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Household size and the housing stock

kevinerdmann.substack.com

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Re: Household size and the housing stock

#121

Post by hackerlight »

scotty79 wrote: post #114
hackerlight wrote: post #102

Earlier quoted context omitted.

> After all, rents are huge part of the return on their investment and also huge factor in determining the asset price. Yes, rents are part of their ROI. That does not mean asset prices cause rents. Rents cause asset prices by impacting investment demand. Rents provide a soft bound on asset prices because investors demand a certain ROI, else they will allocate capital in other markets. We're getting the direction of…

Higher rents inflate asset prices, but higher asset prices also inflate rents because buying becomes too expensive and rents can safely grow because people who can't buy must rent. Direction of causality goes both ways. It's positive feedback loop that's barely contrained by any reality. That's why it seems to run away towards infinity despite only small changes in supply and demand. There's no good solution to your…

This economic reasoning doesn't make sense to me. If a buyer can't buy because an investor priced them out, they'll become a renter (+1 demand), and that property will become a rental property (+1 supply). These things cancel out. You still haven't explained the imbalance (lack of rental properties versus number of renters) that causes rents to go up.

However, the other poster brought up vacancies, which is a good point. That does give a plausible way that investors can cause rents to go up. But rents are going up even in places where vacancy rates are decreasing, so it's not the full picture.

If you proposed a large vacancy tax as a way to remove this contribution to increasing rents, I'd support that. But the other stuff should not contribute to reducing rents, and it won't be close to a complete solution. Rents should remain high until you build. FWIW, I actually do support all your other proposals too, because reducing prices is good, I just don't think it will solve the rental crisis.

Re: Household size and the housing stock

#122

Post by underlipton »

davidw wrote: post #94
2four2 wrote: post #59

Earlier quoted context omitted.

Another point overlooked is that the main focus of the article cites fewer people per household, then discounts things like AirB&B, which directly contributes to this statistic. It seems like a casual dismissal of the statistic, painting it as simply no one having children.

Short Term Rentals do not help, but ... as someone who has been doing housing stuff for a few years now, they're one of several bogeymen that people want so badly to be 'the real problem'. But they aren't. It's your neighbors who show up to oppose housing, like this crowd at a hearing I attended to support some apartments: https://bendyimby.com/2024/04/16/the-hearing-and-the-housing... That's 40 homes (aka 'units') t…

I don't think he's saying it's the cause, just a contributor. I would group them in with the "status-quo likers" I talked about, which also includes NIMBYs. The root remains an unwillingness to tell these people, "No, you had enough/had your chance. We're opening the spigot, and we're not predicating it on your getting rent."

Re: Household size and the housing stock

#123

Post by arrosenberg »

hackerlight wrote: post #120
arrosenberg wrote: post #116

Earlier quoted context omitted.

High rents are being caused by investors, which is why plenty of stock is sitting vacant. When the developer or PE purchaser financed the building they did so based on an estimate of what the building can generate in revenue. If average rent drops to 70% of what the estimate had, then the loan goes completely underwater. However, if the landlord simply refuses to rent those units at the market rate, they can pretend…

> High rents are being caused by investors, which is why plenty of stock is sitting vacant. Vacancies are a contributing factor, but why think it's the primary one, compared to a lack of housing? Rents are going up everywhere in the West, even in places where vacancy rates are decreasing such as Ireland. How can vacancy rates decrease while rents skyrocket?

How should I know, provide some data to support that claim. Could be more people are cohabitating to meet the higher rents. Roommates are still better than homelessness, after all. There is a ton of evidence for financial shenanigans and only modest evidence of actual shortage. As with most things these days, its a problem is distribution and ownership model, not supply.

Re: Household size and the housing stock

#124

Post by tmnvix »

mastax wrote: post #98
tmnvix wrote: post #55

Earlier quoted context omitted.

