If you're not buying another house, how does that change the net availability? You're not buying or selling.
This odd lots episode is a pretty good discussion on the whole subject: https://www.bloomberg.com/news/articles/2023-07-24/how-the-h...
So, by your definition, did I contribute to the auto shortage?
If they purchased this property at e.g. 7% or more, you may have a point.
That's not a luxury we plebes have when buying and selling homes. If the market happens to have crashed just before we have to move, for whatever reason, we have to take the loss, no matter how much it hurts.
So these lovely people (I'm sure) just lock up vast amounts of real estate at unrealistically inflated prices, hurting the entire system, purely so that they don't have to record a loss.
I view this as basically left-wing science denialism. The right has climate, the left denies the overwhelming consensus of economists as to the cause of housing affordability crises (it's supply and bad policy, not blackstone). [0]. Institutional investors own less than 3% of rental homes, which is a minority of overall homes and disproportionately buy homes that were not fit for sale anyways (so-called fixer uppers).
[0]: https://www.nytimes.com/2022/10/19/opinion/affordable-housin...
They owned 74.4% of rental units in 2015 https://www.jchs.harvard.edu/blog/who-owns-rental-properties...
Given the extensive reporting that they have been growing their share certainly it is even higher 8 years later.
Nobody is stupid enough to own an apartment complex in their own personal name without the protections of some kind of corporate structure. If that and/or a number of units owned that is lower than the size of an apartment complex are part of the definition of "institutional investor," the definition is circular.
Note I messed up and it is just over 50% of units.
This is what I mean about left-wing science denialism. Try even reading your own article
1. "According to the RHFS, individual investors were the biggest group in the rental housing market in 2015, accounting for 74.4 percent, or 16.7 million rental properties, followed by limited liability partnerships (LLPs), limited partnerships (LPs), or limited liability companies (LLCs) (14.8 percent);"
This is literally the exact opposite of your claim. But let's pretend that your claim was correct:
2. They're price takers.
3. Why is this a bad thing? If this were true (it isn't), then they're basically the only people who will rent at all anymore. The alternative is net worse for affordability - places without institutional investors have far fewer shares of people renting because there is literally nobody offering places for rent.
Isn't the very next sentence "However, because the share of rental properties owned by individual investors tends to decrease with the property size, individual investors owned less than half (47.8 percent) of rental units, followed by LLPs, LPs, or LLCs (33.2 percent), trustees for estates (3.3 percent), real estate corporations (3.3 percent), and nonprofit organizations (3.2 percent)."
Which makes it seem like the article is claiming the number is 52.2%—somewhere in between your original claim of 3%, and the GP's claim of 74.4%.
> Institutional investors own the vast majority of rental units
False - individual investors + trustees own the majority. Institutional investors are nowhere close to the size of a 'vast majority', especially when you consider that many individual investors choose to work through LLCs.
My claim:
> Institutional investors own less than 3% of rental homes
This is referring to single-family homes - I could probably have been more explicit when using the term 'home' above, but I was also replying to a comment specifically about SFH so I thought it was obvious from context.
Probably most of the discrepancy comes from 'institutional investor' not being a well defined term. If we are discussing megacorp, it is closer to the 3% number I have mentioned. If we are discussing mom & pop operating behind LLC, it is likely higher.
It is not as easy as "only C Corps are big"...
Especially since the linked article says it is >50% per unit which supports my point.
So big investors are good for housing because they increase demand for housing driving up the price because they offer rentals?
You are pretending that the investors are providing the housing here while ignoring that they are taking away housing that would be available.
Investors building units provide housing. Investors buying housing and renting it out do not.
I'm not going to continue responding but I encourage anyone looking at this thread to actually read the article as this person is just blatantly mis-stating it repeatedly.
It says that institutional investors are 14.8% of properties and ~36% of units or less. Neither of these are '>50% per unit', nor are they '77.4% of rental units', nor are they a 'vast majority of rental units', all of which have been stated at various times by this commentator.
You are each failing to actually read what the other is writing. One of you is talking about properties and one of you is talking about units.
Individual investors account for 74.4% of properties, according to the article you two are both citing:
> According to the RHFS, individual investors were the biggest group in the rental housing market in 2015, accounting for 74.4 percent, or 16.7 million rental properties
but institutional investors own a majority of the units:
> Institutional investors own a growing share of the nation’s 22.5 million rental properties and a majority of the 47.5 million units contained in those properties
In addition, you are using a different definition of "institutional investor" than the article.
No, I was originally talking about SFH properties as that was what the first post by 'TeckPerspecc' in the thread was talking about. Then when 'Guvante' responded and pivoted to units (not relevant to the original discussion of SFH), I pointed out that the article did not support their successive claims that the 'vast majority', '74%', or '>50%' of units were owned by institutional investors.
