I recently learned that it is, but that's not at all obvious for non-US people. In Europe an apartment is an apartment, and the ownership status is a separate matter. Condo is a not a word anyone uses or probably even understands over here.
America doesn't need more urban sprawl and the stigma against renting is ridiculous.
> Rent payments go down a black hole. Mortgage payments at least result in an actual asset, and eventually end.
Generally making rent payments and investing the money you would have spent on the house in the stock market will get you further ahead in terms of ownership stake than just making payments on a mortgage. The only reason this is not true is due to massive, massive government subsidies of owners at the expense of renters (ie. Fannie Mae/Freddie Mac acting as lenders of last resort for nonsense mortgages that no private bank would have ever granted without this support).
Renting is much more common in Europe and renters have significantly more rights. This is because much more wealth in Europe is generational (although we are quickly moving in that direction in the U.S. as well).
Some European countries have things like the imputed rent tax (basically taxing homeowners as if they were renting their own home). This goes a long way towards balancing the scales between homeowners & renters.
> America doesn't need more urban sprawl and the stigma against renting is ridiculous.
Not that there isn't a stigma against renting, but, does one really want to be renting during retirement when most people's income is fixed? And yes, there are ongoing costs to ownership, but you can possibly plan for those better. You can't really plan for your land lord to raise rent by 50% because the media tells him the market is hot and he can do that.
Yes, there are downsides of the flexibility that renting provides.
So if you feel a need to buy a home, you should be able to do it. But the government should not be propping up unsustainable markets at considerable risk to the rest of us to let you do so - if you can afford a home and get a bank to lend you the money and assume the risk, you should be able to. But I am not sacrificing my ability to afford quality housing to give you government-guaranteed mortgages, it's a massive moral hazard.
If you need the fixed-income security, pay for it.
It depends. While mortgages lock in a monthly payment you must first save up a down payment. The same cash flow directed into the stock market would also build "equity." If one does not move within seven years buying housing is better.
Not sure if that is true with current rates - and also is due to government policy propping up cheap money to homebuyers.
As I've said, no bank in their right mind would give out the mortgages they are right now if they didn't know they could turn around and sell it straight to Fannie & Freddie
Indeed. Without Fannie Mae and Freddie Mac (government sponsored enterprises) there would not be a 30 year mortgage. Mortgages would probably adjust the rate every five years.
The problem with this argument is that getting a mortgage locks in your housing payments. If you look at the growth in rents over 25 years you don’t come out ahead investing. In year 25 of my mortgage I’m paying the same amount as in year one but in many markets in the US rent has gone up 4.7%/year and that means rent is 315% of what it used to be. When rent goes from $2000/month to $6300/month and your mortgage was $4000/month you aren’t coming out ahead by taking $2300/month out of savings each month to pay rent.
> Generally making rent payments and investing the money you would have spent on the house in the stock market will get you further ahead in terms of ownership stake than just making payments on a mortgage.
This cannot be accurate.
1: rentals are often as much or more expensive than a mortgage (the problem is the down payment)
2: rental prices *constantly* go up, despite nothing changing in the house or apartment you're living in. Mortgages stay flat (in the US), so raises, etc, aren't eaten up by a cost of housing that exceeds the local inflation rate.
> 1: rentals are often as much or more expensive than a mortgage (the problem is the down payment)
Not now, no.
You have to compare the money you would spent on the down payment (and excess from mortgage) to the returns you would get from investing that money directly.
And as I said, the only reason mortgages are so cheap is due to the massive, massive amount of government subsidy in favor of owners - if owners were remotely exposed to the true cost of borrowing, it would not even be particularly close.
Do you realize the stocks had such a rally also due to the massive, massive amount of government subsidy? The same "untrue" cost of borrowing drove them up just like all other assets, including the real estate.
A mortgage is an extremely leveraged investment at preferable rates. Your statement is extremely sensitive to the change in home prices (generally rising), the change in stock prices, and interest rates.
My home has been making an unrealized 11% per year (disgusting) on a much larger pool of money than I actually had to invest. The economics of renting and investing the leftovers are deeply unfavorable.
The question of whether renting or buying is more financially beneficial is highly complex, and certainly it is not always the case that buying is better. Additionally, there are non-financial reasons why some people prefer to rent. So IMO we shouldn't be designing housing policy around everyone becoming an owner.
I bought a condo in 2021 (at a fantastic interest rate), and am currently regretting it deeply because my life circumstances changed and I probably need to move to a different state, meaning I need to either sell the place at a considerable loss or become an out-of-state landlord, which I don't want to do and is unlikely to turn a profit for me.
The flexibility of renting is a real and important phenomenon: people's lives change unexpectedly sometimes.
I regret not buying an apt in 2021 at a fantastic interest rate. Even though I moved since then, it would have been very easy to rent it, and inflation would have paid for it.
Since then, interest rates have only increased, and in my location, real estate is at a record high. It's been increasing pretty much since the 90s without a break. I don't believe a bubble will break any time soon. Also, materials/energy is getting more expensive, there's a lack of labour, so even building/renovating places isn't an option.
