19% of California houses are owned by investors(ocregister.com) |
19% of California houses are owned by investors(ocregister.com) |
I mention that because I remember reading during the pandemic that institutional investors generally make shittier landlords: they're quicker to evict, quicker to raise rents, less likely to work with a tenant on a payment plan, and they have fewer ties to the community. There was a concern that with all the eviction moratoriums during the pandemic that large landlords could wait it out, while smaller landlords got screwed and got out altogether in some cases, leaving their housing stock to be gobbled up by the shittier institutional landlords.
Always gets me is the ideological contortions people will get up to in order to not face that California is short a couple million units of housing. Really the US has been investing in looting schemes and not in build out for the last 40 years.
On the other hand, during the upswing in prices, house flipping in California was really popular with investors because the (then) low interest and likely capital gain made things easy.
The headline is true and relevant if you are wondering how investors influence housing prices - with a 20% share, clearly investors influence prices a lot. Moreover, California is where the housing bubble began but it's quite logical it's no longer where the bubble is concentrated so again 20% doesn't imply investor ownership is unimportant.
To understand the meaning of this, consider that supply/demand curves are naturally non-linear and even 5% increase in demand can double the prices.
Nothing else ("% of housing owned by investors"?) is even close.
edit: Yes, obviously I included a time lag (3 years).
[1] https://constructioncoverage.com/research/cities-investing-m...
[2] eg, https://www.zillow.com/home-values/10221/austin-tx/#/
"Most of California’s single-family house investors are “mom and pop” types, according to BatchData.
Small-fry owners, with up to five properties nationwide, control 91% of California investment houses.
The rest is divvied up this way: Owners of six to 10 houses control 4% of California investment houses. Investors with 11 to 50 houses own 3% of this Golden State housing group. And 51 or more? Only 2% of investment houses."
From the article:
> By this math, 19% of California houses were owned by investors, ranking No. 36 among the states and just below the 20% national norm. By county, tiny Sierra has the most (83%) and Ventura the least (14%).
This might undercount (if owners don't file the form) or overcount (tax fraud or error), but there's financial incentives to get it right on both sides, so it's probably fairly accurate.
The link to the original source is paywalled.
Simply looking for properties owned by corporations will get you really close.
> 19% of California houses were owned by investors, ranking No. 36 among the states and just below the 20% national norm.
States with the highest share of investor-owned houses:
> Hawaii at 40%, Alaska at 35%, Vermont at 31%, West Virginia at 30%, and Wyoming at 30%.
States with the lowest are all in the Mid-Atlantic and lower New England:
> Connecticut at 10%, Rhode Island and Massachusetts at 12%, and Delaware at 13%.
Why so low in California (again, I'm baffled that this is "low")?
> the sky-high price tag for single-family homes, the third-highest nationally at $866,100
Maybe stable white color employing businesses mixed with a constant out migration of younger people, more likely to be renters, to the coasts?
A majority of people own real estate, so they're happy with the status quo. Why would you put up with even the slightest personal inconvenience from added housing, if all it got you was a reduced value of your property?
California has a massive housing problem, which is just not building enough houses. Doesn't matter much to me who owns them.
This indicates some broken market dynamics to me. Entities with more capital are having property sit unoccupied, decaying slowly, paying property taxes, because they are betting their self-interested reward for doing so outweighs the risk.
I realize this doesn’t generalize to the entire housing stock, but it sure seems vulgar to me.
Various stats put the ratio of owner-occupied residences to renter-occupied residences at roughly 70% to 30% (https://www.apartmentlist.com/research/rent-statistics)
Since only 40% of those "owner"-occupied homes have their mortgages paid off, that means the bank owns the other 60%.
Doing the math, this means only about 28% of people actually own the place in which they live. The other 72% is owned by banks, investors, landlords, etc.
That fully 20% of homes in California - intended to be owned by families or individuals as their primary residence - are instead served out as rentals, and this is a low percentage compared to other states, is a massive indicator of the one the key issues facing Americans:
We don't own anything. Not even our own homes. Not even our lives, which we sell to others at a discount as "labor".
When we don't own anything, we have no stability. When we have no stability, we live in a constant state of uncertainty, which is just another word for "fear". Fear makes us act desperately or angrily or selfishly.
