[grafmax]

If investors keep houses off the market that artificially reduces supply. All they need is for the increased prices to outweigh any price decline that comes from increased supply. This can happen with or without vacancies for example by having pricing power in the rental market.

House vacancies aren’t my central argument however - they are a symptom of the wealth distribution problem causing our housing crisis.

[tptacek]

You didn't answer my question, you defined it away. Obviously, the premise of investors driving housing costs up is that they're artificially reducing supply. Allowing new housing construction increases supply. The question: assume steadily increasing supply --- how are investors making money on this scheme?

It's fine if you just don't have an answer. But then my point is: nobody seems to have an answer about how this is supposed to work.

[grafmax]

Pretty sure I answered your question. As long as scarcity effects outpace price declines investors are incentivized to retain vacancies, and it’s not just vacancies but pricing control over rent. The real housing market isn’t effectively modeled by your simplistic abstraction. If you look at a YIMBY darling like Austin, for example, investor owned housing has actually grown, as well as homelessness, despite a modest decline in median price.

[tptacek]

Your rebuttal here is a market in which prices declined.

You're clearly trying to route around the question and answer some broader question I didn't ask about how the overall housing market works. I'm not interested. I asked: how can investors make money on this? Your answer is: they don't; they lose money, but I guess do it anyways in order to twirl their mustaches.

[grafmax]

The investor class increased as did homelessness in Austin. Not only that but mortgage payments on the median priced home have increased in Austin, comparing 2018-2019 . Houses are even less affordable.

Investors can make money on price fluctuations and rent. And supply increases are neither immediate nor endless, despite what a simplistic model would hold.

Sadly we need structural solutions not superficial answers to the housing crisis.

[tptacek]

No, if they make money on rent, they're supplying housing and competing with all the other landlords.

[grafmax]

Suppliers can make money by withholding supply in an inelastic market. Supply and demand effects depend on elasticity to work. It’s not just NIMBYism which contributes to housing’s inelasticity. It is a basic need, with no substitute, and a long time horizon (for building and moving). Pricing power is a motivation for keeping houses off the market (besides just speculation). You seem to think NIMBYism is the only contributor to that.

And investors providing rentals contribute to supply also, sure. Yet pricing power among suppliers plays a role here as well.

My argument is not that increasing YIMBYism is bad, but that it is a meager half measure that can at best nudge housing prices, not fix the essential problem.

For example, even with a completely efficient and housing supply, with housing selling at cost, people would still be homeless, as homeless people lack money to pay for housing at cost. By ignoring the wealth composition of buyers, we can at best make housing more elastic through YIMBYism, applying a bandaid rather than fundamentally addressing the housing problem itself.