What about wealth inequality as the root cause of housing shortage? Even if supply is eased, the wealthy (those who have enough capital to earn passive income) will buy the extra supply and rent to the poor. The Piketty effect takes over, they invest their profit in more housing, wealth inequality continues to get worse, and while more housing exists, it owned by an increasingly small cohort.
Personally I'd like to see legal constraints on investment in primary, single-family homes, and fewer legal constraints on building them.
My gut feeling is that wealthy people buying up the housing stock to rent out is not actually as common just supply restrictions not meeting the demands of individuals.
I used to live in Vancouver, and on my street almost all occupants were owners. But guess what, the number of houses on that street has not changes in 100 years, and the number of people who want to live in Vancouver has probably increased tenfold.
The issue wasnt that all the housing stock was bought up, the issue is that housing stock did not increase to satisfy demands.
Additionally, a place like Vancouver is really a global real estate destination. People with money who are not from Canada come to Vancouver and drop a few mil on a single family home and outprice all the locals. If you are buying a house in Vancouver you are competing with wealthy people local, but also the top wealth from across the globe.
BC did pass legislation to make all single family homes qualified for quadplexes, but I think it is too little too late.
Anything short of taxing every residence which is not a primary residence AND banning foreign ownership AND reducing permitting toil AND raising interest rates, is going to fall short.
I gave up a few years ago and moved somewhere else. Vancouver is no longer for Canadians.
> Anything short of taxing every residence which is not a primary residence AND banning foreign ownership AND reducing permitting toil AND raising interest rates, is going to fall short.
You forgot eliminating favorable taxation for real estate as well.
But actually if you kept all of those factors and simply just increased supply, it would still lower prices. It's not that complicated. It doesn't matter how many incentives you place on top of real estate. If you build more and prices decrease by 20%, it doesn't make demand shoot up by 20%.
The vast majority of people will never purchase more than one home, and will also never leave the metro-area they grew up in.
I think Vancouver people imagine the demand of Chinese real estate investors interested in their city is endless. It is not. Vancouver is the city that has the highest percentage of Chinese-owned real estate outside of China (globally) and its still at only 30%.
And the vast vast majority of cities do not have this dynamic or anything close to it. And the Chinese population is massively declining over the next 40 years, not growing.
> only 30%
That is a huge amount. I don’t blame immigration and foreign ownership as the only issues with Vancouver prices, but 30% of housing stock being owned just by Chinese population is massive. I knew several people who were Chinese nationals and owned a factory or large business in China and then bought a $4 million home in Vancouver. I don’t have any personal issues with these people and I befriend several, but I also realize that foreign capital from the richest residents outside of Canada were out competing locals.
Another thing to consider is that a large number of foreign nationals buying real estate in Vancouver come from countries that have strong capital controls (China, India) whereas Canada has basically no capital controls which results in a pretty onesided trade relationship.
All of the housing stock was bought up. In 1953.
Why not tax primary residences too? Why should housing hoarders pay no tax when someone who invests in a productive business or hoards mostly useless shiny metals has to pay capital gains tax?
They probably could be taxed but not a lot of countries do this and those that do have exemptions.
There's many arguments against taxation of primary residents but the strongest is probably that it punishes and hinders the ability for people to make sideways movements from similar properties to other similar properties, so it hinders housing liquidity, labour movement etc.
I would be fine with house sales incurring capital gains/losses. You are right, it is just another asset.
Piketty logic assumes infinite demand. Housing demand is very large, large enough to seem infinite when North American cities have spend 100 years banning every form of housing imaginable except the single family house, but it is not actually infinite.
If Piketty was correct, then inflation adjusted housing cost per sqft floor would always go up everywhere all the time. But we see dramatic differences in different periods of history, between different cities and we see rents stabilize & decline after building booms. We see housing costs go up the most in the places that build the least and the least in places that build the most.
If Piketty was correct, rich people could do this with things other than housing - they could buy cars and rent them out and then reinvest the profits to buy more cars. Ofc this doesn't actually work because there is no scarcity of cars - for better or worse we have chosen to place almost no limits on the quantity and density of cars in any city, state or country, while placing extremely tight & arbitrary limits on the quantity & density of floorspace in every city. For every car a rich person buys up to rent out, a car company reinvests the profits to build 1 more and then some. There is no functional reason residential floorspace cannot be exactly like that.
The housing market is much more inelastic than eg. the cars market. Whether demand in housing is infinte is a question of scale of population and wealth growth and elasticity. With that given, i would assume the postulated effect of run-off construction and renting, but we only have poluation growth and not the other two.
Just off the top of my head I can think of plenty of functional reasons why residential floor space cannot be analogous to cars.
