The key word here is "Wall Street". And this statement is playing off a popular misconception around corporate investors buying up American houses.
There has been a bit of a panic around "Investors buying up all the property!!!" With people often citing Black Rock and Blackstone as the main culprits. But most of the "investors" buying up property are individuals purchasing investment properties.
Here's an article on the topic from 2023[0], a bit old but my understanding is large institutional investment in residential real estate was already starting to cool down.
Black rock isn't buying up all the housing, your neighbors are.
I suspect this statement, and even if it becomes an actual ban, is largely to gain wider popular support around a largely imaginary concern people have.
It's not that simple - the problem is that those institutions are market makers. They are a tiny portion of the market, but a huge driving force in setting and manipulating prices, because their properties get leveraged, instrumentalized, and securitized, with derivative products, speculation, and all sorts of incentives that you don't normally want operating in the arena of housing.
The things that they do have massively outsized downstream impact contrasted against their relatively tiny overall participation in the market, and they can afford to behave in ways that manipulate the behavior of the majority.
If you can decouple them from the housing markets, you also decouple the interests of the donor class, and you allow for policy that doesn't maximize the cost of real estate over the interests of the majority of the population.
> They are a tiny portion of the market, but a huge driving force in setting and manipulating prices, because their properties get leveraged, instrumentalized, and securitized, with derivative products, speculation, and all sorts of incentives that you don't normally want operating in the arena of housing.
Raising prices when you only have a tiny portion of the market does not work. People won't buy them when there's another house for less.
It's not just raising prices - it's holding prices steady at some point without the concurrent pressure to sell, for example, or manipulating other markets in order to raise or lower prices in an area, or using other mechanics to manipulate pricing, across the entire market, depending on the intended actions. If they intend to purchase properties, it benefits them to depress pricing in the area, if they intend to rent, they can afford to impose artificial scarcity until they force renters to meet their rates, and so on.
Normal landlords don't have effectively infinite money with no forces bearing prices down, nor do they have the capabilities to influence markets. Even tiny percentage shifts can result in significant fluctuations in the prices consumers see. It's a very nuanced and complex system in which these institutional investors have very outsized influence.
You're telling a just-so story, and you can tell because there isn't a simple schematic 1-2-3 story you can make from this about how these people exert control over home prices. Words mean things; wielding scarcity requires you to control enough inventory to manipulate scarcity, and REITs and corporate buyers empirically don't.
I get why people like telling stories like this: it suggests there's a single boogeyman that can be dispelled to solve the affordability problem without painstakingly goring people's oxes state-by-state and municipality-by-municipality. But it's a fantasy.
If you can tell this story in simple step-by-step form, you will. I think you could tell a story about how a large corporate buyer clears out all the marginal buyers for some thin market like an individual subdivision or tranche of new construction housing in the Sun Belt. But I don't think you can tell a realistic story for them being "a huge driving force in setting and manipulating prices" across the whole market. I look forward to seeing your attempt, though.
you’re treating narrative completeness as a prerequisite for legitimacy. that makes any systemic issue unfalsifiable unless someone can account for every market, municipality, and incentive simultaneously.
this is an impossible burden of proof. requiring a perfectly schematic, end-to-end causal story before acknowledging harm is a convenient way to dismiss any structural concern.
pointing out that housing markets are complex doesn’t invalidate localized, repeatable effects or concentrated power. that just raises the bar of explanation until lived outcomes are dismissed as “just-so stories”, which matches the tone of your condescension.
If narrative coherence is your expectation the only satisfactory resolution is not dig into and normalize the contractual minutiae of the legacy finance system but flush the finance industry and the politically coddled mess it created.
There is no narrative coherence to be found demanding the living honor social debts, contracts of history; yes children believe these successes you never witnessed happened! That surely cannot be used for ill gains.
This smells more like self selection bias. You have been successful and thus prefer care be taken tidying up systemic issues created by our ledger.
Am a Thomas Jefferson fan when it comes to generational churn; the only constant political rule should be to rewrite things every couple decades or the living end up ruled by fiat decree of the dead.
im not even disagreeing with you, but i hate that hn seems to have this penchant to point out that unreasonable assertions may still be true despite being ludicrous. can facts emerge from a hypocrite? yes of course, but prices are not affected by buying and holding a tiny supply, so given that reasonable axiom, it is reasonable to demand more comprehensive evidence.
> but i hate that hn seems to have this penchant to point out that unreasonable assertions may still be true despite being ludicrous
Topics like this are hard on HN because a lot of commenters hold a deep, passionate hatred of something: Wall Street, Big Tech, OSes they don't use, even the concept of private automobile ownership. Once they descend upon a thread they're not interested in facts, they just want to tell stories that support their villain narratives. When it starts to get illogical they don't want to back down because doing so feels like an attack on their deep-seated beliefs.
There are some completely illogical economic theories being pushed all through this comment section. It's kind of fascinating to see how bad some of them are. Someone tried to argue with me that cars could be produced for a couple thousand dollars if not for all the regulatory overhead we impose on them in the US. It's almost hard to fathom how someone could believe that without stopping for a moment to wonder why no other country is building these $2000 full featured automobiles without these supposed regulations that increase the price by an order of magnitude.
The tata nano is an example of a low-featured car that sold in India for the equivalent of $2500 in 2008 dollars. You can make a car for pretty cheap if you strip down a lot of the hardware. I think one of the reasons new cars are designed/priced the way they are in the US is that the more frugal buyers always end up buying a used car anyway, so the manufacturers don't target the low end of the market.
I don’t think it’s an unreasonable assertion in the first place. Just because they are holding a small portion of all houses doesn’t meant they can’t have a huge effect. The primary reason being that the portion of houses on sale is small as well. Another reason being they are huge institutions with tons of money, and thus can hold houses longer, buy houses are higher prices, influence related markets, etc.
> Just because they are holding a small portion of all houses doesn’t meant they can’t have a huge effect.
There's no reason to believe that someone owning a tiny portion of the houses is setting the market price.
> they are huge institutions with tons of money, and thus can hold houses longer, buy houses are higher prices, influence related markets, etc.
No huge institution is willing to lose enormous sums of money waiting for vacant overpriced houses to sell.
I've lived in many houses. One was in a development, and I wanted to sell it. There were several houses in it that were vacant and for sale with no offers in the previous year. I sold mine in 3 weeks. It was simple - I priced it properly, and I didn't have to pay another year of taxes, insurance, repairs, maintenance, and worry, only to have to lower the price anyway to get rid of it. A couple of the other homeowners were angry with me about that, but that was their problem.
There is reason to believe that someone owning a tiny portion of the houses is setting the market price because that tiny portion is a significant portion of the houses on sale.
Before we even reach the question of how true that is, there isn't evidence that any firm holds a significant portion of the "houses on sale". A starting point here would be the fact that corporate investors buy houses and hold on to them, and thus definitionally don't hold any of the house on sale, but whatever, either way, just flesh the story out instead of handwaving it.
if we start with reasonable but definitely vague numbers that suggest 2M houses are for sale and institutional investors own 500k of the total stock, it suggests this is NOT true; it's unlikely they own all their houses in the same geo market and they're all for sale at the same time. This doesn't mesh with a business strategy (diversification) or the typical model (they rent houses; they don't flip them).
Doesn’t rent have a constant influence on house prices? Along with the data science based rent prices they demand, that implies a constant upward influence on rent and consequently house prices.
Also these institutions would be buying houses in high demand areas.
> It was simple - I priced it properly, and I didn't have to pay another year of taxes, insurance, repairs, maintenance, and worry, only to have to lower the price anyway to get rid of it. A couple of the other homeowners were angry with me about that, but that was their problem.
I think you just explained partly the reason behind why a small number of owners can drive the prices up. But these are usually private owners. Whenever I see bank sales, they're more like flash sale and done.
Those who can afford to sit on the property trying to obtain a higher price will do it. Other owners will look at that and try to keep the price high with the illusory hope that they can also make that much money. Individual owners can suffer from FOMO and are influenced by success stories, so ask a high price hoping to capture as much of the value as possible.
I saw it in action when I bought my house. The seller saw his neighbor selling the house a year earlier for [princely sum] so he jumped to put his house on the market for [princely sum +20%]. The whole neighborhood was following the same playbook, looking at who sold and raising the bar. After a year with that house on the market I became interested and in a 6 month process I ended up buying the house for [princely sum -20%].
None of the neighbors know how much he got, only know how much he asked. A similar house 50m away is still up for sale for even higher price than than the listed price for mine. They can afford to sit on it for a while because the extra money they hope for covers the taxes and upkeep tenfold or more.
"None of the neighbors know how much he got, only know how much he asked. A similar house 50m away is still up for sale for even higher price than than the listed price for mine. They can afford to sit on it for a while because the extra money they hope for covers the taxes and upkeep tenfold or more."
At least where I live, real estate sales are public and you can easily find the sale price at the county assessor's website.
You're either generalizing or just making a mistake stating so definitively that sitting on an asset means being stupid with investments. You know your house and situation but that's far from representative. Sitting on it might turn out to be the stupidest or the smartest decision you can make. If you take the hard stance that it can only mean one thing, you're just being stupid with investments in all the "other" cases.
I am surrounded by people who sat on houses for a decade only to triple their money after inflation adjustment when they sold. We're talking 7 figure profits. Trying to sound smarter than everyone else sometimes backfires.
this is not true, this is the basis for housing speculation. Holding vacant overpriced houses until they sell. Its not a loss until you close the sale.
this doesn't make any sense; you're tying up significant resources and losing out an the alternatives. Nobody evaluates investment returns in isolation.
the numbers I have seen suggest that institutional investors own about 500k of the ~100M residential properties in the US. Small investors probably own about 15M in total. Roughly 2M units are for sale, so even if every single institution-owned unit was for sale they wouldn't be able to exert much influence. The fact that this is a big, complex and widely distributed market IS the reason they can't distort it like they do with specific industries in a given geography.
Ownership share is a stock. Prices get set by flow - transactions. Housing is a thin market; maybe 5-6% of homes change hands in a given year. Price discovery happens at that transaction layer.
Institutional investors own ~3% of single-family rentals nationally. But per CoreLogic they're 29% of purchases in the starter home tier. That's the market where we first-time buyers actually compete.
In some metros it's more concentrated.
Atlanta: ~30% of single-family rentals corporate-owned.
Charlotte neighborhoods in 2022: 50%!!! of sales to institutional buyers.
So for your 1-2-3... maybe something like?
1. Institutional buyers concentrate in starter homes where they're 29% of transactions, not 3% of stock
2. Target metros/neighborhoods go higher still
3. Real estate uses comps-based pricing - their winning bids propagate to surrounding valuations
The mechanism isn't inventory control, it's just a buyer with a different utility function (rental yield vs owner-occupancy) systematically outbidding price-sensitive first-time buyers. In a thick market that gets arbitraged away. In a thin market with sparse comps, each transaction is a price-setting event.
The St. Louis Fed found institutional presence specifically increases price-to-income ratios in the bottom tier.
If you're evil corporate Landlordman You don't need to affect the whole market. You just need to cut off the bottom rung of the ladder.
Is this Trump move the right one? No frickin idea! But I do think we need to reckon with what's actually happening to first-time homebuyers. I bought a place in Englewood Co last year and ... it was pretty rough.
Whoah, hold up, your (3) is doing a lot more work than you think it is. Comps matter but they don't literally break the market:
* They impact listing prices but not necessarily clearing prices.
* They assume all the sellers, who are not corporate investors, can mechanically anchor off those inflated comps, without factoring in buyer budgets and carrying costs.
Real estate is slower than most financial products, but it's still an actual market. You can't just buy a tiny fraction of the inventory at an inflated price and assume the whole rest of the market will follow you.
Reread my #3 in the context of "rental yield vs owner-occupancy."
I'm not saying comps magically anchor prices. I'm saying institutional buyers ARE the clearing prices, because they are anchored to "how much can I rent this out for" whereas first-time homebuyers are anchored to "how much can my mortgage cover?" which are different questions.
29% of transactions, not 3% of stock.
Those become the comps. There's less of a gap for "but buyers won't pay that" because the institutions *are the buyers. The call is coming from inside the housing market.
I'd actually just say that comps magically anchor prices in the constrained market we've been experiencing. As a person who was looking to buy a few times over the last few years, comps strongly affect appraisals which affects whether a company will issue a loan for the house (appraisers actually send you the houses they based their appraisal on). Plus realtors base their understanding of the market on comps when they try to help you form your offer. And of course sellers will look at comps when deciding what to ask for and whether to accept your offer.
Now this only really works in constrained markets, but intrinsically there's always a time constraints in buying (our lifetime of course, but also life events and lease renewals and er ). There's of course also selection constraints because of the aforementioned time constraints, and location, and whether new construction in happening within those.
Saying "they impact listing prices but not necessarily clearing prices." might be logically consistent, but is disconnected from the reality of the housing market.
All of you are assuming that buyers are rational, as if pump and dump in crypto was somehow isolated to the online world and not possible in the housing market. You don't have to have complete market capture to make that happen. All you need is to have enough volume that it causes potential buyers and sellers to play along.
If you're big enough, you can cause prices to ripple, get others to lose rationality and buy in on the ascent as you cash out and leave everyone else holding the bag for the crash.
Respectfully, I think 'individuals' is doing a lot more work in GP's 'But most of the "investors" buying up property are individuals purchasing investment properties.'
The average 21+ US resident may own 2+ properties but I'd be surprised if the median equivalent owns 1. It kinda hides the equivalent of the top x% of individuals owns y% of the stock market where y is unreasonably disproportionate to most.
The timing and pricing of investor selling is different to residents selling.
Residents sell (mostly) for reasons other than profit. They might be moving up, or moving away, or whatever. There's some pressure to "get it done" so they can move on. They can't really afford to "time" the market.
For investors there's much more "buy in the down, sell in the up". Except that it's been going up for a while, so there's no motivation to sell at all. It would be uncommon for them to accept a loss. Even unoccupied it's (mostly) better to hold rather than sell at a loss.
As mentioned elsewhere, overall market penetration by investors differs wildly by market, and segment. So 3% overall might sound low, but 20% of a dwelling type in a specific market is plenty to alter market forces.
I say this as someone who has owned property as an individual, and also worked in a business that invested in property.
Returns are better on the lower end of the market, and demand for rent there is higher. Which is why most residential investment is at the bottom end, not the top end.
In most markets I'm guessing an 800k house is at the higher end of the market.
That aside, housing portfolios always plan for a certain amount of unoccupied space. It's built into the model. (That's partly why small investors who own 1 or 2 properties get hit harder by this.)
Equally, even if the house is empty, there's usually some capital gain going on.
Investing in property is a long-term investment. The cost of buying, or selling is very high. So it's about getting quality units, in the right market space, and then leveraging that for a decade or more.
Yes there are lemons. And yes they'll get sold, perhaps at a loss. But being unoccupied for a bit doesn't make it a lemon, and being unoccupied won't necessarily trigger a sale.
Institutional investors are much more experienced and thus also a lot more likely to not buy lemons in the first place. Most "mom and dad with a second property" investors either inherited a place, kept an earlier property they lived in, or bought another property in their own neighborhood. They're typically gonna make some mistakes along the way.
It depends on the swing of the market if it's a buyers or sellers market.
In the past there was far more spread in housing prices. These days real estate agents tend to follow a few market making sources for setting those prices, along with personal home sellers looking at 'internet prices'.
>inventory at an inflated price and assume the whole rest of the market will follow you.
When you target particular areas you absolutely can.
> Institutional investors own ~3% of single-family rentals nationally. But per CoreLogic they're 29% of purchases in the starter home tier.
Not true. That 29% is “investors”. Only one fifth of those transactions are from “institutional investors”. It’s mostly evil non-institutional investors, who also own ~97% of single-family rentals.
>> You're telling a just-so story, and you can tell because there isn't a simple schematic 1-2-3 story you can make from this about how these people exert control over home prices.
We don't need to explain how they do it. We KNOW private equity is expecting to make profit from their investment in residential real estate. That profit ultimately comes from people in houses, making them less affordable.
We most certainly do. PE owns pools of rental housing; this is a fundamentally different model from speculation. While both impact the selling price they do it in completely different ways, and if institutional investors own a tiny fraction of the total stock, they're not having a huge impact on the supply side which would potentially drive up prices.
You're supposed "logic" seems comparable to magic.
I don't mean to convey that it's intentional. There's no conspiracy of cigar smoking financiers in tuxedos smoking cigars in dark rooms. It's just like the Carlin observation - there doesn't have to be a big conspiracy. They just know what's good for them.
They behave accordingly. The do things that they can, and because those things are relatively new, it's a type of information asymmetry and policy / good intentions / competence arbitrage that we haven't had to cope with before.
You might end up banning certain types of institutional participation in the housing market, because there's no way to protect against the negative consequences that doesn't have even worse consequences for either the participants or the population at large.
It'll probably have to be arbitrary, and the cost will be a bunch of firms no longer get the opportunity to make a bunch of money by leveraging their resources in that way.
And we see the influence and impact constantly, with outlandish asking prices being immediately met by institutions that have decided they want a particular property in a particular region. Or house prices being set to an outlandish level with no reduction in price over months and months on the market, because they can afford to sit and wait for the market to change. And if they can afford to do that, then all of a sudden they've got an incentive to drive prices up in that region, because local and state governments, banks, and realtors tend to use the same basic rubric to evaluate price. If a lower valued area sees home prices go up, properties in the higher valued area will be raised accordingly. There's no secret quant voodoo, it's just using a level of liquidity and staying power not accessible to non-institutional homeowners.
Supply and demand normally influence pricing feedback at much more granular levels which benefits individuals, and our policy and regulation and evaluation models are largely built around those assumptions. Without the negative feedback driving prices down, bad things happen for consumers, good things happen for those who already have lots of money and property.
I'm not talking about whether it's intentional. I'm talking about whether it's possible. If corporate investors could control the price of housing, I believe they would.
I can buy a house tomorrow and hold it vacant off the market at a listing price 3x its value. I will have zero impact on the housing market. You may be conflating the listing price of an asset with the clearing price of that same asset. You can, obviously, build up inventory to manipulate prices. To do that, you have to be able to generate scarcity, which is exactly what corporate investors aren't doing.
You've just given me 6 more paragraphs about the control you think they have, and you still haven't told a simple 1-2-3 story about how they're using a microscopic footprint in the total housing market to distort prices.
You have to do better than "supply and demand normally influence pricing feedback at much more granular levels". In the context of your original claim, of them being "a huge driving force in setting and manipulating prices", you need to explain how that would actually work, and not rely on handwaving.
I think your case on this debate is more sound however
> To do that, you have to be able to generate scarcity, which is exactly what corporate investors aren't doing.
But they did. When inventory was low and then zero percent rates where available, they bought everything they could and drove prices up and created an appreciation bubble. I don’t think they have some other dark patterns for manipulating the market but they had access to a lot of basically free cash. Inventory of houses for sale is a tiny portion of the total market and they could and did contribute to driving prices up. But so did everyone that had the opportunity and inclination to do so, and why not when money is free leverage the shit out of it in an asset class that will generally appreciate without much risk.
I don’t know what ever came of that now that rates have increased. Are they still holding those homes? Did they sell them after driving prices up? (But not fast enough to make prices go down again obviously). Are they landlords now? Etc.
The market is still reeling from that economic situation that created this. Prices may eventually float down but no seller is eager for that so it’s a bit sticky.
My case is built on the empirics that corporate investors are a very small fraction of the available houses for sale. Notice the stories you're reading about places where corporations are disruptive: they're in thin markets. A corporate investors can totally (if temporarily) fuck up the prices in a single subdivision. But unless they can do that across a broader market, they don't have meaningful pricing control.
My claim would be that in any any of the top 10 markets by transaction volume (just to pick a handy metric out of the sky; you could choose others), corporate investors are literally a nonfactor.
They don’t have to buy to fuck up the market. They just have to bid. If there’s low inventory, people that actually need to buy a home are forced to beat/match the bidding.
They can also target just specific areas of specific major metros and there are ripples throughout the entire market.
The housing “market” does work the same as the stock or commodity markets. People aren’t buying an intangible share. They’re buying this specific and unique house and if they’re told “we just got a cash offer for $50k over ask”, they may be tempted to beat it. That doesn’t happen when people buy AAPL. The shares are fungible.
There’s only empirical evidence of their buying activity. We’ll never know how many deals they bid the price up on but didn’t buy. This auction like quality is evident in any market like this; watch Storage Wars and one disinterested buyer will bid up the price just to fuck with his competing bidders.
Respectfully, I think this is just made up. "They just have to bid" to manipulate prices in the real estate market: I don't think you can show that's a thing. Please by all means make the attempt.
As I said, there’s no data on this. Unaccepted offers don’t get tracked anywhere and don’t show up in anyone’s financial records. However, have you ever participated in a “multiple offer, best and final” type RE market? There’s plenty of opportunities for what I explained in market conditions we saw in recent past in many parts of US.
No, making an offer is a bid. It’s cost nothing to make an offer. Multiple offer situations were the norm for a few years in much of the US. Many listing agents will post on the listing “multiple offers, best and final due by X date”. Nobody knows if that’s true or has spent any money yet by making those offers (earnest is put down only once an offer is accepted). This is US I don’t know if you’re from elsewhere or just misinformed but you’re wrong.
There’s a lot going on between making an offer and losing earnest money.
I’m selling a house right now that’s in bad shape so getting lowball offers. They don’t even submit an offer, they text me or call me and tell me what price they would offer. They don’t want to do the paperwork for something I’m just going to ignore. Yet, if it turns into 2 or more people floating numbers I like I will tell them to write it up then I will tell them there’s another offer and try to get them to go higher. All that is before I accept there offer and earnest money is put down after that. So the bidding war is over by that time.
Even if earnest money did work how you describe, it would tie up a few thousand dollars per property for a few days max then be returned and redeployed on another property. These companies have deep enough pockets to fund that. There earnest money only ever enters the picture of their offer is accepted.
What? Cash is never ever free. If it's your Scrooge McDuck cash vault, you're losing money by not investing it. If you borrow it, you're paying interest on it.
> When inventory was low and then zero percent rates where available, they bought everything they could and drove prices up and created an appreciation bubble.
I’m speaking mostly from memory of it when it occurred in the US , was Covid era housing market 2020-2021 is when prices surged the most and was when they had a marked increase in their activity. Again, it seems small overall but they were the cash offer 50k over ask that everyone trying to buy a house was competing with. It doesn’t take much to move a market this size as it’s relatively low inventory and volume. It’s like how a whale could transact move bitcoin price so easily because so much of it is illiquid. It’s gotten more difficult as the price is much higher, but still possible. Also, prices tend to correct faster in that market than they would in housing market.
Googles AI overview of my search for “ covid era corporate home purchases”, also plenty of substantiating references in those search results;
> Corporate home purchases surged during the COVID-19 pandemic, driven by factors like low mortgage rates and increased demand for single-family homes. While this trend has plateaued since the peak, investor activity remains above pre-pandemic levels and has sparked significant public debate and legislative action.
A tidbit from an article indicates they doubled their prior investment activity. Probably more than double because investors bought homes increased and their share of that metric doubled.
> Prior to the pandemic, mega investors averaged about 7% of overall investor purchases and their share increased to 14% during the pandemic — it has now slowed
You don’t have to agree with anything I said but I’m not here to be your research assistant, I gave you my thoughts and some paths to references. It’s evident by this debate nobody is certain on anything and were hypothesizing. If you want a mathematical proof before you can grasp concept of gravity, or form any opinion of your own, I can’t help you.
Not anymore than an occupied rental house with a bad tenant.
Many vacant homes in the SF bay have been that way for years and have appreciated tremendously.
Mant would perfectly prefer buying poorly maintained boomer stock, holding for roughly forever (in ideal markets, like the distorted California/Prop13) and leveraging it like a brick of gold. Actually having someone live in it doesn’t outweigh the risk of managing pesky tenants esp. when the houses are appreciating 500k over 5 years.
How do I distinguish the world where institutional investors are meaningfully contributing to high housing prices and the world where they aren’t? Is there some metric you’ve seen that substantiates the mechanism? For example, are they only 1% of holders but 50% of trading volume or something?
Because if I saw a house 15% below market where I live, I would buy it (to live in). I don’t imagine I’m the only one. Institutional investors can’t stop me from doing that if it’s offered - can they stop the seller from offering that?
I don't get how that hasn't had an effect on prices.
There's not enough houses on the market (zoning, and people want to keep their low-rate mortgages), there's people worried they can't afford houses (prices inflated faster than wages, rates went up), and a large amount of housing transactions (someone quoted 29% of starter homes) are being paid for by institutional investors (who can pay cash).
Wouldn't these institutional investors buying houses be "marginal consumers", kind of like the marginal producers who set the price of inelastic commodities such as oil? Seems like 29% of transactions is even more than marginal.
I assume that sellers would need to come down in price to what non-institutional buyers could afford if institutional buyers were removed from the equation.
As an aside, I'd rather see supply increased, but maybe demographics over the next decade or two will fix that problem anyways.
Manipulating markets by controlling liquidity while not holding a large percentage of the overall stock is a thing. The fact that you could juice trading volume by doing something stupid for no reason doesn’t make it a useless statistic for evaluating what is going on in a market (unless you’re alleging that institutional investors would do this, and I can’t see the motive). This isn’t some shitcoin whose creators are faking trading volume to appear on the leaderboards - it’s houses with deeds.
To be clear, I don’t think institutional real state investment is a substantial part of the reason housing prices are so high. I’m just trying to push whatever argument they were thinking of toward something quantifiable.
That has not very much to do with money though. There are many ways to allocate scarce resources, such as rationing. Even if money is used, the mere fact of scarcity doesn't define the price of something. Silver is also finite, but it still costs $2.50 a gram and not $25000 a gram. Land was always finite but was still much cheaper in the past.
The main contributor to the price here is financialization. The more money the average buyer can raise for one of the scarce things, the more they cost. Nobody wins from this except the banks, so perhaps it should be more regulated.
Building regulations are also a problem. Legalize whatever you feel is the minimum safety standard of homeless encampment or slum, and watch house prices crash overnight, since prices are set at the margins and a lot of people (including me) would be happy to find a way to work with simple concrete box if it was cheap and secure, but it's not legal to build those.
You're getting at the problem but you still don't understand the essence. Land is special because you can't make more of it. Even the Netherlands don't count since what they did is considered an 'improvement'.
Yes, you still need to solve the problem with 'money', or more accurately a tax. That tax is based on the assessed land value using market knowledge, but it would ideally be set to drive down the price of land to zero. However since we don't live in a world of spherical cow, tax would be set below that ideal to avoid land abandonment.
This is not even new by the way. The crisis we face is the same as in the 19th century when Land Value Tax and Georgism was proposed.
I like Georgism just fine but you don't need it to solve this problem; LVTs are just a prompt align people's incentives with upzoning and increased supply. Instead of doing that (it's not going to happen), you can just outlaw the municipal measures that are used to restrict supply.
Okay, but institutional investors didn’t create that fact of reality, and I don’t think they’re responsible for the fact that people want to live in or near cities either (instead of the middle of nowhere, which remains dirt cheap). If they’re not holding significant stock, what effect are they having on scarcity?
You overly complicate the situation by targeting one type of actors. If you look at comment around this story, people propose complicated mechanism to hack at the problem instead of looking at the root causes.
It's just land ownership isn't being taxed properly, no matter who owns the land. We homeowners get a free lunch from economic growth and price appreciation of real estate while penalizing capital investment.
The solution is simple if not necessarily easy to implement. Tax land and at a high enough rate, and exclude building and improvements. We'll reap bigger benefits if we reduce taxes on income and capital and eventually phase it out.
Don't tax land, because that will force homeowners to prematurely sell and move into cardboard boxes on the street. Tax gains when selling at a higher rate.
Having deep pockets simply means that you lose a lot more money when following money-losing strategies.
Most of these schemes are hare-brained because they do not take into account the time value of money nor the costs of having vacant investments that are not generating revenue.
The way businesses make money is by buying an asset and then immediately putting that asset to work generating revenue.
I don't think you can say that universally. Some people prefer to rent instead of own. Some people would like to own, but would probably still only be afford to rent even if home prices were more affordable.
Sure, you can absolutely make the argument that for some specific region there are too many rental properties and not enough owner-occupied properties, by looking at the supply, demand, and pricing for each type in that region.
But you absolutely can't say that as a general statement. There is demand for both sorts of housing.
At scale, it limits the supply of available homes to buy which increases the prices.
When we constantly read stories about people not being able to afford homes today, it’s all driven by pure supply and demand. When a firehose of money gets aimed at any aspect of the economy everything gets more expensive.
This is from institutional investors. Sometimes it’s government when we are talking about the price of education or healthcare for example.
None of this is happening "at scale", but either way, you're talking about the price of deeds on houses, and affordable housing isn't about home ownership; in fact, the urge people have to drive this issue towards "starter homes" is a big part of the problem, because the highest-opportunity areas have strictly limited carrying capacity for single-family homes in the first place, and what we desperately need to do is upzone and diversify the housing stock.
It’s literally a new development. Someone went out and turned some raw land into rental houses. If they had left it as raw land, there also would have been no change in supply of houses to buy.
Instead, now they’ve created a slight reduction in demand for houses to buy by offering a housing alternative that didn’t exist before.
Isn’t manipulation of zoning an example of why it’s important and how even with a small share they can have an outsized influence on the market? Also I seriously doubt the return to work directives are driven by anything more then the projected drop in property values.
No. I actually don't give a shit whether corporations can buy single-family houses, by which I mean, I don't care if that's banned. My problem is that high-opportunity high-value residential areas are deeply resistant to upzoning and are actively using this "corporate investor" narrative as a reason why they should wait. Corporate investors are not why the inner ring suburbs with the good schools in major metros are expensive; zoning is. This is literally a distraction from affordability work.
You said blaming corp buyers is a distraction from NIMBYISM. I'd argue corp buyers are a problem as well as NIMBYISM. Both should get blamed and be addressed.
In fact, it's the opposite: corp buyers are associated with declining rents. I don't care what happens with them either way, they're a second-order factor, but most of what people are saying about this phenomenon is just wrong.
I agree, in the same way I'd care the other direction if I wanted to rent, which is why I don't understand the concern about inventory shifting to rentals.
In my experience, there are a lot of people who don't consider renters as people that deserve consideration in governmental decision making. So if rental supply becomes available, it doesn't matter, not only because the person doesn't want to rent, but more so because renters are not considered permanent citizens of the local city and therefore they don't matter.
This is a recurring theme k see among both right wing and left wing people when it comes to looking at single family homes.
Can you point to any municipality anywhere in the USA (or anywhere else, if you like) that prevents renters from voting, attending public meetings, donating to candidates and otherwise participating in local decision making?
> there are a lot of people who don't consider renters as people that deserve consideration in governmental decision making
How does it matter whether "a lot of people don't consider" something if there are no laws or enforcement actions that make their opinions actually effective in the world?
> no laws or enforcement actions that make their opinions actually effective in the world?
How do you come to that conclusion? The people who show up to local planning meetings are clearly very effective at enacting their opinions in the world, and local planning is the place where a tiny number, perhaps 3-5 people, can drastically change the results for an entire area.
The line I quoted from you concerned people who don't consider that renters should be involved in local decision making. I'm asking you what difference it makes what they consider, when they are not actually able to enact any barriers to participating in local decision making? I mean, sure, they make think that renters should stay out of the planning meetings, but if they do not stop them, what difference does it make what they think? Renters vote too ....
If I understand you correctly, you're saying that because renters can vote, they have equal impact on planning decisions, and therefore a bloc of voters that do not consider renters' needs as being valid for the city is OK. Please correct me if I'm wrong. I have two objections to that.
1) Local planning decisions are not made on the basis of democratic votes, they are political decisions made by a tiny number of people that are highly susceptible to influence. In particular, money and local political power has a huge effect on who gets elected, who is paying attention to what happens, and who benefits. There's very little attention paid to these matters except those with highly conflicted interests, which means that highly conflicted decisions are the most common outcome. Which leads to suboptimal results over longer periods of time, as happens in any system that appears to be democratic but is actually corrupt.
2) Even in democracy, one bloc deciding that another bloc's interests can be ignored and don't matter to the functioning of government is an extremely toxic environment which results in awful outcomes. I view any system where there are second-class citizens as a fundamentally un-American idea and counter to the goals of our nation. Those who wish to exclude an entire economic class from their community are trying to create precisely that sort of second-class citizen.
I agree that political decisions are arrived at by imperfect, corruptible processes, and that these tend to favor those with capital interests (e.g. home ownership) in certain outcomes.
However, I do not think there is any reason to require that all voters respect the interest of all other voters, and any system that is predicated on such respect is doomed to fail in worse ways than the one we have.
Democracy is hard work. Good things don't happen by just casting votes. There are almost always other interests at work that are likely to conflict with your own. You can't wish this away, you have to do the work.
The one thing I will say that I think is actually blatantly corrupt is when planning meetings are held at times or in locations that make it challenging or impossible for the people most likely to be renting to attend. And this really does happen, far too much. In spite of this, I think that focusing on the attitude of the voters who oppose the interests of renters is a mistake, and that one should focus on how to fix the process.
Not remotely. As someone who came of age in the 1990s, I can say with complete confidence that it has never, ever, in the whole of human history, been easier for ordinary people to access more film content than it is today. If I had to pay every single time I watched a film, as opposed to opting to "buy" (say) Big Night, I'd still take that in preference to going to a fucking video store.
But either way this has nothing at all to do with housing affordability.
My point is that the rent vs own model is taking over every industry and it's never good long-term. If you had to watch the same movie every day, and you knew that fact in advance, and your only option was pay-per-view, wouldn't that suck?
You're doing my job on this thread for me by trying to set rental up as some kind of second-class residency we should be skeptical of. I agree, that's the subtext of this corporate investment stuff: that renters are bad.
No, it isn't. This is literally the subtext behind the policy. You see it all over this thread: the idea that converting an owner-occupied unit to a rental, even though it lowers area median rent, is a bad thing. There's no other interpretation. If reading that makes you uncomfortable, recheck your priors on the policy itself!
My wife and I prefer to rent. Greater flexibility. This is not a big problem any more than the fact that Costco replaced stock of Spiceology rubs with Bang Bang Sichuan seasoning.
> it's holding prices steady at some point without the concurrent pressure to sell
Earlier you were arguing that investors were acting as marketmakers and now you say this. Marketmakers make their profit from the difference between buying and selling some asset. They don't want to hold prices, they want turnover.
If investors really are acting as marketmakers it's actually a good thing because marketmakers have the effect of adding liquidity to a market.
if they controlled even a notable minority share this might make sense, or the majority of a specific region or type of stock where there are limited alternatives, but I don't see any examples of this. We didn't even see this type of phenomenon in the biggest US crash markets where banks owned entire neighbourhoods; even they were not immune to overall market forces. To suggest PE has anything like infinite money and/or time totally ignores that everyone is subject to opportunity cost. A fund that under performs for any length of time because they're playing some sort of marginal long game won't exist for long.
You just haven't presented any evidence or even a hypothetical where this does or could happen.
> If they intend to purchase properties, it benefits them to depress pricing in the area
Yeah, that’s true of everyone but how would a bank/individual do that? By selling… But if they sell while they’re depressing prices, they lose money!
> Normal landlords don't have effectively infinite money with no forces bearing prices down
Neither do banks. They have quarterly earnings, tax bills, they need to buy more stock, cost of capital etc etc.
> It's a very nuanced and complex system in which these institutional investors have very outsized influence.
Just saying ‘it’s complex’ is trivially true. But, supply and demand isn’t some small factor in that calculation - it’s an iron law that exerts itself at all times.
If a bank wants to ‘manipulate prices’ then, without a monopoly, the only way to do that is to dump or buy. But if you buy up homes to ‘push up prices’ … then you end up with a bunch of homes which you paid more than their current value. Not a great business.
The person who has the real unfair advantage in the US happens to also be the most sympathetic person - the owner occupier.
Prices are high because we don't build enough houses which is mostly because it's really expensive to build houses, then the houses we have built are all owned by empty nesters and people with 1 - 3 investment properties.
Everything else you're describing is completely ridiculous.
> which is mostly because it's really expensive to build houses,
Assuming you're referring to the typical high CoL areas, the shortage has very little to do with the expense of building. The zoning laws don't permit sufficient supply in those areas. And that's quite unlikely to change (at least quickly) because anyone pushing such reform would be obliterating the average Joe's net worth.
> anyone pushing such reform would be obliterating the average Joe's net worth.
This what Obama calls the false choice dichotomy -- "Damned if you do, damned if you don't." In your scenario, if we build more homes, then existing home owners are "obliterated". This is untrue. We can easily build twice as much in high cost areas (with the strongest job markets) with little impact on existing home owners.
That doesn't really make sense. The problem we're trying to solve is that housing is too expensive. If we do things that end up lowering the cost of housing, then the saleable value of "average Joe's" house will also go down. You can't say that newly-built housing will be (for example) 20% less expensive, but existing housing will keep its value; that's just not how the housing market works.
I'm not sure if "obliterated" is the right word to use, but if making housing affordable means a 20% drop in home prices (which is perhaps not even enough in some places), average Joe existing homeowner is going to run into financial trouble once that happens.
> We can easily build twice as much in high cost areas (with the strongest job markets) with little impact on existing home owners.
If that's the case, then all that new housing will also cost more or less exactly the same as the existing housing stock costs, and the problem will not have been solved yet.
How do home owners get into trouble from falling prices if they're just living in their home?
Sure, if they need to move and sell, the price difference might be less favorable to them, but having to weigh cost vs benefit of moving is a fact of life one way or another.
It's a strange expectation to have that home values should act as an investment that can only ever go up.
Letting that expectation influence policy on making space for living available is one of the root causes of this crisis.
I'm only proposing to build enough units such that house prices rise at the rate of general inflation or slower. In many highly developed, capitalist systems, their housing prices barely budge in a generation when accounting for general inflation. This is done though careful regional planning. This business of "housing as investment" (for normies) is awful and greatly harms renters.
My feeling is because we build little in the way of new units of housing most places. All the money being injected into the real estate industry is from the price-debt spiral.
To be honest, just getting to the point where house prices don't rise above inflation, maybe even stay fixed (so inflation eats away at their value), would be a massive accomplishment. The main problem at the moment is prices keep rising above inflation in most places, year after year.
Also known as “housing cannot be both a good long-term investment and simultaneously remain affordable over a long period of time.”
Many people have been sold on the former and will (fairly understandably) act to protect the value of their single largest purchase which often has a large mortgage attached to it.
Many people overlook the effect of 30 years of general inflation on their outstanding mortgage debt. Also, most people's income rises as they age, so the monthly payment becomes proportionally smaller. If you buy around 30-35 (and many in the US, outside of crazy areas, buy much younger), then their income will rise for long periods of their mortgage.
What I'm describing is a systemic dysfunction due to financial incentives.
The "crisis" is specifically the high cost of housing. So if whatever you do doesn't lower the price then by definition you've failed to solve the problem.
It's certainly a dichotomy but I don't see how it's false?
> We can easily build twice as much in high cost areas (with the strongest job markets) with little impact on existing home owners.
It's certainly possible to encounter nonlinear behavior. If some aspect has saturated then we might build quite a bit without seeing any substantial price movement. But eventually prices would start to decline.
> anyone pushing such reform would be obliterating the average Joe's net worth.
Only in a purely illusory sense. Suppose you have all your net worth tied up in a house. If your house magically vanished, you'd have nothing but your job.
The price of houses falls to $500 and you potentially go bankrupt. Then, you buy a house for $500.
You, personally, are now better off than you were before. Some examples:
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1. You have $200,000 of equity in a $700,000 house. After the price drop, your net worth in dollars has improved by $300,000. Your net worth in "stuff" has risen dramatically; you kept your job, and now you have 100% of a house instead of having 30% of a house.
2. You have $700,000 of equity in a $700,000 house. After the price drop, your net worth in dollars is down by $699,500. Your net worth in stuff is unchanged. Assuming you always need to live in a house, this will never have any negative impact on you. You retain the option to live in the house you have (which leaves your life unchanged), and you also retain the option to sell your house and use the proceeds to buy another house (and this option looks a lot better than it used to; given the crash in prices, you can probably afford a much nicer house).
3. You have $200,000 of equity in a $700,000 house. You also have $15,000 of "equity" (resale value) in a car that you owe no money on and bought for $50,000. After the price crash, you lose your house and your car, and then you buy another house for $500.
Replacing your car will cost you $50,000. You are in a similar position to the guy in example (1), but $50,000 poorer. So now we ask: was it better to be $500,000 in the hole on your house before, or to be $50,000 in the hole on your car now?
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There isn't a way for the average Joe not to come out ahead. There is a way for someone else to lose out on the price crash: if you had more than one house before, you lost everything on the houses you weren't living in. But that's got nothing to do with the average Joe.
You would still need to pay the bank the full 700k even if it's only worth 300k now. This might mean that you still owe 400k on a 300k asset. In this way you can be underwater while still being a 30% owner.
It does raise the point though that anyone who borrowed against his house to obtain other assets could be negatively affected by this turn of events.
Also in the case of mass bankruptcy and mortgage failure of the lower middle class I guess there would be risk of bank failure as in 08? That said, I still think the hypothetical illustrates the overall situation quite well.
> It does raise the point though that anyone who borrowed against his house to obtain other assets could be negatively affected by this turn of events.
How?
A drop in the price of houses means it becomes more difficult to exchange houses for non-houses.
If you borrow against your house to obtain something else, and then the price of houses falls, you successfully timed the market. That's all upside for you.
What do you think is the difference between example 3, the guy with a $500,000 mortgage on a $700,000 house, plus a $50,000 car, and example 3', the guy with a $450,000 mortgage and a $50,000 car loan on his house, plus a $50,000 car?
Say I inherit a $700,000 house and, being the kind of guy I am, immediately mortgage it for $500,000. But I stop renting and move in to my new house. Also, I hire a bunch of call girls to live with me in my house. One year later, the price of my house drops to $100,000, and I turn it over to the bank.
I started (the crash) with a $500,000 loan and no way to pay it back other than selling my house. At this point, the faster I realize what's happened and sell my house, the more money I'll be left with. (If I sell immediately, I'll get $200,000!) The longer I postpone selling, the worse off I'll become. (Though since I can live in the house, this trades off against what I would spend on rent.)
I've also spent $500,000 on entertainment and one year's rent. Mostly entertainment. Is this a harm that was dealt to me by the fall in the price of my house?
When the price falls, this forces me to sell the house, locking in a profit of... $500,000. (Which I've already spent.) It could have been $700,000, in theory. This $200k difference in profit vs potential profit can be seen as an effect of the price crash. But that's pretty good for an event that notionally took $600,000 out of the value of my house. Borrowing against the house helped me.
If you want to talk about a negative effect on someone, walk me through the accounting.
At the beginning of this process, I was short $700,000 for a house that I needed but didn't have.
Before the price crash, I had "200k equity"† in that very house, leaving me $500,000 short of a house.
After the price crash, I was deeply underwater on the house. Without bankruptcy, I was still $500,000 short of my house, but only $100,000 short of some other house.
And then, after the bankruptcy, I was $100,000 short of a house.
1. What is the harm that I suffered from the price crash?
2. If the "hookers" column had some other label, would that change the harm that I suffered from the price crash?
† You might note that this is accounted as 700k equity in the table. The table is correct, but that's not how we talk about it. There is probably an error in my earlier comment related to this.
> a $50,000 car loan on his house, plus a $50,000 car?
Well I suppose that guy might come out unscathed since many US states protect your primary vehicle in a bankruptcy. But to an approximation declaring bankruptcy involves losing all of your remaining assets. So in that scenario the borrower is on the hook for the cost of replacing those assets (limited by how far underwater they were on the mortgage naturally).
Your other example involved blowing the borrowed money on entertainment in which case I agree that you come out ahead. But that is precisely why I used the term "assets" in GP.
Also I don't think everyone just gets let off scot free after a bankruptcy? Don't you sometimes get stuck with some amount of repayment depending on the nature and volume of your income?
My question about bank failure also still stands. While the impacts of this hypothetical on personal finances are certainly interesting to consider, I'm thinking we really don't want to do the whole widespread mortgage default thing again.
Sure, bank failure might happen. That comes out clearly in the chart; the flow of value is that the bank loses a bunch of cash which ends up in "hookers".
> But to an approximation declaring bankruptcy involves losing all of your remaining assets. So in that scenario the borrower is on the hook for the cost of replacing those assets (limited by how far underwater they were on the mortgage naturally).
If you financed something by borrowing against your house, then it cost less than your house, and when you have to replace it, the cost will be less than the cost of buying a house at the original prices. This is the "you lose your house and your car" example. Losing your mortgaged house and your owned-free-and-clear car is good when buying a replacement house+car costs less than the mortgage on your house.
What if house prices fall into the sweet spot where (1) your mortgage is underwater; and (2) a new house + new "assets" exceed the value of your mortgage? (But don't exceed the original value of your house.)
It could be that those assets don't generate income. In this case, they are isomorphic to the hookers in the example.
If they do generate income, then you might save money by keeping your house at its inflated pre-crash price, and you'll make those pre-crash loan payments using the income stream generated by the assets. Here you have a loan that is nominally against your house but actually against your business. It's underwater when considered as a mortgage, but it's not underwater when considered as a business loan, so you'll keep paying it. Your bank will be fine with this. (Both in the sense that they won't object, and also in the sense that they won't suffer financial hardship.) You'll probably have to recollateralize the loan.
(Or your assets might generate income, but not enough income that you'd save money by keeping your original mortgage. In this case it's straightforward that you're better off losing the original house, losing the original assets, buying a new house, and then not buying new assets.)
That is an excellent way of putting it. However I fear that it will be nigh impossible to convince the average Joe that the numbers going down was actually good for him.
In the past tense it should be easy to do. Since he is better off, and he has a good view of how he's doing personally, you don't really need to do much. The difficulty is in convincing him that it will be good for him, not that it was good for him.
Compare congestion pricing in NYC, or self-service gas in Oregon.
In areas with low CoL the cost of building houses and the cost of selling a house has a massive impact on the number and type of homes that get built. If it's not profitable for a builder to build a home they simply won't, whether it's because of bureaucratic red tap or economic conditions. There's very strong incentives for builders to take the path of least resistance and highest margin.
> If it's not profitable for a builder to build a home they simply won't,
Agreed. They will generally build as tall and as dense as they are permitted to because (within reason) it reduces unit cost. Obviously there are limits to that. No one wants to build a high rise in the middle of nowhere.
But within high CoL areas they are generally severely limited on both of those aspects. That's due to zoning laws.
Of course that's not the whole story. Infrastructure has to be upgraded to keep pace with growth. But that's on the local government to plan and execute properly. Right now they largely just say "no".
The profit margin has to be significantly higher than simply plopping that cash straight into an index fund. The risk of a project failure is simply too high.
> If it's not profitable for a builder to build a home they simply won't, whether it's because of bureaucratic red tap or economic conditions.
Right, and that bureaucratic red tape is one of the things that makes the cost of building higher. If the builder expects they won't be able to break ground for two or three years because dealing with the planning commission takes forever, or because they'll have to deal with environmental lawsuits before they can build, then they will need to target higher-end buyers (by building a higher-end property) in order to make a profit. And if they can't do that... right, they simply won't.
The zoning laws are far from the only tool used by municipalities to dramatically reduce supply. Permitting, requiring expensive changes at various points in the process, local building boards requiring extraneous modifications and often forcing scope reductions, affordable housing requirements, etc all make building more expensive. Often by a very large amount.
I don't believe this has much impact on the current situation (relative to zoning) but would be interested to learn otherwise. Can you provide verifiable examples for any of it?
"drop" is doing a lot of work there; as these things are slow and take time, the "drop" is often a reduction in the rate of appreciation (which, everything else being the same, should roughly be equal inflation ± some fudge factor for desirability of the area).
that's a great paper, but did you read it? I don't see the authors reaching this conclusion. in fact, they seem pretty emphatic that restrictive zoning is a major driver of supply bottlenecks.
I don't think that's quite what the comment is claiming. They're not saying that some small portion of homeowners are working together to raise prices. I think they're more talking about the concept of "marginal buyers." It's the marginal buyer that sets prices, not the average buyer. And particularly when supply is heavily restricted, the marginal buyers can be a very tiny portion of all buyers, and can look very different from the average buyer.
Marginal buyers have a big impact by adding a lot of liquidity, but I'm not sure they manipulate prices that much, given that if they ever tried to move prices far from the margin they would cease to be marginal buyers.
But again, I don't think we're talking about a concerted effort to manipulate prices. We're talking about the effect that particular marginal buyers just so happen to cause.
Define "tiny portion of the market", especially "market".
There are many houses in the US. Not all of them are for sale. There's a difference between having a "tiny portion of the market" when you define "the market" as all houses in the US, and "tiny portion of the market" when you define "the market" as the houses that are actively being bought and sold. I would not be surprised if corporate involvement was a significantly higher proportion of the latter rather than the former.
It takes a lot less to put your thumb on the scale of the "liquid" portion of a stock if it is significantly smaller in size than the total stock.
The market meaning all real estate, residential and commercial, and tiny, as in under 3%, with regards to what is owned by the institutional investors. That's probably higher with regards to properties that are or have been on the market in the last ten years or so. From what I can tell, the other ~97% is owned by individuals and smaller funds and mom&pop companies, with fewer than 20 properties involved.
In some dense urban areas, up to 10% of the local residential properties are owned by funds or investors. There's also overlap with investment networks where you're not getting to BlackRock levels, but you'll have a web of companies with mutual interests and a network of private debt and collateral, and these make up around 20% of the whole. For the most part, though, the majority of single family homes are not institutional. Even multi-family units, apartment complexes, and other rental properties are only in the ~10% range of institutional ownership, with the remainder owned by individuals, mom&pops, and small investment networks.
The conjunction of capabilities and incentives in combination with a huge buffer of wealth allows institutional investors to manipulate things in ways that aren't healthy for private home ownership, and the downstream social and economic impacts of being forced to rent, or hold debt that's not properly reflective of the value of the property.
We should impose reasonable policies that serve the interests of the people, and not simply maximize wealth building at the expense of citizens and families that would benefit from home ownership.
To add to this: the "total stock" is also completely different to any other asset in terms of market forces, because it varies widely depending on the buyer in question. People don't shop for "a house" and address the entire available market of houses in the country. They shop for a house in a particular area/city, of a certain value, with certain amenities, in proximity to other things, etc. etc. etc.
In this way houses are virtually unique in terms of financial vehicles and it introduces all manner of complexity and otherwise strange forces into the market. You can't simply treat it like any other commodified asset.
I generally agree with you on market discussions, but I don't think you're considering this one correctly. Imagine a country responsible for just 10% of global oil production decided to stop producing. What's going to happen oil prices assuming no other country starts producing more?
They're going to skyrocket in a seemingly irrational way. But it's completely rational. The reason is that they're a finite resource that is needed, and so there is very minimal price elasticity. People will pay as low as they can, but simultaneously must have oil and so have a practically uncapped price ceiling if that's all that's available. The same is true of housing.
You're right that people won't, generally speaking, buy a house for $100 when there's another one for sale for $80. But what you've done there is greatly increase the demand for that $80 house, which is now going to naturally send its price upwards.
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Finally there's the issue that figures on the percent of homes that are owned by investment groups are misleading, because they aren't just buying homes randomly. They're going to pick up lots of houses in precise areas, and so the impact on prohibiting this behavior will be dramatic in these areas.
Having lived through the various oil crises, I can confidently assert that there's a great deal of demand elasticity.
For example, when the 70s oil crisis hit, people stopped driving to the store for a loaf of bread, but would shop weekly instead. For another, people buy more fuel efficient cars when gas prices are high. For a third, people switch to electric cars.
There are regular major disruptions in the flow of oil. Pump prices change on a daily basis, and that results in the amount of gas available == number of gallons customers pay for. No gluts and no shortages.
That's the problem, they don't care if people will buy or rent them. They literally just sit on them writing off any losses against other business units.
When enough institutional investors are all doing that same thing, the market suppply becomes restricted, especially in focused regional areas. It ends up indistinguishable from collusionary antitrust, though there's no actual communicated collusion so it's not technically illegal.
In a normal situation like that, all it takes is a single participant to cave and drops prices to take advantage of the demand. But in this case the institutional investors can keep taking the losses indefinitely so no one ever feels the need or benefit to "break" first, and they can maintain it forever.
Going by the graph in the article, that's still ~13% of homes owned by investors with >5 properties. And that's total of what is currently held, it speaks nothing of liquidity. That number likely includes investors who have had that property for a long time, the current property buy-up likely means far greater than 13% of the market right now is going to those sorts of aggregators.
Dropping the price of a house by a few percentage points can be the make-or-break for some families. And small changes in availability can have large impacts on price.
If we banned (or severely penalized) all entities from owning more than 5 residential homes, this would probably reduce cost by a few percentage points across the board. That's thousands of dollars.
Personally, I think unoccupied homes in general ought to be penalized (beyond just tax burden, an actual vacancy tax).
You may be interested in learning about the Land Value Tax[0] which will in effect, taxes become more burdensome for leaving land unproductive (e.g., empty housing or land). It also shifts the calculus on home improvements, which means remodeling your home or doing other perhaps large pieces of upkeep will not trigger a property tax increase as it does today, which is better for median home owners as well.
> home improvements, which means remodeling your home or doing other perhaps large pieces of upkeep will not trigger a property tax increase as it does today
I have heard this complaint here a few times, but very few specifics. I would call getting your roof replaced or your kitchen/bathroom remodelled as major home improvements. Do these actually property tax increases?
Depends on how your locality assesses the value of your home. You can probably do a web search for where you live specifically if you want to get into the nitty gritty. In the places I've lived, unless I added more square footage, these won't trigger an automatic property tax increase.
But if the improvements on your house makes the neighborhood more desirable and your neighbor's house sell for a higher price then your locality expects, then your house will be assessed at a higher value the next time the locality does their assessments, which means higher taxes.
Of course, improvements to your home that increase a sale value will affect the taxes, but the buyer has to deal with that.
Do some localities assess homes individually every so often? I wonder...
In many jurisdictions they do, yes. A general guideline is that if it requires an permit it will typically trigger an assessment and thus increase in property tax
If everything else is equal, a roof replacement or other maintenance shouldn't appreciably change the value of the house (not beyond the cost of maintenance).
What WILL change your property tax is an addition or similar that makes your house go from X (same as everyone around you) to 1.2X or similar, then you'll proportionally pay more tax.
(It varies by district, but most USA property taxes are calculated by figuring out the budget for the city/county/school district, and dividing it proportionally amongst the valuations of properties/houses. This is often displayed as a percentage of the value, but it is not a percentage TAX - as if everyone's property doubles overnight but the budget remains the same, the property tax dollar amounts would remain the same while the percentage reported goes down.)
The thing is that there is only a tiny portion of houses ever selling at any time. The only ones that would benefit from selling are people who are downsizing or moving away.
If you buy 60% of the properties on market, the rest will see this and adjust their own prices. Usually this only works when the macro is favourable (low interest rates, easy mortgage applications, etc.), but it is definitely a large factor. It sometimes creates a even hotter market, with people thinking that real estate goes up forever, then they sell.
You're right that it's not always large investment groups. Vancouver in Canada had the same thing happen, but mostly from foreign investors and criminals washing money. The latter was facilitated by politicians who cashed in big on this.
I don’t understand the last sentence in your second paragraph. If “people [think] that real estate goes up forever” why does that trigger them to sell?
> People won't buy them when there's another house for less.
As others have pointed out housing markets are illiquid and tend to have a limited set of sellers at any given time such that the race-to-the-bottom doesn’t happen very often.
Rather, an institutional investor buys high on houses in desired neighborhoods then charge high rents on their portfolio. Subsequent sellers in the same neighborhood see the high closing price and ask for even more.
You don't have to control the whole market to manipulate it. Housing is localized and the ideal situation is people hold onto their homes for decades before going on the market again and spend months if not years looking at purchasing a home. But investments into single family homes operates on completely different timescales and pace with an entirely separate list of considerations and values.
When a strongly capitalized minority cohort can sustain positions that are untenable for normal market participants, they can act as a kingmaker by shaping outcomes at the margin.
There is always another house for less. You will almost certainly have to sacrifice on something (size, location, condition) in order to find that lower price but you can get there if price isn’t flexible.
> because their properties get leveraged, instrumentalized, and securitized, with derivative products, speculation, and all sorts of incentives that you don't normally want operating in the arena of housing.
I assume that you are already aware that regular home buyers use debt, and, thus lots(!) of leverage to buy their homes. The average down payment for first time buyers in the US is about 10%. That is a lot of leverage! Probably much more than corporate buyers of residential homes.
> instrumentalized
What does this term mean? I have never seen it before. My spell checker does recognize it as a word.
> securitized
Regular home buyers almost always enter into borrowing agreements with their bank that fit loan buying programmes with Fannie Mae and Freddie Mac. This allows for most of these loans to be securitized into MBS.
> with derivative products
Can you give an example scenario / product? Else, this feels like handwaving. CDS on MBS is an absolutely tiny market these days.
> speculation
There is already plenty of speculation from regular home buyers in the US. Do you have any suggestions to reduce the existing speculation by these regular buyers?
The vast majority of land in the country has been owned by capitalistic profit motivated players since 1776 - individual home owner occupiers.
If you doubt they will lobby to increase their profit, try proposing anything that has a 0.1% risk of their property value going down and see how they react.
"The U.S. has roughly 140 million housing units, a broad category that includes mansions, tiny townhouses, and apartments of all sizes. Of those 140 million units, about 80 million are stand-alone single-family homes. Of those 80 million, about 15 million are rental properties. Of those 15 million single-family rentals, institutional investors own about 300,000; most of the rest are owned by individual landlords. Of that 300,000, the real-estate rental company Invitation Homes—in which BlackRock is an investor—owns about 80,000. (To clear up a common confusion: The investment firm Blackstone, not BlackRock, established Invitation Homes. Don’t yell at me; I didn’t name them.)
Megacorps such as BlackRock, then, are not removing a large share of the market from individual ownership. Rental-home companies own less than half of one percent of all housing, even in states such as Texas, where they were actively buying up foreclosed properties after the Great Recession. Their recent buying has been small compared with the overall market."
I somehow doubt these institutions are market makers in the housing market, if they had been ones then they'd be offering to sell and buy houses all the time, this is a market maker's function.
Why doesn't your explanation apply to every commodity? Gold, cocoa, mustard seed, electricity? These are also essential products subject to the influence of markets and market makers.
You can substitute cocoa sources globally, but you can't substitute a house in Charlotte with one in Phoenix.
If cocoa prices spike, you buy less chocolate. If housing prices spike in your job market, your options are: pay more, endure a brutal commute, or uproot your life. The demand is far more inelastic.
I can easily live a full and meaningful life without owning gold, drinking cocoa or eating mustard. Those aren't essential and have decent substitutes.
Electricity is essential, just like housing and it's very highly regulated.
That's overly reductive. I was hoping that the specific commodities weren't going to be the focus, but I guess that was naive.
If you're going to use "housing" as an umbrella for its substitutes, let me do the same. Instead of wheat, beef, pork, cocoa, sugar, etc, let's call that "food". So now food is as essential as housing. Why doesn't the housing complaint against speculators work for food speculators?
The argument is either intellectually dishonest or you just really haven't thought this through very deep and are just puppeting this neoliberal bullshit.
We could start with I have traded wheat futures and could hedge with future contracts on all those commodities. You can't trade single family home derivatives in the same way because it is not the same.
This is unthinking market religion stupidity and the result is going to be a massive over correction towards socialism. You don't help free markets with this bullshit. You are helping to destroy them in the long run.
So on one side, we have a theory which suggests increasing supply to reduce prices. And on the other, we have playing whack-a-mole with the bogeymen du jour who are manipulating a vast market. One solution makes economic sense and the other appeals to populists who favor state control.
And you're claiming that the reaction to opposing state control and socialism is socialism? Not compelling.
In other words it doesn’t work that way. The people who actually pay for the end product do not have the opportunity to apply market pressure by choosing a different source.
Yes, they do apply market pressure. They can change who they buy from and there are different deals - like fixed rate, or different charges for different time periods.
The intermediate players "electricity retailers" then participate in a day ahead and real time market to fulfill their obligations to their customers. This is a good summary (https://chatgpt.com/share/696170d5-5d08-8002-a0ff-e2f45e42c4...) - if you hate ai links, so be it, this is a good description of an esoteric topic.
You'll find most markets actually work this way. When I go to the supermarket to buy sugar, the price isn't jumping around real time with the underlying price of sugar. Same for coffee etc. But it changes with a lag, and consumers respond and the effects flow through even if not in real time. Similar things occur in most markets where there is a wholesale market for something and then several players between that market and the consumer, each player doing some combination of logistics, risk eating, aggregation/disaggregation etc.
So you weren't really "just curious". You felt it necessary to cherry pick a particular commodity to debunk the notion that markets are markets? Do harder to steel man it.
A “market maker” provides liquidity that allows trades to clear and keeps prices stable. They make money on the bid-ask spread. They don’t have leverage to raise or lower prices.
Liquidity doesn’t make something more or less of an investment, it makes it easier to buy and sell. Liquidity in residential homes is a good thing. It means that it’s easier to sell your house and buy a new one if you need to move for whatever reason.
If what you say is true, wouldn't the same argument apply to practically every market these institutions are in? Oil, timber, steel, AI stuff, cars, you name it.
The majority of the US population (65% https://fred.stlouisfed.org/series/RHORUSQ156N) are home owners. I agree that high home prices are not in the interest of the majority of the population, but I bet the majority think so.
If you have a model where you can do price manipulation of something while owning 1% of it, I understand why you wouldn’t share it. Where are you on the Forbes Billionaire List, out of curiosity?
The gobbledygook you posted, “ properties get leveraged, instrumentalized, and securitized, with derivative products, speculation, and all sorts of incentives that you don't normally want operating in the arena of housing”, is just that, gobbledygook.
Just because a buyer as Inc. behind its name doesn’t give it magical powers to set market prices.
If you think it does, then please explain it to us like we are really slow.
It’s not gobbledygook. I think for most people it’s hard to grasp the scale of the entire industries outside of their area of professional expertise so you can look at some numbers here:
> you allow for policy that doesn't maximize the cost of real estate over the interests of the majority of the population.
How do you think homeowners would feel about a policy that doesn't maximize the value of their homes. That's just another way to phrase "maximizing the cost of real estate"?
Based on the data I've seen, respectfully, you are wrong. No, I can't share it. The data is publicly available, however. Feel free to dig it up and aggregate it. The data is publicly available, the effort to dig into it, finding meaning, and sell it to folks, however, is not.
Controversial, but for affordability reasons, there even should be a cap on how many homes an individual can own for rentals. For the sanity in the housing market, members of society need to be driven to participate in other business activities for income/revenue, not rentals.
This is basically a maximum wage for landlords, bound to start a secret society.
IMO it's a crooked notion that landlords are rent seeking and nothing else - they do create supply and maintain housing.
Issue is when they want to politically and artificially raise the value of their property by preventing more housing from being built, so, if you're going to ban something, ban artificial regulations on construction!
North Carolina has done some good by loosening up code around tiny homes, but, a lot of municipalities want to enforce big homes only because they like the property tax of high value houses, 4 bedroom and all. Small town I'm in basically won't allow expansion of housing because the people that live here don't want the village to get any bigger, but if it's democratic like that I'm mostly OK with it, it's when there's demand for housing and someone with a perverse incentive to block it that we should want to solve for.
No, the real problem is that the vast majority of their income does not come from their role in creating supply or maintaining housing.
Proof: Propose a 100% land value tax, which definitionally only removes that part of income that is generated by the community around their property, and see if they go for it.
The actual value of a landlord is insulating the tenant from financial risk, charging a predictable rent and absorbing the costs of repairs and maintenance. That's a lot of value for some people, but it also comes with problematic incentives and obvious bad outcomes when combined with other aspects of housing markets.
In a perfect world, but rent is often less significantly predictable than mortgage payments. Of course the cost of repairs and maintenance isn’t absorbed, it is paid in full by the renter in the cost of rent.
> IMO it's a crooked notion that landlords are rent seeking and nothing else - they do create supply and maintain housing.
They don’t create supply in any way, the only ones who do that are builders. But sure they maintain houses. Although just the bare minimum, they will never fix it nicely - just enough to rent it out.
But not in the causal chain. The building happened because someone was willing to pay for a fungible asset. An asset is only fungible if there are buyers.
> The building happened because someone was willing to pay for a fungible asset.
Building often happens because a developer believes someone will buy the homes they build. A lot of the time, they are right; some of the time they are wrong. Some developers will get buyers lined up first, to minimize the risks of being wrong; many do not. In the latter case, there's no inherent connection between the building and subsequent buyers.
> But sure they maintain houses. Although just the bare minimum, they will never fix it nicely - just enough to rent it out.
Depends a lot on the landlord. Many will fix it up nicely because they can charge a higher rent. Much of my work is repairing rental properties and I've seen all types of landlords. I try not to work for the cheap ones if I can help it because I don't want my name associated with the crap they want me to do.
How does one propose to supply the market for temporary housing without landlords? Students, travelers, new residents to an area, people early in their careers switching jobs frequently, all of these people have a need for temporary housing. If the only people who own buildings live in them, where do these people find their housing?
I spent over a decade living in various rentals after I moved to a new state. I didn't have the money to buy when I first moved, and even if I had, I didn't know the area well enough to know whether I would want to buy where I first lived. And having the ability to just pick up and move meant I had a lot of flexibility for chasing job opportunities. Don't get me wrong, there's plenty to love about the home I own now, but it absolutely ties me down and anchors me in ways that renting never did. I for one am glad to have had people willing to rent property to me.
All fair and valid points. I agree. In today’s age with a career in the tech field and a newly first time home owner, I do feel the aspect of being tied down. But I never really got to avail of moving to chase job opportunities since the Bay Area is where they’re the densest. That being said during Covid times I had to move to the PNW due to layoffs (got a great offer, but I didn’t have to accept it and could afford to keep looking). So I really do understand the benefits of renting.
Like I said in another reply, I don’t consider landlords to be inherently bad. But there are a lot who will try to take advantage of you if you let them. You have to be lucky to get a good one - I only had a couple out of the dozen or so and I wish them the best.
The actual value of landlording is offloading financial risk. The tenant pays a stable rent including a premium in exchange for maintenance, repairs, and not having to sell a home in order to move to a new one.
I just can't bring myself to agree with the hard-line socialists who think landlording is fundamentally a bad thing. There are a lot of problems with it, but it does have a legitimate place in the world.
I don’t think it’s fundamentally a bad thing. It has its place. But it’s an industry that’s easily exploited - I rented over a dozen places and like 80% would try to do things that the tenant handbook would not allow. I sued one of them, and settled out of court for another. And surprise surprise a lot of them don’t want to rent in areas that are pro-tenant rights.
Right, it's entirely possible that landlording in practice has so many opportunities for abuse that it's irredeemable despite its potential for benefit in certain cases. I don't know if I agree with that, but at least it's more intelligent than "Marx says landlords bad therefore landlords bad."
The concept of "landlords do nothing while collecting passive income, therefore not creating any value but instead are just exploiting that they own the land" would be correctly described as "rent-seeking behavior".
This equally applies to any investment income wouldn't it? Dividend, loan interest would all be classed as "unearned income" by a certain economic theory I won't name that keeps causing people suffering a century later. Don't do that.
Investment is generally considered profit-seeking behavior (i.e. not rent-seeking). Building an apartment and renting it out is clearly profit-seeking behavior, but if you were continuing to rent it out doing the bare minimum to keep it from falling over 40 years later, that would be pretty clearly rent-seeking.
From this, we can conclude that there must be some point after an investment is made where continuing to benefit from it transitions to rent-seeking behavior.
Predatory loans were maligned as "usury" long before "rent-seeking" or Scary Marxists came along. For good reason. They're bad for society and the economy writ large.
Classing all loans as usury help Europe back for a long time.
I guess you could class some rent as predatory as well, allowing others to use your property for a fee is not necessarily predatory (unless you're of "property is theft" kind).
Criticising landlords is fine, but words (and phrases) have actual meanings, and the term "rent seeking" has literally no place in a discussion about landlords.
I am well aware of what the phrase means, and I re-read the Wikipedia article to be sure. Maybe you read the use of the word in a different way than I did, but I helpfully included my precise interpretation of it in my comment to clarify the meaning.
> the term "rent seeking" has literally no place in a discussion about landlords
Having "literally no place" is certainly a strong choice of words, particularity as it was introduced in this thread as being a inaccurate label to apply to landlords.
Personally, I first learned about the term applying it to Feudalism, in which the (land)lords' only contribution was their ownership of the land. That example alone seems to pretty handily disprove your claim of "literally no place", in fact it's specifically cited in the Wikipedia article as the Georgist interpretation of economic rent.
Your own wiki link disagrees with you, most of the article uses landlordism as the base-level example. You've just discovered how "rent seeking" is used as a more broad term to describe many phenomena, but they're still describing them essentially in the metaphor of landlordism.
> "Rent seeking" has nothing to do with landlords and tenants
They're orthogonal. In a competitive market, landlords earn no economic rent. In a market with supply restrictions, however, landlords will earn a return "in excess of the costs needed to bring that factor into production" [1].
This is almost never true. Leases come with a million stipulations, and they get to decide what you can and cannot do. It’s exclusive in the sense that the landlord can’t force other tenants on the place you’re renting.
> if it's democratic like that I'm mostly OK with it
One thing to keep in mind. It might be that it's "democratic" in that all the homeowners are allowed to vote for or against the zoning policy (or for or against the local leaders who set zoning policy) but ONLY the local homeowners are allowed to vote. Those who rent (or who can't even afford to rent) live in a different district and aren't allowed to participate in the election.
If that's the case, then voting doesn't represent "the will of the people", just the will of those people permitted to participate.
I live in Massachusetts. Maybe I’d like to move to Palo Alto or Malibu. I hear they’re lovely.
To what extent, and by what mechanism, should the government of those two areas weight my preferences on housing policies in those areas? (I think it is properly exactly zero, even I say really, really want to.)
> Rent-seeking is the act of growing one's existing wealth by manipulating public policy or economic conditions without creating new wealth. (https://en.wikipedia.org/wiki/Rent-seeking)
Given that renting out property you own doesn't meet this definition it can categorically not be called rent seeking. I'm always shocked that people apply this definition exclusively to property rentals, and not VHS rentals, without seeing the hypocrisy.
I fail to understand how your quote doesn't describe land lords? It is:
1. An act of growing one's own wealth (no other purpose to land lording)
2. It is accomplished by taking advantage of economic conditions (perhaps not "manipulating")
3. Does not create any new wealth.
And a little further down is this:
> Rent-seeking implies the extraction of uncompensated value from others without making any contribution to productivity.
Which to me certainly sounds like someone who's only contribution is ownership.
Aren’t you exploiting the economic condition that housing supply is extremely low, and a lot of them vote to keep supply low and prevent new builds? I’m not trying to be facetious but I find it hard to believe that landlords don’t exploit economic conditions.
"Normie" and "happens to own one or two extra homes" seem a bit contradictory to me... And doesn't everyone who invests in something that makes them money exploit economic conditions?
Maybe I’m just unlucky but about a third of the places I rented had landlords who owned at least 5 homes. My realtor owns a dozen. I think owning a couple of extra homes is ok… but at some point I feel like it’s a bit excessive. People struggle to own one, let alone a dozen.
If you have 97 flights landing at airport with 1-3 pax each and 3 full jumbo jets and you survey passengers leaving the airport, the average person surveyed will report that their flight was packed.
What? Of course they are. They just produce entertainment instead of housing-days.
I think we're at the bottom of the discussion here. You've got your opinions but each time you've been pressed you don't really have a justification that stands up.
I can’t imagine what you mean by “each time you’ve been pressed.” Are you perhaps confusing me with other people you’re arguing with?
But no, VHS tapes are not factors of production. That’s a term with a widely understood definition, and linguistic tricks like “a VHS tape causes an image to be produced on a television” or “viewing an VHS tape produces a sense of enjoyment” are not valid arguments.
You're trying to side-step the point by not understanding it.
A VHS tape is capital in the same way that a machine or house is capital. They are capitalized goods that produce something of value on the other side. You still haven't been able to demonstrate that renting one is morally questionable while the other is fine except by special pleading.
"Rent" has a few specific meanings in economics, but charging a tenant rent isn't necessarily economic rent. The economic rent is more like the difference between your actual monthly rent and some hypothetical idealized market-clearing monthly rent.
The municipality cares about the taxes, sure but it goes far beyond that. Literally everyone in every department is more convenienced by attracting the well off and being hostile to those who aren't. Those rich people in those big houses with their big assets are much "easier to own" for the town than a bunch of rowdy generally noncompliant trailer trash who crank out a bunch of kids who need services, have poor elderly who need services, don't goose step in line without a bunch of enforcement, can't pay the taxes to pay for the "do we really need this" equipment and facilities government always wants, the working parents can't pick up the slack if the schools slip and scores will show it, etc, etc, etc.
Growing municipalities kind of have to choose if they want to become bedroom communities or industrial/business communities and if they choose the former optimizing for rich people is the easy lazy not sticking their neck out choice and what does government employment optimize for if not retaining people disposed toward that sort of decision making.
