Feels like non news. Or at least, a continuation of existing trends.
We don't build enough housing, so housing becomes a good investment, eventually pricing out everyone except existing investors or people with large assets. We' structured the system so that once you're in you're IN. Leverage, 30yr mortgages, tax deductions all continue to subsidize existing homeowners at the expense of everyone else (who are technically a minority).
If this continues, expect to see more and more radical policy proposals by young people.
If you understand the underlying reasons for why an investor would buy an actively depreciating asset, then you understand why OP suggests--correctly in my opinion--that this is a non-story.
We have a housing shortage. As long as it looks like the shortage will continue, investors--people--will buy depreciating assets in the hopes that population growth will cause them to be worth more tomorrow than they are today. If it's not Private Equity, it'll be rental companies. If it's not rental companies, it'll be mom & pop landlords. If it's not mom & pop landlords, it'll be people looking for a second home or pied-a-terre with upside potential. The problem is the perpetual shortage clearly indicating increasing economic rents, instead of a trend toward the cost of production.
This is a housing crisis but most Americans are treating it like a housing whoopsie. We treat it with kid gloves, where we fight about the "correct" way to build just enough housing, in just the right places, instead of pointing a firehouse of development incentives, to the point of literally subsidizing private development and public development.
It's basic economics, but our electorate will tie itself in knots to make the housing crisis fit their niche political narrative.
Besides not enough new inventory in some areas, one major problem is allowing excessive housing hoarding and not taxing it enough to reduce gamification conditions leading to absurd exploitation. It needs much more regulation and increased progressive taxation for people/orgs who monopolize empty houses simply as speculative "investment" financial chicanery.
I agree but there's only a single factor that matters: special treatment of mortgage loans. In tax. Government guarantees, both for owners and for banks. Special interest rates. Repo with government support. The list goes on.
And now you can say "yes, but ending those will cause a crash in house prices, which will hurt a lot of people, a lot of owners", which is true, but anything you do to change house prices will cause that hurt.
In a way you can look at it as the usual problem: governments effectively sold houses, handing out cash to constituents for votes and power, and now they want, maybe even need, them back. They can't pay to get them back. That's what the argument is about. If the government wanted to buy back houses the way everyone else has to play, by paying market price, nobody would be arguing much. Because of how property taxes work, even if governments crash the housing market, say by ending mortgage guarantees, governments will lose a lot of money they have already spent.
And the fundamental problem is not the division of houses, but how many there are. Crashing house prices is only part of the problem. They need to be torn down and rebuilt denser if you want to make any difference. That also needs to be paid for.
>We have a housing shortage. As long as it looks like the shortage will continue, investors--people--will buy depreciating assets in the hopes that population growth will cause them to be worth more tomorrow than they are today
This is the most interesting point. With the current birthrate, what will these homes be worth in 30, 40 years, when depopulation is ongoing? Prices will drop, and so will supply. Look to Japan, deaths of all towns that are not major cities, I expect that to occur in the US
Yes, in 50 years, I hope we as a society respond to the struggles of people then too, instead of nit picking our way to destroying an entire two generations ability to build wealth like we have done here.
This is a very important thing to point out. So often, issues that affect normal people negatively are only afforded a little bit of coverage once in a while. If the trend persists and it is still negatively affecting the citizenship, it deserves to be in the news.
> Of those, mom-and-pop investors, or those who own between 1 and 5 homes, account for 85% of all investor-owned residential properties, while those with between 6 and 10 properties account for another 5%.
They don’t provide any concrete evidence for how they classify “mom and pop” (to be fair i haven't had the time to read the original paper). It’s standard operating procedure to split investment properties between many subsidiaries to limit the financial splash damage. It’s mostly a legal fiction because the property managers are directors of multiple corporations managing dozens of properties, but the courts haven't cracked down on it yet. I’m suspicious of whatever statistics they use to classify investors.
(I’m speaking only of the investors that buy to rent extract, I have no insight into the flippers)
Not when they’re funneled through states like Wyoming and Nevada which an enormous amount of them are… both have very good privacy laws protecting the owners identity. Often times there will be a local LLC which is owned by (at least one) separate out of state LLC in Nevada or Wyoming obfuscating who the true owners are. There’s a whole industry behind this.
It's actually not, because it's a non-issue. The privacy of a Wyoming LLC doesn't mean protection. Your name isn't on any of the public records documents, but a court order can still force the disclosure of the interested parties.
It’s only a non-issue only if you have legal standing and the wherewithal/funding to push through to discovery, which in this case is a really (in)convenient catch-22 if you’re a constituent who wants to institute reform.
The fourth estate, the one that we ostensibly trust to hold power to account, again very conveniently, does not generally have that standing, FOIA excepted.
Not everyone has to be rich to want/need privacy. Maybe you had threats against your life and dont want your house and vehicle to be traceable to your name. Maybe you disagree with the automated license plate reader/tracker and this is one of the only legal ways around that.
Shit even if not something like that, 5 homes in the middle quintile in my city would be around 2.4 million dollars. That's the entire net worth of a middle class family at the end of their earning years, including their house. The only people whose mom and pop have that kind of money to invest are rich folks. It's just as much a problem as the other thing in practical terms.
>You’re not a mom and pop landlord if you’re just buying a second home to move into with intent to sell your current one.
That's my point. The person I'm replying to is being obtuse and sarcastically arguing that the investor criteria requires owning 3+ as an attempt to use absurdity to force people to admit that 2+ makes you an "investor" thereby classifying the people who are simply swapping homes like you stated as "investors".
blindriver: "you must own two homes and then buying a third makes you an investor"
me: "no, that would mean people who own one home to live in and one home to rent out are not investors. Owning one and investing in a second makes you an investor."
You: "you are sarcastically and obtusely arguing that being an investor requires owning 3+ homes!"
No, I'm not arguing that.
> "thereby classifying the people who are simply swapping homes like you stated as "investors""
Nobody was talking about people who own two homes while moving houses. But if we were then the choice is (people who own a second house to rent are not classed as investors just in case they get confused with people moving house) which is wrong permanently and silly, vs (people who own two homes while selling their old home are classed as investors for a while) which is wrong temporarily but not too unreasonable, then I will pick the latter.
That was my mom and pop in the 80s they bought about one house a year. Empty derelict houses purchased from the city for between $1000 and $15,000. The city provided matching grants to fix them up. Also the city paid the rent for the Cambodian and Vietnamese migrants that came here to live. My parents invested the organization and literal sweat equity to fix up these homes.
Intent doesn't matter; you can justify about any horrible behavior imaginable by saying you're looking after your family. I resent the commodification of housing and the destabilizing effects it has across society. Where's the upside?
In my area owning a trailer park home requires being in like the top 1% internationally. Owning 1 home in Oakland may be worse than owning 4 in Detroit, in terms of being an under-hated under-taxed elite.
Who needs more than two? You can only live in one at a time.
Why let the rentier class grow any larger than they already are?
It's not like there is an oversupply of desirable housing. And even if there were an oversupply, the answer isn't to incentivize the rich to get richer.
Yeah, we definitely still need homes to be available for rent.
If you move a lot, or want to be able to move easily and explore different cities or even neighborhoods within a city, renting is way easier than if you'd have to go through the hassle of buying.
What sucks is when private companies start owning too many houses and they have unfair advantages over regular folks. For example, they have teams of lawyers.
I was suggesting that as a way to prevent purchasing homes to resell for more money. I actually meant it as a tax on the profits from a sale of a house.
I completely agree, we need homes for rent at reasonable rates.
But I forgot that a lot of the homes that were purchased for investing were purchased to rent out. A 75% tax on the profits from sale wouldn’t help. If it’s 75% on all profits, including rental income, it’ll destroy the rental market.
I can’t think of a decent answer off the top of my head. My suggestion was glib, but it was meant for the pretty easy case of just flipping.
Trying to control how many houses are purchased versus rented, and how you determine a reasonable rent or prevent that from being abused, is a lot harder.
I think there are a few solutions. Having a property tax that goes higher the more properties you have would be a good one (it could be exempt for bigger apartment blocs if that was an issue)
A few or dozens, but not a large fraction of a city by one entity. The tax should be progressive and aggregate with ultimate holding companies/investors so they can't just gamify limits by creating a bunch of shell and holding companies.
There’s lots wrong with buying up homes for investing so that prices of homes go up and people can’t afford homes. It’s some kind of flawed myopic morality that says there’s nothing wrong with it.
They buy homes for investing with the expectation that prices soon rise, owing to demand and low interest rates, and inelastic supply. If you fix the supply issue then it would be moot.
30% of homes are not sitting empty, cities have a low vacancy rate. Often they rent out and we want low rents too.
He solution is building more or having fewer people on the market for a home through low immigration, and only the former seems politically viable.
A lot of people over the last few decades have invested in electronics and computer manufacturing, and today electronics and computers are cheaper than they have ever been. If we’re going to have a theory about why housing is expensive it’s going to have to be deeper than just the idea that investing in something makes the price go up.