Most importantly location matters. Space and buildings are not something that you can easily ship from one market to another to balance supply and demand. Space is inherently limited and replacing existing buildings with new more efficient ones is also problematic when you have people happily living in those old buildings, especially in high demand areas. Construction work takes time and in the meanwhile the displaced families will create even more demand.
There are practical limits on how densely you can pack floor space before it becomes prohibitively expensive, unsafe, or simply impractical. As you build higher the costs grow exponentially while the livable space per floor keeps decreasing due to the tapered shape of the building and need for larger structural core and more elevators. Above certain height you will be forced to target wealthier residents which means either offices or large luxury apartments that are anything but space efficient.
Construction is extremely capital intensive. A building takes a large upfront investment, and it takes a long time for it to pay off. With cars the cost of making more is marginal once you have an assembly line in place so it's significantly easier to re-invest profits into ramping up production.
Renting real estate makes more sense than renting automobiles because real estate is more expensive, less liquid, and better at holding its value over time. Owning a house is more difficult even when it would make financial sense to do so (not everyone can get a mortgage, or commit to living in the same city for an extended period of time).
> for better or worse we have chosen to place almost no limits on the quantity and density of cars
Even worse, most places have chosen to place a lower limit on the quantity and density of cars through parking mandates. It is absolutely insane that we are still wasting space on parking even in densely populated urban centers where it's impossible to accommodate everyone commuting by car.
> Space is inherently limited and replacing existing buildings with new more efficient ones is also problematic when you have people happily living in those old buildings, especially in high demand areas. Construction work takes time and in the meanwhile the displaced families will create even more demand.
The main reason old buildings with lots of people are replaced with somewhat taller new buildings, is because of bad laws that require new apartments to go only where old apartments already exist. IMO these are exactly the laws that need to be reformed and or abolished. It doesn’t mean that no one’s old apartment building will ever be demolished for a new one, but right now that’s effectively a requirement. If you want to add four space to a city, you are first required to demolish a large amount of apartment space, and evict everyone inside. If you could simply purchase a house that was already on the market, whose owners wanted to sell and didn’t want to live there anymore, and replace it with an apartment building he wouldn’t evict anyone. This transaction was once common place, but is now effectively illegal almost everywhere in North America because “house people” demand segregation from apartment people.
> There are practical limits on how densely you can pack floor space before it becomes prohibitively expensive, unsafe, or simply impractical. As you build higher the costs grow exponentially while the livable space per floor keeps decreasing due to the tapered shape of the building and need for larger structural core and more elevators. Above certain height you will be forced to target wealthier residents which means either offices or large luxury apartments that are anything but space efficient.
All true, but these limits are really only relevant or binding in Manhattan and perhaps one of two square miles worth of downtown cores in a few large cities. If someone wants to say that Manhattan will always be expensive for those reasons, that’s fine, but it’s no excuse for the other 99.99% of places people want to live in.
Reforming land use successfully IMO doesn’t require us to solve the problem of “how to make Manhattan (or places like Manhattan) even taller” but the much more economical goal of “it should be legal to build a 4 storey walk up with no parking, anywhere you can build a house.” That’s a tough political goal to be sure, but it doesn’t come close to having to deal with any sort of physical or efficiency limits regarding construction of very tall buildings.
You haven't actually worked this example out. Try it. The wealthy buy the extra supply; they now compete with all the existing supply for tenants. What happens next?
Collusion using online management services to fix prices across a region.
I think Washington State is working on legislation around rental services due to this already being a problem in the Seattle area.
“Extra supply” is added to the portfolio containing housing they’ve already purchased. They own part of “existing supply” too.
I live in Seattle, and this is a scapegoat. it's another way to point a finger at anything but massive restrictions on supply. The easiest solution to collusion to keep prices high is to let lots of other people build and compete down price. In Washington, most new construction happens on a very small number of parcels, because that's the only place we allow it.
Nobody concerned about rent price fixing thinks that we don't also need to build more housing here. This is just another part of the problem. Are you defending the practice?
I think it simply doesn't matter. The only reason it could have any impact at all is in an incredibly constrained market. Unconstrain the market and they just won't be able to; it wouldn't work.
Also - I don't think it actually affects prices. It's just that they've gotten good at seeking price equilibrium.
“Yes” would’ve been a sufficient answer.
And yet action gets taken about the rent price fixing, but not about actually encouraging more building.
Seattle upzoned huge chunks of the city, allowed ADUs (now two adus are permitted on all lots), and removed single family zoning. All within the past five years.
Last year, Seattle built 20% more houses than the highest of any of the previous ten years. (~13k units) And this year we're 11% above last year, so far.
