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Comment by flimsypremise | Hacker News Reader

In NYC I can tell you that the metropolitan area lost about 500,000 people since 2020, added ~20-30k housing units per year in that same time. The vacancy rate somehow dropped dramatically despite this and rents also rose dramatically. I've yet to see any good explanation for this, yet you'll still see people advocate for building more housing as the solution.

Simply using the rental vacancy rate as a proxy for supply and demand does not work, since there are lots of factors that can affect vacancies. One of then, as outlined in the article, is landlords keep units off the market to drive up prices.

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The explanation is that there isn't enough housing to meet demand. That's it. Until there is, prices will keep going up even when building more units.

Landlords wouldn't be buying up a ton of units and renting them out at a profit if there was a glut of inventory, because it would be a terrible investment.

Or, accounting and tax law makes it less painful to keep units vacant than reprice them at lower rents.

Which is a thing we could change via something like Vancouver's vacancy tax.

Make it more in landlords' interest to reprice units lower, if the market has excess inventory.

The market will dictate lower prices if there's excess inventory. If landlords are hoarding units and keeping them empty instead of lowering rental prices, that indicates a lack of available inventory.

That's not how repricing works.

If a landlord is unable to rent a unit at a desired price, because the rental market has moved lower, then they have two options.

They can decrease the price.

Or they can not offer the unit for rent (or continue listing it at the higher price).

The second option's cost to landlords is largely defined by accounting/tax rules, in regards to how painful the vacancy will be to them.

Thus, vacancy can be made more or less painful by changing accounting/tax rules.

I'm not talking about repricing specifically? I'm talking about how differently the housing market would behave if there was enough housing to go around.

Landlords have a 3rd option: They can sell the unit, because their unit no longer commands high prices due to housing supply meeting demand, and their capital is best used elsewhere.

If they are underwater and cannot sell above break-even, their bank will eventually do it for them.

As a commercial property, both their loan and sale price are contingent on the rental price.

So again, a disincentive to ever decrease rent (and thus demonstrate the market is softer and therefore you property is worth less).

Versus claiming it still commands higher rent (and is temporarily unrented) and thus more valuable.

What you're saying is true because the market is severely distorted, and a very large part of that is due to zoning restrictions. Zoning restrictions are severely constraining supply, and enabling those with capital to hoard property as an investment vehicle, rather than use it to buy a basic necessity. This scarcity allows landlords to keep a property empty rather than sell or rent at a lower rate, which would not be possible if buyers/renters had ample choice.

Not all rental properties are bought using a commercial loan, many are simply conventional loans where the owner decided to rent out their property rather than sell it. At least in the US, properties purchased with conventional loans can be rented out after the owner has lived in them after a few years. No commercial loan required.

The tax/accounting schemes you mentioned earlier would simply distort the market further without addressing the root problem: There's not enough housing for people that want it. Relaxing zoning rules would allow more housing to be built, and if there was enough of it, it would cease to be an "investment" rather than what they were built to be in the first place: Homes.

As a concrete example, I live in the SFBAY which has an extreme housing shortage. Yet my house is built on an unnecessarily big lot (required via zoning) and any structure built on it cannot be more than 27 feet tall. These are the kinds of rules that are severely distorting the market. I can't build a fourplex on the lot if I wanted to even if I have the space for it, and the demand is there. My next best option is to rent it out for way more than I otherwise could if there was a bunch more housing (Selling isn't really an option either because my mortgage rate is lower than what I could get in a HYSA; I'm basically being paid to borrow an appreciating asset).

All wholeheartedly agreed, but why shoot one arrow when you can shoot a whole quiver?

In addition to mandating upzoning (without allowing local municipalities to overrule or delay), increasing the cost of hoarding property without use would also help, by incentivizing selling or lowering rents.

And because it would be a punitive tax (primary good created simply by existing), there's no reason you couldn't roll the proceeds into programs to facilitate densification. E.g. tax credits for rebuilding existing properties with more units

> The second option's cost to landlords is largely defined by accounting/tax rules

The cost is having empty properties, which require insurance, maintenance costs, property taxes, likely mortgages of their own to pay, all of which cost money and which are by far the biggest costs to letting things sit unused.

And the fact in this case is there simply isn’t all these mythical properties sitting unused; simply look at current housing and rental stats.

