What to do with the hoarding tax? The only way to live justice in Taiwan

This is an old article co-published with the boss in September last year, mainly for a complete discussion of the hoarding tax proposal that was raging at the time. But even though it was last year's article, I think the arguments mentioned in it still apply to this day.

In May of this year, some netizens launched a proposal to " levy an empty house tax " on the public policy online participation platform, opposing "the wealthy use their houses as investment targets." In just 13 days, the threshold of 5,000 secondaries was reached.

Not only are the people unhappy, but the local government can't stand it anymore. The Taipei City Government held a press conference on " Residence Justice 2.0" earlier this month. Mayor Ko Wenzhe worried that "if the problem of high housing prices in Taiwan cannot be solved, today's Hong Kong will be tomorrow's Taiwan" and called on the central government to promote the reform of the property tax system, advocating a single self-occupation with light tax and multiple houses. Heavy taxation, allowing residences to return to residential use. Then, on the 16th of this month, Times Power proposed a draft amendment to some provisions of the "Housing Tax Ordinance" in the Legislative Yuan, and proposed to adopt a progressive tax rate method to increase the housing tax for large households with multiple houses to curb the trend of housing hoarding.

The aforementioned series of proposals and proposals for amendment of the law all point to a common phenomenon—empty houses—and they all believe that releasing houses for use will help alleviate the housing problem.

So, how many houses are vacant in Taiwan? Who owns these empty houses? What is the relationship between vacant homes and current living problems? And, how can we convert vacant houses into residential use? As one of the long-term advocates of housing policy reform, the author writes analysis and suggestions, and teaches all parties about the housing policy reform route.

The more homes you own, the higher the vacancy rate

Before entering the whole discussion, we should distinguish between "vacant house" and "remaining house". Empty homes refer to underutilized or unused homes on the market, while remaining homes refer to unsold (unsalable) homes held by construction and development-related companies.

Let's start with the empty house. The most accurate data on the number of vacant houses in Taiwan is the "Population and Housing Census", but the census is conducted every ten years. In the most recent census (2010), the number of vacant houses in Taiwan was as high as 1.555 million, and the vacancy rate was At 19.3%, nearly one in every five homes is vacant.

In the years before the census was conducted, the estimated data of "low-use (electricity) houses" was used as the estimated data of vacant houses. Since its number is much smaller than the aforementioned census, the official is more willing to cite it, but even so, in 2017, through the low The number of vacant houses according to the electricity consumption statistics still reached 864,000, and the vacancy rate was 10.12%. Among them, there are 545,000 units in Liudu, which have high residential demand, accounting for more than 63% of the total vacant houses.

In addition, according to the data of the Ministry of Finance of the total number of households, Taiwan has about 320,000 households with four houses (including above), holding about 1.62 million houses in total; 37.6% of the residential stock (individually held). If you compare it with the aforementioned data on low-intensity electricity users, you will find that: the higher the number of houses, the higher the rate of vacant houses with low-intensity electricity consumption. The proportion of more than 40% of the five rooms with more than five rooms, it is as high as 50%-60%. So far, it can be reasonably deduced that a small number of multi-households are the largest source of vacant houses in Taiwan.

The more you have left, the more expensive your house will be.

Then look at the rest house. Also according to official statistics, in the fourth quarter of 2017, the number of remaining houses in the country approached 75,000. In terms of regions, in Shuangbei, where housing prices are the most unaffordable, there are 19,395 remaining houses, accounting for 26%.

According to the housing price index and the number of remaining houses announced by the government, the number of remaining houses nationwide has increased from 23,000 in 2012Q4 to 75,000 in 2017Q4, more than tripled in just five years. . If we compare the trend of housing prices in the same period, we can clearly see that the number of remaining houses and housing prices are contrary to the common sense of supply and demand in economics. There are more and more remaining houses that cannot be sold, and house prices are getting more and more expensive.

The tax system is the main reason for the large number of empty and spare houses

Why is the number of empty houses in Taiwan so staggering? And with too many vacant houses, the builders continue to develop and build to double the number of remaining houses, and the prices remain high? One of the key reasons is Taiwan's unreasonable home ownership tax system.

