Even if the wealthy did buy up extra supply to rent out, that would only mean increased supply of rentals, which would lower rents.
It used to be that rental housing was either owner occupied, like a landlord living on one side of a duplex or it was a big commercial investment. The current trend of every idiot having their starter house from 20yr ago listed as an airBnB wasn't a thing back then.
So basically we "need" way more housing per capita now so that they can all have their stupid little side gigs.
We'd revert to the state that applied for most of human history: 99% of humans will be serfs renting from 1% hereditary landlords. We'll have shown the American mid-century home-owning middle-class phenomena to be an historical anomoly. Average living standards will plummet and equity barons will never have lived so well. Any short-term rental rate drops will quickly be erased by a combination of growing population and well-known market manipulation, in particular further wealth consolidation.
Mere millionaires think they are safe; they are not. We live in a world that has a ~10 OOM wealth scale; being at level 7 does very little to protect you from 8s 9s and 10s, just as 2s are powerless to 4s and above. To a 10 a 7 may as well be a New Dehli beggar.
I think land lords wont lease out at marker rate due to that would lower the book value of the house which would make the banks call in loans.
Like, bank and land lords have some sort of understanding which in practice is some sort of price fixing and market collusion via proxy.
There is already price manipulation with rental properties. If a cartel is in control of enough of the supply they can set their prices as high as the market can afford. There is already a nationwide shortage of affordable housing in desirable places with jobs and the idea ITT is that it will only get worse as the investment class are the only people that can afford desirable property.
which is the correct price - because you dont need a cartel to set the price at as high as the market can afford; each individual landlord chooses to price their rental at the highest profit they can, with the lowest chance of a vacancy.
A cartel makes it possible to set the price _higher_ than the market can afford. Which is why a cartel is illegal.
The logic you're using here depends on deliberate vacancy; as soon as you concede that investors let out properties, you force them to compete in the market for housing with all the other supply.
I'm speculating here, but I'm guessing you haven't been month to month rent in a while..
EDIT: you seemed to have tried to redirect the question to this "always buy up more land as an appreciating asset", when both can be true. "Buying that land is an appreciating asset (we haven't made much more I'm aware)" and that "forming an asymmetrical power relationship with the renters improves owners life" are mutually beneficial activities
Or is the argument that merely building more houses isn't sufficient?
(Also presumably you could build an infinite amount of houses, but the land itself is somewhat of a fixed supply...)
Yes. The central thesis of the blog post is that increasing the housing supply solves the housing price issues.
And other people in this thread are going: "Uhh, well actually, have you considered that this is the fault of wealthy investors, and/or collusion or something"?
Anything to distract from the extremely simply and obvious idea that building more housing causes prices to fall.
Car loans have been a thing. And they attach to depreciating asset.
The real effect of this type of ownership is that it distorts the high end of the market and the effects ripple downstream. They force cash to move elsewhere in search of housing, which inflates those markets, so then those who could afford those markets move elsewhere, etc.
Despite all of the data that gets lobbed around on this topic, we don’t seem to have a very good mental model for how small changes in one segment of the market explode into the others and cascade dramatically.
It’s just not very meaningful to examine this as a percentage of units.
That’s why I specified NYC. There’s actually very good economic work on how the housing market is segmented and how demand and supply spill over. There’s some good studies from the NYU’s Furman Center on the topic.
> It’s just not very meaningful to examine this as a percentage of units.
Warehoused condos make up a small fraction of high cost housing in NYC and exist almost solely in a handful of blocks in Manhattan. They have virtually no effect on the broader luxury market, and take up very little land as they are mostly crammed into a small number of buildings.
Feb 2024 (last year there's data, I think) was a record low and it was 1.4% empty, according to NYC[1].
But I don't really know the methodology, and according to other nyc gov data it's surprising, since we still haven't recovered our population from COVID[2].
The first statistic (housing pressure) is based on population growth, but the NYC population statistics suggest still meaningful population loss since 2020.
I have seen articles in the past that suggest that apartment vacancy rates in NYC are self-reported and misleading at best, but I don't really understand how that would work and I can't find any sources on that now.
It's also my understanding that some classes of landlords can mark empty apartments as income losses, basically or partially making up for the loss of revenue in tax rebates. But that's also not something I understand well, just something I have seen asserted.
[1]: https://www.nyc.gov/site/hpd/news/007-24/new-york-city-s-vac... [2]: https://s-media.nyc.gov/agencies/dcp/assets/files/pdf/data-t...
