> But the bigger problem for housing affordability, he adds, is that "we just haven't built enough [homes] to keep up with the population growth and household formation."
The circular incentive here is left unsaid. If a house is an investment, you and every other homeowner has an incentive to keep supply low and demand high. This ultimately drives votes, lobbying, and policies that prevent houses being built. Otherwise you end up with falling rents and stagnating property prices, like in Austin.
"Housing as investment" is such a terrible idea, embedding it in culture should be avoided at all costs. Not only does it drive up housing costs, but it has people dumping loads of money into a single investment. Of course people don't want home prices to go down when, for many, it's their primary investment vehicle.
I hope we can get to a point where this idea eventually dies. I'm shocked that 2008 didn't wake people up in this regard, but I guess the supply shortage made real estate a pretty rational place to invest for a while.
"Housing is an investment" is just a sales tactic that took over and went insane.
It's only really used to justify the humungous loan payments you're willing to take on.
I'd happily take a $1 house if it was guaranteed to never change in value; but it also served my needs.
It's moderately fun to try to figure out what a "healthy" home market would look like - probably something similar to cars; "used" houses should sell for significantly and noticeably less than "new" ones (all things considered). But location and constraints often invert this - the new houses are so far away that they sell for less than the old ones in more favorable locations.
The scary thing is that ONCE you are metrically fuckton in debt, you become exceptionally concerned with the valuations, because once it trends to level or goes under, you're stuck!
Healthy means the value of a house is the value of the land, plus the value of building a new house exactly like it minus depreciation (meaning if you replace something the value goes up). Builders of course need a reasonable profit so that is factored into the value.
The reason why the bay is unhealthy is they don't allow you to put something on the land that matches the value of that land. People who want to spend millions on a house should be getting a mansion not a small house. People who buy a small house should get it on a lot not worth much money. I'm not sure of a good number, but something like only 1/3rd of the value should be the lot, 2/3rd the structure. This is right for most people, but there is nothing wrong with wanting a mansion in an area of tiny houses, or a tiny house on a massive lot if that is how you want to live (if a farm lets count the house separate from the rest of the farm buildings - not that this is possible but ...)
The market you're describing is pretty similar to the Japanese one, where the land keeps its value but the home itself depreciates over time, and old-enough houses are assumed to be teardowns unless proven otherwise.
I live in the Netherlands. In the 80's we use to have giant stores owned by couples living above or behind it. They owned 100% of the building, they owned everything inside it.
One particularly memorable instance to me was an old couple, the store had a ceiling two floors high with an 8 shaped cast iron balustrade wrapped around it. I want to say they sold puzzles, postcards and mostly wooden toys but technically that was what they had in stock, they didn't sell much of anything. If they sold 3 postcards and 2 puzzles per day it was enough to buy food. Food was really cheap.
The store was empty most of the day, if customers arrived they switched some of the lights on from behind the counter. If a wave of tourists arrived the place lit up brightly like a xmas tree. They sold the single key chain and one post card and went back to their living room on the other side of the door behind the counter. It was a magical place with many items aged into antiques on the shelve.
The old couple eventually died and the place was sold for many millions, stripped down and modernized for millions followed by a parade of over priced tourist traps that went bankrupt one by one.
Everyone working there has to pay for housing too! The rare place to live that becomes available would also be far away enough that you need a car, a long drive 2x per day and places to park it. Then you need to work hard, there need to be at least two shifts, you need to sell lots of things with very large margins.
The difference is much larger than people imagine. A bad day use to be one post card for some potatoes. Today's postcard is 1/100 the production cost, sold for 6 times more but the revenue isn't enough for one employee to park their car.
For just 6 employees at 1500 pp plus say 6000 for the store you end up with 15 000 just for housing everyone (not counting the 80 year olds such store has no use for)
Housing is only 'an investment' of the kind people expect to get fast returns on because of the shortage of housing. Everyone who benefits from that is effectively extracting wealth from the people who are stuck outside of the housing market because of those shortages.
One thing we can do to drive down property prices without driving people out of their homes is to tax the ever-loving-bejebus out of second (or more) Single family homes, for individuals and corporations. Make it progressively worse the more SFM's corporations hold.
An example would be to tax a second home and onward at (land tax)^(10nn) where n is the number of total homes you have. The point is to make it financially absurd to own a second home, let alone 20.
This is only one particular point on a multi-prong approach.
Removing the ability of Private equity to eat up all the local contractors to make a little mini-monopoly is also something that 100% needs to be done.
The fastest way to remove 'your home is an investment to be reaped later' mentality is to limit the total sale price based on the last sale price (IE: only increasing the price of actually investment into the property, and legally allowing any sale price far below the estimated property value) which mostly removes all of the incentive of buying a house 'for investment'. That's extreme and would have downstream consequences, we still want to (financially) incentive people to improve their living conditions.
It's also extremely hard to build a home! Regulations and zoning laws aside, America lost a fair bit of knowledge after we practically stopped building homes after the 2008 collapse. There's no silver bullet solutions. No company is going to solve the immensely complicated task of building a home in a warehouse to reduce production costs via automation: that's a pipe dream sold to venture capitalists.
Any real solution would have consequences that would hurt some folks. Still: doing nothing hurts everyone (except for an extremely small subset of already wealthy individuals and corps) far more.
Homes should be for 'living in': not to 'make a living from'.
That is a bad idea. It assumes the buying a house is something everybody must do. For some buying is a good idea, for some it is not. You have forced people who should rent to buy anyway, or pay massive rent to cover that taxes the investor who owns their house must charge.
> Removing the ability of Private equity to eat up all the local contractors to make a little mini-monopoly is also something that 100% needs to be done.
There is no need because private equity has not done that, and there is not current reason to think they will. If they ever to get a monopoly then we need to do something about it, but right now there is no sign they are. Plenty of little builders exist who are competitive with the large builders in both price and quality. There are also enough large builders to be competitive even without the small builders.
There is EVERY reason to think that they would do this, besides the data showing that they are. The MO is to find an area, buy up all the local tiny contractors, and set prices higher and higher until those contractors finally fail, then sell off any and all assets for a profit.
I am also making the assumption that you haven't tried or researched building a home in the last few years, based on your comment.
> There is EVERY reason to think that they would do this, besides the data showing that they are. The MO is to find an area, buy up all the local tiny contractors, and set prices higher and higher until those contractors finally fail, then sell off any and all assets for a profit.
That is a goal that makes sense. However that goal has been around for a long time and nobody has been successful, and it is unlikely this current round will be. They can't buy up enough small players to make it work.
Anybody can write a book that sounds good. I've read enough to not trust them. I need more authority than just someone wrote a book that ignores any factor that isn't convenient to their opinion. Note that I have not read that book, and yet I'm 100% confident that they did that - it is a pattern repeated far too often.
> They can't buy up enough small players to make it work.
We just don't have the data to track that. KKR, Blackstone, and Bain Capital, all buy up small time contractors, as well as real estate. They absolutely have the money to bully their way using that strategy. We don't know for sure if that's what they are doing or not... but as you agree: That goal makes sense.
> Anybody can write a book that sounds good.
Not everyone can write a book both sound and logical, agreed. That is to say, a well researched book is rare indeed.
It is biased, yes: it is very anti-landlord. It views a landlord as inherently extractive, and makes the case for that viewpoint.
To say that the book is not worth reading is also incorrect. It has some fantastic insights unrelated to its anti-landlord bias and it is an interesting read.
And yes: you shouldn't just trust what you read. Ever.
Regardless of it's flaws, I still recommend it as a read.
When the line goes up, everyone hopes it keeps going up, and tries to figure out a way to profit from that.
One way to stop that, is ensuring the line doesn’t go up. That has some pretty nasty side effects in other ways though.
When the line stops or starts to go down, then bad things happen. People can’t sell and move without losing a ton of money. People go bankrupt, etc, etc.
> When the line stops or starts to go down, then bad things happen
Only because many millions bought risky investments since they were told it was basically risk free. Normally things getting cheaper is a good thing, but we tricked people into thinking that housing being expensive is good for them.
This is true literally everywhere, in every country (and under every gov’t) I’ve ever seen. And I’ve seen a lot. If you think US property prices are nuts, look in Europe, Asia (especially East Asia), etc.
Most people take crazy risks to buy the most/nicest house they can get a loan for because where you live is a huge factor for a number of other things in people’s lives.
If people will give them loans for more than they can afford, many people will still do it. So easy credit? Housing market goes up. Tough credit? Housing market goes down. All things considered anyway. Eventually.
Owners have a very, very strong incentive to stop it from going down, so unless they have to move, the market can stay locked up for a long time.
This cannot be said enough. If we were remotely serious about addressing the lack of supply, we have multitudes of hard/heavy levers to yank on:
* Taxing non-owner-occupied single-family residences at higher rates (incentivizes sales)
* Removing or barring the traditional zoning/approvals boards beyond a rubber-stamp for developments that meet safety codes (incentivizes building)
* Taxing the capital gains of home sales without ability to roll over (disincentivizes housing as an investment strategy)
* Mandating housing as a human right (myriad of knock-on effects for decades after)
* Barring no-fault evictions of tenants (helps renters save to buy a home)
* National rent control (helps renters save, incentivizes construction since growth must now be achieved through volume, not price hikes)
* Public Housing (a la Singapore’s model, where we can place a down payment on a home or condo with a gov-backed loan to the developer, but with restrictions on sales/residency requirements)
* Prohibition of algorithmic pricing (flattens rent increases)
* Mandating longer leases (to help renters predict housing costs for longer periods)
* Allowing renters to “buy” their apartments and convert into a condo (reduces apartment vacancies, allows more renters to build equity and control housing costs)
* Price controls on rent increases or sale prices, especially for First-Time Buyers (e.g., 20% margin on a home’s cost for sale by builder but with a gov-backed loan, or restricting rent increases to local COLA or a 20% margin, whichever is lesser)
We have so many more options, and nobody wants to try anything because it’ll tank housing values across the board. The longer we wait to pop this metaphorical bubble, the worse it’s going to hurt, for longer.
