[kube-system]

Colloquially you can see this in sentiments such as:

"All these developers are building is just expensive new luxury apartments"

And as the study mentions:

> To the extent that ordinary people form loose mental associations between “housing development” and “housing affordability,” they may well associate more development with higher prices rather than greater affordability. New housing, being new, tends to be more expensive than existing, depreciated housing.

It is just a perception bias thing. You don't really "see" everything around you aging because it happens slowly.

[stego-tech]

Yup, and the kneejerk response from economists is that the housing cycle suggests that new luxury stock would be inhabited by buyers who own existing stock, and what they sell would be more affordable to those buyers, and what those buyers sell would become more affordable to the next rung down, etc.

Except that’s not the reality. The reality is that a large chunk of the market (as much as 25% in some areas) is speculative in the form of PE-owned inventory and rentals. It’s not used as shelter, it’s used as a vehicle of growing capital. When that’s pointed out, suddenly economists blame the very same people who can’t get onto the “property ladder” for failing to “compete in the free market”.

In a vacuum, their original idea makes sense. In reality, it’s heavily exploited for the gains of those already on the ladder at the ongoing expense of those they actively prohibit from joining them. It’s societal exploitation leveraging the singular most basic human need after food and clean water: shelter.

[crazygringo]

> The reality is that a large chunk of the market (as much as 25% in some areas) is speculative in the form of PE-owned inventory and rentals. It’s not used as shelter

This is false.

It is absolutely used as shelter. It's used for renting. Investors don't generate just sit on housing and leave it empty (unless they're remodeling it or something).

Also it's not mostly private equity -- that's a tiny percentage. It's mostly small investors, like a mom and pop who own and rent two other homes to help fund their retirement.

Investors are not taking away living space. And many areas don't have enough rental properties (remember, not everyone wants to own, especially people on a short-term job or relocation), so conversion to rental helps here and brings down rental rates (as happens whenever supply increases).

[lokar]

But (the sound) financial models that lead PE and others to this investment are built around the assumption that supply will be artificially limited. If you build enough they will see reduced returns and back off.

[stego-tech]

Except those firms currently have enough money to lobby politicians to oppose any changes that would meaningfully increase supply, and also hold outsized stakes in the companies and suppliers who would build said stock.

It’s a rigged game top to bottom. A free market would’ve fixed this years ago, but this is not a free market anymore. The difference is I advocate control of necessity markets returning to government regulations around availability and affordability, while luxury markets remain relatively untouched.

Housing is a necessity. No market god is going to fix it.

[lokar]

The political system is particularly susceptible to capture and unfair policy when the public is disengaged and poorly informed (as the paper describes). It makes it very easy to business to get their way.

The solution is the (hard and slow) work to engage and educate voters.

[stego-tech]

Yup, but I also take the tact of educating the current winners of the increasing cost of their inevitable loss when the pendulum swings the other way. Pre-pandemic, the “loss” of home valuations might’ve been 10-15% in many areas once supply was increased and made available to homebuyers; post-pandemic, that loss could be as much as 50% depending on where you bought and what the actual local demand is. That results in fiercer resistance against change that would improve the problem even a modest amount, because now they have more to lose.

As I learned watching Union vs Non-Union labor interactions, it’s exponentially cheaper to do the right thing sooner than being forced to do a compromise thing later. The fact the crisis has gotten so bad that there’s campaigns for national rent control schemes and “homeownership as a human right” legislation means they have already lost by not doing the right thing sooner. Once organization happens, you’ve lost the game.

The rest is just time.

[lokar]

I agree, any change that causes sharp drops in real (inflation adjusted) prices will be a problem. I think the best we could hope for is a long period of gradual decline (when including inflation, so perhaps a slight increase in nominal prices).

This problem took (in some places) 30+ years to create, it won't be fixed quickly.

[dkarl]

> The solution is the (hard and slow) work to engage and educate voters.

It is indeed hard work, especially if you want to influence people who aren't engaged in politics to vote. I find that people who aren't engaged with politics are most receptive to extreme messages that discourage them further. They're all ears if you tell them that the system is rigged and it's impossible for people to defeat the corporations or the elite. It's much harder to convince them that voting matters.

[lokar]

IMO, the best long term strategy is to improve the basic infrastructure of democracy. Non-partisan districting, single election rank choose voting, etc.

[BobaFloutist]

>and also hold outsized stakes in the companies and suppliers who would build said stock.

Wouldn't that motivate them to build more?

[jeremyjh]

Do you realize your argument boils down to “increasing supply doesn’t reduce housing cost because we don’t increase the supply”?