I was talking about the myth that there are tons of apartments held by rich people who don’t use them for anything.
That's almost the exact opposite of your definition, but I agree that a 1.4% vacancy rate means there's almost nothing available for rent.
I'm having trouble finding an official definition from a source that reports them, but my definition matches things that I can find online, eg https://www.brickunderground.com/rent/vacancy-rate-what-does...
I had thought such units would have been included in the housing vacancy statistics, but apparently they are not.
https://gothamist.com/news/how-many-nyc-apartments-are-vacan...
My point though was just that I've seen arguments that these numbers can be manipulated, and the city's own data doesn't make sense by itself: either the 1.4% number is wrong or the slowly recovering population estimate is wrong. Especially considering the 60,000 housing units (representing 2% growth) created.
> They leave it empty (that actually happens a lot, especially with foreign investors
Not talking about rental vacancy.
Keep in mind: as soon as you concede that investor-owners are letting out properties, they are competing in the market: further supply of housing decreases their returns, because they compete with all other suppliers of housing, the high-order bit of which is existing owners. You have to make this math work with owners who deliberately keep their units vacant, or it doesn't even work as an idea.
I reject the notion that the units are not making money, and the notion that they are competing on price. We know corporate landlords engage in cartel behavior using price setting algorithms, and there is a deep well of tax-incentives for real estate (eg 1031s) that make it a more complex math problem than you are making it out to be.
The math works, it's just heinous.
They support these sorts of stifling rules and believe that skirting or changing those rules is a right-wing ultra-capitalist attack on the public good, despite the situation actually being the exact opposite.
That does seem to be a right-wing capitalist attack on the public good? Like, do we still believe in markets, or are we just cool with mega-corporations setting prices and wages?
I think Washington State is working on legislation around rental services due to this already being a problem in the Seattle area.
“Extra supply” is added to the portfolio containing housing they’ve already purchased. They own part of “existing supply” too.
Also - I don't think it actually affects prices. It's just that they've gotten good at seeking price equilibrium.
Last year, Seattle built 20% more houses than the highest of any of the previous ten years. (~13k units) And this year we're 11% above last year, so far.
What about that is not "actually encouraging more building"? I'd say your data might need revising.
Whether Seattle is building enough housing, or whether the region is doing enough to encourage housing development are separate claims.
If supply can be built to meet demand, trying to corner the market to achieve monopoly rents will fail in the long run.
It ought to be, but that is not how America works
What's happening now is the wealth and the middle are buying houses and apartments not for rental income but for appreciation. This motive is what stands in the way of new home building in any given area. This is why rents rise beyond an area can sustain at all - rents are set to maintain the ostensible value of a property - selling an empty property is fine, even encouraged.
The situation is visible everywhere.
That's already the case with a lot of properties in highly desirable locales whether high demand cities or holiday destinations.
The model isn’t an ideology, it is just a model. But there are a lot of ideological beliefs around this stuff. Some people seem to think that all markets have perfect competition, or that the resulting efficient pricing is inherently always good.
I'm very confused by your statements.
I mean it was the Big Beautiful Bill that just added 3-5 trillion in debt and reduced taxes on the very wealthy. I don't think those impotent Dems had any sway in this.
There are some wild political takes on the internet sometimes, and it can be hard to parse out exactly what the person is trying to say (especially if the reader failed their speed reading comprehension ;-) )
I just wish you'd dial back the combative tone of your comments on HN. You've been engaging in a lot of political/ideological battle recently, and it would be good if you could remind yourself of the guidelines and make an effort to use HN in the intended spirit.
We're trying for curious conversation here. Different perspectives about economics are very welcome. Slurs and swipes are not.
The actual data does not agree with you at all. In places that have implemented zoning reform, housing gets cheaper. In areas where it's easier to build (red states), housing is cheaper. There is no reality at all where supply of housing jumps high but prices do also.
> Personally I'd like to see legal constraints on investment in primary, single-family homes, and fewer legal constraints on building them.
Where investors are concerned, these are purchased to flip, or with the expectation that prices would rise. Given that we had inelastic supply but perpetually growing demand, that was a good bet. So, if you build way more, an investor wouldn't be so confident about that price increase. Now compound that with the risk of borrowing at higher interest rates to buy those properties.
I used to live in Vancouver, and on my street almost all occupants were owners. But guess what, the number of houses on that street has not changes in 100 years, and the number of people who want to live in Vancouver has probably increased tenfold.
The issue wasnt that all the housing stock was bought up, the issue is that housing stock did not increase to satisfy demands.
