3 ms·

Maybe a hot take but I feel like high(er) interest rates for homes should be the standard. This allows for demand to be modulated, and puts up a barrier to rent

by mym1990 4y ago

Maybe a hot take but I feel like high(er) interest rates for homes should be the standard. This allows for demand to be modulated, and puts up a barrier to rent seekers from flooding the market. The problem is that over the past 5-10 years a lot of property has already been snapped up by investors at minimal interest rates, so as long as rents stay somewhat stable, they investors will be raking in the returns. I guess at the end of the day the money still flows to a third party rather than the homeowner that is trying to stay in one place for long term.

pbhjpbhj 4y ago
How does it put up a barrier to rent seekers, it makes homes less affordable, which impacts the poorer people more. The rich can but the homes. The poor still need somewhere to live and so tent the homes, they're paying more just they're helping wealth move to the bankers more as well as the property owners. Allowing ownership of houses as an investment is just wrong. (The usual response to this is that you need investors or housing won't be built. The idea no-one would pay for a house to be built is silly, but we also have not-for profit housing associations.)
- ianai 4y ago
  Higher rates mean lower property values - and lower property values mean the rent/mortgage trade off pushes rents lower. It’s instructive to look up how much those SFHs rent for and compare it to local apartment complexes. There’s a huge premium. (And it’s of note that dealing with renting a SFH is possibly a worse experience than renting from a complex. Large enough complexes have maintenance staff and professional management. Someone renting a SFH might well have just that unit to rent - amateur hour. Or they could be a corporation but because you’re just one unit in probably a more spread out population of properties the renter might well experience lowered services from the property management.) I do agree the investment activity we’ve seen in simply hoarding up SFH properties for investment is deeply problematic. There are all sorts of ways to push the market back towards owner occupiers. It’d also be nice if it was a standard thing for working people to be able to make it to public local government meetings. Those tend to be timed when working people are at work. That could help something’s, but there’s probably still be a lot of NIMBYism…
  - ethbr0 4y ago
    In the US at least, higher rates would seem to advantage owner-occupiers over SFH investors. It's harder for both to purchase, but investors are also heavily leveraged and fighting investment alternatives in a higher-rate environment.
    - ianai 4y ago
      Right, the average American lives in a home for something like 7 years and probably decides to move because of things unrelated to interest rates (life events, mood). But the investors are living in the financial world. They’ve not traditionally swamped the SFH market which suggests it’s not a natural choice.
- mym1990 4y ago
  If you are looking to rental properties as an investment, the interest rate is a large part of the cost of doing business. If you think that you can make 10% renting out a property but the interest rate is 8%, that is a pretty slim margin for something with so much overhead. If you think you can make 10% and the rate is 2%, that a bit more juicy. Because high interest rates can reduce demand, in a vacuum you would also see a reduction in the price of the property, making them more affordable. Of course this price is also impacted by countless other things, builder velocity being one of them, so in the real world it takes time to sort out. The 70s, 80s, 90s had relatively stable home ownership rates despite very high interest rates. In 2016 the US reached a bottom in home ownership at 62.9 despite historically low rates. BTW I was not referring to rich people living in their homes that they got with high interest rates, the comment was specifically towards investment property. Definitely agree that hoarding properties is out of hand.
coredog64 4y ago
Nitpick: Rent-seeking is a specific economic activity that doesn’t mean “buying property with the intent to rent it out”. Rent-seeking is an activity where the perpetrator creates legal barriers that result in them collecting money without providing anything of value. Many people hate on landlords, but unless they’re also actively restricting new supply, they’re not rent-seeking as the term is defined.
- Workaccount2 4y ago
  To be fair, I'm sure those investors are NIMBYs for new housing. But I agree with your point.
jen20 4y ago
The easiest ways to put up barriers to rapacious landlords are: - prevent corporations from owning residential property - tax property rental income at a substantially higher rate than income and exempt it from other deductions - tax residential property which is empty for more than de minimis periods at an eye-watering rate (perhaps 5-6x standard property taxes). None of this requires higher interest rates, but it will result in a transfer of wealth away from aging boomers and corporations, which apparently must be avoided at all costs.
presentation 4y ago
Japan has low rates and doesn’t have these problems. The cause probably differs.
- ethbr0 4y ago
  Japan also has a weirdly deflationary housing market because of some financing and cultural quirks. I.e. homes begin depreciating as soon as you buy them.

