4 ms·

Old ladies in multi-million dollar homes is largely a myth. Sure, there are some of them. But it's absurd to think this is anywhere near the majority. Short Ter

Old ladies in multi-million dollar homes is largely a myth. Sure, there are some of them. But it's absurd to think this is anywhere near the majority. Short Term rentals make up <2% of the market (almost everywhere beside vacation towns) - and they are not a major cause of problems (outside of vacation towns). Multi-million dollar homes are <1% of the market (basically everywhere). Old ladies living in these homes is a fraction of the total homes. These are just excuses. These aren't real problems. The real problem is artificially low interest rates, artificial scarcity caused by NIMBYism, low downpayments (backed by Fannie & Freddie), tax breaks for home owners but not for renters, high income taxes, low property taxes, etc... The vast majority of homeowners are just everyday regular homeowners, almost twice as many as everyday regular landlords. Little old ladies and short term rental operators make up <3% of the market. You can only blame them for much.

mateo411 5y ago
Do Fannie and Freddie underwrite mortgages in the UK?
- onlyrealcuzzo 5y ago
  No - but the problem is the same. You have 5% downpayments (instead of 3.5% in the US), and mortgage-backed securities. From my understanding, it appears there is NOT a government agency backing them, though. I don't think the 3.5% downpayment market be very big in the US if not for Fannie and Freddie (it basically doesn't exist outside of conventional loans Fannie & Freddie will buy). I don't know how big the market is in the UK - maybe it's not much of an issue? I'd love to hear from someone who knows more about this part of the UK market.
  - carom 5y ago
    I don't think the 3.5% down payment market is very big. >Between July 2019 and June 2020, the average down payment for a home amounted to 12% of the home value. In the first three months of 2021, 48% of home buyers made a down payment of at least 20% of the home value. 21% of home buyers in that same period made an all-cash purchase. [1] It sounds like 69% are >= 20% down or all cash. I don't think enabling lower income access to housing is hurting our housing market at all. 1. https://www.fool.com/the-ascent/research/average-down-payment-house/ https://www.fool.com/the-ascent/research/average-down-paymen...
    - lesuorac 5y ago
      A 3% increase in vacancy rate caused a ~10% decrease in apartment pricing in NYC [1]. Housing is very much at the margin and a small increase/decrease of demand will have an outsized effect on price. However, I'm not going to argue that everybody poorer than me shouldn't have access to a house just so I can get one at a cheaper price ... [1]: https://inhabit.corcoran.com/new-york-city-residential-rental-market-report-august-2020/ https://inhabit.corcoran.com/new-york-city-residential-renta...
      - onlyrealcuzzo 5y ago
        > However, I'm not going to argue that everybody poorer than me shouldn't have access to a house just so I can get one at a cheaper price ... What's wrong with renting? Why are poor people entitled to home ownership when most of the young middle class isn't? Why can't they rent? There would be no problem with rent if home-ownership wasn't a massive handout from the government by guaranteeing that home prices appreciate more than interest rates. This is extremely unfair to poor people as it is currently - because they can't get in line to get massive amounts of free money. Best they can get is SNAP. Meanwhile, your local millionaire is getting >$20k per year in asset subsidization. I don't think that even more manipulation is the solution to the problem. If the government could get out of the business of pumping up house prices while keeping benefits like SNAP, that would go a long way toward fixing inequality.
  - Sanguinaire 5y ago
    There is/was a UK government "Help to Buy" scheme aimed at people who can only afford a 5% deposit, where the gov basically took part of the equity and then charged you rent on the portion you don't own. Never seemed like a good idea to me; just skews purchases to more expensive areas (ie London) and leaves the taxpayer with an even bigger share of the risk in the event of a house price crash. The only upside is political - the government gets to say they are helping first-time buyers.
conductr 5y ago
I've come to believe flipping is a major problem, at least in my locale. A $300K house gets $50K of "improvements", then the investors needs $100K profit after commissions are covered and so we're in the $500K range for the next buyer and very little value was added. It's often the proverbial "lipstick on a pig" house after the renovations. There's little to no regulations on flippers. They can be DIY people that have never swung a hammer or people that cut every corner possible to squeeze out every cent of profit. Often, buyers of flipped properties are doing major repairs in the first 2 years as things behind the walls was not done correctly. It's a very common tale of people completely renovating their newly renovated bathrooms and kitchens (yes, the most expensive rooms in your house) because the flippers did not take the time to properly waterproof behind the tiles. Or they did not properly mortar the tiles for adhesion and they are now popping up.
