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The rich outbidding poor people is not what is causing a housing shortage. There are only so many houses a rich person can occupy. Even if you assume that every

The rich outbidding poor people is not what is causing a housing shortage. There are only so many houses a rich person can occupy. Even if you assume that every rich person keeps a number of spare houses, there are not enough rich people to cause a housing shortage.

sanedigital 5y ago
It’s not just “rich people,” it’s “wealth.” Speculation in there housing market is a widely accepted contributor to rising housing prices: https://www.princeton.edu/~wxiong/papers/Speculation.pdf https://www.princeton.edu/~wxiong/papers/Speculation.pdf
- McScroogy 5y ago
  It is a leftist, anti-capitalist theory, and there are many leftists. In that sense, it may be widely accepted. Ultimately, speculators only try to guess at future prices. Even when hording occurs to manipulate prices, that is usually temporary, as keeping the asset off the market also has a cost. Maybe prices rose a little faster with speculators than without them. But high prices should lead to more building (like if you have land ready for building, there will usually be a price point that tips you over to "OK let's build"). If it doesn't, odds are something else is going on. I'll take a close look at the paper, but at first glance it also only says "speculation could be a contributor to housing prices".
  - sanedigital 5y ago
    It’s the second sentence on the page: “We find that housing speculation, anchored, in part, on extrapolation of past housing price changes, led not only to greater price increases and more housing construction during the boom in 2004 to 2006, but also to more severe economic downturns during the subsequent bust in 2007 to 2009.”
lou1306 5y ago
The comment was about house owning, though. Owning a house is becoming more and more a thing for the upper classes, it wasn't always like this.
- chrisseaton 5y ago
  > Owning a house is becoming more and more a thing for the upper classes Something like 60% of US people own a home. 30% even own their home completely outright, with no mortgage. Obviously 30%, let alone 60%, of the population cannot be considered 'upper class', and 'middle class' is probably even a stretch. The home ownership rate seems broadly stable since the 60s to me, with gentle ups and downs with the economy, so as well as saying home ownership is an upper-class or middle-class thing not being true it's also not the case that 'it wasn't always like this'. https://en.wikipedia.org/wiki/Home-ownership_in_the_United_States https://en.wikipedia.org/wiki/Home-ownership_in_the_United_S...
  - CrazyStat 5y ago
    > Obviously 30%, let alone 60%, of the population cannot be considered 'upper class', or even 'middle class'. Huh? Why can't 30% (or 60%, for that matter) of the population be middle class? Wikipedia [1]: > The American middle class is a social class in the United States.[1][2] While the concept is typically ambiguous in popular opinion and common language use,[3] contemporary social scientists have put forward several ostensibly congruent theories on the American middle class. Depending on the class model used, the middle class constitutes anywhere from 25% to 66% of households. [1] https://en.wikipedia.org/wiki/American_middle_class https://en.wikipedia.org/wiki/American_middle_class
    - chrisseaton 5y ago
      One in three of people do not have middle class professions. Only about 35% of people go to college at all! But anyway even if you don't agree with that, the original claim was that they were 'upper class'! Which is obviously ludicrous. You do not need to be an elite to own a house - drive down almost any suburban street in American you'll see people who own houses.
johndevor 5y ago
Exactly. Why is there no car shortage? Because politicians can't limit car production.
- wayanon 5y ago
  But politicians can (and should in my opinion) make car ownership less attractive.
  - wing-_-nuts 5y ago
    Only by making public transit more available and reliable.
mattlondon 5y ago
It is not just "rich" people. In the UK there was a trend for Baby Boomers to buy up one or two (or more) properties and rent them out as a "nice little side income" etc in addition to their pensions at a time when savings interest rates were low, so there was no point saving (since returns were awful) and property loans were cheap. You even got a tax break on the loan interest! These people are not mega-rich - just middle-class anybodies. I don't blame them - why leave large sums of money from your pension in the bank where you'll earn 0.05-0.5% interest a year, when you can spend it to buy a property that you can rent out for 5% yeild and benefit from property value increases if/when you need to sell. The laws have changed a bit now to make it less attractive (no more tax breaks on loan interest, and more tax on "additional" properties you buy beyond your own personal home), and there is anecdotal evidence that "amateur" landlords are exiting the market in droves. Even so it has stoked the market considerably over a good decade or more, and so prices for even very modest "starter" properties (think 1 bed flats, small houses etc) are relatively unobtainable for the average person on the street or first-time buyer.
