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.
For example: rent control
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.
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.
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.
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.
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.
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!"
I didn't say that. I said "rent control". And yes, remove all regulations on rent.
> unless we want a return to the Gilded Age
The Gilded Age was a time of great prosperity in the US.
In aggregate, sure. (At least compared to times prior.)
How the prosperity was distributed, OTOH...
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.
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.
“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.”
Karl MArx? No, Adam Smith.
Just pay a 75% tax when you do.
If you can find places to make money with those taxes, have at it.
But you’ll stop messing with normal people’s attempts to buy a house for the most part.
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 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.
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.
And unlike Boomers, corporations can live forever. Permanently raising the ladder.
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 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.
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.
Electronics are made in a factory. Houses are expensive because land near cities and work is scarce.
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.
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.
"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.
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.
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?
Make it 100.
I’m not in the real estate industry so I’m sure there’s things I don’t know about.
So I picked a really big number to dissuade it, but left open the possibility.
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.
“I own one home, and am buying a house”
“That makes you an investor”
“No that’s whack. When I buy a third - buying while owning two - then I will be an investor”
You have an off-by-one error.
Owning one home and buying another with intent to liquidate the first one is not "investing" since the asset is still illiquid and you still only own the one you live in when it's all said and done. Appreciation and whatnot are all secondary to the function of being a residence.
Purchasing stuff you won't personally use with intent to use said stuff to make income is, whether it's a house or something else.
Whether you arrange the sentences to make it look like that happens at 1 or 2 doesn't matter.
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.
(I’m speaking only of the investors that buy to rent extract, I have no insight into the flippers)
Why should that be a thing? More cheesy obfuscation games to protect some random a-hole?
These rich who don’t want to be on the hook for other’s healthcare sure make a lot of demands of everyone else.
Covid just taught us we can stand to shed a few million and be fine. Purge the rich.
If no one else is on the hook for my life story fuck theirs.
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.
- a well off family who buys a 2nd home to make sure their kids are set
- a group of well off investors who pool funds, buys a 2nd home, with intention to "flip" it in the next 1-2 years and make 10%
Both are "investors", but I'd like to think the 1st are trying to build a better future, whereas the 2nd are just arbitraging.
Like what are you going to do with your 5th home???
Are PE firms worse landlords than mom-and-pop landlords?
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.
Want to keep your toll business? Build more housing.
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.
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.
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 a housing crisis but most Americans are treating it like a housing whoopsie. One in which we ought to fight about the best way to build more housing 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.
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.
> 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.
The birth rate for immigrants in america is still quite positive, and has more than offset the low birth rate from ‘non-immigrants’.
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.
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.
[0] https://www.realtor.com/news/trends/real-estate-investors-re...
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.
It’s a bad cycle as lobbying spending will convince harder than people not being able to afford homes.
Not private equity, not 'tHe ChINesE' (or whichever 'bad' foreigners are currently in vogue), but wealthy local NIMBYs.
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.
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.
The rocket had a sharp point on the top.
That is, if I start hallucinating citations it’s fair to compare me to AI!
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.
I need to look up Alan Kohler
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.
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.
It has taken me nearly 20 years to understand why I feel this way. It is painful and unnecessary.
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.
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.
From the article:
> Of those, mom-and-pop investors, or those who own between 1 and 5 homes, account for 85%
Mid sized and large real estate investors make of most of the rest. PE firms account for 0.5-2% of the market.
*edit anyone downvoting this should make an effort to refute what I’m saying with some facts.
> 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. ...)
I don't think we can tell.
*inner Minnesotan twitching*
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.
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.
That is not what's best; it just concentrates more money in the hands of the investors.
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.
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?
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.
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.
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.
2.Nearly half of renters in the USA are cost burdened (https://www.census.gov/newsroom/press-releases/2024/renter-h...).
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.
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?
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.
They can, but because of realtors these 2 transactions will end up costing 12% of the cost of the house.
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.
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.
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.
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 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.
When houses become an investment, that's when you start screwing young people! And it stops being an asset if you just simply build more
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...)
Downvote all you want, but math is math.
Land prices rise with income. Through all places in all points of history.
The solution is a land value tax.
land value is only a small part of housing costs.
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.
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.
this is a better solution: https://www.npr.org/2024/10/07/nx-s1-5119633/housing-crisis-...
> this is a better solution
His company goes into neighborhoods that are often struggling, buy houses for cash, gut them, then rent them.
They have a lot of buying leverage, because there's no mortgage to deal with. They just slap down the cash.
That's one way that higher interest rates cause problems. It's hard to compete with someone that can hand you a cashier's check for $500,000.
I suspect that the Bay Area is even worse.
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.
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.
Cash is more secure, when you turn down a bunch of offers for one that goes belly-up, at the end.
If you want to make it so no homes get built at all your proposal seems like a good starting point.
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."
https://bendyimby.com/2024/04/16/the-hearing-and-the-housing...
I wish everyone who cares about the cost of housing could go to a hearing like that. It's a huge eye opener.
Also, here's a good debunking of investors being some kind of root cause rather than a symptom of housing that is scarce: https://www.theatlantic.com/ideas/archive/2023/01/housing-cr...
> 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.
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?
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.
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.
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.
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.
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?
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.
It's like all the UBI tests. It's not meaningful if the participants know the UBI will stop after a certain period.
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"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."
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.
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.
[1]https://www.census.gov/construction/nrs/pdf/newressales.pdf
Also, mom and pops owners shouldn’t get a free pass here, as the quality of life plummets with renters.
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.
qcic•7h ago
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.
howinator•7h ago
qcic•6h ago
rightbyte•7h ago
But anyway, the trend of corparations buying houses is really bad.
breckenedge•7h ago
> 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.
WalterBright•7h ago
lazide•7h ago
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.
WalterBright•5h ago
MOARDONGZPLZ•7h ago
WalterBright•5h ago
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.
Rent control is simply a disaster.
xenihn•7h ago
Do a google search for "rent-fixing algorithms".
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.
WalterBright•5h ago
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.
yupitsme123•7h ago
dylan604•7h ago
WalterBright•5h ago
lotsofpulp•6h ago
cowsandmilk•7h ago
I don’t know of any real estate investor who doesn’t use mortgages. The norm is interest-only mortgages and not paying down principal at all.