Here in Berlin, the measure has large support and I don‘t know why. It‘s mostly because the measure is called „disowning“ corporate landlords, which seems to resonate with everyone being angry at the rents.

Had they called it „paying out the last decade of profits to corporate landlords to keep the rent of 5% of Berliners instead of building new housing to lower the rents of 95% of Berliners“ (which is what‘s planned), I guess it would have way less support. It‘s a populist market rigging measure just as futile as the failed rent control and I‘m not looking forward to the impact on the city.

I totally don't get it. Why not use that money to build more apartments instead. Why take on the liability with these apartments beiing asbestos contaminated and needing more money to get rid of this. Too me there is the stench of corruption but I don't have evidence. My Hanlons razor is not sharp enough to cut this here though.

This is a standard corruption pattern in Germany. Sell state infrastructure for Cents and buy it back for Euros.

Take for example our Federal Printing Office (Bundesdruckerei).

It's obviously corruption. Corporate landlords get to offload their dodgy property to the government and run away with the cash, without the usual time and expense of selling each property on the market. By cynically cloaking themselves in populist language, they're able to easily manufacture the consent of the public.

To me the consent of the public is even more shocking.

Berlin doesn't care about money. Back when separated by the iron curtain, Berlin always got a special deal in federal/state finances because of its situation. After reunification, Berlin was pumped full of money because it was the new designated capital city and showpiece for unification. Nowadays, some of the special deals still remain, plus Berlin is awarded absurd amounts of money from the "Länderfinanzausgleich" (state finance balancing mechanism), meaning that the richer German states pay for Berlin's deficit.

So Berlin is in the comfortable situation of that one no-good family member on social security who will always find someone to pay their bills. Why change anything, why stop spending all that money, if more keeps coming without any effort in any case?

It’s always easier to spend other people’s money. Is there a competent central auditing department that watches out for this?

There are, but they can only audit and report. Change and punishment would need to happen politically, but that would need a majority of states. Two thirds of the states profit from Laenderfinanzausgleich (to various degrees) and will not change anything.

> To me the consent of the public is even more shocking.

Is there even consent? The referendum (Volksentscheid) hasn't happened yet. I wonder how this haphazard move by the current Red-Green coalition Berlin city administration is even legitimate when the referendum is only due more than a week from now. Unless this was done to pre-empt losing at the ballot box.

Nobody wants new apartments in their neighborhood because the fear is that those would drive rent prices up.

Nobody wants new apartments in their neighborhood because increased density decreases quality of life of those who already live there.

There's no upside _for them_ (remember, they already have apartment, they don't need another), only downsides.

That is like saying more fruit stores on the street will drive the fruit prices up.

This is a complex issue. if you add apartments for the same number of citizens prizes should go down, but that's hardly the nature of the system we are working with here.

If you have a busy highway and add more lanes will traffic jams go down?

This is a complex issue.

https://usa.streetsblog.org/2017/06/21/the-science-is-clear-...

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

> If you have a busy highway and add more lanes will traffic jams go down?

Yes, but perhaps in neighboring/older roads instead of the fancy new lanes on the highway.

All evidence suggests the answer is actually "no".

But this can happen with certain products, including housing, by driving new demand. Imagine your street has a great fruit store that caters to locals and is a bit busy but reasonably priced.

Three other fruit stores see the demand and open up, offering slightly different fruit and other higher margin products like pies and smoothies. People start coming from all over the city for fruit, and tourists come to try local fruit they can't get at home.

Now you have four busy fruit stores, and they gradually raise prices and focus on higher margin items instead of everyday fruits and veg.

This happens all the time with bars and restaurants, too, as a neighborhood gets trendy. And it can happen with housing, because upscale housing brings rich people to the neighborhood, which makes other rich people feel more at home, even in less fancy housing.

People who already own property don't want new apartments in their neighborhood because the fear is that those would drive house prices down. Plus they already got theirs, what do they care about anyone else?

Thankfully it's not really anything like most people who have this NIMBY attitude, just the loudest ones.

Ignoring the corruption question, building housings does NOT lower rent. It’s complicated.

The research I've seen (e.g. [0] [1]) consistently shows a modest decrease in rent prices for existing renters when new housing is built. Are there studies showing the opposite that I'm not aware of? I understand that there are two competing effects at play (which [0] calls an amenity effect vs. a supply effect) but my impression is that empirically the latter seems to reliably outweigh the former.

[0] https://blocksandlots.com/wp-content/uploads/2020/02/Do-New-...

[1] https://doi.org/10.1162/rest_a_01055

I can’t recall the article I read about it - sorry. It probably didn’t cite thorough studies though. It took into account the fact that higher population increases wages (opportunity), which would rise rents. Similar to amenity effect, but iirc it applies to the city as a whole, not just the neighbourhood.

Yes it does

Where did you get that from?

I don't get why he's being downvoted - although maybe too general of a statement, I can completely see how new development in an area could actually drive rent prices up - development also affects demand - from gentrification to things like opening business and infrastructure scaling making the area more attractive.

I've seen this happen in my city - there's a really renowned developer building high quality mixed residential-buisiness complexes - as soon as they started building a new site the surrounding prices went up, this happened in all of their projects I've looked into.

But they are the most extreme example. I'd guess that most of the neighborhoods that are seeing active development are increasing prices faster than the rest of the market.

Possibly the stupidest thing I've read

But it's also a symbolic value, that something is fundamentally changing. 15000 apartments isn't that much for Berlin but a billion is.

Of course more apartments are needed and Berlin needs to grow in height and diameter. But also there is no point in landlords hardly putting any efforts in to keep apartments in good shape. Needed repairs and modern upgrades are labeled as luxury renovations which is just a total distortion of reality. At the same time there are small, non-corporate landlords which put in more effort, are more approachable but who in reality invested in a casino-like asset. IMHO real-estate makes only sense for institutional investors, private or governmental because any single error can be financially disastrous and needs to be averaged out.

That's why I backed the bill but I hope everyone is working towards something better...

If these corporations don't keep their end of the bargain (ie. they don't maintain the buildings), then sue them and/or fine them. No need to buy them out.

Sure, but it's more than frustrating to go to a lawyer for a service you are supposed to just get, even if you can get free consulting through an insurance. That's why most people don't jump through those hoops and work-around it themselves. (I.e. do nothing usually which is bad for both parties)

Also there has been a general official agreement so far that modernizations justify higher rents. Which is just nuts because why would a one-time investment justify a basically indefinitely going increased rent...

> Sure, but it's more than frustrating to go to a lawyer for a service you are supposed to just get [...]

Of course. In a healthy market (low transactions costs and sufficient number of participants leads to sufficient volume and price discovery, and thus competition, which eliminates economic rent seekers) you simply stop using the bad provider and switch to a good provider. Of course people hate moving even more than contracting an attorney.

And that's why advanced economies need consumer protection bureaus/agencies to counteract these inefficiencies. So they should bring the lawsuits to weed out the bad providers and incentivize keeping the terms of the contracts.

Unfortunately in the US these agencies are either non-existent or pretty weak, and their place was taken by class action lawsuits brought by opportunistic law firms.

> modernizations justify higher rents.

Well, a rental unit is like a field in a farm. Or maybe compare it to a greenhouse. If you replace the insulation on the greenhouse to something better now you can cultivate more/better plants, which means you make more money.

Investments (by definition) increase the capital value of the asset. More capital produces more output, so it can be exchanged for more money. For a housing unit the output is hedonistic value (aesthetic value, comfort value, better soundproofing, better plumbing, adding AC).

> Which is just nuts because why would a one-time investment justify a basically indefinitely going increased rent...