> but institutional investors own a majority of the units:
Read the article, it literally says the opposite of this. As I said, even under a very generous interpretation of institutional investor, they own at max ~36% of units. You conveniently only quote something about 'a growing share' because it is flat-out false that institutional investors own a majority of the units.
> In addition, you are using a different definition of "institutional investor" than the article.
Yes, my 3% claim for SFH uses a different definition of institutional investor, but that is irrelevant to the veracity of the claims you and 'Guvante' are making about the "majority of the units."
I do not agree that I have failed to read any of the claims. What has happened is both you and the other commentator have repeatedly mis-stated the numbers in the article. It is frustrating to lay this out quite explicitly and get another comment that completely fails to miss the nuance.
Not quite. He quoted the article about units. Your first response only talked about properties:
> This is what I mean about left-wing science denialism. Try even reading your own article
> 1. "According to the RHFS, individual investors were the biggest group in the rental housing market in 2015, accounting for 74.4 percent, or 16.7 million rental properties, followed by limited liability partnerships (LLPs), limited partnerships (LPs), or limited liability companies (LLCs) (14.8 percent);"
Perhaps you intended to also address units, but if so you forgot or accidentally lost it on an edit or something.
He responded again noting that the article says institutional investors own more than 50% of units. You then responded accusing him of blatantly misrepresent the article, again quoted the numbers from it on properties but also at least this time also gave numbers for units.
> What has happened is both you and the other commentator have repeatedly mis-stated the numbers in the article
OK, first of all since I have only posted once (before this comment) on this matter it is not possible that I have "repeatedly" misstated anything. I have at most misstated something once.
Second of all, here's the first sentence of the article:
> Institutional investors own a growing share of the nation’s 22.5 million rental properties and a majority of the 47.5 million units contained in those properties.
It is making four independent claims:
1. The nation has 22.5 million rental properties,
2. Those 22.5 million properties contain 47.5 million units,
3. Institutional investors own a majority of those 47.5 million units,
4. The share of rental properties owned by institutional investors is growing.
I do not agree with them on #3. From Table 1B they have individual investors at 47.3% of units and trustees for estates at 3.3%, which together is 51.1% and trustees for estates cannot reasonably count as institutional investors. Several of the others that they are also apparently including when they say institutional investors own more that 50% are also things I would not count as institutional investors.
Nevertheless, Guvante's claiming that the article says institutional investors own a majority of units is not a misrepresentation of the article, because the article in fact says that.
That the article's assertion is based on a completely stupid definition of "institutional investor" does not make Guvante's of the article a misrepresentation.
What should have happened in the discussion is this:
1. Guvante should have used properties, not units, or explained why he thought switching to units was more relevant. Or he should have just been more careful in reading, because I think he may have mixed up properties and units.
2. You should not have accused him of not reading the article right before immediately quoting a part of the article that had nothing to do with his claim.
3. When he then, correctly, pointed out that the article did in fact support his claim, you should have realized your mistake in #2, probably apologized for saying he hadn't read the article, pointed out that the article is apparently using a completely idiotic definition of "institutional investor", and pointed out that under a more reasonable definition of "instututional investor" it is at most around 40% of units (and could be much lower...40% comes from assuming that of the 11 categories they give all of those that are likely to have some institutional investors are all institutional investors).
And yes, I should have used the quote about units in responding to the claim about units, think I was focused on their original claim of 74% of units which was the property number so used the property number. FWIW, I did point out the idiotic definition of institutional investor (ie. including trustees) in another comment.
They fail to give the percentage of homes on the market they've been purchasing. In my market, it was more than 25% of all homes for sale. So let's explain away how removing a quarter of available inventory doesn't affect prices...
They are simultaneously responsible for bidding up the price of homes while paying far below the average price for a home in pretty much every state they are present in.
Texas is effectively one of the only markets with a substantial proportion of new buyers being institutional investors and this is largely due to the number of dilapidated homes in the area.
Housing should be consumption, not an investment, but the perpetual-ownership structure of property rights combined with low property taxes turns them into an investment. But not a "consume less today, produce more tomorrow, everyone wins" investment, it's the "rich people get paid for being rich" type of investment. Yes, many/most of those people are less rich than a corporation, but the problem is exactly the same: deadweight loss in the economy.
Renting is good - and requires the type of economic activity you would want banned.
> Housing should be consumption, not an investment,
Housing should be subject to market forces so housing developers can get signals about price. If people anticipate demand for homes is going to increase and start buying homes in anticipation of that (speculating), if we didn't have our stupid zoning laws, homebuilders would be able to build more homes and resolve the demand imbalance before it happened. This is a good thing. The problem is our stupid zoning laws, NIMBYism, etc.
> deadweight loss in the economy.
...no
It would be better if the people renting it and living there were the owner.
