JPMorgan to spend $1B on rental homes in the US to become a megalandlord
businessinsider.com
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Property rights are, to many theorists, the foundation of liberty. The widespread ownership of property is arguably the foundation of democracy. Owning your home gives you rights and independence; your home is your castle. The landlord's home is their castle.
Now we are concentrating wealth and property back into the hands of a few, a corporate aristocracy. You can use property at their pleasure. What happens if you want to do something politically unpopular? Put a sign in your yard? Work someplace or say something on social media? What if you have a dispute with this landlord - can you compete in court with their lawyers? where else will you live? Will other megalandlords accept you?
They also will have enormous influence in local communities. Property owners, not renters, are the influential people in any community. These new megalandlords will concentrate that power in a large corporation which has enormous resources. Local government will not be able to compete.
How does this arrangement differ from feudalism, with the wealthy controlling the land and the rest reduced to renting it. Well past feudalism, the concentration of property ownership has been a serious obstacle to democracy in many countries trying to make that transition. Now we are going backward.
Do you think these wealthy, powerful people, who pride themselves on their naked aggression and disregard of others' welfare, who have a long history of buying government, will not use this power?
A crucial question is, is this part of the deliberate attack on democracy by the (unnamed) coalition of wealthy and corporations, or truly just an investment? Regardless, the power will be there for that coalition to utilize.
Land value tax would fix this.
The banks decide what your house is worth and the gov then tax you based on that. Seems like a way to force people into a never ending grind and kicking out seniors. No thanks.
That doesn't seem fair since your 10 acres is using way more of nearly every government service property taxes fund and requires more of nearly every government infrastructure that property taxes pay for.
The edge would still be worth more to build on because of the lower base-dominant tax.
But it does make the edge less accessible to lower incomes due to the base tax.
It should probably be a max value or max sqft on a given entity than try to indirectly force that with tax values. There's a reason we have anti-trust laws.
I mean, you sell your house with a lot of lot for a lot to some Facebook manager and move to Florida, but the whole scheme seems sinister to me.
Somehow "not getting my neighborhood ruined" is labeled NIMBY:ism nowadays?
I forget the 1960s case, but the gist of it was it instituted equalization in school budgets out from property taxes in the name of equity.
In other words, high property taxes in 1 town were forced to be transfered to the neighboring town with a lower budget, so much so that the transfer had to be make payments by pupil within a $100 band.
That was instituted blind to school performance of course.
This actually took hold in many states not just California, however CA was the o ly one that forced transfer payments within a $100 band. There are different flavors of this all accross the country
Of course, homeowners are not idiots. They dont want their tax dollars wasted. So soon after this case forced these transfer payments, there was a swell of home owners pushing for prop 13.
Makes sense. Local taxes to local benefit. If my taxes are going elsewhere, why should i pay more?
And so here we are. Almost 50 years later. Prop 13 is here to stay and is the only restraint that communities have against out of control state spending.
Since 1977 (before Prop 13) we've had the California Tax Postponement Program. Low income seniors, the disabled and the blind can defer taxes indefinitely. They have zero pressure from the state to move.
Meanwhile, anyone who didn’t buy a house or property for a business 20+ years ago is priced out of the market, so we have tons of low-quality stores and businesses that are insulated from competition. It’s interesting how many free market advocates will throw their values out the window when it benefits them to do so.
This is the paper https://www.journals.uchicago.edu/doi/abs/10.1086/NTJ4178881...
Nope, prop 13 (and the resulting income taxes) is somewhere between feudalism and class warfare, transferring money from the young who work to old people who pay nothing and spend their days at city hall making sure nothing ever gets better.
Im a renter, not a homeowner.
But I didn't choose to move to SF as a settler when it was a polluted mess of a city with days you couldnt go out, and high crime.
I wanted to move to opportunity.. When incomes are high and the city was better (it is not anymore)
Id like for prices to go down but I dont blame those that benefitted from just being there. Instead I look at the enablers, there is plenty of blame to go around, and the homeowner is last in that list. Prices are not High due to just prop13.
Miami, NY, Boise, Nashville and a bunch of other cities have housing prices that are going for the moon relative to what its been. They have no prop 13
40% of land on 280, between SF and Palo Alto is undeveloped farmland.
Cows dont pay property taxes
Investors who buy up 40% of the market, blacklist tenants, and price fix to set a price floor or remove supply by taking rentals off the market. Those are the main issues.
The state governments need to re-implement taxes such that deductions and write-offs do not apply beyond a certain number of properties that are not owner occupied.
As for prices, Prices are high because the banking sector has not been held to account for their unlawful actions, and politician's can't balance their budget.
They have used that to enrich themselves through various frauds, and kickback schemes. The land on 280 has little to no natural water, that's largely why its undeveloped, and job centers are scarce.
Property taxes don't work because you inevitably price locals out of homes and setting a maximum on the tax simply ensures local government increases to that max every year. Long term residents are left in the lurch.
I have parents who have a home up there and their property tax has increased 2% of the value every year for at least the last 10 years. They are paying almost a full salary ($40,000) to keep the home. That's just in property taxes each year and that is just for a single modest home with both having to continue working just to get by.
CA should amend the law to only apply to owners with a SSN and then thibgs make more sense
They don’t want you living near them.
Renters are not taking dumps in the street.
Homeless people are
Prop 13 is around 45 years old, which is much longer than the median homeowner tenure in California. That suggests that new people are moving into neighborhoods.
50%+ of california decided for this. Have you pondered why? First, are we really talking a massive tax benefit? Prop 13 is about tax increases to be limited ? Is that insane? Or is it maybe housing prices that are insane? Something does not add up.
I dont control the price of my home. Why should I pay ever incessant amounts over something I dont control and is effectively, paper gains?
But, I'll tell you what does control prices. Whose fault it is that there is no property being built in all the farmland along 280 between SF and Palo alto or Menlo Park.. Sure it looks nice, but its 40% of available land. Just farms.
Worse...some of farming is almonds... which take so much (subsidized) water. Again, why?
Why are there no municipalities created in those areas? Why is there no competition in the bay area's overpriced land ? Look into who controls the creation of new municipalities. Thats where a key problem for CA.
https://en.wikipedia.org/wiki/1964_California_Proposition_14...
The supreme court had to overturn the law.
Direct democracy is an objectively horrible way to govern. The US realized this hundreds of years ago and The Federalist Papers explicitly called out the "problem of faction" which is why we have a representative democracy instead of US citizens voting on federal law directly.
Children, immigrants, future transplants and prisoners can't vote. Should we be okay to grind them into dirt if it'll enrich voting demographics?
Meanwhile, we had at least 1 close brush with failure (civil war). And counting.
You need to take care of factions and you need big, heated arguments at the local level. So they dont end up scaled up at the federal level.
Otherwise those scaled up "solutions" ends up massive problems, such as the sudden reversal of abortion, foreign interventions, and housing/ credit meltdowns due to federal subsidies of mortgage insurance.
Prop 13 rewards long time landowning families. Who's that? White people. Even if the law wasn't explicitly racist originally it's impact has been. And only impact matters in the law.
Here's a link to a good paper on it
https://twitter.com/jarosenthal/status/1328136286159261698
If the current court weren't a joke I think this would be worth pursuing.
Focusing on the beneficiaries misses the whole issue. No one voting for the law at the time was looking To benefit "whit people". The court case Serrano v priest, which eventually led to prop13 getting momentum... That Serrano case simply enforced a law that , as usual, with good intentions, created unintended winners and losers. Its just this time the incentives ended up going the wrong way towards prop13.
People that passed the law, 2/3 of Californians, simply wanted to control how their money was spent. They wanted to do away with the Serrano vs priest decision.
Serrano vs Priest decision broke the link between housing taxes and local government. That court case was directly related to a law passed by the same proponents of aboliahing prop13 now.
In other words, it is the same people that created the perverse incentives of prop13 who now want to get rid of it
Why should they be trusted?
Prop 13 is arguably illegal under federal law. Of course with the current court I wouldn't want to press it. After all Clarence Thomas loves Prop 13 so much that he refused to sign the majority opinion in Nordlinger v Hahn because it didn't go far enough in empowering landowners.
> No one voting for the law at the time was looking To benefit "whit people".
Again, the Fair Housing Act cares about "disparate impact". Intention is irrelevant.
(Though given that the 70s was the era of school bussing battles it's a bit of a stretch to say that people weren't thinking about race wrt Serrano and school funding)
More generally, land value tax returns land to its rightful owner, the people in the community. No one created land so it doesn’t make sense to allow people to profit off it.
if that was the case, why does somebody currently own it, and who did this current owner buy it from (ala, go up the purchase chain back to the first buyer).
Eventually going up the chain brings us to the government, which again, had no right to give that land away when it belongs to the people. Whether they did it because of corruption or ineptitude is irrelevant.
So, let's take the scenario you gave: it depends very much where the mansion and the trailer are. Generally, people build mansions on high-value land and trailers are on low-value land, so the mansion will be taxed more than the trailer (a half acre in LA has a much higher value than a half-acre in rural Nevada where I live). If they are on the exact same lot, though, then yes they would pay the same tax. The idea is that taxing this way incentivizes the best use of land. Imagine that you have identical plots in New York, one is a big apartment complex, and the other a parking lot. With a property tax, you take a huge tax penalty for building, and so the housing complex pays a lot of taxes and the parking lot almost nothing. With a land value tax, however, the parking lot and the housing complex pay the same amount in tax, so it incentivizes the owner of the lot to build a more profitable housing complex there as well, and they take no tax penalty.
Prop 13 in CA is a law that freezes property tax assessments at sale, so you have people who are paying taxes on a home currently worth $2 million as if it were only worth the $150k they bought it for in 1980. This means it is always better just to rent the house out than sell it, since you have a huge tax benefit, making housing almost impossible to buy. Worse, you can pass the frozen assessment on in your will. So it is almost literally creating a quasi-landed gentry class.
This is absolutely not true. What prop 13 does is that it limits the yearly base property tax increase to 2%. It's not frozen, it still goes up every year, but only 2%. Note that this means it still goes up 2% even in years when the market is down. It's basically a damping fuction to absorb the wild fluctuations in market value.
Local government is, by and large, NIMBY and thus on the side of the megalandlords.
Local government does not compete with property investors, it is already controlled by them.
It's not perfect but absolutely works better than direct democracy which has led to things like Prop 13 and it's endless extensions
Would that even be desirable? I feel that serving the desires of the voters is an essential (and desirable) property of democracy.
That's the reason for rule of law, human rights, and limited government - to protect those without power. The people with power always have had self-determination.
The purpose of human rights is to protect those people.
> I say "slight minority" because quite a few "landlords" are ... individual people who saved up and now let one property.
I agree, but that seems to be changing as these large investors buy up homes. That change is the point.
Something tells me JP Morgan would have an even tougher time getting past the NIMBYs.
You are right that NIMBYism isn't good for developing new housing, which is what JP Morgan is trying to do. How do they get past that initial hump? I don't know, but they obviously think they can.
But once that housing is built, there will be every incentive for JP Morgan to go ultra-NIMBY to protect their investment. Luckily, local government is very easy to push in that direction.
