I wonder if it’s possible to construct a law that would limit corporate ability to acquire these assets while making it possible for families to do so.
Unfortunately, even if there is, politicians at least in DC seem to have zero motivation to solve political problems unless they belong to megacorps or the 0.01% income class.
Like, what value are those corporations bringing to people, to the market, and to a country by hoarding houses other than controlling the renting market for some areas?
How is that a good thing?
In short, they’re offering homes to rent. You can live in the home without buying the home. That’s the value. It’s kinda huge.
And to some extent it becomes class warfare to deny this to renters. These investors are betting big on the houses’ value going up, and expect them to go up a fair bit. This is essentially a bet that the housing market will fail to add new supply, and that anyone who does not own a home yet will suffer greatly from increased rent. And if we’re fighting over is rules on specifically who can buy, instead of doing things to actually make new homes, it seems a fairly sure bet to me.
But you might have pinpointed a couple of problems, so either:
- Those corporations are driving the costs of buying homes so high that regular people are being pushed out, because, you know... they are playing with funny money;
- People's income is so crushed, or they are so deprived of access to free/cheap money - like the corporations - that they aren't allowed to play this game.
Both scenarios make it look like the game is rigged.
Why can't people rent to other people like it was done in the past? Why aren't regular people being allowed to play this game? Or is it such a bad game to play that no one wants to play it, except those corporations?
Even if it was a bad game to play, they're still taking houses away from those who want to buy and not rent. So they're ruining two markets: the rent and the buyers market.
Again, I see no add value that couldn't be created by any other player other than big corp.
Else you'll be here in 20 years saying the same thing, with a minor diference: "these corporations are bringing SEVEN FIGURE housing access to FIVE FIGURE renters"
> they are playing with funny money
YES YES YES YES! Negative real interest rates are pretty damn funny! We should have ended them long ago. We are now beginning to pay the price. You have identified a key way to help end the trends that you do not want to see.
> People's income is so crushed
They are being crushed by inflation! Another blow against ultra low interest rates! RATE HIKE! RATE HIKE! RATE HIKE!
> Why can't people rent to other people like it was done in the past? Why aren't regular people being allowed to play this game?
You're totally allowed!! Go buy a house, and rent out the house. You will probably need money for a down payment, but you can still get a mortgage at negative real interest rates — and if it is in the US and it is a conforming mortgage (<$647200) you will benefit from an interest rate subsidy from the quasi-public mortgage-buying entities, Fannie Mae and Freddie Mac. It might be a great investment! I am buying a house (for myself) and have locked a rate; with current inflation numbers I can expect $2000/month in return simply from inflation eating away at my debt!
The main contraindication here is that you will experience risk, and you may be intolerant to that risk. Your investment could end up underwater, and it's hard to diversify because it's such a big asset relative to your income. This may explain why corporations are better able to do it these days.
> Even if it was a bad game to play, they're still taking houses away from those who want to buy and not rent.
It's true! Existing home-owners are not required to sell to another aspiring home-owner, and are free to sell their property as they see fit. This means that aspiring home-owners must compete with renters (and the people who renters pay, corporations). The renters (and the corporations they pay) may be willing to offer more! The existing home-owner benefits, while the aspiring home-owner does not!
There are lots of ways to use the law to strongarm people into dealing with a politically favored class, at the expense of a politically disfavored class! Some of them are discussed in these threads! I'm not a fan, myself, and believe it will harm the nation and its economy by distorting the economy into doing different things that make less sense and leave the nation overall poorer as a consequence with less money to spend on things that are more meaningful, but if you would benefit maybe you would be a fan!
Renting something bought by an individual (or a very small corporation) was possible and remains possible. But if there was enough of this happening, the corporations who rent might have serious difficulty finding a profit.
It is worth noting that, in a major shift, major home builders expect 50% of their business will soon be in built-to-rent neighborhoods, up from something like 6% today. This is an illustration of how prices are a signal used across the economy to determine what gets done. (Taylor Morrison Home's numbers, from this recent article: https://www.wsj.com/articles/built-to-rent-suburbs-are-poise... )
I refer to the US because it is closer to me. I understand that Canada experiences similar trends.
"People who rent homes" aren't some special type of consumer that isn't interested in buying a home. While there are situations where renting is preferable even if it's possible to buy, many renters only rent because it's not possible for them to buy a home. Any potential benefits to renting are generally outweighed by the fact that you're not building any equity, and have limited control over the place they live.
Massive corporate landlords aren't providing a service to meet a demand. They're actively creating demand by driving up the cost of home ownership, and limiting the amount of properties available to buy. A potential homeowner has no chance of competing with a massive corporation when buying a home.
Obviously there's a huge amount of factors that got us here. Housing is hugely complicated, and no single group is responsible. But corporate landlords are one of the factors making the North American housing market worse, and are one of the things we need to address if we're ever going to decrease the cost of living in this country.
