Selling your house to a local family rather than an “investor” is pretty close to an Absolute Good. Putting a condition in your will that any housing asset in your estate is only to be sold to local families is a pretty trivial way to do a good deed, which you may be in some need of (on the other side).
(Playing devil's advocate, I agree with you personally)
Unless the investor is willing to pay significantly more than a local family, this could deprive your heirs of money that they otherwise would have received.
Especially in a world of decreasing social trust, people are less likely to do something for the benefit of their neighbors or community and more likely to make purely selfish choices for themselves and their family.
"Who's outbidding you by tens of thousands of dollars for that home of your dreams? A hedge fund"
It's unlikely that an investor will pay significantly more than a non-investor for a liquid asset. There is certainly some premium, but a large premium would imply something very strange about housing as a market.
> a large premium would imply something very strange about housing as a market.
It is an investment and the actions to protect such an investment is detrimental to using the house as a home. Corporations get representation in government these days so nothing changes to benefit the would-be family home buyer.
I presume a lot of the harm that hedge funds and similar housing investment operations do isn't in the buying and selling of a single house (though there is that); but in the buying and selling of houses in whole markets, artificially impacting the price over the long run.
And barring a catastrophic event like the housing crisis, housing prices never really go __that__ down.
It's like broader inflation. If prices increase by 2% and wages by 1%, after 10 years that's a much broader gulf that is far, far harder to recover from.
Housing is neither liquid nor fungible. There are a limited number of single family homes and existing homeowners do everything in their power to prevent more from being built.
Give it 20 years and we’ll be where Canada, Australia, and the UK are where a house is 10x or more the median yearly salary.
I’ve come to terms with the fact that I’ll never own a house because of the greed of exisiting homeowners and the cowardice of politicians. It is what it is, and it’s entirely out of my control.
In these cases, I don't think the devil needs any more help. They've already got all the money for advertisements, astro-turfing, misinformation, bribery-via-lobbying and convenient sheep doing their work for free and don't need any more.
When my wife and I decided to upgrade to a house, we kept our townhouse to use as a rental property. Shortly afterwards, the city council (Seattle) and state government started passing new laws that made things less and less friendly to landlords. You couldn't use certain kinds of data to select tenants, you had to take the first qualified applicant, evictions become much harder to do, etc. At the same time (2020, a time of social unrest), the same politicians pushed for less policing, so the townhouse's neighborhood started to go downhill due to increased crime and homelessness. We acted fast and sold off that rental property, somewhat bitter that a passive income stream had dried up.
If someone had come along on a high horse and lectured at us to take another financial hit for the good of local families because doing an Absolute Good is good for our afterlives, I would have laughed in their face. As it turns out we ended up selling it to a married couple, but if a hedge fund had offered even $1K more I would have taken it.
I suppose this is an example of decreasing social trust, but I'm not rich enough to be able to leave money like that on the table.
> Unless the investor is willing to pay significantly more than a local family
Institutions tend to not be dumb money as much as retail. But institutions can uniquely be dumb at scale. Every few years someone thinks they solved the housing market with algorithms, and tends to be profitable to do business with them.
The much better good is to object to anyone new living in the neighborhood and then making the place a good investment opportunity. Ideally, you also say things like “X is full! Transplants go back!”
If you’re in a Democrat state use the word “transplant”. Otherwise use the word “immigrant”.
Then if you’re in a Democrat state put out a sign saying “All are welcome” and stick a COEXIST sticker on your car.
Republican state? Jesus sign outside about him loving everyone.
Now that is True Good. Or as they say “unalloyed good”.
Is there some further requirement that the family reside in it as their primary residence for a specific amount of time? What is considered "local"? What if local families are already affluent? What qualifies as a "family", do they need to be married? Who is actually permitted to live with the family?
This idea falls apart very quickly after the first few sentences of followup.
This is literally what probate lawyers do. Lmao these are not unsolvable problems by any means wills include shit like this all the time. It's a well understood area of law.
> Josh shows that large investors enjoy cost advantages by paying fewer operating expenses, property taxes, and lower mortgage costs. One particularly interesting one is insurance costs, which have of course been rising all over the country. Large landlords appear to enjoy bargaining advantages and pay substantially lower insurance expenses as well.
Their having lower insurance costs totally makes sense. If you go to an insurance company and tell them you have 1500 properties in 12 states (hopefully none of which are Florida!) they're going to give you a nice discount.
But that just isn't possible with property taxes. If you tell your county tax assessor that you want a quantity discount, you'll get "The Look of Disapproval". Or flat laughed-at. The only way they could have lower taxes is by owning lower-valued properties - either because they bought cheap, or aren't maintaining them and they decline in value (which is the slow way to getting poor returns as a landlord).