[stego-tech]

Yes, because unlike every single detractor here I’m not distilling a complex argument full of nuance into a “1+1=2” baby-splaining session.

Let me put it into simple numbers the detractors can understand:

I build ten homes in a market that needs a hundred. I price them affordably because I’m not an asshole and understand there’s a crisis.

* Statistically speaking, 25% of those homes will be bought by PE or REITs. I cannot deny them the sale because the law says so. Let’s round that up to three homes out of ten. Those homes may be rented out at market rate rent, which is far higher than the mortgage would have been, which doesn’t reduce pricing or improve supply - rent remains high because these groups have data to keep rent that high, and supply remains constrained because a fourth of my inventory just got sold to profiteers instead of people.

* Of the remaining seven homes, all are likely sold to actual people. Due to bidding wars and my obligations to shareholders however, I have to take the highest bids. Because of anti-discrimination laws, I can’t sell to underserved minority groups because that’s considered discrimination. So a plurality of owners will be higher net worth individuals, many of whom likely already own property.

* Because we’re in a housing crisis and everyone wants money for doing nothing, it’s likely that about half of the new homeowners won’t outright sell their existing home, but instead rent it out at or near market rates set by PE/REITs. They want that cash after all, and know there’s a lack of supply. Because their old homes aren’t being added to the market for sale, this doesn’t apply negative pressure on housing prices since a home for rent is not a home for sale

* So now we have just three homebuyers left who bought their only home, aren’t renting it out, didn’t have prior equity, and almost certainly overpaid for what was on offer. This places them in a precarious environment where a job loss could lead to eviction or having to sell the home - but because they’re in the midst of a crisis, they can likely get a quick cash offer from a PE/REIT without actually putting the home on the market, making their problems disappear and putting them back as renters. Maybe one to two homeowners are affected by this.

So out of ten homes built, only three go to people not already on the property ladder in some form, and of which as many as five are likely to end up in the hands of an investor at some point anyway. Ten homes for a net gain of five purchasable properties is not a meaningful increase because the market, government, and tax incentives value less supply and more demand.

[amanaplanacanal]

Don't those other five now become more rental stock though? This is still 10 homes that didn't exist before, as 5 owner occupied, and 5 new rental properties.

Sounds like a great outcome! Let's do that some more.

[AnimalMuppet]

If I build 4 houses, and someone speculatively buys 1 house, I've still added 3 to the housing supply.

As a solution to the housing shortage, building new is 25% inefficient? Great, it's 75% efficient. That's not bad for a solution. So let's do it, in volume, and actually make a dent in the problem.

And for the builders, they don't care. A speculator bought that house? It payed me just the same. But even better, the demand is still there, so I should build another one.

[stego-tech]

Again, ON PAPER your math works because you’ve narrowed down the problem to a conveniently limited set of variables that, in a controlled experiment, would produce ideal outcomes. And just like physicists keep learning time and time again of late, just because the math works on paper doesn’t mean the thing is real.

Yours (and every other detractor trying to eSplain Econ101 and market forces to me) ignores the complex realities of the marketplace. It ignores tax structures that benefit demographic groups over others in homebuying and wealth accumulation, incentives to hoard property for passive income through rent in lieu of releasing the property onto the market for sale, tax savings for owning secondary properties or rolling over capital gains, regulations that make teardowns harder until the structure is condemned and thus constrict supply, of homeowners who will go to extreme lengths to preserve paper valuations instead of building more housing.

Taken as a whole, with all the variables, and it’s readily apparent that it’s not “simply” a supply and demand issue.

[epistasis]

There's theory and there's data, and both agree that building more housing lowers prices.

Sure, take care of all that other stuff too, but the data does lot match your theory, and it does match what you call "Econ 101." And I would point out that you haven't even attempted to show that these other things come close to cancelling out Econ 101 effects, you merely have hand waving on the theory without any substance.

[sagarm]

> hoard property for passive income through rent in lieu of releasing the property onto the market for sale

If the properties are being rented, they are providing shelter. They haven't been "removed" from the housing market.

Your point was not immediately clear, so forgive me if I misunderstood.

[amanaplanacanal]

Even if 25% are sucked up by speculators and not rented out, just left empty (which I don't believe), that still gets you 75% as increase to the housing supply.

[whall6]

Curious for the source on the 25% figure if you wouldn’t mind sharing.

[stego-tech]

It was a series of studies earlier this year that made media rounds; searching for “Wall street housing 25%” returns a myriad of results from mainstream sources citing a number of different studies and papers:

https://fortune.com/2025/07/08/investors-buying-25-us-homes-...

