[HN Gopher] How private equity is changing housing
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How private equity is changing housing
Author : harambae
Score : 93 points
Date : 2025-12-09 17:26 UTC (5 hours ago)
(HTM) web link (www.theatlantic.com)
(TXT) w3m dump (www.theatlantic.com)
| toomuchtodo wrote:
| https://archive.today/HlxXN
| mwkaufma wrote:
| Summary: they're pulling "starter homes" off the market,
| predominantly in nonwhite neighborhoods, and skimping more on
| maintenance/landscaping.
| potato3732842 wrote:
| >and skimping more on maintenance/landscaping
|
| I.e the kind of stuff everyone wants to do but can't justify
| flying so close to the sun on because they don't have a legal
| army say "we are in compliance and here's why" on their behalf
| when the municipal government comes looking for fine money or
| the slip and fall lawyer tries to make something their fault.
|
| In "reasonable" (note for the bottom feeders, I did not say
| "free", I said "reasonable") markets the big guy has to do
| things to higher standards because his big pot of money will
| attract vultures looking for a quick buck if he does even
| slightly wrong.
| nradov wrote:
| It's usually the opposite. In a lot of rental markets the
| small time landlords do even less than the minimum in terms
| of maintenance and upkeep, whereas the big corporate
| landlords at least have some basic level of organizational
| competence. Most local governments don't have the resources
| to do much enforcement so only the most serious violations
| are ever punished.
| potato3732842 wrote:
| Eh, toss a coin. I've seen it cut both ways. Corporate can
| be "is sending someone to fix it" for months just like a
| slumlord.
| oldjim798 wrote:
| "Skimping on maintenance" is capitalisms main and really only
| play. So many issues (housing, transport, utilities) are
| because "the market" won't ever pay to maintain.
| edoceo wrote:
| Externalize the costs, to build your profit!
| FireBeyond wrote:
| Agreed. When I moved to the US from Australia 19 years ago,
| the road condition here blew my mind. The potholes, tree
| roots, all of that? There'd be protests at City Councils for
| a fraction of that in Australia. Here, just "the way it is".
| cyberax wrote:
| There are now no "starter homes". There are starter
| _locations_. And dense cities ain't them no more.
| mwkaufma wrote:
| This is addressed in the article that you didn't read, but
| commented on anyway.
| cyberax wrote:
| No, it's not. The article is nothing but a complete lie and
| a ragebait against scapegoats. This is similar to how
| conservatives are raging against trans people.
|
| Starting from this:
|
| > The United States is short 4 million housing units
|
| It's a lie. The US has more than one housing unit (1.1) per
| family.
|
| We don't have a housing problem. We really really don't.
|
| We have an urbanism problem, that made the dense hellscapes
| the only viable housing location.
| thephyber wrote:
| When a landlord "Skimps" systematically on their obligations as
| a landlord, we call it a slumlord.
| christkv wrote:
| I'm as pro capitalism as it comes but private equity should not
| be allowed to operate in the consumer housing market. They can
| develop and sell houses but cannot hold is my point of view.
| jack_tripper wrote:
| Same. I remember growing up in the 90s, after the fall of
| communism, hearing that capitalism beat communism because in
| capitalism you can own things.
|
| MFW I now live in capitalism and can't afford to own anything.
| ReptileMan wrote:
| One of the things communism did right was housing - in the
| Eastern Bloc home ownership was above 90%. The quality was
| not great, not terrible. But bad shelter is infinitely better
| than no shelter. I also think that it also excelled in K12
| education. Whether because the german style system that was
| common in europe pre WWII was just left alone - I don't know.
| But until the mid 90s we really didn't had the school
| reformers to fuck it up. Right now we are as good as
| producing illiteracy as the rest of the west.
| thephyber wrote:
| What does "home ownership" mean in a country where there is
| no private property?
| ReptileMan wrote:
| There was a lot of private property in the socialist
| countries. I am not sure from where this thought even
| came to you. What was impossible was owning big private
| enterprise. But small businesses - like a restaurant or a
| shoe repair shop were allowed. You were also allowed to
| own houses, cars, appliances, clothes and almost
| everything else. Land was a bit weird - you could own,
| but not too much - basically stuff that was small enough
| to evade the collectivisation process.
| iberator wrote:
| Just about right!
| dragonwriter wrote:
| The socialist sense of "private property" refers
| specifically to ownership of physical (or at least,
| nonfinancial) means of production, other than by the
| workers whose labor is applied to it.
|
| It _does not_ refer to all ownership by individuals of
| real and personal property, restrictions on other
| personally-held property are separate concerns from the
| abolition of private property, and socialists regimes,
| including those in the Soviet bloc, frequently have
| retained private home ownership, which is not
| fundamentally inconsistent with socialist theory.
| thephyber wrote:
| The only reason capitalism works is because it turns
| everything into a struggle for existence, which is the best
| motivator. Every company is forced to compete (assuming there
| is no moat created by politics eg. Intellectual Property or
| contract law) or the company will go under.
|
| But it also means that the people who can't compete in this
| type of Darwinism only survive because of the empathy of
| others who do (whether that be family/friends, politics, or
| charities).
|
| I'm worried about the breadth of industries that PE has
| infected in the US.
| Akronymus wrote:
| IMO the main problem with them is that actual competition isnt
| really possible. Most of the time, you just can't develop
| newer/denser housing where they are taking over neighbourhoods,
| so no real competition is possible which allows them to distort
| the market for their own gains.
| lanfeust6 wrote:
| it is stymied in part owing to regulatory requirements that
| makes getting loans at good rates impossible for small
| developers.
|
| Notwithstanding that, the populist fantasy is that developers
| won't build more "because they are greedy", as though that
| math works out. If developers don't leave money on the table,
| then they'd want to build where the demand exists and it
| does. They face a number of constraints and bottlenecks, not
| just for materials/labor, but managing risk. Risk makes loans
| expensive, everything is built on credit. Some of that risk
| is compounded by the threat of litigation by NIMBYs, or
| regulatory requirements, or environmental review, etc.
| imglorp wrote:
| Another market where PE is incompatible with human life is
| healthcare. It becomes a race to maximize profit at the expense
| of worse patient outcomes and worse healthcare availability for
| all. They close redundant, less profitable hospitals (usually
| rural). Same with pharma: they jack the prices on common meds
| and only develop profitable ones, not effective ones or needed
| ones.
| ryuhhnn wrote:
| Not to be pedantic, but this would make you not so "pro
| capitalism as it comes". The ability to develop and sell
| houses, but not hold them (in service of rent-seeking) runs
| contradictory to the very core tenant of capitalism, which is
| private property and free markets. Socialism and supply/demand-
| markets are not mutually exclusive; it sounds like you're more
| amenable to a socialist or mixed-market system than you give
| yourself credit for.
| ReptileMan wrote:
| Except whenever you have inelastic demand or supply you are
| no longer in a free market.
| ryuhhnn wrote:
| One could argue that PE is both A. ) the ultimate form of
| capitalism and B. ) explicitly creates inelastic demand. A
| truly free market will always succumb to dominating forces
| that create the inelasticity (or at least that's what
| history has consistently proven).
| ReptileMan wrote:
| That is the point. Capitalism has never included free
| markets in its honest definition. They are nuisance for
| the capital owners. But when they are forced to
| participate in the free market - then a big part of the
| surplus generated by the companies is captured by the
| society. See that was Marx error - instead of socializing
| everything, he should have just made sure that no
| monopolies, monopsonies and enough state capacity exist
| to make the unfree markets free. Send this message back
| in time and we will save couple of hundred of million
| people.
| Loudergood wrote:
| Capitalism actually prefers to control the markets.
| ReptileMan wrote:
| See my reply downstream.
| phkahler wrote:
| >> Not to be pedantic, but this would make you not so "pro
| capitalism as it comes". The ability to develop and sell
| houses, but not hold them (in service of rent-seeking) runs
| contradictory to the very core tenant of capitalism, which is
| private property and free markets.
|
| I think you're right. A lot of people confuse capitalism for
| working for a living - because that's what capitalists want
| the middle class to think it is. Capitalism is really about
| getting capital to work for you so you don't have to.
| Building and selling homes is a form of working. Holding
| homes for rent is capitalism.
| mylifeandtimes wrote:
| almost, but rent-seeking is an odd form of capitalism,
| because in its pure form it isn't providing value.
|
| nothing in the real world is in its pure form, and some
| business are able to provide value which they cannot charge
| for because they can rent-seek on other areas, so there is
| always nuance.
|
| but an economy where rent-seeking is the main path to wealth
| is an economy in really poor shape.
| mjamesaustin wrote:
| Rent seeking is the end result of capitalism as an economic
| system. The goal of a capitalist is to accumulate capital
| (wealth), and rent seeking allows you to do this without
| expending any effort. Any capitalist acting rationally
| within the system of capitalism will desire to seek rent.
| christkv wrote:
| Im capitalist in the belief of truely free markets. Im
| against monopolies or monopoly like structures. I can make a
| case for private equity being a cartel as well knowing how
| they use algorithmic platforms to price rentals thus
| collaborating on pricing while pretending they don't. After
| all its a third party setting prices.
| lanfeust6 wrote:
| More broadly, housing cannot be relied upon as an investment
| vehicle and remain affordable. Whether it's private equity or
| others is a moot point. The perverse incentive is there in that
| housing appreciates in value because of artificial scarcity.
| It's a 1-1 relationship.
