They are translating between a lump sum and an income stream. They are making a six-figure asset available for the low four figures a month, without someone needing to bring six figures of money, or five to six figures of down payment and closing costs and five times as much debt. If the six figure asset actually falls 50% in value, the tenant is not stuck and does not lose a penny.
In short, they’re offering homes to rent. You can live in the home without buying the home. That’s the value. It’s kinda huge.
And to some extent it becomes class warfare to deny this to renters.
These investors are betting big on the houses’ value going up, and expect them to go up a fair bit. This is essentially a bet that the housing market will fail to add new supply, and that anyone who does not own a home yet will suffer greatly from increased rent. And if we’re fighting over is rules on specifically who can buy, instead of doing things to actually make new homes, it seems a fairly sure bet to me.
Yeah, except you have to take into account that "valuable achievement", or let's frame it as a "game" that's played, is being played for a long time without the involvement of massive corporations that hoard houses.
But you might have pinpointed a couple of problems, so either:
- Those corporations are driving the costs of buying homes so high that regular people are being pushed out, because, you know... they are playing with funny money;
- People's income is so crushed, or they are so deprived of access to free/cheap money - like the corporations - that they aren't allowed to play this game.
Both scenarios make it look like the game is rigged.
Why can't people rent to other people like it was done in the past? Why aren't regular people being allowed to play this game? Or is it such a bad game to play that no one wants to play it, except those corporations?
Even if it was a bad game to play, they're still taking houses away from those who want to buy and not rent. So they're ruining two markets: the rent and the buyers market.
Again, I see no add value that couldn't be created by any other player other than big corp.
Else you'll be here in 20 years saying the same thing, with a minor diference: "these corporations are bringing SEVEN FIGURE housing access to FIVE FIGURE renters"
Why would I model a serious transaction as a "game" with achievements?
> they are playing with funny money
YES YES YES YES! Negative real interest rates are pretty damn funny! We should have ended them long ago. We are now beginning to pay the price. You have identified a key way to help end the trends that you do not want to see.
> People's income is so crushed
They are being crushed by inflation! Another blow against ultra low interest rates! RATE HIKE! RATE HIKE! RATE HIKE!
> Why can't people rent to other people like it was done in the past? Why aren't regular people being allowed to play this game?
You're totally allowed!! Go buy a house, and rent out the house. You will probably need money for a down payment, but you can still get a mortgage at negative real interest rates — and if it is in the US and it is a conforming mortgage (<$647200) you will benefit from an interest rate subsidy from the quasi-public mortgage-buying entities, Fannie Mae and Freddie Mac. It might be a great investment! I am buying a house (for myself) and have locked a rate; with current inflation numbers I can expect $2000/month in return simply from inflation eating away at my debt!
The main contraindication here is that you will experience risk, and you may be intolerant to that risk. Your investment could end up underwater, and it's hard to diversify because it's such a big asset relative to your income. This may explain why corporations are better able to do it these days.
> Even if it was a bad game to play, they're still taking houses away from those who want to buy and not rent.
It's true! Existing home-owners are not required to sell to another aspiring home-owner, and are free to sell their property as they see fit. This means that aspiring home-owners must compete with renters (and the people who renters pay, corporations). The renters (and the corporations they pay) may be willing to offer more! The existing home-owner benefits, while the aspiring home-owner does not!
There are lots of ways to use the law to strongarm people into dealing with a politically favored class, at the expense of a politically disfavored class! Some of them are discussed in these threads! I'm not a fan, myself, and believe it will harm the nation and its economy by distorting the economy into doing different things that make less sense and leave the nation overall poorer as a consequence with less money to spend on things that are more meaningful, but if you would benefit maybe you would be a fan!
You may notice that the US population has grown, and continues to grow, and the abstract group comprised of "people who rent homes" continue to grow, and to need more to rent. Corporations happen to be the ones filling this need now. Of course there is nothing that says they have to, or that it has to be corporations, nor is there any special noble virtue that we should ascribe to them beyond that of a prudent investment, nor is there some special reward beyond what they can earn in commerce. It is also possible that significant new construction, falling home prices, or general prosperity could make members of the group of renters leave the group, in favor of ownership.
Renting something bought by an individual (or a very small corporation) was possible and remains possible. But if there was enough of this happening, the corporations who rent might have serious difficulty finding a profit.