And the people who run everything use that fear to manipulate us into agreeing to be exploited by them - to work for them, vote for them, worship with/for/on them, etc.
If you actually want peace and freedom and liberty and all those things Americans claim to care about, we need to start by building stability in our lives.
That starts by taking back ownership of those things that belong to us through our efforts. The mortgage companies provide zero value to homeowners - they simply gate who gets to live in a home vs. who must pay for a rental, which is even more unstable.
Replace hierarchies with cooperatives. Stop using money as the exclusive determining factor of whether someone is housed, fed, clothed, or cared for.
Desperate people make lousy workers - ask any power and money pervert who believes in this system how hard it is to find good indentured servants who will just obey without complaining.
Stable, cared for people make excellent workers - fear may be a motivator, but gratitude is an even greater motivator. When people are stable and able to relax, they are more often willing to contribute toward keeping that stability. You see this when people who have "free" time spend it volunteering for their community.
If that stability comes at the expense of others, however, it's inherently unethical and leads us back exactly to the situation where we are now - where some people gain stability by manipulating others into working for them and stealing from them a significant portion of the value they create.
I'd like to see zoning opened back up for increasing density wherever it's needed, but I would also like to see a strong social housing policy.
Or maybe I am misunderstanding what "issue" you're referring to?
Regulations block new supply. If this cannot be overcome, why not add another regulation that private equity cannot own houses? There's no reason they should not be subject to CAs extensive regulations too.
Homeowners here would just love to spend a year workshopping regulations to prevent investors from buying homes. They know that those regulations would do nothing at all to address the scarcity that drives their home prices, and wouldn't result in them having to adapt to large numbers of new neighbors.
It's the exact same reason they obsess over inclusionary zoning ordinances (IZOs). Affordability is so important! That's why we need new, toothier regulations to ensure that no new housing projects here can ever pencil out for the developers.
PE is a complete sideshow. The root cause of the housing crisis is exclusionary zoning.
On what land? With what planning permits?
Build more housing, and "predatory" landlords will have more competition. The endless restrictions on residential construction are the root cause, not your envy of wealthy individuals.
Side point: There are many people who are in no position to own a home or have one built for them. Where do they live if there aren't any landlords?
> Most of California’s single-family house investors are “mom and pop” types, according to BatchData.
> Small-fry owners, with up to five properties nationwide, control 91% of California investment houses.
> The rest is divvied up this way: Owners of six to 10 houses control 4% of California investment houses. Investors with 11 to 50 houses own 3% of this Golden State housing group. And 51 or more? Only 2% of investment houses.
I’ve owned the house long enough that I’ve had several tenants churn out when they buy their own houses.
This doesn’t feel like a policy failure, IMO. Renters have the option to live in a free standing home while they save for a down payment, and “investors” have an incentive to increase density/add to the housing stock.
Not everyone is at a point in their life where it makes sense to own a home. It feels weird making a judgement that these people should be required to live in apartments.
California incentivizes holding onto real estate with prop 13, which caps property tax increases to 2% per year for the entire time you or your beneficiaries own it. There are people paying less than $10k per year property tax on $3M+ properties, and they can rent for $7k+ per month.
Look at it in a historic or idealized context.
Personally I would say that is is a lot, and also too much - people tend to be less indifferent about things they own.
The real issue with CA real estate is prop 13. It directly disincentivizes selling your home as you would be paying significantly higher taxes on the same house (same value etc) somewhere else.
So if you do own a home, you’re much better off keeping it and renting it out rather than putting it on the market. The only thing stopping one from doing that is needing the home value itself as the down payment for their next residence. But even that can be avoided by getting a line of credit on your original house.
If you want to fix CA real estate, scrap prop 13, force granny to sell and move to the boonies (to avoid the massively ratcheted property tax she will now be paying), and you’ll have a massive supply of homes for sale.
Prop 13 massively distorts the market and creates large disparities in what two neighbors may be paying. It essentially ensures that you cannot live where you were born, breaking up families and hurting communities.
It's clearly interesting to speculate the ideal solution on the Internet, but after having been here 10+ years I worry that it's just never going to get better.
I wouldn’t even be interested in a house. Just give affordable cookie cutter apartments in a 50-floor building somewhere.
I don't want to be forced out of my home because the neighbors paid too much for theirs raising my "property value" and tax assessment.
Sounds callous.