I support this, but it would require so many more city and county level law changes to implement. Many counties have zoning laws in place that require homes to be a certain square footage (my county is 1,500sqft), that also have to be built on-site, and must have 2 off-street parking spots, and must be 50 feet from the edges of the property line, etc. While making townhome-style housing impossible due to those same zoning regulations. While providing tax incentives to luxury apartment complexes.
These zoning restrictions would need to be rewritten first, and incentives given to developers to create high-volume, inexpensive housing. With restrictions preventing them from selling to built-to-rent companies.
But zoning restrictions are incredibly difficult to rewrite. A woman from a county in GA is having to sue the county to try to adjust their zoning restrictions and the counties constitution states that zoning can only be used to protect the health of the citizens. And their restrictions banning off-site built homes or small homes does nothing to protect health since they're built to the same standards as larger site-built homes.
> But zoning restrictions are incredibly difficult to rewrite.
I really want to know how they got written in the first place. It seems clear that somehow, zoning regulations is one of the biggest issues we've got. But everyone has these onerous zoning regulations that make life worse... where did they come from?!
I think most zoning regulations came as a backlash to the crime waves in the 60s/70s and were intended to keep "safe" neighborhoods "safe". This uses house prices as a tool to separate people into "desirables" and "undesirables" (roughly). China (and the former Soviet Union) did/does it more explicitly via the hukou system - if you don't have a hukou, you can't live in a given city nor attend the school/use the city's resources.
The process in the Soviet Union might not have involved financial capital, but it involved human capital (i.e. if your profession was not "respectable", or if you were ever convicted of a criminal act, you might not receive permission to get an apartment (or even a room) in a top tier city like St. Petersburg or Moscow)
Industrialization led to many dirty cities especially before sanitation technology was deployed. Restrictions on more than e.g. 8 unrelated people per house, minimum window requirements, separating the meat packing district from a pure residential neighborhood were in response to tenements which were deathtraps in fires.
It has it roots from the 20's/30's, but was reinvigorated into what is it now in the 60's/70's as a lot of suburban America was becoming desegregated and redlining was made illegal (redlining is a real estate tactic of marking a red line around an area of town that is the "black" neighborhood, and only showing black customers homes in that neighborhood, etc).
As redlining and segregation had a lot of old white people shaking in their boots complaining about property values, old white people who worked for local government (who were also largely landowners) began implementing zoning regulations that effectively banned any sort of housing being built that was affordable to many citizens. Such as apartment complexes, townhomes, quadplexes, smaller homes, etc.
In today's world, we're now dealing with the continued effects. Wealthier areas of town that do not allow ANY multifamily house. Less wealthier areas of town that do not allow homes to be built off-site, or to have under a certain square footage, effectively ensuring homes there are more expensive than they should be. And then the poorer areas of town only allowing multifamily housing right next to industrial/commercial zoning areas. Effectively preventing anyone (outside of property investors) from affording to own a multifamily property, let alone even be able to legally build a single-family home.
As the separations between middle class and lower class begin to blur, it makes the situation worse for everyone, outside of the financially well-off who either made it big with a business, or have owned property for decades at that point.
Zoning was redefined from a health and safety perspective, to a legal, local government tool to artificially inflate property values by unfairly limiting the types of homes that could be built, and putting the poorer workers and "undesirables" in unsafe communities full of industrial factories, low-wage jobs, and no vertical movement for the community to grow.
More radical: legalize a path to ownership for renters. You rented with no issues for 5 years straight? Great that’s 20% down on your new mortgage, it’s yours.
It isn’t that real estate can’t be an investment, but we should reward those who invest their human capital as well.
Landlords and market investors might balk, but they are going to hell anyway.
Quite the nonsensical argument. Alice pays Bob to rent his house, not her house. This is secondary to the nonsense situation we have at hand though, thanks to usury (aka interest) being normalized.
A lot of people and funds bought up a lot of houses to flip or rent at a premium, so even though free money is gone, they can't lower their prices. The next step is to tax people hard who leave houses empty. Make owning unsalable and unrentable property a liability again!
I’d say it’s because the pricing is algorithmic based off of demographic and personal data. Similar to hotels, it can be more profitable to keep some empty in order to reduce supply and price up the others.
> it can be more profitable to keep some empty in order to reduce supply and price up the others.
You mean if you own a massive complex, which is the vast minority of housing - and also not what was mostly accused of being bought up by individuals or firms for speculation.
If you're talking smaller units, landlords are effectively price takers and it is pretty much never profitable to keep empty and price up everything else unless you are anticipating immediate increase in prices.
None of this is a major driver of housing prices either way.
I’d say based upon the overall profitability and scale of single family corporate landlords like American homes for rent that commercial interests have great influence over pricing. Smaller landlords are then able to price similarly. It makes little sense for them to have houses be empty and lose money, but this is often the case. However, the focal point is the drivers of pricing and I don’t see any evidence in your argument as to why I am wrong.
> I don’t see any evidence in your argument as to why I am wrong.
Basic economics on how prices work? The fact that obviously everybody is a price-taker in most home markets?
Your theory is for some sort of massive coordinated action that would reap massive profits to anybody for defecting from. It's game-theoretically impossible but I need to provide the evidence? There are some landlord pricing tools that should absolutely be subject to anti-trust enforcement, but this is again: an extremely small current in modern rental/housing markets.