... it permanently increases the buying price of the unit. Just like with a house. If you renovate it you can sell it for more. If it's empty you can rent it out for more (in perpetuity).

The simple fact that there's a tenant doesn't change this.

Of course one must also consider amortization, but almost all rental agreements mandate that the owner actively maintain the unit, so its effect should be net zero, but if the market price of maintenance increases (because raw materials, plumbers, painters, etc. become more expensive) then it's not unreasonable for the rent to increase too. (And since the cost disease is especially affecting things manufactured/built/provided locally ... housing is getting a lot pricier. [0])

Also there's inflation. Which just by itself makes nominal rent increases a necessity.

[0] See https://phenomenalworld.org/analysis/the-class-politics-of-t... and http://web.archive.org/web/20191015142434/http://rationallys... ( https://www.stitcher.com/show/rationally-speaking/episode/ra... )

The "disowning" part is somewhat different from the current transaction though. It will be decided by referendum if the "disowning" actually happens and at least the proponents say that Berlin should not be paying market rates for the apartments.

The article mentions a different deal that was struck separately without a referendum. I think there is not much support for buying back apartments for such prices.

Problem is, "not be paying market rates" will never happen. Market rates will be paid, because disowning anyone for the public good is only constitutional, if market rates are paid as restitution. There have been lots and lots of cases around disowned people lost by the state because of that.

There are often ways around that. For example the state can manipulate the markets, or offer an alternate choice, for example to never raise rents ever.

Lowering rents was part of the plan anyways, I think. Market manipulation through rent caps has been tried before and (in the Berlin version) declared unconstitutional.

It's constitutional, it was just ruled it wasn't a municipal faculty

It depends on how much they will pay. There are studies showing that it does not have to be that much. The Grundgesetz (German constitution) allows not paying market value in certain cases.

https://gentrificationblog.files.wordpress.com/2021/08/ag-so...

> Here in Berlin, the measure has large support and I don‘t know why.

This fits perfectly into the recent “eco, socially responsible, ev, wind and solar power, fridays for future, throw the baby out with the water green party support, take from the rich-give to the poor, 100kph Autobahn speed limit, we need to be the best example in the world at whatever cost” mental state of Germany. It doesn’t have to make sense. It is what it is.

Corporate ownership of housing is good. Every time I’ve rented from a corporate landlord, it’s been great. They’re organized, have staff, fix problems promptly. Every time I’ve rented from an individual owner, it’s sucked. They are undercapitalized, don’t know what they are doing, and hem and haw over every tiny repair expense.

Economies of scale are real.

Meanwhile, every time I’ve rented from a corporation the property management has been evasive and incompetent, punting issues down the road and fixing issues with as little effort as possible (often leading to lasting damage and more expensive repairs down the road). All of the private owners I’ve rented from have been incredibly helpful, quick to deal with issues, and willing to flex on move-in/out dates, month-to-month terms, etc.

Sometimes it’s about the personal touch, not “economies of scale.”

Oddly, I agree with you.

When I rented from a personal landlord, when the dishwasher was leaking water across the kitchen they told me it was my problem to replace it with a like model as it must've been my abuse. I barely cook so I have no idea what I could've done wrong.

When I rented from a corporation it was no questions asked, even when I was at fault. They were even proactive with things like filters for the heating/cooling.

My takeaway? Private owners and corporations can both be total jerks to renters. Generalisations about them will (generally) miss the point.

> the personal touch

landlords. Give me a break..

Hm. This is a US-centric website discussing a piece of news from Berlin. Which country are you speaking about?

That’s my experience in the US cities I’ve lived in — NYC and Denver. As discussed in another comment, the truth of the matter is probably closer to “neither private owners nor coporations are universally good or bad.”

What you are missing is that corporate ownership makes it much easier to raise rent. It is very hard for 100 000 individual small time landlords to collectively raise rent in normal conditions (i.e., with no housing shortage). Many will lower rent to get their properties rented faster. But if you have a dozen or so large corporate owners it happens almost automatically.

This is very simple and well understood economics. If you lower the number of providers of a good or service they gain bargaining power.

Large corporations work very hard to make sure there is as large as possible number of providers of every item they buy and every service they use. But somehow when it comes to ordinary people, we are supposed to pretend it is a good thing. No, it is not a good thing.

"It is very hard for 100 000 individual small time landlords to collectively raise rent in normal conditions (i.e., with no housing shortage). Many will lower rent to get their properties rented faster. But if you have a dozen or so large corporate owners it happens almost automatically."

Yes, a 100,000-firm marketplace forces participants to be price takers.

Yes, a 1-firm marketplace allows the firm to arbitrarily raise rents.

Why do you think a dozen-firm marketplace "automatically" tends toward the latter?

A dozen seems like a pretty high number. Explicit OPEC-style cartels are illegal (I assume) under anti-trust law so we're talking about about some pretty implicit forms of collusion.

The way it works here, all the corp landlord have their rent prices track the housing market. So when average price of a certain class of home moves up 5%, so does your rent.

In 2004 the state of Berlin sold 65000 flats for 405 million euro. Now they are buying 14700 flats for 2.46 billion euro. https://de.wikipedia.org/wiki/GSW_Immobilien . Back then they had the same coalition in power as today, the taxpayers money at work.

The important context here: The conservatives who were at the helm pre 2004 created a big banking crisis that brought Berlin on the brink of insolvency, which forced the state to sell a bunch of public property: https://de.wikipedia.org/wiki/Berliner_Bankenskandal (German only, sorry)

> In 2004 the state of Berlin sold 65000 flats for 405 million euro.

So, the average price per flat was € 6,230. That sounds impossibly low. Or were these distressed, dilapidated properties?

In the same period or a bit earlier, hundreds of thousands of apartments in Bucharest and other major cities were sold at preferential prices (read: heavily discounted) to the renters. It was a populist measure, people bought apartments and sold them a year later at 4-5 times the purchase price.

Also the old Communist era small apartments were cheaply build and without much value. 6000 euro looks low, but I bought in 1998 from the open market an apartment for $13,000 (the transaction was in USD). These days, that apartment is around 3-4 times more expensive (I don't have it for many years), but it is still small and poorly insulated. "small" means less than 50 square meters, one living room and one bedroom.

Back then the general sentiment was that Berlin was going to shrink. A lot of high-rises were razed in the eastern districts, others were converted into low-rise buildings as part of the "Stadtumbau Ost" program.

It's not good. It's better than awful. What a horrible way to decide how to structure society. Landlords are parasites that expect their tenants to pay >100% of their mortgage costs every month or they'll be heartlessly ejected into the street.

I mean, as opposed to other businesses where owners expect customers to pay <100% of the costs of the product?

There’s a bit of a difference here, in that the landlord is also coming out the other side with an appreciating asset, not pure costs and the consumer coming out of the transaction with the asset.

The landlord gets 100% of the appreciation as well as 100% of the equity being built by the mortgage payments while the tenants are forced to pay for everything except the initial investment. It's extremely unfair and hurts the most vulnerable people in society.

Sorry but this is an ignorant take of someone who I presume does not own property. I would have thought similar until we bought a house. Some costs that a renter never thinks about: property taxes, home insurance, flood insurance, leaky roofs, flooded basements, mold remediation, HVAC system replacements, the list goes on. If you think a landlord buys a house and never has to put another dollar in, you are on crack.

If you are a landlord you face plenty of other risks - time between tennants, you incur all the expenses and none of the revenue. Ditto if your renter stops paying and it takes you months or years to evict them. Or your tennant does damage to your property that their security deposit doesn't come close to covering.

On top of all that, there are real risks of asset decline. Just because that hasn't happened recently in most places doesn't mean it won't happen. I can name 5 plausible scenarios under which my house ends up never being worth what I paid for it.

