I think the common perception that investors make housing unaffordable is wrong. Investors want rent-paying tenants and have an incentive to build, maintain, and upgrade housing. Here is the abstract of a recent working paper "The Impact of Institutional Investors on Homeownership and Neighborhood Access" https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4554831
'I estimate a demand system to study the effects of institutional investors’ conversion of large fractions of owner-occupied housing into rentals in the suburbs of US cities. I find the purchases and subsequent conversions of houses resulted in a tradeoff between homeowners and renters. Institutional investors decreased the housing available for owner-occupancy by 30% of the homes they converted, and their demand shock raised the price of housing in a census PUMA by 7.4pp per 1pp of housing they purchased. Higher prices made it harder for people to buy homes. However, the institutional investors increased the supply of homes available for renter occupancy by 69% of the houses they converted, and lowered rents by 2.3pp per 1pp of housing they purchased. The increase in the supply of rental housing allowed the financially constrained to move into neighborhoods that previously had few rental units. The people who moved into institutional investor-owned homes had lower incomes, a lower likelihood of having a bachelor’s degree, were more likely to be white, came from areas with worse historic economic mobility, and came from areas with lower school test scores than others who moved into the same census tracts. The findings suggest that institutional investors made it harder for people to purchase homes, but easier for renters to access neighborhoods that previously had few rentals.'
Most of the investment houses in my area are used as vacation rentals for half the year, so they're only for rent at market price to tenants about six months out of the year.
The resolution is simple, crack down hard on short term rentals and empty homes , ensure that only long term rentals or the owners who actually live in the house are allowed. or u have to pay a huge monthly tax or fine
Then the next step is to build like a crazy. The only way to cull the demand is to actually meet the demand. Just make the investment as unappealing as possible.
Whether these can be put into practice, that's another story
I wonder how demographics play into this: if the median current homeowner (primary residence) age is close enough to the median age people die or go into assisted living facilities, then we might see market conditions change drastically in various parts of the country.
Also that you cannot have both that and the tourism industry that this area - presumably - partly lives from. You might say "but hotels" but these short term rentals are being rented because they are wanted.
Hotel is just more regulated short termed rental, which is exactly what we should be doing - regulate the short rentals home more, make it economically inappealling. The tourists can pay for the hotels
Why raising the price for the tourism to the match the actual cost would mean no tourism? If they can't afford the travel cost there, maybe go somewhere else cheaper? The only reason short rentals are cheaper was that they are getting around the regulations AND they sacrifices the local population and push up the prices of the real estate and rentals.
Or do you mean tourism was invented after Airbnb? huh?
if you actually look at housing inflation vs. wage growth, the real story is that people are getting substantially poorer over time. A little bit of extra tax revenue to their town or city isn't going to offset that.
But yes, it's nice when someone is contributing to your living space but doesn't actually live there. Localized example: my building neighbor is away ~50% of the time and it's amazing. I get all the benefits of a multi-unit building with a dedicated landlord, but my day-to-day life is a lot like living in a single-family detached house.
It's a very complex issue. Housing inflation v. wage growth charts often don't account for houses being much bigger and better than the used to be and more people wanting to live in fewer areas. Housing would probably be cheap if we chose to live in the same types of remote areas we did 60 years ago.
As far as I know (please correct me if I'm wrong), you can look at price per square foot and see the same story. Prices of 100-year-old 1400-sqft homes are going up too, faster than consumer prices and faster than wages.
> more people wanting to live in fewer areas
> Housing would probably be cheap if we chose to live in the same types of remote areas we did 60 years ago
As far as I know, people wanting to live in remote areas was a relatively short-lived phenomenon in American history, facilitated by a number of economic and political factors that are not repeatable. My personal belief is that improving mass transit (think: Netherlands) is the best and most sustainable way to mitigate the current crisis, especially in the Boston area.
>The findings suggest that institutional investors made it harder for people to purchase homes, but easier for renters to access neighborhoods that previously had few rentals.
Sounds amazing for a population of stoic monks (own nothing = have no responsibilities, ties, etc), and absolutely terrible for community building (minimum requirement for a community is space to have it in).
1. Get homes.
2. Rent them to people.
3. Increase rent to the point where people can barely afford it.
4. Investors will be happy to get good returns.
But what about neighborhood? People who lived there for decades and now forced to move? Market doesn't care. Nobody cares if there is a profit for shareholders or/and banks.
Investing in a home and leasing it out is not actually 'economic rent-seeking' (which is what your linked article is about). Look at the first example given there:
>"Successful capture of regulatory agencies (if any) to gain a coercive monopoly can result in advantages for rent-seekers in a market while imposing disadvantages on their uncorrupt competitors. This is one of many possible forms of rent-seeking behavior."
Rent-seeking very much does have to do with being a landlord to economists. It was the example that gave rise to the idea. It's right there at the top of the wikipedia page...
Rent-seeking is when a landlord doesn't make serious improvements, but merely sits on the land as titleholder and gets money for it.
