Nice, a pay wall. Pay to read about how housing costs too much.
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How private equity is changing housing
161–170 of 312 posts
Re: How private equity is changing housing
#162Earlier quoted context omitted.
For every complex and difficult problem, there is a simple, easy and wrong solution. If corporations can't own residential properties, how would anyone rent a house? How would home builders build model homes? How would Trusts manage real estate? This is a complex and nuanced problem.
> For every complex and difficult problem, there is a simple, easy and wrong solution. Sure, but realize that also applies to the current status quo. Also, you cannot create the 'right' solution to a complex, nuanced social problem. You can only slowly shift the problem over time, one 'wrong' solution at a time.
Agree, but this simple solution isn't going to shift towards the right solution over time, and could very easily make housing shortage worse (especially as it would forbid home builders from making model homes, or keeping an inventory)
Re: How private equity is changing housing
#163Everyone wants to finger someone to blame rather than (before trying to) fix the fucking problem. Here’s a novel and brazen idea: if a domicile has been vacant inside a metropolitan area for more than thirty days, it’s up for grabs. Be it an apartment, a condo, a house, whatever, but if someone isn’t living in that space for more than thirty days, let folks claim it as abandoned property. Watch rents and values plumm…
Many valid reasons for a property to be vacant. It may need renovations or repair and that can take a lot longer than 30 days. But maybe there's some time frame that makes sense. I'm not convinced that commercial ownership is the problem. Or if it is, it's not a new problem. Slumlords have been around forever. The main problem is we just don't have enough housing supply. Investor-owners can only hold units vacant to…
> If there are enough vacant units available and enough supply that property values are not appreciating like crazy, someone will crack and cut the rent or sell out so they can get a better return on their money.
Your thesis here is disproven in large cities like the one I live in, Miami. Many investors / property owners here don't give a damn on getting a return on their investment so long as it doesn't go to $0 - they buy real estate sight unseen because it's a good way for the well-to-do in LatAm and Russia to get their money out of developing/regressing economies and into the USA. Half the units in the building I live in are vacant - they are owned by Brazilians, Argentines, Venezuelans, etc who want a safe haven for their money (and for Brazilians, as a base to buy loads of Apple products that they can turn around and sell back in Brazil for a 2-3x markup).
Re: How private equity is changing housing
#164Earlier quoted context omitted.
Part of building more is getting government (mostly) out of it so that things like zoning laws don't hamper new development. Obviously that is very hard to do at a local level when incumbent homeowners' housing values would be cut in half overnight.
Well duh because "just make everyone underwater on their mortgage" is a bit of a silly solution that definitely won't have any second order effects.
You're not wrong. There are multiple aspects of government involvement that require untangling which includes federally backed mortgages that allow banks to be more lax on loan terms (which is how we got 30 year loans and Trump proposing a 50 year)
Re: How private equity is changing housing
#165Earlier quoted context omitted.
Not at all what the GP said. They aren't saying landlords are the problem, they are saying Institutional Investors and Foreign Corporations being landlords are the problem.
There is absolutely nothing wrong with institutional investors buying tract homes and renting them out. Nothing! It brings the benefits of living in such homes to people who otherwise would be excluded from them by the financial credit system.
The article linked in the OP, and many posters in this thread, present arguments to the contrary. The main one seems to be that although institutional investors are happy to let people “benefit” from renting their homes, they are precluding many from ever owning those homes themselves.
Re: How private equity is changing housing
#166Re: How private equity is changing housing
#167> The United States is short 4 million housing units, with a particular dearth of starter homes, moderately priced apartments in low-rises, and family-friendly dwellings The number cited links to here: https://upforgrowth.org/apply-the-vision/2023-housing-underp... Which has this as the report: https://upforgrowth.org/wp-content/uploads/2023/10/2023_Hous... The number is driven by this definition: > Missing Household…
Did you intend to add something after the definition? For better or worse, "moving out once you reach 18" is widespread enough of an expectation that it can be used as a yardstick for housing shortage.
I think it's interesting how "shortage" is defined across different products.
From an economics standpoint, "shortage" isn't a useful word, unless it's applied in the extremely unlikely scenario where there nothing is available at any price. Generally, this is because price dictates supply.
"Shortage" for the current housing market is generally used to mean, "relative to historic trends, many people want houses who can't afford the current prices."
Re: How private equity is changing housing
#168Earlier quoted context omitted.
For every complex and difficult problem, there is a simple, easy and wrong solution. If corporations can't own residential properties, how would anyone rent a house? How would home builders build model homes? How would Trusts manage real estate? This is a complex and nuanced problem.
"how would anyone rent a house?" From a private owner "How would home builders build model homes?" - This is a great point. I should have said "after the home is built" "How would Trusts manage real estate" - for residential real-estate, they wouldn't. An individual would. But I just want to point out that I never said that corporations shouldn't own real estate. I said they shouldn't own residential real estate. It'…
> For most of history, individual people owned real estate. Only recently did we manage to screw that up. We can unscrew it.
Corporate ownership of real estate is ancient - read about the land rents (and in-kind labor rents) that early Christian monasteries were entitled to in late Roman/early-middle-ages Europe, or how Buddhist monasteries have been funded from local levees for thousands of years. Or how the British crown as a corporate entity currently vested in Charles III still owns substantial chunks of British real estate. History is long and for most of it it was not the case that ordinary middle class people even existed, let alone owned houses.
Re: How private equity is changing housing
#169Earlier quoted context omitted.
this sounds nice, but neglects the fact that (1) materials cost has gone up and (2) zoning requirements exist. (1) means its just more expensive to build overall, and (2) means that a lot of proposals for apartment complexes get voted down.
Part of building more is getting government (mostly) out of it so that things like zoning laws don't hamper new development. Obviously that is very hard to do at a local level when incumbent homeowners' housing values would be cut in half overnight.
Actual NIMBY/YIMBY fights look like one level of government representing a lot of people who can't afford a primary residence fighting against a different level of government representing a lot of incumbent primary residence owners who are concerned on a personal level about the negative externalities of more people being able to live in their neighborhood. Government is happening no matter what.
Re: How private equity is changing housing
#170Earlier quoted context omitted.
This is not true at all. Corporate loan rates are generally pretty damn high, only exceptionally can they borrow for low rates. Mortages however are a special case since they are basically mandated to be low and safe by most governments in exchange for letting banks exist. Or in the US explicitily guaranteed through freddie mac and fannie may.
You whiffed on the point (note the word "but" in parent comment). The depreciation strategies are where the real benefit is. PE buyers use 60% bonus depreciation and cost segregation studies to create a $70-80K writeoff on a $120K asset, which often larger than the check they cut for the property in the first place The final phase is to exit via UPREIT for OP units rather than cash, with the REIT getting a step up in…
>create a $70-80K writeoff on a $120K asset, which often larger than the check they cut for the property in the first place
They're only deferring the tax on $70-80K, correct?