What about that is not "actually encouraging more building"? I'd say your data might need revising.
Housing is a depreciating asset. Even if you're trying to continuously corner the market, you'll be losing money in the long run if you're not actually renting the units for more than you're buying them for.
If supply can be built to meet demand, trying to corner the market to achieve monopoly rents will fail in the long run.
Land isn't. And the house is depreciating, but not the value of having a rental at that location. My house is worth four times what I bought it for a decade ago. The house itself is depreciating, and because I rent a portion of it, I can claim that depreciation, but the value of the property is going up.
> Housing is a depreciating asset.
It ought to be, but that is not how America works
There are too many competing landlords to form a functional cartel.
Why this collusion doesn’t happen in Austin where rents are falling 2 years in a row?
Collusion on housing only works when there is a shortage. As soon as the shortage ends units go unfilled and landlords defect. Collusion works in industries where supply can change in the short run, tough to do that in real estate. Real estate elasticity is so high though that small collusion can work, but only if there is already a shortage. Yet, again the solution is just build more.
Depends on how many tenants there are: is is a buyers' or sellers' market?
Their point is that an increased housing supply should shift it to a buyer's market - it's not just how many tenants there are but how many housing units vs how many tennants.
Whether it's a buyer or seller's market depends on supply!
If the wealthy buy up existing limited housing supply and there are many tenants looking for housing, then they can continue to raise rents, no?
The premise here is investors that just continually buy up all the supply, even as supply continues to increase, in the hopes that some day housing, the single largest asset class in the United States, will reach the limit of all possible supply? You don't feel like this is "spherical cow" calculating? The amount of investor-owned housing in most metro markets is a rounding error, and the amount of vacant investor-owned housing is smaller than that.
The logic you're using here depends on deliberate vacancy; as soon as you concede that investors let out properties, you force them to compete in the market for housing with all the other supply.
I'm trying to track this argument through this thread but I feel like something has gotten lost here, is there someone arguing against increasing the housing supply? Like, did someone upthread say something like "no, I think we should not build more houses"?
Or is the argument that merely building more houses isn't sufficient?
(Also presumably you could build an infinite amount of houses, but the land itself is somewhat of a fixed supply...)
> is there someone arguing against increasing the housing supply?
Yes. The central thesis of the blog post is that increasing the housing supply solves the housing price issues.
And other people in this thread are going: "Uhh, well actually, have you considered that this is the fault of wealthy investors, and/or collusion or something"?
Anything to distract from the extremely simply and obvious idea that building more housing causes prices to fall.
Yeah except it almost always gravitates to a cartel, almost always, because that is how people work, even when piloting corporate machines.
I'm speculating here, but I'm guessing you haven't been month to month rent in a while..
EDIT: you seemed to have tried to redirect the question to this "always buy up more land as an appreciating asset", when both can be true. "Buying that land is an appreciating asset (we haven't made much more I'm aware)" and that "forming an asymmetrical power relationship with the renters improves owners life" are mutually beneficial activities
Housing returns have constantly lagged behind equities in the US. In the long run it’s almost always preferable to hold stocks as most of your investments in the US.
Again, that means the answer is to stop limiting how much housing is built.
If - hypothetically - I had a ton of money and buying another house or two or fifteen wasn't a big deal, wouldn't there be a clear-ish signal that I should stop my demand for more housing lest too much supply screw with my income? I would also have an incentive to deploy some of my resources/capital to making sure that the supply of housing is juuuuuuust right for my extractive needs.
Thats what I'm trying to figure out myself, which bank is going to give out loans on a depreciating asset. Funding will dry up as supply increases.
It is all fine as long as repayments on principal are faster than depreciation. Might mean larger down payments or shorter durations. As long as you can reasonably expect collateral to stay above principal math does work out in my mind.
Car loans have been a thing. And they attach to depreciating asset.
A lot of the supply will become second or third homes for the affluent, or short term rentals, not residentially leased property.
That's already the case with a lot of properties in highly desirable locales whether high demand cities or holiday destinations.
Yeah, Neither you nor the parent have worked the forces out to describe what's happening now.
What's happening now is the wealth and the middle are buying houses and apartments not for rental income but for appreciation. This motive is what stands in the way of new home building in any given area. This is why rents rise beyond an area can sustain at all - rents are set to maintain the ostensible value of a property - selling an empty property is fine, even encouraged.
The situation is visible everywhere.
There's just no evidence to support this. Appreciation is nowhere near as cost-effective as putting that same money in the stock market.
They leave it empty (that actually happens a lot, especially with foreign investors) or convert it to their 100th AirBnB.
Empty properties barely exist as a percentage of total housing supply in high cost of living areas in the US. You’re looking at no more than a few tenths of of a percentage point of NYC’s more than 4 million units.