If Comcast isn’t a monopoly for many in this country, I don’t know what is. Serious question: what are some notable examples of the government taking actual action against monopolies in a meaningful way that made them no longer monopolies?
There are some business practices that are illegal, but the companies themselves are not.
There's a reason "real" estate derives from the term for "royalty".
Rights: If you do not pay your property taxes, you will probably have 6 months to several years before your home is taken. If you do not pay your rent, the eviction process will likely start immediately and the landlord will probably make your life more difficult until you leave, even if you live in a state with stronger tenant rights.
Costs: Taxes are somewhere between $500-$5000 per year for an average home, while rent is more like $500-$5000 per month. Rent is on par or greater than the mortgage cost for an equivalent space, I have only seen lower rents when the home was not still mortgaged.
So while owning and renting may both theoretically be a subscription or a service with regular costs, the costs and benefits are not the same.
You pay property taxes or you lose your home. You also need to build your house to an exact specification that your local government came up with, of which you have no control over.
In other contexts this isn't classified as ownership. Ownership to me is if I spend $300 on a lawn mower, it's mine forever with no future costs associated to it beyond repairs. I can do whatever I want with it, including modifying how it works or smashing it into a thousand pieces. Both of which are true if you buy a lawn mower today.
With the house scenario there's also tons of things out of your control that could be classified as "well, you own your house but things are about to get drastically different for you". For example what happens if you build a house in a nice empty area of land but you don't own all of the land surrounding your property. Over the years a couple of new houses are built around you and things are fine. But then 5 years later the town decides to build a fire station across the street from your house. Your living conditions are now ruined. A deafening siren may go off at any hour of the day or night and there's going to be extremely loud fire trucks and sirens all around you.
I don't know what would happen in this scenario but something tells me it doesn't end well for you as the home owner? Something tells me the town isn't going to offer to buy every house near the fire station over the market's value then pay to re-locate you to a different part of town (because you don't want to leave a specific school district or move to a different town / state). It also kills the market value of your house for future sales. Maybe at best they'd offer you a relatively small lump sum of money which is no where near worth the noise pollution and future loss of value on the house.
This in old, tired theoretical argument. Your lawnmower won't have much impact on your neighbor, but there are things you can't do with it: (e.g., modify it to emit poisonous gas, make painfully loud noises, or fling objects at high speed through your neighbor's window).
The answer is simply, you are subject to the law. If that makes you not free and oppressed, then you are not free and oppressed.
Things are much less dire than this. My city’s zoning doesn’t come anywhere near an exact specification for buildings. It sets certain minima and maxima, but to call those an “exact specification” is a gross exaggeration.
Further, even if you need a variance from elements of the zoning, those are generally easy to get if there’s good cause (or in practice in our city, merely a not entirely unreasonable reason).
I will still have ownership of my car if I don't register it. I can still use it as long as it's not on public roads etc. This is entirely different than if I don't pay my property taxes. I don't maintain use (or even ownership) of the property. Just because this distinction is clearly spelled out in a legal framework doesn't negate the difference.
It turns out that Allodial Title is a terrible system and has largely been abandoned since the middle ages.
Bold of you to assume that they wouldn't just cancel your lease, share your do-not-rent status with the other mega-landlords, and hope that homelessness makes you go away.
Plus we just were gone mentally.
Doctors wouldn’t fill paperwork saying that high levels of toxic gas caused medical issues, so lawyers wouldn’t take the case.
Growing up gas had a rotten egg smell. So we didn’t realize. Also when we called they kept insisting it was the carpet, the floors, the paint. They would come out and say nothing was wrong and that smell would go away.
There was also a carbon monoxide leak that the dector was going off on. That was what make us stupid as shit while dealing with it.
If you are paycheck to paycheck, a lawyer is a crazy expense at the outset. If suing your landlord means that you are out of a home… and their mention to the credit bureau or landlord friends kills your next lease. Then you probably aren’t going to be able to stay around long enough for the court case to play out.
If there was only a way to review landlords/owners.
Try asking your brokerage for $400,000 of margin at 5% on a $20,000 account and see what they say.
There's no financial instrument even remotely close to what a 30 year mortgage is for the average individual.
Well, in that case, good luck convincing the majority of the population to adopt a policy that will catastrophically crash their net worth. Government involvement in mortgages is what keeps our society civil at this point.
Currently, most people do not rent. If they did, then it would be much less lucrative for the landlord - especially if people are struggling.
“Vote for me and I’ll cap rents at (amount below cost)!” is a fairly easy solution to that problem in a democracy.
They are all complicit. At least in the UK, our politicians have a rich relationships with companies like these (ex - exployees, advisors, donors) and no one bat's eye.
There is no discussion to be had here. It's the return of Europes peasant/aristocrat economy back in full swing. Only took a century to come back. Oh well...
These things are one and the same. There is nothing to do with billions of dollars outside of buying influence.
That's 10,000 $100,000 homes, or 5,000 $200,000 homes, or 2,500 $400,000 homes.
Is it just me, or when put like this it doesn't seem so many? The high rise where I live has, I estimate, 200 units. So at $400,000 per, they're buying roughly 12 high rises. Doesnt seem like a "threat to democracy". What am I missing? I would imagine that right now most of these high rises are owned by a few firms already.
"You'll own nothing. And you'll be happy"
Doesn't seem very... Democratic or even republic to me...
everything in today’s america seems to be “a serious threat to democracy”.
as such it looks like american democracy is too fragile.
The other option to why "everything in today's america seems to be a serious threat to democracy" is, obviously, that maybe that's because America's democracy is under attack.
You really think that's a threat to democracy?
Corpos that compete with me when I am buying housing for my family can go suck a big fat dick.
Why? If they're willing to overpay for properties it will benefit the current homeowner and will encourage new development
In my opinion, housing is the final frontier for this. If housing is bought up by corporates and rented back, we are both feet into corporate dystopia. Land should be between citizens and the states that write the titles.
Providing rental properties is a valuable service
Carpenters and bricklayers provide a service. Plumbers and electricians provide a service. Simply holding a deed is not a service.
I don’t believe my case is particularly uncommon. In ~20 years of renting, ~$500k of rent paid, the total maintenance done on the units I’ve rented probably cost under $100. Toss in the most expensive paint and cleaning regimen after I’ve vacated, and let’s call it a cool $1,000. If the value landlords are providing is “maintaining properties”, their margins here are colossal.
My point is simply that these things don't take care of themselves and need to be managed one way or another.
I’ve had all appliances replaced, a new roof (and a new ceiling when this leaked), the parking lot resurfaced twice, and a new water heater, endless bits and bobs (sink disposal, all new light switches, door knobs, fully new shower enclosure and faucets). Maintenance shovels snow, cleans up leaves, and de-ices. I have never mowed a lawn, shoveled snow nor done any physical labor at all- I’m still in good shape, there’s a gym and pool on premises.
My apartment is small, that’s why it’s inexpensive. But I won’t have kids and don’t need >1 bedroom. Already married for the whole time as well. Depends on how one wants to live their life.
- Property taxes
- Hazard insurance
- Debt service
- Some utilities (water, trash, sometimes even electricity and HVAC, depending on your rental agreement)
- Maintenance and repair of exterior and common spaces
- Repairs and updates after you move out, and before you move in (assuming you have not been in the same apartment for 20 years)
The value provided to you in the owner's margin includes:
- Someone to call if *anything* goes wrong. (Oven broken? faucet dripping? window stuck? Disposal burned out? All problems have one simple solution: Call this number.)
- Flexibility of movement. Want to move at the end of your lease? No problem. (Need to sell to move? That will be a long and/or exhausting process, and will cost you 6% of the property sale price!)
- The security of knowing that you will never be hit by surprise maintenance costs. $30K for a new roof? $20K for a new furnace? $250K for a seismic retrofit? Never going to be your problem.
- The ability to live where you want to! In many locations, there are no apartment-equivalent units for sale.
But as an exchange of cash for services, the equation is more balanced than you might realize.
In exchange for a fraction of what the real maintenance cost of a large repair will be, you get peace of mind that you will never be actually responsible for fixing it or footing the whole bill. The landlord gets to collect profits but one day will have to fix a major problem (and this is guaranteed -- houses wear down over time) that will require them to dip into said profits.
And then you have risk. There are levels of damage that will render the unit or units uninhabitable, wiping out possible years if not decades of gains. The margin is to (theoretically) protect against that.
Not saying this is the perfect system, and definitely greed has inflated these margins while reducing the value of services rendered, but this is the core idea behind it.
But it’s illogical by any standard economic model that any supplier will not build more units if they see it can bring in more money. Either they build more or someone else does.
Crazy real estate prices are caused by NIMBYs blocking new builds - heavy interfering.
Check out this graph of new builds in the States. Zoom out to max. Note how it’s basically flat with some ups and downs. It should go up exponentially with the population. https://tradingeconomics.com/united-states/housing-starts
Here’s a sheet from the gov that seems to show something similar: https://www.census.gov/construction/nrc/xls/starts_cust.xls
We need millions of new units. The capital for that can come from individuals or corporations, but corporations are just a way to pool capital and seems like a quicker and more effective approach.
No corporation in any industry has ever cared about community and affordability. And yet these things have emerged multiple times wherever sane, free markets exist.
Are you saying that regulation (market interference) is universally bad?
The dream would be that individual ownership is cheaper, but maybe if the prices were lower building towers wouldn't be lucrative to developers. I am sure there are a bunch of edge cases like that.
I have owned single family homes and condos and rented apartments and condos. There are good reasons for all of these choices. Those proposing to allow fewer choices are not convincing me that they have thought it through.
The possibilities here are endless. We don't have to keep living the way we do in the USA.
Large buildings require lots of maintenance and specialized management skills. Laws can be updated so that individual apartment owners have similar rights to SFH owners who own both land and structure (a 3D model of land ownership?) Developers could be compelled to provide maintenance service but allowed to collect a small fee in exchange.
Society is a construct, so we can really just construct this however which way we want. Only our imaginations limit us.
Why aren't they all corporate owned yet? I think a lot of renting is not profitable but if all you need is a place to live that's no problem. Perhaps I'm a bit ignorant here?
The issue I forsee is deep pockets cornering specific markets and dictating the price to people who haven't got as much flexibility. Corporate scale slum lords, in other words. It is already happening with private real estate investors.
Anyone can ship in and sell potatoes, I can even buy them online. The market forces work because I have so much flexibility. Not everyone can move, nor should they have to move just because money moves in. People live in communities not investment potfolios.
But within a given city you have a choice of hundreds, or even thousands of landlords? Any specific building might only be owned by one landlord, but you don't exactly have to move to the other side of a city to get away from that landlord.
Columbus has recently found itself to be the new largest city and center of economic growth in the state, and changed rapidly and radically over the past couple of decades. As a result, it's nowhere near as seasoned and well-established as many other major metros, and the massive influx of new monied interests into the area quickly cornered their respective markets.
Moving back to the Cleveland area, which was quite the boom town a century ago but has infamously been in near-perpetual decline ever since (with many residents, like I had, migrating to Columbus), has much healthier competition in the rental market.
