this post was submitted on 16 Aug 2023
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The issue here is buying power is dramatically dropping which is a function of both wages and prices. Raising the minimum wage alone won't fix that; instead, price controls will have to be implemented such that all housing is bought back down to prices that are satisfactory to consumers. That can't happen without federal legislation.
Price controls cause shortages. The solution is plain old taxes - take money away from the rich. Housing will be cheaper to buy up front when recurring taxes are higher. Your dollar will go farther when other dollars are removed from circulation.
A 4% tax on millionaires in Massachussets got free lunch for school kids in the state
We need more housing in general too, to be honest, and to stop people buying it and directly distribute the housing to families looking for a primary residence.
Tax the shit out of the businesses that are holding onto these houses. Extra penalties for letting them sit empty. Special tax for companies with more than x% of purchasable inventory within certain regions. A lot of this could be fixed by taking money away from the people hoarding it.
We need to tax holding property as an investment if you aren't living there or using it for your business. I'm not sure if it's already taxed as capital gains or not, but it sure as hell should be. There's nothing wrong with property being an investment -- you should think of your house as an investment -- but there's a significant problem in treating property like stocks.
The best way to reduce the viability of housing as an investment is to just build more housing.
And no, you ideally should never think of your house as an investment, because that means housing prices are rising.
There's fairly few units that people are just letting sit unused and empty.
In 2022, 23% of vacant for-rent units were vacant for less than a month. Only 26% were vacant for more than 6 months.
There's more vacant housing "held off market", but keep in mind that includes housing occupied by people with usual residences elsewhere, housing that's currently held up in legal proceedings, housing currently under construction or repair, or in need of repair. The amount that's being held off market by Blackrock to keep prices high is tiny at best.
Vacancy taxes have been tried, and their effect is generally fairly small. That's not to say that they're bad, just that they're only a small part of a larger solution.
Prices are a matter of supply and demand.
Housing starts plunged during the Great Recession, and recovered to only mediocre levels. However, over that time the population continued to grow.
We fundamentally have a housing shortage, particularly in places people want to live. One massive problem is that it's currently quite difficult to build net-new housing in places people want to live, due to a combination of overly-restrictive zoning and NIMBYs who ate empowered to block new projects.
The problem is particularly bad in popular urban areas. Either you build outwards or you build upwards. But if someone wants to live "in Boston", "in NYC", etc, they probably don't want to live in a new build an hour's drive away from the city in traffic. And infill development is generally highly regulated.
Adding a price ceiling without fixing the underlying shortage is going to benefit the people currently living in an area, but it will make it harder to find a new unit. Adding units isn't the only important thing, but it's pretty important.
I live in the north area of the San Francisco Bay Area and there is a shocking number of new builds happening right now. Soooooo many apartment complexes and housing developments. It seems like every day another one has begun. Just on the street I work on there have been three very large apartment complexes put in where there used to be businesses within the last two years. On my 8 mile commute home I pass four more, where there used to be pasture land. This area is known for it's NIMBYs but laws have been passed (by voters) requiring more housing and it's happening.
There are 25 empty houses for every homeless person in the US. There are people like Bezos who own multiple $25 million dollar mansions, that sit empty 300+ days a year. There are places with housing shortages, but that is not the case nationwide. The problem is that our government cares little to ensure adequate housing for its population. It sees absolutely no issue in allowing property to be hoarded by the rich and used to strangle the poor.
Also don't forget that people don't like housing built near them because it "drives down housing prices." Homeowners themselves are more a problem than corporations are.
In much of the country, even smaller towns, the problem is that supply and demand is being artificially manipulated by corporations from outside the area coming in, outbidding locals, then putting what we're owner occupied homes on the market for jacked up rent prices. This encourages other local landlords to charge more, because they can.
Corporations are able to do that because housing is a good investment.
Part of the reason it's been a good investment is due to things like exclusive mcmansion zoning. Just imagine if it were easy to build net-new houses in those communities. Developers could make a killing building new housing, and extorting corporations into buying it.
There's only so many people willing and able to pay sky high rents. At some price, people move into their parents basement, double up, become homeless, etc. So corporations have two options: either they continue to outbid average Joes or they don't. If they don't, then people won't be forced to rent from them. If they do, at some point the new housing will just go vacant unless they lower prices.
Owning vacant housing has costs, but little upside. As a larger and larger percentage of their portfolio becomes vacant, housing becomes a worse and worse investment for them. At some point, it's unsustainable, they have sell, the market collapses, and rent becomes cheap. They literally can't sit on an unlimited amount of vacant housing and remain solvent.