|
| I don't think this is contingent at all on the capacity to buy
| and hold, but on policies that limit building and financial
| instruments related to housing. The 30-year mortgage even. So
| now similar to the case with Social Security and public
| pensions abroad, politicians are playing a game of hot-potato
| not wanting to be the ones to have to make changes and upset
| the large aging voting bloc. Similar, too, because it's a
| generational wealth transfer.
|
| Many items through market exchange have gone down in price over
| time owing to increases in efficiency (see: coffee makers).
| This can't be blamed on markets qua markets. It's adversarial
| policy that harms young workers.
| cyberax wrote:
| It won't change anything. Private equity is always a nice
| scapegoat, but it just exploits the same market forces as any
| other economic actor.
|
| If you ban private equity, it's going to be mom&pop
| redevelopment companies doing the same. I give you an example
| of Vancouver. It banned foreign purchases:
| https://www.kelownarealestate.com/blog-posts/canadas-ban-on-...
|
| The impact was literally non-existing. The prices continued to
| grow as Vancouver 's housing density keeps increasing.
| FireBeyond wrote:
| I don't know the specific rules in Vancouver, but yeah, a lot
| of those attempts were illusory/perfunctory...
|
| If you can afford to have one, or multiple, $2M+ condos that
| you just "park" your wealth in to leave them vacant, the
| presence of a $10K or $20K fee/tax a year is in the "chump
| change" category.
| cyberax wrote:
| Vancouver has fewer vacant units than the average for the
| country.
|
| > The number of vacant homes in Vancouver has fallen below
| 1000 as of 2024. The latest Annual report shows low vacancy
| rate of 0.49%. [the average is 2.7%]
|
| Guess what happened with the housing prices? Right. They
| kept increasing. The housing density went up, so the prices
| must also increase.
| oldjim798 wrote:
| Ban corporate ownership of residences. Only individuals, Coops or
| condominiums. Cap how many rentals an individual can own.
|
| The government should also build massive amounts of housing.
| Everywhere of all types - apartments, townhouses, single family.
| After built transferred to the residents as coops.
| garbawarb wrote:
| It's interesting to think of the second-order effects of this.
| If these corporations can't invest in housing, they'd direct
| their money elsewhere. Maybe we'd see a stock market or
| commercial real estate boom. Maybe a proliferation of new
| ventures.
| phkahler wrote:
| >> If these corporations can't invest in housing, they'd
| direct their money elsewhere.
|
| I think that's why they're buying residential - there aren't
| any other traditional investments that aren't in a bubble or
| just have low returns. If you anticipate economic collapse or
| hyper inflation or whatever, physical assets make sense -
| when you measure wealth in houses you don't care what the
| dollar does. Gold people can do without, housing not so much.
| Whatever happens next, people will need a place to live. OTOH
| the population collapse is also coming so housing doesn't
| make much sense beyond 2030 or so.
| the_sleaze_ wrote:
| There will be a squeeze on real estate as the sea level
| rises and insurance increasingly withdraws from coastal and
| fire-prone areas.
| asdff wrote:
| I'd expect to see a surge in self insurance. These areas
| are so valuable already in a lot of cases where rich
| people are content to pay six figure property tax bills.
| Especially with cost of construction being a fraction of
| that property's value.
| quesera wrote:
| If insurability becomes a crisis, I'd expect it to reduce
| housing availability and raise prices for competing
| (insurable) properties.
|
| Of course it wouldn't happen in isolation, so there are
| other massive forces to consider.
|
| Maybe wide swathes of formerly-occupied (but now
| uninsurable) land would sell cheaply enough that middle-
| income people could build inexpensive semi-disposable
| vacation cottages, like the old days.
|
| GP's assertion of population collapse in five years is a
| bit extreme for me!
| teeray wrote:
| I wonder if they could develop some legal apparatus to employ
| individual straw buyers to circumvent such a restriction.
| BeetleB wrote:
| > Ban corporate ownership of residences. Only individuals,
|
| Many/most corporate owners _are_ individuals (as per the linked
| report). See my comment here:
|
| https://news.ycombinator.com/item?id=46208561
|
| > Cap how many rentals an individual can own.
|
| Yes. Cap to 0. Until we get data on the breakdown (what
| percentage of rental homes are by owners who own 1, 2, 3, etc),
| we don't really know. It won't be easy to determine because a
| lot of RE investors create a new LLC for each property they
| own.
| tptacek wrote:
| I love that there are people that can't even conceive of the
| idea that entities that let out apartments are providing a
| service to residents. In their view, the natural state of every
| resident is a desire to own their home.
|
| A fun knock-on effect of this policy proposal: it would
| effectively halt _all_ new development of dense multifamily.
| oldjim798 wrote:
| Yes, the natural state of every resident is to live in their
| own home. To be clear by home I don't mean "single family
| detached house on a suburban street", I mean a place to live
| with water, electricity, and a roof.
|
| Landlords provide no 'service'; they are merely an existence
| tax.
|
| The market already does not build dense multifamily; what is
| there to halt?
| tptacek wrote:
| You can't fathom that someone might _not_ want an ownership
| stake in the property they happen to reside in, that there
| could possibly be a downside to that.
| oldjim798 wrote:
| I never said homeownership. Just a place to live thats
| not owned by a ruthless corporation that spends every day
| trying to squeeze every penny possible out of the tenant
| tptacek wrote:
| I'm responding to _your_ policy proposal! It 's not my
| fault if that policy doesn't cohere with your
| preferences!
| bpt3 wrote:
| What about a non-ruthless corporation? How do you test
| that?
|
| What about the fact that most homeowners get the vast
| majority of the money for said purchase from a
| (presumably ruthless) corporation?
| oldjim798 wrote:
| No such thing as a non-ruthless corporation, it is
| inherent with the legal structure.
| BobaFloutist wrote:
| You know how it's recommended to sell employee stock
| grants asap, so your not over indexed into your employer?
| I.E. if the company you're working for performs poorly or
| goes under, you don't want to lose your job _and_ wealth,
| and if it does well, you 'll keep making money at your
| job anyway, so there's no advantage to investing more of
| your personal capital into your employer than you would
| if they weren't employing you (barring insider trading).
|
| It's funny that people rarely seem to apply the same
| reasoning to their dwelling place.
| tptacek wrote:
| I think everybody has to be obliged, at least once, to
| move within a year or two of buying a house, just so they
| can understand what it is to take a huge bath on closing
| costs.
|
| And that's before you get to things like the furnace
| going, or the roof failing. Two kinds of people with this
| "landlords provide absolutely no services" perspective:
| people so comfortable financially that the y-o-y costs of
| maintaining a property don't even register, and renters
| who have never owned and been on the hook for an urgent
| big-ticket maintenance problem.
| kasey_junk wrote:
| Can I get a waiver due to my home purchase at the height
| of the bubble before the gfc? Cause I feel like I've paid
| enough for lessons learned.
| raw_anon_1111 wrote:
| There is absolutely no way I would have wanted to be tied
| down to buying a house when I was young.
| BeetleB wrote:
| > The market already does not build dense multifamily; what
| is there to halt?
|
| Landlords have existed since forever, and the market was
| until recently very happy to build enough supply.
|
| That it's suddenly gone downhill implies a problem well
| beyond "landlords".
| tptacek wrote:
| There's also the obvious fact that we do build dense
| multifamily (not enough of it, but some is better than
| "none", which is the endpoint of that policy).
| J_Shelby_J wrote:
| The real reason single family housing ownership is the only
| real option is that society effectively pays people to own;
| appreciation out weighs all costs of ownership so in the
| end it's free or even an investment.
|
| But if it was truly a free market and supply met demand
| owning housing would be a depreciating asset and renting
| would be cheaper.
|
| Land ownership is a cultural construct. Their is no natural
| state.
| postflopclarity wrote:
| build. more. and this problem will go away.
| ryanmcbride wrote:
| Not if private equity just snatches it all up.
|
| Yes build more. Also regulate the oligarchs until they no
| longer exist.
| api wrote:
| PE buying real estate is a long bet on housing prices. If
| supply increases enough, prices flatten out and then fall,
| and the longs get crushed.
|
| These investments are a bet on continuing to under-build and
| under-densify.
| swat535 wrote:
| If they buy out all the supply, there will always be a
| shortage.
| Ekaros wrote:
| So build so much they cannot rent all of it. Over supply
| will eventually drive down prices.
| ryanmcbride wrote:
| who is going to do the building? Because PE is the one
| doing that too.
| verteu wrote:
| No, private equity appears to be a minority of home
| builders: https://www.builderonline.com/builder-100/build
| er-100-list/2...
| ryanmcbride wrote:
| Sounds like trickle down housing to me.
|
| Me: "should we stop allowing private equity to hold
| property?"
|
| My Strawman: "nah let's build more houses to be snatched up
| by private equity, that way eventually maybe they'll be
| really nice and decide to lower prices for us someday due
| to the infallible balance of supply and demand that
| definitely hasn't been rigged to hell over the past half
| century. They certainly won't just continue to rig the
| system to benefit themselves"
| gruez wrote:
| >to the infallible balance of supply and demand that
| definitely hasn't been rigged to hell over the past half
| century
|
| How has "supply and demand" been "rigged"? A lack of
| supply isn't evidence of "supply and demand" being
| "rigged", it's it working exactly as predicted, not any
| different than oil prices going up when there's some
| geopolitical event threatening supply.