- onlyrealcuzzo 5y ago
  How is that the flipper's fault? Ultimately, a regular home owner is buying the finished product. If they are willing to pay more for better housing, what's the problem? Of course, they're not willing to "pay more". Interest rates get lowered, and they can keep the same payment and buy more house. The reason flipping is attractive is because Central Banks push up house prices - which flippers capture on leverage. If it weren't for house prices artificially appreciating so much (by constantly lower interest rates) - there wouldn't be any profits to be made flipping houses. Transaction costs are too high.
  - conductr 5y ago
    I don’t think it’s anyone’s “fault” but it does contribute to the affordability issue. It’s basically introducing a middle man into the industry that needs his own markup. It’s capitalism in it’s purest form. But also a form that has detrimental consequences to average people wanting to purchase a home. And, that’s where I start to believe it’s a form of malicious compliance to accept it as status quo. However, the quality of work topic is a major issue and extremely common. It raises the cost of ownership going forward.
    - 5y ago
hdhjebebeb 5y ago
Where do you get stats for short-term rentals? Anecdotally, our last landlady illegally evicted us, converted the house to an airbnb, and then bought the next-door house from the long-time owner to make it an airbnb as well. Not in a vacation town, just downtown in a second-tier city. It seems like a pretty common trend in our neighborhood, I'm wondering if short-term rentals are clustered in dense, walkable areas and the stats are skewed by exurban owner-occupied homes that are 30 minutes drive to everywhere.
- onlyrealcuzzo 5y ago
  There's been a lot of research on this. Here's one of the papers: https://www.sciencedirect.com/science/article/abs/pii/S1051137717300876 https://www.sciencedirect.com/science/article/abs/pii/S10511... It shows that AirBNBs do push up rents - but even in desirable parts of Boston with a lot of AirBNBs - it's /only/ responsible for a 0.4% increase. Keep in mind that rents have been increasing by >4% per year for 20 years in Boston. A .4% increase is 10% of that. General inflation is /at least/ 50% of it. The other ~40% is coming from elsewhere. Unless AirBNBs make up a substantial portion of new sales - it is hard to blame them for the majority of price increases.
screye 5y ago
We see this time and again. Blame everyone else but the common man. Mobs are naturally susceptible to act in their own self interest and what we see today is a natural consequence of housing as an investment and your biggest asset. Nimbys are simply protecting an investment. In a captalistic society we have to change the incentives to drive action. Allow renters vote on local zoning regulation. Hell, remove stringent zoning regulations in general. At the same time, put limitations on what HOAs and local.commitees are allowed to impose. Remove the exorbidant costs/regulations towards building multi family homes. This has been driving the rise 'premium condos' because affordable housing isnt affordable to build. Impose larger taxes on rent collected on 3rd+ homes. Impose large taxes on vacant properties. Start gently discouraging additional housing as an investment. Lastly, I strongly support sensible gentrification. Give long term renters first dibs and zero-additional-cost pathways to home ownership.But after that, gentrify and gentrify heavily. A revitalization of innercities is the easiest way to solve the housing problem in our current political climate. (For those who complain that condos arent suburban single family homes.....thats how we got here in the first place) These are just some ideas .
- jjav 5y ago
  > Allow renters vote on local zoning regulation. What does this mean? If any zoning regulation comes up for public vote, everyone elegible to vote gets to vote on it. Or are you suggesting renters should have special access to vote on these issues?
Tade0 5y ago
> Old ladies in multi-million dollar homes is largely a myth. Oh they are real - it's just that 90% of them reside in Zürich, Switzerland.
ZeroGravitas 5y ago
Just to be clear, I wasn't suggesting the old ladies were at fault. I was suggesting that the people who would suffer the immediate negatives and/or thrive on drama and/or need to sabotage all government intervention would use that as a propagands point to stop any regulations.

