Raising prices when you only have a tiny portion of the market does not work. People won't buy them when there's another house for less.
Normal landlords don't have effectively infinite money with no forces bearing prices down, nor do they have the capabilities to influence markets. Even tiny percentage shifts can result in significant fluctuations in the prices consumers see. It's a very nuanced and complex system in which these institutional investors have very outsized influence.
Prices are high because we don't build enough houses which is mostly because it's really expensive to build houses, then the houses we have built are all owned by empty nesters and people with 1 - 3 investment properties.
Everything else you're describing is completely ridiculous.
Assuming you're referring to the typical high CoL areas, the shortage has very little to do with the expense of building. The zoning laws don't permit sufficient supply in those areas. And that's quite unlikely to change (at least quickly) because anyone pushing such reform would be obliterating the average Joe's net worth.
Agreed. They will generally build as tall and as dense as they are permitted to because (within reason) it reduces unit cost. Obviously there are limits to that. No one wants to build a high rise in the middle of nowhere.
But within high CoL areas they are generally severely limited on both of those aspects. That's due to zoning laws.
Of course that's not the whole story. Infrastructure has to be upgraded to keep pace with growth. But that's on the local government to plan and execute properly. Right now they largely just say "no".
Right, and that bureaucratic red tape is one of the things that makes the cost of building higher. If the builder expects they won't be able to break ground for two or three years because dealing with the planning commission takes forever, or because they'll have to deal with environmental lawsuits before they can build, then they will need to target higher-end buyers (by building a higher-end property) in order to make a profit. And if they can't do that... right, they simply won't.
Cost of living is high because local incomes are high which increases the price of land and labor which increases the price of building.
Restrictive zoning is bad for lots of reasons, but solving it does not solve affordability.
https://bendbulletin.com/2025/12/13/middle-housing-slowly-de...
Or this:
https://bendyimby.com/2025/06/12/detached-townhomes-come-to-...
And it continues:
https://www.sightline.org/2025/06/04/oregons-zoning-reforms-...
It generally does not drop values, just allows for cheaper options.
That can only be true if you suppose that the current values aren't driven by supply and demand. How do you propose to explain that?
> anyone pushing such reform would be obliterating the average Joe's net worth.
The "crisis" is specifically the high cost of housing. So if whatever you do doesn't lower the price then by definition you've failed to solve the problem.
It's certainly a dichotomy but I don't see how it's false?
> We can easily build twice as much in high cost areas (with the strongest job markets) with little impact on existing home owners.
It's certainly possible to encounter nonlinear behavior. If some aspect has saturated then we might build quite a bit without seeing any substantial price movement. But eventually prices would start to decline.
I'm not sure if "obliterated" is the right word to use, but if making housing affordable means a 20% drop in home prices (which is perhaps not even enough in some places), average Joe existing homeowner is going to run into financial trouble once that happens.
> We can easily build twice as much in high cost areas (with the strongest job markets) with little impact on existing home owners.
If that's the case, then all that new housing will also cost more or less exactly the same as the existing housing stock costs, and the problem will not have been solved yet.
Many people have been sold on the former and will (fairly understandably) act to protect the value of their single largest purchase which often has a large mortgage attached to it.
Sure, if they need to move and sell, the price difference might be less favorable to them, but having to weigh cost vs benefit of moving is a fact of life one way or another.
It's a strange expectation to have that home values should act as an investment that can only ever go up.
Letting that expectation influence policy on making space for living available is one of the root causes of this crisis.
These processes are intentionally labyrinthine
Only in a purely illusory sense. Suppose you have all your net worth tied up in a house. If your house magically vanished, you'd have nothing but your job.
The price of houses falls to $500 and you potentially go bankrupt. Then, you buy a house for $500.
You, personally, are now better off than you were before. Some examples:
---
1. You have $200,000 of equity in a $700,000 house. After the price drop, your net worth in dollars has improved by $300,000. Your net worth in "stuff" has risen dramatically; you kept your job, and now you have 100% of a house instead of having 30% of a house.
2. You have $700,000 of equity in a $700,000 house. After the price drop, your net worth in dollars is down by $699,500. Your net worth in stuff is unchanged. Assuming you always need to live in a house, this will never have any negative impact on you. You retain the option to live in the house you have (which leaves your life unchanged), and you also retain the option to sell your house and use the proceeds to buy another house (and this option looks a lot better than it used to; given the crash in prices, you can probably afford a much nicer house).
3. You have $200,000 of equity in a $700,000 house. You also have $15,000 of "equity" (resale value) in a car that you owe no money on and bought for $50,000. After the price crash, you lose your house and your car, and then you buy another house for $500.
Replacing your car will cost you $50,000. You are in a similar position to the guy in example (1), but $50,000 poorer. So now we ask: was it better to be $500,000 in the hole on your house before, or to be $50,000 in the hole on your car now?
