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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 rea

• matchbok 6y ago
  ...and this would be ameliorated with more housing. Real estate is only a good investment if there is tons of demand.
• TuringNYC 6y 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 6y 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.
    • rafale 6y ago
      To cover the mortgage, the owner has to pass it to the renter. If the renter could afford the rent, he can afford the mortgage, which mean he can probably afford the house in the first place. Sounds like the stupid people outbidding each other will lose money on the rent because renters are not outbidding each other.
      • luigibosco 6y ago
        Not sure why you refer to the renter as "he", but anyway there are many reasons people cannot afford to buy a house such as living paycheck to paycheck, damaged credit, no collateral etc.
      • happymellon 6y ago
        You completely miss that a property that I purchase to live in will probably be both interest and loan while a property purchased to rent out will be interest only. This means that someone buying it to rent out can get a loan for significantly more than someone looking to purchase, making it much easier to outbid them.
      • comeonseriously 6y ago
        > ... which mean he can probably afford the house in the first place. Not true. The people (or companies) winning the bidding war for these properties are paying cash. Normals don't have $900K cash laying around to buy a property originally listed at 550K.
      • JoshuaDavid 6y ago
        > If the renter could afford the rent, he can afford the mortgage This is not necessarily true. In Los Angeles, for example, the price-to-rent ratio is about 38, i.e. if you pay $1000 / month in rent for a place, buying a comparable place would cost you about $450,000 (38 * 12 * 1000). There are a lot of people who could afford to pay $12,000 / year for housing, but could not afford the down payment on a $450,000 mortgage. For that matter, the interest payments alone mean that renting is cheaper than buying -- 3% interest on a $450,000 loan alone is already $13,500 / year, and that's before taking into account that you also have to pay property taxes (another $3,500 / year), maintenance (probably another couple thousand a year), and principle on the mortgage (about another $9,000 / year). In less inflated housing markets, it is generally true that the cost of rent is similar to the cost of a mortgage, but that is definitely not true in all markets.
  • gre 6y ago
    Nobody should have to rent.
    • ryanianian 6y ago
      Not even 18-year-olds fresh out of their parents' house with no considerable assets, employment prospects, or credit history?
      • gre 6y ago
        Sure, why not?
• aantix 6y ago
  The renter doesn’t hold the risk. They can walk away. If you want the profit, then hold the risk. If you want the freedom of mobility, then rent.
  • pnutjam 6y ago
    I see you've been rightly downvoted. In the US, landlords also hold little risk, especially if they are corporate. Renters are stuck by leases and in many states, have little recourse to do anything when the property goes bad and the landlord won't fix things.
    • aantix 6y ago
      >landlords also hold little risk Feel free to expand upon the argument of real estate as a "little risk" investment. >Renters are stuck by leases Leases are on average, an order of magnitude shorter than mortgage loans. Less exposure, less risk. Your leverage is to walk away after a year.
      • pnutjam 6y ago
        Every year they have more equity they can just cash out and walk away. Worst case, they lose the property and their credit gets ruined, exactly the same thing that happens to any renters that have to break their lease. Landlords lose an investment, Renters lose a home and their kids might have to change schools, etc...
        • aantix 6y ago
          >very year they have more equity offset by property taxes? Maintenance? Inflation eroding the value of the equity. Time/cost of managing the property. Potentially depreciating property values, depending on area? I've been a landlord. It's a money sink. Tenants brought in cats (against the lease) that peed all over, making the residence smell unbearable. Had to completely rip out carpet, reseal the floors to get the smell out. Ripped out stair case railings. It's far from "little risk". It was a time and money sink. The area itself did not appreciate in value. So after all said and done, definitely lost money. I'm glad to be done. I didn't "walk away" like the renters could. I fixed the house, the damage that the renters caused, I assumed the very liabilities that the renters get to punt on. Their leverage in the deal worked in their favor that time. They get to just move on.
• px43 6y ago
  My brilliant* idea to solve the real estate problem is to tax the hell out of properties that are sitting empty. Something like a 2x or 3x multiplier on property taxes or something, especially in densely populated areas, and especially in areas where there is rampant housing insecurity. The tax needs to be greater than the potential gamble of waiting for occupants. This should be both for residential and commercial use real estate. *facetious
  • p49k 6y ago
    This exists in Vancouver. Unfortunately, the richest people once again find ways out of it, such as claiming the unit is uninhabitable due to renovation, and proceeding with the slowest and most inefficient renovation process imaginable.