First of all, due to the large gap between the announced land price and the current value of the housing assessment and the actual price, although the nominal tax rate in Taiwan is not much different from the international standard or even slightly higher (ranging from 1.2-3.6% for residential buildings), the real tax rate is extremely low (only about 0.13%), which is about one-tenth of that in the United States. It is the standard "scare people to death, and people to laugh at them". It is actually cheaper to keep a house than to keep a car.

Second, the taxation standards for holding houses are too loose. According to the "Standard Operating Principles for the Recognition of Self-Occupied Houses", a husband and wife and minor children who own more than three households will be recognized as "non-self-occupied", and a higher tax rate will be applied. But even so, in Taiwan, only Taipei City, Lianjiang County, and Yilan County really adopt the differential tax rate of "the more houses are taxed, the heavier the tax is". 1.5% tax rate for living.

Because of the low holding tax, and there is little difference between "multiple houses" and "self-occupation", individuals tend to buy houses vacant for profit, and builders prefer to sell houses at high prices. Nearly one million houses are vacant. This is how it accumulates.

Therefore, the author shares the same view with many people that in the face of the phenomenon of a large number of vacant houses being left idle and the resulting problems, we should increase the cost of holding vacant houses (hereinafter referred to as the hoarding tax) and rationalize the market supply and demand mechanism to effectively eliminate vacant houses. , allowing the residence to return to residential use.

Why do we need to hoard house taxes on spare houses?

Some people will say that even if a large number of vacant houses is a fact, it is the owner's right to control the property. This must go back to the two aspects of "economic externality" and "housing is a necessity for people's livelihood".

First of all, we must point out that the particularity of Taiwan's housing problem—with high housing prices at its core—is not a problem of insufficient supply, but an external effect of distortions in the housing market. Where is the twist? Soaring housing prices and a large number of unoccupied houses coexist, and the lack of rental housing and a large number of vacant houses have not been connected, that is, the supply and demand cannot be in line with each other. What is the externality? That is to cause "the house is used for speculation and not for living", and the shellless snails cannot be bought and rented!

It goes without saying that high housing prices cannot afford to buy. In 2018 (Q3), the overall housing price-to-income ratio in Taiwan was 8.82 times, Taipei City was 14.07 times, and New Taipei City’s housing price-to-income ratio was 12.14 times, all far exceeding internationally recognized reasonable standards.

Can't afford that rental house? According to statistics from the Ministry of the Interior, the size of Taiwan's rental market is about 11.3% of the overall residential market, far lower than the 25% to 50% of advanced countries such as Europe and the United States, and the rental index has been rising in the past ten years.

According to a survey conducted by the Taiwan Labor Front, based on the national median salary in 2016, the ratio of rent to income is estimated to be as high as 58% in Taipei City, 30% in New Taipei City and 25% in Taoyuan City. Moreover, the above-mentioned phenomenon of inability to buy and rent is not enough, and none of them suffer the most than the younger generation.

Secondly, I think the vast majority of people should agree that even though housing has the nature of "capital goods" for investment and profit, the more important and priority function should be the "consumer wealth" function that meets the needs of residential use, that is, housing is an inexorable asset. lack of necessities of life. So, when there is a large number of hoarding and vacancies such as residential necessities, should we intervene to deal with them?

In fact, the Chinese government will intervene in the hoarding of necessities for people's livelihood. The Executive Yuan has a "Price Supervision Team", which can be punished in accordance with the Agricultural Products Market Sales Law and the Consumer Protection Law, and even use Article 251 of the Criminal Law to regulate "hoarding food items that are necessary for people's livelihood or agricultural and industrial necessities. Those who should not be marketed for legitimate reasons shall be sentenced to fixed-term imprisonment of not more than three years.”

Comparing the government’s attitude towards some civilian products in recent years, we can’t help but ask, isn’t it very strange that if the price of fruits and vegetables rises, we need to catch vegetable bugs, and if there is a shortage of toilet paper, we need to check the channels.

The benefits of hoarding tax on residential policy

Furthermore, in terms of housing policy, the hoarding tax will also bring positive benefits to the improvement of the housing market and the rental market, and even the government-promoted lease escrow.

As far as the housing market is concerned, there are currently too many remaining houses and excessive development. As the saying goes, "there is no house that cannot be sold, only the price that cannot be sold." , let the supply really enter the market, and return to the supply and demand mechanism to let the price fall back to a relatively reasonable range. That is to say, at the level of the home buying market, the benefits of hoarding the house tax are "depletion of remaining houses, active transactions, and reasonable prices".