---
There isn't a way for the average Joe not to come out ahead. There is a way for someone else to lose out on the price crash: if you had more than one house before, you lost everything on the houses you weren't living in. But that's got nothing to do with the average Joe.
In the past tense it should be easy to do. Since he is better off, and he has a good view of how he's doing personally, you don't really need to do much. The difficulty is in convincing him that it will be good for him, not that it was good for him.
Compare congestion pricing in NYC, or self-service gas in Oregon.
Also in the case of mass bankruptcy and mortgage failure of the lower middle class I guess there would be risk of bank failure as in 08? That said, I still think the hypothetical illustrates the overall situation quite well.
How?
A drop in the price of houses means it becomes more difficult to exchange houses for non-houses.
If you borrow against your house to obtain something else, and then the price of houses falls, you successfully timed the market. That's all upside for you.
What do you think is the difference between example 3, the guy with a $500,000 mortgage on a $700,000 house, plus a $50,000 car, and example 3', the guy with a $450,000 mortgage and a $50,000 car loan on his house, plus a $50,000 car?
Say I inherit a $700,000 house and, being the kind of guy I am, immediately mortgage it for $500,000. But I stop renting and move in to my new house. Also, I hire a bunch of call girls to live with me in my house. One year later, the price of my house drops to $100,000, and I turn it over to the bank.
I started (the crash) with a $500,000 loan and no way to pay it back other than selling my house. At this point, the faster I realize what's happened and sell my house, the more money I'll be left with. (If I sell immediately, I'll get $200,000!) The longer I postpone selling, the worse off I'll become. (Though since I can live in the house, this trades off against what I would spend on rent.)
I've also spent $500,000 on entertainment and one year's rent. Mostly entertainment. Is this a harm that was dealt to me by the fall in the price of my house?
When the price falls, this forces me to sell the house, locking in a profit of... $500,000. (Which I've already spent.) It could have been $700,000, in theory. This $200k difference in profit vs potential profit can be seen as an effect of the price crash. But that's pretty good for an event that notionally took $600,000 out of the value of my house. Borrowing against the house helped me.
If you want to talk about a negative effect on someone, walk me through the accounting.
+-------------+-----------+---------+---------+-------------+-----------+----------------+---------+
| event | my equity | my cash | my debt | bank equity | bank cash | bank held debt | hookers |
+-------------+-----------+---------+---------+-------------+-----------+----------------+---------+
| baseline | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
+-------------+-----------+---------+---------+-------------+-----------+----------------+---------+
| inherit | 700k | 0 | 0 | 0 | 0 | 0 | 0 |
+-------------+-----------+---------+---------+-------------+-----------+----------------+---------+
| mortgage | 700k | 500k | -500k | 0 | -500k | 500k | 0 |
+-------------+-----------+---------+---------+-------------+-----------+----------------+---------+
| party | 700k | 0 | -500k | 0 | -500k | 500k | 500k |
+-------------+-----------+---------+---------+-------------+-----------+----------------+---------+
| price crash | 100k | 0 | -500k | 0 | -500k | 500k | 500k |
+-------------+-----------+---------+---------+-------------+-----------+----------------+---------+
| bankruptcy | 0 | 0 | 0 | 100k | -500k | 0 | 500k |
+-------------+-----------+---------+---------+-------------+-----------+----------------+---------+
Before the price crash, I had "200k equity"† in that very house, leaving me $500,000 short of a house.
After the price crash, I was deeply underwater on the house. Without bankruptcy, I was still $500,000 short of my house, but only $100,000 short of some other house.
And then, after the bankruptcy, I was $100,000 short of a house.
1. What is the harm that I suffered from the price crash?
2. If the "hookers" column had some other label, would that change the harm that I suffered from the price crash?
† You might note that this is accounted as 700k equity in the table. The table is correct, but that's not how we talk about it. There is probably an error in my earlier comment related to this.
Well I suppose that guy might come out unscathed since many US states protect your primary vehicle in a bankruptcy. But to an approximation declaring bankruptcy involves losing all of your remaining assets. So in that scenario the borrower is on the hook for the cost of replacing those assets (limited by how far underwater they were on the mortgage naturally).
Your other example involved blowing the borrowed money on entertainment in which case I agree that you come out ahead. But that is precisely why I used the term "assets" in GP.
Also I don't think everyone just gets let off scot free after a bankruptcy? Don't you sometimes get stuck with some amount of repayment depending on the nature and volume of your income?
My question about bank failure also still stands. While the impacts of this hypothetical on personal finances are certainly interesting to consider, I'm thinking we really don't want to do the whole widespread mortgage default thing again.