Your links don't measure underutilised and vacant property (e.g. AirBnBs and second homes, or land banked properties). From the links: The homeowner vacancy rate is the proportion of the homeowner inventory that is vacant for sale. The rental vacancy rate is the proportion of the rental inventory that is vacant for rent. So essentially this is a measure of how many properties are vacant and available for rent or purc…

You are correct, here is a better statistic: https://fred.stlouisfed.org/series/EVACANTUSQ176N

Thanks.

So with a population of 340m, 15m vacant properties, and an average household size of 2.5 we have 15,000,000/(340,000,000/2.5)= 0.11, or a possible vacancy rate of 11%. That seems like a lot.

Re: Household size and the housing stock

#125

Post by hackerlight »

arrosenberg wrote: post #123
hackerlight wrote: post #120

Earlier quoted context omitted.

> High rents are being caused by investors, which is why plenty of stock is sitting vacant. Vacancies are a contributing factor, but why think it's the primary one, compared to a lack of housing? Rents are going up everywhere in the West, even in places where vacancy rates are decreasing such as Ireland. How can vacancy rates decrease while rents skyrocket?

How should I know, provide some data to support that claim. Could be more people are cohabitating to meet the higher rents. Roommates are still better than homelessness, after all. There is a ton of evidence for financial shenanigans and only modest evidence of actual shortage. As with most things these days, its a problem is distribution and ownership model, not supply.

Net migration in Ireland is 2x the number of new dwellings. Similar thing going on in Canada, Australia and UK. Even if I believed you that there wasn't a shortage 3 years ago, there has to be a shortage now by the most elementary logic (pigeon hole principle).

This combines with the trend towards increased urbanization, creating a relative shortage near major cities where the jobs are located, which, no coincidence, is also where there's the rental crisis.

But you then point to vacancies as the explanation. Yet vacancy rate changes are inversely correlated to rent changes in some places. This proves that vacancies do not explain the increase in rents we've observed. What other reason can you offer to justify the connection between investors and rent, other than the vague "financial shenanigans"?

Re: Household size and the housing stock

#126

Post by arrosenberg »

hackerlight wrote: post #125
arrosenberg wrote: post #123

Earlier quoted context omitted.

How should I know, provide some data to support that claim. Could be more people are cohabitating to meet the higher rents. Roommates are still better than homelessness, after all. There is a ton of evidence for financial shenanigans and only modest evidence of actual shortage. As with most things these days, its a problem is distribution and ownership model, not supply.

Net migration in Ireland is 2x the number of new dwellings. Similar thing going on in Canada, Australia and UK. Even if I believed you that there wasn't a shortage 3 years ago, there has to be a shortage now by the most elementary logic (pigeon hole principle). This combines with the trend towards increased urbanization, creating a relative shortage near major cities where the jobs are located, which, no coincidence,…

> Even if I believed you that there wasn't a shortage 3 years ago, there has to be a shortage now by the most elementary logic

Or you could provide data. I don't live in Ireland, did they have a surplus before?

> So you have not offered any explanation.

I explained exactly how the scheme works, as well as providing the possible explanation of higher cohabitation rates. That's certainly what is happening in Southern California where I am actually familiar with the market. Based on a cursory Google search, it looks like Ireland is having some of the same...

https://dublininquirer.com/2022/11/02/increase-in-landlords-...

> But it had “further potential to secure full market rent levels” subject to tapping into an exemption from the rules around rent increases, with one of the options being “through vacancies”, the advert said. If a property has been vacant for two years – or a year for a protected structure – then a landlord within a rent pressure zone can legally raise the rent by more than the rent-increase cap.

I'm not going to spend any more time on this. The evidence is pretty clear that landlords are playing games to drive up the rental market. There is no question that shifting demand patterns and decades of failure to deliver new housing are part of the equation as well, but those issues are solvable. The intractible problem of a landlord class are much more threatening and difficult to solve.

