One of the issues the article doesn't mention is that these houses are effectively cheaper to purchase for corporate owners. Generally they can borrow money at a lower rate, but the ability of corporate owners to use depreciation on a new purchase to offset profits from previous purchases is more significant. Effectively they are redirecting money that would be paid in taxes into the payments on the new purchase.
This is not true at all. Corporate loan rates are generally pretty damn high, only exceptionally can they borrow for low rates. Mortages however are a special case since they are basically mandated to be low and safe by most governments in exchange for letting banks exist. Or in the US explicitily guaranteed through freddie mac and fannie may.
You whiffed on the point (note the word "but" in parent comment). The depreciation strategies are where the real benefit is. PE buyers use 60% bonus depreciation and cost segregation studies to create a $70-80K writeoff on a $120K asset, which often larger than the check they cut for the property in the first place
The final phase is to exit via UPREIT for OP units rather than cash, with the REIT getting a step up in basis that can be depreciated again, while still not triggering any capital gains for you until you convert
> They're only deferring the tax on $70-80K, correct?
Yes, if they sell normally. But usually capital gains tax is lower than that on the income so overall they're saving.
To be explicit: They use the $70-80K depreciation to offset their rental income (which often means they pay no tax on the income for that year and several years after). They'll pay it eventually when they sell, but at a (usually) lower tax rate.
There are tricks like 1031 exchange to avoid paying taxes when they sell, but I don't know how depreciation benefits factor in to those.
First, depreciation on real property is about 27 years. 80k annual depreciation indicates a 2.2m purchase price.
Corporate capital gains don't get a special rate. They're taxed the same as regular corporate income. The 1031 like kind exchange is also very difficult to achieve as the bar is very high even under the Trump admin.
It's wild when you think about it: a family scrapes together a down payment and pays full freight on property taxes, while a corporate landlord can roll one property's paper losses into the next deal and keep building their portfolio, tax-deferred
You can't use unrealized capital losses (property paper losses) or even realized losses to offset property tax, you can only offset realized losses against realized gains for income taxes.
A lot of veterans live in TX because they have reduced or no property taxes, and also no income taxes. It's probably ~ 8-10% of disabled vets in my neighborhood.
Capital loss carryover is possibly what they were referring to
Unrelated note but the Homestead exemption in Santa Clara County, average sale price $2,300,000, is $7,000. To be explicit, the home’s value is reduced by $7,000 for valuation purposes.
Edit: the tax deferred part sounds like a 1031 exchange
You might be right about the 1031 exchange, but that has almost nothing to do with property taxes.
The homestead exemptions are very small or non-existent in some states, but I believe they are fairly substantial in the south. Ultimately, my point was that they are completely wrong in that I don't know of a single locality where landlords are given discounts on property taxes but owner occupied homes have to pay full freight, but the opposite is true in at least some cases. They could be talking about developer incentives for new construction, but that's not the same thing IMO and it's difficult to understand what they meant.
It's very, very hard to talk to people who have such strong, completely uninformed opinions and seem to be completely unwilling to even attempt to educate themselves on the topic. To be clear, this is not pointed at you, I'm just not willing to invest the time you did to seriously guess at what the parent poster was going on about.
What is this special depreciation corporate owners get? IIUC any landlord can use depreciation to lower their tax bill. Wouldn't the depreciation from a new purchase also apply to the rents from that new purchase?
Somewhat more outrageous is the 1031 exchange. Sell VTI at a profit to buy VOO and the government hits you with a capital gains tax. Sell your primary residence for $250k more than you bought it - same thing. But landlords are a special, privileged investor class to whom these rules don't apply. They can sell a house and pay no taxes on gains as long as they buy another property.
It's not special, just requires scale for it to make sense. E.g. Cost segregation studies and UPREIT transactions are cheaper on a neighborhood level. And you need enough passive income to absorb the depreciation losses
And the scale applies at every single step of the process. A citizen homebuyer is playing a oneshot game. There are few discounts to be had and every single fee is its own battle.
A corporation/PE is playing a multi-shot game. There are bulk discounts, relationships, and scale that is applied to everything from title insurance and inspections to cost segregations to filing all of the paperwork.
> There are few discounts to be had and every single fee is its own battle.
Also if you take a 10% gamble on a strategy to save 50k and it backfires and lands you with a 500k legal bill, that's just the cost of business to a big (or even not that big) company, but it'd be absolutely ruinous to private individuals.
> IIUC any landlord can use depreciation to lower their tax bill.
This is also not really how depreciation works for assets that retain their value. If you buy a building to rent it out, the cost of the building essentially a cost of doing business, i.e. a tax deduction. You pay tax on the profit which is revenue (rents) minus costs (building, interest, maintenance, advertising, etc.) Depreciation is the building, they make you take it over time instead of all at once when you buy it.
But the depreciation lowers the book value of the building, which is your tax basis when you sell it. If you buy a building for a million dollars, depreciate it down to $500,000 and then sell it for $2M, you have a $1.5M capital gain from the sale. You basically have to give back all the depreciation unless the building actually lost that much value by the time you sold it, and in practice it usually goes up instead of down.
It's really the homeowners who have the advantage here because there is a large capital gains tax exemption from the sale of your primary residence, and that's actually a reduction in taxes instead of just a deferral.
Depreciation is mandatory, your cost basis declines while inflation slowly pushes up the value, which leads to a type of phantom gain. There are abilities for individuals to lower their tax bill as there are breaks. But for a Mom & Pop small landlord the tax situation can be tough.
1031 exchanges are tricky for small investors as you have to exchange into a situation with the same mortgage. A big real estate corp can borrow against their total equity, rather than taking a mortgage on the new property. So they can roll their equity into the new deal tax free. This is especially lucurative to buying cheap, rennovating and then selling to another corp.
And what isn't discussed is there is a huge amount of "carried interest" deferred profits. That tax break was intended for high risk venture capital investments but in the 80s and 90s it became used for speculative and even day trading.
https://www.pgpf.org/article/what-is-the-carried-interest-lo...
You can only deduct passive income losses for depreciation if you aren’t a real estate professional of up to $25000 and that’s only if you earn less than $100K. It starts phasing out between $100K and $150K
As another commenter pointed out, buying a home to live in gets you lower interest rates than buying for any other reason.
> but the ability of corporate owners to use depreciation on a new purchase to offset profits from previous purchases is more significant.
If you're referring to cost segregation, this is probably less true now than in the past. It used to cost a lot of money to do a cost segregation analysis, and made sense only for apartment complexes (i.e. the cost to do the analysis vastly exceeded whatever savings you'd get on a single house). So only rich investors who owned 20+ unit complexes would do it.
I've heard that in the last few years, many accounting firms are providing it for relatively cheap, so ordinary investors can do it now.
RE people make a big deal about depreciation as a tax benefit, but it's minor in my experience. You're effectively reducing the cost basis, so when you ultimately sell, you have to pay a larger tax on the capital gains. Overall you gain, but not by a lot.
Perhaps if you combine with a 1031 exchange, you may get a greater benefit.
As the report points out, institutional investors purchase only 3% of homes nationwide (but much higher in some cities). Regular smaller investors likely buy more homes than the institutional ones.
> institutional investors purchase only 3% of homes nationwide (but much higher in some cities).
This is crucial. People are in cities - in the day and age of corporate consolidation, less and less jobs are available, and they are increasingly in-office, and increasingly in only a select few metro areas.
Nobody would give a damn if a glut of housing was built in the middle of South Dakota or Maine or Wyoming. That's because there's very little to no jobs growth in those regions.
That may be the case but it would still be a good idea to look at regulating these run away feedback loops writ large so that people can't just play a game of whack-a-mole where they play the same old tricks in different sectors or invent whole new mediums to play the same old games afresh
Our system is far more regressive than most people realize. The poor pay more for things, don't have access to all kinds of tax breaks and cheap money, and can't afford accountants and shell companies and all the other complicated tricks you can use if you are wealthier.
I wonder: if you added it all up, would a flat tax (which is nominally regressive) actually be more progressive than the regressive taxes we have?
> would a flat tax (which is nominally regressive) actually be more progressive than the regressive taxes we have?
That's an easy one to fix regardless. Use a flat tax with a large fixed refundable credit. Now everyone pays e.g. 30% but gets a $12,000 credit, so someone who makes $40,000 is effectively paying zero, someone who makes $80,000 is effectively paying 15% and the effective rate approaches 30% as the number goes up. But the marginal rate is the same for everyone so there aren't all these complexities and arbitrage games, and at lower incomes the credit stands in for a lot of assistance programs so you don't get all the marginal rate cliffs from overlapping phase outs.
> Now everyone pays e.g. 30% but gets a $12,000 credit, so someone who makes $40,000 is effectively paying zero, someone who makes $80,000 is effectively paying 15% and the effective rate approaches 30% as the number goes up.
This only maybe works if you count capital gains as regular income. Otherwise they do the Steve Jobs $1 salary thing.
The reasons for high housing prices generally come down to "government restriction of supply, as supported by a large amount of voters".
There's no other expense where we talk about it as a market, at least in general layman focused new and discussions. People aren't concerned about the fuel market or the grocery market. They're concerned about fuel prices. Grocery prices.
Housing is an exception due to catastrophic historical policy choices to encourage it as an investment. Government restrictions on housing supply will exist for as long as a significant number of people not only have their net worth wrapped up in housing, but who actually leverage themselves and go in to extreme debt to achieve it. Not to mention the attached cultural issues of then wanting "buying a house" to mean "buying an area staying the same".
Concentration of residential real estate among fewer owners is the only path that doesn't lead to the future being housing based feudalism where your station in life is determined by if you inherited somewhere to live, and how desirable it is.
Good luck trying to mass build in this financial and fiscal environment. Governments could cut as much red tape as they'd like now to stimulate housebuilding and the market will still continue to build higher priced homes because that's the only game in town now to deliver an attractive ROI.
A fundamental issue no one is truly engaging with his the concentration of where people want to live which has been a combination of where jobs are and the development consumer activities in those locations have fostered to keep them attractive places to live. They're too many people trying to live in too few places and thats subtly due to necessity related to where employment is.
Remote working should have eased that more sustainably over the medium term but society decided it was better to throw the baby out with the bathwater when it came to that & productivity issues etc.
Most people are apathetic about most things at best. They don't "really" care nor should they. They only casually approve or disapprove.
The problem is that we as a society tolerate people turning off their brains and becoming useful idiots if you frame things in certain ways. And so what to the scheming weasels with special interests to serve do? They frame things that way.
You see it all the time on HN, say nothing of "other" platforms. People who have no real pressing need to care about some specific thing will go to bat for something just because it's peddlers say it's good for the environment or public health or god or whatever. Anything can be framed in such a way they're happy to advocate for. It's like an open mail relay or DDOS reflection. This exploit in our society gets leverages left and right by special interests to get all sorts of things that make them money written into the rules and laws at every turn.
These people ought to feel bad for just taking a one sided story at face value and broader society ought to ostracize them for it same as we'd ostracize anyone stupid enough to go to bat for bigotry in drag.
The problem is in the mirror. This is a social norms issue.
I agree with you general point, however in the long term, I don’t think this will financially end well for those betting on housing as an investment. At some point, if a loan essentially spans the course of a borrower’s lifetime, it’s no longer a loan, it’s a rental.
Therefore the lender will not be made whole when their debt serf dies. That seems to place an upper ceiling on the (inflation adjusted) growth of the investment side.
People talk about the market for assets: cars, precious metals, collectibles, and houses are examples. They are not normal expenses because you have something after the expense, unlike fuel or groceries.
Assets often function as stores of value, and housing is unique in that it performs an essential function, is comprised of material that generally rises in cost, has sentimental value, and is fixed to a specific location that may or may not rise in value but does in general (you see very little written about the non-housing shortage in Baltimore or many rust belt cities where land is very close to free, or even less than that in some cases).
Residential real estate is one of the most fragmented investment classes in existence. We're so far from feudalism that it's not even worth talking about. If you want housing to be less expensive in your area, you need to be like Baltimore and reduce demand or remove the disincentives from building and allow an increase in supply. Most people prefer the latter.
> The United States is short 4 million housing units, with a particular dearth of starter homes, moderately priced apartments in low-rises, and family-friendly dwellings
> Missing Households. Households that may not have formed due to lack of availability and affordability, e.g. households with children over 18 years of age still living with their parents or individuals or couples living together as roommates at levels exceeding historical norms.
Did you intend to add something after the definition? For better or worse, "moving out once you reach 18" is widespread enough of an expectation that it can be used as a yardstick for housing shortage.
I think it's interesting how "shortage" is defined across different products.
From an economics standpoint, "shortage" isn't a useful word, unless it's applied in the extremely unlikely scenario where there nothing is available at any price. Generally, this is because price dictates supply.
"Shortage" for the current housing market is generally used to mean, "relative to historic trends, many people want houses who can't afford the current prices."
Shortage in the absence of price controls generally means that something is inhibiting supply from increasing as demand does, causing increased demand to have the primary result of increasing prices rather than increasing production.
Sometimes this is expected or unavoidable, e.g. if you have a sudden increase in the demand for electricity then the price will increase temporarily until new power generation or transmission capacity can be brought online, and in the meantime you have a shortage.
The problem comes when the shortage is a result of artificial scarcity as it is with housing/zoning, because then it's not temporary, it persists until the cause of the artificial scarcity is defeated.
Shortage is almost always used with a hidden assumption that the current price is "bad."
Truckers are currently retiring faster than they're being replaced. So some folks are saying there's going to be a "trucker shortage." In reality, there are plenty of people out there who could get a CDL license and drive a truck, but don't. Why? Because the compensation for being a trucker isn't high enough because the demand isn't high enough.
For housing, from the house seller's point of view, they could have the viewpoint that there are far too many houses for sale, the supply is too high, they want a higher price for their house. And from the buyer's point of view, there aren't enough houses because they want to pay a lower price.
I'm not saying either side is right/wrong or good/bad. It's just that "shortage" isn't a very useful word.
It's more like "relative to historic trends, many people want houses [in desirable areas] who can't afford the current prices."
Building tons of new houses outside of the hot areas that all these people want to live would still elicit cries of a shortage and an affordability crisis. Because there are currently affordable places outside of hot areas, but not very many takers.
It's a really tough nut to crack. Because how do you reorient the demand to those areas that have the supply? It's not easy. We can't seem to do it currently, and there's no real plan to do it if even if we could somehow build even more housing. We'd have to build lots of housing only in hot areas. Which sounds easy enough until you realize the economics don't make sense and even on the off chance that you could, it would only generate more demand.
First order of business however should be to find a clever way to stop abuses like the ones outlined in the article. The housing that would free up in the hot areas would not be near enough to meet the demand, but if we stop that nonsense at least we're not "digging the hole deeper" so to speak.
Exactly this. There's something about housing which causes so many people to think its an easy thing to solve by just building more and that's not actually true
Ban corporate ownership of residences. Only individuals, Coops or condominiums. Cap how many rentals an individual can own.
The government should also build massive amounts of housing. Everywhere of all types - apartments, townhouses, single family. After built transferred to the residents as coops.
Yes. Cap to 0. Until we get data on the breakdown (what percentage of rental homes are by owners who own 1, 2, 3, etc), we don't really know. It won't be easy to determine because a lot of RE investors create a new LLC for each property they own.
I love that there are people that can't even conceive of the idea that entities that let out apartments are providing a service to residents. In their view, the natural state of every resident is a desire to own their home.
A fun knock-on effect of this policy proposal: it would effectively halt all new development of dense multifamily.
Yes, the natural state of every resident is to live in their own home. To be clear by home I don't mean "single family detached house on a suburban street", I mean a place to live with water, electricity, and a roof.
Landlords provide no 'service'; they are merely an existence tax.
The market already does not build dense multifamily; what is there to halt?
There's also the obvious fact that we do build dense multifamily (not enough of it, but some is better than "none", which is the endpoint of that policy).
The real reason single family housing ownership is the only real option is that society effectively pays people to own; appreciation out weighs all costs of ownership so in the end it’s free or even an investment.
But if it was truly a free market and supply met demand owning housing would be a depreciating asset and renting would be cheaper.
