Hacker News Reader

What's the point of building more housing if it's all owned by the same handful of investment firms? In my community, over the last few years, one investment firm has spent billions, purchasing nearly 60% of the rental properties. There's smaller players that also own a significant chunk. These handful of investment firms control the rental market, setting the price however they want, since their product (housing) is a necessity and the alternative (competition) is nearly non-existent.

Local political leaders tried to pressure the investment firm to lower the rents, but they responded with "fair-market rent, blah blah blah", and nothing changed. The shameful thing is that the web page of the large investment firm (sorry, don't have a link) basically spells out their strategy: "Purchase rental units in small, low-ish income communities. Raise the rent. Profit. Rinse and repeat." The web page boasted about huge returns; it didn't talk about "fair-market rent, blah blah blah".

Or what happens in London (and probably other higher value land over the world): developers buy land for building or properties for renovation, and then drip feed it into the market to keep prices high. It's better, in financial terms, for them to sell new developments over the course of 2-3 years than to dump them in the market, and thus creating negative pressure on prices.

When developers are well financed there's no counterbalance to this strategy, they can keep these units off the market until the price point is right and drip feed some more, without a cash flow crunch they are not losing money.

I've seen this strategy being used in some São Paulo's neighbourhoods, new developments would sell maybe a tranche of 10% of apartments, after 6-12 months a new tranche of some 20%, then another 6 months and 30-50% would appear, crashing the price of the previous owners. Rinse and repeat.

> What's the point of building more housing if it's all owned by the same handful of investment firms?

If that was the case, the point would be an increased supply pushing the price down.

And what happens when we run out of places to build? Or when we build so much it will take an hour or more to go to the grocery shop to buy milk?

Simply “build” is not the answer. “Building smart” would be a better answer. Build “vertically” instead of “horizontally”. Build 10+ stories residential buildings. And build shopping malls vertically too. Build walkable cities so that people don’t have to rely on cars. Etc.

simply build only happens with relaxed zoning, and relaxed zoning will result in building vertically or at least, mixed use. The current way of building is a result of stupid policies to protect homeownership as an investment among other things. If you want to further incentivize smart building, a land value tax is the answer

> Or when we build so much it will take an hour or more to go to the grocery shop to buy milk? Simply “build” is not the answer. “Building smart” would be a better answer.

If you have residences that are an hour away from groceries, even with no empty lots nearby, I think people would find it obviously profitable to buy a residence and convert it into a grocery shop. Capitalism alone takes care of the need to be this smart.

> This is basically the late stage of us continually not building enough housing for years and years. I'm not sure how anyone thought this would turn out differently.

Absolutely! Build more housing, at any price level[0], and rents will stop growing and maybe even come down.

[0]: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4629628

> Just look at the 30 year fixed rate mortgages.

What about them? They make it more feasible to own a home. The rest of your comment appears to favor people being able to own homes, but this comment opposes one of the few things that help make it happen.

> We've basically given homeowners the keys to power to fight back against any and all building developments.

How is that? As a home owner, I didn't get the memo. The local government approves or rejects all kinds of building sites without ever polling or asking anyone outside their agency. Homeowners of the area don't have any input.

Any explanation for the explosion in housing costs cannot simply consider the United States. The U.S. has some idiosyncratic problems, but it’s not the only place with expensive housing.

pretty much every country follows the US in terms of not building housing. In europe, they block for historical reasons (aka not killing the vibe of the cute towns and stuff)

> pretty much every country follows the US in terms of not building housing.

If nowhere builds enough, maybe it's not a practical solution?

Also interesting to observe that the places that build by far the most, that is, the places which are most densely inhabited, are also the most expensive (NYC, SF).

I know the counterargument that even NYC simply hasn't built enough. Need to build more, a lot more. But I have to ask, if the #1 densest place in the US isn't dense enough to be cheap (instead of the most expensive), maybe density just can't make it cheap in practice?

Maybe it takes a place like (Isaac Asimov's) Trantor, with buildings miles and miles dense to achieve cheap housing in a dense place? Will there ever be such a place on Earth? (Do we want to live in such a place on Earth?)

Ok, but again, other places exist. Housing is extremely expensive in China too, and they arguably had the opposite problem (building too much).

Why do people want to make housing in investment? Maybe it's because inflation incentivizes people to find safe investments to park their capital?