I would focus first on banning the use of homes as investment and permitting mixed-use, medium- to high- density construction (with something like 15 min city as a point of reference) before we reach for the big hammer and start coercing the poors out of their homes.
If your houses value is increasing but rent is capped, the landlord business isn't going to look very rosy. No new rentals will be built. Of course, I could be wrong.
Interested in counter arguments
I don't think any middle aged person is looking for any communal living type experience.
Also, what do you mean by "short term"? Usually it only makes economic sense to buy a house if you plan on staying there for 5+ years otherwise closing costs and realtor fees eat away any savings you made from not renting. The period of our life where we are the most mobile and willing to change cities due to job changes (20-40yrs) is also the period in our life when people start families and have children.
I think most people prefer houses
You are free to go and find some statistics if that is what you want to ground your beliefs in.
Oh you can live where you were born if you never move out and eventually inherit your parents home. You just won’t be able to buy a place nearby (at least without some serious down payment assistance and two high paying jobs).
Doing the same search for "owner occupied" shows only around 50%, though. I don't know where to get the data that teases apart housing units and standalone houses.
I know that my main assertion there was it was a relatively lower number. Adding it to the 19 of this story would still leave owner occupied higher than 50ish. Such that I clearly need help to put a lot of this together.
When you have large transfers of wealth and the wealth gap grows significantly the only thing for rich people to do is buy up assets. Assets are fixed, so the share of assets owned by rich people are drastically increasing. This is inline with the # of houses owned by private investors and #'s of assets owned by other investors will reveal the same thing.
Everything isn't getting more expensive. For example, housing prices and rents have gone down in areas where restrictions on new residential construction have been reduced.
> When you have large transfers of wealth and the wealth gap grows significantly the only thing for rich people to do is buy up assets.
That's not the only thing for rich people to do, but it is something people who make smart financial decisions do.
> Assets are fixed, so the share of assets owned by rich people are drastically increasing.
They aren't fixed in any asset class, so there's no real reason to explore your point here.
> This is inline with the # of houses owned by private investors and #'s of assets owned by other investors will reveal the same thing.
CA actually has a lower than average percentage of homes owned by investors, and I haven't seen any evidence it's increasing by a meaningful amount.
Directly to your first, though, most people stay in dorms for college because that is the best that they can afford. New students moving to a city to go to school almost by definition can't afford a house. I don't imagine that would be easy to ever change.
This low hanging “remedy” is likely to exacerbate the supply issue, not help it.
Right but doesn't it merely change the target from institutional to non institutional investors? 1/5 to 1/4+ SFH homes being owned by non homeowners, and competing on prices, seems like the elephant in the room?
Put another way does the fact that they are non-institutional meaningfully change the narrative and if so how would that relate to policy? It would seem a policy disincentivizing non-primary homeownership could apply equally to institutional and non-institutional investors alike.
As a matter of politics, we're not going to pass any legislation that disfavors mom-and-pop real estate speculators, so I don't really see what's to be gained in litigating. I think you'd be pretty surprised at the demographics of those small-time investors; a lot of them are decidedly middle class. They're not representative of the middle class; obviously, most middle-income earners don't own investment residential properties. But that's not the same thing as saying that middle-income earners aren't represented among real estate investors.
If you raise property taxes then people will leave because it’s not affordable. Not just leave their homes, they will leave CA. That will both lower demand and raise supply.
Yikes
That’s literally what every other state with property taxes assessed on the current value of the home are doing. It’s why retirees move out of their larger homes when they no longer have children occupying the other bed rooms. It’s why you have actual turnover of housing to (generally younger) people that not only want to live there, but are gainfully employed and can afford to do so.
It’s not some evil scheme to evict granny. It’s efficient allocation of a finite resource.
* Multi-ownership can be easier. I.e. you can "hide" who owns the house and it disconnects ownership from property records.
* People think it adds liability protections.
* It might make transferring the house at death easier to control(i.e. LLC rules apply, not state real estate rules)
In the case of owning the house you live in under an LLC, the chances of it protecting you from most liability is 0%. The only thing I can think og it maybe protecting you from is debt obligations, if the person trying to collect from you didn't bother to find out why you don't own your house on property records. This probably has a very low chance of working anymore, but low is > 0 I guess.