I'm not sure if this is what you mean by secret society, but I could well imagine that these kind of limits would be hard to enforce. Like a person creates shell corporations to own their properties on their behalf, or buys them in the name of their kids, or employs randos to "own" pieces of their portfolio.
They already do these things to take advantage of "primary residence" or "first-time home buyer" incentives; see the big hullabaloo over Letitia James doing it by accident.
Check out the origin of freemasons, a originally a secret society of stone masons whose labor was in such high demand after the black plague rolled through Europe and England that London set a maximum wage. I forget exactly what the meetings were for but it was something like a union / underground political resistance / price-fixing agreement club that worked in all the Pythagorean and Egyptian ritual later on .
Noone says it's nothing else. But rent seeking is a big component of it, you just focus on other minor parts.
In general, locking down some limited but critical commodity (e.g. land) is bad for any economic system. It doesn't really matter whether it's "Wall Street" or "your neighbor". A healthy economy is geared towards creating an added value.
I disagree, but I am interested in pulling this thread somewhat. What would be alternative? The role will likely exist in some form regardless, but I suppose there are obviously ways to make it less common just by removing of its incentives. That said, I might be tipping my hand a little.
Germany practices basically rent control, so that 60%+ of population rent and consider it stable. That's another way.
Maybe there are more, I didn't think hard. The basic idea is to prevent formation of an "aristocracy" that holds some limited but necessary (not luxury) resource. Pretty much every revolution happened because of that.
I guess not most, all of mine were fine, mostly individuals with one or two investment properties who were friendly neighbors I happened to pay rent to.
Point is, in choosing to be a landlord and buying property, an ideal world would respond to this demand pressure by building housing, didn't mean to suggest the landlords themselves put on their hard hats and frame a new building. Just that they're also part of the marketplace.
I've had slumlord landlords, landlords who maintained and kept up the property and focused on retaining tenants over increasing rents, and corporate landlords with prices set by a computer. Landlords are a spectrum.
IMO, government owned basic dormitories with high density should exist. Think of something one or two steps above emergency shelters. Call them pods if you like.
Rent and utilities could be positioned at a level that permitted people to survive and have a foundation from which to lift themselves back up and perhaps eventually to a private housing situation with some luxury.
Renting should be viewed is a negative in society. Imagine if car dealerships moved to a rental model instead of ownership..oh wait, they sort of already are, they just call it "financing", they make no money from cash buys because of that economic perversion.
Rent income is not wages, that's the critical part you're mistaken. Income and wages are not the same thing. Rent income is as much wages as Elon Musk selling stocks is to him, or a bank making income on interest payments. Renting is a business, it's income is business revenue, not wages.
There is this terrible view that landlords are "just like you and me, hard working regular people" - not that it's false, but so are the people that own mom & pops shops, or a local subway franchise, they're all business owners making business profits, not wages.
Business practices that harm the public should be regulated and curtailed. With taxis for example, the medallion system was used to limit the number of Taxis in operation. Similarly, not only should an individual be limited to (directly or via an ownership/shareholder interest in a company -- even with them or their family) a reasonable number of properties, but the number of rental properties in an area should itself be limited. Property owners can either sell houses, or sell condos and make income via condo (regulated) condo fees.
Food, shelter, health-care/medicine should be heavily regulated, if private parties take part as intermediaries between individuals and their food, shelter, health-care, they should expect lots of red-tape and limits. Ideally, the government itself would be driving these markets directly by building and selling properties, hospitals, pharmacies, grocery stores, etc.. that's not socialism or communism. That's just common-sense capitalism, everyone, especially the richest make more money this way. not only that their money will spend better this way.
The kind of capitalism we have now is a short-sighted parasitical money-grab. The kind where if fully realized, you'll build your own mansions and sky scrapers but you'd be complaining about the slums and crime nearby, how you can't get good help, skilled labor, and spend a ton of money on bribes instead of paying a fraction of that in taxes.
In theory, reaganism and trickle-down economics could have worked. A rising tide does indeed lift all boats. But in reality, it's more of the "scorpion and the frog" story. In this case, landlords can own a reasonable number of decent homes and make decent income, and then diversify the money in other markets. But currently, it's a race to become the biggest slumlord or until the markets collapse again.
> they make no money from cash buys because of that economic perversion.
This is completely false. This might be surprising to learn, but for normal car dealerships (not buy-here, pay-here or used car dealerships) a huge amount of their compensation rides on receiving holdback payments from manufacturers, as well as per-unit bonuses that often have cliffs.
Cash buyers paying invoice price are welcomed (if they aren't too big of a headache) because they push a dealership over or at least closer to the next sales-volume bonus cliff.
Holdback alone is worth more than any realistic origination fee.
What I heard is that they make no profit. I'm sure they'll make revenue, but if they simply sold all cars at the cash price, they will be losing money, especially dealerships. But if you're certain they do make profit, not just revenue, then you sound like you know more about the industry than myself, so I'll concede that point.
The dealership customarily earns 2-3%+ in quarterly holdback payments from the manufacturer. They sell you a $100k car at invoice, later that quarter they're getting a $3000 payment - this is pure profit, the deal was long-since done and they didn't take a loss at time of sale.
Dealerships are also earning miscellaneous per-car bonuses which are also profit, which go up based on overall volume: if they sell 50 cars, they get $200/car, if they sell 100 units this might jump to $500/car - just a random example.
If a car is in high-demand or really uncommon (in reality, not sales-speak, and a customer has no other options), they can afford to not sell a car at invoice - but this is an exceptional circumstance.
It's the nature of a capitalist society. Perverse incentives are everywhere and our primary measurement of success is wealth. We richly reward grifters and cheaters and folks with integrity often fall behind. The decades of perverse incentives have created a perverse society that no amount of "golden rule" theory taught in kindergarten can stand up against.
I commented elsewhere in more detail, but it is in my opinion caused by a lack of national pride. If I was a billionaire, how would I feel about other Americans living the way they do? Would i be apathetic or would I feel ashamed as an American? Even paying taxes used to be considered a patriotic act a few decades ago.
If nothing else, landlords should be held to much stricter standards for maintenance and the overall state of their properties.
What’d make sense for me is if a rental has a documented history of being poorly maintained, past some threshold the property can be auctioned off, with the proceeds going towards funding public housing. This should help filter slumlords and bare-minimum-effort speculators.
> Controversial, but for affordability reasons, there even should be a cap on how many homes an individual can own for rentals.
Here in Norway the solution, as with so many other things, is taxing. Your home is evaluated at some "market rate", but if it's your primary residence the effective tax value is just 25% up to $1 million (70% on value above $1 million). For reference, a typical 3-room apartment in Oslo, the capital, is around $400-500k.
However, if it's not your primary residence, then you pay tax on 100% of the "market rate". The tax rate is 1%, so not insignificant.
Until a few years ago, tax on non-primary residences was much lower, and hence we had a lot more people buying to rent if they inherited money or similar. Some even had a dozen or more properties. These have now exited, so policy is working as intended.
One thing of course politicians for some reason didn't think of is that if most of the landlords suddenly sell, rental market will shrink. So now it's super-expensive to rent, and those who rent usually do so because they can't buy for one reason or another (no stable income to support a loan for example).
So you created a policy that takes money from the lower/working classes and those on welfare (restricting rental supply for those who rent) and transfers it as a tax subsidy to the middle class (who own) and are offering this up as "good" policy?
You've also encouraged your middle class to massively over-leverage themselves to a single house/apartment by creating a huge tax subsidy for them (from 30-75%), which will no doubt continue placing upward pressure on house prices and also create risks if interest rates increase. Why would you not take the biggest loan the bank will offer, given interest rates are quite low in Europe and you will not be taxed on most of the value of that property you can acquire with leverage?
Crazy thought, did your politicians ever think about the idea of NOT subsidizing the demand side at all? If the issue is the price of housing, subsidizing demand for it in any way is going to make that problem worse!
And as if it was ordered, a news story[1] on exactly that this morning. Last year alone the average price for a rental unit went up 6.3%, and simultaneously a record number of apartments were sold. So very unlikely to come down.
Landlord, or property management, is a job, same as any other job you might have. The problem is not owning multiple properties, but not paying enough taxes on land. Otherwise, landlords benefit from the free lunch that comes with economic growth and real estate price appreciation, which is true for every homeowners in this country.
IF you want affordability? Tax land.
Doesn't matter who owns them. Your grandma or wall street.
A landlord owns the property. Property managers operate the property. Sometimes these are the same people (in mom and pop scenarios), but typically and at scale they certainly are not.
Property management is a job. Landlording is not. It is simply owning an asset.
Landlords have to allocate capital to fixing and improving the house, as well as taking care of insurance and taxes. Also, assuming that they're not living in the house and the value of the home goes up, they're taxes will rise whenever an appraiser reassesses their home value.
All improvements are excluded from a land value tax, which actually means improvements are even more incentivized.
Yes that is correct if you occupy land while your community makes it more and more valuable, you should not get wealthier and wealthier for no reason. All of that should be taxed away.
So when you build a sewage farm on your back 40 you should get wealthier (while your neighbors thank you because their land tax went down), but if someone snaps a photo of your area that goes viral on {THE PLATFORM DU JOUR} thus making your county more popular and driving up a bidding war for postage stamp sized lots of land (leading to the land being valued at a higher rate than it was a year before) you suddenly have a massive tax bill because "we noticed you are living in a popular county" and the benefits of living in a popular place should be taxed away? Or do we need some kind of a standard for "more valuable" that deals only with tangible things? And if so, which tangibles?
> All improvements are excluded from a land value tax, which actually means improvements are even more incentivized.
I'm not sure what this applies to with regards to my original comment. Improvements, insurance, and taxes are capital expenditures which need to be managed. This was to counter that landlording "is simply owning an asset."
> Yes that is correct if you occupy land while your community makes it more and more valuable, you should not get wealthier and wealthier for no reason. All of that should be taxed away.
Why assume that the landlord isn't getting the brunt of the cost for making the community more valuable? I don't think there's a strong case for saying a property manager is a job while denying landlording being one. Assuming landlording is completely passive is as far-fetched as thinking that property management is completely passive (both may require irregularly tasks to be performed or require no involvement in the ideal case).
While we don't want to tax a landowber's capital investment and improvements, most of the land value is due to the agglomeration effect of the surrounding land. So land value is mostly not an individual owner's own work, but the sum total of the community's efforts and entrepenural spirits.
>but the sum total of the community's efforts and entrepenural spirits.
More like "was too rural or too poor in the 70s/80s/90s to indulge in the then trendy policy like zoning the crap out of themselves and passing a bunch of ordinances more akin to country club rules thereby making incremental growth and development actually possible in the 2010s and 2020s"
Because most development today seems to correlate with whether or not that particular policy bullet got dodged than culture or spirit or anything like that.
> Landlords have to allocate capital to fixing and improving the house, as well as taking care of insurance and taxes.
These costs aren’t that high though, compared to rent. 3 months of rent covers a year of property taxes where I live. Major repairs are about a couple months rent. There is still another half year of rent that’s pure profit. Then they raise your rent every year, demonize rent increase caps, and then vote for reduced housing builds. I find it very difficult to accept them. If I had the money and the capital I absolutely would own a dozen homes and rent it all out, you would make insane money. Not to mention the mortgage costs being so low during ZIRP days. At the rate of AI coming for SWE jobs, landlords seem untouchable.
> 3 months of rent covers a year of property taxes where I live. Major repairs are about a couple months rent. There is still another half year of rent that’s pure profit.
Fair. Mortgage during the ZIRP days and prior was really low though. A 3K mortgage then is like a 6-7K mortgage now. And home insurance is also relatively low, I pay like 1.5K for the whole year. Point is, it’s a great way to make money and that is why people become landlords.
> Point is, it’s a great way to make money and that is why people become landlords.
If it is, why not do it and become rich too?
It's not really a particularly good way to make money. I've run the numbers on hundreds of properties over the last two decades and I've yet to find a scenario where I could buy something and rent it out with enough profit to be worth the hassle. You'll be much better off investing in some index fund instead.
If I had the capital I absolutely would have. It’s a bit worse now but any property you bought pre-covid (at least in big cities) can be rented out for more than what mortgage costs. I remember looking at houses in the Bay Area and the monthly mortgage would be 3K while you can rent it out for 4-5K. Anyone who owned property in the 90s and early aughts are absolutely rolling in it. You can invest the profits in an index fund on top of it.
I bought a house in the Bay Area in the 90s and the mortgage was well over $3K (remember interest was over 7%) and an equal house back then was renting for $1300 (my rent at the time for a 3br house in south San Jose).
Try to run the numbers for any property you like. Remember to include taxes and insurance and maintenance. Just to break even is not easy and then you'll have to work for free on the maintenance. Or pay a rental management company, which is another 8-10% taken from the rent.
Your house now can be rented for 4-5K a month if not more, you have no mortgage. Your property taxes are capped at purchase price due to Prop 13. All said and done can’t you net like 35-40K or so per year on a single home?
I agree that buying a home and immediately putting it up for rent would put you underwater these days but during ZIRP times rent and mortgage weren’t too far from each other.
> Your property taxes are capped at purchase price due to Prop 13.
BTW this is a common myth but not true. Property taxes are set by purchase price in year zero when you buy it. Every year after that, they go up 2% compounding.
That's not the full story because the city/county can also add any extra fees they like, and raise them, prop13 does not apply. My taxes go up by well over 2% every year.
> All said and done can’t you net like 35-40K or so per year on a single home?
If you can find yourself a free house somehow, that feels about right. But how do you get yourself a free house? If you have to buy it, now you have a mortgage, and the math no longer works.
The only people I know who profitably rent out homes are those who inherited a home with no debt. In that case, yes it works.
> during ZIRP times rent and mortgage weren’t too far from each other
Low interest helps, for sure, but the numbers still didn't work out.
The rates only briefly dipped below 3% during the pandemic. Let's say you got the timing right and got a 3% mortgage for 1.2M. The payment is still a bit over $5K/mo. That's just the mortgage, add insurance + taxes + maintenance. On a home you can rent out for maybe 4K-4.5K/mo. Losing money every month.
I've been running these numbers every few months for the last two decades hoping to follow the common advice to buy rental property and become rich. But it has always been cash flow negative no matter what the rents and interest rates have been.
Only advice I have is go inherit a free house, that can be profitable.
Pretty insightful details actually, I’ll rethink some of my positions. But I can’t imagine these bigger landlords taking that much of a hit, especially with multiple properties. Like let’s say I bought a home before meeting my significant other who also has a home - then I only need one place and I can rent out the other. Once both are paid off you have significant leverage. I don’t think you necessarily need a “free” house
The landlord of most of the United States is the American people since American public pension plans are some of the largest holders in these funds that purchase single family homes.
People act as if this is due to 'private greed'. It's not. American public pension plans are underfunded and need more returns. Thus they turn to the private markets, who offer them that which they are seeking to purchase. The market is heavily distorted by these public players whose policy and aims are not constrained by the market but by public policy.
If you tax land the only thing you will end up with is higher rents. You are punishing the wrong people.
Want to punish the right people? Cut taxes so that people can save cash faster, afford houses earlier and stop renting from their landlords.
Build more actually-affordable housing, too. Not these blocks of luxury apartments with swimming pools that nobody uses. (See HDB, Singapore -- that’s what the US needs more of)
Land is taxed but improvements are not. That tax is not passed down because landlords are already charging the highest price they can.
The tax simply redirect the unearned income to the public coffer which are either spent on public investment that further increase land value or redistributed as citizen's dividend.
Meanwhile landlords are free to construct as many buildings as they can without being penalized by higher taxes.
Empty lot, parking lots, and self storage facilities would be penalized because they wouldn't generate enough income to cover taxes on land, leading to more efficient utilization of land, as improvements are no longer penalized.
> Empty lot, parking lots, and self storage facilities would be penalized because they wouldn't generate enough income to cover taxes on land, leading to more efficient utilization of land
Right, so the city would be nothing but luxury (to maximize income to pay those taxes) high rise apartments packed tight every block.
No parks, no playgrounds, no soccer fields, no sports courts, no bike trails, no dog parks... none of the things that make living in an area pleasant. Also, no low income housing. Because none of those maximize "efficiency" (measured only in dollars) of every square inch of land.
Life is not pleasant if maximizing value extraction is the one and only #1 criteria. This is what land value tax misses.
Incorrect. Parks and other amenities raise land value. They would be an investment by the city to raise land value in a given area. People do not want to live in soulless concrete jungle. They want to live in a society full of amenities such as theater, parks, train station, basketball courts, etc.
Also, "luxury" housing cause what economists called "filtering", in which new construction are occupied by the upper strata of income, which means they pay for the cost. As housing age, this naturally becomes more affordable to the lower strata. This of course, depend on sufficient housing stock. Otherwise the inverse will happen.
Also, you only need to cover the cost of paying the land value tax to keep it, not to generate the maximum amount of revenue for that plot of land.
We are not talking about value extraction here, but making sure that landowners work for their keep, while the unearned income/economic rent that would otherwise goes to them is returned to society, because the value of the land is largely determined by the agglomeration effect, the sum total of the community's effort and entrepreneurial spirit. Otherwise, your private effort as individuals would flow to landowners reaping the benefit of increased land value, hence appreciation in real estate price.
I am responding to the comment I quoted, namely: "parking lots, and self storage facilities would be penalized because they wouldn't generate enough income to cover taxes on land".
So if a LVT has the explicit goal of eliminating things like parking lots and self storage units because those don't generate enough income to pay for the taxes, then what hope do things like playgrounds and parks have to continue existing.. they generate far less income than a self storage facility.
Parks and playgrounds increase the land value of the surrounding community. That results in higher LVT.
That creates a virtuous cycle for the local government who is administering those taxpayer paid amenities, same as other form of infrastructure and amenities.
That feels like wishfull thinking. What I see around me in practice is government doing all they can to sell off public lots (like parks) to developers to tear down the park and build another luxury condo. More tax revenue, more money in the government pocket, some bribes under the table, another loss of quality of life in the neighborhood.
> Under the tax scheme described, the reverse is true.
Explain how.. In a dense urban area, with LVT, that lot that held a park will bring even larger tax revenue when the city sells it off to a developer. Having the tax be based on maximum potential usage will only increase the temptation to sell it off and remove yet another park from the people.
I think this assumes politicians who care about subjectives like quality of life, and who are able to think in long-term sustainable city finances instead of just maximizing what they can grab in current fiscal year. We don't have any such politicians in power in the US.
> Landlord, or property management, is a job, same as any other job you might have.
Let's ignore property management for now and focus on landlords (i.e. people who own homes and collect rent from the people who live in the homes). That is very much not the same as any other job. Most jobs do not consistent entirely of literally rent-seeking.
>Most jobs do not consistent entirely of literally rent-seeking.
First off you're using "rent seeking" wrong, it's a specific economic term that means something else.
But using your definition....
There's entire industries built around renting capital investments. Sometimes purely, like rental equipment. Sometimes the investmentents are so expensive they come with the labor to operate them (the way many buildings have a building manager and a desk person). Many industrial transactions are structured basically the same way as commercial rent.
> First off you're using "rent seeking" wrong, it's a specific economic term that means something else.
It is a specific term, but it means: taking control of a limited resource (e.g. housing), most typically by ownership, that you do not have any direct use for, and then seeking revenue by then renting it to other people who actually want to use it (e.g. live in it).
Which, not suprisingly, is precisely what landlords are doing.
And also not surprisingly, those "entire industries" would be rent-seeking if the resources they rent out were limited. However, that does not apply to rental equipment, for example (though there are a few specific exceptions in the case of extremely expensive, very complex and/or very large equipment).
>Which, not suprisingly, is precisely what landlords are doing.
The bulk of the political will for this garbage doesn't come from landlords. Landlords want more, more, more. There literally aren't enough landlords in this country for that.
It comes from existing homeowners who are not landlords and don't want a bunch of high(er than them) turnover housing near them let alone cheaper housing because of the "neighborhood character" or whatever. Basically got mine fuck you.
And this is enabled with the remainder of the political will being provided by a select number of unconscionably ignorant non property owners who have insane takes about how the government should manage all this, be deeply involved in this, immensely scrutinize any sort of property development, etc, etc, all of which is to the benefit of megacorp landlords and developers and the detriment of the small time guys who own a number of properties you can count on one hand with a sum total of units you can count on two or thereabouts who make up the overwhelming majority of landlords on a unit basis and if even a small percent of them added a little bit of capacity would be a huge amount.
> However, that does not apply to rental equipment, for example (though there are a few specific exceptions in the case of extremely expensive, very complex and/or very large equipment).
They don't rent seek the literal equipment. They rent seek your ability to use it without a bunch of thugs showing up with a "stop or else" proposition. You can literally buy a car crusher on Alibaba but you can't open a junkyard in my state without a permit that they have a well known hospital-esque "we only allow X to exist overall" system for, assuming your town doesn't outlaw the business outright.
Once again, this is all to the benefit of big business for whom a few million bucks of donations to the right stuff and work directed at the right firms as needed to get a variance (i.e. pay the law away) for their billion dollar dildo manufacturing plant or whatever whereas the guy who wants to, IDK, take his HVAC bending business to the next level, open a second site and get into process equipment is shit outta luck because without greasing palms he can't afford to the government will hem and haw about every goddamn detail and prevent anything from happening. And the existing industrial plant that got in before the rules is laughing its way to the bank the whole time, well, right up until it gets regulated all the way to China but that's a different problem.
Your view of the world we live in is extremely different from mine. I don't think it is remotely correct, but hey, that's just, like, my opinion. I hope you find some peace in the midst of your experience.
People assume that renting out property is rent-seeking literally only because they both have the word rent in them.
I would note that people don't use the word rent-seeker (or parasite) when it comes to banks renting out money. I assume this is partly because banks use the word `loan` and partly because referring to bankers as parasites would be a little too close to dog-whistle antisemitism.
> People assume that renting out property is rent-seeking literally only because they both have the word rent in them.
It's not a coincidence that they have the same word in them. It's literally just the same word with the same definition and etymology in both cases. Rent is a payment demanded by property owners from people who want to make productive use of that property.
But rent-seeking isn't renting. They're different terms that don't have anything to do with each anymore.
> Rent-seeking is the act of growing one's existing wealth by manipulating public policy or economic conditions without creating new wealth. (https://en.wikipedia.org/wiki/Rent-seeking)
> people who own homes and collect rent from the people who live in the homes). That is very much not the same as any other job.
Why are you thinking of it as a job? Is putting money into the stock market a job? Owning property to rent out isn't a job, and that's perfectly fine. People make money off non-jobs all the time.
No. If you want affordability, make the government efficient and tax people LESS.
The government steals half of my money, half of my landlord's money, and I have to pay my landlord’s income and property tax in addition to my own income tax.
This is why I still cannot afford a home even though I work in a senior role in AI. After paying all those damn taxes and everyone else’s taxes there is almost nothing left.
I’d imagine it’s less taxes and more you want to buy a nice house in the Bay Area where a lot of people are high earners and would be driving up prices on the low supply.
Yes and for some weird reason, the bay and all the nice places to live are all single-family and expensive as hell. Just build some soviet or Chinese style apartment blocks and give people housing like Singapore does its not that hard. This is not a democrat or republican issue, it is a have versus have-not issue.
The logical conclusion is that the residents of these desirable areas like the bay / San Diego / Seattle / DC actually want housing prices to stay high.
Building giant apartments would change the vibe of the Bay though, and my guess is some of people who want to live there also want to live in it as it is now and not what it would be with high rise apartments etc. There’s probably a way to do it well, but it’s a pretty heavy lift versus doing nothing, which is the current status quo.
Also doesn’t help there’s a lot of red tape as the other commenter mentioned.
I mean.. some people would prefer to live next to a forest or grassland, but nope, houses were built there, because people needed somewhere to live. Now that's not enough, and larger buildings are needed, and that includes socialist buildings.
I live in a former socialist country (well, part of a country, the country does not exist anymore), and when we needed more housing, we designated the land in the city to be for housing, ie. large socialist buildings. Then 1990s came, no more socialism, capitalism now, and no more large building projects, no new neighborhoods. So now, we have cows and cornfields in what would be prime realestate because the government won't change the zoning, all three neighbors there complain and apartments that used to be 120k eur maybe 20 years ago are now close to 500k eur.
If you want to live next to cows, move to a village, thousands want apartment buildings there, to live in a city.
Repealing all the bullcrap from the last 50yr that makes that artificially expensive to the point of being a non starter if not outright illegal is the hard part.
This is obviously correct. Somehow people just can't accept the pigeonhole principle that if X people are trying to buy Y houses and X>>Y, a lot of them are going to be disappointed regardless of what laws you pass.
It's obviously incorrect. If X people are trying to buy Y houses, and 1 of them can always buy Y/2 houses, then you'll need to build a hell of a lot more than Y houses if Y is only equal to X. Right now in most places, Y < X, and a certain percentage of people can still buy many more than 1, so it seems like that's a real problem shouldn't continue during times of scarcity.
When N_for_sale > N_individuals_and_couples_buying, it is still possible for N_dissatisfied to be > 0 for the reason you give. But N_dissatisfied must be > 0 whenever N_for_sale < N_individuals_and_couples_buying, even if everyone is limited to having at most one.
Agreed, but I wasn't disagreeing with their whole sentiment, just their assertion that the GP was obviously correct, namely that it doesn't matter how many homes people can buy.
Less supply couldn't possibly be helpful for those disappointed, but also there's less supply than there would be if access to it as a commodity was limited, supposing that all other artificial restrictions and funding models could rely on less concentrated investments, which I think they could
> It doesn't matter how many houses anyone owns if you just build. more. housing.
That's what people with disproportionate access to capital would want people to believe. It absolutely matters if there's a ceiling and a floor on the production rate of every aspect of the supply chain of housing. If it doesn't matter how many houses someone owns, then it wouldn't matter if builders don't outpace the ability for particularly wealthy people to borrow and own as much as they possibly can. It's a particular type of commodity that should be appropriately controlled in a way that reduces the whole "tragedy of the commons" type effect.
There's always a finite supply, and there's always some contingent of people who will try and get as much as they possibly can, leveraging as much generational wealth as they need to, if they need to.
There should absolutely be a limit on the number of homes, within a particular region, someone should be able to buy, as long as a sufficient threshold is met for what can reasonably be called a scarcity problem. If an individual average home of any type would require the mean family income to quadruple in order to service the mortage, or the downpayment would require 5x their annual salary pre-tax, that seems like a very liberal threshold.
> there even should be a cap on how many homes an individual can own for rentals
India still has this in some states [1]. You wind up with everyone in the family owning a house. After that, other people own it and pass on most of the rent.
This would certainly drive down prices - how much is an open question. But I think its a fair compromise, UNTIL we actually do have enough homes for everyone. Until then something has to give - right now its people who can't own a single home that are yielding, but IMO it would be much more fair to ask people who already own a home to yield (not buy more than one). Ultimately that's the tradeoff to discuss.
This kinda reminds me of student loans, why not get as many people as possible into 6 figure debt?
Yes mortgage is often cheaper than rental, but the whole tradeoff is the commitment, just like all kinds of services, if you pay 40 years up front you can get a good deal, but do you really want to take out a loan to do that?
Limiting landlords ability to buy property is reducing demand for construction, you want to increase demand for housing, not decrease it.
As I said in a sibling thread, it does suck that property owners are incentivized to raise their property values, preventing supply from reacting to demand.
That "less commitment" argument assumes that renters are content to be paying higher-than-mortgage costs for a property they'll never own. If they are, then it's true that the rental system is benefiting them. If they'd rather own their homes and be paying a mortgage, then the rental system is a hindrance.
My intuition is that the majority of renters would rather be owners paying mortgages. This is less true of certain demographics (young people, students) and more true of others (older people, families).
I also wouldn't characterize being a renter as low-commitment. Say you're renting a place for 1.2k a month. When you sign a year lease, you're committing to pay 1.2k x 12 in rent, plus (at least) a month of security deposit, for a total of 15.6k. That may not be a down payment, but it's still a huge commitment, especially given how hard it is to assess potential problems with a living space before you've actually lived there.
> but it's still a huge commitment, especially given how hard it is to assess potential problems with a living space before you've actually lived there.
Now imagine trying to asses the potential problems with a living space before committing the next 30 years of those payments, plus locking yourself into that single living space and taking on the single and sole responsibility for repairing or addressing all of those problems yourself.
Look, I really like owning my own home, but when I signed a rental agreement, for the duration of the agreement that was the most money I would ever spend on my housing. And I never once worried about replacing a roof, or replacing an HVAC unit, or replacing a water main. I've owned my own home now for over a decade and my monthly housing expenditure is nearly 2x what it was when I started between tax increases, insurance increases and loans to pay for the various major repairs, and that's with a fixed rate primary mortgage. And that's my cost increases AFTER the insurance payouts. The townhome I first rented when I moved to the area currently rents for about $100 LESS than I pay each month. Granted when I bought the place, it was renting for about $200 more per month than I was paying but that basically means renting vs buying was a wash as far as costs go. Yes, to a degree I got unlucky, but that's also the point, I couldn't know if I was going to be unlucky or not before agreeing to the mortgage. As a renter I could get reviews and recommendations or warnings from prior tenants and at least have a chance of knowing what I was getting into.
I don't think this is a purely financial decision - my position on that is it's not a good investment if you're buying a single home. Taking on 5x leverage on a hugely concentrated asset is insane to me if it's a large % of your net worth
The bigger thing, though, is so many people are currently priced out from owning something for themselves. Your home is such a fundamental part of your life and for a lot of people renting fucking sucks. They can't live their lives the way they want to. To have that be the case because others are buying it up to profit? Ehh..
Lowering prices would also disincentivize anyone to sell their house, sort of like the recent, relatively high interest rates. Those undesirable rates have not applied significant downward pressure on prices because they’re simultaneously exerting downward pressure on the volume of houses available for sale. No one wants to sell their low rate house for a higher one.
>that will inevitably shrink the supply of rentals
As someone that's renting because buying is impossible i think this would be fantastic. They should do it with Airbnb too.
Not American or in the US, this is problem everywhere now. People thinking they're entrepreneurs for gouging.
People will come up with all kinds of reasoning, its the property tax, it's migrants, its minimum wage, it's millennials, it's inflation ,when ultimately it's just that landlords will charge whatever they think they can get away.
and sometimes they'll try to charge in other ways...
The purpose of people putting money into stocks or real estate is to allow for a simple, fairly 'hands-off' way to make money (real estate is not totally hands off, but is pretty close to a set-it-and-forget-it business).
Real estate works for this because you can really put in as much as you want into it.
Other business activities do not work because the entrance cost for non-rent-seeking business is extremely high and the risk is way too high compared to real estate. This is due to American regulation and labor laws.
This is a 'first-world problem', but now that I have capital, the question is 'what to do with it'?. Yeah, you could throw it in the stock market, but that's also rent-seeking in a sense because you're not really able to invest in primary rounds (I mean you can, but it's hard to find deals), so basically you're just providing liquidity to people, which is rent-seeking of a different kind.
So then the question becomes what else to do with it? I've given a ton away, but that's useless for the most part since it barely creates any economic value.
In my ideal world, I'd start a factory and hire a manager, but the capital cost of that is high, not because of the material or the rental cost, but because of the labor cost. So then, what's the option? I could easily outsource it all to China or India, but that's completely useless for the United States.
Then the question becomes, why start your own, when you could invest in others. Great! I would love to do that. It would be even better if I could simply invest in a local enterprise... Except, that's not easy either. Regulation over investments means that even investing in this is fraught with difficulty unless you want to establish some sort of 'fund'.
So basically, there's nothing to do with the money, which is sad, since I end up giving most of the money I make away anyway, and would prefer to have more of it to give away.
Until America figures out what it wants to be, it's going to be real estate for me... consistent incomes, fairly uncorrelated with equities (which I have a lot of too), etc. There's really not many other options here. There's barely any 'productive' activities taking place in the United States.
> there even should be a cap on how many homes an individual can own for rentals
Many people wish to rent, not buy. If we make it so each landlord can own fewer homes, but renting demand stays similar we just incentivise more people becoming landlords
That's a surefire way to make sure that all rental properties are controlled by people who are able to de facto own a lot of properties with family members (or "family" members) on the paperwork, and who are able to enforce their ownership with extrajudicial means.
Ironically, supply would probably increase for no other reason than those are the kind of people who just add cash only units without giving a crap about expensive permission and permits.
> Controversial, but for affordability reasons, there even should be a cap on how many homes an individual can own for rentals
Price controls and limits like this rarely work out in history.
Around here, many landlords renovate or build new high density construction. Put a cap on how many properties they can own and they'll switch from building/renting as many units as possible to maximizing the rent on the limited number of properties they can own.
Restricting the market in one dimension rarely has the desire effect.
That would not be useful. A far better solution would be to drive up rates to make/force landlords unload properties they could only afford at lower rates and also deport the roughly 30 million foreign nationals that are currently in the USA driving up costs of everything. It’s basic supply and demand, but ironically the immigrant supporters are allied with the billionaires and generally wealthy who profit from piling in ever more people into the same supply of housing and amenities and resources.
> also deport the roughly 30 million foreign nationals that are currently in the USA driving up costs of everything.
Nothing like middle school economics to help a debate along ... have you checked on the level of economic activity that is due to those 30M foreign nationals, and considered if there might be any downsides to them no longer being here (and presumably not being replaced by other foreign nationals) ?
Speaking of middle school mindsets; so by your logic, you should take in how many strangers into your home against your will? …and if your infantile logic has any value, why don’t we just cram every single human on earth into the USA, at your expense of course, right?
What immature peasant-logic people as yourself don’t understand is that no, there is negative net benefit to the common person, while the common American is deprived of that benefit which goes primarily to the richest, and of course the freeloading foreign nationals.
Nothing about America has gotten on any controlled measure better without the increase in foreign nationals that have been imposed on the citizens of America against their will.
Is it really as simple as that you have no dignity and are just a self-interested person that enjoys living off the theft of Americans?
And again, your infantile mind cannot seem to grasp that removing a squatter from your home is in fact justified, regardless of how much negative economic impact it would have by depriving that squatter of your assets and living in your home.
Why do you types not understand these basic things? Is it really as basic as that you’re vile? Depraved? Narcissistically callous towards the people you harm? Is it really just because you enjoy making others pay the cost of your decisions while you benefit?
How about we just make you pay for all, every single cost of the foreign nationals that are squatting in America at the profit of the ruling class? Of course not, you would prefer others pay the cost with the misery you cause them.
> so by your logic, you should take in how many strangers into your home against your will?
You do realise you don't own all of America, right?
Nobody actually forced you to take 30 million immigrants into your home, because your home stops at your property boundaries.
I've seen this nonsensical argument in my home country, the UK, too. If you want to claim *all of [the USA]* as your country because you're a citizen of that country, then *any other [USA] citizen welcoming migrants into [the USA] is already taking all these "strangers" into their own home*.
(Works just as well if you substitute any other nation for [the USA], everywhere has people who think about their nation the way you think about yours).
> …and if your infantile logic has any value, why don’t we just cram every single human on earth into the USA, at your expense of course, right?
You should talk to more non-Americans. People like me, for example. I don't want to live in the USA. So I don't.
I mean, we'd physically fit quite easily, you've got most of a continent there, every time people like me suggest things you can do to make your nation better the collective response keeps being "oh but the population density is so low we couldn't possibly make public transport or cheap broadband work". We keep suggesting stuff like this because a lot of us just don't look up to the politics or the infrastructure you've got, certainly not any more, although the reasons are various and our interests are a dis-aligned from each others' as much as from yours.
> freeloading foreign nationals
The foreign nationals in the USA come in three broad groups:
1. People like Elon Musk, who took billions of taxpayers' dollars for self enrichment but are somehow really popular (today only with the establishment, but used to be more broadly) despite this.
2. People who do a huge amount of work in the construction and food industry, without whom the USA would collapse in about 6 months, who get all the hate because they're poor and undocumented (AKA "illegal") immigrants.
I'd like to draw your attention to the word "construction" in there specifically, as it's the other half of "supply and demand".
3. People in the middle with the boring work visas doing middle of the road work. By having in-demand skills, they command above-average salaries, but by commanding an above-average salary they drive up rent and house prices, with that money going to landlords etc.
Of these, only group 1 is "freeloading".
> squatter from your home is in fact justified
A squatter is a person who settles in or occupies a property without legal permission or claim to the property. Squatters live on land or in buildings where they have no title, lease, or right.
Ironically, this is how the USA got Texas from Mexico.
You claim 30 million. I don't know where that number comes from, as it doesn't seem to correspond to either documented or undocumented groups. Too big for estimates of undocumented (~10-12 million estimated) too small for documented immigrants (~40 million).
But it's false in any case, that number does not consist of squatters.
I’ll at least give you some credit for effort, where the other CIA mush-mind just sent a link to peek CIA-brainwashing central link, but you’re clearly arguing in bad faith because you’re so mentally deranged from the life long conditioning.
But you are a well trained NPC, repeating all the installed “knowledge” you have faithfully, with no ability to even realize the inherent contradictions in your statements and beliefs, largely because what you have been conditioned with like a good mindless NPC is only what the ruling class wants you to know for a fact and then infect others with in places like Reddit. You’re a good zombie infecting and devouring those brains, lacking any ability to recognize you serve those who hate you and you say you hate.
But not matter how angry reality makes you, it does not change whether you hear it from me or not at all.
You are an inherent contradictions, just like the ruling class wants you.
So I realized who you are. Of course it’s you, living so far away from any and all effects or impacts of those people you have no problem thrusting on others. You’re really a bad person just alone for that mentality, a pure narcissist, prescribing for others that which you want nothing to do with just so you can live a delusional fantasy of being a good person.
Again, if you’re so convinced of how wonderful foreign nationals themselves on Americans against their will, how about you just put up a sign welcoming them all to squat in your house and live on your property and freeload off you; instead of prescribing that misery on others. You’re really a sick and evil person, you know that. How about you do unto yourself first, what you do unto others.
This is treating a problem symptom, not a root cause.
Landlords owning property is not a problem. Some people prefer to rent - they may be students, or they may not anticipate being somewhere for long, they might not want the risk of owning a home, lots of valid reasons. Having housing available for these people is good and landlords are a necessary and valid part of this market.
The problem is when people who want to own houses can't afford them, even when they contribute meaningfully to society. The root cause of this is not landlords existing. It is wealth inequality. A vanishingly tiny number of people own almost all the wealth in the system, to a point that the additional wealth gives them no real benefit, but serves only to remove that wealth from the vast majority of otherwise middle class people.
If you want to fix this problem return the top tax tiers to what they were 50, 75, 100 years ago and the problem will be severely reduced. It's not sufficient to solve it, but its low hanging fruit.
> A vanishingly tiny number of people own almost all the wealth in the system
I'm not sure this is true. Based on a couple articles I found, this is what the current situation looks like in USA:
a) Billionaires, (of whom there are about 1,000) own about 5% of the wealth
b) Millionaires, (of whom there are about 25 million, or 7% of the population, excluding billionaires) own about 74% of the wealth
This tracks with my impression of the rental market. Most rent money isn't going to the billionaires or big corporations, it's going to the 10 million or so mom-and-pop rental property owners.
I'm not an expert on this stuff by any means, but my intuition is that it's a cycle, wherein the rental system is one of the largest drivers of wealth inequality in the country.
It is wealth inequality. A vanishingly tiny number of people own almost all the wealth in the system
To the extent that this is true, it's not why housing is unaffordable. Even if Larry Ellison buys a dozen mansions and keeps them empty most of the time, that's not going to noticeably affect the market for normal people. Houses are expensive because they're scarce; you're far more likely to be outbid by the guy who makes $10k more than you than by an evil billionaire.
You're inspecting entirely the wrong end of this spectrum. The problem isn't that the average person is being outbid by a trillionare on their two bedroom. It's that an corpuscular capital class has so much money that all assets are being wildly inflated, housing included, while simultaneously depriving more than half of the population of anything close to the capital to buy even the cheapest house. There is no 'being outbid' for the average American who makes a hair over 45k. It's a laughable impossibility to even be in the game. The system is broken and the average user of this site is way too comfortable to recognize it but it's a daily reality for almost everyone else, particularly the young generation.
I propose two changes to (try) and broadly solve this:
- Additional property tax if you do not live in your home fulltime. This includes vacation homes.
- First time, US Citizen, non-corporate homebuyers can get a loan at the federal interest rate.
If I were to try and buy the condo I rent, due to interest rates, taxes, and HOA's I would be paying $1000 more per month. At the end of my mortgage I would given the entire cost of the property to a bank in the form of interest payments.
Rich investors and companies effectively get to buy homes at a discount vs average joes.
> Additional property tax if you do not live in your home fulltime.
In states I've lived in with property tax there is a homestead exemption for the house you live in. In my current state that's about twice the tax.
The effect: Rent goes up to cover the tax and margin is added, so the rent goes up more than the tax.
>Rich investors and companies effectively get to buy homes at a discount vs average joes.
Usually the difference is that the big investor bought the property at lower price, and your rent is based on the lower valuation. Annual rent increases are usually are much lower than market increases - there's a lot of value in keeping a tenant year over year.
> The effect: Rent goes up to cover the tax and margin is added, so the rent goes up more than the tax.
Well-established effect and it applies to everything. A huge portion of all technological improvement/productivity gains and nearly all public investment money ultimately accrues to land rents which we then later just call "the cost of living."
You are right to call this out, and is why the legislation for this idea will require a lot of thought. But the important part of this idea is that only the "big" landlords will have a significant increase in cost.
In order for the economy to function there has to be ~ SOME ~ landlords. In my experience the random people that rent out their second property are usually good landlords, whereas the massive players treat people poorly. If this tax were implemented well, the latter group would be taxed more forcing them to stay honest. The small landlords would have a competitive pricing advantage over the big players, which should go a long ways to keep rents fair.
As long as costs are marked up and passed on to the consumer, this is a non starter. Also, government charging more taxes just gets paid by the consumer. Money is fungible. Small landlords have significant advantages in their being able to be more agile, use different rent structures (i.e. rent to own, short term, barter, etc, leverage owner elbow grease to get more profit). The key is to make sure the big guys don't have a financial advantage.
> In my experience the random people that rent out their second property are usually good landlords, whereas the massive players treat people poorly.
I don't think there's really all that much of a difference. Small landlords have low cash problems (slow repairs, stupid disputes on damage deposits, etc...). Big landlords have policy and bureaucracy problems (we forgot you were disabled and removed the ramp from the deck, we evicted the wrong property).
> Rich investors and companies effectively get to buy homes at a discount vs average joes.
Suppose you had $100,000 in cash, and buy a house for $100,000. You'll not be paying 5% interest on a mortgage. But if you did not buy the house, you would be investing that $100,000 for a 5% return.
So, you're either paying 5% on the mortgage, or foregoing 5% return for investing that money.
Couple things to add. First, rates are much lower when you’re leveraging 10,000 homes at 3:1. That allows you to purchase 20,000 additional homes, which isn’t something the normal individual can do. Second, most of this borrowing was done during the 0% interest days and when rates went up after Covid, a lot of the operations grinded to a halt. Third, there’s no regulatory environment for rent rates and rate increases.
> What interest rate do you think rich people are getting?
Depends how rich. Banks have long been known to offer below market or even zero interest loans to the richer segments in exchange for/in the hope of securing other business from them.
This is a good point, and I was curious to see exact numbers on the invest vs be a landlord opportunity cost.
The rich person gets to rent the house, while the "newly weds" are living in it. And most importantly - the house itself will appreciate in value at a rate near 5%
Assuming they both buy a $500k house w/ a 20% down payment and a 5% loan. Realistically the young couple would get a worse rate but lets say they both get 5%. Monthly payment is $2,522.29 w/ taxes and insurance lets call it $3000 a month.
The newly weds are just eating that entire cost every month for 30 years, whereas the Rich landlord rents it out. After a quick and dirty Zillow search lets assume $3500 a month rent to start, so he's making $500 a month profit on an asset thats already increasing in value 5% ish per year.
So, with these assumptions:
- Home cost increases 2% a year
- Rental price increases 3% a year
- Home value increases 5% a year
Total rental profit is $537k
Final home value is $1.56 M
Total Loan cost: $873k
Bringing the landlords return on 100k to be $1.224M in profit over 30 years (Final sell price - total loan cost + rental profit assuming they stuff it under a mattress). Whereas $100k at a 5% yearly return will be ~$430k
disclaimer: Im not the best with Excel and ive never actually bought property so im sure there are flaws in my math.
An intelligent investor wouldn't buy it outright, they'd get a mortgage with a lower than average interest rate. The appreciation of the home will cover the interest rate over the long run and the interest rate is a small price to pay for keeping most of that $100,000 liquid for other investments.
A finance person will mortgage the house if the mortgage interest rate is less than the investment returns elsewhere. If the mortgage interest is higher, he'll buy it cash.
Except they do, as the original comment already said. The rich “person” has cash and access to much cheaper credit, is buying multiple properties, not paying the bills and earning rent, the other will have a mortgage.
> The rich “person” has cash and access to much cheaper credit, is buying multiple properties, not paying the bills and earning rent, the other will have a mortgage
Rich people do not have cash, as they invest it all. (That's how they became rich.) Rich people do not get away with not paying their bills. Rich people do not earn rent on the house they are living in. Rich people do not get better mortgage rates because they are rich. They get credit-scored like everyone else. Bankers want to charge as much interest as possible.
The original comment said “Rich investors and companies” which is why I put “people” in quotes when replying. This is not about homeowners in different income brackets.
This seems to depend an awful lot on your conception of a "rich person".
My wife and I have owned (at separate times) a couple of rental properties over the years due to various life circumstances (we no longer do). Both properties were valued in the mid $200k range. While being even in that situation certainly makes us unusually fortunate, it gave us no access to cheaper credit.
Now, I appreciate that there is a version of a "rich person" who does. But the GP's example wasn't specifically restricted in that way.
It depends on the state, but that is largely kind of already the case. At least in my state you get a significant deduction to your property taxes if it is your primary residence.
Higher rent means more people will opt to buy. That's not necessarily a bad thing in perspective. Assuming the other side effect is a decrease in costs due to a lower profit margin.
I believe your comment is operating under the assumption that people are merely choosing to rent over buying because it's the more economically wise choice. That's not how things work in reality. Many people want to buy but cannot put up the initial costs.
I fit the description of someone who has the cash to make a down payment, but if I were to buy the property I currently rent, I would be paying $1000 more a month.
More people opting to buy means house prices go up.
There's no free lunch. The more friction, taxation, and tariffs you add to the housing market, the higher prices go for both renters and home purchasers.
That is a good point, and this tax would need to be well thought out. I specifically would increase the tax rate the more properties an entity owns (Not a lawyer so IDK how to treat one guy owning 10 companies as 1 entity the right way). That way smaller local landlord's can still exist (and keep rental prices competitive), but massive orgs will be forced to sell properties. The idea is to create a disincentive for hoarding properties in supply constraint markets.
The problem is not owning multiple properties, but untaxed land ownership. There's a prexisting solution for what you want to solve. It's called the Land Value Tax, which imposes a tax on land, but not on buildings and other improvement.
Property tax has a known problem of taxing improvement in addition to land, which constrict urban development. Plus, imposing additional property tax means improvements are further penalized, which means efficient land ownership are penalized.
You should look up Georgism and read up on what they have to say. It's a reaction to the 19th century economic condition but it very much apply to our 21st century situation and even more relevant today.
This should be the top comment IMO. Land Value Tax, coupled with much saner zoning laws and removing artificial restrictions on safe building proposals, would be the 1-2-3 move to resolving many of the worst aspects of the housing issues we face, as well as resolve many of the worst aspects of owning a home, IE having to defer proper maintenance simply to avoid a big tax adjustment
From what I understand this is a big problem on the west coast (and I agree with what you are saying).
This thread is interesting, as we are all naturally biased towards problems in our own area, and I'm learning some interesting nuances affecting other parts of the country. I live in Chicago / Midwest that has more land and residential high-rises, but our tax problem is a nightmare.
> I specifically would increase the tax rate the more properties an entity owns (Not a lawyer so IDK how to treat one guy owning 10 companies as 1 entity the right way).
Very hard to make this work, people find complex ways around it; e.g. “I don’t own that property, it is owned by an LLC which is owned by a trust whose beneficiary is an LLC owned by another trust of which I’m one of the dozen individual beneficiaries”. Close that loophole, someone will cook up an even more obscure one.
With today requirements for accounting, somebody with economics background could tell what would be wrong with following solution?:
If you house owned by commercial entity - taxes are payed from full value, but the valuation to any collateral/derivative goes by something like (0.75x)^l, where l how many levels deep (counting ownership levels). For example it house is in some sort collateral/derivate/indirect ownership mix with 4 levels deep, it can only valuated as 0.31x value (you can only account as it is worth 1/3). In my mind it should reduce attractiveness for speculative buying.
Additional property tax? Do you have any idea what property taxes are like in places like NJ, NY? It's 2-3% of the value, sometimes assessed at sales value. People buy despite this because they like an area or a school system. If you raise it more, rest assured that only the rich will have the right to buy. It's as regressive as it gets, your proposal.
I mentioned this in another comment but - this thread is interesting as it shows the differences in housing policies / issues in different parts of the country. I'm from the Midwest / Chicago where we have a lot more land to work with so the policies are slightly different.
That being said, it sounds like a land value tax might be a better approach to my first suggestion. Regardless, this would not effect people that truly "own and live in their only house"
Property taxes do not directly translate into rent, the % of the tax that is on the land value of the property can't be passed on, because the supply of land is inelastic.
Yes & no. Higher costs can obviously be passed onto consumers, but higher taxes make things a less attractive investment, too. The higher your costs regardless of whether a unit is occupied or not, the less interesting it is an an investment.
> If I were to try and buy the condo I rent, due to interest rates, taxes, and HOA's I would be paying $1000 more per mo
... and you would be building equity.
So you pay less and get less, right?
You're thinking this is a sign that you are being cheated. It seems to me that it's a sign you're getting a better deal by renting so that's beneficial to you.
You lumped a bunch of factors together (interest rates, HOA, taxes) that don't do much for your argument. You would pay less taxes than the landlord in most jurisdictions, because the unit would be owner-occupied. Do you think the landlord isn't paying HOA assessments? Sure they are. The landlord has a loan at 3% because they bought in 2021. You're offered 6.5% because you're buying in 2026. I'm not convinced it's worth my pity.
Opportunity cost means makes purchasing with a mortgage wiser than buying cash. $1000/month more for a few years is nothing compared to the property value increase of a $1M property
Where I live, condo's do not increase in value much due to HOA fees and taxes.
I just plugged in some numbers using (estimated) purchase price, taxes, HOA for the unit I'm in now, and it would cost me a little over $1M over 30 years to own a $300,000 1br apt.
The stock market goes up more than the housing market. When considering the return on investment for a house, remember the property taxes, insurance costs, maintenance costs, repair costs, 6% real estate commissions, and so on.
"Corporations" is meaningless in this context. If you want to own a rental home in the US, you should set up an LLC, both for liability reasons and because it makes it easier to deal with taxes and expenses.
In the parts of the country I lived in, I've never seen big corporations own single-family rentals en masse. They usually go for apartment complexes, which are far more profitable if you have the capital to buy / build one. Commercial real estate too.
If you click around your neighborhood, a lot of single-family homes are owned by living trusts and "Bob & Kate" LLCs, but that doesn't mean there's any hedge fund money involved.
Just to reinforce this, the last place I lived in was owned by a corporation...of one man, who lived a town away in a modest house and worked as a paper pusher by day.
There are well over a million homes in the metro Atlanta area. If the top three owners have less than 4% of a market, need if they act in a completely coordinated manner they have approximately zero market power.
How so, could you explain that a bit? I could see them causing a price dip or spike in purchase prices if they bought or sold all at the same time, but that would affect their own prices that they pay or receive, right? What is the market manipulation with 4% of housing stock?
Houses are unique and have irreducible transaction costs which makes the market for them very inefficient and slow relative to a commodity. For one example, if you are in the market for a 3-bedroom house with a garage, the market is already segmented much more narrowly than can be the case in an efficient market like that for a commodity. If you have to move into one as soon as possible for a new job, and you know closing will take a minimum of 3 months, the market for your prospective houses is going to be extremely small without even factoring in other distinctive characteristics like driving distance and schools. 4% of the aggregate market may represent 25-30% of your “market” nonetheless.
Thanks for that! I guess I don't see how there could be market manipulation without also damaging the manipulator, especially in a market that is as transparent as housing, with nearly every sale being at a public price.
Rental manipulation is much much easier, and probably more prevalent. But unfortunately the price-gouging lawsuits from using software to share pricing information have been settled with the landlords paying peanuts.
I'm not sure deliberate manipulation per se, but the market would be warped by a single participant that owned 4% of the aggregate market. This is especially true if that participant didn't adhere to the normal holding periods and purchasing rationale as the remainder of the market participants. Consider that market manipulation concerns are (some of) the reasons significant holders (>= 5%) of even extremely liquid public companies are required to publicly report ownership and ownership changes.
This assumes that the entire market is for sale at a given time, which is not true. If you have 3 kids and two parents who need to drive to work, there may be only a single digit number of viable houses for sale at a given time in your school district.
> e never seen big corporations own single-family rentals en masse.
I just sold a house to a big corporation that owns about 12,000 homes. There's a whole industry for enabling these buys, opendoor, offerpad, etc... It's usually a wash selling your home as is to a wholesale deal vs. prepping your home and selling it, the difference being done about 60-90 days faster than via retail.
The company I sold to already owned four houses on my street. It's crazy.
I could have a principle and live in a falling apart money pit in a declining neighborhood or move to a brand spanking new home in a neighborhood on the way up.
Part of the problem is how hard it is to sell a home in the first place. I'm not interested now, but for a while I was looking at needing to move states, and that was going to involve selling my home and buying (or renting) in the new location. And all the math was saying that anything other than getting really lucky with a sale just before moving was going to cost me a LOT of extra money and be a drain and a hassle on top of all of the stresses involved with moving to a completely new state.
I really hate the idea of selling to these "we'll buy your home fast" shops, but I have to be honest that had I needed to make that move, it would have been a very real possibility.
That's not really meaningless though. You just explained in more detail some attributes of corporations, many of which are precisely the things many people are criticizing when they criticize the fact that corporations own lots of housing. Of course we all know that there are still humans behind the corporations.
Depends on how unique your legal name is. Buying your own home as an individual creates a public record with your address and your name. This gets ingested by lots of people search websites like https://www.fastpeoplesearch.com/ (which I have used). But if your legal name is really common, it would be harder for anyone else to deduce which one is actually you.
For what it's worth, I just searched that site you linked with my name and the zip code I lived in for the first 18 years of my life, and it seems to have a pretty muddled view of who I am. It has my correct age, full legal name, and current address, as well as two of my past apartments and my address for those 18 years where I lived in the zip code I searched, but it also lists my parents current home that they bought over a decade after I had permanently left that state in a city I've never lived in. The landline number it lists is the number my parents had at the house I grew up in, but they don't even use it now, and it wouldn't have been an effective way of reaching me since I used to live at that house, and the mobile number it lists is one I've never seen in my life. For family members, it lists one of my brothers and parents, but not my other brother or either of my two living maternal grandparents, although it has a strangely long list of names I've never heard of, some of whom have my mother's maiden name but aren't my grandparents or any of my relatives with that name who I'm aware of, as well as a bunch of people whose names I don't recognize with last names I'm not aware of being in my family tree.
I'm not saying that site isn't potentially useful as a starting point to find out some stuff, but it hardly seems worth influencing a major decision like what legal entity to purchase a home with.
(edited to add): It also says there's no public record of me being married, which definitely is not the case. My wife literally co-owns and also lives in the house it lists me as living in (and has the correct purchase date for it), so you'd think that whatever algorithm is used to build the dataset would be smart enough to see if there's any other ways we're legally tied together. It also says it doesn't have any records of business associations I have when last year I registered a single-member LLC for contract work last year. The LLC literally has the same name as me followed by " LLC", because apparently no one else had registered that before in my state, which at least gives some evidence that my name isn't overwhelmingly common.
I'm not saying it's not worth trying to buy a house in a way that ensures privacy. I'm saying that there are probably better ways to consider the risks than looking at a site like this when it literally shows more people I've never met or even heard of than people actually related to me.
If someone is concerned about being stalked, they certainly should consider how to protect themselves if they're purchasing a home, but that would be equally true even if sites like this didn't exist. For someone who isn't otherwise already considering using an LLC to purchase a house for other reasons, I don't think a site like this is worth taking into account.
This suggests that a single-family home is generally a bad investment. Maybe not if you're living in the house yourself (no renter-landlord inefficiency), but still idk. Could make more sense in certain areas where all the value is in the land.
It's segmented. If you don't have a whole lot of capital but want to invest in real estate, you buy a rental home or two.
If you do have a lot of capital ($100M+), you don't, because you can spend that money to build or buy an apartment complex that gives you something like 5x as many tenants per dollar spent. And is cheaper to maintain in the long haul.
LLC may be a type of corporation but when people complain about corporations buying up homes they really mean C-corps, not LLCs owned by Uncle Bob who likes to flip houses.
Right, and when people share stats such as "60% of homes are owned by corporations", they're either clueless or are trying to deliberately muddy the waters.
But is that Big Money Private Equity or "took a class from that Rich Dad, Poor Dad guy who said we should create a company and invest in real estate" corporation?
Having personal experience here, I'll take the company owning 10,000 homes over the rich dad any day. That rich dad is desperate, incompetent, and breaks tenant law all the time, ie chaotic evil. The corporation is lawful evil instead which can at least be planned for.
Looking at Google, I see this press release for a 2024 study says that "3 companies own nearly 19,000 metro Atlanta homes" across 190 LLC shell companies: https://news.gsu.edu/2024/02/26/researchers-find-three-compa... (1). But even so, that 19,000 represented 11% of the single-family rental market in the Atlanta metro area, meaning that even if it's 38,000 then we're talking 1 in 5 of the rental homes available in Atlanta, which the article says has many more large investor owned homes than anywhere else in the US- an expert is quoted as saying that it has more than the next 2-3 cities combined for large investors. If that 38,000 is correct (and I only have your quote for that number) then more than 10% of all large investor-owned homes across the country are in the Atlanta metro area, since the Reuters article that this gives large investors (more than 1k homes) a total of 345k rental single-family homes across the US as of 2Q 2025. A 2022 GAO study found that institutional investors owned about 3% of all rental single-family homes across the US.
"Rich Dad" style investors simply own the vast majority of rental single-family homes across the US. According to the bar chart in the Reuters article, investors who own 1-5 single family houses available for rent (the classic dentist who went to a "Make Money in Real Estate" seminar) own 87% of the national market. Looking at the GSU press release, they claim Atlanta is an unusually attractive market for large investors- they particularly call out the lack of tenant protections- and that means that it has concentrated the activity, and it is still not particularly large a part of the market. Enough to dominate some neighborhoods of Atlanta, probably. But the solution is not some nationwide ban by executive order that can't possibly be constitutional, but for Georgia to get better tenant protections so that institutional investors aren't as attracted to the market.
1: I'm going to presume that the 38,000 is from later work finding more shell companies. I also can't read the underlying research article because I am unwilling to pay absurd journal fees.
> For example, corporate landlords own more than 12,000 homes in Paulding and Henry County, accounting for 11.2% and 9.9% of all single-family homes in the counties.
> Black rock isn't buying up all the housing, your neighbors are.
I'm pretty naive to the issue, but awhile back I took a look at property records for my neighborhood. In fact, equity firms, including BlackRock, were buying up a bunch of houses in my neighborhood.
A tiny datapoint, I know.
Edit: It might've been Blackstone. It's been about a year since I looked it up.
Edit 2: Looking up records now, it looks like most of these equity firm purchases are back to actual people owners! Interesting. What does this mean? Firm bought property and resold at a profit?
> Looking up records now, it looks like most of these equity firm purchases are back to actual people owners! Interesting. What does this mean? Firm bought property and resold at a profit?
I never went far enough to get all the details back when I was considering a move, but my impression is a lot of these "buy your home and close fast" corporate purchasers were offering just enough to make the speed and ability to not have to make a lot of major improvements worth the lost money from selling on the market. Then they do just enough work to clean up any "show stopper" problems and re-sell at market prices.
So (very simplified) if you have a home that might sell for 200k on the market if you put 10k of work into it, but you need to move in a few months, and you need to pay off 100k on the loan, the company offers you something like 180k. You walk away with 80k (instead of 90k) in your pocket and avoid the various real estate agent fees and the need to do any of the fix up work or deal with trying to sell and move at the same time. The company puts the $10k of work into it and sells for the 200k, pocketing the $10k you gave up.
Where I live, in the fastest growing big city in the US, it is absolutely commercial investment firms buying up all the homes. I used to get calls several times a week from these guys want to buy my house in cash. I stopped taking their calls and now it has slowed to only a few calls per month.
The last call I took, last year, they were ready to buy my house in cash at market value without looking at the property.
The majority of the houses in my neighborhood are rentals, and there are thousands of houses in my neighborhood under the same HOA.
> But most of the "investors" buying up property are individuals purchasing investment properties.
Maybe they should clamp down on that as well, especially individuals who are only purchasing SFH in residential neighborhoods as a way to park their overseas cash.
Exactly. Nobody wants to hear this, because we're all Temporarily Embarrassed Landlords, but if a corporation buying 100 houses to sit on and extract rent is bad (or good), then 100 individuals each buying 1 house to sit on and extract rent must be equally bad (or good).
I disagree with this logic. To take it to an extreme, if one person earning a million dollars per minute has moral value X, then a million people earning one dollar per minute has moral value X. I disagree on principle.
Once you try to clamp down on investment properties, you have couples getting divorces so they can own two homes (this happened in China), and all your kids are going to have their own home as well.
It isn't a bad idea, people will game whatever. A singapore public housing system might work better, but I doubt it would work for SFHs.
This comment always comes up when regulation is proposed: "But people will just game it!" The solution is not to throw our hands up and say "Well, we just can't regulate this!" The solution is to prevent the gaming, too. Laws should iterate as often as people find clever ways to work around their spirit.
I can only provide anecdotal information. In my HOA community we had to make a rule that you need to live in your home for two years before you can rent it. This effectively stopped the companies like Innovation Homes from buying up properties in our neighborhood. Post housing crisis-2015 it was getting pretty bad with the investors purchasing the single family homes. I don’t know if places like Innovation Homes qualifies as “Wall Street” or not.
"The Arrived team is cracked, and I love the audacity of their vision: a stock market for real estate," said Ali Partovi, CEO of Neo, in a release. "I'm betting on them to democratize and digitize access to America's $50 trillion in residential real estate." [0]
Should housing be a “$50 trillion” market for fractional ownership, bundled with its own secondary/speculative market to turn around and flip like penny stocks?
Lovely knowing I can have “access” to that platform and own a 0.004% share in a house someone somewhere out there lives in (rents). While I’ll probably never own a house again.
The real contention is two fold: investors are collectively pricing out non-investors that would presumably actually live in the home they purchased, and among investors, institutional investors are both positioned to ignore market pressures and constitute too large a portion of the market, restricting even rental availability and affordability of the homes.
The reason institutional investors are blamed is that they usually have significant holdings elsewhere, and demonstrably will just wait out a market, taking loses they write off against their other businesses in the meantime, rather than actually participating in it. That ability to wait out the market on a finite resource rather than participating is usually otherwise only seen during antitrust market activities. The fact that many cities are considering adding significant vacancy taxes on properties, citing specifically this behavior as a driving factor, is pretty damning.
Additionally, it's not necessary for these institutional investors that are ignoring the market pressures to own a majority, or even that large of a share. Any portion they own and ignore the market for is effectively just removed from the market entirely and reduces the remaining pool of what's available. And the second-order effect is an overall damping of market responsiveness since they are simply refusing to respond to the demand half of supply and demand.
I don't have the models to run the math myself, but it should theoretically be possible to calculate how much their involvement without participation impacts the prices as a relation to market share, and I'll bet it's a nonlinear result with a steep curve at even low volumes.
> But most of the "investors" buying up property are individuals...
I think the relevant quantity we'd want to look at is what constitutes most of the property being bought-up by investors. Counting investors is going to bias the count towards multitudes of little-guys.
While that’s true, even if “Wall Street” is only holding a few percent of homes, those being released to the markets (and future ones not being purchased) might help.
Corporate entity creation in America is such that I don’t think this will be enforceable (“we don’t buy homes, our Gibraltar office’s subsidiary invested in its CEO’s LLC that bought the home”) but if I’m wrong, it could help somewhat.
It’s binary thinking to assume that just because it isn’t a one step solution it won’t make a meaningful impact. But still, I think it won’t yet hope I’m wrong.
Not really, because the problem isn't investors buying homes, its a lack of supply of new homes. Big investors don't buy homes to keep them empty, they buy them to rent them out. An exception to this might be short term rentals but that is going to be significant in only a few markets and the problem there is still fundamentally a supply problem.
I feel like this article is littered with suspicious statements
Like this one:
> In fact, institutional homebuyers (those who bought 100+ homes in a 12-month period) didn’t even reach 2.5% market share at the peak level in this data line, which goes back to the start of the century.
I don’t know how to evaluate this. I doubt this analysis rolls up subsidiaries. So what does it really mean for an entity to own 100+ units? Is that actually something we care about?
Imo only thing people need to give a shit about is whether a house is being bought to be lived in.
I thought one of the big problem with Wall Street buying housing inventory is that they were turning them into AirBnbs because that is more profitable (generally) than renting. This pressure takes a lot of units off of the market for normal people to rent or buy and makes holding on to your last house a lot more profitable as a rental. I think if we get rid of these (basically) unregulated hotel exception and forced people who who AirBnb to live in that property as a primary residence 180 days a year, then the inventory could correct.
Obviously, the other factor in home prices is zoning and people who own wanting to keep supply down so their house is guaranteed to appreciate. Affordable housing (just like homelessness) in the US is only a problem because we lack the political will to solve it.
> "Large institutional investors, defined as those owning over 100 homes (which includes private equity firms), own 3 percent of the single-family rental stock nationwide according to Brookings. This share is higher in some local markets — in the 20 Metropolitan Statistical Areas where these investors are most present, they own 12.4 percent"
I personally believe that its problematic that large institutional investors own 12.4% of single family properties in the 20 main metro areas of the US.
> "Resident experience is hurting as a result," said Jeff Holzmann, COO of RREAF Holdings, a Dallas-based real estate investment firm with over $5 billion in assets. "Instead of you calling your landlord to discuss a problem, you're calling a call center that gives you the runaround."
I'm not sure I understand the difference between "Wall Street" buying up all the property and real estate investment firms like RREAF doing the same, or come to that the guy down the street buying a few properties to rent out.
A small company or single investor can buy up a large percentage of local available property and be just as bad a landlord.
People are always looking for an outside villain in this story. Over the years it's been "Chinese buyers", AirBnBs, private equity, or "the rich" generally, but the thing is that the system is working exactly as it is supposed to. Middle class homeowners demand that their homes go up in value every year and they get what they want. Homes are explicitly called investments my every mainstream organization with any stake in the game. The ones responsible are indeed your neighbors, but not just the ones with investment properties. Talk to these people and between complaints about the price of eggs going up a buck or two you'll hear them mention "property values" frequently in casual conversation and beam with pride as they show you their Zillow Zestimate. Your government is happy for the increase in tax revenue (even as they carve out exemptions for their voter base). The ever increasing prices are all going to be paid by future generations, so there is no need to worry.
If Black Rock is guilty of anything here above all else, it's taking advantage of a situation deliberately created for someone else. If government policy wasn't already going balls to the wall trying to constantly pump up property values, there'd be no investment returns to be had.
Give me the levers of federal, state, and local government and I promise you I can completely tank property values in 48 hours or less.
It really depends on the market. The institutional investors are common in the South and Southwest. I think the fact that they exist at all is a problem.
You are correct however that smaller private investors are more common. I live in a small city. Small property management companies from NYC and NJ are pretty commonly buying up 2-4 family houses. I suspect that some of these "small" players aren't small at all, but hiding in a maze of LLCs.
I know a couple of dudes from way back that have leveraged their way to a real estate empire with >2000 homes in the region.
You seem to want it both ways. It was a misconception, but it apparently did happen, and apparently "cooled down?" I don't think all these things can be true.
It's highly possible they were heavily investing and were planning on continuing but people noticing and the social pushback it created caused them to change their minds about the strategy.
> Black rock isn't buying up all the housing, your neighbors are.
People may or may not be. They may or may not be my neighbors. You seem to be pushing a set of ideals rather than a set of facts.
Atlanta specifically when I was flipping houses in 2012-2015 had a lot of corporate investors buying up low income properties, fixing them up, then renting them out.
This is meaningless, even with "Wall Street", as you've said. Several companies raise funds, to buy these homes. Institutions the like of Blackrock and REITs invest in these funds, all the time. This isn't new at all, and has been happening for years. It's just been accelerating. Add to that startups like Arrived, and there's simply more pressure on this market then ever before, sadly.
I would be very against individual investors not being allowed to buy property for investment. I think most people can agree that corporations like blackstone/rock shouldn't be manipulating markets. It would be very bad to force blackrock to liquidate its current holdings of 230k homes. It could crater the entire industry and it runs into ex-post-facto issues. Assets need to maintain value or banks will fail.
But make no mistake, during the housing boom post 2019, in a lot of 'hot' metro areas, "wall street" was buying way more homes than individuals. Especially in the south. In the area I lived in, Invitation Homes, some weird shell company of Blackstone, was buying up every piece of tract housing they could get their hands on. At one point, they were making agreements with builders building out new neighborhoods to not sell to individuals since they wanted them all.
So no, I care far less about what my neighbor is doing because he or she isn't attempting to price out an entire city.
It might not solve the problem but we also have other countries buying up homes for pension accounts. Take AU for example doing this. Should be illegal regardless of the size.
If they then rent these houses out and keep them maintained I don't care that they own them. Of course they should not be allowed to have a monopoly on houses in any area (including indirect monopoly by agreeing to minimum prices with others). Landlord is an important job that someone needs to do for the people who owning their own house is the wrong decision.
> If they then rent these houses out and keep them maintained I don't care that they own them...
Pension funds don't do that (it's a headache).
Instead, they allocate a certain amount of capital to funds specialized in Real Estate who will invest in real estate firms like Greystar who are forced to maximize revenue.
Much of the financialization people keep complaining about on HN is because institutional investors are now much more demanding in comparison to 40 years ago when institutional investing meant putting all your money in bonds and a bit of domestic stocks and hoping to get a 5-6% return.
Basically, the Yale, OTPPF, and ADIA model goes brrrrrrr as institutional investors now demand double digit returns.
Even if they are the leader in percentage point rent raises, and do it 5x as often as every other landlord? And blackball a renter they don't like, not from 1 specific house, but from 10K all at once?
You're right. It doesn't matter though. People love 'big fixes', the reality of systemic change is hard to present in a 2 minute sound bite or Instagram reel. This is the kind of 'fix' that gets implemented, then when things don't magically improve people will just give up.
> Black rock isn't buying up all the housing, your neighbors are
To a degree, but there's a whole tranche of investment vehicles that accredited investors use to invest in single-family homes that is not securitized at all, and not on Wall Street. The whole fix-and-flip industry feeds into this now, loaning out money to turn houses into rentals that some LLC holds.
I don't think a stock market reaction is a good way to measure their impact on the housing market. It's not that they aren't involved in the market, it's that their impact is questionable given the relative size of their participation.
The tweet says blackstone. Thats a separate firm from blackrock. And the tweets misleading in the first place, it's looking at the bottom of a candle which wasn't even the current price at the time of the photograph? And the stock closed at about 154.
Besides all this says is that it matters for blackstone...not for the housing market at large.
A hit in the stock price doesn't prove or disprove their claims. What would disprove their claims is the number of properties Blackrock is buying and if it is affecting pricing at the margin.
Let's say Blackrock, with all their wealth behind them, buys a home in your neighborhood. What do you think they will charge for rent? Market average? Ha! No way. They jack up the rental prices because they can. That makes rental prices rise everywhere in the area.
If they charged far more than the market average in a given area then people wouldn't rent from them. Even if they bought up the entire area, people would presumably move to cheaper areas where they weren't jacking up the prices.
I worked with these firms for several years when the business concept was in its earlier stages. The money coming in to buy these homes quickly went from family offices (2013-2019) to state pension funds (2019-present) to sovereign funds (2020-present).
Things like the largest pension fund in Sweden is invested in buying SFR. Or the sovereign fund of the UAE.
I’m not sure if that changed your opinion on this not having practical benefit for the average American.
"US will ban Wall Street investors" != "Trump says he will ban Wall Street investments..."
This a Truth Social post from the President. It doesn't mean it has happened, will happen or will happen in the form that either Trump says it will or is being implied here.
This is a very difficult issue to properly address for lots of legal/logistical reasons. For example - many legitimate homeowners have their homes registered as LLCs and most home legislation is governed by states.
After a decade of national politics, and many decades of his "business", too many people still take "Trump says" as anything more than a piece of a con.
If so, then we can at least put that myth to rest and move closer to a real solution. The only potential downside I see here is that maybe it pushes the real solution a bit further down the road.