Examining empty ownership as a percentage of overall housing in America, which has tens of millions of units, is not a very helpful way of categorizing a highly localized and locally felt phenomenon.
The real effect of this type of ownership is that it distorts the high end of the market and the effects ripple downstream. They force cash to move elsewhere in search of housing, which inflates those markets, so then those who could afford those markets move elsewhere, etc.
Despite all of the data that gets lobbed around on this topic, we don’t seem to have a very good mental model for how small changes in one segment of the market explode into the others and cascade dramatically.
It’s just not very meaningful to examine this as a percentage of units.
> Examining empty ownership as a percentage of overall housing in America, which has tens of millions of units, is not a very helpful way of categorizing a highly localized and locally felt phenomenon.
That’s why I specified NYC. There’s actually very good economic work on how the housing market is segmented and how demand and supply spill over. There’s some good studies from the NYU’s Furman Center on the topic.
> It’s just not very meaningful to examine this as a percentage of units.
Warehoused condos make up a small fraction of high cost housing in NYC and exist almost solely in a handful of blocks in Manhattan. They have virtually no effect on the broader luxury market, and take up very little land as they are mostly crammed into a small number of buildings.
> a few tenths of a percentage point of NYC
Feb 2024 (last year there's data, I think) was a record low and it was 1.4% empty, according to NYC[1].
But I don't really know the methodology, and according to other nyc gov data it's surprising, since we still haven't recovered our population from COVID[2].
The first statistic (housing pressure) is based on population growth, but the NYC population statistics suggest still meaningful population loss since 2020.
I have seen articles in the past that suggest that apartment vacancy rates in NYC are self-reported and misleading at best, but I don't really understand how that would work and I can't find any sources on that now.
It's also my understanding that some classes of landlords can mark empty apartments as income losses, basically or partially making up for the loss of revenue in tax rebates. But that's also not something I understand well, just something I have seen asserted.
[1]: https://www.nyc.gov/site/hpd/news/007-24/new-york-city-s-vac... [2]: https://s-media.nyc.gov/agencies/dcp/assets/files/pdf/data-t...
1.4% vacancy in a housing market is extraordinarily low. Remember: there is structurally always some material amount of vacancy, because people vacate housing units well before new people move into them. This, by the way, is a stat whose interpretation you can just look up. Real estate people use it as a benchmark.
Yeah I know it's among the lowest in the world, it's still an ~order of magnitude higher than a few tenths of a percent, which would be shocking for the reasons you mention.
My point though was just that I've seen arguments that these numbers can be manipulated, and the city's own data doesn't make sense by itself: either the 1.4% number is wrong or the slowly recovering population estimate is wrong. Especially considering the 60,000 housing units (representing 2% growth) created.
I was replying to this claim
> They leave it empty (that actually happens a lot, especially with foreign investors
Not talking about rental vacancy.
Vacancy doesn’t mean units held empty as either a parking place for cash or held off the market. Vacancy happens when you’re painting and repairing between rentals. Vacancy happens when there’s a renovation. Things like that are normal and not nefarious. Have 1.4% vacancy rate means there is essentially no usable housing for rent.
I was talking about the myth that there are tons of apartments held by rich people who don’t use them for anything.
My understanding is that vacancy means available units for rent. So, plausibly, if you say 50 of the 100 units in your building aren't available for rent because you say they're being painted then they don't contribute to the vacancy of your building.
That's almost the exact opposite of your definition, but I agree that a 1.4% vacancy rate means there's almost nothing available for rent.
I'm having trouble finding an official definition from a source that reports them, but my definition matches things that I can find online, eg https://www.brickunderground.com/rent/vacancy-rate-what-does...
Do you have any actual data on the rate of unoccupied properties that are not recently or soon to be available to rent in any major US markets? It seems like kind of hard data to find from my brief perusing around. I'm very interested in seeing some reliable data on this.
I had thought such units would have been included in the housing vacancy statistics, but apparently they are not.
I haven’t spent much time looking at any place other than New York. But there’s census data, tax data, and a lot of public records. The number of empty units is small. The total is probably close to 40k, but that’s a fuzzy number and moving target. That includes regular vacant units.
https://gothamist.com/news/how-many-nyc-apartments-are-vacan...
Yes, we get it, they buy the unit and leave it empty. What happens next.
>What happens next?
We'd revert to the state that applied for most of human history: 99% of humans will be serfs renting from 1% hereditary landlords. We'll have shown the American mid-century home-owning middle-class phenomena to be an historical anomoly. Average living standards will plummet and equity barons will never have lived so well. Any short-term rental rate drops will quickly be erased by a combination of growing population and well-known market manipulation, in particular further wealth consolidation.