Land ownership is a cultural construct. Their is no natural state.
You can't fathom that someone might not want an ownership stake in the property they happen to reside in, that there could possibly be a downside to that.
You know how it's recommended to sell employee stock grants asap, so your not over indexed into your employer? I.E. if the company you're working for performs poorly or goes under, you don't want to lose your job and wealth, and if it does well, you'll keep making money at your job anyway, so there's no advantage to investing more of your personal capital into your employer than you would if they weren't employing you (barring insider trading).
It's funny that people rarely seem to apply the same reasoning to their dwelling place.
I think everybody has to be obliged, at least once, to move within a year or two of buying a house, just so they can understand what it is to take a huge bath on closing costs.
And that's before you get to things like the furnace going, or the roof failing. Two kinds of people with this "landlords provide absolutely no services" perspective: people so comfortable financially that the y-o-y costs of maintaining a property don't even register, and renters who have never owned and been on the hook for an urgent big-ticket maintenance problem.
I never said homeownership. Just a place to live thats not owned by a ruthless corporation that spends every day trying to squeeze every penny possible out of the tenant
It's interesting to think of the second-order effects of this. If these corporations can't invest in housing, they'd direct their money elsewhere. Maybe we'd see a stock market or commercial real estate boom. Maybe a proliferation of new ventures.
>> If these corporations can't invest in housing, they'd direct their money elsewhere.
I think that's why they're buying residential - there aren't any other traditional investments that aren't in a bubble or just have low returns. If you anticipate economic collapse or hyper inflation or whatever, physical assets make sense - when you measure wealth in houses you don't care what the dollar does. Gold people can do without, housing not so much. Whatever happens next, people will need a place to live. OTOH the population collapse is also coming so housing doesn't make much sense beyond 2030 or so.
If insurability becomes a crisis, I'd expect it to reduce housing availability and raise prices for competing (insurable) properties.
Of course it wouldn't happen in isolation, so there are other massive forces to consider.
Maybe wide swathes of formerly-occupied (but now uninsurable) land would sell cheaply enough that middle-income people could build inexpensive semi-disposable vacation cottages, like the old days.
GP's assertion of population collapse in five years is a bit extreme for me!
I'd expect to see a surge in self insurance. These areas are so valuable already in a lot of cases where rich people are content to pay six figure property tax bills. Especially with cost of construction being a fraction of that property's value.
When we bought our first home, a townhouse, in the early 1990s the builder only sold to people that were going to live in said home. They helped save the down payment and made sure that utility payments (gas/electric) were under a certain amount each month (super insulated and heated with a hybrid hot water system). Bigelow Homes, they were on a few This Old House episodes in the 80s.
It would be nice to see that again, the new housing market is ridiculous now.
The issue is really felt more on the housing constrained markets. In these markets home prices weren't really very diverged from what we consider extremely low cost markets today very much. In the past 25 years, we've seen these low cost markets essentially stagnate or very hardly grow from 1990s prices, while high demand markets have gone up in price 4x or more in some cases over that time.
Now there are certainly high income buyers who can afford these 1-2-3-5 and up million dollar homes. But the very nature of who is a homebuyer is changing before our eyes in these places. The white collar office worker in 1990 who was buying in west la then is saddled with being a renter, because they only make $70k in west la. Their income hasn't 4x since 2000, not even close.
How does this change the makeup of who lives in the homes? Maybe that $70k worker would have shacked up with the home purchase, and had two kids to fill those spare two bedrooms, who go on to be enrolled in the school district, maybe work part time jobs, and hopefully stick around after and contribute to the regional economy. Instead, maybe that 3br home goes to a content creator, who uses one spare bedroom as a guest bedroom and the other spare for creating content. The school ends up short two potential pupils. The local economy loses two potential contributors, shops don't have anyone to hire and cut shifts and start a downward cycle of declining service and profit against rent increases until closure.
> Median age of ownership? Skews older now I'm guessing
First-time homebuyer (FTB) "average and median age stood at 36.3 and 33 years for the period Q3:24-Q2:25, and there has been minimal FTB average age change since either 2001 or 2021" [1].
I just watched a video from Dave Ramsey title "What the Government Should Do to Fix the Housing Problem" He specifically calls out Institutional Investors and Foreign Corporations that have been purchasing single family housing and converting them into rental properties.
I think he makes some good point in his video: https://youtu.be/_CrgniwSLLM
Thanks for sharing the DR link — hadn't listened to him in many years, but he definitely helped me start my debt-free journey (although his long-term investment opinions aren't aligned with my own planning / re$ult$). I am not religious I just started listening.
>"If you're 25 or 26 years old right now YOU ARE GETTING SCREWED RIGHT NOW (by large banks) like has never happened ever before... record debt debt debt" —Dave Ramsey [0]
I am definitely doing "better than I deserve."
[0] He actually says this at 6m in above-comment's link
Wait, you're not answering his question. "Institutional investors" rent out houses at a scale individual owners can't, and have more resources to maintain those properties and respond to renter complaints. Why isn't a carefully-regulated market of institutional single-family-home lenders a good thing?
>Why isn't a carefully-regulated market of institutional single-family-home lenders a good thing?
Is there a good example of this?
Every corporation I've rented from have all fought me tooth and nail when I needed maintenance and did basically everything possible to ignore any and all complaints (because it costs them money, obviously). I have had to have a lawyer send a letter on my behalf more than once.
But that's just my experience, which has jaded me. Perhaps you can show me a non-hypothetical example of the other side and open my eyes up a bit? Any countries, laws, specific corporations which demonstrate a carefully-regulated market of institutional single-family-home lenders I should look at?
It has not been my experience that individual owner landlords have been better than institutional owners!
Anyways, I was just calling out that your logic didn't appear to hold. The right response to the comment that roots this subthread is "institutional landlords are not generally a thing". Again: the median number of properties a California corporate landlord lets out is 1.
Must be. In particular: the only landlord I ever got a security deposit back from automatically was a corporate landlord.
More broadly: if your concern is that the landlord isn't going to fix the furnace or whatever, you can address that without distorting the market just by creating causes of action, penalties, and fix-and-deduct ordinances to shift incentives.
Banning corporate landlords reduces the supply of housing (larger institutional investors are the primary builders of dense multifamily), and privileges individual owner/landlords who do not have a better track record or better incentives or better resources.
Right. I'm not advocating for a banning of corporate landlords. I just wanted to look at the regulations/ordinances/etc. of a "carefully-regulated market of institutional single-family-home lenders" to take some inspiration from, and perhaps advocate for some of the sensible rules in my area. I know you participate in your local politics, and have a different viewpoint than mine, so I thought I'd ask.
Fair enough! Hard for me to answer, because my priors are that non-corporate landlords are generally worse than institutional landlords, if only because the structural incentives favor scale.
There is absolutely nothing wrong with institutional investors buying tract homes and renting them out. Nothing! It brings the benefits of living in such homes to people who otherwise would be excluded from them by the financial credit system.
The article linked in the OP, and many posters in this thread, present arguments to the contrary. The main one seems to be that although institutional investors are happy to let people “benefit” from renting their homes, they are precluding many from ever owning those homes themselves.
I understand the arguments, and I understand that they are morally vacuous arguments. It is simply an advancement of the interests of the bourgeoisie. They are annoyed that renters are effectively able to influence the market, even if by the second degree through large-scale renting. They believe that having scraped together a quarter million dollars for the down payment makes them a special class of people. It is a stupid position to defend.
Doubly so when they themselves lobby for policies that keep housing prices high, which is the primary thing preventing more people from owning rather than renting.
Well really I was just trying to explain the GP's post, not adopt their views, but I think I can play devil's advocate here for the sake of discussion.
The problem with institutional investors is that in making it big business you drive up home prices which in turn drives up the rental prices. Since they can have a wide portfolio of homes, they are less likely to lower rent prices when demand drops, because they can afford to take the short term hit if it they think the market is going to pick back up again. AND they can play games like grabbing all available homes in an area in order to artificially inflate prices.
I see that you did your best, but it should be obvious that the people who want to buy homes also have a massive financial machine on their side, and that it also drives up prices. If the insured 30-year mortgage did not exist, homes would be a lot cheaper.
Why would someone listen to Dave Ramsey of all people? He is neither an economist, nor a Christian, he has nothing to contribute to the subject!
His shtick is real estate investment, of course he wants to see Joe Public buy a starter home. The trouble is: real estate as a government-guaranteed investment vehicle is what brought us the housing affordability crisis.
His "schtick" is having people pay down and reduce debt. What's noteworthy on this video is that he's calling for the government to fix the problem. He's normally anti-government involvement in business. This should speak to the severity of the problem when someone like him is calling for the government to step in a fix it.
Supply constraints are a symptom of the problem, which is housing is a huge leveraged investment for many. You generally won’t get policies for building more when it negatively affects the finances of a majority of voters
this sounds nice, but neglects the fact that (1) materials cost has gone up and (2) zoning requirements exist. (1) means its just more expensive to build overall, and (2) means that a lot of proposals for apartment complexes get voted down.
I'm not neglecting those facts. 2) is almost the entirety of the problem. the call to action of "build more" is not wishful thinking that someone will donate free houses to the public. the call to action is to vote for politicians who will remove the near-universal smothering red tape that prevents any kind of meaningful new housing construction
Part of building more is getting government (mostly) out of it so that things like zoning laws don't hamper new development. Obviously that is very hard to do at a local level when incumbent homeowners' housing values would be cut in half overnight.
Actual NIMBY/YIMBY fights look like one level of government representing a lot of people who can't afford a primary residence fighting against a different level of government representing a lot of incumbent primary residence owners who are concerned on a personal level about the negative externalities of more people being able to live in their neighborhood. Government is happening no matter what.
This is happening in california. In fact there are three current situations:
1/SB9 cutting R1 lots in half
2/ ADU laws, which let you build up to 3 homes/units where there was one and further, can be combined with SB 9
3/ AB2011 which lets you turn defunct strip malls into housing
Honestly, this plus things like PermitFlow make me feel like we will be able to build enough. The issue will be making sure the housing is affordable rather than expensive and empty.
You're not wrong. There are multiple aspects of government involvement that require untangling which includes federally backed mortgages that allow banks to be more lax on loan terms (which is how we got 30 year loans and Trump proposing a 50 year)
can you please explain how these graphics are supposed to support your argument? it's not clear to me and i'm trying to understand the georgist POV.
nonetheless, materials and the cost of labor are the most significant costs for new buildings. not land, taxes, or zoning regulations. here is one example where this is a fact: www.vermontpublic.org/local-news/2024-05-23/uvm-halts-student-housing-project-construction-costs-workforce-shortage
Switch from "national level" tab to "metro level", and select los angeles for an extreme example. Look at the the figures right of the map, that says "share of SFD units build before 1980 with a land share of" and compare the figures between 2012 and 2024. Just by eyeballing the percentages, it looks like the land share went from 50-60% to 70-80%. This is confirmed if you sum up the figures in a spreadsheet, you go from an average share of 51% to 72%.
You can compare this to overall housing prices in the LA area[1], prices in 2024 is 262.7% of 2012 prices. Suppose you have a $100k house in 2012, that will worth $262k in 2024, an appreciation of $162k. Using the land value percentages above, the land value of the houses are $51k and $188k respectively, an appreciation of $137k. That means 85% of the appreciation was in land, not because building materials got more expensive or whatever.
its a good bet on their part (although i hate it). we obviously can't increase supply fast enough to keep up with demand in the current regulatory climate and with an existing shortage of skilled tradesmen and ratio of tradesman retiring out vs newcomers entering construction, there doesn't seem to be a feasible way to meaningfully increase supply.
Me: "should we stop allowing private equity to hold property?"
My Strawman: "nah let's build more houses to be snatched up by private equity, that way eventually maybe they'll be really nice and decide to lower prices for us someday due to the infallible balance of supply and demand that definitely hasn't been rigged to hell over the past half century. They certainly won't just continue to rig the system to benefit themselves"
>to the infallible balance of supply and demand that definitely hasn't been rigged to hell over the past half century
How has "supply and demand" been "rigged"? A lack of supply isn't evidence of "supply and demand" being "rigged", it's it working exactly as predicted, not any different than oil prices going up when there's some geopolitical event threatening supply.
The area I live in has homes that remain empty because the investor doesn't need the capital nor the space and just holds empty units for multiple years when they eventually sell (for even more than they would have sold in the past).
Housing demand will always be > 0 as long as population is growing and hence there can never be a oversupply.
For every complex and difficult problem, there is a simple, easy and wrong solution.
If corporations can't own residential properties, how would anyone rent a house? How would home builders build model homes? How would Trusts manage real estate?
Anecdotally: I've rented 5 different single-family houses in my life. All of them were rented from individuals.
Only 1 out of the 5 had a landlord that owned some other stuff that they also rented out.
For the remaining 4 out of 5, the landlord only had that singular property to rent: They lived wherever they lived, and they also had an extra house for whatever reason that they rented to me.
I knew these individuals (no scare quotes required) personally before I rented from them.
But sure: If you want to bet that you're right about a very specific situation that you have no specific knowledge of, then don't let me stand in your way. A fool and his money are soon to part.
I think you're misreading his intent. It may not be the case for those you rented from, but over the last 15-20 years, the standard practice for them has increasingly become "Form an LLC".
In most cities, when you rent a detached house from a corporation, it's really one individual behind it.
I've had apartments, too. Both corpo-owned and owned by some dude who had some apartments.
The corpo ones were the worst.
They invented illegal terms ("Sorry, sir. You may have signed your 1-year lease agreement on the fifth day of the month, but our policy is to close leases only on the last day of the month. You still owe us for the rest of this [13th!] month whether you've moved out or not"), were wildly successful at making all of the security deposit disappear, and were miserable at keeping their word on necessary repairs. They were shit.
The ones that were run by some dude who owned some apartments were very different. I paid my rent on time. If I had a problem, I called the singular responsible person directly and he (being the kind of person who likes to have timely payments in their bank account) would answer the phone himself. There were never any surprises relating to money, and I never had an issue that lasted for more than 24 hours.
And the one person operated apartments are usually undercapitalized and doesn’t have a professional maintenance staff. The ones I have stayed at have on site office personnel.
These were both in the north suburbs of Atlanta - one was mid upper end at the time and the other was in one of the more affluent neighborhoods
I have no reason to care about staffing or capitalization. Those aren't my concerns. Those concepts are beyond my purvey as a tenant.
I care only about timeliness. My entire relationship any landlord is that of paying money, and receiving housing and services relating to that housing.
When the aircon dies and it takes weeks of pestering for the corpo entity to address it, that's a problem for me that changes the way I view the world in a negative way.
When the aircon dies and it's fixed the next afternoon by the action of some dude who owns some apartments, then I don't really have anything to complain about at all. There was a problem and it was in the past almost as soon as it was discovered.
Capitalization is your concern because if your landlord is pinching pennies barely scraping by they take shortcuts and slow walk repairs. If they lack staff, they don’t have repair people on site that can fix things.
Why is it better to buy local instead of from Amazon? I mean: The local place has the same profit motives, so they're basically the same thing -- right?
> For every complex and difficult problem, there is a simple, easy and wrong solution.
Sure, but realize that also applies to the current status quo.
Also, you cannot create the 'right' solution to a complex, nuanced social problem. You can only slowly shift the problem over time, one 'wrong' solution at a time.
Agree, but this simple solution isn't going to shift towards the right solution over time, and could very easily make housing shortage worse (especially as it would forbid home builders from making model homes, or keeping an inventory)
"how would anyone rent a house?" From a private owner
"How would home builders build model homes?" - This is a great point. I should have said "after the home is built"
"How would Trusts manage real estate" - for residential real-estate, they wouldn't. An individual would. But I just want to point out that I never said that corporations shouldn't own real estate. I said they shouldn't own residential real estate.
It's only as complex an nuanced as we make it. For most of history, individual people owned real estate. Only recently did we manage to screw that up. We can unscrew it.
> For most of history, individual people owned real estate. Only recently did we manage to screw that up. We can unscrew it.
