Reply to The Daily episode on the housing crisis

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[quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous]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). [/quote]

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.[/quote]

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. [/quote]

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 [url=https://jesse-rothstein.com/wp-content/uploads/2024/01/Location_2023Aug.pdf]latest research[/url] 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.[/quote]

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. [/quote]

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.  [/quote]

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