International investment and local rules push prices up faster than supply
news.mccombs.utexas.edu
news.mccombs.utexas.edu
When you add in an unstable environment at home, this mentality leads to foreign real estate being perceived as the ultimate asset. It's perception rather than reality because foreign real estate is not exactly a good investment, especially if non-resident: it's illiquid, highly taxed, requires insurance, is easy to confiscate, etc.
> “In San Francisco, demand is reflected in increased prices,” she says. “In Charlotte, demand is reflected in increased quantities.”
> “A big takeaway is that cities are in control of a big portion of their supply sensitivity,” Gorback says. “It’s cities that control zoning. It’s cities that control permitting. The real keeper of the keys are the municipalities.”
https://www.pacificresearch.org/time-to-ask-why-so-many-san-...
Strangely enough, if housing got built in response to price increases, there would likely be less unused housing, because it would be seen less as a way to store capital.
That doesn't make sense as stated, because every physical commodity is supply-constrained to some extent, even and especially the ones that are extremely bad stores of value. Picking on Fermium (it has a nice atomic number) - Fermium is supply constrained and it makes a horrible store of value because it rapidly morphs into something else.
Gold is a well-liked store of value because it is absurdly stable (about as close as we can practically get to indestructible) and roughly the easiest to physically store out of all the durable candidates.
This is because the store of value quickly becomes a millstone around the owner's neck if it isnt being used efficiently. That's a feature if you want a healthy city and a bug if you're one of the ultra wealthy.
The UK is a bit like San Francisco in this respect. There are no property taxes, just something called a council tax (which is basically a poll tax) and "stamp duty" which is levied only on property transactions.
The latter is particularly toxic because it actively encourages property hoarding.
This is why London is an alpha world+ city which can't build up to save its life.
By giving the public any say at all, they push and push until they have restricted growth. It's far better for everyone to not ask anyone but the owner of the property how tall they want to build.
Basically, if we quit creating the housing problem with zoning restrictions, you wouldn't see housing sit empty, and it wouldn't matter anyway because the motivated self-interest of FAR more people would build housing to meet demand.
The headline says there are not 40k vacant homes, but the table breaks down the reasons for vacancy of just a bit over 40k homes. So it sounds to me like there are in fact 40k vacant homes.
And it goes on to say:
> Yes, 40,458 units of housing in San Francisco were classified as “vacant” in the U.S. Census Bureau’s American Community Survey (ACS) for 2019.
However it also says:
> an occupied unit is actually classified as “vacant” for the purposes of the ACS if the person living in the unit is planning to move within two months of being surveyed
But this doesn't appear to match any of the categories that sum to 40458, so I am not sure if this is even applicable.
- this article is out of date. The market has changed a lot since the AI boom. - That's a 10%ish of all housing in the city. Right now, of available units SF has one of the smallest vacancy rates in the country right now. The difference is (as the article alludes), apartments that are undergoing renovations, not currently permitted, etc.
I get that their Victorian houses are pretty, but they're only about a 100 years old and they are now crammed full of people and cars. It's too young of a city to be sycophantically in love with its past self.
So, it attracts the foreign investors looking for stores of value and encourages NIMBYism.
If the tax bill of properties in high value locations went up with land value then it would encourage people to stop hoarding and to sell up and have their properties redeveloped.
So, blame Howard Jarvis and his taxpayer's foundation.
This doesn't make a lot of sense for two reasons.
The first is that real estate is more the exception than the rule in being subject to property tax to begin with. If foreign investors want a store of value that minimizes "property tax" then they could just buy stocks or bonds etc. Which is why "foreign investors" are a red herring that pundits keep bringing up because it's clickbait or because they want a scapegoat to divert attention from the real problem (which is zoning).
The second is that if you have a place where taxes are lower than other places, that's the place people should be lobbying to build things. Who wants their lower taxes to be on a $1M single family home when they could be on a $100M skyscraper? The main reason this isn't happening is that the effective property tax rate in California is ~0.7% compared to the national average of ~0.9%, which isn't enough different to make a dramatic difference.
The real problem with prop 13 is that it resets on sale transactions or if you build anything, which does provide a major deterrent to construction because then existing property owners neither want to sell to a developer and use the money to buy something else nor build anything on their property themselves since either one would result in a huge tax hike.
This is exactly the point. If property taxes were higher that flow of capital wouldn't seek store-of-value assets which monopolize valuable land and deprive ordinary people of somewhere to live.
>foreign investors" are a red herring that pundits keep bringing up because it's clickbait or because they want a scapegoat
More like the reverse is ardent defense of the interests of the super wealthy.