mateo411 5y ago

Do Fannie and Freddie underwrite mortgages in the UK?

onlyrealcuzzo 5y ago
No - but the problem is the same. You have 5% downpayments (instead of 3.5% in the US), and mortgage-backed securities. From my understanding, it appears there is NOT a government agency backing them, though. I don't think the 3.5% downpayment market be very big in the US if not for Fannie and Freddie (it basically doesn't exist outside of conventional loans Fannie & Freddie will buy). I don't know how big the market is in the UK - maybe it's not much of an issue? I'd love to hear from someone who knows more about this part of the UK market.
- carom 5y ago
  I don't think the 3.5% down payment market is very big. >Between July 2019 and June 2020, the average down payment for a home amounted to 12% of the home value. In the first three months of 2021, 48% of home buyers made a down payment of at least 20% of the home value. 21% of home buyers in that same period made an all-cash purchase. [1] It sounds like 69% are >= 20% down or all cash. I don't think enabling lower income access to housing is hurting our housing market at all. 1. https://www.fool.com/the-ascent/research/average-down-payment-house/ https://www.fool.com/the-ascent/research/average-down-paymen...
  - lesuorac 5y ago
    A 3% increase in vacancy rate caused a ~10% decrease in apartment pricing in NYC [1]. Housing is very much at the margin and a small increase/decrease of demand will have an outsized effect on price. However, I'm not going to argue that everybody poorer than me shouldn't have access to a house just so I can get one at a cheaper price ... [1]: https://inhabit.corcoran.com/new-york-city-residential-rental-market-report-august-2020/ https://inhabit.corcoran.com/new-york-city-residential-renta...
    - onlyrealcuzzo 5y ago
      > However, I'm not going to argue that everybody poorer than me shouldn't have access to a house just so I can get one at a cheaper price ... What's wrong with renting? Why are poor people entitled to home ownership when most of the young middle class isn't? Why can't they rent? There would be no problem with rent if home-ownership wasn't a massive handout from the government by guaranteeing that home prices appreciate more than interest rates. This is extremely unfair to poor people as it is currently - because they can't get in line to get massive amounts of free money. Best they can get is SNAP. Meanwhile, your local millionaire is getting >$20k per year in asset subsidization. I don't think that even more manipulation is the solution to the problem. If the government could get out of the business of pumping up house prices while keeping benefits like SNAP, that would go a long way toward fixing inequality.
- Sanguinaire 5y ago
  There is/was a UK government "Help to Buy" scheme aimed at people who can only afford a 5% deposit, where the gov basically took part of the equity and then charged you rent on the portion you don't own. Never seemed like a good idea to me; just skews purchases to more expensive areas (ie London) and leaves the taxpayer with an even bigger share of the risk in the event of a house price crash. The only upside is political - the government gets to say they are helping first-time buyers.

conductr 5y ago

I've come to believe flipping is a major problem, at least in my locale. A $300K house gets $50K of "improvements", then the investors needs $100K profit after commissions are covered and so we're in the $500K range for the next buyer and very little value was added. It's often the proverbial "lipstick on a pig" house after the renovations. There's little to no regulations on flippers. They can be DIY people that have never swung a hammer or people that cut every corner possible to squeeze out every cent of profit. Often, buyers of flipped properties are doing major repairs in the first 2 years as things behind the walls was not done correctly. It's a very common tale of people completely renovating their newly renovated bathrooms and kitchens (yes, the most expensive rooms in your house) because the flippers did not take the time to properly waterproof behind the tiles. Or they did not properly mortar the tiles for adhesion and they are now popping up.

