I feel like there will be a difference between a handful of large corporations owning a majority of properties vs thousands of dentists and software engineers. Are you saying that all of these property owners are also soulless profit-optimizers?
I remember watching some video of tenants being priced out of their rental apartments so when they tried to contact the property owner, they found layers upon layers of managers and companies. It just seems better when there are more thousands of owners than just a handful of corporations.
Small businesses are often just as ruthless as large ones, just less competent. In any case, most rental properties are managed through agencies, who are soulless profit-optimisers.
In short, the appalling treatment of renters in Australia is due to the chronic undersupply of housing; if landlords had to compete for tenants it would not be possible to mistreat them in the way many currently do.
There is also scope for better regulation of tenancies and indeed the Victorian government has passed some reforms in this area.
Do we want to trade crazy high prices in the American real estate market for absolutely crazier high prices in the Australian real estate market?
That is a bit simplistic though, there could be other things going on in Australia, and all the other rich countries (e.g. Switzerland, England, China) where American prices look like a good value. I'm sure at the end of the day supply is the main factor, and not having a hot economy also helps, so I'm sure the USA will get there fairly quickly.
Australia I assume you mean the few places where people actually live in the country vs. the undeveloped outback?
It's just that everyone[1], given a choice, would like to live near the beach in Sydney's eastern suburbs[2], and there is most definitely no more land available in those suburbs. So the only alternative is to build up, and the boomers sitting in their multi-million dollar houses that were originally bought for $3.95 don't like that prospect one bit.
[1] Not everyone, but you get the point.
[2] and Melbourne's inner east, and the desirable parts of Brisbane and Perth.
It's awful, rogue landlords who do everything they can to not do repairs or improvements and when they do it often comes after a long time. Often as they have underestimated all the expenses they're liable for and find that the profit is not very much.
Give me a company that owns a whole block every day, they've modelled the risk better, have economies of scale, and you have more recourse against them.
I don't see how you have more recourse against a company with lawyers that can ignore you, and mom-and-pop. The latter are much more likely to respond to reason.
Of course, any landlord can be bad.
THIS. If Supply & Demand just feels too complex, then spend a day watching kids play musical chairs.
In almost all cities land has run out, so the only way to actually increase supply is to increase density. That means fewer single-family-homes, and more townhomes, multi-family, condos, and apartments.
The "American Dream" is a single-family-home, surrounded by other single-family homes, but even with urban sprawl we simply run into the limits of a commute and prices skyrocket.
Ironically we actually solved this problem: Indefinite Telecommuting. But then decided to take our solution that reduces property prices, reduces air pollution, and improves quality of life and then just threw it away because commercial property owners were losing money.
* American apartment complexes are typically ugly as hell. They're little building islands in a sea of asphalt, disconnected from the wider street grid too. They'd be more attractive if they were more like the complexes I saw while living in Munich: more green up front, car parking basically all underground.
* Require substantial backyards/courtyards for said complexes.
* More tenant protections that prevent landlords from arbitrarily non-renewing a lease, so that people in apartments can have long-term stability. If you break the rules repeatedly or severely, then sure, landlords should be able to remove you, but otherwise you should be left alone to live your life.
While in Munich, we lived in the Solln neighborhood. It's mostly apartments of some kind (we lived in an apartment, and then a backyard duplex), but they just look a lot less ugly than they typically do in the US. Example area: https://www.google.com/maps/place/Munich,+Germany/@48.081098...
Existing property owners can only afford to hold this opinion because land rents are insufficiently taxed. Through some sort of monumental stupidity we decided to tax labor instead of land. In this sense the SFH, “Americans like suburbia” problem is just a function of poor tax strategy. If homeowners were faced with the economic reality of their choices then markets would fix land use by themselves.
I live in Wyoming. We don't tax labor. Just extraction, consumption (sales), some investments and property. Our property is still expensive.
> If homeowners were faced with the economic reality of their choices then markets would fix land use by themselves
The problem begins and ends with supply restrictions.
And regardless, "we" also means the US federal government here, and everyone in the US is subject to US income tax, regardless of which state you live in.
The point is we have a natural difference-in-differences layout, and it doesn’t sustain the hypothesis that taxing labor is the problem (for this effect).
Yup. I'm a weirdo who owns his home but wants a shit-ton more housing built in his city, even if it means my home value goes down. I do know some like-minded folks here, but I would be very surprised if we weren't in the minority.
And it makes sense. We're taught (in the US) to treat our primary residence as an investment, and for most US homeowners it's the most expensive asset they'll ever own, and will be their main vehicle for maintaining their wealth through their later years, and for transferring the remainder of that wealth to their children.
Given that, you'd either have to be self-sabotaging-ly altruistic, or otherwise wealthy enough (outside of your home) that a significant dip in your property's value doesn't tank your finances. I expect that describes a small number of people.