A person might not be able to lower prices because they owe more than the house will sell for. I can't imagine that is broadly the case in this market, unless the house was just bought.
A corporation is even less likely to lower prices if they own lots of properties. If they lower the price of one, their loss may be multiplied by the number of comparable holdings.
I imagine that it might affect borrowing for highly leveraged real estate investors. If you are securing loans on asset values and they drop in perceived value, lenders might get nervous and call loans in.
Theoretically, that'll make the debt easier to pay, given enough time.
However, there are levels of debt-to-income that prevent the borrower from getting that time (insolvency exists).
I am hoping policy-makers have a more sophisticated approach than 'money printers go brrr'. Economies like price stability. Deflation and inflation can be destructive in the extreme.
Because if you bought an over-inflated peak-market house you're stuck with that mortgage rate.
There's people paying $1,500 - $2,000 monthly on mortgages for average homes. To rent it out, it's not sufficient (for a variety of reasons) to simply collect the mortgage payment, meaning you have to charge even more to stay afloat.
If the market cools, and people no longer are willing to pay $2,5000 a month in rent on average homes, then the home owner is in a pickle... try to re-fi, if possible, offload the home, or ride the storm out (if financially feasible).
The vast, vast majority of rental properties have a much lower cost basis than if you were to buy it yourself today. Many landlords could rent it for much less than your mortgage payment on the same property and still turn a profit.
> The vast, vast majority of rental properties have a much lower cost basis than if you were to buy it yourself today
Anything to quote here for this? I'm inclined to believe you are probably right, but an awful lot of real estate has changed hands in the past 5ish years... all of which is hugely inflated above actual property values in a normal market.
Lots of people with FOMO bought into houses way above their weight, and thought the rental market was a "game" anyone can play.
"Hold it empty" is not a better way to "ride the storm out" than to rent it at lower cost. The solution to losing money isn't losing even more money even faster.
This is absolutely dependent on the market. It makes sense to hold an empty property in cities that make it incredibly hard to remove tenants without cause.
I mean, it's the choice between paying your full mortgage and partially defraying it. I am not sure what changes economically once you are net negative with the mortgage - it still makes marginal sense to rent it out
The properties are valued based on the advertised rental rates and if property values fall, they can have significant down stream effects on financing like banks requiring the property owner to put up more collateral next time they need a loan, whether it's to build more housing somewhere else or pay for maintenance that has large upfront costs.
Not a major driver of home prices at all. Plus, corporate landlords are some of the only ones that are even making it possible to rent at all in large swathes of America.
I view this as basically left-wing science denialism. The right has climate, the left denies the overwhelming consensus of economists as to the cause of housing affordability crises (it's supply and bad policy, not blackstone). [0]. Institutional investors own less than 3% of rental homes, which is a minority of overall homes and disproportionately buy homes that were not fit for sale anyways (so-called fixer uppers).
Also, there have been other articles I read during the pandemic (the topic was how long eviction moratoriums were killing small landlords while corporate landlords could weather it) that small, individual landlords do a much better job at renting out housing more affordably, being more willing to work with renters when they are behind on their payments, etc.
Individual landlords also tend to play games with renovictions or personal-use evictions to inflate their rents. I would never rent from someone who can decide their "nephew" wants the space and they just couldn't say no to him but then that fell through and meanwhile you're out on the street.
> I would never rent from someone who can decide their "nephew" wants the space and they just couldn't say no to him but then that fell through and meanwhile you're out on the street.
I never understood that attitude. I always took leases as a two-way street. That is, I'm free to leave and go somewhere else at the end of my lease, but the owner is also free to not rent to me at the end of my lease (with appropriate notice). It seems weird to me to have the expectation that if I sign, say, a 1-year lease that means I should have the right to renew that lease in perpetuity.
Where I live in California, for the large majority of rental properties, the owner cannot evict me unless they plan on exiting the rental market or I have somehow violated the lease.
I think this covers flat out most rental properties in California as well.
Even if there is a right to lease renewal, how much the lease will increase is often not regulated or loosely regulated. So…you can always price out a tenant you don’t want to keep, but there are often some extra laws around that.
Not in California, where the rent increases are limited in the vast majority of units (pretty much anything built before 2007) :)
I agree that this has an absolutely massive chilling effect on leasing & building, given that, reasoning from the past, any new development is almost certain to be subject to rent control within 20 years at most. I've never lived in a state nuts enough to have state-wide rent control before, it's interesting.
Well, they have property tax control as well so it isn’t surprising. But ya, rent control sucks in that it picks a few winners to the detriment of everyone else. Great for stability if you win it, but getting in is super hard. California still could stand to lose a few million people, maybe that’s their intention.
I fully understand that, and I think it's really bad policy, similar to rent control. It's just one factor among many, but it contributes to California's astronomical housing crisis - when you make it so distasteful for people to rent out their homes in the first place, people respond by being loath to add badly needed inventory and instead put their homes to other uses, including just letting it sit empty.
