The Daily episode on the housing crisis

[Anonymous]

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Anonymous wrote:Did they bother to address the fact that housing has become commoditized thanks to corporations, hedge funds, and regular people like you and me buying multiple homes and renting them out (whether as airbnbs or more traditional rental properties)? Because that’s the real culprit. Hedge funds and corporations own entire neighborhoods in certain areas. They literally come in a buy up nearly an entire new development and then have the power to set the new fair market value.

What about immigration?

What about foreign nationals who live abroad but buy homes in the US for investment purposes? ICYMI: Canada realized this was ruining their housing market and has taken steps to address it. Too little too late once people and corporations own property, but at least they got the memo.

Building more affordable housing is important, but it’s an exercise in futility unless there are strict restrictions on who can buy the housing and who must actually live there. The MoCo MPDU approach is one example (not perfect, but better than nothing).

They touched on the commoditization issue but it wasn't the focus. I agree I would have liked to hear more on this. Especially because their focus was on markets that recently had very affordable housing (they do a deep dive into Kalamazoo) but have recently seen a huge run up in housing costs as people from other places have started entering those housing markets. The show makes it sound like it's mostly people moving to these markets but as someone who knows a lot of people who work in real estate development I'm pretty confident that a lot of the people buying up housing in this market are investors who do not and will never live there.

Like they interview a couple in Kalamazoo who were displaced when the duplex where they were renting a unit was sold. They ultimately find housing but it is more than double what they'd been paying because they are forced into a new build rental (modular home I think) and they can't find anything like the older rental they'd been living in. This was a dual-income couple with decent working class jobs and now most of their income is going to housing and they can't save and have to watch every penny. It's depressing.

But they don't talk about who bought the duplex. Sure it might have been a family moving from Detroit who bought it to live in and rent the extra unit. But I think odds are good it's a real estate investor who bought it and will do a cheap flip with "luxury look" finishes and then rent it out for 3-4x the prior rent. Or turn it into an Airbnb. Because you see that a lot.

I think most people are aware that speculators and investors started buying up properties in the Dallas metro area before it became hot. They bought multiple SFHs and practically entire neighborhoods @$200k and now thanks to their “investments” they drove the housing market to a frenzy where you must be an all cash buyer prepared to pay $600-800k+ for the basic 3 bdrm sfh. Entire neighborhoods have been flipped to rentals mostly owned by corporations, hedge funds, and foreign investors (mostly Asian).

Once the system has been commoditized, it’s broken and nearly impossible to fix. Building more housing won’t fix the problem since the same investors are best positioned to pay cash immediately.

The pp who said we need to ban foreign investors and dump the tax credits isn’t going far enough. It won’t work. The foreigners will set up shell companies and the reality is the tax credits aren’t fueling the individual investors—it’s quite lucrative to generate income from rentals and periodic flips or sales.

Switching gears: plopping duplexes into established neighborhoods like MoCo is proposing won’t fix the problem either.

The Feds are perhaps the only employer equipped to move the needle by shifting offices to lower-density cities/states to attract people away from the major metro areas. Better yet: force the Amazon’s of the world to plant roots in Kalamazoo instead of NoVA.

Agree with many of the points made here but strong disagree with the conclusion. There is a long literature in economics demonstrating that agglomeration happens because people are more productive when they are in proximity to each other. The evidence also suggests that, on net, they prefer the amenities of large high cost metro areas. For example, some of the latest research shows not only that educated workers are more productive in cities, but also that the increase in housing costs more than swallows up their wage gains. This is another way of saying "even with lower salaries in <lower cost smaller city>, I could buy a nicer house there, but I choose to live in <high cost city> because I like _____." Lots of ways people fill in that blank: things to do, places to eat, hobbies, professional networks, larger dating pools, etc.

Pushing firms and industries to de-agglomerate would be very costly, because we would lose the productivity gains from clustering people together. And, even if de-agglomerating successfully reduced housing costs as a % of income, many people would be worse off, because they would lose all the things that they were filling in the blank above with before.

We need to build more housing in our high-wage metro areas, and that's only going to happen when we either find better ways to incentivize municipalities to pull their weight in the housing market, or when we take some amount of control from them altogether.

Disagree. Strongly.

That premise assumes everyone must live near a Tier 1 city.

The reality is we now have ghost towns surrounding Tier 2 and 3 cities that desperately need revitalization.

I’m looking at this through the lens of the greater good and the people living in under-resourced communities.

Yes, people obviously prefer to live in places like the dc metro area where we have access to perhaps the best healthcare in the nation… but the solution isn’t to build more housing here. Rather, the solution is to revitalize and invest in other areas to make them more desirable. The Dallas metro area is a prime example…look at Frisco. If you build it, they will come. Now do that in Detroit, Kalamazoo, Knoxville, etc.