> But to an approximation declaring bankruptcy involves losing all of your remaining assets. So in that scenario the borrower is on the hook for the cost of replacing those assets (limited by how far underwater they were on the mortgage naturally).
If you financed something by borrowing against your house, then it cost less than your house, and when you have to replace it, the cost will be less than the cost of buying a house at the original prices. This is the "you lose your house and your car" example. Losing your mortgaged house and your owned-free-and-clear car is good when buying a replacement house+car costs less than the mortgage on your house.
What if house prices fall into the sweet spot where (1) your mortgage is underwater; and (2) a new house + new "assets" exceed the value of your mortgage? (But don't exceed the original value of your house.)
It could be that those assets don't generate income. In this case, they are isomorphic to the hookers in the example.
If they do generate income, then you might save money by keeping your house at its inflated pre-crash price, and you'll make those pre-crash loan payments using the income stream generated by the assets. Here you have a loan that is nominally against your house but actually against your business. It's underwater when considered as a mortgage, but it's not underwater when considered as a business loan, so you'll keep paying it. Your bank will be fine with this. (Both in the sense that they won't object, and also in the sense that they won't suffer financial hardship.) You'll probably have to recollateralize the loan.
(Or your assets might generate income, but not enough income that you'd save money by keeping your original mortgage. In this case it's straightforward that you're better off losing the original house, losing the original assets, buying a new house, and then not buying new assets.)
I get why people like telling stories like this: it suggests there's a single boogeyman that can be dispelled to solve the affordability problem without painstakingly goring people's oxes state-by-state and municipality-by-municipality. But it's a fantasy.
If you can tell this story in simple step-by-step form, you will. I think you could tell a story about how a large corporate buyer clears out all the marginal buyers for some thin market like an individual subdivision or tranche of new construction housing in the Sun Belt. But I don't think you can tell a realistic story for them being "a huge driving force in setting and manipulating prices" across the whole market. I look forward to seeing your attempt, though.
They behave accordingly. The do things that they can, and because those things are relatively new, it's a type of information asymmetry and policy / good intentions / competence arbitrage that we haven't had to cope with before.
You might end up banning certain types of institutional participation in the housing market, because there's no way to protect against the negative consequences that doesn't have even worse consequences for either the participants or the population at large.
It'll probably have to be arbitrary, and the cost will be a bunch of firms no longer get the opportunity to make a bunch of money by leveraging their resources in that way.
And we see the influence and impact constantly, with outlandish asking prices being immediately met by institutions that have decided they want a particular property in a particular region. Or house prices being set to an outlandish level with no reduction in price over months and months on the market, because they can afford to sit and wait for the market to change. And if they can afford to do that, then all of a sudden they've got an incentive to drive prices up in that region, because local and state governments, banks, and realtors tend to use the same basic rubric to evaluate price. If a lower valued area sees home prices go up, properties in the higher valued area will be raised accordingly. There's no secret quant voodoo, it's just using a level of liquidity and staying power not accessible to non-institutional homeowners.
Supply and demand normally influence pricing feedback at much more granular levels which benefits individuals, and our policy and regulation and evaluation models are largely built around those assumptions. Without the negative feedback driving prices down, bad things happen for consumers, good things happen for those who already have lots of money and property.
Because if I saw a house 15% below market where I live, I would buy it (to live in). I don’t imagine I’m the only one. Institutional investors can’t stop me from doing that if it’s offered - can they stop the seller from offering that?
There's not enough houses on the market (zoning, and people want to keep their low-rate mortgages), there's people worried they can't afford houses (prices inflated faster than wages, rates went up), and a large amount of housing transactions (someone quoted 29% of starter homes) are being paid for by institutional investors (who can pay cash).
Wouldn't these institutional investors buying houses be "marginal consumers", kind of like the marginal producers who set the price of inelastic commodities such as oil? Seems like 29% of transactions is even more than marginal.
I assume that sellers would need to come down in price to what non-institutional buyers could afford if institutional buyers were removed from the equation.
As an aside, I'd rather see supply increased, but maybe demographics over the next decade or two will fix that problem anyways.
To be clear, I don’t think institutional real state investment is a substantial part of the reason housing prices are so high. I’m just trying to push whatever argument they were thinking of toward something quantifiable.
The main contributor to the price here is financialization. The more money the average buyer can raise for one of the scarce things, the more they cost. Nobody wins from this except the banks, so perhaps it should be more regulated.
Building regulations are also a problem. Legalize whatever you feel is the minimum safety standard of homeless encampment or slum, and watch house prices crash overnight, since prices are set at the margins and a lot of people (including me) would be happy to find a way to work with simple concrete box if it was cheap and secure, but it's not legal to build those.