It seems to me that you and others claiming that being a landlord is free money just have zero idea of what it actually takes.

All of those things and more are paid for by the rent since it keeps going up 5% every year while the mortgage payment stays the same.

I don't understand how anyone can view this as unfair. It's as basic as basic economics gets. It is obviously the case that downstream consumers of goods and services pay more than upstream suppliers. The initial investment is an enormous risk for the landlord, not something to just shrug off.

I guess if you view housing as somehow exempt from market dynamics, then this view holds water. I'm sympathetic to that view, honestly.

Housing market dynamics are strongly influenced by federal policy and the National Association of Realtors is one of the biggest spending lobbyist groups in the country so I would say that by design the housing market is unique and I believe that landlords are abusing that situation, intentionally or not, in a way that harms vulnerable people.

Many markets are strongly influenced by federal policy and have enormous lobbying groups, and capitalism by its nature harms vulnerable people. I don't see what makes housing unique in this sense.

So any company that increases its valuation as a result of more customers or more revenue is also extremely unfair?

So it is services generally that you have a problem with?

> the landlord is also coming out the other side with an appreciating asset

This isn’t true of services in general. Are you reading the comment you’re responding to, or are you just being belligerent?

The restaurant isn't disassembled when you leave, when you eat a meal at a establishment you pay for the upkeep of a building that will grow in value over time and yet receive no upside. If you take an Uber, you pay the auto loan of the person driving you. I guess a pure service like housecleaning doesn't leave behind a productive asset, although the business itself is one.

Obviously you get a hard product when you get a meal. You get someone's labour when you ride and Uber and consume gas and car.

When you rent, you basically are buying someone else a house. You don't get any service in many cases, as the landlord can contract our 100% of maintenance and repair and still make massive amounts of money.

When you eat at a restaurant you are in the very same way also buying them a restaurant. That food will only satiate you for a few hours and eventually you will have to eat again, having nothing to show for the service. In the same way you can rent a house from someone, have shelter from the elements for a time and once that business has concluded have nothing to show for it.

I don't' advise eating out too much or renting long term if you can avoid it. I also don't advise living in a major city. You can more easily take the first two pieces of advice if you take the third first.

No, you're absolutely not buying them a restaurant. They are fundamentally making money because they provide labour in exchange for it.

A landlord is not providing labour. They are acting as a middle-man between you and the bank. They provide no service to society. A restaurant is, as they provide cooked food. One is a zero-sum game, the other is actually producing something.

Your advice is frankly shit on the societal level. There is no way for everyone to avoid long-term rentals unless we do things you are opposed to. Equally it's impossible for everyone to avoid living in big cities, the entire economy would collapse. It's senseless to punish people for doing things that are necessary for our common prosperity and interests, such as living in major cities.

‘ A landlord is not providing labour.’ All built structures undergo entropic decay so maintenance would count as labour being done in both cases, the apartment and the restaurant using the textbook definition. These costs would be packaged into the rent and the price of meals.

Plenty of landlords subcontract maintenance, actually. There is landlording, and there is maintenance, some landlords do both, many do no maintenance themselves.

So through market calculation we can deduce that maintenance is only a small part of rent, the majority of rent is derived from being a middleman with the bank.

This is not the case for a restaurant, you'll find that all of the value in takeout comes from the labour and the capital necessary to make that labour efficient.

Would any landlord sign an agreement stating that you would do all the maintenance and then allow you to live there for free? Of course not.

> Would any landlord sign an agreement stating that you would do all the maintenance and then allow you to live there for free?

This happens frequently enough that you can find a number of articles on how to approach that very arrangement from a tax perspective[0].

[0]https://homeguides.sfgate.com/record-work-done-rental-proper...

That's not what work done in lieu of rent means. Work done in lieu of rent will only replace part of rent. For example I might get annoyed that repairs aren't getting done and offer to do them instead of paying on month of rent as part of a yearly lease, but no one will allow you to only do maintenance and never pay rent.

Show me someone who, on the open markets, offers to allow you to live in a property in exchange for nothing else.

>no one will allow you to only do maintenance and never pay rent.

> Show me someone who, on the open markets, offers to allow you to live in a property in exchange for nothing else.

Property caretaker

A property caretaker is a person, group, or organization that cares for real estate for trade or financial compensation, and sometimes as a barter for rent-free living accommodations.[0]

[0]https://en.wikipedia.org/wiki/Property_caretaker

‘ you'll find that all of the value in takeout comes from the labour and the capital necessary to make that labour efficient.’

Last time I checked kitchens and kitchen equipment are not immune from entropy…

Kitchens and kitchen equipement are necessary to allow cooking, but repairing the kitchen by itself provides zero value to anyone.

Huh? Even a kitchen not in use provides value as all tools do. Unless you don’t believe that tools have latent value?

Don't many restaurants rent? They're stuck in the same predatory situation.

That's only the "happy path" (for the landlord) story. I had a coworker who enterprisingly rented his old apartment to someone, who ended up squatting and forcing him into an expensive and drawn-out litigation. The tenant absolutely abused him and the California law which favors tenants quite strongly. He was a young guy in his 20's, not rich, and that woman really hurt him.

And of course there are other risks too; can you imagine being an entity that owns lots of commercial for-lease real-estate right now?! They must be scrambling to stop the bleeding, since Covid has sent demand into the earth.

My point is that being a landlord is not without risk, and it's not always an "I do nothing and make money by leveraging your fear of homelessness" situation (although, granted, this is the ideal state landlord's seek, which is itself kinda gross).

> since Covid has sent demand into the earth.

This needs more context.

Around here, it's nigh impossible to get a place. Social housing has waiting lists for over a decade, private renting is more expensive than a mortgage, and buying a house requires you to overbid. There are (plenty) stories of folks overbidding 50k€ and still not getting the house.

If you can afford to buy a house, buy it, divide into subunits, charge 80% of mortgage to each of the 5 subunits.

Anyway, that's what tge housing market looks like here. So I'm guessing your experience is from elsewhere.

Perhaps you missed the word "commercial" - which means renting to businesses, rather than individuals. Covid has increased WFH a lot and many small businesses are going virtual, and even larger businesses are scaling back their physical offices. This has the net effect of driving down demand for office space.

It's a bit confusing since you discuss commercial properties between two paragraphs discussing housing rentals. It isn't specifically clear that your comment about low demand only applies to commercial properties.

good? landlording isn’t and shouldn’t be pitched as a risk free investment strategy. I’m glad some landlords have finally realised this.

> My point is that being a landlord is not without risk, and it's not always an "I do nothing and make money by leveraging your fear of homelessness" situation (although, granted, this is the ideal state landlord's seek, which is itself kinda gross).

Yep, that's the problem, at least in the US. Ideally we'd reduce risk on both sides. Rent control wouldn't have to hurt this - your tenant's rent doesn't go up much, but your mortgage isn't going up much either.

It's not like small landlords are in position to redevelop and increase density anyway, so I'm skeptical of arguments about housing stock if you limit the upside (and downside!) of small private landlording.

It's often pitched as the most productive investment strategy for the middle to lower-upper class. Get one property, leverage it into a second, leverage more rents into a third, etc. Even in tenant-friendly states! Yet it's literally just rent-seeking and landlords riding along a wave of demand that they help create (by leveraging their properties and rent to acquire more) to squeeze higher and higher rents out of people is not particularly economically productive overall.

Covid is the first real blip I can remember that's hit those landlords so hard, but the truth is many of these people are over-leveraged and were in a precarious position to start with given the risk. Let's say there were no eviction bans: they could evict all these folks not paying their rent, and ... try to rent out the units to the people that got evicted by other landlords? Because they couldn't afford the old market rate in the first place? Doesn't that just depress the rental market even more?