Rent control is a deeply counterproductive policy that reduces housing supply and lowers housing quality, with the benefits accruing overwhelmingly to already-wealthy households that can make the most of rent control regulations. https://www.nmhc.org/news/articles/the-high-cost-of-rent-con...
> Taxing non-owner-occupied single-family residences at higher rates (incentivizes sales)
We already do that in the form of homestead tax credit. This just discourages renters though and so I oppose it. If you come up with a way to ensure that if the house is rented the renters pay the lower rate (get a tax rebate?) I'm for it.
> Mandating housing as a human right (myriad of knock-on effects for decades after)
I have no idea how you do that in practice. There are many choices, but everything I've seen as serious unintended consequences that end up being worse.
> National rent control (helps renters save, incentivizes construction since growth must now be achieved through volume, not price hikes)
Unintended consequences get you. Every rent control I've seen disincentivizes construction since you can't be sure of a profit.
Most people are investing in houses wrong. If you want to invest as most people think of investments you really need several houses and rent them out. Owning your own home as well makes sense, but your own house is not an investment in the same terms even though it is one of the houses you own!
A house falling in value is still a great investment for many, but it is a very different type of investment from what most people mean by investment. By owning a house you have a place to live for the same price even as inflation increases you income. By owning a house you have a place to live after it is paid for when you are retired and have a much smaller income (even if you have more money you have more time to enjoy/spend that money when you are not working 40 hours per week) - retirement savings are limited and houses are a great place to store money that doesn't falling into traditional accounts. These are great things to have long term, but none of them are about the increase in value. The house you live in is an investment in future rent, but you should only think of the value in terms of paying for your nursing home if/when you need one (even then you should have long term care insurance despite all the fraud and near-fraud in this area)
The idea that rents fall and property values stagnate is short term thinking. Over any 5 year period is can be true, but over 10+ years inflation tends to catch up. Unless you are buying in a very rural area nobody wants to live in - Austin doesn't qualify. Sure prices will fall, but builders have a lot of fixed costs and so that limits supply and in turn ensures prices will need to go up as population expands, or just the old houses start wearing out (houses last for a long time with maintenance, but eventually)
I'm not blindly advocating everybody buy a house. Buying vs renting is a complex question, and many people have proven they can do well in life with both. You need to make your own decisions based on your life situation. If you buy be careful not to think of your house in terms of any other investments you make - it needs very different accounting.
> you and every other homeowner has an incentive to keep supply low and demand high.
Do you really believe everyone thinks this way? No one I know who owns a home bought it for investment. They bought it so their family has a place to live that is theirs.
I don't have hard numbers but anecdotally it's a lot of people. If you listen carefully you'll hear a lot of things like "Renting is throwing money away", "I want to get on the property ladder", "buy land because they aren't making any more of it", etc.
The American Dream™ centers heavily around home ownership and the government subsidizes it by allowing mortgage interest deductions and underwriting zero-down loans. Getting a mortgage and building equity is the only feasible path to wealth for working-class people who don't have money lying around to invest or the financial literacy to start doing so [1]. Contrast this with reality: in the market I live in it's actually around 20% cheaper to rent on average (presumably because California caps property tax increases). For 30 year mortgages in a sideways market you generally have to make payments for 5 years before you can break even when you sell. On top of that houses are non-fungible, illiquid assets that require maintenance and are subject to black swan events like termites, natural disasters, and destructive tenants that might not be covered by insurance. On a rational basis they are mediocre investments but our culture has conditioned people to think this way because it's their only hope for a nest egg. One might also recall what happened circa 2008 when banks encouraged the house-poor to leverage themselves to the hilt via various home equity loans to the delight of sports car and big screen TV manufacturers.
I don't think this is a healthy state of affairs but these are the breaks.
[1] I didn't gain a solid understanding of personal finance until after I'd already bought a house with nothing more than several thousand dollars in my checking account - stumbling across Bogleheads via the web saved me.
Enough of them think that way as to matter to politicians. Even if that is a tiny minority, the rest of not given any reason to think they care otherwise and so that "squeaky wheel" gets the power.
No, I don't think every homeowner thinks that way. But that doesn't change that the incentive is there for every individual, company, and trust that owns homes to keep prices from falling
It seems like the only solution is going to be an FDR style president that sort of runs up against traditional liberties in order to to build. I do wonder if an interesting quirk of the current president essentially consolidated executive power for questionable reasons, leads to a candidate that uses some of those changes to bulldoze these types of projects back into America.
I don't think that's the case. The article specifically mentions multi-family units:
> Austin, TX presents the clearest example of this trend. From 2021 to 2023, an average of 9.9 multifamily units were permitted for every 1,000 existing residents in the Austin metro, by far the highest rate among the nation’s 50 largest metros. As these new units have gradually reached completion, the median rent in the Austin metro has fallen by 7.3 percent over the past year, which also ranks first among the top 50 metros.
That depends. Builders build what there is profitable demand for. If there is a lot of demand that means the high priced high end homes are in demand and builders won't build anything else. (unless forced) However there is only finite demand for such things so and as you build eventually someone says "can you make it cheaper" and some builder - having no other customers is forced to build something lower end just to get any work.
Now builders won't accept a loss (in general), so that does limit how low end they can go. However the other half of this is that most people moving to something high end just freed up something lower end for someone who can't afford luxury. (most people cannot afford a second home and even those who could afford it want to spend their money on something else. There are also a small number of junk houses that are so worthless they end up destroyed, but this isn't common)
People who are not investing need to vote usefully. Renters typically do not vote in large numbers and so this group that isn't getting anything from the investment isn't getting their needs represented. When renters do vote it is often for things that increase rental costs indirectly.
Even those who do own a house are often helped by things that lower value in some way. Many have a kid they want to move out and be successful in life and this means they gain more from lower values then raising values (which is paper money anyway since they would have to sell to see it - most are not). Many want to put an addition on the house and the same laws that prevent building also prevent their addition.
I don't have an answer to that (I'm sure others do) but I do feel this is a problem that can only make itself worse
The more prices go up, the larger % of net worth for an individual a home consumes. If your entire net worth is wound up in your home because your home costs so much, your incentives are much higher to keep the price of your home from falling than if it was just a fraction of your net worth. Worse yet if you're in debt and you have to sell
The longer this problem goes on, it seems the harder it will be to rectify
Glad to see the final section basically cover that this is not actually a problem. I sort of wish the headline was more of the "Why you shouldn't be worried about private equity buying your neighborhood."
Why and how did that ear worm infect so many people?
> Why and how did that ear worm infect so many people?
It's a story they want to believe.
The big bad out-of-town corporation is causing the housing crisis and not the complex web of dozens of factors: existing owners wanting to protect their largest asset, more people wanting to live in fewer places, inflation, tariffs on Canadian lumber, safety standards, etc.
Ultimately it's not really that complex to explain: there just literally aren't enough physical housing units of whatever kind in major US cities to meet demand (https://www.fanniemae.com/research-and-insights/perspectives...), so prices keep going up.
Unfortunately, there are a ton of people who will deny that that factual, well-studied shortage exists, and will try to blame its effects on anything and everything else even tangentially related.
A desirable location will never have enough capacity. Regardless of how much building occurs. If you don’t believe me, look at NYC, Paris, etc, etc.
People move as close to a desirable location as they can afford. And often more.
Don’t get me wrong, rules set where and how bad the line is, but there is no realistic situation where everyone who wants to live in SF can, and can afford to, and it is anything like SF.
Well the problem with SF is less density and more than half of it is single-family home neighborhoods with zero amenities.
Anti-growth people will point to neighborhoods like Glen Park, NoPa and Noe as "SF" while forgetting most of the surface area of the city is empty neighborhoods like Parkside, Mt Davidson Manor, etc.
It’s a matter of degree, not difference. If you fit 2x the number of people in them - you’d still have the same general problem. Just 2x the number of people now.
And because larger cities tend to also be more attractive (Tokyo is still growing, for instance), you’ll never have enough density to be ‘enough’ - aka where it’s cheap enough for everyone to live where they want.
There were two years during the pandemic when people moved out- because jobs let them - but people moved back and it has more than made up for it since.
Every major city in the world has seen significant population increases as mechanized farm work and fertilizers have removed the need for many farm workers, and economy activity has concentrated.
It’s been a consistent trend for almost 100 years.
And yet, with the Tokyo example, the combination of lots of housing and good public transit means that you can get small but liveable apartments that are a 20-minute walk from central downtown Tokyo (and under a 10-minute walk to multiple train stations with access to the rest of the metro area) for under $1500/month. Here's one right here: https://www.realestate-tokyo.com/rent/B0021114/park-flats-gi...
The tiny salaries in Japan make that even more expensive (comparatively than SF) - last I checked. But yes, the Japanese are significantly more socially coherent eh?
This is a real "you'll never make it perfect, so don't bother even trying to make it better" argument.
Paris is cheaper than SF, even in the middle of downtown along the river, because they actually have consistent housing density throughout the city. Look at the arrondissements that are even 20 minutes out from downtown by subway and you can find apartments that people in SF and NYC would kill to have at that price. Paris will never be free to live in, but it's extremely obvious that they have avoided the worst of the US housing crisis by just actually building lots of housing.