Yes, you still need to solve the problem with 'money', or more accurately a tax. That tax is based on the assessed land value using market knowledge, but it would ideally be set to drive down the price of land to zero. However since we don't live in a world of spherical cow, tax would be set below that ideal to avoid land abandonment.
This is not even new by the way. The crisis we face is the same as in the 19th century when Land Value Tax and Georgism was proposed.
The Netherlands and Tokyo beg to differ.
I can buy a house tomorrow and hold it vacant off the market at a listing price 3x its value. I will have zero impact on the housing market. You may be conflating the listing price of an asset with the clearing price of that same asset. You can, obviously, build up inventory to manipulate prices. To do that, you have to be able to generate scarcity, which is exactly what corporate investors aren't doing.
You've just given me 6 more paragraphs about the control you think they have, and you still haven't told a simple 1-2-3 story about how they're using a microscopic footprint in the total housing market to distort prices.
You have to do better than "supply and demand normally influence pricing feedback at much more granular levels". In the context of your original claim, of them being "a huge driving force in setting and manipulating prices", you need to explain how that would actually work, and not rely on handwaving.
> To do that, you have to be able to generate scarcity, which is exactly what corporate investors aren't doing.
But they did. When inventory was low and then zero percent rates where available, they bought everything they could and drove prices up and created an appreciation bubble. I don’t think they have some other dark patterns for manipulating the market but they had access to a lot of basically free cash. Inventory of houses for sale is a tiny portion of the total market and they could and did contribute to driving prices up. But so did everyone that had the opportunity and inclination to do so, and why not when money is free leverage the shit out of it in an asset class that will generally appreciate without much risk.
I don’t know what ever came of that now that rates have increased. Are they still holding those homes? Did they sell them after driving prices up? (But not fast enough to make prices go down again obviously). Are they landlords now? Etc.
The market is still reeling from that economic situation that created this. Prices may eventually float down but no seller is eager for that so it’s a bit sticky.
My claim would be that in any any of the top 10 markets by transaction volume (just to pick a handy metric out of the sky; you could choose others), corporate investors are literally a nonfactor.
They can also target just specific areas of specific major metros and there are ripples throughout the entire market.
The housing “market” does work the same as the stock or commodity markets. People aren’t buying an intangible share. They’re buying this specific and unique house and if they’re told “we just got a cash offer for $50k over ask”, they may be tempted to beat it. That doesn’t happen when people buy AAPL. The shares are fungible.
There’s only empirical evidence of their buying activity. We’ll never know how many deals they bid the price up on but didn’t buy. This auction like quality is evident in any market like this; watch Storage Wars and one disinterested buyer will bid up the price just to fuck with his competing bidders.
You can't "just bid". A bid is a contract. If you back out, you'll lose your earnest money.
There’s a lot going on between making an offer and losing earnest money.
I’m selling a house right now that’s in bad shape so getting lowball offers. They don’t even submit an offer, they text me or call me and tell me what price they would offer. They don’t want to do the paperwork for something I’m just going to ignore. Yet, if it turns into 2 or more people floating numbers I like I will tell them to write it up then I will tell them there’s another offer and try to get them to go higher. All that is before I accept there offer and earnest money is put down after that. So the bidding war is over by that time.
Even if earnest money did work how you describe, it would tie up a few thousand dollars per property for a few days max then be returned and redeployed on another property. These companies have deep enough pockets to fund that. There earnest money only ever enters the picture of their offer is accepted.
Where did this occur? Is this substantiated?
Googles AI overview of my search for “ covid era corporate home purchases”, also plenty of substantiating references in those search results;
> Corporate home purchases surged during the COVID-19 pandemic, driven by factors like low mortgage rates and increased demand for single-family homes. While this trend has plateaued since the peak, investor activity remains above pre-pandemic levels and has sparked significant public debate and legislative action.
A tidbit from an article indicates they doubled their prior investment activity. Probably more than double because investors bought homes increased and their share of that metric doubled.
> Prior to the pandemic, mega investors averaged about 7% of overall investor purchases and their share increased to 14% during the pandemic — it has now slowed
I do not think it's unreasonable to request a single example, statistic, or attributable fact.
What? Cash is never ever free. If it's your Scrooge McDuck cash vault, you're losing money by not investing it. If you borrow it, you're paying interest on it.
https://romanroyce.com/wp-content/uploads/2022/02/ScroogeMcD...
It's just land ownership isn't being taxed properly, no matter who owns the land. We homeowners get a free lunch from economic growth and price appreciation of real estate while penalizing capital investment.
The solution is simple if not necessarily easy to implement. Tax land and at a high enough rate, and exclude building and improvements. We'll reap bigger benefits if we reduce taxes on income and capital and eventually phase it out.
Some people do that, but they aren't good businessmen. Vacant houses lose money at a prodigious rate.
Many vacant homes in the SF bay have been that way for years and have appreciated tremendously.