I agree, but besides the fact that people overlook that the “C” in LLC is “Corporate” and most private rental investors will have put their real estate in an LLC; is that the real problem at the core is cheap, i.e., devalued money and low lending standards, that has made inefficient and reckless lending and investing possible, essentially the inverse of the BNPL ticking time bomb and the cousin of the housing bubble, i.e., fraud.
With house prices being driven up by reckless lending through a debased currency, you enter a feedback loop where every inflating currencies drive prices higher, which only fuels a further frenzy of lending (including through FOMO) to driver prices higher once again.
Unless your neighbor happens to be named Mr. Black Rock, private equity and wall street investors are indeed the #1 buyers of residential housing stock right now.
It has definitely cooled dramatically; even reasonable interest rates make the numbers pretty meh.
This feels very similar to the Canadian narrative that foreign (read: Chinese) investors are buying all the houses in Vancouver & Toronto. Does it happen? absolutely, but it's also a nice way to blame a segment that has no voice or recourse. It also allows us to turn a blind eye to the impact of a generation of essentially zero % interest rates and a country that holds twice as much of their wealth in houses as the US. Other popular targets: out-of-province home owners, vacation property owners, multi-generational properties.
There is no key word here. It's an aspirational assertion on social media. Everyone asking about how it will be implemented is asking questions Trump has spent zero seconds considering. He will maybe sign some EO that will have very limited scope but mostly he is asking Congress to figure it out. Given the makeup of the Senate it will require bipartisan support which means at least months of haggling if they even consider his request. So we really have no idea what the policy will be or when we'll see it.
Its true that its a small number, but when you look at the statistics as a function of "percentage of homes purchased in 2024" instead of "total percentage ownership of homes", it is a bit more substantial: My understanding is the number is closer to 2% for Institutional investors, and as high as 4% for major markets like Phoenix and Dallas.
What it will come down to is the exact wording of what Trump means by "large institutional investors" (his exact words on Truth).
(forgive me if I don my aluminum chapeau going forward)
> Black rock isn't buying up all the housing, your neighbors are.
So in '08 we saw the veil drop on the mortgage folks. For a brief moment the sort of advantage they were taking of individual homeowners (I'm including landlords here) was plain for all to see, because the systems they had built to extract that value had been pushed too far and started to break.
The really clever/evil/nasty thing that happened next was that they all said "we're sowwy" and pretended to close up shop on the Mortgage Backed Securities markets, while sowing the seeds for a resurgence in mortgage lending by having Fannie run REO-to-Rental programs that sold foreclosed homes in bulk to investors. It would have been too obvious in the numbers if large institutional investors had bought those directly, so they let mom and pop go into business as landlords, effectively buying obfuscation of the stream of finances for the cost of whatever margins they had to take a hit on to allow for low interest rates to pump housing prices up to a place where, like in 07, they could go back to fucking around with mortages.
In less word salady terms, the plan looked like so:
- "oh fuck we pushed it too far and here come the torches and pitchforks"
- Stop making money on mortgages, but we're investment banks as well as mortgage lenders, so we can make up for the loss of mortgage money by buying a more significant fraction of the housing market at near-zero interest rates
- Wait for low interest rates to pump housing prices over time
- Okay cool, people have forgotten about the whole 08 thing and we've peeled back all the subsequent regulation so we can go back to making our money bundling risky ass mortgage securities again <--- we are here>
The essence of the problem as I see it is that finance has gotten so byzantine and complicated that the only people who understand it in real time are the people who are actively trying to manipulate it to maximize their profits, and by the time it becomes clear what dirty tricks they're pulling they've moved on to the next grift so it looks like they're innocent.
The (now somehow) political position that blackrock is not the reason a house in Seattle is $1,000,000 is somehow the most hated position in America. Both my left wing friends and right wing family believe blackrock owns something like 30% of houses in America, and saying otherwise is heresy.
Private equity has absolutely been buying up (and building) U.S. residential stock, and this is addressing a real problem. The fact that Trump's doing it doesn't change my opinion at all, but it's absolutely the right thing to do and hopefully will be bipartisan.
It's not the opposite of a problem, it's orthogonal.
In this particular instance, what's happening is that it's crowding out and destroying diversity in the home builder market.
The model is built to rent out, and it's taking capacity out of the build-to-sell market. It's putting regional and smaller homebuilders that have traditionally provided most of the housing out of business because of their greater access to national capital.
We are seeing this everywhere in the economy. If you have access to Wall Street capital, you can put basically everybody outside of business and then set the price. That's exactly what's happening.
It's not confusing at all. There's definitely issues with private equity ownership of single-family homes. Although it is fair to say that the BlackRock meme might not be accurate, they aren't necessarily the key player.
The people responsible for the cost crunch middle class people feel isn’t billionaires. Bezos isn’t using his money to buy up houses or daycare spots in your neighborhood or Disney Word tickets. It’s upper quantile white collar workers. They are competing with the middle class for the same goods and services, but make much more money relatively than they did in past decades.
Daily reminder that the largest purchasers of residential real estate through these intermediary firms (since that's all they are... they own them in trust for others) are public employee pension plans.
Black rock shouldn't buy any family homes. Not a single one.
I'm sick of the arguments that rely on the meaning of "most/many/some/not all". The arguments are irrefutable because you can always weasel your way through the meaning of the quantifier, or the false implication that only the "biggest" of something needs redress before the next in line.
A person owning a second home is fine, that's one of the paths towards financial independence: small business ownership. Someone starting out in a tiny money making operation is a good thing, and they do not need to compete with a trillion dollar empire!
Agreed, I think the simple answer is the tax rate is one thing for a primary residence and another for non-primary residences regardless of who owns it. For example in CA, Prop 13 stays in place for your primary residence, but properties are re-assessed every year like in Texas if it's not your primary residence. In addition, take away some (or all) of the tax deductions for SFH that aren't primary residences.
Rent would go through the roof and it would become even harder to get out of the rental trap. It's better to just have a very low hard cap on the number of properties anyone can own.
That sounds right. And, I have to admit, it's pretty good politics to ban a mostly imaginary thing that is a popular talking point. Since it's barely going to affect anyone, it'll be easy to pass.
And it may win votes for Republicans in swing districts, since the "BlackRock bought all the houses!" line is heard much more often from the Left, meaning this is something you can show an on-the-fence voter to signal how you are against those evil Wall Street guys.
I wonder if he'll be able to resist slipping in some kind of small-time grift for a family member or campaign donor, though.
He's in real estate. Of course he has an angle. Hopefully they can get something worthwhile into the eventual bill anyways.
I would hard cap how many houses anybody can own to something like 4 - whether through an LLC or otherwise. Many countries do not or did not allow foreign ownership of residential real estate. It's definitely not in the interest of any people to have their very land taken from them. In the current climate that would likely take an extremely nasty turn so it's not the best time for it, but I would be very supportive of such a measure with an exception for permanent residents and spouses of US citizens.
From the moment I saw this in the WSJ this morning, I was wondering what people were going to come up with in order to be against this obviously-good idea, just because Trump said it.
I don’t read this as being against it at all. They’re simply pointing out it doesn’t have that big of an impact because of a bigger problem that remains.
Institutional investors collectively nearly a million residential properties in the US, and continue to buy more. When turnover of inventory is only a couple percent a year, owning nearly 1% of the housing stock and not turning it over is a lot. Small landlord property turnover is much higher than institutions.
This action would have an impact.
Other problems will ALWAYS remain. That's no reason not to make a dent in what can be dented.
I'm not against the idea per se, but "institutional investors are buying up homes" is an effect, not a cause. Boomers demanded that "house values are never allowed to go down, only up" and put all manner of construction-preventing policy in place to make sure this happened, so of course institutional investors showed up. If there's an asset class which is only allowed to go up, why wouldn't they?
Banning institutional investment doesn't remove the "can only go up" laws and mindset, so I think (assuming this even happens, which it probably won't: TACO) the actual effect on prices will be minimal.
I don't know if you've noticed, but politicians aren't in the business of root-cause analysis or actual solutions. They are in the business of making things either slightly better or significantly worse for certain people.
This would make the situation slightly better for people who want to buy houses.
Perhaps it's the case I'm 100% for this mainly because my extremely low expectations for politicians have been met and exceeded in this circumstance.
I don't know why we have to be negative about something that makes a small improvement in something that sucks.
I have to admit, I'm very used to politicians tossing out non-fixes as a distraction when there's some problem, but your comment is the first case I've ever seen of a voter openly acknowledging that it's a non-fix, but being happy about it anyway. And not just that, but actually attacking the people pointing out that it's a non-fix, and casting sinister aspersions on their motives.
This isn't even shooting the messenger or the guy pointing out that the emperor has no clothes, I'm not sure there's an existing idiom for the thing you're doing.
There's no such thing as a "fix". Solutions don't exist in politics, only tradeoffs exist. This is a trade I'm quite happy to make.
If others don't want to make the trade, that's fine, I have no issue with that. But saying nothing will happen can't be true. If you remove demand from a market, that affects prices. There's no way I can take seriously a disagreement with tenets of Econ 101.
This would make the situation slightly better for people who want to buy houses.
To the extent that it has the effect of transferring some properties from rentals to sales, it's only better for the renter who wants to buy and who just barely wasn't able to. It's worse for renters who either don't want to buy or who still can't afford it, because rents will increase due to reduced supply.
You're going to need some exceptions. What happens when someone dies and leaves their house to their kids? What if someone's home is temporarily unlivable (say due to a fire or flood which requires extensive renovation) -- do they have to live on the streets?
And that's not even addressing the obvious question of what happens to tenants if there are no landlords.
I think my suggestion would unlock a lot of supply, without expanding our cities or adding to urban sprawl.
Keep in mind, about half of all adults are married, so each couple can own two properties. One to live in, one to rent.
I imagine we could figure out some way to handle inheritance, perhaps we could give somebody 12 months to decide which house the want to keep, and which to sell.
Rental single-family homes should largely be illegal. Short-term housing should be largely limited to apartment buildings and more space-economic structures. Littering the landscape with empty houses only helps bank accounts.
Still, I'm more than cognizant that there must be huge exceptions carved out for any of these ideas.
the owner could rent out their own house and rent someone elses.
it does make sense if you want to save a nice retirement home for yourself or a place where you want to raise your children while you work and live somewhere else.
right, i was just trying to point out that it would not make renting single family homes illegal.
it doesn't have to be a closed loop though. owners could be (and in my example most likely would be) renting an apartment/flat in the city which is not privately owned)
I think the idea is that nobody would prefer to rent if given a choice, and that everybody could afford to own if not for the presence of landlords in the market.
Possibly but that is not the main argument. The main argument is about the lesser of two evils. Do we want to prioritize the open market of SFH ownership, or do we want to prioritize (maximize) the number of people who can own a SFH. Banning multiple SFH ownership would target the latter, with the tradeoff of a restrictive ownership path for wealthy individuals.
Australia's land tax system makes it effectively impossible for large corporations to own large chunks of residential property, but our real estate is amongst the world's most expensive and landlords are still awful - it's just that the landlords are hundreds of thousands of dentists and, yes, software engineers rather than corporate entities.
If you want housing to be cheaper and renters to be better treated, increase supply. Everything else is window-dressing.
In Australia we've treated the family home as an investment, a primary mechanism for wealth creation (rather than an essential for life) for far too long. I fully agree that supply is the #1 driver for housing affordability, but like many things it's mult-factorial. Tax incentives, market forces, town planning, land use regulation, etc. all play their role.
I'm hopeful that successive governments over here show the courage of their convictions and enact enough change that my kids have a chance of getting into their own places, same as I did.
Tangent: how should we approach changing the housing mix in a city like Perth where 95% of new homes are large four-bedroom detached houses? It's all very well saying "That's what the market wants" when that's also all the market supplies. How do we bootstrap the idea of smaller, denser, affordable, more-diverse housing options?
YIMBYs would argue (and in my view rightly) that if you allow townhouses and apartments to be built, the market will build them where there is a demand.
The only problem is that in the US, if you let apartments and townhouses to be built, homeowners will get muscled out by large builder concerns and single family homes will be converted into dense housing--which sounds great, until you realize there's no way those housing concerns will SELL those units--they're going to be rented forever. There's no incentive to actually sell those to people and every reason to keep them as rentable apartments forever.
So you have attractive locations being completely dominated by rentable corporate owned housing and the net outcome is that people are completely boxed out of home ownership. There's no way pricing comes down because they do this in areas where people are willing to pay top dollar to live.
I live near Ann Arbor and we're seeing it play out right now--more dense housing in the inner core is being allowed (as current thinking says should be done) and whats happening is that smaller old-timey landlords and homeowners are being pushed out and their homes and apartment buildings are being replaced with brand new high dollar rentals. Not condos (although there are some of those as well, but fewer), rentals. And the rental prices are going up! Normal people get pushed further and further from the attractive areas to live, and pressure from these people moving out pushes up rent in the surrounding areas.
Usually it means that supply gets bought up and converted (and leaves the supply, often).
The desire is that a row of single family homes (say a block has 10) get slowly redeveloped into a row of brownstones or similar density - but they're still single family and owned by the residents, but now you have 20 in the same space, or 30. You can triple the density and not really change anything else.
But what ends up happening is that the single family homes remain single family, get slowly bought up by a developer and rented, and then the entire block gets turned into an apartment complex, perhaps with the same or even more units, but they're all rentals forever.
This might be fine, and perhaps even encouraged in some areas, but it does reduce the supply of homes to buy.
I mean, they could, but there's no incentive for the builders to sell them. You can make way more money with rentals (if the demand is there) then you can with condos. Condos are a way time hit of money, rentals are smaller profit, but comes reliably.
Right now holding rental apartments is a "good deal" and they'll have buyers for that (the builders don't want to hold anything usually, they want to sell, sell, sell and get building the next thing) - just larger institutional buyers.
When the market turns around (and every time in the past it was "only going up" it eventually ended) then suddenly you have apartment complexes turning into condos to sell off capital and stop the bleeding.
The problem for people "on the ground/in the rentals" is that can force you to act when you're not financially prepared to - it's easy to find situations where someone can afford the rent; even afford the mortgage to BUY the apartment as a condo; but cannot afford the downpayment (or otherwise qualify for the loan).
It's the same in New Zealand - property is the primary mechanism for wealth creation, and you have boomers with 10+ properties that they use for rental income for their retirement.
The issue is exacerbated by the tax structures not incentivizing investments in other assets - e.g. in NZ if you invest over $50k in offshore equities, there is an annual FIF tax that must be paid, even for unrealized gains.
> In Australia we've treated the family home as an investment
That's true of most of the Western world, unfortunately.
> a primary mechanism for wealth creation
I don't disagree but this needs to be correctly framed publicly as simply stealing from the next generation because that's what it is.
> Tax incentives
For anyone unfamiliar, Australia has a system called negative gearing. In the mid-2010s the then Labor party proposed scrapping it and lost the election. It really is the third rail of Australian politics. This is a shame because it needs to be scrapped.
It allows you to deduct losses on property against your ordinary income. So if you have a mortgage payment of $3000/month but only earn $2000/month in rent then your income is reduced by $1000/month. That's waht drives a lot of small investors to essentially speculate on property.
The US actually has a better system than this, which is that if you earn over a certain income level, you cannot deduct passive losses (like the above situation) against ordinary income. That would be better but still not enough.
So many upper income Australians essentially end up just hoarding property. They'll call it "investment properties" but really it's speculation. Historically, property was treated as an income producing asset, not a speculative capitals gains asset.
Oh and capital gains on non-primary residences should be like 70%. If you want to stop rampant speculation, that's how you do it.
> Tangent: how should we approach changing the housing mix in a city like Perth where 95% of new homes are large four-bedroom detached houses?
Perth like every Australian city is an urban planning disaster. It's just endless sprawl up and down the coast and inland to the hills. A generation or two ago it was a quarter acre block. Those days are long gone unless you're wealthy or you're 50km+ from the city (less if you go east).
So it's a car-dependent soulless hellhole. I say this as someone who knows Perth well. So even now if you build higher-density housing along transit routes, as they're doing, you still need a car (or 4) to go anywhere but work. And high land values make infrastructure projects incredibly expensive. Like imagine trying to build the Perth to Mandurah train line now instead of 30+ years ago when it was actually built. I guess they could utilize the Freeway they already had but what about the fremantle or Midland lines?
What you should do as you build out is reserve space for future infrastructure. AFAIK no Australian city, especially Perth, has never done. So Guildford Road or Great Eastern Highway should really be a freeway. Same with Albany Highway.
In 2024 Western Australia did really relax ADU (granny flat) development rules. The rules used to be really strict. Now you can basically always build one with normal building approval if you meet the minimum lot size requirements (generally 450sqm, sometimes as low as 350sqm, depending on the council).
Single family home zoning is really cancer to any decently sized city.
Anyway, the truth is, I'm not sure it can be fixed now. Big infrastructure projects are prohibitively expensive even with tools like eminent domain. We need to look at why it's so expensive to build apartments.
I think the only thing you can do now is for the government to become a significant suplier of housing to increase supply and stabilize rents.
Good points, thoughtfully made. As a resident of Perth, I (largely) endorse that description.
So much of the wealth of our middle- and upper-class is dependent on property ownership and rent-seeking, it's depressing. That population essentially needs to vote against their own self-interest to help improve housing affordability, so it's hard to see that ever happening. The best I could foresee is a government forecasting a stepped reduction of relevant tax benefits over time (e.g. in three years negative gearing gets reduced by half, then half again the following year, etc.) and then future governments honouring that commitment. As you pointed out though, it's a surefire way for any Australian political party to shoot themselves in the face.
I sometimes wonder how strong the demand needs to get for more-affordable housing before the market responds enough to matter. State and local govt could likely have a role in unlocking infill developments and increasing the allowed densities, but I'm not plugged into the planning system. I also strongly agree that state government should be more proactive as a housing supplier (in conjunction with private industry).
Lots of the issues would be "solved" by adequate supply of new dwelling units (which is a way of driving the prices down). There's really no other way of solving the "X people lived here, now 1.4X do, but dwelling units have only increased 1.2 times."
In the past this effect was localized and when housing prices went insane, it was usually in a city, or a region, not a whole country. And high prices would encourage development in the cheaper areas, and people would move "out there".
The problem with "increase supply" is that existing property owners rarely want that.
In almost all cities land has run out, so the only way to actually increase supply is to increase density. That means fewer single-family-homes, and more townhomes, multi-family, condos, and apartments.
The "American Dream" is a single-family-home, surrounded by other single-family homes, but even with urban sprawl we simply run into the limits of a commute and prices skyrocket.
Ironically we actually solved this problem: Indefinite Telecommuting. But then decided to take our solution that reduces property prices, reduces air pollution, and improves quality of life and then just threw it away because commercial property owners were losing money.
I think it's possible to make apartment/condo living more attractive in the US, but you'd need a few changes. For example:
* American apartment complexes are typically ugly as hell. They're little building islands in a sea of asphalt, disconnected from the wider street grid too. They'd be more attractive if they were more like the complexes I saw while living in Munich: more green up front, car parking basically all underground.
* Require substantial backyards/courtyards for said complexes.
* More tenant protections that prevent landlords from arbitrarily non-renewing a lease, so that people in apartments can have long-term stability. If you break the rules repeatedly or severely, then sure, landlords should be able to remove you, but otherwise you should be left alone to live your life.
While in Munich, we lived in the Solln neighborhood. It's mostly apartments of some kind (we lived in an apartment, and then a backyard duplex), but they just look a lot less ugly than they typically do in the US. Example area: https://www.google.com/maps/place/Munich,+Germany/@48.081098...
> The problem with "increase supply" is that existing property owners rarely want that.
Yup. I'm a weirdo who owns his home but wants a shit-ton more housing built in his city, even if it means my home value goes down. I do know some like-minded folks here, but I would be very surprised if we weren't in the minority.
And it makes sense. We're taught (in the US) to treat our primary residence as an investment, and for most US homeowners it's the most expensive asset they'll ever own, and will be their main vehicle for maintaining their wealth through their later years, and for transferring the remainder of that wealth to their children.
Given that, you'd either have to be self-sabotaging-ly altruistic, or otherwise wealthy enough (outside of your home) that a significant dip in your property's value doesn't tank your finances. I expect that describes a small number of people.
Increasing supply would see your property value rise astronomically. Suddenly there would be developers wanting to build a 30 storey building in place of your single family unit. The ROI on that 30 storey would be high enough for them to give you multiple millions of dollars for your land. What would decrease is the beauty of the neighborhood, but people can be taught to appreciate the beauty of highrise buildings
> In almost all cities land has run out, so the only way to actually increase supply is to increase density. That means fewer single-family-homes, and more townhomes, multi-family, condos, and apartments.
Existing property owners can only afford to hold this opinion because land rents are insufficiently taxed. Through some sort of monumental stupidity we decided to tax labor instead of land. In this sense the SFH, “Americans like suburbia” problem is just a function of poor tax strategy. If homeowners were faced with the economic reality of their choices then markets would fix land use by themselves.
More than 70% of the US population lives in a state with state income tax. So I think it's fair to say that "we" tax labor, in general, even if it's not universal.
And regardless, "we" also means the US federal government here, and everyone in the US is subject to US income tax, regardless of which state you live in.
> it's fair to say that "we" tax labor, in general, even if it's not universal
The point is we have a natural difference-in-differences layout, and it doesn’t sustain the hypothesis that taxing labor is the problem (for this effect).
That means the American Dream is unsustainable, and until people can break through the entrenched interests and do something rational, American cities will continue to decline.
More importantly, there's huge tracts of land that could be new cities.
In the past, we had that incidentally or almost "accidentally" as new industries would create or vastly expand existing towns, and development would occur around them.
Now most "work" is more fluid, and doesn't build company towns, instead you get endless suburbs expanding off an existing city, even when they're technically their "own legal framework".
Even after we moved off the "factory town" type new cities, the suburb development wasn't a major issue because each new exurb usually involved a new highway direct to the city center - but new highways have been rare mainly because all the "reasonable" ones have been built now.
You could either create demand for cities somehow (look at Las Vegas, built out of nowhere) or you could use high-speed commuter rail to empty areas to give room for a seed to grow.
Where else do we simply accept that incumbents get to have full protection from loss at the expense of literally everyone else? Certainly other examples exist but we certainly wouldn’t tolerate wheat farmers stopping their neighbors from growing wheat.
No, we threw it away because executives wanted their control fantasy of being able to push people around like little chess pieces, as opposed to setting a vision, hiring professionals, and then giving them the tools to achieve the vision and staying the hell out of their way.
It's a good start. Would be nice to add a gradually increasing tax on multiple home purchases, e.g. buying a third home has a 5% tax, 4th 15% tax, fifth 25%, and if you want a sixth home you have to build it yourself. Would prevent regular people from buying up dozens of homes to rent.
Changing the excessively huge (and probably financially needed) capital gains deduction for selling a home and buying a new one to only work if you literally buy new construction - would probably spur something.
Existing stock would be depressed in value as the pool of buyers would be smaller, but they'd be more likely to be first time buyers anyway (no capital gains to deal with) and demand for new would increase.
But you could end up with insane inversions where existing stock was pulled down to build new to take advantage of the gains exclusion.
It should be much more punishing from the 4th home like 45%. One can understand 2/3 homes, e.g., one to live in and the rest as investment for retirement income. More than that is just greed. Also, if you don't live in one of your properties, either sell one to keep the total number within 3 or pay additional tax.
if you allow each person to have 1-2 investment homes then you have the exact same problem but now it's decentralised and more people (more voters) benefit from the problem continuing to worsen
We have a significant number of problems related to housing; generally I would call it a demand side issue not a supply side however.
My reasoning is we have a massive construction sector compared to other nations, with a relatively high productivity in terms of dwellings built per capita. We also have pretty slack standards, with even weaker enforcement.
In addition to that, we have a very weak growth in productivity per capita; and since we are trying to rapidly grow, we have to play catch up to provide the same level of services. This needs to happen while our construction sector is stressed, so the same amount of wealth goes a shorter distance again.
You can also see this in rental prices; negative gearing should allow the capital price to decouple from the rental yield to a larger extent than without it; but we still see high rents...
It will make very little difference if Wall Street investors hold very little property.
Putting a finger on the scale of how much real estate is individually owned definitely makes a difference though. It makes it worse.
100,000 individuals who own 100,000 properties have far more political power than 10 companies who own 100,000 properties.
>If you want housing to be cheaper and renters to be better treated, increase supply. Everything else is window-dressing.
Yes. However supply is artificially restricted by government, to the approval of the average property owning voter. So more specifically, that is what needs to be changed. Everything else is window-dressing.
This is a country sliding further towards being us, with their housing being more restricted and more expensive.
100,000 votes (and really probably closer to 150,000 influenceable votes across those households) is a significant number compared to 10 companies who own an average of 10,000 properties each, yes.
Companies with tremendous wealth manipulate voters and lobby their representatives. Don’t presume that voters are remotely well-informed of who backs their interests.
Consider every other expense that people have that's supplied by companies (see: literally everything). Why have those companies not successfully lobbied to prevent competition? Industries where it happens are the exception, not the rule.
As long as houses are treated as an investment, there will be all kind of incentives to make them go up in value.
China did "over" solve it by building loads of houses, so everyone's house value just crippled down like crazy.
If buying a house delivers 5–10× the ROI of the S&P 500, that’s not “smart investing” then there is a huge problem to be addressed ... (preferably by building more)
>China did "over" solve it by building loads of houses, so everyone's house value just crippled down like crazy.
That's not really a bad thing unless you believe real estate should be a vehicle for investment. However, in T1 and T2 cities asset prices are roughly on par with western major metro areas. However, property management fees tend to be lower. I suspect the Hukou system contributes significantly to keep housing affordable, and it's not just the massive supply.
5–10× the ROI of the S&P 500 - which is really only true because we allow massive leverage on real estate that we'd not on stocks themselves.
And leverage brings all the problems associated with it; if you own your house outright and it goes down %10 you're out 10%; if you only have 10% equity and the same happens you're down 100%. The gains, of course, work similarly which is why for so long it's been a heads I win, tails I win.
The window-dressing is great. You get the votes from the renters because you are doing ”something”, and you get the votes from the landlords because property values remain high
Right, and the large corporations just buy up all the service companies in the area and squeeze both the landlords and renters at once. The only way to achieve fairness is straight socialism.
It will make a _small_ difference, and then also banning individuals from owning multiple homes would be a bigger difference (and then building enough supply, the biggest). We can do all three.
Increased supply comes in majority black and/or low-income neighborhoods here and it's "luxury" units all the way down. Gentrification is the name of the game, while simultaneously reducing social services.
I feel like there will be a difference between a handful of large corporations owning a majority of properties vs thousands of dentists and software engineers. Are you saying that all of these property owners are also soulless profit-optimizers?
I remember watching some video of tenants being priced out of their rental apartments so when they tried to contact the property owner, they found layers upon layers of managers and companies. It just seems better when there are more thousands of owners than just a handful of corporations.
Small businesses are often just as ruthless as large ones, just less competent. In any case, most rental properties are managed through agencies, who are soulless profit-optimisers.
In short, the appalling treatment of renters in Australia is due to the chronic undersupply of housing; if landlords had to compete for tenants it would not be possible to mistreat them in the way many currently do.
There is also scope for better regulation of tenancies and indeed the Victorian government has passed some reforms in this area.
It's the opposite in the UK. Most landlords are individuals, own one or maybe a couple of properties.
It's awful, rogue landlords who do everything they can to not do repairs or improvements and when they do it often comes after a long time. Often as they have underestimated all the expenses they're liable for and find that the profit is not very much.
Give me a company that owns a whole block every day, they've modelled the risk better, have economies of scale, and you have more recourse against them.
IME companies are worse: professional investors highly focused on maximizing profits - driving up rent and minimizing costs - rather than a long-term investment by someone with another job, a sidelight and retirement plan.
I don't see how you have more recourse against a company with lawyers that can ignore you, and mom-and-pop. The latter are much more likely to respond to reason.
> I feel like there will be a difference between a handful of large corporations owning a majority of properties vs thousands of dentists and software engineers. Are you saying that all of these property owners are also soulless profit-optimizers?
Do we want to trade crazy high prices in the American real estate market for absolutely crazier high prices in the Australian real estate market?
That is a bit simplistic though, there could be other things going on in Australia, and all the other rich countries (e.g. Switzerland, England, China) where American prices look like a good value. I'm sure at the end of the day supply is the main factor, and not having a hot economy also helps, so I'm sure the USA will get there fairly quickly.
And, everywhere, it's about people wanting to live in some specific cities. Even a bit outside of those specific locations isn't necessarily particularly expensive. (Leaving aside ski resorts, especially nice college towns, and the like).
I don't know...some countries are just expensive full stop. Lausanne for example, and since public transportation is good enough, you can live outside of the city and still get to work...so those places just get expensive also.
Australia I assume you mean the few places where people actually live in the country vs. the undeveloped outback?
I don't really have specific knowledge of Australia but within an hour or so radius of Boston/Cambridge (expensive cities), there are reasonably priced exurbs. (Also expensive suburbs/exurbs of course.)
Australia is so big that there's still plenty of land available where you could build new cities (and not just in the desert).
It's just that everyone[1], given a choice, would like to live near the beach in Sydney's eastern suburbs[2], and there is most definitely no more land available in those suburbs. So the only alternative is to build up, and the boomers sitting in their multi-million dollar houses that were originally bought for $3.95 don't like that prospect one bit.
[1] Not everyone, but you get the point.
[2] and Melbourne's inner east, and the desirable parts of Brisbane and Perth.
Don't be a coward, and talk about demand for housing, which in Australia is driven by sustained mass migration.
The inevitable outcome of this is increasing homelessness, and likely slums when homeless just start building themselves make shift shelter in such large numbers that authorities can't stamp down on it.
We're not supposed to notice that the best thing about migrants (especially the illegal ones!) is that you can cram them 10+ to a house in squalid living conditions that would be abhorrent to most.
It's a price we're willing to pay since we're not paying it.
I mean the only downside is the lowering housing and working standards of the native born working class population, but who the fuck cares about them right?
One additional important detail: if this gets implemented at all, hopefully it does not affect the common practice of having a self-owned LLC owning your home. This is common for the purposes of keeping your personal name out of public records; it is far too easy to link someone's name and address, and people at risk of doxing can do this to protect themselves.
Personally I feel people and especially corporations/REITs do not have the right to hide what real estate they own. Sure put it in a trust, but the public has the right to know who controls it.
I have a friend who has someone who has repeatedly threatened to assault her, and her primary protection is keeping her address hidden from him. Should she never be allowed to own a house at risk of being assaulted?
Maybe have a limited exception then, like rape shield laws. You don't need to gut the entire framework for this rare situation. (Plus it would be fun to watch corporate lawyers try to exploit this loophole.)
Or maybe just stop telling people what cases are "legitimate" reasons to protect themselves and what cases aren't.
I know multiple people who have gotten death threats because of technical comments they made online, or just for having the temerity to exist as a member of a minority group. Not the vague "I'm going to kill you" kind, the "here's a picture of your front door on Google Street View, and an unsolicited pizza, I could SWAT you at any arbitrary 3am, have fun being afraid" type.
I mean I get where they are coming from. It doesn’t strike you as a little odd that people have to protect themselves from dangerous individuals stalking them by setting up businesses? That’s not a little circuitous/indirect? Is that really in line with the purpose of setting up a business in the first place?
It’s not like that’s the only way to hide your identity, it’s just one currently available. Plus it’s a very trivial to look up who owns an LLC at least in my state. Not the best solution IMO
Either way I think you’re being a little uncharitable towards them. I don’t think they’re trivializing it, I think they’re asking a very legitimate question.
This is pure whataboutism and made in bad faith. I feel for your friend (if they exist beyond you trying to make an argument), but there are various physical and legal ways to protect yourself from this situation in the US. This edge case is not a good enough reason help shield foreign oligarchs and large corps holding real estate in secret. There is probably a compromise somewhere between both extremes.
This is by definition not whataboutism. Whataboutism is when you distract from a thing with unrelated things (e.g. "but there are more important bad things going on in the world than this!"). It is not whataboutism to bring up legitimate related counterarguments for a policy.
Where do you stand on encryption? Do you feel like the "I have nothing to hide" argument has any merit? If you think people have the right to privacy, why should real estate be an exception? I personally find the fact that real estate ownership is public in the US to be quite bizarre.
Property is a physical thing in the real world that has been here long before anyone "owned it", and will be here long after all the "owners" are gone.
The public, i.e. the people on this planet, have a right to know who is claiming to own which part of the grass and soil that we all share.
This is a really complicated and broad topic that I cant take the time to type out here. I do not stand on the side of "I have nothing to hide." I fully understand the risks of that position. People must keep some secrets to protect themselves from society. Especially as everything devolves into increasingly strict "purity" tests.
With that said, I don't think the right to obfuscate real estate transactions is the same as spicy personal beliefs/private conversations/etc. IMO there is nothing more public than real estate. I do not consider real estate transactions as protected speech nor one that can be legally hidden. We live in this world together.
People who have been stalked or are uncomfortable having their details published for the world to find need privacy.
Privacy mechanisms aren't just what applies to your or my perspectives, there are millions of other situations. For example, most counties in Texas identify the full legal name(s), phone number(s), and mailing address(es) of every single property owner and their tax payment amount and status. That'd get really weird, real quick for celebrities if there weren't any concealment mechanism.
Privacy isn't a binary or continuous thing, but is possible to varying degrees and requires navigating government and business processes carefully.
Owning your family home through an LLC, depending on your state, is often a bad idea.
There are generous protections in most states for your personal home that you lose if it's owned by an LLC. This includes things like a homestead exemption in bankruptcy protection.
In Florida, for example, there are better options to keep yourself anonymous. Florida has something called a land trust [1].
I feel like mortgage lenders should legitimately wonder why they’re lending to an LLC or a trust rather than an individual. I’m not sure there’s a good answer.
There has to be some nuance. Companies are known to either rent of sometimes own housing for personnel who travel to other offices. Universities typically own housing as well. So maybe it’s something like it can’t be one of the main businesses of the corp to buy up residential housing as an investment tool.
I mean, the ideal amount of nuance is to not ban this in the first place"; right now we're talking about damage control for particularly critical subsets of uses.
> Universities typically own housing as well.
I'd expect that argument to carry negative weight with the folks trying to do this, given the hate they have for universities in general, and the love of privatization.
I don't consider rich people trying to hide their identity to be "critical" at all. Maybe having their address public will be a way to force them to act with consideration of the community instead of just themselves for once while they hide in some anonymous mansion.
Rich people aren't the only ones that want to hide their address. Stalking/DV victims can use this too, or even just a regular person that prefers privacy.
Trusts are in the same boat. If you're using the LLC as a pass-through, these restrictions won't apply to you unless an orange cat is charged with drafting.
Ideally, it should not be possible for random hateful people to easily get name/address records from local governments, but that's unfortunately not the world we live in yet.
Indeed. I was in Sweden and learned that you can look up someone's address and pay on a government website. I think there are some "are you human" checks, but it's basically all in the clear.
It creeped me out a bit and then I was angry when I realized it's the same way in the US, but maybe worse. In the US this is possible too, you just have to pay private data brokers and a bunch of middle men make a cheap buck. Employers sell your pay data, websites sell your address. Everyone makes a buck at your expense.
Most Texas counties put all their residents' complete, real-time information out there with zero impediments to scraping and wholesale harvesting. Appraisal value, tax payment and tax status, mailing address, full legal name, and phone number. Basically a scammer, stalker, and data broker goldmine.
I completely agree, but this isn't the fix. Corporations should be expected to behave like corporations. Having said that, I wouldn't argue against keeping it until we had some better privacy laws and practices in this country(/world)
You are right, it is completely absurd. And it's great! Anonymous companies and tax havens (domestic and international) are something completely contrary to how society at large is organized. And it is the best thing which has ever been invented. They are accessible to any person who has about a thousand dollars, no matter your race, sex, age, ethnicity, family name, political affiliation, or any other factors except that tiny sum. If you're not born into wealth or into a politically connected family, making an LLC is the only opportunity you have in life to not be a human battery in the Matrix. And it's easily accessible to anyone. Incredible.
There are lots of benefits to putting your home into a living trust. It just has one side effect of hiding your name on public GIS of tax parcels. One reason to do a trust is so that you can alter who benefits from it without amending a will.
It costs relatively little to create an LLC. This is not an uncommon pattern for people in groups commonly targeted by hate-motivated doxing and similar attacks. This is not a "rich-person trick", and if you can afford a house, the cost of an LLC is a very tiny expense by comparison.
LLC annual registration is up to $800/yr in CA, including foreign LLC's. I don't think $800/yr for privacy is a "very tiny". Not to mention you would need to pay an owner of record, probably a professional, to have their name on the LLC.
EDIT: A quick web search shows that an estimated annual cost of $50-$400 for a registered agent in CA. So the cost is closer to $1k/yr.
Living in California is expensive in general. Average LLC costs in the US are under $100.
> Not to mention you would need to pay an owner of record, probably a professional, to have their name on the LLC.
Whether that is public record depends on the legal requirements in your state. And in any case, costs for registered agent services are typically comparable to the costs of an LLC.
This is an often conjectured example. California allows for that, but it falls under a foreign LLC registration to get it recognized by the state. It turns out that the annual foreign registration fee matches the in-state one. So this ends up costing more if you want it to be enforceable.
I’d need to see numbers about how many such people cannot otherwise be found online. If we all pay higher mortgages and rent to subsidize those who use loopholes, it’s only possibly worth it.
You are factually incorrect, and attempting to invalidate real people's horrifying experiences. "Existing on the internet" != "famous", and "famous" != "rich".
This technique is used by a very solid fraction of people who's job is to do things that are somewhat bad for either a lot of people or very bad for a few people.
So your local cops, everyone on every local commission except the secretary, journalists, payday loan and tow company owners, etc.
"Real estate investors, both individual and institutional, bought one-third of all single-family residential properties sold in the second quarter of 2025"
As long as we have this focus on using homes as investment and rent prices are kept high through collusion, the industry refusing to build "non-luxury" units, and regulation hurdles stopping new entrants, we will be stuck with this problem.
> the industry refusing to build "non-luxury" units
This is a government policy failure. Because no one is allowed to build fast enough, there is always a demand for luxury (higher profit) and thus that is what gets built.
You have to completely satiate the demand for luxury housing before it becomes "desirable" to build new standard housing. In years past the "starter home" market has completely been reselling past housing, even what was lux at the time of building.
Why would you spend your time and effort building a house that earns you $50k when for the same time and effort you could build a house that earns you $150k?
You'd only do the first if the second wasn't available.
This will help out home prices in a lot of lower priced markets, but do little in higher priced markets. In the Bay Area, many houses are bought up by non-occupying internationals. I've been in a couple of such houses. It's bizarre walking into a $5M+ hilltop mansion that's completely bare inside except for a token "student" living out of one room.
"From" other countries is overly broad and I assume not what you intended. I am actually interested though in the idea of legislating how frequently home owners have to actually be within range of the home, for example. A friend has had a hell of a time with a landlord in Malaysia who's never seen the property.
They do it by citizenship, and you might be surprised how many investment properties are vacant homes, but I’m not necessarily advocating for this in any case. The real cure would just be right to build laws.
The problem is, you can’t do that at the federal level, and the people who vote at the local level are the homeowners who benefit from housing restrictions.
The federal government has a very difficult task. They want to make home prices basically stay flat for a long time, and they have limited tools with which to do it since they can’t do the one thing every economist agrees would solve the problem.
Could homeowners be convinced with truckloads of money? As in, yes if you increase density beyond demand the value of each individual home decreases, but the value of the land dramatically increases if suddenly your single family home with a lawn could be converted to a 9 story tower renting out units to 20+ households with infrastructure spending diverted to your area to improve it. Are landowners unaware or just do not care about the profit potential?
I just don’t think it works that way. The developers don’t buy existing homes, they buy farms and golf courses and large vacant tracts. They don’t frequently just like buy 4 homes and put 20 where they had been.
Most people have most of their money tied up in their home equity and would lose an amount that hurts
Many countries prohibit non-citizens from owning any real estate or businesses at all, even if they have a long-term resident status. Thailand is one example. Ownership is limited to 49%, a local partner must own at least 51%.
does that work out in their favor in the end? seems like that would really deter investment in the country. I'm not familiar with any large thai corporations.
Do the math of what it costs a city per resident - napkin math it, total tax intake divided by population. Now compare that to the additional taxes and money that person (who is wealthy) is not injecting into your city.
So out of touch to think the net spend of a gov directly on an individual would be worth sacrificing all of that additional capital injected to your other neighbors and their businesses.
It's the same in Southern California. When I sold my first starter home it was bought by internationals to rent. There were already multiple homes on the block owned by foreign interests.
And at the new home I moved into, the house next door is owned by foreign interests and rented out to the highest bidder. It makes it extremely difficult to get anything done that involves shared areas (like common fence or overhanging trees) because the owner is essentially unavailable and doesn't speak english. Not to mention that every year or so we have to deal with renters who are minimally vetted. We've had a group of 5 college kids turn the place into a frat house once. There is also a property management company involved, but they can't get in contact with the owner either.
In my experience, this seems to be a bigger issue than wall street investors.
- Whether this is needed or helps depends not on percentage of owners or buyer/sellers, but on the effect in the market of such players. REIT's have an outsize effect because they are repeat players, and thus lucrative clients for brokers, who qualify themselves by skewing local markets accordingly.
- Policy-wise, it's hard to distinguish by size: second homes, mom-and-pop with a few rentals, REIT, private equity. (This is how corporations get free-speech rights.)
- Politically, it's a shame that a real problem is addressed via scapegoating
- Practically, it will have little effect since REIT's and home builders are sitting on a lot of inventory that they can't sell, so they've stopped accumulating (and they're resorting to secondary offerings to pay off the original investors). Indeed, to the extent this stimulates buying, they're all for it.
- Ethically, the US has been a magnet for money laundering, much of it via real estate, which has pushed up asset prices and de-conditioned professionals. Scapegoating only delays reform.
> I'd be fine with a policy of "you can rent housing you build" for American corporations
Builders are more concentrated than landlords in pretty much any geography. A concentration that scales with the amount of bureaucracy and bullshit required to get permits.
These things aren't mutually exclusive. There's a supply problem and it depends. You'd be right if there was only a demand for rentals, but people also want to buy homes to live in, and currently those people are completely priced out of the market by landlords because they've bought all the homes as investments. A landlord can buy a 10 bedroom sfh and split it up into student housing near a university (good), or they can buy a 2 bd bungalow and price a new family out of the market (bad). It just depends. It depends entirely on the market.
Need to think about this some...
Would this end up being another way for MegaCorp to extract wealth from the rest of us (similar to student loans)? All new housing ends up rentals, and a generation+ of Americans are unable to use homes for storing/building wealth?
We know using housing as an investment, at an individual level, is problematic (NIMBYism and failure to infill/redevelop/etc). Not sure how incentivizing MegaCorp to do the same on a massive scale fixes anything?
"The key is increasing supply" assumes the goal of new housing laws should be to increase supply and bring house prices down. But a lot of people do not agree with that goal. Many people are homeowners who will get tens of thousands of dollars richer if there is less supply and prices rise. And in America at least, homeowners have more votes than renters or builders or landlords or the homeless or other groups. So new housing law tends to favor the goals of homeowners, not the goals of other groups who want more supply.
It's more complex than that. When I'm not looking to sell, I certainly don't want the assessed value of my house to increase. That just means, higher property tax bill for me.
Also, houses get older every day. Tastes change - ranch, open-plan, multi-story, multi family get more or less valued as time goes on. Not just 'fewer houses means better resale value'. In fact, a shortage may not change housing prices at all - sometimes it just makes them sell faster.
It's easy to take a complex picture, connect a dot or two and draw a line from someplace to some conclusion. But it's always a trickier picture than that. You gotta consider more dots and connect them all.
I think too many people jump to the easy-to-understand "owners want to get richer" conclusion without actually engaging with what people are saying and voting for. Often the results of the voting may be related to property staying somewhat scarce, but (in my experience) the vast majority of people don't really care about the value of their house as long as it doesn't go substantially down.
Assessed value raises (and drops) shouldn't directly affect property tax assuming the whole area raises and falls (in most areas) because of how the tax is apportioned.
The reality that people don't want to deal with is that it's personal and it is slow - there is no SimCity-style bulldozing and redeveloping without pouring in tremendous amounts of money, because people like living where they do and it's hard to get them to move involuntarily.
None of this has anything to do with "affordability", which is not about shifting rentals to owner-occupied properties, but rather reducing the monthly cost of residing in areas with opportunity. The notion of home ownership as an absolute good is a driver of unaffordability.
Right. There are good financial reasons to own a home even if you don't think it's going to be a great investment, just as there are very good reasons not to own a home even if you have the means. It's the absolute, which is the premise of this policy proposal, that's the problem.
And home ownership rates are well within the normal range for the US post war regime! So this is a policy proposal that will likely decrease affordability to fix a problem that doesn’t exist.
Homeownership rates are only ~flat in aggregate because the population is aging and older people are more likely to own their homes. The homeownership rates of Americans aged <35, 35-44, and 45-54 are down ~10% since 1982 and continuing to decrease. https://www.census.gov/housing/hvs/data/charts/fig07.pdf
You just told a story about how we need to build more housing. Kasey and I agree with you about that.
The point is that there isn't a distortionary corporate investment force preventing young people from doing that; what there are is zoning and permitting rules locking every desirable location into stasis.
I agree philosophically though there is a lot that can be done short of upending the entire American wealth structure like removing barriers to housing construction (to dramatically increase supply) as well as subsidizing first time buyers eg with preferential mortgage rates and tax write offs.
Not true re #1, yes creating a glut of housing beyond demand in the market would reduce home prices, but other markets like Tokyo that do build a lot of housing still see increasing home values despite stable prices. Land value goes up, but units per unit land goes up too, so each individual unit does not necessarily go down. Maybe the value of your physical single family home goes down, but the value of the land it stands on goes way up when the density and infrastructure around it intensifies, so it does not follow that the homeowner loses out (most likely they make money)
Subsidizing first time buyers does increase prices overall but you have to consider the effect of such a policy relative to its cost. It has potentially positive externalities so that’s worth considering while balancing it out eg with the previous policy.
You mean like apartments/condos in Trump Tower? Ha. I wonder if banning them from buying SFHs actually decreases the supply of SFHs and shifts people to build more, guess what, apartments/condos that Trump can put his name on and sell to institutional investors.
Speaking as someone who just sold a house in the Bay Area (Dec!), house prices here are very much "buying the payment".
The valuation of the property goes up and down directly with the interest rate.
The ROI of the house (we bought in 2016) was ~8% on the down payment over the past 10 years, excluding maintenance and interest charges. As an investment, property is not a very good one.
To get that 8% on the down payment, I spent 4% on the remainder. It really doesn't net positive after the mortgage interest (with a 20% down payment). It's about "forced savings" and having control over your environment.
As an aside, since people are stuck in houses (mortgage rates and prop-13), there is a definite lack of starter homes. Everyone adds the second bathroom, meaning there aren't any single bathroom homes to be found. That increases the market floor.
The vast majority of home purchases aren't from speculators or institutional investors.
Institutional investors only own about 0.5% of homes. If they're forced to stop buying, nothing will really change in a noticeable way. At best, small landlords and investors will scoop attractive properties up for slightly less.
Is that 0.5% a uniform distribution across the United States or is it concentrated in a handful of hot markets? I suspect the latter and have to imagine some distortion must be occurring in those regions.
Maybe the best part of this legislation will be that people will realize it's not institutional investors that are driving up home prices. No, that's far too optimistic.
Home affordability is getting better anyways, which is great, because we are finally having a surge in new & denser home building in popular regions and there mortgage rates are more reasonable than they were in the COVID-era.
> Institutional investors only own about 0.5% of homes
Where they buy those homes matters though. In areas with lots of jobs/growth (often the areas experiencing the most housing price pain), that number is likely much higher.
Nonsense. Do you think these landlords intentionally overpaid for the properties? They are sophisticated entities who like to pay at or below fair value.
I'm not sure if they could be forced to sell those, the government could, but then that would fall under just compensation seizure. I'm not a lawyer, but it would seem under basic legal theory that you couldn't take those homes.
Not that I expect this particular strategy from this administration, but there's 'forced' as in "you WILL sell this property", and there's 'forced' as in "any corporate owned housing unit will see its property tax rate increase by 25% per year until it is sold to a person". I don't think your description could apply to the latter.
IF it results in dramatic reduction of home prices, this sounds great at first, but in actuality, it throws the market into disarray, since many sellers and also buyers, and it may trap home owners who need to sell into bankruptcy.
God forbid someone not sell out of their home. /s Home ownership isn't exactly a crappy life milestone to be stuck at. Yeah it would suck for a select few people who need to get out of one and into another RFN due to life reasons and surely some municipalities would leverage that to really screw people but I think the upside is orders of magnitude higher than the downside.
Come to think of it, I bet making homes less liquid would knock the divorce rate down more than anyone wants to believe it would, lol
These homes going back on the market wouldn't make a dent in housing prices. As much as we'd like to think that corporations are to blame, that's not reality. Plenty of middle class families own homes and vote for local politicians to keep their investment safe (and for it to increase in value) by making it hard to build.
We’ll try everything except for a land value tax, so that we can eventually prove once and for all that LVT is the right thing to do! :)
But actually, it’s good to see movement on the underlying problem (affordability of home ownership). This is The Domestic American Problem of our times, and it deserves to be closer to the center of the Overton window of our politics and policy-making.
Even if we think this step is kind of meaningless, it draws more attention to the problem, which is a good thing.
Can someone please explain to me a practical way to apply the LVT? Vancouver used to have an LVT, it was too low and there was a housing speculation bubble in the early 1900s, since property was appreciating much faster than the tax rate. And if the LVT is too high, then you will have very little new development. This isn't even mentioning how you determine the value of the land.
Denmark has an LVT and copenhagen affordability is... not good.
As far as I can tell, LVT only achieves what it sets out to do if it’s equivalent to market rent.
As in, you never really “own” your land, you’re just renting it from the sovereign. If you can’t make good enough use out of it to afford that rent, you should move on. You can find comments on this thread that make this argument explicitly in terms of “maximizing land use efficiency”.
This was the economic structure of feudalism. It … wasn’t great. Private ownership of land has its own tradeoffs but a few centuries of historical experimentation in both directions has been fairly decisive.
How is that LVT "rent" different from any other traditional property tax being "rent"?
As near as I can tell, it is just a different way of deciding how the property tax burden is levied.
Downtown property gets taxed much more. Un-developed speculation property that doesn't contribute to the community (and derives value from other people's contributions) get taxed at the same rate as nearby developed property.
Property taxes have to be set high enough to fund services: Voters want more services, they pay more property taxes. The policy goal is delivering services the voters want to households and businesses.
LVT is designed to achieve a different policy goal: Maximize the efficiency of land use. So its rates have to be set to achieve that goal and, for example, force grandma to move out of that condo in a newly revitalized downtown so a young tech kid who can pay more & benefit from it more can move in.
LVT is a tax on the value of the land specifically, not a traditional property tax. This encourages development on valuable land that is currently being put to unproductive uses.
For example, if you own a lot in a downtown metro which is a parking lot you pay low property taxes because parking lots have low property values. You are disincentivised to develop it because your property tax would go up. Opposite incentives with a LVT.
I understand that, but what should the actual rate of the LVT be? If the LVT rate is too high, nobody will want to develop that parking lot at all because the taxes outweigh the possible profit. And if they are lower than land appreciation, speculation is encouraged.
Housing prices are rising due to inflation, and specifically inflation on the raw input for houses - lumber, building materials, and labor. Granted, this is not the only reason in all regions, places like California have much more complex, systematic reasons for increased housing prices. But the bulk of the US has housing prices that are somewhat in line with the cost of building, since there's no limit on land to throw cookie cutter subdivisions on.
They don't want to admit that their abhorrent policies are hitting the pocket books of their supporters, so they latch onto popular sentiment instead of solving the problem. Typical of this administration.
I built a house in 2018 for $350k. To build the same house again today would be $650k (and it would probably take twice as long). Surprisingly, the cost of land is not much more than it was 8 years ago. All of that cost increase is in materials and labor.
The problem is, the market value of my house is $550k, at the most. Meaning it's not profitable to build new houses as the market can't sustain them. And who is going to sell their house at less than they can get another one for? Only people who are forced to move, which is probably why the there is such low inventory in the historically cheaper markets.
Being in the lumber industry myself, I can tell you that lumber prices have not kept up with inflation. There was a major run up in price in 2021 and 2022, but prices have returned to pre-covid levels accounting for inflation. I have our own sales data, but this chart makes the case relatively well: https://tradingeconomics.com/commodity/lumber.
Interesting to see that he did not issue an executive order to ban this but called on congress to do so. This is just pandering to the base and election signaling and nothing else, at least for now.
He's issued plenty of other executive orders that aren't legal in order to continue to bullshit his base. The reason why he's deferring to congress now (instead of trying to take credit) is because he knows it's not possible and can use that as leverage against members of Congress.
Just think of the shit he's going to throw against the wall when it's only a few months away. I bet he'll wade into "Cancelling all student loans" or "Legalizing Marijuana" knowing his base is too stupid to understand his intentions.
I have this idea where we pick a desert road as long as possible (maybe road 50 Nevada) then build a 50 000 metric ton machine that makes large rammed earth houses. Perhaps make a mold the shape of a Ferris wheel. Have it stamp out 200 homes per week (2 miles) Road 50 is 400 miles so 200 weeks.
Rammed earth is a very decent building material but if you make the walls thick and compress it hard enough (maybe add steam?) it will last hundreds of years. Other building methods should be considered ofc domed roofs are perhaps not cool enough.
Disassemble the machine, ship the containers and deploy it some place else.
Add some killer features to the homes so that people cant wait to live there. For the first 400 miles at least $30 billion comes out (over 30 years) or $15 bl per year for each year of construction. Should be good enough for investors.
If it works, build additional improved versions. Aim for a factory that makes these machines.
The reasons people do chose to live some place are mostly man made. The reason to buy a property somewhat overlaps but not entirely. The giant machine alone delivers enough hype for some to just buy one. Take care of the boring things and lure them in with killer features. The line is/was planned to have way to many of them. In Japan real estate people already get excited if there is a subway station planned.
Houses are horrifically boring all over the world. There are so many data points that people building stuff are happy when all the boxes are checked. As you've pointed out they usually follow demand but it's not a rule, it doesn't have to be that way. We do living room, kitchen, dining, bathroom, bedroom but you could do many different rooms. Say a proper office with all the trimmings perhaps a network connecting coworkers. You could do a space for home manufacturing. If you could just dock a truck properly and roll pallets in and out it would go a long way. Could do a district cooling system and/or a centralized pool pumping station. Could have a fee to gradually green the desert behind the homes.
Aren't they just fixing the symptom rather than the cause? I.e, people buy hard assets because holding dollars loses value. Make dollar hold its value instead, thus will individuals and companies stop buying up property they don't actually need.
idk how this would work effectively. There's lots of affordable homes they're just located where no one wants to live. You'd have to focus on HCOL locations and make them not so high cost which seems something that should be done at the local level.
You can increase supply but investors would just snatch them up. Maybe the feds could put a cap on the value of a single-family home that an institution can own and then make ownership very tedious. For example, no institution can own a home valued at more than $500k and for each home owned a quarterly filing must be made in person at the county the home is located. I'm sure these organizations would rather own very high value homes than lots of low value ones out in BFE.
>There's lots of affordable homes they're just located where no one wants to live
It's probably more accurate to say "they're just located where no one can get a job." You can give up you SWE job or whatever and move to a small town/rural area, but you're not going to convince anyone to give you a mortgage off your income from the subway at the local truck stop, or whatever labor gig you can get at the local industrial concern. Although if you're in medicine there is probably hope.
If only technology had progressed to an extent that we don't psychically need to be concentrated in 15-20 HCOL major metro areas to do most (if not all) office jobs.
> You can give up you SWE job or whatever and move to a small town/rural area, but you're not going to convince anyone to give you a mortgage off your income from the subway at the local truck stop, or whatever labor gig you can get at the local industrial concern
There's certainly SWE jobs in LCOL places but even if there weren't, one's savings from a HCOL area should go pretty far in a LCOL one. Also, thinking that you can't get a mortgage off working at Subway in a small town is just out of touch. You'd probably have to work a lot longer than a cushy SWE job, but it's still possible.
> You can give up you SWE job or whatever and move to a small town/rural area, but you're not going to convince anyone to give you a mortgage off your income from
It's strange to me that moving to LCOL wasn't a much bigger thing during the period when everyone was working remotely.
It seems to me that moving to lower cost-of-living cities did have a remote work boom, but it wasn’t evenly distributed. People from HCOL areas still wanted a high level of services (restaurant, airport, healthcare, recreation opportunities, etc) and probably a cool “vibe”. So the people fleeing SF and LA didn’t move to Dayton and Topeka and Duluth, but they did go to Boise and Bozeman and Asheville.
I think that it should be a ramping rate, the idea being that a 1x landlord should be able to outbid a 2x landlord and so on.
In theory this encourages a sort of spreading effect where at some point the Nth property is too expensive to buy to rent or speculate on, which naturally stops the exponential effect of making land lording your full time gig by continuously expanding the portfolio.
If I were renting a house, I would much rather deal with a business than an individual landlord.
On another note, it’s amazing that in only a year, we accept a dictatorship where we are okay with the President setting policy that should require a law to be passed.
I've dealt with both; anecdotal but I had a much better experience with the individual landlord than corporate. Ex: AC went out in both cases; Individual land lord showed up with a replacement window unit the next day after I reported it. Corpo landleech ignored my ticket and calls for 3 days while I slept in a house that was nearly 90F inside past midnight.
Corpo landleeches nickle and dime you (base rent + rent payment fee + pest control fee + trash fee + valet trash fee + fee for the service that bills water/sewage + mail room fee + others I'm no doubt forgetting) (but they only advertise the base rent), and they like to push straight up scams ( such as forcing mandatory renters insurance at 3x the market rate, expensive "benefits" packages with everything from HVAC filter delivery to credit monitoring, all heavily marked up.). The individual land lord? just a flat rent every month, no surprises.
I'm sure there are plenty of horror stories about individual landlords though; the same greed drives both to cut corners and maximize profits.
The two times I’ve stayed in an apartment complex, they had staff onsite and repairmen and someone on call. The individual landlord doing this on the side is likely undercapitalized and operating on thin margins and not budgeting for repairs
The difference here comes from the distinction between corporate landlords that actually want a sustainable business, and corporate landlords that know they will never make the money back for either rent control or market reasons and so only care about extracting as much money as possible before the building falls apart.
The overwhelming majority of landleeches in the US do not have to deal with rent control. It's a completely irrelevant outside of NYC and few counties spread out across the union.
I can tell you that the suburb to a mid city on the eastern seaboard I lived in did not have rent control, but rentals in the $12-1600 range with pest and mold infestation are in great abundance. I'm sure it'd be a total surprise to hear that I live in a state that skews hard in favor of landlords and offers next to no protections for tenants, because you know, deregulation always works out for the little guy, right?
And that’s why rent control is bad. Why wouod I invest money to keep up a building where I knew I couldn’t get market rates for rent if I were a landlord?
Do you imagine rent control is ubiquitous, and landlords nationwide are crushed under the heavy handed regulation of big government?
Because that could not be further from the truth. I'd that bet without googling, you can't name more than one jurisdiction in the entirety of the US that has rent control.
I was a landlord in GA - definitely not a liberal utopia - and if you do everything right, it still takes 5-6 steps in sequence and around 60 days to evict someone for non payment and it’s another long process to get any money out of someone for unpaid rent and damages once you evict them.
If I were a business whose interest in owning houses was banned by legislation, I'd sell my "services" to the individual landlords who now owned the rental property. Blackrock manages the financial part (taking rent, scheduled repairs) and the silent partner gets a cut.
That’s already a thing. Property Management companies charge landlords around 50% of the first month rent for a new tenant and 10% of the rent to manage the property for the landlord.
> On another note, it’s amazing that in only a year, we accept a dictatorship where we are okay with the President setting policy that should require a law to be passed.
Did you read the article? The impetus was a tweet where he called on congress to write and pass a law to this effect.
This is largely a good move. There are plenty of whales, once those 5% disappeared, price should slowly come down. ( The Hong Kong Housing market is the one worth studying ) Next would be increase supply, and may be if needed, additional tax for individuals owning more than one home or when they buy 2nd home. Largely making housing as an asset not attractive for certain group of investment.
Housing continues to be the biggest problem in modern world and yet it is a problem not resolved.
> There are plenty of whales, once those 5% disappeared, price should slowly come down
But by how much? ~3-4% of housing has to be sold, some amount of it will still be bought for renting (as many people still want to rent). Surely this can’t have a very big effect on house price
It could be substantial just by increasing the number of occupied dwelling units - if institutional investors are willing to let housing sit empty for 6 months or a year (because it doesn't hit them where it hurts) and the average vacancy rate in a city is hovering around 10%, dropping that down to 5% will really shake up prices.
If mega institutions are financial extractors who will take all money available, and the units can be rented to make more money, why aren’t they doing it?
Why would the institution turn away free money but individuals owning the houses wouldn’t?
Because commercial real estate works on weird counter-intuitive things, and dropping rental rates adversely affects their entire portfolio more than leaving a building vacant does.
I should have mentioned a bit more - residential real estate (e.g., your house) is valued on comps for the purposes of a mortgage backed by that property alone - commercial real estate is valued by the local rent multiplier and mortgages are against bundles of it, or the entire company.
So (simplified) an "empty building, but it rents at $2k a month" is valued at 200k say; if you drop the rent to $1500 and now are getting rent paid, the building is valued at $150k.
They're not stupid, they're watching the vacancies and cash flow also, but it's over a bunch of properties, not just one. A single-family landlord who owns one property will start to feel the pain quite quickly of an empty building (and even they should plan for 20% vacancy, one year out of five).
This, and it is already happening in as we speak. London, Hong Kong, South Korea ( a little different but all the same ) Vancouver, Sydney. Basically anywhere you see housing bubble.
The trigger of re-evaluation also hurts banks's balance sheet. Crediting Rating agency, a whole lots of other financial institution. i.e Their interest is to not let it fall.
They together with property agency, owner, investors dont want to trigger re-evaluation because it hurts their LTV ( Loan-to-Value ). Which for a set percentage is defined by law along with adequate cash reserve. It is also what causes HSBC to buy its subsidiary HSB. And Bombcar above has already replied. It is rather obvious not something to do with big short but not understand how the financial world of property market works.
Given how inexorably tied the US economy is to SFH prices, a drop may do more harm than good.
Many families have the majority of their wealth tied up in their home, and another significant portion of it (knowingly or not) in the SFH MBS market via their retirement investments. If prices fall quickly enough to impact the MBS market, a large number of households could suddenly see big dips their two biggest sources of wealth.
A gradual drop may be fine, but the financialization of housing at the national is a big mess. Sadly it makes the market dynamics of giving people places to live way more complex than it should be.
Exactly. I am so glad someone gets it. Or a drop of 3% per year. There are plenty of tools to use to help achieving this. The question is whether government have any intention to bring housing market to an affordable level.
So close to realizing the issues with the 2018 tax bill.
- 20% maximum corporate tax
- Personal Salt cap
Made it less expensive for an llc to buy a home than for most individuals.
To make individual ownership on par with corporate, individuals need to be in a lower tax bracket, be able to deduct taxes
, interest, and insurance. And the $10k cap really hurt the ability for local property taxes to make it better for the individual. The new $40k cap may put it slightly towards the individual in some jurisdictions.
But raising corporate rates or reducing corporate deductible expense re real estate is the most efficient policy to encourage individual ownership.
I recently worked on an MVP for a Zillow-for-wholesale startup. As a curveball, our state passed a law restricting where and how these contract-to-buy sellers operate. So their workaround, after consulting lots of lawyers, was to provide a standardized LLC / Contract flow such that you’re no longer marketing a house for sale. You’re marketing a stake in an LLC, only that LLC has a sole purpose (a contract to option out a specific house).
I didn't know about this use-case. But this is also what investors do with real estate in California because Prop 13 resets the taxable value on a real estate sales, but not on buying an LLC that holes the real estate.
Then expand the definition and scope to make it more painful to circumvent. Describe the structure such that it’s hard to not be able an individual non-investing homeowner.
Of course that’s unpopular to those who want to freely commit to bad practices.
Actually, not a bad policy idea. But it is not enough to solve the set of problems that arise when you take a basic human need (housing) and subject it to market forces--inexorably the ability to profit from the need drives costs higher than is affordable for some "market participants," leading to death.
Small investor ownership in single-family homes (for both short- and long-term rentals) have been devastating to communities. What is the right number of single-family homes to permit individuals/trusts to own and how do you disincentivize small empires?
Wall Street investor monopoly ownership of dense housing in urban areas remains a major cause of rents outstripping income (see Blackrock's 2020-2025 market takeover and subsequent market manipulation of apartment rental rates in San Diego). Simple policy solution: trust-bust apartment ownership. Harder, more effective policy solution: municipality ownership of apartment blocks a la European cities.
If regulators allow the same behaviors with water, you can expect a similar set of harms.
This will absolutely help. It’s easy for these institutional players to downplay their involvement with select stats, to play PR defense, but platforms like Zillow work with institutional funds to sell them an information advantage that means they are at the end of the market that does the most upward impact on pricing.
People don’t have a natural feel for how little you need to alter flow to cause liquidity in a system to collapse.
There are a few markets like Jacksonville and Atlanta where there is a lot of institutional ownership, but outside of those few cases impact of Blackrock et al on housing markets is effectively nil.
Zero chance this moves housing costs an iota. Most of those wall street owned houses are rentals. If they are forced to sell them, that is a net zero change to housing supply, because they are taking a rental unit off the market.
It's not going to solve the housing issue and is mostly for press (and it's not even getting into ulterior motives), but it might help with preventing a longer term issue of large investors becoming a major issue. Additionally, I wonder about the choice in properties as properties aren't fungible.
What counts as "Wall Street" here. Is it any investment property? After some threshold of owning many homes? If so, how many? 10? 10,000? Something else? Is it net worth? Maximum number of beneficial owners? You must title them in a natural person's name instead of a corporate entity? Your service address for your corporation is on wall street in NYC?
Which option is being proposed vastly changes the merits and problems of this policy, so it's a poor choice that this isn't made abundantly clear.
How is Wall Street defined? How would they enforce it? What is preventing a large corporation from registering a new company to buy every house? Also this is just a call to action, nothing written up in a law yet. We will see how it goes, if at all it's implemented.
It seems like the root cause is to increase the supply by all means possible. Ban NIMBY instead, support more building, both with already existing infrastructure and with creation of the new one.
The root cause for the low affordability seems to be that most people don't want to sell a house purchased at 3% interest and have to pay for a new one at 6%.
That and zoning restrictions too contribute for the lack of supply.
There was a huge affordability problem 4 years ago when the rates were 3% too, so that’s clearly not the “root cause”. In fact, at the time HN was filled with people blaming the “free money” 3% rates for the lack of affordability…
LOL, you live in California? The past affordability you are talking about was not universal.
There were plenty of people happily buying homes after moving out of CA to other states.
Anyhow, interest rates are the root cause now.
Who in their right mind would do the trade I've described?
In my area the zoning is ludicrous. Need to walk 4 blocks to visit my corner store. Tall skinny townhomes that nobody wants and go unsold for months are the only allowed high density option - with no stacked flats.
Even if this won’t work in practice it’s one of the things I’ve found myself agreeing more with than anything else done by the current White House/congress
They're also buying risk. It's just during the last 10 years buying a home has happened to be a fantastic investment, an easy way for an individual with the ability to get a 200k loan to turn that into 400k+ with 0 effort, especially during COVID. The market could crash and purchasing would become a risk for everyone but the wealthiest once again.
You've now reached the core of hacker news. Profiting from other people's need to have a place to live is actually great. Anybody against it is a racist and also a nazi. The real evil people are those who work and pay taxes and rent. The true heroes are the landlords. Now the dictator is trying to steal the profits from the landlord heroes. If you're a real hacker, you stand tall for the landlords and the corporate investors. Otherwise, we'll denounce you!
I don't actually know anything, but I've been wondering lately: is higher house prices simply a consequence of Baumol's cost disease? If so, then there is kinda nothing we can do about it, right?. Higher house prices is simply a consequence of improved productivity elsewhere, and thus it is necessary to spend a larger fraction of one's income on housing.
Higher house prices in the US are a consequence of literally every major US metro area having a shortage of housing (https://www.fanniemae.com/research-and-insights/perspectives...). There's no mystery here, just that a lot of people decided to shoot themselves in the foot starting in the 1970s by putting more and more zoning and permitting limits on new housing construction.
There's no bubble, there's a massive housing shortage. The only "peak" will be when prices are so high that even the rich can't pay any more, which point it'll just stay there.
One of rare instances I'll say it: make owning a second home a major tax liability and 0 takes breaks for building or ownership.
Not that because "we have a right to housing" or other catchphrases, but because getting rid of the government sponsored local monopolies is impossible.
Anyone want to bet that this will cause the Second Order effect of no more new single-family homes being built and instead move more and more future development into co-living dwellings.
Given this, it’s inevitable - the New American Dream will be communal living.
The actual headline is “Trump says he will ban Wall Street investments in single-family homes,” which is a more accurate description of what happened: one social media post by the president, asking Congress to do something. Nothing has actually changed yet.
Wow this is exciting. I tend liberal, but I think this sounds like a bad policy lol. My understanding of the existing research is that rent control tends to decreases the motivation to increase supply, and I think this should do the same
Yeah if investors are no longer buying from home developers then it'll definitely limit the demand, the price homes sell for, and the motivation to build new homes. I believe that metropolitan areas are the problem and my unpopular opinion is that people have to get used to the idea of moving to sparser areas for affordable housing.
More specifically, the current zoning of metropolitan areas is the problem. US cities have plenty of potential for more housing, they just won't allow it to be built.
The most absurd example is here in SF, where... okay, context. A recently-passed state law overriding local zoning means that there's a high-rise building project in the Marina district (https://sfyimby.com/2025/12/preliminary-permits-filed-for-fo...) that will almost certainly get built, despite people endlessly protesting it. It will add 790 apartments, 86 of which will be required to be affordable housing.
Before this, in 2024, there were 7 net housing units added for the entire year in the Marina District. No typo there, literally just 7, in the most expensive neighborhood in the city, in the most expensive city in the country.
This one building, only possible because the state overrode local zoning, will be adding by itself more than 100 years worth of new housing to the neighborhood. That's how fucked the approval process is.
There's a service called Arrived (I believe Jeff Bezos invested) that lets people buy fractional shares of single-family homes and earn a proportional share of the rent. If you sell, you're effectively selling your percentage of the property.
As a renter, I was drawn to this as a way to get some exposure to real estate, and I ended up investing in a vacation rental. At the same time, I'm pretty conflicted about it. Profiting from vacation housing feels different to me than profiting from people’s primary shelter, which is a basic necessity.
More broadly, I think as long as the incentives of property owners and renters are fundamentally misaligned, it will remain extremely difficult for middle-class folks who don't already own property to break into the market. The system optimizes for extracting rent, not for creating new owners.
> Profiting from vacation housing feels different to me than profiting from people’s primary shelter, which is a basic necessity.
If you believe that nobody should profit from providing housing, what do you propose as the incentives for people to build, capitalize, and maintain said housing?
That's fair, and I'm not claiming rent disappears, or that nobody should ever earn money from operating rental housing. Some people will always need or want to rent, and providing rental housing is real work that should be compensated.
The distinction I'm trying to draw is between operating housing as a service and owning housing primarily as a financial asset whose returns are driven by scarcity and leverage.
In a healthier system, the incentive to own rental property would look closer to running a utility or a hospitality business: you earn steady, relatively bounded returns for providing a well-run service (maintenance, risk, capital deployment, tenant experience), not outsized returns from appreciation and from pushing rents faster than incomes.
People would still buy rental properties to earn income, but the business case would be built more on operational efficiency and quality of service, and less on financial engineering, tax advantages, and asset inflation.
Practically, that can show up in a lot of forms that already exist in pieces today: regulated or capped-return rental models, co-ops and shared-equity housing, community land trusts, public-private development, developer-operator splits, or tax structures that favor building and selling over hoarding and rent maximization.
So I'm not saying "don’t make money on rent." I'm saying a system where most of the upside comes from perpetual control of a scarce necessity will naturally concentrate ownership and make entry harder and harder. A system where most of the upside comes from creating, improving, and operating housing can still support rentals while keeping the door open for new owners.
Even if this goes through without a mountain of loopholes and exceptions, I doubt it will have a significant impact. "Wall Street Investors" implies they're targeting large institutional ownership, which is only around 0.5% of housing ownership as cited in the article. That number is also flat-ish or maybe decreasing depending on the chart you look at, from what I recall.
Outside of a few metro areas where institutional ownership is very high, I don't think this would change anything. As long as houses remain an attractive investment, non-institutional smaller investors will happily buy the properties for a few thousand dollars less than the institutions would.
Anyone familiar with basic economics is pulling their hair out reading this, because there's one extremely obvious way to lower the price of building new housing: Reducing or eliminating tariffs on construction equipment and materials and ensuring a robust supply of low-cost labor.
I agree with the first half of what you posted, but immediately jumping to blaming tariffs in your last paragraph seems weak (and a slight attempt at a gotcha).