Housing is expensive in large part because of how illiquid supply is. This is in large part because the fixed compliance costs of doing work upon "land near cities" is high. I'm not talking the $50 permit. I'm talking the $50-500k worth of engineering and lawyers and whatnot you need to bulldoze a 1-family and put in an N-family even in a place zoned for it. You typically wind up going rounds with the city at every step just because while you're nominally allowed to do whatever it is you have to bicker over everything like parking and setbacks and whatnot that are nebulously defined for the purpose of allowing the .gov to extract concessions. This is why only big money 5-over N apartments get built. When you have a ton of fixed costs nothing less makes sense.
In every North American city facing rising housing costs, there is a literal ocean of usable, desirable land for housing, already serviced by municipal infrastructure.
And every month, a percentage of that useable and desirable land comes up for sale, meaning it’s previous owner occupiers are voluntarily moving, and a new owner, if they chose, could redeploy the land in a way that provides homes to many more people, while not evicting anyone.
Unfortunately, each of these cities has also made it illegal for this transition to happen, mandating that the only way you’re allowed to build larger buildings, (if at all) is by demolishing another large (and occupied) building first.
In New Zealand the central government tried to weaken the building height restrictions, but some of the local governments have blatantly and illegally stuck to the old rules.
the key word is manufacturing. the article is talking about buying homes, not building them. if all those people would invest into building new homes as opposed to buying existing ones then the comparison would make sense and maybe the price of homes would indeed go down.
Absolutely. I think one of the biggest problems in discourse around housing is this idea that housing “investment” can only ever about buying existing assets.
People aren’t “buying up homes for investing so that prices of homes go up and people can’t afford homes.”
That may be an aggregate and long term effect, but i’ve never seen anyone actually motivated by something like that.
At least not statistically.
People with excess money (often dentists, doctors, middle managers, small business owners, etc), who don’t trust stocks or the banks, are buying houses because they think they can rent them to people for cashflow in the future (aka not have to eat dogfood!), or rent them out now to other people for money. People that otherwise couldn’t be in these houses, or those people would be buying them instead.
Aka put their money to work.
IMO, people doing that right now are going to lose their shirts, but that is risk/reward. I could be wildly wrong.
I am not saying it’s their motivation, but it is the end result. And since that is the end result, it is immoral.
I’m sure every person and corporation has some reason for buying homes in excess, but it’s still wrong because homes and land are limited resources that people need to live.
When everyone gets sick of it and votes for punitive taxes on residential property that is not owner occupied.
I would prefer they deregulate the living shit out of constructing additional housing so all the small money can get into that (i.e. something productive instead of literal rent seeking) instead but I am not hopeful.
This has happened in places like Scotland but I doubt it'll happen in the US. And if it did, courts would strike the law on the grounds "can't take property".
First, states like RI are already making incremental steps toward it (they have started taxing non owner occupied non rented properties above a threshold, mainly to get the billionares with fancy waterfront vacation real estate to either live in the places or rent them out). It's only a matter of moving that stuff down the economic ladder.
Second, all the "people oughta hang for this" quality legal precedent that enables. If you own a parcel and the government passes a bunch of laws saying you can't do things to the parcel going forward without jumping through economic non-starter sized hoops is that not a taking? They're basically forcing you to sell out to a developer big enough to jump through the hoops like in that supreme court case, only instead of a named developer it's basically a class of developers. And that's considered "not a taking". Straight up taxation is even less of a taking by comparison.
I'd be much more in favor of the taxation if it weren't for all the laws preventing small time land owners and speculators from developing on a scale and budget that befits them but if new punitive taxes get passed without rolling back all sorts of other regulation it's probably very bad for them.
At some point the number of vacancies (for renting) causes enough cash flow issues people go bankrupt, or the number of non-investor buyers drops enough that it’s clear it’s just an investor bubble and investment value tanks.
You're completely missing the point of the comment you're replying to, though.
The parent comment suggests that the cost of investing is not high enough. Moreover, they suggest that it should not only be a higher cost, but that this cost should be redistributive.
The proposed cost isn't redistributive, though. The investors aren't running a charity, and there's an inelastic supply, so they'll be passing the cost of all of those taxes on to the renters until they have a comfortable margin again.
You are completely missing the point of my comment though. I am saying it’s immoral to buy property in excess in the first place. So it should be discouraged, disincentivized, or made illegal, yes, and there are plenty of ways to do it, and sure, that is one of them.
As I said in another comment, there may be situations I’m not thinking of where this would be beneficial. For example buying up extremely dilapidated properties and flipping them for much more money after fixing them up.
So I guess I’m a little cautious about just making it flat out illegal. I don’t know enough about the market to know if that would really be a problem.
So I suggested a tax high enough to make it extremely undesirable to do. I figure the net effect will be to stop it.
I don't think you understand who the tax hurts in that case. If investors can pass that tax off to a renter, than this type of policy just hurts renters. It seems similar to rent to control its great if you own a house but you ultimually create a shortage that has a lot more slient unknown victims. The real solution is to just build more housing in places people want it so that renting it becomes insanely cheap because there is a glut of supply. It also drives the cost of houses down but I think that might be for the better despite hurting my bottom line as a single family house owner
The nuance needed is in taxing progressively in relation to how many other properties are owned in aggregate by ultimate shareholders/holding companies and forbidding gamification tricks like putting every house into its own trust.
This is a classic fallacy trotted out every time someone suggests taxing the rich/corporations/landlords more.
"Oh, you can't do that, they'll just pass on the costs to consumers and keep their margins the same! Really, when you raise taxes on the wealthy, the only people you're hurting are the little people!!"
But evidence doesn't bear that out. Real economics are more complex than that, and especially given how things are right now, people can't afford more expensive homes, so trying to pass on additional costs is going to sharply reduce your available market.
I disagree that consider the effects on supply and demand that taxes have is simplification or ignoring real economics is fallacy?
My only point was that its a supply issue not really a tax issue. Houses already have tax on them called property tax its small yes but the reason investors are buying houses is not because the tax is small but because the demand for them is extremely high and the supply is very low. Adding a tax does not in any way fix the demand imbalance. This is why things like price controls only create shortages the problem is that its impossible to build houses because of nimbism.
A Tax doesn't make more houses exist even without investors there isn't enough houses because of local zoning and protesting prevents cheap housing from entering the market. A Tax that does not solve this problem still means that there are to many people buying / renting chasing to few houses.
I agree with you. But let’s just say the comment you’re replying to is correct. They’ll pass it on to their renters.
Ok. Good.
That’s why we have to make it high enough. If you put a 10% tax on them they’ll just raise rents 10% (or more). I agree.
If you put a 75% tax on them, they’ll have to charge so much money that they’ll have a very hard time getting renters at all. Pretty soon that property is useless to an investor, but can be sold to a normal person and work just fine.
—
My suggestion was actually designed for just buying houses in hopes of reselling them. Buying them for rentals had not occurred to me, but I do know that’s a very common thing. It should have.
If the tax is high enough that you can’t make the business case work out, they won’t do it. And since it doesn’t apply to home owners on a primary residence that house is still perfectly good for anyone who would like to live there.
But that's the intended outcome, isn't it? The proposal is to increase supply of housing for sale by decreasing of supply of housing to rent.
The cost of investment increases, so to keep the profits investors increase the rent, less people can afford it so the demand for rent decreases and investors sell houses. The supply of housing increases (I agree this is quite convoluted way to increase housing supply) and prices drop. Top cohort of renters can now afford to buy a house, and the bottom cohort is... fucked?
I was being sarcastic. taxes are rarely a good solution to our ills, because you are enabling tyranny from the gvt. And yes there are places/situations where taxes have exceed 100%.
I suggest that any tax on multiple home purchases should scale, and be different depending on whether or not an individual or a corporation is doing the buying.
If someone’s a billionaire and wants to play around by buying houses? Is that any better than an investment company doing it for the market?
How do you tell the difference between a rich person buying their third vacation home and buying a house they intend to sell for profit in a year or two through speculation?
Of course, on the other side, I’m aware of companies that own some company housing to let their employees use. How do you tell that from investing?
Maybe since they weren’t really doing it to make money they wouldn’t really care that the tax would be high when they sold it if they made a big profit.
It all gets really sticky. No special taxes gains on your primary residence, may be a lower tax (that 75% of what’s er) on a secondary residence.
But pretty quickly if you have that many houses personally you can probably afford to pay a high tax on gains. You’re not really what we want to optimize the market for anyway.
I just guessed at a big number. Maybe it should be 50%. Maybe it should be 90%. I have no idea. It seems like it should be legal, there have got to be cases where it might be useful. Buying and flipping houses from dilapidated neighborhood by turning it into something better.
I’m at the age where I wouldn’t mind a house. But they’re all gigantic, expensive, or both in my area. I have no idea how a normal family is ever supposed to afford one.
"Markets" exist because they are a thing people find useful. If people can't afford shelter and participate in the "market" of leveraging property because they are being pushed out by a soulless outgrowth of "line go up" thinking, then the "market" has failed and needs to be fixed until it is useful for people again.
