Maybe there needs to be tighter controls over who is allowed to purchase real estate and under what circumstances they can purchase real estate....ie you must be a citizen of the US to purchase real estate in the US. I know this is going to be down voted but I think its perfectly reasonable.
People are living on the streets yet there are empty homes available that aren't for sale and artificially propping up home values in the area because someone from overseas needed somewhere to hide their cash.
When I first learned that land in US and many other countries can be purchased by anyone in the world, it was mind boggling for me from pure theoretical perspective (actually many government even encourages that). Currently, you need about 3-5 million votes to swing US elections in the desired direction. Now median house price in US is just under $200K. So in theory you can purchase roughly 5 million houses in swing counties for total cost of less than $1T and either leave them vacant or rent out to only people who aligns with your agenda. That's actually not a very large amount to spend over few years when your ROI is literally the ability to control US politics and trade policies almost indefinitely.
In theory, foreign power with deep pockets can buy up large swaths of important land and establish local governments and population that eventually can tilt national politics and policies in desired way. This becomes more and more easier as elections in lot of developed countries often decided by thin margins from very predictable geographical locations. I am not saying this is happening but at least in theory it's possible to design full on economic attack on any country with such laws. Imagine what kind of havoke a foreign government can create if they buy up all aggreculture land and control food prices in peace times and famines in war times. Or buy up key commercial estates critical to producing energy or real estate for even just simple daily needs like gas stations or grocery stores.
This was an actual thing that existed in the UK before the secret ballot and other democratic reforms, when you could effectively own an entire electoral district. They were called "pocket boroughs", i.e. they were in a patron's pocket.
This is far too expensive though. It is much cheaper to influence public with fabricated issues about candidates you don't like. May be 1/100th of your estimate.
Controlling counties doesn't do anything for you at the national level; you need to reliably control swing states. And if you want to actually control things, you need a great deal of influence over ~10 of them, because the deciding states for a given national issue/election tend to vary.
> Imagine what kind of havoke a foreign government can create if they buy up all aggreculture land and control food prices in peace times and famines in war times
They would also have to invade this country or corrupt the government.
> you must be a citizen of the US to purchase real estate in the US
Why would you want to do that? People want to invest in the United States and give us money, we are instead suppossed to spend money and create a blackmarket to prevent them from doing so at a loss?
> People are living on the streets yet there are empty homes available that aren't for sale and artificially propping up home values in the area
Housing prices are high because government spending on public services that increase the attractiveness of a location subsidizes land ownership whenever these services are paid for using taxes other than taxes on land. The solution is not to ban ownership of land but to tax it.
When government spending is not funded by land taxes, it allows landowners to charge higher rent in response to increased government spending on public services, even if they did not inveset in improving the private property located on the site. With a land value tax, landowners are directly charged for the public services which increase their land value. This means that they have to invest in improving their property if they want to increase their profit, such as by increasing the number of available housing units on the site.
Foreign investors may still buy homes and try to lease them, but they will end up funding the government and public services which only benefit the residents which actually live in the US, and they will be unable to pass on this tax burden to renters.
> Why would you want to do that? People want to invest in the United States and give us money, we are instead suppossed to spend money and create a blackmarket to prevent them from doing so at a loss?
Is this the sort of investment you want? Is this good investment? Driving up the price of housing?
1. Demand is only one factor in the price of housing. Supply is another. Eliminate all density/height/parking restrictions and enforce quality, and only quality regulations and the increase won't be that severe.
2. Don't cap property taxes. Instead use property tax revenues to build cool stuff for the city, among them very wide-ranging, very fast public transit so people can live in suburbs without shitty commutes.
I think general motivating sentiment is that you want people who actually live and work in the area to be able to given a favored chance at owning a place. That may be conducive to growing and solidifying a community.
Even the low value, or in foreclosure homes are being snapped up; just by the big banks. Who then rent them and sell that rent money as a new subprime asset. Its the subprime mortgage crisis all over again, except shareholders will get the mortgages given up as collateral.