Concrete, gypsum and steel are primarily domestically produced. Similar goes for wood (although a substantial amount is imported, e.g. from Canada - the tariffs range from 25% to 50%). Labour & Materials may make up say 60% of the cost of a house, but only 50% of this is likely materials, with likely a minority of the materials tariffed.
What is likely to actually reduce rent and house prices is making development permission and laws more lax, as well as preventing rent control.
Tariffs on products like lumber and cabinetry were introduced or raise on January 1st of this year. It's an additional factor that will make a bad situation worse.
You can't tell me that increasing the pricing of construction materials won't have negative pressure on home construction.
> Materials may make up say 60% of the cost of a house, but only 50% of this is likely materials, with likely a minority of the materials tariffed.
And where does the construction equipment come from? The parts to repair that construction equipment? The parts that go into the trucks that the workers drive to the job site?
Focusing on a single input is myopic when the tariffs are so widespread that they touch everything.
I have agreed tariffs will have an effect, but I'm not being myopic.
Lot costs, builder profits, indirect labour (commissioning, financial and legal affairs, advertising) all are far less affected by tariffs. Machine costs could make up 15% of your "labour and material" cost but depreciation and repair purchases are still only 30% of this, with of course not all of this affected by tariffs.
It seems wholly reasonable to believe that the long term effects of a tariff policy like these on housing costs could indeed be in the ballpark of 5%, as I claim, because in fact housing development is less affected by this.
I'm not sure if you trust this for consensus, but you could try asking an AI to give an estimate of the long-term impact for you. Here's what Gemini 3 Pro said to "Estimate the increase Trump's current tariffs, if long term, would have on price of new housing developments."
> Total Home Price Impact: This translates to a roughly 3% to 4% increase in the final purchase price for the consumer.
> Anyone familiar with basic economics is pulling their hair out reading this, because there's one extremely obvious way to lower the price of building new housing: Reducing or eliminating tariffs on construction equipment and materials and ensuring a robust supply of low-cost labor.
And just in general reducing the restrictions on building in places with high rent to income ratios.
> because there's one extremely obvious way to lower the price of building new housing: Reducing or eliminating tariffs on construction equipment and materials and ensuring a robust supply of low-cost labor.
Oh I thought the one extremely obvious way was to fix local policy roadblocks. After all, it's not like a lacking supply of housing is a new issue they suddenly appeared out of nowhere within the last dozen months.
> After all, it's not like a lacking supply of housing is a new issue they suddenly appeared out of nowhere within the last dozen months.
The main lumber and building materials tariffs went into effect January 1st 2026.
If you thought the current situation was bad, it's only going to get worse.
This announcement is a distraction to get people blaming Wall Street. It's a "look over there!" announcement literally days after they raised tariffs to make a bad situation worse.
"President Donald Trump has delayed new tariff increases on upholstered furniture, kitchen cabinets, and vanities for a year, pushing their implementation to 2027, according to a White House statement."
Yeah, all the politicians talking housing— the actual net governmental effect on housing is to massively constrain supply (quantity) in service of rather arbitrary qualitative standards. I’m all for “the building shouldn’t spontaneously collapse” standards, but … two acre lots? Restrictions on casting shadows? Accessory dwelling units? Nah. If the government wants to make a difference it should ban Euclidian zoning as it currently is practiced, full stop.
These qualitative standards are subjective. Everyone has something that they deem essential and others not so much. A lot of zoning regulations is the amalgamation of preferences by different people, because they try to satisfy the aesthetic preferences of too many people.
For example in New York City go take a walk in the streets next to hundred-year-old skyscrapers in downtown. It’s miserable to me. Now go walk alongside midcentury skyscrapers in midtown. It’s much better. The difference is entirely because of shadows cast by the skyscrapers. The visceral reaction from shadows is so strong to me that I am wholeheartedly supporting restrictions on casting shadows.
Now on two-acre lots. That’s not something I care about. Even 0.1 acres of land is too much maintenance for me. But it will be non-negotiable for someone else.
At one end of the extreme unlimitedly cheap housing leads to slums, ghettos, and crime. Such housing is not worth building because it costs the city more in reputation and police force. Take a look at Kowloon walled city for an example of cheap construction without regulations.
So there has to be a line. Different people just draw the line differently. For me the issue on shadows is that these fancy buildings make the streets next to them dark and ghetto-like.
"We expect all states to expand housing supply by 2% per year. States which fail to meet this standard will pay $1000 per unbuilt house per year, as a subtraction from other federal funding. States may trade house building with other states to achieve this.".
Making this decision as a politician in this country is death to your career though; how could we incentivize our leaders to bite the hand that elects them?
If your local mayor decides to allow a tower block to be built next to your house, you might be pissed.
But if the president says 'we're gonna take away mayors powers to restrict housebuilding', you won't be pissed yet.... And when a builder comes along to build later it'll be too late.
The material costs are high too because of regulations that require specific lumber for framing etc.
It’s more complex than just reducing tariffs and inviting cheap labor. It’s systemic red tape put in by the large builders to prevent anyone but them to be able to build. When they do build, it’s never to code. The code they themselves help write. Ryan Homes for example…
> The material costs are high too because of regulations that require specific lumber for framing etc.
Having done some extensive remodeling and building work in recent years and going to great lengths to follow building codes, this just isn't it. The type of lumber you can use for most framing jobs isn't that special. Having walked through a number of new construction properties and seeing what passes code, I don't think relaxing lumber standards would be a good idea, nor buy us anything.
When lumber, cabinetry, and other building products have tariffs in the range of 10-50%, you can't tell me that tariffs are not the primary problem driving costs up right now. There just isn't a secret stash of lesser grade lumber lying around that would also be perfectly good for building homes.
Single and few number family residential and owner stuff gets all sorts of exemptions in just about every town's zoning code because if not the townsfolk would revolt.
This is why everyone on the internet screeches "well I put up a deck and it wasn't so hard". Try and do a new build of literally any structure and get back to me. Or worse, a construction type that is not the regional default for whatever it is you're doing.
Reality for new construction is way, way, way worse than homeowners think.
Unless you know a guy, in which case it's all open doors and green lights because that's how local politics always is.
> Unless you know a guy, in which case it's all open doors and green lights because that's how local politics always is.
LOL, in my city, which is the capital city of our state, the city planning committee and property developers are all friends. By which I don't mean "having a drink at a community event", I mean openly posting on social media about their families going on vacation together, "Loved our family spending the week at this airbnb with the X family! So many good times and memories!"
There was a vote about a measure to change up some tenant's rights in the city code (strengthening them).
It passed 12-1. One dissenter, a Mrs [can't remember] Greene.
Didn't think anything of it until someone pointed out "Oh, you mean [can't remember] Greene, wife of Jim Greene, owner and CEO of the second largest PM company in the County, Greene Property Management?"
"Someone should ask her whether she's representing her constituents or her husband and his clients."
It's so much easier than the renovation work I'm doing.
> Try and do a new build of literally any structure and get back to me. Or worse, a construction type that is not the regional default for whatever it is you're doing.
Please don't be so condescending. I'm talking about my experience with home building in a thread about building homes. I'm sorry you had a bad experience with whatever you were building, but we're talking about homes.
Old home renovations are expensive because of these stupid codes. You have to bring a house up to code in many cases which increases the costs. You’re right that home renovations are more costly.
For new homes it’s easier just to start “at code” and go from there. However, there are places that have strict building codes on the type of lumber you use for the roof, the frame, interior walls, exterior, etc. Lumber yards who sell this in bulk know this and charge a dozen percentages more for it.
For example, in Virginia, lumber has to be graded for use for certain applications. If you happen to mill your own boards, your SOL. You’ll never be to code. The only way is to grease an inspector.
This. They don't want the local septic man and the local roofer partnering up to GC a development of a dozen houses or even worse, an individual doing the bulk of the work of building anything, so they get it all saddled with requirements that amortize away nicely when vertically integrated but absolutely crush anyone else.
It’s a Ponzi scheme disguised as a monopoly. They’ll block everyone and just sit on the lots with a sign that says coming soon rather than let local contractors do the jobs.
Encouraging the creation of new housing is the way to go. One thought— what percentage of new home purchases are made by large investors and is it growing? This seems like the most important metric to look at rather than existing ownership.
Zoning laws are the number one obstacle to building housing. They need to be regulated into oblivion. Then we need to incentivize building dense housing.
The tariffs are a bit of a new phenomenon so I think that may be motivated reasoning. Construction productivity has also been stagnant for about 60 years. I think the most important factor is that housing prices, in the United States at least, are governed by how much a bank will lend. Very small but affordable houses will never be built because a bank will not finance a $10,000 loan over 30 years. In the same vein, it’s technically feasible for automobiles to be built for just a few thousand dollars, but, again, they will not finance $2500 over five years. So cars and houses are just built to the price point which will satisfy the lenders. You may not hate financialization nearly as much as it deserves.
> The tariffs are a bit of a new phenomenon so I think that may be motivated reasoning. Construction productivity has also been stagnant for about 60 years.
If construction was stagnant for 60 years, adding 10-50% tariffs on lumber and building materials would only make it worse. Not motivated reasoning, just basic economics.
The new tariffs went into effect January 1st, by the way. If you thought things were bad now, they're about to get worse.
This announcement is just another distraction. They want you mad at Wall St, not tariffs.
> In the same vein, it’s technically feasible for automobiles to be built for just a few thousand dollars,
No it's not.
If this was true you'd see it in some other countries. It's not happening anywhere in the world. Unless you redefine automobile to mean a tiny cart with a 5HP motor and some seats.
> If this was true you'd see it in some other countries
The closest thing you have are Japanese Kei cars - you can get a brand-new Suzuki Alto for $6,600 before sales tax, but it would not pass crash US safety standards, it's built for slow city streets of Japan and not highway driving.
Sure, these tariffs may further increase the house of prices (e.g. be relevant to 15% of the cost of the house, with tariffs ranging from 20% to 50% and sources of materials adjusting to these tariffs), but the say 4% future effect of these tariffs is likely less than the effect of zoning laws, other development restrictions, and rent freezing.
> governed by how much a bank will lend [...] Very small but affordable houses will never be built because a bank will not finance a $10,000 loan over 30 years.
Banks typically won't hold onto to your loan for 30 years. Mortgages in the US have been thoroughly fiscalized: your typical bank/mortgage lender bundles up a bunch of loans and sells them to another servicing party as soon as the ink dries on the closing documents. The specialized servicer package them, and offer them as securities to investors who in turn will get a monthly return based on aggregate mortgage installments.
All this to say: lending banks would be happy to finance thousands upon thousands of 5-digit mortgages, and sell those to securitization specialists.
New houses aren't built in existing neighborhoods because dense housing is unpopular, as is a distaste of having "poorer" people as neighbors. Static zoning, terrible transport networks and no funding for new public infrastructure tag-team to discourage new developments on undeveloped farmland.
Not sure about $10,000 houses (that would be pretty spartan, even Tiny Homes usually cost more than that), but the $2500 car thing being due to lenders is completely off base. The reason there are no $2500 cars is that it's impossible to make one and meet current US safety regulations. Once you meet all of those, then you're already well beyond $2500, but it's still a pretty crappy car. Might as well add a few extra creature comforts that most consumers demand (power locks, power windows, bluetooth/stereo, disc brakes, more than 100HP engine, etc.) and you're never going to be below ~$15K with current parts and labor pricing.
Those "few metro areas" are on the scale of 10s of millions of houses. Remember that the top 10 largest cities have a third of the US population in it.
>because there's one extremely obvious way to lower the price of building new housing:
Cheaper housing doesn't mean that institutions won't still try to buy it up.
It also seems like it might be important to determine what share of _new_ development is being created for investment. The share of existing homes being owned isn't as important.
There's also the 2nd order effect. The price of property might go down if there weren't investors with tons of money to spend on a property.
All housing is investment due to the way it's owned, regardless of who owns it. For most people, it's by far their biggest investment, resulting in extreme political activity.
We must confront that fact, or negate it, for example by taxing away the investment opportunity.
Investors buy housing to rent it out to others, that's the investment. People who own their own home implicitly pay themselves rent, by choosing to live in what they own versus renting instead.
Getting non-resident owners out of housing only means that renters have been banned from an area.
Isn't that circular reasoning? Charging rent means its an investment, but also just living in a home is "paying yourself". Is there any way to live on a property that isn't an investment (I suppose just staying there while the government owns it?).
No, as long as the housing is bought and sold and priced by the market it's always investment. Homeowners talk freely about how it's an investment, choose their own home for its investment properties.
It's not circular it just is, under our ownership scheme. Adding a 100% land value tax does remove the investment characteristic, though, as it removes the speculative aspect of land, and in fact drives the price of land to $0.
Anyone familiar with basic economics is pulling their hair out reading this, because there's one extremely obvious way to lower the price of building new housing: Reducing or eliminating tariffs on construction equipment and materials and ensuring a robust supply of low-cost labor.
That's quite an extreme political take.
A more humble basic economic theory question would be:
If you ban large institutional investors from buying homes, and then you ban small institutional investors from buying homes. And only owners directly can buy homes, no renting. Would that be good? Sure homes would be cheap, but very shortly after that the supply of new housing would drop dramatically, as there's no one to finance building homes, maybe the ultra rich will just invest in their own mansions or yachts?
Just very basic economics is the discussion here, not tariffs and china politics, but just a variant of the highschool/red-scare question of, "will anti-wealth laws have a positive effect on the economy"? in the past it was determined that no, and that you were a communist for suggesting it, but maybe there's a nuanced take like making a difference between some type of "institutional" investors and other types of investors?
We're in a weird timeline when pointing out that dramatic tax increases on the inputs to home building will increase the price of homes.
> A more humble basic economic theory question would be:
> If you ban large institutional investors from buying homes, and then you ban small institutional investors from buying homes. And only owners directly can buy homes, no renting. Would that be good?
There's nothing humble or basic about this question because it's so unrealistic that it could never possibly happen. Ban renting? What?
Why would you need institutions to finance building new homes? You think the cost of building a home is more than the cost of buying a home? (Obviously not.) Normal people have been building their own homes using their own money for thousands of years.
> You think the cost of building a home is more than the cost of buying a home? (Obviously not.)
Common misconception, I used to have this as well.
Building is more expensive than buying for 2 reasons:
1- People can build custom houses to their taste, they pay a premium for that.
2- House prices fluctuate, most of the time house prices are below maximums, it's only during brief periods of time that building houses is suddenly bottlenecked by capital.
Yes, there is an industry behind building houses.
Sure people can build homes themselves, that's cheaper than both buying a home, and building a commercial home, but for homes that are both a commoditized asset with general appeal and a house to live in, it's a different type of asset.
A house you build by yourself will never be worth much, but you'll live in it for sure. You can even spend a lot in improvements, but you end up with YOUR house, not with a resellable asset.
FWIW, building your house is quite independent of market conditions, so if that's your game you shouldn't care about the macroeconomics of industrial residential construction or tariffs on China's iron.
This is pretty far down in the list of consequences we should be thinking about but building more housing in desirable, coastal areas of the US will only serve to exacerbate the political and cultural divide between the two Americas.
I know we all hate on the electoral college, but it exists and it isn't going away anytime soon.
I'm not saying the answer is to force folks to move to "flyover country", but that's what you'd do if you wanted to avoid another presidential victory by a trump-like character.
Not sure. But I’ve been hearing of this being an issue from both progressives, leftists as well as conservatives and rightists. Maybe they’re all misinformed by their bubbles, but there seems to be some smoke…
It's a populist issue because it sounds vaguely correct and being angry at Wall Street is ever popular. That's also why this idea is being floated before the mid terms.
Left-populists and right-populists like to frame issues as being a conflict between the elites and the common man. Banning big banks from owning homes is a perfect example of this.
It's fine to ban big banks from buying homes and wont do damage to the nation, but don't expect it to solve the problem.
High housing prices are due to zoning-based supply restrictions. These are entrenched due to politically active NIMBY voters.
Actually fixing the housing crisis means addressing zoning, but that doesn't fit the elite vs common man narrative so gets ignored by the populists.
It's because of emotionally charged response. Leftists largely don't want corporations owning houses, because it's "impure" and capitalist. Rightists largely don't want renters to live in homes that used to be exclusionary on the basis of being able to buy a home. Though there's crossover on the reasons, of course.
Honestly, the argument on the other side seems like emotionally charged arguments due to TDS and not wanting to give Trump any credit.
It seems obvious to most people that institutional investors should not be allowed near single family homes and you would need quite a strong argument to persuade otherwise.
Which side is TDS and why? I've heard both of these opinions expressed quite freely over the past few years, without any association with Trump. However, most instances of TDS seem to not "derangement" but "normal human emotion to me."
> It seems obvious to most people that institutional investors should not be allowed near single family homes
What is obvious about this? They have always invested in single family homes. Can you provide a priniciple or rationale? If it's something other than renters or "corporations bad but I won't explain further" then I'd love to hear it!
I have no argument really in favor of corporate ownership, but I don't find the arguments against convincing in terms of helping normal people.
Rental housing is an important part of housing, and giving access to the schools in suburbs through rental opportunities seems good to me. The people I know who have rented a SFH in my area have had better experiences with corporate landlords than home-owning landlords because the home-owning landlords frequently evict their tenants so that a relative can move in, which is super disruptive. California allows homeowners to evict people with very little warning that way, without cause. Corporations can't do that and also follow the law better.
As far as investing: Every home owner treats it as their primary asset. Which is the only reason that corporations are getting in on the game: people living in their own homes have changed regulatory structures so much that it's rigged in favor of owners.
Single family homes owed by corporations are rented out to people to live in them, giving access to neighborhoods that were not accessible before.
If you think that's "economist inspired" well it's no more inspired than your statements!
You’d think he’d want his name on a bunch of homes. Similarly, some salesman on the golf course has surely already pitched his name on a bunch of homes. I bet there’s a reason he’s been uninterested for so long.
Investor owned housing is a bit of a sensationalist scapegoat. Publicly traded companies account for a tiny, tiny fraction of available single family homes in the US. And so long as the tax code doesn't change, it strongly favors private/individual homeowners, and corporations only account for the margins where housing appreciates so fast or rental incomes are disproportionate to asset values.
This is an easy thing for Trump to promise (after all, little family-owned real-estate developer operations like his would never be affected). But who owns the homes is not going to change the problem that Americans have underdeveloped housing supply by over a million homes.
regarding public reits focusing on blackrock misses the Vancouver Model dynamic which is absolutely happening in major us markets.
the issue isn't just yield-seeking corps, it's opaque shell companies (llc) using real estate as a store of value aka money laundering vehicle. vancouver showed how this decouples prices from local wages completely. the us has this exact vulnerability—anonymous delaware/wyoming llcs buying in cash, specifically in supply-constrained cities like ny or miami.
this only works because of zoning. if nimbys didn't artificially cap supply, housing would be a depreciating consumer good (like in Japan) rather than a deflation-proof asset class. zoning is what turns a house into a safe deposit box for offshore capital.
if the corporate transparency act that Trump vetoed is successful then I expect to see the real estate become US's top source of GDP like it is for Canada.
Yeah, this move is maybe a net positive, but will have a tiny impact on actual home prices. It is absolute red meat for the internet conspiracy machine though. Especially on the left.
I also have no idea what statutory authority he has to enforce this. Surely it requires Congress or at least the FTC chair. And if there's enough vested opposition it's going to be challenged in court pretty quickly.
the carve outs will be insane and defeat the whole point
absolutely, easily predictable
what should be a one page bill will have riders of insanity
they'll probably do it like they do with corporations having more than 15 employees, so every little business just has 15 people contracting out to the next business with 15 people etc., there will be a corporation for every 15 houses etc.
It needs to be illegal for anyone to buy a single-family home that already owns one, and who won't agree to live in it, full-time and exclusively for at least one year. They must also agree to sell it ONLY to someone who also accepts the same terms. The penalty should be a criminal fraud charge with minimum jailtime -and- a hefty penalty.
I guess they didn't link it because it changes the meaning of the article, his post reads more like he's going to discuss it and wants to do something about it.
Headline is very misleading. Reuters prefaces this with "Trump says" which is weaselly enough.
Quote from the article: "In a post on Truth Social, Trump said he was immediately taking steps to implement the ban which he would also call on Congress to codify in law."
The president can't do this. His EO will likely be some kind of statement of intent or request to the FTC to see what can be done. Really, this is an exhortation for Congress to do something. A bill has yet to be written.
This mentioning of 'Wall Street' with investors if typical for the kind of populist argument that is used to argue that banning investors from buying houses is a good thing.
What would this 'Wall Street' even mean? Would it mean that companies listed on the stock exchange are banned but privately owned companies not?
Anyhow, I argue that investors are positive for the the house market. They shouldn't be banned. Investors provide enough liquidity to the market so that the building companies have enough certainty to invest in large housing projects, because they know that their properties will be sold quickly.
If investors would be banned they would sell their houses eventually as well but it would take much longer.
Similarly, investors improve mobility and throughput. An individual putting his house for sale will find a buyer much faster when investors are in the buying market, who are willing to buy up a house when nobody else takes it and sell it for a better price later.
So: sellers sell faster, so they can move out and buy a new home faster as well: mobility in the house market increases.
my first reaction was that the counter in the top right seemed like a really low number, but i think i was interpreting it wrong - that's the number of rides in progress, not a cumulative counter for the day, right?
Corporations are people under the current SCOTUS interpretation. Which means they have the same rights under the US Constitution, so this should be struck down in no time in the courts. Another nothing burger likely to end up just manipulating the equity market and the derivative markets in the short term for large investors to capitalize.
Utilizing vacant properties is easier and cheaper than building new ones, by a massive margin. We should do both, but ignoring perfectly good homes in desirable locations being used by nobody is silly.
If the goal is to reduce the number of vacant homes, then why not create a tax on those specifically. Corporate owned homes and vacant homes are not the same thing at all.
The title change here is editorializing. It’s not a given that this will be implemented and the original title reflects that: “Trump threatens to ban Wall Street investments in single-family homes”.
I feel the numbers that show investment groups that own X number of homes is highly misleading. More than likely these investment groups form multiple companies when they buy up the homes. Likely state or regional. From there the larger parent company is invested. So I wonder if there are hundreds or thousands of "small" investment groups that are essentially a shell for a larger private equity group.
So my big worry is that the Trump admin will say they are going to only eliminate the most obvious cases and the problem will remain. The LLCs and shell corps, etc.
EDIT: Also it does not address the massive amount of housing stock that is foreign owned by people that don't even live in the country.
Seems reasonable to me, a very anti Trump individual. Now deliver.
And which of his buddies does this benefit?
I'm trying to think if there will be ramifications to this...
- Obviously forced divestment of all Wall St owned single family homes could impact housing prices which is both the point, but of course... also hurts many families borrowing power and net worth
- I guess that crash could potentially have people paying lots of money for homes that aren't worth that much anymore, which sounds pretty negative
- Of course... wow, would it be nice to be able to afford something in the city I love (which I doubt will be impacted by this)
Of course, no clear plan here. Just Trump saying something, why wasn't the "Trump says" part kept in the headline here?
> also hurts many families borrowing power and net worth
This is part of the crux, isn't it? It's a backbone of families' wealth and positioned as an investment. So there seems to be no winning: either choke off the young trying to buy or crack the nest egg of the old
See also: Bitcoin and the like (wild value fluctuations are the hallmark of a good currency)
> either choke off the young trying to buy or crack the nest egg of the old
The simple fact is, housing can either be affordable xor an investment[0].
Affordable means the prices are flat relative to inflation, which makes it a terrible investment. If it's a good investment, that means the price is going up faster than inflation, which quickly makes it unaffordable.
[0] I want to be clear that I'm referring to housing as an investment to mean buying a house purely for profit purposes, ie, to flip or to rent out. Buying a house to live in, rather than renting the house you live in, can be considered an "investment", but I mean to explicitly exclude that usage of "investment" in this comment.
A house bought for the purpose of renting out is a house that could have gone to someone who wanted to buy it. It creates upward pressure on housing prices.
I mean, I get it. There are some people that truly do want to rent a house because they know the living situation is temporary.
But we have a generation that was able to buy houses during an economic boom where you could buy a house with an entry-level job, and once that house was paid off, they started buying up houses with their extra money to rent out, and it was so lucrative that prices have skyrocketed and now people in their 20s can't buy houses without a decently lucrative job.
Obviously, there are many factors at work here, but buying or building houses with the intent to rent them out is certainly a contributor.
I just think about the fact that I bought my house in 2015 for about $340K, and it's now worth about $600K, an 80% climb in just 10 years, and I think that's absurd, not to mention a bad thing for society overall.
If what this article describes really does come to pass, it may still help.
Often, mom-and-pop landlords are happy to be making more than the mortgage rather than MBAs trying to extract every possible marginal cent. It's less of a faceless spreadsheet relationship.
I guess time will tell if it's anything more than blowing smoke.
Well, there's no explanation for how this will affect any currently owned properties. So maybe it won't do much of anything. And something important to understand about private equity owning homes, is that they tend to descend on specific geos where the supply allows buying in scale. If they are forced to divest, it very well could crash a few cities or towns. And given that the aforementioned supply was heavily bent towards distressed areas, the crash could be brutal.
It will likely have close to zero impact on high-demand areas.
It's mostly a made-up issue to begin with - so this would be a popular policy, easy to pass because there won't be much opposition, and it'll be easy to point to and say "We fixed that problem."
The R party has changed so radically that it's hardly recognizable any more. As a result, "not republican" is no longer a very meaningful description.
I think the most likely explanation is pretty simple. Whenever people are unhappy with their economic situation, at the ballot box they take it out on whoever is currently in power, logic be damned. Politicians know this.
Even if they do it's a little late at this point, plus I don't believe it, since Trump and most people in the admin are too friendly (borderline controlled) by the people who are friendly/control entities like Blackrock, it's either beneficial to them to stop the competition from doing it since they bought enough for now or there is a big gotcha in there.
I know how that paragraph reads, but the past couple of years have made me too cynical to trust anything they say they're going to do.
Hopefully this happens so people can stop blaming institutional investors for high home prices once this fails to work. Then maybe we can work on actually building homes.
Or it won't materially impact Blackstone's business because single-family homes are a tiny sideline for them and not where they make most of their money.
It was not immediately clear what legal authority Trump would draw upon to impose such a ban on the private market purchases of houses. Trump did not detail the policy, the form it would take or the legal changes he was seeking from Congress.
The White House did not immediately respond to a request for comment. The U.S. president was due to sign unspecified executive orders later on Wednesday.
Anyways, I thought that issues with Americans being able to afford things like housing was all a hoax made up by Democrats?
It's extremely likely that the president doesn't have that power. He can disallow corporations from buying houses on a whim? I don't think so. But PR goodness has already been coming his way from the policy if there is any.
Why is it as a soon as a politician announces they will start in the future to have a concept of a plan at tackling an issue, many people react as if it’s already done?
No actual implementation steps have been taken or explained. Will this happen before or after the health care plans are released? Before or after the still pending infrastructure bill?
“ Trump said he was immediately taking steps to implement the ban, which he would also call on Congress to codify in law. *It was not clear what steps he would take*”
Trump will get the boss call from Jamie Diamond or any of his other donors and quietly drop this, or sneak in a loophole big enough to walk an elephant through.
That's true, but to play devils advocate for a second, just because he says something doesn't make it wrong or bad. Banning Wall Street from buying single-family homes is a great thing that I completely support, and I don't really care which president makes it happen.
It also doesn't mean he can actually do it. There's no obvious mechanism by which this can be enforced without a law from Congress, and it's not entirely clear such a law would be Constitutional (they'd have to base it in the right of the federal government to regulate interstate commerce if they're going to base it in anything, which presupposes an interstate market for shelter, and there's a reasonable argument to be made that maybe that's not a thing; housing is a local concern, and home prices in Topeka don't impact me, a buyer in Boston, if I want to live in Boston).
The policy would be great! You aren't playing devil's advocate for what I said. I wasn't talking about the merits of the policy at all. Him saying it just doesn't have any connection to whether the policy will ever exist. The headline without that detail is wrongly implying certainly that isn't warranted.
What baffles me is why people still take it all seriously, we've had well over a decade to examine his patterns of behavior and the takeaway is that fully 99.999% of his utterances are worthless. In the rare case that his promises are turned into some shambling semblance of reality there's always plenty of warning; in the case of VZ and Maduro you had significant troop movements for months for example.
Unfortunately by treating his every utterance as requiring attention he gets what he wants, the media gets clicks, bloggers get clicks, and people get to use it as part of an eternal argument over "what comes next".
People here at least should be more adept at recognizing and responding to patterns.
It might help in the long term, as it can force cities to stop densifying. And as we all know by now, densification is the leading cause of unaffordability. The US has more houses than households, but people are forced by economic forces to move into denser and denser areas.
But short-term it'll hurt availability. One of the most common ways to enshittify cities is buying an SFH, demolishing it, and plopping a 3-4 apartment complex in its place.
This sounds backwards? Density means more units available, which should lower costs. Supply and demand. Rentals in a dense complex are cheaper than standalone rentals or duplexes, townhomes are cheaper than SFH, etc.
I don’t think cities should force density, but there’s no reason to go the other way either as long as growth is managed properly in terms of traffic, transit, and infrastructure.
i can see what they mean. Another way to think about it is like how adding a lane to a highway doesn't decrease traffic it increases it. There's no shortage of demand in densely populated areas otherwise they wouldn't be densely populated. Adding more units will be met with more demand like adding a lane to a highway is met with more cars on that highway. Fix it by making the area less dense and prices will drop like how the way to fix a busy highway is to decrease the cars on it and traffic will lighten up.
True, but typically this also means fewer jobs, local economic contraction, and eventually neighborhoods full of decaying empty properties as in Detroit. They did achieve lower density, as many abandoned homes were forcibly demolished. Housing is cheaper now too.
It seems much more realistic to freeze growth than reverse it. Even then, growth in surrounding areas or other factors can quickly make the area more desirable and expensive as in SF.
Nope. The ONLY way to get cheaper housing is by reducing the city population.
> Supply and demand.
Sigh. No. You assume that the demand is fixed. It's not. By building new housing, you _increase_ the demand. And always faster than you can satisfy it.
I just love this example:
Forbes 2016 - "Tokyo's Affordable Housing Strategy: Build, Build, Build", "The Great Urban Myth: 'Cities Can't Build Their Way To Affordable Housing'"
Reuters 2023 - "Surging Tokyo property prices squeeze out young professionals",
Not quite. But there ARE examples where the price growth was stopped by providing alternative options to the cycle of ever-densification.
A really good example is Copenhagen, the world's most liveable city. Its current population is still _less_ than during the 1970's peak: https://www.macrotrends.net/global-metrics/cities/20894/cope... The driver for the decrease was suburban migration, as cars became more accessible.
The US _itself_ is a great example. The suburban development created cheap housing for the rapidly growing population in 60-s.
Do you have more details on this 1 example, specifically the trends of city housing prices and demand? A quick search [0] seems to show city housing prices increasing, rather than decreasing.
Obviously housing built outside the city will be cheaper than within it, and that might work for people who are fine living just anywhere (like away from the city), but the hypothesis is that the prices within the city increase when more housing (denser housing) is added within the city, right?
It's just hard to imagine how replacing a 300-unit occupied building downtown with 4-8 single-family-homes would result in the SFHs being cheaper than a unit in the skyscraper was.
> Do you have more details on this 1 example, specifically the trends of city housing prices and demand?
I don't have all the information on Copenhagen yet. The stats from 1970-s are not available online, so I commissioned someone to get the data from the archives.
The available data basically shows that prices were stagnant during the 70-80-s and started rising in the 90-s.
> After all, building more housing in the city isn't mutually exclusive with building housing outside the city.
I think it is mutually exclusive, exactly because of the population growth (the lack thereof). Each dense apartment in a city core means one less house in a rural area somewhere.
Japan, that I gave as an example, has literally free houses that anyone can get for nothing but the government real estate transaction fees. Just 3-4 hours away from Tokyo.
Is there any evidence of this? The demand for living in the city (rather than outside of it) already exceeds the supply.
> Japan, that I gave as an example, has literally free houses that anyone can get for nothing but the government real estate transaction fees. Just 3-4 hours away from Tokyo
Yeah, but that isn't housing in the city, it's housing in a place that isn't the city. Even setting aside the cultural differences of Japan, where homes are rebuilt every couple decades, and even setting aside that it has a declining population: a place where people don't want to live will naturally have lower prices than a place where they do.
It kind of sounds like when you're talking about reducing the density of a city, you're actually referring to keeping the density of the city the same, and building SFHs in places that aren't the city (which actually increases the density of those non-city places). Is that what you mean? Or did Tokyo replace skyscrapers with SFHs? And were those SFHs within the city cheaper than a unit in the skyscrapers was?
> a place where people don't want to live will naturally have lower prices than a place where they do.
But that's not true, is it? Most people in the US want to live in suburban SFHs, yet they are often forced to live in apartments. But that's not a viable option for them because the jobs are only available in dense cities.
> It kind of sounds like when you're talking about reducing the density of a city, you're actually referring to keeping the density of the city the same, and building SFHs in places that aren't the city
Correct.
> which actually increases the density of those non-city places
And technically increases the housing price there from zero to some value, just as predicted :)
>> a place where people don't want to live will naturally have lower prices than a place where they do.
> But that's not true, is it?
It certainly is: look at the price of housing in New York City, then look at the price of housing in Newark, New Jersey. Many people want to live in the former, but must settle for the latter, due to lack of affordable NYC housing. Then look at the price of housing in Ainsworth, Nebraska: Even cheaper, because people want to live there even less.
Or look at your own example: People want to live in Tokyo more than they want to live 3-4 hours outside of Tokyo, hence the pricing for the latter is lower.
> Most people in the US want to live in suburban SFHs, yet they are often forced to live in apartments.
In my experience, most people in the US want lots of square footage within the city, and either settle for suburbia to get the square footage they want, or settle for less square footage to get the city living they want. This goes for both renters and buyers, and for both Single- and Multi-Family Housing.
How, then, would increasing the price of in-city housing (by reducing the supply, by replacing denser housing with less-dense housing) allow people to realize their big-city-big-living desires?
Alternatively, how would building housing hours and hours and hours outside the city (where pricing illustrates people don't want to live) allow people to realize their big-city-big-living desires?
> Many people want to live in the former, but must settle for the latter, due to lack of affordable NYC housing.
That's because they _have_ to work in NYC. Polls show that something like 80-85% of people in the US would prefer to live in suburbs.
> Then look at the price of housing in say, Cheyenne, Wyoming: Even cheaper, because people want to live there even less.
Well, yes. Land is not scarce in Cheyenne, so housing is cheap. But people don't flock there because they don't have any job prospects in WY. See my notes about remote work.
> Or look at your own example: People want to live in Tokyo more than they want to live 3-4 hours outside of Tokyo, hence the pricing for the latter is lower.
How about: "People HAVE to live in Tokyo, because there are no job prospects outside of Tokyo"?
> In my experience, most people in the US want lots of square footage within the city, and either settle for suburbia to get the square footage they want, or settle for less square footage to get the city living they want. This goes for both renters and buyers.
Well, sure. I would love to live in a mansion with a private lake, in the middle of Union Square.
> How, then, would increasing the price of in-city housing (by reducing the supply, by replacing denser housing with less-dense housing) allow them to realize their big-city-big-living desires?
You assume that people _want_ to live in big cities. People want to have access to big city amenities, but not necessarily live there all the time.
That's why suburbs are such a desirable place. Think about this: what if you live 1 hour away from the city core? This still allows you to easily enjoy all the amenities like theaters and shows. Or to periodically go to your favorite ethnic restaraunt. But it's _way_ too far for daily commutes so it's impractical.
> Land is not scarce in Cheyenne, so housing is cheap. But people don't flock there because they don't have any job prospects in WY
> How about: "People HAVE to live in Tokyo, because there are no job prospects outside of Tokyo"?
How about: people don't want to be located 3+ hours outside the city, and neither do many employers? Being fully-employed in the middle of nowhere is still pretty undesirable. This is borne out in housing prices: the people buying houses in Cheyenne are likely just as employed as the people buying houses in Newark or NYC, and yet the market rate for the former is still much lower.
> That's because they _have_ to work in NYC.
Or, because they want to live in NYC: socialization and meetups and camaraderie around every conceivable interest, innumerable dining options within a matter of blocks, some of the best live entertainment options in the world, friends within walking distance, etc. Case in point:
> I would love to live in a mansion with a private lake, in the middle of Union Square.
The reason you can't have that is the cost, which we're talking about ways to decrease.
> That's why suburbs are such a desirable place
The suburbs are desirable in that they are cheaper: that mansion with a private lake would be cheaper in the suburbs than in the city, so some people choose to settle for the suburbs, while others choose to settle for a less-nice place in the city.
> what if you live 1 hour away from the city core? This still allows you to easily enjoy all the amenities like theaters and shows.
1 hour each-way of driving is a lot, and by then you're usually in a different city. 3-4 hours puts you in a different state, and in some places, it puts you in an entirely different country!
> socialization and meetups and camaraderie around every conceivable interest, innumerable dining options within a matter of blocks, some of the best live entertainment options in the world, friends within walking distance, etc. Case in point
Well, sure. Everything has trade-offs and people decide which ones are more acceptable for them. When given a choice, I moved out of dense areas. Because I don't actually care about drinking every day, and all other activities are not materially affected by having a 1-hour commute to the downtown.
> 1 hour each-way of driving is a lot, and by then you're usually in a different city. 3-4 hours puts you in a different state, and in some places, it puts you in an entirely different country!
Sure. But we're talking about the US in particular.
Well technically that’s true, in the same sense that the only way to roll back inflation is demand destruction (and an extended recession or depression).
The problem with this is that you can’t forcibly reduce population. Halting growth in one area just displaces it. This can be a good trade if the area into which growth is displaced is underdeveloped with few other potential uses. But it can also create Atlanta or Houston style sprawl, or destroy natural areas that would be better to preserve.
Japan is an unusual example because most job opportunities are in a handful of areas. You can get impossibly cheap properties in the countryside but there are few jobs or young people. Properties in the city keep getting more expensive because of demand and because building codes are constantly evolving to keep up with new developments in earthquake protection. There are older urban properties available for cheap outside of trendy areas, but the cost of renovation is often too high to be worth it. There’s also a cultural stigma around older properties.
> The problem with this is that you can’t forcibly reduce population.
We don't need to. The population growth in the Western world is mostly over, the US will likely peak at barely +10% to the current population numbers. Europe is likely already at or near the peak number.
And Tokyo managed to get a bubble within a country with a _falling_ population. Not just stagnant like in Europe, but actually numerically decreasing.
> Halting growth in one area just displaces it.
That's EXACTLY what we need. The US already has 1.1 houses per household, except that they are not where the demand is.
So the fix is to shift the demand, not try to satisfy it. Ironically, this is exactly the same method that urbanists propose to fight congestion: instead of just adding more lanes to busy roads, you shift people to other modes of transportation.
How can this be done? Exactly like we did it with pollution: tax negative externalities, incentivize clean technology. For cities: tax dense office space (cap-and-trade can also work), incentivize work-from-home, incentivize offices in less dense cities, etc.
Interesting theory, although I don’t know if US based remote work will continue to be as common as it is now. The policies you suggest also seem difficult politically since most environmentalists seem to want more density, not less.
If the combination of AI, declining returns on service and knowledge-based work, and national security priorities create a resurgence in manufacturing then factory towns may make a comeback.
> Interesting theory, although I don’t know if US based remote work will continue to be as common as it is now.
During the pandemic, some research had shown that something like 70-80% of jobs can be remote.
The kicker is that remote work is less efficient. So in the long run and on average, companies with in-office jobs outperform fully remote companies. This is just like the situation with pollution: a company that spends money on waste recovery is less competitive than a company that can just dump toxic sludge into a nearby river.
And just like with pollution, centralized regulatory changes are needed so that all companies are affected similarly.
> The policies you suggest also seem difficult politically since most environmentalists seem to want more density, not less.
Yet they are misguided because they keep looking at the very tip of an iceberg. It's just one example out of many (see: nuclear power plants).
To give an example, light rail is more efficient than individual EVs. So it's great that Seattle is building light rail, right? It'll result in fewer "headline" CO2 emissions.
But then you realize that Seattle is going to spend $180B ("B", as in "billion") to build about 50 miles of tracks. It's more than the yearly GDP of 130 countries! All these resources could have been spent on something else, perhaps on building more renewable generation.
> But then you realize that Seattle is going to spend $180B ("B", as in "billion") to build about 50 miles of tracks.
Well yes, but that's not at all something intrinsic to the process, it's just a dysfunction that Seattle is suffering — along with most of the rest of North America.
In 2002, Toronto paid less than $1b to build the 5.5km of https://en.wikipedia.org/wiki/Line_4_Sheppard , which is fully underground subway running on a custom gauge for historical reasons.
Last year, we finished https://en.wikipedia.org/wiki/Line_6_Finch_West , which is light rail running at-grade on standard gauge. It's not even twice as long but cost 3.6x as much. For light rail. And it's apparently running well below design speed and at least initially with terrible signal priority.
Currently we are building https://en.wikipedia.org/wiki/Line_5_Eglinton, just over five times as long. It's light rail at a combination of underground, at grade and elevated; current projected total cost is $17.5b. So, three and a half times as much per unit distance, for what is supposed to be a considerably less expensive option.
Prices for other things have not gone so crazy in that time frame. But yeah, it isn't costing us anywhere near 3.6b USD/mile (about 3.1b CAD/km) for light rail. Yet.
This is a problem with cities. All new infrastructure is extremely expensive because of the planning overhead and because of labor costs.
Not just light rail, but even regular water and sewer. San Francisco spent half a decade repaving a few blocks (Van Ness bus rapid transit) because they had to slowly dig through unmapped ancient infrastructure.
Even in the case of Toronto, you're looking at amounts that can buy each incremental rider a new house. In case of Seattle, each household is going to pay around $150k for that rail.
I am curious how this intersects with a land value tax. Many LVT proponents try to draw in urbanists by noting its effect on density (LVT should economically increase density). But looking into it a little bit it sounds like that effect may be stronger in dense urban areas, with lower density areas less affected. I was curious because an LVT would likely also help undo distortion in the property market. Perhaps the two ideas are comparable after all; policies to encourage lower density wouldn’t necessarily be undone by an LVT.
In the real world, though, a Georgist style LVT probably has about as much chance to be enacted as any of these other policies. Unfortunately I think we’re going to run the current system into the ground.
> I am curious how this intersects with a land value tax.
I have not run the numbers, but intuitively it seems that this tax will kill the SFH long before it starts affecting the dense office space.
> In the real world, though, a Georgist style LVT probably has about as much chance to be enacted as any of these other policies. Unfortunately I think we’re going to run the current system into the ground.
I think there is a real chance, there is this current of massive dissatisfaction. People _feel_ that something is just not right with the current situation. With the populists proposing the usual easy solutions: "it's all immigrants, ICE them out" or "it's all fault of the end stage capitalism, we need socialized grocery stores".
It's a simple observation. No large city in the US or Europe reduced the housing prices by increasing density. I gave an example of Tokyo in the other comment in this thread as an absolutely illustrative case.
The only price decreases happened only during the 2008 crisis and during the pandemic lockdowns, due to local population decreasing.
There is a conservative case for this in that the 30 year fixed mortgage, combined with all of the foreclosure protections both old and new, amount to a government benefits program. Historically, this type of mortgage was developed to promote family homeownership. The mortgage systems have continually blown up in "crises" in part because it's a product of policy more than it is a market product. This is partly why investors both corporate and small flipper types actually do cause serious distortions: the US housing market is a welfare program first and a market for bundled land and houses second.
No one wants to abolish this welfare program (you would have an easier time abolishing Social Security), but also the government wants to keep the trappings of a market price system. It is easier to have serial crises and to blame some guys for the predictable explosions every time, adjust the laws to create enormous numbers of lawyer billable hours nationwide, and then set the stage for the next crisis and the next round of patsies to be blamed. Fortunately, this time we have AI to write all the think pieces about what it really means.
I mostly agree with your comment except the part where flipper types and corps cause distortion because they have 30-year mortgages at their disposal. A fixed rate, 30-year is distortionary on its own; it's a uniquely American "product" and banks in other countries would look at you crazy for requesting such a thing.
People want the value of their house to go up after they buy it, but stay low before they buy it. This is all nonsense. If people in an area keep breeding, housing costs will go up. It's that simple. Increasing housing prices are actually one of the only checks that keep humans from overbreeding and ruining large swaths of desirable places to live.
Individual owners drive far more NIMBY policy than corporations. The rent of land exclusivity should accrue to the public rather than to private individuals or corporations.
This is not surprising at all. I'm not sure why people keep making this mistake thinking that good 'ol Republicans are flipping their script all of a sudden. MAGA is a populist movement and has a lot in common with the far left types.
This is another non-solution from Trump. Similar to the "no taxes on tips" nonsense that applies to almost no one since the cap is so high. It's a populist move that doesn't address the problem but appears to be a good thing for working class people at first sight.
Yet again the Trump admin identifies an issue but misses the nuance. We want investors to encourage more homebuilding, the problem is more regional concentration - in regions where PE owns a big enough % of the homes that they can monopolize and control the rents. Or NIMBY policies (where the federal government could dock funding to states that don't build to match population growth).
They should go all out and nationalize zoning. Let it be challenged all the way to Supreme Court. Trumps developer buddies get paid, the grift continues and the housing crisis is eliminated.
So there are (at least) six important aspects to the housing crisis.
1. Politically, this issue is a winner and it's crazy that the Democratic Party has refused to bang the drum on this, basically because it potentially upsets corporate donors. They have instead ceded this poopulist political ground to the Republican Party. The Democratic Party does not want to win elections and this should never have been more obvious than the 2024 presidential election;
2. Hoarding housing is state-sanctioned violence. You need housing to live. Housing affordability is the number one factor in homelessness [1]. That then subjects people to violence and danger that we, as a society, are allowing to happen. There is no reason that the wealthiest country on Earth can't provide a roof over the head of every man, woman and child within our borders;
3. The private sector will never solve the housing crisis because solving the housing crisis involves devaluing, definancializing and decommodifying housing. Wealthy people and large corporations who own a lot of real estate won't on their devalue their holdings. Things like Ezra Klein's Abundance claptrap are simply putting a Democratic bow on Reagan era trickle down economics and deregulation. This requires state action. That means the state needs to build significant amounts of housing to provide to people to regulate the housing market. The poster child for this policy is Vienna, Austria;
4. Voters have fooled themselves into thinking that increasing house prices are good for them. They're not. They're bad in virtually every way. There are people who bought a house for $100k in 1990 where that house is now worth $2M. Are you $1.9M richer? No. Because if you sell it what happens? You have to buy another house. And if every other equivalent house costs $2M you still only own one housing unit's worth of wealth;
5. Increasing house prices are simply stealing from the next generation and suppressing wages. Why suppressing wages? Because if you're laden with debt, you'll be a complaint little worker bee. You need that paycheck to not be homeless. You are in effect a debt-slave, particularly combined with student and possibly medical debt; and
6. The next wave of antitrust action will involve the use of AI as a means for market collusion and manipulation. A great and relevant example is RealPage [2]. If all the landlords use the same software and that software is designed to algorithmically increase rents, then that's market collusion. Honestly, dynamic pricing in general needs to be banned.
> There are people who bought a house for $100k in 1990 where that house is now worth $2M. Are you $1.9M richer? No.
This is often repeated but not 100% correct.
You are in fact richer, and you can leverage this $2m in equity to take on debt and buy more houses. This is what has been happening here in Australia, and it's a major factor in the continued rise in prices.
When you've done this, hung on a handful of years and all of your houses have gone up 20-50%, you can cash out for a very nice sum indeed. AFAICT this is now a pretty mainstream middle-class retirement plan in this country, and it's terrible because, as you point out -
> Increasing house prices are simply stealing from the next generation
The money is coming from people, usually younger people, who are funding the insane market with ever larger mortgages and staying in rental properties longer, both of which benefit the equity-holder.
In the US you can often buy houses with no money down.
Also, if you're taking the equity out of your $2M house, how are you servicing that debt?
My point is that it's an awful lot easier to buy 6 $100k houses than it is to buy 6 $2M houses and if houses weren't speculative assets, maybe we wouldn't get those buyers driving up prices.
> In the US you can often buy houses with no money down.
Presumably you can't just walk up to a bank and say "I'd like finance to buy 10 houses please!" with no collateral beyond the houses you're purchasing?
Here you usually need a 10% deposit. If you already own a house you can borrow against equity. The bank considers multiple houses as a single portfolio to calculate loan to value ratio (LVR), and will take tenants rents into account on affordability. A quick worked example based on local figures (average first home price $700k, average home price $1m):
New market entrant looking for a $700k house: Needs $70k in cash for deposit plus $28k stamp duty, takes $630k loan and now has a 90% LVR and 70k equity.
Existing homeowner with $1m house, bought at $300k some years ago and now has $100k left on their mortgage: Has $900k equity. Takes an interest-only loan against equity for the full $728k on the same 700k house. Total property worth $1.7m, 48% LVR qualifying for a lower interest rate and paying much less per month as they have taken the loan interest-only. Didn't have to save up a single cent to cover deposit or stamp duty. Still has $872k in equity on the two properties so does it again three more times. Buys a total of four investment properties, still comes in under 80% LVR.
If the market goes up another 25%, the new entrant is sitting on $245k equity.
The landlord's IPs are now worth 3.5 million on total debts of 3 million, at which point they can sell four houses, clear all their debts including their original mortgage and pocket $500k (and while capital gains tax is chargeable on sale of investment properties, it's heavily discounted compared to other assets). Or they can use this new equity to buy more houses.
> if you're taking the equity out of your $2M house, how are you servicing that debt?
Rent. There's also a rental crisis going on over here. Rents are really high and can pretty easily cover investor mortgages. There's lots of people who would have been able to buy few years back but can't scrape together the finance to do so now that prices have gone up, who are forced to keep renting. So the investor crush creates its own client base!
Plus if you do end up making a loss on mortgage payments, property upkeep etc, the government allows you to offset that against your all-sources income for tax purposes, potentially reducing that loss by 45% if you're a higher rate earner.
> My point is that it's an awful lot easier to buy 6 $100k houses than it is to buy 6 $2M houses, if houses weren't speculative assets, maybe we wouldn't get those buyers driving up prices.
It kinda isn't in Australia. The market rising makes it much easier to access more debt and leverage that into more houses.
But I very much agree that housing shouldn't be a speculative asset and this market is broken. The government should be putting in place disincentives, not discounts and offsets. Unfortunately established homeowners now see this as a normal way of 'getting ahead' and I know multiple people who are effectively playing monopoly like this.
I hate it. Even though in theory I could go out and buy four or five houses next week if I wanted to. But with the rising cost of living and general bleak economic outlook everyone is continually fed, and the seeming impossibility of 'winning' for the average person, I'm not surprised people do it.
Until congress actually does something all of this is simply hot air. I do not see how this could be implemented (other than some kind of tax) and pass muster with a conservative SCOTUS.
Like so many other big promises, it will appease a lot of people, but there will be no real follow through.
Any regulation that prevents unrestrained capitalism is immediately decried as socialism and therefore evil.
These kinds of promises are made which temporarily create market volatility, and once it later (usually quite soon) becomes clear that the big thing will not actually happen, the markets snap back. At this point, it’s incredibly likely that these situations are manufactured to both look good AND create large short term investment gains for people in the know - without actually changing anything.
There will be no way to enforce this such that “Wall Street” can’t easily get around it, so it is clearly for show and not an actual attempt to solve a problem.
This is a good thing, the next step however is to block the guys that use sites like BiggerPockets.com from buying up more then 5 single family homes. I know a whole bunch of guys who own 10 or more houses. That is excessive. We need to limit all investment of single family housing. Apartment complexes? Be my guest buy all you want, build all you want. But lets keep our neighborhoods full of people who can actually live in them.
The key word here is "Wall Street". And this statement is playing off a popular misconception around corporate investors buying up American houses.
There has been a bit of a panic around "Investors buying up all the property!!!" With people often citing Black Rock and Blackstone as the main culprits. But most of the "investors" buying up property are individuals purchasing investment properties.
Here's an article on the topic from 2023[0], a bit old but my understanding is large institutional investment in residential real estate was already starting to cool down.
Black rock isn't buying up all the housing, your neighbors are.
I suspect this statement, and even if it becomes an actual ban, is largely to gain wider popular support around a largely imaginary concern people have.
0. https://www.housingwire.com/articles/no-wall-street-investor...
It's not that simple - the problem is that those institutions are market makers. They are a tiny portion of the market, but a huge driving force in setting and manipulating prices, because their properties get leveraged, instrumentalized, and securitized, with derivative products, speculation, and all sorts of incentives that you don't normally want operating in the arena of housing.
The things that they do have massively outsized downstream impact contrasted against their relatively tiny overall participation in the market, and they can afford to behave in ways that manipulate the behavior of the majority.
If you can decouple them from the housing markets, you also decouple the interests of the donor class, and you allow for policy that doesn't maximize the cost of real estate over the interests of the majority of the population.
> They are a tiny portion of the market, but a huge driving force in setting and manipulating prices, because their properties get leveraged, instrumentalized, and securitized, with derivative products, speculation, and all sorts of incentives that you don't normally want operating in the arena of housing.
Raising prices when you only have a tiny portion of the market does not work. People won't buy them when there's another house for less.
It's not just raising prices - it's holding prices steady at some point without the concurrent pressure to sell, for example, or manipulating other markets in order to raise or lower prices in an area, or using other mechanics to manipulate pricing, across the entire market, depending on the intended actions. If they intend to purchase properties, it benefits them to depress pricing in the area, if they intend to rent, they can afford to impose artificial scarcity until they force renters to meet their rates, and so on.
Normal landlords don't have effectively infinite money with no forces bearing prices down, nor do they have the capabilities to influence markets. Even tiny percentage shifts can result in significant fluctuations in the prices consumers see. It's a very nuanced and complex system in which these institutional investors have very outsized influence.
You're telling a just-so story, and you can tell because there isn't a simple schematic 1-2-3 story you can make from this about how these people exert control over home prices. Words mean things; wielding scarcity requires you to control enough inventory to manipulate scarcity, and REITs and corporate buyers empirically don't.
I get why people like telling stories like this: it suggests there's a single boogeyman that can be dispelled to solve the affordability problem without painstakingly goring people's oxes state-by-state and municipality-by-municipality. But it's a fantasy.
If you can tell this story in simple step-by-step form, you will. I think you could tell a story about how a large corporate buyer clears out all the marginal buyers for some thin market like an individual subdivision or tranche of new construction housing in the Sun Belt. But I don't think you can tell a realistic story for them being "a huge driving force in setting and manipulating prices" across the whole market. I look forward to seeing your attempt, though.
you’re treating narrative completeness as a prerequisite for legitimacy. that makes any systemic issue unfalsifiable unless someone can account for every market, municipality, and incentive simultaneously.
this is an impossible burden of proof. requiring a perfectly schematic, end-to-end causal story before acknowledging harm is a convenient way to dismiss any structural concern.
pointing out that housing markets are complex doesn’t invalidate localized, repeatable effects or concentrated power. that just raises the bar of explanation until lived outcomes are dismissed as “just-so stories”, which matches the tone of your condescension.
I'm treating narrative coherence as a requirement, not completeness.
If narrative coherence is your expectation the only satisfactory resolution is not dig into and normalize the contractual minutiae of the legacy finance system but flush the finance industry and the politically coddled mess it created.
There is no narrative coherence to be found demanding the living honor social debts, contracts of history; yes children believe these successes you never witnessed happened! That surely cannot be used for ill gains.
This smells more like self selection bias. You have been successful and thus prefer care be taken tidying up systemic issues created by our ledger.
Am a Thomas Jefferson fan when it comes to generational churn; the only constant political rule should be to rewrite things every couple decades or the living end up ruled by fiat decree of the dead.
These are words. "normalize the contractual minutiae of the legacy finance system"? Is there a forum where that persuades?
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It's what you appear to be doing. I don't really understand what your issue is with that specifically
im not even disagreeing with you, but i hate that hn seems to have this penchant to point out that unreasonable assertions may still be true despite being ludicrous. can facts emerge from a hypocrite? yes of course, but prices are not affected by buying and holding a tiny supply, so given that reasonable axiom, it is reasonable to demand more comprehensive evidence.
> but i hate that hn seems to have this penchant to point out that unreasonable assertions may still be true despite being ludicrous
Topics like this are hard on HN because a lot of commenters hold a deep, passionate hatred of something: Wall Street, Big Tech, OSes they don't use, even the concept of private automobile ownership. Once they descend upon a thread they're not interested in facts, they just want to tell stories that support their villain narratives. When it starts to get illogical they don't want to back down because doing so feels like an attack on their deep-seated beliefs.
There are some completely illogical economic theories being pushed all through this comment section. It's kind of fascinating to see how bad some of them are. Someone tried to argue with me that cars could be produced for a couple thousand dollars if not for all the regulatory overhead we impose on them in the US. It's almost hard to fathom how someone could believe that without stopping for a moment to wonder why no other country is building these $2000 full featured automobiles without these supposed regulations that increase the price by an order of magnitude.
The tata nano is an example of a low-featured car that sold in India for the equivalent of $2500 in 2008 dollars. You can make a car for pretty cheap if you strip down a lot of the hardware. I think one of the reasons new cars are designed/priced the way they are in the US is that the more frugal buyers always end up buying a used car anyway, so the manufacturers don't target the low end of the market.
I agree with your broader point though.
I checked the Wikipedia page. It said there was a $2000 promotional price at launch but only a few people got it.
The real price in 2017 was $3400, which is $4500 in today's dollars.
The safety ratings and crash test results were also dire.
I don’t think it’s an unreasonable assertion in the first place. Just because they are holding a small portion of all houses doesn’t meant they can’t have a huge effect. The primary reason being that the portion of houses on sale is small as well. Another reason being they are huge institutions with tons of money, and thus can hold houses longer, buy houses are higher prices, influence related markets, etc.
> Just because they are holding a small portion of all houses doesn’t meant they can’t have a huge effect.
There's no reason to believe that someone owning a tiny portion of the houses is setting the market price.
> they are huge institutions with tons of money, and thus can hold houses longer, buy houses are higher prices, influence related markets, etc.
No huge institution is willing to lose enormous sums of money waiting for vacant overpriced houses to sell.
I've lived in many houses. One was in a development, and I wanted to sell it. There were several houses in it that were vacant and for sale with no offers in the previous year. I sold mine in 3 weeks. It was simple - I priced it properly, and I didn't have to pay another year of taxes, insurance, repairs, maintenance, and worry, only to have to lower the price anyway to get rid of it. A couple of the other homeowners were angry with me about that, but that was their problem.
There is reason to believe that someone owning a tiny portion of the houses is setting the market price because that tiny portion is a significant portion of the houses on sale.
Before we even reach the question of how true that is, there isn't evidence that any firm holds a significant portion of the "houses on sale". A starting point here would be the fact that corporate investors buy houses and hold on to them, and thus definitionally don't hold any of the house on sale, but whatever, either way, just flesh the story out instead of handwaving it.
if we start with reasonable but definitely vague numbers that suggest 2M houses are for sale and institutional investors own 500k of the total stock, it suggests this is NOT true; it's unlikely they own all their houses in the same geo market and they're all for sale at the same time. This doesn't mesh with a business strategy (diversification) or the typical model (they rent houses; they don't flip them).
Doesn’t rent have a constant influence on house prices? Along with the data science based rent prices they demand, that implies a constant upward influence on rent and consequently house prices.
Also these institutions would be buying houses in high demand areas.
> It was simple - I priced it properly, and I didn't have to pay another year of taxes, insurance, repairs, maintenance, and worry, only to have to lower the price anyway to get rid of it. A couple of the other homeowners were angry with me about that, but that was their problem.
I think you just explained partly the reason behind why a small number of owners can drive the prices up. But these are usually private owners. Whenever I see bank sales, they're more like flash sale and done.
Those who can afford to sit on the property trying to obtain a higher price will do it. Other owners will look at that and try to keep the price high with the illusory hope that they can also make that much money. Individual owners can suffer from FOMO and are influenced by success stories, so ask a high price hoping to capture as much of the value as possible.
I saw it in action when I bought my house. The seller saw his neighbor selling the house a year earlier for [princely sum] so he jumped to put his house on the market for [princely sum +20%]. The whole neighborhood was following the same playbook, looking at who sold and raising the bar. After a year with that house on the market I became interested and in a 6 month process I ended up buying the house for [princely sum -20%].
None of the neighbors know how much he got, only know how much he asked. A similar house 50m away is still up for sale for even higher price than than the listed price for mine. They can afford to sit on it for a while because the extra money they hope for covers the taxes and upkeep tenfold or more.
"None of the neighbors know how much he got, only know how much he asked. A similar house 50m away is still up for sale for even higher price than than the listed price for mine. They can afford to sit on it for a while because the extra money they hope for covers the taxes and upkeep tenfold or more."
At least where I live, real estate sales are public and you can easily find the sale price at the county assessor's website.
You can go on sites like Zillow and see what homes sold for. It doesn’t even require navigating a potentially obscure county web site.
> Those who can afford to sit on the property trying to obtain a higher price will do it
I could afford to sit on it, but I try not to be stupid with investments.
You're either generalizing or just making a mistake stating so definitively that sitting on an asset means being stupid with investments. You know your house and situation but that's far from representative. Sitting on it might turn out to be the stupidest or the smartest decision you can make. If you take the hard stance that it can only mean one thing, you're just being stupid with investments in all the "other" cases.
I am surrounded by people who sat on houses for a decade only to triple their money after inflation adjustment when they sold. We're talking 7 figure profits. Trying to sound smarter than everyone else sometimes backfires.
this is not true, this is the basis for housing speculation. Holding vacant overpriced houses until they sell. Its not a loss until you close the sale.
Of course it is. Real estate incurs significant carry costs.
this doesn't make any sense; you're tying up significant resources and losing out an the alternatives. Nobody evaluates investment returns in isolation.
the numbers I have seen suggest that institutional investors own about 500k of the ~100M residential properties in the US. Small investors probably own about 15M in total. Roughly 2M units are for sale, so even if every single institution-owned unit was for sale they wouldn't be able to exert much influence. The fact that this is a big, complex and widely distributed market IS the reason they can't distort it like they do with specific industries in a given geography.
Ownership share is a stock. Prices get set by flow - transactions. Housing is a thin market; maybe 5-6% of homes change hands in a given year. Price discovery happens at that transaction layer.
Institutional investors own ~3% of single-family rentals nationally. But per CoreLogic they're 29% of purchases in the starter home tier. That's the market where we first-time buyers actually compete.
In some metros it's more concentrated.
Atlanta: ~30% of single-family rentals corporate-owned.
Charlotte neighborhoods in 2022: 50%!!! of sales to institutional buyers.
So for your 1-2-3... maybe something like?
1. Institutional buyers concentrate in starter homes where they're 29% of transactions, not 3% of stock
2. Target metros/neighborhoods go higher still
3. Real estate uses comps-based pricing - their winning bids propagate to surrounding valuations
The mechanism isn't inventory control, it's just a buyer with a different utility function (rental yield vs owner-occupancy) systematically outbidding price-sensitive first-time buyers. In a thick market that gets arbitraged away. In a thin market with sparse comps, each transaction is a price-setting event.
The St. Louis Fed found institutional presence specifically increases price-to-income ratios in the bottom tier.
If you're evil corporate Landlordman You don't need to affect the whole market. You just need to cut off the bottom rung of the ladder.
Is this Trump move the right one? No frickin idea! But I do think we need to reckon with what's actually happening to first-time homebuyers. I bought a place in Englewood Co last year and ... it was pretty rough.
Whoah, hold up, your (3) is doing a lot more work than you think it is. Comps matter but they don't literally break the market:
* They impact listing prices but not necessarily clearing prices.
* They assume all the sellers, who are not corporate investors, can mechanically anchor off those inflated comps, without factoring in buyer budgets and carrying costs.
Real estate is slower than most financial products, but it's still an actual market. You can't just buy a tiny fraction of the inventory at an inflated price and assume the whole rest of the market will follow you.
Reread my #3 in the context of "rental yield vs owner-occupancy."
I'm not saying comps magically anchor prices. I'm saying institutional buyers ARE the clearing prices, because they are anchored to "how much can I rent this out for" whereas first-time homebuyers are anchored to "how much can my mortgage cover?" which are different questions.
29% of transactions, not 3% of stock.
Those become the comps. There's less of a gap for "but buyers won't pay that" because the institutions *are the buyers. The call is coming from inside the housing market.
I'd actually just say that comps magically anchor prices in the constrained market we've been experiencing. As a person who was looking to buy a few times over the last few years, comps strongly affect appraisals which affects whether a company will issue a loan for the house (appraisers actually send you the houses they based their appraisal on). Plus realtors base their understanding of the market on comps when they try to help you form your offer. And of course sellers will look at comps when deciding what to ask for and whether to accept your offer.
Now this only really works in constrained markets, but intrinsically there's always a time constraints in buying (our lifetime of course, but also life events and lease renewals and er ). There's of course also selection constraints because of the aforementioned time constraints, and location, and whether new construction in happening within those.
Saying "they impact listing prices but not necessarily clearing prices." might be logically consistent, but is disconnected from the reality of the housing market.
All of you are assuming that buyers are rational, as if pump and dump in crypto was somehow isolated to the online world and not possible in the housing market. You don't have to have complete market capture to make that happen. All you need is to have enough volume that it causes potential buyers and sellers to play along.
If you're big enough, you can cause prices to ripple, get others to lose rationality and buy in on the ascent as you cash out and leave everyone else holding the bag for the crash.
Respectfully, I think 'individuals' is doing a lot more work in GP's 'But most of the "investors" buying up property are individuals purchasing investment properties.'
The average 21+ US resident may own 2+ properties but I'd be surprised if the median equivalent owns 1. It kinda hides the equivalent of the top x% of individuals owns y% of the stock market where y is unreasonably disproportionate to most.
I'll add one more data point to the thread;
The timing and pricing of investor selling is different to residents selling.
Residents sell (mostly) for reasons other than profit. They might be moving up, or moving away, or whatever. There's some pressure to "get it done" so they can move on. They can't really afford to "time" the market.
For investors there's much more "buy in the down, sell in the up". Except that it's been going up for a while, so there's no motivation to sell at all. It would be uncommon for them to accept a loss. Even unoccupied it's (mostly) better to hold rather than sell at a loss.
As mentioned elsewhere, overall market penetration by investors differs wildly by market, and segment. So 3% overall might sound low, but 20% of a dwelling type in a specific market is plenty to alter market forces.
I say this as someone who has owned property as an individual, and also worked in a business that invested in property.
> there's no motivation to sell at all
There's a huge motivation - the time value of money. And all the costs of having the house sit there not earning money.
An $800,000 house costs you $150/day in lost income.
Returns are better on the lower end of the market, and demand for rent there is higher. Which is why most residential investment is at the bottom end, not the top end.
In most markets I'm guessing an 800k house is at the higher end of the market.
That aside, housing portfolios always plan for a certain amount of unoccupied space. It's built into the model. (That's partly why small investors who own 1 or 2 properties get hit harder by this.)
Equally, even if the house is empty, there's usually some capital gain going on.
Investing in property is a long-term investment. The cost of buying, or selling is very high. So it's about getting quality units, in the right market space, and then leveraging that for a decade or more.
Yes there are lemons. And yes they'll get sold, perhaps at a loss. But being unoccupied for a bit doesn't make it a lemon, and being unoccupied won't necessarily trigger a sale.
Institutional investors are much more experienced and thus also a lot more likely to not buy lemons in the first place. Most "mom and dad with a second property" investors either inherited a place, kept an earlier property they lived in, or bought another property in their own neighborhood. They're typically gonna make some mistakes along the way.
>but it's still an actual market
It depends on the swing of the market if it's a buyers or sellers market.
In the past there was far more spread in housing prices. These days real estate agents tend to follow a few market making sources for setting those prices, along with personal home sellers looking at 'internet prices'.
>inventory at an inflated price and assume the whole rest of the market will follow you.
When you target particular areas you absolutely can.
> Institutional investors own ~3% of single-family rentals nationally. But per CoreLogic they're 29% of purchases in the starter home tier.
Not true. That 29% is “investors”. Only one fifth of those transactions are from “institutional investors”. It’s mostly evil non-institutional investors, who also own ~97% of single-family rentals.
Exactly, everyone is for affordability but no one wants their primary residency to be worth 50% less in 5 years.
Housing affordability is inherently unpopular with voters.
If it cut my taxes 50%, I would, as I have no intention of selling it.
>> You're telling a just-so story, and you can tell because there isn't a simple schematic 1-2-3 story you can make from this about how these people exert control over home prices.
We don't need to explain how they do it. We KNOW private equity is expecting to make profit from their investment in residential real estate. That profit ultimately comes from people in houses, making them less affordable.
>> We don't need to explain how they do it
We most certainly do. PE owns pools of rental housing; this is a fundamentally different model from speculation. While both impact the selling price they do it in completely different ways, and if institutional investors own a tiny fraction of the total stock, they're not having a huge impact on the supply side which would potentially drive up prices.
You're supposed "logic" seems comparable to magic.
I don't mean to convey that it's intentional. There's no conspiracy of cigar smoking financiers in tuxedos smoking cigars in dark rooms. It's just like the Carlin observation - there doesn't have to be a big conspiracy. They just know what's good for them.
They behave accordingly. The do things that they can, and because those things are relatively new, it's a type of information asymmetry and policy / good intentions / competence arbitrage that we haven't had to cope with before.
You might end up banning certain types of institutional participation in the housing market, because there's no way to protect against the negative consequences that doesn't have even worse consequences for either the participants or the population at large.
It'll probably have to be arbitrary, and the cost will be a bunch of firms no longer get the opportunity to make a bunch of money by leveraging their resources in that way.
And we see the influence and impact constantly, with outlandish asking prices being immediately met by institutions that have decided they want a particular property in a particular region. Or house prices being set to an outlandish level with no reduction in price over months and months on the market, because they can afford to sit and wait for the market to change. And if they can afford to do that, then all of a sudden they've got an incentive to drive prices up in that region, because local and state governments, banks, and realtors tend to use the same basic rubric to evaluate price. If a lower valued area sees home prices go up, properties in the higher valued area will be raised accordingly. There's no secret quant voodoo, it's just using a level of liquidity and staying power not accessible to non-institutional homeowners.
Supply and demand normally influence pricing feedback at much more granular levels which benefits individuals, and our policy and regulation and evaluation models are largely built around those assumptions. Without the negative feedback driving prices down, bad things happen for consumers, good things happen for those who already have lots of money and property.
I'm not talking about whether it's intentional. I'm talking about whether it's possible. If corporate investors could control the price of housing, I believe they would.
I can buy a house tomorrow and hold it vacant off the market at a listing price 3x its value. I will have zero impact on the housing market. You may be conflating the listing price of an asset with the clearing price of that same asset. You can, obviously, build up inventory to manipulate prices. To do that, you have to be able to generate scarcity, which is exactly what corporate investors aren't doing.
You've just given me 6 more paragraphs about the control you think they have, and you still haven't told a simple 1-2-3 story about how they're using a microscopic footprint in the total housing market to distort prices.
You have to do better than "supply and demand normally influence pricing feedback at much more granular levels". In the context of your original claim, of them being "a huge driving force in setting and manipulating prices", you need to explain how that would actually work, and not rely on handwaving.
I think your case on this debate is more sound however
> To do that, you have to be able to generate scarcity, which is exactly what corporate investors aren't doing.
But they did. When inventory was low and then zero percent rates where available, they bought everything they could and drove prices up and created an appreciation bubble. I don’t think they have some other dark patterns for manipulating the market but they had access to a lot of basically free cash. Inventory of houses for sale is a tiny portion of the total market and they could and did contribute to driving prices up. But so did everyone that had the opportunity and inclination to do so, and why not when money is free leverage the shit out of it in an asset class that will generally appreciate without much risk.
I don’t know what ever came of that now that rates have increased. Are they still holding those homes? Did they sell them after driving prices up? (But not fast enough to make prices go down again obviously). Are they landlords now? Etc.
The market is still reeling from that economic situation that created this. Prices may eventually float down but no seller is eager for that so it’s a bit sticky.
My case is built on the empirics that corporate investors are a very small fraction of the available houses for sale. Notice the stories you're reading about places where corporations are disruptive: they're in thin markets. A corporate investors can totally (if temporarily) fuck up the prices in a single subdivision. But unless they can do that across a broader market, they don't have meaningful pricing control.
My claim would be that in any any of the top 10 markets by transaction volume (just to pick a handy metric out of the sky; you could choose others), corporate investors are literally a nonfactor.
They don’t have to buy to fuck up the market. They just have to bid. If there’s low inventory, people that actually need to buy a home are forced to beat/match the bidding.
They can also target just specific areas of specific major metros and there are ripples throughout the entire market.
The housing “market” does work the same as the stock or commodity markets. People aren’t buying an intangible share. They’re buying this specific and unique house and if they’re told “we just got a cash offer for $50k over ask”, they may be tempted to beat it. That doesn’t happen when people buy AAPL. The shares are fungible.
There’s only empirical evidence of their buying activity. We’ll never know how many deals they bid the price up on but didn’t buy. This auction like quality is evident in any market like this; watch Storage Wars and one disinterested buyer will bid up the price just to fuck with his competing bidders.