Corporate ownership of real estate is ancient - read about the land rents (and in-kind labor rents) that early Christian monasteries were entitled to in late Roman/early-middle-ages Europe, or how Buddhist monasteries have been funded from local levees for thousands of years. Or how the British crown as a corporate entity currently vested in Charles III still owns substantial chunks of British real estate. History is long and for most of it it was not the case that ordinary middle class people even existed, let alone owned houses.
Sorry, but this is just a bad idea. It's classic populist slop.
The biggest driver in housing prices is under supply.
The main source of under supply is individual home owners who consistently vote against good zoning to protect their economic interests.
Corporations do not have the votes to strangle supply like individuals do.
"Skimping on maintenance" is capitalisms main and really only play. So many issues (housing, transport, utilities) are because "the market" won't ever pay to maintain.
Agreed. When I moved to the US from Australia 19 years ago, the road condition here blew my mind. The potholes, tree roots, all of that? There'd be protests at City Councils for a fraction of that in Australia. Here, just "the way it is".
No, it's not. The article is nothing but a complete lie and a ragebait against scapegoats. This is similar to how conservatives are raging against trans people.
Starting from this:
> The United States is short 4 million housing units
It's a lie. The US has more than one housing unit (1.1) per family.
We don't have a housing problem. We really really don't.
We have an urbanism problem, that made the dense hellscapes the only viable housing location.
I.e the kind of stuff everyone wants to do but can't justify flying so close to the sun on because they don't have a legal army say "we are in compliance and here's why" on their behalf when the municipal government comes looking for fine money or the slip and fall lawyer tries to make something their fault.
In "reasonable" (note for the bottom feeders, I did not say "free", I said "reasonable") markets the big guy has to do things to higher standards because his big pot of money will attract vultures looking for a quick buck if he does even slightly wrong.
It's usually the opposite. In a lot of rental markets the small time landlords do even less than the minimum in terms of maintenance and upkeep, whereas the big corporate landlords at least have some basic level of organizational competence. Most local governments don't have the resources to do much enforcement so only the most serious violations are ever punished.
Private equity goes to housing because there is a return there.
A housing can either be an investment or be affordable. It cannot be both. Those two things are completely at odds.
When something is an investment, it must become unaffordable over time. There is no way to square that circle! Unfortunately, housing-as-investment is more or less baked into our cultural DNA. We do not need to unwind the supply problem; or the government regulation problem; or the corporate problem. We need to unwind the idea that a house is an investment.
Good luck with that. It's the air we breathe here. There's nowhere to go but up.
Lots of ideas in here that fail to properly identify and address the root cause, which is disappointing given how many of us are programmers.
Trace the problem back. Where does it start?
Why is PE investing in homes? Because they can make money. Why does buying a home make money? Because the value appreciates. Why does the value appreciate on an asset that literally deteriorates over time? Because of restricted supply. Why is there a supply shortage?
The root cause of this issue is supply. Zoning, mostly, is to blame. There are down stream issues, like the capacity of the construction industry, but that is an effect of the current environment not a root cause in and of itself — if there is money to be made, construction will grow as fast as it can.
Fix supply, and you fix the issue. This is a uniquely (English) western world problem. Go look at western countries that speak English vs. non-English housing starts. It’s just a cultural failure. You can blame corporations all you want but at the end of the day most people in the anglosphere expect a return on the largest purchase of their lives, even if it comes at the cost of materially worsening the lives of those around them.
Usually a root-cause analysis asks for five why's so your analysis seems a bit short.
One should ask why it is that housing / land is more profitable than those investments in which banks and private equity previously invested. And then when you follow that line of reasoning (too much capital and credit -- thanks quantitative easing! -- poor performance on bonds due to low interest rates and restrictions on the quality of investment vehicles) and you'll see that the root cause is probably more financial rather than _just_ too little housing.
Debts need to be cleared, losses need to be accepted, and leverage unwound. Building more housing just gives banks and private equity more stuff to buy.
That there may be "too much capital and credit" is a red herring because investors won't pour money into assets that aren't lucrative. The main reason housing has been so lucrative is because there's more demand than supply, so building more housing what needs to happen!
You're absolutely right of course. Even a child could look at the present situation and determine that the solution is to simply build more housing, but for some reason many grown adults cannot accept such a simple solution and insist that what's actually needed is more government regulation or something.
I feel like i've seen the atlantic write this exact same article at least 3 times in the past year. Its getting better but the claims are still not supported by reality.
I recently learned about Singapore’s seemingly excellent public housing system that is used by over 75% of its population. Singapore being so capitalist about everything else while carving out housing I think provides evidence that capitalism can be made stronger by keeping certain things away from strict market forces.
You can't have a free market if supply (or demand) is constrained.
You either go the liberal+regulated free market way, which will get lobbied, then overregulated, or you go the socialized way, where you allow local government and associations/unions to compete in the market... with the exact same rights as the companies, and no weird rules that prevent them to truly compete.
And if you have a natural monopoly (energy distribution is the worst offender), you have to go the central planning way I guess, until we find something better.
That "housing is more than a market - it's where people live" is a platitude. It sounds nice. But it doesn't tell us anything meaningful nor solve any problems.
Private equity is the gamification of everything, in a compressed time frame. A company focused on longer time frames will cultivate their reputation. This takes the form of quality products and good customer service. PE has no need for any of this nonsense. They are looking for a quick return on their investment; to trade in all reputation and goodwill for their immediate value in cold hard cash. The more immediate the better, so they can move on to their next acquisition.
Funny, because you hear the same hand-wringing about how public companies (ie. the exact opposite of PE) only care about next quarter's earnings report. By that metric, PE is better than public companies, because their source of capital is more secure and don't have to worry about flighty shareholders dumping their shares.
> Who’s going to win in a bidding war for a three-bedroom in a suburb of Cincinnati: a single-income family with a scrabbled-together 10 percent down payment or a Wall Street LLC offering cash?
I don't see why the seller would care. They're getting a check at closing, that's all they care about.
I mean, if there's a question about whether the buyer will actually be able to get financing, that could be a concern. But most buyers are pre-qualified (at least if they're working with an agent). The main reason they would not get financing is if the appraisal came in lower than the sale price.
A cash offer will still fall apart if the appraisal comes in too low, I would think. Or does the term "cash offer" imply that no appraisal will be done?
Appraisals are generally done to ensure that the loan guarantor will be able to recover their investment if the party taking the loan defaults. Therefore, cash offers don't perform appraisals. Cash offers lower risk for the seller and provide fastest time to close the transaction.
There is no purpose for a cash buyer to pay an appraiser to appraise a house. They have already decided to pay the price, so who cares what an appraiser thinks?
> Moreover, even if big investors are purchasing thousands of homes, they don’t own significant numbers of homes compared with small-scale landlords and individuals.
> Last month, the Lincoln Institute of Land Policy and the Center for Geospatial Solutions published a report showing that corporations now own a remarkable one in 11 residential real-estate parcels in the 500 urban counties with data robust enough to analyze. In some communities, they control more than 20 percent of properties.
They're invoking a false dichotomy. Small scale landlords (i.e. the guy who owns a second home and rents it out) are part of the corporations. From the linked report:
> A corporate investor, also referred to as a nonindividual investor, is a business entity that owns residential property, usually for the purpose of generating income. This broad category ranges from small entities such as family trusts and limited liability corporations (LLCs) to larger outfits like real estate investment trusts (REITs), endowments, and pension funds.
Many/most "ordinary" folks who buy a house to rent fall in this category - they form an LLC or something similar. Many reasons for this. Percentage-wise, my guess is that institutional investors (not just individuals who formed an LLC) are still a relatively small minority, but I don't have the data.
There is a common misconception on HN that it's rich people who mostly buy houses/units to rent out. In my experience, that's just not the case. Everyone is doing it across the board, and just by virtue of there being more non-rich people, they are likely the majority.
Also, higher income folks don't feel a great need to make more money. Median or lower income want to make a lot more, and real estate is actually one of the fewest options available to them (and also really easy to learn/understand). A lot less work than a second job (although some get a second job just to bootstrap the RE purchase process).
Just 3 days ago I spoke to a friend. Engineer (not software). Decent income, but not FAANG level. Non-working spouse and multiple kids. Rents out two houses, and is buying 2 more.
I took an AirBnB course from a guy who has lots of listings on AirBnB. He got there with almost no money down (most of his money was spent on furnishing the place). He was educated, but fairly low income ($50-60K in California). When I took the course he was making over $300K/year net from his AirBnBs.
When I used to listen to the Bigger Pockets podcast, the majority of people who owned 10+ homes to rent had very average incomes (less than a typical non-FAANG engineer).
I've been in the real estate space for a few years now. I don't own other units, but I do invest in them, and am moderately active in a local real estate club. I know how these things work.
If you want to solve this problem, stop pointing fingers at "rich people", and stop allowing multiple ownership for a decade or two.
I'm as pro capitalism as it comes but private equity should not be allowed to operate in the consumer housing market. They can develop and sell houses but cannot hold is my point of view.
Another market where PE is incompatible with human life is healthcare. It becomes a race to maximize profit at the expense of worse patient outcomes and worse healthcare availability for all. They close redundant, less profitable hospitals (usually rural). Same with pharma: they jack the prices on common meds and only develop profitable ones, not effective ones or needed ones.
IMO the main problem with them is that actual competition isnt really possible. Most of the time, you just can't develop newer/denser housing where they are taking over neighbourhoods, so no real competition is possible which allows them to distort the market for their own gains.
it is stymied in part owing to regulatory requirements that makes getting loans at good rates impossible for small developers.
Notwithstanding that, the populist fantasy is that developers won't build more "because they are greedy", as though that math works out. If developers don't leave money on the table, then they'd want to build where the demand exists and it does. They face a number of constraints and bottlenecks, not just for materials/labor, but managing risk. Risk makes loans expensive, everything is built on credit. Some of that risk is compounded by the threat of litigation by NIMBYs, or regulatory requirements, or environmental review, etc.
Not to be pedantic, but this would make you not so "pro capitalism as it comes". The ability to develop and sell houses, but not hold them (in service of rent-seeking) runs contradictory to the very core tenant of capitalism, which is private property and free markets. Socialism and supply/demand-markets are not mutually exclusive; it sounds like you're more amenable to a socialist or mixed-market system than you give yourself credit for.
almost, but rent-seeking is an odd form of capitalism, because in its pure form it isn't providing value.
nothing in the real world is in its pure form, and some business are able to provide value which they cannot charge for because they can rent-seek on other areas, so there is always nuance.
but an economy where rent-seeking is the main path to wealth is an economy in really poor shape.
Rent seeking is the end result of capitalism as an economic system. The goal of a capitalist is to accumulate capital (wealth), and rent seeking allows you to do this without expending any effort. Any capitalist acting rationally within the system of capitalism will desire to seek rent.
>> Not to be pedantic, but this would make you not so "pro capitalism as it comes". The ability to develop and sell houses, but not hold them (in service of rent-seeking) runs contradictory to the very core tenant of capitalism, which is private property and free markets.
I think you're right. A lot of people confuse capitalism for working for a living - because that's what capitalists want the middle class to think it is. Capitalism is really about getting capital to work for you so you don't have to. Building and selling homes is a form of working. Holding homes for rent is capitalism.
Im capitalist in the belief of truely free markets. Im against monopolies or monopoly like structures. I can make a case for private equity being a cartel as well knowing how they use algorithmic platforms to price rentals thus collaborating on pricing while pretending they don’t. After all its a third party setting prices.
One could argue that PE is both A. ) the ultimate form of capitalism and B. ) explicitly creates inelastic demand. A truly free market will always succumb to dominating forces that create the inelasticity (or at least that's what history has consistently proven).
That is the point. Capitalism has never included free markets in its honest definition. They are nuisance for the capital owners. But when they are forced to participate in the free market - then a big part of the surplus generated by the companies is captured by the society. See that was Marx error - instead of socializing everything, he should have just made sure that no monopolies, monopsonies and enough state capacity exist to make the unfree markets free. Send this message back in time and we will save couple of hundred of million people.
More broadly, housing cannot be relied upon as an investment vehicle and remain affordable. Whether it's private equity or others is a moot point. The perverse incentive is there in that housing appreciates in value because of artificial scarcity. It's a 1-1 relationship.
I don't think this is contingent at all on the capacity to buy and hold, but on policies that limit building and financial instruments related to housing. The 30-year mortgage even. So now similar to the case with Social Security and public pensions abroad, politicians are playing a game of hot-potato not wanting to be the ones to have to make changes and upset the large aging voting bloc. Similar, too, because it's a generational wealth transfer.
Many items through market exchange have gone down in price over time owing to increases in efficiency (see: coffee makers). This can't be blamed on markets qua markets. It's adversarial policy that harms young workers.
The only reason capitalism works is because it turns everything into a struggle for existence, which is the best motivator. Every company is forced to compete (assuming there is no moat created by politics eg. Intellectual Property or contract law) or the company will go under.
But it also means that the people who can’t compete in this type of Darwinism only survive because of the empathy of others who do (whether that be family/friends, politics, or charities).
I’m worried about the breadth of industries that PE has infected in the US.
One of the things communism did right was housing - in the Eastern Bloc home ownership was above 90%. The quality was not great, not terrible. But bad shelter is infinitely better than no shelter. I also think that it also excelled in K12 education. Whether because the german style system that was common in europe pre WWII was just left alone - I don't know. But until the mid 90s we really didn't had the school reformers to fuck it up. Right now we are as good as producing illiteracy as the rest of the west.
The socialist sense of “private property” refers specifically to ownership of physical (or at least, nonfinancial) means of production, other than by the workers whose labor is applied to it.
It does not refer to all ownership by individuals of real and personal property, restrictions on other personally-held property are separate concerns from the abolition of private property, and socialists regimes, including those in the Soviet bloc, frequently have retained private home ownership, which is not fundamentally inconsistent with socialist theory.
There was a lot of private property in the socialist countries. I am not sure from where this thought even came to you. What was impossible was owning big private enterprise. But small businesses - like a restaurant or a shoe repair shop were allowed. You were also allowed to own houses, cars, appliances, clothes and almost everything else. Land was a bit weird - you could own, but not too much - basically stuff that was small enough to evade the collectivisation process.
I don't know the specific rules in Vancouver, but yeah, a lot of those attempts were illusory/perfunctory...
If you can afford to have one, or multiple, $2M+ condos that you just "park" your wealth in to leave them vacant, the presence of a $10K or $20K fee/tax a year is in the "chump change" category.
Vancouver has fewer vacant units than the average for the country.
> The number of vacant homes in Vancouver has fallen below 1000 as of 2024. The latest Annual report shows low vacancy rate of 0.49%. [the average is 2.7%]
Guess what happened with the housing prices? Right. They kept increasing. The housing density went up, so the prices must also increase.
Well, I want more multifamily housing (apartments or condos) to lower prices in good cities near pubic transit.
So let me propose: a wealth tax on land! ("Georgism"). But not a tax on the "value of improvements," i.e, buildings. This disincentivizes single-family homes near train stations (widespread in the town I grew up in) and is very low-cost to collect.
I don't know where you're writing from. But here in California, the source of all evil (Prop 13) originated with single-family homeowners trying to *escape the property taxes that result from their opposing new development.
Given how spectacularly CA housing policy has failed, perhaps it's time to try the opposite: Let's abolish all income taxes and exclusively tax land instead! (Land taxes have the property of being extremely progressive wealth taxes that are dead simple to administer.)
I've had the same idea, but with no property tax on ownership of a single dwelling place.
If the burden is lessened to have your own place, hopefully we could see less homeless on the street or living in cars when times are tough.
However if you have more than one, then you pay significant property tax on all of them. I would hope that could free up more places for more people getting a home.
But of course if you earn more than $180k a year, I guess you could afford some property tax.
I am also thinking foreign ownership of property should be taxed heavily. I know that is not popular, but honestly if you not living full time in the country then you are effectively taking up a spot for someone who needs a place to live.
That sounds like it would penalize renting in favor of homeownership. I'm not in support of that, renting offers people flexibility and is not inherently worse than owning.
Wealth taxes don't work because wealth gets extremely fuzzy.