Mere millionaires think they are safe; they are not. We live in a world that has a ~10 OOM wealth scale; being at level 7 does very little to protect you from 8s 9s and 10s, just as 2s are powerless to 4s and above. To a 10 a 7 may as well be a New Dehli beggar.
I was thinking more along the lines of a simple math problem and less along the lines of an outline for a dystopian novel. Like, show the work.
If capital returns 5% and the economy grows at 1%, where does the extra wealth come from? Spoiler: it's a transfer from the poorest to the wealthiest. Asset classes include stocks, bonds, real-estate, art, and metals. So if artists make more art, will this make art ownership more accessible to the average person? Or will it be a small transient soon erased by the monumental financial forces pulling all assets into the ownership and control of a tiny few? That art that your grandparents bought for $500 is now work $100k; you have student debt and high rent, so of course you sell it. The house your parents bought for $18k is worth $1M and they need end-of-life care, and you're own kids are expensive, so of course you sell it. The movement is irrestable.
tptacek is asking how investors buying properties to rent them out, which clearly leads to increased rental supply, then somehow supposedly leads to higher, not lower, rents.
Increased rental supply at the cost of decreased home ownership.
There is already price manipulation with rental properties. If a cartel is in control of enough of the supply they can set their prices as high as the market can afford. There is already a nationwide shortage of affordable housing in desirable places with jobs and the idea ITT is that it will only get worse as the investment class are the only people that can afford desirable property.
> they can set their prices as high as the market can afford.
which is the correct price - because you dont need a cartel to set the price at as high as the market can afford; each individual landlord chooses to price their rental at the highest profit they can, with the lowest chance of a vacancy.
A cartel makes it possible to set the price _higher_ than the market can afford. Which is why a cartel is illegal.
Recognizing your frustration with reality's failure to adhere to the academic: the fact is that rent rates for corporate-owned units generally don't go down. At least, not in recent history. In the rare cases where cartel behavior doesn't work to cement rates, and owners have to respond somehow to market conditions in order to avoid cash-flow disruption, they will offer "specials" that lower the out-of-pocket cost, but not the on-paper rental rate, for a unit. Your oft-found "1 month free"-type deals (that are actually a monthly bill credit for the initial lease term). Upon renewal, your increase is based on that paper rate, not what you were actually paying.
Recent history has been corporate rents not decreasing amid tight supply, the question being asked repeatedly (and repeatedly not answered) in this thread is “how exactly would landlords continue seeking high rents if housing were no longer scarce?” The only answer so far has been “by buying up the supply and renting it out” which completely ignores the obvious fact that renting out housing may reduce the supply of purchasable properties, but increases the supply of rental properties. There is no reason to assume collusion among a set of landlords would be enough to keep rental prices high if supply is no longer tight. So how exactly would landlords continue seeking be able to keep prices high if supply continues to increase?
> “how exactly would landlords continue seeking high rents if housing were no longer scarce?”
I think land lords wont lease out at marker rate due to that would lower the book value of the house which would make the banks call in loans.
Like, bank and land lords have some sort of understanding which in practice is some sort of price fixing and market collusion via proxy.
Not a direct response but just a follow up question. I'm curious how much surplus supply folks think there needs to be in such a scenario. We've seen that landlords are willing to hold units vacant in order to keep their property values up and avoid renting out at a lower price. At what point does thw math say that should collapse? 10% vacancy? 15%? 30%?
Can you at very least try to answer the comment you're replying to?
Nice points. And of course your first reply in this thread is anlredy light grayed. Classic Hacker News
The total housing supply remains static - the number of owners goes down and the tenants increase, so the S/D curve for housing stays the same. Then the wealthy consolidate the supply into smaller, more powerful groups who drive up rents via monopolist and cartel behavior (eg RealPage).
It costs money to hold on to a unit of housing. Supply is increasing (that's the premise; nobody is proposing a one-time increase in supply). How does the investor profit?
The investor profits from the appreciation of the property - they may Airbnb in the meantime also. Especially, often the speculator will fix-up the property for a sale - and then the next buyer fixes it up as well. Eventually it be a vacation home or someone might even buy it but the entire process keep a lot of property off the rental market and that increases rents.
If a small number of landlords continue to control the supply (which I understand to also be part of the premise) then they can charge whatever rate allows them to profit. Housing is pretty inelastic and is a first order priority for most people, so they will pay the maximum they can afford if they have to. At least near me, most of the housing being created is owned by large corporations like the Irvine Company, it’s not individual owned.