| mikeg8 wrote:
| its a good bet on their part (although i hate it). we
| obviously can't increase supply fast enough to keep up with
| demand in the current regulatory climate and with an
| existing shortage of skilled tradesmen _and_ ratio of
| tradesman retiring out vs newcomers entering construction,
| there doesn 't seem to be a feasible way to meaningfully
| increase supply.
| hashhar wrote:
| The area I live in has homes that remain empty because the
| investor doesn't need the capital nor the space and just
| holds empty units for multiple years when they eventually
| sell (for even more than they would have sold in the past).
|
| Housing demand will always be > 0 as long as population is
| growing and hence there can never be a oversupply.
| pastage wrote:
| In areas where there is demand without risk.
| JumpCrisscross wrote:
| > _Not if private equity just snatches it all up_
|
| "As of December 2022, the five largest investors owned about
| 300,000 homes -- just under 2% of single-family rental homes
| nationally."
|
| Where institutions dominate is in rentals: "institutional
| investors own roughly 2% to 25% of single-family rentals in
| major markets" [1];.
|
| [1] https://www.npr.org/sections/planet-
| money/2025/09/09/g-s1-87...
| quamserena wrote:
| this sounds nice, but neglects the fact that (1) materials cost
| has gone up and (2) zoning requirements exist. (1) means its
| just more expensive to build overall, and (2) means that a lot
| of proposals for apartment complexes get voted down.
| hypeatei wrote:
| Part of building more is getting government (mostly) out of
| it so that things like zoning laws don't hamper new
| development. Obviously that is very hard to do at a local
| level when incumbent homeowners' housing values would be cut
| in half overnight.
| pempem wrote:
| This is happening in california. In fact there are three
| current situations: 1/SB9 cutting R1 lots in half 2/ ADU
| laws, which let you build up to 3 homes/units where there
| was one and further, can be combined with SB 9 3/ AB2011
| which lets you turn defunct strip malls into housing
|
| Honestly, this plus things like PermitFlow make me feel
| like we will be able to build enough. The issue will be
| making sure the housing is affordable rather than expensive
| and empty.
| Spivak wrote:
| Well duh because "just make everyone underwater on their
| mortgage" is a bit of a silly solution that definitely
| won't have any second order effects.
| hypeatei wrote:
| You're not wrong. There are multiple aspects of
| government involvement that require untangling which
| includes federally backed mortgages that allow banks to
| be more lax on loan terms (which is how we got 30 year
| loans and Trump proposing a 50 year)
| JuniperMesos wrote:
| Actual NIMBY/YIMBY fights look like one level of government
| representing a lot of people who can't afford a primary
| residence fighting against a different level of government
| representing a lot of incumbent primary residence owners
| who are concerned on a personal level about the negative
| externalities of more people being able to live in their
| neighborhood. Government is happening no matter what.
| gruez wrote:
| >this sounds nice, but neglects the fact that (1) materials
| cost has gone up
|
| That's a red herring because most of the price increase comes
| from increase in land prices.
|
| https://www.aei.org/housing/land-price-indicators/
| greenie_beans wrote:
| can you please explain how these graphics are supposed to
| support your argument? it's not clear to me and i'm trying
| to understand the georgist POV.
|
| nonetheless, materials and the cost of labor are the most
| significant costs for new buildings. not land, taxes, or
| zoning regulations. here is one example where this is a
| fact: www.vermontpublic.org/local-news/2024-05-23/uvm-
| halts-student-housing-project-construction-costs-workforce-
| shortage
| gruez wrote:
| Switch from "national level" tab to "metro level", and
| select los angeles for an extreme example. Look at the
| the figures right of the map, that says "share of SFD
| units build before 1980 with a land share of" and compare
| the figures between 2012 and 2024. Just by eyeballing the
| percentages, it looks like the land share went from
| 50-60% to 70-80%. This is confirmed if you sum up the
| figures in a spreadsheet, you go from an average share of
| 51% to 72%.
|
| You can compare this to overall housing prices in the LA
| area[1], prices in 2024 is 262.7% of 2012 prices. Suppose
| you have a $100k house in 2012, that will worth $262k in
| 2024, an appreciation of $162k. Using the land value
| percentages above, the land value of the houses are $51k
| and $188k respectively, an appreciation of $137k. That
| means 85% of the appreciation was in land, not because
| building materials got more expensive or whatever.
|
| [1] https://fred.stlouisfed.org/series/LXXRSA
| greenie_beans wrote:
| also neglects the market's appetite for this risk of building
| in the current environment, which is the biggest problem.
| market gonna act like a market
| postflopclarity wrote:
| I'm not neglecting those facts. 2) is almost the entirety of
| the problem. the call to action of "build more" is not
| wishful thinking that someone will donate free houses to the
| public. the call to action is to vote for politicians who
| will remove the near-universal smothering red tape that
| prevents any kind of meaningful new housing construction
| collinmcnulty wrote:
| I recently learned about Singapore's seemingly excellent public
| housing system that is used by over 75% of its population.
| Singapore being so capitalist about everything else while carving
| out housing I think provides evidence that capitalism can be made
| stronger by keeping certain things away from strict market
| forces.
|
| https://en.wikipedia.org/wiki/Public_housing_in_Singapore
| api wrote:
| We don't have a free market in housing at all. It's a cartel
| with restricted supply.
| orwin wrote:
| You can't have a free market if supply (or demand) is
| constrained.
|
| You either go the liberal+regulated free market way, which
| will get lobbied, then overregulated, or you go the
| socialized way, where you allow local government and
| associations/unions to compete in the market... with the
| exact same rights as the companies, and no weird rules that
| prevent them to truly compete.
|
| And if you have a natural monopoly (energy distribution is
| the worst offender), you have to go the central planning way
| I guess, until we find something better.
| collinmcnulty wrote:
| Who is "we"? Even within the USA that statement certainly
| isn't true everywhere.
| hardtke wrote:
| One of the issues the article doesn't mention is that these
| houses are effectively cheaper to purchase for corporate owners.
| Generally they can borrow money at a lower rate, but the ability
| of corporate owners to use depreciation on a new purchase to
| offset profits from previous purchases is more significant.
| Effectively they are redirecting money that would be paid in
| taxes into the payments on the new purchase.
| shadowpho wrote:
| > Generally they can borrow money at a lower rate
|
| There is some tax tricks you can play, but in general homes for
| primary residence is lower then secondary/rent, which is a big
| proportion of cost.
| api wrote:
| Our system is far more regressive than most people realize. The
| poor pay more for things, don't have access to all kinds of tax
| breaks and cheap money, and can't afford accountants and shell
| companies and all the other complicated tricks you can use if
| you are wealthier.
|
| I wonder: if you added it all up, would a flat tax (which is
| nominally regressive) actually be more progressive than the
| regressive taxes we have?
| AnthonyMouse wrote:
| > would a flat tax (which is nominally regressive) actually
| be more progressive than the regressive taxes we have?
|
| That's an easy one to fix regardless. Use a flat tax with a
| large fixed refundable credit. Now everyone pays e.g. 30% but
| gets a $12,000 credit, so someone who makes $40,000 is
| effectively paying zero, someone who makes $80,000 is
| effectively paying 15% and the effective rate approaches 30%
| as the number goes up. But the marginal rate is the same for
| everyone so there aren't all these complexities and arbitrage
| games, and at lower incomes the credit stands in for a lot of
| assistance programs so you don't get all the marginal rate
| cliffs from overlapping phase outs.
| ceejayoz wrote:
| > Now everyone pays e.g. 30% but gets a $12,000 credit, so
| someone who makes $40,000 is effectively paying zero,
| someone who makes $80,000 is effectively paying 15% and the
| effective rate approaches 30% as the number goes up.
|
| This only _maybe_ works if you count capital gains as
| regular income. Otherwise they do the Steve Jobs $1 salary
| thing.
|
| Even the capital gains can be largely evaded.
| https://www.propublica.org/article/billionaires-tax-
| avoidanc... https://www.propublica.org/article/lord-of-the-
| roths-how-tec... etc.
| bpt3 wrote:
| > I wonder: if you added it all up, would a flat tax (which
| is nominally regressive) actually be more progressive than
| the regressive taxes we have?
|
| Absolutely not. The US has the most progressive federal tax
| code in the OECD, mainly because we don't have a VAT like
| most other countries.
|
| Nearly all of the loopholes you mention are at the federal
| level, where half of the households in the nation pay <= $0
| in income tax.
| BeetleB wrote:
| As another commenter pointed out, buying a home to live in gets
| you lower interest rates than buying for any other reason.
|
| > but the ability of corporate owners to use depreciation on a
| new purchase to offset profits from previous purchases is more
| significant.
|
| If you're referring to cost segregation, this is probably less
| true now than in the past. It used to cost a lot of money to do
| a cost segregation analysis, and made sense only for apartment
| complexes (i.e. the cost to do the analysis vastly exceeded
| whatever savings you'd get on a single house). So only rich
| investors who owned 20+ unit complexes would do it.
|
| I've heard that in the last few years, many accounting firms
| are providing it for relatively cheap, so ordinary investors
| can do it now.
|
| RE people make a big deal about depreciation as a tax benefit,
| but it's minor in my experience. You're effectively reducing
| the cost basis, so when you ultimately sell, you have to pay a
| larger tax on the capital gains. Overall you gain, but not by a
| lot.
|
| Perhaps if you combine with a 1031 exchange, you may get a
| greater benefit.
| the_sleaze_ wrote:
| And what about if rent into the next 10 years fully servicing
| the debt, and the maintenance with a margin on top?
|
| If I am blackrock? If I am smaller PE deploying 10 million a
| year?