> Yet it's literally just rent-seeking

That's not the economic definition of rent seeking.

> and landlords riding along a wave of demand that they help create

Demand for owning, yes. But for renting they create supply, not demand, in effect helping lower rents.

> That's not the economic definition of rent seeking.

It is. In fact, the general economic concept of rent and rent-seeking are generalizations of the inherent features of real property rents, which are the source of the name.

(EDIT: Fixed egregious touch keyboard vomit, clarified “land” to “real property”.)

If you want to collect land rents you would buy assets that are mostly land, e.g. empty lots, or even single family houses, not apartment blocks where you're paying more for the building than the land.

Just FYI, it looks like you might have a typo in your post. I usually enjoy your posts and think they're well thought out, so I felt the need to point this out.

> Demand for owning, yes. But for renting they create supply, not demand, in effect helping lower rents.

No supply is created by person A buying a rental building from person B. Person A paying a higher purchase price does nothing good to the rents charged in that building.

Yes, there is no lobbying or current manipulation of the government, but for small landlords it's often just a game of "I want to take advantage of population increasing over time to make more money over time" coupled with "I want to take advantage of other people improving the economy so that I can charge higher rents as incomes increase." Neither of those are productive, and the latter is hard to avoid calling parasitic. They don't have the ability to redevelop into higher density, or often even do much to change the condition of the property. So you get small mom-and-pop rentals in SF or similar places that charge far higher prices for far shittier units compared to those put on the market from larger developers or management companies in, say, Marietta, GA.

But if someone buys a house and rents it out instead of living in it, that creates rental supply.

In a free market, pushing up prices of apartment buildings would also cause more apartment buildings to be built. Of course many places like SF are not a free market because NIMBYs block most construction, which keeps supply down and prices up.

Rental supply is an idiotic concept. You are increasing rental supply by diminishing owned housing supply. You're not doing anything for housing supply, which is the only thing that matters.

And no, pushing up the prices of rents don't incentivize building. Building rentals is meh compared to just buying existing housing supply. While house prices are increasing, so will rental prices commensurately, because renting and buying a house are not isolated and independent choices.

In reality, there is no increase in construction, because the increase in housing demand is no different from someone buying a house, and the increase in property costs that follows it doesn't change anything.

> You are increasing rental supply by diminishing owned housing supply. You're not doing anything for housing supply, which is the only thing that matters.

They're two separate markets. Increasing rental supply does drive down rents.

If in one location, rents are very low but house prices are very high, then landlords would have incentive to take properties off the rental market in that location and sell them, perhaps using the proceeds to buy investments elsewhere.

They are absolutely not two separate markets. You can buy one and sell it as the other, and you can decide to sell the same housing unit as a rental or outright. It's the same market. There is no separation between the two.

Increasing owned housing supply decreases property costs. Decreasing property costs reduce the costs of renting, and they also make buying a house more competitive than renting, which is why increasing housing supply, not rental supply, drives down rent.

Beyond that, increasing rental supply alone will not decrease rent. It's perfectly viable for rents to increase despite more rental units if the alternative of buying a house got more expensive. See the recent increase in rents as property prices increased, despite no change in rental supply.

They've still gotta live somewhere. Overall housing supply has not been increased.

I actually think this case is worse for the overall economy than the rental building scenario!

Perpetual rentership is more economically precarious and less stable than ownership. But here we have the folks with assets and income sufficient to purchase properties buying up additional ones to pull ownership further out of reach for more people. So yay, we've converted a property that someone might've otherwise purchased as an asset to yet another rental.

I also don't agree with your claim that in a free market this would cause (much more rapid) increased construction in most cities, given current attitudes about small-landlordship. You can't build there without tearing something else down first, and small landlords are not often going about replacing ten unit buildings with twenty unit buildings! That requires a different level of capital. In SoCal can see this in neighborhoods in places where the current zoning allows, say, 5 story buildings, but those new five story buildings are still sparsely scattered amongst old two-story buildings that are simply too attractive to keep (the dream people are pitched that makes them become small landlords isn't "sell everything eventually to a developer, it's "passive income".) Small landlords made a lot of fuss about earthquake retrofitting, a much smaller expense than "kick out all my current income-generating tenants and rebuild it all." It's been much easier for developers to convert old low-density commercial or industrial property, since the market is more fluid there (and often with much more slack in it, in large cities).

I similarly don't expect a high number of single family lots to turn into four-plexes in the next fifteen years now that CA has changed zoning on them. It's definitely different at four units than two - where duplexes aren't selling for any more than SFH currently, since the qualitative demand for a true single family home is just that much higher - but I don't think it's enough different for a significant number of people to want to cash out or try to play developer.

(NIMBY's exist everywhere, too - acting like they're unique to big expensive cities is self-defeating. The way lower-cost-of-living cities have maintained those costs is a combination of less demand and more land to expand into. If you can build your new mega apartment complex on empty land, you don't have to convince those small-time landlords or property owners to sell all their separate buildings! Dallas County didn't increase in population much more rapidly than SF County because of rapid increases in density - just look at the Dallas city population vs the burbs.)

> old apartment

> California

Prop 13. Your friend is doing just fine.

Why would you care about the risks of being a parasite on vulnerable people?

It’s all awesome until the roof needs to be redone or the cellar is flooded.

I had my deposit stolen recently by a large corporate landlord in SF when COVID lockdowns started.

Large corporate landlords are the ones who calculate the legal costs of massive abuses and do it anyways.

California small claims court costs like $50. If you win there's a permanent ruling against the landlord.

It's worth going through the process just to learn. It's also crazy how difficult it is.

Do you mean that it’s noticeably more difficult than the equivalent process in other states?

I've never tried in other states. But on an absolute scale I found it ridiculous how many gotchas they put in place to keep you out of court. I remember sitting there watching so many people get told by the judge "you forgot to file proof of service" or whatever and get their case thrown out. And it takes a whole day. How many tenants can easily get a day off?

If I were a landlord I'd keep every deposit no matter what.

By gotchas do you mean folks who misfile their paperwork, or that there’s actually hidden paperwork brought out after a proper filing?

"misfile" yes. But it's amazing how easy it is to do that. This isn't like the DMV or a passport where most people can get it right after a couple tries. You really need to be on top of your shit to win in small claims court.

Ownership moves from corporate to communal, which also manages several thousand units already. There's no individual owner involved in this scheme.

Yes but looked at another way, this is taxpayers subsidizing real estate investment. The act of buying all the units by the government actively raises the collective price of real estate making it an even more lucrative investment.

The taxpayers should also gain from any appreciation of the housing stock, no? Seems like a reasonable, if very abstract, take on community ownership (on paper).

Short term, many people gain from artificially inflating the value of goods in a supply restricted market, but that is just market manipulation, no real value added. Those apartments will be demolished one day and the value will drop from $100,000 to $0 in a second.

So it moves from one landlord to another. In my experience (in Sweden) the communal landlords are no different from corporate, and most people don't even know if their landlord is communal or corporate.

I've never had a prompt and responsive landlord. But at least with an individual, you get the responsible party on the phone. With property management companies, you need to navigate the corporation in order to get work done, and some are quite skilled at putting stupid barely-legal obstacles in your way.

> Economies of scale are real.

Agreed. Try getting google on the phone for support.

Actually it depends on the line of business. It is quite easy to get Google on the phone for Google Fi for example. As for their "free" services, you are not their real customer but the product they sell.

It's famously hard to get any kind of support for GCP and the Android store as well, so I'm not sure this applies only to their "free" services.