That's exactly what's happening here. Investors buy houses. Drive up prices astronomically. And make money from them. Oh, and they also use software tools to coordinate driving those prices up.
They even have the regulatory capture part down, where zoning has created a massive housing shortage to keep prices going up.
Economists are landlords who want to rent your head for free and decorate it with their normalizing semantics.
Everyone’s a missionary spreading some mind virus about why their figurative babble is worth another meal on your dime.
Why let another meat suit infect you with vacuous prestige language? They’re just one of billions. The flow of stuff we need is just data anyone can learn to understand. They’re hardly magic beings with divine vision. Their semantics need not be the futures.
At least in my Cambridge neighborhood, all of the properties that have been touched by investors and developers are being turned into very, very expensive condos. Or biotech labs. You'd think we had enough of those already, but no.
"You'd think we had enough of those already, but no.". The market determines when "we have had enough" not some arbitrary limit imposed by a current resident.
It's hardly a free market - it would certainly be more profitable to build a midrise with 20+ less expensive units rather than one expensive unit on a given lot - but zoning restrictions mean it can't happen.
Generally any neighborhood meeting will also have people providing input that more units will cause more traffic so could the developer please create fewer, more expensive units?
What market? Developers are tripping over themselves to build housing in Cambridge/Somerville.
But zoning gets in the way all the time. For example, Somerville was going to get a new development in Davis Square. And the developer jumped through all the hoops. The city literally changed the zoning map so that they could only build labs and no housing.
Then there is no shortage of the housing. Local people are satisfied with zoning and current state. Prices are going up, everyone who has some ownership have profit.
New people, who wants to move to the city - they are screwed.
So to be fair in some areas, the majority of voters are renters. BUT most of these don't vote (they do whine). The rest vote. Of those who vote, plenty are NIMBY - they have theirs and they don't want any change to their neighborhood. So that yeah, we are screwed (except that the voters actually ARE getting what they want. Just that what they want is messed up.)
So you are saying that not only these investors are buying property but they are spending even MORE to turn them into still more profitable property after several months or years of no income from these properties. If that's not a sign of demand far above offer, I don't know what is.
I think the very wealthy buying houses they don't need to make yet more money is bad and should be discouraged. Buying a duplex and living in half of it is one thing, but people (that are not the very wealthy) should be able to afford a house that they own personally if they play by the rules.
I personally don't want the headaches of being a landlord, but I have invested in apartment real-estate investment trusts (REITs). Such REITs do build housing, and I think that without them, housing costs would be even higher.
It's debatable whether such policies do what you say. Land on which you can build more and more freely is more valuable than land that you can't do anything with.
The only reason it is profitable is because the cost of buying an existing home is often less than the cost of building additional housing. If you want to discourage people buying houses to rent them out, the best thing to do is make it easier to create more homes. Prices only stay high when the demand is higher than supply. Too often people want to try to control the market rather than dealing with the reason a particular way to participate in the market is profitable.
Here in NY, where housing is more expensive than Boston, we are drowning in uninhabited "investment properties". With a proper vacancy tax we could instead be referring to them as "homes".
“Your future is renting, not owning”. They don’t want build incentive. They don’t want anyone to own a home at all.
If they had their way, they would regulate away your ability to own a home in an instant (and I fully expect that this will come to pass should we continue to move further and further right wing as a society).
I don't think the paper you mentioned is a argument for "investors make housing unaffordable is wrong".
The TL;DR of that paper is that investors made buying home harder but renting easier. Doesn't mean that this a good trade-off in the neighborhood and the section of the population concerned. It also doesn't follow that this way of doing it the most efficient way of doing (or even is an efficient way of doing it).
If i am reading this correctly, they raised the price of houses more than they reduce the price of rent. and it seems that the authors only looked at the houses that they actually converted for rent, not the total amount of houses purchased.
Second, they seems to be mainly targeting suburbs instead of high density areas. It's unclear to me that the same capital deployed to either build or buy high density building wouldn't be a far more effective and less disruptive way to increase housing availability.
But the main point about the impact of investor is two fold : First they have access to system of credit/lower interest rate than regular buyer do not thus driving the price up, and even more importantly we have in this country a lot of easement around housing that are design because we believe that stable housing (as in buying , not renting ) provide positive externalities that aren't captured by the market. Investor are simply perverting those incentives by using houses as speculation assets.
In many markets there is a gross lack of housing overall. It makes sense that owners paying attention will raise BOTH house prices and rents. There is not enough for sale AND there is not enough for rent. A larger investor can be BOTH more patient when selling and renting AND more realistic when adjustments need to be made.
Unfortunately in american systems, there is one delyaing effect: property companies seem to be able to borrow based on the nominal rent for their units - even if they can't find renters at that rate. (Which is why you often see "months free" rather than lower rent). This can delay market pricing changes by quite a bit - at least if you are not ready to move often.