Re: Household size and the housing stock

#127

Post by airlocksoftware »

tmnvix wrote: post #55
mastax wrote: post #41

Earlier quoted context omitted.

https://fred.stlouisfed.org/series/RHVRUSQ156N https://fred.stlouisfed.org/series/RRVRUSQ156N

Your links don't measure underutilised and vacant property (e.g. AirBnBs and second homes, or land banked properties). From the links: The homeowner vacancy rate is the proportion of the homeowner inventory that is vacant for sale. The rental vacancy rate is the proportion of the rental inventory that is vacant for rent. So essentially this is a measure of how many properties are vacant and available for rent or purc…

I'm not sure why you'd want to include AirBnBs and second houses in your measurement vacancy measurement — they aren't available for rent.

Re: Household size and the housing stock

#128

Post by hackerlight »

arrosenberg wrote: post #126
hackerlight wrote: post #125

Earlier quoted context omitted.

Net migration in Ireland is 2x the number of new dwellings. Similar thing going on in Canada, Australia and UK. Even if I believed you that there wasn't a shortage 3 years ago, there has to be a shortage now by the most elementary logic (pigeon hole principle). This combines with the trend towards increased urbanization, creating a relative shortage near major cities where the jobs are located, which, no coincidence,…

> Even if I believed you that there wasn't a shortage 3 years ago, there has to be a shortage now by the most elementary logic Or you could provide data. I don't live in Ireland, did they have a surplus before? > So you have not offered any explanation. I explained exactly how the scheme works, as well as providing the possible explanation of higher cohabitation rates. That's certainly what is happening in Southern C…

> Or you could provide data. I don't live in Ireland, did they have a surplus before?

Net migration has tracked higher than new dwellings for a number of years in all of these countries. See Canada for example where this has been a trend since 2016.

Net migration (excludes 2023 which was almost 500k): https://data.worldbank.org/indicator/SM.POP.NETM?locations=C...

New housing: https://tradingeconomics.com/canada/housing-starts

> The evidence is pretty clear that landlords are playing games to drive up the rental market.

This explanation makes no sense, it doesn't generalize outside of Ireland. You're talking about vacancies that are caused by a price ceiling on rent (which is a terrible regulation that always backfires) which doesn't exist in most other locations that are experiencing a rent crisis.

Re: Household size and the housing stock

#129

Post by arrosenberg »

hackerlight wrote: post #128
arrosenberg wrote: post #126

Earlier quoted context omitted.

> Even if I believed you that there wasn't a shortage 3 years ago, there has to be a shortage now by the most elementary logic Or you could provide data. I don't live in Ireland, did they have a surplus before? > So you have not offered any explanation. I explained exactly how the scheme works, as well as providing the possible explanation of higher cohabitation rates. That's certainly what is happening in Southern C…

> Or you could provide data. I don't live in Ireland, did they have a surplus before? Net migration has tracked higher than new dwellings for a number of years in all of these countries. See Canada for example where this has been a trend since 2016. Net migration (excludes 2023 which was almost 500k): https://data.worldbank.org/indicator/SM.POP.NETM?locations=C... New housing: https://tradingeconomics.com/canada/hous…

I chose an example of landlords playing games in Ireland. The only generalizable fact across the western world is low interest rates from 2007-2022 and the landlord class continuing to jack up rents every time they got more access to cheap money. That's the problem.

Re: Household size and the housing stock

#130

Post by fire_lake »

davidw wrote: post #93
fire_lake wrote: post #75

Earlier quoted context omitted.

Front gardens are a benefit to everyone in the neighbourhood, maintained at cost to the owner. They are an anti-SUV, in a way. I could even support tax benefits for maintaining green space in the public view. The alternative (I saw this the UK) is that people turn their front garden into parking or expand their building towards the street.

Grassy front yards are a complete waste of space and water. Kids don't play on them. The person who uses a front yard to grow food is pretty rare. At the end of the day, too, we have a housing crisis, not a front-yard crisis.

Lawns are bad but greenery is good.

We can recognize the need to not recreate Kowloon in the context of a housing shortage.

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