Millions of Homes Still Being Kept Vacant as Housing Costs Surge, Report Finds
vice.com
vice.com
https://council.vancouver.ca/20230510/documents/cfsc2.pdf
(two things I pulled out, they've put $115MM toward affordable housing directly from the tax, and, empty properties fell 20% 2020-2021 and the same again 2021-2022 - worth reading the report)
Now, the investment firms took a different approach. Many ordinary people and even real estate firms will try to rent out their secondary properties, particularly if the property is in a major metropolitan area. Here, the firms didn't rent out the properties for any reason. Their investment strategy decreased the total available housing supply (for anyone, including renters) while demand kept increasing, so the home prices naturally skyrocketed. They sat on the properties and rode the tide.
The issue that Vancouver started encountering was that single-family homes on a regular residential block may be only 50% occupied. The end effect is you'd have families living on a regular ol' city block but with half the properties vacant, which destroys the development of community in that neighborhood. Also, because the Vancouver housing market pricing exploded, property taxes blew up, yet many residents' neighborhoods became a worse place to live. The housing market wasn't growing because of newfound desirability (e.g. Austin) or fresh industry (e.g. Atlanta and entertainment); in those cases, the new economic activity will provide benefit to the community in a variety of ways. The Vancouver situation only benefited the investment firms with no tangible benefit to the community.
Residents became understandably upset. Hence, the empty home tax was passed to disincentivize the investment firms' predatory investment strategy.
Vancouver was the perfect place for the reasons you mentioned and geography, it’s hard to expand the housing supply.
And an existing drug trade to tap into in order to facilitate the funds required!
Reference required. Empirical evidence does not support your claim.
The PDF in the parent’s comment shows there were 1010 vacant homes in 2017 and 502 vancant homes in 2022.
Jens Avon Bergmann of MountainMath.ca did analysis after the 2021 numbers were released. His takeaway:
>> “The results demonstrate very little “toxic demand” leading to vacancies in BC, and provide valuable checks on estimates of “foreign” ownership.”
https://doodles.mountainmath.ca/blog/2021/11/21/three-years-...
Please stop spreading this disinformation unless you have actual references with actual empirical evidence. It is actively harmful to supply-side solutions.
I am open to have my mind changed if you have evidence that toxic demand is actually causing significant harm. With significant harm defined as being one magnitude greater than the 500 vacant homes in the above PDF from the City of Vancouver.
"Analysis of land title records by TI Canada found that nearly half of the 100 most valuable residential properties in Greater Vancouver are held through structures that hide their beneficial owners. Nearly one-third of the properties are owned through shell companies, while at least 11 percent have a nominee listed on title. The use of nominees appears to be on the rise; more than a quarter of the high end homes bought in the last five years are owned by students or homemakers with no clear source of income. Trusts are also common ownership structures for luxury properties; titles for six of the 100 properties disclose that they are held through trusts, but the actual number may be much higher as there is no need to register a trust’s existence."
This is exactly why the Prohibition on the Purchase of Residential Property by Non-Canadians Act and considerably stricter source of income requirements went into effect this year. The reality is nobody really knows, people have a hunch one way, numbers show another, context another again. It's difficult to say.
Here's articles on what the situation was.
2015 - "Vancouver house-buying frenzy leaves half-empty neighbourhoods": https://www.theglobeandmail.com/news/british-columbia/vancou...
2016 - "One-Third Of Vancouver’s Real Estate Market Is Owned By Chinese Buyers": https://www.fortunebuilders.com/one-third-of-vancouvers-real...
2016 - "China is buying Canada: Inside the new real estate frenzy": https://macleans.ca/economy/economicanalysis/chinese-real-es...
Today, the situation is under control because Canadian governing authorities appear to have implemented effective policies.
2022 - "'Astonishing' drop in number of empty homes not occupied by 'usual' residents in Metro Vancouver: Census": https://vancouversun.com/news/local-news/astonishing-drop-in...
2023 - "Chinese Real Estate Investors in Canada – Is Their Ownership Now Less than 4%?": https://precondo.ca/chinese-investment-in-canadian-real-esta...
>Empirical evidence does not support your claim.
Actually, empirical evidence does support my claim, further supported by clear and effective policy reactions taken by Canadian governing authorities.