Perhaps in a few decades as new assets are built and today's ones slosh around the economy, Columbus will have healthier, more diverse competition and see your point ring true. It's certainly healthy in other sectors—one of my favorite things about living there was the great wealth of hole-in-the-wall bodegas, ethnic grocers, restaurants, and food trucks around me that meant even on my last dime I could always try new cuisines—but at least for those of us for whom even a high five-figure income is a distant dream, options are very limited.
[1] https://perc.tamu.edu/PERC-Blog/PERC-Blog/U-S-Farm-Subsidies...
The thing that's really worrying is this - real estate is inherently unproductive. Investment capital ought to be steered into areas that yield technological progress, not into the equivalent of gold stored inside a mattress.
That's the real reason that policy that keeps housing affordable is needed. It's not only good social policy but also good technological policy.
All land should be owned by the public. To use it you would rent it for the market value, that money would be distributed to the citizens as a basic income. As the land becomes more valuable (society shifts to urbanization and cities become more valued), the cost of that land increases, but so does the basic income.
That's what happens now, except the people benefiting from the cost of the land isn't the public, but the land owner.
On the other hand, if a new power plant is opened up, land value reduces, and the land occupier pays less. Currently they just lose out, hence the NIMBY problem.
I agree that most people can't, and we need to do something to ward off a populist uprising
Now where does the average person find the initial capital, such that they can enter the game of capitalism..
The average person gets the initial capital to enter the game of capitalism by living like a poor person and banking the difference. That's how it works: this "capital" that earns a return is simply the difference between what people earn and what they consume. If you get a positive return on it you might eventually start being able to earn like a rich person and live like an average person.
But that's not enough Lords!
Strong, "let them eat cake" energy with this one.
I think you're spot on with this.
This seems to be the public establishment of a neo-feudalism, where the new barons are the megacorp capitalists, who can afford to strategize long-term and implement land grabs, while lobbying with governments to strenghthen their stranglehold on the people by capturing natural resources. Capitalist piracy, in a sense.
Now, I'm not a (neo-) Marxist in the strict sense, but this is too much in line with the Marxist understanding of the state as an institution that looks out for the interests of (big) property owners, rather than those of the people.
Fast forward a couple of decades, and we can project with some certainty an outright voiding the social contract that understands the state as a neutral institution that cares for the interest of the people, and reverting to such feudal-esque configurations.
And, for the record, no, I don't believe for one second that playing it the capitalist way and buying shares in megacorps has any possibility of having a positive counter-balancing effect. It'd be more like buying shares in slaveships, and partaking of the profits of the trade.
Because of inflationary currencies that punish anyone that simply accumulates money instead of investing it. They want to make everything "efficient" by incentivizing everyone to either spend their money or lend it out so that someone else can spend it. Under such a system, people must allocate their capital just to break even. To fail to do so is to lose money to inflation.
After a certain point, personal wealth is nothing more than a highscore showing how good you are at the capitalism game. There is no need to accumulate an ever-growing pile of money - you could just spend it on stuff and let trickle-down economics do its job. It's not like you are going to need it when you inevitably die.
It creates the incessant need to offset those losses. This turns housing into an investment and prices everyone out.
> After a certain point, personal wealth is nothing more than a highscore showing how good you are at the capitalism game.
What? No. Money is a form of power. It's hard for mere mortals like us to even comprehend the extent of the power wielded by the truly rich individuals and corporations.
With enough money, you can buy laws by lobbying the government. If that doesn't work, you can often just ignore laws and buy yourself out of trouble once it catches up with you. Fines? They're nothing.
Want to see something happen? Just invest some money into it and things will start happening immediately. Want to change things in the world? Just buy whatever you want to change and remake it as you see fit. Use money to incentivize the behavior you desire.
There is no point after which it's enough. The more you have, the more powerful you are. You're limited only by your dreams and ambition. There are rich people out there who bought military fighter jets just to fly around in a highly maneuverable aircraft. How many children out there dream of doing that?
> It's not like you are going to need it when you inevitably die.
My children will. My parents worked hard to give me a good life. I consider it my personal responsibility to honor that effort by going even further in life than they did. I want my children to be even more successful than me.
https://www.sfchronicle.com/opinion/openforum/article/Yes-th...
https://www.investopedia.com/ask/answers/040215/how-does-law...
Edit: And downvoted, follow the Science^TM except Economics, in that case follow randos
You can draw a set of supply and demand curves which keep prices the same under a supply increase, but not bc “large corporate interests keep prices pinned.” More important is that that special case is not relevant to housing markets.
There is also relevant empirical work on this issue. Increase supply and prices will fall. I’d bet you a billion dollars on that outcome.
yes, because JP is investing in a depreciating asset, lmao.
Edit: Folks blaming Capitalism, Sauron, etc., but none will open up a spare room vin their home for the homeless for free (due to "reasons"), lmao.
I agree that there is no guarantee that building housing lowers prices, other causes (like increases in demand) may cause prices to go up (and the increased supply would lower the upward pressure). But I have a hard time to understand how increased supply would not have a downward effect on prices.
We can build housing much more efficiently and cheaply than we could 60 years ago, yet it's never been harder to buy a house.
The law of supply and demand only works as expected when used in an extremely simplified model.
If you account for all the other real factors (corporate greed, governmental intervention, NIMBYsm) that are skimmed over by economists, it becomes clear that the law of supply and demand should never be used alone to forecast future economic conditions.
If that was true, buying a house today would be as easy as it was in the 60s. In fact it isn't.
It does, if that is the only thing that happens. If land owners or existing home owners willingness to sell, prospective renters or buyers willingness to buy, or any number of different things also change then those effects can overshadow an increase in supply. As they frequently do.
Starbucks keeps opening new locations but that doesn't say much to the effect that the price of a cup of coffee will decrease.
The housing price could keep rising forever but the demand will always be high, it's not like people can just "give up on housing for this year".
Being a mega-landlord will also allow JPMorgan to influence the general market price.
So no, it's not really as easy as "the laws of supply and demand".
Edit: lol, never ever touch the dogmas of neoclassical economics on HN. Running into a church during mess and shouting profanity would get you a better reception.
If I produce 100 widgets and am perfectly happy selling them for $10 and barely think I'll sell 10 of them.. but then they are highly popular and everyone wants them, you might see me constantly increasing the price because people like them and want to buy them. But that is literally greed in action. I did the math that I would make a nice profit at $10. But now that rich people decide they will pay $50 for each one just because they have the money and don't care, the people that could only afford $10 are priced out. And now the price has been increased and only people with a lot of disposable income can afford it.
Yeah, look at that "supply & demand" in action. Greed and and an excuse of "but wut could I do, the curves I plotted forced me to increase my prices even though I could have left them alone!"
The above is exactly a ticketmaster type example. We let "the market" set the price because people are willing to pay more and more, but those are the small percentage with a lot of disposable income that then get to have all the fun while people sit back and say "no one has a right to go to the concert [except those that can afford to keep on paying more and more]".
Economics is literally based on the assumption and ACCEPTANCE that everyone is a greedy asshole like yourself.
If you’ve cornered the market in ‘luxury’ widgets, someone else will make a ‘bargain’ widget and sell to those with less money.
Hotels are a good example. The luxury brands are competing for the wealthy. But, you don’t have to be a Ritz-Carlton to make money… indeed, you can often make more by selling rooms to the less wealthy (as there are more of them.) And, on it goes, all the way down to the Motel 6’s and the mom-and-pop motels.
Edit: Agreed @cloverich, it's possible I did miss the point. At the same time, automotive price increases seem disproportionately higher compared to other fungible goods. It's possible the supply chain and labor issues have hit this sector harder than e.g. farming. It'd be interesting to quantify what the differential would be without the capacity from new factories.
This is the most naive take. JP morgan is going to sqeeze as much profit as possible, why would they do anything to lower rents?
Everyone in this thread is acting as though anyone building new houses is Sauron and that any action will make house prices and rents always go up.
Being single-family homes complicates the issue, too. We're not talking about high-density units, so the growing housing supply is fairly constrained. I don't see it being enough competition to lead to a pricing war. Meanwhile, it's taking away land that could have been used for home ownership, which will likely raise the value of other single-family homes in the area, movin home ownership even further out of reach for many.
I get that not everyone wants to own a home, but it's nice to have the option. If you're laying down roots, you can lock in a fixed-rate mortgage and have an asset. When renting from a megalandlord you're subject to the whims of quarterly earnings and your one year lease might not afford much protection. I think you're also discounting the cost and hassle of having to move when JP Morgan raises prices above the competition. It's very unlikely people will exit en masse, causing the landlord to adjust the rental price back down.
You might be fine with all of that, but ridiculing people because they're uneasy with the situation is not helping the discussion at all.
That may be higher than today, but it is lower than an alternate future where we ban building houses.
JP Morgan is building more housing though, which is always a good thing because it increases supply. Governments need to ensure that building more housing remains an accessible and profitable venture.
Why does anyone? To capture market from people who don’t.
JPMorgan can squeeze as much profit as possible AND lower rents.
Companies will extract as much profit as possible. But this isn’t always a bad thing as it can be quite profitable to service customers in a mutually beneficial way.
This is pretty simple supply and demand and if you increase the supply, then prices will drop.
So, if I have 4,000 units and I let 100 stay empty to raise rents 8%, I win.
Rents aren’t chosen arbitrarily by the landlord. They can’t set to whatever they like, else they’d increase 100%.
This is different is a single landlord has a monopoly or there’s a cartel. But in a typical city there might be 500k units for rent. So if a landlord raises rent by 8% on their 4,000 units, then people will likely choose other units that didn’t go up.
Not to be dismissive, but this is basic econ101 and any intro text will have lots of examples and evidence of these principles at work.
I mean, you could write it as "better to have X% units empty instead of lowering rents by Y%, given Y >= X + Z, where Z is positive number determined by several factors" if you like
No, clearly not. Housing isn't a commodity and moving is a pain. If I offered you $10/month in a rent reduction (or off the mortgage if you own) to move across the street to an identical home, would you? How about saving $10/month in return for increasing your commute by 10 minutes a day?
Obviously, both of those become worth it at some level of savings. And decreasing rent by 0.05% to double the units occupied is worth it (probably). But there's a huge overlap in the middle where it's not clear what the effects will be, and that's where the real world is.
It's definitely true that things are more complicated in the real world, but that fact doesn't have-wave us into "Z is non-negative" territory.
That is, not only is Y=X a bad deal, but Y=X+Z is a bad deal for a good deal of positive Zs. Up to Zmax which is a positive value. For all values of Z < Zmax (including negative Zs) it's bad for JPM
Thankfully everyone else who is currently in the rental business is NOT donig this already?
Speaking of naive, you fail to understand JPM will have to compete with the existing landlords or their units will remain empty.
housing never goes down. rent has steadily increased from 800 for a 3 bd in my area to 1500 in 6 years. (rural Utah).
this isn't apples and oranges comparison. rental markets aren't the same as consumer markets.