> In many markets there is a gross lack of housing overall. It makes sense that owners paying attention will raise BOTH house prices and rents. There is not enough for sale AND there is not enough for rent. A larger investor can be BOTH more patient when selling and renting AND more realistic when adjustments need to be made.
I am not sure i understand the point you are making here. If there is not enough houses to sale, and not enough to rent. Then inefficiently converting one to the other doesn't sound like a win. Also, i think this is really market based. I am not sure that the mainly complaint for suburbs was the lack of rental unit. Most likely it was from the lack of buying opportunity.
> If i am reading this correctly, they raised the price of houses more than they reduce the price of rent.
In a market with some abundance, some external factor like a change in tax law might result in the balance changing so much that some prices go down. For example many owner-occupied home to be acquired by investors and rented out. The extra availability of rentals might push the rents down.
But in many US markets, there aren't so many properties changing hands. So rents will still go up. The slight change in balance will not push rents down.
There are currently some prices AND rents somewhat down in the SF Bay Area: Next to the street RV camping and worst street action.
> First they have access to system of credit/lower interest rate than regular buyer do not thus driving the price up
Not in the US. In the US, commercial lending is short term. There is no easy way to lock in low interest rates. Compared to long term for homeowners. But a bank or insurance company setting up a real estate portfolio may be willing to settle for a low cash return.
True, thanks for correction. I think i might have miss spoke here. I was trying to articulate that buying a property as a LLC or any other incorporated entity afford to more facilities in term of access to capital and taxes advantage than a primary residence doesn't alway have.
I don't live in Boston. We received one offer on our house that they later rescinded (after being on contract for a few weeks, effectively blocking other potentially interested parties during the summer). After that, no offers. We were selling at around half the cost-per-square foot of everyone else in the area. Now the house is off the market and we apparently have a vacation home.
Just saying, while some areas are crazy hot, some are not.
If the rental market is clearing, and the ownership market is clearing, that means that the same number of houses are being lived in as there were before the houses were sold.
If there aren't enough houses for people to live in as the market could bear, that's an issue of building more houses, not who owns the current houses.
> If the rental market is clearing, and the ownership market is clearing, that means that the same number of houses are being lived in as there were before the houses were sold.
It's not just about the number of homes. It's also about the prices of those homes. The crisis is not necessarily that people literally can't find a place to rent; it's that they can't afford it.
The article clearly posits that investor-owners tend to charge more than other owners, either in resale price or rent, disproportionate to the value of the improvements they make to the property. That is, the article asserts that investor-owned properties cost more than non-investor-owned properties.
Maybe the analysis in the underlying report is flawed (and it very likely could be), but that's the claim. It's not a claim about what might happen, it's a claim about what is happening.
Has there been a writeup on Vancouver BC and their taxes / rules etc they've imposed and outcomes? Would be interesting to know if that has moved the needle at all? It would be also interesting to understand how we could differentiate between "I'm buying a house to live in for a pile of money and hope that at worst it's price follows inflation so that my large pile of money does not devalue.." vs. "I'm an medium to large size investment company that purchases your house with the goal of making it an airbnb or doing some minimal level of work to spruce up the house to then rent out to corporate housing for a local big-tech company down the street for 8k per month"..
I am mixing one 60 pound concrete bag at a time from the ground up to avoid this insanity from all sides. Fuck the investors, fuck the homeowners, fuck the landlords, fuck the general contractors, and fuck the legislators who pass zoning and codes.
I've been a volunteer firefighter for almost 20 years and have seen the results of the work of people who think they know better than building codes many times.
And I thank my lucky stars every day that I live in a place with strict zoning, unlike Texas where an oil refinery can be located adjacent to high-density housing.
Cool, I am building to code but I never could have built to code if it were required, because I have a day job and no time for inspections. So I built without code inspections.
My experience is I know far more of the code than average volunteer firefighter who has probably never even looked at them, although perhaps not you.
Building code and its associated inspections aren't, primarily, for you. They're for the people around you and the people who come after you.
You might be the greatest builder on the planet. I, as the tenant or owner who lives in the structure after you, have no way of knowing that absent you following the process that says a separate entity confirmed that you built a safe structure.
I, as your neighbor two parcels down, have no way of knowing that you did or didn't build a building that is likely to burn down and take half of the area with it.
To head off what I'm sure is the inevitable reply along the lines of "I will live in this house until I die" and/or "there is no one around me for the next 100 miles", that's fine, but those are situations that can change. Code, and having the inspection, confirms that you did what society asked of you to keep the rest of us safe.
(Is the building code and its associated inspections fallible? Absolutely. But deliberately flaunting them because you just didn't have time is similarly not an excuse.)
Some building code elements are absolutely critical, like the burn time required for external walls and then increasing it for shared walls. That absolutely saves lives and should be sacrosanct. Plenty of other code requirements are overly bureaucratic and do nothing but add expense, like ever decreasing maximum distance between outlets.
