14 ms·

Real estate and primary residences should not be a market and an investment opportunity imo. A company buying thousands of homes and then milking workers throu

Real estate and primary residences should not be a market and an investment opportunity imo. A company buying thousands of homes and then milking workers through rent for decades seems unethical. While I do not have a solution, I think this is an issue we should work on

dgzl 7y ago
If there's no market, how can you buy or sell a home? Why should I not invest in my property?
- rwmj 7y ago
  I suppose it might work like council housing (used to) work in the UK. The council builds large numbers of homes and houses people in them for lower than market rentals. Of course people are still free to build and buy homes privately if they want. The problem with this in the UK was that the stock of council housing became immensely valuable and as soon as we had a right wing government they started to sell it off. Selling it off created home owners (who are more likely to vote for that government) and raised "free" money which could be given out in tax cuts, so it was a natural target. In the UK an alternate system - housing associations (HA) - survived a little bit better. Here the houses are either built with public money and handed to a housing association (a private trust) or built by the HA. The HA then rents them out on similar terms to council houses. Because they aren't publicly owned the government couldn't sell them off. Except that because some HAs built using government loans or assistance the government was able to extend the right of tenants to buy to those homes too.
  - apexalpha 7y ago
    In the Netherlands we have the good tendency to take these away from politicians: any extra budget MUST be used to lower our national debt, not to lower taxes or 'buy votes' for the current people in charge. This takes away the incentive to sell off public goods for their own short term profit.
supernova87a 7y ago
Wow, are you joking, or has the new socialism worked its way into people's thinking so easily that you would state such a notion in so offhand a manner? "Real estate should not be a market and an investment opportunity"? Are you kidding? Real estate, and its scarcity, has been the driver of competition, wealth, value creation, for oh, say, all of human history. There must be something to that, even if you think it's not ideal for how it works out for some people. Just like that, you say you want to do away with it? Stunning.
- lotsofpulp 7y ago
  >Real estate, and its scarcity, has been the driver of competition, wealth, value creation, for oh, say, all of human history. Much like excessively long copyright periods, real estate also allows for excessive economic rent that can destroy value creation. Incentives for individual real estate owners are divergent to those of society, hence we see problems getting mass transit online in many places and lack of sufficient housing in booming job markets.
  - saiya-jin 7y ago
    There needs to be some balance between needs of society and individual. I don't claim to know the fine line of this balance, but that's how long-running successful societies work. Opposite side is dictatorship in some form - most common being some variant of communism regime that I had displeasure to live in for initial part of my life - its not a good system for 99% of the population. This is generally highly controversial topic, people either align as per their left/right viewpoints, or their current situation and needs (homeowner/investor views it differently compared to somebody young looking wanting to buy accommodation and and being priced out of their favored location).
- oblio 7y ago
  > Real estate, and its scarcity, has been the driver of competition, wealth, value creation, for oh, say, all of human history. There must be something to that, even if you think it's not ideal for how it works out for some people. You know when humanity started evolving rapidly? When real estate stopped being the main driver for wealth. And you know how the system where the main source of wealth was real estate was named? Feudalism. I'd much rather have socialism than feudalism... I know that there's more options than these two, but we're seeing again a major increase in real estate value that's causing average people to not be able to buy their homes or not even be able to rent something decent. Over time it's starting to look a lot like that regime where a few people "rent" real estate to masses of people... and can (almost) control those masses through it. Personally I'd make it so big groups of people get affordable rents or even affordable prices for homes, through various laws that incentivize private ownership and constant improving of property. The latter part is not even socialist, it's a Roman principle.
lotsofpulp 7y ago
Masking the true price (cost) of something is what causes the market to be inefficient, resulting in excess or insufficient supply. If anything, rents indicate true cost compared to mortgage costs which can accurately signal for more (or less) construction needed. In the US, ownership costs are masked by subsidizing interest rates, loan repayment periods, down payment amounts, and mortgage interest tax deductions. Also, property tax limits subsidize existing owners. There is a bit of a conflict in the mechanics of democracy with zoning laws and taxes, with existing owners having an incentive to limit supply, especially in booming markets. It’s a very tough problem to solve, but making clear the costs of all the subsidies would help.
- apexalpha 7y ago
  The true cost of something depends on the market, and the market is created and shaped by law. If the law changes to disallow foreign direct investment in residential housing and the prices drop then this IS the new true price. Not the other way around.
  - lotsofpulp 7y ago
    I agree, but my intention was to point out downsides of current US home ownership mechanisms.
  - Retric 7y ago
    True cost in economic terms is not the market price. It includes negative externalities that are not included in the market price. https://www.investopedia.com/terms/t/truecosteconomics.asp https://www.investopedia.com/terms/t/truecosteconomics.asp
- bobthepanda 7y ago
  Homeowners don’t really care about the cost of subsidies since they benefit the most from it. The real problem is that zoning is decided at the local level; local turnout is not very high, so it doesn’t take that many concerned homeowners to overthrow someone who is too pro-growth. And usually local municipalities are balkanized subsets of the region, who want all the upside of regional growth but none of the downside. In the most extreme example, the Bay Area, this leads to lots of permits for job expansion in small localities but not for housing, since residents need a lot more in the way of services. It would be much more healthy to have zoning laid out at the state or regional level, but regional level governments don’t even really exist in the American context, and only a few cities in America have continued annexing suburban areas into the 21st century.