I'm asking: how does a small number of landlords continue to "control the supply" of an ever-increasing supply of housing when each of their holdings is non-remunerative (and, in fact, incurs tax and maintenance costs). This seems like a pretty simple math problem, a bet that you would not take if it was laid out in front of you, but I'm waiting for someone to explain how that might not be the case.
Keep in mind: as soon as you concede that investor-owners are letting out properties, they are competing in the market: further supply of housing decreases their returns, because they compete with all other suppliers of housing, the high-order bit of which is existing owners. You have to make this math work with owners who deliberately keep their units vacant, or it doesn't even work as an idea.
I’m not arguing they’re keeping it vacant, that’s someone else in the thread.
I reject the notion that the units are not making money, and the notion that they are competing on price. We know corporate landlords engage in cartel behavior using price setting algorithms, and there is a deep well of tax-incentives for real estate (eg 1031s) that make it a more complex math problem than you are making it out to be.
How did Uber et al. offer services below cost until they'd driven out all competition? The property holdings are not these landlords' only source of income. Why would milk producers deliberately dump millions of gallons of milk (representing a commensurate amount of labor to both produce and then dispose of)? Because they've created an oversupply that threatens to destabilize the price.
The math works, it's just heinous.
I never understand why people think Uber is some kind of mic drop. I don't like Uber as a company, but Uber is vastly better than the system it replaced. It this a generational thing? Are the people casting Uber as archvillains just too young to remember not being able to get a cab at 9PM, or having their cabs kick them out halfway to their destination because they decided to go on a break?
"Uber" was not the mic drop; "[Company] can use 'losing money today on one venture' as a business tactic, in search of higher future profits, if it has another source of cash to cover its losses," was, at least in the sense that it directly answered your question as to how a business losing money on one front could continue to operate. The company doesn't matter; loss-leading is not rare or unknown.
I think it's largely revulsion that Uber ignored regulations, with the revulsion mostly coming from the types of people outraged by things like Newsom's recent CEQA reform.
They support these sorts of stifling rules and believe that skirting or changing those rules is a right-wing ultra-capitalist attack on the public good, despite the situation actually being the exact opposite.
I think it's less the ignored regulations (I'm also happy with the CEQA reforms), and more that they engaged in predatory pricing schemes to stifle competition. This has resulted in a duopoly that engages in politicking to lock in their position and suppress labor rights (e.g. Prop 22).
That does seem to be a right-wing capitalist attack on the public good? Like, do we still believe in markets, or are we just cool with mega-corporations setting prices and wages?
Eventually there are more houses than people who want to be in them, regardless of whether or not they're being rented or owned.
When that happens you'll see the prices fall. After all, if nobody wants to rent your house, you'll either rent it for lower or sell it.
If nobody wants to buy it, you'll lower the price.
Ad nauseum.
China did that on a large scale, at one point using more concrete in three years than the US in the entire 20th century.
There's reportedly enough housing stock to house the population twice over, yet prices still only increased.
Where there's sufficient inequality, the country will run out of eligible land before the wealthy run out of money.
Rents in China are dirt cheap and hardly increase if you’re rational about your housing instead of chasing status and face.
Rents - yes. Real estate - no. One huge sign of the housing market being out of control is the decoupling of renting from real estate prices. There's hardly a stronger indicator of it being irrelevant whether someone lives there or not.
This only works if all those houses are on the market. Nothing is stopping today's rich people from buying up all new housing, and only letting a handful be on the market so as to not flood the market and not let prices go down.
They do not have enough capital to do that. Housing is such as large market that eventually anyone but the state would run out of capital. And it is not actually even that profitable... There is much better investments.
You don't have to buy out the whole market. You buy the houses that are likely to turn over, and then you make sure that they don't until you want them to. Housing and rent is set at the margins. If the average price in your area over the last year for comparable housing was $300k, and the last three comps sold for $400k, your asking is $400k.
It's exactly the situation you'd expect with record high prices and low sales volume, which is where we're at.
What’s stopping rich people from buying up every car in existence and making you pay $1 million for an accord?
Ah, the classic investment strategy of eating up the cost of keeping a house empty, so that others who do accept renters would make more money
”The rich” aren’t that stupid, why would they take the losses to support someone else making a profit?
I recall an article on HN quite a while ago about one of those property management companies/websites in the Bay Area. The article was detailing that, while the majority of people looking to rent out their properties were individuals and not the ultra wealthy, the app "encouraged" price-fixing, including things such as keeping a certain % of lots vacant on purpose in order to drive up prices artificially. I put encouraged in quotes because it turned out that a prerequisite of managing your properties through this application was actually complying with the price fixing, on an app-wide scale of all its users.