> There are ~ 15 million unoccupied houses in the US
Unoccupied houses across the entire country don't matter. What matters is housing in the places that people live.
Places that people want to live. Which are often aspirational. Plenty of people live in places that would be 2nd, 5th, or even 10th on their list if money were not a concern, eh? And that’s normal. And almost everyone could live in those out of the way places too.
Which is why comparing against the rest of the country is valid. Just like comparing SF to Vacaville. Or South SF. Or Oakland.
There are definitely parts of Paris that your typical Parisian (or even atypical French citizen!) cannot afford to live, yes? And many, many live in Paris’s equivalent to Oakland. (Or NYC’s Harlem)
It could be better - but people also have this weird mental block where the only place they ‘can live’ is also the same place everyone else wants too, but they can’t afford it, and somehow it is everyone else’s problem to fix that for them.
The studies on this subject look at entire metro areas (https://www.fanniemae.com/research-and-insights/perspectives...), which include places like Oakland and Vacaville, not just city downtowns. "Want to live" here isn't just 'aspirational', it's covering basic elements like 'are there actually enough jobs there'. "Oh, there are fifteen million empty houses" means absolutely nothing because most of those houses are in places where there's no way for any substantial number of people to actually make a living.
ding ding ding the housing prices have nothing to do with some vague notion of ‘I want to live there’, but are rather a proxy for the expected economic value of a place * people’s ability to leverage it.
Give businesses a reason to spread out a bit and not concentrate in these urban centers, and voila - all those ‘undesirable houses’ are all the sudden more desirable, and all those crazy zoning issues and nimby’s are not such an issue anymore. And the housing crisis mostly evaporates.
But since availability is also a proxy for competition for those jobs, it’s not like folks have too much incentive to make it easy eh?
Lumber is a tiny fraction of the cost of a house, the US produces a huge amount of lumber on its own. I don’t think there’s any real evidence to show that lumber tariffs have had a measurable impact on housing costs. Most housing is built with lumber from here.
Also the tariffs are new this year, housing costs have been a problem for much longer than just this year.
The land, foundation, and utilities (often in the form of impact fees) are largely fixed costs regardless of home size. The larger the home one builds the less impact they have on the final cost to build. This is why “starter homes” don’t get built anymore. The builder has every incentive to build that 3,000 sq ft home on a small lot instead of something more reasonable in size.
Also, other options that used to be more efficient to build multiple homes at once, like row houses or duplexes/triplexes, are generally directly or indirectly illegal to build in most US cities now. Row houses and brownstones were the cheap-and-fast housing option once upon a time; they're now rare and expensive because in most places nobody's allowed to put up a new one.
I've seen sixplexes around here, but unless they're apartment buildings (which have better designs anyway) they're relatively undesirable.
A duplex saves you some coin, but each additional house you stick on the side saves you less, and the desirability goes down. People don't like duplex/triplex/sixplex living.
Yes very true, and lumber is a sub-category inside materials and it is not very expensive compared to the other materials like concrete, siding (fiber cement, stucco), roof material (metal, asphalt, tile), drywall, paint, plumbing, electrical. Of all those things lumber is a cheap line item.
to be fair, xnx said "dozens of factors" and mentioned lumber and tariffs as among them... maybe better examples would've made their point stronger though.
Yes that’s true, I think he’s right on all the other points.
I just built a house by myself, from the ground up, so I couldn’t let that lumber thing slide though as I literally just paid for all the materials myself and I know how little lumber costs compared to everything else.
It's the left wing gaslighting everyone over all the issues caused by making it harder and harder to build anything. You blame landlords and PE when in actuality the government has stopped construction in it's tracks. This then feeds into the ultra-left agenda which tends towards socialism and "make landlords and private property illegal."
This is largely what the Abundance agenda and YIMBY is all about... getting the left to stop throwing up NIMBY road blocks.
The problems with not enough investment in new houses are not limited strictly to blue states but blue states seem to have the largest problem with it. Democrats love regulation so much that states like MA and CA have erected so many zoning and building regulations that new homes have become incredibly difficult and slow to build.
We struggle to even build apartment size condos in suburban MA that cost less than $1.1-1.5M per unit. We are rapidly heading towards new houses being $2M+ in lots of parts of the state. By the time a developer manages to buy a lot and go through all the red tape, possibly tear down an old house, go through environmental review, etc.. they can't make any money unless they build a $2M+ house. Any lot that doesn't have an old house on it in the eastern part of the state will have a long list of environmental gotchas a developer will have to fight through, possibly for years before they can even start building anything.
Housing construction is so far behind the demand that who owns the existing houses has little to do with it.
PE and Corporate landlords own more property in left leaning markets because Blue policies have made it more profitable to do so. The more new construction is slowed, the more valuable the rental properties become. Some of these companies won't want to go near red states where construction is easy. The property values and rents are just not high enough.
The stories about "companies buying houses way over value" were around for awhile; IIRC there were some "AI powered home buying" things related to Zillow, etc that would get in fights with each other and themselves.
Zero interest rate certainly made it much more possible; buying a $500k house and having nearly no holding costs, and worst case scenario selling it for $500k is way different than buying the same $500k house, paying $2k a month in carrying costs (interest alone) and then having to sell it for $450k? That hurts, and hurts hard.
The problem with AI and Zillow is they forget "due diligence" matters. I know someone who sold a friend to Zillow for $20k less than market - they knew, as would anyone who did an inspection that there was rot issues and the correct value was around 100k less than market (which would then allow giving a builder $80k and 3 months to fix the issue before selling). Zillow tried to put a fresh coat of paint and sell the house. Now there is value in someone like Zillow coming in with $20k cash today to buy your house ($20k might be the wrong number, but lets accept it for discussion), and then selling it for market a few months later when someone wants it, but they need to do that due diligence.
That is why Zillow got out of the business even when rates were near zero, doing that due diligence is something they were not prepared to do since it requires humans to do work. (even if it is just taking pictures for the AI, to look at)
I remember the discussion pointed out that as long as they had "assumed due diligence" because they were randomly selecting properties in tests, they did fine.
But once word got out "sell your shithole to Zillow, they don't even check" of course EVERY shithole went to them.
When you have a bunch of rental properties in your neighborhood, you have different maintenance standards and tolerance for unoccupancy. On an average, this allows the neighborhood to be on an average, be average. When you have large corporations buying up all the homes in the neighborhood, things swing heavily in one direction depending on the market conditions.
A house is a deteriorating pile of lumber on land that always wants to return to nature. Only an insane person would expect it to increase in value over time. The maintenance and taxes alone usually swamp speculative gains.
End corporate personhood, end Citizens' United, restore the Tillman Act, and make it illegal for corporations to not be actively divesting from individual residential property units.
In Europe, landlords violate regulations much less often than in the US, because the tenants renovate and maintain the properties, instead of the landlords. It's much cheaper to rent in Europe, because it's much cheaper for a tenant to fix something small themselves, than involve a landlord, a property management company, and a service company.
Any sane one is. Your accountant will make you become a corporation if you are not. It is really cheap to become a corporation and there are too many financial and legal advantages to corporations to not be one (see a lawyer for details - there are many different incorporation options with different pros/cons)
Shameless apologia for private equity vultures buying up all the houses, what a terrible article. "Oh but renting costs less so it makes your neighborhood more diverse with more lower-income residents!" Yeah and renting also ensures you stay low-income forever by never getting the opportunity to build any equity. Real 'you'll own nothing and you'll be happy' energy
The opening paragraph is also a laugh. "Daniel Erb became a corporate landlord kind of by accident." Yeah he was an investment banker who decided he wanted to invest in real estate so he decided to call his cousin at BlackRock- woopsie! what a weird accident!
Private equity doesn't own a lot of houses. For example, in California large landlords (including private equity but also traditional landlord companies) own 1.9% of houses, small landlords (under 10 houses) own about 20% of houses, and individuals own the rest.
How many of those “small landlords” are shell companies under a larger corporation? I’ve never seen an analysis of this but any smart mega corporation would be wise to create many small companies to shield themselves from localized market risks.
And which way is it trending? Massively upwards, as per the article. I've been getting constant texts for years from private equity parasites trying to buy my house, everyone who owns one does. It won't take long for that 2% to become 5% and then 10% and onwards if nothing is done about it.
I've dabbled with RE investments and hang out with those clubs. It's highly likely the origin of those mailings/texts is from an average person like you and me (most of whom have a full time job earning less than most SW engineers). They are doing RE as a side business, and are paying a service to send out those mailers/texts.
They're looking for distressed homeowners (e.g. people who are about to lose the house due to unpaid property taxes, etc).
They've been doing this for decades, but the easier availability of data due to the Internet, as well as the growth of online services, has made it much more accessible to the average Joe. It requires very little capital to send out those mailers/texts.
If you're getting more of these now than 20 years ago, it's because RE investing has become a lot more democratized/accessible.
A lot of them say so at least ("Hi I'm $Name with $FinancialCompany, we're looking to buy houses in your area...)- Though yes, I'm sure some portion of them are just private individuals or smalltime 'flippers'
My bet is the majority are private individuals. Because people are more likely to respond to that than a "normal" person. Just look at your sibling comment who said:
> I'm not sure if I'd count a person who can buy enough investment properties to justify using a mass-texting service an "average person like me"
If your average HN reader can't believe an average person can buy investment properties, then likely most Americans won't :-)
Anyone can set up a company in a few minutes. And then pay someone to design a professional looking mailer.