That's where vacancy taxes should be kicking in. People need to get it through their heads: you don't have some god-given right to hoard property for any other purpose than for it to be legit occupied. It needs to be discouraged as an investment vehicle to the detriment of all the other productive and pro-social uses for it.
Use it or lose it I say. You wanna invest? That's what the S&P and index funds are for. Go thusly
Yeah, yeah, it's always someone else's fault. Not boomer zoning! Not the corpos! No, the people profiting from the problem couldn't possibly be at fault. Mmmhmm.
EDIT: nice edit. At least you acknowledge boomer zoning as problematic. But you blame the left. Lol. I seem to recall your guy repealing a bunch of density-promoting legislation and bragging about "saving your housing values" on TV. Someone is in denial here!
Not sure where you read in my comment that it isn't "boomer zoning" but I believe you are referring to one of the largest proximate causes.
"Corpos" are filling in the gap because a ridiculously sticky real estate market means that there are a ton of places that could easily bear more renters. These corporations are typically paying far below the average for homes in whatever state they are buying in [0] (somehow paradoxically this becomes bidding home prices up) and typically allow more renters to enter the market rather than being priced out.
fwiw, I'm on the left - I just can see that our old pattern of finding a boogeyman that isn't policy choices to blame it on simply will not work for this problem.
They like to throw out that 3% number to get people to stop looking into them.
They fail to give the percentage of homes on the market they've been purchasing. In my market, it was more than 25% of all homes for sale. So let's explain away how removing a quarter of available inventory doesn't affect prices...
The 25% number almost certainly includes much smaller investors than these mega-corps that are being blamed.
They are simultaneously responsible for bidding up the price of homes while paying far below the average price for a home in pretty much every state they are present in.
Texas is effectively one of the only markets with a substantial proportion of new buyers being institutional investors and this is largely due to the number of dilapidated homes in the area.
Small investors aren't a problem? Bidding up the low end of the market isn't a problem? What?
Housing should be consumption, not an investment, but the perpetual-ownership structure of property rights combined with low property taxes turns them into an investment. But not a "consume less today, produce more tomorrow, everyone wins" investment, it's the "rich people get paid for being rich" type of investment. Yes, many/most of those people are less rich than a corporation, but the problem is exactly the same: deadweight loss in the economy.
Someone has to own it if people are renting it, and renting provides a valuable use case in the economy and makes places to live accessible to young people, poor people, etc.
Renting is good - and requires the type of economic activity you would want banned.
> Housing should be consumption, not an investment,
Housing should be subject to market forces so housing developers can get signals about price. If people anticipate demand for homes is going to increase and start buying homes in anticipation of that (speculating), if we didn't have our stupid zoning laws, homebuilders would be able to build more homes and resolve the demand imbalance before it happened. This is a good thing. The problem is our stupid zoning laws, NIMBYism, etc.
> Someone has to own it if people are renting it, and renting provides a valuable use case in the economy and makes places to live accessible to young people, poor people, etc.
It would be better if the people renting it and living there were the owner.
Isn't this circular? How do you define "institutional"? Is it based on number of units and/or the use of a corporate structure?
Nobody is stupid enough to own an apartment complex in their own personal name without the protections of some kind of corporate structure. If that and/or a number of units owned that is lower than the size of an apartment complex are part of the definition of "institutional investor," the definition is circular.
> Institutional investors own the vast majority of rental units
This is what I mean about left-wing science denialism. Try even reading your own article
1. "According to the RHFS, individual investors were the biggest group in the rental housing market in 2015, accounting for 74.4 percent, or 16.7 million rental properties, followed by limited liability partnerships (LLPs), limited partnerships (LPs), or limited liability companies (LLCs) (14.8 percent);"
This is literally the exact opposite of your claim. But let's pretend that your claim was correct:
2. They're price takers.
3. Why is this a bad thing? If this were true (it isn't), then they're basically the only people who will rent at all anymore. The alternative is net worse for affordability - places without institutional investors have far fewer shares of people renting because there is literally nobody offering places for rent.
e: And of course I'm downvoted simply for pointing out that the article linked says the opposite of the claim.
> "According to the RHFS, individual investors were the biggest group in the rental housing market in 2015, accounting for 74.4 percent, or 16.7 million rental properties, followed by limited liability partnerships (LLPs), limited partnerships (LPs), or limited liability companies (LLCs) (14.8 percent);"
Isn't the very next sentence "However, because the share of rental properties owned by individual investors tends to decrease with the property size, individual investors owned less than half (47.8 percent) of rental units, followed by LLPs, LPs, or LLCs (33.2 percent), trustees for estates (3.3 percent), real estate corporations (3.3 percent), and nonprofit organizations (3.2 percent)."
Which makes it seem like the article is claiming the number is 52.2%—somewhere in between your original claim of 3%, and the GP's claim of 74.4%.
> Institutional investors own the vast majority of rental units
False - individual investors + trustees own the majority. Institutional investors are nowhere close to the size of a 'vast majority', especially when you consider that many individual investors choose to work through LLCs.
My claim:
> Institutional investors own less than 3% of rental homes
This is referring to single-family homes - I could probably have been more explicit when using the term 'home' above, but I was also replying to a comment specifically about SFH so I thought it was obvious from context.