It is worth noting that, in a major shift, major home builders expect 50% of their business will soon be in built-to-rent neighborhoods, up from something like 6% today. This is an illustration of how prices are a signal used across the economy to determine what gets done. (Taylor Morrison Home's numbers, from this recent article: https://www.wsj.com/articles/built-to-rent-suburbs-are-poise... )
I refer to the US because it is closer to me. I understand that Canada experiences similar trends.
> You may notice that the US population has grown, and continues to grow, and the abstract group comprised of "people who rent homes" continue to grow, and to need more to rent.
"People who rent homes" aren't some special type of consumer that isn't interested in buying a home. While there are situations where renting is preferable even if it's possible to buy, many renters only rent because it's not possible for them to buy a home. Any potential benefits to renting are generally outweighed by the fact that you're not building any equity, and have limited control over the place they live.
Massive corporate landlords aren't providing a service to meet a demand. They're actively creating demand by driving up the cost of home ownership, and limiting the amount of properties available to buy. A potential homeowner has no chance of competing with a massive corporation when buying a home.
Obviously there's a huge amount of factors that got us here. Housing is hugely complicated, and no single group is responsible. But corporate landlords are one of the factors making the North American housing market worse, and are one of the things we need to address if we're ever going to decrease the cost of living in this country.
> Massive corporate landlords aren't providing a service to meet a demand. They're actively creating demand by driving up the cost of home ownership
This accusation would make a lot of sense if the corporations in question are either (a) a monopoly or (b) an illegal trust, colluding with each other, and through (a) or (b) the corporations enjoyed sufficient concentration of the housing sector that they had pricing power — the ability to restrict the supply and raise prices to make money.
This is not the case. The housing market is fairly competitive, and many different buyers, sellers, homeowners, and home-builders participate and compete with each other. Prices are rising for other reasons: a reduced number of homebuilders, in the aftermath of the 2008 crash; various political land-use, zoning, environmental, and similar homebuilding restrictions; a reduction in the overall labor pool, which impacts the labor in new home construction; labor and other supply chain impacts on the availability of components that are used in new home construction; and a significant pandemic-induced shift in real estate usage patterns (almost everyone wants more space now).
This explanation hides the actual problem in a way that almost feels like gaslighting. Yes, their ability to buy homes allows people who don't have money to live in them.
...except that their greediness of wanting to own everything is precisely what made houses explode in price in first place.
Blaming corporations is a cute meme, but it's not the problem. Corporations in this market are NOT monopolistic price-setters, they do not have remarkable market-concentration, and they are not colluding with each other to limit supply. They are competitive price-takers.
If you want to fix housing prices (or if you just want to screw over these corporations for funsies, which is fine) then you want to increase the supply of homes: that is, you want homebuilders to build, build, build, build, build, build, build — and where necessary, you want to drive the political reforms that make this possible. All the evilcorps™ are betting that you won't — and I'd bet that too, given where you're focusing your attention and efforts.
This can improve the situation, but I'm not sure if it would truly solve it. I believe the proper solution is to simply ban buying non-commercial buildings as an investment. If you're not living on it, you can't own it. I can't see why one would be against this aside from greediness.
I guess single-family housing will be a privilege reserved to the people who can afford a down payment! That's a pretty sneaky way to do class warfare: cloaking it in the language of justice. I'm almost impressed!
We have a history of similar measures to draw from. In the 1950s lots of people believed that banning single-room occupancy buildings was the proper solution to a lot of problems - they were small! they were inhumane! they are associated with crime! New York City lost about 100,000 units, mostly converted into two-bedroom apartments, occupied by good people™ who belonged in families. "Consequently," said activist George McDonald in the wake of this policy, "people sleep on grates outside."
Maybe your laws won't quite achieve this! But to the extent they enjoy success in influencing housing prices, they will be harming those who cannot afford homes.
I think grandparent is not quite so cruel! If apartment buildings count as "commercial" (which they would in the industry lingo, which differs from the SimCity lingo) then we can just quarantine the undesirables away into a bad part of town using our Zoning laws!
Stop zoning out multi-family homes and apartment buildings and this wouldn't be a problem. Believe it or not, there are many low-income people living in cities where these things are allowed, and they're not all renting single family homes.
In short, they’re offering homes to rent. You can live in the home without buying the home. That’s the value. It’s kinda huge.
And to some extent it becomes class warfare to deny this to renters. These investors are betting big on the houses’ value going up, and expect them to go up a fair bit. This is essentially a bet that the housing market will fail to add new supply, and that anyone who does not own a home yet will suffer greatly from increased rent. And if we’re fighting over is rules on specifically who can buy, instead of doing things to actually make new homes, it seems a fairly sure bet to me.