Sure, but if the price of housing is too high then price controls won't fix it either. You'd end up with no availability, or a decades-long waitlist for rent-controlled apartments like Stockholm.
The issue with housing affordability is that the market is often prevented from responding to high demand and low supply by regulation. SF is very restrictive with permitting housing construction, despite the incredibly high rents. It's not that the market forces are failing to incentivize housing construction, it's that developers are prevented from responding to market demand.
>Sure, but if the price of housing is too high then price controls won't fix it either. You'd end up with no availability
You're assuming a baseline of a functional market system.
If you have widespread price-fixing between landlords (say, via everyone using the same algorithm service that gives everyone the same recommendation) then rent control isn't introducing a price fix, it's just changing the level of price fixing.
If you can only rent for $X000, but the rent price is fixed to at least $X500, then for you, there might as well be no availability - the landlord is leaving the place vacant due to the price-fixing.
The allegations of rent fixing don't look very credible. RealPage had a single-digit market share in SF when that story was making the rounds, nowhere near enough to effectively fix rates. Furthermore, these cities don't have high vacancy rates. And lastly, cities that banned the use of the software and did not see a subsequent drop in rental prices.
This is called a cartel. The trouble with cartels is enforcing it. Cartel members cheat all the time by selling for less than the cartel price in order to get a larger share of the market. The setup is unstable as the incentives are much like the Prisoner's Dilemma.
It's not the fault of private capital firms that local governments have essentially outlawed building new homes in many areas. The solution should be focused on restricting the ability of localities to do this, not restricting the ability of companies to buy real estate.
Yeah I agree with this here. Its simply to hard to build housing and the number permits and zoning restrictions have lead to localized housing shortages where people want to live. Its simply a difficult poltical issue to solve because most of the time zoning is handled at the local level and old people who have houses attend town hall meetings where zoning is discussed (if seldomly ever). Homeowners who have treated housing as a speculative centeralized asset have little to gain in allowing the market fixing itself.
Which doesn't really matter because they don't need to be "protected" in any capacity. Removing their ability to purchase those homes, and letting it get sorted between the people who are "outlawing building homes" and those who want to move there makes more sense.
Deciding who gets to buy what is known as central economic planning. It doesn't have a good track record.
In this case, by restricting who can buy, you're reducing the demand for housing. Less demand means lower prices. Lower prices mean fewer homes will be built, meaning less supply.
A better scheme would be to lower the costs of home construction by reducing regulations and taxes on them.
Markets are powerful tools--perhaps the most powerful tool we have to shape human interactions. But too many people believe in a sort of market gospel ("Supply Side Jesus"); that market forces are as inevitable and inflexible as the force of gravity. In reality, policy choices shape markets and careful market design can deliver politically-favorable outcomes.
Markets work for us, not the other way around. "You shall not crucify mankind upon a cross of gold!"
“Ground rents are a species of revenue which the owner, in many cases, enjoys without any care or attention of his own. Ground rents are, therefore, perhaps a species of revenue which best bear to have a particular tax imposed upon them.”
“As soon as the land of any country has all become private property, the landlords, like all other men, love to reap where they never sowed and demand a rent even for its natural produce.”
“A tax upon ground-rents would not raise the rents of houses. It would fall altogether upon the owner of the ground-rent, who acts always as a monopolist, and exacts the greatest rent which can be got for the use of his ground.”
“The sea in the neighbourhood of the islands of Shetland is more than commonly abundant in fish, which make a great part of the subsistence of the inhabitants. But in order to profit by the produce of the water, they must have a habitation upon the neighbouring land. The rent of the landlord is in proportion, not to what he can make by the land, but to what he can make both by the land and water. It is partly paid in sea-fish.”
Got anything more specific than cliches? For example, do you have any examples of this demonstrably making housing more affordable (ie lowering housing costs as a percentage of income) at scale?
I asked you for examples of market deregulation making housing more affordable at scale. I am not interested in your assertions about how the market works, but empirical data of your proposals leading to improved outcomes. Apparently you don't have any.
Those are the result of a free market. Zoning laws are the results of participants in a free market protecting their investments. Even in the absence of a government (if functioning markets could exist in such an environment) with which to create such laws, people would find other ways to do it. Rent control comes after rents in the free market have already increased to the point where people create political pressure to make these policies (if it's not the result of lobbying by investors).
You could temporarily make the situation better by getting rid of these laws and regulations, but over time they would just come back because in a free market the players that get such policies implemented get richer and win.
So basically remove all regulations and everything will fix itself automatically? This kind of wishful thinking is ludicrous, and it's insane how common it is. Markets have issues that need to be addressed through regulations, unless we want a return to the Gilded Age.
Wealth isn't "distributed" in a free market. People work and invest to get money in exchange.
Consider Jeff Bezos. He was roundly criticized for the profligacy of spending $80 million for his wedding. But look at it another way. He spread the wealth around by paying artisans, workers, craftsmen, photographers, travel agents, hotels, restaurateurs, etc.
Wealth has a distribution in any economy, and the actual distribution is a consequence of the economic system which itself is the aggregate of specific policy decisions.
Those people could have been doing something more useful with their time if Bezos hadn't bought them. Because Bezos has such an obscene amount of wealth, he can outpay any other cause that people would want to pay for. Those craftsmen and workers could have built a farm and a school, but because the people that need those don't have the kind of money Bezos does, they used their time to entertain Bezos and his friends for a couple of days instead.
This is comical. Do you fondle billionaires balls out of sheer loyalty or are you that ideologically captured? Trickle-down economics never worked, do you not know that? Nobody can work hard enough to deserve a billion dollars. This wealth was stolen from actual workers being way undercompensated.
Now, from a higher level of abstraction, would you rather $80M worth of work be done toward inflating balloons and setting tables for some megarich fuck's wedding? Or would you rather they be doing something that's actually improving society? (And maybe is more fulfilling to them).
> Wealth isn't "distributed" in a free market. People work and invest to get money in exchange.
It's trickled up by regulatory capture, cheating the political system, gerrymandering, and grants to ensure the property class pay little or no taxes and get socialism for the rich while suppressing wages, expanding undocumented workers and 13a exception prison slave labor, encouraging austerity, and neoliberalism.
> The Gilded Age was a time of great prosperity in the US.
Oh ok, so you have a totally wrong understanding of history. Neoliberalism's strongest solider, I see.
You do realize that the average American back then was working insanely long hours -when there was work at all- for meager wages, in horrendous conditions? Perhaps that's what you want to do with your life? Not me.
> remove all regulations on rent.
How would removing all regulations on rent improve this situation? You'd just make landlords even more powerful than they already are. What would prevent them from charging as much as they can get away with, ensuring their tenants remain poor forever? They are knowns to collectively price gouge.
If you want cash poor people to compete with cash rich private equity in the housing market without banning PE completely, you need to make it cheaper for cash poor people to borrow money. That too isn’t a particularly radical policy proposal. A lot of countries across the world do it with positive outcomes.
You could go the other direction -increasing the borrowing cost of purchasing a home for investment to ensure that borrowers with less capital can still afford homes in the same market.
As a hypothetical, you could tax their purchase at the same rate at which they're borrowing and use the funds to back loan guarantees for new/lower income purchasers.
The point is to impair the ROI for multi-home purchasers without limiting upside in the market.
NINJA loans were loans for people with no income and no jobs. What I’m proposing is cheaper access to cash for first time homebuyers. You’d still have to be credit worthy.
Yep, pass that, free up a few percentage points of inventory, good wealth transfer to the rest of existing entrenched investor base. They might even come leased!
How about we start with no home-based deductions for corporations. The means depreciation, vacancy, any sort of loss is not tax deductible for a corporation. If a corporation owns 100 homes, it may cost them nothing (or close to nothing) to keep 10 (or more) of those homes vacant, because they can simply deduct the costs from those vacant homes from the massive profits they are reaping on the other 90 and lower their tax burden.
The average person who owns a second home for rental purposes is highly motivated to get that home rented out, even if it means lowering the rent to attract a renter, because it can be financially ruinous to pay for the taxes and an upkeep if it stays empty.
Private equity shouldn't be able to own housing. It should be like new highways and tolls, you get to charge until you make up for your investment, but then people who live there or the government should own it.
Want to keep your toll business? Build more housing.
I have a different take. I feel housing is important enough that the government (i.e., the voters) shouldn't be able to interfere in the market for it, e.g., shouldn't be able to restrict who can buy and who can sell a house or apartment building.
If it's so important, then my take is that the government should step in and make sure it happens and in some orderly way.
Cost cutting in my town for profits that go away just drains the local's pockets. If you want free market rules to apply, then profits going out of the town/city should be taxed harder to promote local businesses and community.
If there are people that cannot afford housing, I would prefer for the government to give those people money rather than interfering with the resource-allocation system on which everyone relies. Prohibiting certain kinds of investors from investing in housing would be an example of interfering.
> Prohibiting certain kinds of investors from investing in housing would be an example of interfering.
Note that I did not propose forbidding investment, just having rules to help make sure final ownership ends in people (who ideally live there and don't own other 10+ homes).