neutronicus 5y ago
Rich people can charge rent on any number of houses, outbidding people in the edge of being able to afford owning a home
sheepybloke 5y ago
While this is fair, you forget that real-estate is an investment opportunity. Between flipping houses becoming cool and rental properties being a good investment, if you have an extra couple hundred thousand you can make a strong investment right now. So yes, if this is an investment strategy and you have enough capital, they can just buy up all the houses.
yarcob 5y ago
The problem isn't a "housing shortage". The problem is that interest rates are so low, so everyone who has a bit of money on the side tries to invest in the real estate market. The result is that for every house thats sold, there isn't just someone who wants it as a living space, but also 5 people who want it as an investment. So 5 people outbid each other, the highest bidder gets it, and then the sucker who wanted to live there but couldn't afford to buy it ends up renting it. The problem (at least where I live) is absolutely not that there's too little housing. The problem is that a lot of people want to make money from the real estate market, which drives up prices. Also, because these investors really really want to make a profit, they'll rather let an appartment sit empty than charge lower rent. The appartement I live in was empty for a year because nobody wanted to pay the high rent. (I was able to negotiate a bit, but it's still pretty high) Pretending that the people who use the real estate market as investment don't profit off the working class who can barely afford housing is laughable.
- matchbok 5y ago
  ...and this would be ameliorated with more housing. Real estate is only a good investment if there is tons of demand.
- TuringNYC 5y ago
  I agree with the premise of what youre saying. I dont think the ratio is 5:1, but probably more like 1:5 -- but -- more importantly -- doesnt this make it good for renters because now there are investment properties in an ample environment looking for people to rent? I would argue that it is low interest rates AND low supply. If supply was sufficient then renters would just rent the houses which were purchased, possibly at a discount.
  - wonderwonder 5y ago
    It does not as the new owner now has to have the rates high enough to cover the mortgage on the house he just purchased in a bidding war. moreover, the person that wanted to buy it and live in it is now priced out and has to pay rent and misses out on the asset appreciation.
ramphastidae 5y ago
> There are only so many houses a rich person can occupy. Do you really think that’s a factor? That the wealthy say “My family has all bedrooms they need, so I’m done investing in real estate?” PE firms buy up entire communities and repackage their mortgages into investment products. Foreign investors will buy property regardless of location and never step foot in it if it’s in a more stable country than theirs. Real estate investing is not about finding a place to live for the wealthy.
- Robotbeat 5y ago
  Then we should have a substantial land value tax. If they want to park their wealth in unoccupied housing, they’ll have to pay dearly for it. And they won’t get a cheaper bill by leaving it unbuilt or unoccupied.
wonderwonder 5y ago
They are not buying the homes to live in, they are buying them to rent out as investments.
datacruncher01 5y ago
Less rich and more upper middle class (doctors, lawyers, etc) who are buying lots of properties as rentals.
xivzgrev 5y ago
Um investments? Invitation homes owns over 10k homes https://www.google.com/amp/s/www.newsweek.com/us-largest-provider-single-family-rent-homes-made-largest-profit-ever-amid-pandemic-1579817%3Famp%3D1 https://www.google.com/amp/s/www.newsweek.com/us-largest-pro... In 2015, about 1/3 of vancouver homes bought were to Chinese nationals as investments https://www.fortunebuilders.com/one-third-of-vancouvers-real-estate-market-is-owned-by-chinese-buyers/ https://www.fortunebuilders.com/one-third-of-vancouvers-real...
Tiktaalik 5y ago
Established wealth leverages their outsize influence and power to ensure that new housing for the poors isn't built, so that they can maintain their lush and leafy, exclusive rich person neighbourhoods. There's literal mansion districts in my major city, where not only is building an apartment illegal, but even building a small detached house is illegal. How on earth did that happen??