For example, unsold stock that I bought 15 years ago; and then got a loan against. I'm wealthy... kinda? But I didn't sell the stock; I have unrealized gains, and you shouldn't tax me beyond income tax on borrowed money? Okay, tax me on my unrealized gains then - but then 2008 repeats itself, stock goes down 40%, do I get a refund? Of course not, I only pay when stock goes up and never down, which is not exactly a fair incentive.
Now imagine artwork I bought 15 years ago from Banksy. Or imagine my video game collection I bought on eBay that contains some rare titles. Or what about my wine collection? Now imagine I'm Elon Musk, on paper worth $400B, but if I sold even 20% of my stock, that paper valuation would be shredded from an excess of liquidity driving the share price down, so you can't tax me on what is physically impossible to realize.
> Okay, tax me on my unrealized gains then - but then 2008 repeats itself, stock goes down 40%, do I get a refund? Of course not, I only pay when stock goes up and never down, which is not exactly a fair incentive.
Property taxes are use taxes. You're paying for the right to occupy an inherently limited resource, and for necessary services and infrastructure. It's not a wealth tax because it doesn't matter how much equity you have; it's the same whether you fully paid in cash or have an interest-only mortgage. It's also not a capital gains tax because the purchase price doesn't matter.
The total ownership of all public companies is also a limited resource.
Whether I have 0% equity or 100% equity in my home I still own it. The only question is how much I owe to the bank. "Oh I bought that with leverage" shouldn't change things for home ownership and it should change things for a wealth tax on stock ownership.
Then it’s an asset/property tax, not a wealth tax, because debt doesn't change the asset (even if it is secured by the asset), but it does change wealth.
A corporation does not provide services to shareholders.
A municipality is charging residents for services. Obligations are progressive (by necessity), and indexed to assessed property value (as a practicality), rather than equity or income.
Municipal operations get more expensive with inflation, and with resident demands (ballot initiatives, etc). They are never zero, and must be tied to something in the real world.
These payments are collected as a tax, because that is the only lever available to municipalities.
I see your point, but I think it's a category error.
You are taxed on realized property capital gains, beyond a certain amount ($500K?) for principal residence (anywhere you've lived two of more of the last five years). And for a non-principal residence there is no threshold.
Me owning a bigger house than my neighbor does not mean that I use more services than them. My water bill is my municipality charging me for services. My real estate tax is a charge for the general good of my community. I see no reason why this can't simply be a tax for the national good.
I don't have an economics or finance background. But why could there not be a taxable event for the loan amount when it is made? Sure, maybe it gets taxed at a lower rate than even capital gains to continue incentivizing leveraged investments of this nature. Is there some economic argument for why lenders can realize the value of an asset when loaning out money against it but the tax man can't touch that asset until it's actually sold?
What about a law where you couldnt use over a million dollars (to exclude normal people) a year of any asset as collateral for a loan unless you paid capital gains on it at its current valuation?
You create a lot of other side effects that destroy a lot of valid activity and thus cause a large economic depressive effect, or you will start needing to provide a lot of other counterbalances that will be even worse or cost the government a lot more.
This has the finance equivalent of feeling like cookie banners will actually do anything.
Political power will advocate for it's power, you have to go one level higher and interact at that level, not on tax law tweaks.
To give an example of where this has gone wrong already, look at the entire interaction between startup stock, ISOs and AMT and how it creates a horrible trap for startup employees, but not for founders and investors who get a lot of very nice tax benefits like QSBS, no AMT, so on. Because startup employees are diffuse, usually have unstable employment and are usually younger, this hasn't been fixed to this day.
While other countries like Israel have this fixed in a very elegant way, where you can exercise without tax bombs and only actually have tax liability when you actually can and do practically realize or liquidate the stock gains.
If I pledge $10M in stock for a $2M loan, what's the taxable event? The full $10M valuation, or my $2M loan? What if the stock is in a company worth $40M, but the sale of $10M in stock causes it to be worth $5M afterwards and the private company's value is reassessed to $20M, after I got the loan and after my pledge?
If the tax is set at say 2% of wealth (excluding primary home and _displayed_ artwork/collectibles), and that's above your income, just pay with your stocks at the valuation they have at tax day.
This assumes everything can be paid in liquid public equity, which is often not the case in any private or offshore investment. Additionally, the government now owns stock they can't realize without by definition causing a stock market decline. Sell stock that previously wasn't on the market, you exhibit permanent downward pressure.
Why can't the government just own stakes in private and public companies? Put them into some kind of sovereign wealth fund. No need to sell at all.
At scale the government's holdings will be very diversified and relatively low risk. Almost like an index fund, but for the entire economy. They can use the dividend payments from these holdings to reduce income tax.
I don't have a good solution for private investment, but for offshore public investment, you can have the same principle.
> Sell stock that previously wasn't on the market, you exhibit permanent downward pressure.
Which is a very, very good thing, to be clear. Because it lowers expectations of future returns, and make stock valuations not based on "i predict pension funds will automatically put their contributor money into those stocks", but on actual business information.
Because then 2001 happens or 2008 happens or 2020 happens and the government suddenly owes back a decade of wealth tax. A stock market crash becomes even more disproportionately expensive for the government and requires even more borrowing.
Everyone wants to finger someone to blame rather than (before trying to) fix the fucking problem.
Here’s a novel and brazen idea: if a domicile has been vacant inside a metropolitan area for more than thirty days, it’s up for grabs. Be it an apartment, a condo, a house, whatever, but if someone isn’t living in that space for more than thirty days, let folks claim it as abandoned property.
Watch rents and values plummet real fucking fast as folks seek to claim their “winnings” before their shit gets taken. That’ll at least jumpstart the real discussion of making sure housing is accessible to those who need it rather than constant finger pointing.
Because sometimes you just need a bigger fire to create the necessary action to solve the underlying problems.
EDIT: I am honestly so sick of the current housing crisis and seeing a swath of vacant apartments and condos as “investment properties” here in New England that yes, I am serious, and I’ve got a mental map of about a dozen large starter units that have been vacant for a year or so that I’d rush to claim one of.
Your investment is irrelevant when humans lack basic necessities like shelter, and I’m tired of being civil or polite about this so your ego doesn’t get bruised.
Many valid reasons for a property to be vacant. It may need renovations or repair and that can take a lot longer than 30 days. But maybe there's some time frame that makes sense.
I'm not convinced that commercial ownership is the problem. Or if it is, it's not a new problem. Slumlords have been around forever.
The main problem is we just don't have enough housing supply. Investor-owners can only hold units vacant to support higher rents up to a point. If there are enough vacant units available and enough supply that property values are not appreciating like crazy, someone will crack and cut the rent or sell out so they can get a better return on their money.
> If there are enough vacant units available and enough supply that property values are not appreciating like crazy, someone will crack and cut the rent or sell out so they can get a better return on their money.
Your thesis here is disproven in large cities like the one I live in, Miami. Many investors / property owners here don't give a damn on getting a return on their investment so long as it doesn't go to $0 - they buy real estate sight unseen because it's a good way for the well-to-do in LatAm and Russia to get their money out of developing/regressing economies and into the USA. Half the units in the building I live in are vacant - they are owned by Brazilians, Argentines, Venezuelans, etc who want a safe haven for their money (and for Brazilians, as a base to buy loads of Apple products that they can turn around and sell back in Brazil for a 2-3x markup).
The idea is that tracking it is effectively impossible for a foreign government...and we've made that whole infrastructure incredibly easy via making it legal for LLCs to purchase homes. We don't prevent foreigners from forming LLCs, and often times there are brokers that make their vig on doing just that for wealthy foreigners - they set up a myriad of LLCs to protect the identity of a buyer, who then drops $1mm+ on a property that they will never actually use in a country they will likely never visit.
Plus, to buy stocks or ETFs or bonds or whatever, you have to register with a broker, who has to legally report each sale and transaction to the government. The point isn't the liquidity. The point is that a family can drop 200k-500k in a pretty stable asset in an incredibly less volatile environment and effectively not report it. That is worth it in the age of hyperinflation in LatAm economies. Plus, if the unit in question is in a decent location, they can escape at the first sign of trouble.
I refuse to buy that argument of availability alone (or hell, any standalone argument) when we have continued reporting of landlords and PE leveraging services like RealPage that are designed to maximize rents and revenue, including by keeping units vacant. Every time I’m driving through a dark city at night, residences and condos devoid of furniture (or using an interior design motif with no signs of life), I’m reminded how many of these are investments by a vacant owner designed to capitalize on lax regulation and lack of supply in in-demand areas. I drive by huge corporate plazas clustered together on high-value land because companies demanded everyone live in the same areas rather than spread out to reduce costs, driving up demand further.
I am unbelievably sick of seeing the symptoms go unaddressed while commenters and armchair economists bicker and debate who is the sole source of blame that must foot the bill. We need action, and we need to be brave enough to be willing to admit this isn’t working for the masses anymore.
I’m unbelievably tired of this cowardly pussy-footing by people who can’t or won’t envision a better future that also doesn’t involve number go up on property forever without further investment.
You mean you refuse to believe hard data on vacancy rates over sensationalized opinion pieces or outright misinformation that sounds more appealing to you?
Your proposed "action" is comically obtuse and will be ineffective at best. So no one can renovate a home for more than 30 days?
Number go up on property forever is what the masses want and what works for them, because the majority of people live in a home owned by that household. So you're misinformed about that as well.
Also stop fucking arresting people for living in unapproved locations or building structures that don't cost enough money, as long as they're not actually in the way of anyone.
Like, don't arrest people for sleeping under bridges unless they are sleeping in the middle of a footpath under a bridge. And don't go building footpaths under all the bridges to prevent them, either. Also tear down all the hostile architecture or at least don't arrest people for taking to it with angle grinders.
The free market is supposed to work by everyone solving all their own problems and then exchanging solutions with each other. If you claim to have a market but then arrest people for solving problems, no wonder you get a dysfunctional society.
Not saying that people living in tents on public land is a good long-term solution, but it's a step up from being completely shelterless, and since price changes happen at the margins, if it's even remotely viable, it may cause a market crash.
Literally this. Someone has to “lose” to fix this problem, and that loser has to be those with the most to gain from keeping the status quo as-is (developers, landlords, private equity, current homeowners, extortive townships/governments, etc).
https://archive.today/HlxXN
One of the issues the article doesn't mention is that these houses are effectively cheaper to purchase for corporate owners. Generally they can borrow money at a lower rate, but the ability of corporate owners to use depreciation on a new purchase to offset profits from previous purchases is more significant. Effectively they are redirecting money that would be paid in taxes into the payments on the new purchase.
This is not true at all. Corporate loan rates are generally pretty damn high, only exceptionally can they borrow for low rates. Mortages however are a special case since they are basically mandated to be low and safe by most governments in exchange for letting banks exist. Or in the US explicitily guaranteed through freddie mac and fannie may.
You whiffed on the point (note the word "but" in parent comment). The depreciation strategies are where the real benefit is. PE buyers use 60% bonus depreciation and cost segregation studies to create a $70-80K writeoff on a $120K asset, which often larger than the check they cut for the property in the first place
The final phase is to exit via UPREIT for OP units rather than cash, with the REIT getting a step up in basis that can be depreciated again, while still not triggering any capital gains for you until you convert
>create a $70-80K writeoff on a $120K asset, which often larger than the check they cut for the property in the first place
They're only deferring the tax on $70-80K, correct?
> They're only deferring the tax on $70-80K, correct?
Yes, if they sell normally. But usually capital gains tax is lower than that on the income so overall they're saving.
To be explicit: They use the $70-80K depreciation to offset their rental income (which often means they pay no tax on the income for that year and several years after). They'll pay it eventually when they sell, but at a (usually) lower tax rate.
There are tricks like 1031 exchange to avoid paying taxes when they sell, but I don't know how depreciation benefits factor in to those.
This is almost completely wrong.
First, depreciation on real property is about 27 years. 80k annual depreciation indicates a 2.2m purchase price.
Corporate capital gains don't get a special rate. They're taxed the same as regular corporate income. The 1031 like kind exchange is also very difficult to achieve as the bar is very high even under the Trump admin.
> PE buyers use 60% bonus depreciation and cost segregation studies to create a $70-80K writeoff on a $120K asset
Source? That looks like a juicy target for state taxation…
Bonus Depreciation:
https://tax.thomsonreuters.com/en/glossary/bonus-depreciatio...
Cost Segregation:
https://warrenaverett.com/insights/what-is-cost-segregation/
I believe bonus depreciation is time limited (unless Congress renews it).
Residential rental property does not qualify for bonus depreciation.
>This is not true at all. Corporate loan rates are generally pretty damn high, only exceptionally can they borrow for low rates.
Are these companies going to banks and applying for a loan? I'd think they are privately backed and invested in.
Privately backed isn't necessarily cheaper. In fact PE funds often have a big fat bank loan on their books because it pushes down the average cost
It's wild when you think about it: a family scrapes together a down payment and pays full freight on property taxes, while a corporate landlord can roll one property's paper losses into the next deal and keep building their portfolio, tax-deferred
You can't use unrealized capital losses (property paper losses) or even realized losses to offset property tax, you can only offset realized losses against realized gains for income taxes.
Afaik, property taxes are due no matter what, at least in Texas.
The tax being deferred is income/capital gains.
A lot of veterans live in TX because they have reduced or no property taxes, and also no income taxes. It's probably ~ 8-10% of disabled vets in my neighborhood.
The reduction in property taxes is just for vets, right? I read that, in general, property taxes are high in Texas compared to other states.
In many states, there's a homestead exemption on property taxes that doesn't apply to non-owner occupied properties, so the opposite is true.
Also, I don't know what you mean about rolling paper losses into the next deal, but I suspect it's not accurate either.
There's a reason this non-existent loophole wasn't mentioned in the article that was looking for reasons to hate on corporate landlords.
Capital loss carryover is possibly what they were referring to
Unrelated note but the Homestead exemption in Santa Clara County, average sale price $2,300,000, is $7,000. To be explicit, the home’s value is reduced by $7,000 for valuation purposes.
Edit: the tax deferred part sounds like a 1031 exchange
You might be right about the 1031 exchange, but that has almost nothing to do with property taxes.
The homestead exemptions are very small or non-existent in some states, but I believe they are fairly substantial in the south. Ultimately, my point was that they are completely wrong in that I don't know of a single locality where landlords are given discounts on property taxes but owner occupied homes have to pay full freight, but the opposite is true in at least some cases. They could be talking about developer incentives for new construction, but that's not the same thing IMO and it's difficult to understand what they meant.
It's very, very hard to talk to people who have such strong, completely uninformed opinions and seem to be completely unwilling to even attempt to educate themselves on the topic. To be clear, this is not pointed at you, I'm just not willing to invest the time you did to seriously guess at what the parent poster was going on about.
Don't forget the sweetheart tax rebates they sometimes get for promises of development.
What is this special depreciation corporate owners get? IIUC any landlord can use depreciation to lower their tax bill. Wouldn't the depreciation from a new purchase also apply to the rents from that new purchase?
Somewhat more outrageous is the 1031 exchange. Sell VTI at a profit to buy VOO and the government hits you with a capital gains tax. Sell your primary residence for $250k more than you bought it - same thing. But landlords are a special, privileged investor class to whom these rules don't apply. They can sell a house and pay no taxes on gains as long as they buy another property.
It's not special, just requires scale for it to make sense. E.g. Cost segregation studies and UPREIT transactions are cheaper on a neighborhood level. And you need enough passive income to absorb the depreciation losses
^ This
And the scale applies at every single step of the process. A citizen homebuyer is playing a oneshot game. There are few discounts to be had and every single fee is its own battle.
A corporation/PE is playing a multi-shot game. There are bulk discounts, relationships, and scale that is applied to everything from title insurance and inspections to cost segregations to filing all of the paperwork.
> There are few discounts to be had and every single fee is its own battle.
Also if you take a 10% gamble on a strategy to save 50k and it backfires and lands you with a 500k legal bill, that's just the cost of business to a big (or even not that big) company, but it'd be absolutely ruinous to private individuals.
> IIUC any landlord can use depreciation to lower their tax bill.
