5 ms·

There are many good reasons for real estate to be an investment vehicle. You won't convince someone to build a new apartment building if they can't make money.

There are many good reasons for real estate to be an investment vehicle. You won't convince someone to build a new apartment building if they can't make money. In fact, we really really want people to build more, better housing. The current real estate "market" is certainly far from a "free market". If we live restrictions on supply, by removing things like: - Minimum parking requirements - Maximum height requirements - Aesthetic requirements There are also demand-side subsidies for home ownership that make it more expensive, such as the mortgage tax credit. A land value tax is another way to encourage people to improve the land. https://localhousingsolutions.org/housing-policy-library/land-value-taxation/#:~:text=Land%20value%20taxation%20is%20an,other%20improvements%20to%20the%20site https://localhousingsolutions.org/housing-policy-library/lan.... I agree we can't have real estate be both a great investment (increase faster than inflation) and affordable (decrease on inflation adjusted basis). I think adopting more of a free market here would really improve things for everyone. Note: I also think congestion pricing + eliminating free parking would solve many of the related problems to this issue, and are important parts of a solution.

miguelazo 4y ago
In more civilized countries, plenty of housing stock is built by the government, which is why it is not treated as an investment commodity for speculation.
- Plasmoid 4y ago
  The problem is people hate new housing. Until you change public perception of this relegating this to the government is going to make the situation worse. Right now, private builders can bribe people to allow construction if the market price is high enough. If the government had to do it, there would be basically no new construction. It's politically unpopular and very expensive, so it's an easy project to axe.
  - miguelazo 4y ago
    People hate new housing because it’s 95% luxury condos and McMansions in the US, precisely because we rely too much on the private sector to build housing. Of course they will only focus on units with the fattest margins.
- colinmhayes 4y ago
  The land is the investment here, not the building. Buildings generally go down in value over time, just like most other things. It’s the land that’s gets more expensive as demand increases but supply doesn’t change.
  - roflyear 4y ago
    Correct. It is hard to make more land.
CogitoCogito 4y ago
> There are many good reasons for real estate to be an investment vehicle. You won't convince someone to build a new apartment building if they can't make money. Why is real estate being an investment vehicle required for builders to make money?
- bragr 4y ago
  Because you need them to outlay capital now in return for likely future profits? That's literally what investing is.
  - kelp 4y ago
    Companies make cars, people buy them, everyone knows that a car is a depreciating asset (except for current used car shortages, and certain collectible classics) but people still buy them. This is because they are very useful. A house or an apartment is also quite useful without being an asset that appreciates in value. The whole rental market is based on this concept. I don't see why housing needs to increase in value to incentives people to build it. And in Japan this is exactly the case, it's not typical for housing to increase in value in Japan.
    - NovemberWhiskey 4y ago
      This seems to miss the point. Within this metaphor, the companies that make the cars are the construction and real estate developers - both of which are driven by the profit motive.
      - lostcolony 4y ago