I'm just making sure that investments don't fuel a system where regular people can't own, but only rent forever, paying past the investment and a healthy interest for their lending, planning and doing service.
Why do road and other infrastructure investments can get these limited profit kind of terms for governments, but housing can't get similar ones for the people?
I do a lot of "focus group" style conversations and one theme is "why do people think the economy is so bad for them right now?" A perception that the housing market is unfair comes up a lot, particularly complaints that investors are buying up all the houses.
Ithaca recently got an ordinance to encourage alternative dwelling units (ADU, aka "granny flats") but boy was it a knock-down drag-out because so many people were up in arms about AirBNB conversions and Private Equity getting involved in buying and building properties. As I'm seeing it Ezra Klein's "Abundance" theme is closely linked to Matt Stoller's "antitrust" theme both in the sense that monopolies are one reason "why nothing works" and that anger at them is dominating the public imagination.
the govs of the left shifting countries in EU (Norway, Denmark, Iceland) played an active role in nipping private energy monopolies in the bud. (Where did Spain err in comparison?) Their policies probably would be regarded as communist in the US though. I tend to call it "communitarian" rather than "communist", but I might be too lazy to argue that distinction :(
Abstract
>Traditional corporatist mechanisms in the Nordic countries are increasingly challenged by professionals such as lobbyists, a development that has consequences for the processes and forms of political communication. Populist political parties have increased their media presence and political influence, whereas the news media have lost readers, viewers, listeners, and advertisers.
YC used to be about investing in potential millennialist monopolies like AirBnB/Stripe/Coinbase/sama, though these days they lobby for the small businesses & the small cities (SF) :)
The economist Alan Kohler on Australia's ABC News has a great quote: "For housing to no longer outstrip incomes, it has to become a bad investment."
The "how" of it doesn't matter. Could be changes to taxation, investment rules, foreign buyers, whatever. The point is that no matter what, for housing to stop getting more expensive faster than people's incomes, it has to be a bad investment.
Right now, in Australia, housing is a fantastically good investment, earning ludicrous incomes for people basically doing nothing but sitting on some property. It has created a new social class of the "landed gentry" that can earn income without usefully contributing to the economy.
>The new nobility will not give this up willingly.
It's not just the nobility, it's also the Australian economic system itself. Australia's GDP is built on asset inflation and the housing market - I find numbers between 10% to 25% of Australia's GDP being based on housing.
If the Australian government stops the boomer money train they might crash the GDP, which in turn will negatively affect Australia's borrowing capacity, which will negatively impact (crash?) the economy.
Edit: the obvious solution is to diversify Australia's economy, away from digging holes and building houses. Economists have been shouting this from the roof-tops for years now and I have seen little political will to actually make this happen, the easy-money-train is just too good.
In Australia, I'm a software engineer and don't own property so I'm a peasant but my parents are in the noble class. I'm finding it increasingly difficult to find things to talk about with them because almost everything that happens to me is bad and they can't relate.
So every topic we talk about seems to dissolve into some detailed complaint about how the system is screwing over people and it makes my parents uncomfortable. But then I can't talk about my work since it's too technical (and mind-numbing) for them so I literally have nothing else to talk about since I work all the time. I can't discuss politics because they think everything is fine politically. I picked up some outdoor hobbies so thankfully I have that to talk about; at least until my workload increases and salary drops to the point that I don't have time for hobbies anymore and can't afford to go on holidays.
The class divide is so strong, my life's goal shifted from "become a tech millionaire" to "try to save a deposit for an apartment" to now "just survive 30 years". If I can survive 30 years, I will become noble and I will finally understand what it feels like to be happy.
But because I'm a peasant and constantly stressed with a horrible workaholic lifestyle doing unfulfilling work, I think there's a possibility I'll die before my parents. I try to teach my toddler son about the importance of money. I had my son quite late because I couldn't afford to have a child sooner. Also, because I'm poor, my wife is quite a bit older than me (only noble men can afford younger wife these days). I worry my son won't understand the importance of money so I wrote letters for him in case he ends up inheriting at a young age to explain how money works and how horrible my life has been without money and how corrupt the system is and that real friends cannot exist in this system because people are always trying to get your money or securing their own money and that money is the most important thing. I explain to everyone around me how the government has made it illegal to be homeless and to exist without money, even if you perfect your wilderness survival skills, rangers will literally find you in the forest and arrest you if you refuse to vacate. I already started planning with my wife how we're going to get him married into money when he is older.
My parents always said that it's bad to spoil a child; that you have to be firm with a child; "when you say no, it means no" kind of thing. I couldn't disagree more nowadays. I started teaching my son that if he throws a tantrum bad enough, for long enough, I will give him what he wanted. Because he needs to know what being a jerk pays off and he needs to demand what he wants. Also, I prioritize his confidence above everything else.
You need people who care about you even more than money. I wish I had understood this when I was still young enough to seriously entertain having children.
My experience is; if you get lucky, you might meet someone who will stay with you even without money, but you basically have to live through trauma together, to create that kind of bond. I feel like only extreme traumatic hardship can keep people together when they don't have money.
Some rich people feel jealous of poor people "This guy is dirt poor and yet his wife stayed with him." but they're missing the fact that these two people probably share so much trauma that it's very difficult to relate to anyone else after that. They stay together because they literally lack alternatives; nobody else can possibly understand their pain. Which is the core of their identity. It's not pleasant at all. Also, it's almost impossible to make new friends when you're poor for the same reason. You can't relate to anyone. People get rich for a small number of reasons (it's a unifying experience) but people get poor for a million different reasons which feels like falling through hundreds of different invisible cracks (it's a divisive experience).
Being poor, every time I do something unnecessary like small talk or making a joke, I feel unnatural and fake. At a profound level, I don't understand how it's possible to have friends 'just for fun'. Everything I do must have a path towards money. I feel guilty otherwise. I could have spent this time practicing my coding or writing skills or earning money.
I also believed I needed money and status to make friends. I hated myself, and behaved in ways others found difficult to appreciate or understand. As a result, I often failed and now have far less of these things than people who seem to believe in their own intrinsic value.
It has taken me nearly 20 years to understand why I feel this way. It is painful and unnecessary.
It’s an almost YoY doubling of the Q1 2024 rate (14.8%, 13.1% and 13.8% for 2024, 2023 and 2022) [0], which seems pretty significant. Though, what’s interesting is that the share bought by institutional investor is shrinking per the article.
> If this continues, expect to see more and more radical policy proposals by young people.
The inability of people (specifically ex-soldiers) to acquire land and make a living provided a platform for Julius Caesar to take control of Rome and effectively end the Republic.
Yes, more radical policy proposals are my expectation too.
When the status quo is already extreme (re: property ownership), the appropriate response will seem even MORE extreme because we've gotten used to that opposite one.
Journalists are, on average, shockingly innumerate. Here is Brian Williams (famous anchor) and Mara Gay (NYT Editorial Board member) thinking that $500 million is enough to give all 327 million people in America $1 million: https://www.independent.co.uk/news/world/americas/msnbc-bloo....
Note that this was pre-planned. They had a little graphic overlay prepared for this and everything. Probably a dozen people laid eyes on this and they didn't catch it. If you're a functioning human, your gut-level understanding of the world should have caught this. It would be like reporting that the weather in phoenix this weekend will be 327 degrees F.
It reminds me of my dad's story of watching about the moon landing on TV from Bangladesh. The guy next to him said he didn't believe it, because "how did they break through the dome of the sky?" That's what American reporters are like with statistics and economics.
So what? You're just deflecting attention from this story to a poorly researched one written by someone else. That's like me saying people should ignore anything you say because some other lawyer used ChatGPT in court. Do better.
OP explained why this article displayed a bit of economic ignorance, insofar as the framing is confused about what’s the real story. I’m simply providing broader context.
That is, if I start hallucinating citations it’s fair to compare me to AI!
I think it's as much a social problem as a numbers one. The greatest generation and the silent generation were rich enough to buy up tons of property but mostly didn't. In contrast every thousandaire boomer and gen X is trying to get into the rental game.
So it's possible we get to a point where a minority of the people own enough housing that the rest just vote to say fuck 'em.
The rentier class has tools to prevent such coordinated voting. They divide us with scare tactics on fringe issues, religion, encourage over identifying with things/movements/celebrities, etc.
I'm afraid things would have to fundamentally and undeniably bad to rally enough people to change things. It's amazing how much folks with overlook or rationalize if given an effective distraction, like fear or hate.
>The rentier class has tools to prevent such coordinated voting. They divide us with scare tactics on fringe issues, religion, encourage over identifying with things/movements/celebrities, etc.
The "rentier class" in question here is a bunch of slumlords who own a few apartments as part of an LLC they have with their buddies and boomers who have retired to their vacation home and are AirBnBing their former primary residence, not Blackrock and friends, big money only owns a small fraction of property. The average landlord is some other middle or upper middle class schmuck.
