Comment by observationist
2 days ago
It's not just raising prices - it's holding prices steady at some point without the concurrent pressure to sell, for example, or manipulating other markets in order to raise or lower prices in an area, or using other mechanics to manipulate pricing, across the entire market, depending on the intended actions. If they intend to purchase properties, it benefits them to depress pricing in the area, if they intend to rent, they can afford to impose artificial scarcity until they force renters to meet their rates, and so on.
Normal landlords don't have effectively infinite money with no forces bearing prices down, nor do they have the capabilities to influence markets. Even tiny percentage shifts can result in significant fluctuations in the prices consumers see. It's a very nuanced and complex system in which these institutional investors have very outsized influence.
You're telling a just-so story, and you can tell because there isn't a simple schematic 1-2-3 story you can make from this about how these people exert control over home prices. Words mean things; wielding scarcity requires you to control enough inventory to manipulate scarcity, and REITs and corporate buyers empirically don't.
I get why people like telling stories like this: it suggests there's a single boogeyman that can be dispelled to solve the affordability problem without painstakingly goring people's oxes state-by-state and municipality-by-municipality. But it's a fantasy.
If you can tell this story in simple step-by-step form, you will. I think you could tell a story about how a large corporate buyer clears out all the marginal buyers for some thin market like an individual subdivision or tranche of new construction housing in the Sun Belt. But I don't think you can tell a realistic story for them being "a huge driving force in setting and manipulating prices" across the whole market. I look forward to seeing your attempt, though.
you’re treating narrative completeness as a prerequisite for legitimacy. that makes any systemic issue unfalsifiable unless someone can account for every market, municipality, and incentive simultaneously.
this is an impossible burden of proof. requiring a perfectly schematic, end-to-end causal story before acknowledging harm is a convenient way to dismiss any structural concern.
pointing out that housing markets are complex doesn’t invalidate localized, repeatable effects or concentrated power. that just raises the bar of explanation until lived outcomes are dismissed as “just-so stories”, which matches the tone of your condescension.
I'm treating narrative coherence as a requirement, not completeness.
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im not even disagreeing with you, but i hate that hn seems to have this penchant to point out that unreasonable assertions may still be true despite being ludicrous. can facts emerge from a hypocrite? yes of course, but prices are not affected by buying and holding a tiny supply, so given that reasonable axiom, it is reasonable to demand more comprehensive evidence.
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Ownership share is a stock. Prices get set by flow - transactions. Housing is a thin market; maybe 5-6% of homes change hands in a given year. Price discovery happens at that transaction layer.
Institutional investors own ~3% of single-family rentals nationally. But per CoreLogic they're 29% of purchases in the starter home tier. That's the market where we first-time buyers actually compete.
In some metros it's more concentrated.
Atlanta: ~30% of single-family rentals corporate-owned.
Charlotte neighborhoods in 2022: 50%!!! of sales to institutional buyers.
So for your 1-2-3... maybe something like?
1. Institutional buyers concentrate in starter homes where they're 29% of transactions, not 3% of stock
2. Target metros/neighborhoods go higher still
3. Real estate uses comps-based pricing - their winning bids propagate to surrounding valuations
The mechanism isn't inventory control, it's just a buyer with a different utility function (rental yield vs owner-occupancy) systematically outbidding price-sensitive first-time buyers. In a thick market that gets arbitraged away. In a thin market with sparse comps, each transaction is a price-setting event.
The St. Louis Fed found institutional presence specifically increases price-to-income ratios in the bottom tier.
If you're evil corporate Landlordman You don't need to affect the whole market. You just need to cut off the bottom rung of the ladder.
Is this Trump move the right one? No frickin idea! But I do think we need to reckon with what's actually happening to first-time homebuyers. I bought a place in Englewood Co last year and ... it was pretty rough.
Whoah, hold up, your (3) is doing a lot more work than you think it is. Comps matter but they don't literally break the market:
* They impact listing prices but not necessarily clearing prices.
* They assume all the sellers, who are not corporate investors, can mechanically anchor off those inflated comps, without factoring in buyer budgets and carrying costs.
Real estate is slower than most financial products, but it's still an actual market. You can't just buy a tiny fraction of the inventory at an inflated price and assume the whole rest of the market will follow you.
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> Institutional investors own ~3% of single-family rentals nationally. But per CoreLogic they're 29% of purchases in the starter home tier.
Not true. That 29% is “investors”. Only one fifth of those transactions are from “institutional investors”. It’s mostly evil non-institutional investors, who also own ~97% of single-family rentals.
>> You're telling a just-so story, and you can tell because there isn't a simple schematic 1-2-3 story you can make from this about how these people exert control over home prices.
We don't need to explain how they do it. We KNOW private equity is expecting to make profit from their investment in residential real estate. That profit ultimately comes from people in houses, making them less affordable.
>> We don't need to explain how they do it
We most certainly do. PE owns pools of rental housing; this is a fundamentally different model from speculation. While both impact the selling price they do it in completely different ways, and if institutional investors own a tiny fraction of the total stock, they're not having a huge impact on the supply side which would potentially drive up prices.