And sure housing goes down, check out prices after 2008. Condos in Miami could be bought for $30,000. They couldn't give them away.
After that there's diminishing returns. You are correct.
If supply was able to grow to meet demand, then that would put downward pressure on prices, but it isn't allowed to grow, and everyone other than the lord of the land suffers.
But would at least buy a hundred years or so for other cities around the country to develop solid economies so I'm all for it.
Sure, still technically finite, but even just at the Netherlands' population density, we could fit the world population into 1/10th of the world's land area, so it isn't a real constraint.
London density could easily be that of Westminster (the borough with large open areas such as Hyde Park, Green Park, St James Gardens, most of Regents Park etc -- imagine all London boroughs having that much public open space).
Westminster isn't even particularly dense, but that alone would allow an extra 6 million people to live in Greater London.
Go for Manhattan density and that's 3 times Westminster, allowing 45 million in Greater London.
The article says:
> The first installment will include a purchase of 250 homes in three communities around the Atlanta metropolitan area.
Come to England, we've already done that! One of only two countries in the world to completely privatise its water, the other being Chile.
https://www.bmj.com/content/378/bmj.o2076
Just wow. Also, English water is 70% foreign owned apparently. That sounds unsettling. Also, didn't Liz Truss's cabinet not have a single English man on it recently? Out of 22 spots not one English male. Also isn't London property like 40% foreign owned?
Interesting times we live in.
Having to buy 1000l of water for £1 and sell it for £1.20 gives a major investment to not throw the stock away through leaks. Other company have incentives to do things like building more storage (to buy supply when it's cheap and sell when it's not), and the consumer gets to choose which supplier to use. Same with sewage.
The main problem is the last mile would have to remain in public ownership as you couldn't have multiple companies providing pipes to each premises, and that I believe is where most of the leaks go
It does seem like if you have the government and industry working together on something, it's the worst of all worlds rather than just one or the other.
Basically the local road (the fibre) is paid for by the local city and run on behalf of the residents, the local road transports people (packets) to the airport (municipal data centre), where the ISPs pay landing fees to take people where they need to go at different rates for different services, with competition between ISPs, and pretty easy entry costs, ensuring high standards, low prices, and plenty of choice.
Is there an exact definition of an "English man" you know that we aren't aware of? Most of them are born and brought up in England, they seem pretty English to me. And why do you specifically point out males, what about English females?
Rather than people whose parents came to England because it has a good economy.
Boo fucking hoo. 1/6th of all British forces in WW2 were Indian, of course you don't count them. All this is ironic considering Britain murdered and raped the rest of the world to be where it is today. India was the cash cow of the empire without which Britain would not survive the war. And economic migration has been happening throughout human history, it is a fact of life. Immigrants today are actually saving the country by keeping the economy afloat and maintaining values of hard work which the "multi-generational English" people seem to have forgotten. Stop being a miserable old racist c*nt, go outside and actually talk to some brown people and fix your pitiful existence.
Now you're just rationalizing what's going on in England today. Every country on the planet fought tooth and nail for all of our existence.
> 1/6th of all British forces in WW2 were Indian
I like how you make the distinction between Indian and Britain.
> values of hard work which the "multi-generational English" people seem to have forgotten
All that hard work only seems to matter in the context of European and North American and Australian countries for some reason.Why isn't India the greatest GDP country on the planet if what you're saying is true?
I'm a huge fan of brown people and all people in general. I'm just not a huge fan of the billions of a singular culture subsuming the world simply because they don't have ecologically responsible numbers of children. Indians are fleeing India but you can't flee the planet.
> Every country on the planet fought tooth and nail for all of our existence
Ah yes. Killing hundreds of millions and siphoning off trillions over couple hundred years, only to "fight for your own existence". You even worship Churchill as a hero who was worse than Hitler. You are a joke.
> I like how you make the distinction between Indian and Britain.
Asians were considered as a different class/caste in your own English legal system and denied certain rights back then. So yeah.
> Why isn't India the greatest GDP country on the planet if what you're saying is true?
Yeah, and why can't we solve nuclear fusion already? Surely it only takes a few years...
> because they don't have ecologically responsible numbers of children
Poverty leads to high birth rates, not culture. If you had the slightest clue about anything you would understand that fundamental fact. Read up on demographic transition, and how it has been delayed in Asia/Africa because of European imperialism. I recommend the book Factfulness by Hans Rosling. Birth rates are falling everywhere and human population will hit the peak in a few decades. As for fucking the planet, read up on which countries have the highest cumulative emissions and continue to have high per-capita emissions because of their greedy lifestyles. There was a time when London had worse air than Delhi today. Things change, unlike your static worldview.
I'm really starting to question the quality of your education system, maybe that's why your country is failing. No worries, we're here to take the wheel. Signing off from London, UK.
It's clear that some of the Indian people flooding into England have minimal respect for the British culture. It's just something they have to memorize to get the immigration paper. I wonder how many Indian people in power have the same views.
Its just sad to see an entire culture that gave the world so much...subsumed by a culture that has ecologically irresponsible amounts of children.
To be fair the British are opening the doors to let it happen.
For Indians*. It's not hard to understand, Churchill caused more harm than Hitler in India.
> people flooding into England have minimal respect for the British culture
Wrong. I respect rule of law, democratic institutions, scientific rigour, equality, secularism. That I believe is British culture. I will always root for these values, and indeed these are also the fundamental values of the Indian constitution. My problem is only with people like you who have forgotten these values. I consider myself more British than you. Well tbf I consider myself a global citizen.
What I do not respect is denial of your own history, weird unfounded superiority complex and meddling in other countries affairs. US and allies have a history of supporting non-democratic genocidal regimes in many parts of the world including the Indian subcontinent, all while claiming a moral high ground.
> subsumed by a culture that has ecologically irresponsible amounts of children.
You don't learn do you? Go read the book I mentioned in my previous comment.
> To be fair the British are opening the doors to let it happen.
There are many Brits smarter than you who see the bigger picture.
Good for you Indians. Keep up the good work of turning Britain into your home literally.
Recently, for example, the arguments around off-shoring jobs have changed completely due to the supply-chain crisis and its impact being greater than situation previously, when the only consequence had been that the people that dont matter lost their jobs.
This is not about buying existing homes. This is a joint venture to build new build-to-rent housing developments.
> The build-to-rent trend initially emerged during the Great Recession as a way for homebuilders to continue adding supply at a time when consumers were not buying homes. It refers to a process where developers construct an entire community of typically detached single-family homes that are later rented out by an operating partner.
In my opinion, this strategy and investment makes sense to large institutions like JPMorgan because interest rates are high while property values remain high. Building new rental housing increases overall supply, which is something that should, at least in theory, help people like you.
So in essence the US government has created, for corporations, a nearly risk free investment. Highly profitable in the good years, and the bill picked up by all of us in the bad years.
For normal homeowners who want to pass an inheritance to the next generation, a house is both a home and, a retirement plan, and an inheritance investment.
The big losers in cheap housing are the families that've paid a mortgage for 30 years in order to save money for the future.
Asking for cheap housing, today, is like asking for eating the cake and selling it too.
An asset with infinite growth... very sustainable system we've created isn't it?
But housing prices are artificially held up because of voters and taxpayers who would vote them out of office if 2008 were to be the norm, it's not a shady conspiracy.
Something never depreciating against its value is simply bad economics. Things will always appreciate and depreciate. I don’t know who promised you this, but it sounds like you got sold a bridge in Brooklyn.
Given that, there are plenty of other ways to save, pass on an inheritance, etc. You don’t need to hoard land so that I can’t live anywhere.
I don’t really care about your 30 year mortgage, respectfully. I probably wasn’t born when you signed it - why do you get to fuck me out of having affordable housing when I wasn’t even born yet to have that fight with you?
Gold keeps increasing in value, the Mona Lisa too... Econ 101.
I've already partially answer this in another comment but if you think about it: I'd never buy a property with a 30 year mortgage if I'd known it'd lose its value. I'd be better or cheaper to just rent. But then if buying is a bad choice, because what just said, then who we'd be renting from?
I'm with you, that housing should be affordable. But it seems that everyone here forgets basic Economics.
Anyways, gold doesn’t go up like you think it does (I recall it spent the better part of a decade getting smoked) and your house in some city isn’t a one off like the Mona Lisa.
Is gold more useful now than 20 years ago? More desirable? Has gold as a material been improved?
Most of the increase in "value" is something artificial like inflation / scarcity due to increase in population. But that's not value, that is only indeed economic forces only mildly related to gold itself.
We don't want cheap housing that appreciates in value so that we can use it as an investment. We want cheap housing that we can live in, period. We are being screwed out of that because other people got cheap housing and then decided it should appreciate forever, and pulled the ladder up behind them.
You are right, though, that it is impossible to have housing be affordable and an investment good. That's why we want it to stop being an investment good.
Therefore, want it or not, mean it or not, the whole point of buying a property is to get something that appreciates in value. Otherwise it'd be cheaper or better to just keep renting.
In order to stop being an investment, we need more houses, both in quantity and diversity. Lower the barrier to entry for everyone, everywhere.
Or, from another angle, the uninhibited spread of the human race does come with significant ecological drawbacks, at large scale. Those costs are realised, in the value of land over time - while the population curve sustains.
1. Being a landlord has become a more attractive investment because in job-rich regions, cities don’t let developers build enough new homes. The lack of competition from new units allows landlords to raise rents on existing units. Let us be clear on a point of confusion: Developers DO NOT EQUAL landlords. Sometimes developers will rent the units they build, but often not. Developers are the good guys here. When they build shiny luxury towers, it gives the Amazon tech bro something to buy instead of coming into your neighborhood and bidding up the price of older units.
2. Financialization of homes as a personal investment is a BAD thing. It’s essentially a Ponzi scheme operating over decades where home buyers depend on people wealthier than themselves to buy their home at a higher price decades later. This is clearly unsustainable. Homes need to stop being seen as an investment, but rather a consumption, much like a car or other goods. The Atlantic had a good article exploring this topic:
https://www.theatlantic.com/newsletters/archive/2022/12/home...
The solution to our housing crises will include A. State governments allow lots of new homes such that homes are no longer a scarce (thus expensive) commodity, and B. We put in better tenant protections or practices such as multi-year leases that can be broken without too much of a penalty. That is, a family can, say, sign a 10-15 year lease on a home and still break the lease if life events make it necessary.
https://www.progressivemaryland.org/home_mortgage_interest_d...
The US is also one of the only countries where mortgages are so expensive. We wouldn't need the tax breaks if housing prices were low, I suppose.
The capital gains exclusion I have less strong feelings about, but it amounts in large part to excluding being taxed on the effect of inflation.
Landlords can deduct mortgage interest just like any profit-seeking business can deduct interest on loans taken on in furtherance of their business. That’s true for single-family homes or duplexes in a suburb same as a rowhouse, 4-plex or 50-unit building in a city.
The owner-occupant deduction applies to their unit, whether that’s all of an SFR, half a duplex, one level of a triple-decker, or 1 unit in a 4-plex.
https://www.brookings.edu/blog/up-front/2022/05/18/how-does-...