I’m on mobile and can’t dig into total ownership figures at the moment, but I do know that in the sunbelt states property acquisition by investment firms has been a real issue. Even slumlords are getting bought out at top dollar, and affordable housing is increasingly just a trailer rented on land owned by - you guessed it - PE or REITs at consistently inflating rents.

[whall6]

Is this housing that they are purchasing just being sat on? I would think that these are being purchased to be rented out (thereby still increasing housing supply), not just held. Homes are depreciating assets.

[stego-tech]

In the sunbelt, they buy it, jack up rents, evict tenants, and basically turbocharge being a slumlord until they find new buyers for more than what they paid. Due to supply constraints, they often succeed in this process (which repeats under new landlords) multiple times before the market becomes too pricey and further increases aren’t tolerated (which is why organization is on the rise - the rent is too damn high for no valid reason). On paper, yes, the homes should devalue, but take a look at places like New England where absolute shitholes can fetch half a million dollars and it becomes clear that property depreciation is happening far slower than pricing inflation.

[amanaplanacanal]

Sounds like they need more housing stock. At some point, if you keep building, it will no longer be profitable for speculators to do that.

[sagarm]

Buildings depreciate, but land does not.

[ch4s3]

That isn't a study, its just an article in fortune that says

> Nearly 27% of all homes sold in the first three months of the year were bought by investors

That isn't PE firms, it's all investors meaning anyone who isn't planning on living in the home. Most investors are regular people who own 2-3 properties.

[tempestn]

Vacancy taxes seem like a reasonable solution to this problem.

[stego-tech]

They are one of many pragmatic solutions, though I’d strongly argue cities skip right to forced-divestiture schemes of vacant units for owners and landlords alike. We have a homelessness crisis, and if you own a property that’s vacant nine months out of the year in a major metro then that should be forcibly sold off, incur steep tax penalties, or be rented out at fixed rates and long leases if you want to preserve ownership.

[kube-system]

There is not some epidemic of vacant rentals driving up prices. Vacancies right now are right around the long-term norm, 7%. Home vacancies are actually near all-time lows: 1%.

[stego-tech]

** right off. If I’m in a downtown metro near any newer development at night - rentals or owners - they’re largely dark and empty with little to no signs of life.

Your statistics are damned lies to those of us observing lived life in our cities. Nobody is hand-checking every single unit out there for accurate statistics on housing utilization, it’s all self-reporting.

[kube-system]

1. your anecdote isn't data

2. usually things are quiet at night because people go home and/or bed

3. the only places i've been to where the nightlife is in a neighborhood called "downtown" are small towns

4. my anecdotal data contradicts yours

[epistasis]

People lie about high vacancies in new buildings almost compulsively.

There was a big splash of PR for a report on high vacancies in new LA apartment buildings a few years ago, and it had to be retracted within a week because the methodology was pretty much nonexistent, like counting lights in windows at night and not realizing that people visit friends, go to concerts, go out to eat, stay at their girlfriend's place, or any one of many other things that keeps lights off in occupied apartments.

I see it with every single new multistory building in my small downtown. People complaining about a building being fully empty shortly after it has been built, when in reality it's filling up faster than planned and there are only 20% of the units left.

Yes, there are lies, but in my experience the lies are only for too many vacancies.

[kube-system]

Those speculative investments only make sense in a world where it is expected that supply will not keep up with demand.

[stego-tech]

And when your PE firm owns significant share of homebuilders, owns large tracts of land, and owns politicians, lobbying groups, think tanks, and economists, then you can effectively game the market to maximize your personal returns at the expense of everyone else.

They wouldn’t be buying 1 out of every 4 homes and bankrolling schemes to “unlock homeowner equity” (HEOCs, reverse mortgages, etc) if they thought this would be a resolved issue anytime soon. That’s exactly why government needs to get involved and force divestiture.

[bluGill]

Fortunately homebuilders include a lot of private companies and so they can't do that.

[energy123]

  > "All these developers are building is just expensive new luxury apartments"

I've recently realized that any argument that contains the word "just" can be discarded.

[gorfian_robot]

I see those going up all over the US West. I know people who live in a few. Always feels like they live in a mid-range hotel. IDK why anyone would want that.

[kube-system]

Yeah, the point is that new apartments are ... new apartments. "luxury apartment" is meaningless marketing copy that every developer uses for every apartment building. What is marketed as a "luxury apartment" today will just be a "regular apartment" in 20 years.