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19% of California houses are owned by investors

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Re: 19% of California houses are owned by investors

#151

Post by bpt3 »

esseph wrote: post #144
bpt3 wrote: post #142

Earlier quoted context omitted.

> 20% of market capture does not cause homelessness Right, which is why trying to link the two is misleading at best. > there are many valid arguments that treating housing as an investment isn't a stairway to ending homelessness Such as? We seem to agree that the existence of rental units isn't a cause of homelessness.

Turbo Greed (acquire all the things) and lack of monopoly protection and enforcement. If we're going to tackle homeless, we have to remove systems that incentivize the collection of homes as a financial asset. Make more homes by one person or entity less desirable or simply undoable.

Turbo greed isn't a thing. And if you think there's a monopoly in residential real estate ownership, you have an absurdly broad definition of the term.

Instead of trying to manipulate a market through yet another layer of regulation, you can just let builders build more.

Re: 19% of California houses are owned by investors

#152

Post by [deleted] »

esseph wrote: post #144
bpt3 wrote: post #142

Earlier quoted context omitted.

> 20% of market capture does not cause homelessness Right, which is why trying to link the two is misleading at best. > there are many valid arguments that treating housing as an investment isn't a stairway to ending homelessness Such as? We seem to agree that the existence of rental units isn't a cause of homelessness.

Turbo Greed (acquire all the things) and lack of monopoly protection and enforcement. If we're going to tackle homeless, we have to remove systems that incentivize the collection of homes as a financial asset. Make more homes by one person or entity less desirable or simply undoable.

[deleted]

Re: 19% of California houses are owned by investors

#153

Post by tptacek »

cloverich wrote: post #145
tptacek wrote: post #129

Earlier quoted context omitted.

Renting a home out isn't "capturing" the house. Rental housing is a desirable product. Lots of people don't want to own, be locked into a particular house for years to offset transaction costs, and to own all the downside and maintenance risk of the property.

Consider soliciting the opinion of more renters. Plenty of us would happily purchase if prices were more reasonable. Renting out sfh should be rare, imho. The current situation needs many remedies and kicking out sfh as investment vehicles is a very low hanging fruit.

Spoken like someone who never lost their shirt on a house after discovering they had to move a couple years after buying. No, I'm pretty confident: lots of renters are renters on purpose. Ownership is not categorically better than renting.

Re: 19% of California houses are owned by investors

#154

Post by tptacek »

cloverich wrote: post #146
tptacek wrote: post #100

Seems like extremely important context that 91% of these investor-owned houses are owned by entities with 5 or fewer houses: in other words, these are mostly houses that normal mom-and-pop homeowners bought.

It's notable but why is it extremely important exactly? It ultimately causes the same problem.

Among other things, it suggests that concerns about institutional investors distorting the market (at least in California) are misplaced; they're a microscopic component of California house ownership.

Re: 19% of California houses are owned by investors

#155

Post by grafmax »

tptacek wrote: post #135
grafmax wrote: post #134

Earlier quoted context omitted.

The investor class increased as did homelessness in Austin. Not only that but mortgage payments on the median priced home have increased in Austin, comparing 2018-2019 . Houses are even less affordable . Investors can make money on price fluctuations and rent. And supply increases are neither immediate nor endless, despite what a simplistic model would hold. Sadly we need structural solutions not superficial answers…

No, if they make money on rent, they're supplying housing and competing with all the other landlords.

Suppliers can make money by withholding supply in an inelastic market. Supply and demand effects depend on elasticity to work. It’s not just NIMBYism which contributes to housing’s inelasticity. It is a basic need, with no substitute, and a long time horizon (for building and moving). Pricing power is a motivation for keeping houses off the market (besides just speculation). You seem to think NIMBYism is the only contributor to that.

And investors providing rentals contribute to supply also, sure. Yet pricing power among suppliers plays a role here as well.

My argument is not that increasing YIMBYism is bad, but that it is a meager half measure that can at best nudge housing prices, not fix the essential problem.

For example, even with a completely efficient and housing supply, with housing selling at cost, people would still be homeless, as homeless people lack money to pay for housing at cost. By ignoring the wealth composition of buyers, we can at best make housing more elastic through YIMBYism, applying a bandaid rather than fundamentally addressing the housing problem itself.

Re: 19% of California houses are owned by investors

#156

Post by rtkwe »

fortran77 wrote: post #44
rtkwe wrote: post #27

Earlier quoted context omitted.

Easy first step is anything not listed as owned by individual people. Investors will have some type of business ownership arrangement in 99%+ of cases and individuals will rarely have an LLC or similar setup for their purchases.