There are RE bootcamps/gurus that walk you through the whole process (which LLC to set up, in what state, which online service to use to make those mailers, which data broker to get the mailing addresses from, etc).
BTW, don't pay for those bootcamps. They are anywhere from 10-100x overpriced.
> I'm not sure if I'd count a person who can buy enough investment properties
Enough means "1 or 2". So yes, many average people can.
They'll often put, say, $50K down and that's it.
Here's how it works.[1] Homeowner has a house that has some significant flaw that's so bad no bank will mortgage it. This means the homeowner cannot sell via traditional methods. It will cost, say, $100K to repair the house and bring it up to market standards, but homeowner doesn't want to spend the money. He may already be ready to move (this may be a second house - or an inherited house, etc).
His only option is to sell for cash. The house is currently worth $250K, but market rates are $450K.
Wealthy non-RE investors won't buy his house - they want a house ready to move in to.
So what does the "average person like you" do? He gets a hard money loan. A private lender gives him $300K. $250K is to buy the house, and $50K is to help with the repairs. The average guy also puts in $50K of his own. At the end of 6 months, the house is all fixed up, and now worth $450K. He sells the house, and pays back the loan, and makes a decent profit.
Alternatively, he gets a mortgage on the house, pays back the private lender, and rents the house out.
What's in it for the lender? A very high interest rate. Back when mortgage rates were 4%, private lenders charged 12%. While this sounds scary high, the average guy plans to be done with everything in 6 months, so it's only 6 months of high interest.
What's in it for the "average guy"? Well, he just got a house, right? Also, what happens if things go south (e.g. runs out of money because he misestimated repair costs)? He loses the interest and his $50K, and that's it. The private lender gets ownership of the house, but cannot go after his assets.
So if you can save up $50K, you can get a house. The real hard work is to identify the right property (i.e. one that can't be sold easily).
Everyone I know who's done this earns less than a SW engineer. Some people are blue collar workers.
Another model: The homeowner is in a bad financial situation and has not have been paying property taxes. Now the county is threatening to take away his house because he owes $20K in taxes. There are only a few weeks left for the deadline.
The investor contacts the owner and says "Hey, let me pay the $20K you owe, and sell me the house for $30K. If you can sell the house for more to someone else, go for it. But if not, here's my number."
If the owner could have sold it for higher, he likely would have already. Both ways he's losing the house, but this way he gets money.
I know people who do that. They pay the same interest rates as if the house was in perfect shape, not higher interest rates, and they are getting loans for most (if not all) the value. Their local banker knows them well (since they get loans for this all the time), and knows they are good for paying back the loan and so they are willing to extend them a loan for a low rate. If the bank forecloses on a house and their inspection decides it is in bad shape the bank will call this person first and it will never go on the market. (they have a list of people who do this work - different people specialize in different problems)
If I was to try to do the same I'd pay a higher rate, and have to put a lot of money down. However once you do it a few times the banks realizes you know how to run this type of business and so is willing to lend you money to do it. (which is to say if you want to get into it you almost have to live in the first 2-3 houses while you fix it up, but after that you can just buy something with their money to fix up)
> I know people who do that. They pay the same interest rates as if the house was in perfect shape, not higher interest rates, and they are getting loans for most (if not all) the value.
Totally different category. The people you know are not getting private loans, but regular bank loans (backed by Freddie Mac, etc). Those houses likely are regular houses banks are willing to mortgage (i.e. free of serious defects).
They are basically just buying regular houses to rent/invest. Requires a lot more money, and is a lot less lucrative.
I'm talking about houses that banks are not willing to touch in their current condition.
> If the bank forecloses on a house and their inspection decides it is in bad shape the bank will call this person first and it will never go on the market. (they have a list of people who do this work - different people specialize in different problems)
Yes - once you make connections with banks, brokers, etc, you'll get on the list of people to call first :-)
Nothing wrong with what you're saying - just a different category of RE investors. My guess is the people you're referring to aren't sending out those mailers.
> If I was to try to do the same I'd pay a higher rate, and have to put a lot of money down. However once you do it a few times the banks realizes you know how to run this type of business and so is willing to lend you money to do it. (which is to say if you want to get into it you almost have to live in the first 2-3 houses while you fix it up, but after that you can just buy something with their money to fix up)
Same idea with the category I'm talking about. It'll be hard to get the first hard money loan, but once you've successfully exited an investment this way, other private lenders are more likely to trust you and give you favorable terms.
No, they are buying houses that need significant work before they are rent able. I'm not sure how the loan terms are structured, but they are getting good rates (they likely are doing two loans, one for the house and one for remodeling, perhaps with different rates - but rates you couldn't get overall). Banks will touch any house in current condition (Freddie Mac may not!), they just care that it can be sold - the land has value and the structure has value even when not livable.
> I'm talking about houses that banks are not willing to touch in their current condition.
If they're not willing to touch them in their current condition, it seems strange that they loan me $300k with that house as collateral. If I can't make the renovation work financially, they're stuck with a shitbox, potentially one that I've done more harm than good to.
Private lending is a financial avenue where borrowers get loans from private lenders — individuals or businesses instead of borrowing funds from a bank or a credit union."
> If I can't make the renovation work financially, they're stuck with a shitbox, potentially one that I've done more harm than good to.
Yes, and ...?
Lending is always risky. That's why private lenders have very high interest rates. The private lender will assess how likely you are to succeed. They generally know RE fairly well, so they'll want your analysis on the worth of the house, and how you made the estimates on repairs. If they think you're way off, they'll just tell you why and not fund the deal.
And they'll want to know what you're losing. If you're a blue collar person and are willing to put $50-75K of your own money into the enterprise, they know you have skin in the game.
I appreciate the questions/counterpoints. Just keep in mind you're not arguing with someone who is merely arguing from a theoretical vantage point :-)
Where do you think they're supposed to get all those houses? New construction is negligible in much of the US, and ironically enough, the same housing shortage they're benefiting from would make it incredibly expensive to buy out that many individual homeowners.
The fact that most people can only get exposure to the housing market by taking a massive loan to perform a leveraged buy-in, at which point a single asset forms the bulk of their capital portfolio, is not a good way to build generational wealth, and it certainly shouldn’t be the only way to a middle class life.
It’s honestly possible that people would be better off putting their money into a diversified investment fund that includes a spread portfolio of housing among other assets, so they can benefit from that growth. If your 401K includes Blackrock assets, you’re still benefitting from overall housing market growth, without that being tied up in also being the building you live in.
The big win buying a house historically represents – for those for whom it works out – is of course that you can buy a house with borrowed money on a fixed rate, pay off the loan over 30 years, and pocket the appreciation in the asset over the loan value. That’s an amazing deal if you’re lucky enough to buy and sell the right house at the right time and get your loan at the right interest rate. But it definitely doesn’t work out for everyone.
I agree that the 'housing as an investment' situation is awful but what are the prospects, realistically, for someone looking for a home right now? If it's a choice between renting or paying off a mortgage then to me it's a no brainer to go for the loan if you can get one on reasonable terms. Otherwise you're just throwing money away on rent, you'll never see those rent payments again. And that's what I don't want to see, private equity home ownership reaching a point where more and more people have no choice but to rent. Whatever the solution is to the housing crisis (probably building more homes, duh), I don't think it's relinquishing ownership to wall street and becoming a society of renters
And yes I know they don't own that many houses relatively speaking, right now, but I personally don't see any upside to allowing the practice at all.
> Otherwise you're just throwing money away on rent, you'll never see those rent payments again.
This propaganda is not the whole truth. Renting almost always means you live in a smaller/cheaper place (or perhaps in a more expensive place but you don't own a car) after maintenance costs are accounted for. People who take that different and invest it well end up just as rich as people who invest in houses - it isn't hard to find investments that have a much better long-term returns than real estate.
In the real world it has been shown in many many cases that renters can get just as rich as homeowners. Details of your situation matters, so I cannot say what is right for you. However I can say with all confidence that renting is not why you are poor, nor is it why you won't build wealth long term.
> But the bigger problem for housing affordability, he adds, is that "we just haven't built enough [homes] to keep up with the population growth and household formation."
The circular incentive here is left unsaid. If a house is an investment, you and every other homeowner has an incentive to keep supply low and demand high. This ultimately drives votes, lobbying, and policies that prevent houses being built. Otherwise you end up with falling rents and stagnating property prices, like in Austin.
https://www.apartmentlist.com/research/cooling-rent-growth-d...
"Housing as investment" is such a terrible idea, embedding it in culture should be avoided at all costs. Not only does it drive up housing costs, but it has people dumping loads of money into a single investment. Of course people don't want home prices to go down when, for many, it's their primary investment vehicle.
I hope we can get to a point where this idea eventually dies. I'm shocked that 2008 didn't wake people up in this regard, but I guess the supply shortage made real estate a pretty rational place to invest for a while.
"Housing is an investment" is just a sales tactic that took over and went insane.
It's only really used to justify the humungous loan payments you're willing to take on.
I'd happily take a $1 house if it was guaranteed to never change in value; but it also served my needs.
It's moderately fun to try to figure out what a "healthy" home market would look like - probably something similar to cars; "used" houses should sell for significantly and noticeably less than "new" ones (all things considered). But location and constraints often invert this - the new houses are so far away that they sell for less than the old ones in more favorable locations.
The scary thing is that ONCE you are metrically fuckton in debt, you become exceptionally concerned with the valuations, because once it trends to level or goes under, you're stuck!
Healthy means the value of a house is the value of the land, plus the value of building a new house exactly like it minus depreciation (meaning if you replace something the value goes up). Builders of course need a reasonable profit so that is factored into the value.