sanedigital 5y ago

It’s not just “rich people,” it’s “wealth.” Speculation in there housing market is a widely accepted contributor to rising housing prices: https://www.princeton.edu/~wxiong/papers/Speculation.pdf https://www.princeton.edu/~wxiong/papers/Speculation.pdf

McScroogy 5y ago
It is a leftist, anti-capitalist theory, and there are many leftists. In that sense, it may be widely accepted. Ultimately, speculators only try to guess at future prices. Even when hording occurs to manipulate prices, that is usually temporary, as keeping the asset off the market also has a cost. Maybe prices rose a little faster with speculators than without them. But high prices should lead to more building (like if you have land ready for building, there will usually be a price point that tips you over to "OK let's build"). If it doesn't, odds are something else is going on. I'll take a close look at the paper, but at first glance it also only says "speculation could be a contributor to housing prices".
- sanedigital 5y ago
  It’s the second sentence on the page: “We find that housing speculation, anchored, in part, on extrapolation of past housing price changes, led not only to greater price increases and more housing construction during the boom in 2004 to 2006, but also to more severe economic downturns during the subsequent bust in 2007 to 2009.”

lou1306 5y ago

The comment was about house owning, though. Owning a house is becoming more and more a thing for the upper classes, it wasn't always like this.

chrisseaton 5y ago
> Owning a house is becoming more and more a thing for the upper classes Something like 60% of US people own a home. 30% even own their home completely outright, with no mortgage. Obviously 30%, let alone 60%, of the population cannot be considered 'upper class', and 'middle class' is probably even a stretch. The home ownership rate seems broadly stable since the 60s to me, with gentle ups and downs with the economy, so as well as saying home ownership is an upper-class or middle-class thing not being true it's also not the case that 'it wasn't always like this'. https://en.wikipedia.org/wiki/Home-ownership_in_the_United_States https://en.wikipedia.org/wiki/Home-ownership_in_the_United_S...
- CrazyStat 5y ago
  > Obviously 30%, let alone 60%, of the population cannot be considered 'upper class', or even 'middle class'. Huh? Why can't 30% (or 60%, for that matter) of the population be middle class? Wikipedia [1]: > The American middle class is a social class in the United States.[1][2] While the concept is typically ambiguous in popular opinion and common language use,[3] contemporary social scientists have put forward several ostensibly congruent theories on the American middle class. Depending on the class model used, the middle class constitutes anywhere from 25% to 66% of households. [1] https://en.wikipedia.org/wiki/American_middle_class https://en.wikipedia.org/wiki/American_middle_class
  - chrisseaton 5y ago
    One in three of people do not have middle class professions. Only about 35% of people go to college at all! But anyway even if you don't agree with that, the original claim was that they were 'upper class'! Which is obviously ludicrous. You do not need to be an elite to own a house - drive down almost any suburban street in American you'll see people who own houses.

johndevor 5y ago

Exactly. Why is there no car shortage? Because politicians can't limit car production.

wayanon 5y ago
But politicians can (and should in my opinion) make car ownership less attractive.
- wing-_-nuts 5y ago
  Only by making public transit more available and reliable.

mattlondon 5y ago

It is not just "rich" people. In the UK there was a trend for Baby Boomers to buy up one or two (or more) properties and rent them out as a "nice little side income" etc in addition to their pensions at a time when savings interest rates were low, so there was no point saving (since returns were awful) and property loans were cheap. You even got a tax break on the loan interest! These people are not mega-rich - just middle-class anybodies. I don't blame them - why leave large sums of money from your pension in the bank where you'll earn 0.05-0.5% interest a year, when you can spend it to buy a property that you can rent out for 5% yeild and benefit from property value increases if/when you need to sell. The laws have changed a bit now to make it less attractive (no more tax breaks on loan interest, and more tax on "additional" properties you buy beyond your own personal home), and there is anecdotal evidence that "amateur" landlords are exiting the market in droves. Even so it has stoked the market considerably over a good decade or more, and so prices for even very modest "starter" properties (think 1 bed flats, small houses etc) are relatively unobtainable for the average person on the street or first-time buyer.