There was already money in preventing it. In a link I posted elsewhere about a hearing, the same people raised nearly $8,000 to try and stop one apartment building from going up in their neighborhood.
Not private equity, not 'tHe ChINesE' (or whichever 'bad' foreigners are currently in vogue), but wealthy local NIMBYs.
The problem isn’t a lack of housing, it’s a lot of breeding. US population has doubled since 1950. It quadrupled since 1900.
As long as people keep having babies in excess of the replacement rate, housing will always be good investment. They don’t make any more land, and the earth is, frankly, full.
Problem is absolutely lack of housing and population growth has nothing to do with it.
Average house size was about 1000 sqft in the 1900 and average household size was 5. This remained relatively the same in 1950 where the average household size was 4. These days, the average size of a house is 2600sqft and household size is 3. We have created a system where we build fewer larger houses. This is because policy (often dictated by people who already own houses) makes it impossible to build small high density housing or even if it is possible to build it, it’s not profitable.
> The problem isn’t a lack of housing, it’s a lot of breeding.
> As long as people keep having babies in excess of the replacement rate
To reiterate, the thread was about "breeding". The birth rate has fallen behind.
You are referring to the overall population growth being due to immigration. This may be true, but is unrelated. Respond to the post about why overpop is driving the housing pricing, not to the factual corrections.
> So immigrants don’t count as people, or have babies?
Births for immigrants are not counted separately. Again, the birth rate is the topic (which includes immigrant births). Granted, all kinds of residents have births outside of hospitals, but that's a tiny minority that is not counted.
This focus on immigrant vs non-immigrant is more noise in the wrong thread.
The trend is clear. The outliers from 2024 onward (which are pretty big outliers) are likely due to data not being curated correctly. The administration would be to blame for that. The US is faring better than most other western nations specifically because of immigration, so the political environment will likely have a negative downward pressure on that benefit.
It may very well also be that the way we're organizing people means they can't live densely and that's why it's full. Regardless it's full enough that there's almost no place for young people in the US economy.
7e specifically said "land". He (?) said that "the earth is full", even though the issue was the US housing supply. Well, the US has plenty of land for houses - even if people can't or won't live densely.
And whether there's a place for young people in the economy is not what's under discussion here.
> Of those, mom-and-pop investors, or those who own between 1 and 5 homes, account for 85% of all investor-owned residential properties
In my social circle, if you are going to buy a new house, you are doing everything you can to keep your current house while purchasing the second. It is the clearest path to retirement from traditional 40hr/week employment for the people around me.
> Institutional investors that own 1,000 or more homes account for only about 2.2% of all investor-owned homes, the firm said.
Talking about these two cohorts in the same article may be problematic as they such vastly different motives, operating procedures, and (please don't light me on fire) different regulations needed.
> In my social circle, if you are going to buy a new house, you are doing everything you can to keep your current house while purchasing the second. It is the clearest path to retirement from traditional 40hr/week employment for the people around me.
That’s fascinating to me. Generally, the homes people buy to live in aren’t optimal investment properties. Why not sell and buy something optimized for return and growth?
> That’s fascinating to me. Generally, the homes people buy to live in aren’t optimal investment properties. Why not sell and buy something optimized for return and growth?
Great question and one I wrestled with until hearing Paula Pant's perspective:
You _really_ know the house you already own. You have a much better understanding of its issues and capital expenses in the next 1-5 years, than a house you are purchasing with an inspection. You know the yard, the neighbors, the city regs, the roof, the plumbing, the weird dog two doors down, and the weirder neighbor three doors down. The mom and pop investor have a much greater risk-of-ruin on a single property than an institutional investor, so this knowledge is extremely valuable.
The second reason is you most likely purchased that house with a non-investment mortgage, so you get priced in a bit to converting to an investment property after the living in it. My non-owner occupied mortgages for my investment properties required 30-35% down and had a much higher interest rate. Converting your existing home avoids all that.
Thirdly, taxes. Selling a house triggers a taxable event and with investment properties will heavily push the seller towards a 1031 exchange to avoid a hefty tax bill that year. A 1031 basically requires you to pick 3 specific properties when your property closes with a requirement to purchase one of those three in the immediate six months or face a capital gains bill is a hard bill to swallow. Depending on the state in the United States, purchasing a new property will also reset your property tax bill, while an existing property can have property taxes well below the current rate based solely on property values when purchased.
That’s really interesting, thanks for the detailed response.
Honestly makes me wish I’d had better advice when we traded up. And I also ignored the “you’re keeping the old house right?” from a few relatively wise friends. Should’ve asked follow-up questions.
That's the first order analysis. It's correct within its assumptions, but it neglects leverage.
But if you bought a place before the pandemic you could lock in a ridiculously low interest rate for 30 years.
Now you have the value of the mortgage (leverage) locked at an interest rate lower than inflation. Let's say rent covers expenses and mortgage. The return on an initial $50k down on a 250k property might be around $10k/year, or 20%.
Tell me, where does one get an investment returning 20% annum?
Real estate is the easiest and safest way to leverage your investment.
It's not all sunshine. Renters suck and expenses come as big ticket items. Also, the first few years suck until inflation eats away at the mortgage payments suck (cash flow)
Land rents are pretty great in the US at least. Landowners get bailed out by taxpayers when times are hard in many instances. Plus laws are generally designed to protect land rents.
That doesn’t change the question though. Why would the house you bought last likely be good for renting out? There are much better properties out there generally for residential cash flow.
But the probable answer is mortgages. If you got a 30 year mortgage for less than 3% you almost certainly want to do anything you can to keep your hands on it. It’s probably the best financial device ever given to the average consumer.
Why wouldn’t it be a good house to rent? It’s usually not tourist rental (airbnb), it’s long term living rental (annual lease). Anyone who doesn’t own has to rent an apartment or house.
Theres also a chunk of people who “don’t believe in debt” so even when they have kids and live in a house they rent until they can pay cash. Or there’s young people who get together in a group of 4 and rent a house to share etc etc.
My understanding of rental properties is that you want to optimize for low costs and low maintenance, low taxes, and maximum rental yield. Those are absolutely not the things I look for in a permanent home. They might happen accidentally, but generally not.
I know a lot of people who have extra property they own to rent. Mostly it’s about diversification and believing that appreciation of the asset will ensure profitability even if the margins from taxes and rents is low.
The U.S. is unique in that it offers fixed-rate 30 year mortgages to basically everyone who can afford the monthly payments. Once you've locked in a 30 year mortgage at a great rate, it's super cheap money - your new goal is to basically hold it until it's completely paid off. Then, the only way you can move is by renting out your old place.
Both investors buying up homes and i-got-mine retirees can be part of the problem. They aren't mutually exclusive. One puts pressure on existing stock and the other ensures there's no new stock.
If you get involved with any of this on the ground, it's not really a 'both' question. It's the NIMBYism. Without that, you build enough for it to become not a very interesting investment and large-scale investors go find something else to put money in.
Cash doesn't really give you much more leverage. A seller really couldn't care less where the money comes from as long as they get paid. Cash will get you a better price in the case where a seller really needs to sell instantly, but that's a rarity. Most of the time the higher offer wins regardless of how the buyer finances it.
When we were buying a house, we made offers on around 30 properties, and about 10 of them lost out to lower dollar value cash offers. In a hot real estate market, nobody wants to deal with any contingencies.
The leverage cash gives you is convenience. A normal buyer will have very specific times they can do the transaction (since they need to almost finish selling their house before they can buy yours). Showing up with cash offers means that the buyer can be done right now.
“Cash offer” just means no financing contingency. I made a cash offer for my place despite financing it with a mortgage; it just meant I couldn’t pull out of the deal if my financing fell through. (We would have had to settle to break the contract.)
I’m having a little trouble squaring the circle of “neighborhoods that are often struggling” and “a cashier's check for $500,000”, but maybe it is a regional US thing.
It is very regional. An older house on 5 acres (2 hectare / 20k square meters) could go for $300k. $500k could get you a really nice house. Picking a random rural area in a random midwest state found this beauty: https://www.landsearch.com/properties/16167-160th-st-letts-i...
The homes investors would look to pick up to flip and sell or rent would go in the $80-120 range in this area, I'd think.
My neighborhood is like this. It's been underresourced and neglected for decades, but is well connected to transit and is adjacent to more prestigious neighborhoods.
The buildings being bought are 2-4 unit apartment rental buildings, and quite old, so 300-500k is typical. Then they're downzoned into single family homes or possibly two condos and resold for about double the price I think.
Obviously the ones using (and then losing) them as rental housing and the ones buying are completely different groups.
Lots of banks now offer “cash equivalent” mortgages. You do more to pre qualify and the bank locks you in with some contracts but then you can make a cash equivalent offer that has no mortgage contingency which can close just as fast as an all cash offer.
I hate to pass judgement on the individuals who work in industries. We have families and retirements to secure.
But to me, this kind of corporate, large scale buy-out of residential property is immoral and dangerous to our society.
They tell themselves they're increasing liquidity in the market or that they're helping people who can't afford to buy, have a place to rent.
