5 ms·

The thing I've noticed is that in my area all the modest neighborhoods (2 bed, 1 bath, sub $200k) are being bought up by landlords. This leads to a neighborhood

The thing I've noticed is that in my area all the modest neighborhoods (2 bed, 1 bath, sub $200k) are being bought up by landlords. This leads to a neighborhood of renters, which is a lot different than a neighborhood of owners. The Havers can buy a lot more houses than the Have-Nots and I'm left wondering what the price of single family homes would be if renting them was illegal and they were all placed on the market.

Animats 7y ago
Yes. That's a "private equity" thing.[1] Blackrock can borrow at lower rates than homeowners. So they can buy up houses and rent them out at a profit. Plus they can keep raising the rent. And they outsource maintenance. [1] https://www.theatlantic.com/technology/archive/2019/02/single-family-landlords-wall-street/582394/ https://www.theatlantic.com/technology/archive/2019/02/singl...
- nroets 7y ago
  The agency cost of any landlord is much larger than the savings in capital cost. For example, for a tenant there is an incentive to complain over the smallest problem instead of fixing himself or just living with the problem. Management agents charge a fortune to deal with these issues.
treis 7y ago
It's another example of the high cost of being poor. The rent on my town home is several thousand more per year than what a mortgage (5% down), taxes, HOA fee, PMI, and home insurance would be.
- drtillberg 7y ago
  Think of it instead as a player closer to the money printing machine that is the fractional reserve banking system. This is the inflation the Fed created directly, and these institutions probably are thinking: 'housing prices only go up, so the duration of my borrowing doesn't matter, borrow short term buy long term, it's all gravy!' If you're over 30 and feel like you've heard this story before, you have....
- i_am_proteus 7y ago
  Several thousand more per year doesn't sound too far off: if you own, you're responsible for home repairs: roof, HVAC, electrical, plumbing, appliances, siding, painting, etc. I budget $2,000 a year for repairs on a modest-sized home; most years it's under $1,000, but HVAC and roof are infrequent and fairly expensive.
  - treis 7y ago
    Even if we say that the owner is spending those several thousand dollars on maintenance that just means they're cash flow neutral. They are still making thousands through increased equity and appreciation.
    - mcguire 7y ago
      Well, yeah, except 2008 kinda put a dent in that.
      - treis 7y ago
        Only if you were forced to liquidate before the rebound. Even if you bought at the absolute peak in ~2008 you'd still be way ahead today.
        refurb 7y ago
        Not if you live in Phoenix[1], Miami[2], Las Vegas[3], Chicago[4] or a host of other US cities. [1]https://fred.stlouisfed.org/series/PHXRNSA https://fred.stlouisfed.org/series/PHXRNSA [2]https://fred.stlouisfed.org/series/MIXRNSA https://fred.stlouisfed.org/series/MIXRNSA [3]https://fred.stlouisfed.org/series/LVXRNSA https://fred.stlouisfed.org/series/LVXRNSA [4]https://fred.stlouisfed.org/series/CHXRCNSA https://fred.stlouisfed.org/series/CHXRCNSA
        treis 7y ago
        You're not accounting for equity changes. Even if you lost 20% of your house value you've paid down more of your mortgage than that.
quasse 7y ago
This is something I think about as well. In my Midwestern city, some neighborhoods seem to be 60%+ landlord owned and always increasing. For every home sale to a young couple or first time owner it seems like another house is purchased in cash by some mid-size wanna-be property baron or a mega real estate conglomerate that already owns 200+ homes in the city. It definitely feels like we're moving towards a system of feudal property barons extracting rent from people who are quickly being priced out of the means to own their own home.
zcid 7y ago
We really need some stronger regulation on renting. I'd like something along the lines of federal rent control. Limit the rent that can be charged to reduce the profitability of buying up house after house. This would be unpopular with the current owners of homes as it would lower property values, but over time they would remain much more stable.
- clairity 7y ago
  i agree with your sentiment, but i don't think that rent control is a federal concern. we need to hold our state legislators accountable here. living in CA frustrates me in that regard, because we cannot pass a single f'ing bill about housing affordability generally, even though democrats have a super-majority and every politician and news outlet talks a big game on the topic. i'm ready to vote against every incumbent at this point. in any case, part of the solution is to equalize the capital gains tax with income tax rates and have the capital gains tax escalate with the number of homes owned (but keep a small tax advantage for long-term owners of a primary lived-in home). and get rid of 1031 exchanges for investment property, which greatly advantage large capital holders over the average citizen.
  - zcid 7y ago
    There are too many loopholes with holding property. You can create and diversify among enough companies and eventually you won't have to pay tax at all. No politician will vote for this because they know where their bread is buttered. It would be suicide as they would find out when they lose every large donor. I doubt we'll ever get people into office that would vote for anything to disadvantage property holders. Even if you vote it in through a referendum, I expect a judge will crush it through some weaselly interpretation of the constitution or other precedent. California in particular has had several major referendums reversed by the courts. Will of the oligarchy, not that of the people.
- tathougies 7y ago
  Why federal? The federal government has no authority to do so. Housing is literally, more than any other market, an intra state matter, and the feds cannot regulate intra state trade.

