In 2012 I was looking at investing in REITs. One REIT's pitch was that they owned such a large percentage of the rental housing in Tampa Florida, that even though vacancy rates were high, and rents were going down throughout the nation and other areas in the state of Florida, they were able to keep rents high in Tampa.<p>Disgusted, I realized the harm that REITs and private equity are doing to housing markets, and wanted nothing to do with it.<p>We need legislation that discourages housing as investment if we are to maintain housing as shelter. Unlikely, as wealthy folks who make money with the status quo run things.
I have considerable experience in the Real Estate backend software industry, and so am occasionally contacted by headhunters hiring for Real Estate Investment startups. Here's a typical reply that I give to them:<p><pre><code> I am philosophically opposed to "investing" in real estate, as your industry exists entirely to snatch up affordable housing from actual homeowners as a get-rich-quick scheme, benefiting those who are already rich at the expense of those who would otherwise be rising up out of their own financial situation.
Nothing personal, but I wish you - and everyone in your predatory industry - swift failure in your endeavor, for the benefit of the average homeowner.
Have a good day!</code></pre>
Key piece of information from the article:<p>> The CoreLogic data shows that what it calls “mega” investors, with a thousand or more homes, bought 3% of houses last year and in 2022, compared with about 1% in previous years, with the bulk of investor purchases made by smaller groups.<p>So the mega investors only make up 3% of that 25%. I'd love to see data on what the remaining 22% are, but my guess is:<p>* flippers<p>* middle class individuals buying a second property as an investment<p>* small time property management firms run by local businesses<p>Also the Inside Economics podcast's recent episode Cooling Inflation and Confounding Housing Riddles[0] adds even more interesting color to the dialog. They explain that a lot of this is driven by <i>demand</i> for single-family home rentals. Roughly half of Americans will want/need to rent a single-family home at some point in their lives! Many people want to live in a home on a short-term basis, like when a family with kids moves to a new city and wants to familiarize with the area before committing to a full mortgage. And COVID combined with the changing demographics has caused a huge surge in demand, so <i>surprise</i> prices have also gone up.<p>[0] <a href="https://moodys-talks-inside-economics.simplecast.com/episodes/cooling-inflation-and-confounding-housing-riddles-4YNptV9z" rel="nofollow">https://moodys-talks-inside-economics.simplecast.com/episode...</a>
One insidious bit here is that as lower-income people are priced out by increasing rents , they can't even go downmarket because of things like this:<p>Investors Are Buying Mobile Home Parks. Residents Are Paying a Price
<a href="https://www.nytimes.com/2022/03/27/us/mobile-home-park-ownership-costs.html" rel="nofollow">https://www.nytimes.com/2022/03/27/us/mobile-home-park-owner...</a>
What's nuts is not just that investors get to buy homes, but that its <i>tax advantaged</i> to do so. Between prop 13 in California, to 1031 exchanges, there are plenty of reasons to invest in RE over even say the stock market. I don't get to do a 1031 exchange for my Meta stock into AAPL or something...
<i>Housing is at the root of many of the rich world’s problems (2020)</i> | 379 points | 6 days ago | 794 comments | <a href="https://news.ycombinator.com/item?id=32493549" rel="nofollow">https://news.ycombinator.com/item?id=32493549</a><p>On this post I wrote:<p>> A couple ideas for how to fix some real estate problems:<p>> 1. A zoning rule that requires home owners to live in the owned home. ...<p>And the general response?<p>> The mega reit buying residential properties is also overblown. 70% of rental properties are owned by individual investors.<p>> None of this would have much impact.<p>> This would reduce the housing stock.
The CoreLogic data shows that what it calls “mega” investors, with a thousand or more homes, bought 3% of houses last year and in 2022, compared with about 1% in previous years, with the bulk of investor purchases made by smaller groups.
It would be interesting to see the "investors" segmented by assets under management (AUM). I'm sure some "investors" are mom and pop rental situations while other institutions, such as BlackRock, are purchasing single-family homes at scale.<p>I'll also be curious to see what happens when remodels need to happen. Many trade labor markets are hyper localized and difficult to scale across a property portfolio, this is where RedFin and Zillow struggled to "flip" effectively.
