4 ms·

"In the example of home rental, making homes available for rent enables families to live in accommodations that they would not be able to purchase. These accomm

"In the example of home rental, making homes available for rent enables families to live in accommodations that they would not be able to purchase. These accommodations are not without cost to the owner: Taxes, utilities, maintenance, security and administration are all associated costs that rent payments offset. What the rentier provides in most cases, is a better quality of life than the family could have if they were forced to own the property they lived in." In many parts of the UK this just isn't the case any more. There is a serious lack of housing due to many factors (the bigots will tell you it's all the fault of immigration) but the short story is that the competition for rental property is so fierce now that in many places, monthly rent to the private landlord is higher than a monthly mortgage payment would be to buy a similar property. So why don't people just buy? Well, there is a shortage of houses to buy, and you can't usually get a 100% mortgage. You need to put down a substantial cash deposit towards the purchase price of the house, for example 15, 20 and even 25% in some cases. So why don't people just save up for a deposit? Well, if you need to spend £250k on a very modest 3-bedroom house, you are looking at anything from £37.5k plus fees. Housing is so expensive now in relation to average income, that people are effectively priced out of the market forever, unless they win or inherit a lot of money. It is not possible to save that amount in any reasonable time scale. So why not get a second or third job? Maybe they'll work themselves to death before they need that house? Only joking, people have to work long hours at their main jobs nowadays. The contract may say 37.5 hours per week, and that's what you get paid for, but "You're all professionals..."