This is also not really how depreciation works for assets that retain their value. If you buy a building to rent it out, the cost of the building essentially a cost of doing business, i.e. a tax deduction. You pay tax on the profit which is revenue (rents) minus costs (building, interest, maintenance, advertising, etc.) Depreciation is the building, they make you take it over time instead of all at once when you buy it.
But the depreciation lowers the book value of the building, which is your tax basis when you sell it. If you buy a building for a million dollars, depreciate it down to $500,000 and then sell it for $2M, you have a $1.5M capital gain from the sale. You basically have to give back all the depreciation unless the building actually lost that much value by the time you sold it, and in practice it usually goes up instead of down.
It's really the homeowners who have the advantage here because there is a large capital gains tax exemption from the sale of your primary residence, and that's actually a reduction in taxes instead of just a deferral.
Depreciation is mandatory, your cost basis declines while inflation slowly pushes up the value, which leads to a type of phantom gain. There are abilities for individuals to lower their tax bill as there are breaks. But for a Mom & Pop small landlord the tax situation can be tough. 1031 exchanges are tricky for small investors as you have to exchange into a situation with the same mortgage. A big real estate corp can borrow against their total equity, rather than taking a mortgage on the new property. So they can roll their equity into the new deal tax free. This is especially lucurative to buying cheap, rennovating and then selling to another corp. And what isn't discussed is there is a huge amount of "carried interest" deferred profits. That tax break was intended for high risk venture capital investments but in the 80s and 90s it became used for speculative and even day trading. https://www.pgpf.org/article/what-is-the-carried-interest-lo...
You can only deduct passive income losses for depreciation if you aren’t a real estate professional of up to $25000 and that’s only if you earn less than $100K. It starts phasing out between $100K and $150K
> They can sell a house and pay no taxes on gains as long as they buy another property.
As long as they buy another property at least as expensive or more, within a certain time period.
And it's not that they don't pay taxes, it's that the cost basis gets reset. That is the benefit.
As another commenter pointed out, buying a home to live in gets you lower interest rates than buying for any other reason.
> but the ability of corporate owners to use depreciation on a new purchase to offset profits from previous purchases is more significant.
If you're referring to cost segregation, this is probably less true now than in the past. It used to cost a lot of money to do a cost segregation analysis, and made sense only for apartment complexes (i.e. the cost to do the analysis vastly exceeded whatever savings you'd get on a single house). So only rich investors who owned 20+ unit complexes would do it.
I've heard that in the last few years, many accounting firms are providing it for relatively cheap, so ordinary investors can do it now.
RE people make a big deal about depreciation as a tax benefit, but it's minor in my experience. You're effectively reducing the cost basis, so when you ultimately sell, you have to pay a larger tax on the capital gains. Overall you gain, but not by a lot.
Perhaps if you combine with a 1031 exchange, you may get a greater benefit.
And what about if rent into the next 10 years fully servicing the debt, and the maintenance with a margin on top?
If I am blackrock? If I am smaller PE deploying 10 million a year?
And ...?
Not sure what you're asking.
As the report points out, institutional investors purchase only 3% of homes nationwide (but much higher in some cities). Regular smaller investors likely buy more homes than the institutional ones.
> institutional investors purchase only 3% of homes nationwide (but much higher in some cities).
This is crucial. People are in cities - in the day and age of corporate consolidation, less and less jobs are available, and they are increasingly in-office, and increasingly in only a select few metro areas.
Nobody would give a damn if a glut of housing was built in the middle of South Dakota or Maine or Wyoming. That's because there's very little to no jobs growth in those regions.
Most people are in cities, and most rentals in cities are not owned by then - except for the exceptions pointed out (Midwest and Southeast).
If you're having trouble buying a house in Atlanta, yes - they are a big factor.
In Austin? No - not a big factor.
> Generally they can borrow money at a lower rate
There is some tax tricks you can play, but in general homes for primary residence is lower then secondary/rent, which is a big proportion of cost.
Build enough housing and all of the sudden it isn't such a sure thing investment.
Not easy to do of course, but the problems that come with building more housing are better then the problems we have now.
That may be the case but it would still be a good idea to look at regulating these run away feedback loops writ large so that people can't just play a game of whack-a-mole where they play the same old tricks in different sectors or invent whole new mediums to play the same old games afresh
Our system is far more regressive than most people realize. The poor pay more for things, don't have access to all kinds of tax breaks and cheap money, and can't afford accountants and shell companies and all the other complicated tricks you can use if you are wealthier.
I wonder: if you added it all up, would a flat tax (which is nominally regressive) actually be more progressive than the regressive taxes we have?
> would a flat tax (which is nominally regressive) actually be more progressive than the regressive taxes we have?
That's an easy one to fix regardless. Use a flat tax with a large fixed refundable credit. Now everyone pays e.g. 30% but gets a $12,000 credit, so someone who makes $40,000 is effectively paying zero, someone who makes $80,000 is effectively paying 15% and the effective rate approaches 30% as the number goes up. But the marginal rate is the same for everyone so there aren't all these complexities and arbitrage games, and at lower incomes the credit stands in for a lot of assistance programs so you don't get all the marginal rate cliffs from overlapping phase outs.
> Now everyone pays e.g. 30% but gets a $12,000 credit, so someone who makes $40,000 is effectively paying zero, someone who makes $80,000 is effectively paying 15% and the effective rate approaches 30% as the number goes up.
This only maybe works if you count capital gains as regular income. Otherwise they do the Steve Jobs $1 salary thing.
Even the capital gains can be largely evaded. https://www.propublica.org/article/billionaires-tax-avoidanc... https://www.propublica.org/article/lord-of-the-roths-how-tec... etc.
> I wonder: if you added it all up, would a flat tax (which is nominally regressive) actually be more progressive than the regressive taxes we have?
Absolutely not. The US has the most progressive federal tax code in the OECD, mainly because we don't have a VAT like most other countries.
Nearly all of the loopholes you mention are at the federal level, where half of the households in the nation pay <= $0 in income tax.
This^, this is how you end up with serfdom
Ah yes, the down votes have started I forgot that this is a forum for the rent seeking class
The reasons for high housing prices generally come down to "government restriction of supply, as supported by a large amount of voters".
There's no other expense where we talk about it as a market, at least in general layman focused new and discussions. People aren't concerned about the fuel market or the grocery market. They're concerned about fuel prices. Grocery prices.
Housing is an exception due to catastrophic historical policy choices to encourage it as an investment. Government restrictions on housing supply will exist for as long as a significant number of people not only have their net worth wrapped up in housing, but who actually leverage themselves and go in to extreme debt to achieve it. Not to mention the attached cultural issues of then wanting "buying a house" to mean "buying an area staying the same".
Concentration of residential real estate among fewer owners is the only path that doesn't lead to the future being housing based feudalism where your station in life is determined by if you inherited somewhere to live, and how desirable it is.
Good luck trying to mass build in this financial and fiscal environment. Governments could cut as much red tape as they'd like now to stimulate housebuilding and the market will still continue to build higher priced homes because that's the only game in town now to deliver an attractive ROI.
A fundamental issue no one is truly engaging with his the concentration of where people want to live which has been a combination of where jobs are and the development consumer activities in those locations have fostered to keep them attractive places to live. They're too many people trying to live in too few places and thats subtly due to necessity related to where employment is.
Remote working should have eased that more sustainably over the medium term but society decided it was better to throw the baby out with the bathwater when it came to that & productivity issues etc.
Most people are apathetic about most things at best. They don't "really" care nor should they. They only casually approve or disapprove.
The problem is that we as a society tolerate people turning off their brains and becoming useful idiots if you frame things in certain ways. And so what to the scheming weasels with special interests to serve do? They frame things that way.
You see it all the time on HN, say nothing of "other" platforms. People who have no real pressing need to care about some specific thing will go to bat for something just because it's peddlers say it's good for the environment or public health or god or whatever. Anything can be framed in such a way they're happy to advocate for. It's like an open mail relay or DDOS reflection. This exploit in our society gets leverages left and right by special interests to get all sorts of things that make them money written into the rules and laws at every turn.
These people ought to feel bad for just taking a one sided story at face value and broader society ought to ostracize them for it same as we'd ostracize anyone stupid enough to go to bat for bigotry in drag.
The problem is in the mirror. This is a social norms issue.
I agree with you general point, however in the long term, I don’t think this will financially end well for those betting on housing as an investment. At some point, if a loan essentially spans the course of a borrower’s lifetime, it’s no longer a loan, it’s a rental.
Therefore the lender will not be made whole when their debt serf dies. That seems to place an upper ceiling on the (inflation adjusted) growth of the investment side.
People talk about the market for assets: cars, precious metals, collectibles, and houses are examples. They are not normal expenses because you have something after the expense, unlike fuel or groceries.
Assets often function as stores of value, and housing is unique in that it performs an essential function, is comprised of material that generally rises in cost, has sentimental value, and is fixed to a specific location that may or may not rise in value but does in general (you see very little written about the non-housing shortage in Baltimore or many rust belt cities where land is very close to free, or even less than that in some cases).
Residential real estate is one of the most fragmented investment classes in existence. We're so far from feudalism that it's not even worth talking about. If you want housing to be less expensive in your area, you need to be like Baltimore and reduce demand or remove the disincentives from building and allow an increase in supply. Most people prefer the latter.
> The United States is short 4 million housing units, with a particular dearth of starter homes, moderately priced apartments in low-rises, and family-friendly dwellings
The number cited links to here:
https://upforgrowth.org/apply-the-vision/2023-housing-underp...
Which has this as the report:
https://upforgrowth.org/wp-content/uploads/2023/10/2023_Hous...
The number is driven by this definition:
> Missing Households. Households that may not have formed due to lack of availability and affordability, e.g. households with children over 18 years of age still living with their parents or individuals or couples living together as roommates at levels exceeding historical norms.
Did you intend to add something after the definition? For better or worse, "moving out once you reach 18" is widespread enough of an expectation that it can be used as a yardstick for housing shortage.
I think it's interesting how "shortage" is defined across different products.
From an economics standpoint, "shortage" isn't a useful word, unless it's applied in the extremely unlikely scenario where there nothing is available at any price. Generally, this is because price dictates supply.
"Shortage" for the current housing market is generally used to mean, "relative to historic trends, many people want houses who can't afford the current prices."
Shortage in the absence of price controls generally means that something is inhibiting supply from increasing as demand does, causing increased demand to have the primary result of increasing prices rather than increasing production.
Sometimes this is expected or unavoidable, e.g. if you have a sudden increase in the demand for electricity then the price will increase temporarily until new power generation or transmission capacity can be brought online, and in the meantime you have a shortage.
The problem comes when the shortage is a result of artificial scarcity as it is with housing/zoning, because then it's not temporary, it persists until the cause of the artificial scarcity is defeated.
Shortage is almost always used with a hidden assumption that the current price is "bad."
Truckers are currently retiring faster than they're being replaced. So some folks are saying there's going to be a "trucker shortage." In reality, there are plenty of people out there who could get a CDL license and drive a truck, but don't. Why? Because the compensation for being a trucker isn't high enough because the demand isn't high enough.
For housing, from the house seller's point of view, they could have the viewpoint that there are far too many houses for sale, the supply is too high, they want a higher price for their house. And from the buyer's point of view, there aren't enough houses because they want to pay a lower price.
I'm not saying either side is right/wrong or good/bad. It's just that "shortage" isn't a very useful word.
Let's be honest, it's not even that.
It's more like "relative to historic trends, many people want houses [in desirable areas] who can't afford the current prices."
Building tons of new houses outside of the hot areas that all these people want to live would still elicit cries of a shortage and an affordability crisis. Because there are currently affordable places outside of hot areas, but not very many takers.
It's a really tough nut to crack. Because how do you reorient the demand to those areas that have the supply? It's not easy. We can't seem to do it currently, and there's no real plan to do it if even if we could somehow build even more housing. We'd have to build lots of housing only in hot areas. Which sounds easy enough until you realize the economics don't make sense and even on the off chance that you could, it would only generate more demand.
First order of business however should be to find a clever way to stop abuses like the ones outlined in the article. The housing that would free up in the hot areas would not be near enough to meet the demand, but if we stop that nonsense at least we're not "digging the hole deeper" so to speak.
Exactly this. There's something about housing which causes so many people to think its an easy thing to solve by just building more and that's not actually true
Ban corporate ownership of residences. Only individuals, Coops or condominiums. Cap how many rentals an individual can own.
The government should also build massive amounts of housing. Everywhere of all types - apartments, townhouses, single family. After built transferred to the residents as coops.
> Ban corporate ownership of residences. Only individuals,
Many/most corporate owners are individuals (as per the linked report). See my comment here:
https://news.ycombinator.com/item?id=46208561
> Cap how many rentals an individual can own.
Yes. Cap to 0. Until we get data on the breakdown (what percentage of rental homes are by owners who own 1, 2, 3, etc), we don't really know. It won't be easy to determine because a lot of RE investors create a new LLC for each property they own.
I love that there are people that can't even conceive of the idea that entities that let out apartments are providing a service to residents. In their view, the natural state of every resident is a desire to own their home.
A fun knock-on effect of this policy proposal: it would effectively halt all new development of dense multifamily.
Yes, the natural state of every resident is to live in their own home. To be clear by home I don't mean "single family detached house on a suburban street", I mean a place to live with water, electricity, and a roof.
Landlords provide no 'service'; they are merely an existence tax.
The market already does not build dense multifamily; what is there to halt?
> The market already does not build dense multifamily; what is there to halt?
Landlords have existed since forever, and the market was until recently very happy to build enough supply.
That it's suddenly gone downhill implies a problem well beyond "landlords".
There's also the obvious fact that we do build dense multifamily (not enough of it, but some is better than "none", which is the endpoint of that policy).
The real reason single family housing ownership is the only real option is that society effectively pays people to own; appreciation out weighs all costs of ownership so in the end it’s free or even an investment.
But if it was truly a free market and supply met demand owning housing would be a depreciating asset and renting would be cheaper.
Land ownership is a cultural construct. Their is no natural state.
You can't fathom that someone might not want an ownership stake in the property they happen to reside in, that there could possibly be a downside to that.
You know how it's recommended to sell employee stock grants asap, so your not over indexed into your employer? I.E. if the company you're working for performs poorly or goes under, you don't want to lose your job and wealth, and if it does well, you'll keep making money at your job anyway, so there's no advantage to investing more of your personal capital into your employer than you would if they weren't employing you (barring insider trading).
It's funny that people rarely seem to apply the same reasoning to their dwelling place.
I think everybody has to be obliged, at least once, to move within a year or two of buying a house, just so they can understand what it is to take a huge bath on closing costs.
And that's before you get to things like the furnace going, or the roof failing. Two kinds of people with this "landlords provide absolutely no services" perspective: people so comfortable financially that the y-o-y costs of maintaining a property don't even register, and renters who have never owned and been on the hook for an urgent big-ticket maintenance problem.
Can I get a waiver due to my home purchase at the height of the bubble before the gfc? Cause I feel like I’ve paid enough for lessons learned.
I never said homeownership. Just a place to live thats not owned by a ruthless corporation that spends every day trying to squeeze every penny possible out of the tenant
I'm responding to your policy proposal! It's not my fault if that policy doesn't cohere with your preferences!
What about a non-ruthless corporation? How do you test that?
What about the fact that most homeowners get the vast majority of the money for said purchase from a (presumably ruthless) corporation?
No such thing as a non-ruthless corporation, it is inherent with the legal structure.
I think it hasn't clicked with you that you're effectively advocating for the end of all renting.
There is absolutely no way I would have wanted to be tied down to buying a house when I was young.
It's interesting to think of the second-order effects of this. If these corporations can't invest in housing, they'd direct their money elsewhere. Maybe we'd see a stock market or commercial real estate boom. Maybe a proliferation of new ventures.
>> If these corporations can't invest in housing, they'd direct their money elsewhere.
I think that's why they're buying residential - there aren't any other traditional investments that aren't in a bubble or just have low returns. If you anticipate economic collapse or hyper inflation or whatever, physical assets make sense - when you measure wealth in houses you don't care what the dollar does. Gold people can do without, housing not so much. Whatever happens next, people will need a place to live. OTOH the population collapse is also coming so housing doesn't make much sense beyond 2030 or so.
