Hacker News Reader

Comment by CraigRo | Hacker News Reader

There are structural reasons why this would happen:

Bigger companies can get better financing enabling them to pay more. Bigger companies can claim depreciation vs individual owners who can't. Companies don't have to sell and pay transfer, estate, and capital gains taxes. Property taxes are deductible against rents, but not on individual returns.

So basically, the tax code favors rentals over ownership, and now that the private equity guys have figured out how to cost effectively manage the properties, you are starting to see the inevitable result.

View on HN

  now that the private equity guys have figured out how to cost effectively manage the properties

Anyone renting from one of this big corporations knows that this game can only go on for so long with this "cost effective" management. Pretty much every apartment I've rented from a big soulless corporation has had insect and rodent problems, dripping ceilings, poor ventilation, mold problems, and a whole lot more. When you build cheaply, maintain lazily, and extract as much profit as possible, you're effectively destroying the rental unit in the long term for short term gains. At some point these buildings will literally collapse due to poor maintenance. I can only hope that the government fights lobbyist attempts to "step in and correct the situation" with massive corporate bailouts.

For PE the building decay isn't a problem. They will have extracted a profit over time and there will be new buildings to move to.

It's a harvesting/consuming model more like a carnivore than a producing model like a plant.

You left out the housing shortage. In a market with no other options you can make people leave in filth if the only other option is living in their car. The more property you buy up and let decay, the higher rents you can charge.

You have it completely backwards with respect to taxes. The tax code heavily favors ownership over rentals because owners aren't taxed on the "rent" they would have paid to themselves.

Big rental companies exist despite tax disadvantages, not because of them.

You've got it backwards.

Landlords can deduct mortgage payments, interest, expenses, as well as depreciation from income. If you're only income is the rent, then all expenses are deducted.

As a home owner, you can only deduct mortgage interest from your income.

Owner occupied units don’t pay tax on imputed rent, and have untaxed capital gains up to 500k.

Owner occupied units also don’t pay 10% of revenue to a management firm.

It pencils out as a wash, otherwise people would simply buy their home as a corporation and rent it to themselves.

Individuals can claim depreciation.

Reply on news.ycombinator.com