As far as the rental housing market is concerned, the current shortage of rental housing and rising rents have made many renters overwhelmed, or they can only choose to rent low-quality housing. Once the house hoarding tax is implemented, it will encourage people with multiple houses to rent out vacant houses to make up for their tax expenses, thereby slowing down the rent increase through the increase in supply, and helping to eliminate ugly and illegal cubicles and covered objects in the market. . That is to say, at the level of the rental housing market, the benefits of the hoarding tax are "expanding supply, restraining rents, and improving quality."

In addition, as for the lease escrow that the government is actively promoting, since the current mechanism is "only carrots do not produce sticks", most of the people participating in the plan are landlords who already have rental properties, and few are released from vacant houses, resulting in effective results. Far less than expected.

If there is a hoarding tax, the release of a large number of vacant houses will become a niche for its expansion and compliance, and it can also usher in a new life for the budding rental industry. That is to say, in terms of the promotion of chartered escrow, the benefit of the hoarding tax is "policy compliance and industrial development".

How to promote the hoarding tax?

Although it is reasonable and effective to levy the hoarding tax, it is not easy to promote. The most difficult thing is the opposition of vested interests, which will include builders and a small number of people with multiple houses. There is no doubt about the ability of builders to put pressure on the government. Although there are a small number of people with multiple houses, most of them have social and economic influence. Therefore, the discussion on the issue of vacant houses over the years has always been based on the sound of the stairs, and there is no further discussion. Faced with this, how to push the hoarding tax? Below are our views and suggestions.

1. Clearly define the object and narrow the influence area

As far as the definition of the object is concerned, it should be noted that the targets of vacant houses and remaining houses are different groups. The former is those with many houses, and the latter is the builders. That is to deal with the "vacant house problem" or the "remaining house problem" first, or want to combine them together. Handling, it deserves careful evaluation.

Taking the previously unfavorable "Real Price Registration 2.0" amendment as an example, it also involves two groups of builders and individuals, so it appears that the builders are actually opposed to the "real-time registration of pre-sale houses" so that they lose the ability to manipulate information and manipulate prices. Space, but falsely "segmentation, de-identification" will cause public privacy damage, security concerns and other reasons to sell fear, creating the illusion that the majority of the society is opposed, thus blocking the bill.

In addition, Taipei City also imposed a hoarding tax on the remaining houses of the builders (shortening the sales period), but it ended with the overturn of the council and the concession of the city government soon. The lessons learned from the past are not far away. We suggest that the promotion of the hoarding tax should be “divide and rule, first easy and then difficult”. Empty houses and remaining houses can be dealt with in stages, and vacant houses should be given priority at this stage.

On the other hand, the impact area will be narrowed, and the applicable objects of the hoarding tax in dealing with vacant houses should also be measured. According to the above-mentioned national data on total households, if the target is those with four houses (including above), the affected ratio is only 3.94%; if the standard is revised down to the third house, the affected ratio will increase to 9.65%, although it can be The number of vacant homes covered will be higher, but the rebound will be nearly three times stronger. Based on this, we believe that it is a pragmatic consideration to initially target those who own four houses (including above) as the object of hoarding house tax.

2. Heavy tax on idle, light tax on rental

In order to promote the legitimacy of the hoarding house tax, the purpose of this tax reform should be clarified. The author believes that it is not because of financial needs to increase taxes, nor is it because the rich want to exploit those who have many houses, but to effectively promote the release of vacant houses and convert them to residential use. Based on this, in terms of the specific tax system design, it is suggested that the basic principle should be "Idle taxation is heavy, and rental taxation is light".

Specifically, starting from the fourth house (non-self-occupied), the house tax rate will be significantly increased in a progressive manner. The more houses there are, the higher the tax rate will be; on the other hand, if the house is rented out for residential use, reductions and exemptions can be applied.

This approach has several advantages. First, on the surface, it significantly increases the cost of holding multiple houses, but in fact, it uses tax avoidance as an incentive to convert vacant houses into rentals; second, it does not fall into the technology of "how to identify vacant houses" The controversy is no longer that the government has to prove that the homeowner is vacant, but that the homeowner must submit the rental information certificate that is not vacant; finally, only the homeowner who still insists on being vacant will be subject to a substantial increase in tax, reducing the impact from 3.94% to more. Small.