My house is owned by an LLC that I own. I live in the house and don't rent it. If you count this way you will overcount by quite a bit!

On the scale of the housing market of a whole state people like yourself are probably a rounding error. There's a reason I said rarely in my original post.

Re: 19% of California houses are owned by investors

#157

Post by cloverich »

kasey_junk wrote: post #149
cloverich wrote: post #145

Earlier quoted context omitted.

Consider soliciting the opinion of more renters. Plenty of us would happily purchase if prices were more reasonable. Renting out sfh should be rare, imho. The current situation needs many remedies and kicking out sfh as investment vehicles is a very low hanging fruit.

Kicking out sfh as investment vehicles makes it harder to sell homes. This a) increases the risk to home buyers and b) makes owning inventory more expensive. Thats likely to make increasing supply untenable. This low hanging “remedy” is likely to exacerbate the supply issue, not help it.

Demand would still outstrip supply, so by what mechanism would selling be difficult or risky? It would modestly reduce prices, making it less expensive for all regular home owners. That's a win for everyone but (sfh) investors.

Re: 19% of California houses are owned by investors

#158

Post by kasey_junk »

cloverich wrote: post #157
kasey_junk wrote: post #149

Earlier quoted context omitted.

Kicking out sfh as investment vehicles makes it harder to sell homes. This a) increases the risk to home buyers and b) makes owning inventory more expensive. Thats likely to make increasing supply untenable. This low hanging “remedy” is likely to exacerbate the supply issue, not help it.

Demand would still outstrip supply, so by what mechanism would selling be difficult or risky? It would modestly reduce prices, making it less expensive for all regular home owners. That's a win for everyone but (sfh) investors.

Home builders are “investors” in sfh. So out of the gate you’ve got a problem with making the regulations more complicated to navigate. For the people creating supply.

Some of those homebuilders build because they can rent homes if they can’t be sold. Others build because they have large investors to sell to if necessary. All of them build with their financial models account for carry time, as carry costs are extremely important to their bottom line.

If the average carry time goes up even a little bit (and it will because investors close faster) that can make whole developments untenable.

Re: 19% of California houses are owned by investors

#159

Post by cloverich »

tptacek wrote: post #154
cloverich wrote: post #146

Earlier quoted context omitted.

It's notable but why is it extremely important exactly? It ultimately causes the same problem.

Among other things, it suggests that concerns about institutional investors distorting the market (at least in California) are misplaced; they're a microscopic component of California house ownership.

> it suggests that concerns about institutional investors distorting the market

Right but doesn't it merely change the target from institutional to non institutional investors? 1/5 to 1/4+ SFH homes being owned by non homeowners, and competing on prices, seems like the elephant in the room?

Put another way does the fact that they are non-institutional meaningfully change the narrative and if so how would that relate to policy? It would seem a policy disincentivizing non-primary homeownership could apply equally to institutional and non-institutional investors alike.

Re: 19% of California houses are owned by investors

#160

Post by cloverich »

kasey_junk wrote: post #158
cloverich wrote: post #157

Earlier quoted context omitted.

Demand would still outstrip supply, so by what mechanism would selling be difficult or risky? It would modestly reduce prices, making it less expensive for all regular home owners. That's a win for everyone but (sfh) investors.

Home builders are “investors” in sfh. So out of the gate you’ve got a problem with making the regulations more complicated to navigate. For the people creating supply. Some of those homebuilders build because they can rent homes if they can’t be sold. Others build because they have large investors to sell to if necessary. All of them build with their financial models account for carry time, as carry costs are extreme…

> So out of the gate you’ve got a problem with making the regulations more complicated to navigate.

Assuming the policy to reduce non-primary home ownership is tax based, carve out tax exceptions for home builders. Personally I would carve out exceptions for home flippers too, but could see that being more contentious. Either way though, this part of the problem would be, IMHO, trivial to solve.

> If the average carry time goes up even a little bit (and it will because investors close faster) that can make whole developments untenable. Others build because they have large investors to sell to if necessary.

I think that's fair. But conversely carry time is also high because prices are high, and investors drive up prices; builders also do this to an extent, by e.g. buying down points to avoid lowering prices, to keep the perceived price elevated. I have no illusions this is a simple problem to solve. The right question here is probably figuring out whether the overall supply going up by X increased rate because of investors will be worth the cost of the total homeownership rate being controlled by a shrinking proportion of the population (I would guess no).

My personal proposed solution here would be to kick out investors (tax policy), and also directly incentivize home builders selling to first time owners (via tax credits, comparable to e.g. EV tax credits). The latter would be quite expensive, but if the overall homeownership rate increases and home prices drop, it would likely be popular.

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