Comment by tptacek
2 days ago
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?
2 days ago
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?
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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.
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.
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?
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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.
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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.
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> 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...
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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.
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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.
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