In order to have LLC liability protections you have to separate the LLC from your personal life, i.e. you have to treat the LLC as a real business, no mixing bank accounts, etc
You realize people live in those rental homes, correct?
Also, why is it desirable to force all renters to live in an apartment (assuming those are not banned, and people who are unwilling or unable to own their residence are not forced to wander the streets)?
I was talking about private equity/institutional and foreign investors, specifically. An average young family cannot compete against them, especially in a housing shortage.
Don't hide behind the "freedom" defense. Being priced out of housing isn't freedom. Housing is a place to live and to build a life, not an investment.
Home ownership is higher in the US than many other countries, and banning certain groups from participating in a sector will not increase supply.
People should rent what they can afford and need. Some people need the house with all its space, some only need an apartment.
The big thing is people shouldn’t be spending 50% of their monthly income on rent. It doesn’t help them, their family, or you. Likely, eventually, they’ll have trouble paying, you’ll have to evict them, their lives will be disrupted, their families lives will be disrupted, and you’ll have to spend time evicting them and finding a new tenant else you’re not making money.
I have no interest in ever evicting anyone, it sounds like a nightmare for everyone involved. I like my tenants, and my rents go up rarely and below market rate/inflation.
> This doesn’t feel like a policy failure, IMO. Renters have the option to live in a free standing home while they save for a down payment, and “investors” have an incentive to increase density/add to the housing stock.
First, when you have a renter, your payment is the "mortgage + tax liability + chunk of profit usually 25-50%"
Nobody, except for IT can save in predatory environment like that, no matter how much you wish it so.
And you're double-dipping by having THEM pay your mortgage and handsome profit on top. And for what? A "let them eat cake" comment. Im sure someone paying 50% or more their income can 'save for a mortgage'.
Knowing this scam, by the time they save up 50k, the bank will demand 100k down. But landlords can just capitalize on existing equity. Its a scam, through and through, that punishes renters.
We do need residences. And they're simple to build. They're called "rent controlled apartments". But 'ewww socialism' rears its ugly head.
25-50% is absurdly false.
We own a second home which we've rented out for years (wasn't the original intention, but anyway ...). The rent covers mortgage, taxes, and upkeep. Profit is minimal, less than 10%. Once you factor in eventual renovations, like replacing the roof, floors, etc., there is no profit at all, or very little.
I keep getting anecdotes as some sort of glorious rebuttals. No matter. When the people are at their last end and the guillotines come, I will not shed a tear.
You would have to be yielding 10%+ on your rental to get anything near that. In my part of the world - rent is cheaper than the interest the mortgage would bear.
You think landlords make 25 - 50% profit on a SFH rental unit? You're so comically wrong that there's no point in discussing the rest of this post (which is basically a list of every failed housing policy in existence).
Allow builders to build more units. It's that simple, which is part of the problem for some people.
Can you explain the mechanism by which accumulating vacant houses would provide the same reward structure as crypto speculation?
Besides that speculators can also withhold supply, artificially inflating prices. 2008 occurred due to speculation, independent of NIMBY regulation.
As for crypto, housing can actually be more profitable than crypto since investors see rentier income not just speculative appreciation.
Ultimately, this isn't just a supply-and-demand problem in an idealized market. It's a resource allocation issue where investors with significant capital can hoard housing, driving up costs, while many people struggle with homelessness. Simply greasing the market with deregulation won't solve this fundamental imbalance.
Sprawl chews up more and more farmland and forest, lengthens commutes, increases congestion. There's enough subdivisions and single family neighborhoods already.
Why not just build more homes so she can live close to family?
Or should we tear down some grannies houses to build multi floor apartment buildings?
Some of those homebuilders build because they can rent homes if they can’t be sold. Others build because they have large investors to sell to if necessary. All of them build with their financial models account for carry time, as carry costs are extremely important to their bottom line.
If the average carry time goes up even a little bit (and it will because investors close faster) that can make whole developments untenable.
Assuming the policy to reduce non-primary home ownership is tax based, carve out tax exceptions for home builders. Personally I would carve out exceptions for home flippers too, but could see that being more contentious. Either way though, this part of the problem would be, IMHO, trivial to solve.
> If the average carry time goes up even a little bit (and it will because investors close faster) that can make whole developments untenable. Others build because they have large investors to sell to if necessary.
