character. How can you have history, when everything is being
bought up and redeveloped every (x) years because the previous owners can no
longer afford the taxes on the "improved value". Everyone becomes the victims
of everyone's success.

~~~
throwaway2048
When "historical charachter" and entrenched interests are making cities en
masse completely unlivable for anybody but the top margin of society, we have
a serious problem that needs solutions. "historical charachter" is a pretty
shitty reason that people should go homeless

~~~
jdmichal
I'm confused why you put scare quotes around "historical character" \-- it's a
real phenomenon and a real concern. There are places where historical
character is what drives the demand so high to start with. Sure, you could fit
more people into the historical district... If you knocked down all the
historical construction and basically removed all charm that's attracting
people there in the first place. And one could always invoke tourism into this
argument also. Those same districts also tend to be the ones that tourists
want to see, precisely because it's different from what they know.

~~~
throwaway2048
because its often a canard in many areas for "no new development so we can
artifically maintain a shortage, and keep our property values sky high".

Sorry but your property values and neighbourhood appearance shouldnt be
winning out against people literally being unable to live inside cities
because they have comitted the crime of being too poor.

~~~
jdmichal
> Sorry but your property values and neighbourhood appearance shouldnt be
> winning out against people literally being unable to live inside cities
> because they have comitted the crime of being too poor.

I think there's a lot of secondary effects tied up in your statement that
would not necessarily unravel the way you would wish them to. Ad absurdum, I
don't see how it results in anything other than assigned, identical housing.

Because, even at a fundamental level, someone will always be willing to pay
for something more than the bare minimum. And as long as that is true, there
will be stratification. And that stratification will price individuals out of
an area.

~~~
throwaway2048
You are the one reducing it to an absurdity here, but the reality of the
situation is people below the 90%th income percentile are being priced out of
cities entirely, not just select areas, not just "historical" areas, entire
metropolitan regions.

This needs to change, and I'm sorry if it means some property owners get huffy
about actual affordable housing getting constructed.

------
zzalpha
Are houses the new tulips? If value isn't linked to utility and only to
speculative investor demand, it's hard to conclude otherwise...

~~~
21
Only if said tulip is in a desired place. "Location, location, location" as
someone would say.

So the investment is actually in the location, not in the house itself.

Which is a good idea. For a bunch of reasons cities will continue to grow, and
bigger cities will grow faster. So if you have a multi-decade view, buying
location in any major cities is a sound idea.

~~~
paganel
> For a bunch of reasons cities will continue to grow, and bigger cities will
> grow faster.

In the Eastern-European country from where I'm from the cities' population has
actually decreased after 1990, the demographic crisis is a real thing (the
country's population as a whole has decreased by 17-20% after 1990). I see
this phenomenon extending to the rest of Europe in the next 20-30 years.

~~~
21
What about the population of Bucharest? Did the population decreased because
of lot of your people migrated to Western Europe, and in particular to Western
capitals?

This chart shows clear increases in most major cities of Europe:
[https://media.boingboing.net/wp-
content/uploads/2015/06/euro...](https://media.boingboing.net/wp-
content/uploads/2015/06/europepopulation.jpg)

~~~
paganel
> Did the population decreased because of lot of your people migrated to
> Western Europe, and in particular to Western capitals?

Interesting question!

Intuitively, I'd say that the answer is "yes". The birth vs mortality rate is
also a huge factor, of course, as in Bucharest people tend to die more
compared to kids being born here. Until we joined the EU that was counter-
balanced by the countryside people coming to Bucharest (so much so that in the
early 1980s the communist regime instituted some draconian rules against that,
pretty similar to the Hukou system now in effect in China), but after our EU
accession those countryside people saw that the salaries in Spain or Italy
were higher compared to those from Bucharest, plus cost-of-living was pretty
much the same if not lower, so they took the logical decision and migrated to
those countries instead.

Right now Bucharest is feeding off smaller cities from Southern and Eastern
Romania. I've made a heatmap showing that phenomenon in here:
[http://4.bp.blogspot.com/-tbQVpiC4CuI/UX7rUriCEBI/AAAAAAAAAk...](http://4.bp.blogspot.com/-tbQVpiC4CuI/UX7rUriCEBI/AAAAAAAAAko/3mOPiZMcnVc/s1600/Picture+5.png)
("hotter" points represent places where people lived before coming to
Bucharest), based on FB-profile data I parsed a couple of years ago; of
course, there's nothing scientific-like in that map, I just found it
interesting. This strategy is not sustainable on the long-term.

------
bryanlarsen
The building of homes for investment purposes should be making housing more
affordable, not less. Simple supply & demand: more supply should mean lower
prices.

Which implies that these homes aren't actually being added to supply. Why are
investors choosing to forgo rental income? There are lots of potential answers
to the question, and answering them might magically fix the problem.