It's just excuses for taking advantage of a situation, and I wish what your friend did was against the law (or else regulated into oblivion) so regular people could afford a home in cities.
Land prices rise with income but housing constraints mean each family needs more land. Just look at the rental market in austin collapsing 20% while incomes continue to rise to empirically falsify your working paper.
I don't think you understand LVT based on this "not to mention the political debates/decisions over what constitutes "fully utilized"."
LVT doesn't require any such determination.
Anyway, I'm not opposed to the solution you mention as well. We should subsidize supply of housing, and supply at any price will serve the same purpose of driving prices down, so yes I agree we should build public housing for higher price points.
i no longer buy the YIMBY argument as the sole reason we have a housing crisis. it's a very convenient narrative if you work in/around real estate and a lot of smart people have been duped by it. we had no problem in the past building housing with current regulations: https://fred.stlouisfed.org/series/HOUST
to be clear, regulations is part of the problem in some markets but not everywhere. how are local regulations causing a housing crisis everywhere? this problem is happening everywhere, and local municipalities across the country didn't coordinate to cause this.
they stopped building after GFC bc it was too risky. market dynamics, the profit incentive, and now the cost for labor + material + borrowing costs is the problem.
Public housing is very good, but I want to encourage a mindset shift. There are many plausible housing policies, and they are not in competition with each other. We should have public housing and we should follow the neoliberal abundance agenda and we should implement a LVT and we should do many other things. None of these policies somehow makes it difficult to implement the others. There's no tension. If anything they work in harmony. A LVT can be used to fund public housing, and neoliberal deregulations will also assist in making public housing cheaper for the taxpayer in terms of land use efficiency. If we care about housing, we need to get over these factional battles that only serve the landowning class.
If loads of housing is built and the price of housing starts dropping, firms won't want to invest in housing because they'll lose money. Unfortunately, a lot of politically active home owners also want to keep the price of housing from dropping so this is a harder thing for local governments to put into practice.
Same reason anything else keeps getting built when the price drops. Builders are not investors. As the price drops the cost of acquiring new land to build on also drops. As long as a builder has a margin between land + construction cost, they will build.
A huge part of the cost of building a house right now is the excessive regulation. By deregulating we will be able to build houses for less money and so builders will be able to sell them for less money. In addition apartments and especially larger apartment buildings are straight up illegal in many areas even though demand is high. Legalizing these units which are much cheaper than SFHs would allow all housing prices to decrease as some of the people competing for SFHs instead buy a condo.
Because if you get zoning out of the way, we can keep building, and keep building, and keep building.
Let them keep buying. But if we build enough, they won't be able to rent it all out. Are they going to keep buying to control the rent-able supply forever? No, they'll run out of money before we run out of buildable land. (Maybe not before we run out of wood, shingles, and labor though...)
And then you're left with huge ghost towns, like that one place in Seattle. This seems like a terrible solution, although it might work. And let's not even talk about the environmental impact, it seems to be a taboo nowadays.
Why not just prevent private companies from buying homes they don't use, and force them to sell the ones they are currently holding?
Right, ghost towns owned by private equity. So I'm not crying. I agree about the environmental impact, though.
"Prevent private companies from buying homes they don't use" is going to be a really hard sell legally. (Though, to be fair, changing zoning laws seems also to be a really hard sell...)
You're fixated on price. Look at rent instead. Private equity cannot create new tenants. The number of tenants is fixed. That's why rental inflation is significantly better in Texas compared to California. Private equity is not a relevant variable here.
It's not even a long article, but why are so many of the comments ignoring the end of it? "Indications are that institutional investors are scaling back home sales." from the article would seem to contradict a large number of the comments.
--
"Of those, mom-and-pop investors, or those who own between 1 and 5 homes, account for 85% of all investor-owned residential properties, while those with between 6 and 10 properties account for another 5%.
Institutional investors that own 1,000 or more homes account for only about 2.2% of all investor-owned homes, the firm said.
And that number could get smaller, amid signs that large institutional investors are scaling back home purchases.
Out of a group of eight of the biggest companies that own and lease single-family houses, including Invitation Homes and American Homes 4 Rent, six sold more homes in the second quarter than they bought, according to data from Parcl Labs."
Yea really weird. 1 home usually doesn’t even mean you are an investor: you just own one home and live in it. And then 5 homes? That’s not what anyone would think of as “mom and pop.” That’s a very large real estate investment business.
I’d just ignore people with one home because they are not investors. Have one “mom and pop” bucket for people with 2 homes, one rented out, and then another bucket for businesses with 3+ homes, 2+ rented out.
If investors are buying homes to rent them out, then is this really a bad thing?
I know a lot of people who have struggled to find homes to rent when they need to move to a new city with a family for a shorter-term job like a year or two. All the homes available are for sale, none are to rent.
If it's to rent, it's not taking any living space off the market.
And with elevated mortgage rates, it could be smart for people to rent now rather than buy, waiting to buy until interest rates come down.
Ideally you want a reasonable balance. And the prices low enough that paying off a mortgage is not too far away from paying the rent. But if 27% is pure corporate investment pushing up the prices - yes, it's bad.
> But if 27% is pure corporate investment pushing up the prices - yes, it's bad.
But it's not "pure corporate". Quite the opposite. From the article:
> mom-and-pop investors, or those who own between 1 and 5 homes, account for 85% of all investor-owned residential properties, while those with between 6 and 10 properties account for another 5%.
I really don't see anything wrong with mom and pop buying a second or third home to rent out for extra income.
And I don't see anything inherently wrong with 27% either. If there aren't enough rental homes, then an increase in the share of investors is exactly what you need to achieve the "reasonable balance" you're talking about. And then there's nothing bad about it -- it's exactly what's best.
Having investment money inherently raises the price of rentals. There is a gap between how much the renters could conceivably pay and the minimum for which the house could be built and maintained. The actual price will be somewhere between the two. But if they are competing against investors, putting more money into the demand side, the price that renters actually pay is pushed towards their potential limit.
That is not what's best; it just concentrates more money in the hands of the investors.
> There is a gap between how much the renters could conceivably pay and the minimum for which the house could be built and maintained. The actual price will be somewhere between the two.
No, not necessarily. If there's enough competition for renters, then the homeowner may have to rent at a loss. Renting at a loss is still preferable to no collecting rent at all. Getting $90 on a $100 investment is bad, but better than getting $0 on a $100 investment.
> Having investment money inherently raises the price of rentals.
It's literally the opposite. More rental properties means more rental supply which means lower rental prices.
> But if they are competing against investors, putting more money into the demand side, the price that renters actually pay is pushed towards their potential limit.
2. Keeping houses off market and renting them for a profit is a bad thing as it is harvesting the money the renters could be putting to the side to buy a house AND hikes the price of houses, making it even harder for renters to become owners.
Can't your friend buy and then sell when they are ready to move?
1. I mean, investors invest to make money. You make money by renting. Otherwise you're just throwing money away, which isn't what investors like to do.
2. In general, rent payments are less than mortgage payments for the same property (though this can vary in specific cases due to a number of factors). So the point is the renters get to save more money than they would with a mortgage.
And the problem with buying and selling is the realtor fee on both ends. You can't buy and sell a house every year or two. You'd go broke real quick.
> In general, rent payments are less than mortgage payments for the same property (though this can vary in specific cases due to a number of factors).
This didn't seem true to me - Anecdotally, my friends pay more in rent for apartments than I do for my mortgage on a single-family home in my area.
Then I googled it, and turns out my city is one of the top five US cities with the highest ratio of renting vs owning cost, and indeed a place where it costs nearly twice as much to rent as it does to own.
> and indeed a place where it costs nearly twice as much to rent as it does to own.
Which is exactly where the supply and demand is out of whack. But fortunately, the more people buy places to rent out, the cheaper it becomes to rent.
The renters in your area would love if investors bought a ton of properties and rented them out, increasing supply and therefore bringing down rates! And if rents are really 2x mortgage payments, then there should be tons of people lining up to do so, since it's basically just free money lying around. The invisible hand and everything.
It is mental gymnastics to say that renters are saving by renting.
And about realtor fees, that sure would affect my decision to move or not. Or to rent an appartment/condo, which is almost always possible, especially in urban centers.
1. Not really? You make money by renting until you sell. What other things are you talking about?
2. And lots of homeowners are cost-burdened too. What's your point? The US is an expensive place for everything. Mortgage rates are crazy expensive now too.
It's not mental gymnastics to say you can save by renting. There are lots of online calculators where you can see the places in the US where it's cheaper to rent than to buy.
And sometimes you have to move for a job, period. And families don't always want to rent an apartment, they want to rent a house with a backyard, you know?
1. So investments can be in other sectors than housing, I've heard. I'm sure you can look it up. Or you're welcome to lecture me too.
2. If a homeowner has more than one property, why not sell one of the properties when you become cost burdened? Also, I think at some point you stop paying a mortgage, right? I don't think that's the case with renting.Oh and it's a neat financial tool too, a mortgage.
So yeah renters would be better off owning, other than in some niche situations.