pbhjpbhj 4y ago

How does it put up a barrier to rent seekers, it makes homes less affordable, which impacts the poorer people more. The rich can but the homes. The poor still need somewhere to live and so tent the homes, they're paying more just they're helping wealth move to the bankers more as well as the property owners. Allowing ownership of houses as an investment is just wrong. (The usual response to this is that you need investors or housing won't be built. The idea no-one would pay for a house to be built is silly, but we also have not-for profit housing associations.)

ianai 4y ago
Higher rates mean lower property values - and lower property values mean the rent/mortgage trade off pushes rents lower. It’s instructive to look up how much those SFHs rent for and compare it to local apartment complexes. There’s a huge premium. (And it’s of note that dealing with renting a SFH is possibly a worse experience than renting from a complex. Large enough complexes have maintenance staff and professional management. Someone renting a SFH might well have just that unit to rent - amateur hour. Or they could be a corporation but because you’re just one unit in probably a more spread out population of properties the renter might well experience lowered services from the property management.) I do agree the investment activity we’ve seen in simply hoarding up SFH properties for investment is deeply problematic. There are all sorts of ways to push the market back towards owner occupiers. It’d also be nice if it was a standard thing for working people to be able to make it to public local government meetings. Those tend to be timed when working people are at work. That could help something’s, but there’s probably still be a lot of NIMBYism…
- ethbr0 4y ago
  In the US at least, higher rates would seem to advantage owner-occupiers over SFH investors. It's harder for both to purchase, but investors are also heavily leveraged and fighting investment alternatives in a higher-rate environment.
  - ianai 4y ago
    Right, the average American lives in a home for something like 7 years and probably decides to move because of things unrelated to interest rates (life events, mood). But the investors are living in the financial world. They’ve not traditionally swamped the SFH market which suggests it’s not a natural choice.
mym1990 4y ago
If you are looking to rental properties as an investment, the interest rate is a large part of the cost of doing business. If you think that you can make 10% renting out a property but the interest rate is 8%, that is a pretty slim margin for something with so much overhead. If you think you can make 10% and the rate is 2%, that a bit more juicy. Because high interest rates can reduce demand, in a vacuum you would also see a reduction in the price of the property, making them more affordable. Of course this price is also impacted by countless other things, builder velocity being one of them, so in the real world it takes time to sort out. The 70s, 80s, 90s had relatively stable home ownership rates despite very high interest rates. In 2016 the US reached a bottom in home ownership at 62.9 despite historically low rates. BTW I was not referring to rich people living in their homes that they got with high interest rates, the comment was specifically towards investment property. Definitely agree that hoarding properties is out of hand.

coredog64 4y ago

Nitpick: Rent-seeking is a specific economic activity that doesn’t mean “buying property with the intent to rent it out”. Rent-seeking is an activity where the perpetrator creates legal barriers that result in them collecting money without providing anything of value. Many people hate on landlords, but unless they’re also actively restricting new supply, they’re not rent-seeking as the term is defined.

Workaccount2 4y ago
To be fair, I'm sure those investors are NIMBYs for new housing. But I agree with your point.

jen20 4y ago

The easiest ways to put up barriers to rapacious landlords are: - prevent corporations from owning residential property - tax property rental income at a substantially higher rate than income and exempt it from other deductions - tax residential property which is empty for more than de minimis periods at an eye-watering rate (perhaps 5-6x standard property taxes). None of this requires higher interest rates, but it will result in a transfer of wealth away from aging boomers and corporations, which apparently must be avoided at all costs.

presentation 4y ago

Japan has low rates and doesn’t have these problems. The cause probably differs.

ethbr0 4y ago
Japan also has a weirdly deflationary housing market because of some financing and cultural quirks. I.e. homes begin depreciating as soon as you buy them.