They channel their media networks towards scapegoating immigrants instead. Or AI. Or selfish boomers. Or any number of other things which aren't really the problem and most importantly aren't them.
>The second is that if you have a place where taxes are lower than other places, that's the place people should be lobbying to build things
People want to build things because they are useful. People will NIMBY the fuck out of that if it affects the value of their property which it does, disproportionately if property taxes are low.
This is how San Francisco ruined itself - with precisely that attitude of "lower taxes = better"
Only they still would, because the higher property taxes would deter new construction until scarcity increases rents to the level that investment gets back over the threshold of profitability. And then investors are still there and what you've really done is cause rents to increase to the level that allows landlords to use it to pay the higher property tax.
> They channel their media networks towards scapegoating immigrants instead. Or AI. Or selfish boomers. Or any number of other things which aren't really the problem and most importantly aren't them.
Are "selfish boomers" not the problem in this case? Who are the ones lobbying for NIMBY zoning rules?
> This is how San Francisco ruined itself - with precisely that attitude of "lower taxes = better"
The big problem with prop 13 isn't that it lowers taxes, it's that it disproportionately raises them if you build anything new on your land or sell it to anyone who wants to.
It’s 2026, they’re more like 140 year old by now :)
> now crammed full of people and cars
Funnily enough, if you look at the 1950 census, in every single building I have lived in in San Francisco, there were more people than there are now :).
The city has so much underdeveloped land (come on, 2% of of the surface of of the second densest city in the US spent on the lowest density sport ever, golf???), tearing down our heritage does not make sense when we have so much usable space.
Also I never understood this obsession with "heritage". Why not promote the next generation of SF architecture instead? Modernize the victorian into increased density, create something new and creative. Over time blend the new-ness with the old. This ideology of stasis seems at-odds with SF's image as an innovation hub, both technologically and culturally. Why should our architecture be stagnant when our ethos is to constantly push forward?
This is one of the big loses we've had to NIMBYism / prop 13 / regressive zoning. We could have such cool, interesting architectural advances, but ironically our perverse urban development incentive structure discourages those kinds of innovations.
I’m in Europe and here if people suggested to tear down some art noveau buildings because they’re just 100-150 years old… I’d be absolutely furious. Don’t get me started on buildings from 200 or 300 years ago.
With US having much less old buildings, I totally get why people want to preserve such buildings.
To directly answer your question about where to draw the line a simple heuristic is to leave public buildings alone. This can even include a privately owned shop that is accessible to the public. They are part of the cities culture. Private homes in the other hand shouldn't be protected.
Exemptions like you suggest would just open the gates for fancy corruption schemes. Here the public is okay-ish about historical buildings changes hands specifically because of strict rules.
A lot of public institutions are now moving from historical buildings to new buildings in outskirts because old buildings are expensive to maintain and not flexible enough for modern office working. And those historical buildings frequently get renovated (or, sometimes, reverted to) apartments. And the public is fine in general.
Excuse me if I’m wrong, but most of business activity is already not in SF. But people love living in SF for it’s charm. If you destroy the charm for the sake of lowering prices… why would people pick SF-proper instead of same boring buildings outside of the peninsula?
“”” We estimate price elasticities of housing supply for U.S. cities by examining the impact of foreign purchases on housing prices and quantities. After other countries introduced foreign-buyer taxes beginning in 2011, both house prices and quantities increased more in locations with high foreign-born populations. A 1% increase in global capital inflows, instrumented with tax policy changes scaled by immigrant exposure, increased prices and quantities by 3% and 0.5%, respectively, over 2011–2018. We combine these estimates to construct new local supply elasticities. Compared to prior estimates, our elasticities are more inelastic and change cities’ relative rankings. “””
So it would seem the focus of the research was very much foreign investment in housing.
My own belief is that at national scale the % of foreign capital in housing stock for most western democratic states is low, and when it exists in scale its things like the Canadian teachers pension fund or .. Blackstone.
In America, I suspect it's Blackstone before foreigners.
"Anyone who’s lived in London as long as I have can’t fail to notice that over the last 30 years, the city’s become awash with money. From the mid-90s onwards (the last time property was affordable to anyone on an average salary) shops have got more designer, cars faster, and property commands ever more eye-watering sums. Knightsbridge and Belgravia have become the playground of oligarchs and at the centre of it all — that temple to Mammon — stands Canary Wharf, home to banks, insurance companies and lawyers, gleaming on the London skyline, its shiny windows hiding shady deals.