Probably most of the discrepancy comes from 'institutional investor' not being a well defined term. If we are discussing megacorp, it is closer to the 3% number I have mentioned. If we are discussing mom & pop operating behind LLC, it is likely higher.
> Especially since the linked article says it is >50% per unit which supports my point.
I don't think it's productive so I'm not going to continue responding to you but I encourage anyone looking at this thread to actually read the article as this person is just blatantly mis-stating it repeatedly.
It says that institutional investors are 14.8% of properties and ~36% of units or less. Neither of these are '>50% per unit', nor are they '77.4% of rental units', nor are they a 'vast majority of rental units', all of which have been stated at various times by this commentator.
You exclude LLC but Irvine Company LLC is a multi billion dollar company (wholly owned by someone worth $15.8b) that has hundreds of buildings and tens of thousands of units (maybe over a hundred thousand, counting is hard).
> I'm not going to continue responding but I encourage anyone looking at this thread to actually read the article as this person is just blatantly mis-stating it repeatedly.
You are each failing to actually read what the other is writing. One of you is talking about properties and one of you is talking about units.
Individual investors account for 74.4% of properties, according to the article you two are both citing:
> According to the RHFS, individual investors were the biggest group in the rental housing market in 2015, accounting for 74.4 percent, or 16.7 million rental properties
but institutional investors own a majority of the units:
> Institutional investors own a growing share of the nation’s 22.5 million rental properties and a majority of the 47.5 million units contained in those properties
In addition, you are using a different definition of "institutional investor" than the article.
> You are each failing to actually read what the other is writing. One of you is talking about properties and one of you is talking about units.
No, I was originally talking about SFH properties as that was what the first post by 'TeckPerspecc' in the thread was talking about. Then when 'Guvante' responded and pivoted to units (not relevant to the original discussion of SFH), I pointed out that the article did not support their successive claims that the 'vast majority', '74%', or '>50%' of units were owned by institutional investors.
> but institutional investors own a majority of the units:
Read the article, it literally says the opposite of this. As I said, even under a very generous interpretation of institutional investor, they own at max ~36% of units. You conveniently only quote something about 'a growing share' because it is flat-out false that institutional investors own a majority of the units.
> In addition, you are using a different definition of "institutional investor" than the article.
Yes, my 3% claim for SFH uses a different definition of institutional investor, but that is irrelevant to the veracity of the claims you and 'Guvante' are making about the "majority of the units."
I do not agree that I have failed to read any of the claims. What has happened is both you and the other commentator have repeatedly mis-stated the numbers in the article. It is frustrating to lay this out quite explicitly and get another comment that completely fails to miss the nuance.
> No, I was originally talking about SFH properties as that was what the first post by 'TeckPerspecc' in the thread was talking about. Then when 'Guvante' responded and pivoted to units (not relevant to the original discussion of SFH), I pointed out that the article did not support their successive claims that the 'vast majority', '74%', or '>50%' of units were owned by institutional investors.
Not quite. He quoted the article about units. Your first response only talked about properties:
> This is what I mean about left-wing science denialism. Try even reading your own article
> 1. "According to the RHFS, individual investors were the biggest group in the rental housing market in 2015, accounting for 74.4 percent, or 16.7 million rental properties, followed by limited liability partnerships (LLPs), limited partnerships (LPs), or limited liability companies (LLCs) (14.8 percent);"
Perhaps you intended to also address units, but if so you forgot or accidentally lost it on an edit or something.
He responded again noting that the article says institutional investors own more than 50% of units. You then responded accusing him of blatantly misrepresent the article, again quoted the numbers from it on properties but also at least this time also gave numbers for units.
> What has happened is both you and the other commentator have repeatedly mis-stated the numbers in the article
OK, first of all since I have only posted once (before this comment) on this matter it is not possible that I have "repeatedly" misstated anything. I have at most misstated something once.
Second of all, here's the first sentence of the article:
> Institutional investors own a growing share of the nation’s 22.5 million rental properties and a majority of the 47.5 million units contained in those properties.
It is making four independent claims:
1. The nation has 22.5 million rental properties,
2. Those 22.5 million properties contain 47.5 million units,
3. Institutional investors own a majority of those 47.5 million units,
4. The share of rental properties owned by institutional investors is growing.
I do not agree with them on #3. From Table 1B they have individual investors at 47.3% of units and trustees for estates at 3.3%, which together is 51.1% and trustees for estates cannot reasonably count as institutional investors. Several of the others that they are also apparently including when they say institutional investors own more that 50% are also things I would not count as institutional investors.
Nevertheless, Guvante's claiming that the article says institutional investors own a majority of units is not a misrepresentation of the article, because the article in fact says that.
That the article's assertion is based on a completely stupid definition of "institutional investor" does not make Guvante's of the article a misrepresentation.
What should have happened in the discussion is this:
1. Guvante should have used properties, not units, or explained why he thought switching to units was more relevant. Or he should have just been more careful in reading, because I think he may have mixed up properties and units.
2. You should not have accused him of not reading the article right before immediately quoting a part of the article that had nothing to do with his claim.