This meme has got to go: there is little if any evidence to suggest that markets are functioning either in the specific case of housing in high COL areas in the United States or frankly most times anyone trots out the Milton Friedman trope on HN.

Markets fail, they get captured, they get distorted by accounting treatments, they generate cartels. They get technologically disrupted by new forms of cartel pricing that blow past existing regulations(e.g. TFA).

Capitalism sounds dope, I hope I live to see it. But the idea that supply and demand in the Econ 101 formulation is anything to do with the lot of say a person renting a flat in 2024 is silly and borders on insulting.

It's really unclear to me why you think this is the case. The median cost of a house in the Chicagoland suburb I live in is north of $470k, and that's not because of technological disruption or cartel pricing, but rather because we've outlawed anything but single-family housing on lots, something we did deliberately back in 1923 and 1947 with the express purpose of preserving and increasing home values for people who lived there at the time and keeping Black families out.

"Markets" didn't "fail" or "get captured" and no hedge fund engineered this situation; people who lived here voted for this outcome.

I didn’t make my point either clearly or well and your scrutiny is merited.

I also know nothing about living or real estate in Chicago, which is by any measure a “high COL” area. I meant “the Bay and NYC” which I know a little better.

The phenomenon you describe is real in those two places: home owners try to restrict high-density construction, presumably to artificially limit supply. This seems to be more effective in Palo Alto than in Downtown Brooklyn, where high rise condo buildings go up practically every other week despite lobbying, but the effect is conspicuous in either case.

NYC is the more striking case by pick your study of available housing going up in a year, flat seekers trending steady or down, and prices spiking all at once.

But even in your given example: a homeowner pulling some NIMBY kick flip to fuck with black people or line their own pockets or both is by any measure a “market participant”. Manipulating the situation via side-channel to prevent actual functioning markets is what I was talking about whether one is BlackRock or the representative of a podunk HOA.

The meme that needs to die is that markets work absent referees that make rent-seeking unprofitable. This forum is hosted by an enterprise that began with the noblest of intentions and is now by far the most dangerous clique of insiders to get on the wrong side of in this line of work. It’s a selling point that on BookFace, your first several hundred SaaS customers are in the bag. Far from tearing down credentialism and old boys clubs, which is a grand vision requiring a grand strategy, it turns out that the end state was to stuff a monumental vision into a tiny, tinker-toy strategy as old as clay tablets: reshuffle the local oligarchy in my favor.

I hear all the time that “it’s not what you know, it’s who you know” in the same breath as some faux-Reaganism: “government isn’t the solution to our problems, government is the problem”.

The former sounds like how to get a decent pair of shoes in East Berlin in the 1970s, the latter sounds like someone who is on the take.

Capitalism sounds dope: I hope I live to see it.

There is never enough housing to meet demand. Once people have housing they breed, that drives up the population and housing prices once more: only now the world is more crowded and shittier. Without habitat control, it will always be this way.

A lot of native New Yorkers live with a lot of family members or roommates, and these are the types of people who are most likely the move out. Meanwhile, the most likely people to move into New York are well paid young professionals who can afford more space.

> In NYC I can tell you that the metropolitan area lost about 500,000 people since 2020, added ~20-30k housing units per year in that same time. The vacancy rate somehow dropped dramatically despite this and rents also rose dramatically. I've >yet to see any good explanation for this

Taking these numbers as given, the obvious explanation is latent demand. A lot of people who used to live five to a 900 sqft. New York apartment are now living 2 or 3 to an apartment instead. Probably the rent dipped briefly before soaring, yeah? People took advantage, and when leases are up, many of those people will presumably consolidate back with their families.

Very similar to the concept of "induced demand" (which is also really latent demand) with regards to highways. Build new lanes, people who were unwilling to drive before use the lanes, traffic delays stay the same (but with higher throughput, and therefore still a net positive, even if the money would've been better spent on trains).

Landlords are not keeping units off the market to drive up prices. There are no landlords who have the pricing power to make that work. There is no landlord that can keep 10% of his inventory off the market to drive up rental prices 11%.

There is, however, in any market a small number of big players, all politically connected, who will conspire against newcomers building new units. A couple years ago stories about that "historic laundromat" in SF were making the rounds, that is very typical.

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