‘Londongrad’, ‘Moscow-on-Thames’… That Russian money has been given a warm welcome in London is no secret. Over the last two decades, swathes of prime real estate in London and its surroundings have been bought by wealthy Russians looking for a safe haven for their cash, with few or no questions asked. "
https://www.investigate-europe.eu/opinion/londongrad-a-citys...
In 2024 a corrupt government was toppled in Bangladesh. In subsequent investigations it was revealed that just one member of the cabinet had bought more than 200 luxury properties across US, UK, and UAE.
The fact that the West welcomes black money from anybody and everybody causes both inflation to go up in the West and exploitation to prevail in less developed countries of the world.
https://www.theguardian.com/world/article/2024/may/14/nearly...
Usually this would be welcomed for housing, because e.g. the Chinese are funding local housing construction at ridiculous prices but Americans hate each other so they try to pull up each other's ladder.
Meanwhile vs Canada (turn on your ad blocker): https://awealthofcommonsense.com/2023/09/the-u-s-housing-mar...
Probably I am getting overly sensitive about what seems to be creeping casual xenophobia even in mainstream media. The way the story is presented, the sketchy “foreign” aspect of the money is apparently central to it having this undesirable outcome.
Most countries have residency by investment programs. Invest in real estate, prop up residential home pricing by injection wealthy foreigner/criminal money. Which imo is pretty idiotic.
https://newrepublic.com/article/211855/republicans-making-wo...
This just in, water is wet.
Everybody knows why, but people are desperately looking for scapegoats because the truth is too uncomfortable.
The people to blame can easily be found among your own family and friends. It might even be you yourself. It is probably your parents.
Everybody who works for a living has relatives who have become wealthy by real estate value appreciation. If they're your parents or grandparents, they most probably earn as much yearly from real estate appreciation doing nothing as you do by working full time and being fully taxed for your hard labour.
If they're your uncle and aunt who are still working, then they have a completely different life from a renter working full time, even if it's the same job. Your money as a renter is gone into a black hole, while their money goes into paying off their lucrative real estate or into a very comfortable life if it's already paid off. Unless they are ambitious, they will stay working for whatever salary, keeping salaries from growing. Because they need the stable income. They have no reason to put any effort into a career, since that same effort pays much more being put into real estate.
Outside of the USA any full time working expert in his field can never earn as much per hour in wages in any job as he will earn in real estate value increase by doing home renovations - even if he has no skills in home renovations. Even if he is the leading expert in his field in his nation.
People will look for scapegoats; billionaires, foreign investors, expats. There are dozens of countries with no billionaires, no foreign investments and no rich expats who have a housing crisis. You know that billionaires aren't the problem.
If you have a large percentage of your population who do not work, or who work pretend jobs, or who work real jobs but just at part of their capacity, then it's no surprise that the rest of the population has to work hard to compensate for them. Everything around us is the result of hard work, and if somebody is living comfortably without working that means somebody else is providing for them. Food on their plate doesn't come from the job they worked 30 years ago. It comes from somebody working today. The same for everything.
Until people start admitting what's going on, the problem won't be solved. It's a deliberately created problem by tying the money supply to housing as an effort to decrease the population. Now we're seeing population collapse and total destruction of the industrialized world for the limitless greed of the current old generation. The near future will be very different than what people now are used to. We're already seeing changes and should talk about them instead of pretending and telling lies.
Agree with all except maybe this:
> It's a deliberately created problem by tying the money supply to housing as an effort to decrease the population.
I don’t think there’s a grand evil plan. it’s just people acting selfishly, on selfish incentives. It looks similar around the world because property rights and local planning controls look similar around the world, a huge number of such systems derived from common old Europe roots
Really? Are they buying the tiniest cheapest apartments or chalets to live in while they save up money to upgrade to something bigger later? Or are they buying the biggest and best thing that the bank will allow? Because I'm mostly seeing the latter. Which means they are using the monetary system to get the best deal they can.
The only people purchasing tiny apartments and houses are doing it to extract rent from others, those places hardly even get out on the market.
Most people want to buy a house or an apartment just to live in, I agree there. But they usually don't have the money for that. They have to pay rent, taxes and other tributes to the non-working class in this global feudalistic system.
Pretty much everyone I know cares a whole lot about how much their home is worth.
Same goes for NIMBY behavior. Plenty of relatives preach about how there needs to be more cheap housing, but whenever they are directly impacted they at least talk negatively about the changes. Almost no matter what they are. From the “nuisance” of too much density, not liking renters in their neighborhood, not wanting subsidized housing near them, or not wanting rural land near them developed on since it ruins their view on walks or whatever. Basically they are for building in everyone’s backyard but their own.