3. When he then, correctly, pointed out that the article did in fact support his claim, you should have realized your mistake in #2, probably apologized for saying he hadn't read the article, pointed out that the article is apparently using a completely idiotic definition of "institutional investor", and pointed out that under a more reasonable definition of "instututional investor" it is at most around 40% of units (and could be much lower...40% comes from assuming that of the 11 categories they give all of those that are likely to have some institutional investors are all institutional investors).
Fair enough on all points - I did somehow miss multiple times that the article explicitly makes claim #3 in the first sentence (was skipping straight to the data probably), which I think is dumb for the reasons you mentioned, but also does vindicate Guvante's claims as being from the article.
And yes, I should have used the quote about units in responding to the claim about units, think I was focused on their original claim of 74% of units which was the property number so used the property number. FWIW, I did point out the idiotic definition of institutional investor (ie. including trustees) in another comment.
And one of the largest proximate causes of a housing disaster for young people in California - taking from the poorest generations in the state to give to the wealthiest and interfering with the effective operation of housing markets in the process.
Big corps don't own large swathes of single family homes by any reasonable definition of 'large swathes'.
I don't agree it is an apriori bad or a cause of the housing crisis - in many markets these are the only people fixing up dilapidated homes and the only people putting rentals on the market - both of which are valuable services.
People have been socialized to believe in the American Dream(tm). A detached single family house with a white picket fence and 2.3 kids is how the world ought to work. Allowing a duplex or (gasp) a 6 unit apartment building to be permitted would irreparably damage the character of the neighborhood /s
There's also the fact a lot of people got a really good interest rate on their homes and will not get anything like that if they decide to sell (i got under 3%, not a chance I'm entering the market again at 7%) so the actual amount of not-new homes available in the market is very low.
That's exactly the issue, there would usually be a considerable amount of people in the market moving to bigger homes, changing neighborhoods, downscaling, but right now if you have a low rate loan it would be insane to give up your loan and pick one with the current rate, so these people generally left the market.
I bought my last car 13 years ago and wanted to upgrade during Covid but didn't (after prices went up a bunch). Didn't sell my existing car, didn't buy a new one.
So, by your definition, did I contribute to the auto shortage?
Barely on a 3% mortgage. There's a reason a lot of investment companies are buying empty lots and putting storage units on them, they are just trying to break even on the business and expect the land itself to inflate over time.
If they purchased this property at e.g. 7% or more, you may have a point.
"Can't" == "refuse to lose money on the transaction".
That's not a luxury we plebes have when buying and selling homes. If the market happens to have crashed just before we have to move, for whatever reason, we have to take the loss, no matter how much it hurts.
So these lovely people (I'm sure) just lock up vast amounts of real estate at unrealistically inflated prices, hurting the entire system, purely so that they don't have to record a loss.
housing should be a human right and people preying on this should pay for it. Own more square meters than reasonable? tax heavily or confiscate it for the greater good.
Comrade SaintSeiya84! Your bourgeois decadence has come to an end. Your housing unit has been placed into receivership by the local revolutionary council. We will give the unit to a worthy family or distinguished hero. You are evicted effective at the end of the month.
That's part of the problem. The other part is that common buyers are competing with investor funds + international investors who can pay over asking price and still make a major profit.
Worse is how in New York a ton of stores are left empty to lower the tax burden on the owner of the building, or to drive up prices more.
All that combined with automated landlord pricing tools that effectively make a nationwide collaboration between landlords who'd previously never talk to eachother.
Investing in real estate this way only makes sense when supply is sufficiently constrained. An explosion of housing makes it a bad investment.
But we've made it incredibly difficult in many, perhaps most areas to build substantial new housing, so we don't get housing explosions even in areas with incredible demand. You end up with just a trickle.
I don't deny it. People want more housing, just not right next to them.
Move the decisionmaking authority for zoning to the metro or state level where this sort of local regulatory capture is harder. Get more new housing spread everywhere, rather than concentrated in the few spots that are okay with it (or are too politically weak to stop it).
The current setup is kind of a prisoner's dilemma. Ideally everyone would approve housing next to them and that would be the impact almost everywhere would be small, since new construction would be spread out, and housing prices would go down a lot. But if you choose to opt out of new housing, well, then you get to deal with zero new construction, which for many people is an improvement. But then if everyone does that, hardly any new housing.
Housing in the US is freakingly cheap. You can buy a house that would be an envy of half of the people in Europe for $200k. The problem is, it won't be anywhere near "trendy" locations.
And that's the _real_ problem. People are forced by market forces to move into ever denser cities.
And increasing density ALWAYS results in cost increases. It's like the rocket equation: dense cities need infrastructure to support infrastructure to support infrastructure.
And no, none of the inane solutions: "let's legalize SROs^W microapartments!" or "let's just force each homeowner to take a family to live with them!" will do anything with that. They'll just increase the overall misery.
> You can buy a house that would be an envy of half of the people in Europe for $200k. The problem is, it won't be anywhere near "trendy" locations.
It’s not been my experience that the lion share of Europeans envy Americans and certainly not Americans who live outside big cities. And I work with Europeans every day in my job.
> The problem is, it won't be anywhere near "trendy" locations.
You are being very reductive and writing out entire categories of reasons why housing is unsustainably expensive. In your next two sentences:
> People are forced by market forces to move into ever denser cities.