I think there's just too much money being spent. One day in a few years the investors will find a new "sure-fire" strategy involving some other asset and the country will get a glut of properties up for sale. At first they'll be listed at market rates, and then much lower as they panic to sell at any price. Leading to housing crash 2.0
>If you tell your county tax assessor that you want a quantity discount, you'll get "The Look of Disapproval".
1. Why would the assessor give bulk discounts in the first place? It's not like they can take their business (houses?) elsewhere if the assessor refuses. Many jurisdiction have transaction/transfer taxes, which mean even if they want to dump their holdings, the county would come out on top.
2. Is the assessor even allowed to give bulk discounts? Even if they could, given the political climate against big corporations, granting such discounts seems like political suicide. You're just asking to get challenged in the next election.
I suspect its more about the ability at scale to appeal prop value increases. At enough scale you have data points on maybe ways to get an edge in appealing the increase. Its on a county/state rule level so I could not say much more but my mental model is if you have 100 SFH in the same county, you may be able to come up with datapoints to appeal or reduce the increase which can provide an edge. They are definitely not negotiating though.
> But that just isn't possible with property taxes
I think what they mean is the overall hit from property taxes is marginal at their scale because of the better margins they get on other inputs like insurance.
That said, Zillow tried this strategy a couple years ago and it ended horribly for them.
I don't think yet another fund will be able to get an edge that local landlords and real estate companies have.
Depending on how many properties they have in their portfolio for a particular county, it could make sense for them to start donating to candidates for tax assessor that are favorable to them. If the goal here is to buy properties and flip them, having an assessor that only assess value once a decade is going to be better than one who requires a reassessment each time a permit is issued for a property. If they want to hold and rent, another assessment strategy would be beneficial for them.
I suspect this is the big one, at size, you can have people on staff that do nothing but fight property value increases. It may be like throwing a stick against the wind but some of them will land ahead and they get some reductions on annual increases.
> Professionalizing management, better bargaining over expenses, some degree of appeals over property tax, and better access to capital markets therefore enable institutional investors to improve their cost structure
It's just regulatory capture by people with an interest in the real estate asset class, which mainly consists of two groups: (1) investors and (2) people whose net worth is primarily derived from their house (read: poor people). Both of these seemingly opposing groups have an incentive to see property prices appreciate and avoid any obvious solution that would fix the problem, i.e. higher property tax rates for properties that aren't primary residences.
I've noticed this on HN. Anytime thr market produces a negative result for society, rather than acknowledge it, it gets blamed on some imaginary regulatory capture. Like there there is an ability to accept that markets produce negative results for society - it's always blamed on some external force.
> Like there there is an ability to accept that markets produce negative results for society
That's not mutually exclusive with regulatory capture. The problem of excessively large motor vehicles in the US is contributed to by both deliberate quirks of the tax system and a zero sum bidding war to be the biggest on the road, for example.
>(2) people whose net worth is primarily derived from their house (read: poor people)
If these people were smart, they'd realize that rising house values don't help them, because 1) they can't make money on a house they're still living in, they have to sell it first, and then where are they going to move to? and 2) rising house values means rising tax assessments which means their mortgage bill will increase to pay the higher property taxes.
Institutional investors should have little if any impact on prices. As long as they rent them out, which they will, this will have not affect housing supply. If anything, people who can’t afford to buy will have more rental options.
The underlying problem is that city councils ban the construction of most new homes. This has led to a supply shortage. The wealthier among us are thus forced to bid up the price of cheaper, older homes. Landlords can charge more for existing properties too. We need to change the laws so that we build lots more homes.
I do. agree strongly with your point about the loss of a social contract. If you’re interested in helping fix this problem, join the YIMBY movement.
Yeah, no way that this undermines the security of families, reduces parenting investment, erodes stability and is generally yet another layer of parasitism on society.
I’m sure this will be fine.
Thank gods my parents were wise enough to buy land and homestead the frontiers when it was still possible for the working class to do so.
Buy land if you can, people. Not houses, land. You can always build a house. You can’t build land.
At least in many parts of the USA it’s still possible for many to buy land in lower demand rural areas if you are very careful with your living expenses. It might not be in the ideal place, but owning land makes it the best place. My preference is for land with few zoning restrictions and a low tax burden, since it might sit unused for a while.
I was able to build a (tiny) house on my parents property using scraps I got from doing free demolition work when I was 16-18. I have parlayed that one advantage of never having to pay rent into a relatively prosperous life despite only modest successes. Not having a huge monthly bill pays compounding dividends over a lifetime if you invest that money into things you own instead of borrow.
> At first blush, the fact that these investors still own such a small fraction of the overall stock of single-family homes would suggest their impact is still pretty minor.
This doesn't matter all that much because houses that people bought and are living in are inert, off the market. They might as well not exist (and people who own them).
What matters is how many houses investors are buying right now and it's significant part of all purchases.