This feels sensational. Imagine a common scenario: a unit is rented for 2 years (24 months), and then is vacant for 1 month while the owner repaints, performs maintenance, and relists the property for rental. That is 1/(24+1) = 4% vacancy. Given you can easily get to 4% vacancy with simple turnover, you can see why very low vacancy rates are bad for renters: they indicate it is extremely competitive to find housing. You can see this anecdotally in extremely tight housing markets like NYC where renters looking for apartments often report they need to move extremely quickly to secure rentals and some people even ofter to pay more than the listing price for desirable apartments.
I’ll say from personal experience it is somewhat rare to have this one month gap period between renters. I tend to see the super (manager) paint the unit in 1-2 days or even overnight. Then repairs can happen as the tenant reports them while living in the unit, barring any severe damage.
It’s the same deal with unemployment, 7% is much worse than 4% even though the numbers aren’t that far apart because it’s a composite of a baseline and issues.
You tend to know people like yourself. Young professionals move quiet frequently. Do you know anyone in a rent controlled or subsidized apartment? How many retired couples do you permit know? What about school teachers or police officers etc?
Also, looking at people who can’t tell if someone is 2 days into a 15 year stay which makes it easy to overestimate how mobile people are. You really need to look at things from the perspective of move out dates not how long people have been in their current apartment.
I know a lot of working class people who live in the same neighborhood they grew up in and have rented the whole time. Just depends on who you know a lot of I think.
Subsidized housing is another, the waiting list can be years long and people then generally stay until they are kicked out.
It’s also age related, retired people have fewer reasons to move and families are harder to relocate. Further looking at individuals you don’t yet know how long they are going to be in that location.
PS: 5.5% of renters have lived in their home for more than 20 years. Average is 3 years nationally at 7.22% that’s ~2.6 months between occupancy which seems long IMO.
Your individual experience means essentially nothing, and I frankly disbelieve you don't even know anyone who has not or will not eventually have rented for 10 years, since they are everywhere.
In San Francisco, rent in rent-controlled apartments can only be raised by 2.6% per year. Which is far more impactful.
> landlords exploit this by neglecting repairs
To be fair, if rent can never go up more than 3% per year, how long until the landlord can't afford to do any repairs?
Property tax goes up 2% every year, so there's only 1% headroom. If some other expense starts to go up wildly (such as insurance has been doing for years now) it can eat that up and then the landlord is losing money every month, which leads to abandoned maintenance. Which isn't good for anyone.
The property tax increase is at a max of 2% cap, it has not been a full 2% most years in my experience (anecdotally in my area).
Further if all expenses increase by 3%, then profit also increases by 3%. With decades of inflation well below 3% landlords weren’t having issues affording repairs, they simply weren’t getting the maximum benefit from the area’s prosperity increasing.
The US seems to default to doing the worst possible solution. Take long term rent control and private ownership, because like seriously WTF??? That’s literally combining the worst aspects of communism and capitalism.
This debate over "public housing" vs "more landlords" is kind of dumb; both operate by increasing the supply of housing and rely on fundamental market factors to work.
>A housing unit is vacant if no one is living in it at the time of the interview, unless its occupants are only temporarily absent. In addition, a vacant unit may be one which is entirely occupied by persons who have a usual residence elsewhere. New units not yet occupied are classified as vacant housing units if construction has reached a point where all exterior windows and doors are installed and final usable floors are in place.
If a builder is building a house and it has a roof/windows/doors/floors but no occupancy permit, utilities are not hooked up, and there are no appliances/furniture that is counted as 'vacant' even though you technically can't live there.
If I left an apartment today (12th) and my lease ends the 30th. Even if a lease is in place at the start of the next month that still counts as a vacancy.
If I have a 2nd home I share with family/friends/short term lease that is generally occupied, it's still "vacant".
I don't think Powell gives two fucks about the inflation or unemployment rate. Think he's very interested in cost of living and rent more than anything else. Housing prices barely have moved down at we're on the wrong side over 5%. If housing just thinks its going to wait this wait out and emerge from all of this with this inflated money house has left in tact, while the rest of get slammed by the waves, well ... well I guess I've seen dumber stuff.
Housing needs to get hit for any of this to be worthing anything.
The people withholding units from the market are your normal landlords and speculators who can stomach reduced rents in the income. They need to be taxed out of existence. LVT continues to be the right answer here, both for incentivizing development and disincentivizing speculation/holdouts.