precisioncoder 7y ago
It is being worked on in many european cities. Berlin for instance has a public housing buyback plan in place and many European cities are looking at or have already placed rules in place making foreign ownership or running of massive rental companies more expensive or difficult. Generally commodification of essential needs such as housing and food does need some regulation in order to prevent victimization of the poorest citizens.
mevile 7y ago
> A company buying thousands of homes and then milking workers through rent for decades seems unethical. Providing homes for rent is a service provided to people that they can pay for if they want to make use of it. An economic transaction involves an exchange for money. It is not milking someone. Is a grocery store milking you for food you buy? A house has value. The people who built it had to feed themselves and their families. Land has value. It is not free. I have to pay expensive annual property taxes to maintain ownership. The services a bank provides are not free. Living expenses are a real thing and even if you can't afford it then someone else is going to have to pay for your housing.
- MrBuddyCasino 7y ago
  The difference is that housing is a market where you can't increase supply much, because of location. This makes it an accelerator of inequality, unfairness and hereditary wealth. Also, regulatory capture.
  - lotsofpulp 7y ago
    We can increase supply by a lot in most places, just not single family homes with garages.
    - MrBuddyCasino 7y ago
      Theoretically, it could be done. Practically, home ownership makes everyone a Nimby, pulling up the ladder for everyone who doesn't.
- pytester 7y ago
  >Land has value. It is not free. And if you derive any rental income from the land value whatsoever, you are milking money from something valuable you did not create and did not make valuable. It's a purely parasitic form of value extraction from something that isn't free. This is why the value of land improvements (e.g. having a nice house) should be untaxed, separated from the value of the land while the rental value of the land should be taxed at 100%. And, until we do do that, we shouldn't pretend that rent isn't largely (i.e. ~60%) parasitic value extraction.
tim333 7y ago
You can tip the balance a bit by having an annual property tax with a discount/exemption if it's your main residence.
- paulgb 7y ago
  The cost of this would just be passed on to people who rent rather than own, since the extra tax would apply to any property they could rent.
  - tim333 7y ago
    Depends on the details - the tax could be paid by the occupants a bit like the council tax in the UK. And then discounts applied. Or by the owner if the property is unoccupied.
  - sly010 7y ago
    You could charge exponentially more tax based on the number of units rented. That way even if the cost is passed on, renters are incentivized to rent from small landlords.
    - lsaferite 7y ago
      Then you simply have a web of LLCs so that each corporate entity only owns a single unit.
      - sly010 7y ago
        Administrative costs are costs too.
  - asdff 7y ago
    Then tax and cap rent increases county wide on every building no matter when it was built or if a tenant moves out. Then again, I'm pretty far left on housing issues. In my ideal world, the rent formula would be: monthy rent = 0.3(minumum hourly wage * 160 hours) * n bedrooms; with studios being n = 0.5 That way if landlords want to lobby for higher profit margins, the only way to do it would be to also ensure the working class can actually afford to supply those higher profit margins for the landlords.
CryptoPunk 7y ago
An investment opportunity just means a shortage that you can profitably fill. Preventing people from making money by investing in real estate just means housing shortages are less effectively filled. That's essentially what rent control does, and economists are almost unanimous about the harm it has done to housing affordability: https://www.econlib.org/library/Enc/RentControl.html https://www.econlib.org/library/Enc/RentControl.html
jefflombardjr 7y ago
I am completely against a 'landed class' collecting malthusian rents. But, if these companies are adding value that shouldn't be overlooked. Not all people want to maintain a property, and not all people want to "rent for decades" in the same place. I rented in a larger city last year. Had I bought instead of renting I would have had transaction costs that would be 3x the amount I paid in rent. Not only that, if something broke in the apartment I had someone I could call to take care of it. I didn't even have to think through the logistics of getting contractors to my apt and getting bids on jobs. Not all landlords are slumlords.
- charlesdm 7y ago
  I rent for the exact same reason, and can agree. The second reason is that there is minimal opportunity for capital appreciation where I am, and I do not feel like locking up a significant deposit in such an illiquid asset. I get much better returns on my money elsewhere.
- C1sc0cat 7y ago
  Where in the world are transaction costs that high for buying a property
  - jaclaz 7y ago
    I will give you an example for Italy. The real estate agent wants between 2% and 3% of the actual value of the building from both the seller and the buyer. Taxes (unless it is a "first house" designed and actually used as your "primary residence" AND provided that you are not going to resell it within 5 years, in which case will be around 2% of nominal value) will be around 9% of nominal value (usually much lower than market value). Then there is the notary fees. So, example, you buy an apartment paying it 200,000 Euro, something that would be rented between 600 and 800 Euro/month (if you are lucky): Estate agent (buying) 6,000 (0.03x200,000) Taxes (buying) 10,800 (0.09x120,000) Notary 2,000 Estate agent (re-selling) 6,000 (0.03x200,000) That is 24,800 Euro to which you add the equivalent of 1 year land tax probably some 800 Euro, and some repairs/refurbishing making it more than 26,000 Euro (and without considering what the 226,000 Euro could have produced if invested). Compare this with 12x800=9600 Maybe it is not exactly 3x, but it is at least 2.5x. If you prefer, unless there is a huge increase in house value in the (short) period of ownership, the breaking even point is past more than three years.
ericmcer 7y ago
The rule in china: 'Foreigners who have studied or worked in China for a minimum of one year are permitted to buy property. ... Unfortunately, a foreigner can only own one property and it has to be residential. Again, the foreigners are banned from renting the property as you are supposed to use it for dwelling purposes.'
- baybal2 7y ago
  Thanks for bringing it up. I see it being perfectly rational for countries to mirror asset possession rules that are instilled on their citizens abroad. There is so much draconian regulations of foreign bank account holding all around the world, but none regulating foreign possessions of the said bank. Same for real estate.