Additionally, a place like Vancouver is really a global real estate destination. People with money who are not from Canada come to Vancouver and drop a few mil on a single family home and outprice all the locals. If you are buying a house in Vancouver you are competing with wealthy people local, but also the top wealth from across the globe.
BC did pass legislation to make all single family homes qualified for quadplexes, but I think it is too little too late.
Anything short of taxing every residence which is not a primary residence AND banning foreign ownership AND reducing permitting toil AND raising interest rates, is going to fall short.
I gave up a few years ago and moved somewhere else. Vancouver is no longer for Canadians.
There's many arguments against taxation of primary residents but the strongest is probably that it punishes and hinders the ability for people to make sideways movements from similar properties to other similar properties, so it hinders housing liquidity, labour movement etc.
You forgot eliminating favorable taxation for real estate as well.
But actually if you kept all of those factors and simply just increased supply, it would still lower prices. It's not that complicated. It doesn't matter how many incentives you place on top of real estate. If you build more and prices decrease by 20%, it doesn't make demand shoot up by 20%.
The vast majority of people will never purchase more than one home, and will also never leave the metro-area they grew up in.
I think Vancouver people imagine the demand of Chinese real estate investors interested in their city is endless. It is not. Vancouver is the city that has the highest percentage of Chinese-owned real estate outside of China (globally) and its still at only 30%.
And the vast vast majority of cities do not have this dynamic or anything close to it. And the Chinese population is massively declining over the next 40 years, not growing.
That is a huge amount. I don’t blame immigration and foreign ownership as the only issues with Vancouver prices, but 30% of housing stock being owned just by Chinese population is massive. I knew several people who were Chinese nationals and owned a factory or large business in China and then bought a $4 million home in Vancouver. I don’t have any personal issues with these people and I befriend several, but I also realize that foreign capital from the richest residents outside of Canada were out competing locals.
Another thing to consider is that a large number of foreign nationals buying real estate in Vancouver come from countries that have strong capital controls (China, India) whereas Canada has basically no capital controls which results in a pretty onesided trade relationship.
If Piketty was correct, then inflation adjusted housing cost per sqft floor would always go up everywhere all the time. But we see dramatic differences in different periods of history, between different cities and we see rents stabilize & decline after building booms. We see housing costs go up the most in the places that build the least and the least in places that build the most.
If Piketty was correct, rich people could do this with things other than housing - they could buy cars and rent them out and then reinvest the profits to buy more cars. Ofc this doesn't actually work because there is no scarcity of cars - for better or worse we have chosen to place almost no limits on the quantity and density of cars in any city, state or country, while placing extremely tight & arbitrary limits on the quantity & density of floorspace in every city. For every car a rich person buys up to rent out, a car company reinvests the profits to build 1 more and then some. There is no functional reason residential floorspace cannot be exactly like that.
Most importantly location matters. Space and buildings are not something that you can easily ship from one market to another to balance supply and demand. Space is inherently limited and replacing existing buildings with new more efficient ones is also problematic when you have people happily living in those old buildings, especially in high demand areas. Construction work takes time and in the meanwhile the displaced families will create even more demand.
There are practical limits on how densely you can pack floor space before it becomes prohibitively expensive, unsafe, or simply impractical. As you build higher the costs grow exponentially while the livable space per floor keeps decreasing due to the tapered shape of the building and need for larger structural core and more elevators. Above certain height you will be forced to target wealthier residents which means either offices or large luxury apartments that are anything but space efficient.
Construction is extremely capital intensive. A building takes a large upfront investment, and it takes a long time for it to pay off. With cars the cost of making more is marginal once you have an assembly line in place so it's significantly easier to re-invest profits into ramping up production.
Renting real estate makes more sense than renting automobiles because real estate is more expensive, less liquid, and better at holding its value over time. Owning a house is more difficult even when it would make financial sense to do so (not everyone can get a mortgage, or commit to living in the same city for an extended period of time).
> for better or worse we have chosen to place almost no limits on the quantity and density of cars
Even worse, most places have chosen to place a lower limit on the quantity and density of cars through parking mandates. It is absolutely insane that we are still wasting space on parking even in densely populated urban centers where it's impossible to accommodate everyone commuting by car.