That's a fair assessment and I agree with your prediction at the end. I think the problem is that, in the meantime, there massive real-world harm being done to people by these practices that have potentially generation spanning consequences (much like redlining).
The point more is that corporations jacking up rents is more of a symptom of the underlying problem. The problem isn't corporations. It's that we've normalized NIMBYs artificially inflating their home value.
There are more direct solutions, like building deed-restricted affordable housing, public housing, etc.
Then we need master lists of who currently lives in an area and for how much, and who wants to live in an area based on housing bids, homeless populations, etc., like with an application or something.
Or, hear me out on this, we could build more housing.
We could do this by upzoning basically the whole city, and by disempowering NIMBYs. Make it so that every location can build just a bit more densely, by right (i.e. where the approval is automatic).
Make it so you can build triplexes by right in what was an exclusively single family zoned area. Take areas with apartments and let them build a few stories taller. Let neighborhoods evolve into density over a decade or two.
Rent control is absolutely not the solution. Building more is the solution.
How about regulating all the big companies - prohibit sitting on apartments to drive up rents, limit Airbnbs,that sort of thing.
Only for it to be snapped up by corporate interests and not handed to the families that actually need it.
We need a list of all of the families and single people looking for a primary residence, build new housing, and just give it to them first. No buying allowed.
Ehhh, you've got the right spirit, but that won't happen lol.
What would be useful is banning, or at least limiting, speculative real estate ownership. A liveable home being unoccupied for no productive reason is a massively arrogant thing for a society to allow.
Some estimates put the number of vacant homes upwards of 30% a few months back, and it's been climbing
It's not about a lack of supply, it's about homes being both an investment and a basic need - someone like Black Rock can go into a small town in Georgia, snap up every property that goes on the market, then dictate rental prices while jacking up the house prices by bidding on everything. Even if they greatly overpay, by doing it a few times it drives up the valuation of the entire area, overall making their net profit grow
And it's not just Black Rock, it's a bunch of investment companies doing this everywhere. They have the same goal and their interests are aligned - they're not competing for tenants, they just want to jack up the values and use homes like stock investments
You cannot say it is not about lack of supply in the same sentence you mention housing being an investment and expect to be taken seriously.
Housing is a good investment specifically because of lack of supply.
Most of the problem isn't even big companies, but existing neighborhoods/local gov being pressured not to change their existing neighborhood, and passing zoning ordinances that prevent building.
I think the point he is trying to make is that basic needs being conflated with investments is bad, which is a fair point. If rentseeking behavior was much more heavily regulated we would see a sudden spike in housing supply as it wouldn't be an investment in a passive income source anymore.
The rentseeking behavior being, of course, passing legislation restricting where one can build multi-family housing and not "charging rent"
In my area of the country (mid-south), home prices were pretty low until the last couple of years. I bought a 3000 ft² house in 2020 for <100k in a city. Now, a similar sized house is going for >500k. A lot of homes were bought by individuals and property management companies who did some cosmetic renovations then raised rents sometimes by >200%.
Other properties are bought and left vacant on purpose to make sure the renters don't have other places to go.
I'm not sure what you're missing. Speculation only happens when a market is already tight and profit can be basically guaranteed. Build more and this incentive goes away.
No one is keeping houses vacant to turn away paying renters. That's nonsense.
Some estimates put the number of vacant homes upwards of 30% a few months back, and it's been climbing
It's not about a lack of supply, it's about homes being both an investment and a basic need - someone like Black Rock can go into a small town in Georgia, snap up every property that goes on the market, then dictate rental prices while jacking up the house prices by bidding on everything. Even if they greatly overpay, by doing it a few times it drives up the valuation of the entire area, overall making their net profit grow
And it's not just Black Rock, it's a bunch of investment companies doing this everywhere. They have the same goal and their interests are aligned - they're not competing for tenants, they just want to jack up the values and use homes like stock investments
you forgot that most country which has this house price problem actually build houses and apartment more than enough for all the homeless hence you would see lots of ghost town everywhere, economy now doesnt work as intended, you can build more house but without regulation despite the supply the price would still skyrocket like now
I didn't forget anything. If we had an excess supply of houses, prices would be trending down, not up. "Ghost towns" aren't really relevant because houses need to exist in places people want to live or they have no impact on demand.
The housing market isn't black magic. It's just a market.