neutronicus 5y ago

Rich people can charge rent on any number of houses, outbidding people in the edge of being able to afford owning a home

sheepybloke 5y ago

While this is fair, you forget that real-estate is an investment opportunity. Between flipping houses becoming cool and rental properties being a good investment, if you have an extra couple hundred thousand you can make a strong investment right now. So yes, if this is an investment strategy and you have enough capital, they can just buy up all the houses.

yarcob 5y ago

The problem isn't a "housing shortage". The problem is that interest rates are so low, so everyone who has a bit of money on the side tries to invest in the real estate market. The result is that for every house thats sold, there isn't just someone who wants it as a living space, but also 5 people who want it as an investment. So 5 people outbid each other, the highest bidder gets it, and then the sucker who wanted to live there but couldn't afford to buy it ends up renting it. The problem (at least where I live) is absolutely not that there's too little housing. The problem is that a lot of people want to make money from the real estate market, which drives up prices. Also, because these investors really really want to make a profit, they'll rather let an appartment sit empty than charge lower rent. The appartement I live in was empty for a year because nobody wanted to pay the high rent. (I was able to negotiate a bit, but it's still pretty high) Pretending that the people who use the real estate market as investment don't profit off the working class who can barely afford housing is laughable.

matchbok 5y ago
...and this would be ameliorated with more housing. Real estate is only a good investment if there is tons of demand.
TuringNYC 5y ago
I agree with the premise of what youre saying. I dont think the ratio is 5:1, but probably more like 1:5 -- but -- more importantly -- doesnt this make it good for renters because now there are investment properties in an ample environment looking for people to rent? I would argue that it is low interest rates AND low supply. If supply was sufficient then renters would just rent the houses which were purchased, possibly at a discount.
- wonderwonder 5y ago
  It does not as the new owner now has to have the rates high enough to cover the mortgage on the house he just purchased in a bidding war. moreover, the person that wanted to buy it and live in it is now priced out and has to pay rent and misses out on the asset appreciation.

ramphastidae 5y ago

> There are only so many houses a rich person can occupy. Do you really think that’s a factor? That the wealthy say “My family has all bedrooms they need, so I’m done investing in real estate?” PE firms buy up entire communities and repackage their mortgages into investment products. Foreign investors will buy property regardless of location and never step foot in it if it’s in a more stable country than theirs. Real estate investing is not about finding a place to live for the wealthy.

Robotbeat 5y ago
Then we should have a substantial land value tax. If they want to park their wealth in unoccupied housing, they’ll have to pay dearly for it. And they won’t get a cheaper bill by leaving it unbuilt or unoccupied.

wonderwonder 5y ago

They are not buying the homes to live in, they are buying them to rent out as investments.

datacruncher01 5y ago

Less rich and more upper middle class (doctors, lawyers, etc) who are buying lots of properties as rentals.

xivzgrev 5y ago

Um investments? Invitation homes owns over 10k homes https://www.google.com/amp/s/www.newsweek.com/us-largest-provider-single-family-rent-homes-made-largest-profit-ever-amid-pandemic-1579817%3Famp%3D1 https://www.google.com/amp/s/www.newsweek.com/us-largest-pro... In 2015, about 1/3 of vancouver homes bought were to Chinese nationals as investments https://www.fortunebuilders.com/one-third-of-vancouvers-real-estate-market-is-owned-by-chinese-buyers/ https://www.fortunebuilders.com/one-third-of-vancouvers-real...

Tiktaalik 5y ago

Established wealth leverages their outsize influence and power to ensure that new housing for the poors isn't built, so that they can maintain their lush and leafy, exclusive rich person neighbourhoods. There's literal mansion districts in my major city, where not only is building an apartment illegal, but even building a small detached house is illegal. How on earth did that happen??