There will be a squeeze on real estate as the sea level rises and insurance increasingly withdraws from coastal and fire-prone areas.
If insurability becomes a crisis, I'd expect it to reduce housing availability and raise prices for competing (insurable) properties.
Of course it wouldn't happen in isolation, so there are other massive forces to consider.
Maybe wide swathes of formerly-occupied (but now uninsurable) land would sell cheaply enough that middle-income people could build inexpensive semi-disposable vacation cottages, like the old days.
GP's assertion of population collapse in five years is a bit extreme for me!
I'd expect to see a surge in self insurance. These areas are so valuable already in a lot of cases where rich people are content to pay six figure property tax bills. Especially with cost of construction being a fraction of that property's value.
I wonder if they could develop some legal apparatus to employ individual straw buyers to circumvent such a restriction.
When we bought our first home, a townhouse, in the early 1990s the builder only sold to people that were going to live in said home. They helped save the down payment and made sure that utility payments (gas/electric) were under a certain amount each month (super insulated and heated with a hybrid hot water system). Bigelow Homes, they were on a few This Old House episodes in the 80s.
It would be nice to see that again, the new housing market is ridiculous now.
That sounds like an absolute dream compared to today's market
Homeownership rates are not materially lower than before. Page 5 for the data, page 13 for the formula.
https://www.census.gov/housing/hvs/files/currenthvspress.pdf
I would bet most, if not almost all homes, are sold to buyers who will occupy them.
This graph goes further back:
https://fred.stlouisfed.org/series/RHORUSQ156N
More info:
https://en.wikipedia.org/wiki/Homeownership_in_the_United_St...
The issue is really felt more on the housing constrained markets. In these markets home prices weren't really very diverged from what we consider extremely low cost markets today very much. In the past 25 years, we've seen these low cost markets essentially stagnate or very hardly grow from 1990s prices, while high demand markets have gone up in price 4x or more in some cases over that time.
Now there are certainly high income buyers who can afford these 1-2-3-5 and up million dollar homes. But the very nature of who is a homebuyer is changing before our eyes in these places. The white collar office worker in 1990 who was buying in west la then is saddled with being a renter, because they only make $70k in west la. Their income hasn't 4x since 2000, not even close.
How does this change the makeup of who lives in the homes? Maybe that $70k worker would have shacked up with the home purchase, and had two kids to fill those spare two bedrooms, who go on to be enrolled in the school district, maybe work part time jobs, and hopefully stick around after and contribute to the regional economy. Instead, maybe that 3br home goes to a content creator, who uses one spare bedroom as a guest bedroom and the other spare for creating content. The school ends up short two potential pupils. The local economy loses two potential contributors, shops don't have anyone to hire and cut shifts and start a downward cycle of declining service and profit against rent increases until closure.
Median age of ownership? Skews older now I'm guessing.
I was talking about the younger crowd trying to get a start.
> Median age of ownership? Skews older now I'm guessing
First-time homebuyer (FTB) "average and median age stood at 36.3 and 33 years for the period Q3:24-Q2:25, and there has been minimal FTB average age change since either 2001 or 2021" [1].
[1] https://www.aei.org/articles/nar-says-the-typical-first-time...
I just watched a video from Dave Ramsey title "What the Government Should Do to Fix the Housing Problem" He specifically calls out Institutional Investors and Foreign Corporations that have been purchasing single family housing and converting them into rental properties. I think he makes some good point in his video: https://youtu.be/_CrgniwSLLM
We just had a research report on HN a few weeks ago showing that the median number of properties "corporations" in California rented out is 1.
Thanks for sharing the DR link — hadn't listened to him in many years, but he definitely helped me start my debt-free journey (although his long-term investment opinions aren't aligned with my own planning / re$ult$). I am not religious I just started listening.
>"If you're 25 or 26 years old right now YOU ARE GETTING SCREWED RIGHT NOW (by large banks) like has never happened ever before... record debt debt debt" —Dave Ramsey [0]
I am definitely doing "better than I deserve."
[0] He actually says this at 6m in above-comment's link
Why do you think that renters don't deserve to live in single-family homes?
Not at all what the GP said.
They aren't saying landlords are the problem, they are saying Institutional Investors and Foreign Corporations being landlords are the problem.
Wait, you're not answering his question. "Institutional investors" rent out houses at a scale individual owners can't, and have more resources to maintain those properties and respond to renter complaints. Why isn't a carefully-regulated market of institutional single-family-home lenders a good thing?
>Why isn't a carefully-regulated market of institutional single-family-home lenders a good thing?
Is there a good example of this?
Every corporation I've rented from have all fought me tooth and nail when I needed maintenance and did basically everything possible to ignore any and all complaints (because it costs them money, obviously). I have had to have a lawyer send a letter on my behalf more than once.
But that's just my experience, which has jaded me. Perhaps you can show me a non-hypothetical example of the other side and open my eyes up a bit? Any countries, laws, specific corporations which demonstrate a carefully-regulated market of institutional single-family-home lenders I should look at?
It has not been my experience that individual owner landlords have been better than institutional owners!
Anyways, I was just calling out that your logic didn't appear to hold. The right response to the comment that roots this subthread is "institutional landlords are not generally a thing". Again: the median number of properties a California corporate landlord lets out is 1.
>your logic
I didn't write any other comment here :)
But, anyways:
>It has not been my experience that individual owner landlords have been better than institutional owners!
My experience has been different than yours, in that case!
Must be. In particular: the only landlord I ever got a security deposit back from automatically was a corporate landlord.
More broadly: if your concern is that the landlord isn't going to fix the furnace or whatever, you can address that without distorting the market just by creating causes of action, penalties, and fix-and-deduct ordinances to shift incentives.
Banning corporate landlords reduces the supply of housing (larger institutional investors are the primary builders of dense multifamily), and privileges individual owner/landlords who do not have a better track record or better incentives or better resources.
Right. I'm not advocating for a banning of corporate landlords. I just wanted to look at the regulations/ordinances/etc. of a "carefully-regulated market of institutional single-family-home lenders" to take some inspiration from, and perhaps advocate for some of the sensible rules in my area. I know you participate in your local politics, and have a different viewpoint than mine, so I thought I'd ask.
Fair enough! Hard for me to answer, because my priors are that non-corporate landlords are generally worse than institutional landlords, if only because the structural incentives favor scale.
There is absolutely nothing wrong with institutional investors buying tract homes and renting them out. Nothing! It brings the benefits of living in such homes to people who otherwise would be excluded from them by the financial credit system.
The article linked in the OP, and many posters in this thread, present arguments to the contrary. The main one seems to be that although institutional investors are happy to let people “benefit” from renting their homes, they are precluding many from ever owning those homes themselves.
I understand the arguments, and I understand that they are morally vacuous arguments. It is simply an advancement of the interests of the bourgeoisie. They are annoyed that renters are effectively able to influence the market, even if by the second degree through large-scale renting. They believe that having scraped together a quarter million dollars for the down payment makes them a special class of people. It is a stupid position to defend.
> It is a stupid position to defend.
Doubly so when they themselves lobby for policies that keep housing prices high, which is the primary thing preventing more people from owning rather than renting.
Well really I was just trying to explain the GP's post, not adopt their views, but I think I can play devil's advocate here for the sake of discussion.
The problem with institutional investors is that in making it big business you drive up home prices which in turn drives up the rental prices. Since they can have a wide portfolio of homes, they are less likely to lower rent prices when demand drops, because they can afford to take the short term hit if it they think the market is going to pick back up again. AND they can play games like grabbing all available homes in an area in order to artificially inflate prices.
I see that you did your best, but it should be obvious that the people who want to buy homes also have a massive financial machine on their side, and that it also drives up prices. If the insured 30-year mortgage did not exist, homes would be a lot cheaper.
Why would someone listen to Dave Ramsey of all people? He is neither an economist, nor a Christian, he has nothing to contribute to the subject!
His shtick is real estate investment, of course he wants to see Joe Public buy a starter home. The trouble is: real estate as a government-guaranteed investment vehicle is what brought us the housing affordability crisis.
His "schtick" is having people pay down and reduce debt. What's noteworthy on this video is that he's calling for the government to fix the problem. He's normally anti-government involvement in business. This should speak to the severity of the problem when someone like him is calling for the government to step in a fix it.
> nor a Christian
... what bearing does that have on anything?
Only the right kind of people can hear that dog whistle.
Dave Ramsey, commonly described as "Christian finance guru", who had a show on the "Christian Broadcasting Network".
... pitching his books and preaching the Prosperity Gospel, which is antithetical to mainstream Christianity and not good financial advice.
build. more. and this problem will go away.
Supply constraints are a symptom of the problem, which is housing is a huge leveraged investment for many. You generally won’t get policies for building more when it negatively affects the finances of a majority of voters
this sounds nice, but neglects the fact that (1) materials cost has gone up and (2) zoning requirements exist. (1) means its just more expensive to build overall, and (2) means that a lot of proposals for apartment complexes get voted down.
I'm not neglecting those facts. 2) is almost the entirety of the problem. the call to action of "build more" is not wishful thinking that someone will donate free houses to the public. the call to action is to vote for politicians who will remove the near-universal smothering red tape that prevents any kind of meaningful new housing construction
Part of building more is getting government (mostly) out of it so that things like zoning laws don't hamper new development. Obviously that is very hard to do at a local level when incumbent homeowners' housing values would be cut in half overnight.
Actual NIMBY/YIMBY fights look like one level of government representing a lot of people who can't afford a primary residence fighting against a different level of government representing a lot of incumbent primary residence owners who are concerned on a personal level about the negative externalities of more people being able to live in their neighborhood. Government is happening no matter what.
This is happening in california. In fact there are three current situations: 1/SB9 cutting R1 lots in half 2/ ADU laws, which let you build up to 3 homes/units where there was one and further, can be combined with SB 9 3/ AB2011 which lets you turn defunct strip malls into housing
Honestly, this plus things like PermitFlow make me feel like we will be able to build enough. The issue will be making sure the housing is affordable rather than expensive and empty.
Well duh because "just make everyone underwater on their mortgage" is a bit of a silly solution that definitely won't have any second order effects.
You're not wrong. There are multiple aspects of government involvement that require untangling which includes federally backed mortgages that allow banks to be more lax on loan terms (which is how we got 30 year loans and Trump proposing a 50 year)
>this sounds nice, but neglects the fact that (1) materials cost has gone up
That's a red herring because most of the price increase comes from increase in land prices.
https://www.aei.org/housing/land-price-indicators/
can you please explain how these graphics are supposed to support your argument? it's not clear to me and i'm trying to understand the georgist POV.
nonetheless, materials and the cost of labor are the most significant costs for new buildings. not land, taxes, or zoning regulations. here is one example where this is a fact: www.vermontpublic.org/local-news/2024-05-23/uvm-halts-student-housing-project-construction-costs-workforce-shortage
Switch from "national level" tab to "metro level", and select los angeles for an extreme example. Look at the the figures right of the map, that says "share of SFD units build before 1980 with a land share of" and compare the figures between 2012 and 2024. Just by eyeballing the percentages, it looks like the land share went from 50-60% to 70-80%. This is confirmed if you sum up the figures in a spreadsheet, you go from an average share of 51% to 72%.
You can compare this to overall housing prices in the LA area[1], prices in 2024 is 262.7% of 2012 prices. Suppose you have a $100k house in 2012, that will worth $262k in 2024, an appreciation of $162k. Using the land value percentages above, the land value of the houses are $51k and $188k respectively, an appreciation of $137k. That means 85% of the appreciation was in land, not because building materials got more expensive or whatever.
[1] https://fred.stlouisfed.org/series/LXXRSA
also neglects the market's appetite for this risk of building in the current environment, which is the biggest problem. market gonna act like a market
Not if private equity just snatches it all up.
Yes build more. Also regulate the oligarchs until they no longer exist.
> Not if private equity just snatches it all up
"As of December 2022, the five largest investors owned about 300,000 homes — just under 2% of single-family rental homes nationally."
Where institutions dominate is in rentals: "institutional investors own roughly 2% to 25% of single-family rentals in major markets" [1];.
[1] https://www.npr.org/sections/planet-money/2025/09/09/g-s1-87...
PE buying real estate is a long bet on housing prices. If supply increases enough, prices flatten out and then fall, and the longs get crushed.
These investments are a bet on continuing to under-build and under-densify.
its a good bet on their part (although i hate it). we obviously can't increase supply fast enough to keep up with demand in the current regulatory climate and with an existing shortage of skilled tradesmen and ratio of tradesman retiring out vs newcomers entering construction, there doesn't seem to be a feasible way to meaningfully increase supply.
If they buy out all the supply, there will always be a shortage.
So build so much they cannot rent all of it. Over supply will eventually drive down prices.
who is going to do the building? Because PE is the one doing that too.
No, private equity appears to be a minority of home builders: https://www.builderonline.com/builder-100/builder-100-list/2...
Sounds like trickle down housing to me.
Me: "should we stop allowing private equity to hold property?"
My Strawman: "nah let's build more houses to be snatched up by private equity, that way eventually maybe they'll be really nice and decide to lower prices for us someday due to the infallible balance of supply and demand that definitely hasn't been rigged to hell over the past half century. They certainly won't just continue to rig the system to benefit themselves"
>to the infallible balance of supply and demand that definitely hasn't been rigged to hell over the past half century
How has "supply and demand" been "rigged"? A lack of supply isn't evidence of "supply and demand" being "rigged", it's it working exactly as predicted, not any different than oil prices going up when there's some geopolitical event threatening supply.
The area I live in has homes that remain empty because the investor doesn't need the capital nor the space and just holds empty units for multiple years when they eventually sell (for even more than they would have sold in the past).
Housing demand will always be > 0 as long as population is growing and hence there can never be a oversupply.
In areas where there is demand without risk.
Corporations shouldn't be allowed to own residential properties. Period.
For every complex and difficult problem, there is a simple, easy and wrong solution.
If corporations can't own residential properties, how would anyone rent a house? How would home builders build model homes? How would Trusts manage real estate?
This is a complex and nuanced problem.
From individuals?
Anecdotally: I've rented 5 different single-family houses in my life. All of them were rented from individuals.
Only 1 out of the 5 had a landlord that owned some other stuff that they also rented out.
For the remaining 4 out of 5, the landlord only had that singular property to rent: They lived wherever they lived, and they also had an extra house for whatever reason that they rented to me.
I'd be willing to bet the majority of those "individuals" were incorporated as an LLC to limit liability, thus making them corporations.
I knew these individuals (no scare quotes required) personally before I rented from them.
But sure: If you want to bet that you're right about a very specific situation that you have no specific knowledge of, then don't let me stand in your way. A fool and his money are soon to part.
I think you're misreading his intent. It may not be the case for those you rented from, but over the last 15-20 years, the standard practice for them has increasingly become "Form an LLC".
In most cities, when you rent a detached house from a corporation, it's really one individual behind it.
These people are likely not the minority.
> those "individuals"
The context is my anecdotal experience.
Within that context, their intent was spelled very precisely.
So no apartments? I would much rather do business with another business than deal with individual hobby landlords
I've had apartments, too. Both corpo-owned and owned by some dude who had some apartments.
The corpo ones were the worst.
They invented illegal terms ("Sorry, sir. You may have signed your 1-year lease agreement on the fifth day of the month, but our policy is to close leases only on the last day of the month. You still owe us for the rest of this [13th!] month whether you've moved out or not"), were wildly successful at making all of the security deposit disappear, and were miserable at keeping their word on necessary repairs. They were shit.
The ones that were run by some dude who owned some apartments were very different. I paid my rent on time. If I had a problem, I called the singular responsible person directly and he (being the kind of person who likes to have timely payments in their bank account) would answer the phone himself. There were never any surprises relating to money, and I never had an issue that lasted for more than 24 hours.
And the one person operated apartments are usually undercapitalized and doesn’t have a professional maintenance staff. The ones I have stayed at have on site office personnel.
These were both in the north suburbs of Atlanta - one was mid upper end at the time and the other was in one of the more affluent neighborhoods
Huh?
I have no reason to care about staffing or capitalization. Those aren't my concerns. Those concepts are beyond my purvey as a tenant.