Mant would perfectly prefer buying poorly maintained boomer stock, holding for roughly forever (in ideal markets, like the distorted California/Prop13) and leveraging it like a brick of gold. Actually having someone live in it doesn’t outweigh the risk of managing pesky tenants esp. when the houses are appreciating 500k over 5 years.
Having deep pockets simply means that you lose a lot more money when following money-losing strategies.
Most of these schemes are hare-brained because they do not take into account the time value of money nor the costs of having vacant investments that are not generating revenue.
The way businesses make money is by buying an asset and then immediately putting that asset to work generating revenue.
Institutional investors own ~3% of single-family rentals nationally. But per CoreLogic they're 29% of purchases in the starter home tier. That's the market where we first-time buyers actually compete.
In some metros it's more concentrated.
Atlanta: ~30% of single-family rentals corporate-owned.
Charlotte neighborhoods in 2022: 50%!!! of sales to institutional buyers.
So for your 1-2-3... maybe something like?
1. Institutional buyers concentrate in starter homes where they're 29% of transactions, not 3% of stock
2. Target metros/neighborhoods go higher still
3. Real estate uses comps-based pricing - their winning bids propagate to surrounding valuations
The mechanism isn't inventory control, it's just a buyer with a different utility function (rental yield vs owner-occupancy) systematically outbidding price-sensitive first-time buyers. In a thick market that gets arbitraged away. In a thin market with sparse comps, each transaction is a price-setting event.
The St. Louis Fed found institutional presence specifically increases price-to-income ratios in the bottom tier.
If you're evil corporate Landlordman You don't need to affect the whole market. You just need to cut off the bottom rung of the ladder.
Is this Trump move the right one? No frickin idea! But I do think we need to reckon with what's actually happening to first-time homebuyers. I bought a place in Englewood Co last year and ... it was pretty rough.
* They impact listing prices but not necessarily clearing prices.
* They assume all the sellers, who are not corporate investors, can mechanically anchor off those inflated comps, without factoring in buyer budgets and carrying costs.
Real estate is slower than most financial products, but it's still an actual market. You can't just buy a tiny fraction of the inventory at an inflated price and assume the whole rest of the market will follow you.
The timing and pricing of investor selling is different to residents selling.
Residents sell (mostly) for reasons other than profit. They might be moving up, or moving away, or whatever. There's some pressure to "get it done" so they can move on. They can't really afford to "time" the market.
For investors there's much more "buy in the down, sell in the up". Except that it's been going up for a while, so there's no motivation to sell at all. It would be uncommon for them to accept a loss. Even unoccupied it's (mostly) better to hold rather than sell at a loss.
As mentioned elsewhere, overall market penetration by investors differs wildly by market, and segment. So 3% overall might sound low, but 20% of a dwelling type in a specific market is plenty to alter market forces.
I say this as someone who has owned property as an individual, and also worked in a business that invested in property.
There's a huge motivation - the time value of money. And all the costs of having the house sit there not earning money.
An $800,000 house costs you $150/day in lost income.
In most markets I'm guessing an 800k house is at the higher end of the market.
That aside, housing portfolios always plan for a certain amount of unoccupied space. It's built into the model. (That's partly why small investors who own 1 or 2 properties get hit harder by this.)
Equally, even if the house is empty, there's usually some capital gain going on.
Investing in property is a long-term investment. The cost of buying, or selling is very high. So it's about getting quality units, in the right market space, and then leveraging that for a decade or more.
Yes there are lemons. And yes they'll get sold, perhaps at a loss. But being unoccupied for a bit doesn't make it a lemon, and being unoccupied won't necessarily trigger a sale.
Institutional investors are much more experienced and thus also a lot more likely to not buy lemons in the first place. Most "mom and dad with a second property" investors either inherited a place, kept an earlier property they lived in, or bought another property in their own neighborhood. They're typically gonna make some mistakes along the way.
I'm not saying comps magically anchor prices. I'm saying institutional buyers ARE the clearing prices, because they are anchored to "how much can I rent this out for" whereas first-time homebuyers are anchored to "how much can my mortgage cover?" which are different questions.
29% of transactions, not 3% of stock.
Those become the comps. There's less of a gap for "but buyers won't pay that" because the institutions *are the buyers. The call is coming from inside the housing market.
Now this only really works in constrained markets, but intrinsically there's always a time constraints in buying (our lifetime of course, but also life events and lease renewals and er ). There's of course also selection constraints because of the aforementioned time constraints, and location, and whether new construction in happening within those.
Saying "they impact listing prices but not necessarily clearing prices." might be logically consistent, but is disconnected from the reality of the housing market.
If you're big enough, you can cause prices to ripple, get others to lose rationality and buy in on the ascent as you cash out and leave everyone else holding the bag for the crash.
