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How private equity is changing housing

theatlantic.com

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Re: How private equity is changing housing

#81

Post by UncleMeat »

gjsman-1000 wrote: post #40
stock_toaster wrote: post #29

Wild idea... Maybe tax wealth instead of income? Tax break on single home ownership, but significantly increased tax on multi-home-ownership? It would be interesting to see comparisons between PE ownership in markets with property tax vs markets without.

Wealth taxes don't work because wealth gets extremely fuzzy. For example, unsold stock that I bought 15 years ago; and then got a loan against. I'm wealthy... kinda? But I didn't sell the stock; I have unrealized gains, and you shouldn't tax me beyond income tax on borrowed money? Okay, tax me on my unrealized gains then - but then 2008 repeats itself, stock goes down 40%, do I get a refund? Of course not, I only pay…

> Okay, tax me on my unrealized gains then - but then 2008 repeats itself, stock goes down 40%, do I get a refund? Of course not, I only pay when stock goes up and never down, which is not exactly a fair incentive.

We already do this for property taxes.

Re: How private equity is changing housing

#83

Post by 9oliYQjP »

gjsman-1000 wrote: post #40
stock_toaster wrote: post #29

Wild idea... Maybe tax wealth instead of income? Tax break on single home ownership, but significantly increased tax on multi-home-ownership? It would be interesting to see comparisons between PE ownership in markets with property tax vs markets without.

Wealth taxes don't work because wealth gets extremely fuzzy. For example, unsold stock that I bought 15 years ago; and then got a loan against. I'm wealthy... kinda? But I didn't sell the stock; I have unrealized gains, and you shouldn't tax me beyond income tax on borrowed money? Okay, tax me on my unrealized gains then - but then 2008 repeats itself, stock goes down 40%, do I get a refund? Of course not, I only pay…

I don't have an economics or finance background. But why could there not be a taxable event for the loan amount when it is made? Sure, maybe it gets taxed at a lower rate than even capital gains to continue incentivizing leveraged investments of this nature. Is there some economic argument for why lenders can realize the value of an asset when loaning out money against it but the tax man can't touch that asset until it's actually sold?

Re: How private equity is changing housing

#84

Post by hypeatei »

quamserena wrote: post #73
postflopclarity wrote: post #12

build. more. and this problem will go away.

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.

Re: How private equity is changing housing

#85

Post by drivingmenuts »

HexPhantom wrote: post #77
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.

It's wild when you think about it: a family scrapes together a down payment and pays full freight on property taxes, while a corporate landlord can roll one property's paper losses into the next deal and keep building their portfolio, tax-deferred

Don't forget the sweetheart tax rebates they sometimes get for promises of development.

Re: How private equity is changing housing

#86

Post by swat535 »

api wrote: post #37
ryanmcbride wrote: post #22

Earlier quoted context omitted.

Not if private equity just snatches it all up. Yes build more. Also regulate the oligarchs until they no longer exist.

PE buying real estate is a long bet on housing prices. If supply increases enough, prices flatten out and then fall, and the longs get crushed. These investments are a bet on continuing to under-build and under-densify.

If they buy out all the supply, there will always be a shortage.

Re: How private equity is changing housing

#88

Post by lwansbrough »

Lots of ideas in here that fail to properly identify and address the root cause, which is disappointing given how many of us are programmers.

Trace the problem back. Where does it start?

Why is PE investing in homes? Because they can make money. Why does buying a home make money? Because the value appreciates. Why does the value appreciate on an asset that literally deteriorates over time? Because of restricted supply. Why is there a supply shortage?

The root cause of this issue is supply. Zoning, mostly, is to blame. There are down stream issues, like the capacity of the construction industry, but that is an effect of the current environment not a root cause in and of itself — if there is money to be made, construction will grow as fast as it can.

Fix supply, and you fix the issue. This is a uniquely (English) western world problem. Go look at western countries that speak English vs. non-English housing starts. It’s just a cultural failure. You can blame corporations all you want but at the end of the day most people in the anglosphere expect a return on the largest purchase of their lives, even if it comes at the cost of materially worsening the lives of those around them.

Re: How private equity is changing housing

#89

Post by stego-tech »

SoftTalker wrote: post #80
stego-tech wrote: post #70

Everyone 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…

I refuse to buy that argument of availability alone (or hell, any standalone argument) when we have continued reporting of landlords and PE leveraging services like RealPage that are designed to maximize rents and revenue, including by keeping units vacant. Every time I’m driving through a dark city at night, residences and condos devoid of furniture (or using an interior design motif with no signs of life), I’m reminded how many of these are investments by a vacant owner designed to capitalize on lax regulation and lack of supply in in-demand areas. I drive by huge corporate plazas clustered together on high-value land because companies demanded everyone live in the same areas rather than spread out to reduce costs, driving up demand further.

I am unbelievably sick of seeing the symptoms go unaddressed while commenters and armchair economists bicker and debate who is the sole source of blame that must foot the bill. We need action, and we need to be brave enough to be willing to admit this isn’t working for the masses anymore.

I’m unbelievably tired of this cowardly pussy-footing by people who can’t or won’t envision a better future that also doesn’t involve number go up on property forever without further investment.

Re: How private equity is changing housing

#90

Post by roboror »

zipy124 wrote: post #53
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.

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.

>This is not true at all. Corporate loan rates are generally pretty damn high, only exceptionally can they borrow for low rates.

Are these companies going to banks and applying for a loan? I'd think they are privately backed and invested in.

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