I care only about timeliness. My entire relationship any landlord is that of paying money, and receiving housing and services relating to that housing.
When the aircon dies and it takes weeks of pestering for the corpo entity to address it, that's a problem for me that changes the way I view the world in a negative way.
When the aircon dies and it's fixed the next afternoon by the action of some dude who owns some apartments, then I don't really have anything to complain about at all. There was a problem and it was in the past almost as soon as it was discovered.
Capitalization is your concern because if your landlord is pinching pennies barely scraping by they take shortcuts and slow walk repairs. If they lack staff, they don’t have repair people on site that can fix things.
Why is it better to rent from individuals? They have the same profit motives as corporations.
Why is it better to buy local instead of from Amazon? I mean: The local place has the same profit motives, so they're basically the same thing -- right?
> For every complex and difficult problem, there is a simple, easy and wrong solution.
Sure, but realize that also applies to the current status quo.
Also, you cannot create the 'right' solution to a complex, nuanced social problem. You can only slowly shift the problem over time, one 'wrong' solution at a time.
Agree, but this simple solution isn't going to shift towards the right solution over time, and could very easily make housing shortage worse (especially as it would forbid home builders from making model homes, or keeping an inventory)
"how would anyone rent a house?" From a private owner
"How would home builders build model homes?" - This is a great point. I should have said "after the home is built"
"How would Trusts manage real estate" - for residential real-estate, they wouldn't. An individual would. But I just want to point out that I never said that corporations shouldn't own real estate. I said they shouldn't own residential real estate.
It's only as complex an nuanced as we make it. For most of history, individual people owned real estate. Only recently did we manage to screw that up. We can unscrew it.
> For most of history, individual people owned real estate. Only recently did we manage to screw that up. We can unscrew it.
Corporate ownership of real estate is ancient - read about the land rents (and in-kind labor rents) that early Christian monasteries were entitled to in late Roman/early-middle-ages Europe, or how Buddhist monasteries have been funded from local levees for thousands of years. Or how the British crown as a corporate entity currently vested in Charles III still owns substantial chunks of British real estate. History is long and for most of it it was not the case that ordinary middle class people even existed, let alone owned houses.
> Corporations shouldn't be allowed to own residential properties. Period
Congratulations, you just ensured zero new housing creation in our cities. (Co-ops are corporations.)
I am currently suing a former residential LLC in small claims court. Going on three years, now...
Justice is not blind. Both sides make this so difficult. And expen$ive!
Sorry, but this is just a bad idea. It's classic populist slop.
The biggest driver in housing prices is under supply. The main source of under supply is individual home owners who consistently vote against good zoning to protect their economic interests.
Corporations do not have the votes to strangle supply like individuals do.
Summary: they're pulling "starter homes" off the market, predominantly in nonwhite neighborhoods, and skimping more on maintenance/landscaping.
When a landlord “Skimps” systematically on their obligations as a landlord, we call it a slumlord.
"Skimping on maintenance" is capitalisms main and really only play. So many issues (housing, transport, utilities) are because "the market" won't ever pay to maintain.
Externalize the costs, to build your profit!
Agreed. When I moved to the US from Australia 19 years ago, the road condition here blew my mind. The potholes, tree roots, all of that? There'd be protests at City Councils for a fraction of that in Australia. Here, just "the way it is".
There are now no "starter homes". There are starter _locations_. And dense cities ain't them no more.
This is addressed in the article that you didn't read, but commented on anyway.
No, it's not. The article is nothing but a complete lie and a ragebait against scapegoats. This is similar to how conservatives are raging against trans people.
Starting from this:
> The United States is short 4 million housing units
It's a lie. The US has more than one housing unit (1.1) per family.
We don't have a housing problem. We really really don't.
We have an urbanism problem, that made the dense hellscapes the only viable housing location.
>and skimping more on maintenance/landscaping
I.e the kind of stuff everyone wants to do but can't justify flying so close to the sun on because they don't have a legal army say "we are in compliance and here's why" on their behalf when the municipal government comes looking for fine money or the slip and fall lawyer tries to make something their fault.
In "reasonable" (note for the bottom feeders, I did not say "free", I said "reasonable") markets the big guy has to do things to higher standards because his big pot of money will attract vultures looking for a quick buck if he does even slightly wrong.
It's usually the opposite. In a lot of rental markets the small time landlords do even less than the minimum in terms of maintenance and upkeep, whereas the big corporate landlords at least have some basic level of organizational competence. Most local governments don't have the resources to do much enforcement so only the most serious violations are ever punished.
Eh, toss a coin. I've seen it cut both ways. Corporate can be "is sending someone to fix it" for months just like a slumlord.
Super depressing. An individual can’t compete against big money
Private equity goes to housing because there is a return there.
A housing can either be an investment or be affordable. It cannot be both. Those two things are completely at odds.
When something is an investment, it must become unaffordable over time. There is no way to square that circle! Unfortunately, housing-as-investment is more or less baked into our cultural DNA. We do not need to unwind the supply problem; or the government regulation problem; or the corporate problem. We need to unwind the idea that a house is an investment.
Good luck with that. It's the air we breathe here. There's nowhere to go but up.
Lots of ideas in here that fail to properly identify and address the root cause, which is disappointing given how many of us are programmers.
Trace the problem back. Where does it start?
Why is PE investing in homes? Because they can make money. Why does buying a home make money? Because the value appreciates. Why does the value appreciate on an asset that literally deteriorates over time? Because of restricted supply. Why is there a supply shortage?
The root cause of this issue is supply. Zoning, mostly, is to blame. There are down stream issues, like the capacity of the construction industry, but that is an effect of the current environment not a root cause in and of itself — if there is money to be made, construction will grow as fast as it can.
Fix supply, and you fix the issue. This is a uniquely (English) western world problem. Go look at western countries that speak English vs. non-English housing starts. It’s just a cultural failure. You can blame corporations all you want but at the end of the day most people in the anglosphere expect a return on the largest purchase of their lives, even if it comes at the cost of materially worsening the lives of those around them.
Usually a root-cause analysis asks for five why's so your analysis seems a bit short.
One should ask why it is that housing / land is more profitable than those investments in which banks and private equity previously invested. And then when you follow that line of reasoning (too much capital and credit -- thanks quantitative easing! -- poor performance on bonds due to low interest rates and restrictions on the quality of investment vehicles) and you'll see that the root cause is probably more financial rather than _just_ too little housing.
Debts need to be cleared, losses need to be accepted, and leverage unwound. Building more housing just gives banks and private equity more stuff to buy.
That there may be "too much capital and credit" is a red herring because investors won't pour money into assets that aren't lucrative. The main reason housing has been so lucrative is because there's more demand than supply, so building more housing what needs to happen!
You're absolutely right of course. Even a child could look at the present situation and determine that the solution is to simply build more housing, but for some reason many grown adults cannot accept such a simple solution and insist that what's actually needed is more government regulation or something.
I feel like i've seen the atlantic write this exact same article at least 3 times in the past year. Its getting better but the claims are still not supported by reality.
I recently learned about Singapore’s seemingly excellent public housing system that is used by over 75% of its population. Singapore being so capitalist about everything else while carving out housing I think provides evidence that capitalism can be made stronger by keeping certain things away from strict market forces.
https://en.wikipedia.org/wiki/Public_housing_in_Singapore
We don't have a free market in housing at all. It's a cartel with restricted supply.
You can't have a free market if supply (or demand) is constrained.
You either go the liberal+regulated free market way, which will get lobbied, then overregulated, or you go the socialized way, where you allow local government and associations/unions to compete in the market... with the exact same rights as the companies, and no weird rules that prevent them to truly compete.
And if you have a natural monopoly (energy distribution is the worst offender), you have to go the central planning way I guess, until we find something better.
Who is “we”? Even within the USA that statement certainly isn’t true everywhere.
Housing is more than a market - it's where people live
Do we apply that logic to any other market that's served by for-profit companies?
"corn/egg/beef is more than a market - it's what people eat"
"cars/gas is more than a market - it's how people get around"
"natural gas is more than a market - it's how people stay warm"
So what if we do apply that same logic to those other categories? Or what if we do not?
Is there a point to this line of questioning?
> Is there a point to this line of questioning?
That "housing is more than a market - it's where people live" is a platitude. It sounds nice. But it doesn't tell us anything meaningful nor solve any problems.
Private equity is the gamification of everything, in a compressed time frame. A company focused on longer time frames will cultivate their reputation. This takes the form of quality products and good customer service. PE has no need for any of this nonsense. They are looking for a quick return on their investment; to trade in all reputation and goodwill for their immediate value in cold hard cash. The more immediate the better, so they can move on to their next acquisition.
Funny, because you hear the same hand-wringing about how public companies (ie. the exact opposite of PE) only care about next quarter's earnings report. By that metric, PE is better than public companies, because their source of capital is more secure and don't have to worry about flighty shareholders dumping their shares.
I don't see how they are opposites; public companies have their own perverse incentives.
A gift link (no paywall, no archive): https://www.theatlantic.com/ideas/2025/12/private-equity-hou...
> Who’s going to win in a bidding war for a three-bedroom in a suburb of Cincinnati: a single-income family with a scrabbled-together 10 percent down payment or a Wall Street LLC offering cash?
I don't see why the seller would care. They're getting a check at closing, that's all they care about.
I mean, if there's a question about whether the buyer will actually be able to get financing, that could be a concern. But most buyers are pre-qualified (at least if they're working with an agent). The main reason they would not get financing is if the appraisal came in lower than the sale price.
Closing certainty is a major reason people will take all-cash offers over financed ones. Even if you're pre-approved for a loan.
A cash offer will still fall apart if the appraisal comes in too low, I would think. Or does the term "cash offer" imply that no appraisal will be done?
Appraisals are generally done to ensure that the loan guarantor will be able to recover their investment if the party taking the loan defaults. Therefore, cash offers don't perform appraisals. Cash offers lower risk for the seller and provide fastest time to close the transaction.
Probably the latter, the appraisal is typically mandated by the bank issuing the mortgage.
There is no purpose for a cash buyer to pay an appraiser to appraise a house. They have already decided to pay the price, so who cares what an appraiser thinks?
> Moreover, even if big investors are purchasing thousands of homes, they don’t own significant numbers of homes compared with small-scale landlords and individuals.
> Last month, the Lincoln Institute of Land Policy and the Center for Geospatial Solutions published a report showing that corporations now own a remarkable one in 11 residential real-estate parcels in the 500 urban counties with data robust enough to analyze. In some communities, they control more than 20 percent of properties.
They're invoking a false dichotomy. Small scale landlords (i.e. the guy who owns a second home and rents it out) are part of the corporations. From the linked report:
> A corporate investor, also referred to as a nonindividual investor, is a business entity that owns residential property, usually for the purpose of generating income. This broad category ranges from small entities such as family trusts and limited liability corporations (LLCs) to larger outfits like real estate investment trusts (REITs), endowments, and pension funds.
Many/most "ordinary" folks who buy a house to rent fall in this category - they form an LLC or something similar. Many reasons for this. Percentage-wise, my guess is that institutional investors (not just individuals who formed an LLC) are still a relatively small minority, but I don't have the data.
There is a common misconception on HN that it's rich people who mostly buy houses/units to rent out. In my experience, that's just not the case. Everyone is doing it across the board, and just by virtue of there being more non-rich people, they are likely the majority.
Also, higher income folks don't feel a great need to make more money. Median or lower income want to make a lot more, and real estate is actually one of the fewest options available to them (and also really easy to learn/understand). A lot less work than a second job (although some get a second job just to bootstrap the RE purchase process).
Just 3 days ago I spoke to a friend. Engineer (not software). Decent income, but not FAANG level. Non-working spouse and multiple kids. Rents out two houses, and is buying 2 more.
I took an AirBnB course from a guy who has lots of listings on AirBnB. He got there with almost no money down (most of his money was spent on furnishing the place). He was educated, but fairly low income ($50-60K in California). When I took the course he was making over $300K/year net from his AirBnBs.
When I used to listen to the Bigger Pockets podcast, the majority of people who owned 10+ homes to rent had very average incomes (less than a typical non-FAANG engineer).
I've been in the real estate space for a few years now. I don't own other units, but I do invest in them, and am moderately active in a local real estate club. I know how these things work.
If you want to solve this problem, stop pointing fingers at "rich people", and stop allowing multiple ownership for a decade or two.
My extreme political opinion is that no one (including corporations) should be allowed to own more than one property in which they do not reside.
So I can own a duplex and rent out the other half, but that's it?
Or - what if I own a 5-bedroom house, and rent the other 4 bedrooms to roommates?
No, you just do what most people (and corporations) do and create a new entity (normally an LLC) for each property.
There you go, you've sidestepped this inane policy.
I'm as pro capitalism as it comes but private equity should not be allowed to operate in the consumer housing market. They can develop and sell houses but cannot hold is my point of view.
Another market where PE is incompatible with human life is healthcare. It becomes a race to maximize profit at the expense of worse patient outcomes and worse healthcare availability for all. They close redundant, less profitable hospitals (usually rural). Same with pharma: they jack the prices on common meds and only develop profitable ones, not effective ones or needed ones.
IMO the main problem with them is that actual competition isnt really possible. Most of the time, you just can't develop newer/denser housing where they are taking over neighbourhoods, so no real competition is possible which allows them to distort the market for their own gains.
it is stymied in part owing to regulatory requirements that makes getting loans at good rates impossible for small developers.
Notwithstanding that, the populist fantasy is that developers won't build more "because they are greedy", as though that math works out. If developers don't leave money on the table, then they'd want to build where the demand exists and it does. They face a number of constraints and bottlenecks, not just for materials/labor, but managing risk. Risk makes loans expensive, everything is built on credit. Some of that risk is compounded by the threat of litigation by NIMBYs, or regulatory requirements, or environmental review, etc.
Not to be pedantic, but this would make you not so "pro capitalism as it comes". The ability to develop and sell houses, but not hold them (in service of rent-seeking) runs contradictory to the very core tenant of capitalism, which is private property and free markets. Socialism and supply/demand-markets are not mutually exclusive; it sounds like you're more amenable to a socialist or mixed-market system than you give yourself credit for.
almost, but rent-seeking is an odd form of capitalism, because in its pure form it isn't providing value.
nothing in the real world is in its pure form, and some business are able to provide value which they cannot charge for because they can rent-seek on other areas, so there is always nuance.
but an economy where rent-seeking is the main path to wealth is an economy in really poor shape.
Rent seeking is the end result of capitalism as an economic system. The goal of a capitalist is to accumulate capital (wealth), and rent seeking allows you to do this without expending any effort. Any capitalist acting rationally within the system of capitalism will desire to seek rent.
>> Not to be pedantic, but this would make you not so "pro capitalism as it comes". The ability to develop and sell houses, but not hold them (in service of rent-seeking) runs contradictory to the very core tenant of capitalism, which is private property and free markets.
I think you're right. A lot of people confuse capitalism for working for a living - because that's what capitalists want the middle class to think it is. Capitalism is really about getting capital to work for you so you don't have to. Building and selling homes is a form of working. Holding homes for rent is capitalism.
Im capitalist in the belief of truely free markets. Im against monopolies or monopoly like structures. I can make a case for private equity being a cartel as well knowing how they use algorithmic platforms to price rentals thus collaborating on pricing while pretending they don’t. After all its a third party setting prices.
Except whenever you have inelastic demand or supply you are no longer in a free market.
One could argue that PE is both A. ) the ultimate form of capitalism and B. ) explicitly creates inelastic demand. A truly free market will always succumb to dominating forces that create the inelasticity (or at least that's what history has consistently proven).
That is the point. Capitalism has never included free markets in its honest definition. They are nuisance for the capital owners. But when they are forced to participate in the free market - then a big part of the surplus generated by the companies is captured by the society. See that was Marx error - instead of socializing everything, he should have just made sure that no monopolies, monopsonies and enough state capacity exist to make the unfree markets free. Send this message back in time and we will save couple of hundred of million people.
Capitalism actually prefers to control the markets.
See my reply downstream.
More broadly, housing cannot be relied upon as an investment vehicle and remain affordable. Whether it's private equity or others is a moot point. The perverse incentive is there in that housing appreciates in value because of artificial scarcity. It's a 1-1 relationship.