I'm a little skeptical that homes being disposable is a good idea.
Housing simply should not be seen as the primary personal investment vehicle for the average person.
Easiest way to do that is a land value tax; the home itself is not what is appreciating in value anyways, the land is what is appreciating.
The homeowner just owns the liabilities.
In order to get the attractive spots, they’ll throw you a very lucrative bid, which also raises the surrounding property values considerably (well, until the blocks have been finished, that is. Could take years in cities with strong NIMBYism).
To be honest, many of the newer and “cheaper” apartments in such blocks (still costs you $350k minimum) kind of suck. Small, narrow, etc.
there's two parts to home ownership
Physical asset, which deprecates (or needs a lot of maintenance to keep its value)
Land, which appreciates, as they aren't making any more
The former is fine. If you take a wreck and improve/renovate it and sell it for more than you paid, that's great, should be encouraged. The problem is the land value. Ironically the US tends to tax the physical asset far more than the land.
The increase in labor costs may now exceed the rate of home degradation.
Doubt.
Property developers are one of the most despised groups in Ireland, despite our extreme housing shortage, and there are many very fucking good reasons for that.
https://www.opendemocracy.net/en/dark-money-investigations/2...
Successive Ministers for Housing have dramatically under-built social housing, every year, for decades. This, while a "housing emergency" has been recognised for near as long.
These failures are used to justify things like the HAP scheme, which subsidize landlords directly. If this seems stupid - you're right. Many have pointed this out, but the politicians and landlords and developers responsible don't see any issue.
We sometimes subsidize developers to the tune of tens or hundreds of millions, just so we can rent the future property off of them, at above market rate, for decades. And we give it back afterward!
We allow developers to lobby the Government on policies that will make housing less affordable for young people.
Sometimes we just straight up give them €150,000 taxpayer cash per unit, to build "unprofitable" €450,000 units.
All this, while we have all time high homelessness rates, with hundreds of thousands more Irish adults living on friends couches.... While State homelessness organizations accuse charities who question this of "virtue signalling".
Even our constructions materials companies are staggeringly corrupt, eg, CRH (https://villagemagazine.ie/a-history-of-scandal/). They're widely known among Irish people to be criminal, and have been for a long time. See the mica blocks scandal for another example. Yet somehow they all keep getting lucrative contracts. No one is ever punished. And every time there's a big documentary planned about their various mafia type scams, it gets pulled. "Orders from up top".
1031 exchange
Mortgage interest deduction
Opportunity zones
Taxpayer backing of Fannie and Freddie (allows insane leverage and eliminates interest rate risk for borrowers)
Lack of any federal property/land tax
Historical precedent that the government will bail out property owners in times of financial uncertainty
Countless local tax cuts (Prop 13 etc)
You make it sound like a bad thing? Policies should favor the people. There are policies that favor renting flats too.
I believe the problem is not "making it a good deal to own your home". That should be the default anyway.
In China for example there's no property taxes and you can't send your kids to public schools unless you own property.
This is changing as we speak due to the interest rate. These investments are less attractive if you can get a safe 4% or higher return without having to deal with tenants and maintenance.
So if I buy a house for $100,000, I get $4000 in rent per year? Or I get $4000 in my pocket after I use the rent money to pay the mortgage and property tax?
There are different ways to calculate returns: IRR, cash on cash, but it’s immaterial for this discussion. TLDR you want returns higher than you can get elsewhere easier.
(you must not just develop housing, you must lock it up from investors if you want to ensure long term affordability; capital is callous, uncaring, and voracious for returns)
What do you mean by 'bad'? Morally bad? Macro-economically negative? A money-losing investment for the investor?
The investment has been a good one for generations. One reason is we have continued to grow wealthier for generations.
Owning your property, with the rights and independence that come with it, is fundamental to personal liberty and security. Your home is your castle; the landlord's home is not. Not everyone has to do it, but you are handing over a lot of power to someone else when you rent.
You then said primary home ownership is a ponzi scheme which I gave an example as to why that seems untrue. I might be wrong here but providing a counter argument supporting why renting should be preferential to home ownership financially would be helpful as that seems superficially untrue.
The pay off from investing in a house is when you retire you live there rent free, thus needing less in other retirement investments. Most home owners fail at this, instead living beyond their means and have nothing saved for retirement.
I think it is fairly safe to say that the general expectation of an investor is that the value of a home will grow faster than inflation - why else bother investing? This means that the average inhabitant's costs for living in that home (rent, mortgage payments) must also grow faster than inflation. However, the average inhabitant's income will only grows with the inflation rate.
This means that for homes to be used as investment, the cost of living in them must be an ever-growing percentage of the inhabitant's income. And this is what we are currently seeing in practice: since 1965, home prices have increased 7.6x faster than income.[0]
This is obviously unsustainable - we can't end up with everyone spending 100% of their income on housing. The big question is, who will be holding the bag when the bubble bursts?
[0]: https://www.realestatewitch.com/house-price-to-income-ratio-...
Secondly, unless you own multiple properties, it's a market you can't exit. You always need a place to live so if you sell your "investment" at a market high, you have to buy your next "investment" at a market high.
Combining the two, you get a lot of policies that protect paper wealth not generating much value. I think it was Putin who said something along the lines of "I don't understand the American economy. It seems like they're just buying and selling homes to each other."
Owning a home provides tremendous value to the owner beyond the financial aspect.
Contrary to your statements, it benefits everyone if these are seen as a personal investment - but not a liquid asset like stock or something.
Financiers shouldn't make broad stroking national moves on this, and it's basically up to state governments to beat back their capital by regulating things like quality, tax levels, and even build rates to prevent gluts, stem out-of-state "investment", maintainable infrastructure. If the banks try to dive into "house" be assured that they mindlessly leave it up to government to assure upkeep of every other dependency.
Banks can't even upkeep the property they plan to buy, they are so dumb and myopic that they'll buy a place, turn off the sump pumps in the basement to "save money" and literally destroy 2% of the available housing in an area -- which is fine for them since they can write it off pricing everything else up a bit, not as fine for the people who already couldn't afford a home, and are more deeply priced-out.
Governments could make them liable for this, akin to how you are contractually obligated not to destroy a leased car, but most homeless folks make poor lobbyists.
This is largely context dependent. For example, Japan's homes aren't built to last as long as many American ones. Additionally, even heavily depreciating assets like cars can last virtually indefinitely with proper maintenance. (E.g., Model T's aren't really worth much because there still are many around and they are relatively easily maintained)
What makes "homes" appreciate in value is almost never the building itself, it is the land.
And it has always been an odd split of who you want as tenants. Commonly, you either wanted very poor, or commercial tenants. Middle class was not desired.
For the middle class, you wanted to be their bank.
- prices dropping is a good thing
- nimby are the real evil
- we should promote the idea of housing as utility not a store of wealth
- but govt encourages housing as wealth via subsidies, tax breaks, bailouts ect.
- poc should be allowed to build inter-generational wealth via housing. This shouldn't be suddenly cancelled.
- we should be building more public housing like germany and france.
- some random side convo about gentrification
- another side convo about suburban housing = bad. we should all live in tightly packed cities with no cars.
Rinse and repeat.
I think this topic is might be second only to 'tech interviews and hiring' in terms of predictability
it's a catch-22. "lowering the cost of housing" and "lowering property values" are the exact same thing. there's no actual political appetite to lower the cost of housing, because all the people in charge of making those decisions are property owners who don't want to see their investment lose value.
It's also why my first step is not to sell it as the implementation of a new tax; rather, it is an exemption to buildings. People don't like new taxes, but everyone loves exemptions!
Political problems are often difficult to solve but that by no means makes them impossible.
IMO, this is slightly at odds with the OPs point that creating housing investments is a bad thing. One of the problems in my eyes is that a disproportionate amount of Americans wealth is tied up in their homes. This creates incentives to protect those "investments" through things like NIMBY policies, tax incentives, etc. An alternative would be to create a system that fosters more diversified inter-generational wealth.
> - another side convo about suburban housing = bad. we should all live in tightly packed cities with no cars.
Are they wrong though ?
Removing zoning restrictions (and fake environmental/historical significance reports) will immediately restore supply-n-demand stability to housing. Want more housing ? Build it. Simple as that.
> second only to 'tech interviews and hiring' in terms of predictability
The main difference is that no one has a good alternative to tech interviews. On the other hand, every single NIMBY problem has been analyzed to death, with location relevant solutions proposals and verified proofs of them working.
It isn't, at all. The increase in prices is tied to increase in GDP, interest rates and disposable income. Unless you think investing is a Ponzi scheme.
[0]: https://www.realestatewitch.com/house-price-to-income-ratio-...
I'm in full agreement that big money is a threat to society, but at least be realistic about the numbers. Just imagine how insanely large amounts of money you need to corner the market. I'm not saying it's impossible, but if the articles aren't talking about trillions, then they're simply not relevant.
Maybe if the article was about a thousand JPMorgans becoming "mega" landlords it could be relevant. Also.. who is really losing here? The way I see it, this is a threat to the lower upper class, who are being pushed out of the renting market. Are we supposed to feel bad for them, or is this article intended audience the lower upper class?
I am also of the opinion that big landlords are typically preferable to smaller landlords. They are very predictable known entities with brands to protect, and have legal departments that ensure they will follow laws. They may in some cases be more eager to raise rent (although my corporate landlord hasn’t in the last year despite the market rate increasing about 10%) but they’re not gonna do random manual inspections or capriciously fail to perform maintenance, nor do something batshit like change your locks.
The only thing I find problematic is when entities like blackstone purchase SFH for rentals as I see it as a way of capturing value from the middle class (taking the margin that makes home ownership economically attractive) where it wasn’t previously.
And frankly, having worked on the inside in the land development industry: the primary clientele of virtually every land development office in the world - from small city to large - is either wealthy old dude/family, or their companies.
Because land = wealth. If you have one, you can have the other. Or already do. In that sense, this JP Morgan topic is, as you say, just a drop in the ocean.
Younger generation really isn’t on board with all this & only a matter of time before it shows in polls
That requires at least as much effort to do as keeping a regular job and maintaining your relationship. A young person without a solid family backing is already stretched too thin. And families is rapidly disintegrating across America leaving the young particularly vulnerable to the corporate landlord scheme.
I don’t think it’s particularly worse for millennials vs genx.
Coming up with $2500-$5000 for a down payment was not that difficult, even for someone just finished in high-school. One could easily save that up over a summer or two.
Fast forward 15 years, and the same apartments now goes for $250k-$350k. Rent is $1k minimum, and all the rooms on campus are either full and waitlisted, and you can only live there for 2 years anyway. Oh, and banks require a minimum of 15% for the down payment. And that's for the smallest, most basic "starter" units. The 2008-2009 crash killed all momentum, and building only reached the same pre-crash levels some 5-6 years later. This vacuum led to used housing exploding in price.
I think the resentment comes from the fact that many young people are paying $1500 in monthly rent, while a mortgage for the same unit would come at $1000 / month. They go to the bank and apply for a loan, but the bank says "Sorry, you need to save up more for the down payment". Next year the same house is 5% more expensive, while the rent has also increased in the same manner - but salaries have not.