Zoning is the same way. Some of the rules are critical, but most are existing residents enforcing their preferences via bylaw. Ensuring adequate buffers between truly industrial uses and residential is a great use of zoning. Not being able to open low impact business like a barber shop or cafe in a residential neighbourhood makes absolutely no sense. Lot coverage percentages, parking minimums, height restrictions that don't allow gentle density, and exclusive single family zoning all need to go.
More than a century of code and zoning restriction have piled on each other over and over (with zoning often deeply rooted in racist policies). It's long past time to identify the safety critical ones and eject all the rest. It's true of zoning moreso than building code, but both could use a serious refactor.
Investors are banking on the idea in part that the governments will make it hard for others to compete with them by restricting new housing. Not a super bad bet.
At least in the bay area the layer of regulations and hoop jumping is very very daunting. Plenty of "funny" stories - all of which mean that it's very very very hard to build new housing at any meaningful scale for reasonable costs.
Boston likely has many of the same factors.
Investors want barriers to competition - and governments and taxpayers provide it.
I grew up in a suburb not far from Boston, and my parents still live in the house I grew up in. Somehow some real estate database got my email in it associated with my parents address, so I occasionally get emails addressed to my father asking if he's interested in selling the house, which is amusing since my email is in the format lastname.firstname.middleinitial@<provider>, and my father's first name is not the same as my own or even beginning with my middle initial (not that even a human would necessarily come to the conclusion that the data was wrong, let alone an email bot). It sounds like this might have been coming from a private investor like the article describes.
I sometimes joke with my parents that they should hope the offer isn't too good or I might take them up on it someday!
The rallying cry of Georgists is "land value tax would solve this," and at least in Detroit, they're looking to try it.
The concept is a very interesting one, but I think that the overarching shift towards institutional mega-REIT ownership of a significant portion of housing inventory, coupled with the obvious pervasive NIMBYism against density, continues to exacerbate the ability for basically anyone truly middle-class or below, to ever actually be able to buy a home.
Is Detroit a place with a really tight housing market? It wasn't that long ago that neighbors were offering potential purchasers of near by houses dinner every week for a year to encourage them to go ahead and buy it because they didn't want more empty houses on their block.
Lovely. "A place that doesn't have the problems Georgism is designed to solve is planning to test Georgism." That's going to make it close to a meaningless experiment.
[Edit: Including politically meaningless. No matter what happens, one side or the other will use "wrong circumstances" as an escape hatch to deny the general applicability of the results.]
> When Mayor Mike Duggan talks about his accomplishments in Detroit, the list is both impressive and sad. He had the streetlights turned back on, and reopened closed parks. In the decade since he took office, the city has demolished some 25,000 blighted homes whose rusty debris and incubation of crime drag down neighborhoods.
> The progress would be even greater, the mayor argues, if the city hadn’t been smothered by speculation. In the years after the Great Recession, tens of thousands of Detroit properties were bought by absentee landlords and faceless LLCs. The owners are so negligent and hard to find that the city mows their lawns without asking.
Georgism is simply one of those ideas that has changed how I look at the city around me. After reading that primer, I recommend looking around your city with fresh eyes, noticing how many vacant shops, mostly empty parking lots, and underutilized spaces blight otherwise productive (and expensive) urban cores.
land will be taxed at a new rate of 11.8%, whether or not it has anything built on it.
Homeowners are guaranteed that they won't pay more tax. They can make the change fairly cost neutral for honeowners because currently land value is usually low compared to value of the house.
Increasing tax to 12% will drastically devalue existing vacant land. Land owners are currently paying say 7% mortgage (or equivalent opportunity cost by tying up equity).
Adding a 12% land tax would massively devalue land. The city is basically saying use it or lose it. To make it worthwhile to use it, any extra investment needs to return enough income to cover the new land tax (the tax is still there even if developed since the land value remains the same). I imagine owners would sue the city. Having your land value crashed by heavy taxation seems a bit harsh (not that most of us would be weeping for the investors).
The land value tax appears to only affect some of Detroit:
I can't think of a way to model the drop in property market value due to the taxation. Can anyone think of a good approximation for how precipitously the market value would drop?
PS: I live near an area totally blighted by investors over many decades. I agree with the purpose behind land value tax - even though a land tax appears to completely screw over current investors. Investors have been screwing us locals for a long time, so maybe it is just.
A %12 tax is relatively mild, but you're right that a transition to a tax system that taxes land more and taxes everything else less will screw over existing investors of underutilized land.
Another pain point is that homeowners who have been sitting on lots that are highly desirable and infilled will be taxed considerably more. This is in the long run a major benefit of the LTV: that underutilized land is put to productive use. That doesn't mean the political optics won't be difficult to square.
Yeah, I absolutely agree. It's just that it makes georgism politically difficult, as benefits are diffused across a wider population and the negatives are intensely focused on a smaller population.
12% is halving value in 5 years. A tax that steals half of the asset over 5 years is not "mild". The tax makes a mockery of any reasonable multiyear plans. It's okay to say screw retirement savings, but be honest exactly what is being said.