That's incredibly untrue. There are numerous cities, even in CA and NY, that have plenty of room for new single family homes.
The response to that is usually some variant of "eww, gross".
In the past, we had that incidentally or almost "accidentally" as new industries would create or vastly expand existing towns, and development would occur around them.
Now most "work" is more fluid, and doesn't build company towns, instead you get endless suburbs expanding off an existing city, even when they're technically their "own legal framework".
Even after we moved off the "factory town" type new cities, the suburb development wasn't a major issue because each new exurb usually involved a new highway direct to the city center - but new highways have been rare mainly because all the "reasonable" ones have been built now.
You could either create demand for cities somehow (look at Las Vegas, built out of nowhere) or you could use high-speed commuter rail to empty areas to give room for a seed to grow.
It will make very little difference if Wall Street investors hold very little property.
Putting a finger on the scale of how much real estate is individually owned definitely makes a difference though. It makes it worse.
100,000 individuals who own 100,000 properties have far more political power than 10 companies who own 100,000 properties.
>If you want housing to be cheaper and renters to be better treated, increase supply. Everything else is window-dressing.
Yes. However supply is artificially restricted by government, to the approval of the average property owning voter. So more specifically, that is what needs to be changed. Everything else is window-dressing.
This is a country sliding further towards being us, with their housing being more restricted and more expensive.
Is that really true in the US?
Existing stock would be depressed in value as the pool of buyers would be smaller, but they'd be more likely to be first time buyers anyway (no capital gains to deal with) and demand for new would increase.
But you could end up with insane inversions where existing stock was pulled down to build new to take advantage of the gains exclusion.
The inevitable outcome of this is increasing homelessness, and likely slums when homeless just start building themselves make shift shelter in such large numbers that authorities can't stamp down on it.
It's a price we're willing to pay since we're not paying it.
I'm hopeful that successive governments over here show the courage of their convictions and enact enough change that my kids have a chance of getting into their own places, same as I did.
Tangent: how should we approach changing the housing mix in a city like Perth where 95% of new homes are large four-bedroom detached houses? It's all very well saying "That's what the market wants" when that's also all the market supplies. How do we bootstrap the idea of smaller, denser, affordable, more-diverse housing options?
The issue is exacerbated by the tax structures not incentivizing investments in other assets - e.g. in NZ if you invest over $50k in offshore equities, there is an annual FIF tax that must be paid, even for unrealized gains.
The fact that there is a housing crisis in most of the western world seems to prove this
"We're not trying to bring down house prices," Housing Minister Clare O'Neil declared on ABC's youth radio station triple j.
"That may be the view of young people, [but] it's not the view of our government."
https://www.abc.net.au/news/2024-12-14/housing-minister-says...
So you have attractive locations being completely dominated by rentable corporate owned housing and the net outcome is that people are completely boxed out of home ownership. There's no way pricing comes down because they do this in areas where people are willing to pay top dollar to live.
I live near Ann Arbor and we're seeing it play out right now--more dense housing in the inner core is being allowed (as current thinking says should be done) and whats happening is that smaller old-timey landlords and homeowners are being pushed out and their homes and apartment buildings are being replaced with brand new high dollar rentals. Not condos (although there are some of those as well, but fewer), rentals. And the rental prices are going up! Normal people get pushed further and further from the attractive areas to live, and pressure from these people moving out pushes up rent in the surrounding areas.
When the market turns around (and every time in the past it was "only going up" it eventually ended) then suddenly you have apartment complexes turning into condos to sell off capital and stop the bleeding.
The problem for people "on the ground/in the rentals" is that can force you to act when you're not financially prepared to - it's easy to find situations where someone can afford the rent; even afford the mortgage to BUY the apartment as a condo; but cannot afford the downpayment (or otherwise qualify for the loan).
> homeowners are being pushed out and their homes
What does this mean?
The desire is that a row of single family homes (say a block has 10) get slowly redeveloped into a row of brownstones or similar density - but they're still single family and owned by the residents, but now you have 20 in the same space, or 30. You can triple the density and not really change anything else.
But what ends up happening is that the single family homes remain single family, get slowly bought up by a developer and rented, and then the entire block gets turned into an apartment complex, perhaps with the same or even more units, but they're all rentals forever.
This might be fine, and perhaps even encouraged in some areas, but it does reduce the supply of homes to buy.
That's true of most of the Western world, unfortunately.
> a primary mechanism for wealth creation
I don't disagree but this needs to be correctly framed publicly as simply stealing from the next generation because that's what it is.
> Tax incentives
For anyone unfamiliar, Australia has a system called negative gearing. In the mid-2010s the then Labor party proposed scrapping it and lost the election. It really is the third rail of Australian politics. This is a shame because it needs to be scrapped.