Probably not a problem for us that are working in high-paying fields, but for regular people - especially young ones starting at the bottom - it probably seems like a race where the goalpost is being moved further and further away.
It's an entire inconvenience for not having an inital capital for a mortgage deposit.
I've rented many places, both with excellent and terrible landlords. And it makes little difference, when the laws offer so little protection to the renter.
It wouldn't be half as bad if the inconvience was offset with the rent being the cheaper option. But that isn't going to be economically viable in such a captialistic society.
Many more would complain if renting was a software product.
I do no think they're sufficient and go far enough.
I say this as someone living in the UK.
https://www.lettingaproperty.com/landlord/blog/renters-refor...
I'd like to see some proposals on how much rent can be raised with respect to local rates. Some European cities have attempted this, but not without issues.
And some enforcable time limits on how soon repairs can take - for example a broken boiler.
It wouldn't be linked to inflation, as the housing and renting market has historically been above inflation. So limiting to market rate would still be beyond inflation.
It would be balancing between having housing as a necessity vs a comodity.
You might want to argue that monopoly is efficient, but it's only a temporary thing until they have built their moat.
To be a little less glib, it's easy to imagine other non-profit funding structures such as co-ops and government help (dirty phrase in the U.S. I know).
I imagine a lot of the costs of actually building would decrease a lot when remove the incentive for NIMBYish building codes.
There would be challenges as you point out, but the overall situation would be much better for all of society.
A simple supply/demand model is useful but limited when the demand is everyone.
Builders of individual homes are building larger houses that are unaffordable to the people who need them the most. The answer is multi unit housing - like those being built by the evil profit seeking capitalists.
Single person occupancy growth in the last 20 years has pushed up pressure on stock as has the addition of many millions of persons beyond the national fertility rate. Incredible levels of regulation of which I wager you know nothing make building nearly impossible. I've built many properties, managed many, sold many, bought many. These flippant simplifications don't make sense. Costs to building quality housing to a modern standard are considerable. This the explosion in generic poor quality housing with aesthetics that are vile. If there were real cost pressures we'd see trailer parks everywhere in the UK. But we don't.
In California owners have a minimum of 5 years for example.
To me this seems absurdly low. Losing a dwelling is much more difficult than losing a job. It can be absolutely traumatic, and set people back financially, or worse for people who are already on the brink. In Quebec, where I live, thankfully it's one year. But it should be longer unless you can demonstrate some sort of valid legal reason like your tenant is damaging the building. Just cause you can extract a higher rent shouldn't mean you upend where someone lives.
If I know that there is more risk involved in being a landlord, why wouldn’t I increase the rent to compensate?
If you could increase the rent and still find tenants you'd do it right now. No reason to wait for any legislation
If the regulations change, all landlords that have any business acumen are going to address that by raising rent. The entire market is going to change.
People don't want a landlord, they want a home. For many people the landlord is currently a necessary evil they'd rather get rid of.
It’s going to increase prices and/or reduce supply as not as much capital flows in.
People may not want landlords. But everyone doesn’t want to own a home. By definition, they want to rent from someone else - ie have a landlord.
If you can really do it then why don't you simply increase rent right now?
Maybe we can agree that the price-to-rent ratio will decrease?
The current setup hasn't exactly been great at generating new housing. Juicing speculation increases nimbyism just as much as it increases developer interest.
There is also plenty of affordable land in the US in flyover country.
Huh? Save for a small number of cities most of the nation is sprawling suburbia. 70% of Americans live in single family homes.
Most of what you pay for here is the land. And this is becoming ever more important because of agglomeration effects in the modern world.
> Build up
Ok you're switching gears a bit here but I'll entertain anyway. If you want to build up the right solution is a Land Value Tax. Landlords of course hate this idea.
That is not true.
https://www.statista.com/topics/5144/single-family-homes-in-...
> Most of what you pay for here is the land. And this is becoming ever more important because of agglomeration effects in the modern world
This is also not true. With an investment property you can depreciate the value of the building. But not land. It would reduce the tax incentives greatly if that were true.
I’ve owned five properties in my life and the house “improvements” is always more valuable.
Out of those five, two were new builds I had built from the ground up as primary residence. You can see the value of the unimproved land and compare it to the values of the houses built on top of it.
The other three were investment properties where I could only depreciate “the improvements” - the amount attributed to the house
In “sprawling suburbia”, builders can buy land cheaply and build hundreds of homes.
> Ok you're switching gears a bit here but I'll entertain anyway. If you want to build up the right solution is a Land Value Tax. Landlords of course hate this idea.
You realize any increase in cost is passed on to the tenants. How does that help affordable housing?
> You realize any increase in cost is passed on to the tenants. How does that help affordable housing?
This is 100% totally wrong. The concept you're reaching for is called tax incidence. In the case of Land Value Tax it's fully the burden of the landowner.
Here is a mountain of data backing me up: https://gameofrent.com/content/can-lvt-be-passed-on-to-tenan...
Landlords often retreat at this point and just say "well we are charging what the market rate is" and leave behind any pretense that this is a fair economic transaction. In that case, landlords can get fucked, in my opinion. A system that buys up a scarce and necessary resource and then sells it back at prices disconnected from the actual value provided by landlords is unethical.
My point is that complaining about rare cases where landlords lose money because they cannot evict a tenant who isn't paying at the drop of a hat is simply ridiculous. It is like complaining that an insurance company occasionally has to pay out for their policies.
The truth is that the price of rent is utterly disconnected from the value of a landlord's labor plus the various premiums you'd pay for risk smoothing, lower transaction overhead, and opportunity cost. Landlords simply charge whatever they can get away with and we should all laugh at attempts by landlords to justify their rent through any argument other than "fuck you, pay me." After all, I've never heard of a landlord reducing the rent when they finish paying off their mortgage.
Once we at least have this shared understanding we can start having a real conversation about the merits and costs of the system we have today, rather than this fake conversation about how landlords are so nice for paying for that new roof.
Is your pay based on market rate for your services? Do you voluntarily make less money than you can?
I don't believe that rents would actually go down meaningfully if states adopted laws enabling evictions within two weeks. As you say, rent is actually based on market rate and is entirely disconnected from the expenses landlords pay. All of these discussions about landlord expenses are non sequiturs that just hide the real discussion.
> Is your pay based on market rate for your services? Do you voluntarily make less money than you can?
I am performing labor rather than gating access to a scarce and necessary resource. The social damage of charging for labor is not the same as the social damage of charging for housing.
Your pay is also more than likely built on the back of the less privileged.
How much “social damage” is being caused by a company investing money to build new housing as is the case with JPM?
What’s the alternative?
That's true. The founders of my employer are mega-billionaires though. I'm not worried about them.
> Your pay is also more than likely built on the back of the less privileged.
That's also true. Capitalism is fundamentally unjust. I donate a huge amount of money to anti-poverty charities annually to help mitigate this.
> What’s the alternative?
I am not certain. But we can't even have this conversation until people stop talking about landlords like they are engaged in some essential charity for renters.
It's not to allow a subset of renters to explicitly screw the owners by deciding they don't need to pay rent.
"I'll totally be able to get my landlord to pay for mold treatment" is a good joke, though.
I've rented from several different single-person landlords. None of them have ever done any preventative maintenance on the property and every single one dragged their feet terribly when it came to urgent and necessary maintenance. Two summers ago my AC broke and my landlord was uncontactable (I tried for days). I arranged for a HVAC company to come and repair it on my own and my landlord refused to pay for the bill because I didn't use their normal company (I was never informed of their normal company). Even though in my state it is a legal requirement that rented homes have working air conditioning, it was a huge fucking ordeal to get my landlord to take the cost off my rent.
Now imagine I'm a non-native english speaker who didn't have spare time to dig through state regulations and this happens to me. I'd just get fucked. That's what happens to a huge number of tenants.
According to the law in GA, you have the right to put your rent toward necessary repairs.
But, all of your anecdotes argue for professionally managed properties - like ones being built by JPM.
My experience with corporate landlords has also been shitty, but in different ways. They've done fun things like have terribly sealed granite countertops with stains that they charge each tenant for "ruining" but then don't actually change out between tenants. I was dinged for $2,100 for stains that were present when I moved in (I foolishly didn't have photos). The new tenant was in a few days later without new countertops.
But we have plenty of evidence from especially around 2008-2011 that people were both not worried about squatting and not paying their rent and owners doing “strategic defaults” credit be damned.
Yes, I could have avoided their abusive nonsense by protecting myself more carefully. But that's fucking awful. People shouldn't need to enter adversarial relationships with their landlords on day one.
Do you do any large scale transaction without doing due diligence?
I also made a cross-country move during covid and had to choose a place to rent based on old photos because the current tenants understandably did not want their landlord to come into their home to do a virtual walkthrough for me.
"Oh, if you don't work hard to protect yourself of course you get fucked over" is not a good world. It may be the real world but this should not be used as a defense of the virtue of landlords.
I did something similar. My lease was up and instead of rushing to buy a home. We moved our stuff into storage. We found an extended stay close by and we stayed there six months while our house was getting built.
I had a friend who relocated from Seattle to Atlanta and did something similar.
They are very happy sharing a vitriolic dislike of everything that is a landlord society.
This is very clearly against even a single buy-to-let landlord, but fully extends to all AirBnBs, their rental flats/homes (it is shocking how few seem to have a communal living space - their living room has been converted to a sleeping room to make the rent affordable), and it extends to the perception of what Netflix is and everything about SaaS business models.
They do not hesitate to share ways in which they sabotage landlords in small ways daily. They gleefully share about coffee grinds down the sink in the AirBnB that has a septic tank, of using "bills included" rentals to run the heater... some of them in the cold snap before Christmas went into discount AirBnBs just to run the heating constantly, and of course there's rampant piracy.
There is a very angry generation coming up.
I'll note, I wouldn't have even thought the demographic of the sites I run would be considered left leaning or poverty, these are middle-class people who are angry at their hardship compared to what they perceive as they easy wealth and times of the preceding generations.
In municipalities with highly restricted supply due to regulation, as well as expensive land due to lack of a land value tax or property tax, most of your rent will be the "rent-seeking" kind of rent. Apartments usually are built on very expensive land and are still affected by restricted supply caused by regulatory capture, so they're not different in this instance.
https://www.prb.org/resources/u-s-homeownership-rates-fall-a...
Given the perception (and perhaps reality) that they are worse off than their parents generation, it’s not too surprising that they rebel against the system.
But when working people look out for their best interests, suddenly there's something wrong with them.
Selling a house is hard. Owning has downsides.
But the upsides almost always outweigh the downsides.
If you plan on moving every year or something, then buying will be bad due to the transaction costs. But even if you move every 5 years, it’s possible that owning will be better in the long run.
And there was just another post here within the last couple of days about how many of the remote customer service work jobs require unpaid training, inconsistent hours and are a race to the bottom.
There are remote jobs of varying quality. But they are much more prevalent now, than 10 years ago.
Not that you ever needed to sell up in order to move. As a kid I moved around a lot when my father changed jobs. We rented in each new place but the family home was kept (and rented out).