Investing often talks about percentage points because small differences in returns matter. 12% is two orders of magnitude bigger - it's significant. 1% really matters - which you would know if you were involved with finance or had a variable rate mortgage.
Note the word relative. The land value tax has been championed by economists across the political sprectrum as a single tax to displace other taxes with. The entire movement of georgism advocates for a land value tax approaching %100.
This article is based on a report by "Metropolitan Area Planning Council". All of their goals ("sustainable land use, protection of natural resources, efficient and affordable transportation, a diverse housing stock...") are admirable, but are also things that increase the cost of housing.
How does efficient and affordable transportation increase the cost of housing? It should be pretty clear that this decreases the cost of housing, by allowing people to live in a larger physical area.
How does a diverse housing stock increase the cost of housing? When there's only a limited variety of housing available, competition for the less-available variety becomes intense and prices go through the roof. This is currently what's happening with smaller, older single-family homes.
There's just a vocal contingent of left politics who believe that what the people secretly crave is socialism, that tenants don't want merely shelter at a fair price but the elimination of property as a concept altogether, and this contingent has plenty of overlap with press reporters.
It's clear that you've never talked to any leftist about this, because what you're likely to hear is an argument that everyone should have the right to own their own home (yes, as private property).
Are there are a lot of practical problems with a world that truly has no landlords? Of course. But it does you no good to make stuff up about a school of thought you clearly know nothing about and have never attempted to engage with.
You must be phoning this in from a different planet, or at least some other country. It is a plank of the DSA policy platform that only "social housing" be allowed to be built.
More than 1 in 5 people living in Boston rent. Virtually everybody who is renting rents from an investor. So this stat implies that the owner-occupier share is going up and the rental share is going down, which means that it should be pushing housing prices down and rental prices up.
I've been thinking about some kind of a model of the real estate market that would be able to explain past prices and estimate future prices based on several factors that change in time: current interest rates, expected future interest rates, disposable income, demographics, urbanization (people moving to cities), cost of building new houses, regulation, taxes.
This questionable analysis relies on the viewpoint that if an LLC owns a triplex, it is "investors", even if the owner lives there. This is simplistic, as well as stupid.
Investors snagged 1 in 5 homes for sale in Boston area
B:
worsening housing crisis
'A' does not lead to 'B'. Investors are money chasers. They will pursue gains where the system shows potential for gains. That simple. With the large amount of temporary residents (students & researchers) in Boston, it is the perfect city for corporate rental properties.
American cities are woefully under-built. Boston is especially primed for further densification, because it has the infrastructure (other than the current MBTA hiccup) and walkability to scale up with more people.
Sadly, the US treats houses as an odd combination of emotional-basic-need and investment. It would've been fine if it was one or the other. The emotional-basic-need part of it allows local individuals to exercise more control on housing in their neighborhood than would be allowed for any other tradeable-investment. The investment part of it leads to the expectations of prices needing to always go up.
So you get high upside, and protection from downside at the expense of everyone who isn't a home owner. Investors exploit this dissonance, but it is entirely on the administration for allowing it to exist in the first place.
If housing height limits were eased & housing regulations were relaxed (2 fire exits in every building, parking minimum, ""environmental certifications""), then these investors would only be able to make money off thin margins by predicting demand. (like commodity trading). But instead, the US gives unjustifiably oppressive privileges to all homeowners including large investing companies, and now, we're seeing the natural results of it.
A does not ALWAYS lead to B, but if the area has a scarcity of housing, then it will.
Here's the basic logic in my head:
We'll say the total cost of available housing in an area is H. These investors now own 0.2H
They will then do one of 2 things:
Either put the housing back on the market for more than they paid (they are investors after all). We'll say they want to make P% profit. So the cost of the housing that was .2 * H is now .2 * H * (1 + P/100) = .2 * H + P * H / 5. So now the total cost of available housing has gone up, meaning that any housing difficulties are now worse.
The other alternative is even more bleak. The investors buy the housing, and then hold on to it (without renting it) in hopes of making something higher than P% at a future date. We now have 0-20% less housing on the market, which means that housing difficulties are now worse.
No matter how you slice it, injecting investors (i.e., middle men) into a scarce market will only ever increase cost or scarcity.
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[ 3.0 ms ] story [ 128 ms ] thread'I estimate a demand system to study the effects of institutional investors’ conversion of large fractions of owner-occupied housing into rentals in the suburbs of US cities. I find the purchases and subsequent conversions of houses resulted in a tradeoff between homeowners and renters. Institutional investors decreased the housing available for owner-occupancy by 30% of the homes they converted, and their demand shock raised the price of housing in a census PUMA by 7.4pp per 1pp of housing they purchased. Higher prices made it harder for people to buy homes. However, the institutional investors increased the supply of homes available for renter occupancy by 69% of the houses they converted, and lowered rents by 2.3pp per 1pp of housing they purchased. The increase in the supply of rental housing allowed the financially constrained to move into neighborhoods that previously had few rental units. The people who moved into institutional investor-owned homes had lower incomes, a lower likelihood of having a bachelor’s degree, were more likely to be white, came from areas with worse historic economic mobility, and came from areas with lower school test scores than others who moved into the same census tracts. The findings suggest that institutional investors made it harder for people to purchase homes, but easier for renters to access neighborhoods that previously had few rentals.'