You think you understand the issue, but you have it backwards, and your examples are wild. Dallas area has been growing like wildfire for 70 years because people like warm weather areas, and zoning controls in Texas are weak compared to most other places. It was also driven by oil/gas money for a generation. People didn't just go there for no reason- it was because there were jobs.

The article is literally about Kalamazoo and how even there they are having issues because of limited supply. Knoxville is kind of a wild example- it's a booming college town that has a huge jobs magnet that is already pushing up the cost of housing considerably.

Developers want to make money and decrease risk. They follow job growth, not the other way around. The reason rural areas are depopulating is because agricultural work has been becoming more mechanized for the last 130 years.

The explosion in Dallas (and Frisco and random even far out burbs) is most certainly not oil related—or warm weather related. The housing prices in far flung burbs have exploded in the last few years. Success breeds success, but entire new sfh neighborhoods are being snatched up by private equity investors, etc.

I’m not fixated on developers; rather, I’m focused on the investors who have destroyed housing markets across the country. More housing doesn’t fix the problem precisely because individual buyers can’t compete with private equity firms, hedge funds, and even regular investors who operate in cash.

Speculators skewed the housing market in the RGV, betting on Elon Musk’s venture bringing jobs. The jobs never came but the housing market was screwed up nonetheless.

I know these large investors are easy bogeymen, but they are not driving the market anywhere.

https://www.rentalincomeadvisors.com/blog/hedge-funds-single-family-homes

If you lived in the Dallas metro area and were stuck renting for years, you’d understand who owns what. And if your realtor friends in the area disclosed what they’ve been dealing with, you would understand.

Ever seen an entire new sfh neighborhood bought by a single investment group to flip to rentals? It’s happening.

[Anonymous]

My family tried to sell land to develop into housing. The county blocked us. They had a moratorium on housing construction for years. We have thought about trying to sell now that the moratorium is lifted, but it would be an uphill battle. So we gave up and the land is just sitting there, vacant. That could have been a couple hundred houses.

[Anonymous]

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Anonymous wrote:There are plenty of affordable areas of the country to live.

I think you are missing the point. There was an article recently about some random town in Michigan…probably an affordable area in your eyes.

Well, the median price has doubled in just the last 5 years because of people selling from high cost area and moving there. Great for them, but now the locals are priced out.

Now they have a homeless problem…mainly due to local jobs not paying enough and rents increasing as much as owning.

It cascades.

Then these priced-out people need to move to an even cheaper town/city/zip code /state. Their inertia and lack of hustle is not a “crisis.”

There are vast, vast swaths of the United States that have plenty of homes and these do overlap with adequate jobs.

Domestic migration is a tradition in the US, or it used to be.

If your rent goes up to the point you can’t afford it, and you have no specialized skills keeping you tied to, say, semi-coastal Maine, then you need to move inland. Or to upstate NY. Or Iowa.

All of these places are looking for certified nursing assistants and have low rent options. You’re not entitled to Camden or Knoxville.

Every place needs people to fill lower income jobs, and those people need somewhere to live.

[Anonymous]

Anonymous wrote:
So do we really think there would be no encampments in DC if there were multiple homes that costs under $250,000? $150,000? $75,000?

No, of course not. Homeownership is not possible for many. However, living in unneeded office buildings and sharing a bathroom for very reasonable rent would indeed shrink the encampments.

But don’t most homeless, at least DC homeless, say they would prefer the tent over say a shelter? What would be different? And many housing projects for lower income become no-man’s land over time. How do you prevent this?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote: There are simply not enough units. I saw many buildings in small suburban and rural areas being bought up by people from big cities who saw they could buy low and rent high, and due to demand they can get by with making little to no improvements. Imagine living in a 10 or 20 story building without a working elevator and being disabled, elderly, or with a young child….It’s now the norm.
The competition for the available units is fierce. 3x monthly income of rent and very good credit score, and that is still not enough.
The old mom and pop owners can’t keep up, and often turn to property management firms that charge more than expected and force them to raise rents.
We need more housing. Period. Especially centrally located urban area where people can walk to stores and transit. I know it’s not easy to convert office buildings, but it must be seriously considered to alleviate the problems.

It's being seriously considered everywhere because its an easy idea that doesn't piss off people already living in residential areas. It basically doesn't work unless you can charge super high end rents. The conversion costs are so high that the vast majority of office buildings don't work economically to convert to apartments. Not saying it isn't part of the solution, but it's like 5% of it.

I think it's also just a longer term solution that is evolving. I do think ultimately if work trends hold that it will fundamentally transform what urban cores look like with fewer office buildings and more housing and tourism. I think in DC for instance people would love to waive a magic wand and change the composition of downtown to tilt more heavily toward apartment units and hotels because with WFH these uses would produce more people on the streets and thus more business for restaurants and retail. The loss of daily office workers has had a brutal ripple effect on all the businesses who who used to serve the office workers and it creates a downward spiral.