| BeetleB wrote:
| And ...?
|
| Not sure what you're asking.
|
| As the report points out, institutional investors purchase
| only 3% of homes nationwide (but much higher in some
| cities). Regular smaller investors likely buy more homes
| than the institutional ones.
| NickC25 wrote:
| > institutional investors purchase only 3% of homes
| nationwide (but much higher in some cities).
|
| This is crucial. People are in cities - in the day and
| age of corporate consolidation, less and less jobs are
| available, and they are increasingly in-office, and
| increasingly in only a select few metro areas.
|
| Nobody would give a damn if a glut of housing was built
| in the middle of South Dakota or Maine or Wyoming. That's
| because there's very little to no jobs growth in those
| regions.
| BeetleB wrote:
| Most people are in cities, and most rentals in cities are
| not owned by then - except for the exceptions pointed out
| (Midwest and Southeast).
|
| If you're having trouble buying a house in Atlanta, yes -
| they are a big factor.
|
| In Austin? No - not a big factor.
| zipy124 wrote:
| This is not true at all. Corporate loan rates are generally
| pretty damn high, only exceptionally can they borrow for low
| rates. Mortages however are a special case since they are
| basically mandated to be low and safe by most governments in
| exchange for letting banks exist. Or in the US explicitily
| guaranteed through freddie mac and fannie may.
| roboror wrote:
| >This is not true at all. Corporate loan rates are generally
| pretty damn high, only exceptionally can they borrow for low
| rates.
|
| Are these companies going to banks and applying for a loan?
| I'd think they are privately backed and invested in.
| Havoc wrote:
| Privately backed isn't necessarily cheaper. In fact PE
| funds often have a big fat bank loan on their books because
| it pushes _down_ the average cost
| CGMthrowaway wrote:
| You whiffed on the point (note the word "but" in parent
| comment). The depreciation strategies are where the real
| benefit is. PE buyers use 60% bonus depreciation and cost
| segregation studies to create a $70-80K writeoff on a $120K
| asset, which often larger than the check they cut for the
| property in the first place
|
| The final phase is to exit via UPREIT for OP units rather
| than cash, with the REIT getting a step up in basis that can
| be depreciated again, while still not triggering any capital
| gains for you until you convert
| JumpCrisscross wrote:
| > _PE buyers use 60% bonus depreciation and cost
| segregation studies to create a $70-80K writeoff on a $120K
| asset_
|
| Source? That looks like a juicy target for state
| taxation...
| BeetleB wrote:
| Bonus Depreciation:
|
| https://tax.thomsonreuters.com/en/glossary/bonus-
| depreciatio...
|
| Cost Segregation:
|
| https://warrenaverett.com/insights/what-is-cost-
| segregation/
|
| I believe bonus depreciation is time limited (unless
| Congress renews it).
| PopAlongKid wrote:
| >create a $70-80K writeoff on a $120K asset, which often
| larger than the check they cut for the property in the
| first place
|
| They're only deferring the _tax_ on $70-80K, correct?
| BeetleB wrote:
| > They're only deferring the tax on $70-80K, correct?
|
| Yes, if they sell normally. But usually capital gains tax
| is lower than that on the income so overall they're
| saving.
|
| To be explicit: They use the $70-80K depreciation to
| offset their rental income (which often means they pay no
| tax on the income for that year and several years after).
| They'll pay it eventually when they sell, but at a
| (usually) lower tax rate.
|
| There are tricks like 1031 exchange to avoid paying taxes
| when they sell, but I don't know how depreciation
| benefits factor in to those.
| HexPhantom wrote:
| It's wild when you think about it: a family scrapes together a
| down payment and pays full freight on property taxes, while a
| corporate landlord can roll one property's paper losses into
| the next deal and keep building their portfolio, tax-deferred
| drivingmenuts wrote:
| Don't forget the sweetheart tax rebates they sometimes get
| for promises of development.
| hippich wrote:
| Afaik, property taxes are due no matter what, at least in
| Texas.
| thfuran wrote:
| The tax being deferred is income/capital gains.
| burnt-resistor wrote:
| A lot of veterans live in TX because they have reduced or
| no property taxes, and also no income taxes. It's probably
| ~ 8-10% of disabled vets in my neighborhood.
| seethishat wrote:
| The reduction in property taxes is just for vets, right?
| I read that, in general, property taxes are high in Texas
| compared to other states.
| bpt3 wrote:
| In many states, there's a homestead exemption on property
| taxes that doesn't apply to non-owner occupied properties, so
| the opposite is true.
|
| Also, I don't know what you mean about rolling paper losses
| into the next deal, but I suspect it's not accurate either.
|
| There's a reason this non-existent loophole wasn't mentioned
| in the article that was looking for reasons to hate on
| corporate landlords.
| georgeburdell wrote:
| Capital loss carryover is possibly what they were referring
| to
|
| Unrelated note but the Homestead exemption in Santa Clara
| County, average sale price $2,300,000, is $7,000. To be
| explicit, the home's value is reduced by $7,000 for
| valuation purposes.
|
| Edit: the tax deferred part sounds like a 1031 exchange
| bpt3 wrote:
| You might be right about the 1031 exchange, but that has
| almost nothing to do with property taxes.
|
| The homestead exemptions are very small or non-existent
| in some states, but I believe they are fairly substantial
| in the south. Ultimately, my point was that they are
| completely wrong in that I don't know of a single
| locality where landlords are given discounts on property
| taxes but owner occupied homes have to pay full freight,
| but the opposite is true in at least some cases. They
| could be talking about developer incentives for new
| construction, but that's not the same thing IMO and it's
| difficult to understand what they meant.
|
| It's very, very hard to talk to people who have such
| strong, completely uninformed opinions and seem to be
| completely unwilling to even attempt to educate
| themselves on the topic. To be clear, this is not pointed
| at you, I'm just not willing to invest the time you did
| to seriously guess at what the parent poster was going on
| about.
| rmah wrote:
| You can't use unrealized capital losses (property paper
| losses) or even realized losses to offset property tax, you
| can only offset realized losses against realized gains for
| income taxes.
| triceratops wrote:
| What is this special depreciation corporate owners get? IIUC
| any landlord can use depreciation to lower their tax bill.
| Wouldn't the depreciation from a new purchase also apply to the
| rents from that new purchase?
|
| Somewhat more outrageous is the 1031 exchange. Sell VTI at a
| profit to buy VOO and the government hits you with a capital
| gains tax. Sell your primary residence for $250k more than you
| bought it - same thing. But landlords are a special, privileged
| investor class to whom these rules don't apply. They can sell a
| house and pay no taxes on gains as long as they buy another
| property.
| CGMthrowaway wrote:
| It's not special, just requires scale for it to make sense.
| E.g. Cost segregation studies and UPREIT transactions are
| cheaper on a neighborhood level. And you need enough passive
| income to absorb the depreciation losses
| pempem wrote:
| ^ This
|
| And the scale applies at every single step of the process.
| A citizen homebuyer is playing a oneshot game. There are
| few discounts to be had and every single fee is its own
| battle.
|
| A corporation/PE is playing a multi-shot game. There are
| bulk discounts, relationships, and scale that is applied to
| everything from title insurance and inspections to cost
| segregations to filing all of the paperwork.
| georgefrowny wrote:
| > There are few discounts to be had and every single fee
| is its own battle.
|
| Also if you take a 10% gamble on a strategy to save 50k
| and it backfires and lands you with a 500k legal bill,
| that's just the cost of business to a big (or even not
| that big) company, but it'd be absolutely ruinous to
| private individuals.
| AnthonyMouse wrote:
| > IIUC any landlord can use depreciation to lower their tax
| bill.
|
| This is also not really how depreciation works for assets
| that retain their value. If you buy a building to rent it
| out, the cost of the building essentially a cost of doing
| business, i.e. a tax deduction. You pay tax on the profit
| which is revenue (rents) minus costs (building, interest,
| maintenance, advertising, etc.) Depreciation is the building,
| they make you take it over time instead of all at once when
| you buy it.
|
| But the depreciation lowers the book value of the building,
| which is your tax basis when you sell it. If you buy a
| building for a million dollars, depreciate it down to
| $500,000 and then sell it for $2M, you have a $1.5M capital
| gain from the sale. You basically have to give back all the
| depreciation unless the building actually lost that much
| value by the time you sold it, and in practice it usually
| goes up instead of down.
|
| It's really the homeowners who have the advantage here
| because there is a large capital gains tax exemption from the
| sale of your primary residence, and that's actually a
| reduction in taxes instead of just a deferral.
| raw_anon_1111 wrote:
| You can only deduct passive income losses for depreciation if
| you aren't a real estate professional of up to $25000 and
| that's only if you earn less than $100K. It starts phasing
| out between $100K and $150K
| BeetleB wrote:
| > They can sell a house and pay no taxes on gains as long as
| they buy another property.
|
| As long as they buy another property at least as expensive or
| more, within a certain time period.
|
| And it's not that they don't pay taxes, it's that the cost
| basis gets reset. _That_ is the benefit.
| mx7zysuj4xew wrote:
| This^, this is how you end up with serfdom
| mx7zysuj4xew wrote:
| Ah yes, the down votes have started I forgot that this is a
| forum for the rent seeking class
| maxerickson wrote:
| Build enough housing and all of the sudden it isn't such a sure
| thing investment.
|
| Not easy to do of course, but the problems that come with
| building more housing are better then the problems we have now.