Edit: Yep, vacant units per capita are at historic lows. We have a construction problem not a vacancy problem: https://fred.stlouisfed.org/graph/?g=131FW#0.
> In addition, a vacant unit may be one which is entirely occupied by persons who have a usual residence elsewhere.
I guess we would have to read further on how they determine temporary. But given the sampling method, I would guess people doing a door to door survey and noting it as temporary absent if it’s well kept?
The headwinds on construction are labor shortages, material shortages, zoning, and land prices. Zoning and land prices are both also alleviated by LVT.
The feds actions show they want high asset prices relative to wages.
The plan is exactly as you describe. "Asset inflation good, wage inflation bad" is government policy at this point.
So the fed doesn't have any other good options. They cannot raise taxes on the rich or institute a wealth tax or 'take' the rich's assets. That's up to Congress. Blaming the Fed I think is unproductive because they seem to be doing their job trying to balance low inflation and a low unemployment rate as much as they can, within the limitations of only being able to change interest rates and quantitative tightening/easing(not to mention things like the war in Ukraine increasing energy prices which affect prices of almost everything). If you had the choice between high(or run away) inflation and slightly higher unemployment(which was historically low), what would you choose? Wage increases are eaten up by inflation.
Aka profit inflation, instead of wage inflation.
It’s an economic axiom that high interest rates mean lower asset prices.
So can you explain what you mean?
Also - as far as I know every us city except for Miami has had a decline in real estate prices - so again - where are you and everyone in this thread getting information? Anecdotes?
Wages finally start to creep up after decades of lagging behind productivity, panic, need to raise rates aggressively.
When home prices double in a decade there was no concern, when a burger king employee asks for a 10% raise its a crisis.
If that is the case, why is housing so expensive?
The Fed hasn't really squeezed hard. They're looking for a soft landing. We went from super loose negative real rates to just loose policy, but to hear Jay Powell say it, we're already tight and restrictive. We probably need to get up to 3%+ real rate (maybe 6%+ overnight rate) to get a good washout and some forced selling.
Housing prices have nothing to do with 2023 interest rates. Well they do, the fact that they are stalling/falling is very much to do with the higher interest rates.
You can't look at 20+ years of loose monetary policy, take the 1 year of high interest rates, and blame that on high asset prices.
Btw, have you looked at stocks and bonds in the last 1 year? PE ratios? They've collapsed. Because asset prices collapse with high interest rates, and stocks and bonds are much faster at responding than real estate.
But still, real estate prices have fallen in every major city bar one.
"In September 2023, Boston home prices were up 2.7% compared to last year, selling for a median price of $770K." [0]
"In September 2023, Naples home prices were up 11.4% compared to last year, selling for a median price of $702K." [1]
I stopped at 2 (the 2 that affect me) because that was enough to falsify your statement, but I probably could've gone on for another 150 cities.
[0] https://www.redfin.com/city/1826/MA/Boston/housing-market
[1] https://www.redfin.com/city/12171/FL/Naples/housing-market
Investors looking for a return on investment want to rent everything. They leave property empty when remodeling, or when between tenants.
You're just banking on leveraged appreciation.
Take a $2M condo. The rent is will be ~$60k for a year. The appreciation will be ~$200k, and the the principal (@ 3% interest - which they have if they're leaving it empty - is $35k).
You're getting an expected $235k if you leave it empty, and $280k (after vacancy and management) if you take on the risk of renting it.
Why go through all the hassle when the government is doing everything they can to pump up prices on leverage?
If that stops happening, eventually everyone has to adjust their spreadsheets/models, and all the sudden that model gets very grim.
actual cashflow is real/concrete and hence has a momentum and credibility that tends to reduce panic. It gives time to wait out market valuation issues, since there is money to pay the bills coming in.
And once the money changes hands, it also is ‘permanently’ the owners. That reduces risk.
Expected market value? Not so much, on any of those fronts. And at some point, all but the most die hard true believers are going to want to know why they’re dumping cash into finance payments (or keeping cash locked up) for property that isn’t worth it.
At some point with speculation, enough people blink that it collapses.
Or maybe not. At least that is what everyone in that situation tells themselves.
But it isn’t panning out for Chinese firms anymore like it used to.
This takes time to actually happen though, as everyone has very strong incentives to keep wil-e-coyote’ing once they’ve run off the edge of the cliff.