I submit that artificial currency inflation is not a good thing as economists claim.

>Just look at the 30 year fixed rate mortgages. They're an insane subsidization for homeowners.

Canada is in worse shape, and doesn't have 30 year fixed mortgages (most are 5 years), and you can't write off mortgage interest expenses. In other words, our homeowner incentives are worse, and yet the house crisis is also worse.

That's leaves what you mention off-the-hop: we aren't building enough. But why? Is it a supply or demand problem? My country is starting to believe it's the latter.

i mean 30 year fixed mortgages aren't the only thing. I just pointed it as example. The insane keys to power we've given homeowners to essentially fight back against any kind of building in the form of environmental reviews, and community boards are a much bigger problem. It's all a problem. Most western countries have fallen into the same trap in terms of homeownership.

> The insane keys to power we've given homeowners to essentially fight back against any kind of building in the form of environmental reviews, and community boards

That's right. The states that have the least land-use freedom[0] are some of the worst in terms of housing availability.

[0]: https://www.freedominthe50states.org/land-use

California is even more screwed up with property tax laws which essentially subsidize boomers (who have property taxes locked in based on the value of a home purchased in the 1980s!) to the detriment of anybody buying their first home (who pay tax based on current value).

I live in the Bay Area and know multiple households making well over $250k who rent largely due to the fact that those who bought 10-20 years ago are paying about 1/3 of the property tax of a new buyer today (even setting aside interest rates).

This has been disproven so many times. There’s more vacant homes in the US than homeless people. But homes == money. As someone who is a real estate investor, it’s no secret, we are jacking up the prices. It’s what we do for a living.

> This has been disproven so many times. There’s more vacant homes in the US than homeless people.

It hasn't been disproven. There being more vacant homes than homeless people just means that the market isn't clearing, because the minimum price acceptable to the landlord is higher than the maximum price acceptable to the homeless. This could be from any number of reasons, none of which "disprove" the fact that the laws of supply and demand do in fact apply to housing.

As an analogy, there are always jobless people even when there are vacant positions to fill. Why? Because of a mismatch between the price of labor, which is artificially inflated by minimum wage laws and another hundred laws and regulations that make it costlier to employ someone, and the economic value generated by that labor.

I consider the fact there’s a surplus of housing to disprove the fact that there’s a shortage of housing. Seems obvious to me.

Housing surplus != housing surplus in liveable areas, or at least areas with work

Those houses are also not in places where people want to be. We don't have a nation-wide housing crisis, rather we have a top 20 city housing crisis.

The homes aren't where the jobs are, though.

Who cares if there are vacant homes in downtown Detroit for sale or rent? If you moved there you wouldn't be able to get a job

Well the reverse is also true.

“it’s no secret, we are jacking up the prices. It’s what we do for a living.”

And as with many other ways to make a living at the expense of society - such as fraud, theft, and abuse - it should be illegal.

You could make the case for the opposite:

- there is a housing shortage

- as a society, we should make sure that resources are available for the ones who need it most

- people who earn more money, deliver more value to society (not necessarily true of course, but well, capitalism)

- as a society, houses should be available for the highest earners first

Therefore, everyone should increase prices as much as possible. Until you cannot sell or rent to anyone, then you lower slightly until you can.

Great idea, but incomplete. I think you need to take the logical next step that those that aren’t valuable in terms of earning power should be executed en mass to make commutes of the wealthy more enjoyable. How many people clogging up 101 really need to be alive anyway?

They don't have to be executed; just stash them away someplace where the wealthy can't see them, don't let them leave, and let them basically fend for themselves. Needs a sympathetic name, though... maybe something like "Sanctuary Districts".

So maybe instead of (just) building, make real estate a poor investment? High taxes for more than one home, more difficult eviction procedure and on the other side affordable mortgages for first homes. This way you make them unattractive for investors and more affordable to actual users.

Of course, this could also result in just rents going up, so maybe also put a cap on that?

how would that help if there's no supply?

There isn't enough mention of AirBnB in this discussion.

There are areas where a lot of housing is being built but most of it is is siphoned off the local-resident market by investors who convert them into AirBnB rentals. So now all this housing stock exists, but only to serve tourists, and the locals can neither rent nor buy a place to live.