| Teever wrote:
| That may be the case but it would still be a good idea to
| look at regulating these run away feedback loops writ large
| so that people can't just play a game of whack-a-mole where
| they play the same old tricks in different sectors or invent
| whole new mediums to play the same old games afresh
| jkhall81 wrote:
| Nice, a pay wall. Pay to read about how housing costs too much.
| quesera wrote:
| Disable JavaScript. Solves many of the problems on the net,
| including the ability to read this article. :)
| BeetleB wrote:
| > Moreover, even if big investors are purchasing thousands of
| homes, they don't own significant numbers of homes compared with
| small-scale landlords and individuals.
|
| > Last month, the Lincoln Institute of Land Policy and the Center
| for Geospatial Solutions published a report showing that
| corporations now own a remarkable one in 11 residential real-
| estate parcels in the 500 urban counties with data robust enough
| to analyze. In some communities, they control more than 20
| percent of properties.
|
| They're invoking a false dichotomy. Small scale landlords (i.e.
| the guy who owns a second home and rents it out) _are_ part of
| the corporations. From the linked report:
|
| > A corporate investor, also referred to as a nonindividual
| investor, is a business entity that owns residential property,
| usually for the purpose of generating income. This broad category
| ranges from small entities such as family trusts and limited
| liability corporations (LLCs) to larger outfits like real estate
| investment trusts (REITs), endowments, and pension funds.
|
| Many/most "ordinary" folks who buy a house to rent fall in this
| category - they form an LLC or something similar. Many reasons
| for this. Percentage-wise, my guess is that institutional
| investors (not just individuals who formed an LLC) are still a
| relatively small minority, but I don't have the data.
|
| There is a common misconception on HN that it's rich people who
| mostly buy houses/units to rent out. In my experience, that's
| just not the case. Everyone is doing it across the board, and
| just by virtue of there being more non-rich people, they are
| likely the majority.
|
| Also, higher income folks don't feel a great _need_ to make more
| money. Median or lower income want to make a lot more, and real
| estate is actually one of the fewest options available to them
| (and also really easy to learn /understand). A lot less work than
| a second job (although some get a second job just to bootstrap
| the RE purchase process).
|
| Just 3 days ago I spoke to a friend. Engineer (not software).
| Decent income, but not FAANG level. Non-working spouse and
| multiple kids. Rents out two houses, and is buying 2 more.
|
| I took an AirBnB course from a guy who has lots of listings on
| AirBnB. He got there with almost no money down (most of his money
| was spent on furnishing the place). He was educated, but fairly
| low income ($50-60K in California). When I took the course he was
| making over $300K/year _net_ from his AirBnBs.
|
| When I used to listen to the Bigger Pockets podcast, the majority
| of people who owned 10+ homes to rent had very average incomes
| (less than a typical non-FAANG engineer).
|
| I've been in the real estate space for a few years now. I don't
| own other units, but I do invest in them, and am moderately
| active in a local real estate club. I know how these things work.
|
| If you want to solve this problem, stop pointing fingers at "rich
| people", and stop allowing multiple ownership for a decade or
| two.
| stock_toaster wrote:
| Wild idea... Maybe tax wealth instead of income?
|
| Tax break on single home ownership, but significantly increased
| tax on multi-home-ownership?
|
| It would be interesting to see comparisons between PE ownership
| in markets with property tax vs markets without.
| gjsman-1000 wrote:
| Wealth taxes don't work because wealth gets extremely fuzzy.
|
| For example, unsold stock that I bought 15 years ago; and then
| got a loan against. I'm wealthy... kinda? But I didn't sell the
| stock; I have unrealized gains, and you shouldn't tax me beyond
| income tax on borrowed money? Okay, tax me on my unrealized
| gains then - but then 2008 repeats itself, stock goes down 40%,
| do I get a refund? Of course not, I only pay when stock goes up
| and never down, which is not exactly a fair incentive.
|
| Now imagine artwork I bought 15 years ago from Banksy. Or
| imagine my video game collection I bought on eBay that contains
| some rare titles. Or what about my wine collection? Now imagine
| I'm Elon Musk, on paper worth $400B, but if I sold even 20% of
| my stock, that paper valuation would be shredded from an excess
| of liquidity driving the share price down, so you can't tax me
| on what is physically impossible to realize.
| EricDeb wrote:
| What about a law where you couldnt use over a million dollars
| (to exclude normal people) a year of any asset as collateral
| for a loan unless you paid capital gains on it at its current
| valuation?
| gjsman-1000 wrote:
| If I pledge $10M in stock for a $2M loan, what's the
| taxable event? The full $10M valuation, or my $2M loan?
| What if the stock is in a company worth $40M, but the sale
| of $10M in stock causes it to be worth $5M afterwards and
| the private company's value is reassessed to $20M, after I
| got the loan and after my pledge?
| novok wrote:
| You create a lot of other side effects that destroy a lot
| of valid activity and thus cause a large economic
| depressive effect, or you will start needing to provide a
| lot of other counterbalances that will be even worse or
| cost the government a lot more.
|
| This has the finance equivalent of feeling like cookie
| banners will actually do anything.
|
| Political power will advocate for it's power, you have to
| go one level higher and interact at that level, not on tax
| law tweaks.
|
| To give an example of where this has gone wrong already,
| look at the entire interaction between startup stock, ISOs
| and AMT and how it creates a horrible trap for startup
| employees, but not for founders and investors who get a lot
| of very nice tax benefits like QSBS, no AMT, so on. Because
| startup employees are diffuse, usually have unstable
| employment and are usually younger, this hasn't been fixed
| to this day.
|
| While other countries like Israel have this fixed in a very
| elegant way, where you can exercise without tax bombs and
| only actually have tax liability when you actually can and
| do practically realize or liquidate the stock gains.
| skywhopper wrote:
| Why do you assume such a law would not allow counterbalancing
| capital losses?
| gjsman-1000 wrote:
| Because then 2001 happens or 2008 happens or 2020 happens
| and the government suddenly owes _back_ a decade of wealth
| tax. A stock market crash becomes even more
| disproportionately expensive for the government and
| requires even more borrowing.
| orwin wrote:
| If the tax is set at say 2% of wealth (excluding primary home
| and _displayed_ artwork/collectibles), and that's above your
| income, just pay with your stocks at the valuation they have
| at tax day.
| gjsman-1000 wrote:
| This assumes everything can be paid in liquid public
| equity, which is often not the case in any private or
| offshore investment. Additionally, the government now owns
| stock they can't realize without by definition causing a
| stock market decline. Sell stock that previously wasn't on
| the market, you exhibit permanent downward pressure.
| orwin wrote:
| > private or offshore investment.
|
| I don't have a good solution for private investment, but
| for offshore public investment, you can have the same
| principle.
|
| > Sell stock that previously wasn't on the market, you
| exhibit permanent downward pressure.
|
| Which is a very, very good thing, to be clear. Because it
| lowers expectations of future returns, and make stock
| valuations not based on "i predict pension funds will
| automatically put their contributor money into those
| stocks", but on actual business information.
| triceratops wrote:
| Why can't the government just own stakes in private and
| public companies? Put them into some kind of sovereign
| wealth fund. No need to sell at all.
|
| At scale the government's holdings will be very
| diversified and relatively low risk. Almost like an index
| fund, but for the entire economy. They can use the
| dividend payments from these holdings to reduce income
| tax.
| UncleMeat wrote:
| > Okay, tax me on my unrealized gains then - but then 2008
| repeats itself, stock goes down 40%, do I get a refund? Of
| course not, I only pay when stock goes up and never down,
| which is not exactly a fair incentive.
|
| We already do this for property taxes.
| quesera wrote:
| That's a very strange way of looking at property taxes.
| UncleMeat wrote:
| I do not see the difference between property taxes on my
| home and property taxes on my stock portfolio. What makes
| wealth taxes bad?
| quesera wrote:
| A corporation does not provide services to shareholders.
|
| A municipality is charging residents for services.
| Obligations are progressive (by necessity), and indexed
| to assessed property value (as a practicality), rather
| than equity or income.
|
| Municipal operations get more expensive with inflation,
| and with resident demands (ballot initiatives, etc). They
| are never zero, and must be tied to something in the real
| world.
|
| These payments are collected as a tax, because that is
| the only lever available to municipalities.
|
| I see your point, but I think it's a category error.
|
| You _are_ taxed on _realized_ property capital gains,
| beyond a certain amount ($500K?) for principal residence
| (anywhere you 've lived two of more of the last five
| years). And for a non-principal residence there is no
| threshold.
| UncleMeat wrote:
| Me owning a bigger house than my neighbor does not mean
| that I use more services than them. My water bill is my
| municipality charging me for services. My real estate tax
| is a charge for the general good of my community. I see
| no reason why this can't simply be a tax for the national
| good.
| orangecat wrote:
| Property taxes are use taxes. You're paying for the right
| to occupy an inherently limited resource, and for
| necessary services and infrastructure. It's not a wealth
| tax because it doesn't matter how much equity you have;
| it's the same whether you fully paid in cash or have an
| interest-only mortgage. It's also not a capital gains tax
| because the purchase price doesn't matter.
| UncleMeat wrote:
| The total ownership of all public companies is also a
| limited resource.
|
| Whether I have 0% equity or 100% equity in my home I
| still own it. The only question is how much I owe to the
| bank. "Oh I bought that with leverage" shouldn't change
| things for home ownership and it should change things for
| a wealth tax on stock ownership.
