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Comment by toomuchcredit | Hacker News Reader

VCs are just cogs in the wheels taking us from an "Ownership Society" to a "Sharecropper's Society," as Buffett once put it. Private Equity buying up housing, is just the latest worrying trend in a troubling trajectory with excessive debt, centralization of power, concentration of wealth, etc.

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Private Equity buying up housing

Speaking of this, an entire new construction neighborhood near where I live was just purchased, with all of the for-sale signs replaced with leasing info signs. You will own nothing, but you will not be happy about it.

I'm in a traditionally mexican east Austin neighborhood. I used to see a lot of houses bought by techies. Yes it was 'gentrification', but at least they lived in them and often eventually started families.

In 2021, the 6-7 in my neighborhood which have sold for record prices are sitting empty with 'for lease' signs. Checking the property records they are all some under a different named LLC.

In the end they still have to find tenants, so the properties can't be empty forever or we'll have a lot of bankruptcies on our hands.

Ugh, living in an entire community of renters is hell. They just don’t care as much about the homes, and everything goes to shit.

This is a stereotype, but having lived in a nice brand new apartment tower I can tell you it’s pretty true. People mess with all the common spaces at a level that’s not sustainable for management to fix. Renters as a group are insulated from maintenance costs and some individuals take advantage of this.

Never lived in a condo tower, might be the same.

> at a level that’s not sustainable for management to fix

Management gets thousands of dollars every month from each renter. They could absolutely fix it if they wanted to. In this market, they don't get punished for not fixing it, so they let it go and pocket the difference.

Normally I'd be with you here. It's gross what some people think is acceptable in common spaces. Slumlording is also pretty gross, though, and I tend to think it's the larger evil here. By a considerable margin, too.

The problem is that in any sizeable population there will be bad apples that impose asymmetrically costly problems.

Because cause and effect can have a non linear relationship in the real world.

People aren’t going to accept having their rent go up 20% next month because a bad apple wrecked some common shared stuff that is peculiarly difficult to restore. People by and large don’t accept non-linear effects when it impacts their wallet negatively.

Thus in fact there is never enough money to repair everything.

Society at large gets around the issue by reserving very harsh punishments in such circumstances, though even now that is declining in frequency nowadays. Rental management do not have any punishment authority beyond taking away a security deposit, if that.

I’m assuming there’s a few bad apples who ruin common areas. Most people I see wipe down exercise machines after use, turn off the grills, put away their trash etc. But then there’s a minority of people who are just total slops.

That sounds like an issue of collectively managing shared resources that would exist even if the occupants owned the units, no?

There's usually a greater sense of accountability if someone expects to live somewhere longer than a year or two.

Condo owners tend to all know who’s in which units - even if it’s only at a vague level. If someone is wrecking stuff it’ll go up to the condo board eventually and they can force the offender to pay for damages.

Renters generally benefit from anonymity and limited liability.

One of my brothers sublets a condo, and the place is very well maintained. It turns out that even if people grumble about condo fees, they're quite willing to pay them because they can see where those fees are going to.

Every year the condo board approves and funds at least one round of improvements at my brother's condo, keeping everything looking and feeling fresh. This year it's a refresh of condo front doors, for example.

I don't get how this works? Isn't the cost of maintenance a part of your rent? If it doesn't cover the costs then you end up with a rent increase?

We're not talking about apartment towers, we're talking about single family homes.

It won't work. We're facing another 2008 but writ large, and if that plays out in a similar way, we'll see people move in together so that not only will housing prices drop through the floor but rents as well.

A lot of this is to diversify out of equities which will soon crater ala 1929. The problem is that hundreds of empty track houses don't have value either. I think they know that; I think they feel they don't have much choice. Desperate times.

That can't happen as long as interest rates are borderline negative. People are investing in stocks because they're a sure thing. People are investing in property because it's a sure thing. Everything is a sure thing but cash.

I know people who have gotten <2% mortgages, which is like a 0% interest mortgage. These are private individuals. What rates do you think banks the super wealthy are getting?

Nothing can go down until rates go up. Hell BTC went up after the Senate passed a bill that could really curtail adoption of it... because nothing can go down. Money printer go BRRRRRRRRRRR...

https://brrr.money

> we'll see people move in together so that not only will housing prices drop through the floor but rents as well.