This accusation would make a lot of sense if the corporations in question are either (a) a monopoly or (b) an illegal trust, colluding with each other, and through (a) or (b) the corporations enjoyed sufficient concentration of the housing sector that they had pricing power — the ability to restrict the supply and raise prices to make money.
This is not the case. The housing market is fairly competitive, and many different buyers, sellers, homeowners, and home-builders participate and compete with each other. Prices are rising for other reasons: a reduced number of homebuilders, in the aftermath of the 2008 crash; various political land-use, zoning, environmental, and similar homebuilding restrictions; a reduction in the overall labor pool, which impacts the labor in new home construction; labor and other supply chain impacts on the availability of components that are used in new home construction; and a significant pandemic-induced shift in real estate usage patterns (almost everyone wants more space now).
...except that their greediness of wanting to own everything is precisely what made houses explode in price in first place.
If you want to fix housing prices (or if you just want to screw over these corporations for funsies, which is fine) then you want to increase the supply of homes: that is, you want homebuilders to build, build, build, build, build, build, build — and where necessary, you want to drive the political reforms that make this possible. All the evilcorps™ are betting that you won't — and I'd bet that too, given where you're focusing your attention and efforts.
We have a history of similar measures to draw from. In the 1950s lots of people believed that banning single-room occupancy buildings was the proper solution to a lot of problems - they were small! they were inhumane! they are associated with crime! New York City lost about 100,000 units, mostly converted into two-bedroom apartments, occupied by good people™ who belonged in families. "Consequently," said activist George McDonald in the wake of this policy, "people sleep on grates outside."
Maybe your laws won't quite achieve this! But to the extent they enjoy success in influencing housing prices, they will be harming those who cannot afford homes.
(I agree that corporations hoarding housing is a problem...but they do bring value in some specific areas, even if net value is negative.)
The problem seems to boil down to access to money and the destruction it causes, simply because we play by different sets of rules.
Housing used to be an asset class that was accessible to people, apparently it's a matter of time before it'll be yet another asset limited to a few bunch. They simply have to drive the prices up enough, and outbid people, which is whats happening.
So you have to level the playing field by giving everyone the same type of access to cash, or you make hoarding houses more expensive to the point of being unsustainable.
I’m not convinced it’s a problem.
Again, all roads point back to supply. Build enough homes and the issue is moot.
One of the problems is people can move quite quickly from one side of a country to another, it's a matter of weeks. But from empty lot to new house is a matter of months at best, years at worst.
Yes, but at the same time it should not be possible for them to pass those costs on to people renting the house; rents should be fixed, or based on things like floor space and amenities.
But personally I think everyone should have a way in to the housing market. Renting is throwing away money; it goes into someone else's pocket and it's gone. When you buy a house you pay off a mortgage on the one hand, and (in today's economy) your property appreciates in value. Combine that with the issue that over here, a mortgage is cheaper than rent, and you can see how it's a huge issue.
I've spent something like €50.000 in rent before I finally bought a house; part of that was because I didn't want any longer term commitments, part was because I couldn't afford a house because even then the price of housing was going up sharply already. That's a lot of money that I'll never see again.
You also have to replace anything that breaks and are responsible for all repairs on the property. Many of these replacements and repairs don’t increase the value of the home.
At best buying a home is a forced investment plan. It forces you to take money above and beyond the cost of rent and put it into a savings vehicle that generally generates good returns. But if you’re renting you could just as easily put that excess money into the stock market if you have the discipline to not spend it.
My mortgage, insurance, taxes, and savings towards repairs is now a good bit less than the current rent at my last apartment just a couple of miles from my house. But my house has over twice the square footage, a private garage, a private yard, etc.
Holy shit this is insane. Do you actually believe renting has no benefits?
When you purchase a property you’re on the hook for that mortgage payment for the next 30 years. Buyers absorb an enormous amount of risk. Maintenance is time consuming and expensive.
Renters can leave whenever they like and have no long term financial ties to the state of the property.
I guess everyone needs someone to fight against huh?
You position renting as easy and buying as a burden and an "enormous risk" so I assume you will be renting apartments and leasing cars for the rest of your life surely?
> I assume you will be renting apartments and leasing cars for the rest of your life surely?
No. I will consider my current financial and life circumstances like a rational human being. Do you understand how the world works?
There's also the matter of new developments.
Try to dodge some IRS stuff and you'll see how efficient the government is.
1 house - tax breaks
2 houses - same taxes as currently for 2 houses
3+ houses - incrementally more expensive with each extra house
Also there's a really nice law in Spain, born for the wrong reasons, that makes you pay more taxes if the house is empty vs if someone lives there.
Why should society be subsidizing home ownership more than they already do?