Respectfully, I think this is just made up. "They just have to bid" to manipulate prices in the real estate market: I don't think you can show that's a thing. Please by all means make the attempt.
As I said, there’s no data on this. Unaccepted offers don’t get tracked anywhere and don’t show up in anyone’s financial records. However, have you ever participated in a “multiple offer, best and final” type RE market? There’s plenty of opportunities for what I explained in market conditions we saw in recent past in many parts of US.
So you're saying there's no evidence to support your claim. That's what I just said.
I said it in the comment you replied to asking for evidence
Fair enough!
> They just have to bid.
You can't "just bid". A bid is a contract. If you back out, you'll lose your earnest money.
No, making an offer is a bid. It’s cost nothing to make an offer. Multiple offer situations were the norm for a few years in much of the US. Many listing agents will post on the listing “multiple offers, best and final due by X date”. Nobody knows if that’s true or has spent any money yet by making those offers (earnest is put down only once an offer is accepted). This is US I don’t know if you’re from elsewhere or just misinformed but you’re wrong.
There’s a lot going on between making an offer and losing earnest money.
I’m selling a house right now that’s in bad shape so getting lowball offers. They don’t even submit an offer, they text me or call me and tell me what price they would offer. They don’t want to do the paperwork for something I’m just going to ignore. Yet, if it turns into 2 or more people floating numbers I like I will tell them to write it up then I will tell them there’s another offer and try to get them to go higher. All that is before I accept there offer and earnest money is put down after that. So the bidding war is over by that time.
Even if earnest money did work how you describe, it would tie up a few thousand dollars per property for a few days max then be returned and redeployed on another property. These companies have deep enough pockets to fund that. There earnest money only ever enters the picture of their offer is accepted.
> they had access to a lot of basically free cash
What? Cash is never ever free. If it's your Scrooge McDuck cash vault, you're losing money by not investing it. If you borrow it, you're paying interest on it.
https://romanroyce.com/wp-content/uploads/2022/02/ScroogeMcD...
Mortgage rates were below inflation. That’s same as free money and why so many investors bought as much as they could leverage
> When inventory was low and then zero percent rates where available, they bought everything they could and drove prices up and created an appreciation bubble.
Where did this occur? Is this substantiated?
I’m speaking mostly from memory of it when it occurred in the US , was Covid era housing market 2020-2021 is when prices surged the most and was when they had a marked increase in their activity. Again, it seems small overall but they were the cash offer 50k over ask that everyone trying to buy a house was competing with. It doesn’t take much to move a market this size as it’s relatively low inventory and volume. It’s like how a whale could transact move bitcoin price so easily because so much of it is illiquid. It’s gotten more difficult as the price is much higher, but still possible. Also, prices tend to correct faster in that market than they would in housing market.
Googles AI overview of my search for “ covid era corporate home purchases”, also plenty of substantiating references in those search results;
> Corporate home purchases surged during the COVID-19 pandemic, driven by factors like low mortgage rates and increased demand for single-family homes. While this trend has plateaued since the peak, investor activity remains above pre-pandemic levels and has sparked significant public debate and legislative action.
A tidbit from an article indicates they doubled their prior investment activity. Probably more than double because investors bought homes increased and their share of that metric doubled.
> Prior to the pandemic, mega investors averaged about 7% of overall investor purchases and their share increased to 14% during the pandemic — it has now slowed
What article? Which markets were impacted?
I do not think it's unreasonable to request a single example, statistic, or attributable fact.
You don’t have to agree with anything I said but I’m not here to be your research assistant, I gave you my thoughts and some paths to references. It’s evident by this debate nobody is certain on anything and were hypothesizing. If you want a mathematical proof before you can grasp concept of gravity, or form any opinion of your own, I can’t help you.
> because they can afford to sit and wait for the market to change
Some people do that, but they aren't good businessmen. Vacant houses lose money at a prodigious rate.
Not anymore than an occupied rental house with a bad tenant.
Many vacant homes in the SF bay have been that way for years and have appreciated tremendously.
Mant would perfectly prefer buying poorly maintained boomer stock, holding for roughly forever (in ideal markets, like the distorted California/Prop13) and leveraging it like a brick of gold. Actually having someone live in it doesn’t outweigh the risk of managing pesky tenants esp. when the houses are appreciating 500k over 5 years.
How do I distinguish the world where institutional investors are meaningfully contributing to high housing prices and the world where they aren’t? Is there some metric you’ve seen that substantiates the mechanism? For example, are they only 1% of holders but 50% of trading volume or something?
Because if I saw a house 15% below market where I live, I would buy it (to live in). I don’t imagine I’m the only one. Institutional investors can’t stop me from doing that if it’s offered - can they stop the seller from offering that?
You could be 50% of trading volume just by trading a small number of properties back and forth constantly! That doesn't mean anything.
I don't get how that hasn't had an effect on prices.
There's not enough houses on the market (zoning, and people want to keep their low-rate mortgages), there's people worried they can't afford houses (prices inflated faster than wages, rates went up), and a large amount of housing transactions (someone quoted 29% of starter homes) are being paid for by institutional investors (who can pay cash).
Wouldn't these institutional investors buying houses be "marginal consumers", kind of like the marginal producers who set the price of inelastic commodities such as oil? Seems like 29% of transactions is even more than marginal.
I assume that sellers would need to come down in price to what non-institutional buyers could afford if institutional buyers were removed from the equation.
As an aside, I'd rather see supply increased, but maybe demographics over the next decade or two will fix that problem anyways.
Manipulating markets by controlling liquidity while not holding a large percentage of the overall stock is a thing. The fact that you could juice trading volume by doing something stupid for no reason doesn’t make it a useless statistic for evaluating what is going on in a market (unless you’re alleging that institutional investors would do this, and I can’t see the motive). This isn’t some shitcoin whose creators are faking trading volume to appear on the leaderboards - it’s houses with deeds.
To be clear, I don’t think institutional real state investment is a substantial part of the reason housing prices are so high. I’m just trying to push whatever argument they were thinking of toward something quantifiable.
Just wanted to say these are great comments – you are good at explaining complex economic concepts clearly.
You're looking at the symptoms rather than the cause. Land is scarce and finite and you cannot make more of it.
That has not very much to do with money though. There are many ways to allocate scarce resources, such as rationing. Even if money is used, the mere fact of scarcity doesn't define the price of something. Silver is also finite, but it still costs $2.50 a gram and not $25000 a gram. Land was always finite but was still much cheaper in the past.
The main contributor to the price here is financialization. The more money the average buyer can raise for one of the scarce things, the more they cost. Nobody wins from this except the banks, so perhaps it should be more regulated.
Building regulations are also a problem. Legalize whatever you feel is the minimum safety standard of homeless encampment or slum, and watch house prices crash overnight, since prices are set at the margins and a lot of people (including me) would be happy to find a way to work with simple concrete box if it was cheap and secure, but it's not legal to build those.
You're getting at the problem but you still don't understand the essence. Land is special because you can't make more of it. Even the Netherlands don't count since what they did is considered an 'improvement'.
Yes, you still need to solve the problem with 'money', or more accurately a tax. That tax is based on the assessed land value using market knowledge, but it would ideally be set to drive down the price of land to zero. However since we don't live in a world of spherical cow, tax would be set below that ideal to avoid land abandonment.
This is not even new by the way. The crisis we face is the same as in the 19th century when Land Value Tax and Georgism was proposed.
I like Georgism just fine but you don't need it to solve this problem; LVTs are just a prompt align people's incentives with upzoning and increased supply. Instead of doing that (it's not going to happen), you can just outlaw the municipal measures that are used to restrict supply.
Okay, but institutional investors didn’t create that fact of reality, and I don’t think they’re responsible for the fact that people want to live in or near cities either (instead of the middle of nowhere, which remains dirt cheap). If they’re not holding significant stock, what effect are they having on scarcity?
> and you cannot make more of it
The Netherlands and Tokyo beg to differ.
Yes, you can make more. Make multi-level buildings.
You overly complicate the situation by targeting one type of actors. If you look at comment around this story, people propose complicated mechanism to hack at the problem instead of looking at the root causes.
It's just land ownership isn't being taxed properly, no matter who owns the land. We homeowners get a free lunch from economic growth and price appreciation of real estate while penalizing capital investment.
The solution is simple if not necessarily easy to implement. Tax land and at a high enough rate, and exclude building and improvements. We'll reap bigger benefits if we reduce taxes on income and capital and eventually phase it out.
Don't tax land, because that will force homeowners to prematurely sell and move into cardboard boxes on the street. Tax gains when selling at a higher rate.
Carlin was a comedian, not a finance person.
Having deep pockets simply means that you lose a lot more money when following money-losing strategies.
Most of these schemes are hare-brained because they do not take into account the time value of money nor the costs of having vacant investments that are not generating revenue.
The way businesses make money is by buying an asset and then immediately putting that asset to work generating revenue.
About 2 miles from my house, a housing development recently went up.
No homes for sale. Rent only.
Stuff like that is becoming a big problem.
I don't think you can say that universally. Some people prefer to rent instead of own. Some people would like to own, but would probably still only be afford to rent even if home prices were more affordable.
Sure, you can absolutely make the argument that for some specific region there are too many rental properties and not enough owner-occupied properties, by looking at the supply, demand, and pricing for each type in that region.
But you absolutely can't say that as a general statement. There is demand for both sorts of housing.
Why? Why should I care what the balance of rental and owner-occupied is? Owned is not strictly better than rented!
At scale, it limits the supply of available homes to buy which increases the prices.
When we constantly read stories about people not being able to afford homes today, it’s all driven by pure supply and demand. When a firehose of money gets aimed at any aspect of the economy everything gets more expensive.
This is from institutional investors. Sometimes it’s government when we are talking about the price of education or healthcare for example.
None of this is happening "at scale", but either way, you're talking about the price of deeds on houses, and affordable housing isn't about home ownership; in fact, the urge people have to drive this issue towards "starter homes" is a big part of the problem, because the highest-opportunity areas have strictly limited carrying capacity for single-family homes in the first place, and what we desperately need to do is upzone and diversify the housing stock.
It’s literally a new development. Someone went out and turned some raw land into rental houses. If they had left it as raw land, there also would have been no change in supply of houses to buy.
Instead, now they’ve created a slight reduction in demand for houses to buy by offering a housing alternative that didn’t exist before.
> it limits the supply of available homes to buy
It also lowers the demand (it increases the supply of an alternative).
Isn’t manipulation of zoning an example of why it’s important and how even with a small share they can have an outsized influence on the market? Also I seriously doubt the return to work directives are driven by anything more then the projected drop in property values.
No. I actually don't give a shit whether corporations can buy single-family houses, by which I mean, I don't care if that's banned. My problem is that high-opportunity high-value residential areas are deeply resistant to upzoning and are actively using this "corporate investor" narrative as a reason why they should wait. Corporate investors are not why the inner ring suburbs with the good schools in major metros are expensive; zoning is. This is literally a distraction from affordability work.
There can be more than one problem at once. Two different solutions can be tried at the same time.
This doesn't acknowledge anything I just wrote.
You said blaming corp buyers is a distraction from NIMBYISM. I'd argue corp buyers are a problem as well as NIMBYISM. Both should get blamed and be addressed.
In fact, it's the opposite: corp buyers are associated with declining rents. I don't care what happens with them either way, they're a second-order factor, but most of what people are saying about this phenomenon is just wrong.
And neither is rented strictly better than owned. You would care if you wanted to own but couldn't.
I agree, in the same way I'd care the other direction if I wanted to rent, which is why I don't understand the concern about inventory shifting to rentals.
In my experience, there are a lot of people who don't consider renters as people that deserve consideration in governmental decision making. So if rental supply becomes available, it doesn't matter, not only because the person doesn't want to rent, but more so because renters are not considered permanent citizens of the local city and therefore they don't matter.
This is a recurring theme k see among both right wing and left wing people when it comes to looking at single family homes.
Yes, it's a real problem. A surprising number of politically-well-connected people in my muni believe that renters don't even pay property tax.
Can you point to any municipality anywhere in the USA (or anywhere else, if you like) that prevents renters from voting, attending public meetings, donating to candidates and otherwise participating in local decision making?
No but that is not what my comment was talking about.
> there are a lot of people who don't consider renters as people that deserve consideration in governmental decision making
How does it matter whether "a lot of people don't consider" something if there are no laws or enforcement actions that make their opinions actually effective in the world?
> no laws or enforcement actions that make their opinions actually effective in the world?
How do you come to that conclusion? The people who show up to local planning meetings are clearly very effective at enacting their opinions in the world, and local planning is the place where a tiny number, perhaps 3-5 people, can drastically change the results for an entire area.
The line I quoted from you concerned people who don't consider that renters should be involved in local decision making. I'm asking you what difference it makes what they consider, when they are not actually able to enact any barriers to participating in local decision making? I mean, sure, they make think that renters should stay out of the planning meetings, but if they do not stop them, what difference does it make what they think? Renters vote too ....
If I understand you correctly, you're saying that because renters can vote, they have equal impact on planning decisions, and therefore a bloc of voters that do not consider renters' needs as being valid for the city is OK. Please correct me if I'm wrong. I have two objections to that.
1) Local planning decisions are not made on the basis of democratic votes, they are political decisions made by a tiny number of people that are highly susceptible to influence. In particular, money and local political power has a huge effect on who gets elected, who is paying attention to what happens, and who benefits. There's very little attention paid to these matters except those with highly conflicted interests, which means that highly conflicted decisions are the most common outcome. Which leads to suboptimal results over longer periods of time, as happens in any system that appears to be democratic but is actually corrupt.
2) Even in democracy, one bloc deciding that another bloc's interests can be ignored and don't matter to the functioning of government is an extremely toxic environment which results in awful outcomes. I view any system where there are second-class citizens as a fundamentally un-American idea and counter to the goals of our nation. Those who wish to exclude an entire economic class from their community are trying to create precisely that sort of second-class citizen.
I agree that political decisions are arrived at by imperfect, corruptible processes, and that these tend to favor those with capital interests (e.g. home ownership) in certain outcomes.
However, I do not think there is any reason to require that all voters respect the interest of all other voters, and any system that is predicated on such respect is doomed to fail in worse ways than the one we have.
Democracy is hard work. Good things don't happen by just casting votes. There are almost always other interests at work that are likely to conflict with your own. You can't wish this away, you have to do the work.
The one thing I will say that I think is actually blatantly corrupt is when planning meetings are held at times or in locations that make it challenging or impossible for the people most likely to be renting to attend. And this really does happen, far too much. In spite of this, I think that focusing on the attitude of the voters who oppose the interests of renters is a mistake, and that one should focus on how to fix the process.
Are you concerned about physical DVD purchases shifting to subscription-based websites?
Not remotely. As someone who came of age in the 1990s, I can say with complete confidence that it has never, ever, in the whole of human history, been easier for ordinary people to access more film content than it is today. If I had to pay every single time I watched a film, as opposed to opting to "buy" (say) Big Night, I'd still take that in preference to going to a fucking video store.
But either way this has nothing at all to do with housing affordability.
My point is that the rent vs own model is taking over every industry and it's never good long-term. If you had to watch the same movie every day, and you knew that fact in advance, and your only option was pay-per-view, wouldn't that suck?
You're doing my job on this thread for me by trying to set rental up as some kind of second-class residency we should be skeptical of. I agree, that's the subtext of this corporate investment stuff: that renters are bad.
> renters are bad
Uh, no, don't equivocate "forced rent" with "renters". That's bad faith.
No, it isn't. This is literally the subtext behind the policy. You see it all over this thread: the idea that converting an owner-occupied unit to a rental, even though it lowers area median rent, is a bad thing. There's no other interpretation. If reading that makes you uncomfortable, recheck your priors on the policy itself!
My wife and I prefer to rent. Greater flexibility. This is not a big problem any more than the fact that Costco replaced stock of Spiceology rubs with Bang Bang Sichuan seasoning.
Example of large buyer in thin market - just as up-thread described.
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> it's holding prices steady at some point without the concurrent pressure to sell
Earlier you were arguing that investors were acting as marketmakers and now you say this. Marketmakers make their profit from the difference between buying and selling some asset. They don't want to hold prices, they want turnover. If investors really are acting as marketmakers it's actually a good thing because marketmakers have the effect of adding liquidity to a market.
if they controlled even a notable minority share this might make sense, or the majority of a specific region or type of stock where there are limited alternatives, but I don't see any examples of this. We didn't even see this type of phenomenon in the biggest US crash markets where banks owned entire neighbourhoods; even they were not immune to overall market forces. To suggest PE has anything like infinite money and/or time totally ignores that everyone is subject to opportunity cost. A fund that under performs for any length of time because they're playing some sort of marginal long game won't exist for long.
You just haven't presented any evidence or even a hypothetical where this does or could happen.
This just isn’t true - I sort of wish it where.
> If they intend to purchase properties, it benefits them to depress pricing in the area
Yeah, that’s true of everyone but how would a bank/individual do that? By selling… But if they sell while they’re depressing prices, they lose money!
> Normal landlords don't have effectively infinite money with no forces bearing prices down
Neither do banks. They have quarterly earnings, tax bills, they need to buy more stock, cost of capital etc etc.
> It's a very nuanced and complex system in which these institutional investors have very outsized influence.
Just saying ‘it’s complex’ is trivially true. But, supply and demand isn’t some small factor in that calculation - it’s an iron law that exerts itself at all times.
If a bank wants to ‘manipulate prices’ then, without a monopoly, the only way to do that is to dump or buy. But if you buy up homes to ‘push up prices’ … then you end up with a bunch of homes which you paid more than their current value. Not a great business.
The person who has the real unfair advantage in the US happens to also be the most sympathetic person - the owner occupier.
This is extremely silly.
Prices are high because we don't build enough houses which is mostly because it's really expensive to build houses, then the houses we have built are all owned by empty nesters and people with 1 - 3 investment properties.
Everything else you're describing is completely ridiculous.
> which is mostly because it's really expensive to build houses,
Assuming you're referring to the typical high CoL areas, the shortage has very little to do with the expense of building. The zoning laws don't permit sufficient supply in those areas. And that's quite unlikely to change (at least quickly) because anyone pushing such reform would be obliterating the average Joe's net worth.
That doesn't really make sense. The problem we're trying to solve is that housing is too expensive. If we do things that end up lowering the cost of housing, then the saleable value of "average Joe's" house will also go down. You can't say that newly-built housing will be (for example) 20% less expensive, but existing housing will keep its value; that's just not how the housing market works.
I'm not sure if "obliterated" is the right word to use, but if making housing affordable means a 20% drop in home prices (which is perhaps not even enough in some places), average Joe existing homeowner is going to run into financial trouble once that happens.
> We can easily build twice as much in high cost areas (with the strongest job markets) with little impact on existing home owners.
If that's the case, then all that new housing will also cost more or less exactly the same as the existing housing stock costs, and the problem will not have been solved yet.
How do home owners get into trouble from falling prices if they're just living in their home?
Sure, if they need to move and sell, the price difference might be less favorable to them, but having to weigh cost vs benefit of moving is a fact of life one way or another.
It's a strange expectation to have that home values should act as an investment that can only ever go up.
Letting that expectation influence policy on making space for living available is one of the root causes of this crisis.
I'm only proposing to build enough units such that house prices rise at the rate of general inflation or slower. In many highly developed, capitalist systems, their housing prices barely budge in a generation when accounting for general inflation. This is done though careful regional planning. This business of "housing as investment" (for normies) is awful and greatly harms renters.
My feeling is because we build little in the way of new units of housing most places. All the money being injected into the real estate industry is from the price-debt spiral.
To be honest, just getting to the point where house prices don't rise above inflation, maybe even stay fixed (so inflation eats away at their value), would be a massive accomplishment. The main problem at the moment is prices keep rising above inflation in most places, year after year.
Also known as “housing cannot be both a good long-term investment and simultaneously remain affordable over a long period of time.”
Many people have been sold on the former and will (fairly understandably) act to protect the value of their single largest purchase which often has a large mortgage attached to it.
Many people overlook the effect of 30 years of general inflation on their outstanding mortgage debt. Also, most people's income rises as they age, so the monthly payment becomes proportionally smaller. If you buy around 30-35 (and many in the US, outside of crazy areas, buy much younger), then their income will rise for long periods of their mortgage.
What I'm describing is a systemic dysfunction due to financial incentives.
The "crisis" is specifically the high cost of housing. So if whatever you do doesn't lower the price then by definition you've failed to solve the problem.
It's certainly a dichotomy but I don't see how it's false?
> We can easily build twice as much in high cost areas (with the strongest job markets) with little impact on existing home owners.
It's certainly possible to encounter nonlinear behavior. If some aspect has saturated then we might build quite a bit without seeing any substantial price movement. But eventually prices would start to decline.
> anyone pushing such reform would be obliterating the average Joe's net worth.
Only in a purely illusory sense. Suppose you have all your net worth tied up in a house. If your house magically vanished, you'd have nothing but your job.
The price of houses falls to $500 and you potentially go bankrupt. Then, you buy a house for $500.
You, personally, are now better off than you were before. Some examples:
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1. You have $200,000 of equity in a $700,000 house. After the price drop, your net worth in dollars has improved by $300,000. Your net worth in "stuff" has risen dramatically; you kept your job, and now you have 100% of a house instead of having 30% of a house.
2. You have $700,000 of equity in a $700,000 house. After the price drop, your net worth in dollars is down by $699,500. Your net worth in stuff is unchanged. Assuming you always need to live in a house, this will never have any negative impact on you. You retain the option to live in the house you have (which leaves your life unchanged), and you also retain the option to sell your house and use the proceeds to buy another house (and this option looks a lot better than it used to; given the crash in prices, you can probably afford a much nicer house).
3. You have $200,000 of equity in a $700,000 house. You also have $15,000 of "equity" (resale value) in a car that you owe no money on and bought for $50,000. After the price crash, you lose your house and your car, and then you buy another house for $500.
Replacing your car will cost you $50,000. You are in a similar position to the guy in example (1), but $50,000 poorer. So now we ask: was it better to be $500,000 in the hole on your house before, or to be $50,000 in the hole on your car now?
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There isn't a way for the average Joe not to come out ahead. There is a way for someone else to lose out on the price crash: if you had more than one house before, you lost everything on the houses you weren't living in. But that's got nothing to do with the average Joe.
You would still need to pay the bank the full 700k even if it's only worth 300k now. This might mean that you still owe 400k on a 300k asset. In this way you can be underwater while still being a 30% owner.
But that option is obviously worse than declaring bankruptcy, which you can do. You can't be forced into remaining with your underwater house.
It does raise the point though that anyone who borrowed against his house to obtain other assets could be negatively affected by this turn of events.
Also in the case of mass bankruptcy and mortgage failure of the lower middle class I guess there would be risk of bank failure as in 08? That said, I still think the hypothetical illustrates the overall situation quite well.
> It does raise the point though that anyone who borrowed against his house to obtain other assets could be negatively affected by this turn of events.
How?
A drop in the price of houses means it becomes more difficult to exchange houses for non-houses.
If you borrow against your house to obtain something else, and then the price of houses falls, you successfully timed the market. That's all upside for you.
What do you think is the difference between example 3, the guy with a $500,000 mortgage on a $700,000 house, plus a $50,000 car, and example 3', the guy with a $450,000 mortgage and a $50,000 car loan on his house, plus a $50,000 car?
Say I inherit a $700,000 house and, being the kind of guy I am, immediately mortgage it for $500,000. But I stop renting and move in to my new house. Also, I hire a bunch of call girls to live with me in my house. One year later, the price of my house drops to $100,000, and I turn it over to the bank.
I started (the crash) with a $500,000 loan and no way to pay it back other than selling my house. At this point, the faster I realize what's happened and sell my house, the more money I'll be left with. (If I sell immediately, I'll get $200,000!) The longer I postpone selling, the worse off I'll become. (Though since I can live in the house, this trades off against what I would spend on rent.)
I've also spent $500,000 on entertainment and one year's rent. Mostly entertainment. Is this a harm that was dealt to me by the fall in the price of my house?
When the price falls, this forces me to sell the house, locking in a profit of... $500,000. (Which I've already spent.) It could have been $700,000, in theory. This $200k difference in profit vs potential profit can be seen as an effect of the price crash. But that's pretty good for an event that notionally took $600,000 out of the value of my house. Borrowing against the house helped me.
If you want to talk about a negative effect on someone, walk me through the accounting.
At the beginning of this process, I was short $700,000 for a house that I needed but didn't have.Before the price crash, I had "200k equity"† in that very house, leaving me $500,000 short of a house.
After the price crash, I was deeply underwater on the house. Without bankruptcy, I was still $500,000 short of my house, but only $100,000 short of some other house.
And then, after the bankruptcy, I was $100,000 short of a house.
1. What is the harm that I suffered from the price crash?
2. If the "hookers" column had some other label, would that change the harm that I suffered from the price crash?
† You might note that this is accounted as 700k equity in the table. The table is correct, but that's not how we talk about it. There is probably an error in my earlier comment related to this.
> a $50,000 car loan on his house, plus a $50,000 car?
Well I suppose that guy might come out unscathed since many US states protect your primary vehicle in a bankruptcy. But to an approximation declaring bankruptcy involves losing all of your remaining assets. So in that scenario the borrower is on the hook for the cost of replacing those assets (limited by how far underwater they were on the mortgage naturally).
Your other example involved blowing the borrowed money on entertainment in which case I agree that you come out ahead. But that is precisely why I used the term "assets" in GP.
Also I don't think everyone just gets let off scot free after a bankruptcy? Don't you sometimes get stuck with some amount of repayment depending on the nature and volume of your income?
My question about bank failure also still stands. While the impacts of this hypothetical on personal finances are certainly interesting to consider, I'm thinking we really don't want to do the whole widespread mortgage default thing again.
Sure, bank failure might happen. That comes out clearly in the chart; the flow of value is that the bank loses a bunch of cash which ends up in "hookers".
> But to an approximation declaring bankruptcy involves losing all of your remaining assets. So in that scenario the borrower is on the hook for the cost of replacing those assets (limited by how far underwater they were on the mortgage naturally).
If you financed something by borrowing against your house, then it cost less than your house, and when you have to replace it, the cost will be less than the cost of buying a house at the original prices. This is the "you lose your house and your car" example. Losing your mortgaged house and your owned-free-and-clear car is good when buying a replacement house+car costs less than the mortgage on your house.
What if house prices fall into the sweet spot where (1) your mortgage is underwater; and (2) a new house + new "assets" exceed the value of your mortgage? (But don't exceed the original value of your house.)
It could be that those assets don't generate income. In this case, they are isomorphic to the hookers in the example.
If they do generate income, then you might save money by keeping your house at its inflated pre-crash price, and you'll make those pre-crash loan payments using the income stream generated by the assets. Here you have a loan that is nominally against your house but actually against your business. It's underwater when considered as a mortgage, but it's not underwater when considered as a business loan, so you'll keep paying it. Your bank will be fine with this. (Both in the sense that they won't object, and also in the sense that they won't suffer financial hardship.) You'll probably have to recollateralize the loan.
(Or your assets might generate income, but not enough income that you'd save money by keeping your original mortgage. In this case it's straightforward that you're better off losing the original house, losing the original assets, buying a new house, and then not buying new assets.)
The bank isn't going to give you a loan for the next 300k house though, if you declared bankruptcy.
That is an excellent way of putting it. However I fear that it will be nigh impossible to convince the average Joe that the numbers going down was actually good for him.
> was actually good for him.
In the past tense it should be easy to do. Since he is better off, and he has a good view of how he's doing personally, you don't really need to do much. The difficulty is in convincing him that it will be good for him, not that it was good for him.
Compare congestion pricing in NYC, or self-service gas in Oregon.
In areas with low CoL the cost of building houses and the cost of selling a house has a massive impact on the number and type of homes that get built. If it's not profitable for a builder to build a home they simply won't, whether it's because of bureaucratic red tap or economic conditions. There's very strong incentives for builders to take the path of least resistance and highest margin.
> If it's not profitable for a builder to build a home they simply won't,
Agreed. They will generally build as tall and as dense as they are permitted to because (within reason) it reduces unit cost. Obviously there are limits to that. No one wants to build a high rise in the middle of nowhere.
But within high CoL areas they are generally severely limited on both of those aspects. That's due to zoning laws.
Of course that's not the whole story. Infrastructure has to be upgraded to keep pace with growth. But that's on the local government to plan and execute properly. Right now they largely just say "no".
The profit margin has to be significantly higher than simply plopping that cash straight into an index fund. The risk of a project failure is simply too high.
I imagine the margin necessary scales with the size of the project.
> If it's not profitable for a builder to build a home they simply won't, whether it's because of bureaucratic red tap or economic conditions.
Right, and that bureaucratic red tape is one of the things that makes the cost of building higher. If the builder expects they won't be able to break ground for two or three years because dealing with the planning commission takes forever, or because they'll have to deal with environmental lawsuits before they can build, then they will need to target higher-end buyers (by building a higher-end property) in order to make a profit. And if they can't do that... right, they simply won't.
The zoning laws are far from the only tool used by municipalities to dramatically reduce supply. Permitting, requiring expensive changes at various points in the process, local building boards requiring extraneous modifications and often forcing scope reductions, affordable housing requirements, etc all make building more expensive. Often by a very large amount.
These processes are intentionally labyrinthine
I don't believe this has much impact on the current situation (relative to zoning) but would be interested to learn otherwise. Can you provide verifiable examples for any of it?
Eh, reforms are starting to happen, like here in Oregon.
https://bendbulletin.com/2025/12/13/middle-housing-slowly-de...
Or this:
https://bendyimby.com/2025/06/12/detached-townhomes-come-to-...
And it continues:
https://www.sightline.org/2025/06/04/oregons-zoning-reforms-...
It generally does not drop values, just allows for cheaper options.
> It generally does not drop values, just allows for cheaper options.
That can only be true if you suppose that the current values aren't driven by supply and demand. How do you propose to explain that?
"drop" is doing a lot of work there; as these things are slow and take time, the "drop" is often a reduction in the rate of appreciation (which, everything else being the same, should roughly be equal inflation ± some fudge factor for desirability of the area).
Not true.
Cost of living is high because local incomes are high which increases the price of land and labor which increases the price of building.
Restrictive zoning is bad for lots of reasons, but solving it does not solve affordability.
https://www.nber.org/papers/w33694
that's a great paper, but did you read it? I don't see the authors reaching this conclusion. in fact, they seem pretty emphatic that restrictive zoning is a major driver of supply bottlenecks.
"We don't build enough houses" does not explain the massive spike in prices we have seen in the last 5 years.
[dead]
I don't think that's quite what the comment is claiming. They're not saying that some small portion of homeowners are working together to raise prices. I think they're more talking about the concept of "marginal buyers." It's the marginal buyer that sets prices, not the average buyer. And particularly when supply is heavily restricted, the marginal buyers can be a very tiny portion of all buyers, and can look very different from the average buyer.
Marginal buyers have a big impact by adding a lot of liquidity, but I'm not sure they manipulate prices that much, given that if they ever tried to move prices far from the margin they would cease to be marginal buyers.
But again, I don't think we're talking about a concerted effort to manipulate prices. We're talking about the effect that particular marginal buyers just so happen to cause.
Define "tiny portion of the market", especially "market".
There are many houses in the US. Not all of them are for sale. There's a difference between having a "tiny portion of the market" when you define "the market" as all houses in the US, and "tiny portion of the market" when you define "the market" as the houses that are actively being bought and sold. I would not be surprised if corporate involvement was a significantly higher proportion of the latter rather than the former.
It takes a lot less to put your thumb on the scale of the "liquid" portion of a stock if it is significantly smaller in size than the total stock.
The market meaning all real estate, residential and commercial, and tiny, as in under 3%, with regards to what is owned by the institutional investors. That's probably higher with regards to properties that are or have been on the market in the last ten years or so. From what I can tell, the other ~97% is owned by individuals and smaller funds and mom&pop companies, with fewer than 20 properties involved.
In some dense urban areas, up to 10% of the local residential properties are owned by funds or investors. There's also overlap with investment networks where you're not getting to BlackRock levels, but you'll have a web of companies with mutual interests and a network of private debt and collateral, and these make up around 20% of the whole. For the most part, though, the majority of single family homes are not institutional. Even multi-family units, apartment complexes, and other rental properties are only in the ~10% range of institutional ownership, with the remainder owned by individuals, mom&pops, and small investment networks.
The conjunction of capabilities and incentives in combination with a huge buffer of wealth allows institutional investors to manipulate things in ways that aren't healthy for private home ownership, and the downstream social and economic impacts of being forced to rent, or hold debt that's not properly reflective of the value of the property.
We should impose reasonable policies that serve the interests of the people, and not simply maximize wealth building at the expense of citizens and families that would benefit from home ownership.
To add to this: the "total stock" is also completely different to any other asset in terms of market forces, because it varies widely depending on the buyer in question. People don't shop for "a house" and address the entire available market of houses in the country. They shop for a house in a particular area/city, of a certain value, with certain amenities, in proximity to other things, etc. etc. etc.
In this way houses are virtually unique in terms of financial vehicles and it introduces all manner of complexity and otherwise strange forces into the market. You can't simply treat it like any other commodified asset.
I generally agree with you on market discussions, but I don't think you're considering this one correctly. Imagine a country responsible for just 10% of global oil production decided to stop producing. What's going to happen oil prices assuming no other country starts producing more?
They're going to skyrocket in a seemingly irrational way. But it's completely rational. The reason is that they're a finite resource that is needed, and so there is very minimal price elasticity. People will pay as low as they can, but simultaneously must have oil and so have a practically uncapped price ceiling if that's all that's available. The same is true of housing.
You're right that people won't, generally speaking, buy a house for $100 when there's another one for sale for $80. But what you've done there is greatly increase the demand for that $80 house, which is now going to naturally send its price upwards.
---
Finally there's the issue that figures on the percent of homes that are owned by investment groups are misleading, because they aren't just buying homes randomly. They're going to pick up lots of houses in precise areas, and so the impact on prohibiting this behavior will be dramatic in these areas.
> so there is very minimal price elasticity.
Having lived through the various oil crises, I can confidently assert that there's a great deal of demand elasticity.
For example, when the 70s oil crisis hit, people stopped driving to the store for a loaf of bread, but would shop weekly instead. For another, people buy more fuel efficient cars when gas prices are high. For a third, people switch to electric cars.
There are regular major disruptions in the flow of oil. Pump prices change on a daily basis, and that results in the amount of gas available == number of gallons customers pay for. No gluts and no shortages.
That's the problem, they don't care if people will buy or rent them. They literally just sit on them writing off any losses against other business units.
When enough institutional investors are all doing that same thing, the market suppply becomes restricted, especially in focused regional areas. It ends up indistinguishable from collusionary antitrust, though there's no actual communicated collusion so it's not technically illegal. In a normal situation like that, all it takes is a single participant to cave and drops prices to take advantage of the demand. But in this case the institutional investors can keep taking the losses indefinitely so no one ever feels the need or benefit to "break" first, and they can maintain it forever.
Going by the graph in the article, that's still ~13% of homes owned by investors with >5 properties. And that's total of what is currently held, it speaks nothing of liquidity. That number likely includes investors who have had that property for a long time, the current property buy-up likely means far greater than 13% of the market right now is going to those sorts of aggregators.
Dropping the price of a house by a few percentage points can be the make-or-break for some families. And small changes in availability can have large impacts on price.
If we banned (or severely penalized) all entities from owning more than 5 residential homes, this would probably reduce cost by a few percentage points across the board. That's thousands of dollars.
Personally, I think unoccupied homes in general ought to be penalized (beyond just tax burden, an actual vacancy tax).
You may be interested in learning about the Land Value Tax[0] which will in effect, taxes become more burdensome for leaving land unproductive (e.g., empty housing or land). It also shifts the calculus on home improvements, which means remodeling your home or doing other perhaps large pieces of upkeep will not trigger a property tax increase as it does today, which is better for median home owners as well.
[0]: https://en.wikipedia.org/wiki/Land_value_tax
In general a roof repair (including a full replacement) won’t trigger a re-assessment but a kitchen remodel will.
A roof replacement isn’t really an improvement so much as expensive maintenance.
Imagine actually telling the government that you remodeled your kitchen. Nobody is that dumb, right?
Some people think the primary purpose of building permits and inspections is to ensure quality work. Others disagree.
Depends on how your locality assesses the value of your home. You can probably do a web search for where you live specifically if you want to get into the nitty gritty. In the places I've lived, unless I added more square footage, these won't trigger an automatic property tax increase.
But if the improvements on your house makes the neighborhood more desirable and your neighbor's house sell for a higher price then your locality expects, then your house will be assessed at a higher value the next time the locality does their assessments, which means higher taxes.
Of course, improvements to your home that increase a sale value will affect the taxes, but the buyer has to deal with that.
Do some localities assess homes individually every so often? I wonder...
In many jurisdictions they do, yes. A general guideline is that if it requires an permit it will typically trigger an assessment and thus increase in property tax
If everything else is equal, a roof replacement or other maintenance shouldn't appreciably change the value of the house (not beyond the cost of maintenance).
What WILL change your property tax is an addition or similar that makes your house go from X (same as everyone around you) to 1.2X or similar, then you'll proportionally pay more tax.
(It varies by district, but most USA property taxes are calculated by figuring out the budget for the city/county/school district, and dividing it proportionally amongst the valuations of properties/houses. This is often displayed as a percentage of the value, but it is not a percentage TAX - as if everyone's property doubles overnight but the budget remains the same, the property tax dollar amounts would remain the same while the percentage reported goes down.)
>Personally, I think unoccupied homes in general ought to be penalized
As is done in the UK
That sounds like the "empty home premium" - which only kicks in after a year:
https://www.gov.uk/council-tax/second-homes-and-empty-proper...
Which is fair compromise as it can take that long to find a tenant.
I think Vancouver has a vacancy tax. Does it work?
The thing is that there is only a tiny portion of houses ever selling at any time. The only ones that would benefit from selling are people who are downsizing or moving away.
If you buy 60% of the properties on market, the rest will see this and adjust their own prices. Usually this only works when the macro is favourable (low interest rates, easy mortgage applications, etc.), but it is definitely a large factor. It sometimes creates a even hotter market, with people thinking that real estate goes up forever, then they sell.
You're right that it's not always large investment groups. Vancouver in Canada had the same thing happen, but mostly from foreign investors and criminals washing money. The latter was facilitated by politicians who cashed in big on this.
I don’t understand the last sentence in your second paragraph. If “people [think] that real estate goes up forever” why does that trigger them to sell?
But if you bought that tiny portion of the total market all at once or in concentrated areas you better believe you can influence it.
https://papersourceonline.com/wall-street-has-spent-billions...
https://www.kut.org/texasstandard/2022-06-14/texas-home-sale...
> People won't buy them when there's another house for less.
As others have pointed out housing markets are illiquid and tend to have a limited set of sellers at any given time such that the race-to-the-bottom doesn’t happen very often.
Rather, an institutional investor buys high on houses in desired neighborhoods then charge high rents on their portfolio. Subsequent sellers in the same neighborhood see the high closing price and ask for even more.
You don't have to control the whole market to manipulate it. Housing is localized and the ideal situation is people hold onto their homes for decades before going on the market again and spend months if not years looking at purchasing a home. But investments into single family homes operates on completely different timescales and pace with an entirely separate list of considerations and values.
When a strongly capitalized minority cohort can sustain positions that are untenable for normal market participants, they can act as a kingmaker by shaping outcomes at the margin.
There won't BE another house for less, because of the way the real estate market works. If a house goes up in price, others do to.
There is always another house for less. You will almost certainly have to sacrifice on something (size, location, condition) in order to find that lower price but you can get there if price isn’t flexible.
Does no one remember “drive til you qualify”?
The theater on fire has a small exit door.
It can in an extremely illiquid market.
The vast majority of land in the country has been owned by capitalistic profit motivated players since 1776 - individual home owner occupiers.
If you doubt they will lobby to increase their profit, try proposing anything that has a 0.1% risk of their property value going down and see how they react.
An article making that case: https://www.thebignewsletter.com/p/messing-with-texas-how-bi...
A rebuttal to that article from Derek Thompson: https://www.derekthompson.org/p/the-anti-abundance-critique-...
Noah Smith on "Corporations aren't the reason your rent is too high", with nice things to say about Thompson:
https://www.noahpinion.blog/p/corporations-arent-the-reason-...
Quoting Thompson:
"The U.S. has roughly 140 million housing units, a broad category that includes mansions, tiny townhouses, and apartments of all sizes. Of those 140 million units, about 80 million are stand-alone single-family homes. Of those 80 million, about 15 million are rental properties. Of those 15 million single-family rentals, institutional investors own about 300,000; most of the rest are owned by individual landlords. Of that 300,000, the real-estate rental company Invitation Homes—in which BlackRock is an investor—owns about 80,000. (To clear up a common confusion: The investment firm Blackstone, not BlackRock, established Invitation Homes. Don’t yell at me; I didn’t name them.)
Megacorps such as BlackRock, then, are not removing a large share of the market from individual ownership. Rental-home companies own less than half of one percent of all housing, even in states such as Texas, where they were actively buying up foreclosed properties after the Great Recession. Their recent buying has been small compared with the overall market."
“properties get leveraged, instrumentalized, and securitized, with derivative products, speculation, and all sorts of incentives”
Spoken like someone has no clue what they are talking about and just throwing out jargon
I think specifically spoken like someone who saw The Big Short very recently
The truth is that BlackRock buying rental properties is the opposite of that. The foundation of the MBS market is in its name: mortgages.
I somehow doubt these institutions are market makers in the housing market, if they had been ones then they'd be offering to sell and buy houses all the time, this is a market maker's function.
Not buying this. Have you seen studies that support this line of arguments?
Why doesn't your explanation apply to every commodity? Gold, cocoa, mustard seed, electricity? These are also essential products subject to the influence of markets and market makers.
You can substitute cocoa sources globally, but you can't substitute a house in Charlotte with one in Phoenix.
If cocoa prices spike, you buy less chocolate. If housing prices spike in your job market, your options are: pay more, endure a brutal commute, or uproot your life. The demand is far more inelastic.
> Gold, cocoa, mustard seed, electricity
I can easily live a full and meaningful life without owning gold, drinking cocoa or eating mustard. Those aren't essential and have decent substitutes.
Electricity is essential, just like housing and it's very highly regulated.
That's overly reductive. I was hoping that the specific commodities weren't going to be the focus, but I guess that was naive.
If you're going to use "housing" as an umbrella for its substitutes, let me do the same. Instead of wheat, beef, pork, cocoa, sugar, etc, let's call that "food". So now food is as essential as housing. Why doesn't the housing complaint against speculators work for food speculators?
The argument is either intellectually dishonest or you just really haven't thought this through very deep and are just puppeting this neoliberal bullshit.
We could start with I have traded wheat futures and could hedge with future contracts on all those commodities. You can't trade single family home derivatives in the same way because it is not the same.
This is unthinking market religion stupidity and the result is going to be a massive over correction towards socialism. You don't help free markets with this bullshit. You are helping to destroy them in the long run.
So on one side, we have a theory which suggests increasing supply to reduce prices. And on the other, we have playing whack-a-mole with the bogeymen du jour who are manipulating a vast market. One solution makes economic sense and the other appeals to populists who favor state control.
And you're claiming that the reaction to opposing state control and socialism is socialism? Not compelling.
Just curious, where do you live that electricity is sold in an open market? Seems like a very strange setup.
Much of the US works this way, but individual consumers don't buy it that way. It's the level above that.
In other words it doesn’t work that way. The people who actually pay for the end product do not have the opportunity to apply market pressure by choosing a different source.
Yes, they do apply market pressure. They can change who they buy from and there are different deals - like fixed rate, or different charges for different time periods.
The intermediate players "electricity retailers" then participate in a day ahead and real time market to fulfill their obligations to their customers. This is a good summary (https://chatgpt.com/share/696170d5-5d08-8002-a0ff-e2f45e42c4...) - if you hate ai links, so be it, this is a good description of an esoteric topic.
You'll find most markets actually work this way. When I go to the supermarket to buy sugar, the price isn't jumping around real time with the underlying price of sugar. Same for coffee etc. But it changes with a lag, and consumers respond and the effects flow through even if not in real time. Similar things occur in most markets where there is a wholesale market for something and then several players between that market and the consumer, each player doing some combination of logistics, risk eating, aggregation/disaggregation etc.
So you weren't really "just curious". You felt it necessary to cherry pick a particular commodity to debunk the notion that markets are markets? Do harder to steel man it.
A “market maker” provides liquidity that allows trades to clear and keeps prices stable. They make money on the bid-ask spread. They don’t have leverage to raise or lower prices.
Another thing: Residential homes are never considered liquid assets. They don't need professional market makers.
Liquidity doesn’t make something more or less of an investment, it makes it easier to buy and sell. Liquidity in residential homes is a good thing. It means that it’s easier to sell your house and buy a new one if you need to move for whatever reason.
If we're still talking about big investors, they're buying, not selling. They're not "market makers" if they're one side only.
If what you say is true, wouldn't the same argument apply to practically every market these institutions are in? Oil, timber, steel, AI stuff, cars, you name it.
The majority of the US population (65% https://fred.stlouisfed.org/series/RHORUSQ156N) are home owners. I agree that high home prices are not in the interest of the majority of the population, but I bet the majority think so.
If you have a model where you can do price manipulation of something while owning 1% of it, I understand why you wouldn’t share it. Where are you on the Forbes Billionaire List, out of curiosity?
Supply and demand sets prices.
The gobbledygook you posted, “ properties get leveraged, instrumentalized, and securitized, with derivative products, speculation, and all sorts of incentives that you don't normally want operating in the arena of housing”, is just that, gobbledygook.
Just because a buyer as Inc. behind its name doesn’t give it magical powers to set market prices.
If you think it does, then please explain it to us like we are really slow.
It’s not gobbledygook. I think for most people it’s hard to grasp the scale of the entire industries outside of their area of professional expertise so you can look at some numbers here:
https://www.milliman.com/en/insight/mortgage-market-and-hous...
https://www.sifma.org/issues/market-structure/housing-financ...
> you allow for policy that doesn't maximize the cost of real estate over the interests of the majority of the population.
How do you think homeowners would feel about a policy that doesn't maximize the value of their homes. That's just another way to phrase "maximizing the cost of real estate"?
Based on the data I've seen, respectfully, you are wrong. No, I can't share it. The data is publicly available, however. Feel free to dig it up and aggregate it. The data is publicly available, the effort to dig into it, finding meaning, and sell it to folks, however, is not.
What I don't understand is how this new type of asset is above reproach.
I mean BlackRock and Blackstone creating securities backed by real estate in general, not only single family homes.
What if this new type of asset signals to the broader real estate market that regulators favor large investors?
Even more likely, what if this new type of asset succeeds at the expense of first time home buyers?
Controversial, but for affordability reasons, there even should be a cap on how many homes an individual can own for rentals. For the sanity in the housing market, members of society need to be driven to participate in other business activities for income/revenue, not rentals.
This is basically a maximum wage for landlords, bound to start a secret society.
IMO it's a crooked notion that landlords are rent seeking and nothing else - they do create supply and maintain housing.
Issue is when they want to politically and artificially raise the value of their property by preventing more housing from being built, so, if you're going to ban something, ban artificial regulations on construction!
North Carolina has done some good by loosening up code around tiny homes, but, a lot of municipalities want to enforce big homes only because they like the property tax of high value houses, 4 bedroom and all. Small town I'm in basically won't allow expansion of housing because the people that live here don't want the village to get any bigger, but if it's democratic like that I'm mostly OK with it, it's when there's demand for housing and someone with a perverse incentive to block it that we should want to solve for.
No, the real problem is that the vast majority of their income does not come from their role in creating supply or maintaining housing.
Proof: Propose a 100% land value tax, which definitionally only removes that part of income that is generated by the community around their property, and see if they go for it.
The actual value of a landlord is insulating the tenant from financial risk, charging a predictable rent and absorbing the costs of repairs and maintenance. That's a lot of value for some people, but it also comes with problematic incentives and obvious bad outcomes when combined with other aspects of housing markets.
In a perfect world, but rent is often less significantly predictable than mortgage payments. Of course the cost of repairs and maintenance isn’t absorbed, it is paid in full by the renter in the cost of rent.
Over the term of the lease agreement, rent is contractually predictable.
Which is rarely longer than a year, and many people go month-to-month, if they even have a contract.
> IMO it's a crooked notion that landlords are rent seeking and nothing else - they do create supply and maintain housing.
They don’t create supply in any way, the only ones who do that are builders. But sure they maintain houses. Although just the bare minimum, they will never fix it nicely - just enough to rent it out.
> They don’t create supply in any way, the only ones who do that are builders.
For a house to be available for me to rent, both things need to happen.
Someone had to build it, obviously. But just as necessary, someone needs to offer it up for a rental.
One of these things precedes the other in time, however, which may be significant.
But not in the causal chain. The building happened because someone was willing to pay for a fungible asset. An asset is only fungible if there are buyers.
> The building happened because someone was willing to pay for a fungible asset.
Building often happens because a developer believes someone will buy the homes they build. A lot of the time, they are right; some of the time they are wrong. Some developers will get buyers lined up first, to minimize the risks of being wrong; many do not. In the latter case, there's no inherent connection between the building and subsequent buyers.
> But sure they maintain houses. Although just the bare minimum, they will never fix it nicely - just enough to rent it out.
Depends a lot on the landlord. Many will fix it up nicely because they can charge a higher rent. Much of my work is repairing rental properties and I've seen all types of landlords. I try not to work for the cheap ones if I can help it because I don't want my name associated with the crap they want me to do.
How does one propose to supply the market for temporary housing without landlords? Students, travelers, new residents to an area, people early in their careers switching jobs frequently, all of these people have a need for temporary housing. If the only people who own buildings live in them, where do these people find their housing?
I spent over a decade living in various rentals after I moved to a new state. I didn't have the money to buy when I first moved, and even if I had, I didn't know the area well enough to know whether I would want to buy where I first lived. And having the ability to just pick up and move meant I had a lot of flexibility for chasing job opportunities. Don't get me wrong, there's plenty to love about the home I own now, but it absolutely ties me down and anchors me in ways that renting never did. I for one am glad to have had people willing to rent property to me.
All fair and valid points. I agree. In today’s age with a career in the tech field and a newly first time home owner, I do feel the aspect of being tied down. But I never really got to avail of moving to chase job opportunities since the Bay Area is where they’re the densest. That being said during Covid times I had to move to the PNW due to layoffs (got a great offer, but I didn’t have to accept it and could afford to keep looking). So I really do understand the benefits of renting.
Like I said in another reply, I don’t consider landlords to be inherently bad. But there are a lot who will try to take advantage of you if you let them. You have to be lucky to get a good one - I only had a couple out of the dozen or so and I wish them the best.
Of course landlords create supply.
A renter is someone looking to rent. If someone buys a home then rents it out they just +1 the supply of rental units.
Only if that home wasn't already rented out by the previous owner.
A high proportion of real estate sales are owner churn, not the purchase of brand new never used before properties.
The actual value of landlording is offloading financial risk. The tenant pays a stable rent including a premium in exchange for maintenance, repairs, and not having to sell a home in order to move to a new one.
I just can't bring myself to agree with the hard-line socialists who think landlording is fundamentally a bad thing. There are a lot of problems with it, but it does have a legitimate place in the world.
I don’t think it’s fundamentally a bad thing. It has its place. But it’s an industry that’s easily exploited - I rented over a dozen places and like 80% would try to do things that the tenant handbook would not allow. I sued one of them, and settled out of court for another. And surprise surprise a lot of them don’t want to rent in areas that are pro-tenant rights.
Right, it's entirely possible that landlording in practice has so many opportunities for abuse that it's irredeemable despite its potential for benefit in certain cases. I don't know if I agree with that, but at least it's more intelligent than "Marx says landlords bad therefore landlords bad."
"Rent seeking" has nothing to do with landlords and tenants. It's about buying legislation that forces people to give you money for nothing.
https://en.wikipedia.org/wiki/Rent-seeking
Tenants who rent property get something tangible in exchange for their cash - exclusive use of the property.
Just because the word "rent" is common to both, doesn't mean they are connected in any way.
gp used "rent seeking" correctly.
The concept of "landlords do nothing while collecting passive income, therefore not creating any value but instead are just exploiting that they own the land" would be correctly described as "rent-seeking behavior".
This equally applies to any investment income wouldn't it? Dividend, loan interest would all be classed as "unearned income" by a certain economic theory I won't name that keeps causing people suffering a century later. Don't do that.
Investment is generally considered profit-seeking behavior (i.e. not rent-seeking). Building an apartment and renting it out is clearly profit-seeking behavior, but if you were continuing to rent it out doing the bare minimum to keep it from falling over 40 years later, that would be pretty clearly rent-seeking.
From this, we can conclude that there must be some point after an investment is made where continuing to benefit from it transitions to rent-seeking behavior.
Would holding some stock 40 year after buying it for dividend also be rent-seeking?
Would rebuilding the apartment every so often straighten you back to profit-seeking?
Rent-seeking is just a meaningless insult if framed like that, it highlights no economically net-negative behaviour.
Predatory loans were maligned as "usury" long before "rent-seeking" or Scary Marxists came along. For good reason. They're bad for society and the economy writ large.
Classing all loans as usury help Europe back for a long time.
I guess you could class some rent as predatory as well, allowing others to use your property for a fee is not necessarily predatory (unless you're of "property is theft" kind).
You should read the wiki article.
Criticising landlords is fine, but words (and phrases) have actual meanings, and the term "rent seeking" has literally no place in a discussion about landlords.
I am well aware of what the phrase means, and I re-read the Wikipedia article to be sure. Maybe you read the use of the word in a different way than I did, but I helpfully included my precise interpretation of it in my comment to clarify the meaning.
> the term "rent seeking" has literally no place in a discussion about landlords
Having "literally no place" is certainly a strong choice of words, particularity as it was introduced in this thread as being a inaccurate label to apply to landlords.
Personally, I first learned about the term applying it to Feudalism, in which the (land)lords' only contribution was their ownership of the land. That example alone seems to pretty handily disprove your claim of "literally no place", in fact it's specifically cited in the Wikipedia article as the Georgist interpretation of economic rent.
Your own wiki link disagrees with you, most of the article uses landlordism as the base-level example. You've just discovered how "rent seeking" is used as a more broad term to describe many phenomena, but they're still describing them essentially in the metaphor of landlordism.
> "Rent seeking" has nothing to do with landlords and tenants
They're orthogonal. In a competitive market, landlords earn no economic rent. In a market with supply restrictions, however, landlords will earn a return "in excess of the costs needed to bring that factor into production" [1].
[1] https://en.wikipedia.org/wiki/Economic_rent
> exclusive use of the property.
This is almost never true. Leases come with a million stipulations, and they get to decide what you can and cannot do. It’s exclusive in the sense that the landlord can’t force other tenants on the place you’re renting.
Exclusive does not mean unrestricted.
> if it's democratic like that I'm mostly OK with it
One thing to keep in mind. It might be that it's "democratic" in that all the homeowners are allowed to vote for or against the zoning policy (or for or against the local leaders who set zoning policy) but ONLY the local homeowners are allowed to vote. Those who rent (or who can't even afford to rent) live in a different district and aren't allowed to participate in the election.
If that's the case, then voting doesn't represent "the will of the people", just the will of those people permitted to participate.
I live in Massachusetts. Maybe I’d like to move to Palo Alto or Malibu. I hear they’re lovely.
To what extent, and by what mechanism, should the government of those two areas weight my preferences on housing policies in those areas? (I think it is properly exactly zero, even I say really, really want to.)
> This is basically a maximum wage for landlords
Well sure, but it's good to incentivize looking for sources of wages other than (literally) rent-seeking.
Renting out property isn't rent seeking.
Ok. I'll bite. Why is the thing thats literallly the basis for the term rent seeking not rent seeking?
Because:
> Rent-seeking is the act of growing one's existing wealth by manipulating public policy or economic conditions without creating new wealth. (https://en.wikipedia.org/wiki/Rent-seeking)
Given that renting out property you own doesn't meet this definition it can categorically not be called rent seeking. I'm always shocked that people apply this definition exclusively to property rentals, and not VHS rentals, without seeing the hypocrisy.
Wild. It seems to be a very common misunderstanding too.
Googling it after reading Wikipedia shows that about half the sites out there talking about it are also using it wrongly.
Thanks for explaining!
Massive credit for genuinely changing position in the face of evidence; this is rare and deserves lauding.
I fail to understand how your quote doesn't describe land lords? It is: 1. An act of growing one's own wealth (no other purpose to land lording) 2. It is accomplished by taking advantage of economic conditions (perhaps not "manipulating") 3. Does not create any new wealth.
And a little further down is this: > Rent-seeking implies the extraction of uncompensated value from others without making any contribution to productivity.
Which to me certainly sounds like someone who's only contribution is ownership.
Aren’t you exploiting the economic condition that housing supply is extremely low, and a lot of them vote to keep supply low and prevent new builds? I’m not trying to be facetious but I find it hard to believe that landlords don’t exploit economic conditions.
Most landlords are normies that happen to own one or two extra homes. How could these people meaningfully "exploit economic conditions"?
"Normie" and "happens to own one or two extra homes" seem a bit contradictory to me... And doesn't everyone who invests in something that makes them money exploit economic conditions?
Maybe I’m just unlucky but about a third of the places I rented had landlords who owned at least 5 homes. My realtor owns a dozen. I think owning a couple of extra homes is ok… but at some point I feel like it’s a bit excessive. People struggle to own one, let alone a dozen.
If you have 97 flights landing at airport with 1-3 pax each and 3 full jumbo jets and you survey passengers leaving the airport, the average person surveyed will report that their flight was packed.
That's too broad of a concept to be useful. If you applied it like that then quitting a job would be rent seeking for the same reason
There’s no hypocrisy, of course. VHS tapes are not factors of production, which is the universe of discourse here.
What? Of course they are. They just produce entertainment instead of housing-days.
I think we're at the bottom of the discussion here. You've got your opinions but each time you've been pressed you don't really have a justification that stands up.
I can’t imagine what you mean by “each time you’ve been pressed.” Are you perhaps confusing me with other people you’re arguing with?
But no, VHS tapes are not factors of production. That’s a term with a widely understood definition, and linguistic tricks like “a VHS tape causes an image to be produced on a television” or “viewing an VHS tape produces a sense of enjoyment” are not valid arguments.
You're trying to side-step the point by not understanding it.
A VHS tape is capital in the same way that a machine or house is capital. They are capitalized goods that produce something of value on the other side. You still haven't been able to demonstrate that renting one is morally questionable while the other is fine except by special pleading.
"Rent" has a few specific meanings in economics, but charging a tenant rent isn't necessarily economic rent. The economic rent is more like the difference between your actual monthly rent and some hypothetical idealized market-clearing monthly rent.
That's not the basis for the term.
The municipality cares about the taxes, sure but it goes far beyond that. Literally everyone in every department is more convenienced by attracting the well off and being hostile to those who aren't. Those rich people in those big houses with their big assets are much "easier to own" for the town than a bunch of rowdy generally noncompliant trailer trash who crank out a bunch of kids who need services, have poor elderly who need services, don't goose step in line without a bunch of enforcement, can't pay the taxes to pay for the "do we really need this" equipment and facilities government always wants, the working parents can't pick up the slack if the schools slip and scores will show it, etc, etc, etc.
Growing municipalities kind of have to choose if they want to become bedroom communities or industrial/business communities and if they choose the former optimizing for rich people is the easy lazy not sticking their neck out choice and what does government employment optimize for if not retaining people disposed toward that sort of decision making.
I'm not sure if this is what you mean by secret society, but I could well imagine that these kind of limits would be hard to enforce. Like a person creates shell corporations to own their properties on their behalf, or buys them in the name of their kids, or employs randos to "own" pieces of their portfolio.
They already do these things to take advantage of "primary residence" or "first-time home buyer" incentives; see the big hullabaloo over Letitia James doing it by accident.
I feel like a lot of politicians get exposed making these “accidents” that just fortunately happen to be beneficial to them.
Perhaps they ought to be more careful when filling out paperwork. Or perhaps they’re not accidents.
Check out the origin of freemasons, a originally a secret society of stone masons whose labor was in such high demand after the black plague rolled through Europe and England that London set a maximum wage. I forget exactly what the meetings were for but it was something like a union / underground political resistance / price-fixing agreement club that worked in all the Pythagorean and Egyptian ritual later on .
> landlords are rent seeking and nothing else
Noone says it's nothing else. But rent seeking is a big component of it, you just focus on other minor parts.
In general, locking down some limited but critical commodity (e.g. land) is bad for any economic system. It doesn't really matter whether it's "Wall Street" or "your neighbor". A healthy economy is geared towards creating an added value.
<< A healthy economy is geared towards creating an added value.
I am trying to read this charitably, but it is hard to read as anything but: 'landlords do not add value'.
Rephrasing my original point -- landlords do add value, but not as much to offset the negatives of locking down the resources.
I disagree, but I am interested in pulling this thread somewhat. What would be alternative? The role will likely exist in some form regardless, but I suppose there are obviously ways to make it less common just by removing of its incentives. That said, I might be tipping my hand a little.
Land Value Tax is one way, a very old idea.
Germany practices basically rent control, so that 60%+ of population rent and consider it stable. That's another way.
Maybe there are more, I didn't think hard. The basic idea is to prevent formation of an "aristocracy" that holds some limited but necessary (not luxury) resource. Pretty much every revolution happened because of that.
But wouldn't this suggest that the solution is really just stopping ( and then keeping ) things from being too excessive?
> they do create supply and maintain housing.
Clearly you have never interacted with most land lords
I guess not most, all of mine were fine, mostly individuals with one or two investment properties who were friendly neighbors I happened to pay rent to.
Point is, in choosing to be a landlord and buying property, an ideal world would respond to this demand pressure by building housing, didn't mean to suggest the landlords themselves put on their hard hats and frame a new building. Just that they're also part of the marketplace.
Back when I was a renter mine just created slums and maintained misery, but maybe he was special.
I've had slumlord landlords, landlords who maintained and kept up the property and focused on retaining tenants over increasing rents, and corporate landlords with prices set by a computer. Landlords are a spectrum.
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IMO, government owned basic dormitories with high density should exist. Think of something one or two steps above emergency shelters. Call them pods if you like.
Rent and utilities could be positioned at a level that permitted people to survive and have a foundation from which to lift themselves back up and perhaps eventually to a private housing situation with some luxury.
If you would like, I'll explain why you should care and value starter homes.
Speaking from experience, that is miles ahead of living on the street.
I've lived in studio apartments smaller than the homes that are allowed to be built, and a tiny home has a yard you can grow produce in ...
Renting should be viewed is a negative in society. Imagine if car dealerships moved to a rental model instead of ownership..oh wait, they sort of already are, they just call it "financing", they make no money from cash buys because of that economic perversion.
Rent income is not wages, that's the critical part you're mistaken. Income and wages are not the same thing. Rent income is as much wages as Elon Musk selling stocks is to him, or a bank making income on interest payments. Renting is a business, it's income is business revenue, not wages.
There is this terrible view that landlords are "just like you and me, hard working regular people" - not that it's false, but so are the people that own mom & pops shops, or a local subway franchise, they're all business owners making business profits, not wages.
Business practices that harm the public should be regulated and curtailed. With taxis for example, the medallion system was used to limit the number of Taxis in operation. Similarly, not only should an individual be limited to (directly or via an ownership/shareholder interest in a company -- even with them or their family) a reasonable number of properties, but the number of rental properties in an area should itself be limited. Property owners can either sell houses, or sell condos and make income via condo (regulated) condo fees.
Food, shelter, health-care/medicine should be heavily regulated, if private parties take part as intermediaries between individuals and their food, shelter, health-care, they should expect lots of red-tape and limits. Ideally, the government itself would be driving these markets directly by building and selling properties, hospitals, pharmacies, grocery stores, etc.. that's not socialism or communism. That's just common-sense capitalism, everyone, especially the richest make more money this way. not only that their money will spend better this way.
The kind of capitalism we have now is a short-sighted parasitical money-grab. The kind where if fully realized, you'll build your own mansions and sky scrapers but you'd be complaining about the slums and crime nearby, how you can't get good help, skilled labor, and spend a ton of money on bribes instead of paying a fraction of that in taxes.
In theory, reaganism and trickle-down economics could have worked. A rising tide does indeed lift all boats. But in reality, it's more of the "scorpion and the frog" story. In this case, landlords can own a reasonable number of decent homes and make decent income, and then diversify the money in other markets. But currently, it's a race to become the biggest slumlord or until the markets collapse again.
> they make no money from cash buys because of that economic perversion.
This is completely false. This might be surprising to learn, but for normal car dealerships (not buy-here, pay-here or used car dealerships) a huge amount of their compensation rides on receiving holdback payments from manufacturers, as well as per-unit bonuses that often have cliffs.
Cash buyers paying invoice price are welcomed (if they aren't too big of a headache) because they push a dealership over or at least closer to the next sales-volume bonus cliff.
Holdback alone is worth more than any realistic origination fee.
What I heard is that they make no profit. I'm sure they'll make revenue, but if they simply sold all cars at the cash price, they will be losing money, especially dealerships. But if you're certain they do make profit, not just revenue, then you sound like you know more about the industry than myself, so I'll concede that point.
The dealership customarily earns 2-3%+ in quarterly holdback payments from the manufacturer. They sell you a $100k car at invoice, later that quarter they're getting a $3000 payment - this is pure profit, the deal was long-since done and they didn't take a loss at time of sale.
Dealerships are also earning miscellaneous per-car bonuses which are also profit, which go up based on overall volume: if they sell 50 cars, they get $200/car, if they sell 100 units this might jump to $500/car - just a random example.
If a car is in high-demand or really uncommon (in reality, not sales-speak, and a customer has no other options), they can afford to not sell a car at invoice - but this is an exceptional circumstance.
It's the nature of a capitalist society. Perverse incentives are everywhere and our primary measurement of success is wealth. We richly reward grifters and cheaters and folks with integrity often fall behind. The decades of perverse incentives have created a perverse society that no amount of "golden rule" theory taught in kindergarten can stand up against.
I commented elsewhere in more detail, but it is in my opinion caused by a lack of national pride. If I was a billionaire, how would I feel about other Americans living the way they do? Would i be apathetic or would I feel ashamed as an American? Even paying taxes used to be considered a patriotic act a few decades ago.
If nothing else, landlords should be held to much stricter standards for maintenance and the overall state of their properties.
What’d make sense for me is if a rental has a documented history of being poorly maintained, past some threshold the property can be auctioned off, with the proceeds going towards funding public housing. This should help filter slumlords and bare-minimum-effort speculators.
> Controversial, but for affordability reasons, there even should be a cap on how many homes an individual can own for rentals.
Here in Norway the solution, as with so many other things, is taxing. Your home is evaluated at some "market rate", but if it's your primary residence the effective tax value is just 25% up to $1 million (70% on value above $1 million). For reference, a typical 3-room apartment in Oslo, the capital, is around $400-500k.
However, if it's not your primary residence, then you pay tax on 100% of the "market rate". The tax rate is 1%, so not insignificant.
Until a few years ago, tax on non-primary residences was much lower, and hence we had a lot more people buying to rent if they inherited money or similar. Some even had a dozen or more properties. These have now exited, so policy is working as intended.
One thing of course politicians for some reason didn't think of is that if most of the landlords suddenly sell, rental market will shrink. So now it's super-expensive to rent, and those who rent usually do so because they can't buy for one reason or another (no stable income to support a loan for example).
So you created a policy that takes money from the lower/working classes and those on welfare (restricting rental supply for those who rent) and transfers it as a tax subsidy to the middle class (who own) and are offering this up as "good" policy?
You've also encouraged your middle class to massively over-leverage themselves to a single house/apartment by creating a huge tax subsidy for them (from 30-75%), which will no doubt continue placing upward pressure on house prices and also create risks if interest rates increase. Why would you not take the biggest loan the bank will offer, given interest rates are quite low in Europe and you will not be taxed on most of the value of that property you can acquire with leverage?
Crazy thought, did your politicians ever think about the idea of NOT subsidizing the demand side at all? If the issue is the price of housing, subsidizing demand for it in any way is going to make that problem worse!
> So now it's super-expensive to rent
And as if it was ordered, a news story[1] on exactly that this morning. Last year alone the average price for a rental unit went up 6.3%, and simultaneously a record number of apartments were sold. So very unlikely to come down.
[1]: https://www.nrk.no/norge/leieprissjokk_-nesten-20.000-kroner...
Landlord, or property management, is a job, same as any other job you might have. The problem is not owning multiple properties, but not paying enough taxes on land. Otherwise, landlords benefit from the free lunch that comes with economic growth and real estate price appreciation, which is true for every homeowners in this country.
IF you want affordability? Tax land.
Doesn't matter who owns them. Your grandma or wall street.
> Landlord, or property management,
This is literally not true.
A landlord owns the property. Property managers operate the property. Sometimes these are the same people (in mom and pop scenarios), but typically and at scale they certainly are not.
Property management is a job. Landlording is not. It is simply owning an asset.
+1 on taxing land though.
Landlords have to allocate capital to fixing and improving the house, as well as taking care of insurance and taxes. Also, assuming that they're not living in the house and the value of the home goes up, they're taxes will rise whenever an appraiser reassesses their home value.
All improvements are excluded from a land value tax, which actually means improvements are even more incentivized.
Yes that is correct if you occupy land while your community makes it more and more valuable, you should not get wealthier and wealthier for no reason. All of that should be taxed away.
So when you build a sewage farm on your back 40 you should get wealthier (while your neighbors thank you because their land tax went down), but if someone snaps a photo of your area that goes viral on {THE PLATFORM DU JOUR} thus making your county more popular and driving up a bidding war for postage stamp sized lots of land (leading to the land being valued at a higher rate than it was a year before) you suddenly have a massive tax bill because "we noticed you are living in a popular county" and the benefits of living in a popular place should be taxed away? Or do we need some kind of a standard for "more valuable" that deals only with tangible things? And if so, which tangibles?
No, we don’t need standards for “tangibles.” The price factors in all relevant variables.
> All improvements are excluded from a land value tax, which actually means improvements are even more incentivized.
I'm not sure what this applies to with regards to my original comment. Improvements, insurance, and taxes are capital expenditures which need to be managed. This was to counter that landlording "is simply owning an asset."
> Yes that is correct if you occupy land while your community makes it more and more valuable, you should not get wealthier and wealthier for no reason. All of that should be taxed away.
Why assume that the landlord isn't getting the brunt of the cost for making the community more valuable? I don't think there's a strong case for saying a property manager is a job while denying landlording being one. Assuming landlording is completely passive is as far-fetched as thinking that property management is completely passive (both may require irregularly tasks to be performed or require no involvement in the ideal case).
While we don't want to tax a landowber's capital investment and improvements, most of the land value is due to the agglomeration effect of the surrounding land. So land value is mostly not an individual owner's own work, but the sum total of the community's efforts and entrepenural spirits.
>but the sum total of the community's efforts and entrepenural spirits.
More like "was too rural or too poor in the 70s/80s/90s to indulge in the then trendy policy like zoning the crap out of themselves and passing a bunch of ordinances more akin to country club rules thereby making incremental growth and development actually possible in the 2010s and 2020s"
Because most development today seems to correlate with whether or not that particular policy bullet got dodged than culture or spirit or anything like that.
> Landlords have to allocate capital to fixing and improving the house, as well as taking care of insurance and taxes.
These costs aren’t that high though, compared to rent. 3 months of rent covers a year of property taxes where I live. Major repairs are about a couple months rent. There is still another half year of rent that’s pure profit. Then they raise your rent every year, demonize rent increase caps, and then vote for reduced housing builds. I find it very difficult to accept them. If I had the money and the capital I absolutely would own a dozen homes and rent it all out, you would make insane money. Not to mention the mortgage costs being so low during ZIRP days. At the rate of AI coming for SWE jobs, landlords seem untouchable.
> 3 months of rent covers a year of property taxes where I live. Major repairs are about a couple months rent. There is still another half year of rent that’s pure profit.
You missed insurance and mortgage.
Fair. Mortgage during the ZIRP days and prior was really low though. A 3K mortgage then is like a 6-7K mortgage now. And home insurance is also relatively low, I pay like 1.5K for the whole year. Point is, it’s a great way to make money and that is why people become landlords.
> Point is, it’s a great way to make money and that is why people become landlords.
If it is, why not do it and become rich too?
It's not really a particularly good way to make money. I've run the numbers on hundreds of properties over the last two decades and I've yet to find a scenario where I could buy something and rent it out with enough profit to be worth the hassle. You'll be much better off investing in some index fund instead.
> If it is, why not do it and become rich too?
If I had the capital I absolutely would have. It’s a bit worse now but any property you bought pre-covid (at least in big cities) can be rented out for more than what mortgage costs. I remember looking at houses in the Bay Area and the monthly mortgage would be 3K while you can rent it out for 4-5K. Anyone who owned property in the 90s and early aughts are absolutely rolling in it. You can invest the profits in an index fund on top of it.
There's quite a bit of optimism in those numbers.
I bought a house in the Bay Area in the 90s and the mortgage was well over $3K (remember interest was over 7%) and an equal house back then was renting for $1300 (my rent at the time for a 3br house in south San Jose).