You get the best of both worlds with housing cooperatives, where the tenants are also collective owners of the units. Those are pretty common in Berlin and the rest of Germany (at least Eastern Germany).

You have a large enterprise giving tenants the advantages you described, while also removing the incentive to rise rents on every possible occasion.

I wish there was more of this in North America. It’s either rent and own nothing, get soaked by a condo corp, or own a McMansion freehold out in the burbs.

It’s also much easier to avoid scams.

Plenty of individual owners will rent out units they don’t actually own , rent it out while in foreclosure, etc.

That said, always see the unit first. Avoid luxury apartments! Get the cheapest place in the best neighborhood

The worst is renting a condo and then something affects your unit that requires the HOA's involvement... might be faster just to move out.

When I was in Berlin I got the exact opposite experience. Same in Hamburg. Are you actually talking about Germany?

Believe me, I’ve lived in both individual and corporate owned rentals. I fully agree that the latter are better organized, and economies of scale are real.

But I’d much rather nobody invest in housing, and governments handle scaled affordable housing - so that there’s accountability and no profit motive.

P.S. Please no replies claiming anything run by the gov will fail; those are boring and called whataboutism.

Government run housing can have its own problems too. For example in Singapore, there have been huge issues with gay couples being unable to rent housing. This can happen with some private landlords too, but at least in that situation there can be multiple suppliers and you only need one to rent to you.

While we’re using anecdotes, corporate owned housing can have issues too. They discriminate against renters with low income, unstable jobs, mixed-race families, etc etc - examples from “first world” Netherlands, where companies like MVGM own majorities of rental housing.

> While we’re using anecdotes...

Shallow dismissal. Singapore discriminates against LGBTQ couples as a matter of policy. Just because it doesn't affect you doesn't mean it's an anecdote.

https://the-singapore-lgbt-encyclopaedia.wikia.org/wiki/Publ...

It's still an anecdote. Corporate housing discriminates against poor people and people of colour as a matter of incentive, which is no different in practice.

In any case, it doesn't change anything, if Singapore is oppressing LGBT people they will do so government owned housing or not.

Sorry but it’s just not an anecdote. It’s government policy, as you can easily determine by googling. It’s not like we have to take one person’s word for it that this is happening.

The argument is not about Singapore. You're making the argument that it's not a good idea to have government-run public housing (presumably in Berlin/US/UK) because one government somewhere they did something bad through that they could have done even with private housing.

It's an anecdote for your argument. If the argument was "did Singapore discriminate against people through housing" it wouldn't be. If the argument is "should we have public housing [here]" then it's an anecdote. You'd have to show that this would happen in the place in question. If you want to make a general statement, you'd have to make that clear and make the case that in such countries landlords wouldn't discriminate against you for being LGBT (which they absolutely do).

I’m not making any argument about whether it’s a good idea to have government run public housing. I think you have me confused with another poster.

Your definition of ‘anecdote’ seems way off to me. We’re talking about an objectively verifiable data point. Just because it doesn’t fully confirm some argument that someone’s making doesn’t make it an anecdote. Check the dictionary definition.

Anecdotes are objectively verifiable data points. The key is that they are a single data point and can't be used to make a general argument because of that. It's a single interesting story about an event. That is a valid definition of "anecdote".

Housing discrimination against LGBT people in Singapore isn't a single story, it's government policy.

The definition of 'anecdote' has nothing to do with arguments. 'Anecdote' isn't a back formation from 'anecdotal argument'.

It's completely legal for private landlords to discriminate against LGBT people in housing federally in the US, as well as many states, counties and cities. And it happens quite often.

There's also the Fair Housing Act exemptions, where small private landlords with fewer than about 4 units, or landlords that share buildings with their tenants, can ignore the discrimination limits imposed by the FHA.

I think Singapore discriminating against LGBTQ is the bigger deal than Singapore owning the housing.

It's all part of the same deal for people living in Singapore. They don't get to pick and choose which aspects of the government they want (democracy in Singapore is a farce.)

Sure, but that goes to show that "state ownership" simply means very different things in a democratic state vs a non-democratic state. Democratic state ownership is a kind of public ownership - the voters have some amount of control over the state, and through the state, over the owned resource. Non-democratic state ownership is a kind of private ownership - the dictator(s) have direct control of the resource, and the voters have no more rights to control state-owned property than corporate-owned property.

Indeed! As I acknowledge in the last sentence of my comment. Because of these things, I think the healthiest housing markets are those with a good mix of suppliers (both govt and private). Supplier competition comes with many benefits.

My point about MVGM and the rental corporations mentioned in the post, is that they’re massive and bordering on mono/duopolies. That reduces the “mix of suppliers” you’re talking about. Moreover, most corporations act similarly when driven by profit, so it’s a false choice.

The vast majority of public housing in Singapore is owned, not rented. However, government policy is that subsidized flats are only available to married couples, and thanks to colonial-era British laws still in force, in Singapore that means only a man and woman.

>and thanks to colonial-era British laws still in force

These laws could easily be repealed. The root cause of the problem is that Singapore is still a pretty homophobic society. (Also, did Singapore have same sex marriage before British Colonial rule?)

The quasi-fascist PAP has ruled Singapore with authoritarian force since the 1950s. They have the uncontested power to change any old British law they wish. If they haven't, it's because they've chosen not to. If you want to point fingers, all fingers in modern Singapore should be pointed directly at the PAP.

A non-democratic state like Singapore is very different in discussions of state-provided services compared to mostly democratic states.

A democratic state is, ideally, controlled by the people who live under its rule. As such, services provided by the state are, to some extent, under the control of these people, who can use their political power to influence those services directly in various ways. In contrast, people don't generally have any right to change the way a private entity chooses to do business, as part of the basic definitions of property rights. Basically, people often want public ownership, and use the idea of state ownership as the mechanism to achieve that.

This difference though changes completely when discussing an authoritarian state like Singapore (and even more so in dictatorial states). The benefit of democratic control that is expected from state ownership in democratic states doesn't exist if there is no democratic control of the state in the first place (this is one of the reasons it is absurd to talk about the USSR as "socialist", when all economic activity was in fact controlled by a state that was in turn controlled by a ruthless dictator). In a non-democratic state, state ownership is just as much private ownership as corporate ownership.

Of course, the problems get even more complex when you have a quasi-democratic state that is nevertheless actively discriminating against certain groups of people.

You live in bubble and are failing to look at all aspects of your situation including your own wealth.

Can you explain how wealth status of renters affects the competence of corporate landlords?

FWIW, I've also had nothing but good experiences in corporate-owned/managed housing.

The worst is: just a couple of years ago, in 2013, the (mostly) publicly owned BayernLB has sold 32 000 condos/rentals to a private owner for extremely cheap prices: around 77 thousand euro per rental.

https://de.wikipedia.org/wiki/Bayerische_Landesbank#GBW-Verk... (German)

In 2008 the state of North Rhine-Westphalia sold ~93,000 apartments for about 8,500€ each to Goldman Sachs. The reasoning was that the apartments were in bad shape and renovations would be expensive.

It's ridiculous how concerned politicians, especially conservatives, act now.

https://rp-online.de/nrw/panorama/leg-mieter-in-sorge_aid-11... (German)

> for about 8,500€ each to Goldman Sachs.

The article you linked mentions debt in height of 2.7 billion EUR. Means that the actual purchase price was about 3̶7̶5̶k̶ 37.5k per apartment.

If you factor that in, it's ~38,000€/apartment, you got an extra 0 mixed in somewhere. Those debts should've never existed in the first place. It's public housing, it should not make profits and rather break even.

Nowadays the investor makes huge profits despite the 60 year rental agreements the state negotiated for the renters and the required 12.50€/m² per year improvements. How was the state unable to break even? It's a mystery.