However as you said converting office buildings to housing (or hotels) si not a quick or inexpensive fix. In most cases it involves a total gut and rebuild and some buildings will never be suitable for housing because of the structure itself. This is a project that could take 20 years. But people want solutions to both the housing shortage AND the impact of remote work on urban centers right now. It sounds good but unless we develop better methods for conversion it's not a right now solution.

There is also the risk that remote trends aren't as permanent as some think and that demand for those downtown office buildings could return sooner than people think. I work in strategy consulting within several private industries and there's not a consensus on this -- you would be surprised at how many people (including younger people who were previously a lot more enthusiastic about remote work) are souring on how it's impact workplace culture and morale and think it greatly diminishes the quality and enjoyment people take in their work. For some industries I think remote work is here to stay but for a surprising number of people in industries like law and finance there is a growing unhappiness with it as it currently functions.

I don't think anyone wants to return to the office 5x a week unless their living conditions are terrible. When young people say they want to be in person it's primarily because they want to have some social lives and go somewhere fun during the day for change of scenery. Totally expected. But they don't want to spend all their days in chaotic open floor offices or dreary cube farms, they want flexibility and using offices primarily for social interaction and collaboration work. This won't create enough demand for sprawling office floors where every employee gets an assigned desk, companies wont' pay for empty desks. I can see companies returning back to smaller offices and reducing footprint, which will still leave huge inventory of unused office buildings.

I'd say each building can be evaluated for plausibility of conversion and the buildings that absolutely cannot be practically converted should remain as office buildings and every other office building that can be converted should be prioritized and converted. The problem is that resulting housing wont' be affordable. Nothing can be affordable if MAINTENANCE costs a lot of money with labor/materials costs. Construction costs are also high as is land in premium locations everyone wants. Affordable units would have to be tiny. Micro-appartments for single people as well as dorm like units with shared kitchens might be the future of affordable housing for singles not earning much who want their own units and not have roommates.

[Anonymous]

Anonymous wrote:

Anonymous wrote:
So do we really think there would be no encampments in DC if there were multiple homes that costs under $250,000? $150,000? $75,000?

No, of course not. Homeownership is not possible for many. However, living in unneeded office buildings and sharing a bathroom for very reasonable rent would indeed shrink the encampments.

But don’t most homeless, at least DC homeless, say they would prefer the tent over say a shelter? What would be different? And many housing projects for lower income become no-man’s land over time. How do you prevent this?

The only way is to go back to asylums where there are workers taking care of people with severe mental issues rendering them not able to function and take care of themselves or drug rehabs and some communal living. A lot of these people cannot live in normal units that require residents to take care of their housing, kitchens, clothing, garbage, toilets, etc. They need nannies.. It's the unfortunate truth. People who can pay market rates don't want to be around any type of degeneracy and will flee if you put lower income housing for people who cannot maintain their housing or behave in a way not disruptive to people accustomed to having choices of nicer housing.

[Anonymous]

There is no housing crisis, there is only an entitlement crisis. People expect houses to be way larger than before, they want fancy kitchens, his and hers closets, a separate bedroom for each child. Expectations have become completely detached from what the average person can realistically afford. This is a giant ruse by developers and the real estate lobby.

[Anonymous]

Anonymous wrote:

Anonymous wrote:
So do we really think there would be no encampments in DC if there were multiple homes that costs under $250,000? $150,000? $75,000?

No, of course not. Homeownership is not possible for many. However, living in unneeded office buildings and sharing a bathroom for very reasonable rent would indeed shrink the encampments.

But don’t most homeless, at least DC homeless, say they would prefer the tent over say a shelter? What would be different? And many housing projects for lower income become no-man’s land over time. How do you prevent this?

Institutionalize them. Many of them do not want to get better. They are unwilling to work and constantly addicted to drugs. They are a safety threat to everyone else.

[Anonymous]

Anonymous wrote:There is no housing crisis, there is only an entitlement crisis. People expect houses to be way larger than before, they want fancy kitchens, his and hers closets, a separate bedroom for each child. Expectations have become completely detached from what the average person can realistically afford. This is a giant ruse by developers and the real estate lobby.

This is wrong because we actively want a small starter home and don't care about big closets or a bunch of bathrooms or a big kitchen. We are fine with something 1200-1600 ft and don't need it to be updated. But what I'm describing will cost you 500-600k in the DC area. There are a handful of places where you can get it for under 500k but they have horrible schools and we want at least okay schools.

The problem is that houses like that haven't been built in 30 or more years builders can make a lot more off high end, huge homes). The ones that are out there get gobbled up by developers who will tear them down and replace with a 1.5m new build. And the demand for land by these developers drives up the price across the board. If you can even get one of these houses at all-- lots of people coming in with all cash offers or willing to waive contingencies because they intend to tear it down anyway.