And somehow people always find reasons to not update those spreadsheets when the numbers are going down instead of up. For many of them, they ran off this cliff many years ago.
And it does work, as long as there are enough ‘greater fools’ around, and there are a lot of greater fools, or they can afford to wait.
Boomers here and in China can still go for many years before they have to sell.
Endure, they will cave eventually. They always cave.
But the article also talks about some cities where there is housing for rent, but not at prices where anyone will rent it. That’s curious. It would be interesting to find out more about what’s going on there.
Now, is this ethical? Abso-fucking-lutely not. Not only is it basically a bigger fool scam, it takes an extremely valuable and important commodity (housing) out of the market for no reason other than financial gain. I'm of the opinion that apartment buildings should be required to maintain 80% occupancy or risk having their apartments go rent controlled; if you aren't willing to rent at market rates in order to provide the service you claim to provide, you're taking housing away from people who need it, and you should be punished for it. Sure, you can argue that real estate is an investment and therefore these ghouls have the right to do this, but IMO becoming a landlord should come with the social responsibility to _increase_ housing supply and availability, not decrease it. If you're not willing to play by those rules you shouldn't be allowed to participate in the market.
2007 called, they would like to sell you an amazing condo development in Naples, FL.
A multifamily property is worth some multiple of its Net Operating Income. Almost all Multifamily properties are acquired with debt. No lender will grant a loan for a property that has a high asking price, high rents and high vacancy.
Source: I have owned many multifamily properties.
Also, it seems like an apartment building that’s mostly rented out would sell for more than one that’s mostly vacant and losing money? Assuming it’s not a teardown.
It seems like it’s similar to any other business. A profitable business would go for more than an unprofitable one.
I can see it as a reason to be picky about tenants, though.
You do not seem to understand how commercial property is valued at all.
Your rant is some /r/LateStageCapitalism nonsense.
Restaurants are a tough business, so towns with a high vacancy rate end up being unable to support very many restaurants. Forget the quality of the restaurant, lots of these places barely have any restaurants (or they're very seasonal)
Honestly, I wonder if one could do a "benefit local business tax" where they tax the non primary residents and then just subsidize the types of local businesses they want to keep open (it's hard to design good systems for this though!)
There's a third option you're ignoring: The rich people from elsewhere don't own those houses. They're priced more affordably and owned by locals who genuinely care about the area.
Everyone wants to live in the goldilocks situation of a desirable area with low prices, good services, low taxes, good commutes (low traffic and-or good transit), and plentiful jobs. I've lived in various areas from rural, suburban to Manhattan and.. you can usually have 2.5 out of 5 at best.
In touristy Montana cities the amenities are nice sure, but people aren't there for that. They're there to ski or hike or bike.
Regarding your last point - Manhattan can hit 3/5 if you can coordinate your apt and work locations.
Propery taxes are the same in NH whether someone lives there full time or not, so it doesn’t matter that they aren’t there and would be equally valuable if they did live full time. The traffic argument is the only one I can see being true, except that traffic in the seacoast is awful already anyway with tourists driving back and forth to Maine.
Personally, I think having permanent residents is far better for a town than a graveyard of empty soulless homes, but I’m just a regular human being and I’m sure its just a matter of opinion at that point.
Property taxes pay for municipal services like parks, schools, and police. The rest of the town's residents get better versions of those than they could afford otherwise. This isn't a very complex idea, regardless of whether you think the town would be better off with more people living within it full-time.
Unless you are suggesting replacing such a home with higher numbers of lower value homes. Obviously that would be a different story.
We're certainly a year-round town. But it's a reality of a lot of coastal communities as you get up the coast further that, if they're not commercial fishing ports, they do largely close down in the winter. If there weren't summer homes and a tourist industry, not many people would live there.
Vacant properties are around 1% here.
For example, the article says, "About 26.6 percent of the nation’s vacant housing units are actively available for rent." Does that mean the landlords are having trouble finding qualified tenants? If so, then the real issue is the disconnect between inventory and what those seeking shelter can afford.
A $5000 p/m unit being held back if 99% of those needing a place to live can't afford it.
Housing availablity is like jobs creation. X new jobs? Ok. Whatever. But at what rate of pay? With what benefits? A job is not a transparent unit of measure. The devil in these things is in the details.
Perhaps. But supply (as in supply and demand) plays a key role as well. The ratio between higher-end and "affordable" seems to keep trending in the wrong direction.