Try to run the numbers for any property you like. Remember to include taxes and insurance and maintenance. Just to break even is not easy and then you'll have to work for free on the maintenance. Or pay a rental management company, which is another 8-10% taken from the rent.
Your house now can be rented for 4-5K a month if not more, you have no mortgage. Your property taxes are capped at purchase price due to Prop 13. All said and done can’t you net like 35-40K or so per year on a single home?
I agree that buying a home and immediately putting it up for rent would put you underwater these days but during ZIRP times rent and mortgage weren’t too far from each other.
> Your property taxes are capped at purchase price due to Prop 13.
BTW this is a common myth but not true. Property taxes are set by purchase price in year zero when you buy it. Every year after that, they go up 2% compounding.
That's not the full story because the city/county can also add any extra fees they like, and raise them, prop13 does not apply. My taxes go up by well over 2% every year.
> All said and done can’t you net like 35-40K or so per year on a single home?
If you can find yourself a free house somehow, that feels about right. But how do you get yourself a free house? If you have to buy it, now you have a mortgage, and the math no longer works.
The only people I know who profitably rent out homes are those who inherited a home with no debt. In that case, yes it works.
> during ZIRP times rent and mortgage weren’t too far from each other
Low interest helps, for sure, but the numbers still didn't work out.
Here's a graph of interest rates: https://fred.stlouisfed.org/graph/?g=1KZYI
The rates only briefly dipped below 3% during the pandemic. Let's say you got the timing right and got a 3% mortgage for 1.2M. The payment is still a bit over $5K/mo. That's just the mortgage, add insurance + taxes + maintenance. On a home you can rent out for maybe 4K-4.5K/mo. Losing money every month.
I've been running these numbers every few months for the last two decades hoping to follow the common advice to buy rental property and become rich. But it has always been cash flow negative no matter what the rents and interest rates have been.
Only advice I have is go inherit a free house, that can be profitable.
Pretty insightful details actually, I’ll rethink some of my positions. But I can’t imagine these bigger landlords taking that much of a hit, especially with multiple properties. Like let’s say I bought a home before meeting my significant other who also has a home - then I only need one place and I can rent out the other. Once both are paid off you have significant leverage. I don’t think you necessarily need a “free” house
You're assuming a mortgage.
The landlord of most of the United States is the American people since American public pension plans are some of the largest holders in these funds that purchase single family homes.
People act as if this is due to 'private greed'. It's not. American public pension plans are underfunded and need more returns. Thus they turn to the private markets, who offer them that which they are seeking to purchase. The market is heavily distorted by these public players whose policy and aims are not constrained by the market but by public policy.
If you tax land the only thing you will end up with is higher rents. You are punishing the wrong people.
Want to punish the right people? Cut taxes so that people can save cash faster, afford houses earlier and stop renting from their landlords.
Build more actually-affordable housing, too. Not these blocks of luxury apartments with swimming pools that nobody uses. (See HDB, Singapore -- that’s what the US needs more of)
Land is taxed but improvements are not. That tax is not passed down because landlords are already charging the highest price they can.
The tax simply redirect the unearned income to the public coffer which are either spent on public investment that further increase land value or redistributed as citizen's dividend.
Meanwhile landlords are free to construct as many buildings as they can without being penalized by higher taxes.
Empty lot, parking lots, and self storage facilities would be penalized because they wouldn't generate enough income to cover taxes on land, leading to more efficient utilization of land, as improvements are no longer penalized.
> Empty lot, parking lots, and self storage facilities would be penalized because they wouldn't generate enough income to cover taxes on land, leading to more efficient utilization of land
Right, so the city would be nothing but luxury (to maximize income to pay those taxes) high rise apartments packed tight every block.
No parks, no playgrounds, no soccer fields, no sports courts, no bike trails, no dog parks... none of the things that make living in an area pleasant. Also, no low income housing. Because none of those maximize "efficiency" (measured only in dollars) of every square inch of land.
Life is not pleasant if maximizing value extraction is the one and only #1 criteria. This is what land value tax misses.
Incorrect. Parks and other amenities raise land value. They would be an investment by the city to raise land value in a given area. People do not want to live in soulless concrete jungle. They want to live in a society full of amenities such as theater, parks, train station, basketball courts, etc.
Also, "luxury" housing cause what economists called "filtering", in which new construction are occupied by the upper strata of income, which means they pay for the cost. As housing age, this naturally becomes more affordable to the lower strata. This of course, depend on sufficient housing stock. Otherwise the inverse will happen.
Also, you only need to cover the cost of paying the land value tax to keep it, not to generate the maximum amount of revenue for that plot of land.
We are not talking about value extraction here, but making sure that landowners work for their keep, while the unearned income/economic rent that would otherwise goes to them is returned to society, because the value of the land is largely determined by the agglomeration effect, the sum total of the community's effort and entrepreneurial spirit. Otherwise, your private effort as individuals would flow to landowners reaping the benefit of increased land value, hence appreciation in real estate price.
I am responding to the comment I quoted, namely: "parking lots, and self storage facilities would be penalized because they wouldn't generate enough income to cover taxes on land".
So if a LVT has the explicit goal of eliminating things like parking lots and self storage units because those don't generate enough income to pay for the taxes, then what hope do things like playgrounds and parks have to continue existing.. they generate far less income than a self storage facility.
Parks and playgrounds increase the land value of the surrounding community. That results in higher LVT.
That creates a virtuous cycle for the local government who is administering those taxpayer paid amenities, same as other form of infrastructure and amenities.
And they just answered: they generate huge amounts of income for the entity that actually pays for playgrounds and parks (the city).
That feels like wishfull thinking. What I see around me in practice is government doing all they can to sell off public lots (like parks) to developers to tear down the park and build another luxury condo. More tax revenue, more money in the government pocket, some bribes under the table, another loss of quality of life in the neighborhood.
Right, because selling it is a better revenue opportunity. Under the tax scheme described, the reverse is true.
> Under the tax scheme described, the reverse is true.
Explain how.. In a dense urban area, with LVT, that lot that held a park will bring even larger tax revenue when the city sells it off to a developer. Having the tax be based on maximum potential usage will only increase the temptation to sell it off and remove yet another park from the people.
It would decrease land value since the park is no longer there. Tax revenue would decrease as quality of life decreases.
I think this assumes politicians who care about subjectives like quality of life, and who are able to think in long-term sustainable city finances instead of just maximizing what they can grab in current fiscal year. We don't have any such politicians in power in the US.
> Landlord, or property management, is a job, same as any other job you might have.
Let's ignore property management for now and focus on landlords (i.e. people who own homes and collect rent from the people who live in the homes). That is very much not the same as any other job. Most jobs do not consistent entirely of literally rent-seeking.
>Most jobs do not consistent entirely of literally rent-seeking.
First off you're using "rent seeking" wrong, it's a specific economic term that means something else.
But using your definition....
There's entire industries built around renting capital investments. Sometimes purely, like rental equipment. Sometimes the investmentents are so expensive they come with the labor to operate them (the way many buildings have a building manager and a desk person). Many industrial transactions are structured basically the same way as commercial rent.
> First off you're using "rent seeking" wrong, it's a specific economic term that means something else.
It is a specific term, but it means: taking control of a limited resource (e.g. housing), most typically by ownership, that you do not have any direct use for, and then seeking revenue by then renting it to other people who actually want to use it (e.g. live in it).
Which, not suprisingly, is precisely what landlords are doing.
And also not surprisingly, those "entire industries" would be rent-seeking if the resources they rent out were limited. However, that does not apply to rental equipment, for example (though there are a few specific exceptions in the case of extremely expensive, very complex and/or very large equipment).
>Which, not suprisingly, is precisely what landlords are doing.
The bulk of the political will for this garbage doesn't come from landlords. Landlords want more, more, more. There literally aren't enough landlords in this country for that.
It comes from existing homeowners who are not landlords and don't want a bunch of high(er than them) turnover housing near them let alone cheaper housing because of the "neighborhood character" or whatever. Basically got mine fuck you.
And this is enabled with the remainder of the political will being provided by a select number of unconscionably ignorant non property owners who have insane takes about how the government should manage all this, be deeply involved in this, immensely scrutinize any sort of property development, etc, etc, all of which is to the benefit of megacorp landlords and developers and the detriment of the small time guys who own a number of properties you can count on one hand with a sum total of units you can count on two or thereabouts who make up the overwhelming majority of landlords on a unit basis and if even a small percent of them added a little bit of capacity would be a huge amount.
> However, that does not apply to rental equipment, for example (though there are a few specific exceptions in the case of extremely expensive, very complex and/or very large equipment).
They don't rent seek the literal equipment. They rent seek your ability to use it without a bunch of thugs showing up with a "stop or else" proposition. You can literally buy a car crusher on Alibaba but you can't open a junkyard in my state without a permit that they have a well known hospital-esque "we only allow X to exist overall" system for, assuming your town doesn't outlaw the business outright.
Once again, this is all to the benefit of big business for whom a few million bucks of donations to the right stuff and work directed at the right firms as needed to get a variance (i.e. pay the law away) for their billion dollar dildo manufacturing plant or whatever whereas the guy who wants to, IDK, take his HVAC bending business to the next level, open a second site and get into process equipment is shit outta luck because without greasing palms he can't afford to the government will hem and haw about every goddamn detail and prevent anything from happening. And the existing industrial plant that got in before the rules is laughing its way to the bank the whole time, well, right up until it gets regulated all the way to China but that's a different problem.
Your view of the world we live in is extremely different from mine. I don't think it is remotely correct, but hey, that's just, like, my opinion. I hope you find some peace in the midst of your experience.
Let's expand on this.
People assume that renting out property is rent-seeking literally only because they both have the word rent in them.
I would note that people don't use the word rent-seeker (or parasite) when it comes to banks renting out money. I assume this is partly because banks use the word `loan` and partly because referring to bankers as parasites would be a little too close to dog-whistle antisemitism.
> People assume that renting out property is rent-seeking literally only because they both have the word rent in them.
It's not a coincidence that they have the same word in them. It's literally just the same word with the same definition and etymology in both cases. Rent is a payment demanded by property owners from people who want to make productive use of that property.
But rent-seeking isn't renting. They're different terms that don't have anything to do with each anymore.
> Rent-seeking is the act of growing one's existing wealth by manipulating public policy or economic conditions without creating new wealth. (https://en.wikipedia.org/wiki/Rent-seeking)
This definition doesn't overlap with renting.
The term has been generalized in economics to refer to more cases than just rent paid to live on or farm a piece of land.
I blame econonists for reusing the same word to mean different things.
> people who own homes and collect rent from the people who live in the homes). That is very much not the same as any other job.
Why are you thinking of it as a job? Is putting money into the stock market a job? Owning property to rent out isn't a job, and that's perfectly fine. People make money off non-jobs all the time.
They said that because upthread someone else said that being landlord was just like any other job ...
No. If you want affordability, make the government efficient and tax people LESS.
The government steals half of my money, half of my landlord's money, and I have to pay my landlord’s income and property tax in addition to my own income tax.
This is why I still cannot afford a home even though I work in a senior role in AI. After paying all those damn taxes and everyone else’s taxes there is almost nothing left.
I’d imagine it’s less taxes and more you want to buy a nice house in the Bay Area where a lot of people are high earners and would be driving up prices on the low supply.
Yes and for some weird reason, the bay and all the nice places to live are all single-family and expensive as hell. Just build some soviet or Chinese style apartment blocks and give people housing like Singapore does its not that hard. This is not a democrat or republican issue, it is a have versus have-not issue.
The logical conclusion is that the residents of these desirable areas like the bay / San Diego / Seattle / DC actually want housing prices to stay high.
Building giant apartments would change the vibe of the Bay though, and my guess is some of people who want to live there also want to live in it as it is now and not what it would be with high rise apartments etc. There’s probably a way to do it well, but it’s a pretty heavy lift versus doing nothing, which is the current status quo.
Also doesn’t help there’s a lot of red tape as the other commenter mentioned.
I mean.. some people would prefer to live next to a forest or grassland, but nope, houses were built there, because people needed somewhere to live. Now that's not enough, and larger buildings are needed, and that includes socialist buildings.
I live in a former socialist country (well, part of a country, the country does not exist anymore), and when we needed more housing, we designated the land in the city to be for housing, ie. large socialist buildings. Then 1990s came, no more socialism, capitalism now, and no more large building projects, no new neighborhoods. So now, we have cows and cornfields in what would be prime realestate because the government won't change the zoning, all three neighbors there complain and apartments that used to be 120k eur maybe 20 years ago are now close to 500k eur.
If you want to live next to cows, move to a village, thousands want apartment buildings there, to live in a city.
>its not that hard.
Repealing all the bullcrap from the last 50yr that makes that artificially expensive to the point of being a non starter if not outright illegal is the hard part.
For affordability reasons, just build more housing. It doesn't matter how many houses anyone owns if you just build. more. housing.
This is obviously correct. Somehow people just can't accept the pigeonhole principle that if X people are trying to buy Y houses and X>>Y, a lot of them are going to be disappointed regardless of what laws you pass.
It's obviously incorrect. If X people are trying to buy Y houses, and 1 of them can always buy Y/2 houses, then you'll need to build a hell of a lot more than Y houses if Y is only equal to X. Right now in most places, Y < X, and a certain percentage of people can still buy many more than 1, so it seems like that's a real problem shouldn't continue during times of scarcity.
That is an additional problem, but does not contradict what you replied to.
N_dissatisfied > max(0, N_for_sale - N_individuals_and_couples_buying)
When N_for_sale > N_individuals_and_couples_buying, it is still possible for N_dissatisfied to be > 0 for the reason you give. But N_dissatisfied must be > 0 whenever N_for_sale < N_individuals_and_couples_buying, even if everyone is limited to having at most one.
Agreed, but I wasn't disagreeing with their whole sentiment, just their assertion that the GP was obviously correct, namely that it doesn't matter how many homes people can buy.
Less supply couldn't possibly be helpful for those disappointed, but also there's less supply than there would be if access to it as a commodity was limited, supposing that all other artificial restrictions and funding models could rely on less concentrated investments, which I think they could
> It doesn't matter how many houses anyone owns if you just build. more. housing.
That's what people with disproportionate access to capital would want people to believe. It absolutely matters if there's a ceiling and a floor on the production rate of every aspect of the supply chain of housing. If it doesn't matter how many houses someone owns, then it wouldn't matter if builders don't outpace the ability for particularly wealthy people to borrow and own as much as they possibly can. It's a particular type of commodity that should be appropriately controlled in a way that reduces the whole "tragedy of the commons" type effect.
There's always a finite supply, and there's always some contingent of people who will try and get as much as they possibly can, leveraging as much generational wealth as they need to, if they need to.
There should absolutely be a limit on the number of homes, within a particular region, someone should be able to buy, as long as a sufficient threshold is met for what can reasonably be called a scarcity problem. If an individual average home of any type would require the mean family income to quadruple in order to service the mortage, or the downpayment would require 5x their annual salary pre-tax, that seems like a very liberal threshold.
> there even should be a cap on how many homes an individual can own for rentals
India still has this in some states [1]. You wind up with everyone in the family owning a house. After that, other people own it and pass on most of the rent.
Better: progressive capital-gains taxes.
[1] https://en.wikipedia.org/wiki/Urban_Land_(Ceiling_and_Regula...
This would certainly drive down prices - how much is an open question. But I think its a fair compromise, UNTIL we actually do have enough homes for everyone. Until then something has to give - right now its people who can't own a single home that are yielding, but IMO it would be much more fair to ask people who already own a home to yield (not buy more than one). Ultimately that's the tradeoff to discuss.
Why would this help affordability? If you restrict who can operate rentals, that will inevitably shrink the supply of rentals, which will raise rents.
Would it not also lower house prices, causing would-be renters to buy instead, reducing demand for rentals?
Renting and purchasing are not perfect substitutes. There are many situations where a rental is a far better solution.
This kinda reminds me of student loans, why not get as many people as possible into 6 figure debt?
Yes mortgage is often cheaper than rental, but the whole tradeoff is the commitment, just like all kinds of services, if you pay 40 years up front you can get a good deal, but do you really want to take out a loan to do that?
Limiting landlords ability to buy property is reducing demand for construction, you want to increase demand for housing, not decrease it.
As I said in a sibling thread, it does suck that property owners are incentivized to raise their property values, preventing supply from reacting to demand.
That "less commitment" argument assumes that renters are content to be paying higher-than-mortgage costs for a property they'll never own. If they are, then it's true that the rental system is benefiting them. If they'd rather own their homes and be paying a mortgage, then the rental system is a hindrance.
My intuition is that the majority of renters would rather be owners paying mortgages. This is less true of certain demographics (young people, students) and more true of others (older people, families).
I also wouldn't characterize being a renter as low-commitment. Say you're renting a place for 1.2k a month. When you sign a year lease, you're committing to pay 1.2k x 12 in rent, plus (at least) a month of security deposit, for a total of 15.6k. That may not be a down payment, but it's still a huge commitment, especially given how hard it is to assess potential problems with a living space before you've actually lived there.
> but it's still a huge commitment, especially given how hard it is to assess potential problems with a living space before you've actually lived there.
Now imagine trying to asses the potential problems with a living space before committing the next 30 years of those payments, plus locking yourself into that single living space and taking on the single and sole responsibility for repairing or addressing all of those problems yourself.
Look, I really like owning my own home, but when I signed a rental agreement, for the duration of the agreement that was the most money I would ever spend on my housing. And I never once worried about replacing a roof, or replacing an HVAC unit, or replacing a water main. I've owned my own home now for over a decade and my monthly housing expenditure is nearly 2x what it was when I started between tax increases, insurance increases and loans to pay for the various major repairs, and that's with a fixed rate primary mortgage. And that's my cost increases AFTER the insurance payouts. The townhome I first rented when I moved to the area currently rents for about $100 LESS than I pay each month. Granted when I bought the place, it was renting for about $200 more per month than I was paying but that basically means renting vs buying was a wash as far as costs go. Yes, to a degree I got unlucky, but that's also the point, I couldn't know if I was going to be unlucky or not before agreeing to the mortgage. As a renter I could get reviews and recommendations or warnings from prior tenants and at least have a chance of knowing what I was getting into.
> This kinda reminds me of student loans, why not get as many people as possible into 6 figure debt?
Didn't we already try that with housing?
I don't think this is a purely financial decision - my position on that is it's not a good investment if you're buying a single home. Taking on 5x leverage on a hugely concentrated asset is insane to me if it's a large % of your net worth
The bigger thing, though, is so many people are currently priced out from owning something for themselves. Your home is such a fundamental part of your life and for a lot of people renting fucking sucks. They can't live their lives the way they want to. To have that be the case because others are buying it up to profit? Ehh..
Lowering prices would also disincentivize anyone to sell their house, sort of like the recent, relatively high interest rates. Those undesirable rates have not applied significant downward pressure on prices because they’re simultaneously exerting downward pressure on the volume of houses available for sale. No one wants to sell their low rate house for a higher one.
This will release homes on the market, which will lower the prices, causing the rents to drop.
but it'll lower mortgages, which will lower rents.
>that will inevitably shrink the supply of rentals
As someone that's renting because buying is impossible i think this would be fantastic. They should do it with Airbnb too.
Not American or in the US, this is problem everywhere now. People thinking they're entrepreneurs for gouging.
People will come up with all kinds of reasoning, its the property tax, it's migrants, its minimum wage, it's millennials, it's inflation ,when ultimately it's just that landlords will charge whatever they think they can get away.
and sometimes they'll try to charge in other ways...
https://www.irishtimes.com/ireland/housing-planning/2025/02/...
The purpose of people putting money into stocks or real estate is to allow for a simple, fairly 'hands-off' way to make money (real estate is not totally hands off, but is pretty close to a set-it-and-forget-it business).
Real estate works for this because you can really put in as much as you want into it.
Other business activities do not work because the entrance cost for non-rent-seeking business is extremely high and the risk is way too high compared to real estate. This is due to American regulation and labor laws.
This is a 'first-world problem', but now that I have capital, the question is 'what to do with it'?. Yeah, you could throw it in the stock market, but that's also rent-seeking in a sense because you're not really able to invest in primary rounds (I mean you can, but it's hard to find deals), so basically you're just providing liquidity to people, which is rent-seeking of a different kind.
So then the question becomes what else to do with it? I've given a ton away, but that's useless for the most part since it barely creates any economic value.
In my ideal world, I'd start a factory and hire a manager, but the capital cost of that is high, not because of the material or the rental cost, but because of the labor cost. So then, what's the option? I could easily outsource it all to China or India, but that's completely useless for the United States.
Then the question becomes, why start your own, when you could invest in others. Great! I would love to do that. It would be even better if I could simply invest in a local enterprise... Except, that's not easy either. Regulation over investments means that even investing in this is fraught with difficulty unless you want to establish some sort of 'fund'.
So basically, there's nothing to do with the money, which is sad, since I end up giving most of the money I make away anyway, and would prefer to have more of it to give away.
Until America figures out what it wants to be, it's going to be real estate for me... consistent incomes, fairly uncorrelated with equities (which I have a lot of too), etc. There's really not many other options here. There's barely any 'productive' activities taking place in the United States.
> there even should be a cap on how many homes an individual can own for rentals
Many people wish to rent, not buy. If we make it so each landlord can own fewer homes, but renting demand stays similar we just incentivise more people becoming landlords
That's a surefire way to make sure that all rental properties are controlled by people who are able to de facto own a lot of properties with family members (or "family" members) on the paperwork, and who are able to enforce their ownership with extrajudicial means.
Ironically, supply would probably increase for no other reason than those are the kind of people who just add cash only units without giving a crap about expensive permission and permits.
> Controversial, but for affordability reasons, there even should be a cap on how many homes an individual can own for rentals
Price controls and limits like this rarely work out in history.
Around here, many landlords renovate or build new high density construction. Put a cap on how many properties they can own and they'll switch from building/renting as many units as possible to maximizing the rent on the limited number of properties they can own.
Restricting the market in one dimension rarely has the desire effect.
Corporations are people and states aren't legally entitled to know the composition of a foreign corporation's membership.
Should this apply to multi-family homes or just single family?
I'm in favor of a property tax multiplier that increases with the number of properties owned.
That would not be useful. A far better solution would be to drive up rates to make/force landlords unload properties they could only afford at lower rates and also deport the roughly 30 million foreign nationals that are currently in the USA driving up costs of everything. It’s basic supply and demand, but ironically the immigrant supporters are allied with the billionaires and generally wealthy who profit from piling in ever more people into the same supply of housing and amenities and resources.
> also deport the roughly 30 million foreign nationals that are currently in the USA driving up costs of everything.
Nothing like middle school economics to help a debate along ... have you checked on the level of economic activity that is due to those 30M foreign nationals, and considered if there might be any downsides to them no longer being here (and presumably not being replaced by other foreign nationals) ?
Speaking of middle school mindsets; so by your logic, you should take in how many strangers into your home against your will? …and if your infantile logic has any value, why don’t we just cram every single human on earth into the USA, at your expense of course, right?
What immature peasant-logic people as yourself don’t understand is that no, there is negative net benefit to the common person, while the common American is deprived of that benefit which goes primarily to the richest, and of course the freeloading foreign nationals. Nothing about America has gotten on any controlled measure better without the increase in foreign nationals that have been imposed on the citizens of America against their will.
Is it really as simple as that you have no dignity and are just a self-interested person that enjoys living off the theft of Americans?
And again, your infantile mind cannot seem to grasp that removing a squatter from your home is in fact justified, regardless of how much negative economic impact it would have by depriving that squatter of your assets and living in your home.
Why do you types not understand these basic things? Is it really as basic as that you’re vile? Depraved? Narcissistically callous towards the people you harm? Is it really just because you enjoy making others pay the cost of your decisions while you benefit?
How about we just make you pay for all, every single cost of the foreign nationals that are squatting in America at the profit of the ruling class? Of course not, you would prefer others pay the cost with the misery you cause them.
https://www.reddit.com/r/WhatIsThisPainting/comments/lfa41m/...
> so by your logic, you should take in how many strangers into your home against your will?
You do realise you don't own all of America, right?
Nobody actually forced you to take 30 million immigrants into your home, because your home stops at your property boundaries.
I've seen this nonsensical argument in my home country, the UK, too. If you want to claim *all of [the USA]* as your country because you're a citizen of that country, then *any other [USA] citizen welcoming migrants into [the USA] is already taking all these "strangers" into their own home*.
(Works just as well if you substitute any other nation for [the USA], everywhere has people who think about their nation the way you think about yours).
> …and if your infantile logic has any value, why don’t we just cram every single human on earth into the USA, at your expense of course, right?
You should talk to more non-Americans. People like me, for example. I don't want to live in the USA. So I don't.
I mean, we'd physically fit quite easily, you've got most of a continent there, every time people like me suggest things you can do to make your nation better the collective response keeps being "oh but the population density is so low we couldn't possibly make public transport or cheap broadband work". We keep suggesting stuff like this because a lot of us just don't look up to the politics or the infrastructure you've got, certainly not any more, although the reasons are various and our interests are a dis-aligned from each others' as much as from yours.
> freeloading foreign nationals
The foreign nationals in the USA come in three broad groups:
1. People like Elon Musk, who took billions of taxpayers' dollars for self enrichment but are somehow really popular (today only with the establishment, but used to be more broadly) despite this.
2. People who do a huge amount of work in the construction and food industry, without whom the USA would collapse in about 6 months, who get all the hate because they're poor and undocumented (AKA "illegal") immigrants.
I'd like to draw your attention to the word "construction" in there specifically, as it's the other half of "supply and demand".
3. People in the middle with the boring work visas doing middle of the road work. By having in-demand skills, they command above-average salaries, but by commanding an above-average salary they drive up rent and house prices, with that money going to landlords etc.
Of these, only group 1 is "freeloading".
> squatter from your home is in fact justified
A squatter is a person who settles in or occupies a property without legal permission or claim to the property. Squatters live on land or in buildings where they have no title, lease, or right.
Ironically, this is how the USA got Texas from Mexico.
You claim 30 million. I don't know where that number comes from, as it doesn't seem to correspond to either documented or undocumented groups. Too big for estimates of undocumented (~10-12 million estimated) too small for documented immigrants (~40 million).
But it's false in any case, that number does not consist of squatters.
I’ll at least give you some credit for effort, where the other CIA mush-mind just sent a link to peek CIA-brainwashing central link, but you’re clearly arguing in bad faith because you’re so mentally deranged from the life long conditioning.
But you are a well trained NPC, repeating all the installed “knowledge” you have faithfully, with no ability to even realize the inherent contradictions in your statements and beliefs, largely because what you have been conditioned with like a good mindless NPC is only what the ruling class wants you to know for a fact and then infect others with in places like Reddit. You’re a good zombie infecting and devouring those brains, lacking any ability to recognize you serve those who hate you and you say you hate.
But not matter how angry reality makes you, it does not change whether you hear it from me or not at all.
You are an inherent contradictions, just like the ruling class wants you.
> with no ability to even realize the inherent contradictions in your statements and beliefs
Matthew, chapter 7, verses 1 to 5. But which brother has the beam?
I've shown you your own self-contradictions. You say I have my own, but you fail to demonstrate them, you merely assert them.
So I realized who you are. Of course it’s you, living so far away from any and all effects or impacts of those people you have no problem thrusting on others. You’re really a bad person just alone for that mentality, a pure narcissist, prescribing for others that which you want nothing to do with just so you can live a delusional fantasy of being a good person.
Again, if you’re so convinced of how wonderful foreign nationals themselves on Americans against their will, how about you just put up a sign welcoming them all to squat in your house and live on your property and freeload off you; instead of prescribing that misery on others. You’re really a sick and evil person, you know that. How about you do unto yourself first, what you do unto others.
This is treating a problem symptom, not a root cause.
Landlords owning property is not a problem. Some people prefer to rent - they may be students, or they may not anticipate being somewhere for long, they might not want the risk of owning a home, lots of valid reasons. Having housing available for these people is good and landlords are a necessary and valid part of this market.
The problem is when people who want to own houses can't afford them, even when they contribute meaningfully to society. The root cause of this is not landlords existing. It is wealth inequality. A vanishingly tiny number of people own almost all the wealth in the system, to a point that the additional wealth gives them no real benefit, but serves only to remove that wealth from the vast majority of otherwise middle class people.
If you want to fix this problem return the top tax tiers to what they were 50, 75, 100 years ago and the problem will be severely reduced. It's not sufficient to solve it, but its low hanging fruit.
> A vanishingly tiny number of people own almost all the wealth in the system
I'm not sure this is true. Based on a couple articles I found, this is what the current situation looks like in USA:
a) Billionaires, (of whom there are about 1,000) own about 5% of the wealth
b) Millionaires, (of whom there are about 25 million, or 7% of the population, excluding billionaires) own about 74% of the wealth
This tracks with my impression of the rental market. Most rent money isn't going to the billionaires or big corporations, it's going to the 10 million or so mom-and-pop rental property owners.
I'm not an expert on this stuff by any means, but my intuition is that it's a cycle, wherein the rental system is one of the largest drivers of wealth inequality in the country.
https://en.wikipedia.org/wiki/Wealth_inequality_in_the_Unite... https://inequality.org/article/billionaire-wealth-concentrat...
Landlords owning property is not a problem.
Correct.
It is wealth inequality. A vanishingly tiny number of people own almost all the wealth in the system
To the extent that this is true, it's not why housing is unaffordable. Even if Larry Ellison buys a dozen mansions and keeps them empty most of the time, that's not going to noticeably affect the market for normal people. Houses are expensive because they're scarce; you're far more likely to be outbid by the guy who makes $10k more than you than by an evil billionaire.
You're inspecting entirely the wrong end of this spectrum. The problem isn't that the average person is being outbid by a trillionare on their two bedroom. It's that an corpuscular capital class has so much money that all assets are being wildly inflated, housing included, while simultaneously depriving more than half of the population of anything close to the capital to buy even the cheapest house. There is no 'being outbid' for the average American who makes a hair over 45k. It's a laughable impossibility to even be in the game. The system is broken and the average user of this site is way too comfortable to recognize it but it's a daily reality for almost everyone else, particularly the young generation.
I propose two changes to (try) and broadly solve this: - Additional property tax if you do not live in your home fulltime. This includes vacation homes. - First time, US Citizen, non-corporate homebuyers can get a loan at the federal interest rate.
If I were to try and buy the condo I rent, due to interest rates, taxes, and HOA's I would be paying $1000 more per month. At the end of my mortgage I would given the entire cost of the property to a bank in the form of interest payments.
Rich investors and companies effectively get to buy homes at a discount vs average joes.
> Additional property tax if you do not live in your home fulltime.
In states I've lived in with property tax there is a homestead exemption for the house you live in. In my current state that's about twice the tax.
The effect: Rent goes up to cover the tax and margin is added, so the rent goes up more than the tax.
>Rich investors and companies effectively get to buy homes at a discount vs average joes.
Usually the difference is that the big investor bought the property at lower price, and your rent is based on the lower valuation. Annual rent increases are usually are much lower than market increases - there's a lot of value in keeping a tenant year over year.
> The effect: Rent goes up to cover the tax and margin is added, so the rent goes up more than the tax.
Well-established effect and it applies to everything. A huge portion of all technological improvement/productivity gains and nearly all public investment money ultimately accrues to land rents which we then later just call "the cost of living."
https://en.wikipedia.org/wiki/Henry_George_theorem
You are right to call this out, and is why the legislation for this idea will require a lot of thought. But the important part of this idea is that only the "big" landlords will have a significant increase in cost.
In order for the economy to function there has to be ~ SOME ~ landlords. In my experience the random people that rent out their second property are usually good landlords, whereas the massive players treat people poorly. If this tax were implemented well, the latter group would be taxed more forcing them to stay honest. The small landlords would have a competitive pricing advantage over the big players, which should go a long ways to keep rents fair.
As long as costs are marked up and passed on to the consumer, this is a non starter. Also, government charging more taxes just gets paid by the consumer. Money is fungible. Small landlords have significant advantages in their being able to be more agile, use different rent structures (i.e. rent to own, short term, barter, etc, leverage owner elbow grease to get more profit). The key is to make sure the big guys don't have a financial advantage.
> In my experience the random people that rent out their second property are usually good landlords, whereas the massive players treat people poorly.
I don't think there's really all that much of a difference. Small landlords have low cash problems (slow repairs, stupid disputes on damage deposits, etc...). Big landlords have policy and bureaucracy problems (we forgot you were disabled and removed the ramp from the deck, we evicted the wrong property).
> Rich investors and companies effectively get to buy homes at a discount vs average joes.
Suppose you had $100,000 in cash, and buy a house for $100,000. You'll not be paying 5% interest on a mortgage. But if you did not buy the house, you would be investing that $100,000 for a 5% return.
So, you're either paying 5% on the mortgage, or foregoing 5% return for investing that money.
The rich person is not getting a discount.
Couple things to add. First, rates are much lower when you’re leveraging 10,000 homes at 3:1. That allows you to purchase 20,000 additional homes, which isn’t something the normal individual can do. Second, most of this borrowing was done during the 0% interest days and when rates went up after Covid, a lot of the operations grinded to a halt. Third, there’s no regulatory environment for rent rates and rate increases.
> First, rates are much lower when you’re leveraging 10,000 homes at 3:1
What interest rate do you think rich people are getting?
As for the Covid interest rates, those were available to everyone.
Third, we're talking about buying houses, not renting.
> What interest rate do you think rich people are getting?
Depends how rich. Banks have long been known to offer below market or even zero interest loans to the richer segments in exchange for/in the hope of securing other business from them.
> in exchange for/in the hope of securing other business from them.
I.e. they'll be paying the market rate one way or another.
"For a portion of their business, or their company's business". While they get a 0% interest loan to buy their $10M home, or whatever.
Funded, effectively, by you and me, subsidizing this as customers of the same financial institution.
This is a good point, and I was curious to see exact numbers on the invest vs be a landlord opportunity cost.
The rich person gets to rent the house, while the "newly weds" are living in it. And most importantly - the house itself will appreciate in value at a rate near 5%
Assuming they both buy a $500k house w/ a 20% down payment and a 5% loan. Realistically the young couple would get a worse rate but lets say they both get 5%. Monthly payment is $2,522.29 w/ taxes and insurance lets call it $3000 a month.
The newly weds are just eating that entire cost every month for 30 years, whereas the Rich landlord rents it out. After a quick and dirty Zillow search lets assume $3500 a month rent to start, so he's making $500 a month profit on an asset thats already increasing in value 5% ish per year.
So, with these assumptions: - Home cost increases 2% a year - Rental price increases 3% a year - Home value increases 5% a year
Total rental profit is $537k Final home value is $1.56 M Total Loan cost: $873k
Bringing the landlords return on 100k to be $1.224M in profit over 30 years (Final sell price - total loan cost + rental profit assuming they stuff it under a mattress). Whereas $100k at a 5% yearly return will be ~$430k
disclaimer: Im not the best with Excel and ive never actually bought property so im sure there are flaws in my math.
> And most importantly - the house itself will appreciate in value at a rate near 5%
or 0.7% ... or 20% ... or ... -2.3% ... or ...
An intelligent investor wouldn't buy it outright, they'd get a mortgage with a lower than average interest rate. The appreciation of the home will cover the interest rate over the long run and the interest rate is a small price to pay for keeping most of that $100,000 liquid for other investments.
A finance person will mortgage the house if the mortgage interest rate is less than the investment returns elsewhere. If the mortgage interest is higher, he'll buy it cash.
Aren’t you forgetting something, like hmm, rent and appreciation?
I'm talking about both parties buying a house, not renting it. The appreciation would be the same for both scenarios.
Except they do, as the original comment already said. The rich “person” has cash and access to much cheaper credit, is buying multiple properties, not paying the bills and earning rent, the other will have a mortgage.
> The rich “person” has cash and access to much cheaper credit, is buying multiple properties, not paying the bills and earning rent, the other will have a mortgage
Rich people do not have cash, as they invest it all. (That's how they became rich.) Rich people do not get away with not paying their bills. Rich people do not earn rent on the house they are living in. Rich people do not get better mortgage rates because they are rich. They get credit-scored like everyone else. Bankers want to charge as much interest as possible.
The original comment said “Rich investors and companies” which is why I put “people” in quotes when replying. This is not about homeowners in different income brackets.
This seems to depend an awful lot on your conception of a "rich person".
My wife and I have owned (at separate times) a couple of rental properties over the years due to various life circumstances (we no longer do). Both properties were valued in the mid $200k range. While being even in that situation certainly makes us unusually fortunate, it gave us no access to cheaper credit.
Now, I appreciate that there is a version of a "rich person" who does. But the GP's example wasn't specifically restricted in that way.
It depends on the state, but that is largely kind of already the case. At least in my state you get a significant deduction to your property taxes if it is your primary residence.
That sounds nice, but I think that increased tax will just be passed down as higher rent.
Higher rent means more people will opt to buy. That's not necessarily a bad thing in perspective. Assuming the other side effect is a decrease in costs due to a lower profit margin.
I believe your comment is operating under the assumption that people are merely choosing to rent over buying because it's the more economically wise choice. That's not how things work in reality. Many people want to buy but cannot put up the initial costs.
I fit the description of someone who has the cash to make a down payment, but if I were to buy the property I currently rent, I would be paying $1000 more a month.
> Many people want to buy but cannot put up the initial costs.
This, monthly rent actually costs more here in Ireland than what you would pay monthly for mortgage.
Many things cost less when you pay for 40 years up front
More people opting to buy means house prices go up.
There's no free lunch. The more friction, taxation, and tariffs you add to the housing market, the higher prices go for both renters and home purchasers.
If rent is higher, how will people save for a down payment?
That is a good point, and this tax would need to be well thought out. I specifically would increase the tax rate the more properties an entity owns (Not a lawyer so IDK how to treat one guy owning 10 companies as 1 entity the right way). That way smaller local landlord's can still exist (and keep rental prices competitive), but massive orgs will be forced to sell properties. The idea is to create a disincentive for hoarding properties in supply constraint markets.
The problem is not owning multiple properties, but untaxed land ownership. There's a prexisting solution for what you want to solve. It's called the Land Value Tax, which imposes a tax on land, but not on buildings and other improvement.
Property tax has a known problem of taxing improvement in addition to land, which constrict urban development. Plus, imposing additional property tax means improvements are further penalized, which means efficient land ownership are penalized.
You should look up Georgism and read up on what they have to say. It's a reaction to the 19th century economic condition but it very much apply to our 21st century situation and even more relevant today.
This should be the top comment IMO. Land Value Tax, coupled with much saner zoning laws and removing artificial restrictions on safe building proposals, would be the 1-2-3 move to resolving many of the worst aspects of the housing issues we face, as well as resolve many of the worst aspects of owning a home, IE having to defer proper maintenance simply to avoid a big tax adjustment
From what I understand this is a big problem on the west coast (and I agree with what you are saying).
This thread is interesting, as we are all naturally biased towards problems in our own area, and I'm learning some interesting nuances affecting other parts of the country. I live in Chicago / Midwest that has more land and residential high-rises, but our tax problem is a nightmare.
> I specifically would increase the tax rate the more properties an entity owns (Not a lawyer so IDK how to treat one guy owning 10 companies as 1 entity the right way).
Very hard to make this work, people find complex ways around it; e.g. “I don’t own that property, it is owned by an LLC which is owned by a trust whose beneficiary is an LLC owned by another trust of which I’m one of the dozen individual beneficiaries”. Close that loophole, someone will cook up an even more obscure one.
Long term these non-occupants will sell as other properties are being purchased by x-renters.
With today requirements for accounting, somebody with economics background could tell what would be wrong with following solution?:
If you house owned by commercial entity - taxes are payed from full value, but the valuation to any collateral/derivative goes by something like (0.75x)^l, where l how many levels deep (counting ownership levels). For example it house is in some sort collateral/derivate/indirect ownership mix with 4 levels deep, it can only valuated as 0.31x value (you can only account as it is worth 1/3). In my mind it should reduce attractiveness for speculative buying.
Additional property tax? Do you have any idea what property taxes are like in places like NJ, NY? It's 2-3% of the value, sometimes assessed at sales value. People buy despite this because they like an area or a school system. If you raise it more, rest assured that only the rich will have the right to buy. It's as regressive as it gets, your proposal.
I mentioned this in another comment but - this thread is interesting as it shows the differences in housing policies / issues in different parts of the country. I'm from the Midwest / Chicago where we have a lot more land to work with so the policies are slightly different.
That being said, it sounds like a land value tax might be a better approach to my first suggestion. Regardless, this would not effect people that truly "own and live in their only house"
But you'd have an asset you own at the end of that period, and your mortgage payments wouldn't go up over time whereas rent likely would.
Property taxes are directly and immediately translate into higher rent.
Making rent more expensive doesn't make ownership cheaper, just makes it more attractive relative to renting.
Property taxes do not directly translate into rent, the % of the tax that is on the land value of the property can't be passed on, because the supply of land is inelastic.
https://www.astralcodexten.com/p/does-georgism-work-part-2-c...
Yes & no. Higher costs can obviously be passed onto consumers, but higher taxes make things a less attractive investment, too. The higher your costs regardless of whether a unit is occupied or not, the less interesting it is an an investment.
Key adjustment to your first proposal: the additional property tax should also be waived when having long-term renters/occupants.
> If I were to try and buy the condo I rent, due to interest rates, taxes, and HOA's I would be paying $1000 more per mo
... and you would be building equity.
So you pay less and get less, right?
You're thinking this is a sign that you are being cheated. It seems to me that it's a sign you're getting a better deal by renting so that's beneficial to you.
You lumped a bunch of factors together (interest rates, HOA, taxes) that don't do much for your argument. You would pay less taxes than the landlord in most jurisdictions, because the unit would be owner-occupied. Do you think the landlord isn't paying HOA assessments? Sure they are. The landlord has a loan at 3% because they bought in 2021. You're offered 6.5% because you're buying in 2026. I'm not convinced it's worth my pity.
It'd be simpler to just have a high LVT and treat it as a credit instead of deductible.
Opportunity cost means makes purchasing with a mortgage wiser than buying cash. $1000/month more for a few years is nothing compared to the property value increase of a $1M property
Where I live, condo's do not increase in value much due to HOA fees and taxes.
I just plugged in some numbers using (estimated) purchase price, taxes, HOA for the unit I'm in now, and it would cost me a little over $1M over 30 years to own a $300,000 1br apt.
See my other reply about what it costs to own a house.
The stock market goes up more than the housing market. When considering the return on investment for a house, remember the property taxes, insurance costs, maintenance costs, repair costs, 6% real estate commissions, and so on.
Of course of course.
1) Is already how things work. Every single municipality I've ever seen in the US offers an owner-occupancy tax abatement.
2) Would just inflate home prices.
> 2) Would just inflate home prices.
That depends on demand. If no one wants to buy homes at the prices offered, prices will drop.
Depends where you are
https://www.wsbtv.com/news/local/henry-county/3-companies-ow...
|“I’d say at least 60 percent of the homes around here are owned by corporations,” Clark said.
"Corporations" is meaningless in this context. If you want to own a rental home in the US, you should set up an LLC, both for liability reasons and because it makes it easier to deal with taxes and expenses.
In the parts of the country I lived in, I've never seen big corporations own single-family rentals en masse. They usually go for apartment complexes, which are far more profitable if you have the capital to buy / build one. Commercial real estate too.
If you click around your neighborhood, a lot of single-family homes are owned by living trusts and "Bob & Kate" LLCs, but that doesn't mean there's any hedge fund money involved.
Just to reinforce this, the last place I lived in was owned by a corporation...of one man, who lived a town away in a modest house and worked as a paper pusher by day.
The title of the article - "3 companies own nearly 38,000 metro Atlanta homes"
Metro Atlanta has a population of 6 mil, say 2/3 live in detached homes with 2 persons per home. So that's 38,000 out of 2 mil homes, so about 2%
There are well over a million homes in the metro Atlanta area. If the top three owners have less than 4% of a market, need if they act in a completely coordinated manner they have approximately zero market power.
Yes if the market is for rice, but illiquid assets are an entirely different market which can be crazy warped by a few important participants.
How so, could you explain that a bit? I could see them causing a price dip or spike in purchase prices if they bought or sold all at the same time, but that would affect their own prices that they pay or receive, right? What is the market manipulation with 4% of housing stock?
Houses are unique and have irreducible transaction costs which makes the market for them very inefficient and slow relative to a commodity. For one example, if you are in the market for a 3-bedroom house with a garage, the market is already segmented much more narrowly than can be the case in an efficient market like that for a commodity. If you have to move into one as soon as possible for a new job, and you know closing will take a minimum of 3 months, the market for your prospective houses is going to be extremely small without even factoring in other distinctive characteristics like driving distance and schools. 4% of the aggregate market may represent 25-30% of your “market” nonetheless.
Thanks for that! I guess I don't see how there could be market manipulation without also damaging the manipulator, especially in a market that is as transparent as housing, with nearly every sale being at a public price.
Rental manipulation is much much easier, and probably more prevalent. But unfortunately the price-gouging lawsuits from using software to share pricing information have been settled with the landlords paying peanuts.
I'm not sure deliberate manipulation per se, but the market would be warped by a single participant that owned 4% of the aggregate market. This is especially true if that participant didn't adhere to the normal holding periods and purchasing rationale as the remainder of the market participants. Consider that market manipulation concerns are (some of) the reasons significant holders (>= 5%) of even extremely liquid public companies are required to publicly report ownership and ownership changes.
Maybe if they keep buying the houses in the top school district of the entire city. Which I've never heard of anyone doing.
Maybe easier to just form a realtor cartel?
This assumes that the entire market is for sale at a given time, which is not true. If you have 3 kids and two parents who need to drive to work, there may be only a single digit number of viable houses for sale at a given time in your school district.
> e never seen big corporations own single-family rentals en masse.
I just sold a house to a big corporation that owns about 12,000 homes. There's a whole industry for enabling these buys, opendoor, offerpad, etc... It's usually a wash selling your home as is to a wholesale deal vs. prepping your home and selling it, the difference being done about 60-90 days faster than via retail.
The company I sold to already owned four houses on my street. It's crazy.
no offence but this kind of makes you part of the problem
I could have a principle and live in a falling apart money pit in a declining neighborhood or move to a brand spanking new home in a neighborhood on the way up.
Part of the problem is how hard it is to sell a home in the first place. I'm not interested now, but for a while I was looking at needing to move states, and that was going to involve selling my home and buying (or renting) in the new location. And all the math was saying that anything other than getting really lucky with a sale just before moving was going to cost me a LOT of extra money and be a drain and a hassle on top of all of the stresses involved with moving to a completely new state.
I really hate the idea of selling to these "we'll buy your home fast" shops, but I have to be honest that had I needed to make that move, it would have been a very real possibility.
That's not really meaningless though. You just explained in more detail some attributes of corporations, many of which are precisely the things many people are criticizing when they criticize the fact that corporations own lots of housing. Of course we all know that there are still humans behind the corporations.
I've been told that, for privacy reasons, you should even buy your own home under an LLC as well
Depends on how unique your legal name is. Buying your own home as an individual creates a public record with your address and your name. This gets ingested by lots of people search websites like https://www.fastpeoplesearch.com/ (which I have used). But if your legal name is really common, it would be harder for anyone else to deduce which one is actually you.
For what it's worth, I just searched that site you linked with my name and the zip code I lived in for the first 18 years of my life, and it seems to have a pretty muddled view of who I am. It has my correct age, full legal name, and current address, as well as two of my past apartments and my address for those 18 years where I lived in the zip code I searched, but it also lists my parents current home that they bought over a decade after I had permanently left that state in a city I've never lived in. The landline number it lists is the number my parents had at the house I grew up in, but they don't even use it now, and it wouldn't have been an effective way of reaching me since I used to live at that house, and the mobile number it lists is one I've never seen in my life. For family members, it lists one of my brothers and parents, but not my other brother or either of my two living maternal grandparents, although it has a strangely long list of names I've never heard of, some of whom have my mother's maiden name but aren't my grandparents or any of my relatives with that name who I'm aware of, as well as a bunch of people whose names I don't recognize with last names I'm not aware of being in my family tree.
I'm not saying that site isn't potentially useful as a starting point to find out some stuff, but it hardly seems worth influencing a major decision like what legal entity to purchase a home with.
(edited to add): It also says there's no public record of me being married, which definitely is not the case. My wife literally co-owns and also lives in the house it lists me as living in (and has the correct purchase date for it), so you'd think that whatever algorithm is used to build the dataset would be smart enough to see if there's any other ways we're legally tied together. It also says it doesn't have any records of business associations I have when last year I registered a single-member LLC for contract work last year. The LLC literally has the same name as me followed by " LLC", because apparently no one else had registered that before in my state, which at least gives some evidence that my name isn't overwhelmingly common.
> it hardly seems worth influencing a major decision like what legal entity to purchase a home with.
Until you have a stalker who will harass you, your parents, siblings, grandparents... and that stuff isn't all that uncommon.
I'm not saying it's not worth trying to buy a house in a way that ensures privacy. I'm saying that there are probably better ways to consider the risks than looking at a site like this when it literally shows more people I've never met or even heard of than people actually related to me.
If someone is concerned about being stalked, they certainly should consider how to protect themselves if they're purchasing a home, but that would be equally true even if sites like this didn't exist. For someone who isn't otherwise already considering using an LLC to purchase a house for other reasons, I don't think a site like this is worth taking into account.
Significantly complicates getting a mortgage though
This suggests that a single-family home is generally a bad investment. Maybe not if you're living in the house yourself (no renter-landlord inefficiency), but still idk. Could make more sense in certain areas where all the value is in the land.
It's segmented. If you don't have a whole lot of capital but want to invest in real estate, you buy a rental home or two.
If you do have a lot of capital ($100M+), you don't, because you can spend that money to build or buy an apartment complex that gives you something like 5x as many tenants per dollar spent. And is cheaper to maintain in the long haul.
Indeed. This was discussed about a month ago. My prior comment:
https://news.ycombinator.com/item?id=46208561
LLC may be a type of corporation but when people complain about corporations buying up homes they really mean C-corps, not LLCs owned by Uncle Bob who likes to flip houses.
Right, and when people share stats such as "60% of homes are owned by corporations", they're either clueless or are trying to deliberately muddy the waters.
But is that Big Money Private Equity or "took a class from that Rich Dad, Poor Dad guy who said we should create a company and invest in real estate" corporation?
The title of the article - "3 companies own nearly 38,000 metro Atlanta homes" Home many rich dads do you know with 12,500 homes?
Having personal experience here, I'll take the company owning 10,000 homes over the rich dad any day. That rich dad is desperate, incompetent, and breaks tenant law all the time, ie chaotic evil. The corporation is lawful evil instead which can at least be planned for.
It is possible that the article has changed, but that is not in the article that I see right now, which is this: https://www.reuters.com/world/us/us-will-ban-large-instituti...
Looking at Google, I see this press release for a 2024 study says that "3 companies own nearly 19,000 metro Atlanta homes" across 190 LLC shell companies: https://news.gsu.edu/2024/02/26/researchers-find-three-compa... (1). But even so, that 19,000 represented 11% of the single-family rental market in the Atlanta metro area, meaning that even if it's 38,000 then we're talking 1 in 5 of the rental homes available in Atlanta, which the article says has many more large investor owned homes than anywhere else in the US- an expert is quoted as saying that it has more than the next 2-3 cities combined for large investors. If that 38,000 is correct (and I only have your quote for that number) then more than 10% of all large investor-owned homes across the country are in the Atlanta metro area, since the Reuters article that this gives large investors (more than 1k homes) a total of 345k rental single-family homes across the US as of 2Q 2025. A 2022 GAO study found that institutional investors owned about 3% of all rental single-family homes across the US.
"Rich Dad" style investors simply own the vast majority of rental single-family homes across the US. According to the bar chart in the Reuters article, investors who own 1-5 single family houses available for rent (the classic dentist who went to a "Make Money in Real Estate" seminar) own 87% of the national market. Looking at the GSU press release, they claim Atlanta is an unusually attractive market for large investors- they particularly call out the lack of tenant protections- and that means that it has concentrated the activity, and it is still not particularly large a part of the market. Enough to dominate some neighborhoods of Atlanta, probably. But the solution is not some nationwide ban by executive order that can't possibly be constitutional, but for Georgia to get better tenant protections so that institutional investors aren't as attracted to the market.
1: I'm going to presume that the 38,000 is from later work finding more shell companies. I also can't read the underlying research article because I am unwilling to pay absurd journal fees.
Is there a difference?
Only one of them will be affected by the proposed law.
Both are bad.
"Clark" is an arbitrary commenter.
The actual data provided was:
> For example, corporate landlords own more than 12,000 homes in Paulding and Henry County, accounting for 11.2% and 9.9% of all single-family homes in the counties.
Many people register houses they purchase in LLCs for privacy protection purposes
> Black rock isn't buying up all the housing, your neighbors are.
I'm pretty naive to the issue, but awhile back I took a look at property records for my neighborhood. In fact, equity firms, including BlackRock, were buying up a bunch of houses in my neighborhood.
A tiny datapoint, I know.
Edit: It might've been Blackstone. It's been about a year since I looked it up.
Edit 2: Looking up records now, it looks like most of these equity firm purchases are back to actual people owners! Interesting. What does this mean? Firm bought property and resold at a profit?
> Looking up records now, it looks like most of these equity firm purchases are back to actual people owners! Interesting. What does this mean? Firm bought property and resold at a profit?
I never went far enough to get all the details back when I was considering a move, but my impression is a lot of these "buy your home and close fast" corporate purchasers were offering just enough to make the speed and ability to not have to make a lot of major improvements worth the lost money from selling on the market. Then they do just enough work to clean up any "show stopper" problems and re-sell at market prices.
So (very simplified) if you have a home that might sell for 200k on the market if you put 10k of work into it, but you need to move in a few months, and you need to pay off 100k on the loan, the company offers you something like 180k. You walk away with 80k (instead of 90k) in your pocket and avoid the various real estate agent fees and the need to do any of the fix up work or deal with trying to sell and move at the same time. The company puts the $10k of work into it and sells for the 200k, pocketing the $10k you gave up.
[dead]
Where I live, in the fastest growing big city in the US, it is absolutely commercial investment firms buying up all the homes. I used to get calls several times a week from these guys want to buy my house in cash. I stopped taking their calls and now it has slowed to only a few calls per month.
The last call I took, last year, they were ready to buy my house in cash at market value without looking at the property.
The majority of the houses in my neighborhood are rentals, and there are thousands of houses in my neighborhood under the same HOA.
> But most of the "investors" buying up property are individuals purchasing investment properties.
Maybe they should clamp down on that as well, especially individuals who are only purchasing SFH in residential neighborhoods as a way to park their overseas cash.
Exactly. Nobody wants to hear this, because we're all Temporarily Embarrassed Landlords, but if a corporation buying 100 houses to sit on and extract rent is bad (or good), then 100 individuals each buying 1 house to sit on and extract rent must be equally bad (or good).
The complaint, real or imagined, is that young individuals aren’t building up capital. Home ownership was the bedrock of middle class assets.
Guaranteed those 100 individuals won't all raise their rent 10% (or whatever) on the same day, every n months.
I disagree with this logic. To take it to an extreme, if one person earning a million dollars per minute has moral value X, then a million people earning one dollar per minute has moral value X. I disagree on principle.
Just allow people and corporations to own any homes they build. That way we can all still hope to be landlords with a hundred homes.
So long as landlords grow their business by increasing the total stock of housing, no harm is done.
Once you try to clamp down on investment properties, you have couples getting divorces so they can own two homes (this happened in China), and all your kids are going to have their own home as well.
It isn't a bad idea, people will game whatever. A singapore public housing system might work better, but I doubt it would work for SFHs.
This comment always comes up when regulation is proposed: "But people will just game it!" The solution is not to throw our hands up and say "Well, we just can't regulate this!" The solution is to prevent the gaming, too. Laws should iterate as often as people find clever ways to work around their spirit.
Realistically if the biggest problem is couple’s divorcing to get a second home, then the problem has been pretty well attacked
Why do you people always need to use more jackboot? At some point the juice is not worth the squeeze.
If the rule changes fixes it in 9/10 cases and 1/10 games it then call it success and move on.
I can only provide anecdotal information. In my HOA community we had to make a rule that you need to live in your home for two years before you can rent it. This effectively stopped the companies like Innovation Homes from buying up properties in our neighborhood. Post housing crisis-2015 it was getting pretty bad with the investors purchasing the single family homes. I don’t know if places like Innovation Homes qualifies as “Wall Street” or not.
> Black rock isn't buying up all the housing, your neighbors are.
This is a common trope.
"It's not big conglomerates that buy and hodl the homes where families are supposed to live, its mom and pop investors so please be nice."
Having a home is not something to speculate with or leave it to the supposed "market forces".
Housing projects and regulation is what this country needs, yesterday.
A better example than Blackrock is Arrived:
"The Arrived team is cracked, and I love the audacity of their vision: a stock market for real estate," said Ali Partovi, CEO of Neo, in a release. "I'm betting on them to democratize and digitize access to America's $50 trillion in residential real estate." [0]
Should housing be a “$50 trillion” market for fractional ownership, bundled with its own secondary/speculative market to turn around and flip like penny stocks?
Lovely knowing I can have “access” to that platform and own a 0.004% share in a house someone somewhere out there lives in (rents). While I’ll probably never own a house again.
[0] https://www.cnbc.com/amp/2025/11/13/arrived-launches-trading...
The real contention is two fold: investors are collectively pricing out non-investors that would presumably actually live in the home they purchased, and among investors, institutional investors are both positioned to ignore market pressures and constitute too large a portion of the market, restricting even rental availability and affordability of the homes.
The reason institutional investors are blamed is that they usually have significant holdings elsewhere, and demonstrably will just wait out a market, taking loses they write off against their other businesses in the meantime, rather than actually participating in it. That ability to wait out the market on a finite resource rather than participating is usually otherwise only seen during antitrust market activities. The fact that many cities are considering adding significant vacancy taxes on properties, citing specifically this behavior as a driving factor, is pretty damning.
Additionally, it's not necessary for these institutional investors that are ignoring the market pressures to own a majority, or even that large of a share. Any portion they own and ignore the market for is effectively just removed from the market entirely and reduces the remaining pool of what's available. And the second-order effect is an overall damping of market responsiveness since they are simply refusing to respond to the demand half of supply and demand. I don't have the models to run the math myself, but it should theoretically be possible to calculate how much their involvement without participation impacts the prices as a relation to market share, and I'll bet it's a nonlinear result with a steep curve at even low volumes.
> But most of the "investors" buying up property are individuals...
I think the relevant quantity we'd want to look at is what constitutes most of the property being bought-up by investors. Counting investors is going to bias the count towards multitudes of little-guys.
And part of the problem may be people like my cousin, who bought a house without selling the old one, choosing to rent it instead.
Why isn't it your cousin's tenant who is the problem?
While that’s true, even if “Wall Street” is only holding a few percent of homes, those being released to the markets (and future ones not being purchased) might help.
Corporate entity creation in America is such that I don’t think this will be enforceable (“we don’t buy homes, our Gibraltar office’s subsidiary invested in its CEO’s LLC that bought the home”) but if I’m wrong, it could help somewhat.
It’s binary thinking to assume that just because it isn’t a one step solution it won’t make a meaningful impact. But still, I think it won’t yet hope I’m wrong.
Why do you think they aren't on the market right now? These companies buy them so that they can rent them. They are on the rental market!
Not really, because the problem isn't investors buying homes, its a lack of supply of new homes. Big investors don't buy homes to keep them empty, they buy them to rent them out. An exception to this might be short term rentals but that is going to be significant in only a few markets and the problem there is still fundamentally a supply problem.
But even by long term renting they’re driving up home prices.
I feel like this article is littered with suspicious statements
Like this one:
> In fact, institutional homebuyers (those who bought 100+ homes in a 12-month period) didn’t even reach 2.5% market share at the peak level in this data line, which goes back to the start of the century.
I don’t know how to evaluate this. I doubt this analysis rolls up subsidiaries. So what does it really mean for an entity to own 100+ units? Is that actually something we care about?
Imo only thing people need to give a shit about is whether a house is being bought to be lived in.
I thought one of the big problem with Wall Street buying housing inventory is that they were turning them into AirBnbs because that is more profitable (generally) than renting. This pressure takes a lot of units off of the market for normal people to rent or buy and makes holding on to your last house a lot more profitable as a rental. I think if we get rid of these (basically) unregulated hotel exception and forced people who who AirBnb to live in that property as a primary residence 180 days a year, then the inventory could correct.
Obviously, the other factor in home prices is zoning and people who own wanting to keep supply down so their house is guaranteed to appreciate. Affordable housing (just like homelessness) in the US is only a problem because we lack the political will to solve it.
https://econofact.org/factbrief/do-private-equity-firms-own-...
> "Large institutional investors, defined as those owning over 100 homes (which includes private equity firms), own 3 percent of the single-family rental stock nationwide according to Brookings. This share is higher in some local markets — in the 20 Metropolitan Statistical Areas where these investors are most present, they own 12.4 percent"
I personally believe that its problematic that large institutional investors own 12.4% of single family properties in the 20 main metro areas of the US.
> "Resident experience is hurting as a result," said Jeff Holzmann, COO of RREAF Holdings, a Dallas-based real estate investment firm with over $5 billion in assets. "Instead of you calling your landlord to discuss a problem, you're calling a call center that gives you the runaround."
I'm not sure I understand the difference between "Wall Street" buying up all the property and real estate investment firms like RREAF doing the same, or come to that the guy down the street buying a few properties to rent out.
A small company or single investor can buy up a large percentage of local available property and be just as bad a landlord.
People are always looking for an outside villain in this story. Over the years it's been "Chinese buyers", AirBnBs, private equity, or "the rich" generally, but the thing is that the system is working exactly as it is supposed to. Middle class homeowners demand that their homes go up in value every year and they get what they want. Homes are explicitly called investments my every mainstream organization with any stake in the game. The ones responsible are indeed your neighbors, but not just the ones with investment properties. Talk to these people and between complaints about the price of eggs going up a buck or two you'll hear them mention "property values" frequently in casual conversation and beam with pride as they show you their Zillow Zestimate. Your government is happy for the increase in tax revenue (even as they carve out exemptions for their voter base). The ever increasing prices are all going to be paid by future generations, so there is no need to worry.
If Black Rock is guilty of anything here above all else, it's taking advantage of a situation deliberately created for someone else. If government policy wasn't already going balls to the wall trying to constantly pump up property values, there'd be no investment returns to be had.
Give me the levers of federal, state, and local government and I promise you I can completely tank property values in 48 hours or less.
It really depends on the market. The institutional investors are common in the South and Southwest. I think the fact that they exist at all is a problem.
You are correct however that smaller private investors are more common. I live in a small city. Small property management companies from NYC and NJ are pretty commonly buying up 2-4 family houses. I suspect that some of these "small" players aren't small at all, but hiding in a maze of LLCs.
I know a couple of dudes from way back that have leveraged their way to a real estate empire with >2000 homes in the region.
> was already starting to cool down.
You seem to want it both ways. It was a misconception, but it apparently did happen, and apparently "cooled down?" I don't think all these things can be true.
It's highly possible they were heavily investing and were planning on continuing but people noticing and the social pushback it created caused them to change their minds about the strategy.
> Black rock isn't buying up all the housing, your neighbors are.
People may or may not be. They may or may not be my neighbors. You seem to be pushing a set of ideals rather than a set of facts.
I think it depends on the market.
Atlanta specifically when I was flipping houses in 2012-2015 had a lot of corporate investors buying up low income properties, fixing them up, then renting them out.
This is meaningless, even with "Wall Street", as you've said. Several companies raise funds, to buy these homes. Institutions the like of Blackrock and REITs invest in these funds, all the time. This isn't new at all, and has been happening for years. It's just been accelerating. Add to that startups like Arrived, and there's simply more pressure on this market then ever before, sadly.
I would be very against individual investors not being allowed to buy property for investment. I think most people can agree that corporations like blackstone/rock shouldn't be manipulating markets. It would be very bad to force blackrock to liquidate its current holdings of 230k homes. It could crater the entire industry and it runs into ex-post-facto issues. Assets need to maintain value or banks will fail.
In raw numbers of ownership, sure.
But make no mistake, during the housing boom post 2019, in a lot of 'hot' metro areas, "wall street" was buying way more homes than individuals. Especially in the south. In the area I lived in, Invitation Homes, some weird shell company of Blackstone, was buying up every piece of tract housing they could get their hands on. At one point, they were making agreements with builders building out new neighborhoods to not sell to individuals since they wanted them all.
So no, I care far less about what my neighbor is doing because he or she isn't attempting to price out an entire city.
Here's a report where you can see which areas have a high percentage of big investors (not just people who own 2-3 homes):
https://go.lincolninst.edu/whoa-mapping-corp-ownership-repor...
Looking at the map one might conclude that big investors buying up single family homes is a recipe for affordable housing.
LOL - Simpson's Paradox at play here?
Exactly, absolute ownership numbers matter less for housing prices than the proportion of corporate buyers in the market.
It might not solve the problem but we also have other countries buying up homes for pension accounts. Take AU for example doing this. Should be illegal regardless of the size.
Pension funds like Ontario Teacher's are institutional investors who would be barred as well according to this proposal.
As they should be.
If they then rent these houses out and keep them maintained I don't care that they own them. Of course they should not be allowed to have a monopoly on houses in any area (including indirect monopoly by agreeing to minimum prices with others). Landlord is an important job that someone needs to do for the people who owning their own house is the wrong decision.
> If they then rent these houses out and keep them maintained I don't care that they own them...
Pension funds don't do that (it's a headache).
Instead, they allocate a certain amount of capital to funds specialized in Real Estate who will invest in real estate firms like Greystar who are forced to maximize revenue.
Much of the financialization people keep complaining about on HN is because institutional investors are now much more demanding in comparison to 40 years ago when institutional investing meant putting all your money in bonds and a bit of domestic stocks and hoping to get a 5-6% return.
Basically, the Yale, OTPPF, and ADIA model goes brrrrrrr as institutional investors now demand double digit returns.
Even if they are the leader in percentage point rent raises, and do it 5x as often as every other landlord? And blackball a renter they don't like, not from 1 specific house, but from 10K all at once?
they don't have a monopoly so the problem is imangined
You're right. It doesn't matter though. People love 'big fixes', the reality of systemic change is hard to present in a 2 minute sound bite or Instagram reel. This is the kind of 'fix' that gets implemented, then when things don't magically improve people will just give up.
> Black rock isn't buying up all the housing, your neighbors are
To a degree, but there's a whole tranche of investment vehicles that accredited investors use to invest in single-family homes that is not securitized at all, and not on Wall Street. The whole fix-and-flip industry feeds into this now, loaning out money to turn houses into rentals that some LLC holds.
They do seem to have a significant impact on prices though: https://www.reri.org/research/files/big_ltrs_and_housing_mar...
If "Black rock isn't buying up all the housing" then how do you explain why Blackrock lost $17 billion in capital today?
https://xcancel.com/KobeissiLetter/status/200899449445747946...
It matters, you just dont want to know it matters.
I don't think a stock market reaction is a good way to measure their impact on the housing market. It's not that they aren't involved in the market, it's that their impact is questionable given the relative size of their participation.
The tweet says blackstone. Thats a separate firm from blackrock. And the tweets misleading in the first place, it's looking at the bottom of a candle which wasn't even the current price at the time of the photograph? And the stock closed at about 154.
Besides all this says is that it matters for blackstone...not for the housing market at large.
Ohhhh, sorry for my typo...
> Besides all this says is that it matters for blackstone...not for the housing market at large.
It means that blackstone cares about this, which means they like buying houses, which means it matters.
And the stock dropped 6% today. That is what matters.
A hit in the stock price doesn't prove or disprove their claims. What would disprove their claims is the number of properties Blackrock is buying and if it is affecting pricing at the margin.
Let's say Blackrock, with all their wealth behind them, buys a home in your neighborhood. What do you think they will charge for rent? Market average? Ha! No way. They jack up the rental prices because they can. That makes rental prices rise everywhere in the area.
If they charged far more than the market average in a given area then people wouldn't rent from them. Even if they bought up the entire area, people would presumably move to cheaper areas where they weren't jacking up the prices.
Now explain Tesla stock.
Perfect for a big splashy press release. Populist policy with no practical benefit to the average American.
I worked with these firms for several years when the business concept was in its earlier stages. The money coming in to buy these homes quickly went from family offices (2013-2019) to state pension funds (2019-present) to sovereign funds (2020-present).
Things like the largest pension fund in Sweden is invested in buying SFR. Or the sovereign fund of the UAE.
I’m not sure if that changed your opinion on this not having practical benefit for the average American.
More demand for homes makes homes more valuable and encourages more supply!
Why is this a problem? Build more homes, get rich from the Swedes!
Also, the headline on HN is downright wrong.
"US will ban Wall Street investors" != "Trump says he will ban Wall Street investments..."
This a Truth Social post from the President. It doesn't mean it has happened, will happen or will happen in the form that either Trump says it will or is being implied here.
This is a very difficult issue to properly address for lots of legal/logistical reasons. For example - many legitimate homeowners have their homes registered as LLCs and most home legislation is governed by states.
After a decade of national politics, and many decades of his "business", too many people still take "Trump says" as anything more than a piece of a con.
If so, then we can at least put that myth to rest and move closer to a real solution. The only potential downside I see here is that maybe it pushes the real solution a bit further down the road.
I agree, but besides the fact that people overlook that the “C” in LLC is “Corporate” and most private rental investors will have put their real estate in an LLC; is that the real problem at the core is cheap, i.e., devalued money and low lending standards, that has made inefficient and reckless lending and investing possible, essentially the inverse of the BNPL ticking time bomb and the cousin of the housing bubble, i.e., fraud.
With house prices being driven up by reckless lending through a debased currency, you enter a feedback loop where every inflating currencies drive prices higher, which only fuels a further frenzy of lending (including through FOMO) to driver prices higher once again.
Unless your neighbor happens to be named Mr. Black Rock, private equity and wall street investors are indeed the #1 buyers of residential housing stock right now.
This doesn't match what's been going on in my area. A local newspaper reported about a year ago that Black Rock owns 40% of the rental units.
Are my neighbors the ones sending me unsolicited text messages and letters about how they'd like to buy my property?
Moreover, the fundamental problem is lack of supply.
Building has not kept pace with growth in households.
I love these professional lawyers running defense for large corporations.
Random private equity newspaper isn't the most convincing source.
It has definitely cooled dramatically; even reasonable interest rates make the numbers pretty meh.
This feels very similar to the Canadian narrative that foreign (read: Chinese) investors are buying all the houses in Vancouver & Toronto. Does it happen? absolutely, but it's also a nice way to blame a segment that has no voice or recourse. It also allows us to turn a blind eye to the impact of a generation of essentially zero % interest rates and a country that holds twice as much of their wealth in houses as the US. Other popular targets: out-of-province home owners, vacation property owners, multi-generational properties.
There is no key word here. It's an aspirational assertion on social media. Everyone asking about how it will be implemented is asking questions Trump has spent zero seconds considering. He will maybe sign some EO that will have very limited scope but mostly he is asking Congress to figure it out. Given the makeup of the Senate it will require bipartisan support which means at least months of haggling if they even consider his request. So we really have no idea what the policy will be or when we'll see it.
Its true that its a small number, but when you look at the statistics as a function of "percentage of homes purchased in 2024" instead of "total percentage ownership of homes", it is a bit more substantial: My understanding is the number is closer to 2% for Institutional investors, and as high as 4% for major markets like Phoenix and Dallas.
What it will come down to is the exact wording of what Trump means by "large institutional investors" (his exact words on Truth).
(forgive me if I don my aluminum chapeau going forward)
> Black rock isn't buying up all the housing, your neighbors are.
So in '08 we saw the veil drop on the mortgage folks. For a brief moment the sort of advantage they were taking of individual homeowners (I'm including landlords here) was plain for all to see, because the systems they had built to extract that value had been pushed too far and started to break.
The really clever/evil/nasty thing that happened next was that they all said "we're sowwy" and pretended to close up shop on the Mortgage Backed Securities markets, while sowing the seeds for a resurgence in mortgage lending by having Fannie run REO-to-Rental programs that sold foreclosed homes in bulk to investors. It would have been too obvious in the numbers if large institutional investors had bought those directly, so they let mom and pop go into business as landlords, effectively buying obfuscation of the stream of finances for the cost of whatever margins they had to take a hit on to allow for low interest rates to pump housing prices up to a place where, like in 07, they could go back to fucking around with mortages.
In less word salady terms, the plan looked like so:
- "oh fuck we pushed it too far and here come the torches and pitchforks"
- Stop making money on mortgages, but we're investment banks as well as mortgage lenders, so we can make up for the loss of mortgage money by buying a more significant fraction of the housing market at near-zero interest rates
- Wait for low interest rates to pump housing prices over time
- Okay cool, people have forgotten about the whole 08 thing and we've peeled back all the subsequent regulation so we can go back to making our money bundling risky ass mortgage securities again <--- we are here>
The essence of the problem as I see it is that finance has gotten so byzantine and complicated that the only people who understand it in real time are the people who are actively trying to manipulate it to maximize their profits, and by the time it becomes clear what dirty tricks they're pulling they've moved on to the next grift so it looks like they're innocent.