EDIT: nice edit. At least you acknowledge boomer zoning as problematic. But you blame the left. Lol. I seem to recall your guy repealing a bunch of density-promoting legislation and bragging about "saving your housing values" on TV. Someone is in denial here!
"Corpos" are filling in the gap because a ridiculously sticky real estate market means that there are a ton of places that could easily bear more renters. These corporations are typically paying far below the average for homes in whatever state they are buying in [0] (somehow paradoxically this becomes bidding home prices up) and typically allow more renters to enter the market rather than being priced out.
[0]: https://www.corelogic.com/intelligence/the-beginning-of-the-...
https://www.keranews.org/business-economy/2022-06-14/investo...
Also, there have been other articles I read during the pandemic (the topic was how long eviction moratoriums were killing small landlords while corporate landlords could weather it) that small, individual landlords do a much better job at renting out housing more affordably, being more willing to work with renters when they are behind on their payments, etc.
Regardless, these investors are paying way below the typical average for new homes in Texas, but somehow responsible for the affordability crisis?
I never understood that attitude. I always took leases as a two-way street. That is, I'm free to leave and go somewhere else at the end of my lease, but the owner is also free to not rent to me at the end of my lease (with appropriate notice). It seems weird to me to have the expectation that if I sign, say, a 1-year lease that means I should have the right to renew that lease in perpetuity.
I think this covers flat out most rental properties in California as well.
So the answer: California
I agree that this has an absolutely massive chilling effect on leasing & building, given that, reasoning from the past, any new development is almost certain to be subject to rent control within 20 years at most. I've never lived in a state nuts enough to have state-wide rent control before, it's interesting.
Use it or lose it I say. You wanna invest? That's what the S&P and index funds are for. Go thusly
Things get interesting when owners become a minority of the electorate.
Where do you draw the line/define at corporate ownership?
(You can trivially make the ban pierce any ownership structures)
I don't agree it is an apriori bad or a cause of the housing crisis - in many markets these are the only people fixing up dilapidated homes and the only people putting rentals on the market - both of which are valuable services.
Even with government intervention in the form of Fannie Mae and Freddie Mac underwriting 30 year mortgages, toll free highways to link suburbs with job centers, and mandated parking at every building, single family homes are not affordable.
Because if you bought an over-inflated peak-market house you're stuck with that mortgage rate.
There's people paying $1,500 - $2,000 monthly on mortgages for average homes. To rent it out, it's not sufficient (for a variety of reasons) to simply collect the mortgage payment, meaning you have to charge even more to stay afloat.
If the market cools, and people no longer are willing to pay $2,5000 a month in rent on average homes, then the home owner is in a pickle... try to re-fi, if possible, offload the home, or ride the storm out (if financially feasible).
Anything to quote here for this? I'm inclined to believe you are probably right, but an awful lot of real estate has changed hands in the past 5ish years... all of which is hugely inflated above actual property values in a normal market.
Lots of people with FOMO bought into houses way above their weight, and thought the rental market was a "game" anyone can play.
1) Actively looking for that right renter willing to pay a premium for a particular property/part of town.
2) There's probably tax benefits to the lost income and mortgage expenses while looking for a renter.
A person might not be able to lower prices because they owe more than the house will sell for. I can't imagine that is broadly the case in this market, unless the house was just bought.
A corporation is even less likely to lower prices if they own lots of properties. If they lower the price of one, their loss may be multiplied by the number of comparable holdings.
I imagine that it might affect borrowing for highly leveraged real estate investors. If you are securing loans on asset values and they drop in perceived value, lenders might get nervous and call loans in.
However, there are levels of debt-to-income that prevent the borrower from getting that time (insolvency exists).
I am hoping policy-makers have a more sophisticated approach than 'money printers go brrr'. Economies like price stability. Deflation and inflation can be destructive in the extreme.
You mean if you own a massive complex, which is the vast minority of housing - and also not what was mostly accused of being bought up by individuals or firms for speculation.
If you're talking smaller units, landlords are effectively price takers and it is pretty much never profitable to keep empty and price up everything else unless you are anticipating immediate increase in prices.
None of this is a major driver of housing prices either way.
Basic economics on how prices work? The fact that obviously nobody is a price-taker in most home markets?
Your theory is for some sort of massive coordinated action that would reap massive profits to anybody for defecting from. It's game-theoretically impossible but I need to provide the evidence? There are some landlord pricing tools that should absolutely be subject to anti-trust enforcement, but this is again: an extremely small current in modern rental/housing markets.
This is what I am referring to when I say that this is basically left-wing science denialism.
The properties are valued based on the advertised rental rates and if property values fall, they can have significant down stream effects on financing like banks requiring the property owner to put up more collateral next time they need a loan, whether it's to build more housing somewhere else or pay for maintenance that has large upfront costs.