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How private equity is changing housing

theatlantic.com

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Re: How private equity is changing housing

#211

Post by tptacek »

BeetleB wrote: post #206
oldjim798 wrote: post #189

Earlier quoted context omitted.

Yes, the natural state of every resident is to live in their own home. To be clear by home I don't mean "single family detached house on a suburban street", I mean a place to live with water, electricity, and a roof. Landlords provide no 'service'; they are merely an existence tax. The market already does not build dense multifamily; what is there to halt?

> The market already does not build dense multifamily; what is there to halt? Landlords have existed since forever, and the market was until recently very happy to build enough supply. That it's suddenly gone downhill implies a problem well beyond "landlords".

There's also the obvious fact that we do build dense multifamily (not enough of it, but some is better than "none", which is the endpoint of that policy).

Re: How private equity is changing housing

#212

Post by AnthonyMouse »

jeffbee wrote: post #198
gnatman wrote: post #165

Earlier quoted context omitted.

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.

I understand the arguments, and I understand that they are morally vacuous arguments. It is simply an advancement of the interests of the bourgeoisie. They are annoyed that renters are effectively able to influence the market, even if by the second degree through large-scale renting. They believe that having scraped together a quarter million dollars for the down payment makes them a special class of people. It is a…

> It is a stupid position to defend.

Doubly so when they themselves lobby for policies that keep housing prices high, which is the primary thing preventing more people from owning rather than renting.

Re: How private equity is changing housing

#213

Post by gruez »

greenie_beans wrote: post #157
gruez wrote: post #125

Earlier quoted context omitted.

>this sounds nice, but neglects the fact that (1) materials cost has gone up That's a red herring because most of the price increase comes from increase in land prices. https://www.aei.org/housing/land-price-indicators/

can you please explain how these graphics are supposed to support your argument? it's not clear to me and i'm trying to understand the georgist POV. nonetheless, materials and the cost of labor are the most significant costs for new buildings. not land, taxes, or zoning regulations. here is one example where this is a fact: www.vermontpublic.org/local-news/2024-05-23/uvm-halts-student-housing-project-construction-cos…

Switch from "national level" tab to "metro level", and select los angeles for an extreme example. Look at the the figures right of the map, that says "share of SFD units build before 1980 with a land share of" and compare the figures between 2012 and 2024. Just by eyeballing the percentages, it looks like the land share went from 50-60% to 70-80%. This is confirmed if you sum up the figures in a spreadsheet, you go from an average share of 51% to 72%.

You can compare this to overall housing prices in the LA area[1], prices in 2024 is 262.7% of 2012 prices. Suppose you have a $100k house in 2012, that will worth $262k in 2024, an appreciation of $162k. Using the land value percentages above, the land value of the houses are $51k and $188k respectively, an appreciation of $137k. That means 85% of the appreciation was in land, not because building materials got more expensive or whatever.

[1] https://fred.stlouisfed.org/series/LXXRSA

Re: How private equity is changing housing

#214

Post by georgefrowny »

pempem wrote: post #116
CGMthrowaway wrote: post #109

Earlier quoted context omitted.

It's not special, just requires scale for it to make sense. E.g. Cost segregation studies and UPREIT transactions are cheaper on a neighborhood level. And you need enough passive income to absorb the depreciation losses

^ This And the scale applies at every single step of the process. A citizen homebuyer is playing a oneshot game. There are few discounts to be had and every single fee is its own battle. A corporation/PE is playing a multi-shot game. There are bulk discounts, relationships, and scale that is applied to everything from title insurance and inspections to cost segregations to filing all of the paperwork.

> There are few discounts to be had and every single fee is its own battle.

Also if you take a 10% gamble on a strategy to save 50k and it backfires and lands you with a 500k legal bill, that's just the cost of business to a big (or even not that big) company, but it'd be absolutely ruinous to private individuals.

Re: How private equity is changing housing

#216

Post by tptacek »

MetaWhirledPeas wrote: post #126
jeffbee wrote: post #100

Earlier quoted context omitted.

Why do you think that renters don't deserve to live in single-family homes?

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.

Wait, you're not answering his question. "Institutional investors" rent out houses at a scale individual owners can't, and have more resources to maintain those properties and respond to renter complaints. Why isn't a carefully-regulated market of institutional single-family-home lenders a good thing?

Re: How private equity is changing housing

#217

Post by BobaFloutist »

tptacek wrote: post #190
oldjim798 wrote: post #189

Earlier quoted context omitted.

Yes, the natural state of every resident is to live in their own home. To be clear by home I don't mean "single family detached house on a suburban street", I mean a place to live with water, electricity, and a roof. Landlords provide no 'service'; they are merely an existence tax. The market already does not build dense multifamily; what is there to halt?

You can't fathom that someone might not want an ownership stake in the property they happen to reside in, that there could possibly be a downside to that.

You know how it's recommended to sell employee stock grants asap, so your not over indexed into your employer? I.E. if the company you're working for performs poorly or goes under, you don't want to lose your job and wealth, and if it does well, you'll keep making money at your job anyway, so there's no advantage to investing more of your personal capital into your employer than you would if they weren't employing you (barring insider trading).

It's funny that people rarely seem to apply the same reasoning to their dwelling place.

Re: How private equity is changing housing

#218

Post by carlosjobim »

ssl-3 wrote: post #134
malfist wrote: post #127

Earlier 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.

From individuals? Anecdotally: I've rented 5 different single-family houses in my life. All of them were rented from individuals. Only 1 out of the 5 had a landlord that owned some other stuff that they also rented out. For the remaining 4 out of 5, the landlord only had that singular property to rent: They lived wherever they lived, and they also had an extra house for whatever reason that they rented to me.

Why is it better to rent from individuals? They have the same profit motives as corporations.

Re: How private equity is changing housing

#219

Post by tptacek »

vondur wrote: post #49

I just watched a video from Dave Ramsey title "What the Government Should Do to Fix the Housing Problem" He specifically calls out Institutional Investors and Foreign Corporations that have been purchasing single family housing and converting them into rental properties. I think he makes some good point in his video: https://youtu.be/_CrgniwSLLM

We just had a research report on HN a few weeks ago showing that the median number of properties "corporations" in California rented out is 1.

Re: How private equity is changing housing

#220

Post by bpt3 »

api wrote: post #33
hardtke wrote: post #18

One of the issues the article doesn't mention is that these houses are effectively cheaper to purchase for corporate owners. Generally they can borrow money at a lower rate, but the ability of corporate owners to use depreciation on a new purchase to offset profits from previous purchases is more significant. Effectively they are redirecting money that would be paid in taxes into the payments on the new purchase.

Our system is far more regressive than most people realize. The poor pay more for things, don't have access to all kinds of tax breaks and cheap money, and can't afford accountants and shell companies and all the other complicated tricks you can use if you are wealthier. I wonder: if you added it all up, would a flat tax (which is nominally regressive) actually be more progressive than the regressive taxes we have?

> I wonder: if you added it all up, would a flat tax (which is nominally regressive) actually be more progressive than the regressive taxes we have?

Absolutely not. The US has the most progressive federal tax code in the OECD, mainly because we don't have a VAT like most other countries.

Nearly all of the loopholes you mention are at the federal level, where half of the households in the nation pay <= $0 in income tax.

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