| dragonwriter wrote:
| Then it's an asset/property tax, not a wealth tax,
| because debt doesn't change the asset (even if it is
| secured by the asset), but it does change wealth.
| 9oliYQjP wrote:
| I don't have an economics or finance background. But why
| could there not be a taxable event for the loan amount when
| it is made? Sure, maybe it gets taxed at a lower rate than
| even capital gains to continue incentivizing leveraged
| investments of this nature. Is there some economic argument
| for why lenders can realize the value of an asset when
| loaning out money against it but the tax man can't touch that
| asset until it's actually sold?
| the_sleaze_ wrote:
| > paper valuation
|
| Don't allow loans against equity ownership. If you can take a
| loan against it, you should be taxed on it.
|
| > artwork, rare collection
|
| Tax the insured value. If it can be insured for 100 bucks, it
| should be taxed on 100 bucks.
| mrDmrTmrJ wrote:
| Well, I want more multifamily housing (apartments or condos) to
| lower prices in good cities near pubic transit.
|
| So let me propose: a wealth tax on land! ("Georgism"). But not
| a tax on the "value of improvements," i.e, buildings. This
| disincentivizes single-family homes near train stations
| (widespread in the town I grew up in) and is very low-cost to
| collect.
|
| I don't know where you're writing from. But here in California,
| the source of all evil (Prop 13) originated with single-family
| homeowners trying to *escape the property taxes that result
| from their opposing new development.
|
| Given how spectacularly CA housing policy has failed, perhaps
| it's time to try the opposite: Let's abolish all income taxes
| and exclusively tax land instead! (Land taxes have the property
| of being extremely progressive wealth taxes that are dead
| simple to administer.)
| the_sleaze_ wrote:
| Now my corporation owns my house, I rent from myself and
| since the rent my corp is charging is so incredibly low its
| essentially a write off.
| quesera wrote:
| That arrangement will not pass IRS muster.
|
| Not that the system would not be abused, but the obvious
| exploit is not going to work.
| TheChaplain wrote:
| I've had the same idea, but with no property tax on ownership
| of a single dwelling place.
|
| If the burden is lessened to have your own place, hopefully we
| could see less homeless on the street or living in cars when
| times are tough.
|
| However if you have more than one, then you pay significant
| property tax on all of them. I would hope that could free up
| more places for more people getting a home.
|
| But of course if you earn more than $180k a year, I guess you
| could afford some property tax.
|
| I am also thinking foreign ownership of property should be
| taxed heavily. I know that is not popular, but honestly if you
| not living full time in the country then you are effectively
| taking up a spot for someone who needs a place to live.
| welshwelsh wrote:
| That sounds like it would penalize renting in favor of
| homeownership. I'm not in support of that, renting offers
| people flexibility and is not inherently worse than owning.
| CGMthrowaway wrote:
| Lots of jurisdictions have higher property taxes for non-owner
| occupants
| shuntress wrote:
| My extreme political opinion is that no one (including
| corporations) should be allowed to own more than one property in
| which they do not reside.
| bell-cot wrote:
| So I can own a duplex and rent out the other half, but that's
| it?
|
| Or - what if I own a 5-bedroom house, and rent the other 4
| bedrooms to roommates?
| bpt3 wrote:
| No, you just do what most people (and corporations) do and
| create a new entity (normally an LLC) for each property.
|
| There you go, you've sidestepped this inane policy.
| djoldman wrote:
| > The United States is short 4 million housing units, with a
| particular dearth of starter homes, moderately priced apartments
| in low-rises, and family-friendly dwellings
|
| The number cited links to here:
|
| https://upforgrowth.org/apply-the-vision/2023-housing-underp...
|
| Which has this as the report:
|
| https://upforgrowth.org/wp-content/uploads/2023/10/2023_Hous...
|
| The number is driven by this definition:
|
| > Missing Households. Households that may not have formed due to
| lack of availability and affordability, e.g. households with
| children over 18 years of age still living with their parents or
| individuals or couples living together as roommates at levels
| exceeding historical norms.
| gruez wrote:
| Did you intend to add something after the definition? For
| better or worse, "moving out once you reach 18" is widespread
| enough of an expectation that it can be used as a yardstick for
| housing shortage.
| djoldman wrote:
| I think it's interesting how "shortage" is defined across
| different products.
|
| From an economics standpoint, "shortage" isn't a useful word,
| unless it's applied in the extremely unlikely scenario where
| there nothing is available at any price. Generally, this is
| because price dictates supply.
|
| "Shortage" for the current housing market is generally used
| to mean, "relative to historic trends, many people want
| houses who can't afford the current prices."
| AnthonyMouse wrote:
| Shortage in the absence of price controls generally means
| that something is inhibiting supply from increasing as
| demand does, causing increased demand to have the primary
| result of increasing prices rather than increasing
| production.
|
| Sometimes this is expected or unavoidable, e.g. if you have
| a sudden increase in the demand for electricity then the
| price will increase temporarily until new power generation
| or transmission capacity can be brought online, and in the
| meantime you have a shortage.
|
| The problem comes when the shortage is a result of
| artificial scarcity as it is with housing/zoning, because
| then it's not temporary, it persists until the cause of the
| artificial scarcity is defeated.
| bilbo0s wrote:
| Let's be honest, it's not even that.
|
| It's more like "relative to historic trends, many people
| want houses [in desirable areas] who can't afford the
| current prices."
|
| Building tons of new houses outside of the hot areas that
| all these people want to live would still elicit cries of a
| shortage and an affordability crisis. Because there are
| currently affordable places outside of hot areas, but not
| very many takers.
|
| It's a really tough nut to crack. Because how do you
| reorient the demand to those areas that have the supply?
| It's not easy.
| vondur wrote:
| I just watched a video from Dave Ramsey title "What the
| Government Should Do to Fix the Housing Problem" He specifically
| calls out Institutional Investors and Foreign Corporations that
| have been purchasing single family housing and converting them
| into rental properties. I think he makes some good point in his
| video: https://youtu.be/_CrgniwSLLM
| jeffbee wrote:
| Why do you think that renters don't deserve to live in single-
| family homes?
| MetaWhirledPeas wrote:
| Not at all what the GP said.
|
| They aren't saying landlords are the problem, they are saying
| _Institutional Investors and Foreign Corporations_ being
| landlords are the problem.
| jeffbee wrote:
| There is absolutely nothing wrong with institutional
| investors buying tract homes and renting them out. Nothing!
| It brings the benefits of living in such homes to people
| who otherwise would be excluded from them by the financial
| credit system.
| gnatman wrote:
| The article linked in the OP, and many posters in this
| thread, present arguments to the contrary. The main one
| seems to be that although institutional investors are
| happy to let people "benefit" from renting their homes,
| they are precluding many from ever owning those homes
| themselves.
| jeffbee wrote:
| I understand the arguments, and I understand that they
| are morally vacuous arguments. It is simply an
| advancement of the interests of the bourgeoisie. They are
| annoyed that renters are effectively able to influence
| the market, even if by the second degree through large-
| scale renting. They believe that having scraped together
| a quarter million dollars for the down payment makes them
| a special class of people. It is a stupid position to
| defend.
| AnthonyMouse wrote:
| > It is a stupid position to defend.
|
| Doubly so when they themselves lobby for policies that
| keep housing prices high, which is the primary thing
| preventing more people from owning rather than renting.
| tptacek wrote:
| Wait, you're not answering his question. "Institutional
| investors" rent out houses at a scale individual owners
| can't, and have more resources to maintain those properties
| and respond to renter complaints. Why isn't a carefully-
| regulated market of institutional single-family-home
| lenders a good thing?
| HarryHirsch wrote:
| Why would someone listen to Dave Ramsey of all people? He is
| neither an economist, nor a Christian, he has nothing to
| contribute to the subject!
|
| His shtick is real estate investment, of course he wants to see
| Joe Public buy a starter home. The trouble is: real estate as a
| government-guaranteed investment vehicle is what brought us the
| housing affordability crisis.
| pavel_lishin wrote:
| > _nor a Christian_
|
| ... what bearing does that have on anything?
| c-linkage wrote:
| Only the right kind of people can hear that dog whistle.
| carlosjobim wrote:
| Dave Ramsey, commonly described as "Christian finance
| guru", who had a show on the "Christian Broadcasting
| Network".
| vondur wrote:
| His "schtick" is having people pay down and reduce debt.
| What's noteworthy on this video is that he's calling for the
| government to fix the problem. He's normally anti-government
| involvement in business. This should speak to the severity of
| the problem when someone like him is calling for the
| government to step in a fix it.
| ProllyInfamous wrote:
| Thanks for sharing the DR link -- hadn't listened to him in
| many years, but he definitely helped me start my debt-free
| journey (although his long-term investment opinions aren't
| aligned with my own planning / re$ult$). I am not religious I
| just started listening.
|
| >"If you're 25 or 26 years old right now YOU ARE GETTING
| SCREWED RIGHT NOW (by large banks) like has never happened ever
| before... record debt debt debt" --Dave Ramsey [0]
|
| I am definitely doing "better than I deserve."
|
| [0] He actually says this at 6m in above-comment's link
| tptacek wrote:
| We just had a research report on HN a few weeks ago showing
| that the median number of properties "corporations" in
| California rented out is 1.
| SirFatty wrote:
| When we bought our first home, a townhouse, in the early 1990s
| the builder only sold to people that were going to live in said
| home. They helped save the down payment and made sure that
| utility payments (gas/electric) were under a certain amount each
| month (super insulated and heated with a hybrid hot water
| system). Bigelow Homes, they were on a few This Old House
| episodes in the 80s.