The (now somehow) political position that blackrock is not the reason a house in Seattle is $1,000,000 is somehow the most hated position in America. Both my left wing friends and right wing family believe blackrock owns something like 30% of houses in America, and saying otherwise is heresy.
This is absolutely, violently, incorrect.
Private equity has absolutely been buying up (and building) U.S. residential stock, and this is addressing a real problem. The fact that Trump's doing it doesn't change my opinion at all, but it's absolutely the right thing to do and hopefully will be bipartisan.
Private equity has absolutely been buying up (and building) U.S. residential stock, and this is addressing a real problem.
Building more housing is the opposite of a problem.
It's not the opposite of a problem, it's orthogonal.
In this particular instance, what's happening is that it's crowding out and destroying diversity in the home builder market.
The model is built to rent out, and it's taking capacity out of the build-to-sell market. It's putting regional and smaller homebuilders that have traditionally provided most of the housing out of business because of their greater access to national capital.
We are seeing this everywhere in the economy. If you have access to Wall Street capital, you can put basically everybody outside of business and then set the price. That's exactly what's happening.
Do you have any source? Googling it tells me otherwise.
Here's a few examples:
https://www.thebignewsletter.com/p/messing-with-texas-how-bi... https://www.thebignewsletter.com/p/monopoly-round-up-corpora...
It's not confusing at all. There's definitely issues with private equity ownership of single-family homes. Although it is fair to say that the BlackRock meme might not be accurate, they aren't necessarily the key player.
Correct. More specifically, your upper middle class neighbors whose incomes have grown far more than middle earners over the past few decades: https://marginalrevolution.com/marginalrevolution/2018/03/cb...
The people responsible for the cost crunch middle class people feel isn’t billionaires. Bezos isn’t using his money to buy up houses or daycare spots in your neighborhood or Disney Word tickets. It’s upper quantile white collar workers. They are competing with the middle class for the same goods and services, but make much more money relatively than they did in past decades.
Daily reminder that the largest purchasers of residential real estate through these intermediary firms (since that's all they are... they own them in trust for others) are public employee pension plans.
Black rock shouldn't buy any family homes. Not a single one.
I'm sick of the arguments that rely on the meaning of "most/many/some/not all". The arguments are irrefutable because you can always weasel your way through the meaning of the quantifier, or the false implication that only the "biggest" of something needs redress before the next in line.
A person owning a second home is fine, that's one of the paths towards financial independence: small business ownership. Someone starting out in a tiny money making operation is a good thing, and they do not need to compete with a trillion dollar empire!
Cover those individual investors too.
Agreed, I think the simple answer is the tax rate is one thing for a primary residence and another for non-primary residences regardless of who owns it. For example in CA, Prop 13 stays in place for your primary residence, but properties are re-assessed every year like in Texas if it's not your primary residence. In addition, take away some (or all) of the tax deductions for SFH that aren't primary residences.
Rent would go through the roof and it would become even harder to get out of the rental trap. It's better to just have a very low hard cap on the number of properties anyone can own.
People being less likely to buy multiple houses is going to make it harder for people to buy a primary residence?
You think landlords won't pass their costs on to tenants? How do the tenants save when their rent is even more unaffordable than it is now?
That sounds right. And, I have to admit, it's pretty good politics to ban a mostly imaginary thing that is a popular talking point. Since it's barely going to affect anyone, it'll be easy to pass.
And it may win votes for Republicans in swing districts, since the "BlackRock bought all the houses!" line is heard much more often from the Left, meaning this is something you can show an on-the-fence voter to signal how you are against those evil Wall Street guys.
I wonder if he'll be able to resist slipping in some kind of small-time grift for a family member or campaign donor, though.
He's in real estate. Of course he has an angle. Hopefully they can get something worthwhile into the eventual bill anyways.
I would hard cap how many houses anybody can own to something like 4 - whether through an LLC or otherwise. Many countries do not or did not allow foreign ownership of residential real estate. It's definitely not in the interest of any people to have their very land taken from them. In the current climate that would likely take an extremely nasty turn so it's not the best time for it, but I would be very supportive of such a measure with an exception for permanent residents and spouses of US citizens.
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From the moment I saw this in the WSJ this morning, I was wondering what people were going to come up with in order to be against this obviously-good idea, just because Trump said it.
Now I know.
I don’t read this as being against it at all. They’re simply pointing out it doesn’t have that big of an impact because of a bigger problem that remains.
Institutional investors collectively nearly a million residential properties in the US, and continue to buy more. When turnover of inventory is only a couple percent a year, owning nearly 1% of the housing stock and not turning it over is a lot. Small landlord property turnover is much higher than institutions.
This action would have an impact.
Other problems will ALWAYS remain. That's no reason not to make a dent in what can be dented.
I'm not against the idea per se, but "institutional investors are buying up homes" is an effect, not a cause. Boomers demanded that "house values are never allowed to go down, only up" and put all manner of construction-preventing policy in place to make sure this happened, so of course institutional investors showed up. If there's an asset class which is only allowed to go up, why wouldn't they?
Banning institutional investment doesn't remove the "can only go up" laws and mindset, so I think (assuming this even happens, which it probably won't: TACO) the actual effect on prices will be minimal.
I don't know if you've noticed, but politicians aren't in the business of root-cause analysis or actual solutions. They are in the business of making things either slightly better or significantly worse for certain people.
This would make the situation slightly better for people who want to buy houses.
Perhaps it's the case I'm 100% for this mainly because my extremely low expectations for politicians have been met and exceeded in this circumstance.
I don't know why we have to be negative about something that makes a small improvement in something that sucks.
I have to admit, I'm very used to politicians tossing out non-fixes as a distraction when there's some problem, but your comment is the first case I've ever seen of a voter openly acknowledging that it's a non-fix, but being happy about it anyway. And not just that, but actually attacking the people pointing out that it's a non-fix, and casting sinister aspersions on their motives.
This isn't even shooting the messenger or the guy pointing out that the emperor has no clothes, I'm not sure there's an existing idiom for the thing you're doing.
There's no such thing as a "fix". Solutions don't exist in politics, only tradeoffs exist. This is a trade I'm quite happy to make.
If others don't want to make the trade, that's fine, I have no issue with that. But saying nothing will happen can't be true. If you remove demand from a market, that affects prices. There's no way I can take seriously a disagreement with tenets of Econ 101.
This would make the situation slightly better for people who want to buy houses.
To the extent that it has the effect of transferring some properties from rentals to sales, it's only better for the renter who wants to buy and who just barely wasn't able to. It's worse for renters who either don't want to buy or who still can't afford it, because rents will increase due to reduced supply.
How are you so sure this will be a definite improvement? Many well-meaning policies have had a measurable negative effect.
Too much TDS man. Not everything is about Trump.
Yeah, that's why Blackstone's stock fell 9% on this news. It doesn't affect them at all.
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Yes, It should be expanded that no company can own residential property, and more importantly, each person can only own one property.
People should go find something else to invest their savings in.
each person can only own one property.
You're going to need some exceptions. What happens when someone dies and leaves their house to their kids? What if someone's home is temporarily unlivable (say due to a fire or flood which requires extensive renovation) -- do they have to live on the streets?
And that's not even addressing the obvious question of what happens to tenants if there are no landlords.
The problem is supply, not distribution.
I think my suggestion would unlock a lot of supply, without expanding our cities or adding to urban sprawl.
Keep in mind, about half of all adults are married, so each couple can own two properties. One to live in, one to rent.
I imagine we could figure out some way to handle inheritance, perhaps we could give somebody 12 months to decide which house the want to keep, and which to sell.
Would that not make rental properties entirely illegal? That seems... complicated
There are people who unironically seem to want to do that.
I figure many couples would live in one home, rent a second.
The children could have one each too, perhaps only once they reach 18.
I think there would be plenty of rental stock still.
Rental single-family homes should largely be illegal. Short-term housing should be largely limited to apartment buildings and more space-economic structures. Littering the landscape with empty houses only helps bank accounts.
Still, I'm more than cognizant that there must be huge exceptions carved out for any of these ideas.
You find it hard to believe people may want to live in single-family homes temporarily? Or live in them without worrying about maintenance?
the owner could rent out their own house and rent someone elses.
it does make sense if you want to save a nice retirement home for yourself or a place where you want to raise your children while you work and live somewhere else.
that only works with a complete loop of landlord/renters and hence doesn't help anyone rent who can't own themselves....
right, i was just trying to point out that it would not make renting single family homes illegal.
it doesn't have to be a closed loop though. owners could be (and in my example most likely would be) renting an apartment/flat in the city which is not privately owned)
I think the idea is that nobody would prefer to rent if given a choice, and that everybody could afford to own if not for the presence of landlords in the market.
> I think the idea is that nobody would prefer to rent if given a choice
I'd wager about 25-50% of the population prefers renting. Lots of people don't want to be tied down.
Which is obviously incorrect.
Possibly but that is not the main argument. The main argument is about the lesser of two evils. Do we want to prioritize the open market of SFH ownership, or do we want to prioritize (maximize) the number of people who can own a SFH. Banning multiple SFH ownership would target the latter, with the tradeoff of a restrictive ownership path for wealthy individuals.
It will make very little difference in the end.
Australia's land tax system makes it effectively impossible for large corporations to own large chunks of residential property, but our real estate is amongst the world's most expensive and landlords are still awful - it's just that the landlords are hundreds of thousands of dentists and, yes, software engineers rather than corporate entities.
If you want housing to be cheaper and renters to be better treated, increase supply. Everything else is window-dressing.
In Australia we've treated the family home as an investment, a primary mechanism for wealth creation (rather than an essential for life) for far too long. I fully agree that supply is the #1 driver for housing affordability, but like many things it's mult-factorial. Tax incentives, market forces, town planning, land use regulation, etc. all play their role.
I'm hopeful that successive governments over here show the courage of their convictions and enact enough change that my kids have a chance of getting into their own places, same as I did.
Tangent: how should we approach changing the housing mix in a city like Perth where 95% of new homes are large four-bedroom detached houses? It's all very well saying "That's what the market wants" when that's also all the market supplies. How do we bootstrap the idea of smaller, denser, affordable, more-diverse housing options?
Current government has explicitly said that they will not lower hose prices:
"We're not trying to bring down house prices," Housing Minister Clare O'Neil declared on ABC's youth radio station triple j.
"That may be the view of young people, [but] it's not the view of our government."
https://www.abc.net.au/news/2024-12-14/housing-minister-says...
YIMBYs would argue (and in my view rightly) that if you allow townhouses and apartments to be built, the market will build them where there is a demand.
The only problem is that in the US, if you let apartments and townhouses to be built, homeowners will get muscled out by large builder concerns and single family homes will be converted into dense housing--which sounds great, until you realize there's no way those housing concerns will SELL those units--they're going to be rented forever. There's no incentive to actually sell those to people and every reason to keep them as rentable apartments forever.
So you have attractive locations being completely dominated by rentable corporate owned housing and the net outcome is that people are completely boxed out of home ownership. There's no way pricing comes down because they do this in areas where people are willing to pay top dollar to live.
I live near Ann Arbor and we're seeing it play out right now--more dense housing in the inner core is being allowed (as current thinking says should be done) and whats happening is that smaller old-timey landlords and homeowners are being pushed out and their homes and apartment buildings are being replaced with brand new high dollar rentals. Not condos (although there are some of those as well, but fewer), rentals. And the rental prices are going up! Normal people get pushed further and further from the attractive areas to live, and pressure from these people moving out pushes up rent in the surrounding areas.
> homeowners will get muscled out by large builder concerns
> homeowners are being pushed out and their homes
What does this mean?
Usually it means that supply gets bought up and converted (and leaves the supply, often).
The desire is that a row of single family homes (say a block has 10) get slowly redeveloped into a row of brownstones or similar density - but they're still single family and owned by the residents, but now you have 20 in the same space, or 30. You can triple the density and not really change anything else.
But what ends up happening is that the single family homes remain single family, get slowly bought up by a developer and rented, and then the entire block gets turned into an apartment complex, perhaps with the same or even more units, but they're all rentals forever.
This might be fine, and perhaps even encouraged in some areas, but it does reduce the supply of homes to buy.
Right, but how do homeowners get "muscled" or "pushed" out? Is it by the homeowners agreeing to sell their homes for a price they found acceptable?
Surely they'll sell if the price is right.
I mean, they could, but there's no incentive for the builders to sell them. You can make way more money with rentals (if the demand is there) then you can with condos. Condos are a way time hit of money, rentals are smaller profit, but comes reliably.
Right now holding rental apartments is a "good deal" and they'll have buyers for that (the builders don't want to hold anything usually, they want to sell, sell, sell and get building the next thing) - just larger institutional buyers.
When the market turns around (and every time in the past it was "only going up" it eventually ended) then suddenly you have apartment complexes turning into condos to sell off capital and stop the bleeding.
The problem for people "on the ground/in the rentals" is that can force you to act when you're not financially prepared to - it's easy to find situations where someone can afford the rent; even afford the mortgage to BUY the apartment as a condo; but cannot afford the downpayment (or otherwise qualify for the loan).
It's the same in New Zealand - property is the primary mechanism for wealth creation, and you have boomers with 10+ properties that they use for rental income for their retirement.
The issue is exacerbated by the tax structures not incentivizing investments in other assets - e.g. in NZ if you invest over $50k in offshore equities, there is an annual FIF tax that must be paid, even for unrealized gains.
“Show me the incentive and I’ll show you the outcome” Presumably most politicians own one (or more) houses
The fact that there is a housing crisis in most of the western world seems to prove this
> In Australia we've treated the family home as an investment
That's true of most of the Western world, unfortunately.
> a primary mechanism for wealth creation
I don't disagree but this needs to be correctly framed publicly as simply stealing from the next generation because that's what it is.
> Tax incentives
For anyone unfamiliar, Australia has a system called negative gearing. In the mid-2010s the then Labor party proposed scrapping it and lost the election. It really is the third rail of Australian politics. This is a shame because it needs to be scrapped.
It allows you to deduct losses on property against your ordinary income. So if you have a mortgage payment of $3000/month but only earn $2000/month in rent then your income is reduced by $1000/month. That's waht drives a lot of small investors to essentially speculate on property.
The US actually has a better system than this, which is that if you earn over a certain income level, you cannot deduct passive losses (like the above situation) against ordinary income. That would be better but still not enough.
So many upper income Australians essentially end up just hoarding property. They'll call it "investment properties" but really it's speculation. Historically, property was treated as an income producing asset, not a speculative capitals gains asset.
Oh and capital gains on non-primary residences should be like 70%. If you want to stop rampant speculation, that's how you do it.
> Tangent: how should we approach changing the housing mix in a city like Perth where 95% of new homes are large four-bedroom detached houses?
Perth like every Australian city is an urban planning disaster. It's just endless sprawl up and down the coast and inland to the hills. A generation or two ago it was a quarter acre block. Those days are long gone unless you're wealthy or you're 50km+ from the city (less if you go east).
So it's a car-dependent soulless hellhole. I say this as someone who knows Perth well. So even now if you build higher-density housing along transit routes, as they're doing, you still need a car (or 4) to go anywhere but work. And high land values make infrastructure projects incredibly expensive. Like imagine trying to build the Perth to Mandurah train line now instead of 30+ years ago when it was actually built. I guess they could utilize the Freeway they already had but what about the fremantle or Midland lines?
What you should do as you build out is reserve space for future infrastructure. AFAIK no Australian city, especially Perth, has never done. So Guildford Road or Great Eastern Highway should really be a freeway. Same with Albany Highway.
In 2024 Western Australia did really relax ADU (granny flat) development rules. The rules used to be really strict. Now you can basically always build one with normal building approval if you meet the minimum lot size requirements (generally 450sqm, sometimes as low as 350sqm, depending on the council).
Single family home zoning is really cancer to any decently sized city.
Anyway, the truth is, I'm not sure it can be fixed now. Big infrastructure projects are prohibitively expensive even with tools like eminent domain. We need to look at why it's so expensive to build apartments.
I think the only thing you can do now is for the government to become a significant suplier of housing to increase supply and stabilize rents.
Good points, thoughtfully made. As a resident of Perth, I (largely) endorse that description.
So much of the wealth of our middle- and upper-class is dependent on property ownership and rent-seeking, it's depressing. That population essentially needs to vote against their own self-interest to help improve housing affordability, so it's hard to see that ever happening. The best I could foresee is a government forecasting a stepped reduction of relevant tax benefits over time (e.g. in three years negative gearing gets reduced by half, then half again the following year, etc.) and then future governments honouring that commitment. As you pointed out though, it's a surefire way for any Australian political party to shoot themselves in the face.
I sometimes wonder how strong the demand needs to get for more-affordable housing before the market responds enough to matter. State and local govt could likely have a role in unlocking infill developments and increasing the allowed densities, but I'm not plugged into the planning system. I also strongly agree that state government should be more proactive as a housing supplier (in conjunction with private industry).
Lots of the issues would be "solved" by adequate supply of new dwelling units (which is a way of driving the prices down). There's really no other way of solving the "X people lived here, now 1.4X do, but dwelling units have only increased 1.2 times."
In the past this effect was localized and when housing prices went insane, it was usually in a city, or a region, not a whole country. And high prices would encourage development in the cheaper areas, and people would move "out there".
The problem with "increase supply" is that existing property owners rarely want that.
In almost all cities land has run out, so the only way to actually increase supply is to increase density. That means fewer single-family-homes, and more townhomes, multi-family, condos, and apartments.
The "American Dream" is a single-family-home, surrounded by other single-family homes, but even with urban sprawl we simply run into the limits of a commute and prices skyrocket.
Ironically we actually solved this problem: Indefinite Telecommuting. But then decided to take our solution that reduces property prices, reduces air pollution, and improves quality of life and then just threw it away because commercial property owners were losing money.
I think it's possible to make apartment/condo living more attractive in the US, but you'd need a few changes. For example:
* American apartment complexes are typically ugly as hell. They're little building islands in a sea of asphalt, disconnected from the wider street grid too. They'd be more attractive if they were more like the complexes I saw while living in Munich: more green up front, car parking basically all underground.
* Require substantial backyards/courtyards for said complexes.
* More tenant protections that prevent landlords from arbitrarily non-renewing a lease, so that people in apartments can have long-term stability. If you break the rules repeatedly or severely, then sure, landlords should be able to remove you, but otherwise you should be left alone to live your life.
While in Munich, we lived in the Solln neighborhood. It's mostly apartments of some kind (we lived in an apartment, and then a backyard duplex), but they just look a lot less ugly than they typically do in the US. Example area: https://www.google.com/maps/place/Munich,+Germany/@48.081098...
> The problem with "increase supply" is that existing property owners rarely want that.
Yup. I'm a weirdo who owns his home but wants a shit-ton more housing built in his city, even if it means my home value goes down. I do know some like-minded folks here, but I would be very surprised if we weren't in the minority.
And it makes sense. We're taught (in the US) to treat our primary residence as an investment, and for most US homeowners it's the most expensive asset they'll ever own, and will be their main vehicle for maintaining their wealth through their later years, and for transferring the remainder of that wealth to their children.
Given that, you'd either have to be self-sabotaging-ly altruistic, or otherwise wealthy enough (outside of your home) that a significant dip in your property's value doesn't tank your finances. I expect that describes a small number of people.
Increasing supply would see your property value rise astronomically. Suddenly there would be developers wanting to build a 30 storey building in place of your single family unit. The ROI on that 30 storey would be high enough for them to give you multiple millions of dollars for your land. What would decrease is the beauty of the neighborhood, but people can be taught to appreciate the beauty of highrise buildings
> In almost all cities land has run out, so the only way to actually increase supply is to increase density. That means fewer single-family-homes, and more townhomes, multi-family, condos, and apartments.
Existing property owners can only afford to hold this opinion because land rents are insufficiently taxed. Through some sort of monumental stupidity we decided to tax labor instead of land. In this sense the SFH, “Americans like suburbia” problem is just a function of poor tax strategy. If homeowners were faced with the economic reality of their choices then markets would fix land use by themselves.
> we decided to tax labor instead of land
I live in Wyoming. We don't tax labor. Just extraction, consumption (sales), some investments and property. Our property is still expensive.
> If homeowners were faced with the economic reality of their choices then markets would fix land use by themselves
The problem begins and ends with supply restrictions.
More than 70% of the US population lives in a state with state income tax. So I think it's fair to say that "we" tax labor, in general, even if it's not universal.
And regardless, "we" also means the US federal government here, and everyone in the US is subject to US income tax, regardless of which state you live in.
> it's fair to say that "we" tax labor, in general, even if it's not universal
The point is we have a natural difference-in-differences layout, and it doesn’t sustain the hypothesis that taxing labor is the problem (for this effect).
That means the American Dream is unsustainable, and until people can break through the entrenched interests and do something rational, American cities will continue to decline.
> In almost all cities land has run out
That's incredibly untrue. There are numerous cities, even in CA and NY, that have plenty of room for new single family homes.
The response to that is usually some variant of "eww, gross".
More importantly, there's huge tracts of land that could be new cities.
In the past, we had that incidentally or almost "accidentally" as new industries would create or vastly expand existing towns, and development would occur around them.
Now most "work" is more fluid, and doesn't build company towns, instead you get endless suburbs expanding off an existing city, even when they're technically their "own legal framework".
Even after we moved off the "factory town" type new cities, the suburb development wasn't a major issue because each new exurb usually involved a new highway direct to the city center - but new highways have been rare mainly because all the "reasonable" ones have been built now.
You could either create demand for cities somehow (look at Las Vegas, built out of nowhere) or you could use high-speed commuter rail to empty areas to give room for a seed to grow.
Where else do we simply accept that incumbents get to have full protection from loss at the expense of literally everyone else? Certainly other examples exist but we certainly wouldn’t tolerate wheat farmers stopping their neighbors from growing wheat.
No, we threw it away because executives wanted their control fantasy of being able to push people around like little chess pieces, as opposed to setting a vision, hiring professionals, and then giving them the tools to achieve the vision and staying the hell out of their way.
can someone who downvoted this comment explain why? I'm guessing you're management and find it offensive? Feels pretty accurate in my experience
It's a good start. Would be nice to add a gradually increasing tax on multiple home purchases, e.g. buying a third home has a 5% tax, 4th 15% tax, fifth 25%, and if you want a sixth home you have to build it yourself. Would prevent regular people from buying up dozens of homes to rent.
Changing the excessively huge (and probably financially needed) capital gains deduction for selling a home and buying a new one to only work if you literally buy new construction - would probably spur something.
Existing stock would be depressed in value as the pool of buyers would be smaller, but they'd be more likely to be first time buyers anyway (no capital gains to deal with) and demand for new would increase.
But you could end up with insane inversions where existing stock was pulled down to build new to take advantage of the gains exclusion.
It should be much more punishing from the 4th home like 45%. One can understand 2/3 homes, e.g., one to live in and the rest as investment for retirement income. More than that is just greed. Also, if you don't live in one of your properties, either sell one to keep the total number within 3 or pay additional tax.
if you allow each person to have 1-2 investment homes then you have the exact same problem but now it's decentralised and more people (more voters) benefit from the problem continuing to worsen
We have a significant number of problems related to housing; generally I would call it a demand side issue not a supply side however.
My reasoning is we have a massive construction sector compared to other nations, with a relatively high productivity in terms of dwellings built per capita. We also have pretty slack standards, with even weaker enforcement.
In addition to that, we have a very weak growth in productivity per capita; and since we are trying to rapidly grow, we have to play catch up to provide the same level of services. This needs to happen while our construction sector is stressed, so the same amount of wealth goes a shorter distance again.
You can also see this in rental prices; negative gearing should allow the capital price to decouple from the rental yield to a larger extent than without it; but we still see high rents...
>It will make very little difference in the end.
It will make very little difference if Wall Street investors hold very little property.
Putting a finger on the scale of how much real estate is individually owned definitely makes a difference though. It makes it worse.
100,000 individuals who own 100,000 properties have far more political power than 10 companies who own 100,000 properties.
>If you want housing to be cheaper and renters to be better treated, increase supply. Everything else is window-dressing.
Yes. However supply is artificially restricted by government, to the approval of the average property owning voter. So more specifically, that is what needs to be changed. Everything else is window-dressing.
This is a country sliding further towards being us, with their housing being more restricted and more expensive.
> 100,000 individuals who own 100,000 properties have far more political power than 10 companies who own 100,000 properties.
Is that really true in the US?
100,000 votes (and really probably closer to 150,000 influenceable votes across those households) is a significant number compared to 10 companies who own an average of 10,000 properties each, yes.
Companies with tremendous wealth manipulate voters and lobby their representatives. Don’t presume that voters are remotely well-informed of who backs their interests.
If wealth could simply buy elections then Clinton would have won over Trump in 2016 and Sanders would have won the primary over Biden in 2020.
Consider every other expense that people have that's supplied by companies (see: literally everything). Why have those companies not successfully lobbied to prevent competition? Industries where it happens are the exception, not the rule.
As long as houses are treated as an investment, there will be all kind of incentives to make them go up in value.
China did "over" solve it by building loads of houses, so everyone's house value just crippled down like crazy.
If buying a house delivers 5–10× the ROI of the S&P 500, that’s not “smart investing” then there is a huge problem to be addressed ... (preferably by building more)
>China did "over" solve it by building loads of houses, so everyone's house value just crippled down like crazy.
That's not really a bad thing unless you believe real estate should be a vehicle for investment. However, in T1 and T2 cities asset prices are roughly on par with western major metro areas. However, property management fees tend to be lower. I suspect the Hukou system contributes significantly to keep housing affordable, and it's not just the massive supply.
5–10× the ROI of the S&P 500 - which is really only true because we allow massive leverage on real estate that we'd not on stocks themselves.
And leverage brings all the problems associated with it; if you own your house outright and it goes down %10 you're out 10%; if you only have 10% equity and the same happens you're down 100%. The gains, of course, work similarly which is why for so long it's been a heads I win, tails I win.
> increase supply
There's a counterpart to supply in supply-demand. I wonder if we could also adjust that.
> increase supply.
THIS. If Supply & Demand just feels too complex, then spend a day watching kids play musical chairs.
Well said. A solution so simple and obvious it’s clear why Americans haven’t gotten there yet
I've heard that japan has a system that keeps real estate dynamic with lower prices.
Have you read anything on this you could point me to?
here's something: https://news.ycombinator.com/item?id=33418125
And reduce demand, by not importing 3% year on year, where we can't keep up
The window-dressing is great. You get the votes from the renters because you are doing ”something”, and you get the votes from the landlords because property values remain high
Certainly this is better than nothing though, right?
>>If you want housing to be cheaper and renters to be better treated, increase supply. Everything else is window-dressing.
You can also look at reducing demand due to mass migration.
Yeah, start wars with NATO allies and people will flee your country like it's 1940.
Right, and the large corporations just buy up all the service companies in the area and squeeze both the landlords and renters at once. The only way to achieve fairness is straight socialism.
It will make a _small_ difference, and then also banning individuals from owning multiple homes would be a bigger difference (and then building enough supply, the biggest). We can do all three.
Increased supply comes in majority black and/or low-income neighborhoods here and it's "luxury" units all the way down. Gentrification is the name of the game, while simultaneously reducing social services.
In that light, this move is A-OK with me.
> It will make very little difference in the end.
I feel like there will be a difference between a handful of large corporations owning a majority of properties vs thousands of dentists and software engineers. Are you saying that all of these property owners are also soulless profit-optimizers?
I remember watching some video of tenants being priced out of their rental apartments so when they tried to contact the property owner, they found layers upon layers of managers and companies. It just seems better when there are more thousands of owners than just a handful of corporations.
You would feel that, but you would be wrong.
Small businesses are often just as ruthless as large ones, just less competent. In any case, most rental properties are managed through agencies, who are soulless profit-optimisers.
So what’s your solution exactly? No businesses at all?
See my OP.
In short, the appalling treatment of renters in Australia is due to the chronic undersupply of housing; if landlords had to compete for tenants it would not be possible to mistreat them in the way many currently do.
There is also scope for better regulation of tenancies and indeed the Victorian government has passed some reforms in this area.
That’s… not what they said, you’re putting words in their mouth
It's the opposite in the UK. Most landlords are individuals, own one or maybe a couple of properties.
It's awful, rogue landlords who do everything they can to not do repairs or improvements and when they do it often comes after a long time. Often as they have underestimated all the expenses they're liable for and find that the profit is not very much.
Give me a company that owns a whole block every day, they've modelled the risk better, have economies of scale, and you have more recourse against them.
IME companies are worse: professional investors highly focused on maximizing profits - driving up rent and minimizing costs - rather than a long-term investment by someone with another job, a sidelight and retirement plan.
I don't see how you have more recourse against a company with lawyers that can ignore you, and mom-and-pop. The latter are much more likely to respond to reason.
Of course, any landlord can be bad.
> I feel like there will be a difference between a handful of large corporations owning a majority of properties vs thousands of dentists and software engineers. Are you saying that all of these property owners are also soulless profit-optimizers?
Do we want to trade crazy high prices in the American real estate market for absolutely crazier high prices in the Australian real estate market?
That is a bit simplistic though, there could be other things going on in Australia, and all the other rich countries (e.g. Switzerland, England, China) where American prices look like a good value. I'm sure at the end of the day supply is the main factor, and not having a hot economy also helps, so I'm sure the USA will get there fairly quickly.
And, everywhere, it's about people wanting to live in some specific cities. Even a bit outside of those specific locations isn't necessarily particularly expensive. (Leaving aside ski resorts, especially nice college towns, and the like).
I don't know...some countries are just expensive full stop. Lausanne for example, and since public transportation is good enough, you can live outside of the city and still get to work...so those places just get expensive also.
Australia I assume you mean the few places where people actually live in the country vs. the undeveloped outback?
I don't really have specific knowledge of Australia but within an hour or so radius of Boston/Cambridge (expensive cities), there are reasonably priced exurbs. (Also expensive suburbs/exurbs of course.)
Australia is so big that there's still plenty of land available where you could build new cities (and not just in the desert).
It's just that everyone[1], given a choice, would like to live near the beach in Sydney's eastern suburbs[2], and there is most definitely no more land available in those suburbs. So the only alternative is to build up, and the boomers sitting in their multi-million dollar houses that were originally bought for $3.95 don't like that prospect one bit.
[1] Not everyone, but you get the point.
[2] and Melbourne's inner east, and the desirable parts of Brisbane and Perth.
Don't be a coward, and talk about demand for housing, which in Australia is driven by sustained mass migration.
The inevitable outcome of this is increasing homelessness, and likely slums when homeless just start building themselves make shift shelter in such large numbers that authorities can't stamp down on it.
We're not supposed to notice that the best thing about migrants (especially the illegal ones!) is that you can cram them 10+ to a house in squalid living conditions that would be abhorrent to most.
It's a price we're willing to pay since we're not paying it.
I mean the only downside is the lowering housing and working standards of the native born working class population, but who the fuck cares about them right?
One additional important detail: if this gets implemented at all, hopefully it does not affect the common practice of having a self-owned LLC owning your home. This is common for the purposes of keeping your personal name out of public records; it is far too easy to link someone's name and address, and people at risk of doxing can do this to protect themselves.
Personally I feel people and especially corporations/REITs do not have the right to hide what real estate they own. Sure put it in a trust, but the public has the right to know who controls it.
I have a friend who has someone who has repeatedly threatened to assault her, and her primary protection is keeping her address hidden from him. Should she never be allowed to own a house at risk of being assaulted?
Maybe have a limited exception then, like rape shield laws. You don't need to gut the entire framework for this rare situation. (Plus it would be fun to watch corporate lawyers try to exploit this loophole.)
Or maybe just stop telling people what cases are "legitimate" reasons to protect themselves and what cases aren't.
I know multiple people who have gotten death threats because of technical comments they made online, or just for having the temerity to exist as a member of a minority group. Not the vague "I'm going to kill you" kind, the "here's a picture of your front door on Google Street View, and an unsolicited pizza, I could SWAT you at any arbitrary 3am, have fun being afraid" type.
I don't feel like the solution to this is having victims set up LLCs.
It isn't, but that's the best solution that is currently available to people.
A better solution would be to stop putting people's addresses in public records, and eliminating data brokers that expose name/address correlations.
You're advocating taking away, a method people have to protect themselves, with a simple "oh, I'm not so sure".
How about you make an iron clad promise people will be safe? How about if someone dies because of your minor concerns, you go to jail for life?
Would you be so "oh well" then?
If not, you're probably not taking people's very lives seriously.
I mean I get where they are coming from. It doesn’t strike you as a little odd that people have to protect themselves from dangerous individuals stalking them by setting up businesses? That’s not a little circuitous/indirect? Is that really in line with the purpose of setting up a business in the first place?
It’s not like that’s the only way to hide your identity, it’s just one currently available. Plus it’s a very trivial to look up who owns an LLC at least in my state. Not the best solution IMO
Either way I think you’re being a little uncharitable towards them. I don’t think they’re trivializing it, I think they’re asking a very legitimate question.
Do you find this style of argument to be productive?
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I think its pretty easy to separate investment properties from primary residences when it comes to transparency requirements.
This is pure whataboutism and made in bad faith. I feel for your friend (if they exist beyond you trying to make an argument), but there are various physical and legal ways to protect yourself from this situation in the US. This edge case is not a good enough reason help shield foreign oligarchs and large corps holding real estate in secret. There is probably a compromise somewhere between both extremes.
> This is pure whataboutism
This is by definition not whataboutism. Whataboutism is when you distract from a thing with unrelated things (e.g. "but there are more important bad things going on in the world than this!"). It is not whataboutism to bring up legitimate related counterarguments for a policy.
True, I did misuse it to a degree. I was actually a bit unsure.
You'll have to trust me that she's real, but I promise you that this is a real situation that she's actually concerned about.
Where do you stand on encryption? Do you feel like the "I have nothing to hide" argument has any merit? If you think people have the right to privacy, why should real estate be an exception? I personally find the fact that real estate ownership is public in the US to be quite bizarre.
Property is a physical thing in the real world that has been here long before anyone "owned it", and will be here long after all the "owners" are gone.
The public, i.e. the people on this planet, have a right to know who is claiming to own which part of the grass and soil that we all share.
They have the right to know that, but why should they know the transaction price?
To support a fair market of property value
> Where do you stand on encryption?
This is a really complicated and broad topic that I cant take the time to type out here. I do not stand on the side of "I have nothing to hide." I fully understand the risks of that position. People must keep some secrets to protect themselves from society. Especially as everything devolves into increasingly strict "purity" tests.
With that said, I don't think the right to obfuscate real estate transactions is the same as spicy personal beliefs/private conversations/etc. IMO there is nothing more public than real estate. I do not consider real estate transactions as protected speech nor one that can be legally hidden. We live in this world together.
> common practice of having a self-owned LLC owning your home. This is common for the purposes of keeping your personal name out of public records
I have a hard time believing lots of people care to do that - not many take steps for privacy - or have the resources or time to setup an LLC.
People who have been stalked or are uncomfortable having their details published for the world to find need privacy.
Privacy mechanisms aren't just what applies to your or my perspectives, there are millions of other situations. For example, most counties in Texas identify the full legal name(s), phone number(s), and mailing address(es) of every single property owner and their tax payment amount and status. That'd get really weird, real quick for celebrities if there weren't any concealment mechanism.
Privacy isn't a binary or continuous thing, but is possible to varying degrees and requires navigating government and business processes carefully.
I agree, but most people don't.
> or have the resources or time to setup an LLC.
Costs about 200$ at most places and can be done online.
Owning your family home through an LLC, depending on your state, is often a bad idea.
There are generous protections in most states for your personal home that you lose if it's owned by an LLC. This includes things like a homestead exemption in bankruptcy protection.
In Florida, for example, there are better options to keep yourself anonymous. Florida has something called a land trust [1].
[1]: https://www.jimersonfirm.com/blog/2024/04/understanding-the-...
I feel like mortgage lenders should legitimately wonder why they’re lending to an LLC or a trust rather than an individual. I’m not sure there’s a good answer.
Houses are also put into revocable living trust to avoid probate when kicking the bucket.
There has to be some nuance. Companies are known to either rent of sometimes own housing for personnel who travel to other offices. Universities typically own housing as well. So maybe it’s something like it can’t be one of the main businesses of the corp to buy up residential housing as an investment tool.
I agree in principle, but companies (and individual very rich people) are amazingly inventive when it comes to finding loopholes in the "nuance".
I mean, the ideal amount of nuance is to not ban this in the first place"; right now we're talking about damage control for particularly critical subsets of uses.
> Universities typically own housing as well.
I'd expect that argument to carry negative weight with the folks trying to do this, given the hate they have for universities in general, and the love of privatization.
> critical subsets of uses
I don't consider rich people trying to hide their identity to be "critical" at all. Maybe having their address public will be a way to force them to act with consideration of the community instead of just themselves for once while they hide in some anonymous mansion.
> rich people
What part of "people at risk of doxing" made you jump to "rich people" rather than, for instance, "people in groups commonly attacked"?
> force them to act with consideration of the community
By doing what, precisely? "Have you tried not being (commonly attacked group here)?"
Only rich people can afford houses in the US, ergo.
~65% of the US is rich?
Keyword was "afford" not own. The average person can not afford to purchase a home (without having to uproot their entire life).
Some numbers and definitions would go a long way here
So basically you're subtly encouraging violence and intimidation, and want that to be easier than trying to find someone's "anonymous mansion."
Rich people aren't the only ones that want to hide their address. Stalking/DV victims can use this too, or even just a regular person that prefers privacy.
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> a self-owned LLC owning your home
Trusts are in the same boat. If you're using the LLC as a pass-through, these restrictions won't apply to you unless an orange cat is charged with drafting.
Is it not public in the US who owns a company?
https://legalclarity.org/how-can-you-find-out-who-owns-a-bus...
Why should you be allowed to create a corporation that has no actual purpose other than a shield for your own private concerns?
Ideally, it should not be possible for random hateful people to easily get name/address records from local governments, but that's unfortunately not the world we live in yet.
They could just buy it from data brokers.
Indeed. I was in Sweden and learned that you can look up someone's address and pay on a government website. I think there are some "are you human" checks, but it's basically all in the clear.
It creeped me out a bit and then I was angry when I realized it's the same way in the US, but maybe worse. In the US this is possible too, you just have to pay private data brokers and a bunch of middle men make a cheap buck. Employers sell your pay data, websites sell your address. Everyone makes a buck at your expense.
If you know the region they live in, many counties in the US now let you search property records by name from a simple web form.
Most Texas counties put all their residents' complete, real-time information out there with zero impediments to scraping and wholesale harvesting. Appraisal value, tax payment and tax status, mailing address, full legal name, and phone number. Basically a scammer, stalker, and data broker goldmine.
I completely agree, but this isn't the fix. Corporations should be expected to behave like corporations. Having said that, I wouldn't argue against keeping it until we had some better privacy laws and practices in this country(/world)
You are right, it is completely absurd. And it's great! Anonymous companies and tax havens (domestic and international) are something completely contrary to how society at large is organized. And it is the best thing which has ever been invented. They are accessible to any person who has about a thousand dollars, no matter your race, sex, age, ethnicity, family name, political affiliation, or any other factors except that tiny sum. If you're not born into wealth or into a politically connected family, making an LLC is the only opportunity you have in life to not be a human battery in the Matrix. And it's easily accessible to anyone. Incredible.
There are lots of benefits to putting your home into a living trust. It just has one side effect of hiding your name on public GIS of tax parcels. One reason to do a trust is so that you can alter who benefits from it without amending a will.
You should be allowed to do whatever you want, by default. Preventing things only make sense if there's good reason to.
Otherwise everything you do, you have to first think about whether you are allowed to, like a slave.
Maybe they can just own one?
So basically you want to give a loophole for Wall Street to cosplay as regular people.
No thanks.
https://news.ycombinator.com/item?id=46532033
https://news.ycombinator.com/item?id=46532004
It costs relatively little to create an LLC. This is not an uncommon pattern for people in groups commonly targeted by hate-motivated doxing and similar attacks. This is not a "rich-person trick", and if you can afford a house, the cost of an LLC is a very tiny expense by comparison.
LLC annual registration is up to $800/yr in CA, including foreign LLC's. I don't think $800/yr for privacy is a "very tiny". Not to mention you would need to pay an owner of record, probably a professional, to have their name on the LLC.
EDIT: A quick web search shows that an estimated annual cost of $50-$400 for a registered agent in CA. So the cost is closer to $1k/yr.
Living in California is expensive in general. Average LLC costs in the US are under $100.
> Not to mention you would need to pay an owner of record, probably a professional, to have their name on the LLC.
Whether that is public record depends on the legal requirements in your state. And in any case, costs for registered agent services are typically comparable to the costs of an LLC.
I have an LLC registered in Nevada. I neither live there, nor do business there.
Most states allow for this - I don't know about California, though.
This is an often conjectured example. California allows for that, but it falls under a foreign LLC registration to get it recognized by the state. It turns out that the annual foreign registration fee matches the in-state one. So this ends up costing more if you want it to be enforceable.
> California allows for that, but it falls under a foreign LLC registration to get it recognized by the state.
That's what I mean: California may be different.
In my state, I don't need to register anything for the Nevada LLC.
I’d need to see numbers about how many such people cannot otherwise be found online. If we all pay higher mortgages and rent to subsidize those who use loopholes, it’s only possibly worth it.
hate-motivated doxing? That doesn't sound like a real thing except for maybe famous people, so we're basically back to rich people.
You are factually incorrect, and attempting to invalidate real people's horrifying experiences. "Existing on the internet" != "famous", and "famous" != "rich".
This technique is used by a very solid fraction of people who's job is to do things that are somewhat bad for either a lot of people or very bad for a few people.
So your local cops, everyone on every local commission except the secretary, journalists, payday loan and tow company owners, etc.
"Real estate investors, both individual and institutional, bought one-third of all single-family residential properties sold in the second quarter of 2025"
https://www.cnbc.com/2025/10/07/home-sales-investors-make-up...
As long as we have this focus on using homes as investment and rent prices are kept high through collusion, the industry refusing to build "non-luxury" units, and regulation hurdles stopping new entrants, we will be stuck with this problem.
Rent is high because you aren’t allowed to build in high-demand areas, and it takes a huge amount of capital with limited return.
If your rentoid decides to rip the copper wiring out, or not pay their rent for a year, then you’ve wiped out 10 years of profit.
> the industry refusing to build "non-luxury" units
This is a government policy failure. Because no one is allowed to build fast enough, there is always a demand for luxury (higher profit) and thus that is what gets built.
You have to completely satiate the demand for luxury housing before it becomes "desirable" to build new standard housing. In years past the "starter home" market has completely been reselling past housing, even what was lux at the time of building.
Why would you spend your time and effort building a house that earns you $50k when for the same time and effort you could build a house that earns you $150k?
You'd only do the first if the second wasn't available.
The government in this case being your city council
Houses are expensive because supply is constrained. This new rule would do nothing to increase the housing supply.
In fact, quite possibly it could do the opposite because we’re softening the demand signal.
This will help out home prices in a lot of lower priced markets, but do little in higher priced markets. In the Bay Area, many houses are bought up by non-occupying internationals. I've been in a couple of such houses. It's bizarre walking into a $5M+ hilltop mansion that's completely bare inside except for a token "student" living out of one room.
Banning people from other countries buying home is both more sensible and more practical than this, which is why very many countries do it.
"From" other countries is overly broad and I assume not what you intended. I am actually interested though in the idea of legislating how frequently home owners have to actually be within range of the home, for example. A friend has had a hell of a time with a landlord in Malaysia who's never seen the property.
They do it by citizenship, and you might be surprised how many investment properties are vacant homes, but I’m not necessarily advocating for this in any case. The real cure would just be right to build laws.
The problem is, you can’t do that at the federal level, and the people who vote at the local level are the homeowners who benefit from housing restrictions.
The federal government has a very difficult task. They want to make home prices basically stay flat for a long time, and they have limited tools with which to do it since they can’t do the one thing every economist agrees would solve the problem.
Could homeowners be convinced with truckloads of money? As in, yes if you increase density beyond demand the value of each individual home decreases, but the value of the land dramatically increases if suddenly your single family home with a lawn could be converted to a 9 story tower renting out units to 20+ households with infrastructure spending diverted to your area to improve it. Are landowners unaware or just do not care about the profit potential?
I just don’t think it works that way. The developers don’t buy existing homes, they buy farms and golf courses and large vacant tracts. They don’t frequently just like buy 4 homes and put 20 where they had been.
Most people have most of their money tied up in their home equity and would lose an amount that hurts
Many countries prohibit non-citizens from owning any real estate or businesses at all, even if they have a long-term resident status. Thailand is one example. Ownership is limited to 49%, a local partner must own at least 51%.
does that work out in their favor in the end? seems like that would really deter investment in the country. I'm not familiar with any large thai corporations.
Citizenship or long term visa would immediately cut out 90% of the foreign speculators I imagine.
Someone from another country taking ownership of land in your country is practically an invasion.
I'm not sure we'll get china to buy our debt if we do this
related to: Warren Buffett's Thriftville
Its even done in some US territories!
Kind of great to have someone paying property taxes and using minimal city resources.
Feel like that would be cancelled out by the opportunity cost of high network individuals not spending in the area.
Do the math of what it costs a city per resident - napkin math it, total tax intake divided by population. Now compare that to the additional taxes and money that person (who is wealthy) is not injecting into your city.
So out of touch to think the net spend of a gov directly on an individual would be worth sacrificing all of that additional capital injected to your other neighbors and their businesses.
Yes but the area would collect far more revenue overall if an individual of commensurate means was actually dwelling within the dwelling.
Except land is one of a city's most important resources, and they often aren't paying much property tax (https://en.wikipedia.org/wiki/1978_California_Proposition_13).
It's the same in Southern California. When I sold my first starter home it was bought by internationals to rent. There were already multiple homes on the block owned by foreign interests.
And at the new home I moved into, the house next door is owned by foreign interests and rented out to the highest bidder. It makes it extremely difficult to get anything done that involves shared areas (like common fence or overhanging trees) because the owner is essentially unavailable and doesn't speak english. Not to mention that every year or so we have to deal with renters who are minimally vetted. We've had a group of 5 college kids turn the place into a frat house once. There is also a property management company involved, but they can't get in contact with the owner either.
In my experience, this seems to be a bigger issue than wall street investors.
What is the mechanism that you believe would cause this to lower home prices? Early signals are that the announcement alone will increase prices
> many houses are bought up by non-occupying internationals.
Maybe they are next?
As others have noted:
- Whether this is needed or helps depends not on percentage of owners or buyer/sellers, but on the effect in the market of such players. REIT's have an outsize effect because they are repeat players, and thus lucrative clients for brokers, who qualify themselves by skewing local markets accordingly.
- Policy-wise, it's hard to distinguish by size: second homes, mom-and-pop with a few rentals, REIT, private equity. (This is how corporations get free-speech rights.)
- Politically, it's a shame that a real problem is addressed via scapegoating
- Practically, it will have little effect since REIT's and home builders are sitting on a lot of inventory that they can't sell, so they've stopped accumulating (and they're resorting to secondary offerings to pay off the original investors). Indeed, to the extent this stimulates buying, they're all for it.
- Ethically, the US has been a magnet for money laundering, much of it via real estate, which has pushed up asset prices and de-conditioned professionals. Scapegoating only delays reform.
I'd be fine with a policy of "you can rent housing you build" for American corporations.
If a corporation thinks there is demand in some city, goes and build housing for that demand and then rents that housing, that is good for the world.
Would be a better policy than letting corporations use their access to capital markets to outcompete individuals trying to buy a house.
> I'd be fine with a policy of "you can rent housing you build" for American corporations
Builders are more concentrated than landlords in pretty much any geography. A concentration that scales with the amount of bureaucracy and bullshit required to get permits.
You can rent a home after you’ve personally owned it and lived in it for 10 years? That would cap any individual to 3-4 rentals in a lifetime
We need more rental units, and it isn't clear how that policy would help the situation.
These things aren't mutually exclusive. There's a supply problem and it depends. You'd be right if there was only a demand for rentals, but people also want to buy homes to live in, and currently those people are completely priced out of the market by landlords because they've bought all the homes as investments. A landlord can buy a 10 bedroom sfh and split it up into student housing near a university (good), or they can buy a 2 bd bungalow and price a new family out of the market (bad). It just depends. It depends entirely on the market.
We need more houses for sales and this would incentive people to create it.
Need to think about this some... Would this end up being another way for MegaCorp to extract wealth from the rest of us (similar to student loans)? All new housing ends up rentals, and a generation+ of Americans are unable to use homes for storing/building wealth?
We know using housing as an investment, at an individual level, is problematic (NIMBYism and failure to infill/redevelop/etc). Not sure how incentivizing MegaCorp to do the same on a massive scale fixes anything?
Simply greatly reducing loans available to small investors for non-built rental properties would do that.
The key is increasing supply, and we should directly target that issue (or decrease demand, but people don't like that side).
"The key is increasing supply" assumes the goal of new housing laws should be to increase supply and bring house prices down. But a lot of people do not agree with that goal. Many people are homeowners who will get tens of thousands of dollars richer if there is less supply and prices rise. And in America at least, homeowners have more votes than renters or builders or landlords or the homeless or other groups. So new housing law tends to favor the goals of homeowners, not the goals of other groups who want more supply.
It's more complex than that. When I'm not looking to sell, I certainly don't want the assessed value of my house to increase. That just means, higher property tax bill for me.
Also, houses get older every day. Tastes change - ranch, open-plan, multi-story, multi family get more or less valued as time goes on. Not just 'fewer houses means better resale value'. In fact, a shortage may not change housing prices at all - sometimes it just makes them sell faster.
It's easy to take a complex picture, connect a dot or two and draw a line from someplace to some conclusion. But it's always a trickier picture than that. You gotta consider more dots and connect them all.
I think too many people jump to the easy-to-understand "owners want to get richer" conclusion without actually engaging with what people are saying and voting for. Often the results of the voting may be related to property staying somewhat scarce, but (in my experience) the vast majority of people don't really care about the value of their house as long as it doesn't go substantially down.
Assessed value raises (and drops) shouldn't directly affect property tax assuming the whole area raises and falls (in most areas) because of how the tax is apportioned.
The reality that people don't want to deal with is that it's personal and it is slow - there is no SimCity-style bulldozing and redeveloping without pouring in tremendous amounts of money, because people like living where they do and it's hard to get them to move involuntarily.
Then it would be lucrative to buy up land and sit on it to hold a monopoly on the competition. Can’t build or rent what you can’t buy.
I suppose that depends on the way the property tax system works. Paying 1-2% property tax each year on empty land does not seem like a path to riches.
2% property tax is cheap compared to inflation and how quickly property values have been increasing.
Maybe if it doesn't include property with existing homes that you tear down.
None of this has anything to do with "affordability", which is not about shifting rentals to owner-occupied properties, but rather reducing the monthly cost of residing in areas with opportunity. The notion of home ownership as an absolute good is a driver of unaffordability.
Yup. Building wealth through home ownership directly implies homes becoming unaffordable for new buyers.
Right. There are good financial reasons to own a home even if you don't think it's going to be a great investment, just as there are very good reasons not to own a home even if you have the means. It's the absolute, which is the premise of this policy proposal, that's the problem.
And home ownership rates are well within the normal range for the US post war regime! So this is a policy proposal that will likely decrease affordability to fix a problem that doesn’t exist.
Homeownership rates are only ~flat in aggregate because the population is aging and older people are more likely to own their homes. The homeownership rates of Americans aged <35, 35-44, and 45-54 are down ~10% since 1982 and continuing to decrease. https://www.census.gov/housing/hvs/data/charts/fig07.pdf
You just told a story about how we need to build more housing. Kasey and I agree with you about that.
The point is that there isn't a distortionary corporate investment force preventing young people from doing that; what there are is zoning and permitting rules locking every desirable location into stasis.
I agree philosophically though there is a lot that can be done short of upending the entire American wealth structure like removing barriers to housing construction (to dramatically increase supply) as well as subsidizing first time buyers eg with preferential mortgage rates and tax write offs.
* Dramatically increasing supply will dramatically reduce home prices. That's the point.
* Subsidizing first-time buyers will increase home prices. That's the opposite of the point.
Not true re #1, yes creating a glut of housing beyond demand in the market would reduce home prices, but other markets like Tokyo that do build a lot of housing still see increasing home values despite stable prices. Land value goes up, but units per unit land goes up too, so each individual unit does not necessarily go down. Maybe the value of your physical single family home goes down, but the value of the land it stands on goes way up when the density and infrastructure around it intensifies, so it does not follow that the homeowner loses out (most likely they make money)
Subsidizing first time buyers does increase prices overall but you have to consider the effect of such a policy relative to its cost. It has potentially positive externalities so that’s worth considering while balancing it out eg with the previous policy.
Pure populism.
If you believe that banning investors from buying SFHs will decrease the price of SFHs, why not also ban investors from buying apartments/condos?
You mean like apartments/condos in Trump Tower? Ha. I wonder if banning them from buying SFHs actually decreases the supply of SFHs and shifts people to build more, guess what, apartments/condos that Trump can put his name on and sell to institutional investors.
Look into Trump Ocean Club in Panama. Openly popular for drug cartel money.
Speaking as someone who just sold a house in the Bay Area (Dec!), house prices here are very much "buying the payment".
The valuation of the property goes up and down directly with the interest rate.
The ROI of the house (we bought in 2016) was ~8% on the down payment over the past 10 years, excluding maintenance and interest charges. As an investment, property is not a very good one.
To get that 8% on the down payment, I spent 4% on the remainder. It really doesn't net positive after the mortgage interest (with a 20% down payment). It's about "forced savings" and having control over your environment.
As an aside, since people are stuck in houses (mortgage rates and prop-13), there is a definite lack of starter homes. Everyone adds the second bathroom, meaning there aren't any single bathroom homes to be found. That increases the market floor.
What about the many, many thousands of homes that have already been bought up?
If they cannot be resold to other speculators their price can go waaay down
The vast majority of home purchases aren't from speculators or institutional investors.
Institutional investors only own about 0.5% of homes. If they're forced to stop buying, nothing will really change in a noticeable way. At best, small landlords and investors will scoop attractive properties up for slightly less.
Is that 0.5% a uniform distribution across the United States or is it concentrated in a handful of hot markets? I suspect the latter and have to imagine some distortion must be occurring in those regions.
Maybe the best part of this legislation will be that people will realize it's not institutional investors that are driving up home prices. No, that's far too optimistic.
When this doesn't make anything better, the conclusion won't be that it was a bad idea but that it somehow didn't go far enough.
Home affordability is getting better anyways, which is great, because we are finally having a surge in new & denser home building in popular regions and there mortgage rates are more reasonable than they were in the COVID-era.
> Institutional investors only own about 0.5% of homes
Where they buy those homes matters though. In areas with lots of jobs/growth (often the areas experiencing the most housing price pain), that number is likely much higher.
The only way that prices could go waaay down is if the supply of new homes increases or demand decreases (or some combination of both).
Which of those do you think is likely as a result of the proposed action, and why?
Nonsense. Do you think these landlords intentionally overpaid for the properties? They are sophisticated entities who like to pay at or below fair value.
It's pretty simple, you overpay for something if you suspect it will be worth even more in the future.
It happens
https://www.npr.org/2021/11/03/1051941654/zillow-will-stop-b...
I'm not sure if they could be forced to sell those, the government could, but then that would fall under just compensation seizure. I'm not a lawyer, but it would seem under basic legal theory that you couldn't take those homes.
Not that I expect this particular strategy from this administration, but there's 'forced' as in "you WILL sell this property", and there's 'forced' as in "any corporate owned housing unit will see its property tax rate increase by 25% per year until it is sold to a person". I don't think your description could apply to the latter.
The Comrade Trump memes would go crazy
IF it results in dramatic reduction of home prices, this sounds great at first, but in actuality, it throws the market into disarray, since many sellers and also buyers, and it may trap home owners who need to sell into bankruptcy.
God forbid someone not sell out of their home. /s Home ownership isn't exactly a crappy life milestone to be stuck at. Yeah it would suck for a select few people who need to get out of one and into another RFN due to life reasons and surely some municipalities would leverage that to really screw people but I think the upside is orders of magnitude higher than the downside.
Come to think of it, I bet making homes less liquid would knock the divorce rate down more than anyone wants to believe it would, lol
Tax vacant properties. To high heaven.
Great point. Those homes need to be back on the market for housing prices to come down.
These homes going back on the market wouldn't make a dent in housing prices. As much as we'd like to think that corporations are to blame, that's not reality. Plenty of middle class families own homes and vote for local politicians to keep their investment safe (and for it to increase in value) by making it hard to build.
Your housing affordability plan is that everyone who rents from a corporation gets evicted?
Churchill was right!
We’ll try everything except for a land value tax, so that we can eventually prove once and for all that LVT is the right thing to do! :)
But actually, it’s good to see movement on the underlying problem (affordability of home ownership). This is The Domestic American Problem of our times, and it deserves to be closer to the center of the Overton window of our politics and policy-making.
Even if we think this step is kind of meaningless, it draws more attention to the problem, which is a good thing.
Can someone please explain to me a practical way to apply the LVT? Vancouver used to have an LVT, it was too low and there was a housing speculation bubble in the early 1900s, since property was appreciating much faster than the tax rate. And if the LVT is too high, then you will have very little new development. This isn't even mentioning how you determine the value of the land.
Denmark has an LVT and copenhagen affordability is... not good.
As far as I can tell, LVT only achieves what it sets out to do if it’s equivalent to market rent.
As in, you never really “own” your land, you’re just renting it from the sovereign. If you can’t make good enough use out of it to afford that rent, you should move on. You can find comments on this thread that make this argument explicitly in terms of “maximizing land use efficiency”.
This was the economic structure of feudalism. It … wasn’t great. Private ownership of land has its own tradeoffs but a few centuries of historical experimentation in both directions has been fairly decisive.
How is that LVT "rent" different from any other traditional property tax being "rent"?
As near as I can tell, it is just a different way of deciding how the property tax burden is levied.
Downtown property gets taxed much more. Un-developed speculation property that doesn't contribute to the community (and derives value from other people's contributions) get taxed at the same rate as nearby developed property.
Property taxes have to be set high enough to fund services: Voters want more services, they pay more property taxes. The policy goal is delivering services the voters want to households and businesses.
LVT is designed to achieve a different policy goal: Maximize the efficiency of land use. So its rates have to be set to achieve that goal and, for example, force grandma to move out of that condo in a newly revitalized downtown so a young tech kid who can pay more & benefit from it more can move in.
LVT is a tax on the value of the land specifically, not a traditional property tax. This encourages development on valuable land that is currently being put to unproductive uses.
For example, if you own a lot in a downtown metro which is a parking lot you pay low property taxes because parking lots have low property values. You are disincentivised to develop it because your property tax would go up. Opposite incentives with a LVT.
I understand that, but what should the actual rate of the LVT be? If the LVT rate is too high, nobody will want to develop that parking lot at all because the taxes outweigh the possible profit. And if they are lower than land appreciation, speculation is encouraged.
Housing prices are rising due to inflation, and specifically inflation on the raw input for houses - lumber, building materials, and labor. Granted, this is not the only reason in all regions, places like California have much more complex, systematic reasons for increased housing prices. But the bulk of the US has housing prices that are somewhat in line with the cost of building, since there's no limit on land to throw cookie cutter subdivisions on.
They don't want to admit that their abhorrent policies are hitting the pocket books of their supporters, so they latch onto popular sentiment instead of solving the problem. Typical of this administration.
I built a house in 2018 for $350k. To build the same house again today would be $650k (and it would probably take twice as long). Surprisingly, the cost of land is not much more than it was 8 years ago. All of that cost increase is in materials and labor.
The problem is, the market value of my house is $550k, at the most. Meaning it's not profitable to build new houses as the market can't sustain them. And who is going to sell their house at less than they can get another one for? Only people who are forced to move, which is probably why the there is such low inventory in the historically cheaper markets.
Being in the lumber industry myself, I can tell you that lumber prices have not kept up with inflation. There was a major run up in price in 2021 and 2022, but prices have returned to pre-covid levels accounting for inflation. I have our own sales data, but this chart makes the case relatively well: https://tradingeconomics.com/commodity/lumber.
Interesting to see that he did not issue an executive order to ban this but called on congress to do so. This is just pandering to the base and election signaling and nothing else, at least for now.
This cannot be done by Executive Order anyway.
That's not the point.
He's issued plenty of other executive orders that aren't legal in order to continue to bullshit his base. The reason why he's deferring to congress now (instead of trying to take credit) is because he knows it's not possible and can use that as leverage against members of Congress.
Midterm pandering, for sure
Just think of the shit he's going to throw against the wall when it's only a few months away. I bet he'll wade into "Cancelling all student loans" or "Legalizing Marijuana" knowing his base is too stupid to understand his intentions.
I have this idea where we pick a desert road as long as possible (maybe road 50 Nevada) then build a 50 000 metric ton machine that makes large rammed earth houses. Perhaps make a mold the shape of a Ferris wheel. Have it stamp out 200 homes per week (2 miles) Road 50 is 400 miles so 200 weeks.
Rammed earth is a very decent building material but if you make the walls thick and compress it hard enough (maybe add steam?) it will last hundreds of years. Other building methods should be considered ofc domed roofs are perhaps not cool enough.
Disassemble the machine, ship the containers and deploy it some place else.
Add some killer features to the homes so that people cant wait to live there. For the first 400 miles at least $30 billion comes out (over 30 years) or $15 bl per year for each year of construction. Should be good enough for investors.
If it works, build additional improved versions. Aim for a factory that makes these machines.
Something like a sane version of the line.
Something like this only 20 times larger.
https://www.youtube.com/watch?v=cKi8VWRDA_c
Something like this but moving.
https://www.youtube.com/watch?v=gn0g68XE3Ds
There's a reason people don't live in that part of the world and it's not because there aren't any houses.
The reasons people do chose to live some place are mostly man made. The reason to buy a property somewhat overlaps but not entirely. The giant machine alone delivers enough hype for some to just buy one. Take care of the boring things and lure them in with killer features. The line is/was planned to have way to many of them. In Japan real estate people already get excited if there is a subway station planned.
Houses are horrifically boring all over the world. There are so many data points that people building stuff are happy when all the boxes are checked. As you've pointed out they usually follow demand but it's not a rule, it doesn't have to be that way. We do living room, kitchen, dining, bathroom, bedroom but you could do many different rooms. Say a proper office with all the trimmings perhaps a network connecting coworkers. You could do a space for home manufacturing. If you could just dock a truck properly and roll pallets in and out it would go a long way. Could do a district cooling system and/or a centralized pool pumping station. Could have a fee to gradually green the desert behind the homes.
But the true killer feature is lack of red tape.
> The reasons people do chose to live some place are mostly man made
Where's the water coming from.
a pipeline
Aren't they just fixing the symptom rather than the cause? I.e, people buy hard assets because holding dollars loses value. Make dollar hold its value instead, thus will individuals and companies stop buying up property they don't actually need.
idk how this would work effectively. There's lots of affordable homes they're just located where no one wants to live. You'd have to focus on HCOL locations and make them not so high cost which seems something that should be done at the local level.
You can increase supply but investors would just snatch them up. Maybe the feds could put a cap on the value of a single-family home that an institution can own and then make ownership very tedious. For example, no institution can own a home valued at more than $500k and for each home owned a quarterly filing must be made in person at the county the home is located. I'm sure these organizations would rather own very high value homes than lots of low value ones out in BFE.
>There's lots of affordable homes they're just located where no one wants to live
It's probably more accurate to say "they're just located where no one can get a job." You can give up you SWE job or whatever and move to a small town/rural area, but you're not going to convince anyone to give you a mortgage off your income from the subway at the local truck stop, or whatever labor gig you can get at the local industrial concern. Although if you're in medicine there is probably hope.
If only technology had progressed to an extent that we don't psychically need to be concentrated in 15-20 HCOL major metro areas to do most (if not all) office jobs.
> You can give up you SWE job or whatever and move to a small town/rural area, but you're not going to convince anyone to give you a mortgage off your income from the subway at the local truck stop, or whatever labor gig you can get at the local industrial concern
There's certainly SWE jobs in LCOL places but even if there weren't, one's savings from a HCOL area should go pretty far in a LCOL one. Also, thinking that you can't get a mortgage off working at Subway in a small town is just out of touch. You'd probably have to work a lot longer than a cushy SWE job, but it's still possible.
> You can give up you SWE job or whatever and move to a small town/rural area, but you're not going to convince anyone to give you a mortgage off your income from
It's strange to me that moving to LCOL wasn't a much bigger thing during the period when everyone was working remotely.
It seems to me that moving to lower cost-of-living cities did have a remote work boom, but it wasn’t evenly distributed. People from HCOL areas still wanted a high level of services (restaurant, airport, healthcare, recreation opportunities, etc) and probably a cool “vibe”. So the people fleeing SF and LA didn’t move to Dayton and Topeka and Duluth, but they did go to Boise and Bozeman and Asheville.
A lot of people did try moving to Texas, but with RTO it didn’t last.
Just tax non primary residences at a much higher rate. Housing crisis solved.
I think that it should be a ramping rate, the idea being that a 1x landlord should be able to outbid a 2x landlord and so on.
In theory this encourages a sort of spreading effect where at some point the Nth property is too expensive to buy to rent or speculate on, which naturally stops the exponential effect of making land lording your full time gig by continuously expanding the portfolio.
As someone who generally hates taxes I support this. Taxes at best should be used to discourage externalities and rent seeking.
However, California even tried to repeal prop13 for non primary residence and it failed! So i'm not sure how popular this idea is.
They already are.
Not enough. Things like 1031 exchanges should be removed from the tax code.
Only on a local level.
And businesses can already expense that tax, so it's 20% off, while individuals have been subject to the SALT cap
Clearly, not enough!
Capitalists hate him! Use this one weird trick to...
What a sign of the times, when Reuters calls a situation in which Democrats and Republicans can agree on something "perverse."
If I were renting a house, I would much rather deal with a business than an individual landlord.
On another note, it’s amazing that in only a year, we accept a dictatorship where we are okay with the President setting policy that should require a law to be passed.
I've dealt with both; anecdotal but I had a much better experience with the individual landlord than corporate. Ex: AC went out in both cases; Individual land lord showed up with a replacement window unit the next day after I reported it. Corpo landleech ignored my ticket and calls for 3 days while I slept in a house that was nearly 90F inside past midnight.
Corpo landleeches nickle and dime you (base rent + rent payment fee + pest control fee + trash fee + valet trash fee + fee for the service that bills water/sewage + mail room fee + others I'm no doubt forgetting) (but they only advertise the base rent), and they like to push straight up scams ( such as forcing mandatory renters insurance at 3x the market rate, expensive "benefits" packages with everything from HVAC filter delivery to credit monitoring, all heavily marked up.). The individual land lord? just a flat rent every month, no surprises.
I'm sure there are plenty of horror stories about individual landlords though; the same greed drives both to cut corners and maximize profits.
The two times I’ve stayed in an apartment complex, they had staff onsite and repairmen and someone on call. The individual landlord doing this on the side is likely undercapitalized and operating on thin margins and not budgeting for repairs
The difference here comes from the distinction between corporate landlords that actually want a sustainable business, and corporate landlords that know they will never make the money back for either rent control or market reasons and so only care about extracting as much money as possible before the building falls apart.
The overwhelming majority of landleeches in the US do not have to deal with rent control. It's a completely irrelevant outside of NYC and few counties spread out across the union.
I can tell you that the suburb to a mid city on the eastern seaboard I lived in did not have rent control, but rentals in the $12-1600 range with pest and mold infestation are in great abundance. I'm sure it'd be a total surprise to hear that I live in a state that skews hard in favor of landlords and offers next to no protections for tenants, because you know, deregulation always works out for the little guy, right?
And that’s why rent control is bad. Why wouod I invest money to keep up a building where I knew I couldn’t get market rates for rent if I were a landlord?
Do you imagine rent control is ubiquitous, and landlords nationwide are crushed under the heavy handed regulation of big government?
Because that could not be further from the truth. I'd that bet without googling, you can't name more than one jurisdiction in the entirety of the US that has rent control.
I was a landlord in GA - definitely not a liberal utopia - and if you do everything right, it still takes 5-6 steps in sequence and around 60 days to evict someone for non payment and it’s another long process to get any money out of someone for unpaid rent and damages once you evict them.
If I were a business whose interest in owning houses was banned by legislation, I'd sell my "services" to the individual landlords who now owned the rental property. Blackrock manages the financial part (taking rent, scheduled repairs) and the silent partner gets a cut.
That’s already a thing. Property Management companies charge landlords around 50% of the first month rent for a new tenant and 10% of the rent to manage the property for the landlord.
They also charge a lease renewal fee.
Then expand the scope to include all interested parties in the chain, whether owners or service providers.
So now you’re going to make it illegal for individual landlords to use external property management companies?
> On another note, it’s amazing that in only a year, we accept a dictatorship where we are okay with the President setting policy that should require a law to be passed.
Did you read the article? The impetus was a tweet where he called on congress to write and pass a law to this effect.
I think the point is that he said he’d do it, and he’ll campaign that it’s done, even if nothing happens.
This is not how the law works. The president shouldn’t be able to do stuff and ask Congress to sign off on afterwards
> In a post on Truth Social, Trump said he was immediately taking steps to implement the ban,
This is largely a good move. There are plenty of whales, once those 5% disappeared, price should slowly come down. ( The Hong Kong Housing market is the one worth studying ) Next would be increase supply, and may be if needed, additional tax for individuals owning more than one home or when they buy 2nd home. Largely making housing as an asset not attractive for certain group of investment.
Housing continues to be the biggest problem in modern world and yet it is a problem not resolved.
> There are plenty of whales, once those 5% disappeared, price should slowly come down
But by how much? ~3-4% of housing has to be sold, some amount of it will still be bought for renting (as many people still want to rent). Surely this can’t have a very big effect on house price
It could be substantial just by increasing the number of occupied dwelling units - if institutional investors are willing to let housing sit empty for 6 months or a year (because it doesn't hit them where it hurts) and the average vacancy rate in a city is hovering around 10%, dropping that down to 5% will really shake up prices.
If mega institutions are financial extractors who will take all money available, and the units can be rented to make more money, why aren’t they doing it?
Why would the institution turn away free money but individuals owning the houses wouldn’t?
Because commercial real estate works on weird counter-intuitive things, and dropping rental rates adversely affects their entire portfolio more than leaving a building vacant does.
I should have mentioned a bit more - residential real estate (e.g., your house) is valued on comps for the purposes of a mortgage backed by that property alone - commercial real estate is valued by the local rent multiplier and mortgages are against bundles of it, or the entire company.
So (simplified) an "empty building, but it rents at $2k a month" is valued at 200k say; if you drop the rent to $1500 and now are getting rent paid, the building is valued at $150k.
They're not stupid, they're watching the vacancies and cash flow also, but it's over a bunch of properties, not just one. A single-family landlord who owns one property will start to feel the pain quite quickly of an empty building (and even they should plan for 20% vacancy, one year out of five).
But … none of this is commercial real estate? It’s all single family homes
This, and it is already happening in as we speak. London, Hong Kong, South Korea ( a little different but all the same ) Vancouver, Sydney. Basically anywhere you see housing bubble.
The trigger of re-evaluation also hurts banks's balance sheet. Crediting Rating agency, a whole lots of other financial institution. i.e Their interest is to not let it fall.
Banks? Banks don’t buy up houses, banks are what helps individuals buy houses. Again this just sounds like someone who recently watched the big short
They together with property agency, owner, investors dont want to trigger re-evaluation because it hurts their LTV ( Loan-to-Value ). Which for a set percentage is defined by law along with adequate cash reserve. It is also what causes HSBC to buy its subsidiary HSB. And Bombcar above has already replied. It is rather obvious not something to do with big short but not understand how the financial world of property market works.
Given how inexorably tied the US economy is to SFH prices, a drop may do more harm than good.
Many families have the majority of their wealth tied up in their home, and another significant portion of it (knowingly or not) in the SFH MBS market via their retirement investments. If prices fall quickly enough to impact the MBS market, a large number of households could suddenly see big dips their two biggest sources of wealth.
A gradual drop may be fine, but the financialization of housing at the national is a big mess. Sadly it makes the market dynamics of giving people places to live way more complex than it should be.
You don't even need a drop; you just need prices to stay stable for a decade or so, and inflation will "drop" the real cost of new ownership.
Exactly. I am so glad someone gets it. Or a drop of 3% per year. There are plenty of tools to use to help achieving this. The question is whether government have any intention to bring housing market to an affordable level.
So close to realizing the issues with the 2018 tax bill.
- 20% maximum corporate tax
- Personal Salt cap
Made it less expensive for an llc to buy a home than for most individuals.
To make individual ownership on par with corporate, individuals need to be in a lower tax bracket, be able to deduct taxes , interest, and insurance. And the $10k cap really hurt the ability for local property taxes to make it better for the individual. The new $40k cap may put it slightly towards the individual in some jurisdictions.
But raising corporate rates or reducing corporate deductible expense re real estate is the most efficient policy to encourage individual ownership.
They will continue trading the ones they have as LLC holding companies.
This guy wholesales ;)
I recently worked on an MVP for a Zillow-for-wholesale startup. As a curveball, our state passed a law restricting where and how these contract-to-buy sellers operate. So their workaround, after consulting lots of lawyers, was to provide a standardized LLC / Contract flow such that you’re no longer marketing a house for sale. You’re marketing a stake in an LLC, only that LLC has a sole purpose (a contract to option out a specific house).