    • Robotbeat 6y ago
      The solution is just a land value tax. You don’t get taxed on improvements to the land, you get taxed on the value of the land (ie based on the value of the surrounding land... a vacant lot—or a lot being “renovated”—pays the ~same tax per acre as a 3 story apartment building next door instead of an order of magnitude less).
      • ryanianian 6y ago
        Not without pretty severe fallout for those on the other side of the equation. That same tax would force long-time homeowners and retirees out of their houses as soon as the neighbors start selling to build condos. Maybe this isn't a terrible thing if it leads to more density, but the profit still goes to the developer.
        • kwere 6y ago
          society still benefit from it
        • Robotbeat 6y ago
          On the contrary, in your scenario, the profit goes to the retirees whose land is now super valuable. That they can’t afford to pay the wealth tax on that land without selling/mortgaging some of it doesn’t mean they’re not now very wealthy. A mortgage or a reverse mortgage would allow them to live the rest of their lives there if they really wanted to. But they’d have to pay their fair share of the tax on that wealth.
• comeonseriously 6y ago
  Interesting video that makes some of the same points: https://www.youtube.com/watch?v=EBb9zf_zWvU https://www.youtube.com/watch?v=EBb9zf_zWvU
• rjmunro 6y ago
  In the UK, it's not just low interest rates, it's also that the rules on renting have made it more attractive for landlords and less attractive for tenants. For example, you used to need a good reason to evict someone, now you can just evict them whenever you like. Once you moved in, increases in rent used to be regulated. Now a landlord can charge whatever they want after the initial period and if you can't afford it you have to leave. Landlords used to have to maintain and fix the property. While they still do in theory, in practise they often just threaten one of the two options above to anyone who wants a repair done.
  • nybble41 6y ago
    > Landlords used to have to maintain and fix the property. While they still do in theory, in practise they often just threaten one of the two options above to anyone who wants a repair done. That's not very smart. So the current tenant leaves, and then what? Good luck finding someone else to rent the property at the original price without fixing the issue…
• literallycancer 6y ago
  If you think being a landlord is such a great deal, why don't you do it?
  • banannaise 6y ago
    Some of us are not trying to get into the business of exploiting people with less money than us?
• McScroogy 6y ago
  From your description, it seems to me that renting is cheaper than buying. So it seems renters get the better deal. It's a pity if a flat is empty for a year, but that in itself also does not cause a shortage. After all, it was rented out after a year. The market is supposed to deliver the flat to the person who needs it most. In that case, apparently it was you. Without the speculator, somebody would have rented it for a very low price long ago, and you would not have been able to live there at all. So maybe the market worked.
  • kmeisthax 6y ago
    Debtors have to make even on their mortgage, at least, so an increase in prices also drags rental rates up - either because the landlord bought later and has higher costs; or because the increase in prices drives up property tax and thus increases costs on existing properties. If the market worked, you'd see people building multi-family units everywhere until supply caught up with demand, and then you'd see a huge crater in prices as people who took a bath on real estate speculation were overrun with the resulting supply glut. This doesn't happen, for a host of various reasons. Governments want housing to be simultaneously affordable and an investment, which is impossible. Hence most cities wind up building a sort of shadow immigration system, through rent control, selective property tax moratoriums, and so on. People who have lived in a city all their life enjoy lower rents, subsidized by people who just moved in and have to buy at market rate.
    • McScroogy 6y ago
      A market working does not imply the creation of unlimited supply. Governments that restrict building are an external factor. Markets can only operate within those bounds. Since land for building is scarce, prices rise. There are other factors, of course. Just speculation does not really seem to be a major one.
      • esyir 6y ago
        Key word here being "working". The market is literally hindered here by said government. The natural response to high demand for housing would be more housing and higher density housing. Zoning laws do a fantastic job of hammering that down.
• Shugarl 6y ago
  Well, real estate has always been one of the best ways to invest money. But the problem is that there's much more demand than there are supply in some places. If a lot of people wish to live in a specific place, then the price will go up, and vice versa. You could buy several houses in small cities for the price of only one house in Paris, for example.