~~~
robk
Wear and tear. The ones I know say that they don't want renters wearing the
interior

------
tunap
Just reinstate the GS Act, already! Must we wait until the banks, funds &
their ilk completely ruin more markets and put mllions og REAL PEOPLE in more
desperate, stagflating situations on more fronts? Let the wealth managers
apply their smarts to actually creating tangible value to society instead of
nicking more margins for "the investors". Parasitoid behavior kills the host
every time.

[https://en.wikipedia.org/wiki/Decline_of_the_Glass%E2%80%93S...](https://en.wikipedia.org/wiki/Decline_of_the_Glass%E2%80%93Steagall_Act)

~~~
valuearb
Glass-Steagal was just a competitive barrier that made markets less efficient,
why would restoring it make anything better?

~~~
tunap
It _was_ a barrier to nonparticipants from meddling in markets. Leveraging
differentials to siphon auxiliary wealth drains said markets & raises prices
for the participants involved. Then add the spurious actors who create
artificial events(shortages) to further leverage returns. That's where bubbles
appear & without said barriers the world economy has been, still is, broken
twice now.

------
kazinator
If something costs a lot of money, retains its value with a potential to
appreciate, people will treat it as a financial commodity.

Oh well, "shikata ga nai", as they say in Japan. Can't be helped.

Funny how the talk always turns to human rights when Peter sets his sights on
something he is lacking, which Paul happens to have.

If housing is a right, then even if you're not a real estate speculator but an
earnest home owner, some assholes out there believe that they have a right to
what is yours.

Want to relocate somewhere temporarily to work? Hey, "your" home is empty:
rent it to some trash that will destroy it, or pay up!

------
Shivetya
Should they go after anyone who owns more than one home? When does a vacation
home become a "Bad social construct" or whatever phrase they want to use? All
depending on where it is located?

Yes I understand there is an issue that many homes go unoccupied in some areas
but I cannot tell from the article how long between owner uses does it qualify
for this designation?

Now I can agree if the unit is never occupied, however if they visit a few
weeks out of the year then I don't see an issue. It is no different than
owning a second or third home anywhere else.

------
mschuster91
There is a dead simple solution: cities must be allowed to use eminent domain
for unoccupied (more than half a year is usually used as standard) housing if
the city declares a housing emergency.

Radical, yes, but I don't believe that there is any other viable solution
left, including "unoccupied taxes" \- because when the tax over a year is
lower than expected value gain, investors just pay the fine instead of
complying.

~~~
ptaipale
> _if the city declares housing emergency_

Such declarations should not justify extraordinary action if you don't have a
clear plan for how you are going to get away from the emergency. They are a
tool of political trickery to avoid regular checks and balances of democratic
policies.

For comparison, France declared a "national emergency" in November 2015, and
has then extended it repeatedly, and now France lives in a perpetual "state of
emergency".

If you need to keep extending the state of emergency, you should admit that
the "emergency" is actually your normal state of affairs.

If you have a problem in housing, with a really substantial part of your
housing stock empty, your rental market isn't working. Don't blame evil
capitalists for it; blame the rules of the market you created with
legislation. For instance, unreasonable tenant protections at the expense of
the owner.

Most often this is, however, just a diversion. Empty housing is not the real
problem; the problem is lack of building permits and zoning in areas of
population growth, and generally meddling with the market.

Beware of "dead simple solutions"; silver bullets offered as solutions to
complex problems are usually bogus.

~~~
mschuster91
> If you need to keep extending the state of emergency, you should admit that
> the "emergency" is actually your normal state of affairs.