Then the next step is to build like a crazy. The only way to cull the demand is to actually meet the demand. Just make the investment as unappealing as possible.
Whether these can be put into practice, that's another story
Or do you mean tourism was invented after Airbnb? huh?
if you actually look at housing inflation vs. wage growth, the real story is that people are getting substantially poorer over time. A little bit of extra tax revenue to their town or city isn't going to offset that.
But yes, it's nice when someone is contributing to your living space but doesn't actually live there. Localized example: my building neighbor is away ~50% of the time and it's amazing. I get all the benefits of a multi-unit building with a dedicated landlord, but my day-to-day life is a lot like living in a single-family detached house.
> more people wanting to live in fewer areas
> Housing would probably be cheap if we chose to live in the same types of remote areas we did 60 years ago
As far as I know, people wanting to live in remote areas was a relatively short-lived phenomenon in American history, facilitated by a number of economic and political factors that are not repeatable. My personal belief is that improving mass transit (think: Netherlands) is the best and most sustainable way to mitigate the current crisis, especially in the Boston area.
That doesn't even account for the higher code requirements for insulation, fire, and wind resistance.
> As far as I know, people wanting to live in remote areas was a relatively short-lived phenomenon in American history,
As the US left its agrarian roots, more people have been living in fewer places: https://en.wikipedia.org/wiki/Urbanization_in_the_United_Sta...
It will be interesting to see if the remote knowledge work can reverse this trend.
The Netherlands is great, but I don't know if its successes can be repeated in the US.
"You'll own nothing and you'll be happy"
This is indeed the intended outcome.
But what about neighborhood? People who lived there for decades and now forced to move? Market doesn't care. Nobody cares if there is a profit for shareholders or/and banks.
https://en.wikipedia.org/wiki/Rent-seeking
>"Successful capture of regulatory agencies (if any) to gain a coercive monopoly can result in advantages for rent-seekers in a market while imposing disadvantages on their uncorrupt competitors. This is one of many possible forms of rent-seeking behavior."
Rent-seeking is when a landlord doesn't make serious improvements, but merely sits on the land as titleholder and gets money for it.
That's exactly what's happening here. Investors buy houses. Drive up prices astronomically. And make money from them. Oh, and they also use software tools to coordinate driving those prices up.
They even have the regulatory capture part down, where zoning has created a massive housing shortage to keep prices going up.
Everyone’s a missionary spreading some mind virus about why their figurative babble is worth another meal on your dime.
Why let another meat suit infect you with vacuous prestige language? They’re just one of billions. The flow of stuff we need is just data anyone can learn to understand. They’re hardly magic beings with divine vision. Their semantics need not be the futures.
But zoning gets in the way all the time. For example, Somerville was going to get a new development in Davis Square. And the developer jumped through all the hoops. The city literally changed the zoning map so that they could only build labs and no housing.
The underlying issue is that we need more homes.
Fine, then let's mandate this by law.
“Your future is renting, not owning”. They don’t want build incentive. They don’t want anyone to own a home at all.
If they had their way, they would regulate away your ability to own a home in an instant (and I fully expect that this will come to pass should we continue to move further and further right wing as a society).
The TL;DR of that paper is that investors made buying home harder but renting easier. Doesn't mean that this a good trade-off in the neighborhood and the section of the population concerned. It also doesn't follow that this way of doing it the most efficient way of doing (or even is an efficient way of doing it).
If i am reading this correctly, they raised the price of houses more than they reduce the price of rent. and it seems that the authors only looked at the houses that they actually converted for rent, not the total amount of houses purchased.
Second, they seems to be mainly targeting suburbs instead of high density areas. It's unclear to me that the same capital deployed to either build or buy high density building wouldn't be a far more effective and less disruptive way to increase housing availability.
But the main point about the impact of investor is two fold : First they have access to system of credit/lower interest rate than regular buyer do not thus driving the price up, and even more importantly we have in this country a lot of easement around housing that are design because we believe that stable housing (as in buying , not renting ) provide positive externalities that aren't captured by the market. Investor are simply perverting those incentives by using houses as speculation assets.
Unfortunately in american systems, there is one delyaing effect: property companies seem to be able to borrow based on the nominal rent for their units - even if they can't find renters at that rate. (Which is why you often see "months free" rather than lower rent). This can delay market pricing changes by quite a bit - at least if you are not ready to move often.
