Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

19% of California houses are owned by investors

ocregister.com

Post reply on HN
Print view View original

161–170 of 185 posts

Re: 19% of California houses are owned by investors

#161

Post by esseph »

bpt3 wrote: post #151
esseph wrote: post #144

Earlier quoted context omitted.

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.

If turbo Greed isn't a thing, why do the 830+ billionaires in the United States control more wealth than the bottom 50% of the population?

And, why did we just give them a YUGE tax break?

"Build more" is not an option, because the incentives don't align to solve the problem. The things getting built are built to capture margins and not to solve the housing problem.

Need regulation.

Re: 19% of California houses are owned by investors

#162

Post by tptacek »

cloverich wrote: post #160
kasey_junk wrote: post #158

Earlier quoted context omitted.

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 carr…

Tax incentives for first-time home buyers are enormously regressive. You're operating from a presumption that everybody intends to buy a house (see upthread), but that's not true, and it gets less true as you go down the income ladder. Owning a home comes with huge downside risk, added expense, and loss of flexibility.

Re: 19% of California houses are owned by investors

#163

Post by tptacek »

cloverich wrote: post #159
tptacek wrote: post #154

Earlier quoted context omitted.

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…

I don't really care what happens to mom-and-pop real estate speculators. I don't think targeting any kind of investor is going to do anything for housing affordability, but my real target in this subthread is the PE thing, because "target PE investors instead of rezoning" is a super common NIMBY argument.

As a matter of politics, we're not going to pass any legislation that disfavors mom-and-pop real estate speculators, so I don't really see what's to be gained in litigating. I think you'd be pretty surprised at the demographics of those small-time investors; a lot of them are decidedly middle class. They're not representative of the middle class; obviously, most middle-income earners don't own investment residential properties. But that's not the same thing as saying that middle-income earners aren't represented among real estate investors.

Re: 19% of California houses are owned by investors

#164

Post by tptacek »

grafmax wrote: post #155
tptacek wrote: post #135

Earlier quoted context omitted.

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 con…

I'm sure you're writing this in good faith, but it really seems like you're trying to slip out from under the question I asked at the top of this thread. "Suppliers can make money by withholding supply in an inelastic market" is an answer to some other question; my question is: stipulating that they can't rent their properties out, and that supply is consistently increasing, how do they make money? All your specific answers have attempted to define away one or both of the premises of that question.

Re: 19% of California houses are owned by investors

#165

Post by kasey_junk »

cloverich wrote: post #160
kasey_junk wrote: post #158

Earlier quoted context omitted.

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 carr…

Homeownership rates are not particularly out of band right now. They’ve kept within a couple of % points for the entire post ww2 era. They’ve kept within track almost exactly mortgage rates. They are higher they were 10 years ago for instance.

https://fred.stlouisfed.org/series/RHORUSQ156N

But note that’s not the same thing as housing affordability. You probably can goose the homeownership rate by appropriating a bunch of homes and redistributing them to the marginal buyers who are currently not owners.

But it will not drop the price of housing, it will increase it because supply will still be constrained (think of the normal case of someone moving temporarily for work. If you disincentivize them being allowed to rent the unit out you now have 2 units off the market).

Carry cost is mostly about financing costs and regulations not the price of homes.

Re: 19% of California houses are owned by investors

#166

Post by grafmax »

breakyerself wrote: post #92
grafmax wrote: post #69

Earlier quoted context omitted.

An unregulated supply will still offer promising investment opportunities to those with enough money to buy them up. Look at crypto or private equity. These markets are lightly regulated. But prices are bid up by big money. Unfortunately just dumping regulation is unlikely to fix housing.

I'd never argue for an unregulated market. Just that we stop regulating them to benefit the few over the many.

Unfortunately deregulating them will do much the same. BlackRock promotes YIMBY because that will allow it to expand its rental property portfolio, effectively generating new cashflows from the poor and middle class to wealthy asset owners. In fact deregulation/regulation is a false choice. Cashflow should go in the opposite direction by raises taxing on the wealthy (including real estate investments) and building public housing.

Re: 19% of California houses are owned by investors

#167

Post by grafmax »

tptacek wrote: post #164
grafmax wrote: post #155

Earlier quoted context omitted.

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 con…

I'm sure you're writing this in good faith, but it really seems like you're trying to slip out from under the question I asked at the top of this thread. "Suppliers can make money by withholding supply in an inelastic market" is an answer to some other question; my question is: stipulating that they can't rent their properties out, and that supply is consistently increasing, how do they make money? All your specific…

Yeah it does seem like we are talking around each other but I will try again to answer your question.