I don't understand what brings people to move for jobs if the salary doesn't make housing trivial for them. You're saying people on a 50k salary will move cities rather than change jobs?
Edit0: and that link I sent earlier that you probably didn't open shows that renters on average pay 30% of income on housing, while owners with mortgages paid 20% and 10% without a mortgage. Renters are the in the absolute worst situation however you want to cut it.
The subject here is property investors. You seemed to be claiming that they would buy a property and not rent it. So I don't know what "other sectors" has to do with anything?
And no, renters are not better off owning, except in "niche situations". I genuinely don't know where you've gotten that idea. It depends highly on your local market, but on average renting is cheaper than owning, and it frees up a lot of money that can be invested more productively.
You seem to have some kind of prejudice against renting, which I genuinely don't understand. And your concept that the cost of housing ought to be "trivial" for people to move is incredibly unsympathetic. An assistant professor will move for a better chance of getting tenure. For a fellowship. For whatever. A lot of people can't just "change jobs". They have training for a specific niche, and often advancing their career requires moving to a different city, full stop.
1. I've heard of buying properties and developping them to resell at a profit. I believe there has also been firms that held off properties to raise prices, weren't there?
Edit0: actually, your point was about "buying properties to rent", but you're talking about the avg investor "renting until they sell". I can see a massive distinction, as some properties are rentals their whole lifetimes, and some are only in parts while trying to sell them. But you seem to propose that all investors are waiting to sell and "bought to rent"?
2.You can write things and those things not be factual y'know? You can just say that renting is the best choice for most, while I've provided you evidence yo the contrary, whoch you lovingly ingored twice now. Census.gov is very biased, I know.
I've rented every single day of my adult life, it's not something I'm prejudiced against, whatever you might think that means.
It is crystal clear to me and anyone I know who rents: renting is more expensive than owning, and owning a dwelling is a life goal for most people.
I really don't understand your position - other than trying to justify your own investments to yourself.
That's too bad for them. As a plant worker in manufacturing, I wish them to find everything that makes them happy - and recommend getting a union job.
Edit1: What's the line again? You will own nothing and be happy?
I honestly don't know what you're talking about anymore. I'm saying that investors don't hold homes empty for no reason. They rent them out whenever possible to make money.
And when you say "It is crystal clear to me and anyone I know who rents: renting is more expensive than owning", your crystal clarity is wrong, sorry. I haven't responded to your census.gov link because it's irrelevant. You can be "cost-burdened" renting even while renting is cheaper than a monthly mortgage would be. The link doesn't have anything to do with the discussion here. But if you don't want to google it, here are literally the first two links I got when searching for whether it's cheaper to rent or buy:
> On average, renting a home is cheaper than paying a mortgage in all 50 of the largest U.S. metros in 2025 — with the cost difference between the two growing in 38 metros since last year.
Hope that helps you understand not "my position" but just the facts. And I truly can't imagine why you'd tell someone seeking tenure to get a union job instead. I don't see how that could come across as anything but insulting, to tell them they should pick a job more like yours.
I've not had a job where I moved for the salary/advantages, but I imagine I would only do so if the conpensation made it so that 12% fee seemed negligeable.
I get the feeling this kind of activity is misunderstood and perceived as repugnant because, unlike most investment options, this one is actively creating haves and have-nots.
Most other investments are fractional, meaning there's a pool of the same asset available to many investors and your purchase doesn't necessarily limit their opportunity. But when you're "investing" in your first home, it's not a decision between safe or unsafe investments, debt or equity (or crypto) - it's a combination of needs and wants. And oftentimes you're in direct competition with someone who wants to make the same investment.
In this case, losers are forced to reallocate more of their income to cover rents and winners are alleviated of that same burden. When the winner is an investor with multiple homes, mom & pop or not, they are claiming the same rents that burden those who have lost their chances to invest because of competition.
Personally, I think people need to start thinking on moral terms when they look to invest their money into rental homes. I've never seen somebody who owns multiple homes actually put any sweat into their equity. At least, none of their own sweat. And rental properties are almost never maintained - they slowly slide into oblivion because every decision is a cash flow decision. When you own the home, the decision to maintain the property reflects personal and social influences, not just long-term returns.
Financially, the only disincentive to owning a second home is that the home mortgage interest doesn’t apply but I’m not sure what the disincentive ought to be.
Also, mom and pops owners shouldn’t get a free pass here, as the quality of life plummets with renters.
Someone should do a startup that focuses on designing a sort of RV that can be mass produced, for millenials, genZ, and so on. Maybe they could be modular, link them up for communal living, that sort of thing.
Climate change isn’t going to be stopped. Don’t get tied to some dirt that’ll be inhospitable before too long. And houses are generally full of obsolete crap anyway, like bad electric wiring, rooms without ethernet, and big empty rooms that need to be inefficiently climate controlled.
Tech folks should really lead the way on this. If you are remote and have a high wage, why don’t you live in some futuristic RV off in some idyllic countryside?
This is pretty naive. RVs are almost as infamous as boats are as giant pits for burning money. They are perpetual maintenance hell in a way that houses rarely are.
Fully agreed, there is a major opportunity with younger people but it would still take cultural shift, rather than just technological change. Someone, maybe a popular influencer(s), would sell it (ideologically) the best, rather than traditional marketing.
~6 months (in an RV, not a more hospitable mobile home). I’ve had worse apartments. Not through winter, though. Millions of people have more experience than me (I’m sure) but a couple days is a pretty low bar.
I’d definitely say it wasn’t ideal, the waste situation was certainly not great without a septic tank hook-up! But it is a something that can be iterated on. NIMBYs, on the other hand, there just isn’t any traction there at all.
I'm sure there's an order of magnitude difference between living in an RV for a few days _knowing_ it's temporary (or at least hoping it is), vs living in one knowing it's permanent. You make completely different choices and take on a different mentality.
It's like all the UBI tests. It's not meaningful if the participants know the UBI will stop after a certain period.
> ... investor-owned homes account for roughly 20% of the nation's 86 million single-family homes, the firm said.
> Of those, mom-and-pop investors, or those who own between 1 and 5 homes, account for 85% of all investor-owned residential properties, while those with between 6 and 10 properties account for another 5%.
> Institutional investors that own 1,000 or more homes account for only about 2.2% of all investor-owned homes, the firm said.
> ...
> Out of a group of eight of the biggest companies that own and lease single-family houses, including Invitation Homes and American Homes 4 Rent, six sold more homes in the second quarter than they bought ...
SO - how many of those mom-and-pop investors are mostly buying homes as investments? Vs. how many are building a well-to-do lifestyle, with a "cabin on the lake up north", and "winter condo in Florida"? (Or buying homes for their less-well-to-do children, maybe with some inheritance tax dodges baked in?)
EDIT: The issue with "investor" is here:
> Nearly 27% of all homes sold in the first three months of the year were bought by investors -- the highest share in at least five years, according to a report by real estate data provider BatchData.
How much does BatchData actually know about the finances and lifestyles of the "mom-and-pop" buyers which it has labeled as "investors"? (Vs. "developers", or "fixer-uppers", or multi-home lifestylers, vs. ...)
First off, this is only for homes sold in the first 3 months which based on the extremely limited data I've looked at[1] seems to meaningfully below the total number of homes sold. With that said, this is still way more than I expected, I probably would have guessed closer to 2.7% than 27%.
Edit: Oh nevermind, they included individuals owning 1-99 houses buying rental properties as investors making institutional investors more like 2.2% (of the 27%) much more in line with what I would have guessed.
Because it’s not free market capitalism. Zoning, NIMBYs, over regulation etc. all together ensure supply demand economics don’t work the way they should.
What percentage of people live in a rental? All rentals were at some point bought by investors. Unless they’re a much smaller volume of total sales (held longer?) then it seems ok even though the number sounds alarming
> For other readers: greenie_beans does not understand what LVT is, how it works
Personal attacks and shaming like this are unacceptable and it set off a hellish flamewar that you perpetuated. Please don't do this again. If you wouldn't mind reviewing https://news.ycombinator.com/newsguidelines.html and taking the intended spirit of the site more to heart, we'd be grateful.
i'm very well aware. i'm just responding to what i was given. condescend to me without contending with my ideas then i'll roast. "good hackers break rules" - paul graham, probably
PG built HN in the hope of creating something that could avoid being dragged down by terrible flamewars like this.
We frequently remind people that it's not acceptable to comment in this style, no matter what you're replying to. If we want others to be better we have to hold ourselves to a high standard too. Please read the guidelines and make an effort to observe them in future.
thank you for reminding me. it's hard not to get drawn in. defending personal attacks like this is an urge i have to resist often and i failed. years of therapy and you can still fall into old behavioral patterns. thank you for being a good moderator.
No, what prompted me to say you don't understand LVT was the suggestion there needs to be some determination of what the "highest use" is.
Yes, if you hold land in a place where a lot of people around you (and/or the state) is investing in economic development, your carrying cost will increase and the ultimate goal is for you not to be able to extract uncapped gains from the appreciation that people around you are generating.