onlyrealcuzzo 5y ago
How is that the flipper's fault? Ultimately, a regular home owner is buying the finished product. If they are willing to pay more for better housing, what's the problem? Of course, they're not willing to "pay more". Interest rates get lowered, and they can keep the same payment and buy more house. The reason flipping is attractive is because Central Banks push up house prices - which flippers capture on leverage. If it weren't for house prices artificially appreciating so much (by constantly lower interest rates) - there wouldn't be any profits to be made flipping houses. Transaction costs are too high.
- conductr 5y ago
  I don’t think it’s anyone’s “fault” but it does contribute to the affordability issue. It’s basically introducing a middle man into the industry that needs his own markup. It’s capitalism in it’s purest form. But also a form that has detrimental consequences to average people wanting to purchase a home. And, that’s where I start to believe it’s a form of malicious compliance to accept it as status quo. However, the quality of work topic is a major issue and extremely common. It raises the cost of ownership going forward.
  - 5y ago

hdhjebebeb 5y ago

Where do you get stats for short-term rentals? Anecdotally, our last landlady illegally evicted us, converted the house to an airbnb, and then bought the next-door house from the long-time owner to make it an airbnb as well. Not in a vacation town, just downtown in a second-tier city. It seems like a pretty common trend in our neighborhood, I'm wondering if short-term rentals are clustered in dense, walkable areas and the stats are skewed by exurban owner-occupied homes that are 30 minutes drive to everywhere.

onlyrealcuzzo 5y ago
There's been a lot of research on this. Here's one of the papers: https://www.sciencedirect.com/science/article/abs/pii/S1051137717300876 https://www.sciencedirect.com/science/article/abs/pii/S10511... It shows that AirBNBs do push up rents - but even in desirable parts of Boston with a lot of AirBNBs - it's /only/ responsible for a 0.4% increase. Keep in mind that rents have been increasing by >4% per year for 20 years in Boston. A .4% increase is 10% of that. General inflation is /at least/ 50% of it. The other ~40% is coming from elsewhere. Unless AirBNBs make up a substantial portion of new sales - it is hard to blame them for the majority of price increases.

screye 5y ago

We see this time and again. Blame everyone else but the common man. Mobs are naturally susceptible to act in their own self interest and what we see today is a natural consequence of housing as an investment and your biggest asset. Nimbys are simply protecting an investment. In a captalistic society we have to change the incentives to drive action. Allow renters vote on local zoning regulation. Hell, remove stringent zoning regulations in general. At the same time, put limitations on what HOAs and local.commitees are allowed to impose. Remove the exorbidant costs/regulations towards building multi family homes. This has been driving the rise 'premium condos' because affordable housing isnt affordable to build. Impose larger taxes on rent collected on 3rd+ homes. Impose large taxes on vacant properties. Start gently discouraging additional housing as an investment. Lastly, I strongly support sensible gentrification. Give long term renters first dibs and zero-additional-cost pathways to home ownership.But after that, gentrify and gentrify heavily. A revitalization of innercities is the easiest way to solve the housing problem in our current political climate. (For those who complain that condos arent suburban single family homes.....thats how we got here in the first place) These are just some ideas .

jjav 5y ago
> Allow renters vote on local zoning regulation. What does this mean? If any zoning regulation comes up for public vote, everyone elegible to vote gets to vote on it. Or are you suggesting renters should have special access to vote on these issues?

Tade0 5y ago

> Old ladies in multi-million dollar homes is largely a myth. Oh they are real - it's just that 90% of them reside in Zürich, Switzerland.

ZeroGravitas 5y ago

Just to be clear, I wasn't suggesting the old ladies were at fault. I was suggesting that the people who would suffer the immediate negatives and/or thrive on drama and/or need to sabotage all government intervention would use that as a propagands point to stop any regulations.