Oh right, my bad, it's been 38k per apt. I've edited the comment. Indeed that's very cheap. As for debt never existing, it's pretty common to leverage in the real estate world.

They got 3x what they expected and still it didn’t dawn on them that they were missing something. At first sight this goes off the stupidity chart into evil territory.

pretty sure you can expect most politicians to be evil.

if you understand german, Rezo [1] did an interesting video last month about similar corruption

[1] https://www.youtube.com/watch?v=rIj3qskDAZM

This is exactly the kind of solution I favor in the states. Buy up properties, build or expanding housing supply, and then either continue to subsidize it or sell it back to the market while imposing land value tax.

Why? Because the problem is lack of political will. You can't expand housing supply if nobody wants to.

It's a piecemeal solution until we figure out something better or that society is willing to support public housing initiative. Otherwise, we would be waiting forever for entrenched political opposition to die or the situation to worsen over time.

Why not just let private developers build apartments. They have the capital, know-how and will to do it. All that needs to happen is government and councils getting out of their way with zoning restrictions and the problem will fix itself as if by magic.

I agree on the land value tax part of what you said, though.

The problem is not government and councils but all the homeowners who don't want any development. Buying them out incrementally is hopefully a way to remove political opposition.

The problem is councils and governments that are controlled by homeowners who vote in NIMBY restrictions. The reason there aren't apartments going up everywhere is that it's literally illegal to do it, not that a developer is finding it difficult to find eight adjacent single detached homes to buy up in one go.

Baden Würtemberg is introducing a modified land value tax. It's probably the biggest political win of the decade.

Because private developers optimize for their profit, not creating high quality area of living. You can look at what the full fledged free market is doing to largest cities in Warsaw. It’s a shit show.

There's nothing preventing them from building now, yet they are not.

What would incentivize the building of low or medium income housing, when higher profits can be made from high income housing.

The BauNVO stipulates restrictions on building height and on floor area relative to land area. Are you sure it's legal to build a 30-storey apartment in a residential zoned area in Berlin without needing to get some special exemption or permit?

In the US and many other countries, the reason is definitely local government restrictions. Developers would love to build more high-rise apartments - it's very profitable to them - but they're not allowed to in many areas. In the area I'm living in, it is illegal to do it.

The incentive picture is not as you're portraying, and we can look to other industries for counter examples. If there's profit to make, the market will fill those shoes, even if there's "more profit" (which I don't agree is the case always due to volume) serving wealthier customers. Consider the market for low-margin cheap restaurants in poor areas, and the market for high-end dining in rich areas. These are both very well served markets. The market will almost always find profits where they're to be had, especially in an industry like real estate development.

>You can't expand housing supply if nobody wants to.

it's wrong to say "nobody" wants to. the problem is that the homeowner class holds all the political power, and so there is no greater political sin than decreasing the cost of housing (or "lowering property values" in homeowner terminology). if anybody cared what non-homeowners thought, there'd be plenty of will to build more housing. as long as so many people's net worth is tied to their housing, there will be no appetite for lowering the cost of housing.

Maybe this is just me being a filthy capitalist, but it also seems somewhat fair? If cities are instituting rent controls on properties that were previously market rate, that is a targeted form of wealth expropriation. To be clear, I'm not one of these "taxes are theft" people -- we do have to pay shared costs. But there's a continuum of acceptability: it would clearly be wrong to pass a law that raises taxes on one person by name. And it's clearly ok to raise taxes on everyone.

For me, instituting rent controls is towards the less acceptable end of this spectrum. If the city believes it ought to be able to set prices on an apartment, it should own that apartment first. Just my unenlightened gut feeling on this issue.

> it would clearly be wrong to pass a law that raises taxes on one person by name

What do you mean? There are innumerable such taxes, globally. You definitely need to tax various people & businesses differently, it’s the only real solution.

I am not aware of any examples where a country taxes a single individual at a higher rate than everyone else by law. If examples are innumerable, I'd be grateful if you could provide one.

Where are you getting this strawman of taxing “single individuals”? I’m saying that classes of people or businesses are already taxed differently.

> Where are you getting this strawman of taxing “single individuals”?

Could you please reread the section of my comment that you quoted and your response to it? I said, "it would clearly be wrong to pass a law that raises taxes on one person by name," and you said, "there are innumerable such taxes, globally." You very specifically did not say that classes of people or businesses are taxed differently. You said single individuals are taxed differently. (You might not have intended to, and if not, well enough, but I set up no strawman in my comment.)

Iirc the first income tax targeted a very small number of individuals- maybe just Rockefeller or something, as nobody else qualified.

I believe it, although at least then it's still targeting a class that others might enter. I do also believe that there's a fundamental difference between income taxes and wealth taking in this regard, in that one is retroactive and the other isn't.

Or, you could simply allow private entities to build housing.

I am sure especially in those "hot" areas where prices are spiralling out of control, there is no shortage of entities with the "will" to build.

That is usually the point behind markets, rising prices give an incentive to increase supply.

Berlin has been a hot market for a long time, what's been built has been a lot of very expensive apartments. There is actually some leerstand but they are luxury apartments without renters. The biggest thing the market has achieved in Berlin is allowing landlords to rent out shitty apartments at abhorrent prices (25sqm at 600€) without incentive to actually provide good services for the renters

It would surprise me if Berlin is permissive with respect to permitting new housing. It would be quite unique among desirable western cities if it did. When the amount of new housing allowed is insufficient to keep up with growth in demand, obviously developers are going to tackle the most lucrative segment of the market, since they can essentially pick their buyers. If there were ten people who want new cars but you have one import permit, and your cut is 10%, are you going to import the luxury car or the econobox?

I agree and that's why I think the problem cannot be solved in private hands but with communal ownership.

If you permit enough new housing to satisfy demand, that would also solve the problem. As long as insufficient new housing is being built, prices will go up on market rate housing. The lucky few who manage to get into price controlled housing will have better prices, but everyone else will face higher costs or be unable to live in a region entirely.

One thing is for sure: as long as any private housing ownership is allowed, rich people aren't going to be the ones left high and dry.

The amount of new apts would be dramatically high to curb prices and make them realistic again. And Berlin is probably also not able to magically create as much new living space as is needed in that short of a time frame especially given the developers unwillingness to build affordable housing. I think where we probably fundamentally don't agree is that not all things need to be provided through a market. (or I think my point is more so that we've at least observed it not reall working here, so we could at least try a different strategy or multitudes and see how far those take us)

> The amount of new apts would be dramatically high to curb prices and make them realistic again

I'm fine with short term patches to help with the acute issues, but fundamentally unless a lot of housing is built, there are going to be some people suffering in the housing market. Either it will be poor people paying a lot for housing, or it will be poor people who are unable to win lotteries to get into public housing who then cannot afford housing at all. Whether the housing is publicly or privately owned is just pushing sand around the sandbox. It just changes exactly who the winners and losers are, but not the number of people losing.

> I think where we probably fundamentally don't agree is that not all things need to be provided through a market.

I don't hold this belief. There is no fundamental disagreement on this score between us.

The problem is: who gets the cheap housing in communal ownership? Supply is limited. So if you don't pick the person who is willing to pay the most, who do you give the apartment to? Who gets to decide? Are you sure you want to live in that kind of world, where some political elite gets to decide your fate?

A number of public housing here in Berlin is reserved for people making less than a certain amount, having no job at all, or working/living in precarious situations. You can apply for that status at the local gov. It is not flawless, of course, but it at least avoids segregation.

I live in a district that was originally working class, and is being very fastly gentrified now (yuppie myself I guess), and it just sucks that people who've lived here all their lives have to move to completely new environments because this is now an area desirable desirable for rich people.

