> If I owned a property outright, and rented it out at market rates at a decent yield, is it not both?
For you yes, but if everyone does it, then the market is priced on the "market rates" which have now become much higher than your initial price due to market capture.
The problem with private land ownership is that land is a natural monopoly and as such has very actual market conditions. You could theoretically have a functioning one as long as you build way more than people need, housing then becomes elastic despite the land below being non elastic but the math quickly breaks down.
For the conditions to be met where housing "always goes up", and "housing is a basic need" someone is gotta give. And power wise, homeowners wreck non homeowners and have for 70 years hence, they always win. Now with the rush of institutional house buyers and the rush of big corps buying entire house blocks, the problem is gonna become much worse, and quickly.
If you wanna see alternatives to fix the problem, Singapore nationalised all land and has no private landlords and Austria has about 50% of the houses in Vienna to be non market rates (so the price is dictated by construction costs plus a percentage not on how much you can charge for rent). Both models heavily bring down rent/ mortgage costs and yield better results for people, the only ones who lose out are IRA's tied to housing and large landlord conglomerates.
Not all current homeowners are sitting on their house as an investment. The true value in a house is that you have some property and a roof over your head as long as you can pay the mortgage, taxes and insurance. Much better than being at the whim of landlords in a lot of cases.
My father has owned a house for 29 years and when he’s gone I don’t care about cashing out or making a profit. Its just great to have a literal home base to rely on in case things get rough.
> My father has owned a house for 29 years and when he’s gone I don’t care about cashing out or making a profit.
Too bad, I have bought every house around and put them on the market for 1000% what your dad bought it for. Your taxes are calculated based on market rates, and therefore your housing tax is now completely unaffordable to you. You gotta sell the house you grew up in because I decided to fuck the market in your area.
Also because I own 30 houses and you only own one, I can dictate the price, doing things like marking 28 above you and one below you so yours doesn't get sold. Then 27 above you and 1 below you, and keep doing that while you pay taxes on a house you can no longer afford nor sell.
Welcome to your new nightmare of having me as a neighbour maximising my investment, meanwhile 27 people are homeless because the houses are not on the market despite the demand being there, but if I make them desperate first my return will be higher.
Even people like you, with the right idea, to use housing as a house, can be caught up in the never ending bullshit that is the current housing model.
This would make a good novel like a Christmas story where the evil capitalist tries to destroy an old family housing cost but in my experience is far from reality. Starting with taxes - no where I have lived has does taxes at market rates like that. Many houses I have seen have low tax values that might adjust slightly on a sale. I don’t live in Cali but they famously avoid this with prop 13. Taxes may be re-rated by appraisals once in a while with adjustments to the market rate but the town doesn’t suddenly gain more of a tax base or revenue. Houses that improved move to a higher appraisal and houses that didn’t go lower. I have been through two re-rates and my lack of updates has resulted in a drop in the appraisal for the tax rate while my neighbors are higher. The rates adjust and the end result is some pay more and some pay less. This scenario might happen if you live in gentrified area and bought extremely low and get priced out but that is not the norm. The rest, I just don’t see. Either the evil capitalist is renting the houses or selling but who would list houses and not sell to drive a price down. If one is lower and sells, and there is demand for more to sell a buyer will be found.
The play with evil capitalists trying to force pricing out with taxes might be far-fetched but drip-feeding housing to help maintain inflated prices is a well-known tactic of developers in London, probably elsewhere it applies in varying degrees as well.
For a well-financed developer it's a much better deal to drip-feed some 30 renovated apartments at 1x over 1-3 years than sell a chunk of 30 renovated apartments at once and at 0.8x due to the increased supply. If they wait they know the demand will still be there to sell at their full 1x.
I like owning the house because then I can modify it to suit. Rentals tend to be designed right down the middle, for maximum appeal. But I like different things. Some of my ideas I was bluntly told by the contractor would make the house difficult to sell.
Of course, but that is exactly the point that GP was making: we either have this sort of safety for the majority of people, or we have a lucrative investment opportunity. It is fundamentally impossible, or or at least deeply unlikely, to have both.
>Now with the rush of institutional house buyers and the rush of big corps buying entire house blocks, the problem is gonna become much worse, and quickly.
Is there any reason why we can't ban institutional investors from the personal housing market? Seems unfair that a family who wants shelter should compete with giant faceless piles of money which only wants to make a profit at the cost of fucking those who want shelter. Let them chase other investments instead (stocks, crypto, bonds, whatever).
> Is there any reason why we can't ban institutional investors from the personal housing market?
The same reason Corporations have personhood, it makes investors money.
> Let them chase other investments instead (stocks, crypto, bonds, whatever).
All of those are down, but housing isn't, thats why they are chasing it like crazy.
If I am not wrong, in London the most prevalent number fo homes owned was 1, then 2 and then it was like 7. Because 3-6 was expensive but not maximising yield, by 7 your investment pays for itself plus then you can accrue value to buy more property. So landlords get as many as possible. In the early 2010s when I was renting there a landlady asked us to pay rent on direct debit every 1st of the month because she had 42 properties and couldn't afford all the mortages if everyone didn't pay at once. An 82 year old lady, with 42 properties. This was not uncommon when meeting landlords at the time (maybe not as crazy as 42 but still higher than 5 was commmon).