Remember that a _lot_ of people who are in a country are not necessarily citizens. Many have green cards. Some people cannot accept US citizenship without losing their other one (Germans face this quandary, for instance). You can spend an entire life in the US productively and legally and not be a citizen. Barring them from owning a home is problematic.
Take this at face value because I'm too busy to look up citations, but it seems the general trend around the world is to make citizenship harder to acquire, not easier, compounding this issue.
* Full disclosure - I am very biased because I am a resident of a country in which I am not a citizen, and I've been really frustrated by not being able to get a mortgage.
You can't actually spend your _entire_ life in the US and not be a citizen, since if you're born there you're a citizen. Still, though, the general idea holds.
What about companies? Also, what if they enter a contract with an US citizen under which the house is owned by such citizen, but the proceeds of all rentals and sale are to be passed back to the foreign citizen?
It's a can of worms. Once that control is in place, you'll have people flying in to give birth in the US and then immediately purchase property in the name of their newborn.
Real state seems to be a preferred way to stash money overseas. Vancouver is full of homes without occupants in them because of this reason. They're now trying to mitigate the problem by applying a high tax penalty for home owners that keep their house without occupants, making it inefficient to buy houses to keep them vacant.
They also do it domestically, but leading to ghost towns.
A more comprehensive solution would be to eliminate all other taxes and fund all public services from taxes on land. This naturally incentives local ownership because owners of high demand locations do not receive a benefit from the high taxes they are assessed to pay for public services for residents unless they actually live there.
I wonder if this is because you can get around money laundering/financial control laws when buying a house for cash? Do the sellers have to check where your money is from when you buy a house?
Hong Kong and China has a similar restrictions or tax on non-citizens who attempt to buy property in China. China in fact disallows non-residents from purchasing real estate until they've lived there for a certain period of time.
I'll be curious as to see how this affects Vancouver real estate prices. Right now it doesn't seem to have had a huge effect, but if the market crashes, it will be very interesting to watch to see how it ends up. Real estate there has been going straight up for so long, it's a way of life for 2 generations who have never seen a major crash. I wonder if the market does crash, it will shake out the way the dotcom bust did, where people kept buying because they thought "it's on sale" but it never reached a bottom until so many people lost so much money.
The Chinese consul in Vancouver actually criticized the Canadian government for doing too little to regulate the housing market. She even suggested a tax on foreign buyers to quell some of the public outrage about housing prices.
I actually heard a Chinese investor, active in the market, talking about how stupid the Canadian government is to allow him to do what he does. He was basically boasting that he will keep it going as long as he is allowed, and that the new regulations are weak and ineffective if you can afford a decent lawyer. In other words, "don't hate the player, hate the game."
Seattle will probably be too slow to react and end up in the same situation, but maybe it will get the attention of other cities/states before it becomes a problem.
Significant Chinese immigration to Sydney started in the 1840s and to Vancouver in the 1850s. While you're technically correct, I would call that contemporaneous. :)
I thought Vancouver was the new Sydney/Melbourne, with the capital influx to Vancouver spurred in part by Australian government controls on foreign home buying.
So how does this work and why does it make sense at all? I am assuming Chinese investors aren't getting citizenship just because of their real estate purchase. At least US laws require at least $1M investment ($500K for special projects) and most houses in Seattle are below that mark.
So now you as Chinese investor have an expensive property in a foreign country where you can't live permanently and very likely you have little information on purchase itself. Sure you can rent out using some management company and bet on appreciation but it's still a lot of risk considering you have little control and information over property management, local events and economics. Plus real estate markets have long history of downturns and non-liquidity in times when you need the most. Wouldn't buying S&P500 index or something for long term would be a far better investment choice? Or just REIT funds if you just want to bet on real estate? Or is there some hidden economics involved that we don't know of?
Can't speak to the US situation, but here in Canada there are anti-money laundering "know your client" rules for securities brokers - and securities are far more regulated in the US than Canada (Canada has no equivalent of the SEC). You can't just buy millions of dollars of publicly-traded securities through an anonymous shell corporation.
No such rules exist for housing that is purchased outright and not financed.