It's not really mainstream. For tech workers and middle management maybe but certainly not blue collar, medicine, retail, transportation, HORECA, etc. For perspective, the majority of adults in the US don't have college degrees, narrowing down their opportunities for work that can be done via Zoom. It was a deep point of resentment between the cozy work from home laptop class who could have all their needs met through delivery apps and everyone else during lock-downs.
But I'm not sure I'd envy people who bought in 80s Japan.
Their argument was “My landlord bought the house 20 years ago and it’s paid off. So they should charge me less/nothing because their expenses are zero.”
It was weirdly illogical to me as first, they thought the mortgage was the only expense and didn’t even know about taxes and insurance.
And second, the idea of markets didn’t seem to matter and they thought they should get very low/free rent because they lived there. And they hadn’t thought about how people would be able to rent if this is how the world worked.
I think maybe it’s because of virtualization where there’s not a clear cause and effect with digital goods so it all becomes very relative. Or something. But it made me not want to ever be a landlord as negotiating with people like that would be tough.
Well, well, if it isn't the consequences of my own opinions.
There is, because land owners are monopolists that can extract economic rents (extra-high profits due to monopoly ownership) far beyond the ordinary rate of return in a fair and free market of capital goods.
This is primarily because land (or more specifically, location) is a monopoly good, not a capital good that can be created if demand increases.
The extreme end of this reality is feudalism, which most countries in the world decided against for one reason or another. Your young relatives are intuitively sensing that they feel like serfs in feudalism, and there's an increasing truth to that.
Land value tax would solve this.
This allows the property tax rate to increase while impacting non-resident owners more than resident owners.
Sadly though, this kind of tax just increases rent as it’s an additional cost to land owners.
I disagree. Costs are frequently passed on directly. For example, if utilities are included in the rent and the utility rates shift up, then the rent will increase due to that.
I think it’s common that there’s an expected rate of return that investors want in their rental property and they invest according to that.
It’s not that landlords charge what the tenant can bear as the tenant might be able to afford lots. The landlord charges what the market will bear. If the tenant makes $1M/year it won’t really affect what the landlord charges them.
This is an example of a tenant cost, not a landlord cost. In fact, the landlord may not be able to increase rent as much in the future due to the utility cost increase, because the tenant has less disposable income.
> If the tenant makes $1M/year it won’t really affect what the landlord charges them.
I don't think an extreme end of the scale is particularly useful to consider in this case; most tenants don't make $1m a year, and most people who make $1m a year don't rent.
This is relatively easy to resolve, anyway. If "Costs are frequently passed on directly" as you say, then you should be able to make some predictions about landlord costs and rent and then see them replicated in the market.
An example would be:
Many landlords have mortgages. An increase in mortgage rates in countries with non-30-year mortgage rates is an increase in landlord costs. We can expect a doubling of mortgage rates to have a significant impact on landlord costs, and thus a significant impact on rents. Do we find in countries with non-30-year mortgage rate rises that rents go up significantly more than usual with significant mortgage rate rises, or not?
You can also think of an example more to prove whether rents go up when tenant incomes go up or not, such as:
Do rent increases have a correlation with tenant income increases, or are they unrelated?
In my country (New Zealand), there is ample evidence to support landlord costs not generally being passed onto the tenants (I say generally because there will be specific instances where this isn't true).
Then everyone and their mother decided that becoming a landlord is where the money is at, and started bidding each others up. This was sustainable because the city had a surge in people moving there.
These days, most landlords here are just some random small companies charging exorbitant rents while trying to avoid costs and responsibilities at all cost.
And as perverse as it sounds, these folks are often also involved in local politics, and will actively vote against things lie new development projects, changes in zoning regulations, etc.
Man that is the most accurate description I’ve seen in a while.
My current apartment (powered by RealPage, just like my last 3 weeee) sent us all no less than 6 notifications during the cold last week about making sure we run water to not have the pipes freeze.
A total of 4 buildings have burst pipes that included the fire sprinkler system, and they are now trying to blame the residents for not keeping their apartments warm, and also trying to say that “this is why you should have renters insurance because it’s not our fault.”
I’m really hoping to get some popcorn and watch this shot show go down in lawsuits.
Renters essentially finance the ongoing ownership of an asset without getting any of the value back. At the end of the day, the landlord typically doesn’t have to do much work (or can use rent to pay someone to do the work), but gets an entire house in value. Whereas a renter does a huge amount of work to handle the cost of rent, but gets nothing at the end of their stay.
The only difference between a landlord and a renter is that the landlord has enough money for the initial downpayment in the first place. The renter is still covering all ongoing costs associated with ownership anyways, including mortgage and maintenance. (If they didn’t, renting out wouldn’t make financial sense.)
A renter will easily pay $90k over 3 years, but will have nothing to show for it. Whereas the landlord gets 3 years of their mortgage paid off.
The financial aspect of renting is very unfair to renters, and incentivizes perverse behavior. And JUST because renters don’t have the upfront capital for a down payment, or because all housing inventory has been snatched by landlords.
Reiterating: renters CAN handle ongoing ownership costs, because they’re already the ones paying for the landlord’s ongoing ownership costs. In fact, that’s the only way that renting makes sense for the landlord in the first place.
So the entire concept of renting is based on one class of people having capital and one class not.
Most zoning seems to make life worse for renters.
But not all zoning is bad.
https://www.theatlantic.com/photo/2014/08/the-urban-oil-fiel...
If zoning can't prevent the heaviest of heavy industries from sharing space with schools and playgrounds then I don't see why keeping it around to kill new housing projects is so useful.
It would not make any sense to create real estate ETFs under this world for example because the tax penalty would be extremely high.
If taxes are mostly punitive means to shape behavior, then sure.
This should of course be offset by a reduction in other taxes, but it is a supremely just and efficient tax and far preferred to most other taxes.
The problem with any of this is with elected government and privately funded campaigns, elected officials are mostly responsive to the needs of the donor class. So good luck getting passed any legislation that benefits the masses over the campaign donors.
> The companies plan to acquire up to $1 billion in build-to-rent properties, starting in Atlanta.
Besides, “owning” a condo when you still have all of the issues of being in an apartment is not ideal. You are still dependent on the condo association to fix common parts of the building , it needs to be a well run association, you have to deal with neighbors and shared walls etc.
[0] https://www.weforum.org/agenda/2021/07/flats-houses-types-ho...
I'm curious as to who you think will pay the tax.. Wont it be the tenant?
Under your system rent will simply increase by the cost of the tax, which will fully be passed on to the tenant.
This is like applying an "import taxes" and claiming the foreign country "pays". - No they don't domestic consumption pays.
https://gameofrent.com/content/can-lvt-be-passed-on-to-tenan...
tldr: if landlords could raise the rent and still get tenants they'd do it right now
The "simple" part isn't correct. Renters will pay some share of the tax, but it's unlikely that the owners would be able to shift 100% of the burden.
I don't know about the US but in other places you can actually buy an apartment which would solve that problem.
Or there could also be a different tax rate depending on density. Single family home would be taxed the highest. Lower taxes for townhomes. Lower still for apartments.
The rate would still increase with number of units that a single entity owns, but by a smaller amount for more-dense housing.
I'd say an additional point should be to try and not make it so that the path of least resistance for the system of taxes being for a few corporations to accumulate all the available real estate. From what you say you're fine with one company owning all the land as long as they pay the tax. What I'm proposing is similar except the tax gets more and more prohibitive the more you own, instead of being a flat rate.
Nobody's going to get behind a law that kicks grandma out of the house she's been living in for 50 years.
You have to start with residential properties owned by investing companies first, then phase it into nonprimary residences owned by individuals, then primary residences over a certain dollar amount for people under 65, etc. Then you slowly ramp up land value taxes and dial back traditional property taxes until they're entirely replaced.
Look up the controversy over a wealth tax - most Conservatives would tell you it's unconstitutional and/or wildly impractical, but I pay property taxes every year which sure feel like a wealth tax.
https://progressandpoverty.substack.com/p/land-and-the-liber...
It isn’t surprising that they want to start in Atlanta, as the combination of few renter protections, lax code enforcement, and affordable housing subsidies can combine to make an ideal situation for maximizing profit at the cost of human misery.
Let's back up a bit.
The richest country in the history of humanity has a ton of homeless people yet its corporations buy up houses purely for the sake of preventing others from living in the house so they can sell it at a higher price later on.
Is that not absurd?
Even canada, vast beautiful land with most living close to the US border. Yet land or house in the middle nowhere in the Yukon costs a fortune now. All because this one simple disease: corporations, which are legal entities constructed to allow a group of people to use their collective wealth to advance a goal (such as profit) are treated the same as natural persons whose rights and liberties are naturally justified beyond the scope of any country's laws, all because collective wealth meant collective power to influence lae makers and judges?
The answet to this and so many other first world ailments is simple:
1) corporations as legal entities are not the same as natural persons. They are not created equal to individuals and do not enjoy human rightd or civil liberties.
2) Land and housing is for individual needs first (because of #1). Investment housing by nature forms a perverse incentive, investors can instead invest in derivstives or ETFs where they can build equity in a similar way without robbing people of housing.
I am really shocked that these things are missing from mainstream discussions. It sounds like everyone wants to avoid the big fat elephant in the crowded room.
The media, and by extension the minds of majority of our citizens, are owned by the same corporate entities you mention.
They control language so that people will go along with their greed.
So if you’re a corp, you steer the discussions around your profit seeking avenues so people don’t even posses the language necessary ti discuss your demise.
People will never discuss the abstract idea that this whole “legal entities == people” thing is fucked, because they think they’re clever to talk about some vague future tax that will never be implemented because the corps own the politicians too.
People aren’t avoiding the elephant - they have been programmed to not realize the elephant is the problem.
>Broadly speaking, the Ban prohibits foreign corporations and individuals who are not permanent residents of Canada or Canadian citizens from purchasing residential real estate in Canada between January 1, 2023, and December 31, 2024. Any contractual obligations arising or assumed prior to January 1, 2023, will not be subject to the Ban
https://www.mltaikins.com/real-estate/its-not-just-foreign-b...
Banning non-Canadian residents from purchasing residential properties as well as banning corporations that are owned (in part or in whole) by non-Canadian residents seems like a good start. It will be interesting to see how many LLCs (or the Canadian equivalent) get created by Canadians but that are actually used as shell companies for international buyers. I hope that there's some sort of flagging of Canadian individuals who suddenly become real estate moguls, buying up dozens or hundreds of properties via LLCs, when the Canadian had no interest in real estate prior to 1 Jan 2023 (which is when the law takes effect).
Also, the article indicates that "the companies plan to acquire up to $1 billion in build-to-rent properties, starting in Atlanta."
So, in the grand scheme of themes (greater US) probably a drop in the bucket. But maybe it's a big deal when we only look at Atlanta.
Yes, I know the cost of housing is insane and something should be done about it, but introducing some level of market efficiency isn't necessarily a bad thing.
I can't speak for the US but in the UK a huge majority of private landlords are individuals, many of who want to earn a living from renting out two or three homes max. I rent an office from such a person, his sense of entitlement is off the scales.