        You can have a profit motive driving behavior without something being an investment vehicle. Cars are an example of that. Even when scarcity has driven the cost of cars up (such as during the recent pandemic), everyone recognized that more could, and would, be produced, and so no one viewed them as an investment vehicle, that adding time in somehow increased the value over the initial purchase price. Housing is viewed that way. Part of that is due to location; there is innately a level of scarcity (not everyone can live in (insert city)), but there is also massive artifical scarcity. Even where there's room, there is NIMPYism and zoning regulations and etc that keeps enough housing from being built in areas people are able to live (i.e., close enough to civilization to be able to buy groceries without an hour long drive each way, for instance), forcing pricing up, in a positive reinforcement loop (scarcity = pricing goes up = people buying for the 'investment' rather than a place to live = more scarcity)
Barrin92 4y ago
>You won't convince someone to build a new apartment building if they can't make money You don't really need to. Do what Singapore (or Vienna) did. Create a Housing and Development board, build the housing that you need... and that's about it. These bizarre contortions that people go through of schemes and tax credits and mechanisms, it's the same as the healthcare sector, one single bloated mess.
- dv_dt 4y ago
  When you look at the model that Germany is following in some areas, it seems like a nice long term way to stabilize housing prices. https://tribunemag.co.uk/2022/07/germany-mietshauser-syndikat-property-housing https://tribunemag.co.uk/2022/07/germany-mietshauser-syndika...
- axus 4y ago
  Government housing projects had a bad outcome in the US... "The Projects".
  - newfonewhodis 4y ago
    Your statement isn't wrong but can be misconstrued to imply that government housing led to bad outcomes. I very strongly suggest reading through citations of https://en.wikipedia.org/wiki/Subsidized_housing_in_the_United_States#Social_issues https://en.wikipedia.org/wiki/Subsidized_housing_in_the_Unit.... tl;dr: "The Projects" were primarily concentrated outside of major economic centers, were left out of public transportation (and other) infrastructure projects. Mix in the government sanctioned racism and segregation of economic groups, "The Projects" in the US were doomed before they even started.
  - TaylorAlexander 4y ago
    Here is a nice article that compares public housing between the USA, Singapore, and Vienna and talks about how the USA could do better. https://charterforcompassion.org/shareable-community-ideas/public-housing-works-lessons-from-vienna-and-singapore https://charterforcompassion.org/shareable-community-ideas/p...
- 4y ago
TaylorAlexander 4y ago
> You won't convince someone to build a new apartment building if they can't make money. Demonstrably false. The city of Venna Austria builds housing for people because people need housing, not because it expects to make money. This kind of thinking demonstrates a depressingly narrow view of human possibilities. https://www.huduser.gov/portal/pdredge/pdr_edge_featd_article_011314.html https://www.huduser.gov/portal/pdredge/pdr_edge_featd_articl...
- Plasmoid 4y ago
  > about 5,000 annually That's not a lot of housing production for a city of 2 million.
  - rsynnott 4y ago
    That's quite an old article; it'd appear to be more like 9000/year as of 2016, of a a total of 13,000.
  - TaylorAlexander 4y ago
    From the article: “Vienna’s city government owns and manages 220,000 housing units, which represent about 25 percent of the city’s housing stock.1 These city-owned housing units, called social housing, are meant primarily for lower-income residents. The city also indirectly controls 200,000 units that are built and owned by limited-profit private developers but developed through a city-regulated process.” So according to this data the government controls about 50% of the housing in the city. Seems pretty good to me! As someone else said the article and data are a bit old, but it sounds like they’ve been keeping up with demand if they had 50% when this article was written. (They’ve been doing this for 100 years)
deleted 4y ago
[deleted]
ska 4y ago
> You won't convince someone to build a new apartment building if they can't make money. This is orthogonal to the investment value of the apartment building as an asset. Surely you generally build rental properties to make a profit via rent, not to make a profit on the land & building - thought you'll factor that into your models.