>The same reason Corporations have personhood, it makes investors money.
Yeah obviously, but it doesn't answer my question of why can't we regulate them out of the housing market?
"It makes investors money" is not a good answer because a lot of nefarious things used make investors money, like slavery, child labor, 16h workdays, warmongering, snake oil, using asbestos or other toxic substances that kill you, building shoddy buildings that can collapse on you, drugs, polluting cars, alcohol, opioids, tobacco, fossil fuels, dumping toxic chemicals in rivers, deforestation, Ponzi schemes, and yet in most of the west we have regulated a lot of them or even outlawed some of them completely for the greater good because what's good for the investors isn't always good for humanity or for the environment.
So why can't we do the same with housing? Tell institutional investors to fuck off with their bags of money somewhere else. Let them speculate on NFTs, famous paintings or Pokémon cards for all I care.
>An 82 year old lady, with 42 properties.
My point exactly. It's obvious that for basic human necessities like water, shelter and healthcare we can't just leave it to the free market competition to sort itself out, since over time it creates a system of winners and losers, where few who lucked out end up monopolizing the majority of the market share and defaulting to rentseeking, while the rest are left out completely, with no hope of ever being able to jump on board and forced to rent their whole lives.
This rampant inequality is what led to the communists seizing power ~100 years ago, and despite being only ~30 years since communism collapsed in Europe, communism is on the rise again in elections in some EU countries especially among young people because the last 20-30 years of deregulated globalized capitalism has seen the biggest and quickest wealth transfer from the working class to the upper class ever seen.
> Yeah obviously, but it doesn't answer my question of why can't we regulate them out of the housing market?
Sorry I misunderstod your question. Well the main reason I would argue is the disconnect between politicians and general people. The examples you gave, like asbestos or child in mines do not benefit politicians directly. However most politicians are house owners, most own multiple properties, those laws affect them directly. The fact many of their constituents do not own a home is irrelevant because signing those laws affect them.
> This rampant inequality is what led to the communists seizing power ~100 years ago, and despite being only ~30 years since communism collapsed in Europe, communism is on the rise again in elections in some EU countries especially among young people because the last 20-30 years of deregulated globalized capitalism has seen the biggest and quickest wealth transfer from the working class to the upper class ever seen.
I think whatever is coming is gonna be inevitable, there has been an economic capture of levels unseen, coomers owned 30% of the gdp when they were the age millenials are now. Millenials own like 7%. It is unsusteinable and things like AI, the Internet, Globalisation have not yet been integrated properly into the economic model.
I think the prefered solution is more horizontal models, unions are coming back, cooperatives are having a resurgance. Ideas like digital money can be terrible but could also reduce lending barriers. We are at a point where it seems to be more than enough for everyone its a matter of logistics. Green energy and 4 day weeks seem atteinable goals
Big investors are chasing profits in housing because your average middle class homeowner has pushed policy distorting the market so much. They're not the root cause of housing being unaffordable
> You could theoretically have a functioning one as long as you build way more than people need, housing then becomes elastic despite the land below being non elastic but the math quickly breaks down.
I doubt this would ever work out, as a high availability elsewhere won't help here. People pick a place to large parts due to job availability, social factors (close to friends/family), infrastructure (shops, restaurants, sports, schools, cultural activity) which is hard to replicate to some scale.
On a very narrow scale there can be an effect, say in Tokyo, where JR builds some railway station and develops that into a new urban center with lots of local infrastructure and connection to job, school, friends, but that is still benefiting to proximity to the other.
Homeownership cannot be both affordable and a good investment because a good investment has returns that at least beat inflation. That implies housing costs for new buyers will become increasingly expensive in real terms.
Think about how cars generally depreciate over time such that a used car becomes more affordable. During the pandemic, this trend broke to supply side disruptions and used cars actually started to appreciate. Housing always has supply side constraints to zoning regulations to guard the entrenched interests of existing homeowners, and thereby housing generally appreciates in value.
The closest that we can come to balancing both affordability and investment interests in a growing area is to constantly increase housing density. Then the land itself can appreciate in value as larger buildings are built in a fixed footprint. Yet the price of an individual unit of housing can stay roughly constant in real terms due to the ever increasing supply.
> Homeownership cannot be both affordable and a good investment because a good investment has returns that at least beat inflation.
This is precisely why a house is different. You can't live in a stock certificate but you live in a home. If you buy a stock at $10 and sell it for $10 ten years later you lost money. If you buy a house and sell it ten years later at exactly the same price it was still good value because you got to live in it for a decade.
Imagine a world without landlords. It's way worse than the one we live in now. It's a world where you cannot rent, you can only choose between buying or being homeless.
Landlords provide housing and most of them don't make a ton of money out of it. They hope for future appreciation of the property, which they can only realize if they sell, and their monthly income often doesn't cover the cost of ownership.
Landlords don't provide housing, property developers do.
Most people who currently rent don't want landlord. You already make that point yourself: the alternative for them is being homeless, because they are unable to buy due to high housing prices and restrictions on getting mortgages.