|
| It would be nice to see that again, the new housing market is
| ridiculous now.
| HexPhantom wrote:
| That sounds like an absolute dream compared to today's market
| lotsofpulp wrote:
| Homeownership rates are not materially lower than before.
| Page 5 for the data, page 13 for the formula.
|
| https://www.census.gov/housing/hvs/files/currenthvspress.pdf
|
| I would bet most, if not almost all homes, are sold to buyers
| who will occupy them.
|
| This graph goes further back:
|
| https://fred.stlouisfed.org/series/RHORUSQ156N
|
| More info:
|
| https://en.wikipedia.org/wiki/Homeownership_in_the_United_St.
| ..
| SirFatty wrote:
| Median age of ownership? Skews older now I'm guessing.
|
| I was talking about the younger crowd trying to get a
| start.
| JumpCrisscross wrote:
| > _Median age of ownership? Skews older now I 'm
| guessing_
|
| First-time homebuyer (FTB) "average and median age stood
| at 36.3 and 33 years for the period Q3:24-Q2:25, and
| there has been minimal FTB average age change since
| either 2001 or 2021" [1].
|
| [1] https://www.aei.org/articles/nar-says-the-typical-
| first-time...
| asdff wrote:
| The issue is really felt more on the housing constrained
| markets. In these markets home prices weren't really very
| diverged from what we consider extremely low cost markets
| today very much. In the past 25 years, we've seen these low
| cost markets essentially stagnate or very hardly grow from
| 1990s prices, while high demand markets have gone up in
| price 4x or more in some cases over that time.
|
| Now there are certainly high income buyers who can afford
| these 1-2-3-5 and up million dollar homes. But the very
| nature of who is a homebuyer is changing before our eyes in
| these places. The white collar office worker in 1990 who
| was buying in west la then is saddled with being a renter,
| because they only make $70k in west la. Their income hasn't
| 4x since 2000, not even close.
|
| How does this change the makeup of who lives in the homes?
| Maybe that $70k worker would have shacked up with the home
| purchase, and had two kids to fill those spare two
| bedrooms, who go on to be enrolled in the school district,
| maybe work part time jobs, and hopefully stick around after
| and contribute to the regional economy. Instead, maybe that
| 3br home goes to a content creator, who uses one spare
| bedroom as a guest bedroom and the other spare for creating
| content. The school ends up short two potential pupils. The
| local economy loses two potential contributors, shops don't
| have anyone to hire and cut shifts and start a downward
| cycle of declining service and profit against rent
| increases until closure.
| SoftTalker wrote:
| > Who's going to win in a bidding war for a three-bedroom in a
| suburb of Cincinnati: a single-income family with a scrabbled-
| together 10 percent down payment or a Wall Street LLC offering
| cash?
|
| I don't see why the seller would care. They're getting a check at
| closing, that's all they care about.
|
| I mean, if there's a question about whether the buyer will
| actually be able to get financing, that could be a concern. But
| most buyers are pre-qualified (at least if they're working with
| an agent). The main reason they would not get financing is if the
| appraisal came in lower than the sale price.
| beisner wrote:
| Closing certainty is a major reason people will take all-cash
| offers over financed ones. Even if you're pre-approved for a
| loan.
| SoftTalker wrote:
| A cash offer will still fall apart if the appraisal comes in
| too low, I would think. Or does the term "cash offer" imply
| that no appraisal will be done?
| abosley wrote:
| Appraisals are generally done to ensure that the loan
| guarantor will be able to recover their investment if the
| party taking the loan defaults. Therefore, cash offers
| don't perform appraisals. Cash offers lower risk for the
| seller and provide fastest time to close the transaction.
| creaghpatr wrote:
| Probably the latter, the appraisal is typically mandated by
| the bank issuing the mortgage.
| lotsofpulp wrote:
| There is no purpose for a cash buyer to pay an appraiser to
| appraise a house. They have already decided to pay the
| price, so who cares what an appraiser thinks?
| stego-tech wrote:
| Everyone wants to finger someone to blame rather than (before
| trying to) fix the fucking problem.
|
| Here's a novel and brazen idea: if a domicile has been vacant
| inside a metropolitan area for more than thirty days, it's up for
| grabs. Be it an apartment, a condo, a house, whatever, but if
| someone isn't living in that space for more than thirty days, let
| folks claim it as abandoned property.
|
| Watch rents and values plummet real fucking fast as folks seek to
| claim their "winnings" before their shit gets taken. That'll at
| least jumpstart the real discussion of _making sure housing is
| accessible to those who need it_ rather than constant finger
| pointing.
|
| Because sometimes you just need a bigger fire to create the
| necessary action to solve the underlying problems.
|
| EDIT: I am honestly so sick of the current housing crisis and
| seeing a swath of vacant apartments and condos as "investment
| properties" here in New England that yes, I am serious, and I've
| got a mental map of about a dozen large starter units that have
| been vacant for a year or so that I'd rush to claim one of.
|
| Your investment is irrelevant when humans lack basic necessities
| like shelter, and I'm tired of being civil or polite about this
| so your ego doesn't get bruised.
| immibis wrote:
| Also stop fucking arresting people for living in unapproved
| locations or building structures that don't cost enough money,
| as long as they're not actually in the way of anyone.
|
| Like, don't arrest people for sleeping under bridges unless
| they are sleeping in the middle of a footpath under a bridge.
| And don't go building footpaths under all the bridges to
| prevent them, either. Also tear down all the hostile
| architecture or at least don't arrest people for taking to it
| with angle grinders.
|
| The free market is supposed to work by everyone solving all
| their own problems and then exchanging solutions with each
| other. If you claim to have a market but then arrest people for
| solving problems, no wonder you get a dysfunctional society.
|
| Not saying that people living in tents on public land is a good
| long-term solution, but it's a step up from being completely
| shelterless, and since price changes happen at the margins, if
| it's even remotely viable, it may cause a market crash.
| stego-tech wrote:
| Literally this. _Someone_ has to "lose" to fix this problem,
| and that loser has to be those with the most to gain from
| keeping the status quo as-is (developers, landlords, private
| equity, current homeowners, extortive townships /governments,
| etc).
| SoftTalker wrote:
| Many valid reasons for a property to be vacant. It may need
| renovations or repair and that can take a lot longer than 30
| days. But maybe there's some time frame that makes sense.
|
| I'm not convinced that commercial ownership is the problem. Or
| if it is, it's not a new problem. Slumlords have been around
| forever.
|
| The main problem is we just don't have enough housing supply.
| Investor-owners can only hold units vacant to support higher
| rents up to a point. If there are enough vacant units available
| and enough supply that property values are not appreciating
| like crazy, someone will crack and cut the rent or sell out so
| they can get a better return on their money.
| stego-tech wrote:
| I refuse to buy that argument of availability alone (or hell,
| _any_ standalone argument) when we have continued reporting
| of landlords and PE leveraging services like RealPage that
| are _designed_ to maximize rents and revenue, including by
| keeping units vacant. Every time I'm driving through a dark
| city at night, residences and condos devoid of furniture (or
| using an interior design motif with no signs of life), I'm
| reminded how many of these are investments by a vacant owner
| designed to capitalize on lax regulation and lack of supply
| in in-demand areas. I drive by huge corporate plazas
| clustered together on high-value land because companies
| demanded everyone live in the same areas rather than spread
| out to reduce costs, driving up demand further.
|
| I am unbelievably sick of seeing the symptoms go unaddressed
| while commenters and armchair economists bicker and debate
| who is the sole source of blame that must foot the bill. We
| need action, and we need to be brave enough to be willing to
| admit _this isn't working for the masses anymore_.
|
| I'm unbelievably tired of this cowardly pussy-footing by
| people who can't or won't envision a better future that also
| doesn't involve number go up on property forever without
| further investment.
| bpt3 wrote:
| You mean you refuse to believe hard data on vacancy rates
| over sensationalized opinion pieces or outright
| misinformation that sounds more appealing to you?
|
| Your proposed "action" is comically obtuse and will be
| ineffective at best. So no one can renovate a home for more
| than 30 days?
|
| Number go up on property forever is what the masses want
| and what works for them, because the majority of people
| live in a home owned by that household. So you're
| misinformed about that as well.
| NickC25 wrote:
| > If there are enough vacant units available and enough
| supply that property values are not appreciating like crazy,
| someone will crack and cut the rent or sell out so they can
| get a better return on their money.
|
| Your thesis here is disproven in large cities like the one I
| live in, Miami. Many investors / property owners here don't
| give a damn on getting a return on their investment so long
| as it doesn't go to $0 - they buy real estate sight unseen
| because it's a good way for the well-to-do in LatAm and
| Russia to get their money out of developing/regressing
| economies and into the USA. Half the units in the building I
| live in are vacant - they are owned by Brazilians,
| Argentines, Venezuelans, etc who want a safe haven for their
| money (and for Brazilians, as a base to buy loads of Apple
| products that they can turn around and sell back in Brazil
| for a 2-3x markup).
| SoftTalker wrote:
| Why would they buy properties and not assets that are even
| easier to buy and sell such as stocks, ETFs, mutual funds,
| bonds, etc.
|
| That said, I would probably not be opposed to restricting
| foreign ownership of residential real estate, if indeed it
| is that big an issue.