The real estate market already discriminates against people who cannot afford a deposit (an increasing proportion of people, since house prices are increasing so rapidly), and the design of North American cities encourages urban spawl which is unsustainable with current property tax rates. [1]
> and I think to promote everyone's owning a house
Why? Half of German households rent [2] and no one is wringing their hands about how people should be owning their home instead of renting.
As someone who has lived in Europe and North America, there seems to be a borderline obsession with owning a house in anglophone countries, and I don't understand why. If the rental market is sane (e.g. rent is approximately equivalent to a mortgage) then it's up to the individual if they want to purchase a home (e.g. to renovate how they see fit) or is comfortable just renting.
[1] https://www.youtube.com/watch?v=7Nw6qyyrTeI
[2] https://www.weforum.org/agenda/2021/04/global-percentage-ren...
Rent is gone to the owner, in exchange for one more month/two weeks/year/whatever frequency the payment is paid to the owner.
The opportunity cost between a mortgage and rent is not dollar for dollar (euro for euro, or whatever).
Because it's good for society if a large % of the population owns a home. I'm not advocating for more urban sprawl.
> "no one is wringing their hands about how people should be owning their home instead of renting"
What do you mean? People are desperate in e.g. Berlin, that they don't come here to HN and write in German about it doesn't mean that it's all rosy.
> "there seems to be a borderline obsession with owning a house in anglophone countries"
I'm a Spaniard living in Japan, not American, so not sure what you mean.
Amusingly enough we have rent inversions in many markets right now, rental costs are below mortgage carrying costs.
To decrease the return on holding property indefinitely, which prevents renters from building equity to the benefit of small-time REIT holders. The outcome of this is an increase in home ownership which has a host of benefits to society. It also helps economic benefits to stay in the local area. Basically, Georgism tax policy - https://en.wikipedia.org/wiki/Georgism.
What benefits do you see REITs provide to a community, beyond increasing your personal wealth?
Also, a hard cap of, say, 10 homes without increase would still allow REITs to exist depending on implementation.
What is _not_ desirable is a large financial firm like Blackrock or JPMC siphoning off the liquidity of the housing market.
>Basically, Georgism tax policy - https://en.wikipedia.org/wiki/Georgism.
Yes, I largely agree with Georgism, but I don't think incentivizing rich people to buy the largest home possible is within the spirit of Georgism. You'd also run into the problem of people pretending their apartment complex is really just a large mansion. They'd likely spend money on renovations that make the units less desirable to make it classify as a single home.
>What benefits do you see REITs provide to a community, beyond increasing your personal wealth?
What benefit does my landlord provide that a REIT doesn't? REITs allow me to be invested in real estate without exposing me to too much risk associated with a single location.
>Also, a hard cap of, say, 10 homes without increase would still allow REITs to exist depending on implementation.
No REIT can exist with 10 homes. That's way too much money proportionally spent on administrating it.
Business and investment models can adjust; management companies would fill the investment gap for REITs. So rather than direct ownership, shareholders can instead invest in publicly traded property management firms -- arguably what a REIT should do anyhow.
With fewer units, landlords have more incentive to keep properties in working order to keep up liquidity should they choose to sell. This helps offset the tax incentive to let properties go to ruin.
I don't follow your assertion that increasing taxes on larger ownerships would result in rich people buying the biggest property they could possibly afford. People do that anyway?
Residential REITs and other institutional investors finance the construction of new apartment complexes. I don't think a landlord is that much more incentivized to take care of their property any more than a property manager who gets hired by the REIT or institution. Even if small landlords are better than REITs, I don't think that people who own 2-10 homes are necessarily any more productive landowners than institutional investors. There are plenty of people in the former category besides landlords: for example, someone buys a seasonal home that does nothing for most of the year or inherited property and are just letting it sit vacant.
>I don't follow your assertion that increasing taxes on larger ownerships would result in rich people buying the biggest property they could possibly afford. People do that anyway?
The point is to disincentivize this behavior? Same reason why you would increase property taxes/LVT in the first place. I'm not saying that institutional investing in property is great. I'm saying that there are worse behaviors that should also be punished. This is a particularly big problem in vacation destinations where the housing supply gets swallowed by non-residents.
Nah, I was looking for a simple, reasonable bound was all.
I'm not sure how it would qualitatively affect the builder's market.
The reality is that there is no market for renters that could actually afford these supposed monumental price hikes. So instead landlords would simply be forced to sell their houses, increasing the market supply and decreasing the cost of houses.
I looked up some property tax docs of a new luxury apartment building (majority of units go for 2M+) in NYC and I was shocked to see something like 90% of the owners had chinese names.
I'm guessing that the majority of these are foreign buyers. I'm also guessing its unlikely that the NYC new development market is being dominated by asian americans?