In many cases the landlord are making boatloads of money, simply by being the middleman between tenant and bank. They are not the selfless charities you are making them out to be.
Most landlords actually spend more than they make, and they hope the long-term appreciation on the property will make up for the expenses.
Property developers only build things because they know they can rent them out directly or sell them to landlords who will. None of this exists without a market that will demand it.
We still don't need landlords. Water is a requirement, so my government has built out the infrastructure, and provides the service at near-cost. Same with power, insurance, licensing for firearms and motor vehicles, public transit, and more.
Why is housing different in your mind? Or is this an American view that everything must be a "free" market? Note that the government doesn't need to be the sole provider of housing, but allowing the government to compete with private industry hardly seems unreasonable.
> If the government provided your housing, the government would be your landlord.
> Is that really preferable to your landlord being an individual you can sue in court?
Yes, in the country I live in that's much more preferable than to have an individual I can sue. Public housing was the scheme that afforded most people in this country with their first dwelling, and the government in the 1950-1960s publicly incentivised the construction of 1 million dwellings.
So yes to your question, I prefer if I have the option to rent an apartment from my government than from an individual, thank you very much.
If a state housing commission fails to deliver contracted services then of course they can be taken to court - they are far less likely to dodge and avoid in the manner a truly bad individual landlord can.
They're also there to provide housing services to all including the most needy that many landlords might reject.
It's not government ownership of housing here, it's a mixture of private ownership of privately owned housing, private ownership of rental housing, and a choice by the two million+ free citizens of the state to invest some of their collective investment money in a managed state housing commision to provide housing to parts of the convential rental market and to the otherwise unserviced poorer end of the rental market as a means of addressing what would otherwise be a large homelessness issue.
It's a smart investment that saves on policing costs and reduces crime .. that other wise the same citizens would have to pay for and live with.
Do try and think more broadly and out of the box. The slavery stuff is just ridiculous (you're US, right?).
> Landlords don't provide housing, property developers do.
With rare exceptions, developers want nothing to do with owning the properties they build. They want to finish the build and get those properties off their books and close the contruction loans and move on.
So somone has to own the property after build is complete.
Developers only provide a service of constructing a house on a plot of land. Whereas landlords actually provide the resources (capital) required to build it.
Yes, of course - but ultimately, it's the landlords who park the capital for many decades in the properties, and not the developers. So, it's the landlords' capital which makes development possible in the first place. Developers are just providing a service. Well, that's not entirely fair, as they're also assuming a bit of risk on themselves - if they miscalculate the investment, or conditions change negatively before they sell, they'll end up holding the bag. But, majority of risk is on the landlords' side, as they hold the property for decades.
That's just not the case even though the net cash flow makes it seem like landlords are often just breaking even.
If a tenants rent only covered the the monthly mortgage, that's still a 5.5% ROI assuming 20% down, 30 year mortgage. Accounting for interest rates, then the ROI is 5.5-(R*0.8)% returns.
But rents go up yearly to match market rents so the actual returns are closer to 15-22% (though it tends to scale poorly which is why REITs pay so little IMO). Even after accounting for loan interest & costs, real estate is a very attractive 8%-15% investment with very favorable tax incentives. E.g. gains gan be deferred as long as they are invested in other real estate, positive cash flow is typically tax free due to depreciation of property - despite it's market value going up!.
IRC Section 1031 lets you transfer the cost basis as long as you reinvest in real estate and inherited assets get stepped up cost basis. As long as you stay invested in real estate (and the tax laws don't change), you could get an entire lifetime of appreciation tax free all while having positive cash flow.
How would you consider public/council/local-authority housing then? They certainly don’t own the property as an investment - especially as oftentimes thise properties cannot legally be sold anyway.
> Governments could set themselves up as a monopoly landlord
If you wanted to make the current situation worse, congratulations, you have found a solution! Now you can't get out of your rent because your landlord is the damn government!
There could be options beyond rent buy or be homeless. But a number of steps would be required, such as growing up and taking the boot out of our throat.
Please identify this "huge class of people" who own more housing than they can possibly live in.
I don't believe they exist.
If you are referring to corporate owners of apartment buildings, that's one thing. But to say there is a huge class of people who are landlords is just unrealistic. Very few people own more than one home, and even fewer people own more than two.
You don't believe individual landlords exist? They have a whole, entire subreddit, r/Landlord. Voilà, quod erat demonstrandum.
To wit:
> Of the approximately 50 million rental housing units in the United States, around 41% of the rental units are owned by mom and pop landlords, also known as individual investor landlords. That means approximately 20.5 million units are overseen by mom and pop landlords.
Also, from the same site, the average landlord has 3 properties. That means there are more than 6 million individual landlords in the US. I'm not going to nitpick whether that's "huge" or not; the point is proven.
I'm not going to debate whether enough people to fill multiple major cities is a "huge" class or not. Go nitpick someone else if that's your only point.
If I owned a property outright, and rented it out at market rates at a decent yield, is it not both?
The problem is property exists in a debt market. Mortgage pricing basically determines property prices.