A great solution is a land value tax as per Henry George <a href="https://en.wikipedia.org/wiki/Land_value_tax" rel="nofollow">https://en.wikipedia.org/wiki/Land_value_tax</a>
I fully support developing newer cheaper alternatives to housing and cut open the jugular vein of this rotten market. Let the investors and creditors burn.
Don’t forget also the anticipation of inflation - many use housing as a hedge of high inflationary environment.<p>If there is more damage the Fed could have done to GenZ since the bailout, that was reckless Covid spending. I sincerely wish these agencies are shut down someday. But alas we are going the other way.
Except the problem isn't investors buying property.<p>Investors are buying up property for rental because it is profitable because there is huge demand for it because a lot of people simply are unable to own their own house and that is because housing is getting expensive faster than salaries.<p>The problem is government tied in stupid games while important problems like encouraging new, more affordable housing is set aside as some kind of communist agenda. A house does not need to cost the equivalent of your entire life's savings.<p>Also government sleeping on the job not including useful knowledge in school curriculum -- like basics of personal finances and economics.
What constitutes an 'Investor' in this article? If I see a distressed home for sale in my neighborhood and decide to buy it, fix it up, and rent it out; this article seems to put me in the same category as institutional investors who come in and buy or build entire communities of homes.
Is this really a change for the worse compared to the status quo?<p>Compare this with the home-ownership rate graph here:<p><a href="https://en.wikipedia.org/wiki/Home-ownership_in_the_United_States" rel="nofollow">https://en.wikipedia.org/wiki/Home-ownership_in_the_United_S...</a><p>Remarkably steady at around two thirds over the past ~50 years which of course is less than three quarters.<p>(Not an american, so I may be confused by some terminology.)
"but many Republican lawmakers oppose such controls." — I'm not American and not in in the US, so I'm wondering, why in many articles I read, "Doing Good Things For People™" tend to be opposed by Republicans?<p>1. Are there a scheme to vilify them? Bcoz it's not even mentioned <i>why</i> they oppose (maybe they see Bad Things™ far ahead).<p>2. Are they not elected by the people?
There are Billions of dollars in cash just sitting around at companies like Blackstone Group waiting for the housing market to crash - which of course it will.<p><a href="https://twitter.com/zerohedge/status/1562080678652641280" rel="nofollow">https://twitter.com/zerohedge/status/1562080678652641280</a>
We (people) must recognize that housing is a finite resource and is a variable in a major humanitarian crisis.<p>Owning a second house for rent-seeking behavior should require a license like using any other scarce natural resource.<p>Like occupying a river for selling bottled water or digging ground oil.<p>It should not be a no-barrier free-for-all speculative endeavor.
Cause and effect are often hard to disentangle.<p>In this case I'm convinced that constantly rising housing values is the <i>reason</i> investors buy up housing, not the other way around.<p>Surely it makes sense that investors buy assets that continue to appreciate more than other investment types?
References to the racialization of property in the united states. The issue is not simply who has a right to a own home, but who has a right to housing.<p>- The History Wars and Property Law: Conquest and Slavery as Foundational to the Field, K-Sue Park, <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3793972" rel="nofollow">https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3793972</a><p>- Racialized geographies of housing financialization, Desiree Fields, Elora Lee Raymond, <a href="https://escholarship.org/content/qt5gd214jn/qt5gd214jn.pdf" rel="nofollow">https://escholarship.org/content/qt5gd214jn/qt5gd214jn.pdf</a><p>- Race and uneven recovery: neighborhood home value trajectories in Atlanta before and after the housing crisis, Elora Raymond, Kyungsoon Wang & Dan Immergluck, <a href="https://www.researchgate.net/profile/Elora-Raymond/publication/282412773_Race_and_uneven_recovery_neighborhood_home_value_trajectories_in_Atlanta_before_and_after_the_housing_crisis/links/59a6bbd5a6fdcc61fcfbb3cb/Race-and-uneven-recovery-neighborhood-home-value-trajectories-in-Atlanta-before-and-after-the-housing-crisis.pdf" rel="nofollow">https://www.researchgate.net/profile/Elora-Raymond/publicati...</a><p>- Race for Profit: The Political Economy of Black Urban Housing in the 1970s, Keeanga-Yamahtta Taylor
I will be perfectly ok if the high interest rates drive these companies bankrupt. They chose to speculate. Speculation comes with risk. Let them bear the burden.<p>For owner occupancy protections, the real answer was to never to give tax breaks to investors in the first place. Only owner occupants should have any tax breaks. But this is not going to happen.<p>So let the speculators burn and go bankrupt.