These people don't want an investment, per se. They need to store the money, but also to hide it. If the beneficial ownership of the assets purchased with the money is obscured, they can't be clawed back if they are arrested in China and charged with stealing that money in the first place.
It may be a bit different than outright stealing. Many Chinese businesses make money in a foreign currency outside of China. Instead of bringing the money in and then finding that they can't re-export it they leave it abroad and use it to buy real estate and pretty much anything else they can get their hands on.
This makes for a fairly large but hidden component of the trade imbalance.
The only other way to get funds > $50K out of China is through getting 'permission' which equates giving the right people a cut, or maybe you'll find your money confiscated.
Source: did some business with the Chinese well in excess of that $50k.
It makes no sense from a money making standpoint. But they're not doing it to make money. They're doing it as a backup in case something goes bad in China. It's like insurance. Also a nice place to stay while in the US for short periods.
1) You don't get citizenship, but your kid(s) likely will, after they study and get a job there.
2) There are many native Chinese property managers in these markets (coastal US, Vancouver, Sydney) specializing in supplying info and property management services to mainland Chinese looking to invest/speculate.
3) Expensive is relative. Seattle property is about half the price of property in Beijing or Shanghai (while the average income is about 3 to 4 times as high)
4) As others have noted, stocks are a lot more regulated. And in China they're perceived as much more speculative than property.
I am sure there are businesses whose sole job it is to manage these properties on behalf of their owners for a fee. Considering that they are buying property in usually lawful places where the chances of someone usurping your property from you (or illegally squatting on it) are low, I think they don't have much cause for worry.
> The tax applies to anyone who isn’t a citizen or permanent resident of Canada and purchases a home in metro Vancouver.
I feel they could simply apply the same tax to non US citizens/permanent residents trying to purchase a home in the Seattle area.
The idea of a vacancy tax seems hard to apply while respecting people privacy.
If the owner is a non citizen who doesn't live in the US, you can use immigration records to know of his presence, and they he/she can show rent documents to prove if the house was occupied. But this looks like it would be hard to enforce.
> The idea of a vacancy tax seems hard to apply while respecting people privacy.
There is support growing in Vancouver for a surtax based on property value that would be offset by income taxes, and wouldn't apply to those who are retired or on disability [1]. This would be collected from both foreigners who are underreporting their income as well as the idle rich, while also putting additional pressure on those leaving homes vacant to rent.
The idea is to renew the social contract, so that those who are working and contributing to the economy can enjoy the benefits of reasonably affordable housing.
Instead of a vacancy tax you have a homestead exemption. If you live in your home, you get a tax exception. So instead of having to find the vacancies, people who are residents will sign up for the exemption. Same effect.
Why not just apply to it to non-resident aliens (a federal income tax status) rather than to people who aren't US citizens or permanent residents (which is related to nationality/immigration status).
All US citizens are tax resident. All permanent residents are resident aliens. However, by defining things this way, you are excluding people who are living in the US on a temporary work visa (e.g. H-1B, TN, L-1, etc.) and other temporary residents who are, nonetheless, very much resident in the US, in that they spend over 183 days in a year (or more than 4 months per year averaged over 3 years; the rules are kind of complicated) in the US.
Yeah, it could make sense apply it to only "non resident for tax purposes" (i.e. People filling a 1040NR)
As other comments mentioned, a tax like this should also affect rich citizens who similarly contribute to vacant houses, so to actually solve the problem I guess it should affect all property owners
I don't think the US constitution would allow for that tax, written that way anyway.
To pass a court challenge, the laws as written and the discussions around them have to apply to everyone otherwise it would be too discriminatory (5th amendment equal liberty clause, & 14th amendment equal protection clause). Maybe you could write it as all homebuyers in that jurisdiction being subject to the tax, and then its tiered for certain variables.
Protection under US laws to non-citizens including 5th amendment applies only if you are physically on US soil (excluding space before immigration at port of entry). So if you are non-citizen US house owner living in foreign country, it would be tricky to file lawsuit seeking such protection.
