Investors are chasing easy profits. The fault lies with anti- development and NIMBY forces
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.
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