Society has to choose between housing being an investment with a return much higher than the risk free rate and housing being affordable. The higher the ROI on housing the larger the percentage of people who can't afford housing.
The higher the ROI the more people invest in building housing, bringing the price of housing and the ROI down. This is the general rule of supply and demand, to which exceptions are exceptional and rare. It is the single most well accepted principle in economics.
Is this /s ? I can't tell. This reeks of some trickle down nonsense speak. What these pe firms want is rent, control over a limited market, with inflated prices for a consumer base who's purchasing power has turned to mush. Prices will inflate
because of limited supply and the consumer will the one holding the bag
This does not drive down prices. What is different now is that the properties get leveraged for loans to purchase more properties. The loans are secured against future rents and the landlord cannot lower a single rent in response to market demand because it would signal to the lenders that it is an inflated asset, causing a domino effect on all the other loans. The property owner is would rather the property stay empty, take the loss, than lower the rent and risk their loans. This is a huge problem here in Toronto where REITs are doing this and causing rents to continuously ratchet up. Nobody wants to talk about it because everyone's retirement funds are full of REITs.
It will drive the prices down when enough supply hits the market. Current numbers are a joke compared to the demand generated.
Leveraged loans can indeed create higher prices for a percentage of the market, but when supply approaches or exceeds the demand the "investment grade securities" will repeat the 2008 scenario.
Check for example commercial properties in SF before and after COVID. After COVID (and SF city mismanagement) the supply > demand and prices went down a lot and investors lost money. Retail market is different, but the same scenario would work.
This has not happened for 15 years. It's entirely theoretical given current conditions, and we need to ground discussion in the reality where things are now.
I wouldn't call SF office price a "theoretical".
The supply/demand curve is one of the most time tested economic law.
15 years of bad zoning regulation and limiting suply doesn't disprove it.
It's bizarre that we've prioritized increasing shelter costs for all of those who haven't hedged it. It's costing the next generation and is just unsustainable.
It wouldn't even be a bad thing if rent was low. But it can't be, as that would probably imply a lower cost of ownership.
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[ 0.18 ms ] story [ 120 ms ] threadUnless the investor is willing to pay significantly more than a local family, this could deprive your heirs of money that they otherwise would have received.
Especially in a world of decreasing social trust, people are less likely to do something for the benefit of their neighbors or community and more likely to make purely selfish choices for themselves and their family.
"Who's outbidding you by tens of thousands of dollars for that home of your dreams? A hedge fund"
https://www.nbcnews.com/business/real-estate/who-s-outbiddin...
Research about declining social trust:
https://www.pewresearch.org/politics/2019/07/22/the-state-of...
https://www.pewresearch.org/short-reads/2019/07/22/key-findi...
It is an investment and the actions to protect such an investment is detrimental to using the house as a home. Corporations get representation in government these days so nothing changes to benefit the would-be family home buyer.
https://www.nbcnews.com/business/real-estate/who-s-outbiddin...
"Who's outbidding you by tens of thousands of dollars for that home of your dreams? A hedge fund"
I am assuming "outbidding you by tens of thousands of dollars" means they are paying higher prices right?
10k+ extra is a nontrivial amount of money for most Americans. That's enough to help offset taxes or pay the real estate agent fees.
And barring a catastrophic event like the housing crisis, housing prices never really go __that__ down.
It's like broader inflation. If prices increase by 2% and wages by 1%, after 10 years that's a much broader gulf that is far, far harder to recover from.
Give it 20 years and we’ll be where Canada, Australia, and the UK are where a house is 10x or more the median yearly salary.
I’ve come to terms with the fact that I’ll never own a house because of the greed of exisiting homeowners and the cowardice of politicians. It is what it is, and it’s entirely out of my control.
When my wife and I decided to upgrade to a house, we kept our townhouse to use as a rental property. Shortly afterwards, the city council (Seattle) and state government started passing new laws that made things less and less friendly to landlords. You couldn't use certain kinds of data to select tenants, you had to take the first qualified applicant, evictions become much harder to do, etc. At the same time (2020, a time of social unrest), the same politicians pushed for less policing, so the townhouse's neighborhood started to go downhill due to increased crime and homelessness. We acted fast and sold off that rental property, somewhat bitter that a passive income stream had dried up.
If someone had come along on a high horse and lectured at us to take another financial hit for the good of local families because doing an Absolute Good is good for our afterlives, I would have laughed in their face. As it turns out we ended up selling it to a married couple, but if a hedge fund had offered even $1K more I would have taken it.
I suppose this is an example of decreasing social trust, but I'm not rich enough to be able to leave money like that on the table.
Institutions tend to not be dumb money as much as retail. But institutions can uniquely be dumb at scale. Every few years someone thinks they solved the housing market with algorithms, and tends to be profitable to do business with them.