You're supposed "logic" seems comparable to magic.
I don't mean to convey that it's intentional. There's no conspiracy of cigar smoking financiers in tuxedos smoking cigars in dark rooms. It's just like the Carlin observation - there doesn't have to be a big conspiracy. They just know what's good for them.
They behave accordingly. The do things that they can, and because those things are relatively new, it's a type of information asymmetry and policy / good intentions / competence arbitrage that we haven't had to cope with before.
You might end up banning certain types of institutional participation in the housing market, because there's no way to protect against the negative consequences that doesn't have even worse consequences for either the participants or the population at large.
It'll probably have to be arbitrary, and the cost will be a bunch of firms no longer get the opportunity to make a bunch of money by leveraging their resources in that way.
And we see the influence and impact constantly, with outlandish asking prices being immediately met by institutions that have decided they want a particular property in a particular region. Or house prices being set to an outlandish level with no reduction in price over months and months on the market, because they can afford to sit and wait for the market to change. And if they can afford to do that, then all of a sudden they've got an incentive to drive prices up in that region, because local and state governments, banks, and realtors tend to use the same basic rubric to evaluate price. If a lower valued area sees home prices go up, properties in the higher valued area will be raised accordingly. There's no secret quant voodoo, it's just using a level of liquidity and staying power not accessible to non-institutional homeowners.
Supply and demand normally influence pricing feedback at much more granular levels which benefits individuals, and our policy and regulation and evaluation models are largely built around those assumptions. Without the negative feedback driving prices down, bad things happen for consumers, good things happen for those who already have lots of money and property.
I'm not talking about whether it's intentional. I'm talking about whether it's possible. If corporate investors could control the price of housing, I believe they would.
I can buy a house tomorrow and hold it vacant off the market at a listing price 3x its value. I will have zero impact on the housing market. You may be conflating the listing price of an asset with the clearing price of that same asset. You can, obviously, build up inventory to manipulate prices. To do that, you have to be able to generate scarcity, which is exactly what corporate investors aren't doing.
You've just given me 6 more paragraphs about the control you think they have, and you still haven't told a simple 1-2-3 story about how they're using a microscopic footprint in the total housing market to distort prices.
You have to do better than "supply and demand normally influence pricing feedback at much more granular levels". In the context of your original claim, of them being "a huge driving force in setting and manipulating prices", you need to explain how that would actually work, and not rely on handwaving.
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> because they can afford to sit and wait for the market to change
Some people do that, but they aren't good businessmen. Vacant houses lose money at a prodigious rate.
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How do I distinguish the world where institutional investors are meaningfully contributing to high housing prices and the world where they aren’t? Is there some metric you’ve seen that substantiates the mechanism? For example, are they only 1% of holders but 50% of trading volume or something?
Because if I saw a house 15% below market where I live, I would buy it (to live in). I don’t imagine I’m the only one. Institutional investors can’t stop me from doing that if it’s offered - can they stop the seller from offering that?
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You overly complicate the situation by targeting one type of actors. If you look at comment around this story, people propose complicated mechanism to hack at the problem instead of looking at the root causes.
It's just land ownership isn't being taxed properly, no matter who owns the land. We homeowners get a free lunch from economic growth and price appreciation of real estate while penalizing capital investment.
The solution is simple if not necessarily easy to implement. Tax land and at a high enough rate, and exclude building and improvements. We'll reap bigger benefits if we reduce taxes on income and capital and eventually phase it out.
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Carlin was a comedian, not a finance person.
Having deep pockets simply means that you lose a lot more money when following money-losing strategies.
Most of these schemes are hare-brained because they do not take into account the time value of money nor the costs of having vacant investments that are not generating revenue.
The way businesses make money is by buying an asset and then immediately putting that asset to work generating revenue.
Exactly, everyone is for affordability but no one wants their primary residency to be worth 50% less in 5 years.
Housing affordability is inherently unpopular with voters.
If it cut my taxes 50%, I would, as I have no intention of selling it.
About 2 miles from my house, a housing development recently went up.
No homes for sale. Rent only.
Stuff like that is becoming a big problem.
I don't think you can say that universally. Some people prefer to rent instead of own. Some people would like to own, but would probably still only be afford to rent even if home prices were more affordable.
Sure, you can absolutely make the argument that for some specific region there are too many rental properties and not enough owner-occupied properties, by looking at the supply, demand, and pricing for each type in that region.
But you absolutely can't say that as a general statement. There is demand for both sorts of housing.
Why? Why should I care what the balance of rental and owner-occupied is? Owned is not strictly better than rented!
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My wife and I prefer to rent. Greater flexibility. This is not a big problem any more than the fact that Costco replaced stock of Spiceology rubs with Bang Bang Sichuan seasoning.
Example of large buyer in thin market - just as up-thread described.