I am not sure i understand the point you are making here. If there is not enough houses to sale, and not enough to rent. Then inefficiently converting one to the other doesn't sound like a win. Also, i think this is really market based. I am not sure that the mainly complaint for suburbs was the lack of rental unit. Most likely it was from the lack of buying opportunity.
> If i am reading this correctly, they raised the price of houses more than they reduce the price of rent.
In a market with some abundance, some external factor like a change in tax law might result in the balance changing so much that some prices go down. For example many owner-occupied home to be acquired by investors and rented out. The extra availability of rentals might push the rents down.
But in many US markets, there aren't so many properties changing hands. So rents will still go up. The slight change in balance will not push rents down.
There are currently some prices AND rents somewhat down in the SF Bay Area: Next to the street RV camping and worst street action.
Not in the US. In the US, commercial lending is short term. There is no easy way to lock in low interest rates. Compared to long term for homeowners. But a bank or insurance company setting up a real estate portfolio may be willing to settle for a low cash return.
Just saying, while some areas are crazy hot, some are not.
If there aren't enough houses for people to live in as the market could bear, that's an issue of building more houses, not who owns the current houses.
It's not just about the number of homes. It's also about the prices of those homes. The crisis is not necessarily that people literally can't find a place to rent; it's that they can't afford it.
Maybe the analysis in the underlying report is flawed (and it very likely could be), but that's the claim. It's not a claim about what might happen, it's a claim about what is happening.
Doesn't seem like it really had much of an effect.
I've been a volunteer firefighter for almost 20 years and have seen the results of the work of people who think they know better than building codes many times.
And I thank my lucky stars every day that I live in a place with strict zoning, unlike Texas where an oil refinery can be located adjacent to high-density housing.
My experience is I know far more of the code than average volunteer firefighter who has probably never even looked at them, although perhaps not you.
Building code and its associated inspections aren't, primarily, for you. They're for the people around you and the people who come after you.
You might be the greatest builder on the planet. I, as the tenant or owner who lives in the structure after you, have no way of knowing that absent you following the process that says a separate entity confirmed that you built a safe structure.
I, as your neighbor two parcels down, have no way of knowing that you did or didn't build a building that is likely to burn down and take half of the area with it.
To head off what I'm sure is the inevitable reply along the lines of "I will live in this house until I die" and/or "there is no one around me for the next 100 miles", that's fine, but those are situations that can change. Code, and having the inspection, confirms that you did what society asked of you to keep the rest of us safe.
(Is the building code and its associated inspections fallible? Absolutely. But deliberately flaunting them because you just didn't have time is similarly not an excuse.)
I live here specifically to get away from people with your concerns.
Zoning is the same way. Some of the rules are critical, but most are existing residents enforcing their preferences via bylaw. Ensuring adequate buffers between truly industrial uses and residential is a great use of zoning. Not being able to open low impact business like a barber shop or cafe in a residential neighbourhood makes absolutely no sense. Lot coverage percentages, parking minimums, height restrictions that don't allow gentle density, and exclusive single family zoning all need to go.
More than a century of code and zoning restriction have piled on each other over and over (with zoning often deeply rooted in racist policies). It's long past time to identify the safety critical ones and eject all the rest. It's true of zoning moreso than building code, but both could use a serious refactor.
You might not notice the value because the problems they were designed to prevent do not occur!
Exclusive SFH zoning is the least-frequently (but still not never) defensible, IMO. The others can be reasonable.
At least in the bay area the layer of regulations and hoop jumping is very very daunting. Plenty of "funny" stories - all of which mean that it's very very very hard to build new housing at any meaningful scale for reasonable costs.
Boston likely has many of the same factors.
Investors want barriers to competition - and governments and taxpayers provide it.
I sometimes joke with my parents that they should hope the offer isn't too good or I might take them up on it someday!
The concept is a very interesting one, but I think that the overarching shift towards institutional mega-REIT ownership of a significant portion of housing inventory, coupled with the obvious pervasive NIMBYism against density, continues to exacerbate the ability for basically anyone truly middle-class or below, to ever actually be able to buy a home.
NYT has a great piece on the Georgist approach being considered in Detroit: https://www.nytimes.com/2023/11/12/business/georgism-land-ta...
Here's The Economist's short summary as well: https://www.economist.com/united-states/2023/10/05/detroit-w...
They also had a piece about how in Switzerland, essentially no one new is able to purchase a home, so it's become a nation of renters: https://www.nytimes.com/2023/11/06/realestate/zurich-switzer...
Is Detroit a place with a really tight housing market? It wasn't that long ago that neighbors were offering potential purchasers of near by houses dinner every week for a year to encourage them to go ahead and buy it because they didn't want more empty houses on their block.
[Edit: Including politically meaningless. No matter what happens, one side or the other will use "wrong circumstances" as an escape hatch to deny the general applicability of the results.]
> When Mayor Mike Duggan talks about his accomplishments in Detroit, the list is both impressive and sad. He had the streetlights turned back on, and reopened closed parks. In the decade since he took office, the city has demolished some 25,000 blighted homes whose rusty debris and incubation of crime drag down neighborhoods.