I didn't know about this use-case. But this is also what investors do with real estate in California because Prop 13 resets the taxable value on a real estate sales, but not on buying an LLC that holes the real estate.
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Then expand the definition and scope to make it more painful to circumvent. Describe the structure such that it’s hard to not be able an individual non-investing homeowner.
Of course that’s unpopular to those who want to freely commit to bad practices.
Actually, not a bad policy idea. But it is not enough to solve the set of problems that arise when you take a basic human need (housing) and subject it to market forces--inexorably the ability to profit from the need drives costs higher than is affordable for some "market participants," leading to death.
Small investor ownership in single-family homes (for both short- and long-term rentals) have been devastating to communities. What is the right number of single-family homes to permit individuals/trusts to own and how do you disincentivize small empires?
Wall Street investor monopoly ownership of dense housing in urban areas remains a major cause of rents outstripping income (see Blackrock's 2020-2025 market takeover and subsequent market manipulation of apartment rental rates in San Diego). Simple policy solution: trust-bust apartment ownership. Harder, more effective policy solution: municipality ownership of apartment blocks a la European cities.
If regulators allow the same behaviors with water, you can expect a similar set of harms.
I wonder if this would include the real estate investment startup that Jared Kushner co-founded.
This will absolutely help. It’s easy for these institutional players to downplay their involvement with select stats, to play PR defense, but platforms like Zillow work with institutional funds to sell them an information advantage that means they are at the end of the market that does the most upward impact on pricing.
People don’t have a natural feel for how little you need to alter flow to cause liquidity in a system to collapse.
There are a few markets like Jacksonville and Atlanta where there is a lot of institutional ownership, but outside of those few cases impact of Blackrock et al on housing markets is effectively nil.
Help who exactly?
This will be good for existing homeowners because it will increase home prices and increase rents.
It's bad for renters.
Zero chance this moves housing costs an iota. Most of those wall street owned houses are rentals. If they are forced to sell them, that is a net zero change to housing supply, because they are taking a rental unit off the market.
I also think this will help. There's no one size fits all solution. I hope it goes through.
It's not going to solve the housing issue and is mostly for press (and it's not even getting into ulterior motives), but it might help with preventing a longer term issue of large investors becoming a major issue. Additionally, I wonder about the choice in properties as properties aren't fungible.
So if you aren't staying long enough to want to deal with a mortgage, you'll be stuck with an apartment only?
If you don't want to own, you rent, is that what you're saying?
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What counts as "Wall Street" here. Is it any investment property? After some threshold of owning many homes? If so, how many? 10? 10,000? Something else? Is it net worth? Maximum number of beneficial owners? You must title them in a natural person's name instead of a corporate entity? Your service address for your corporation is on wall street in NYC?
Which option is being proposed vastly changes the merits and problems of this policy, so it's a poor choice that this isn't made abundantly clear.
How is Wall Street defined? How would they enforce it? What is preventing a large corporation from registering a new company to buy every house? Also this is just a call to action, nothing written up in a law yet. We will see how it goes, if at all it's implemented.
The modern US government runs on vibes, not definitions and enforceability!
(And no, this is not a Trump thing. This has been the case for a while now.)
It seems like the root cause is to increase the supply by all means possible. Ban NIMBY instead, support more building, both with already existing infrastructure and with creation of the new one.
The root cause for the low affordability seems to be that most people don't want to sell a house purchased at 3% interest and have to pay for a new one at 6%. That and zoning restrictions too contribute for the lack of supply.
There was a huge affordability problem 4 years ago when the rates were 3% too, so that’s clearly not the “root cause”. In fact, at the time HN was filled with people blaming the “free money” 3% rates for the lack of affordability…
LOL, you live in California? The past affordability you are talking about was not universal. There were plenty of people happily buying homes after moving out of CA to other states.
Anyhow, interest rates are the root cause now. Who in their right mind would do the trade I've described?
In my area the zoning is ludicrous. Need to walk 4 blocks to visit my corner store. Tall skinny townhomes that nobody wants and go unsold for months are the only allowed high density option - with no stacked flats.
Sounds like federal outreach over what is probably within states' jurisdiction.
Housing simply cannot be both an investment AND affordable.
Even if this won’t work in practice it’s one of the things I’ve found myself agreeing more with than anything else done by the current White House/congress
I wonder if we will one day look back and wonder at the morality of a society that considered homes suitable targets for investors of any stripe.
Not unless we decide that personal mobility is evil, and start just assigning people to plots of land when they reach adulthood.
Eh? I'm not talking about investing in your own home, but buying them simply as profit vehicles with no intention of living in them.
They're also buying risk. It's just during the last 10 years buying a home has happened to be a fantastic investment, an easy way for an individual with the ability to get a 200k loan to turn that into 400k+ with 0 effort, especially during COVID. The market could crash and purchasing would become a risk for everyone but the wealthiest once again.
You've now reached the core of hacker news. Profiting from other people's need to have a place to live is actually great. Anybody against it is a racist and also a nazi. The real evil people are those who work and pay taxes and rent. The true heroes are the landlords. Now the dictator is trying to steal the profits from the landlord heroes. If you're a real hacker, you stand tall for the landlords and the corporate investors. Otherwise, we'll denounce you!
I don't actually know anything, but I've been wondering lately: is higher house prices simply a consequence of Baumol's cost disease? If so, then there is kinda nothing we can do about it, right?. Higher house prices is simply a consequence of improved productivity elsewhere, and thus it is necessary to spend a larger fraction of one's income on housing.
Higher house prices in the US are a consequence of literally every major US metro area having a shortage of housing (https://www.fanniemae.com/research-and-insights/perspectives...). There's no mystery here, just that a lot of people decided to shoot themselves in the foot starting in the 1970s by putting more and more zoning and permitting limits on new housing construction.
As usual, the US continues to do everything possible about the housing shortage except actually building enough housing.
More like the housing bubble peaked and with this fund managers have a way to save face while fleecing investors.
There's no bubble, there's a massive housing shortage. The only "peak" will be when prices are so high that even the rich can't pay any more, which point it'll just stay there.
It figures that by the time I can finally afford a vacation home, somebody is going to yank up the ladder.
One of rare instances I'll say it: make owning a second home a major tax liability and 0 takes breaks for building or ownership.
Not that because "we have a right to housing" or other catchphrases, but because getting rid of the government sponsored local monopolies is impossible.
Well that's going to do nothing.
But at least people eating the chaff of property owners will celebrate it, I guess.
It is going to be fascinating to see how the impacts of this will ripple through the housing market.
Two areas I'm particularly curious about are a) the financing of new construction, and b) the sale prices of SFHs.
Anyone want to bet that this will cause the Second Order effect of no more new single-family homes being built and instead move more and more future development into co-living dwellings.
Given this, it’s inevitable - the New American Dream will be communal living.
The actual headline is “Trump says he will ban Wall Street investments in single-family homes,” which is a more accurate description of what happened: one social media post by the president, asking Congress to do something. Nothing has actually changed yet.
Wow this is exciting. I tend liberal, but I think this sounds like a bad policy lol. My understanding of the existing research is that rent control tends to decreases the motivation to increase supply, and I think this should do the same
Yeah if investors are no longer buying from home developers then it'll definitely limit the demand, the price homes sell for, and the motivation to build new homes. I believe that metropolitan areas are the problem and my unpopular opinion is that people have to get used to the idea of moving to sparser areas for affordable housing.
More specifically, the current zoning of metropolitan areas is the problem. US cities have plenty of potential for more housing, they just won't allow it to be built.
The most absurd example is here in SF, where... okay, context. A recently-passed state law overriding local zoning means that there's a high-rise building project in the Marina district (https://sfyimby.com/2025/12/preliminary-permits-filed-for-fo...) that will almost certainly get built, despite people endlessly protesting it. It will add 790 apartments, 86 of which will be required to be affordable housing.
Before this, in 2024, there were 7 net housing units added for the entire year in the Marina District. No typo there, literally just 7, in the most expensive neighborhood in the city, in the most expensive city in the country.
This one building, only possible because the state overrode local zoning, will be adding by itself more than 100 years worth of new housing to the neighborhood. That's how fucked the approval process is.
There's a service called Arrived (I believe Jeff Bezos invested) that lets people buy fractional shares of single-family homes and earn a proportional share of the rent. If you sell, you're effectively selling your percentage of the property.
As a renter, I was drawn to this as a way to get some exposure to real estate, and I ended up investing in a vacation rental. At the same time, I'm pretty conflicted about it. Profiting from vacation housing feels different to me than profiting from people’s primary shelter, which is a basic necessity.
More broadly, I think as long as the incentives of property owners and renters are fundamentally misaligned, it will remain extremely difficult for middle-class folks who don't already own property to break into the market. The system optimizes for extracting rent, not for creating new owners.
> Profiting from vacation housing feels different to me than profiting from people’s primary shelter, which is a basic necessity.
If you believe that nobody should profit from providing housing, what do you propose as the incentives for people to build, capitalize, and maintain said housing?
That's fair, and I'm not claiming rent disappears, or that nobody should ever earn money from operating rental housing. Some people will always need or want to rent, and providing rental housing is real work that should be compensated.
The distinction I'm trying to draw is between operating housing as a service and owning housing primarily as a financial asset whose returns are driven by scarcity and leverage.
In a healthier system, the incentive to own rental property would look closer to running a utility or a hospitality business: you earn steady, relatively bounded returns for providing a well-run service (maintenance, risk, capital deployment, tenant experience), not outsized returns from appreciation and from pushing rents faster than incomes.
People would still buy rental properties to earn income, but the business case would be built more on operational efficiency and quality of service, and less on financial engineering, tax advantages, and asset inflation.
Practically, that can show up in a lot of forms that already exist in pieces today: regulated or capped-return rental models, co-ops and shared-equity housing, community land trusts, public-private development, developer-operator splits, or tax structures that favor building and selling over hoarding and rent maximization.
So I'm not saying "don’t make money on rent." I'm saying a system where most of the upside comes from perpetual control of a scarce necessity will naturally concentrate ownership and make entry harder and harder. A system where most of the upside comes from creating, improving, and operating housing can still support rentals while keeping the door open for new owners.
Well, the primary incentive today, for most people, is a place to live. Profit just skews the preference on how that is accomplished.
Even if this goes through without a mountain of loopholes and exceptions, I doubt it will have a significant impact. "Wall Street Investors" implies they're targeting large institutional ownership, which is only around 0.5% of housing ownership as cited in the article. That number is also flat-ish or maybe decreasing depending on the chart you look at, from what I recall.
Outside of a few metro areas where institutional ownership is very high, I don't think this would change anything. As long as houses remain an attractive investment, non-institutional smaller investors will happily buy the properties for a few thousand dollars less than the institutions would.
Anyone familiar with basic economics is pulling their hair out reading this, because there's one extremely obvious way to lower the price of building new housing: Reducing or eliminating tariffs on construction equipment and materials and ensuring a robust supply of low-cost labor.
I agree with the first half of what you posted, but immediately jumping to blaming tariffs in your last paragraph seems weak (and a slight attempt at a gotcha).
Concrete, gypsum and steel are primarily domestically produced. Similar goes for wood (although a substantial amount is imported, e.g. from Canada - the tariffs range from 25% to 50%). Labour & Materials may make up say 60% of the cost of a house, but only 50% of this is likely materials, with likely a minority of the materials tariffed.
What is likely to actually reduce rent and house prices is making development permission and laws more lax, as well as preventing rent control.
Tariffs on products like lumber and cabinetry were introduced or raise on January 1st of this year. It's an additional factor that will make a bad situation worse.
You can't tell me that increasing the pricing of construction materials won't have negative pressure on home construction.
> Materials may make up say 60% of the cost of a house, but only 50% of this is likely materials, with likely a minority of the materials tariffed.
And where does the construction equipment come from? The parts to repair that construction equipment? The parts that go into the trucks that the workers drive to the job site?
Focusing on a single input is myopic when the tariffs are so widespread that they touch everything.
I have agreed tariffs will have an effect, but I'm not being myopic.
Lot costs, builder profits, indirect labour (commissioning, financial and legal affairs, advertising) all are far less affected by tariffs. Machine costs could make up 15% of your "labour and material" cost but depreciation and repair purchases are still only 30% of this, with of course not all of this affected by tariffs.
It seems wholly reasonable to believe that the long term effects of a tariff policy like these on housing costs could indeed be in the ballpark of 5%, as I claim, because in fact housing development is less affected by this.
I'm not sure if you trust this for consensus, but you could try asking an AI to give an estimate of the long-term impact for you. Here's what Gemini 3 Pro said to "Estimate the increase Trump's current tariffs, if long term, would have on price of new housing developments."
> Total Home Price Impact: This translates to a roughly 3% to 4% increase in the final purchase price for the consumer.
> Anyone familiar with basic economics is pulling their hair out reading this, because there's one extremely obvious way to lower the price of building new housing: Reducing or eliminating tariffs on construction equipment and materials and ensuring a robust supply of low-cost labor.
And just in general reducing the restrictions on building in places with high rent to income ratios.
> because there's one extremely obvious way to lower the price of building new housing: Reducing or eliminating tariffs on construction equipment and materials and ensuring a robust supply of low-cost labor.
Oh I thought the one extremely obvious way was to fix local policy roadblocks. After all, it's not like a lacking supply of housing is a new issue they suddenly appeared out of nowhere within the last dozen months.
> After all, it's not like a lacking supply of housing is a new issue they suddenly appeared out of nowhere within the last dozen months.
The main lumber and building materials tariffs went into effect January 1st 2026.
If you thought the current situation was bad, it's only going to get worse.
This announcement is a distraction to get people blaming Wall Street. It's a "look over there!" announcement literally days after they raised tariffs to make a bad situation worse.
I think you're getting your facts wrong: https://edition.cnn.com/2026/01/01/business/trump-furniture-...
"President Donald Trump has delayed new tariff increases on upholstered furniture, kitchen cabinets, and vanities for a year, pushing their implementation to 2027, according to a White House statement."
You're right, I probably got some of the increases delayed.
But those are increases on top of the already high tariffs.
I agree with you, they'll probably worsen the effect, and I assume this is maybe 5% in the long run from all these tariffs (if they're not cancelled).
Making it hard for cities to deny all permission to build new housing through impossible zoning laws should also be on the cards.
Yeah, all the politicians talking housing— the actual net governmental effect on housing is to massively constrain supply (quantity) in service of rather arbitrary qualitative standards. I’m all for “the building shouldn’t spontaneously collapse” standards, but … two acre lots? Restrictions on casting shadows? Accessory dwelling units? Nah. If the government wants to make a difference it should ban Euclidian zoning as it currently is practiced, full stop.
These qualitative standards are subjective. Everyone has something that they deem essential and others not so much. A lot of zoning regulations is the amalgamation of preferences by different people, because they try to satisfy the aesthetic preferences of too many people.
For example in New York City go take a walk in the streets next to hundred-year-old skyscrapers in downtown. It’s miserable to me. Now go walk alongside midcentury skyscrapers in midtown. It’s much better. The difference is entirely because of shadows cast by the skyscrapers. The visceral reaction from shadows is so strong to me that I am wholeheartedly supporting restrictions on casting shadows.
Now on two-acre lots. That’s not something I care about. Even 0.1 acres of land is too much maintenance for me. But it will be non-negotiable for someone else.
Millions of people want to live in NYC and would productively contribute to the city if it were more affordable.
The government should not criminalize development that would make housing more affordable over your preference on shadows!
It's a negative externality, yes, but it's a trivial one next to the upside of cheaper housing for more people!
At one end of the extreme unlimitedly cheap housing leads to slums, ghettos, and crime. Such housing is not worth building because it costs the city more in reputation and police force. Take a look at Kowloon walled city for an example of cheap construction without regulations.
So there has to be a line. Different people just draw the line differently. For me the issue on shadows is that these fancy buildings make the streets next to them dark and ghetto-like.
"We expect all states to expand housing supply by 2% per year. States which fail to meet this standard will pay $1000 per unbuilt house per year, as a subtraction from other federal funding. States may trade house building with other states to achieve this.".
Making this decision as a politician in this country is death to your career though; how could we incentivize our leaders to bite the hand that elects them?
If your local mayor decides to allow a tower block to be built next to your house, you might be pissed.
But if the president says 'we're gonna take away mayors powers to restrict housebuilding', you won't be pissed yet.... And when a builder comes along to build later it'll be too late.
The president doesn’t have this power, or shouldn’t according to a sane reading of the Constitution. This needs to be a state level action.
The material costs are high too because of regulations that require specific lumber for framing etc.
It’s more complex than just reducing tariffs and inviting cheap labor. It’s systemic red tape put in by the large builders to prevent anyone but them to be able to build. When they do build, it’s never to code. The code they themselves help write. Ryan Homes for example…
> The material costs are high too because of regulations that require specific lumber for framing etc.
Having done some extensive remodeling and building work in recent years and going to great lengths to follow building codes, this just isn't it. The type of lumber you can use for most framing jobs isn't that special. Having walked through a number of new construction properties and seeing what passes code, I don't think relaxing lumber standards would be a good idea, nor buy us anything.
When lumber, cabinetry, and other building products have tariffs in the range of 10-50%, you can't tell me that tariffs are not the primary problem driving costs up right now. There just isn't a secret stash of lesser grade lumber lying around that would also be perfectly good for building homes.
Single and few number family residential and owner stuff gets all sorts of exemptions in just about every town's zoning code because if not the townsfolk would revolt.
This is why everyone on the internet screeches "well I put up a deck and it wasn't so hard". Try and do a new build of literally any structure and get back to me. Or worse, a construction type that is not the regional default for whatever it is you're doing.
Reality for new construction is way, way, way worse than homeowners think.
Unless you know a guy, in which case it's all open doors and green lights because that's how local politics always is.
> Unless you know a guy, in which case it's all open doors and green lights because that's how local politics always is.
LOL, in my city, which is the capital city of our state, the city planning committee and property developers are all friends. By which I don't mean "having a drink at a community event", I mean openly posting on social media about their families going on vacation together, "Loved our family spending the week at this airbnb with the X family! So many good times and memories!"
It's a club and you ain't in it.
So true.
There was a vote about a measure to change up some tenant's rights in the city code (strengthening them).
It passed 12-1. One dissenter, a Mrs [can't remember] Greene.
Didn't think anything of it until someone pointed out "Oh, you mean [can't remember] Greene, wife of Jim Greene, owner and CEO of the second largest PM company in the County, Greene Property Management?"
"Someone should ask her whether she's representing her constituents or her husband and his clients."
I've worked in new construction previously.
It's so much easier than the renovation work I'm doing.
> Try and do a new build of literally any structure and get back to me. Or worse, a construction type that is not the regional default for whatever it is you're doing.
Please don't be so condescending. I'm talking about my experience with home building in a thread about building homes. I'm sorry you had a bad experience with whatever you were building, but we're talking about homes.
Old home renovations are expensive because of these stupid codes. You have to bring a house up to code in many cases which increases the costs. You’re right that home renovations are more costly.
For new homes it’s easier just to start “at code” and go from there. However, there are places that have strict building codes on the type of lumber you use for the roof, the frame, interior walls, exterior, etc. Lumber yards who sell this in bulk know this and charge a dozen percentages more for it.
For example, in Virginia, lumber has to be graded for use for certain applications. If you happen to mill your own boards, your SOL. You’ll never be to code. The only way is to grease an inspector.
This. They don't want the local septic man and the local roofer partnering up to GC a development of a dozen houses or even worse, an individual doing the bulk of the work of building anything, so they get it all saddled with requirements that amortize away nicely when vertically integrated but absolutely crush anyone else.
It’s a Ponzi scheme disguised as a monopoly. They’ll block everyone and just sit on the lots with a sign that says coming soon rather than let local contractors do the jobs.
Encouraging the creation of new housing is the way to go. One thought— what percentage of new home purchases are made by large investors and is it growing? This seems like the most important metric to look at rather than existing ownership.
There are examples of entire subdivisions being built to order for private investors to rent out. It’s called “built to rent.”
https://www.nar.realtor/magazine/real-estate-news/commercial...
Corporate ownership mapped:
https://www.lincolninst.edu/publications/other/who-owns-amer...
https://storage.pardot.com/153411/17634993251KmjZ4d2/whoa_ma...
Zoning laws are the number one obstacle to building housing. They need to be regulated into oblivion. Then we need to incentivize building dense housing.
The tariffs are a bit of a new phenomenon so I think that may be motivated reasoning. Construction productivity has also been stagnant for about 60 years. I think the most important factor is that housing prices, in the United States at least, are governed by how much a bank will lend. Very small but affordable houses will never be built because a bank will not finance a $10,000 loan over 30 years. In the same vein, it’s technically feasible for automobiles to be built for just a few thousand dollars, but, again, they will not finance $2500 over five years. So cars and houses are just built to the price point which will satisfy the lenders. You may not hate financialization nearly as much as it deserves.
> The tariffs are a bit of a new phenomenon so I think that may be motivated reasoning. Construction productivity has also been stagnant for about 60 years.
If construction was stagnant for 60 years, adding 10-50% tariffs on lumber and building materials would only make it worse. Not motivated reasoning, just basic economics.
The new tariffs went into effect January 1st, by the way. If you thought things were bad now, they're about to get worse.
This announcement is just another distraction. They want you mad at Wall St, not tariffs.
> In the same vein, it’s technically feasible for automobiles to be built for just a few thousand dollars,
No it's not.
If this was true you'd see it in some other countries. It's not happening anywhere in the world. Unless you redefine automobile to mean a tiny cart with a 5HP motor and some seats.
> If this was true you'd see it in some other countries
The closest thing you have are Japanese Kei cars - you can get a brand-new Suzuki Alto for $6,600 before sales tax, but it would not pass crash US safety standards, it's built for slow city streets of Japan and not highway driving.
The claim they went into effect January 1 simply does not seem true.
The finished products tariff was delayed: https://edition.cnn.com/2026/01/01/business/trump-furniture-... For unfinished lumber, I don't think there was any tariff going into effect January 1.
Sure, these tariffs may further increase the house of prices (e.g. be relevant to 15% of the cost of the house, with tariffs ranging from 20% to 50% and sources of materials adjusting to these tariffs), but the say 4% future effect of these tariffs is likely less than the effect of zoning laws, other development restrictions, and rent freezing.
> governed by how much a bank will lend [...] Very small but affordable houses will never be built because a bank will not finance a $10,000 loan over 30 years.
Banks typically won't hold onto to your loan for 30 years. Mortgages in the US have been thoroughly fiscalized: your typical bank/mortgage lender bundles up a bunch of loans and sells them to another servicing party as soon as the ink dries on the closing documents. The specialized servicer package them, and offer them as securities to investors who in turn will get a monthly return based on aggregate mortgage installments.
All this to say: lending banks would be happy to finance thousands upon thousands of 5-digit mortgages, and sell those to securitization specialists.
New houses aren't built in existing neighborhoods because dense housing is unpopular, as is a distaste of having "poorer" people as neighbors. Static zoning, terrible transport networks and no funding for new public infrastructure tag-team to discourage new developments on undeveloped farmland.
Not sure about $10,000 houses (that would be pretty spartan, even Tiny Homes usually cost more than that), but the $2500 car thing being due to lenders is completely off base. The reason there are no $2500 cars is that it's impossible to make one and meet current US safety regulations. Once you meet all of those, then you're already well beyond $2500, but it's still a pretty crappy car. Might as well add a few extra creature comforts that most consumers demand (power locks, power windows, bluetooth/stereo, disc brakes, more than 100HP engine, etc.) and you're never going to be below ~$15K with current parts and labor pricing.
$2,500 cars? $10,000 houses? I found the time traveler from 1960!
Source that cars are buildable for a few thousand dollars to the existing laws?
Even the Slate truck is $25,000 because safety features are required.
Those "few metro areas" are on the scale of 10s of millions of houses. Remember that the top 10 largest cities have a third of the US population in it.
>because there's one extremely obvious way to lower the price of building new housing:
Cheaper housing doesn't mean that institutions won't still try to buy it up.
It seems like in some areas (the good ones) its much higher (12%): https://econofact.org/factbrief/do-private-equity-firms-own-...
It also seems like it might be important to determine what share of _new_ development is being created for investment. The share of existing homes being owned isn't as important.
There's also the 2nd order effect. The price of property might go down if there weren't investors with tons of money to spend on a property.
All housing is investment due to the way it's owned, regardless of who owns it. For most people, it's by far their biggest investment, resulting in extreme political activity.
We must confront that fact, or negate it, for example by taxing away the investment opportunity.
Investors buy housing to rent it out to others, that's the investment. People who own their own home implicitly pay themselves rent, by choosing to live in what they own versus renting instead.
Getting non-resident owners out of housing only means that renters have been banned from an area.
Isn't that circular reasoning? Charging rent means its an investment, but also just living in a home is "paying yourself". Is there any way to live on a property that isn't an investment (I suppose just staying there while the government owns it?).
No, as long as the housing is bought and sold and priced by the market it's always investment. Homeowners talk freely about how it's an investment, choose their own home for its investment properties.
It's not circular it just is, under our ownership scheme. Adding a 100% land value tax does remove the investment characteristic, though, as it removes the speculative aspect of land, and in fact drives the price of land to $0.
Even if it is only 0.5% I would prefer that large institutional investment firms not be allowed into the housing market.
actually, they are actively beneficial owners. They can do things more efficiently than small time owners.
More efficiently extract cash from renters
Only if you consider their more efficient ability of pumping the renter for cash and dumping the renter with an arbitrary rent increase.
Everything you stated is speculation.
Well as soon as you find someone who can speak about the future of the housing market without speculating, let me know.
they don't even have affordable housing in the country all those tarriffed materials and equipment come from.
Anyone familiar with basic economics is pulling their hair out reading this, because there's one extremely obvious way to lower the price of building new housing: Reducing or eliminating tariffs on construction equipment and materials and ensuring a robust supply of low-cost labor.
That's quite an extreme political take.
A more humble basic economic theory question would be:
If you ban large institutional investors from buying homes, and then you ban small institutional investors from buying homes. And only owners directly can buy homes, no renting. Would that be good? Sure homes would be cheap, but very shortly after that the supply of new housing would drop dramatically, as there's no one to finance building homes, maybe the ultra rich will just invest in their own mansions or yachts?
Just very basic economics is the discussion here, not tariffs and china politics, but just a variant of the highschool/red-scare question of, "will anti-wealth laws have a positive effect on the economy"? in the past it was determined that no, and that you were a communist for suggesting it, but maybe there's a nuanced take like making a difference between some type of "institutional" investors and other types of investors?
> That's quite an extreme political take.
We're in a weird timeline when pointing out that dramatic tax increases on the inputs to home building will increase the price of homes.
> A more humble basic economic theory question would be:
> If you ban large institutional investors from buying homes, and then you ban small institutional investors from buying homes. And only owners directly can buy homes, no renting. Would that be good?
There's nothing humble or basic about this question because it's so unrealistic that it could never possibly happen. Ban renting? What?
It's a gedankedankexperiment man
Why would you need institutions to finance building new homes? You think the cost of building a home is more than the cost of buying a home? (Obviously not.) Normal people have been building their own homes using their own money for thousands of years.
> You think the cost of building a home is more than the cost of buying a home? (Obviously not.)
Common misconception, I used to have this as well.
Building is more expensive than buying for 2 reasons:
1- People can build custom houses to their taste, they pay a premium for that. 2- House prices fluctuate, most of the time house prices are below maximums, it's only during brief periods of time that building houses is suddenly bottlenecked by capital.
Yes, there is an industry behind building houses. Sure people can build homes themselves, that's cheaper than both buying a home, and building a commercial home, but for homes that are both a commoditized asset with general appeal and a house to live in, it's a different type of asset.
A house you build by yourself will never be worth much, but you'll live in it for sure. You can even spend a lot in improvements, but you end up with YOUR house, not with a resellable asset.
FWIW, building your house is quite independent of market conditions, so if that's your game you shouldn't care about the macroeconomics of industrial residential construction or tariffs on China's iron.
This is pretty far down in the list of consequences we should be thinking about but building more housing in desirable, coastal areas of the US will only serve to exacerbate the political and cultural divide between the two Americas.
I know we all hate on the electoral college, but it exists and it isn't going away anytime soon.
I'm not saying the answer is to force folks to move to "flyover country", but that's what you'd do if you wanted to avoid another presidential victory by a trump-like character.
“Built to rent” lately occurs in the sun belt and Midwest, in which fall most of the swing states.
It's also what you'd do if you wanted to buy an inexpensive house and have a low cost of living.
Not sure. But I’ve been hearing of this being an issue from both progressives, leftists as well as conservatives and rightists. Maybe they’re all misinformed by their bubbles, but there seems to be some smoke…
It's a populist issue because it sounds vaguely correct and being angry at Wall Street is ever popular. That's also why this idea is being floated before the mid terms.
That doesn't make it correct.
Left-populists and right-populists like to frame issues as being a conflict between the elites and the common man. Banning big banks from owning homes is a perfect example of this.
It's fine to ban big banks from buying homes and wont do damage to the nation, but don't expect it to solve the problem.
High housing prices are due to zoning-based supply restrictions. These are entrenched due to politically active NIMBY voters.
Actually fixing the housing crisis means addressing zoning, but that doesn't fit the elite vs common man narrative so gets ignored by the populists.
> It's fine to ban big banks from buying homes and wont do damage to the nation
It makes things slightly worse for people who want a non-apartment house but think they might move soon.
It's because of emotionally charged response. Leftists largely don't want corporations owning houses, because it's "impure" and capitalist. Rightists largely don't want renters to live in homes that used to be exclusionary on the basis of being able to buy a home. Though there's crossover on the reasons, of course.
Honestly, the argument on the other side seems like emotionally charged arguments due to TDS and not wanting to give Trump any credit.
It seems obvious to most people that institutional investors should not be allowed near single family homes and you would need quite a strong argument to persuade otherwise.
Which side is TDS and why? I've heard both of these opinions expressed quite freely over the past few years, without any association with Trump. However, most instances of TDS seem to not "derangement" but "normal human emotion to me."
> It seems obvious to most people that institutional investors should not be allowed near single family homes
What is obvious about this? They have always invested in single family homes. Can you provide a priniciple or rationale? If it's something other than renters or "corporations bad but I won't explain further" then I'd love to hear it!
Homes are for people to live in, not asset classes for investors to play with.
There, you have the apparently obscure principle that no one has ever heard of. I’d love to hear whatever economist inspired argument against it lol.
I have no argument really in favor of corporate ownership, but I don't find the arguments against convincing in terms of helping normal people.
Rental housing is an important part of housing, and giving access to the schools in suburbs through rental opportunities seems good to me. The people I know who have rented a SFH in my area have had better experiences with corporate landlords than home-owning landlords because the home-owning landlords frequently evict their tenants so that a relative can move in, which is super disruptive. California allows homeowners to evict people with very little warning that way, without cause. Corporations can't do that and also follow the law better.
As far as investing: Every home owner treats it as their primary asset. Which is the only reason that corporations are getting in on the game: people living in their own homes have changed regulatory structures so much that it's rigged in favor of owners.
Single family homes owed by corporations are rented out to people to live in them, giving access to neighborhoods that were not accessible before.
If you think that's "economist inspired" well it's no more inspired than your statements!
"Trump says" is not the same as "US will"
Trump says a ton of things that he never ends up doing.
You’d think he’d want his name on a bunch of homes. Similarly, some salesman on the golf course has surely already pitched his name on a bunch of homes. I bet there’s a reason he’s been uninterested for so long.
What about REITs!? They are a crucial source of portfolio diversification!
Crowd pleasing policy that will not make any difference to the problem.
What about investors from other stock exchanges and locales? I don't understand why the phrase "Wall Street" is being included in this.
This is excellent news if it can actually be enforced.
Investor owned housing is a bit of a sensationalist scapegoat. Publicly traded companies account for a tiny, tiny fraction of available single family homes in the US. And so long as the tax code doesn't change, it strongly favors private/individual homeowners, and corporations only account for the margins where housing appreciates so fast or rental incomes are disproportionate to asset values.
This is an easy thing for Trump to promise (after all, little family-owned real-estate developer operations like his would never be affected). But who owns the homes is not going to change the problem that Americans have underdeveloped housing supply by over a million homes.
regarding public reits focusing on blackrock misses the Vancouver Model dynamic which is absolutely happening in major us markets.
the issue isn't just yield-seeking corps, it's opaque shell companies (llc) using real estate as a store of value aka money laundering vehicle. vancouver showed how this decouples prices from local wages completely. the us has this exact vulnerability—anonymous delaware/wyoming llcs buying in cash, specifically in supply-constrained cities like ny or miami.
this only works because of zoning. if nimbys didn't artificially cap supply, housing would be a depreciating consumer good (like in Japan) rather than a deflation-proof asset class. zoning is what turns a house into a safe deposit box for offshore capital.
if the corporate transparency act that Trump vetoed is successful then I expect to see the real estate become US's top source of GDP like it is for Canada.
> this only works because of zoning
The dynamics in the countries that don't have zoning is exactly the same. Price bubble and misery for everyone in dense cities.
There will be no affordable housing in cities, whatever you do, short of nuking everything from the orbit.
Yeah, this move is maybe a net positive, but will have a tiny impact on actual home prices. It is absolute red meat for the internet conspiracy machine though. Especially on the left.
I also have no idea what statutory authority he has to enforce this. Surely it requires Congress or at least the FTC chair. And if there's enough vested opposition it's going to be challenged in court pretty quickly.
So, REITs? There is so much money there I expect some immediate pushback or a built in loophole.
Can’t buy a single home but an entire community is okay.
Does wall street investors include private equity? i thought i was pretty sure that is most of the problem, but maybe i am wrong.
the carve outs will be insane and defeat the whole point
absolutely, easily predictable
what should be a one page bill will have riders of insanity
they'll probably do it like they do with corporations having more than 15 employees, so every little business just has 15 people contracting out to the next business with 15 people etc., there will be a corporation for every 15 houses etc.
Actual title: "US will ban Wall Street investors from buying single-family homes, Trump says"
Trump, notoriously, says all sorts of things.
I'm sure this'll come right after he finishes his healthcare plans in "two weeks".
Im sure this will be rolled back 2 days after mid-terms.
I see the Democrats are right back in their 'wildly overconfident' phase again.
Either a) this is window dressing and nothing material will change or b) there's a housing crash coming.
Don't hold your breath.
It needs to be illegal for anyone to buy a single-family home that already owns one, and who won't agree to live in it, full-time and exclusively for at least one year. They must also agree to sell it ONLY to someone who also accepts the same terms. The penalty should be a criminal fraud charge with minimum jailtime -and- a hefty penalty.
Wouldn't that most likely lead to less rather than more construction of single family homes?
Why do they not link Trumps posts? I would really rather be able to see what he said, and this was something he posted online to truth social
Edit: I think this was the post https://truthsocial.com/@realDonaldTrump/posts/1158550595275...
I guess they didn't link it because it changes the meaning of the article, his post reads more like he's going to discuss it and wants to do something about it.
Corporations can build their own buildings and rent them out, keep them out of the second hand market.
They are already doing this. They build entire SFH communities exclusively for rent. Nobody even has an opportunity to buy them. Build to rent, etc.
Headline is very misleading. Reuters prefaces this with "Trump says" which is weaselly enough.
Quote from the article: "In a post on Truth Social, Trump said he was immediately taking steps to implement the ban which he would also call on Congress to codify in law."
The president can't do this. His EO will likely be some kind of statement of intent or request to the FTC to see what can be done. Really, this is an exhortation for Congress to do something. A bill has yet to be written.
This mentioning of 'Wall Street' with investors if typical for the kind of populist argument that is used to argue that banning investors from buying houses is a good thing. What would this 'Wall Street' even mean? Would it mean that companies listed on the stock exchange are banned but privately owned companies not?
Anyhow, I argue that investors are positive for the the house market. They shouldn't be banned. Investors provide enough liquidity to the market so that the building companies have enough certainty to invest in large housing projects, because they know that their properties will be sold quickly. If investors would be banned they would sell their houses eventually as well but it would take much longer.
Similarly, investors improve mobility and throughput. An individual putting his house for sale will find a buyer much faster when investors are in the buying market, who are willing to buy up a house when nobody else takes it and sell it for a better price later. So: sellers sell faster, so they can move out and buy a new home faster as well: mobility in the house market increases.
In IT terms: investors function as a buffer.
my first reaction was that the counter in the top right seemed like a really low number, but i think i was interpreting it wrong - that's the number of rides in progress, not a cumulative counter for the day, right?
"Houses are for living, not for speculation" spreads to the Imperial Core
This is good for homeowners. Bad for renters.
Why? Housing prices will rise, rents will rise.
A lot of people live in apartment complexes and this won't cover those.
how is this going to help when they already own it and new housing is built at a snail's pace? investors pulling up the ladder behind them
not that I expect it to even happen at all
Corporations are people under the current SCOTUS interpretation. Which means they have the same rights under the US Constitution, so this should be struck down in no time in the courts. Another nothing burger likely to end up just manipulating the equity market and the derivative markets in the short term for large investors to capitalize.
Just build more housing, the whole "let's make rules to avoid the easy and obvious solution" trend annoys me.
Utilizing vacant properties is easier and cheaper than building new ones, by a massive margin. We should do both, but ignoring perfectly good homes in desirable locations being used by nobody is silly.
If the goal is to reduce the number of vacant homes, then why not create a tax on those specifically. Corporate owned homes and vacant homes are not the same thing at all.
If a home isn't the sole primary residence of a person, it's essentially "vacant" and should be taxed, imho.
I mean converting vacant is fine, to me it's the same category basically - increasing housing supply.
The title change here is editorializing. It’s not a given that this will be implemented and the original title reflects that: “Trump threatens to ban Wall Street investments in single-family homes”.
Ban predatory private equity altogether.
I feel the numbers that show investment groups that own X number of homes is highly misleading. More than likely these investment groups form multiple companies when they buy up the homes. Likely state or regional. From there the larger parent company is invested. So I wonder if there are hundreds or thousands of "small" investment groups that are essentially a shell for a larger private equity group.
So my big worry is that the Trump admin will say they are going to only eliminate the most obvious cases and the problem will remain. The LLCs and shell corps, etc.
EDIT: Also it does not address the massive amount of housing stock that is foreign owned by people that don't even live in the country.
How about we stop companies from buying up properties to turn into airbnb/short term rentals, unless its a company that flips homes. Those we need.
Why the exception for companies that flip homes? In my area, those typically have really poor workmanship and it’s a good idea to avoid them.
Seems reasonable to me, a very anti Trump individual. Now deliver.
And which of his buddies does this benefit?
I'm trying to think if there will be ramifications to this...
- Obviously forced divestment of all Wall St owned single family homes could impact housing prices which is both the point, but of course... also hurts many families borrowing power and net worth
- I guess that crash could potentially have people paying lots of money for homes that aren't worth that much anymore, which sounds pretty negative
- Of course... wow, would it be nice to be able to afford something in the city I love (which I doubt will be impacted by this)
Of course, no clear plan here. Just Trump saying something, why wasn't the "Trump says" part kept in the headline here?
> also hurts many families borrowing power and net worth
This is part of the crux, isn't it? It's a backbone of families' wealth and positioned as an investment. So there seems to be no winning: either choke off the young trying to buy or crack the nest egg of the old
See also: Bitcoin and the like (wild value fluctuations are the hallmark of a good currency)
Related article of interest: https://archinect.com/news/article/150496266/is-this-swiss-h...
> either choke off the young trying to buy or crack the nest egg of the old
The simple fact is, housing can either be affordable xor an investment[0].
Affordable means the prices are flat relative to inflation, which makes it a terrible investment. If it's a good investment, that means the price is going up faster than inflation, which quickly makes it unaffordable.
[0] I want to be clear that I'm referring to housing as an investment to mean buying a house purely for profit purposes, ie, to flip or to rent out. Buying a house to live in, rather than renting the house you live in, can be considered an "investment", but I mean to explicitly exclude that usage of "investment" in this comment.
Sure it can be an investment even with no capital gains, there's still income from charging rent.
Which still contributes to unaffordability.
A house bought for the purpose of renting out is a house that could have gone to someone who wanted to buy it. It creates upward pressure on housing prices.
I mean, I get it. There are some people that truly do want to rent a house because they know the living situation is temporary.
But we have a generation that was able to buy houses during an economic boom where you could buy a house with an entry-level job, and once that house was paid off, they started buying up houses with their extra money to rent out, and it was so lucrative that prices have skyrocketed and now people in their 20s can't buy houses without a decently lucrative job.
Obviously, there are many factors at work here, but buying or building houses with the intent to rent them out is certainly a contributor.
I just think about the fact that I bought my house in 2015 for about $340K, and it's now worth about $600K, an 80% climb in just 10 years, and I think that's absurd, not to mention a bad thing for society overall.
If what this article describes really does come to pass, it may still help.
Often, mom-and-pop landlords are happy to be making more than the mortgage rather than MBAs trying to extract every possible marginal cent. It's less of a faceless spreadsheet relationship.
I guess time will tell if it's anything more than blowing smoke.
Well, there's no explanation for how this will affect any currently owned properties. So maybe it won't do much of anything. And something important to understand about private equity owning homes, is that they tend to descend on specific geos where the supply allows buying in scale. If they are forced to divest, it very well could crash a few cities or towns. And given that the aforementioned supply was heavily bent towards distressed areas, the crash could be brutal.
It will likely have close to zero impact on high-demand areas.
I am also trying to think of what else could actually be fueling this, since it sounds very... not republican. Quite literally the opposite.
Like you said that also assumes it actually happens and isn't another incoherent ramble that is conveniently forgotten about or claimed he never said.
I mean if its legit I will cheer it on... but I remain skeptical.
It's mostly a made-up issue to begin with - so this would be a popular policy, easy to pass because there won't be much opposition, and it'll be easy to point to and say "We fixed that problem."
The R party has changed so radically that it's hardly recognizable any more. As a result, "not republican" is no longer a very meaningful description.
I think the most likely explanation is pretty simple. Whenever people are unhappy with their economic situation, at the ballot box they take it out on whoever is currently in power, logic be damned. Politicians know this.
[dead]
Even if they do it's a little late at this point, plus I don't believe it, since Trump and most people in the admin are too friendly (borderline controlled) by the people who are friendly/control entities like Blackrock, it's either beneficial to them to stop the competition from doing it since they bought enough for now or there is a big gotcha in there.
I know how that paragraph reads, but the past couple of years have made me too cynical to trust anything they say they're going to do.
Just build more homes. JUST BUILD MORE HOMES.
Hopefully this happens so people can stop blaming institutional investors for high home prices once this fails to work. Then maybe we can work on actually building homes.
Stupid populism. Homeownership is bad policy, and I welcome private equity buying it all so we are finally disabused of it.
(Of course, they were not buying it all.)
Wow. Usually everything is about the money.
Now its about elections, which are about power. And subsequently money
Interesting that Blackstone stock is the same as a week ago. Either this can't be done, or it can be done and they're exempt, or it will be reversed.
Or it won't materially impact Blackstone's business because single-family homes are a tiny sideline for them and not where they make most of their money.
It was not immediately clear what legal authority Trump would draw upon to impose such a ban on the private market purchases of houses. Trump did not detail the policy, the form it would take or the legal changes he was seeking from Congress.
The White House did not immediately respond to a request for comment. The U.S. president was due to sign unspecified executive orders later on Wednesday.
Anyways, I thought that issues with Americans being able to afford things like housing was all a hoax made up by Democrats?
Why craft policies to address a made up issue?
It's extremely likely that the president doesn't have that power. He can disallow corporations from buying houses on a whim? I don't think so. But PR goodness has already been coming his way from the policy if there is any.
because he doesn't run mid-terms - states do. He's desperate.
Why is it as a soon as a politician announces they will start in the future to have a concept of a plan at tackling an issue, many people react as if it’s already done?
No actual implementation steps have been taken or explained. Will this happen before or after the health care plans are released? Before or after the still pending infrastructure bill?
“ Trump said he was immediately taking steps to implement the ban, which he would also call on Congress to codify in law. *It was not clear what steps he would take*”
Even if their negative impact is a fantasy, they provide no benefit. There is no reason we shouldn't ban them.
They should just increase the taxes on rental income to make it less profitable. It's too easy to be a bum landlord.
The landlords would raise the rent to pass the tax along? If all landlords have this tax, all landlords will be raising rents.
Trump will get the boss call from Jamie Diamond or any of his other donors and quietly drop this, or sneak in a loophole big enough to walk an elephant through.
Seems like a good start. Then ban this as an asset class for scale investors so they have to release existing inventory.
I get that title length is limited, but the "Trump Says" in the title is a pretty significant detail. He "says" things all the time.
That's true, but to play devils advocate for a second, just because he says something doesn't make it wrong or bad. Banning Wall Street from buying single-family homes is a great thing that I completely support, and I don't really care which president makes it happen.
It also doesn't mean he can actually do it. There's no obvious mechanism by which this can be enforced without a law from Congress, and it's not entirely clear such a law would be Constitutional (they'd have to base it in the right of the federal government to regulate interstate commerce if they're going to base it in anything, which presupposes an interstate market for shelter, and there's a reasonable argument to be made that maybe that's not a thing; housing is a local concern, and home prices in Topeka don't impact me, a buyer in Boston, if I want to live in Boston).
The policy would be great! You aren't playing devil's advocate for what I said. I wasn't talking about the merits of the policy at all. Him saying it just doesn't have any connection to whether the policy will ever exist. The headline without that detail is wrongly implying certainly that isn't warranted.
The point is that leaving off “Trump says” makes it sound like something that will actually happen.
What baffles me is why people still take it all seriously, we've had well over a decade to examine his patterns of behavior and the takeaway is that fully 99.999% of his utterances are worthless. In the rare case that his promises are turned into some shambling semblance of reality there's always plenty of warning; in the case of VZ and Maduro you had significant troop movements for months for example.
Unfortunately by treating his every utterance as requiring attention he gets what he wants, the media gets clicks, bloggers get clicks, and people get to use it as part of an eternal argument over "what comes next".
People here at least should be more adept at recognizing and responding to patterns.
How does this affect Arrived?
There goes my home value
It might help in the long term, as it can force cities to stop densifying. And as we all know by now, densification is the leading cause of unaffordability. The US has more houses than households, but people are forced by economic forces to move into denser and denser areas.
But short-term it'll hurt availability. One of the most common ways to enshittify cities is buying an SFH, demolishing it, and plopping a 3-4 apartment complex in its place.
This sounds backwards? Density means more units available, which should lower costs. Supply and demand. Rentals in a dense complex are cheaper than standalone rentals or duplexes, townhomes are cheaper than SFH, etc.
I don’t think cities should force density, but there’s no reason to go the other way either as long as growth is managed properly in terms of traffic, transit, and infrastructure.
i can see what they mean. Another way to think about it is like how adding a lane to a highway doesn't decrease traffic it increases it. There's no shortage of demand in densely populated areas otherwise they wouldn't be densely populated. Adding more units will be met with more demand like adding a lane to a highway is met with more cars on that highway. Fix it by making the area less dense and prices will drop like how the way to fix a busy highway is to decrease the cars on it and traffic will lighten up.
True, but typically this also means fewer jobs, local economic contraction, and eventually neighborhoods full of decaying empty properties as in Detroit. They did achieve lower density, as many abandoned homes were forcibly demolished. Housing is cheaper now too.
It seems much more realistic to freeze growth than reverse it. Even then, growth in surrounding areas or other factors can quickly make the area more desirable and expensive as in SF.
> This sounds backwards?
Nope. The ONLY way to get cheaper housing is by reducing the city population.
> Supply and demand.
Sigh. No. You assume that the demand is fixed. It's not. By building new housing, you _increase_ the demand. And always faster than you can satisfy it.
I just love this example:
Forbes 2016 - "Tokyo's Affordable Housing Strategy: Build, Build, Build", "The Great Urban Myth: 'Cities Can't Build Their Way To Affordable Housing'"
Reuters 2023 - "Surging Tokyo property prices squeeze out young professionals",
Japandaily 2025: "Housing Crisis: Families Struggle to Buy Homes in Tokyo" ( https://japandaily.jp/housing-crisis-families-struggle-to-bu... )
> Rentals in a dense complex are cheaper than standalone rentals or duplexes, townhomes are cheaper than SFH, etc.
Try to find a city where dense housing made it cheaper.
> Try to find a city where dense housing made it cheaper.
Are there cities where replacing denser housing with single-family homes made housing cheaper?
Not quite. But there ARE examples where the price growth was stopped by providing alternative options to the cycle of ever-densification.
A really good example is Copenhagen, the world's most liveable city. Its current population is still _less_ than during the 1970's peak: https://www.macrotrends.net/global-metrics/cities/20894/cope... The driver for the decrease was suburban migration, as cars became more accessible.
The US _itself_ is a great example. The suburban development created cheap housing for the rapidly growing population in 60-s.
Do you have more details on this 1 example, specifically the trends of city housing prices and demand? A quick search [0] seems to show city housing prices increasing, rather than decreasing.
Obviously housing built outside the city will be cheaper than within it, and that might work for people who are fine living just anywhere (like away from the city), but the hypothesis is that the prices within the city increase when more housing (denser housing) is added within the city, right?
It's just hard to imagine how replacing a 300-unit occupied building downtown with 4-8 single-family-homes would result in the SFHs being cheaper than a unit in the skyscraper was.
0: https://www.courthousenews.com/copenhagen-housing-prices-dou...
> Do you have more details on this 1 example, specifically the trends of city housing prices and demand?
I don't have all the information on Copenhagen yet. The stats from 1970-s are not available online, so I commissioned someone to get the data from the archives.
The available data basically shows that prices were stagnant during the 70-80-s and started rising in the 90-s.
> After all, building more housing in the city isn't mutually exclusive with building housing outside the city.
I think it is mutually exclusive, exactly because of the population growth (the lack thereof). Each dense apartment in a city core means one less house in a rural area somewhere.
Japan, that I gave as an example, has literally free houses that anyone can get for nothing but the government real estate transaction fees. Just 3-4 hours away from Tokyo.
> I think it is mutually exclusive
Is there any evidence of this? The demand for living in the city (rather than outside of it) already exceeds the supply.
> Japan, that I gave as an example, has literally free houses that anyone can get for nothing but the government real estate transaction fees. Just 3-4 hours away from Tokyo
Yeah, but that isn't housing in the city, it's housing in a place that isn't the city. Even setting aside the cultural differences of Japan, where homes are rebuilt every couple decades, and even setting aside that it has a declining population: a place where people don't want to live will naturally have lower prices than a place where they do.
It kind of sounds like when you're talking about reducing the density of a city, you're actually referring to keeping the density of the city the same, and building SFHs in places that aren't the city (which actually increases the density of those non-city places). Is that what you mean? Or did Tokyo replace skyscrapers with SFHs? And were those SFHs within the city cheaper than a unit in the skyscrapers was?
> a place where people don't want to live will naturally have lower prices than a place where they do.
But that's not true, is it? Most people in the US want to live in suburban SFHs, yet they are often forced to live in apartments. But that's not a viable option for them because the jobs are only available in dense cities.
> It kind of sounds like when you're talking about reducing the density of a city, you're actually referring to keeping the density of the city the same, and building SFHs in places that aren't the city
Correct.
> which actually increases the density of those non-city places
And technically increases the housing price there from zero to some value, just as predicted :)
>> a place where people don't want to live will naturally have lower prices than a place where they do.
> But that's not true, is it?
It certainly is: look at the price of housing in New York City, then look at the price of housing in Newark, New Jersey. Many people want to live in the former, but must settle for the latter, due to lack of affordable NYC housing. Then look at the price of housing in Ainsworth, Nebraska: Even cheaper, because people want to live there even less.
Or look at your own example: People want to live in Tokyo more than they want to live 3-4 hours outside of Tokyo, hence the pricing for the latter is lower.
> Most people in the US want to live in suburban SFHs, yet they are often forced to live in apartments.
In my experience, most people in the US want lots of square footage within the city, and either settle for suburbia to get the square footage they want, or settle for less square footage to get the city living they want. This goes for both renters and buyers, and for both Single- and Multi-Family Housing.
How, then, would increasing the price of in-city housing (by reducing the supply, by replacing denser housing with less-dense housing) allow people to realize their big-city-big-living desires?
Alternatively, how would building housing hours and hours and hours outside the city (where pricing illustrates people don't want to live) allow people to realize their big-city-big-living desires?
> Many people want to live in the former, but must settle for the latter, due to lack of affordable NYC housing.
That's because they _have_ to work in NYC. Polls show that something like 80-85% of people in the US would prefer to live in suburbs.
> Then look at the price of housing in say, Cheyenne, Wyoming: Even cheaper, because people want to live there even less.
Well, yes. Land is not scarce in Cheyenne, so housing is cheap. But people don't flock there because they don't have any job prospects in WY. See my notes about remote work.
> Or look at your own example: People want to live in Tokyo more than they want to live 3-4 hours outside of Tokyo, hence the pricing for the latter is lower.
How about: "People HAVE to live in Tokyo, because there are no job prospects outside of Tokyo"?
> In my experience, most people in the US want lots of square footage within the city, and either settle for suburbia to get the square footage they want, or settle for less square footage to get the city living they want. This goes for both renters and buyers.
Well, sure. I would love to live in a mansion with a private lake, in the middle of Union Square.
> How, then, would increasing the price of in-city housing (by reducing the supply, by replacing denser housing with less-dense housing) allow them to realize their big-city-big-living desires?
You assume that people _want_ to live in big cities. People want to have access to big city amenities, but not necessarily live there all the time.
That's why suburbs are such a desirable place. Think about this: what if you live 1 hour away from the city core? This still allows you to easily enjoy all the amenities like theaters and shows. Or to periodically go to your favorite ethnic restaraunt. But it's _way_ too far for daily commutes so it's impractical.
> Land is not scarce in Cheyenne, so housing is cheap. But people don't flock there because they don't have any job prospects in WY
> How about: "People HAVE to live in Tokyo, because there are no job prospects outside of Tokyo"?
How about: people don't want to be located 3+ hours outside the city, and neither do many employers? Being fully-employed in the middle of nowhere is still pretty undesirable. This is borne out in housing prices: the people buying houses in Cheyenne are likely just as employed as the people buying houses in Newark or NYC, and yet the market rate for the former is still much lower.
> That's because they _have_ to work in NYC.
Or, because they want to live in NYC: socialization and meetups and camaraderie around every conceivable interest, innumerable dining options within a matter of blocks, some of the best live entertainment options in the world, friends within walking distance, etc. Case in point:
> I would love to live in a mansion with a private lake, in the middle of Union Square.
The reason you can't have that is the cost, which we're talking about ways to decrease.
> That's why suburbs are such a desirable place
The suburbs are desirable in that they are cheaper: that mansion with a private lake would be cheaper in the suburbs than in the city, so some people choose to settle for the suburbs, while others choose to settle for a less-nice place in the city.
> what if you live 1 hour away from the city core? This still allows you to easily enjoy all the amenities like theaters and shows.
1 hour each-way of driving is a lot, and by then you're usually in a different city. 3-4 hours puts you in a different state, and in some places, it puts you in an entirely different country!
> Or, because they want to live in NYC
Do they? Or do they just rationalize having to live in NYC?
Depending on the question, most people HATE living in cities: https://www.reddit.com/r/dataisbeautiful/comments/1l1ryyq/ci... - and it's not even a close competition.
> socialization and meetups and camaraderie around every conceivable interest, innumerable dining options within a matter of blocks, some of the best live entertainment options in the world, friends within walking distance, etc. Case in point
Well, sure. Everything has trade-offs and people decide which ones are more acceptable for them. When given a choice, I moved out of dense areas. Because I don't actually care about drinking every day, and all other activities are not materially affected by having a 1-hour commute to the downtown.
> 1 hour each-way of driving is a lot, and by then you're usually in a different city. 3-4 hours puts you in a different state, and in some places, it puts you in an entirely different country!
Sure. But we're talking about the US in particular.
Well technically that’s true, in the same sense that the only way to roll back inflation is demand destruction (and an extended recession or depression).
The problem with this is that you can’t forcibly reduce population. Halting growth in one area just displaces it. This can be a good trade if the area into which growth is displaced is underdeveloped with few other potential uses. But it can also create Atlanta or Houston style sprawl, or destroy natural areas that would be better to preserve.
Japan is an unusual example because most job opportunities are in a handful of areas. You can get impossibly cheap properties in the countryside but there are few jobs or young people. Properties in the city keep getting more expensive because of demand and because building codes are constantly evolving to keep up with new developments in earthquake protection. There are older urban properties available for cheap outside of trendy areas, but the cost of renovation is often too high to be worth it. There’s also a cultural stigma around older properties.
> The problem with this is that you can’t forcibly reduce population.
We don't need to. The population growth in the Western world is mostly over, the US will likely peak at barely +10% to the current population numbers. Europe is likely already at or near the peak number.
And Tokyo managed to get a bubble within a country with a _falling_ population. Not just stagnant like in Europe, but actually numerically decreasing.
> Halting growth in one area just displaces it.
That's EXACTLY what we need. The US already has 1.1 houses per household, except that they are not where the demand is.
So the fix is to shift the demand, not try to satisfy it. Ironically, this is exactly the same method that urbanists propose to fight congestion: instead of just adding more lanes to busy roads, you shift people to other modes of transportation.
How can this be done? Exactly like we did it with pollution: tax negative externalities, incentivize clean technology. For cities: tax dense office space (cap-and-trade can also work), incentivize work-from-home, incentivize offices in less dense cities, etc.
This doesn't even have to be a huge policy shift.
Interesting theory, although I don’t know if US based remote work will continue to be as common as it is now. The policies you suggest also seem difficult politically since most environmentalists seem to want more density, not less.
If the combination of AI, declining returns on service and knowledge-based work, and national security priorities create a resurgence in manufacturing then factory towns may make a comeback.
> Interesting theory, although I don’t know if US based remote work will continue to be as common as it is now.
During the pandemic, some research had shown that something like 70-80% of jobs can be remote.
The kicker is that remote work is less efficient. So in the long run and on average, companies with in-office jobs outperform fully remote companies. This is just like the situation with pollution: a company that spends money on waste recovery is less competitive than a company that can just dump toxic sludge into a nearby river.
And just like with pollution, centralized regulatory changes are needed so that all companies are affected similarly.
> The policies you suggest also seem difficult politically since most environmentalists seem to want more density, not less.
Yet they are misguided because they keep looking at the very tip of an iceberg. It's just one example out of many (see: nuclear power plants).
To give an example, light rail is more efficient than individual EVs. So it's great that Seattle is building light rail, right? It'll result in fewer "headline" CO2 emissions.
But then you realize that Seattle is going to spend $180B ("B", as in "billion") to build about 50 miles of tracks. It's more than the yearly GDP of 130 countries! All these resources could have been spent on something else, perhaps on building more renewable generation.
> But then you realize that Seattle is going to spend $180B ("B", as in "billion") to build about 50 miles of tracks.
Well yes, but that's not at all something intrinsic to the process, it's just a dysfunction that Seattle is suffering — along with most of the rest of North America.
In 2002, Toronto paid less than $1b to build the 5.5km of https://en.wikipedia.org/wiki/Line_4_Sheppard , which is fully underground subway running on a custom gauge for historical reasons.
Last year, we finished https://en.wikipedia.org/wiki/Line_6_Finch_West , which is light rail running at-grade on standard gauge. It's not even twice as long but cost 3.6x as much. For light rail. And it's apparently running well below design speed and at least initially with terrible signal priority.
Currently we are building https://en.wikipedia.org/wiki/Line_5_Eglinton, just over five times as long. It's light rail at a combination of underground, at grade and elevated; current projected total cost is $17.5b. So, three and a half times as much per unit distance, for what is supposed to be a considerably less expensive option.
Prices for other things have not gone so crazy in that time frame. But yeah, it isn't costing us anywhere near 3.6b USD/mile (about 3.1b CAD/km) for light rail. Yet.
This is a problem with cities. All new infrastructure is extremely expensive because of the planning overhead and because of labor costs.
Not just light rail, but even regular water and sewer. San Francisco spent half a decade repaving a few blocks (Van Ness bus rapid transit) because they had to slowly dig through unmapped ancient infrastructure.
Even in the case of Toronto, you're looking at amounts that can buy each incremental rider a new house. In case of Seattle, each household is going to pay around $150k for that rail.
It's simply ridiculous.
I am curious how this intersects with a land value tax. Many LVT proponents try to draw in urbanists by noting its effect on density (LVT should economically increase density). But looking into it a little bit it sounds like that effect may be stronger in dense urban areas, with lower density areas less affected. I was curious because an LVT would likely also help undo distortion in the property market. Perhaps the two ideas are comparable after all; policies to encourage lower density wouldn’t necessarily be undone by an LVT.
In the real world, though, a Georgist style LVT probably has about as much chance to be enacted as any of these other policies. Unfortunately I think we’re going to run the current system into the ground.
> I am curious how this intersects with a land value tax.
I have not run the numbers, but intuitively it seems that this tax will kill the SFH long before it starts affecting the dense office space.
> In the real world, though, a Georgist style LVT probably has about as much chance to be enacted as any of these other policies. Unfortunately I think we’re going to run the current system into the ground.
I think there is a real chance, there is this current of massive dissatisfaction. People _feel_ that something is just not right with the current situation. With the populists proposing the usual easy solutions: "it's all immigrants, ICE them out" or "it's all fault of the end stage capitalism, we need socialized grocery stores".
> And as we all know by now, densification is the leading cause of unaffordability.
This is the first time I see this bold claim, what evidence do you have to prove it?
It's a simple observation. No large city in the US or Europe reduced the housing prices by increasing density. I gave an example of Tokyo in the other comment in this thread as an absolutely illustrative case.
The only price decreases happened only during the 2008 crisis and during the pandemic lockdowns, due to local population decreasing.
Believe it when you see it folks. No sooner.
"US will ban" More like Trump said today that he will try to ban...TACO and all
There is a conservative case for this in that the 30 year fixed mortgage, combined with all of the foreclosure protections both old and new, amount to a government benefits program. Historically, this type of mortgage was developed to promote family homeownership. The mortgage systems have continually blown up in "crises" in part because it's a product of policy more than it is a market product. This is partly why investors both corporate and small flipper types actually do cause serious distortions: the US housing market is a welfare program first and a market for bundled land and houses second.
No one wants to abolish this welfare program (you would have an easier time abolishing Social Security), but also the government wants to keep the trappings of a market price system. It is easier to have serial crises and to blame some guys for the predictable explosions every time, adjust the laws to create enormous numbers of lawyer billable hours nationwide, and then set the stage for the next crisis and the next round of patsies to be blamed. Fortunately, this time we have AI to write all the think pieces about what it really means.
I mostly agree with your comment except the part where flipper types and corps cause distortion because they have 30-year mortgages at their disposal. A fixed rate, 30-year is distortionary on its own; it's a uniquely American "product" and banks in other countries would look at you crazy for requesting such a thing.
Great news!
title of post is "US will ban", title of article is "Trump threatens to ban". OP why are you misleading people?
Yea, right. "Wall Street" has publicized lashings and rules, but there's also a backdoor. And they obviously have a strangle-hold on rentals.
The end game for capitalism is for everyone to rent everything: healthcare, cars, software, music, physical items, roads, etc.
This headline is wrong. It’s just something Trump said and any mechanism to do this seems dubious at best. The entire idea is likely unconstitutional.
Submitted editorialized title in a misleading way.
Correct title is: "Trump says he will ban Wall Street investments in single-family homes"
The TechBros currently run the country, so I don't buy into anything the current government does in regards to Average Joe, including family homes.
Ironic this coming from the king of scummy landlords
Um… banned by what authority? I fail to see how this is legal. Same as banning obese people from buying cookies
People want the value of their house to go up after they buy it, but stay low before they buy it. This is all nonsense. If people in an area keep breeding, housing costs will go up. It's that simple. Increasing housing prices are actually one of the only checks that keep humans from overbreeding and ruining large swaths of desirable places to live.
> "People live in homes, not corporations," Trump said.
Very surprisingly progressive opinions from Trump.
I do completely agree though, the consumer surplus of housing should be captured by people. Not investors looking to profit.
It's extremely toxic to society when investors get to eat the utility of housing.
Individual owners drive far more NIMBY policy than corporations. The rent of land exclusivity should accrue to the public rather than to private individuals or corporations.
This is not surprising at all. I'm not sure why people keep making this mistake thinking that good 'ol Republicans are flipping their script all of a sudden. MAGA is a populist movement and has a lot in common with the far left types.
> Very surprisingly progressive opinions from Trump.
Trump does not possess many "locked-in" opinions. He can be persuaded to support anything if you are charismatic enough.
Oh come on. There are plenty of uncharismatic rich people who have still managed to persuade him.
My friend Ben is pretty charismatic... especially when I give you several copies of his portrait.
This is another non-solution from Trump. Similar to the "no taxes on tips" nonsense that applies to almost no one since the cap is so high. It's a populist move that doesn't address the problem but appears to be a good thing for working class people at first sight.
I'll believe it when I see it in action.
Reuters taking the regime seriously is weird.
Yet again the Trump admin identifies an issue but misses the nuance. We want investors to encourage more homebuilding, the problem is more regional concentration - in regions where PE owns a big enough % of the homes that they can monopolize and control the rents. Or NIMBY policies (where the federal government could dock funding to states that don't build to match population growth).
They should go all out and nationalize zoning. Let it be challenged all the way to Supreme Court. Trumps developer buddies get paid, the grift continues and the housing crisis is eliminated.
Do it. Do it now.
Now ban everyone from buying them :P Tax the land
So there are (at least) six important aspects to the housing crisis.
1. Politically, this issue is a winner and it's crazy that the Democratic Party has refused to bang the drum on this, basically because it potentially upsets corporate donors. They have instead ceded this poopulist political ground to the Republican Party. The Democratic Party does not want to win elections and this should never have been more obvious than the 2024 presidential election;
2. Hoarding housing is state-sanctioned violence. You need housing to live. Housing affordability is the number one factor in homelessness [1]. That then subjects people to violence and danger that we, as a society, are allowing to happen. There is no reason that the wealthiest country on Earth can't provide a roof over the head of every man, woman and child within our borders;
3. The private sector will never solve the housing crisis because solving the housing crisis involves devaluing, definancializing and decommodifying housing. Wealthy people and large corporations who own a lot of real estate won't on their devalue their holdings. Things like Ezra Klein's Abundance claptrap are simply putting a Democratic bow on Reagan era trickle down economics and deregulation. This requires state action. That means the state needs to build significant amounts of housing to provide to people to regulate the housing market. The poster child for this policy is Vienna, Austria;
4. Voters have fooled themselves into thinking that increasing house prices are good for them. They're not. They're bad in virtually every way. There are people who bought a house for $100k in 1990 where that house is now worth $2M. Are you $1.9M richer? No. Because if you sell it what happens? You have to buy another house. And if every other equivalent house costs $2M you still only own one housing unit's worth of wealth;
5. Increasing house prices are simply stealing from the next generation and suppressing wages. Why suppressing wages? Because if you're laden with debt, you'll be a complaint little worker bee. You need that paycheck to not be homeless. You are in effect a debt-slave, particularly combined with student and possibly medical debt; and
6. The next wave of antitrust action will involve the use of AI as a means for market collusion and manipulation. A great and relevant example is RealPage [2]. If all the landlords use the same software and that software is designed to algorithmically increase rents, then that's market collusion. Honestly, dynamic pricing in general needs to be banned.
[1]: https://www.pew.org/en/research-and-analysis/articles/2023/0...
[2]: https://www.justice.gov/archives/opa/pr/justice-department-s...
> There are people who bought a house for $100k in 1990 where that house is now worth $2M. Are you $1.9M richer? No.
This is often repeated but not 100% correct.
You are in fact richer, and you can leverage this $2m in equity to take on debt and buy more houses. This is what has been happening here in Australia, and it's a major factor in the continued rise in prices.
When you've done this, hung on a handful of years and all of your houses have gone up 20-50%, you can cash out for a very nice sum indeed. AFAICT this is now a pretty mainstream middle-class retirement plan in this country, and it's terrible because, as you point out -
> Increasing house prices are simply stealing from the next generation
The money is coming from people, usually younger people, who are funding the insane market with ever larger mortgages and staying in rental properties longer, both of which benefit the equity-holder.
In the US you can often buy houses with no money down.
Also, if you're taking the equity out of your $2M house, how are you servicing that debt?
My point is that it's an awful lot easier to buy 6 $100k houses than it is to buy 6 $2M houses and if houses weren't speculative assets, maybe we wouldn't get those buyers driving up prices.
> In the US you can often buy houses with no money down.
Presumably you can't just walk up to a bank and say "I'd like finance to buy 10 houses please!" with no collateral beyond the houses you're purchasing?
Here you usually need a 10% deposit. If you already own a house you can borrow against equity. The bank considers multiple houses as a single portfolio to calculate loan to value ratio (LVR), and will take tenants rents into account on affordability. A quick worked example based on local figures (average first home price $700k, average home price $1m):
New market entrant looking for a $700k house: Needs $70k in cash for deposit plus $28k stamp duty, takes $630k loan and now has a 90% LVR and 70k equity.
Existing homeowner with $1m house, bought at $300k some years ago and now has $100k left on their mortgage: Has $900k equity. Takes an interest-only loan against equity for the full $728k on the same 700k house. Total property worth $1.7m, 48% LVR qualifying for a lower interest rate and paying much less per month as they have taken the loan interest-only. Didn't have to save up a single cent to cover deposit or stamp duty. Still has $872k in equity on the two properties so does it again three more times. Buys a total of four investment properties, still comes in under 80% LVR.
If the market goes up another 25%, the new entrant is sitting on $245k equity.
The landlord's IPs are now worth 3.5 million on total debts of 3 million, at which point they can sell four houses, clear all their debts including their original mortgage and pocket $500k (and while capital gains tax is chargeable on sale of investment properties, it's heavily discounted compared to other assets). Or they can use this new equity to buy more houses.
> if you're taking the equity out of your $2M house, how are you servicing that debt?
Rent. There's also a rental crisis going on over here. Rents are really high and can pretty easily cover investor mortgages. There's lots of people who would have been able to buy few years back but can't scrape together the finance to do so now that prices have gone up, who are forced to keep renting. So the investor crush creates its own client base!
Plus if you do end up making a loss on mortgage payments, property upkeep etc, the government allows you to offset that against your all-sources income for tax purposes, potentially reducing that loss by 45% if you're a higher rate earner.
> My point is that it's an awful lot easier to buy 6 $100k houses than it is to buy 6 $2M houses, if houses weren't speculative assets, maybe we wouldn't get those buyers driving up prices.
It kinda isn't in Australia. The market rising makes it much easier to access more debt and leverage that into more houses.
But I very much agree that housing shouldn't be a speculative asset and this market is broken. The government should be putting in place disincentives, not discounts and offsets. Unfortunately established homeowners now see this as a normal way of 'getting ahead' and I know multiple people who are effectively playing monopoly like this.
I hate it. Even though in theory I could go out and buy four or five houses next week if I wanted to. But with the rising cost of living and general bleak economic outlook everyone is continually fed, and the seeming impossibility of 'winning' for the average person, I'm not surprised people do it.
(Yes I was very bored with work this morning....)
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Agreed. It's important to evaluate policies regardless of the party promoting them.
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So what should be done instead?
Until congress actually does something all of this is simply hot air. I do not see how this could be implemented (other than some kind of tax) and pass muster with a conservative SCOTUS.
SCOTUS does whatever trump tells them to, so..
"This is gonna happen... unless..."
Manufacture a crisis only you can solve, for the right price.
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Will not happen with the current administration.
Like so many other big promises, it will appease a lot of people, but there will be no real follow through.
Any regulation that prevents unrestrained capitalism is immediately decried as socialism and therefore evil.
These kinds of promises are made which temporarily create market volatility, and once it later (usually quite soon) becomes clear that the big thing will not actually happen, the markets snap back. At this point, it’s incredibly likely that these situations are manufactured to both look good AND create large short term investment gains for people in the know - without actually changing anything.
Simple test
If anyone thinks this is not a problem, why would they comment, it would be irrelevant as banning salmon from participating in taikwondo
Instead everyone says how it's so false and this is just silly. This tells me - they are liars and it isn't silly at all
A clock is right twice a day
At least
I’m from the government and I’m hear to help!
There is hope for humanity.
How about stopping all non-occupants from buying properties.
I don’t want to purchase property, so where do I live?
Apartments, sorry I should have been more clear - all SFH should be owner-occupied
Sounds like a terrible idea. Have you heard otherwise?
Anything bad for Wall Street is generally good for the rest of us.
Just ban corporate ownership of private homes. Ban second homes altogether.
Lots of rich people here I guess.
There will be no way to enforce this such that “Wall Street” can’t easily get around it, so it is clearly for show and not an actual attempt to solve a problem.
This is a good thing, the next step however is to block the guys that use sites like BiggerPockets.com from buying up more then 5 single family homes. I know a whole bunch of guys who own 10 or more houses. That is excessive. We need to limit all investment of single family housing. Apartment complexes? Be my guest buy all you want, build all you want. But lets keep our neighborhoods full of people who can actually live in them.