It depends on the swing of the market if it's a buyers or sellers market.
In the past there was far more spread in housing prices. These days real estate agents tend to follow a few market making sources for setting those prices, along with personal home sellers looking at 'internet prices'.
>inventory at an inflated price and assume the whole rest of the market will follow you.
When you target particular areas you absolutely can.
The average 21+ US resident may own 2+ properties but I'd be surprised if the median equivalent owns 1. It kinda hides the equivalent of the top x% of individuals owns y% of the stock market where y is unreasonably disproportionate to most.
Not true. That 29% is “investors”. Only one fifth of those transactions are from “institutional investors”. It’s mostly evil non-institutional investors, who also own ~97% of single-family rentals.
No homes for sale. Rent only.
Stuff like that is becoming a big problem.
This is a recurring theme k see among both right wing and left wing people when it comes to looking at single family homes.
How does it matter whether "a lot of people don't consider" something if there are no laws or enforcement actions that make their opinions actually effective in the world?
How do you come to that conclusion? The people who show up to local planning meetings are clearly very effective at enacting their opinions in the world, and local planning is the place where a tiny number, perhaps 3-5 people, can drastically change the results for an entire area.
1) Local planning decisions are not made on the basis of democratic votes, they are political decisions made by a tiny number of people that are highly susceptible to influence. In particular, money and local political power has a huge effect on who gets elected, who is paying attention to what happens, and who benefits. There's very little attention paid to these matters except those with highly conflicted interests, which means that highly conflicted decisions are the most common outcome. Which leads to suboptimal results over longer periods of time, as happens in any system that appears to be democratic but is actually corrupt.
2) Even in democracy, one bloc deciding that another bloc's interests can be ignored and don't matter to the functioning of government is an extremely toxic environment which results in awful outcomes. I view any system where there are second-class citizens as a fundamentally un-American idea and counter to the goals of our nation. Those who wish to exclude an entire economic class from their community are trying to create precisely that sort of second-class citizen.
However, I do not think there is any reason to require that all voters respect the interest of all other voters, and any system that is predicated on such respect is doomed to fail in worse ways than the one we have.
Democracy is hard work. Good things don't happen by just casting votes. There are almost always other interests at work that are likely to conflict with your own. You can't wish this away, you have to do the work.
The one thing I will say that I think is actually blatantly corrupt is when planning meetings are held at times or in locations that make it challenging or impossible for the people most likely to be renting to attend. And this really does happen, far too much. In spite of this, I think that focusing on the attitude of the voters who oppose the interests of renters is a mistake, and that one should focus on how to fix the process.
But either way this has nothing at all to do with housing affordability.
Uh, no, don't equivocate "forced rent" with "renters". That's bad faith.
When we constantly read stories about people not being able to afford homes today, it’s all driven by pure supply and demand. When a firehose of money gets aimed at any aspect of the economy everything gets more expensive.
This is from institutional investors. Sometimes it’s government when we are talking about the price of education or healthcare for example.
It also lowers the demand (it increases the supply of an alternative).
Instead, now they’ve created a slight reduction in demand for houses to buy by offering a housing alternative that didn’t exist before.
Sure, you can absolutely make the argument that for some specific region there are too many rental properties and not enough owner-occupied properties, by looking at the supply, demand, and pricing for each type in that region.
But you absolutely can't say that as a general statement. There is demand for both sorts of housing.
this is an impossible burden of proof. requiring a perfectly schematic, end-to-end causal story before acknowledging harm is a convenient way to dismiss any structural concern.
pointing out that housing markets are complex doesn’t invalidate localized, repeatable effects or concentrated power. that just raises the bar of explanation until lived outcomes are dismissed as “just-so stories”, which matches the tone of your condescension.
There is no narrative coherence to be found demanding the living honor social debts, contracts of history; yes children believe these successes you never witnessed happened! That surely cannot be used for ill gains.
This smells more like self selection bias. You have been successful and thus prefer care be taken tidying up systemic issues created by our ledger.
Am a Thomas Jefferson fan when it comes to generational churn; the only constant political rule should be to rewrite things every couple decades or the living end up ruled by fiat decree of the dead.
There's no reason to believe that someone owning a tiny portion of the houses is setting the market price.
> they are huge institutions with tons of money, and thus can hold houses longer, buy houses are higher prices, influence related markets, etc.
No huge institution is willing to lose enormous sums of money waiting for vacant overpriced houses to sell.
I've lived in many houses. One was in a development, and I wanted to sell it. There were several houses in it that were vacant and for sale with no offers in the previous year. I sold mine in 3 weeks. It was simple - I priced it properly, and I didn't have to pay another year of taxes, insurance, repairs, maintenance, and worry, only to have to lower the price anyway to get rid of it. A couple of the other homeowners were angry with me about that, but that was their problem.