Same with small businesses, one of my favorite bars closed down recently due to some English billionaires wanting to turn the house into higher margin living. Vice did a documentary on it called "Punks vs. Billionaires". For the people living here, who live in small flats and still pay half their income to it, these "living room" bars, where you do not have to buy to be welcome were absolutely essential. But they all get destroyed now.

Almost all new private housing is for richer people, because they are the most profitable, and lots of them move over at the moment. The state needs to step in to make sure that normal people can still live a decent life around here, too, lest we become a horror show like London.

> Are you sure you want to live in that kind of world, where some political elite gets to decide your fate?

Whenever people say stuff like this, I wonder if they’ve ever taken a moment to look around themselves and see that it is already that way. The current housing problem is also orchestrated by the same political elite…

There is a difference between policies making your desired place more expensive, and being literally dependent on some corrupt government officials, who is handing out apartments as favors for allies, or just for bribes.

There is already communal property in Berlin and all over Europe. Its not some grim socialist dystopia. They serve under the same conditions as private companies just don't have to completely bend over to shareholders wishes. Vienna the city for example is the biggest landlord in Europe.

Obviously we need more housing but until then we also need to ensure that people with normal incomes can also afford to live _in_ the City.

How is it that there are "luxury apartments without renters", yet landlords get away with " rent[ing] out shitty apartments at abhorrent prices"? Why don't the people who can afford those shitty apartments move to the empty luxury ones instead?

Because they're not on the rental market, but are mostly used as a value store by owners that don't live anywhere nearby, and have multiple properties.

Maybe impose a tax on unoccupied apartments past a certain number

A land value tax accomplishes this without the complexities of determining occupancy status or fraud concerning same.

The argument of the empty apartments in Berlin comes up all the time, but it is a myth. Maybe in London it is different, for various reasons, but in Berlin, that is not the reason for the issues. [1]

Even if only new luxury apartments are being built, it is more housing that takes pressure off the market. The wealthy people can move into those apartments, freeing their old less luxurious apartments for "poorer" people.

And there is no "free market" for housing here - it is very difficult to build, with lots of regulations.

And who wants to invest, when the government will seize your assets as soon as you are successful? Last year they introduced a hard cap on rents, that applied no matter how much you paid for the house you wanted to rent out, and no matter where it was located.

In two weeks, there will be a public vote to seize thousands of flats at "way below market value" (quote from the voting sheet) from corporate landlords. These are not conditions where a "free market" can do its thing.

As a matter of fact, only big companies have the means to build under such conditions, it is much too risky for smaller entities.

But then, sure, blame the evil capitalists for the issues your socialist government has created.

[1] https://www.tagesspiegel.de/berlin/wohnungsnot-leerstand-in-...

> Even if only new luxury apartments are being built, it is more housing that takes pressure off the market.

Luxury housing construction can help, but can't really fix the issue on its own because it is also a relatively inefficient and expensive method of increasing the housing supply (since each added unit has high costs.)

This problem is one that a large number of municipalities have failed to solve. It seems very difficult to get the regulatory and tax incentive structure setup just right to get sufficient affordable housing built in large urban areas.

> As a matter of fact, only big companies have the means to build under such conditions, it is much too risky for smaller entities.

I would think that governments have the scale to take on those risks as well. At some point, I think it makes sense to stop struggling to get privately build affordable housing and do it publicly.

> you could simply allow private entities to build housing.

London is the poster boy for exactly why you don't do this.

The result is builders and landlords buying up land, "delaying" (often indefinitely) building the homes to artificially drive up the prices of existing housing, or building tiny, tiny, apartments in huge hive-like blocks and towers, with insane prices.

Nobody lives there anymore. It's too expensive.

There’s always real estate developers willing to build. The problem is that they never want to build affordable housing, only massively profitable housing. Also, an underlying problem is usually lack of land - a limited resource by nature.

If they build luxury apts rich people take those freeing up crappier apts for middle income people and so on. Silicon valley millionaires dont want to spend 2.5 million on shitty 50yr old homes, but they cant get new ones built

Thanks for this non-insightful comment and derailing a post about Berlin into yet another SV rant.

If you give real estate developers too much of a free hand, they will plaster over every bit of common space with cramped flats or other abominations. There's even a word for it in Polish - "patodeweloperka". It's most prominent in Cracow (alleged ties of real estate companies with local officials), also in Warsaw and its suburbs. In Gdańsk, it's suspected that many old unused buildings in attractive areas had an "accidental" fire.

I looked at some of the new construction in Wroclaw (arguably not Cracow) and it seemed fine to me.

If I could sustain my work from abroad, I would be tempted to move to Wroclaw, actually. Unfortunately I need access to cheap shipping to Czechia, which means being in Czechia or at least going there pretty often.

Define “fine”. People want to start the family, but private real estate developers build shitload 40m^2, 1 bedroom flats (as they’re the most profitable). I’d argue the current housing market is definitely not “fine” for them.

You need to realign incentives. You can't do that now if homeowners and investors don't want to allow housing.

Resetting taxes to LVT means that improvements on land won't be disincentivized. Buying them out means they get a lot of cash and won't be so opposed to you lowering the value of their owned property.

Also, the government will be able to afford to focus on cheap housing, not what makes them the most money, since their focus isn't private profit.

The prices are spiraling out of control everywhere that’s even moderately desirable. In a city in the BW part of Germany which has ~20k inhabitants and is nearby another city with ~200k inhabitants there’s new 3 room apartments for sale for around 400.000+ €.

The sales prices in BW and many other areas of Germany are simply ridiculous.

And they are building: a few dozen lots are being offered by the city and there’s dozens of takers per lot.

Then they are not allowing to build enough if there are dozens per lot?

Which city can easily add thousands of parcels of land for building houses? There’s significant administrative effort and those extra houses would put pressure on all local municipal services. This has to be thought out and done incrementally.

in SF, the wholesale cost for building a unit is $800-900k.

private entities will only build luxury housing in these conditions

This is one of the reasons why all new housing is in the luxury category in Germany as well.

Building codes have become so strict that it's not worthwhile to build affordable housing for private investors. Especially since the government pays incentives (or rather gives out very low interest loans) to build houses of the highest energy standard.

Why build a "cheap" house when you can build a more expensive house with subsidies that has a lot higher resale value later?

Why are building code so strict? Are they 'necessary'? How much benefit do these building codes provide?

Note that there is a lot of lobbying involved in the building code. An example:

What if a kid ran into a balcony glass and broke it, hurting or killing itself? Better demand that balcony glass be reinforced (and more expensive, to a great delight of the glass factories!) just in case. Even in old folks' homes.

No one wants to be known as the child killer, so here is a new demand making the construction a bit more expensive.

That seems perfectly reasonable to me. I expect balcony railings to be sturdy, they exist precisely to prevent accidents. As long as there is no regulation mandating railings be made of glass, I don't see any problem. I've only ever seen glass railings on the houses of people who can afford to pay someone else to clean them (i.e luxury housing) so I don't see how that makes it harder to build affordable housing.

I meant glass in the door that connects the room to the balcony. Not in railings. Sorry.

earthquakes, at least in SF

> build luxury housing

The most luxurious housing is single family homes. Is that all they're pitching in SF now?

most of the new development is midrise to highrise condos.

I don't think there are any new SFH being built on empty lots.

"overpriced" is accurate. People complaints of rising rental prices, but property prices have skyrocketed to a much faster pace.

A realignment is going to be due at some point in the future: either rental price will have to catch up faster, which would fuel more discontent, or the real estate will have to "collapse" ...