So despite it making no financial sense on an individual, house-by-house level, what happened in practice is that the market itself got strangled by this collusion and despite the existence of many empty houses available for either purchase or rent, you ended up with a non-negligible amount of these places not ending up in the market organically and as such driving up the costs for everyone. The property owners win big with this scheme of course, and the way things were setup you'd be a fool to go against the grain and try outcompete on cheaper housing, since you can't beat an entire market getting strangled.
So yes, "the rich" aren't that stupid, they just so happen to have systems that make these sort of moves profitable.
Seems like this article had a large impact on your understanding of the housing system. Could you post it so that others can read it too?
It's likely something related to this:
https://www.propublica.org/article/yieldstar-rent-increase-r...
There are multiple lawsuits, and settlements are already in with some property managers. Yieldstar/RealPage are not the only culprits, either: https://imgur.com/a/EmJQryv
It's not about the rich being stupid. It's about banks only creating credit for "sure bets". Housing.
And who will build homes if there's no one to buy them?
Having more homes than people want to buy would be an amazing problem to have.
Yes but that's impossible, the builder needs a buyer before he builds.
This will not work if there is an exponential wealth inequality in a society, which is where everything is heading.
Can you explain "exponential wealth inequality"?
Sounds a bit like "problem A is unsolvable because - look at here! - no one is solving problem C!"
I mean, I can't speak to housing problems in this thread, but your second sentence sounds like every post mortem and root cause analysis I've ever seen. Sometimes problems have root causes that must be addressed first.
40 years ago you could buy a share in American companies for an hours work.
Today you have to work 25 hours to buy the same share
In 40 years time you’ll have to work 4 months to buy what in 1985 would cost 1 hour.
Where's the evidence that wealth inequality is the root cause of housing shortage, as opposed to say, the real and factual lack of building?
Even if the wealthy did buy up extra supply to rent out, that would only mean increased supply of rentals, which would lower rents.
Not commenting on the ethical side of it, in many instances rentals are just a side income, the real value is in the increasing price of the house due to demand outpacing supply. See https://news.ycombinator.com/item?id=37855625 for past discussion on this.
Demand is out pacing supply because while the greatest and silent generation was happy to retire on stonks, pensions and bonds the boomers all went out and bought more and more homes and condos and whatnot for rental income.
It used to be that rental housing was either owner occupied, like a landlord living on one side of a duplex or it was a big commercial investment. The current trend of every idiot having their starter house from 20yr ago listed as an airBnB wasn't a thing back then.
So basically we "need" way more housing per capita now so that they can all have their stupid little side gigs.
Want something really interesting? There's a pretty decent chance that our wealth inequality is entirely caused by restricting housing supply. ;)
The ultra wealthy don't even care if it's rented, they're just diversifying their asset portfolios.
If people had the wealth to own land and build on it then they'd build their own.
It can be both. Wealthy people make it illegal to subdivide large housing units.
Who owns housing is orthogonal to the rent or imputed rent for an owner occupied unit. The effective monthly rent is supply and demand.
Higher supply still means lower prices. Even if "the wealthy" buy it all and rent it, they are still competing with all the other wealthy who are doing the same thing and that will limit how much they can charge for rent, and will make it a less profitable investment than other things the wealthy could invest in.
Housing is not really a great investment. It's great for small investors because it's the only place where they can invest with leverage via a mortgage. If you have billions there's much better things you can invest in.
>will buy the extra supply and rent to the poor.
The wealthy are generally monetarily shrewd, and building homes makes home ownership a worse investment. If there is a deluge of homes being built, the wealthy will take their money elsewhere. Being a landlord typically has ~10% annual return. Compared to just sticking money in the stock market, it's actually been worse as of late.
The goal of the wealthy isn't to make people suffer, it's to maximize their ROI.
If there’s 1 million people and 2 million houses then the wealthy aren’t going to be. Using up to rent out as the return on investment will trend to zero.
If there’s 1 million people and 500k houses they will buy them up because everyone needs somewhere to live and will keep paying more and more to avoid the overcrowded slums that someone has to live in.
The causality is in the other direction, see (as I posted in another comment) https://www.brookings.edu/wp-content/uploads/2016/07/2015a_r...
Rental stress is a bigger problem than price appreciation, though. Investors cannot cause rents to increase by buying stock.
If general housing is abundant enough that it has very low ROI compared to other available investments, then no they won’t buy up housing. One pretty simple way to do this is to raise property taxes high enough that a vacant condo is a very bad investment. This is what it would mean to commoditize housing.
I think it’s a realistic goal for apartments/condos. Single family homes will always be constrained by land.