Also these institutions would be buying houses in high demand areas.
I think you just explained partly the reason behind why a small number of owners can drive the prices up. But these are usually private owners. Whenever I see bank sales, they're more like flash sale and done.
Those who can afford to sit on the property trying to obtain a higher price will do it. Other owners will look at that and try to keep the price high with the illusory hope that they can also make that much money. Individual owners can suffer from FOMO and are influenced by success stories, so ask a high price hoping to capture as much of the value as possible.
I saw it in action when I bought my house. The seller saw his neighbor selling the house a year earlier for [princely sum] so he jumped to put his house on the market for [princely sum +20%]. The whole neighborhood was following the same playbook, looking at who sold and raising the bar. After a year with that house on the market I became interested and in a 6 month process I ended up buying the house for [princely sum -20%].
None of the neighbors know how much he got, only know how much he asked. A similar house 50m away is still up for sale for even higher price than than the listed price for mine. They can afford to sit on it for a while because the extra money they hope for covers the taxes and upkeep tenfold or more.
At least where I live, real estate sales are public and you can easily find the sale price at the county assessor's website.
I could afford to sit on it, but I try not to be stupid with investments.
I am surrounded by people who sat on houses for a decade only to triple their money after inflation adjustment when they sold. We're talking 7 figure profits. Trying to sound smarter than everyone else sometimes backfires.
Topics like this are hard on HN because a lot of commenters hold a deep, passionate hatred of something: Wall Street, Big Tech, OSes they don't use, even the concept of private automobile ownership. Once they descend upon a thread they're not interested in facts, they just want to tell stories that support their villain narratives. When it starts to get illogical they don't want to back down because doing so feels like an attack on their deep-seated beliefs.
There are some completely illogical economic theories being pushed all through this comment section. It's kind of fascinating to see how bad some of them are. Someone tried to argue with me that cars could be produced for a couple thousand dollars if not for all the regulatory overhead we impose on them in the US. It's almost hard to fathom how someone could believe that without stopping for a moment to wonder why no other country is building these $2000 full featured automobiles without these supposed regulations that increase the price by an order of magnitude.
I agree with your broader point though.
The real price in 2017 was $3400, which is $4500 in today's dollars.
The safety ratings and crash test results were also dire.
We don't need to explain how they do it. We KNOW private equity is expecting to make profit from their investment in residential real estate. That profit ultimately comes from people in houses, making them less affordable.
We most certainly do. PE owns pools of rental housing; this is a fundamentally different model from speculation. While both impact the selling price they do it in completely different ways, and if institutional investors own a tiny fraction of the total stock, they're not having a huge impact on the supply side which would potentially drive up prices.
You're supposed "logic" seems comparable to magic.
Housing affordability is inherently unpopular with voters.
> If they intend to purchase properties, it benefits them to depress pricing in the area
Yeah, that’s true of everyone but how would a bank/individual do that? By selling… But if they sell while they’re depressing prices, they lose money!
> Normal landlords don't have effectively infinite money with no forces bearing prices down
Neither do banks. They have quarterly earnings, tax bills, they need to buy more stock, cost of capital etc etc.
> It's a very nuanced and complex system in which these institutional investors have very outsized influence.
Just saying ‘it’s complex’ is trivially true. But, supply and demand isn’t some small factor in that calculation - it’s an iron law that exerts itself at all times.
If a bank wants to ‘manipulate prices’ then, without a monopoly, the only way to do that is to dump or buy. But if you buy up homes to ‘push up prices’ … then you end up with a bunch of homes which you paid more than their current value. Not a great business.
The person who has the real unfair advantage in the US happens to also be the most sympathetic person - the owner occupier.
Earlier you were arguing that investors were acting as marketmakers and now you say this. Marketmakers make their profit from the difference between buying and selling some asset. They don't want to hold prices, they want turnover. If investors really are acting as marketmakers it's actually a good thing because marketmakers have the effect of adding liquidity to a market.
You just haven't presented any evidence or even a hypothetical where this does or could happen.
There are many houses in the US. Not all of them are for sale. There's a difference between having a "tiny portion of the market" when you define "the market" as all houses in the US, and "tiny portion of the market" when you define "the market" as the houses that are actively being bought and sold. I would not be surprised if corporate involvement was a significantly higher proportion of the latter rather than the former.
It takes a lot less to put your thumb on the scale of the "liquid" portion of a stock if it is significantly smaller in size than the total stock.
In this way houses are virtually unique in terms of financial vehicles and it introduces all manner of complexity and otherwise strange forces into the market. You can't simply treat it like any other commodified asset.