Now, it's about 25%. In the future it will be 50%, the 100% - the trend is going in that direction. Millennials and the generations after will look at era of home ownership like the "good old days" while coughing up 75% of their income for rent.<p>There is so much to be said for this problem, but...its exhausting. I give up.
We've inadvertently created substantial cost advantages for REITS:<p>* Assuming that they never sell, they never pay capital gains taxes. Meanwhile, if I move and sell, I get hit now.
* Ability to cross-collateralize a bunch of houses lets you tap into institutional capital. No pesky appraisal fees, no payoff for a mortgage broker, etc. Result is that their cost of capital is way below an individual's.
* Better management -- ability to hire a bunch of actual skilled handymen to work across multiple properties means that they have specialization/ gains from scale. Typical homeowner is a jack of all trades who has to hire specialized talent which is vastly more expensive.
* lots of pricing data with which to price as optimistically as possible.
* ability to write off expenses<p>So basically, tax regime changes have created the rise of the REIT.
In Denmark housing built before 1992 cannot be rented out for profit. The owner can only demand enough rent to cover for upkeep and maintenance. However it's still a lucrative business to invest in old housing in the bigger towns and cities because the price is only trending upwards.
This should be illegal. Plain and simple.<p>Just make it illegal for a corporation to own residential property. Or heck, even just make it illegal for one to own > 5 properties or some number of acreage. That would put a damper on this shit.
I'm sure the percentage is much much higher in supply constrained cities, because those cities are where there's much more opportunity for speculative real estate growth, and the local political structures are dedicated to keeping the supply constrained, and the speculative real estate asset price growth unchecked.<p>At the core of a lot of this is the NIMBY behavior and downzoning that started in the 1970s. It's hyper-commodified housing, while decommoditizing out places to live. (Please note that the difference between commodify and commoditize, here.)
This isn't caused by investors, they simply see the value in owning and renting to those that aren't interested or capable of outright ownership.<p>The price increases seen in the market are driven by the rising cost of energy, materials, and the lowering value of the dollar through inflation.<p>If governments, state and local, were receptive to construction, you'd see the market compensate for higher prices with increased supply. With building heavily regulated in many areas you've got government driving prices up through their limits on supply.
Owning homes you can't live in is as perverse as claiming domain over a patch of the ocean or a chunk of the sky. The very concept ought to be attacked with every legal method.
It's interesting to play armchair city planner and think what kind of tax structure to encourage more equitable housing. I imagine you'd want something like:<p>Owner occupier < owner landlord < owner vacation home < owner investor(vacant)<p>But I think you should also encourage density, like if you have a 5000 sqft house for two people, that should come with a sort of extra property tax than a 5000 sqft house for a large extended family or multifamily building.
These same people are the ones that will want bailed out when the economy crashes and their tenants can’t afford their ridiculously high rent. It’s greed. A buddy of mine wants to rent his home because then he can afford to buy a new home off what his renters are paying. Watch things crumble and he’s stuck with two mortgages.
I'm so frustrated by some of the conversations people get in around housing. They want to live in the most desirable places on planet earth, and seem to think that we should just abolish the concept of property ownership to accomplish this.<p>What do you guys think happens when you get what you want, and nobody can "own" property anymore? Do you think there is an unlimited amount of single family 3000 square foot homes in San Francisco and that you will <i>all</i> be able to live in them?<p>Go on zillow and look at cities you've never heard of in that awful "flyover" part of the country. There are scores of homes for less than $200k, and plenty of homes around $100k. Go look at Parkersberg, ~~OH~~ WV.<p>Here's a house in Indiana for $125k. The payment on that is going to be like $450/mo. <a href="https://www.zillow.com/homedetails/51-S-Main-St-Laketon-IN-46943/94618467_zpid/" rel="nofollow">https://www.zillow.com/homedetails/51-S-Main-St-Laketon-IN-4...</a><p>It's just absolutely insane to me the places that peoples minds go when this topic comes up.