| NickC25 wrote:
| The idea is that tracking it is effectively impossible
| for a foreign government...and we've made that whole
| infrastructure incredibly easy via making it legal for
| LLCs to purchase homes. We don't prevent foreigners from
| forming LLCs, and often times there are brokers that make
| their vig on doing just that for wealthy foreigners -
| they set up a myriad of LLCs to protect the identity of a
| buyer, who then drops $1mm+ on a property that they will
| never actually use in a country they will likely never
| visit.
|
| Plus, to buy stocks or ETFs or bonds or whatever, you
| have to register with a broker, who has to legally report
| each sale and transaction to the government. The point
| isn't the liquidity. The point is that a family can drop
| 200k-500k in a pretty stable asset in an incredibly less
| volatile environment and effectively not report it. That
| is worth it in the age of hyperinflation in LatAm
| economies. Plus, if the unit in question is in a decent
| location, they can escape at the first sign of trouble.
| HexPhantom wrote:
| Housing is more than a market - it's where people live
| gruez wrote:
| Do we apply that logic to any other market that's served by
| for-profit companies?
|
| "corn/egg/beef is more than a market - it's what people eat"
|
| "cars/gas is more than a market - it's how people get around"
|
| "natural gas is more than a market - it's how people stay warm"
| ssl-3 wrote:
| So what if we do apply that same logic to those other
| categories? Or what if we do not?
|
| Is there a point to this line of questioning?
| JumpCrisscross wrote:
| > _Is there a point to this line of questioning?_
|
| That "housing is more than a market - it's where people
| live" is a platitude. It sounds nice. But it doesn't tell
| us anything meaningful nor solve any problems.
| fuckinpuppers wrote:
| Super depressing. An individual can't compete against big money
| lwansbrough wrote:
| Lots of ideas in here that fail to properly identify and address
| the root cause, which is disappointing given how many of us are
| programmers.
|
| Trace the problem back. Where does it start?
|
| Why is PE investing in homes? Because they can make money. Why
| does buying a home make money? Because the value appreciates. Why
| does the value appreciate on an asset that literally deteriorates
| over time? Because of restricted supply. Why is there a supply
| shortage?
|
| The root cause of this issue is supply. Zoning, mostly, is to
| blame. There are down stream issues, like the capacity of the
| construction industry, but that is an effect of the current
| environment not a root cause in and of itself -- if there is
| money to be made, construction will grow as fast as it can.
|
| Fix supply, and you fix the issue. This is a uniquely (English)
| western world problem. Go look at western countries that speak
| English vs. non-English housing starts. It's just a cultural
| failure. You can blame corporations all you want but at the end
| of the day most people in the anglosphere expect a return on the
| largest purchase of their lives, even if it comes at the cost of
| materially worsening the lives of those around them.
| samdoesnothing wrote:
| You're absolutely right of course. Even a child could look at
| the present situation and determine that the solution is to
| simply build more housing, but for some reason many grown
| adults cannot accept such a simple solution and insist that
| what's actually needed is more government regulation or
| something.
| c-linkage wrote:
| Usually a root-cause analysis asks for five why's so your
| analysis seems a bit short.
|
| One should ask why it is that housing / land is more profitable
| than those investments in which banks and private equity
| previously invested. And then when you follow that line of
| reasoning (too much capital and credit -- thanks quantitative
| easing! -- poor performance on bonds due to low interest rates
| and restrictions on the quality of investment vehicles) and
| you'll see that the root cause is probably more financial
| rather than _just_ too little housing.
|
| Debts need to be cleared, losses need to be accepted, and
| leverage unwound. Building more housing just gives banks and
| private equity more stuff to buy.
| MetaWhirledPeas wrote:
| Private equity is the gamification of everything, in a compressed
| time frame. A company focused on longer time frames will
| cultivate their reputation. This takes the form of quality
| products and good customer service. PE has no need for any of
| this nonsense. They are looking for a quick return on their
| investment; to trade in all reputation and goodwill for their
| immediate value in cold hard cash. The more immediate the better,
| so they can move on to their next acquisition.
| gruez wrote:
| Funny, because you hear the same hand-wringing about how public
| companies (ie. the exact opposite of PE) only care about next
| quarter's earnings report. By that metric, PE is better than
| public companies, because their source of capital is more
| secure and don't have to worry about flighty shareholders
| dumping their shares.
| MetaWhirledPeas wrote:
| I don't see how they are opposites; public companies have
| their own perverse incentives.
| danesparza wrote:
| Corporations shouldn't be allowed to own residential properties.
| Period.
| malfist wrote:
| For every complex and difficult problem, there is a simple,
| easy and wrong solution.
|
| If corporations can't own residential properties, how would
| anyone rent a house? How would home builders build model homes?
| How would Trusts manage real estate?
|
| This is a complex and nuanced problem.
| ssl-3 wrote:
| From individuals?
|
| Anecdotally: I've rented 5 different single-family houses in
| my life. All of them were rented from individuals.
|
| Only 1 out of the 5 had a landlord that owned some other
| stuff that they also rented out.
|
| For the remaining 4 out of 5, the landlord only had that
| singular property to rent: They lived wherever they lived,
| and they also had an extra house for whatever reason that
| they rented to me.
| malfist wrote:
| I'd be willing to bet the majority of those "individuals"
| were incorporated as an LLC to limit liability, thus making
| them corporations.
| ssl-3 wrote:
| I knew these individuals (no scare quotes required)
| personally before I rented from them.
|
| But sure: If you want to bet that you're right about a
| very specific situation that you have no specific
| knowledge of, then don't let me stand in your way. A fool
| and his money are soon to part.
| BeetleB wrote:
| I think you're misreading his intent. It may not be the
| case for those you rented from, but over the last 15-20
| years, the standard practice for them has increasingly
| become "Form an LLC".
|
| In most cities, when you rent a detached house from a
| corporation, it's really one individual behind it.
|
| These people are likely not the minority.
| raw_anon_1111 wrote:
| So no apartments? I would much rather do business with
| another business than deal with individual hobby landlords
| carlosjobim wrote:
| Why is it better to rent from individuals? They have the
| same profit motives as corporations.
| danesparza wrote:
| "how would anyone rent a house?" From a private owner
|
| "How would home builders build model homes?" - This is a
| great point. I should have said "after the home is built"
|
| "How would Trusts manage real estate" - for residential real-
| estate, they wouldn't. An individual would. But I just want
| to point out that I never said that corporations shouldn't
| own real estate. I said they shouldn't own residential real
| estate.
|
| It's only as complex an nuanced as we make it. For most of
| history, individual people owned real estate. Only recently
| did we manage to screw that up. We can unscrew it.
| JuniperMesos wrote:
| > For most of history, individual people owned real estate.
| Only recently did we manage to screw that up. We can
| unscrew it.
|
| Corporate ownership of real estate is ancient - read about
| the land rents (and in-kind labor rents) that early
| Christian monasteries were entitled to in late Roman/early-
| middle-ages Europe, or how Buddhist monasteries have been
| funded from local levees for thousands of years. Or how the
| British crown as a corporate entity currently vested in
| Charles III still owns substantial chunks of British real
| estate. History is long and for most of it it was not the
| case that ordinary middle class people even existed, let
| alone owned houses.
| bcrosby95 wrote:
| > For every complex and difficult problem, there is a simple,
| easy and wrong solution.
|
| Sure, but realize that also applies to the current status
| quo.
|
| Also, you cannot create the 'right' solution to a complex,
| nuanced _social_ problem. You can only slowly shift the
| problem over time, one 'wrong' solution at a time.
| malfist wrote:
| Agree, but this simple solution isn't going to shift
| towards the right solution over time, and could very easily
| make housing shortage worse (especially as it would forbid
| home builders from making model homes, or keeping an
| inventory)
| ProllyInfamous wrote:
| I am currently suing a former residential LLC in small claims
| court. Going on three years, now...
|
| Justice is not blind. Both sides make this so difficult. And
| expen$ive!
| JumpCrisscross wrote:
| > _Corporations shouldn 't be allowed to own residential
| properties. Period_
|
| Congratulations, you just ensured zero new housing creation in
| our cities. (Co-ops are corporations.)
| javascriptfan69 wrote:
| Sorry, but this is just a bad idea. It's classic populist slop.
|
| The biggest driver in housing prices is under supply. The main
| source of under supply is individual home owners who
| consistently vote against good zoning to protect their economic
| interests.
|
| Corporations do not have the votes to strangle supply like
| individuals do.
| nine_k wrote:
| A gift link (no paywall, no archive):
| https://www.theatlantic.com/ideas/2025/12/private-equity-hou...
| austhrow743 wrote:
| The reasons for high housing prices generally come down to
| "government restriction of supply, as supported by a large amount
| of voters".
|
| There's no other expense where we talk about it as a market, at
| least in general layman focused new and discussions. People
| aren't concerned about the fuel market or the grocery market.
| They're concerned about fuel prices. Grocery prices.
|
| Housing is an exception due to catastrophic historical policy
| choices to encourage it as an investment. Government restrictions
| on housing supply will exist for as long as a significant number
| of people not only have their net worth wrapped up in housing,
| but who actually leverage themselves and go in to extreme debt to
| achieve it. Not to mention the attached cultural issues of then
| wanting "buying a house" to mean "buying an area staying the
| same".
|
| Concentration of residential real estate among fewer owners is
| the only path that doesn't lead to the future being housing based
| feudalism where your station in life is determined by if you
| inherited somewhere to live, and how desirable it is.
| AuthAuth wrote:
| I feel like i've seen the atlantic write this exact same article
| at least 3 times in the past year. Its getting better but the
| claims are still not supported by reality.
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