I don't think this is contingent at all on the capacity to buy and hold, but on policies that limit building and financial instruments related to housing. The 30-year mortgage even. So now similar to the case with Social Security and public pensions abroad, politicians are playing a game of hot-potato not wanting to be the ones to have to make changes and upset the large aging voting bloc. Similar, too, because it's a generational wealth transfer.
Many items through market exchange have gone down in price over time owing to increases in efficiency (see: coffee makers). This can't be blamed on markets qua markets. It's adversarial policy that harms young workers.
Same. I remember growing up in the 90s, after the fall of communism, hearing that capitalism beat communism because in capitalism you can own things.
MFW I now live in capitalism and can't afford to own anything.
The only reason capitalism works is because it turns everything into a struggle for existence, which is the best motivator. Every company is forced to compete (assuming there is no moat created by politics eg. Intellectual Property or contract law) or the company will go under.
But it also means that the people who can’t compete in this type of Darwinism only survive because of the empathy of others who do (whether that be family/friends, politics, or charities).
I’m worried about the breadth of industries that PE has infected in the US.
One of the things communism did right was housing - in the Eastern Bloc home ownership was above 90%. The quality was not great, not terrible. But bad shelter is infinitely better than no shelter. I also think that it also excelled in K12 education. Whether because the german style system that was common in europe pre WWII was just left alone - I don't know. But until the mid 90s we really didn't had the school reformers to fuck it up. Right now we are as good as producing illiteracy as the rest of the west.
What does “home ownership” mean in a country where there is no private property?
The socialist sense of “private property” refers specifically to ownership of physical (or at least, nonfinancial) means of production, other than by the workers whose labor is applied to it.
It does not refer to all ownership by individuals of real and personal property, restrictions on other personally-held property are separate concerns from the abolition of private property, and socialists regimes, including those in the Soviet bloc, frequently have retained private home ownership, which is not fundamentally inconsistent with socialist theory.
There was a lot of private property in the socialist countries. I am not sure from where this thought even came to you. What was impossible was owning big private enterprise. But small businesses - like a restaurant or a shoe repair shop were allowed. You were also allowed to own houses, cars, appliances, clothes and almost everything else. Land was a bit weird - you could own, but not too much - basically stuff that was small enough to evade the collectivisation process.
Just about right!
It won't change anything. Private equity is always a nice scapegoat, but it just exploits the same market forces as any other economic actor.
If you ban private equity, it's going to be mom&pop redevelopment companies doing the same. I give you an example of Vancouver. It banned foreign purchases: https://www.kelownarealestate.com/blog-posts/canadas-ban-on-...
The impact was literally non-existing. The prices continued to grow as Vancouver 's housing density keeps increasing.
I don't know the specific rules in Vancouver, but yeah, a lot of those attempts were illusory/perfunctory...
If you can afford to have one, or multiple, $2M+ condos that you just "park" your wealth in to leave them vacant, the presence of a $10K or $20K fee/tax a year is in the "chump change" category.
Vancouver has fewer vacant units than the average for the country.
> The number of vacant homes in Vancouver has fallen below 1000 as of 2024. The latest Annual report shows low vacancy rate of 0.49%. [the average is 2.7%]
Guess what happened with the housing prices? Right. They kept increasing. The housing density went up, so the prices must also increase.
Nice, a pay wall. Pay to read about how housing costs too much.
Disable JavaScript. Solves many of the problems on the net, including the ability to read this article. :)
Wild idea... Maybe tax wealth instead of income?
Tax break on single home ownership, but significantly increased tax on multi-home-ownership?
It would be interesting to see comparisons between PE ownership in markets with property tax vs markets without.
Well, I want more multifamily housing (apartments or condos) to lower prices in good cities near pubic transit.
So let me propose: a wealth tax on land! ("Georgism"). But not a tax on the "value of improvements," i.e, buildings. This disincentivizes single-family homes near train stations (widespread in the town I grew up in) and is very low-cost to collect.
I don't know where you're writing from. But here in California, the source of all evil (Prop 13) originated with single-family homeowners trying to *escape the property taxes that result from their opposing new development.
Given how spectacularly CA housing policy has failed, perhaps it's time to try the opposite: Let's abolish all income taxes and exclusively tax land instead! (Land taxes have the property of being extremely progressive wealth taxes that are dead simple to administer.)
Now my corporation owns my house, I rent from myself and since the rent my corp is charging is so incredibly low its essentially a write off.
That arrangement will not pass IRS muster.
Not that the system would not be abused, but the obvious exploit is not going to work.
I've had the same idea, but with no property tax on ownership of a single dwelling place.
If the burden is lessened to have your own place, hopefully we could see less homeless on the street or living in cars when times are tough.
However if you have more than one, then you pay significant property tax on all of them. I would hope that could free up more places for more people getting a home.
But of course if you earn more than $180k a year, I guess you could afford some property tax.
I am also thinking foreign ownership of property should be taxed heavily. I know that is not popular, but honestly if you not living full time in the country then you are effectively taking up a spot for someone who needs a place to live.
That sounds like it would penalize renting in favor of homeownership. I'm not in support of that, renting offers people flexibility and is not inherently worse than owning.
Wealth taxes don't work because wealth gets extremely fuzzy.
For example, unsold stock that I bought 15 years ago; and then got a loan against. I'm wealthy... kinda? But I didn't sell the stock; I have unrealized gains, and you shouldn't tax me beyond income tax on borrowed money? Okay, tax me on my unrealized gains then - but then 2008 repeats itself, stock goes down 40%, do I get a refund? Of course not, I only pay when stock goes up and never down, which is not exactly a fair incentive.
Now imagine artwork I bought 15 years ago from Banksy. Or imagine my video game collection I bought on eBay that contains some rare titles. Or what about my wine collection? Now imagine I'm Elon Musk, on paper worth $400B, but if I sold even 20% of my stock, that paper valuation would be shredded from an excess of liquidity driving the share price down, so you can't tax me on what is physically impossible to realize.
> Okay, tax me on my unrealized gains then - but then 2008 repeats itself, stock goes down 40%, do I get a refund? Of course not, I only pay when stock goes up and never down, which is not exactly a fair incentive.
We already do this for property taxes.
That's a very strange way of looking at property taxes.
I do not see the difference between property taxes on my home and property taxes on my stock portfolio. What makes wealth taxes bad?
Property taxes are use taxes. You're paying for the right to occupy an inherently limited resource, and for necessary services and infrastructure. It's not a wealth tax because it doesn't matter how much equity you have; it's the same whether you fully paid in cash or have an interest-only mortgage. It's also not a capital gains tax because the purchase price doesn't matter.
The total ownership of all public companies is also a limited resource.
Whether I have 0% equity or 100% equity in my home I still own it. The only question is how much I owe to the bank. "Oh I bought that with leverage" shouldn't change things for home ownership and it should change things for a wealth tax on stock ownership.
Then it’s an asset/property tax, not a wealth tax, because debt doesn't change the asset (even if it is secured by the asset), but it does change wealth.
A corporation does not provide services to shareholders.
A municipality is charging residents for services. Obligations are progressive (by necessity), and indexed to assessed property value (as a practicality), rather than equity or income.
Municipal operations get more expensive with inflation, and with resident demands (ballot initiatives, etc). They are never zero, and must be tied to something in the real world.
These payments are collected as a tax, because that is the only lever available to municipalities.
I see your point, but I think it's a category error.
You are taxed on realized property capital gains, beyond a certain amount ($500K?) for principal residence (anywhere you've lived two of more of the last five years). And for a non-principal residence there is no threshold.
Me owning a bigger house than my neighbor does not mean that I use more services than them. My water bill is my municipality charging me for services. My real estate tax is a charge for the general good of my community. I see no reason why this can't simply be a tax for the national good.
I don't have an economics or finance background. But why could there not be a taxable event for the loan amount when it is made? Sure, maybe it gets taxed at a lower rate than even capital gains to continue incentivizing leveraged investments of this nature. Is there some economic argument for why lenders can realize the value of an asset when loaning out money against it but the tax man can't touch that asset until it's actually sold?
> paper valuation
Don't allow loans against equity ownership. If you can take a loan against it, you should be taxed on it.
> artwork, rare collection
Tax the insured value. If it can be insured for 100 bucks, it should be taxed on 100 bucks.
What about a law where you couldnt use over a million dollars (to exclude normal people) a year of any asset as collateral for a loan unless you paid capital gains on it at its current valuation?
You create a lot of other side effects that destroy a lot of valid activity and thus cause a large economic depressive effect, or you will start needing to provide a lot of other counterbalances that will be even worse or cost the government a lot more.
This has the finance equivalent of feeling like cookie banners will actually do anything.
Political power will advocate for it's power, you have to go one level higher and interact at that level, not on tax law tweaks.
To give an example of where this has gone wrong already, look at the entire interaction between startup stock, ISOs and AMT and how it creates a horrible trap for startup employees, but not for founders and investors who get a lot of very nice tax benefits like QSBS, no AMT, so on. Because startup employees are diffuse, usually have unstable employment and are usually younger, this hasn't been fixed to this day.
While other countries like Israel have this fixed in a very elegant way, where you can exercise without tax bombs and only actually have tax liability when you actually can and do practically realize or liquidate the stock gains.
If I pledge $10M in stock for a $2M loan, what's the taxable event? The full $10M valuation, or my $2M loan? What if the stock is in a company worth $40M, but the sale of $10M in stock causes it to be worth $5M afterwards and the private company's value is reassessed to $20M, after I got the loan and after my pledge?
If the tax is set at say 2% of wealth (excluding primary home and _displayed_ artwork/collectibles), and that's above your income, just pay with your stocks at the valuation they have at tax day.
This assumes everything can be paid in liquid public equity, which is often not the case in any private or offshore investment. Additionally, the government now owns stock they can't realize without by definition causing a stock market decline. Sell stock that previously wasn't on the market, you exhibit permanent downward pressure.
Why can't the government just own stakes in private and public companies? Put them into some kind of sovereign wealth fund. No need to sell at all.
At scale the government's holdings will be very diversified and relatively low risk. Almost like an index fund, but for the entire economy. They can use the dividend payments from these holdings to reduce income tax.
> private or offshore investment.
I don't have a good solution for private investment, but for offshore public investment, you can have the same principle.
> Sell stock that previously wasn't on the market, you exhibit permanent downward pressure.
Which is a very, very good thing, to be clear. Because it lowers expectations of future returns, and make stock valuations not based on "i predict pension funds will automatically put their contributor money into those stocks", but on actual business information.
Why do you assume such a law would not allow counterbalancing capital losses?
Because then 2001 happens or 2008 happens or 2020 happens and the government suddenly owes back a decade of wealth tax. A stock market crash becomes even more disproportionately expensive for the government and requires even more borrowing.
Lots of jurisdictions have higher property taxes for non-owner occupants
Everyone wants to finger someone to blame rather than (before trying to) fix the fucking problem.
Here’s a novel and brazen idea: if a domicile has been vacant inside a metropolitan area for more than thirty days, it’s up for grabs. Be it an apartment, a condo, a house, whatever, but if someone isn’t living in that space for more than thirty days, let folks claim it as abandoned property.
Watch rents and values plummet real fucking fast as folks seek to claim their “winnings” before their shit gets taken. That’ll at least jumpstart the real discussion of making sure housing is accessible to those who need it rather than constant finger pointing.
Because sometimes you just need a bigger fire to create the necessary action to solve the underlying problems.
EDIT: I am honestly so sick of the current housing crisis and seeing a swath of vacant apartments and condos as “investment properties” here in New England that yes, I am serious, and I’ve got a mental map of about a dozen large starter units that have been vacant for a year or so that I’d rush to claim one of.
Your investment is irrelevant when humans lack basic necessities like shelter, and I’m tired of being civil or polite about this so your ego doesn’t get bruised.
Many valid reasons for a property to be vacant. It may need renovations or repair and that can take a lot longer than 30 days. But maybe there's some time frame that makes sense.
I'm not convinced that commercial ownership is the problem. Or if it is, it's not a new problem. Slumlords have been around forever.
The main problem is we just don't have enough housing supply. Investor-owners can only hold units vacant to support higher rents up to a point. If there are enough vacant units available and enough supply that property values are not appreciating like crazy, someone will crack and cut the rent or sell out so they can get a better return on their money.
> If there are enough vacant units available and enough supply that property values are not appreciating like crazy, someone will crack and cut the rent or sell out so they can get a better return on their money.
Your thesis here is disproven in large cities like the one I live in, Miami. Many investors / property owners here don't give a damn on getting a return on their investment so long as it doesn't go to $0 - they buy real estate sight unseen because it's a good way for the well-to-do in LatAm and Russia to get their money out of developing/regressing economies and into the USA. Half the units in the building I live in are vacant - they are owned by Brazilians, Argentines, Venezuelans, etc who want a safe haven for their money (and for Brazilians, as a base to buy loads of Apple products that they can turn around and sell back in Brazil for a 2-3x markup).
Why would they buy properties and not assets that are even easier to buy and sell such as stocks, ETFs, mutual funds, bonds, etc.
That said, I would probably not be opposed to restricting foreign ownership of residential real estate, if indeed it is that big an issue.
The idea is that tracking it is effectively impossible for a foreign government...and we've made that whole infrastructure incredibly easy via making it legal for LLCs to purchase homes. We don't prevent foreigners from forming LLCs, and often times there are brokers that make their vig on doing just that for wealthy foreigners - they set up a myriad of LLCs to protect the identity of a buyer, who then drops $1mm+ on a property that they will never actually use in a country they will likely never visit.
Plus, to buy stocks or ETFs or bonds or whatever, you have to register with a broker, who has to legally report each sale and transaction to the government. The point isn't the liquidity. The point is that a family can drop 200k-500k in a pretty stable asset in an incredibly less volatile environment and effectively not report it. That is worth it in the age of hyperinflation in LatAm economies. Plus, if the unit in question is in a decent location, they can escape at the first sign of trouble.
I refuse to buy that argument of availability alone (or hell, any standalone argument) when we have continued reporting of landlords and PE leveraging services like RealPage that are designed to maximize rents and revenue, including by keeping units vacant. Every time I’m driving through a dark city at night, residences and condos devoid of furniture (or using an interior design motif with no signs of life), I’m reminded how many of these are investments by a vacant owner designed to capitalize on lax regulation and lack of supply in in-demand areas. I drive by huge corporate plazas clustered together on high-value land because companies demanded everyone live in the same areas rather than spread out to reduce costs, driving up demand further.
I am unbelievably sick of seeing the symptoms go unaddressed while commenters and armchair economists bicker and debate who is the sole source of blame that must foot the bill. We need action, and we need to be brave enough to be willing to admit this isn’t working for the masses anymore.
I’m unbelievably tired of this cowardly pussy-footing by people who can’t or won’t envision a better future that also doesn’t involve number go up on property forever without further investment.
You mean you refuse to believe hard data on vacancy rates over sensationalized opinion pieces or outright misinformation that sounds more appealing to you?
Your proposed "action" is comically obtuse and will be ineffective at best. So no one can renovate a home for more than 30 days?
Number go up on property forever is what the masses want and what works for them, because the majority of people live in a home owned by that household. So you're misinformed about that as well.
Also stop fucking arresting people for living in unapproved locations or building structures that don't cost enough money, as long as they're not actually in the way of anyone.
Like, don't arrest people for sleeping under bridges unless they are sleeping in the middle of a footpath under a bridge. And don't go building footpaths under all the bridges to prevent them, either. Also tear down all the hostile architecture or at least don't arrest people for taking to it with angle grinders.
The free market is supposed to work by everyone solving all their own problems and then exchanging solutions with each other. If you claim to have a market but then arrest people for solving problems, no wonder you get a dysfunctional society.
Not saying that people living in tents on public land is a good long-term solution, but it's a step up from being completely shelterless, and since price changes happen at the margins, if it's even remotely viable, it may cause a market crash.
Literally this. Someone has to “lose” to fix this problem, and that loser has to be those with the most to gain from keeping the status quo as-is (developers, landlords, private equity, current homeowners, extortive townships/governments, etc).