I'm not suggesting everyone should own a home, that's impracticable and economically dangerous. On the otherhand, too much of a resource (e.g., hoysing) controlled by too few hands has serious economic consequences. Perhaps, eventually, sociopolitical consequences.
2. We have multistory buildings.
If this doesn't seem reasonable to you, what vacancy rate would you find acceptable?
Just for argument's sake, it can be done: Renters are supposed to give notice months in advance, so landlords can advertise during that time. (And yes, painting etc takes some time, but not that much.)
Definition of a commodity. In economics, a commodity is defined as a tangible good that can be bought and sold or exchanged for products of similar value. Natural resources such as oil as well as basic foods like corn are two common types of commodities. Like other classes of assets such as stocks, commodities have value and can be traded on open markets. And like other assets, commodities can fluctuate in price according to supply and demand.
Of course, the other solution would be increasing tax and just build massive oversupply of social housing- but that can not happen, as it would devalue the poker-chips, that are the stacks we life in.
It bothers me that in this article that in the same paragraph it mentions housing "deteriorating conditions" it gives percentages for housing in rent and being renovated, but ignores the percent for this important aspect? How much of this housing is actually in a livable state?
Maybe the original report actually gives these numbers so I will need to look at this closer.
But something about this really isn't adding up for me given what has been said time and time again over the last few years.
Edit: Ok so it seems like the reason this article doesn't mention this percent is because the lending tree one doesn't either. If I am reading this correctly it is only explaining about 52% (26.61 + 17.04 + 7.98) of this number. So what is the reason for the other roughly 50%? That is a huge percent to be seemingly ignoring but still taking into account for an attention grabbing headline.
It's abundantly clear that the powers that be in the economic world are some combination of willfully lying and self-deluded about how various parts of the country's and the world's economy actually work. It would not surprise me at all if the statistics showing a "housing shortage" were either shortsightedly or deliberately ignoring particular categories of vacant housing.
But housing numbers are cut and dry. Worst case we have people who are trying to hide the numbers, but ultimately if the numbers can be found they are there. Gets a bit more complicated since you do need to account for wether or not there are people where those houses are and if the housing is in a livable state.
But it isn't like you can add an opinion disclaimer to housing numbers.
And as you've already noted, the article appears to be making bold claims while not showing all its work. Yes, this article is doing that while arguing for extra vacant homes—but what makes you think the opposite isn't also true? Beware of the Gell-Mann amnesia effect.
He's never going to take in people again. Nor will he ever rent out to anyone again.
California Insider (channel killed by Youtube) documented how thousands of former rental units are sitting vacant in San Francisco because of issues like this.
Increasing the risk to landlords even more than it already is will only reduce available rentals even more.
The court system being unreliable and backed up for months is a travesty of its own that has myriad downstream effects in society, including incentivizing discrimination.
This seems to be completely ignoring inflation and hinting at a greed narrative.
[1] https://www.npr.org/2022/02/13/1080494838/economist-explains...
It's also still too small a % of total housing to create a proper liquid market. I've seen a liquid housing market, in KC - it's amazing. In NYC, it's fucking miserable to convince a landlord to let you suck them off to the tune of 6k a month.
This is Flat Earth but for housing policy. Look at places that win the housing price war - they just build a shitload of housing. Houston, Dallas, increasingly MSP.
Mexico is significantly better at cities than CA. Fucking Guatemala has better urbanism.
It is insanity because it’s being sprawled by the same developers and same regulations. Sure, fixing existing cities is better option but it’s unrealistic to do so, because you will need an authoritarian set of decisions that will never happen in a democratic government when 2/3 of your voters are home owners and already paid their life savings in that house and want the returns now, yeah, that fix will never happen, the realistic option is to use the already vacant land -that surprise surprise it’s actually owned by the crown!- with new sets of regulations to ease the crisis, or absolutely nothing will substantially change.
I'd argue that changed as of this morning:
https://www.latimes.com/california/story/2023-10-11/carpente...
According to the NAHB, housing contribution to GDP occurs in 2 ways:
a) Residential investment (averaging roughly 3-5% of GDP), which includes construction of new single-family and multifamily structures, residential remodeling, production of manufactured homes, and brokers’ fees.
b) Consumption spending on housing services (averaging roughly 12-13% of GDP), which includes gross rents and utilities paid by renters, as well as owners’ imputed rents and utility payments.