An example is as follows (the following tax rate is only a hypothetical simulation), if an A holds seven houses, the tax on the fourth and fifth houses will be increased from the current 1.5% to 3.6%, and the sixth and seventh houses will be 4.8%. However, if he is willing to rent out four houses other than his own residence, he will not adopt a progressive tax rate of 1.5%. In addition, if their house is willing to join the government's chartered escrow or rent it out to those who receive rent subsidies (charity lessors), the tax rate for self-occupation is 1.2%.

Excuse me, what do homeowners with more than three bedrooms do in order to avoid a substantial increase in taxes? Just imagine, what will happen when a certain proportion of the 1.62 million houses they have on hand (about 700,000 houses subject to the hoarding tax) enter the rental market?

3. Supporting the reform of the rental income tax system

In view of the fact that the vast majority of individual landlords in Taiwan (accounting for the vast majority of the market supply) hide the fact that rent evasion and evasion make it difficult to develop the black market in the rental market, it is recommended to cooperate with the promotion of the hoarding tax, and we should further consider the reform of the rental income tax system. .

The idea of reform continues the same logic. It is not to increase taxes (which has always been the case for landlords to evade tax), but to cooperate with the hoarding tax to expand the strength of the rental housing market, and let the rental housing market go to the black market, so that landlords can take the initiative. Sign in to rent. It is recommended to use "radish" and "stick" for processing:

The radish is to promote "separate taxation of rental income", decouple it from income tax and adopt a single tax rate, greatly reduce the rental tax of individual small landlords who account for the bulk of the market (especially the integration of other income results in progressive tax rates), and encourage honest declaration.

The stick is that, in conjunction with the aforementioned tax adjustment, a sunset clause is also set for the landlord's rental housing declaration, which clearly stipulates that tax evasion and evasion in the past will not be blamed for the past.

The hoarding tax is an unavoidable part of the housing policy

Finally, it is necessary to make a derivative supplement to the hoarding tax on the issue of the reform route of the housing policy.

The reform of housing issues must be a "three-pronged approach" in the housing market, the rental market, and social housing , all of which are indispensable. Compared with the reform of the housing market and the rental housing market, social housing has the least resistance because it does not directly affect vested interests. It can be used as the first step in the reform. Therefore, since 2010, we have been actively advocating social housing and continue to pay attention to participation. so far.

Therefore, we have affirmed the efforts and achievements of the government in building social housing in recent years, especially during the tenure of President Tsai, which means that the "first step" of Taiwan's housing policy reform has been taken. Undoubtedly, the goal of “200,000 households in eight years” must continue to be promoted. Even if it is achieved, it will only account for 2.2% of the housing stock. In terms of policy implications, it is to build Taiwan’s “living safety net” to allow the purchased houses. Young people and disadvantaged groups excluded from the rental housing market have at least a temporary place to live.

If it is further discussed that social housing plays the role of "market regulation" to promote reasonable prices and quality improvement in the private rental housing market, and effective mitigation will curb the rise in housing prices, it must be accumulated to a certain scale. For example, the average social housing ratio in OECD countries exceeds 10%. , because the gap is far, it is not a meaningful discussion topic at this stage.

Even if the proportion of social housing in the Netherlands and Hong Kong reaches 30%, there are still living problems. For example, the Netherlands has experienced rising housing prices and rents in recent years, and Hong Kong is facing the most serious problem of high housing prices in the world. These experiences remind us that social housing alone is not enough for housing policy! In particular, the mechanisms related to the home buying and renting market in Taiwan are still far from those of foreign countries, such as transparent transaction information, a large number of vacant homes, and a black market for renting homes. Dare to ask, after the first step in social housing, will other reforms be stalled?

This year's 30th anniversary of the Shellless Snail Movement, in all fairness, over the past 30 years, the government has not done nothing to address the housing issue, but it has never faced the drawbacks and avoided system reform. Looking to the future, if you do not want to continue to delay in the next 30 years, there is no doubt that the solution to the problem of vacant houses must be a pivotal piece of the puzzle, and it is also an unavoidable challenge to achieve housing justice.

Are we going to drag on?