When two people move in together so that they now only have to pay 1/2 the rent of a house, that means the rent of each house can double and the occupants can still afford it.

There’s a way this plays out where both home price and rent double, but an increasing number of houses sit on the sidelines empty. Watching the commercial real estate market over the past decade, that scenario doesn’t strike me as outlandish.

That only works if the landlords who are "in on the game" own all the houses. If they only own half, and people double up, then the landlords who are trying to play this game end up with $0 income for their investments. That's going to be painful - hopefully painful enough that they have to abandon the strategy, and we can return to sanity.

They just take up more loans to cover their debts. That works while interest rates are zero or lower. Hyperinflation here we come.

"Hyperinflation here we come" and "interest rates are zero or lower" aren't going to coexist, at least not for long.

And thank the neomarxists and communists for that.

Capitalist society -> Slowly institute communism -> Slowly destroy economy to reduce purchase price of assets (real estate, infrastructure, industrial businesses) -> Elites with cash stockpiles buy those assets at low cost -> Power & wealth further centralized -> Just before moving economy/society towards Capitalism, sell off public property (such as natural resources) to your cronies -> Reimplement capitalism, now with more power than before.

Wash, rinse, and repeat, until you reach your desired level of wealth centralization in the hands of the "Qui?"'s

Feels a bit “no true Scotsman” - have you considered the possibility that the process you describe is actually a structural consequence of capitalism?

Seems to me that capital accumulation and inheritance is a pretty obvious mechanism to drive that process.

> Private Equity buying up housing

I know there's a lot of media saying this headline but This is actually false. checkout Stephan graham, he's got a post on this on Youtube where he investigates it deeply and finds that an extremely tiny percentage of houses are being bought up by private equity.

And that trend is often accelerated by software, even outside of VC

As devs, what do we do about it?

> Private Equity buying up housing

Honest question from outside of the western world: is it really private, as in, the end beneficiaries are "evil rich" people with net worth over $10m? Or are those investment funds that hold the pension plans and life savings of the western middle class?

It's the second one. This kerfluffle was started by Blackrock moving into real estate. Blackrock is a retail investment-management company that everyone from the middle class up invests with.

So, it's not really "you will own nothing and be happy about it", but rather "you will own 0.1% of 1000 houses rather than 100% of 1 house, and be happy about it."

So, it's not really "you will own nothing and be happy about it", but rather "you will own 0.1% of 1000 houses rather than 100% of 1 house, and be happy about it."

If only that were actually literally true. If I could buy shares in a housing cooperative that allowed me the right to live in any house owned by the cooperative, and when I owned shares equivalent to the market value of a house I could trade those in for full ownership of one house, that would actually be pretty interesting.

Private Equity means investment funds structured as limited partnerships that buy companies and asset classes that aren't publicly traded.

Amazingly enough, pension funds are allowed to park money with them. For whatever reason, unlike endowments, which are heavily restricted in what they're allowed to invest in, pension funds can invest in nearly anything they want to.

But they're still called private equity, which has nothing to do with who is allowed to give them money to invest.

Don't confuse PE & VC the two a very different.

You can think of venture capital as privately financed stimulus package focused on a few sectors. So its actually necessary for the growth of an economy.

PE on the other hand is more of the rent seeking behavior (buying cash flows) that we should really worry about.

>You can think of venture capital as privately financed stimulus package focused on a few sectors. So its actually necessary for the growth of an economy.

>PE on the other hand is more of the rent seeking behavior (buying cash flows) that we should really worry about.

You don't think that VCs are buying future cash flows with their investments? Do you think they're just giving out free money because they're feeling generous?

> You don't think that VCs are buying future cash flows with their investments?

The point is that they risk their own capital to create new opportunities in the economy. 'future cash flows' do not exist.

Which is almost the exact aim of an actual stimulus package.

>Do you think they're just giving out free money because they're feeling generous?

No. Anything that needs to be sustainable has to produce more that it consumes. And that extra production is what people happen to call profit or "exploitation" depending on the envy.

It is like saying the farmer is exploiting the fact that people can become hungry and need to eat.

Or saying that a doctors should not be paid what they want because their primary job should be to heal people.

PE buys the shares in the now rent seeking businesses the VCs financed, that's how they exit. Many VCs these days are doing nothing more noble than creating more investment vehicles for rent seeking PE.

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