So yeah actually there is a housing shortage that is unrelated to some people wanting extravagant houses that are also magically cheap.

[Anonymous]

Anonymous wrote:

Anonymous wrote:There is no housing crisis, there is only an entitlement crisis. People expect houses to be way larger than before, they want fancy kitchens, his and hers closets, a separate bedroom for each child. Expectations have become completely detached from what the average person can realistically afford. This is a giant ruse by developers and the real estate lobby.

This is wrong because we actively want a small starter home and don't care about big closets or a bunch of bathrooms or a big kitchen. We are fine with something 1200-1600 ft and don't need it to be updated. But what I'm describing will cost you 500-600k in the DC area. There are a handful of places where you can get it for under 500k but they have horrible schools and we want at least okay schools.

The problem is that houses like that haven't been built in 30 or more years builders can make a lot more off high end, huge homes). The ones that are out there get gobbled up by developers who will tear them down and replace with a 1.5m new build. And the demand for land by these developers drives up the price across the board. If you can even get one of these houses at all-- lots of people coming in with all cash offers or willing to waive contingencies because they intend to tear it down anyway.

So yeah actually there is a housing shortage that is unrelated to some people wanting extravagant houses that are also magically cheap.

You are living in fantasy land. It's not even possible to build a new house that is 1600 sq feet for under 500k anymore in an area like DC. Even if the land were free you would not be able to find someone to build you a house for this price, (including site prep). Also, the median household income in the DC metro area is high enough to afford something that cost 500-600k, so it is not realistic to make a below average income for this area and expect to be able to afford to live in a the best school district.

[Anonymous]

Anonymous wrote:We could probably solve the housing "crisis" just by allowing more office workers to be 100% remote. Imagine if people weren't chained to their jobs in about a dozen big cities.

I think you are missing the point that remote workers is a major cause of the housing crisis.

[Anonymous]

Anonymous wrote:Solutions to "crisis":

-- Ban foreign ownership of real estate
-- Eliminate all federal tax deductions on homes that aren't people's primary residences

Once you realize that our country is set up to benefit corporations and the wealthy, you'll realize that the "crisis" is intentional and works to their benefit.

+1

[Anonymous]

Anonymous wrote:

Anonymous wrote:There is no housing crisis, there is only an entitlement crisis. People expect houses to be way larger than before, they want fancy kitchens, his and hers closets, a separate bedroom for each child. Expectations have become completely detached from what the average person can realistically afford. This is a giant ruse by developers and the real estate lobby.

This is wrong because we actively want a small starter home and don't care about big closets or a bunch of bathrooms or a big kitchen. We are fine with something 1200-1600 ft and don't need it to be updated. But what I'm describing will cost you 500-600k in the DC area. There are a handful of places where you can get it for under 500k but they have horrible schools and we want at least okay schools.

The problem is that houses like that haven't been built in 30 or more years builders can make a lot more off high end, huge homes). The ones that are out there get gobbled up by developers who will tear them down and replace with a 1.5m new build. And the demand for land by these developers drives up the price across the board. If you can even get one of these houses at all-- lots of people coming in with all cash offers or willing to waive contingencies because they intend to tear it down anyway.

So yeah actually there is a housing shortage that is unrelated to some people wanting extravagant houses that are also magically cheap.

This. My neighborhood of affordable-for-DC-area (400-600k) 1950s cape cods etc is slowly being torn down and replaced with enormous 1.4 million dollar houses.

[Anonymous]

Anonymous wrote:Did they bother to address the fact that housing has become commoditized thanks to corporations, hedge funds, and regular people like you and me buying multiple homes and renting them out (whether as airbnbs or more traditional rental properties)? Because that’s the real culprit. Hedge funds and corporations own entire neighborhoods in certain areas. They literally come in a buy up nearly an entire new development and then have the power to set the new fair market value.

What about immigration?

What about foreign nationals who live abroad but buy homes in the US for investment purposes? ICYMI: Canada realized this was ruining their housing market and has taken steps to address it. Too little too late once people and corporations own property, but at least they got the memo.

Building more affordable housing is important, but it’s an exercise in futility unless there are strict restrictions on who can buy the housing and who must actually live there. The MoCo MPDU approach is one example (not perfect, but better than nothing).

Corporations/ hedge funds etc own virtually none of the single family housing stock in the U.S. Less than 1% nationally and that is centralized in markets nowhere remotely close to us.

https://www.resiclubanalytics.com/p/2-maps-show-momandpops-institutions-homes

[Anonymous]

Investor-owned homes hit their peak in December 2022, accounting for 28.7 percent of all home sales in America. Per MetLife Investment Management, institutional investors may control 40 percent of U.S. single-family rental homes by 2030.