(Edit): I think you, and a lot of people who are anti-capitalist on housing, make the implicit assumption that all housing is a fixed good. There is only so much housing and our political goal is to allocate that fixed amount. In a lot of major US cities this is sort of true because we have regulated the construction of new housing to the point where even the government can’t build it. But the anti-regulation perspective is that if we get rid of the regulations preventing housing construction, then enough housing will be constructed that the allocation problem isn’t much of a problem. (Or something in between, ie it’s a lot easier to build/buy social housing to give away to people if housing is already made very abundant, and the fact that even governments like California have to spend truly ludicrous amounts of money just to get a few crappy studios built)
So why are rents falling in Austin for multiple years in a row?
Why did the wealthy simple didn’t buy all of it to extort more rent?
To the extent that housing speculation exists, it's because of the lack of supply. So you have the cause and effect reversed.
Why is it OK to constrain investments on SFH but not apartments or condos?
When interest rates were rock-bottom a bigger chunk of new builds were purchased, but they're not anymore. Vacancy rates in cities, though, are very low, and if you constrain supply of rental units, rent prices go up. That impacts the poor demographic far more. People who rent entire houses are not typically poor, unless maybe you count places where houses are cheap like Mississipi.
The actual data does not agree with you at all. In places that have implemented zoning reform, housing gets cheaper. In areas where it's easier to build (red states), housing is cheaper. There is no reality at all where supply of housing jumps high but prices do also.
> Personally I'd like to see legal constraints on investment in primary, single-family homes, and fewer legal constraints on building them.
Where investors are concerned, these are purchased to flip, or with the expectation that prices would rise. Given that we had inelastic supply but perpetually growing demand, that was a good bet. So, if you build way more, an investor wouldn't be so confident about that price increase. Now compound that with the risk of borrowing at higher interest rates to buy those properties.
[flagged]
I have a soft spot for anyone with a background in Turbo Pascal from the 90s (my father built our family business on Turbo Pascal then Delphi through the 80s and 90s, so I grew up with it around the house).
I just wish you'd dial back the combative tone of your comments on HN. You've been engaging in a lot of political/ideological battle recently, and it would be good if you could remind yourself of the guidelines and make an effort to use HN in the intended spirit.
We're trying for curious conversation here. Different perspectives about economics are very welcome. Slurs and swipes are not.
https://news.ycombinator.com/newsguidelines.html
"Trickle-down" economics is a direct subsidy for high-income earners meant to spur demand. That's the opposite of what increasing the housing supply does.
Totally wrong strawman missing the bigger point. It's still a vague, misguided utopian ideology focused on helping the rich supposedly "overproduce" while doing nothing for everyone else. That's trickle-down economics 101.
Well, you have the economics wrong, and our ability to handwave at each other about whose policy is "miguided" and "utopian" seems like a pretty boring conversation. Regardless: it's obviously not "trickle-down economics". Trickle-down economics are policies that deliberately and directly subsidize the wealthy in the hopes of spurring demand.
Supply and demand is not an ideology, it’s the most fundamental way that pricing works in a capitalist society. Has been studied for centuries. To think that supply and demand would not apply to housing and instead be trickle down economics is a hell of a statement.
The Supply and Demand model makes some assumptions that are not always true (perfect competition, for example).
The model isn’t an ideology, it is just a model. But there are a lot of ideological beliefs around this stuff. Some people seem to think that all markets have perfect competition, or that the resulting efficient pricing is inherently always good.
Housing seems pretty far from perfect competition to me.
https://en.wikipedia.org/wiki/Perfect_competition#Idealizing...
How about for fun, instead of rhetorical devices and snarky projection, just look at the facts. The data on effects of zoning reform in places like Minneapolis and others, about where housing is cheaper wherever it's easier to build, about rent dropping ( https://denverite.com/2025/07/25/denver-rent-prices-drop-q2/) when you build way more units, etc.
[dead]
Trickle down was a Reagan thing.
I'm very confused by your statements.
I mean it was the Big Beautiful Bill that just added 3-5 trillion in debt and reduced taxes on the very wealthy. I don't think those impotent Dems had any sway in this.
Dems are also beholden to the wealthy--not sure they tried that hard, overall.
Then you're too focused on political concerns. Neoliberalism doesn't recognize political parties, it recognizes money. As Gore Vidal would say, the Property party.
To avoid confusion: neoliberalism has not much to do with the liberals (Democrats). It's closer to libertarianism, but only about money.
I think I was confused (speed) reading through it and hit the Democrats part and was just thinking to myself... They have extremely limited power right now, and aren't passing laws?
There are some wild political takes on the internet sometimes, and it can be hard to parse out exactly what the person is trying to say (especially if the reader failed their speed reading comprehension ;-) )
Neoliberalism, trickle down, abundance. They are all similar and/or the same.