dgzl 7y ago

If there's no market, how can you buy or sell a home? Why should I not invest in my property?

rwmj 7y ago
I suppose it might work like council housing (used to) work in the UK. The council builds large numbers of homes and houses people in them for lower than market rentals. Of course people are still free to build and buy homes privately if they want. The problem with this in the UK was that the stock of council housing became immensely valuable and as soon as we had a right wing government they started to sell it off. Selling it off created home owners (who are more likely to vote for that government) and raised "free" money which could be given out in tax cuts, so it was a natural target. In the UK an alternate system - housing associations (HA) - survived a little bit better. Here the houses are either built with public money and handed to a housing association (a private trust) or built by the HA. The HA then rents them out on similar terms to council houses. Because they aren't publicly owned the government couldn't sell them off. Except that because some HAs built using government loans or assistance the government was able to extend the right of tenants to buy to those homes too.
- apexalpha 7y ago
  In the Netherlands we have the good tendency to take these away from politicians: any extra budget MUST be used to lower our national debt, not to lower taxes or 'buy votes' for the current people in charge. This takes away the incentive to sell off public goods for their own short term profit.

supernova87a 7y ago

Wow, are you joking, or has the new socialism worked its way into people's thinking so easily that you would state such a notion in so offhand a manner? "Real estate should not be a market and an investment opportunity"? Are you kidding? Real estate, and its scarcity, has been the driver of competition, wealth, value creation, for oh, say, all of human history. There must be something to that, even if you think it's not ideal for how it works out for some people. Just like that, you say you want to do away with it? Stunning.