Actually, it should be pretty easy to monitor without invading privacy much: just monitor water usage. If water is being used, its occupied. To combat fraud from people faking it by wasting water, just check water usage patterns. The rise of the smart home could give homeowners away to fake it, but that's a problem that can be addressed if and when thinks escalate to that point.
We have seen the effect of foreign investment in Seattle real estate, but this has been happening a lot longer than the tax actions taken in Vancouver.
This article couldn't be farther from the truth. The graph at the top shows some ridiculous "searches" bar graph.
Once Seattle's had 25%+ average growth in housing prices for several years coupled with absolutely no economic basis to support such a trend, then we can start a discussion.
Chinese grocery stores are common in the city and many suburbs. You can easily find mandarin speakers at most banks. Chinese signage and mandarin staff are common in malls, especially luxury goods.
And if you get permanent residence healthcare is free. Just don't declare your foreign income. Everyone's doing it.
Sure it does. They follow their friends and families and generally stick to friendly enclaves. Why do you think they buy homes in Vancouver and not Yellowknife?
Getting the money into a destination country is only the first part of capital flight, the other half is making reasonably good and relatively liquid investments with it. Therefore, housing in Yellowknife is probably out. Generally speaking, the goods in which one invests in as capital flight tend to be either a good investment (big city real estate), or easily concealed and transported (jewelry, precious metals).
And if the English-speaking westernized kids and grandkids can get things like tuition and medical care out of it, that's certainly a nice bonus.
I lived for many years in a city that saw a truly massive influx of investments driven almost entirely by capital flight, predominantly from Iran and China, and those buyers were all too happy to buy a house, never move into it, eventually send their kids over for an education, bring the kids back home, sell the housing in US Dollars and keep those funds there. (Or, rent it out and deposit the funds into a US account.)
It's also worth noting that seasoning requirements for funds contributed to a mortgage don't apply when the purchase happens in cash. The people who play at the level required to make capital flight worthwhile aren't near the center of the bell curve.
My language could have been more clear. They state at the top of the page that you have to be "admitted for permanent residence" if you are not a citizen. However other visa situations also qualify [1]:
> Certain other individuals, such as some holders of study and/or work permits, or working permits on working holiday programs — which are issued under the federal Immigration and Refugee Protection Act and are valid for a period of six or more months — may be deemed residents. Tourists or visitors to B.C. do not qualify.
I was thinking especially of the university students I know who got MSP cards after being in BC for a few months on student visas--they are actually required to enrol [2]. Incidentally, there was a thing in the media about the number of owners of multi-million dollar homes in Vancouver who listed their profession as "student" [3]. Working holiday visas are typically only for 1 year, and they also qualify. You might think that a lot of young people who need elective surgery would take advantage of the working holiday visa programs, but the waiting times for most specialties would make it a gamble to get anything done in the 9 months they'd have coverage (I'm not entirely joking).
If you're curious what happens while waiting to become eligible, private insurance companies offer a standard insurance package called "Visitors to Canada" insurance ($200-$500 CAD for 3 months depending on deductible and whether you need coverage for a "stable" pre-existing condition).
Visitor to Canada insurance is also what you need to buy if you're a Canadian who has lived abroad and need to cover the gap before you can re-enroll, though it is not a mandate, and technically under the Canada Health Act they can't refuse to treat you if you are a citizen. I have heard that a citizen or lawful resident can refuse to pay a bill even if you are not enrolled and nothing will happen, but that may also be an urban legend.
One other point of clarification, since it confuses people to no end. Each province administers its own program. Three provinces (of ten) collect health care "premiums" on those who have income levels to support it: BC, Alberta, and Ontario. The premiums are not paying the cost of health insurance by any stretch, they are a poorly designed and administered poll tax that shares a name with the health care programs. This bothers me constantly when Americans who have moved to BC harp on about how "health insurance" only costs $75 a month in Canada, because the vast majority of the costs are paid through other revenues. Eliminating premiums is an issue in tomorrow's BC election.
People are living on the streets yet there are empty homes available that aren't for sale and artificially propping up home values in the area because someone from overseas needed somewhere to hide their cash.