The reason why the bay is unhealthy is they don't allow you to put something on the land that matches the value of that land. People who want to spend millions on a house should be getting a mansion not a small house. People who buy a small house should get it on a lot not worth much money. I'm not sure of a good number, but something like only 1/3rd of the value should be the lot, 2/3rd the structure. This is right for most people, but there is nothing wrong with wanting a mansion in an area of tiny houses, or a tiny house on a massive lot if that is how you want to live (if a farm lets count the house separate from the rest of the farm buildings - not that this is possible but ...)
The market you're describing is pretty similar to the Japanese one, where the land keeps its value but the home itself depreciates over time, and old-enough houses are assumed to be teardowns unless proven otherwise.
It probably looks somewhat like this: https://psmag.com/economics/inside-japans-disposable-home-ma...
I live in the Netherlands. In the 80's we use to have giant stores owned by couples living above or behind it. They owned 100% of the building, they owned everything inside it.
One particularly memorable instance to me was an old couple, the store had a ceiling two floors high with an 8 shaped cast iron balustrade wrapped around it. I want to say they sold puzzles, postcards and mostly wooden toys but technically that was what they had in stock, they didn't sell much of anything. If they sold 3 postcards and 2 puzzles per day it was enough to buy food. Food was really cheap.
The store was empty most of the day, if customers arrived they switched some of the lights on from behind the counter. If a wave of tourists arrived the place lit up brightly like a xmas tree. They sold the single key chain and one post card and went back to their living room on the other side of the door behind the counter. It was a magical place with many items aged into antiques on the shelve.
The old couple eventually died and the place was sold for many millions, stripped down and modernized for millions followed by a parade of over priced tourist traps that went bankrupt one by one.
Everyone working there has to pay for housing too! The rare place to live that becomes available would also be far away enough that you need a car, a long drive 2x per day and places to park it. Then you need to work hard, there need to be at least two shifts, you need to sell lots of things with very large margins.
The difference is much larger than people imagine. A bad day use to be one post card for some potatoes. Today's postcard is 1/100 the production cost, sold for 6 times more but the revenue isn't enough for one employee to park their car.
For just 6 employees at 1500 pp plus say 6000 for the store you end up with 15 000 just for housing everyone (not counting the 80 year olds such store has no use for)
Housing is only 'an investment' of the kind people expect to get fast returns on because of the shortage of housing. Everyone who benefits from that is effectively extracting wealth from the people who are stuck outside of the housing market because of those shortages.
'Abolish rent' is a good read.
One thing we can do to drive down property prices without driving people out of their homes is to tax the ever-loving-bejebus out of second (or more) Single family homes, for individuals and corporations. Make it progressively worse the more SFM's corporations hold.
An example would be to tax a second home and onward at (land tax)^(10nn) where n is the number of total homes you have. The point is to make it financially absurd to own a second home, let alone 20.
This is only one particular point on a multi-prong approach.
Removing the ability of Private equity to eat up all the local contractors to make a little mini-monopoly is also something that 100% needs to be done.
The fastest way to remove 'your home is an investment to be reaped later' mentality is to limit the total sale price based on the last sale price (IE: only increasing the price of actually investment into the property, and legally allowing any sale price far below the estimated property value) which mostly removes all of the incentive of buying a house 'for investment'. That's extreme and would have downstream consequences, we still want to (financially) incentive people to improve their living conditions.
It's also extremely hard to build a home! Regulations and zoning laws aside, America lost a fair bit of knowledge after we practically stopped building homes after the 2008 collapse. There's no silver bullet solutions. No company is going to solve the immensely complicated task of building a home in a warehouse to reduce production costs via automation: that's a pipe dream sold to venture capitalists.
Any real solution would have consequences that would hurt some folks. Still: doing nothing hurts everyone (except for an extremely small subset of already wealthy individuals and corps) far more.
Homes should be for 'living in': not to 'make a living from'.
That is a bad idea. It assumes the buying a house is something everybody must do. For some buying is a good idea, for some it is not. You have forced people who should rent to buy anyway, or pay massive rent to cover that taxes the investor who owns their house must charge.
> Removing the ability of Private equity to eat up all the local contractors to make a little mini-monopoly is also something that 100% needs to be done.
There is no need because private equity has not done that, and there is not current reason to think they will. If they ever to get a monopoly then we need to do something about it, but right now there is no sign they are. Plenty of little builders exist who are competitive with the large builders in both price and quality. There are also enough large builders to be competitive even without the small builders.
Not everyone needs a home, no, that is not the assumption.
It does make the assumption that it's bad to buy twenty houses and live in only one while also opposing more housing contraction.
'Abolish rent' is still a good read.
As far as private equity... look closer: it is happening.
https://fieldrocket.us/private-equity-companies-are-buying-t...
https://www.marketplace.org/story/2024/10/24/private-equity-...
There is EVERY reason to think that they would do this, besides the data showing that they are. The MO is to find an area, buy up all the local tiny contractors, and set prices higher and higher until those contractors finally fail, then sell off any and all assets for a profit.
I am also making the assumption that you haven't tried or researched building a home in the last few years, based on your comment.
> There is EVERY reason to think that they would do this, besides the data showing that they are. The MO is to find an area, buy up all the local tiny contractors, and set prices higher and higher until those contractors finally fail, then sell off any and all assets for a profit.
That is a goal that makes sense. However that goal has been around for a long time and nobody has been successful, and it is unlikely this current round will be. They can't buy up enough small players to make it work.
Anybody can write a book that sounds good. I've read enough to not trust them. I need more authority than just someone wrote a book that ignores any factor that isn't convenient to their opinion. Note that I have not read that book, and yet I'm 100% confident that they did that - it is a pattern repeated far too often.
> They can't buy up enough small players to make it work.
We just don't have the data to track that. KKR, Blackstone, and Bain Capital, all buy up small time contractors, as well as real estate. They absolutely have the money to bully their way using that strategy. We don't know for sure if that's what they are doing or not... but as you agree: That goal makes sense.
> Anybody can write a book that sounds good.
Not everyone can write a book both sound and logical, agreed. That is to say, a well researched book is rare indeed.
It is biased, yes: it is very anti-landlord. It views a landlord as inherently extractive, and makes the case for that viewpoint.
To say that the book is not worth reading is also incorrect. It has some fantastic insights unrelated to its anti-landlord bias and it is an interesting read.
And yes: you shouldn't just trust what you read. Ever.
Regardless of it's flaws, I still recommend it as a read.
When the line goes up, everyone hopes it keeps going up, and tries to figure out a way to profit from that.
One way to stop that, is ensuring the line doesn’t go up. That has some pretty nasty side effects in other ways though.
When the line stops or starts to go down, then bad things happen. People can’t sell and move without losing a ton of money. People go bankrupt, etc, etc.
> When the line stops or starts to go down, then bad things happen
Only because many millions bought risky investments since they were told it was basically risk free. Normally things getting cheaper is a good thing, but we tricked people into thinking that housing being expensive is good for them.
This is true literally everywhere, in every country (and under every gov’t) I’ve ever seen. And I’ve seen a lot. If you think US property prices are nuts, look in Europe, Asia (especially East Asia), etc.
Most people take crazy risks to buy the most/nicest house they can get a loan for because where you live is a huge factor for a number of other things in people’s lives.
If people will give them loans for more than they can afford, many people will still do it. So easy credit? Housing market goes up. Tough credit? Housing market goes down. All things considered anyway. Eventually.
Owners have a very, very strong incentive to stop it from going down, so unless they have to move, the market can stay locked up for a long time.
This cannot be said enough. If we were remotely serious about addressing the lack of supply, we have multitudes of hard/heavy levers to yank on:
* Taxing non-owner-occupied single-family residences at higher rates (incentivizes sales)
* Removing or barring the traditional zoning/approvals boards beyond a rubber-stamp for developments that meet safety codes (incentivizes building)
* Taxing the capital gains of home sales without ability to roll over (disincentivizes housing as an investment strategy)
* Mandating housing as a human right (myriad of knock-on effects for decades after)
* Barring no-fault evictions of tenants (helps renters save to buy a home)
* National rent control (helps renters save, incentivizes construction since growth must now be achieved through volume, not price hikes)
* Public Housing (a la Singapore’s model, where we can place a down payment on a home or condo with a gov-backed loan to the developer, but with restrictions on sales/residency requirements)
* Prohibition of algorithmic pricing (flattens rent increases)
* Mandating longer leases (to help renters predict housing costs for longer periods)
* Allowing renters to “buy” their apartments and convert into a condo (reduces apartment vacancies, allows more renters to build equity and control housing costs)
* Price controls on rent increases or sale prices, especially for First-Time Buyers (e.g., 20% margin on a home’s cost for sale by builder but with a gov-backed loan, or restricting rent increases to local COLA or a 20% margin, whichever is lesser)
We have so many more options, and nobody wants to try anything because it’ll tank housing values across the board. The longer we wait to pop this metaphorical bubble, the worse it’s going to hurt, for longer.
> National rent control
Rent control is a deeply counterproductive policy that reduces housing supply and lowers housing quality, with the benefits accruing overwhelmingly to already-wealthy households that can make the most of rent control regulations. https://www.nmhc.org/news/articles/the-high-cost-of-rent-con...
> Taxing non-owner-occupied single-family residences at higher rates (incentivizes sales)
We already do that in the form of homestead tax credit. This just discourages renters though and so I oppose it. If you come up with a way to ensure that if the house is rented the renters pay the lower rate (get a tax rebate?) I'm for it.