Lots of us already live in cities but our neighbors and elected leaders have let this get massively out of hand. I have lived in Seattle my entire life, as has my wife, and we raised kids here. One of them has had to move away because they can't afford housing here and the other has moved to Marysville just to be able to afford something.
My wife and I are both getting older and didn't want to climb stairs to be able to get to our front door (Seattle, as you may recall, has a lot of hills). Even though we had nominal equity in our house, the red hot housing market here means that equity didn't go as far because we wanted to stay in the same region to be near family and friends we've had our entire life.
Never mind that a lot of those "trendy" areas are where jobs and cultural activities are. Housing is "cheap" in the US if you follow the "just live in the middle of nowhere" model, which of course lots of people don't want or are unable to do.
> Lots of us already live in cities but our neighbors and elected leaders have let this get massively out of hand. I have lived in Seattle my entire life, as has my wife, and we raised kids here. One of them has had to move away because they can't afford housing here and the other has moved to Marysville just to be able to afford something.
A quick check. Can you tell me how many new units Seattle has created within the last ~12 years in percentage of the total?
> Never mind that a lot of those "trendy" areas are where jobs and cultural activities are.
"Cultural activities" that are specific for large cities for the vast majority of people consist of going to a game maybe once a year.
We were all hoping to be able to move out of inner cities to more affordable areas, but then corporations and even government banned telecommuting because it hurt commercial real estate's bottom line.
You want to discuss home affordability, WFH has to be a pillar of that discussion. We came within an inch of being able to populate a substantially larger previously non-commutable area of the US, and then it was pulled back.
It's not that it won't be near "trendy". It's that it won't be near jobs. Look at median salary and workforce participation in places where houses cost $200k. Your affordability calculation will be re-calibrated.
Density is not a problem, it is a solution. Denser means more developed, more environmentally friendly, more productive, higher earning, more efficient. Increasing density increases wealth (pay a little, gain a lot). It almost always increases wealth faster than costs.
The issue right now is that we are not allowed to build dense cities. We are not allowed to build single bedroom apartments where young, single workers need them to live next to new, productive jobs. We can only build single family homes and even then only at the periphery of huge cities. Massive swathes of downtowns are parking, highways, and single family houses -- when those should have been demolished and replaced with transit and dense towers long ago.
The market is screaming for the opportunity to build us dense housing. All we have to do is grant it.
Quite simply, it's not. Densification leads to cost increases. And "more developed"? LOL.
I have analyzed the database of all real estate sales in the US for the last 25 years, and I have not found a single example where densification of a city led to lower prices. Not a single one.
> The issue right now is that we are not allowed to build dense cities
> The market is screaming for the opportunity to build us dense housing. All we have to do is grant it.
Sorry. But you're spewing a bunch of horseshit.
Some forms of densification are allowed pretty much everywhere. It has not led to lower prices even once.
Of course the cost goes up. Densification does not lead to lower prices, because it increases wealth. People in denser areas make more money, because businesses in denser areas are more productive, because density is efficient and causes people to be more productive.
This is a good thing.
Affordability is not cost. The problem that we have now is that supply of housing is artificially constrained by bad policy, which allows some groups to capture the surplus. It is broadly not a coincidence that the groups that capture the surplus are the very same that set policy.
It seems to me that "some forms of densification are allowed pretty much everywhere" is doing a lot of work for you. Can you elaborate? How easy is it to build an apartment building "anywhere?" [1] is an example of what I mean, but you can google "housing supply shortage USA" if you want general statistics. The conclusion is pretty much unanimous: it is immensely difficult to build anything, anywhere, which has caused a massive shortage in the supply of housing. Again: density, solution.
If we allow buildings to be built, a developer will gladly come in and build buildings. Someone building a house for someone else to live in is, in general, a very good thing. Everyone participating in this conversation lives in a house that someone else built for them and made a profit in so doing, and it's a good thing, because that allows us to work and create value.
If that were true, then people in big dense urban areas would be paying less share of their income than in other areas. But I don’t think that’s true at all, at least for those making at or below the median.
Dense cities are more desirable to live in, but that induces more demand, so even though the cities generate more wealth, the equilibrium between supply and demand still skews to people wanting to pay more of their income to bid on a limited supply of housing (even if that supply is larger, more demand is simply induced). We should allow more building (and denser building) in popular cities, but we shouldn’t do that blindly thinking that it would somehow make housing more affordable.
You can google housing supply shortage for basically any country with a good economy, not just the USA. The only way to get around it is somehow suppress demand (low paying jobs in Berlin 20 years ago, or a declining population in Japan).
People don't really like each other enough to work for a positive future. And yet they all want to live in a populous city with amazing opportunities/infrastructure/environment/etc
That's the problem.
If technology is so advanced and if solar panels are getting cheaper, why aren't we building new cities in the desert? (Or, why aren't we bringing new techs to small towns that already exist?)
If everyone is so tired of planned obsolescence and not owning their devices, why aren't we making new industries based on sustainable, repairable, open source phones?
There could be whole new towns running an economy on producing sustainable hardwares and then selling the repair parts. It wouldn't be a lot of money. But if everything we use is repairable and sustainable, we wouldn't need a lot of money.
