[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.

[tptacek]

I'm sure you're writing this in good faith, but it really seems like you're trying to slip out from under the question I asked at the top of this thread. "Suppliers can make money by withholding supply in an inelastic market" is an answer to some other question; my question is: stipulating that they can't rent their properties out, and that supply is consistently increasing, how do they make money? All your specific answers have attempted to define away one or both of the premises of that question.

[grafmax]

Yeah it does seem like we are talking around each other but I will try again to answer your question.

It depends on the circumstances of the market. Imagine an extreme hypothetical example, where one investor owns 90 out of 100 houses. And one new house is built every ten years. That investor has pricing power. They can essentially charge whatever they want even if it’s means some houses they own are empty (withholding supply). So: it depends on how fast new houses enter the market versus how much pricing power the investor possesses.

(In fact YIMBY doesn’t create an endless new supply. The idea is that it deregulates, facilitating a new supply where there wasn’t one before. That doesn’t constitute an endless supply, just a new one-time shift allowing a finite boost of additional supply.)

Another example: consider a speculative bubble. In a speculative bubble an investor can purchase a house, it can stay empty, there can be new supply coming into the market, but the forces of froth can outpace the force of additional supply, for quite some time. If they sell before the bubble pops, they profit.

Both these examples are of investors withholding supply, new supply coming into the market, and still profiting. Whether prices fall comes down to whether the downward force of new supply outstrips other forces that boost prices.