> The progress would be even greater, the mayor argues, if the city hadn’t been smothered by speculation. In the years after the Great Recession, tens of thousands of Detroit properties were bought by absentee landlords and faceless LLCs. The owners are so negligent and hard to find that the city mows their lawns without asking.
https://www.astralcodexten.com/p/your-book-review-progress-a...
Georgism is simply one of those ideas that has changed how I look at the city around me. After reading that primer, I recommend looking around your city with fresh eyes, noticing how many vacant shops, mostly empty parking lots, and underutilized spaces blight otherwise productive (and expensive) urban cores.
http://www.vacantnewyork.com/
Increasing tax to 12% will drastically devalue existing vacant land. Land owners are currently paying say 7% mortgage (or equivalent opportunity cost by tying up equity).
Adding a 12% land tax would massively devalue land. The city is basically saying use it or lose it. To make it worthwhile to use it, any extra investment needs to return enough income to cover the new land tax (the tax is still there even if developed since the land value remains the same). I imagine owners would sue the city. Having your land value crashed by heavy taxation seems a bit harsh (not that most of us would be weeping for the investors).
The land value tax appears to only affect some of Detroit:
Before: https://detroitmi.gov/sites/detroitmi.localhost/files/2023-0...
After: https://detroitmi.gov/sites/detroitmi.localhost/files/2023-0...
I can't think of a way to model the drop in property market value due to the taxation. Can anyone think of a good approximation for how precipitously the market value would drop?
PS: I live near an area totally blighted by investors over many decades. I agree with the purpose behind land value tax - even though a land tax appears to completely screw over current investors. Investors have been screwing us locals for a long time, so maybe it is just.
Another pain point is that homeowners who have been sitting on lots that are highly desirable and infilled will be taxed considerably more. This is in the long run a major benefit of the LTV: that underutilized land is put to productive use. That doesn't mean the political optics won't be difficult to square.
That's a feature, not a bug.
Strong disagree.
12% is halving value in 5 years. A tax that steals half of the asset over 5 years is not "mild". The tax makes a mockery of any reasonable multiyear plans. It's okay to say screw retirement savings, but be honest exactly what is being said.
Investing often talks about percentage points because small differences in returns matter. 12% is two orders of magnitude bigger - it's significant. 1% really matters - which you would know if you were involved with finance or had a variable rate mortgage.
How does a diverse housing stock increase the cost of housing? When there's only a limited variety of housing available, competition for the less-available variety becomes intense and prices go through the roof. This is currently what's happening with smaller, older single-family homes.
> How does efficient and affordable transportation increase the cost of housing?
I'm not familiar enough with this organization, but "efficient and affordable transportation" is sometimes a euphemism for anti-car policies.
> How does a diverse housing stock increase the cost of housing?
Again, the specific positions can change everything, but this could mean opposing 5-over-1 development because there's "too much" already.
Are there are a lot of practical problems with a world that truly has no landlords? Of course. But it does you no good to make stuff up about a school of thought you clearly know nothing about and have never attempted to engage with.
It's as much about prices as it is about quantity. The houses and rental units are there, they're just really expensive as a % of income.
Maybe something like this already exists...
American cities are woefully under-built. Boston is especially primed for further densification, because it has the infrastructure (other than the current MBTA hiccup) and walkability to scale up with more people.
Sadly, the US treats houses as an odd combination of emotional-basic-need and investment. It would've been fine if it was one or the other. The emotional-basic-need part of it allows local individuals to exercise more control on housing in their neighborhood than would be allowed for any other tradeable-investment. The investment part of it leads to the expectations of prices needing to always go up.
So you get high upside, and protection from downside at the expense of everyone who isn't a home owner. Investors exploit this dissonance, but it is entirely on the administration for allowing it to exist in the first place.
If housing height limits were eased & housing regulations were relaxed (2 fire exits in every building, parking minimum, ""environmental certifications""), then these investors would only be able to make money off thin margins by predicting demand. (like commodity trading). But instead, the US gives unjustifiably oppressive privileges to all homeowners including large investing companies, and now, we're seeing the natural results of it.
Here's the basic logic in my head:
We'll say the total cost of available housing in an area is H. These investors now own 0.2H
They will then do one of 2 things:
Either put the housing back on the market for more than they paid (they are investors after all). We'll say they want to make P% profit. So the cost of the housing that was .2 * H is now .2 * H * (1 + P/100) = .2 * H + P * H / 5. So now the total cost of available housing has gone up, meaning that any housing difficulties are now worse.
The other alternative is even more bleak. The investors buy the housing, and then hold on to it (without renting it) in hopes of making something higher than P% at a future date. We now have 0-20% less housing on the market, which means that housing difficulties are now worse.
No matter how you slice it, injecting investors (i.e., middle men) into a scarce market will only ever increase cost or scarcity.