> There could be whole new towns running an economy on producing sustainable hardwares and then selling the repair parts. It wouldn't be a lot of money. But if everything we use is repairable and sustainable, we wouldn't need a lot of money.
> Maybe I am just silly to hope for such a future?
I think you are projecting your interests onto the population at large, planned obsolescence of phones is not really a major concern for most people.
And if you are starting out by asking people to accept a poorer lifestyle because it will be sustainable and repairable, you are setting yourself up to lose.
I don't even agree that these are choices we necessarily have to make - I think we are getting closer and closer to sustainable growth, not merely subsistence.
Hopefully one day we will be advanced enough to start transforming the desert. It's not an easy task and I don't know enough about science or economics to say it's definitely feasible. It's just a hope.
And if people would hope for that then they would be willing to improve existing small towns too.
I don't like this trend that we all move to major cities and compete for scraps of lands and housing.
> If technology is so advanced and if solar panels are getting cheaper, why aren't we building new cities in the desert?
Why would we build cities in the desert? It's a lot easier to generate power in the desert and transport it to other places, than it is to supply cities in the desert with water, and increased energy costs due to having to run A/Cs 24-7-365.
If it's a question of land, there's plenty of land in places with water and better climate.
If so, how? Did you use a real estate agent? Mortgage rates are the highest in more Than 20 Years[1]. Did you put more than 20% down? Or did you pay cash for a foreclosure, auction, fixer-upper or wholesale home? Are there any sites / apps / services you would recommend for finding a home?
For context, California housing affordability is at its lowest level in nearly 16 years where a minimum annual income of $208,000 was needed to make monthly payments of $5,200[2]
I feel like Colorado is creeping up there in terms of costs comparable to California. I'm disappointed rent control keeps failing to pass committee, they bumped my rent 12.5% this year. I didn't get a 12.5% pay increase, I can tell you that.
Rent control only makes housing less affordable in the long run, this is the consensus of economists [0], and ignoring this is the left-wing equivalent to pushing oil & gas and continuing to ignore the consensus opinion of climate scientists - beneficial to ones short-term interests but absolutely screwing the future.
> Rent control only makes housing less affordable in the long run
Rent control doesn’t exist to make housing affordable in general, or in the long run; it exists to prevent existing residents from being priced out of their existing residence, particularly against localized (in time and/or space) market movements.
It is intended to (or, at lrast, it is not an unknown cost when it is adopted) to make housing more expensive for others (new market entrants, and, when rent control is targeted by age, income, or other conditions, those existing residents not eligible) to provide that benefit.
Absent general new supply restrictions which are the actual problem, it is a redistributive that makes an area brcoming attractive to new and richer populations less destructive to existing and more econonically precarious communities. If there are problematic general new supply restrictions it magnifies the effect, but the solution is to deal with the new supply restrictions.
Greenhouse gas emissions don't exist to make the earth cooler in general; or in the long run; it exists to make existing residents of Earth richer.
It is intended to make the earth warmer for others (future Earth entrants).
It is redistributive in that it heats the earth for future, richer, more technologically advanced populations that will be more equipped to handle the heat and runaway warming, while allowing more wealth accumulation for the less technologically advanced (and thus more deserving) current human society.
yes, in very much the same way as climate - destroying what exists (affordable housing) in order to benefit incumbents is bad politics, bad policy, and bad ethically.
nevermind that, looking at the poll, most indicate that rent controlled apartments fall into the hands of the rich anyways - who then are protected from poorer renting populations moving in. See: New York City.
Homes are still moving in my area of Orange county. Average home sale is > 2x what we paid in the first half of 2016. Jumbo loans at 7%. It truly blows my mind.
This comes up so much it's like a pathological condition. If the voting population want's more houses the solution is not to tax people out of their homes - that just swaps house occupants - the solution is to build more houses. There is plenty of land and room to do this, but the GOVERNMENT - again the ~GOVERNMENT~ implements restrictions on the building process. The restrictions are so onerous in CA that new properties are expensive. You want more houses, scale back the government control over building and building costs. Easy.
Taxing people out of their homes would help resolve the problem because homes in prime areas for development are often held for an extremely long time, especially in California, due to distortionary tax incentives.
This is politically impossible to say because it usually amounts to pricing out old people from places that could use an apartment building.
The main thing requires zoning reform, agreed - but higher land taxes would absolutely help.
In all of these conversations no one is mentioning income inequality. I see housing unaffordability to be symptom of this. The transfer of wealth to the highest income Americans has been constant for the last several decades. We are now seeing the impact of this. The significant number of Americans don't have meaningful savings. How can they be expected to afford a house?
The transfer of wealth to the highest income people has been a thing for all of time. High income == transfer of wealth. They're literally two different ways to say the exact same thing.
How can they be expected to afford a house? The same way they were in the past. A house is a plot of land with some sticks bundled up to create a shelter, with some added amenities like a toilet and an air conditioner. There's no reason that something like that should cost what it does. There's also no reason that a bunch of wood exposed to moisture and termites should appreciate in value over time or be viewed as an asset. Yet here we are.
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