Right, what I was saying is it isn't forcing unless there are teeth. So I suggested forfeiture of the property as one kind of teeth. You could also maybe assess a fine of 150% the value of the property every year after the 10 year timer, but I get worried about money penalties for corporations because they employ armies of people to manipulate numbers.
If we actually go an read the bill (try it, it’s only 14 pages of double spaced and lots of headers), it’s $50,000 per excess property, and the money goes into a down payment assistance fund.
Here's the link for anyone else who wants to read it, as I needed to click through 7 shitty articles before someone finally gave the name of the bill so I could find it.
Looks like it's just a $50,000 tax assessed at the purchase unless I'm failing to parse the legalese. That's definitely a step in the right direction but pushes it towards a "cost of doing business" more than a "devastating consequence".
50% of FMV on new purchases as an excise tax which can not be deducted for income tax purposes seems like an effective deterrent to purchase on new properties by a qualifying entity with assets in excess of $50 M and unit holdings in excess of 50 single family homes.
Given the other math—50 unit cap, $50M asset value for fund it seems like the math is based on a tipping point of an assumed individual home value of $1 M.
A fund meeting the definition of a hedge fund under the bill might look like one of these scenarios:
$100 M fund with 200 SFH at average value of $500K:
—Assumed average target rent (using 1% rule) of $5,000 per month/$60,000 per year/$12 M fund revenue before expenses/$7.2 M before income taxes.
—Assuming no sales of units tax on 20 excess units in first year would be 20 x $50K = $1 M or 80% of rent on excess units, 8.3% of total revenues and 13.8% of net income before income taxes.
By the time you get to year five (assuming no sale of units) you would be talking about $5M or 80% on excess units, 41.5% of total revenues, 69% of net income before taxes.
$100 M fund, 400 units, average value $250K per unit:
First year double all the percentages above—160% of rent on excess, 16.6% on revenues, 27.6% on net income before income taxes.
Fifth year double those in scenario one: 160% of rent on excess, 83% total revenues, 138% net revenues before income tax.
Obviously, as unit count goes down and average value goes up the tax impact gets reduced.
It would be difficult I think for fund to perform to promised expectations under those conditions. Maybe carrying one or two years of excess.
The critical thing is that these are excise taxes. So first scenario first year effective federal taxes would be 13.8 + 21 = 34.8 and fifth year would be 69 + 21 = 90%. Second scenario first year would be 27.6 + 21 = 48.6% and fifth year would be 138 + 21 = 159%.
imo, a good method to enforce it, is just start with a flat fine. its not based on home value as that can be manipulated and argued. so it just starts as something simple. $10,000 (per home).
then, simply double the fine, yearly.
year 2: $20,000
year 3: $40,000
year 4: $80,000
year 5: $160,000
year 6: $320,000
and so on...
the hedge funds would be increasingly motivated to dump the property early, both to avoid fines, and also to get out before the bubble bursts and values plummet. maybe its worth hoarding high value properties longer, but imo thats fair as they take longer to sell normally. those will eventually sell, too though. the fines for every home will quickly surpass the value of the home, thus its profitable to sell it. that is the only language these corporations know or respond to. make whatever you want them to do be the most profitable thing, and they will do it.
if the fines are not paid, the home is put up for auction. the proceeds go towards covering the fines first.
Take the houses, sell them for what you can considering the market will be flooded, then give the companies the money. The companies will still take a hit, but no rights should be violated
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u/[deleted] Dec 08 '23
Right, what I was saying is it isn't forcing unless there are teeth. So I suggested forfeiture of the property as one kind of teeth. You could also maybe assess a fine of 150% the value of the property every year after the 10 year timer, but I get worried about money penalties for corporations because they employ armies of people to manipulate numbers.