If you’re in a Democrat state use the word “transplant”. Otherwise use the word “immigrant”.
Then if you’re in a Democrat state put out a sign saying “All are welcome” and stick a COEXIST sticker on your car.
Republican state? Jesus sign outside about him loving everyone.
Now that is True Good. Or as they say “unalloyed good”.
This idea falls apart very quickly after the first few sentences of followup.
Their having lower insurance costs totally makes sense. If you go to an insurance company and tell them you have 1500 properties in 12 states (hopefully none of which are Florida!) they're going to give you a nice discount.
But that just isn't possible with property taxes. If you tell your county tax assessor that you want a quantity discount, you'll get "The Look of Disapproval". Or flat laughed-at. The only way they could have lower taxes is by owning lower-valued properties - either because they bought cheap, or aren't maintaining them and they decline in value (which is the slow way to getting poor returns as a landlord).
I think there's just too much money being spent. One day in a few years the investors will find a new "sure-fire" strategy involving some other asset and the country will get a glut of properties up for sale. At first they'll be listed at market rates, and then much lower as they panic to sell at any price. Leading to housing crash 2.0
1. Why would the assessor give bulk discounts in the first place? It's not like they can take their business (houses?) elsewhere if the assessor refuses. Many jurisdiction have transaction/transfer taxes, which mean even if they want to dump their holdings, the county would come out on top.
2. Is the assessor even allowed to give bulk discounts? Even if they could, given the political climate against big corporations, granting such discounts seems like political suicide. You're just asking to get challenged in the next election.
I think what they mean is the overall hit from property taxes is marginal at their scale because of the better margins they get on other inputs like insurance.
That said, Zillow tried this strategy a couple years ago and it ended horribly for them.
I don't think yet another fund will be able to get an edge that local landlords and real estate companies have.
> Professionalizing management, better bargaining over expenses, some degree of appeals over property tax, and better access to capital markets therefore enable institutional investors to improve their cost structure
where 'some degree of appeals over property tax' is linked here: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4269561
I am not a subscriber so can't read the details, and nothing about appeals is mentioned in the abstract.
But hey, money is more important than anything and nothing should constrain the markets, eh?
Politicians don’t care, people with houses don’t care, the rich don’t care.
We’ve made a future in which there’s no social contract, where young people have nothing and no home and no prospect of ever owning a home.
By this measure, capitalism has failed entirely to serve the people.
There will be consequences.
What regulation is being captured?
I've noticed this on HN. Anytime thr market produces a negative result for society, rather than acknowledge it, it gets blamed on some imaginary regulatory capture. Like there there is an ability to accept that markets produce negative results for society - it's always blamed on some external force.
Like, what are the odds some local 'boomer NIMBYs' or whoever the scapegoat is succeed about everywhere.
That's not mutually exclusive with regulatory capture. The problem of excessively large motor vehicles in the US is contributed to by both deliberate quirks of the tax system and a zero sum bidding war to be the biggest on the road, for example.
If these people were smart, they'd realize that rising house values don't help them, because 1) they can't make money on a house they're still living in, they have to sell it first, and then where are they going to move to? and 2) rising house values means rising tax assessments which means their mortgage bill will increase to pay the higher property taxes.
The underlying problem is that city councils ban the construction of most new homes. This has led to a supply shortage. The wealthier among us are thus forced to bid up the price of cheaper, older homes. Landlords can charge more for existing properties too. We need to change the laws so that we build lots more homes.
I do. agree strongly with your point about the loss of a social contract. If you’re interested in helping fix this problem, join the YIMBY movement.
If you are selling your home and the highest offer is a Wall Street firm, turn it down and go with a lower bid.
If you’re selling your home and it’s been listed for almost a year and the only offer is from a Wall Street firm, turn it down and wait.
Who is with me?
I’m sure this will be fine.
Thank gods my parents were wise enough to buy land and homestead the frontiers when it was still possible for the working class to do so.
Buy land if you can, people. Not houses, land. You can always build a house. You can’t build land.
At least in many parts of the USA it’s still possible for many to buy land in lower demand rural areas if you are very careful with your living expenses. It might not be in the ideal place, but owning land makes it the best place. My preference is for land with few zoning restrictions and a low tax burden, since it might sit unused for a while.
I was able to build a (tiny) house on my parents property using scraps I got from doing free demolition work when I was 16-18. I have parlayed that one advantage of never having to pay rent into a relatively prosperous life despite only modest successes. Not having a huge monthly bill pays compounding dividends over a lifetime if you invest that money into things you own instead of borrow.
This doesn't matter all that much because houses that people bought and are living in are inert, off the market. They might as well not exist (and people who own them).
What matters is how many houses investors are buying right now and it's significant part of all purchases.
It wouldn't even be a bad thing if rent was low. But it can't be, as that would probably imply a lower cost of ownership.