> Mandating housing as a human right (myriad of knock-on effects for decades after)
I have no idea how you do that in practice. There are many choices, but everything I've seen as serious unintended consequences that end up being worse.
> National rent control (helps renters save, incentivizes construction since growth must now be achieved through volume, not price hikes)
Unintended consequences get you. Every rent control I've seen disincentivizes construction since you can't be sure of a profit.
Most people are investing in houses wrong. If you want to invest as most people think of investments you really need several houses and rent them out. Owning your own home as well makes sense, but your own house is not an investment in the same terms even though it is one of the houses you own!
A house falling in value is still a great investment for many, but it is a very different type of investment from what most people mean by investment. By owning a house you have a place to live for the same price even as inflation increases you income. By owning a house you have a place to live after it is paid for when you are retired and have a much smaller income (even if you have more money you have more time to enjoy/spend that money when you are not working 40 hours per week) - retirement savings are limited and houses are a great place to store money that doesn't falling into traditional accounts. These are great things to have long term, but none of them are about the increase in value. The house you live in is an investment in future rent, but you should only think of the value in terms of paying for your nursing home if/when you need one (even then you should have long term care insurance despite all the fraud and near-fraud in this area)
The idea that rents fall and property values stagnate is short term thinking. Over any 5 year period is can be true, but over 10+ years inflation tends to catch up. Unless you are buying in a very rural area nobody wants to live in - Austin doesn't qualify. Sure prices will fall, but builders have a lot of fixed costs and so that limits supply and in turn ensures prices will need to go up as population expands, or just the old houses start wearing out (houses last for a long time with maintenance, but eventually)
I'm not blindly advocating everybody buy a house. Buying vs renting is a complex question, and many people have proven they can do well in life with both. You need to make your own decisions based on your life situation. If you buy be careful not to think of your house in terms of any other investments you make - it needs very different accounting.
> you and every other homeowner has an incentive to keep supply low and demand high.
Do you really believe everyone thinks this way? No one I know who owns a home bought it for investment. They bought it so their family has a place to live that is theirs.
I don't have hard numbers but anecdotally it's a lot of people. If you listen carefully you'll hear a lot of things like "Renting is throwing money away", "I want to get on the property ladder", "buy land because they aren't making any more of it", etc.
The American Dream™ centers heavily around home ownership and the government subsidizes it by allowing mortgage interest deductions and underwriting zero-down loans. Getting a mortgage and building equity is the only feasible path to wealth for working-class people who don't have money lying around to invest or the financial literacy to start doing so [1]. Contrast this with reality: in the market I live in it's actually around 20% cheaper to rent on average (presumably because California caps property tax increases). For 30 year mortgages in a sideways market you generally have to make payments for 5 years before you can break even when you sell. On top of that houses are non-fungible, illiquid assets that require maintenance and are subject to black swan events like termites, natural disasters, and destructive tenants that might not be covered by insurance. On a rational basis they are mediocre investments but our culture has conditioned people to think this way because it's their only hope for a nest egg. One might also recall what happened circa 2008 when banks encouraged the house-poor to leverage themselves to the hilt via various home equity loans to the delight of sports car and big screen TV manufacturers.
I don't think this is a healthy state of affairs but these are the breaks.
[1] I didn't gain a solid understanding of personal finance until after I'd already bought a house with nothing more than several thousand dollars in my checking account - stumbling across Bogleheads via the web saved me.
Enough of them think that way as to matter to politicians. Even if that is a tiny minority, the rest of not given any reason to think they care otherwise and so that "squeaky wheel" gets the power.
No, I don't think every homeowner thinks that way. But that doesn't change that the incentive is there for every individual, company, and trust that owns homes to keep prices from falling
So they wouldn't mind if the resale value drops because other houses get built?
It seems like the only solution is going to be an FDR style president that sort of runs up against traditional liberties in order to to build. I do wonder if an interesting quirk of the current president essentially consolidated executive power for questionable reasons, leads to a candidate that uses some of those changes to bulldoze these types of projects back into America.
If you're planning on upsizing in future, you still benefit from falling prices.
I would imagine most of the housing being newly built is also on the higher end. This new supply doesn't exactly help affordability!
I don't think that's the case. The article specifically mentions multi-family units:
> Austin, TX presents the clearest example of this trend. From 2021 to 2023, an average of 9.9 multifamily units were permitted for every 1,000 existing residents in the Austin metro, by far the highest rate among the nation’s 50 largest metros. As these new units have gradually reached completion, the median rent in the Austin metro has fallen by 7.3 percent over the past year, which also ranks first among the top 50 metros.
That depends. Builders build what there is profitable demand for. If there is a lot of demand that means the high priced high end homes are in demand and builders won't build anything else. (unless forced) However there is only finite demand for such things so and as you build eventually someone says "can you make it cheaper" and some builder - having no other customers is forced to build something lower end just to get any work.
Now builders won't accept a loss (in general), so that does limit how low end they can go. However the other half of this is that most people moving to something high end just freed up something lower end for someone who can't afford luxury. (most people cannot afford a second home and even those who could afford it want to spend their money on something else. There are also a small number of junk houses that are so worthless they end up destroyed, but this isn't common)
That's why the "Century Initiative", lobbying to increase Canada's population to 100 million by 2100, is funded by real-estate investors:
https://en.wikipedia.org/wiki/Century_Initiative#Connections...
How do you end housing as an investment?
People who are not investing need to vote usefully. Renters typically do not vote in large numbers and so this group that isn't getting anything from the investment isn't getting their needs represented. When renters do vote it is often for things that increase rental costs indirectly.
Even those who do own a house are often helped by things that lower value in some way. Many have a kid they want to move out and be successful in life and this means they gain more from lower values then raising values (which is paper money anyway since they would have to sell to see it - most are not). Many want to put an addition on the house and the same laws that prevent building also prevent their addition.
I don't have an answer to that (I'm sure others do) but I do feel this is a problem that can only make itself worse
The more prices go up, the larger % of net worth for an individual a home consumes. If your entire net worth is wound up in your home because your home costs so much, your incentives are much higher to keep the price of your home from falling than if it was just a fraction of your net worth. Worse yet if you're in debt and you have to sell
The longer this problem goes on, it seems the harder it will be to rectify
Glad to see the final section basically cover that this is not actually a problem. I sort of wish the headline was more of the "Why you shouldn't be worried about private equity buying your neighborhood."
Why and how did that ear worm infect so many people?
> Why and how did that ear worm infect so many people?
It's a story they want to believe.
The big bad out-of-town corporation is causing the housing crisis and not the complex web of dozens of factors: existing owners wanting to protect their largest asset, more people wanting to live in fewer places, inflation, tariffs on Canadian lumber, safety standards, etc.
Ultimately it's not really that complex to explain: there just literally aren't enough physical housing units of whatever kind in major US cities to meet demand (https://www.fanniemae.com/research-and-insights/perspectives...), so prices keep going up.
Unfortunately, there are a ton of people who will deny that that factual, well-studied shortage exists, and will try to blame its effects on anything and everything else even tangentially related.
There are ~ 15 million unoccupied houses in the US [https://www.realtor.com/news/trends/states-with-most-vacant-...]. That we know about.
A desirable location will never have enough capacity. Regardless of how much building occurs. If you don’t believe me, look at NYC, Paris, etc, etc.
People move as close to a desirable location as they can afford. And often more.
Don’t get me wrong, rules set where and how bad the line is, but there is no realistic situation where everyone who wants to live in SF can, and can afford to, and it is anything like SF.
Well the problem with SF is less density and more than half of it is single-family home neighborhoods with zero amenities.
Anti-growth people will point to neighborhoods like Glen Park, NoPa and Noe as "SF" while forgetting most of the surface area of the city is empty neighborhoods like Parkside, Mt Davidson Manor, etc.
It’s a matter of degree, not difference. If you fit 2x the number of people in them - you’d still have the same general problem. Just 2x the number of people now.
And because larger cities tend to also be more attractive (Tokyo is still growing, for instance), you’ll never have enough density to be ‘enough’ - aka where it’s cheap enough for everyone to live where they want.
You will have more people though.
It's a false premise, cities do not grow endlessly. If you look at other cities they're actually losing population – NYC for example.
NYC is not losing population. [https://www.nyc.gov/assets/planning/downloads/pdf/our-work/r...]
There were two years during the pandemic when people moved out- because jobs let them - but people moved back and it has more than made up for it since.
Every major city in the world has seen significant population increases as mechanized farm work and fertilizers have removed the need for many farm workers, and economy activity has concentrated.
It’s been a consistent trend for almost 100 years.
And yet, with the Tokyo example, the combination of lots of housing and good public transit means that you can get small but liveable apartments that are a 20-minute walk from central downtown Tokyo (and under a 10-minute walk to multiple train stations with access to the rest of the metro area) for under $1500/month. Here's one right here: https://www.realestate-tokyo.com/rent/B0021114/park-flats-gi...
The tiny salaries in Japan make that even more expensive (comparatively than SF) - last I checked. But yes, the Japanese are significantly more socially coherent eh?
This is a real "you'll never make it perfect, so don't bother even trying to make it better" argument.
Paris is cheaper than SF, even in the middle of downtown along the river, because they actually have consistent housing density throughout the city. Look at the arrondissements that are even 20 minutes out from downtown by subway and you can find apartments that people in SF and NYC would kill to have at that price. Paris will never be free to live in, but it's extremely obvious that they have avoided the worst of the US housing crisis by just actually building lots of housing.
> There are ~ 15 million unoccupied houses in the US
Unoccupied houses across the entire country don't matter. What matters is housing in the places that people live.