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> it's holding prices steady at some point without the concurrent pressure to sell
Earlier you were arguing that investors were acting as marketmakers and now you say this. Marketmakers make their profit from the difference between buying and selling some asset. They don't want to hold prices, they want turnover. If investors really are acting as marketmakers it's actually a good thing because marketmakers have the effect of adding liquidity to a market.
if they controlled even a notable minority share this might make sense, or the majority of a specific region or type of stock where there are limited alternatives, but I don't see any examples of this. We didn't even see this type of phenomenon in the biggest US crash markets where banks owned entire neighbourhoods; even they were not immune to overall market forces. To suggest PE has anything like infinite money and/or time totally ignores that everyone is subject to opportunity cost. A fund that under performs for any length of time because they're playing some sort of marginal long game won't exist for long.
You just haven't presented any evidence or even a hypothetical where this does or could happen.
This just isn’t true - I sort of wish it where.
> If they intend to purchase properties, it benefits them to depress pricing in the area
Yeah, that’s true of everyone but how would a bank/individual do that? By selling… But if they sell while they’re depressing prices, they lose money!
> Normal landlords don't have effectively infinite money with no forces bearing prices down
Neither do banks. They have quarterly earnings, tax bills, they need to buy more stock, cost of capital etc etc.
> It's a very nuanced and complex system in which these institutional investors have very outsized influence.
Just saying ‘it’s complex’ is trivially true. But, supply and demand isn’t some small factor in that calculation - it’s an iron law that exerts itself at all times.
If a bank wants to ‘manipulate prices’ then, without a monopoly, the only way to do that is to dump or buy. But if you buy up homes to ‘push up prices’ … then you end up with a bunch of homes which you paid more than their current value. Not a great business.
The person who has the real unfair advantage in the US happens to also be the most sympathetic person - the owner occupier.
This is extremely silly.
Prices are high because we don't build enough houses which is mostly because it's really expensive to build houses, then the houses we have built are all owned by empty nesters and people with 1 - 3 investment properties.
Everything else you're describing is completely ridiculous.
> which is mostly because it's really expensive to build houses,
Assuming you're referring to the typical high CoL areas, the shortage has very little to do with the expense of building. The zoning laws don't permit sufficient supply in those areas. And that's quite unlikely to change (at least quickly) because anyone pushing such reform would be obliterating the average Joe's net worth.
This what Obama calls the false choice dichotomy -- "Damned if you do, damned if you don't." In your scenario, if we build more homes, then existing home owners are "obliterated". This is untrue. We can easily build twice as much in high cost areas (with the strongest job markets) with little impact on existing home owners.
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> anyone pushing such reform would be obliterating the average Joe's net worth.
Only in a purely illusory sense. Suppose you have all your net worth tied up in a house. If your house magically vanished, you'd have nothing but your job.
The price of houses falls to $500 and you potentially go bankrupt. Then, you buy a house for $500.
You, personally, are now better off than you were before. Some examples:
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1. You have $200,000 of equity in a $700,000 house. After the price drop, your net worth in dollars has improved by $300,000. Your net worth in "stuff" has risen dramatically; you kept your job, and now you have 100% of a house instead of having 30% of a house.
2. You have $700,000 of equity in a $700,000 house. After the price drop, your net worth in dollars is down by $699,500. Your net worth in stuff is unchanged. Assuming you always need to live in a house, this will never have any negative impact on you. You retain the option to live in the house you have (which leaves your life unchanged), and you also retain the option to sell your house and use the proceeds to buy another house (and this option looks a lot better than it used to; given the crash in prices, you can probably afford a much nicer house).
3. You have $200,000 of equity in a $700,000 house. You also have $15,000 of "equity" (resale value) in a car that you owe no money on and bought for $50,000. After the price crash, you lose your house and your car, and then you buy another house for $500.
Replacing your car will cost you $50,000. You are in a similar position to the guy in example (1), but $50,000 poorer. So now we ask: was it better to be $500,000 in the hole on your house before, or to be $50,000 in the hole on your car now?
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There isn't a way for the average Joe not to come out ahead. There is a way for someone else to lose out on the price crash: if you had more than one house before, you lost everything on the houses you weren't living in. But that's got nothing to do with the average Joe.
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In areas with low CoL the cost of building houses and the cost of selling a house has a massive impact on the number and type of homes that get built. If it's not profitable for a builder to build a home they simply won't, whether it's because of bureaucratic red tap or economic conditions. There's very strong incentives for builders to take the path of least resistance and highest margin.
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The zoning laws are far from the only tool used by municipalities to dramatically reduce supply. Permitting, requiring expensive changes at various points in the process, local building boards requiring extraneous modifications and often forcing scope reductions, affordable housing requirements, etc all make building more expensive. Often by a very large amount.
These processes are intentionally labyrinthine
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Eh, reforms are starting to happen, like here in Oregon.
https://bendbulletin.com/2025/12/13/middle-housing-slowly-de...
Or this:
https://bendyimby.com/2025/06/12/detached-townhomes-come-to-...
And it continues:
https://www.sightline.org/2025/06/04/oregons-zoning-reforms-...
It generally does not drop values, just allows for cheaper options.
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Not true.
Cost of living is high because local incomes are high which increases the price of land and labor which increases the price of building.
Restrictive zoning is bad for lots of reasons, but solving it does not solve affordability.
https://www.nber.org/papers/w33694
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"We don't build enough houses" does not explain the massive spike in prices we have seen in the last 5 years.
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