A land value tax would solve this: <a href="https://astralcodexten.substack.com/p/does-georgism-work-is-land-really" rel="nofollow">https://astralcodexten.substack.com/p/does-georgism-work-is-...</a>
So glad I bought a house when I did. I was unsure b/c the value seemed inflated, but rent has gone up, up, UP!<p>A lot of my friends are now paying rent that is $100-$200 within my mortgage payment. And that is for an apartment without AC or a yard.
If this bothers you there is an extremely simple way to kick these guys in the teeth: approve new housing developments in your town! Housing investors fear nothing more greatly than they fear competition.
Every conversation about “NIMBYs” and “we don’t have enough affordable housing” needs to account for this. Building doesn’t lower prices, it creates a fat investment opportunity.
See <a href="https://news.ycombinator.com/item?id=32568638" rel="nofollow">https://news.ycombinator.com/item?id=32568638</a>
Let me summarize all the problems here:<p>1. In most of the US it is quite literally illegal to build anything other than single-family homes ("SFHs"). This is a form of NIMBYism and reduces housing supply;<p>2. Part of (1) is that absolute necessity of car ownership in the US. This is by design to keep the riffraff (ie poor people) out;<p>3. We need robust public transit infrastructure to give people the option of living somewhere where they don't need a car to survive;<p>4. Pretty much anywhere you can build SFHs, you should be able to build multi-family dwellings ("MFDs"). Homeowners that own an extra unit or two <i>on the same site as where they live</i> is about the most ethical form of supply private rentals;<p>5. More states need to follow California's model of blocking a lot of NIMBYism at the state level. This requires towns to have an housing plan for affordable housing;<p>6. Ultra-luxury housing needs to be taxed punitively;<p>7. Cities and states need to be in the business in providing social housing as a significant supplier of housing. Americans in particularly have a kneejerk reaction against this as "socialism" or it'll be propagandized as slum housing. Vienna is about 60% social housing. Use that as a model;<p>8. Certain classes of housing should be illegal for corporations to buy. I'm fine with a corporation owning and running an apartment building with 200+ units with a management office onsite where they handle all the maintenance. I'm not OK with corporations constricting supply by buying up all the SFHs in a state.<p>9. We need to remove a lot of the tax benefits for investment property ownership (eg 1031 exchanges);<p>10. We need to remove a lot of beneficial tax treatment for home ownership period (eg Prop 13 in California caps property tax increases, inheriting property on a stepped up basis for CGT purposes);<p>11. AirBnB for anything other than a room in your house or a unit on your property (so you too have to live with the consequences) should be illegal.<p>This isn't a demand side problem. It's a supply side problem but we also need to restrict certain types of demand (eg REITs buying residential housing en masse).
This is why I can't take the "we just need more supply!" crowd seriously. Building more supply is just sacrificing more stock to the investor class.
I really hope that battery technology, EV technology, and self-driving technology lead to a tremendous boom in full-time RV / vanlife popularity and make it a better quality of life than traditional fixed housing and all the people who bought up housing as an investment vehicle see their money go poof.<p>It's like using potable water or the air we breathe as an investment vehicle.
How about we just make 20% down the minimum on home loans? That'll pull the price down pretty fast. We can slowly increase the minimum until we're at a reasonable point above 50%. And also reduce the maximum allowable term to below 30 years (should be 10-15). If done over a long enough time period, we can still give some appreciation to home owners (at least to match inflation), while also making the market saner in the long term. Otherwise, we're just encouraging rampant price growth and making homeownership exceedingly difficult for normal people.<p>Soon, banks will prefer to give a 100 year loan for $3 million for a modest home to an investor than the same loan to an individual (because who can pay a 100 year loan, or make the monthly payment on so high a principal).