Animats 7y ago

Yes. That's a "private equity" thing.[1] Blackrock can borrow at lower rates than homeowners. So they can buy up houses and rent them out at a profit. Plus they can keep raising the rent. And they outsource maintenance. [1] https://www.theatlantic.com/technology/archive/2019/02/single-family-landlords-wall-street/582394/ https://www.theatlantic.com/technology/archive/2019/02/singl...

nroets 7y ago
The agency cost of any landlord is much larger than the savings in capital cost. For example, for a tenant there is an incentive to complain over the smallest problem instead of fixing himself or just living with the problem. Management agents charge a fortune to deal with these issues.

treis 7y ago

It's another example of the high cost of being poor. The rent on my town home is several thousand more per year than what a mortgage (5% down), taxes, HOA fee, PMI, and home insurance would be.

drtillberg 7y ago
Think of it instead as a player closer to the money printing machine that is the fractional reserve banking system. This is the inflation the Fed created directly, and these institutions probably are thinking: 'housing prices only go up, so the duration of my borrowing doesn't matter, borrow short term buy long term, it's all gravy!' If you're over 30 and feel like you've heard this story before, you have....
i_am_proteus 7y ago
Several thousand more per year doesn't sound too far off: if you own, you're responsible for home repairs: roof, HVAC, electrical, plumbing, appliances, siding, painting, etc. I budget $2,000 a year for repairs on a modest-sized home; most years it's under $1,000, but HVAC and roof are infrequent and fairly expensive.
- treis 7y ago
  Even if we say that the owner is spending those several thousand dollars on maintenance that just means they're cash flow neutral. They are still making thousands through increased equity and appreciation.
  - mcguire 7y ago
    Well, yeah, except 2008 kinda put a dent in that.
    - treis 7y ago
      Only if you were forced to liquidate before the rebound. Even if you bought at the absolute peak in ~2008 you'd still be way ahead today.
      - refurb 7y ago
        Not if you live in Phoenix[1], Miami[2], Las Vegas[3], Chicago[4] or a host of other US cities. [1]https://fred.stlouisfed.org/series/PHXRNSA https://fred.stlouisfed.org/series/PHXRNSA [2]https://fred.stlouisfed.org/series/MIXRNSA https://fred.stlouisfed.org/series/MIXRNSA [3]https://fred.stlouisfed.org/series/LVXRNSA https://fred.stlouisfed.org/series/LVXRNSA [4]https://fred.stlouisfed.org/series/CHXRCNSA https://fred.stlouisfed.org/series/CHXRCNSA
        treis 7y ago
        You're not accounting for equity changes. Even if you lost 20% of your house value you've paid down more of your mortgage than that.

quasse 7y ago

This is something I think about as well. In my Midwestern city, some neighborhoods seem to be 60%+ landlord owned and always increasing. For every home sale to a young couple or first time owner it seems like another house is purchased in cash by some mid-size wanna-be property baron or a mega real estate conglomerate that already owns 200+ homes in the city. It definitely feels like we're moving towards a system of feudal property barons extracting rent from people who are quickly being priced out of the means to own their own home.

zcid 7y ago

We really need some stronger regulation on renting. I'd like something along the lines of federal rent control. Limit the rent that can be charged to reduce the profitability of buying up house after house. This would be unpopular with the current owners of homes as it would lower property values, but over time they would remain much more stable.

clairity 7y ago
i agree with your sentiment, but i don't think that rent control is a federal concern. we need to hold our state legislators accountable here. living in CA frustrates me in that regard, because we cannot pass a single f'ing bill about housing affordability generally, even though democrats have a super-majority and every politician and news outlet talks a big game on the topic. i'm ready to vote against every incumbent at this point. in any case, part of the solution is to equalize the capital gains tax with income tax rates and have the capital gains tax escalate with the number of homes owned (but keep a small tax advantage for long-term owners of a primary lived-in home). and get rid of 1031 exchanges for investment property, which greatly advantage large capital holders over the average citizen.
- zcid 7y ago
  There are too many loopholes with holding property. You can create and diversify among enough companies and eventually you won't have to pay tax at all. No politician will vote for this because they know where their bread is buttered. It would be suicide as they would find out when they lose every large donor. I doubt we'll ever get people into office that would vote for anything to disadvantage property holders. Even if you vote it in through a referendum, I expect a judge will crush it through some weaselly interpretation of the constitution or other precedent. California in particular has had several major referendums reversed by the courts. Will of the oligarchy, not that of the people.
tathougies 7y ago
Why federal? The federal government has no authority to do so. Housing is literally, more than any other market, an intra state matter, and the feds cannot regulate intra state trade.