Places that people want to live. Which are often aspirational. Plenty of people live in places that would be 2nd, 5th, or even 10th on their list if money were not a concern, eh? And that’s normal. And almost everyone could live in those out of the way places too.
Which is why comparing against the rest of the country is valid. Just like comparing SF to Vacaville. Or South SF. Or Oakland.
There are definitely parts of Paris that your typical Parisian (or even atypical French citizen!) cannot afford to live, yes? And many, many live in Paris’s equivalent to Oakland. (Or NYC’s Harlem)
It could be better - but people also have this weird mental block where the only place they ‘can live’ is also the same place everyone else wants too, but they can’t afford it, and somehow it is everyone else’s problem to fix that for them.
The studies on this subject look at entire metro areas (https://www.fanniemae.com/research-and-insights/perspectives...), which include places like Oakland and Vacaville, not just city downtowns. "Want to live" here isn't just 'aspirational', it's covering basic elements like 'are there actually enough jobs there'. "Oh, there are fifteen million empty houses" means absolutely nothing because most of those houses are in places where there's no way for any substantial number of people to actually make a living.
ding ding ding the housing prices have nothing to do with some vague notion of ‘I want to live there’, but are rather a proxy for the expected economic value of a place * people’s ability to leverage it.
Give businesses a reason to spread out a bit and not concentrate in these urban centers, and voila - all those ‘undesirable houses’ are all the sudden more desirable, and all those crazy zoning issues and nimby’s are not such an issue anymore. And the housing crisis mostly evaporates.
But since availability is also a proxy for competition for those jobs, it’s not like folks have too much incentive to make it easy eh?
Lumber is a tiny fraction of the cost of a house, the US produces a huge amount of lumber on its own. I don’t think there’s any real evidence to show that lumber tariffs have had a measurable impact on housing costs. Most housing is built with lumber from here.
Also the tariffs are new this year, housing costs have been a problem for much longer than just this year.
Here's a "kit" for a 1,400 sq ft house: https://www.menards.com/main/building-materials/books-buildi...
$90k for materials.
Around here a 1,400 square goes for $385k (half a house, but there you go).
So materials are somewhere around a quarter of the cost. Land + foundation + utilities is another quarter; the rest is labor and profit.
The land, foundation, and utilities (often in the form of impact fees) are largely fixed costs regardless of home size. The larger the home one builds the less impact they have on the final cost to build. This is why “starter homes” don’t get built anymore. The builder has every incentive to build that 3,000 sq ft home on a small lot instead of something more reasonable in size.
Also, other options that used to be more efficient to build multiple homes at once, like row houses or duplexes/triplexes, are generally directly or indirectly illegal to build in most US cities now. Row houses and brownstones were the cheap-and-fast housing option once upon a time; they're now rare and expensive because in most places nobody's allowed to put up a new one.
I've seen sixplexes around here, but unless they're apartment buildings (which have better designs anyway) they're relatively undesirable.
A duplex saves you some coin, but each additional house you stick on the side saves you less, and the desirability goes down. People don't like duplex/triplex/sixplex living.
Yes very true, and lumber is a sub-category inside materials and it is not very expensive compared to the other materials like concrete, siding (fiber cement, stucco), roof material (metal, asphalt, tile), drywall, paint, plumbing, electrical. Of all those things lumber is a cheap line item.
to be fair, xnx said "dozens of factors" and mentioned lumber and tariffs as among them... maybe better examples would've made their point stronger though.
Yes that’s true, I think he’s right on all the other points.
I just built a house by myself, from the ground up, so I couldn’t let that lumber thing slide though as I literally just paid for all the materials myself and I know how little lumber costs compared to everything else.
It's the left wing gaslighting everyone over all the issues caused by making it harder and harder to build anything. You blame landlords and PE when in actuality the government has stopped construction in it's tracks. This then feeds into the ultra-left agenda which tends towards socialism and "make landlords and private property illegal."
This is largely what the Abundance agenda and YIMBY is all about... getting the left to stop throwing up NIMBY road blocks.
The problems with not enough investment in new houses are not limited strictly to blue states but blue states seem to have the largest problem with it. Democrats love regulation so much that states like MA and CA have erected so many zoning and building regulations that new homes have become incredibly difficult and slow to build.
We struggle to even build apartment size condos in suburban MA that cost less than $1.1-1.5M per unit. We are rapidly heading towards new houses being $2M+ in lots of parts of the state. By the time a developer manages to buy a lot and go through all the red tape, possibly tear down an old house, go through environmental review, etc.. they can't make any money unless they build a $2M+ house. Any lot that doesn't have an old house on it in the eastern part of the state will have a long list of environmental gotchas a developer will have to fight through, possibly for years before they can even start building anything.
Housing construction is so far behind the demand that who owns the existing houses has little to do with it.
PE and Corporate landlords own more property in left leaning markets because Blue policies have made it more profitable to do so. The more new construction is slowed, the more valuable the rental properties become. Some of these companies won't want to go near red states where construction is easy. The property values and rents are just not high enough.
Is this persisting now that the zero interest rate era is over? It would have been profitable during the cheap money era, but is it still?
The stories about "companies buying houses way over value" were around for awhile; IIRC there were some "AI powered home buying" things related to Zillow, etc that would get in fights with each other and themselves.
Zero interest rate certainly made it much more possible; buying a $500k house and having nearly no holding costs, and worst case scenario selling it for $500k is way different than buying the same $500k house, paying $2k a month in carrying costs (interest alone) and then having to sell it for $450k? That hurts, and hurts hard.
The problem with AI and Zillow is they forget "due diligence" matters. I know someone who sold a friend to Zillow for $20k less than market - they knew, as would anyone who did an inspection that there was rot issues and the correct value was around 100k less than market (which would then allow giving a builder $80k and 3 months to fix the issue before selling). Zillow tried to put a fresh coat of paint and sell the house. Now there is value in someone like Zillow coming in with $20k cash today to buy your house ($20k might be the wrong number, but lets accept it for discussion), and then selling it for market a few months later when someone wants it, but they need to do that due diligence.
That is why Zillow got out of the business even when rates were near zero, doing that due diligence is something they were not prepared to do since it requires humans to do work. (even if it is just taking pictures for the AI, to look at)
I remember the discussion pointed out that as long as they had "assumed due diligence" because they were randomly selecting properties in tests, they did fine.
But once word got out "sell your shithole to Zillow, they don't even check" of course EVERY shithole went to them.
Tragedy of the Venture Capitalists or something.
When you have a bunch of rental properties in your neighborhood, you have different maintenance standards and tolerance for unoccupancy. On an average, this allows the neighborhood to be on an average, be average. When you have large corporations buying up all the homes in the neighborhood, things swing heavily in one direction depending on the market conditions.
[dead]
A house is a deteriorating pile of lumber on land that always wants to return to nature. Only an insane person would expect it to increase in value over time. The maintenance and taxes alone usually swamp speculative gains.
Still don’t want a neighborhood full of LLCs.
>... but they are aslo diversifying the suburbs!
Why would anyone sane live near a black neighborhood?
End corporate personhood, end Citizens' United, restore the Tillman Act, and make it illegal for corporations to not be actively divesting from individual residential property units.
Except: corporate landlords SHOULD be banned. And PE should be, too.
So we should have smallhold landlords that frequently skirt rental regulations and are difficult to hold accountable?
In Europe, landlords violate regulations much less often than in the US, because the tenants renovate and maintain the properties, instead of the landlords. It's much cheaper to rent in Europe, because it's much cheaper for a tenant to fix something small themselves, than involve a landlord, a property management company, and a service company.
How do you define that? Plenty of small landlords are "corporate".
Any sane one is. Your accountant will make you become a corporation if you are not. It is really cheap to become a corporation and there are too many financial and legal advantages to corporations to not be one (see a lawyer for details - there are many different incorporation options with different pros/cons)
Banned and reeducated.
Shameless apologia for private equity vultures buying up all the houses, what a terrible article. "Oh but renting costs less so it makes your neighborhood more diverse with more lower-income residents!" Yeah and renting also ensures you stay low-income forever by never getting the opportunity to build any equity. Real 'you'll own nothing and you'll be happy' energy
The opening paragraph is also a laugh. "Daniel Erb became a corporate landlord kind of by accident." Yeah he was an investment banker who decided he wanted to invest in real estate so he decided to call his cousin at BlackRock- woopsie! what a weird accident!
Private equity doesn't own a lot of houses. For example, in California large landlords (including private equity but also traditional landlord companies) own 1.9% of houses, small landlords (under 10 houses) own about 20% of houses, and individuals own the rest.
Agreed, the meme of private equity buying up enough houses to make houses scarce is overblown. However, PE is an easy target for populist politics.
How many of those “small landlords” are shell companies under a larger corporation? I’ve never seen an analysis of this but any smart mega corporation would be wise to create many small companies to shield themselves from localized market risks.
And which way is it trending? Massively upwards, as per the article. I've been getting constant texts for years from private equity parasites trying to buy my house, everyone who owns one does. It won't take long for that 2% to become 5% and then 10% and onwards if nothing is done about it.
Are you sure those texts are from private equity?
I've dabbled with RE investments and hang out with those clubs. It's highly likely the origin of those mailings/texts is from an average person like you and me (most of whom have a full time job earning less than most SW engineers). They are doing RE as a side business, and are paying a service to send out those mailers/texts.
They're looking for distressed homeowners (e.g. people who are about to lose the house due to unpaid property taxes, etc).
