Hacker News Reader

Comment by rpmisms | Hacker News Reader

We need to ban private equity home ownership.

We need to build more homes. When we do that, buying and holding homes ceases to become an interesting investment, and private equity gets out of it, just like private equity does not buy and hold used Toyota Corollas.

https://www.theatlantic.com/ideas/archive/2023/01/housing-cr...

I wonder what would be a really effective incentive to the construction industry to build more homes.

Something like -- no tax on any homes construction for the next 5 years. Wouldn't that create a construction boom?

The first step is to legalize a much broader array of housing types. Apartments, condos, small lots, townhomes, cottage clusters... all of it.

I'm involved in housing advocacy locally, and a huge impediment to building more is zoning and NIMBYism.

Zoning should be used to keep factories out of neighborhoods, nothing more. Also, building code is making houses boring. Should be a third-party standard, like UL.

It kind of is. Most places just adopt the IBC and make a few amendments.

You can't build if you don't have the labor. There are half a million open construction jobs [0].

People forget that most construction companies went bankrupt in the aftermath of 2008.

[0] - https://www.abc.org/News-Media/News-Releases/construction-wo...

The limits are: Getting people willing to work in the industry (a lot of it is hard labor for okay but not great pay). Zoning which doesn't allow you to build at all in high demand places. Building codes that sometimes require things that don't make sense. Places where builders can get permits "by right" tend to have a lot more building and thus much lower housing prices.

If that created a construction boom, then it would be a boom of constructing very expensive housing, not affordable housing. At least, that's what would happen if recent history is anything to go by.

Except that houses last much longer and there won‘t be an newer more attractive version 5 years later. And in many places the value is the land not the house.

I would agree that treating the taxation of land differently than that of housing would be a sensible idea.

Newer housing is quite often much nicer than older housing, truth be told. More energy efficient, for instance.

> Newer housing is quite often much nicer than older housing

I would disagree very strongly. Stronger building codes and rising material costs have made everything look very samey. I really wish people would/could build more houses that were interesting.

You're discussing aesthetics, not the actual quality of the housing:

https://www.theatlantic.com/ideas/archive/2022/01/stop-fetis...

Anecdotally, housing quality has gone way down, but that's probably due to quality of labor.

> Newer housing is quite often much nicer than older housing, truth be told.

I haven't seen this in the real world. Newer housing tends to be of much lower quality than older housing, even when we're talking about high-end housing.

Perhaps we agree in terms of aesthetics, but that's in the eye of the beholder. In terms of the quality of the actual build, see the article below. Newer is generally much better in terms of energy efficiency and other metrics.

Anyone who says house a hundred years ago were better built is free to buy one and discover all the fun money pits they come with.

I've owned two houses now that were older than 100 years, and both of them were the best houses I've had. No money pits that were any worse than the money pits new houses are.

I'm specifically ignoring aesthetics here.

Newer housing is indeed better in certain ways, but is worse in others. I suppose whether or not it's better overall depends on how much you value those different things.

The idea that Blackrock brought all the homes has reached the level of what I'd call "TikTok truth", ie. an idea that feels so true that reality can't compete. Can I ask you why you find it convincing?

I found this Derek Thompson article informed my thinking on the subject:

https://www.theatlantic.com/ideas/archive/2021/06/blackrock-...

I'm not saying anything about Blackrock (although they are most likely evil).

I'm simply saying that we should ban private equity firms owning residential properties, period. If it's not a problem, why should Blackrock care?

> ban private equity firms owning residential properties

What happens to apartments? What is a "PE" fund defined as? REITs own a number of properties but are not PE. Are small landlords banned from renting? What is the delineation of a Family Office/Small Landlord and a PE fund?

You've basically done the policy equivalent of asking you to build me a website that can host FB level load with no other criteria except Facebook did it.

I came up with a rough idea for a policy. I'd say it's more like I'm describing Facebook as a timeline-based social media website where you can connect with your friends.

Low detail, high accuracy.

Not OP, but I did work real estate for 8 years. While Blackrock themselves aren't buying all the homes, private companies such as them buying homes for investment portfolios is a major issue.

In the area I worked in, 30% of all home sales were bought with cash with no inspections to investment companies like Blackrock and then listed for rent. In the 3 cities around me, 2 new communities that were supposed to be starter homes starting at $300k, were all bought up by those investment companies and are now rental-only communities.

The average American can't compete with that no matter how much we delude ourselves into thinking we can.

Land Value Tax will penalize unproductive land ownership.

https://en.wikipedia.org/wiki/Land_value_tax

Georgism is nice and all, but it would have to not apply to individuals and small farms. People are already being taxed out of their land.

Is there any evidence that private equity owns a significant percentage of homes? Absent any strong data, I am skeptical that PE would purchase (and hold) large swaths of residential real estate. Unlike, commercial real estate, the operations component of maintaining the buildings (outside of apartment complexes) would be complex and hard to scale. I am open to be disproven but it just seems like a much more unwieldy asset class than PE normally deals with.

> a significant percentage of homes

The real question is what is a significant percentage? My understanding was that the housing stock has always been so tight that residential vacancies (rental/sales) have always been in the single digit percentages. So if a private equity starts buying just a few percent they put an outsized pressure on a tight market.

Add in things like airbnb, foreign sales and the limited capacity in time and labour for construction you have a recipe for exhausting the already extremely limited suppy

That is why I used the qualifier "significant" as in enough to influence prices. What percentage of SFH sold are bought by PE each year? What percent of homes are held by PE? I would be surprised if either one is even in the high single digits.

I can definitely see Airbnb or foreign buyers being a factor in some local markets. In both these cases, the operational aspect of home ownership is less of an issue since the ownership is diffuse.

This is irrelevant. Homes are depreciating assets. The only reason that finance got involved is that we are building way to few relative to demand. Remove the extreme market distortion and finance has nothing to push against.

I think you're right, and I think I'm right. The correct approach would be to punish rampant speculation backed by my 401k, and reward building and private ownership.

Why? Institutional owners of homes rent them out, which increases the rental housing stock.

exactly. Not everyone wants to own their own home. This actual increases rental supply.

if you want more housing, build more houses.

Changing % ownership of houses between individuals/companies via government mandates does not actually build more houses.

To drive down the price of homes, because owning is better than renting. Rentals will still exist, I promise.

They also play games where they refuse to lower rents even when they're going empty because it will lower the resale value of the property. There's lots of economic games you can play when you own a large percentage of the rental property in an area. The logic of "landlords provide housing" is a myth, but it's especially true here when the primary purpose of owning the property for these firms is speculation and collecting market rate rents is secondary to that.

Landlords generally own a couple properties, and have competition. If you control a significant percentage of the market, you can really really abuse that.

Is increasing the rental housing stock an intrinsically good thing if every unit of housing available for rent means one less unit of housing available for sale?

Here on HN we're all quick to lament the end of real ownership in the sense of media like books and music, at the mercy of an exploitative corporate practice that is not coincidentally called rent-seeking. So why should we all be happy to be literal rentiers to the landed gentry?

There's no intrinsic reason people should own as opposed to rent. Some people want to own, some to rent. When it comes to single-family lots, the stock is profoundly tilted towards ownership, so the more extraordinary claim would be that shifting those lots slightly towards rentals is somehow bad.

This!!! And especially foreign private equity home ownership!

Reply on news.ycombinator.com