Some of these landlords had the homes fall into their laps via inheritance, some are simply playing an arbitrage game, very few are actually doing anything economically productive.
Anything that threatens this method of exploitation has to be positive.
My Son lives in a "mega landlord" unit in Saskatoon (Canada) and it is well maintained and his rental fee is very reasonable.
My Son-in-law lives in a "mega landlord" unit in New Jersey (USA) and it is also in excellent condition.
I personally rented from a private individual in Connecticut for several years and it was a slumhouse.
Landlord was never around, no one to call when things didnt work. we actually had to fix the heating system in Jan because we were freezing cold and the owner was once again MIA.
Private landlords are a gamble. They are better on the average, but the variance is also higher. Because most private landlords only have a handful of properties, it's effectively impossible to know in advance what they will be like if something goes wrong.
How many "slumlords" are in the marketplace today?
people illegally renting "rooming houses", illegal basement units, etc.
Perhaps JPM entering the realestate rental business might put a "floor" on the low quality rental units?
Lastly, what makes buying property and renting it out illegal? If you owned a house would you like renting it out to be illegal?
https://comptroller.nyc.gov/reports/bringing-basement-apartm...
Without such restrictions, JP Morgan buying up thousands of units does little to both rents and unit values in the long-run.
Imagine if it were illegal to invest in farms, or trucking companies.
Texas has a "homestead" tax exemption that saves you 2-3k a year on your primary residence.
I think up that.
Make it 20k a year savings... people don't need multiple houses. Companies certainly don't need to own houses.
Blah blah. I just hate this. It feels like taking advantage of people, another barrier to the "American Dream" of home ownership.
The traditional process with estate agents and unreasonable private landlords is completely broken and extremely frustrating to deal with.
Because corporations with the cashflow of nation-states have routinely given better customer service in your experience?
Or does it sound simpler having only 3 choices to rent from in your city instead of 30? Because it does sound like a hell of a time-saver making it onto 30% of your city's "Do not rent to" list when you can do it by taking a single company to small-claims court over an issue they don't want to fix, when you have tenent protections laws on your side forcing them to.
They can "greatly improve the experience" when everything goes smoothly, but it's difficult to argue with a tag-team comprised of a computer database, and a different customer service agent for every call you make.
Managing ~3,000 single family home rentals is possible for a single small office assuming it’s all in a small geographical area. But the article mentions they are outsourcing the work to a third party.
Most but not all big corps want nothing to do with being landlords in Chicago, though there are a lot of local corporations involved. My first apartment in Chicago was owned by the family that also owns the Blackhawks hockey team, and you had to call their front office with any problems. I’m sure that was fun for them - any phone call could be about some important hockey business, or maybe just a broken toilet.
The idea is to divide up income tax brackets based on property wealth instead of income level? That's interesting. Is it just your idea or something people advocate for somewhere?
If you own a house you should pay higher tax on it than your neighbor that has the same house but doesn't have 30 other houses like you do.
And of course you should pay more on each of the 30 houses you own.
Basically large propery owners should pay higher real estate tax than it would be paid if their real estate was split up between multiple smaller owners.
That's why I mentioned subsidiaries, so you can't fake-split ownership.
We're possibly at a multi-generational peak in inflation-adjusted returns to homeownership. Total population growth has essentially peaked, and working age population is falling. Expect more inflation over the next 50 years as we have more retirees (pure consumers of goods) to working age folk (who are net producers). On top of that, we've built more housing than "needed" in 99% of the country (look up the numbers if you're curious... construction has outpaced population growth).
Perhaps provide a link? I did a Google and the first result said the opposite.
the market rate of return. You establish this by making sure that a market has enough participants that they all vie for the investment. This will drive down the rate of return, down to an acceptable level that allows participants to continue.
Also no amount of housing will fix the issue with people wanting to live all in the same place(i.e location, location, location). You can build your own house if you want to cut off the middle man but it won't be in the city center.
I mean I still prefer public housing but if we're on a mixed economy road, don't have a national pension model that works and people do market investment in property trusts for income class reliable returns...
The other suggestion is basically section 8 vouchers that the government already does.
They can’t just create money out of thin air. And even if they could, that money would compete with other investments.
In some ways, that’s what banks do as there are deposit reserve ratios and what not where they take in deposits and loan out more. But JPMorgan internal projects would “borrow” similarly to anyone else who wanted to use $1B to buy a bunch of houses.
[0] https://ycharts.com/indicators/us_coporate_aaa_effective_yie...
Suppose that we have a company buying houses and an individual buying a house using his salary. In order to move money from a company to an individual income tax must be paid and if a company instead invests its money, I assume that no tax is paid immediately.
Consequently if companies start bidding for houses, they will have much more money available than individuals, ensuring that houses will in the long run hardly ever be owned by individuals.
The result would thus be large company-owned estates, filled with renters.
I think most real estate rented out is technically owned by a corporation because of the liability issues. So we’re already there. But I think there’s a difference between a solely owned Corp and a huge Corp. But for tax purposes, they seem the same.
Thus they will end up severely disadvantaged in competition with actual companies for ownership of housing and land.
I think the advantage of corporations over individuals is their ability to more easily raise capital.
If an individual is making high levels of income, it’s likely they are already deferring and rerouting income into tax advantaged mechanisms. Kind of like a partner in a high value partnership.
But I don’t imagine an individual directly funding a billion dollars through their income.
The issue with individuals is that they just aren’t likely to use earned income as the source for these investments.
If it were me and I wanted to say invest $1M in rental properties. I would form an LLC and take out a bit loan in the LLC’s name backed by my personal assets as collateral. Then I’d buy property using the loan and collect all income into the LLC to pay the loan and invest in new properties over time.
The taxes on my personal income don’t really factor into it.
Airbnb essentially rezones residential units as commerical hotels
As an aside, the article also refers to a story on ‘digitising the rental market’ which seems to be about moving the US market away from rent checks? Why are these still a thing there? in most countries at least in OECD this is like doing business via fax or even telex.
I mean, wow.
Rents are already as high as the market can bear for most tenancies, so the landlord has to eat cost increases.
The Renter will pay the tax.
Landlords are running a business, they are not “eating” costs, the costs are paid for by the rent, and if the rent isn’t high enough to cover the costs, they go out of business. Every tax you inflict is simply violence against the renter. So go ahead, make a land value tax, make it even harder for people to rent.
Lars Doucet has a good essay on this with empirical sources on AstralCodexTen: https://astralcodexten.substack.com/p/does-georgism-work-par... I believe he frequents HN as well.
ownership society my ass!
This megalandloards directly violate the core tenet "Right to property". Day by day these mega wealthy people are undermining the democracy, and our government is silent due to lobbies.
Corporations buying up and renting real estate is worse than feudalism because you're just paying them for the right to live in a place. Protection such as it is is "outsourced" to the police, but the police don't actually have a material incentive to keep the peace either because they get tax money one way or the other. If anything, some crime is good for business because it provides political leverage to call for more tax money.
So please, let's bring on feudalism because it would actually align incentives far better than what we have now.
It sounds like this will involve building new houses, increasing the housing supply, which is a good thing.
> [Haven Realty Capital and JPMorgan Chase plan] to seed their investment with up to $415 million in equity. The first installment will include a purchase of 250 homes in three communities around the Atlanta metropolitan area…
It’s hard to tell if these homes have been built yet or not. (I assume “not”).
Could be a very good assumption. Or maybe it's supposed to be hard to tell.
I can almost imagine a well-connected Atlanta real estate operator with something like $100 million in loans, building 250 units at one time in the hottest subdivisions, where the units are not quite completely built and there may now be pressure due to rising interest rates. The market might not be quite so hot now.
The properties can not stand to be unloaded slower or for lower sales prices than it was expected when they were originally financed.
So faster it is, with major restructuring and even more leverage.
It could even be called a bailout, and the big capital groups will be able to structure the rental cash flow as an operating loss while it actually pays its own way the whole time. Leaving the underlying real estate appreciation to be realized in a more tax-advantaged situation after it becomes possible in the future, at which point the actual cash outlay for the asset itself would be quite nebulous.
The money brokers are all-in with the $415 million, they'll be owning homes that are now too far out-of-reach for retail buyers to make them fly off the shelf as fast, and the builders can keep making money building more of them anyway.
Other builders in the same subdivisions, who are not being bailed out, will benefit too since there will be less downward pressure on sales prices overall.
So everybody wins except the renters who are paying for it all, but at least they can count on their payments starting out within reach, with gradual rate increases providing a competitive return for the investors, considering the future prevailing interest rates and inflation as a guideline.
No ordinary mortgages will ever apply to these properties, not even at the beginning.
If the renters' income fails to increase at the rate their rent payment increases over the long run, the landlord will get replacement renters as always. Why do you think there are so many more homeless?
A business model could be built on young families who had worked for years to be able to own a home in a target neighborhood by about the end of 2022 or so. Or maybe before the start of the school year in 2023. As this date approached, things escalated rapidly and ownership jumped beyond the reach of their monthly income. If they can be persuaded to enjoy the same homes as renters instead that can be arranged no problem.
Now once it doesn't make any difference if the homes are already built or not, the only homes that will be built will be the ones where the outcome is not much different than simply buying up many of the already-built homes and turning them into rentals. Without building anything new unless it reaches an ever-higher bar of consumer disadvantage.
Or something like that.
When a vulture swoops in it's a pretty good sign there's something more rotten than you thought.
Next step: build-to-lease EV's.
Final step: Eloi renters/users and Morlock builder/banker/owners
This ends up being a relatively small investment relative to the overall housing market (thousands of units gets you to a billion dollar acquisition cost). I can see it being a problem if large investors started to own most housing, but the best check on that is probably distributed and local (building more housing).
The uber-concentration of wealth and the exploitation of labor that we are allowing to happen is short-term thinking.
The #1 factor in homelessness by a mile is the cost of housing. Poverty is the most significant factor in crime. We, as a society, would rather spend billions on an overmilitarized ineffective police force to be "tough on crime" rather than address the systemic issues that lead to that crime.
The first stage we will see is a well-documented phenomenon called the alienation of labor where the people required to produce something cannot possibly afford it. Once that reaches housing (and some argue it already has) then we're in big trouble.
What comes next? War and revolution. These are the ultimate forms of wealth redistribution once wealth inequality becomes too extreme.
This country produces enough wealth for every man, woman and child to have shelter, food and health care, period. It is a political decision to let people die on the streets, starve or die from being unable to afford insulin. This is state violence.
A fairer distribution of wealth isn't just about the morality of providing for basic human needs. It's also about giving those increasingly-consolidated megacorporations customers for the widgets they sell and preventing the inevitable violent uprising that lies at the end of the road when late stage capitalism turns into neofeudalism.
It feels like we're heading back to feudalism, only with extra steps.
This will create social unrest, to say the least.
"Mom and Pop" never fix anything and keep security deposits with no justification all the time in my experience.
Big corps might not have nice stories to tell you about how the neighborhood was 50 years ago but at least they behave predictably
What a shit company.
They are really heavily invested in property