No, the difficulty of increasing supply has directly led to increased home prices.
You are describing something functionally on the same scale as to the "extreme blowback" rich people get when people make fun of them on Twitter for, say, burning untold amounts of dead dinosaur goop to make an NFT or to not quite go to space as a personal stunt. It is somehow, however, though not the "economically just circumstances" of the hand-to-mouth mom. Which is a situation to which I will confess some confusion, but whatever.
I'm sorry - I don't think we should build a million skyscrapers in Kethum, Idaho and Jackson Hole, Wyoming so that tourists can enjoy it more cheaply.
I do think we should build more housing in major cities.
Why ban just AirBnB and not Waze for bringing unwanted traffic in previously quiet neighborhoods?
[0] And I would expect those units to not be evenly distributed around a city; there will probably be higher concentrations in the more touristy spots where this community stuff matters less, and lower concentrations in the more "sleepy" residential areas.
It's better than sleeping in your car.
Without the Airbnb, where would we have gone? A hotel? But a hotel with a useable kitchen and good wifi would have been too expensive for any of us renting one of those rooms.
1. Poor people are living in crappy conditions in boarding houses.
2. We solve this problem by banning boarding houses.
3. Now poor people are living in the streets.
4. ...and we're OK with this! Best I can tell, it's because now there is now no landlord profiting on the poor!!
There are plenty of similar examples.
A tourist is fundamentally there for temporary and consumptive reasons. They don't have any long term interests about the place they visit. They are accommodated as guests. As such, it is only rational that they don't receive the exact same consideration as the residents who have their skin-in-the-game of that same place.
And let's not assume that anyone who wants to list a property on Airbnb is mainly motivated by greed. Attempting to paint the people on the other side of your argument as evil is a pretty transparently bad argumentation strategy.
This only works because you can count on the Fed constantly lowering interest rates and pumping up your investment on 5:1 leverage.
If you start with 50 000$ then loan against 30 000$ of that, but your equity increases by 70 000$ as you make payments, and then sell the house at the same price, you're still up 40 000$, even though your cash flow was -30 000$.
In the simplest terms, take a $100k house. 20% down = $20k downpayment + $3k closing costs. Generally, this is a house that would rent for at least $800/m.
Your payment is $337/m. Of that, only $143 is principal. If the house is even 5% cash-flow negative - that means you're only getting ~$100/m in principal.
You'd get ~$145 on your $23k downpayment in the S&P 500. And instead of being cash-flow negative and taking money OUT of your investments, you could instead ADD to it.
Add to that the fact that you'll pay an additional ~6%+ transaction costs at closing -> And even a 5% cash-flow negative house with 0% appreciation is likely to come out negative.
This only works because the Fed pretty much guarantees that house prices will appreciate >3% per year for the last 20 years.
3%*5:1 leverage => Crushes the S&P 500 average. Even if you're 10% cash-flow negative, it usually beats the S&P.
Add to that the fact that $250k of the capital gains are tax free -> And that pretty much eliminates the 10% transaction fee and makes it better tax-wise than the S&P 500.
Generally a cashflow negative house will have a much higher payment over a shorter term with much more principal, and much more in rent.
You also forgot inflation of the house price. You have to take into account 2% increase in house prices even without the fed doing anything, and leverage that. When you do that you find out that almost all of your interest payments disappear and much more goes towards you principal, thus increasing your equity gain.
You can't hand wave expenses and pretend you're cash-flow positive. You can do that with profitablity, though.
I did not forget inflation. I literally said a "a cash-flow negative house that does not appreciate and become even more cash-flow negative"!
You are taking appreciation for granted (which is fine, the Fed literally guarantees it now).
If you have a house with a 20 year mortgage at 3% interest where maintenance is 50% of the mortgage payment, with no appreciation in real terms and 2% inflation, 50% of what rent is becomes profit. (1/((1.03-1.02)^20))*0.66 = 54.5%
If you put down as down-payment 100 000$ for a property worth 1800$ in rent, which is realistic, you get 11 000$ in profit per year from a 100 000$ investment, which is great.
That's assuming no appreciation in real terms, ie, the cost of the house exactly matches inflation.
Therefore, renting is profitable even without appreciation of real estate in real terms.*
Its priced to hit your maximum threshold on monthly wages expendable to rent with minimal savings.
There actually is enough land if you look outward from major cities, but billionaire investors already own that, too.
(Which is to say that there is absolutely an argument for increased supply, but rather that the interests of the REIT-helming class are not congruent with the interests of the people who live there, and thus can either come congruent or be ignored.)
Oh yea, require all real estate purchases to be American, or have legitimate relitaves residing here. We are selling our land with an to anyone in the world with money. I don't know of any country that makes it so easy for the wealthy to buy land.
I would love to know which countries allow real estate purchases like we do?
(I am against regulations, and more laws, but only for the little guys. Regulate big corporations like Blackrock, Facebook, Google. Regulate the big boys, so the little guys can begin to get ahead. Yes-I conflated two different industries.)
Both the UK and Canada for sure. I think Canada is considering a foreign buyers tax but I don’t think it has been implemented yet. In the UK, property taxes don’t even exist - only council taxes paid for by the occupant which makes leasing much easier.
Because housing is not being built, existing houses are sure to increase in price, and so become a good investment for rich people.
You can't just do this with goods that are still being made.
https://prospect.org/infrastructure/housing/blackrock-buying...
I've seen this black rock conspiracy posted elsewhere, and while it makes for a compelling dystopian narrative that large corporations are secretly buying all our homes to lease back to us, the reality is just not true.
People are leaving expensive urban housing in droves and competing for what seem like relatively cheap houses to them, so they are comfortable bidding wildly (I know many, many real people in this situation). I'm sure Black Rock wants in on the action, but until that rate falls dramatically lower, I'm not particularly convinced that that's what's happening.
Less friction in increasing supply is also not an unalloyed good. You can look at the commercial office market, which is much less restricted and has huge boom/bust cycles. And that's before we get to the externalities of rapid housing growth.
I'm actually for increased supply, but I'd rather we stuck with better arguments for it than helping Airbnb get off the hook for the reasonably forseeable consequences of their actions.
Sure, but supply keeps increasing less than demand is increasing, accumulating the housing shortage each year. This is a decades old trend, from long before AirBnb.
I think that supply increase is vastly dominated by regular old population increase in cities that refuse to build housing. I'd need a lot of convincing to believe AirBnb is more than a minor factor.
This is a problem only for investors. Dealing with that is their job. Protecting them from it is not a good reason to restrict housing supply.