In some dense urban areas, up to 10% of the local residential properties are owned by funds or investors. There's also overlap with investment networks where you're not getting to BlackRock levels, but you'll have a web of companies with mutual interests and a network of private debt and collateral, and these make up around 20% of the whole. For the most part, though, the majority of single family homes are not institutional. Even multi-family units, apartment complexes, and other rental properties are only in the ~10% range of institutional ownership, with the remainder owned by individuals, mom&pops, and small investment networks.
The conjunction of capabilities and incentives in combination with a huge buffer of wealth allows institutional investors to manipulate things in ways that aren't healthy for private home ownership, and the downstream social and economic impacts of being forced to rent, or hold debt that's not properly reflective of the value of the property.
We should impose reasonable policies that serve the interests of the people, and not simply maximize wealth building at the expense of citizens and families that would benefit from home ownership.
They're going to skyrocket in a seemingly irrational way. But it's completely rational. The reason is that they're a finite resource that is needed, and so there is very minimal price elasticity. People will pay as low as they can, but simultaneously must have oil and so have a practically uncapped price ceiling if that's all that's available. The same is true of housing.
You're right that people won't, generally speaking, buy a house for $100 when there's another one for sale for $80. But what you've done there is greatly increase the demand for that $80 house, which is now going to naturally send its price upwards.
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Finally there's the issue that figures on the percent of homes that are owned by investment groups are misleading, because they aren't just buying homes randomly. They're going to pick up lots of houses in precise areas, and so the impact on prohibiting this behavior will be dramatic in these areas.
Having lived through the various oil crises, I can confidently assert that there's a great deal of demand elasticity.
For example, when the 70s oil crisis hit, people stopped driving to the store for a loaf of bread, but would shop weekly instead. For another, people buy more fuel efficient cars when gas prices are high. For a third, people switch to electric cars.
There are regular major disruptions in the flow of oil. Pump prices change on a daily basis, and that results in the amount of gas available == number of gallons customers pay for. No gluts and no shortages.
When enough institutional investors are all doing that same thing, the market suppply becomes restricted, especially in focused regional areas. It ends up indistinguishable from collusionary antitrust, though there's no actual communicated collusion so it's not technically illegal. In a normal situation like that, all it takes is a single participant to cave and drops prices to take advantage of the demand. But in this case the institutional investors can keep taking the losses indefinitely so no one ever feels the need or benefit to "break" first, and they can maintain it forever.
Dropping the price of a house by a few percentage points can be the make-or-break for some families. And small changes in availability can have large impacts on price.
If we banned (or severely penalized) all entities from owning more than 5 residential homes, this would probably reduce cost by a few percentage points across the board. That's thousands of dollars.
Personally, I think unoccupied homes in general ought to be penalized (beyond just tax burden, an actual vacancy tax).
> home improvements, which means remodeling your home or doing other perhaps large pieces of upkeep will not trigger a property tax increase as it does today
What WILL change your property tax is an addition or similar that makes your house go from X (same as everyone around you) to 1.2X or similar, then you'll proportionally pay more tax.
(It varies by district, but most USA property taxes are calculated by figuring out the budget for the city/county/school district, and dividing it proportionally amongst the valuations of properties/houses. This is often displayed as a percentage of the value, but it is not a percentage TAX - as if everyone's property doubles overnight but the budget remains the same, the property tax dollar amounts would remain the same while the percentage reported goes down.)
But if the improvements on your house makes the neighborhood more desirable and your neighbor's house sell for a higher price then your locality expects, then your house will be assessed at a higher value the next time the locality does their assessments, which means higher taxes.
Of course, improvements to your home that increase a sale value will affect the taxes, but the buyer has to deal with that.
Do some localities assess homes individually every so often? I wonder...
A roof replacement isn’t really an improvement so much as expensive maintenance.
As is done in the UK
https://www.gov.uk/council-tax/second-homes-and-empty-proper...
If you buy 60% of the properties on market, the rest will see this and adjust their own prices. Usually this only works when the macro is favourable (low interest rates, easy mortgage applications, etc.), but it is definitely a large factor. It sometimes creates a even hotter market, with people thinking that real estate goes up forever, then they sell.
You're right that it's not always large investment groups. Vancouver in Canada had the same thing happen, but mostly from foreign investors and criminals washing money. The latter was facilitated by politicians who cashed in big on this.
https://papersourceonline.com/wall-street-has-spent-billions...
https://www.kut.org/texasstandard/2022-06-14/texas-home-sale...
As others have pointed out housing markets are illiquid and tend to have a limited set of sellers at any given time such that the race-to-the-bottom doesn’t happen very often.
Rather, an institutional investor buys high on houses in desired neighborhoods then charge high rents on their portfolio. Subsequent sellers in the same neighborhood see the high closing price and ask for even more.
Does no one remember “drive til you qualify”?