I think that's fair. But conversely carry time is also high because prices are high, and investors drive up prices; builders also do this to an extent, by e.g. buying down points to avoid lowering prices, to keep the perceived price elevated. I have no illusions this is a simple problem to solve. The right question here is probably figuring out whether the overall supply going up by X increased rate because of investors will be worth the cost of the total homeownership rate being controlled by a shrinking proportion of the population (I would guess no).
My personal proposed solution here would be to kick out investors (tax policy), and also directly incentivize home builders selling to first time owners (via tax credits, comparable to e.g. EV tax credits). The latter would be quite expensive, but if the overall homeownership rate increases and home prices drop, it would likely be popular.
https://fred.stlouisfed.org/series/RHORUSQ156N
But note that’s not the same thing as housing affordability. You probably can goose the homeownership rate by appropriating a bunch of homes and redistributing them to the marginal buyers who are currently not owners.
But it will not drop the price of housing, it will increase it because supply will still be constrained (think of the normal case of someone moving temporarily for work. If you disincentivize them being allowed to rent the unit out you now have 2 units off the market).
Carry cost is mostly about financing costs and regulations not the price of homes.
And I see you showed your true colors with your second comment. I'm sure if the revolution you're praying for actually comes, you'll definitely be in the vanguard!
irrelevant fun fact: people think that the vast majority of those who were visited by Mme La Guillotine during the French Revolution were nobles. In fact, the vast majority, ~85%, were from the "third estate" (commoners, which also excluded clergy).
Right, which is why trying to link the two is misleading at best.
> there are many valid arguments that treating housing as an investment isn't a stairway to ending homelessness
Such as? We seem to agree that the existence of rental units isn't a cause of homelessness.
If we're going to tackle homeless, we have to remove systems that incentivize the collection of homes as a financial asset. Make more homes by one person or entity less desirable or simply undoable.
Instead of trying to manipulate a market through yet another layer of regulation, you can just let builders build more.
In other words you are looking at it from a supply side but ignoring the wealth distribution of buyers. Wealth has further concentrated among the richest buyers over the past few years, while the poorest have grown poor, leading to higher prices for everyone. That’s the cause, not NIMBYism, which has been around forever. It’s a wealth redistribution issue not a deregulation issue.
House vacancies aren’t my central argument however - they are a symptom of the wealth distribution problem causing our housing crisis.
And, why did we just give them a YUGE tax break?
"Build more" is not an option, because the incentives don't align to solve the problem. The things getting built are built to capture margins and not to solve the housing problem.
Need regulation.
Build more is the only option to actually fix the problem. The incentives could not be more aligned between home builders and home dwellers. Builders want to build, and there are dozens of them in all major metropolitan areas. Home dwellers want shelter. Sounds like an ideal situation to keep margins low.
More regulation == more regulatory capture, which your kind supposedly doesn't like but you don't seem to be able to help yourself.
I'm not "missing the point" because I don't agree with economic principles that got us where we are today. Doubling down on those very same principles thinking we will have a different outcome? Nonsense.
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.
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.
It's not a coincidence that there's a huge overlap between people who use terms like "turbo greed", those who "don't agree" with the economic principles that have outperformed all known alternatives, and those who think that more state involvement is the solution to every problem.
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.
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.
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.
OK.
This describes zero investors anywhere in the country. There is no significant market in the US where investors owns even a significant percentage of all houses (the total in California is 19%, and that statistic is dominated by mom-and-pop house speculators that can't buy even two more houses, let alone keep up with continuous added supply).
I'm fine with the idea that we've played this out now. Maybe someone else has a better idea of how investors can beat zoning reform, but for now I'm going to go back to assuming that investors are immaterial to housing scarcity.
The 19% stat & the mom-and-pop claim you are referring to is actually misleading for our discussion.
> This study included properties for short-term or long-term rentals, second homes, and vacation retreats but did not follow condos or build-to-rent single-family-home projects.
So it only refers to a subset of the housing market. For a better idea of the pricing power investors have we need to include other kinds of rentals. Also from the article:
> Census Bureau stats show 45% of households live in a place they don’t own, the third-highest share of tenants nationally.
The vast majority of that 45% is multifamily housing, which is typically owned by institutions.
This shows a broader picture of the housing market in California. There is huge institutional ownership of housing. It’s far from implausible that these investors lack pricing power.