lotsofpulp 7y ago
>Real estate, and its scarcity, has been the driver of competition, wealth, value creation, for oh, say, all of human history. Much like excessively long copyright periods, real estate also allows for excessive economic rent that can destroy value creation. Incentives for individual real estate owners are divergent to those of society, hence we see problems getting mass transit online in many places and lack of sufficient housing in booming job markets.
- saiya-jin 7y ago
  There needs to be some balance between needs of society and individual. I don't claim to know the fine line of this balance, but that's how long-running successful societies work. Opposite side is dictatorship in some form - most common being some variant of communism regime that I had displeasure to live in for initial part of my life - its not a good system for 99% of the population. This is generally highly controversial topic, people either align as per their left/right viewpoints, or their current situation and needs (homeowner/investor views it differently compared to somebody young looking wanting to buy accommodation and and being priced out of their favored location).
oblio 7y ago
> Real estate, and its scarcity, has been the driver of competition, wealth, value creation, for oh, say, all of human history. There must be something to that, even if you think it's not ideal for how it works out for some people. You know when humanity started evolving rapidly? When real estate stopped being the main driver for wealth. And you know how the system where the main source of wealth was real estate was named? Feudalism. I'd much rather have socialism than feudalism... I know that there's more options than these two, but we're seeing again a major increase in real estate value that's causing average people to not be able to buy their homes or not even be able to rent something decent. Over time it's starting to look a lot like that regime where a few people "rent" real estate to masses of people... and can (almost) control those masses through it. Personally I'd make it so big groups of people get affordable rents or even affordable prices for homes, through various laws that incentivize private ownership and constant improving of property. The latter part is not even socialist, it's a Roman principle.

lotsofpulp 7y ago

Masking the true price (cost) of something is what causes the market to be inefficient, resulting in excess or insufficient supply. If anything, rents indicate true cost compared to mortgage costs which can accurately signal for more (or less) construction needed. In the US, ownership costs are masked by subsidizing interest rates, loan repayment periods, down payment amounts, and mortgage interest tax deductions. Also, property tax limits subsidize existing owners. There is a bit of a conflict in the mechanics of democracy with zoning laws and taxes, with existing owners having an incentive to limit supply, especially in booming markets. It’s a very tough problem to solve, but making clear the costs of all the subsidies would help.

apexalpha 7y ago
The true cost of something depends on the market, and the market is created and shaped by law. If the law changes to disallow foreign direct investment in residential housing and the prices drop then this IS the new true price. Not the other way around.
- lotsofpulp 7y ago
  I agree, but my intention was to point out downsides of current US home ownership mechanisms.
- Retric 7y ago
  True cost in economic terms is not the market price. It includes negative externalities that are not included in the market price. https://www.investopedia.com/terms/t/truecosteconomics.asp https://www.investopedia.com/terms/t/truecosteconomics.asp
bobthepanda 7y ago
Homeowners don’t really care about the cost of subsidies since they benefit the most from it. The real problem is that zoning is decided at the local level; local turnout is not very high, so it doesn’t take that many concerned homeowners to overthrow someone who is too pro-growth. And usually local municipalities are balkanized subsets of the region, who want all the upside of regional growth but none of the downside. In the most extreme example, the Bay Area, this leads to lots of permits for job expansion in small localities but not for housing, since residents need a lot more in the way of services. It would be much more healthy to have zoning laid out at the state or regional level, but regional level governments don’t even really exist in the American context, and only a few cities in America have continued annexing suburban areas into the 21st century.

precisioncoder 7y ago

It is being worked on in many european cities. Berlin for instance has a public housing buyback plan in place and many European cities are looking at or have already placed rules in place making foreign ownership or running of massive rental companies more expensive or difficult. Generally commodification of essential needs such as housing and food does need some regulation in order to prevent victimization of the poorest citizens.

mevile 7y ago

> A company buying thousands of homes and then milking workers through rent for decades seems unethical. Providing homes for rent is a service provided to people that they can pay for if they want to make use of it. An economic transaction involves an exchange for money. It is not milking someone. Is a grocery store milking you for food you buy? A house has value. The people who built it had to feed themselves and their families. Land has value. It is not free. I have to pay expensive annual property taxes to maintain ownership. The services a bank provides are not free. Living expenses are a real thing and even if you can't afford it then someone else is going to have to pay for your housing.