What will happen, I think, is a large amount of inflation. Prices of everything else (including wages and rent) will increase substantially, but house prices will stay (nominally) about the same.

That way, they cease to be overpriced but the owners avoid negative equity.

Maybe. That would be a pretty bad scenario. Just less bad than anything else, I guess.

Real estate rarely decreased in price, especially in Berlin. It may turn out to be a good investment.

That’s exactly… the problem? Housing shouldn’t be an investment, for corporates nor the government.

One of the problems of 2021 is that money printers went brrrr with such intensity that some people are losing faith in future purchasing power of their local currencies and stick any free money into bricks and mortar.

Also, where I live, the official inflation is now like 4 per cent, but gosh, so many things are massively more expensive than before (food in restaurants maybe 40 per cent, some construction material even 100 per cent more expensive than before), that it makes people distrustful of official figures.

Even if it’s not an investment, housing will likely always have a price ratchet, so it’s still not terrible for the government.

If the price goes up any more than inflation long-term, we've still got a problem.

> Housing shouldn’t be an investment, for corporates

If it’s not, you’re essentially going to eliminate privately owned rental housing.

Just like cars depreciating eliminated privately owned car rentals.

Oh, wait, no it didn't. Housing is the only thing miraculously protected from depreciation because making it depreciate would hurt chances at reelection.

This is a great point. Physical houses deteriorate and get damaged, just like vehicles. But their value /always/ goes up.

I’d be really happy with communal non-private rental housing. Corporates already do a bad job, I don’t see why they should make massive money from limited land resources.

Realestate is a commodity so it is unrealistic to think that it wouldn't have value and it would increase overtime as supply and demand fluctuate.

The only way for housing to keep rising at its current speeds is for buyers to spend a greater share of income on housing and for interest rates to fall.

Interest rates are near zero and individuals are spending very large portions of their income on housing. Continued expectations for high returns on housing will lead to hard landings/defaults or pathological cases where renters don’t pay rent and can’t be evicted.

This is based on assumption that average property user income will not rise and that the possible profits are almost maximized. Berlin is growing fast, creating lots of new jobs, often well-paid ones (above national average) filled by immigration, so demand is growing faster than construction of new apartments. And prices are still below Munich or other big cities. That said, this is an indicator of liquidity showing that property is indeed a secure and reliable asset, but this is not the reason for investment by city.

Im glad I bought in 2009 because it decreased A LOT

Many people’s view points are influenced heavily by the 2008 financial crisis, which was a exceptionally rare and historic event. Demand for housing was artificially inflated due to fraud. Do you think demand is being inflated now? If so, by what, and what would cause demand to shift back?

One possible answer is interest rates being low. However, the trend in interest rates towards 0 / negative has been going on for over 100 years. I don’t see them going up significantly ever again.

At some point they can't go lower because it becomes cheaper to store physical money than to pay negative interest rates, so it will stop somewhere.

yeah, I tripled my "investment" in 10 years, I might be biased... the only thing I regret is not getting a more expensive home

Yeah, it's completely bad timing, like the situation took them by surprise. Doesn't the state employ economists and planners to handle these situations properly and timely?

If so, what were these economists thinking? What is the profession even worth if it brings a false sense of knowledge and security?

Privatisation was seen as a cool thing 10-20 years ago.

> spending public money on overpriced real estate

What gave you that idea? The transaction is explicitly budget neutral, this is entirely financed by loans that will be covered by rental income.

Who carries the risk if rental income dries up? Exactly, the tax payer.

If rental income dries up in rent-controlled properties in Berlin, this will be a sign of such an enormous macroeconomic shift, that losses from this deal will be insignificant compared to everything else. Seriously, this is unrealistic scenario.

Ok, I see your point.

This is happening now in the UK. Lloyds bank [0] and John Lewis [1], a retailer, are both planning to tap into this revenue stream.

[0] https://www.theguardian.com/business/2021/aug/19/lloyds-plan...

[1] https://www.theguardian.com/business/2021/jul/04/john-lewis-...

I am all for big businesses moving into buy to rent. There are far too many amatuer landlords in the UK making a living by renting out poor quality housing.

My office landlord also has two small flats above (think glorified bedsits) and his partner also rents out a tiny cottage. This is their living (aprox. £3k a month), neither works or has any other business, all from a 'portfolio' of properties that maybe cost £150k twelve to fifteen years ago.

As an example of market inefficiency, multiply this across the country and it's not hard to argue that the housing market is severely broken.

A lot of comments in this thread about corporate buy-to-let seem reasonable, but only under the nihilistic assumption that prices cannot fall and home ownership must be perennially out of reach for the median earner.

What about instead of shifting from private parasitic landlords to corporate parasitic landlords, we just let people buy the homes they live in (by enacting one of many possible policies to limit the profitability of BTL and thus reduce competition for homebuyers)?

It just doesn't seem to make any sense to try and apply free market principles to housing. There's absolutely no benefit.

If we wouldn’t have a centrally planned monetary system that is trying to avoid deflation at all cost, I would agree with you. So for now, it seems that assets won’t be allowed to go down because it would blow up the debt based system that we have built. Central planning begets more central planning.

I too have no issues with large business getting involved with rentals. As long as it is clear for everyone involved that housing should be low margin business. That is very low, but relatively safe returns and mostly not from appreciation of assets.

Yeah, the shouldn’t have allowed rampant corporate ownership. Now is a great time to remedy that. Given the city’s continued growth, in ten years that real estate will look like a great investment.

Yeah, the shouldn’t have allowed rampant corporate ownership. Now is a great time to remedy that. Given the city’s continued growth, those purchases are a solid investment.

I don't think so. In investment terms, i believe the taxpayer is being forced to buy back these apartments closer to a top than a bottom.

The market for housing sets the price. Whether it is owned by a family, a landlord with one property or a corporation doesn’t change the price.

In Berlin property market is heavily regulated. Same property under different legal conditions may have 50% spread in price for which it can be sold. City is currently buying at a price not available to ordinary investors in order to offer rents significantly below the market. And it is still an ok deal for sellers, which purchased it much cheaper.

Around here, corporations buy a lot of homes and rent them so that probably affect prices.

At average price of approx.160 000€ per apartment it can be a good deal if financed with debt. Market value for those apartments is likely much higher and city-owned property firms can borrow very cheap. The only question is, whether this debt should be used to fix a short term problem with increasing rents or to invest in building more city-owned apartments. Besides, this deal may discourage investors, which may see property market in Berlin as low margin due to artificially limited returns.

is this necessarily a bad deal? Governments can normally raise capital at significantly lower interest rates than the private sector, so if the private sector was making a profit on this, then the public should be able to do too, and then re-invest that into public services

The government sold public housing and then bought (other) units that have appreciated in value.

Makes me think of Singapore - a very different model where the state owns a large part of housing

"rampant corporate ownership" - what exactly makes it "rampant"? It is just ownership.

I live in Berlin and for the most part, the houses really just sit there. They are not on a rampage or anything.

Rampant:

(of something bad) getting worse quickly and in an uncontrolled way

<https://dictionary.cambridge.org/dictionary/english/rampant>

Exactly.

After the leftists start to fuck up the real estate market with rental cap, statization, and other threats. The real estate investment fled the city.

Now it's almost impossible to find an apartment in Berlin anymore.

This populism is ruin the city, which needs to build new residents for the incoming influx of migrants.

Go to London. Then you'll see if the free market can provide what you want. It doesn't.

It has provided quite a few high rise buildings that are used by a lot of people. That will keep happening as long as it is allowed, making it possible for more people to enjoy the city.

(more rich people). Average people are not living there and they are getting increasingly squeezed. But if that's your goal, I guess we fundamentally disagree then.