I agree with this, therefore the trigger for a "housing emergency" should be
something that can be measured in qualified facts (e.g. ratio of migration
influx vs build of housing stock, queue length for welfare housing).

> If you have a problem in housing, with a really substantial part of your
> housing stock empty, your rental market isn't working. Don't blame evil
> capitalists for it; blame the rules of the market you created with
> legislation. For instance, unreasonable tenant protections at the expense of
> the owner.

Housing is a _human right_. Tenant protections are not unreasonable, they're
often enough the only thing preventing capitalism from its worst excesses. The
countless stories I have read alone on HN how in America people are kicked out
of their homes just because the landlord wants to have more money should be
proof of why tenant protections are needed.

> Empty housing is not the real problem

It is. Empty housing causes entire zones going dead - look at London. Wherever
a large number of "investment housing" appears, the small shops etc. have to
close because there are no customers.

> the problem is lack of building permits and zoning in areas of population
> growth, and generally meddling with the market.

I highly doubt the problems in Berlin, London or Munich are related to a lack
of building permits or population growth. It's just that it fetches more money
for real estate developers to build luxury apartments instead of affordable
housing, therefore the solution is _more zoning_ , not _less_.

~~~
x220
>Housing is a human right

If housing is a human right, who is responsible for protecting this right? If
I decide to sit on a couch all day and not get a job, does a private property
owner or the government still have to provide housing for me? If I become
homeless, who or what entity is depriving me of the right to housing? If I am
entitled to housing, am I entitled to housing anywhere I want or in any city I
want?

>it fetches more money for real estate developers to build luxury apartments
instead of affordable housing

Perhaps this is a signal that it's more economically productive for the rich
to live in cities than for the poor to live in cities.

~~~
mschuster91
Little upfront disclosure: I'm what many people would consider a left-wing
extremist.

> If I decide to sit on a couch all day and not get a job, does a private
> property owner or the government still have to provide housing for me?

In Germany (and other civilized countries), the government actually has to do
so.

> If I become homeless, who or what entity is depriving me of the right to
> housing?

The government must provide you with adequate housing by law (again, in
Germany). That it often fails to do so without consequences is the sad
reality.

> If I am entitled to housing, am I entitled to housing anywhere I want or in
> any city I want?

In Germany, housing is the responsibility of the city where you live in (which
includes sometimes paying motels to house people). I'm a bit unsure about the
details on what happens when you relocate, though, and the core problem is
many of the homeless do not really trust authority or do not like that many of
the help-homelessnes-programs enforce crap like no-alcohol policies -
thankfully there are first programs under evaluation which follow the policy
"housing first, remainder second".

> Perhaps this is a signal that it's more economically productive for the rich
> to live in cities than for the poor to live in cities.

F..k this mindset. Or wait, just let it happen and let the rich rot away in a
city where no one else lives and they can't buy anything, eat anything or
where there are no cops, firefighters or schools because the staff cannot find
any place to live (hint, in some areas of Germany this already is a problem,
and I remember having seen some reports on HN that this is also valid for the
US and London).

Cities are there for the entire population, not just rich foreign investor
.... wanting to make a quick buck.

------
orasis
"In prime locations for wealthy foreign investors, such as the affluent
boroughs of Chelsea and Kensington in the city of London, the number of vacant
units increased by 40% between 2013 and 2014."

How much of this is vacant vs AirBnB units? In heavily regulated markets a lot
of owners will under-report that they're being used for AirBnB.

~~~
Element_
I believe the average price of a semi in Chelsea and Kensington is something
like 6 million Euros or 40x local median income. These properties aren't for
Airbnb they are for rich foreigners who need to park their money outside their
governments reach.

------
easilyBored
_They are built with the intention of lying empty and accumulating value,
while at the same time, homelessness remains a persistent problem_

Yeah and Apple has $250,000,000,000 in the bank and at the same time....
Welcome to inequality in home ownership, stock ownership, money in the bank,
education, crime rates etc etc.

------
orschiro
Homes are such a critical resource. While other resources are passed down the
stream from the rich to the poor — see for example food leftovers (waste) —
this is not the case for homes. They remain where they are and don't easily
change ownership.