ams6110 10y ago
The answer to this is build more housing. Who or what is preventing that?
- ParrotyError 10y ago
  All kinds of things. Large organisations (supermarket chains like Tesco) holding onto vast "land banks," new property being bought up and left vacant by foreign investors as fast as it can been build (a big problem in London and Cambridge), construction companies and their investors who want to restrict the supply to keep prices high, a lack of suitable places to build new housing (lack of infrastructure, protected countryside...). Everywhere I look I keep seeing new flats (apartments) being built where offices used to be but they are empty, so it's a bit of a mystery. Maybe these are of the wrong type or these are examples of the ones the foreign investors are buying?
  - themartorana 10y ago
    Foreign "investments" in property are almost universally bad. I give you Vancouver, London, SF, and NYC as just a few examples. The very rich in other economies buy large amounts of "investment" property and do nothing other than drive up prices against - and out of step with - the local economy. This drives out the locals, and causes many actual residents to wonder how someone, even on a good salary, could afford a local property. A lot of these foreign investments come from China. I don't know a solution - if I had buckets of money I'd love to have property abroad (although more for living, less as investment). I don't know what restricting local investments in property would do economically, but I know the current lack of restrictions cause terrible hurt to locals.
    - megous 10y ago
      I always wonder at lack of reciprocal thinking in these kinds of views. People don't mind buying cheap stuff from foreign countries but think there's something wrong or bad when the people that received their money use that money to buy something in their country. This is exactly part of the whole deal. It's inseparable. Why would they sell you something in the first place if they couldn't buy anything back?
    - zanny 10y ago
      The buying up and hoarding of land and property is just one symptom of broader wealth concentration into the hands of global elite. Like you said, its universally bad, but when you have so much wealth (on a macroeconomic scale) and nowhere to in the immediate term invest it to produce reliable returns, you instead towards hoarding scarce resources as a store of value - gold, land, and essential crops and anywhere else you can trade fiat / volatile stock into less risky properties. China has gotten very rich in the last twenty years, but it has been nothing close to an equal rising tide of prosperity. There are now uber-rich competitive with the greatest dynasties of Euro-American enterprise that want to do something with all that wealth, and particular relative to the West they have a problem with their stock market being heavily state controlled and thus an undesirable place to safety hoard capital.
- ommunist 10y ago
  The rich will capitalize on that and will create endless waves of constructing and reconstructing 'social housing'. They will become super rich and will form a layer with vested interest in maintaining hundreds of thousands being poor. This is France.
11thEarlOfMar 10y ago
All true, and the problem exists in many geographies. However, I don't think a shortage of housing is caused by rentiers or super-rich, which is the topic of the article. More to do with government policies in most cases.
hectormalot 10y ago
> the competition for rental property is so fierce now that in many places, monthly rent to the private landlord is higher than a monthly mortgage payment would be to buy a similar property. This is not a malfunction of the market. Economically renting is always expected to cost more than buying. Renting has advantages over buying: * No need to have a significant amount of cash to deposit * Flexibility to move out into a larger or smaller house that better fits your needs * No exposure to the risk of changing housing prices (which don't always go up, and can be hugely impacted by policy) * Less headaches over maintenance, etc. This is (typically) your landlords responsibility. So, just like a flexible airfare is more expensive than a 'no changes allowed' fare, it makes perfect sense that a rental house on average is more expensive than owning a house. Also, if rental prices are lower than the mortgage cost, the owner should probably do something different with that house. TL;DR: rental prices are expected to be higher than owning, because renters are willing to pay a premium, and because landlords otherwise have no incentive to let out a property in the first place. Parent's comment still stands, but you have to take the regulation into account: * people can live in a bigger house than they could otherwise afford, e.g. if they can't make the deposit * people can live in a bigger house than they could have the mortgage for. (e.g. Dutch regulation you can mortgage 4.5x your yearly salary. If you make 40.000 Eur that is 180k, which perhaps buys you a small studio in Amsterdam). Renting you could probably live in a 250k valued house, because those restrictions don't apply.
- whamlastxmas 10y ago
  >No exposure to the risk of changing housing prices Except when your 12 month lease expires and they jack up your rate 20%. If anything renters are at greater exposure to changing housing prices. Renters don't benefit from drops in pricing, and they only have detriment from increases. At least home owners benefit from one side.
  - aoeusnth1 10y ago
    Rents must be tied to drops in pricing in the long run. If rents don't drop with the price of houses, investors would swoop in to buy the high ROI housing, and existing renters would make home purchasing a higher priority as opposed to buying stocks, paying off other debt, or spending their disposable income. Also, having a uncertain monthly expense is not nearly as much of a risk as having 100% or 200% of your networth tied to a volitile and usually zero-sum housing market. The counterfactual of owning a diversified portfolio of stocks and bonds is much better from an investment perspective.
sologoub 10y ago
Many very desirable localities are experiencing this in US, though people generally still can find lower costs with exceptionally longer commutes. In Southern California the shortage in these desirable are is mostly driving by locals. In Santa Monica, I have observed a lot of development get killed by local activist groups who are mostly made up of not wealthy people on rent control. They have no upside that I can think of in the skyrocketing prices or rents. Though they are protected from the consequences by rent control. Yet they still very consistently vote against more housing, even if it's 20% mandatory affordable below market units... The reasoning seems to be "if only all these gentrifiers stopped moving here and those who are here moved out!", but that's not gonna happen so long as jobs are blocked by impassible traffic. So in Santa Monica, it's not the rich that are creating the problem. They are simply optimizing their lifestyle to have more free time by using resources at their disposal. If slightly more dense housing was built (Santa Monica averages about 1.5 floors from my observation), it could easily double the supply with only a modest gain in height. Utilities would have to be expanded, but that can be funded with the developments.

ams6110 10y ago

The answer to this is build more housing. Who or what is preventing that?

ParrotyError 10y ago
All kinds of things. Large organisations (supermarket chains like Tesco) holding onto vast "land banks," new property being bought up and left vacant by foreign investors as fast as it can been build (a big problem in London and Cambridge), construction companies and their investors who want to restrict the supply to keep prices high, a lack of suitable places to build new housing (lack of infrastructure, protected countryside...). Everywhere I look I keep seeing new flats (apartments) being built where offices used to be but they are empty, so it's a bit of a mystery. Maybe these are of the wrong type or these are examples of the ones the foreign investors are buying?
- themartorana 10y ago
  Foreign "investments" in property are almost universally bad. I give you Vancouver, London, SF, and NYC as just a few examples. The very rich in other economies buy large amounts of "investment" property and do nothing other than drive up prices against - and out of step with - the local economy. This drives out the locals, and causes many actual residents to wonder how someone, even on a good salary, could afford a local property. A lot of these foreign investments come from China. I don't know a solution - if I had buckets of money I'd love to have property abroad (although more for living, less as investment). I don't know what restricting local investments in property would do economically, but I know the current lack of restrictions cause terrible hurt to locals.
  - megous 10y ago
    I always wonder at lack of reciprocal thinking in these kinds of views. People don't mind buying cheap stuff from foreign countries but think there's something wrong or bad when the people that received their money use that money to buy something in their country. This is exactly part of the whole deal. It's inseparable. Why would they sell you something in the first place if they couldn't buy anything back?
  - zanny 10y ago
    The buying up and hoarding of land and property is just one symptom of broader wealth concentration into the hands of global elite. Like you said, its universally bad, but when you have so much wealth (on a macroeconomic scale) and nowhere to in the immediate term invest it to produce reliable returns, you instead towards hoarding scarce resources as a store of value - gold, land, and essential crops and anywhere else you can trade fiat / volatile stock into less risky properties. China has gotten very rich in the last twenty years, but it has been nothing close to an equal rising tide of prosperity. There are now uber-rich competitive with the greatest dynasties of Euro-American enterprise that want to do something with all that wealth, and particular relative to the West they have a problem with their stock market being heavily state controlled and thus an undesirable place to safety hoard capital.
ommunist 10y ago
The rich will capitalize on that and will create endless waves of constructing and reconstructing 'social housing'. They will become super rich and will form a layer with vested interest in maintaining hundreds of thousands being poor. This is France.