The main reason old buildings with lots of people are replaced with somewhat taller new buildings, is because of bad laws that require new apartments to go only where old apartments already exist. IMO these are exactly the laws that need to be reformed and or abolished. It doesn’t mean that no one’s old apartment building will ever be demolished for a new one, but right now that’s effectively a requirement. If you want to add four space to a city, you are first required to demolish a large amount of apartment space, and evict everyone inside. If you could simply purchase a house that was already on the market, whose owners wanted to sell and didn’t want to live there anymore, and replace it with an apartment building he wouldn’t evict anyone. This transaction was once common place, but is now effectively illegal almost everywhere in North America because “house people” demand segregation from apartment people.
> There are practical limits on how densely you can pack floor space before it becomes prohibitively expensive, unsafe, or simply impractical. As you build higher the costs grow exponentially while the livable space per floor keeps decreasing due to the tapered shape of the building and need for larger structural core and more elevators. Above certain height you will be forced to target wealthier residents which means either offices or large luxury apartments that are anything but space efficient.
All true, but these limits are really only relevant or binding in Manhattan and perhaps one of two square miles worth of downtown cores in a few large cities. If someone wants to say that Manhattan will always be expensive for those reasons, that’s fine, but it’s no excuse for the other 99.99% of places people want to live in.
Reforming land use successfully IMO doesn’t require us to solve the problem of “how to make Manhattan (or places like Manhattan) even taller” but the much more economical goal of “it should be legal to build a 4 storey walk up with no parking, anywhere you can build a house.” That’s a tough political goal to be sure, but it doesn’t come close to having to deal with any sort of physical or efficiency limits regarding construction of very tall buildings.
What about wealth inequality as the root cause of housing shortage?
Eventually there are more houses than people who want to be in them, regardless of whether or not they're being rented or owned.
When that happens you'll see the prices fall. After all, if nobody wants to rent your house, you'll either rent it for lower or sell it.
If nobody wants to buy it, you'll lower the price.
Ad nauseum.
Sounds a bit like "problem A is unsolvable because - look at here! - no one is solving problem C!"
Today you have to work 25 hours to buy the same share
In 40 years time you’ll have to work 4 months to buy what in 1985 would cost 1 hour.
There's reportedly enough housing stock to house the population twice over, yet prices still only increased.
Where there's sufficient inequality, the country will run out of eligible land before the wealthy run out of money.
It's exactly the situation you'd expect with record high prices and low sales volume, which is where we're at.
”The rich” aren’t that stupid, why would they take the losses to support someone else making a profit?
So despite it making no financial sense on an individual, house-by-house level, what happened in practice is that the market itself got strangled by this collusion and despite the existence of many empty houses available for either purchase or rent, you ended up with a non-negligible amount of these places not ending up in the market organically and as such driving up the costs for everyone. The property owners win big with this scheme of course, and the way things were setup you'd be a fool to go against the grain and try outcompete on cheaper housing, since you can't beat an entire market getting strangled.
So yes, "the rich" aren't that stupid, they just so happen to have systems that make these sort of moves profitable.
https://www.propublica.org/article/yieldstar-rent-increase-r...
There are multiple lawsuits, and settlements are already in with some property managers. Yieldstar/RealPage are not the only culprits, either: https://imgur.com/a/EmJQryv
The wealthy are generally monetarily shrewd, and building homes makes home ownership a worse investment. If there is a deluge of homes being built, the wealthy will take their money elsewhere. Being a landlord typically has ~10% annual return. Compared to just sticking money in the stock market, it's actually been worse as of late.
The goal of the wealthy isn't to make people suffer, it's to maximize their ROI.
Housing is not really a great investment. It's great for small investors because it's the only place where they can invest with leverage via a mortgage. If you have billions there's much better things you can invest in.
Why did the wealthy simple didn’t buy all of it to extort more rent?
If there’s 1 million people and 500k houses they will buy them up because everyone needs somewhere to live and will keep paying more and more to avoid the overcrowded slums that someone has to live in.
I think it’s a realistic goal for apartments/condos. Single family homes will always be constrained by land.
(Edit): I think you, and a lot of people who are anti-capitalist on housing, make the implicit assumption that all housing is a fixed good. There is only so much housing and our political goal is to allocate that fixed amount. In a lot of major US cities this is sort of true because we have regulated the construction of new housing to the point where even the government can’t build it. But the anti-regulation perspective is that if we get rid of the regulations preventing housing construction, then enough housing will be constructed that the allocation problem isn’t much of a problem. (Or something in between, ie it’s a lot easier to build/buy social housing to give away to people if housing is already made very abundant, and the fact that even governments like California have to spend truly ludicrous amounts of money just to get a few crappy studios built)
Personally I'd like to see legal constraints on investment in primary, single-family homes, and fewer legal constraints on building them.