It allows you to deduct losses on property against your ordinary income. So if you have a mortgage payment of $3000/month but only earn $2000/month in rent then your income is reduced by $1000/month. That's waht drives a lot of small investors to essentially speculate on property.
The US actually has a better system than this, which is that if you earn over a certain income level, you cannot deduct passive losses (like the above situation) against ordinary income. That would be better but still not enough.
So many upper income Australians essentially end up just hoarding property. They'll call it "investment properties" but really it's speculation. Historically, property was treated as an income producing asset, not a speculative capitals gains asset.
Oh and capital gains on non-primary residences should be like 70%. If you want to stop rampant speculation, that's how you do it.
> Tangent: how should we approach changing the housing mix in a city like Perth where 95% of new homes are large four-bedroom detached houses?
Perth like every Australian city is an urban planning disaster. It's just endless sprawl up and down the coast and inland to the hills. A generation or two ago it was a quarter acre block. Those days are long gone unless you're wealthy or you're 50km+ from the city (less if you go east).
So it's a car-dependent soulless hellhole. I say this as someone who knows Perth well. So even now if you build higher-density housing along transit routes, as they're doing, you still need a car (or 4) to go anywhere but work. And high land values make infrastructure projects incredibly expensive. Like imagine trying to build the Perth to Mandurah train line now instead of 30+ years ago when it was actually built. I guess they could utilize the Freeway they already had but what about the fremantle or Midland lines?
What you should do as you build out is reserve space for future infrastructure. AFAIK no Australian city, especially Perth, has never done. So Guildford Road or Great Eastern Highway should really be a freeway. Same with Albany Highway.
In 2024 Western Australia did really relax ADU (granny flat) development rules. The rules used to be really strict. Now you can basically always build one with normal building approval if you meet the minimum lot size requirements (generally 450sqm, sometimes as low as 350sqm, depending on the council).
Single family home zoning is really cancer to any decently sized city.
Anyway, the truth is, I'm not sure it can be fixed now. Big infrastructure projects are prohibitively expensive even with tools like eminent domain. We need to look at why it's so expensive to build apartments.
I think the only thing you can do now is for the government to become a significant suplier of housing to increase supply and stabilize rents.
So much of the wealth of our middle- and upper-class is dependent on property ownership and rent-seeking, it's depressing. That population essentially needs to vote against their own self-interest to help improve housing affordability, so it's hard to see that ever happening. The best I could foresee is a government forecasting a stepped reduction of relevant tax benefits over time (e.g. in three years negative gearing gets reduced by half, then half again the following year, etc.) and then future governments honouring that commitment. As you pointed out though, it's a surefire way for any Australian political party to shoot themselves in the face.
I sometimes wonder how strong the demand needs to get for more-affordable housing before the market responds enough to matter. State and local govt could likely have a role in unlocking infill developments and increasing the allowed densities, but I'm not plugged into the planning system. I also strongly agree that state government should be more proactive as a housing supplier (in conjunction with private industry).
In the past this effect was localized and when housing prices went insane, it was usually in a city, or a region, not a whole country. And high prices would encourage development in the cheaper areas, and people would move "out there".
In that light, this move is A-OK with me.
China did "over" solve it by building loads of houses, so everyone's house value just crippled down like crazy.
If buying a house delivers 5–10× the ROI of the S&P 500, that’s not “smart investing” then there is a huge problem to be addressed ... (preferably by building more)
That's not really a bad thing unless you believe real estate should be a vehicle for investment. However, in T1 and T2 cities asset prices are roughly on par with western major metro areas. However, property management fees tend to be lower. I suspect the Hukou system contributes significantly to keep housing affordable, and it's not just the massive supply.
And leverage brings all the problems associated with it; if you own your house outright and it goes down %10 you're out 10%; if you only have 10% equity and the same happens you're down 100%. The gains, of course, work similarly which is why for so long it's been a heads I win, tails I win.
My reasoning is we have a massive construction sector compared to other nations, with a relatively high productivity in terms of dwellings built per capita. We also have pretty slack standards, with even weaker enforcement.
In addition to that, we have a very weak growth in productivity per capita; and since we are trying to rapidly grow, we have to play catch up to provide the same level of services. This needs to happen while our construction sector is stressed, so the same amount of wealth goes a shorter distance again.
You can also see this in rental prices; negative gearing should allow the capital price to decouple from the rental yield to a larger extent than without it; but we still see high rents...
There's a counterpart to supply in supply-demand. I wonder if we could also adjust that.
You can also look at reducing demand due to mass migration.
Australia's land tax system makes it effectively impossible for large corporations to own large chunks of residential property, but our real estate is amongst the world's most expensive and landlords are still awful - it's just that the landlords are hundreds of thousands of dentists and, yes, software engineers rather corporate entities.
I'd you want housing to be cheaper and renters to be better treated, increase supply. Everything else is window-dressing.