miguelazo 4y ago

In more civilized countries, plenty of housing stock is built by the government, which is why it is not treated as an investment commodity for speculation.

Plasmoid 4y ago
The problem is people hate new housing. Until you change public perception of this relegating this to the government is going to make the situation worse. Right now, private builders can bribe people to allow construction if the market price is high enough. If the government had to do it, there would be basically no new construction. It's politically unpopular and very expensive, so it's an easy project to axe.
- miguelazo 4y ago
  People hate new housing because it’s 95% luxury condos and McMansions in the US, precisely because we rely too much on the private sector to build housing. Of course they will only focus on units with the fattest margins.
colinmhayes 4y ago
The land is the investment here, not the building. Buildings generally go down in value over time, just like most other things. It’s the land that’s gets more expensive as demand increases but supply doesn’t change.
- roflyear 4y ago
  Correct. It is hard to make more land.

CogitoCogito 4y ago

> There are many good reasons for real estate to be an investment vehicle. You won't convince someone to build a new apartment building if they can't make money. Why is real estate being an investment vehicle required for builders to make money?

bragr 4y ago
Because you need them to outlay capital now in return for likely future profits? That's literally what investing is.
- kelp 4y ago
  Companies make cars, people buy them, everyone knows that a car is a depreciating asset (except for current used car shortages, and certain collectible classics) but people still buy them. This is because they are very useful. A house or an apartment is also quite useful without being an asset that appreciates in value. The whole rental market is based on this concept. I don't see why housing needs to increase in value to incentives people to build it. And in Japan this is exactly the case, it's not typical for housing to increase in value in Japan.
  - NovemberWhiskey 4y ago
    This seems to miss the point. Within this metaphor, the companies that make the cars are the construction and real estate developers - both of which are driven by the profit motive.
    - lostcolony 4y ago
      You can have a profit motive driving behavior without something being an investment vehicle. Cars are an example of that. Even when scarcity has driven the cost of cars up (such as during the recent pandemic), everyone recognized that more could, and would, be produced, and so no one viewed them as an investment vehicle, that adding time in somehow increased the value over the initial purchase price. Housing is viewed that way. Part of that is due to location; there is innately a level of scarcity (not everyone can live in (insert city)), but there is also massive artifical scarcity. Even where there's room, there is NIMPYism and zoning regulations and etc that keeps enough housing from being built in areas people are able to live (i.e., close enough to civilization to be able to buy groceries without an hour long drive each way, for instance), forcing pricing up, in a positive reinforcement loop (scarcity = pricing goes up = people buying for the 'investment' rather than a place to live = more scarcity)

Barrin92 4y ago

>You won't convince someone to build a new apartment building if they can't make money You don't really need to. Do what Singapore (or Vienna) did. Create a Housing and Development board, build the housing that you need... and that's about it. These bizarre contortions that people go through of schemes and tax credits and mechanisms, it's the same as the healthcare sector, one single bloated mess.

dv_dt 4y ago
When you look at the model that Germany is following in some areas, it seems like a nice long term way to stabilize housing prices. https://tribunemag.co.uk/2022/07/germany-mietshauser-syndikat-property-housing https://tribunemag.co.uk/2022/07/germany-mietshauser-syndika...
axus 4y ago
Government housing projects had a bad outcome in the US... "The Projects".
- newfonewhodis 4y ago
  Your statement isn't wrong but can be misconstrued to imply that government housing led to bad outcomes. I very strongly suggest reading through citations of https://en.wikipedia.org/wiki/Subsidized_housing_in_the_United_States#Social_issues https://en.wikipedia.org/wiki/Subsidized_housing_in_the_Unit.... tl;dr: "The Projects" were primarily concentrated outside of major economic centers, were left out of public transportation (and other) infrastructure projects. Mix in the government sanctioned racism and segregation of economic groups, "The Projects" in the US were doomed before they even started.
- TaylorAlexander 4y ago
  Here is a nice article that compares public housing between the USA, Singapore, and Vienna and talks about how the USA could do better. https://charterforcompassion.org/shareable-community-ideas/public-housing-works-lessons-from-vienna-and-singapore https://charterforcompassion.org/shareable-community-ideas/p...
4y ago

TaylorAlexander 4y ago

> You won't convince someone to build a new apartment building if they can't make money. Demonstrably false. The city of Venna Austria builds housing for people because people need housing, not because it expects to make money. This kind of thinking demonstrates a depressingly narrow view of human possibilities. https://www.huduser.gov/portal/pdredge/pdr_edge_featd_article_011314.html https://www.huduser.gov/portal/pdredge/pdr_edge_featd_articl...

Plasmoid 4y ago
> about 5,000 annually That's not a lot of housing production for a city of 2 million.
- rsynnott 4y ago
  That's quite an old article; it'd appear to be more like 9000/year as of 2016, of a a total of 13,000.
- TaylorAlexander 4y ago
  From the article: “Vienna’s city government owns and manages 220,000 housing units, which represent about 25 percent of the city’s housing stock.1 These city-owned housing units, called social housing, are meant primarily for lower-income residents. The city also indirectly controls 200,000 units that are built and owned by limited-profit private developers but developed through a city-regulated process.” So according to this data the government controls about 50% of the housing in the city. Seems pretty good to me! As someone else said the article and data are a bit old, but it sounds like they’ve been keeping up with demand if they had 50% when this article was written. (They’ve been doing this for 100 years)

deleted 4y ago

[deleted]

ska 4y ago

> You won't convince someone to build a new apartment building if they can't make money. This is orthogonal to the investment value of the apartment building as an asset. Surely you generally build rental properties to make a profit via rent, not to make a profit on the land & building - thought you'll factor that into your models.