MrBuddyCasino 7y ago
The difference is that housing is a market where you can't increase supply much, because of location. This makes it an accelerator of inequality, unfairness and hereditary wealth. Also, regulatory capture.
- lotsofpulp 7y ago
  We can increase supply by a lot in most places, just not single family homes with garages.
  - MrBuddyCasino 7y ago
    Theoretically, it could be done. Practically, home ownership makes everyone a Nimby, pulling up the ladder for everyone who doesn't.
pytester 7y ago
>Land has value. It is not free. And if you derive any rental income from the land value whatsoever, you are milking money from something valuable you did not create and did not make valuable. It's a purely parasitic form of value extraction from something that isn't free. This is why the value of land improvements (e.g. having a nice house) should be untaxed, separated from the value of the land while the rental value of the land should be taxed at 100%. And, until we do do that, we shouldn't pretend that rent isn't largely (i.e. ~60%) parasitic value extraction.

tim333 7y ago

You can tip the balance a bit by having an annual property tax with a discount/exemption if it's your main residence.

paulgb 7y ago
The cost of this would just be passed on to people who rent rather than own, since the extra tax would apply to any property they could rent.
- tim333 7y ago
  Depends on the details - the tax could be paid by the occupants a bit like the council tax in the UK. And then discounts applied. Or by the owner if the property is unoccupied.
- sly010 7y ago
  You could charge exponentially more tax based on the number of units rented. That way even if the cost is passed on, renters are incentivized to rent from small landlords.
  - lsaferite 7y ago
    Then you simply have a web of LLCs so that each corporate entity only owns a single unit.
    - sly010 7y ago
      Administrative costs are costs too.
- asdff 7y ago
  Then tax and cap rent increases county wide on every building no matter when it was built or if a tenant moves out. Then again, I'm pretty far left on housing issues. In my ideal world, the rent formula would be: monthy rent = 0.3(minumum hourly wage * 160 hours) * n bedrooms; with studios being n = 0.5 That way if landlords want to lobby for higher profit margins, the only way to do it would be to also ensure the working class can actually afford to supply those higher profit margins for the landlords.

CryptoPunk 7y ago

An investment opportunity just means a shortage that you can profitably fill. Preventing people from making money by investing in real estate just means housing shortages are less effectively filled. That's essentially what rent control does, and economists are almost unanimous about the harm it has done to housing affordability: https://www.econlib.org/library/Enc/RentControl.html https://www.econlib.org/library/Enc/RentControl.html

jefflombardjr 7y ago

I am completely against a 'landed class' collecting malthusian rents. But, if these companies are adding value that shouldn't be overlooked. Not all people want to maintain a property, and not all people want to "rent for decades" in the same place. I rented in a larger city last year. Had I bought instead of renting I would have had transaction costs that would be 3x the amount I paid in rent. Not only that, if something broke in the apartment I had someone I could call to take care of it. I didn't even have to think through the logistics of getting contractors to my apt and getting bids on jobs. Not all landlords are slumlords.

charlesdm 7y ago
I rent for the exact same reason, and can agree. The second reason is that there is minimal opportunity for capital appreciation where I am, and I do not feel like locking up a significant deposit in such an illiquid asset. I get much better returns on my money elsewhere.
C1sc0cat 7y ago
Where in the world are transaction costs that high for buying a property
- jaclaz 7y ago
  I will give you an example for Italy. The real estate agent wants between 2% and 3% of the actual value of the building from both the seller and the buyer. Taxes (unless it is a "first house" designed and actually used as your "primary residence" AND provided that you are not going to resell it within 5 years, in which case will be around 2% of nominal value) will be around 9% of nominal value (usually much lower than market value). Then there is the notary fees. So, example, you buy an apartment paying it 200,000 Euro, something that would be rented between 600 and 800 Euro/month (if you are lucky): Estate agent (buying) 6,000 (0.03x200,000) Taxes (buying) 10,800 (0.09x120,000) Notary 2,000 Estate agent (re-selling) 6,000 (0.03x200,000) That is 24,800 Euro to which you add the equivalent of 1 year land tax probably some 800 Euro, and some repairs/refurbishing making it more than 26,000 Euro (and without considering what the 226,000 Euro could have produced if invested). Compare this with 12x800=9600 Maybe it is not exactly 3x, but it is at least 2.5x. If you prefer, unless there is a huge increase in house value in the (short) period of ownership, the breaking even point is past more than three years.

ericmcer 7y ago

The rule in china: 'Foreigners who have studied or worked in China for a minimum of one year are permitted to buy property. ... Unfortunately, a foreigner can only own one property and it has to be residential. Again, the foreigners are banned from renting the property as you are supposed to use it for dwelling purposes.'

baybal2 7y ago
Thanks for bringing it up. I see it being perfectly rational for countries to mirror asset possession rules that are instilled on their citizens abroad. There is so much draconian regulations of foreign bank account holding all around the world, but none regulating foreign possessions of the said bank. Same for real estate.