11thEarlOfMar 10y ago

All true, and the problem exists in many geographies. However, I don't think a shortage of housing is caused by rentiers or super-rich, which is the topic of the article. More to do with government policies in most cases.

hectormalot 10y ago

> the competition for rental property is so fierce now that in many places, monthly rent to the private landlord is higher than a monthly mortgage payment would be to buy a similar property. This is not a malfunction of the market. Economically renting is always expected to cost more than buying. Renting has advantages over buying: * No need to have a significant amount of cash to deposit * Flexibility to move out into a larger or smaller house that better fits your needs * No exposure to the risk of changing housing prices (which don't always go up, and can be hugely impacted by policy) * Less headaches over maintenance, etc. This is (typically) your landlords responsibility. So, just like a flexible airfare is more expensive than a 'no changes allowed' fare, it makes perfect sense that a rental house on average is more expensive than owning a house. Also, if rental prices are lower than the mortgage cost, the owner should probably do something different with that house. TL;DR: rental prices are expected to be higher than owning, because renters are willing to pay a premium, and because landlords otherwise have no incentive to let out a property in the first place. Parent's comment still stands, but you have to take the regulation into account: * people can live in a bigger house than they could otherwise afford, e.g. if they can't make the deposit * people can live in a bigger house than they could have the mortgage for. (e.g. Dutch regulation you can mortgage 4.5x your yearly salary. If you make 40.000 Eur that is 180k, which perhaps buys you a small studio in Amsterdam). Renting you could probably live in a 250k valued house, because those restrictions don't apply.

whamlastxmas 10y ago
>No exposure to the risk of changing housing prices Except when your 12 month lease expires and they jack up your rate 20%. If anything renters are at greater exposure to changing housing prices. Renters don't benefit from drops in pricing, and they only have detriment from increases. At least home owners benefit from one side.
- aoeusnth1 10y ago
  Rents must be tied to drops in pricing in the long run. If rents don't drop with the price of houses, investors would swoop in to buy the high ROI housing, and existing renters would make home purchasing a higher priority as opposed to buying stocks, paying off other debt, or spending their disposable income. Also, having a uncertain monthly expense is not nearly as much of a risk as having 100% or 200% of your networth tied to a volitile and usually zero-sum housing market. The counterfactual of owning a diversified portfolio of stocks and bonds is much better from an investment perspective.

sologoub 10y ago

Many very desirable localities are experiencing this in US, though people generally still can find lower costs with exceptionally longer commutes. In Southern California the shortage in these desirable are is mostly driving by locals. In Santa Monica, I have observed a lot of development get killed by local activist groups who are mostly made up of not wealthy people on rent control. They have no upside that I can think of in the skyrocketing prices or rents. Though they are protected from the consequences by rent control. Yet they still very consistently vote against more housing, even if it's 20% mandatory affordable below market units... The reasoning seems to be "if only all these gentrifiers stopped moving here and those who are here moved out!", but that's not gonna happen so long as jobs are blocked by impassible traffic. So in Santa Monica, it's not the rich that are creating the problem. They are simply optimizing their lifestyle to have more free time by using resources at their disposal. If slightly more dense housing was built (Santa Monica averages about 1.5 floors from my observation), it could easily double the supply with only a modest gain in height. Utilities would have to be expanded, but that can be funded with the developments.