> you will raise taxes on their now-high value urban SFH because they aren't producing anything (aka "fully utilized")
This is the type of statement that makes me suspect again you do not understand LVT. You don't raise taxes because they aren't producing anything. The tax goes up as the value of the land goes up as already occurs with property taxes. The only difference is that if you decide to build a second house on your property, your taxes would not go up under LVT, whereas under the current property tax regime, it would go up dramatically. This has the net effect of incentivizing people to fully utilize their land, but does not require any determination of their utilization nor does it "raise taxes" on them for failing to utilize.
> like you said, it's a neutral shift. if the cost of the property goes down because of a higher tax, then it's a neutral shift
This is not what's described by "neutral." It's neutral because right now your property tax is already both an LVT and a tax on the improvements. LVT would increase the LVT component and decrease the improvement component.
If the introduction of LVT reduces the value of a property, then it would accordingly reduce the carrying cost of that property. Your two variables are mutually exclusive under a revenue-neutral scheme.
you're contradicting yourself. you say it's "revenue neutral" but then admit people in areas with rising land values face higher carrying costs. that's exactly the displacement i'm describing.
your clarification on mechanics doesn't address my core concern: this policy forces people who bought affordable homes decades ago to either pay significantly more or sell when their neighborhoods gentrify. who benefits when they're forced to sell? developers who can afford both the LVT and development costs.
so we're transferring wealth from middle-class homeowners to wealthy developers and calling it progressive policy.
frame this as preventing "uncapped gains from appreciation," but these are people who just needed housing, not speculators. meanwhile, actual investors get to buy the forced sales.
you still haven't addressed how LVT solves the actual constraint. in my market, a major developer cancelled a project because of constructions cost. not land value. if land availability isn't the bottleneck, how does your policy help? construction costs are the real issue in most markets.
this remains a policy that sounds elegant in theory but would be politically impossible and harmful in practice.
"Revenue neutral" at time of implementation. It's not a bunch of people being jolted out of their houses by the policy.
> this policy forces people who bought affordable homes decades ago to either pay significantly more or sell when their neighborhoods gentrify.
Correct. The alternative is that these people freeze a region in time while prices continue to skyrocket due to the increasingly Sisyphean efforts of those around them to grow the local economy.
> who benefits when they're forced to sell? developers who can afford both the LVT and development costs.
All of the people who are moving into an area and developing its economy further? Yes, developers get a cut for the work that they do of developing the area to meet the new demands on it. What's wrong with that exactly?
> you still haven't addressed how LVT solves the actual constraint
Yes I have. LVT makes it cost-prohibitive not to develop land to its highest use. In a hot real estate market, highest use will be to build more units. It has nothing to do with land availability.
It is not a roast. I am describing why you are confused about what's going on here, which is that you lack basic background knowledge but are too headstrong to be curious about it.
Maybe you shouldn't take commentary like "you don't understand basic tenets of this idea" and "you don't understand the basic set of stakeholders in this ecosystem" as personal insults, and instead a helpful note that there's more to learn if you wish to form informed opinions about a topic.
Landlords and developers have distinct and often diametrically opposed incentives, so it's quite alarming (and should be alarming to you!) that you do not know the difference between them.
"Mom-and-pop investors, or those who own between 1 and 5 homes, account for 85% of all investor-owned residential properties, while those with between 6 and 10 properties account for another 5%
Institutional investors that own 1,000 or more homes account for only about 2.2% of all investor-owned homes, the firm said.
And that number could get smaller, amid signs that large institutional investors are scaling back home purchases.
Out of a group of eight of the biggest companies that own and lease single-family houses, including Invitation Homes and American Homes 4 Rent, six sold more homes in the second quarter than they bought, according to data from Parcl Labs."
Exactly why would single family homes receive this odd policy preference? Is the only reason that you couldn't do it at all with multifamily housing (the vast, overwhelming majority of which aren't co-ops, themselves corporations but not the kind you mean)? In which case all you're really doing here is flailing?
Meritocracy looks a bit different when individuals standing alone are expected to go toe to toe with multi-industry corporate conglomerates and their franchisees.
Don't more than 27% of Americans rent rather than own the housing they live in? It appears 36% rent. Doesn't this mean that the share of owner-occupied housing is going down, not up as the headline implies and readers are assuming?
You can’t extrapolate anything about owner occupancy rate broadly from this stat because it’s about who _bought_ in a short period.
If 28% of sellers that quarter were investors then the owner occupancy rate went up.
Now I suspect that’s not the case but if you look at home ownership rates for non-investors they stay in a very tight couple of % points in the mid 60s and they track interest rates. This has been true since the US started making home ownership a governmental priority post ww2.
Prior to that it was in the 40s for as far back as I could find any data.
I would expect investors to sell houses quicker than owner occupiers. Yes, some investors hold for a while, but there are enough that flip homes within months that I expect their average to be fairly low.
I can't vouch for what readers are assuming, but the headline is intended to say that more people are renting because more homes are going to institutions who don't occupy them.
The implication is that this drives up the price for renters, because the demand side includes not just money from people seeking a place to live, but much larger amounts of money from other markets.
If those homes had been purchased by an owner occupiers, then there would be that many fewer homes for rent, causing rent to go up.
The implication of these article is always that investors are somehow unfairly competing against homeowners. But there is only one fixed pool of people competing for housing - something that reduces supply for buyers is increasing it for tenants and vice versa.
I don't know how it works, but if a renter becomes an owner (i e. A home is purchased by and owner occupier) there is one less renter and one less house available, remaining in balance and prices shouldn't move?
There's a fixed pool of ppl who need housing (aka the entire population of the country) and a relatively fixed pool of interior floorspace to divvy up among them.
Whether each person chooses to/prefers to/is forced to rent or buy is not the driving force behind rent and price changes
Rents & prices are moving because the amount of floorspace that exists (in places people want to live) is much lower than the aggregate amt of floorspace people would like there to be. Each month, everyone who needs to buy/sell/rent is forced to play a game of musical chairs. If you don't have a lot of $, you are going to be one of the people w/no chair, and be forced to leave.
In any normal market this would trigger vast increases of floorspace (or chair) manufacturing, but in the anglosphere we have convinced ourselves that there is only one true way to live - in a square box with a triangle on top - and we forbid almost every other form on most land, making it extremely difficult to increase the # of chairs.
If 27% of new homes are purchased by investors and 36% of old homes are owned by investors, then math says that this lowers the percentage of homes owned by investors. (27% * x + 36% * y) / (x + y) -> a number between 27 and 36.
It's only a 5-year high. Do they not have data before 2020? I need data over a much longer timeframe than 5 years to determine how interesting the 27% number is.
27% of homes sold, not 27% of US homes. The title is completely misleading.
Not a shocker, given high interest rates usually drive down prices, and investors are not getting mortgages. Great investment to keep value, not so much for growth.
The phrasing was clear to me on first read. I don’t think anyone would assume 27% of all homes are for sale in one 3 month period since that would imply every home is sold, on average, once per year.
If you own enough homes in a rental market, you can determine the market rate. An empty house has value simply by depleting local housing stock, since it is giving you greater leverage to drive market rate up.
Of course its less value than actually having it rented, but its still value. Tax code will also allow for softening the loss.
> If you own enough homes in a rental market, you can determine the market rate.
Only if the government has managed to prevent new construction.
Consider this: You aim to buy all 100 units, and then you can charge whatever rent you like, right? What happens is sellers discover you are doing this, and then raise their asking prices through the roof. The result is it costs you so much to get that monopoly that you cannot hope to be able to rent at a profit. Especially if it is possible to create new units for the purpose of selling at a high price to you. And it is possible, unless the government prevents new construction.
You cannot attain a monopoly unless there are major barriers to entry. In this case, it is government zoning that prevents new construction. In California, anyone can sue to block any new housing construction, bringing the construction market to a standstill and hence the highest home prices in the nation.
>Consider this: You aim to buy all 100 units, and then you can charge whatever rent you like, right? What happens is sellers discover you are doing this, and then raise their asking prices through the roof. The result is it costs you so much to get that monopoly that you cannot hope to be able to rent at a profit. Especially if it is possible to create new units for the purpose of selling at a high price to you. And it is possible, unless the government prevents new construction.
This doesn't matter to you as a buyer when the money you're spending is either borrowed, being printed out of thin air, or both.
Depends on your definition of value. There are many investments structured in a way that mere ownership, as long as comps go up in the local market, will cause increases in value.
Don’t look down.
It’s also why the current admin seems really intent on bullying Powell into decreasing the fed rate - Trump and many of his friends are very exposed to real estate.
If rents are not allowed to rise, the landlord risks locking in a low rent for the indeterminate future. It's a better play to leave it vacant until the rents rise.
We don't build enough housing, so housing becomes a good investment, eventually pricing out everyone except existing investors or people with large assets. We' structured the system so that once you're in you're IN. Leverage, 30yr mortgages, tax deductions all continue to subsidize existing homeowners at the expense of everyone else (who are technically a minority).
If this continues, expect to see more and more radical policy proposals by young people.