It depends on the circumstances of the market. Imagine an extreme hypothetical example, where one investor owns 90 out of 100 houses. And one new house is built every ten years. That investor has pricing power. They can essentially charge whatever they want even if it’s means some houses they own are empty (withholding supply). So: it depends on how fast new houses enter the market versus how much pricing power the investor possesses.

(In fact YIMBY doesn’t create an endless new supply. The idea is that it deregulates, facilitating a new supply where there wasn’t one before. That doesn’t constitute an endless supply, just a new one-time shift allowing a finite boost of additional supply.)

Another example: consider a speculative bubble. In a speculative bubble an investor can purchase a house, it can stay empty, there can be new supply coming into the market, but the forces of froth can outpace the force of additional supply, for quite some time. If they sell before the bubble pops, they profit.

Both these examples are of investors withholding supply, new supply coming into the market, and still profiting. Whether prices fall comes down to whether the downward force of new supply outstrips other forces that boost prices.

Re: 19% of California houses are owned by investors

#168

Post by bpt3 »

esseph wrote: post #161
bpt3 wrote: post #151

Earlier quoted context omitted.

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.

If turbo Greed isn't a thing, why do the 830+ billionaires in the United States control more wealth than the bottom 50% of the population? And, why did we just give them a YUGE tax break? "Build more" is not an option, because the incentives don't align to solve the problem. The things getting built are built to capture margins and not to solve the housing problem. Need regulation.

You're missing the point, which is that adding a superlative in front of a concept you don't like doesn't make it more important or the problem more severe. And your reductionist take on wealth distribution isn't even worth discussing.

Build more is the only option to actually fix the problem. The incentives could not be more aligned between home builders and home dwellers. Builders want to build, and there are dozens of them in all major metropolitan areas. Home dwellers want shelter. Sounds like an ideal situation to keep margins low.

More regulation == more regulatory capture, which your kind supposedly doesn't like but you don't seem to be able to help yourself.

Re: 19% of California houses are owned by investors

#169

Post by esseph »

bpt3 wrote: post #168
esseph wrote: post #161

Earlier quoted context omitted.

If turbo Greed isn't a thing, why do the 830+ billionaires in the United States control more wealth than the bottom 50% of the population? And, why did we just give them a YUGE tax break? "Build more" is not an option, because the incentives don't align to solve the problem. The things getting built are built to capture margins and not to solve the housing problem. Need regulation.

You're missing the point, which is that adding a superlative in front of a concept you don't like doesn't make it more important or the problem more severe. And your reductionist take on wealth distribution isn't even worth discussing. Build more is the only option to actually fix the problem. The incentives could not be more aligned between home builders and home dwellers. Builders want to build, and there are dozen…

I don't know what the fuck "my kind" is, but you instantly threw away any validity you may have remotely had by jumping to some nonsense like that.

I'm not "missing the point" because I don't agree with economic principles that got us where we are today. Doubling down on those very same principles thinking we will have a different outcome? Nonsense.

Re: 19% of California houses are owned by investors

#170

Post by tptacek »

grafmax wrote: post #167
tptacek wrote: post #164

Earlier quoted context omitted.

I'm sure you're writing this in good faith, but it really seems like you're trying to slip out from under the question I asked at the top of this thread. "Suppliers can make money by withholding supply in an inelastic market" is an answer to some other question; my question is: stipulating that they can't rent their properties out, and that supply is consistently increasing, how do they make money? All your specific…

Yeah it does seem like we are talking around each other but I will try again to answer your question. It depends on the circumstances of the market. Imagine an extreme hypothetical example, where one investor owns 90 out of 100 houses. And one new house is built every ten years. That investor has pricing power. They can essentially charge whatever they want even if it’s means some houses they own are empty (withholdi…

So what you're saying is that the scenarios you're thinking of where investors hold houses, don't rent them, and still make money all require investors to have monopoly control of the housing market that is maintained regardless of the amount of supply added, and that rather than exploiting inelasticity they exploit irrational speculative bubbles.

OK.

This describes zero investors anywhere in the country. There is no significant market in the US where investors owns even a significant percentage of all houses (the total in California is 19%, and that statistic is dominated by mom-and-pop house speculators that can't buy even two more houses, let alone keep up with continuous added supply).

I'm fine with the idea that we've played this out now. Maybe someone else has a better idea of how investors can beat zoning reform, but for now I'm going to go back to assuming that investors are immaterial to housing scarcity.

Post reply on HN