They've been doing this for decades, but the easier availability of data due to the Internet, as well as the growth of online services, has made it much more accessible to the average Joe. It requires very little capital to send out those mailers/texts.
If you're getting more of these now than 20 years ago, it's because RE investing has become a lot more democratized/accessible.
A lot of them say so at least ("Hi I'm $Name with $FinancialCompany, we're looking to buy houses in your area...)- Though yes, I'm sure some portion of them are just private individuals or smalltime 'flippers'
My bet is the majority are private individuals. Because people are more likely to respond to that than a "normal" person. Just look at your sibling comment who said:
> I'm not sure if I'd count a person who can buy enough investment properties to justify using a mass-texting service an "average person like me"
If your average HN reader can't believe an average person can buy investment properties, then likely most Americans won't :-)
Anyone can set up a company in a few minutes. And then pay someone to design a professional looking mailer.
There are RE bootcamps/gurus that walk you through the whole process (which LLC to set up, in what state, which online service to use to make those mailers, which data broker to get the mailing addresses from, etc).
BTW, don't pay for those bootcamps. They are anywhere from 10-100x overpriced.
I'm not sure if I'd count a person who can buy enough investment properties to justify using a mass-texting service an "average person like me".
> I'm not sure if I'd count a person who can buy enough investment properties
Enough means "1 or 2". So yes, many average people can.
They'll often put, say, $50K down and that's it.
Here's how it works.[1] Homeowner has a house that has some significant flaw that's so bad no bank will mortgage it. This means the homeowner cannot sell via traditional methods. It will cost, say, $100K to repair the house and bring it up to market standards, but homeowner doesn't want to spend the money. He may already be ready to move (this may be a second house - or an inherited house, etc).
His only option is to sell for cash. The house is currently worth $250K, but market rates are $450K.
Wealthy non-RE investors won't buy his house - they want a house ready to move in to.
So what does the "average person like you" do? He gets a hard money loan. A private lender gives him $300K. $250K is to buy the house, and $50K is to help with the repairs. The average guy also puts in $50K of his own. At the end of 6 months, the house is all fixed up, and now worth $450K. He sells the house, and pays back the loan, and makes a decent profit.
Alternatively, he gets a mortgage on the house, pays back the private lender, and rents the house out.
What's in it for the lender? A very high interest rate. Back when mortgage rates were 4%, private lenders charged 12%. While this sounds scary high, the average guy plans to be done with everything in 6 months, so it's only 6 months of high interest.
What's in it for the "average guy"? Well, he just got a house, right? Also, what happens if things go south (e.g. runs out of money because he misestimated repair costs)? He loses the interest and his $50K, and that's it. The private lender gets ownership of the house, but cannot go after his assets.
So if you can save up $50K, you can get a house. The real hard work is to identify the right property (i.e. one that can't be sold easily).
Everyone I know who's done this earns less than a SW engineer. Some people are blue collar workers.
Another model: The homeowner is in a bad financial situation and has not have been paying property taxes. Now the county is threatening to take away his house because he owes $20K in taxes. There are only a few weeks left for the deadline.
The investor contacts the owner and says "Hey, let me pay the $20K you owe, and sell me the house for $30K. If you can sell the house for more to someone else, go for it. But if not, here's my number."
If the owner could have sold it for higher, he likely would have already. Both ways he's losing the house, but this way he gets money.
Again, such properties are hard to find.
[1] This is just one model. There are others.
I know people who do that. They pay the same interest rates as if the house was in perfect shape, not higher interest rates, and they are getting loans for most (if not all) the value. Their local banker knows them well (since they get loans for this all the time), and knows they are good for paying back the loan and so they are willing to extend them a loan for a low rate. If the bank forecloses on a house and their inspection decides it is in bad shape the bank will call this person first and it will never go on the market. (they have a list of people who do this work - different people specialize in different problems)
If I was to try to do the same I'd pay a higher rate, and have to put a lot of money down. However once you do it a few times the banks realizes you know how to run this type of business and so is willing to lend you money to do it. (which is to say if you want to get into it you almost have to live in the first 2-3 houses while you fix it up, but after that you can just buy something with their money to fix up)
> I know people who do that. They pay the same interest rates as if the house was in perfect shape, not higher interest rates, and they are getting loans for most (if not all) the value.
Totally different category. The people you know are not getting private loans, but regular bank loans (backed by Freddie Mac, etc). Those houses likely are regular houses banks are willing to mortgage (i.e. free of serious defects).
They are basically just buying regular houses to rent/invest. Requires a lot more money, and is a lot less lucrative.
I'm talking about houses that banks are not willing to touch in their current condition.
> If the bank forecloses on a house and their inspection decides it is in bad shape the bank will call this person first and it will never go on the market. (they have a list of people who do this work - different people specialize in different problems)
Yes - once you make connections with banks, brokers, etc, you'll get on the list of people to call first :-)
Nothing wrong with what you're saying - just a different category of RE investors. My guess is the people you're referring to aren't sending out those mailers.
> If I was to try to do the same I'd pay a higher rate, and have to put a lot of money down. However once you do it a few times the banks realizes you know how to run this type of business and so is willing to lend you money to do it. (which is to say if you want to get into it you almost have to live in the first 2-3 houses while you fix it up, but after that you can just buy something with their money to fix up)
Same idea with the category I'm talking about. It'll be hard to get the first hard money loan, but once you've successfully exited an investment this way, other private lenders are more likely to trust you and give you favorable terms.
No, they are buying houses that need significant work before they are rent able. I'm not sure how the loan terms are structured, but they are getting good rates (they likely are doing two loans, one for the house and one for remodeling, perhaps with different rates - but rates you couldn't get overall). Banks will touch any house in current condition (Freddie Mac may not!), they just care that it can be sold - the land has value and the structure has value even when not livable.
Ah yes - my mistake. My guess is they're likely not getting mortgage loans, but rather some other type of bank loan (e.g. business loan).
> Banks will touch any house in current condition (Freddie Mac may not!),
I was speaking of regular mortgage loans. Yes - there are other loan types.
> I'm talking about houses that banks are not willing to touch in their current condition.
If they're not willing to touch them in their current condition, it seems strange that they loan me $300k with that house as collateral. If I can't make the renovation work financially, they're stuck with a shitbox, potentially one that I've done more harm than good to.
> If they're not willing to touch them in their current condition, it seems strange that they loan me $300k with that house as collateral.
Private lenders != Bank loans. And as another commenter clarified, when I said "bank loan" I meant the usual mortgage loans.
https://lenderkit.com/blog/what-is-private-lending-and-how-i...
"What is private lending?
Private lending is a financial avenue where borrowers get loans from private lenders — individuals or businesses instead of borrowing funds from a bank or a credit union."
> If I can't make the renovation work financially, they're stuck with a shitbox, potentially one that I've done more harm than good to.
Yes, and ...?
Lending is always risky. That's why private lenders have very high interest rates. The private lender will assess how likely you are to succeed. They generally know RE fairly well, so they'll want your analysis on the worth of the house, and how you made the estimates on repairs. If they think you're way off, they'll just tell you why and not fund the deal.
And they'll want to know what you're losing. If you're a blue collar person and are willing to put $50-75K of your own money into the enterprise, they know you have skin in the game.
I appreciate the questions/counterpoints. Just keep in mind you're not arguing with someone who is merely arguing from a theoretical vantage point :-)
Oh, I know! At this point I'm not arguing, I'm genuinely curious about how it works.
Where do you think they're supposed to get all those houses? New construction is negligible in much of the US, and ironically enough, the same housing shortage they're benefiting from would make it incredibly expensive to buy out that many individual homeowners.
The fact that most people can only get exposure to the housing market by taking a massive loan to perform a leveraged buy-in, at which point a single asset forms the bulk of their capital portfolio, is not a good way to build generational wealth, and it certainly shouldn’t be the only way to a middle class life.
It’s honestly possible that people would be better off putting their money into a diversified investment fund that includes a spread portfolio of housing among other assets, so they can benefit from that growth. If your 401K includes Blackrock assets, you’re still benefitting from overall housing market growth, without that being tied up in also being the building you live in.
The big win buying a house historically represents – for those for whom it works out – is of course that you can buy a house with borrowed money on a fixed rate, pay off the loan over 30 years, and pocket the appreciation in the asset over the loan value. That’s an amazing deal if you’re lucky enough to buy and sell the right house at the right time and get your loan at the right interest rate. But it definitely doesn’t work out for everyone.
I agree that the 'housing as an investment' situation is awful but what are the prospects, realistically, for someone looking for a home right now? If it's a choice between renting or paying off a mortgage then to me it's a no brainer to go for the loan if you can get one on reasonable terms. Otherwise you're just throwing money away on rent, you'll never see those rent payments again. And that's what I don't want to see, private equity home ownership reaching a point where more and more people have no choice but to rent. Whatever the solution is to the housing crisis (probably building more homes, duh), I don't think it's relinquishing ownership to wall street and becoming a society of renters
And yes I know they don't own that many houses relatively speaking, right now, but I personally don't see any upside to allowing the practice at all.
> Otherwise you're just throwing money away on rent, you'll never see those rent payments again.
This propaganda is not the whole truth. Renting almost always means you live in a smaller/cheaper place (or perhaps in a more expensive place but you don't own a car) after maintenance costs are accounted for. People who take that different and invest it well end up just as rich as people who invest in houses - it isn't hard to find investments that have a much better long-term returns than real estate.
In the real world it has been shown in many many cases that renters can get just as rich as homeowners. Details of your situation matters, so I cannot say what is right for you. However I can say with all confidence that renting is not why you are poor, nor is it why you won't build wealth long term.