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>Cheap credit causes an increase in demand. This is not demand for homes but additional 'artificial' demand for properties as investments. Think short term rent

>Cheap credit causes an increase in demand. This is not demand for homes but additional 'artificial' demand for properties as investments. Think short term rentals, second homes, land banked properties, etc. By definition, only investment properties can be underutilised - owner occupied homes are occupied! So in an environment that encourages property investment you will see more underutilisation. An important nitpick: cheap credit intensifies the search for returns. You need to consider why those races end in real estate. In the US, at least, the answer is that the American single family house is the single most privileged asset class in the history of the world. The entire economy assumes that housing prices will grow at a rate that outpaces inflation. You cannot, in that system, be a person who calmly watches to evaluate the correctness of the hypothesis. No, you shut up and push. Whether you're the President or the Fed or some affordable housing commission, you shut up and push for housing as an appreciating asset.

ethbr1 2y ago
That's comingling a few things, because a lot of the privileges around holding a home as an asset don't extend to investment properties. E.g. the easy availability of competitive mortgages and individual tax breaks. Personally, I think we should lean into that -- make single family homes completely unattractive as an investment. Rental units are more debatable, because of the density argument, but I think we should probably disincentize it as an asset class too. In favor of offering townhomes for sale.
- QuarterReptile 2y ago
  I didn't mean even tax advantages or favorable financing. The heart of the issue is that we have a national policy of not letting housing prices go down because that would crush too many people's equity and with it their financial stability. The longer it goes, the more we ratchet up the tension between affordable housing and housing as investment. There's probably a lot to be said about the secondary market for conforming mortgages, but I'm not the knowledgeable person to do so.

ethbr1 2y ago

That's comingling a few things, because a lot of the privileges around holding a home as an asset don't extend to investment properties. E.g. the easy availability of competitive mortgages and individual tax breaks. Personally, I think we should lean into that -- make single family homes completely unattractive as an investment. Rental units are more debatable, because of the density argument, but I think we should probably disincentize it as an asset class too. In favor of offering townhomes for sale.

QuarterReptile 2y ago
I didn't mean even tax advantages or favorable financing. The heart of the issue is that we have a national policy of not letting housing prices go down because that would crush too many people's equity and with it their financial stability. The longer it goes, the more we ratchet up the tension between affordable housing and housing as investment. There's probably a lot to be said about the secondary market for conforming mortgages, but I'm not the knowledgeable person to do so.