Corporations will own the majority of homes by 2030

[look 171]

Originally Posted by Arizona_928

That's a low ROI...


I feel something fishy is going on with the market...

If you had 800k sitting around, where would you park it so that it isn't worth 700 in the next year due to inflation. Maybe he had 500k sitting around, so why not borrow (assuming interest was low when they bought), its almost free money, eat off the rental and still have someone buy half of the house for you in the long run. This is what is going on with lot of foreign investors. I met with a listing agent once years ago in an open house and he only works for these two brothers from Israel. They come to LA, buy 10 houses at a time. His responsibility is to fix them and sell them off as they finish them. After they are done, they start buying again. Rinse and repeat.

[look 171]

Originally Posted by zakthor

Tax, insurance, maintenance and opportunity cost of money adds up to 5-7% of house cost per year. That’s assuming no mortgage. 840k house costs a minimum of 3500/month just to hold. With gardener and hot tub I guess they’re counting on appreciation?

Owning costs more than renting.

Structural reason is I can deduct expenses on my rental house, roof, windows, furnace, painter - all reduces my taxes. Pretty sweet deal. Why is it I can’t deduct the same expenses for the house I actually live in?

Fed tax policy is to subsidize the rich landowners.

I’ve thought it might be good local tax policy to require all federally deducted property expenses to be taxed at 100% to local county. Would probably take care of many rental homes and airbnb pretty darn quick.

If we want to subsidize housing there’s gotta be a more efficient way than giving money to the rich owners to encourage them to rent out properties for less.

I’m benefitting and it feels like a giant scam

Oh yeah, I see how the fed gov is subsided the rich owners. You know they just fooked the Air B B owners. Around here, they can only rent 10 days out of the month max. For those owners cough up blood to buy a place so they can Air BB it. Suddenly, they got fooked because they caved due to pressure from the hotel industry. A piece of property isn't cheap in LA. Who's going to subside their lost? I like to know. Not only that. they impose more fees jsut to run an Air BB. The local police dept are talking about sticking their hand in the same cookie jar. They want a fee to help police the air BB. What BS. De-fund the police, they will fu#k someone else for it.

The house you live in isn't a business so there's no deduction allowed. You are already getting your interest deducted. Isn't that enough? They deduction is a huge off set for most Americans.

[Gogar]

This $750/sqft beauty down the street just sold to a cash buyer. It's been empty since it was finished about 7 months ago. There's probably 40-50 of them just like it in the hood and they're going up as fast as they can get em up

https://www.zillow.com/homedetails/875-S-York-St-Denver-CO-80209/13354806_zpid/?utm_campaign=iosappmessage&utm_medium=referral&utm_source=txtshare

[Gogar]

[jyl]

I think institutional ownership of houses is bad.

Most Americans don’t have securities or a pension or lots of retirement savings; their house is their primary asset.

Houses are a good long term investment because you buy them with tons of leverage (for $20 down, you get $100 of house, if it goes up 10%, that’s 10% of $100 rather than 10% of $20).

The American system is designed to encourage home ownership; mortgages are fixed rate for 30 years, almost unheard of in other countries, and subsidized by the federal government through the various agencies that effectively fund and guarantee mortgages and through mortgage interest tax deduction plus basis increase for cost of improvements.

Buying a house is low risk because mortgages are non-recourse, you can walk away, not without consequences but the bank can’t come after you personally for the mortgage.

As a result, the home ownership rate in the US is much higher than most other Western countries, and that is a large part of household wealth and retirement security.

Big picture, almost all assets in the US are owned by the wealthiest Americans - the stock market, bond market, etc are almost entirely owned by the top few percent by wealth. Houses are the last major asset class that is still mostly owned by ordinary people.

For that last asset class to shift from ordinary people to the very wealthy, via institutional home ownership, will accelerate the wealth inequality and economic stress that is already way too high.

We’re only a little bit of the way there. Institutions still own only a small percent of houses in America. We can still stop it.

Personally I’d tax the crap out of institutional home fleets, and prevent them from using federally subsidized mortgages. “Institutional” to me means over 100 houses, maybe over 50.

[1990C4S]

Originally Posted by jyl

The American system is designed to encourage home ownership; mortgages are fixed rate for 30 years, almost unheard of in other countries, and subsidized by the federal government through the various agencies that effectively fund and guarantee mortgages and through mortgage interest tax deduction plus basis increase for cost of improvements.

I think the primary benefit is forced savings, the mortgage payment can't be missed. Renting and investing wisely would also work, but people lack discipline.

[wdfifteen]

Originally Posted by jyl

I think institutional ownership of houses is bad.

Most Americans don’t have securities or a pension or lots of retirement savings; their house is their primary asset.

Houses are a good long term investment because you buy them with tons of leverage (for $20 down, you get $100 of house, if it goes up 10%, that’s 10% of $100 rather than 10% of $20).

The American system is designed to encourage home ownership; mortgages are fixed rate for 30 years, almost unheard of in other countries, and subsidized by the federal government through the various agencies that effectively fund and guarantee mortgages and through mortgage interest tax deduction plus basis increase for cost of improvements.

Buying a house is low risk because mortgages are non-recourse, you can walk away, not without consequences but the bank can’t come after you personally for the mortgage.

As a result, the home ownership rate in the US is much higher than most other Western countries, and that is a large part of household wealth and retirement security.

Big picture, almost all assets in the US are owned by the wealthiest Americans - the stock market, bond market, etc are almost entirely owned by the top few percent by wealth. Houses are the last major asset class that is still mostly owned by ordinary people.

For that last asset class to shift from ordinary people to the very wealthy, via institutional home ownership, will accelerate the wealth inequality and economic stress that is already way too high.

We’re only a little bit of the way there. Institutions still own only a small percent of houses in America. We can still stop it.

Personally I’d tax the crap out of institutional home fleets, and prevent them from using federally subsidized mortgages. “Institutional” to me means over 100 houses, maybe over 50.

So much truth here. Thank you.

[zakthor]

Originally Posted by look 171

Oh yeah, I see how the fed gov is subsided the rich owners. You know they just fooked the Air B B owners. Around here, they can only rent 10 days out of the month max. For those owners cough up blood to buy a place so they can Air BB it. Suddenly, they got fooked because they caved due to pressure from the hotel industry. A piece of property isn't cheap in LA. Who's going to subside their lost? I like to know. Not only that. they impose more fees jsut to run an Air BB. The local police dept are talking about sticking their hand in the same cookie jar. They want a fee to help police the air BB. What BS. De-fund the police, they will fu#k someone else for it.

The house you live in isn't a business so there's no deduction allowed. You are already getting your interest deducted. Isn't that enough? They deduction is a huge off set for most Americans.

Interest: what is your point? Business gets that deduction, and many more. Current tax structure is an encouragement for non owner occupied housing. I could literally swap deeds with my neighbor, we rent from each other, and we both save >1.5% per year. Why is that good tax policy? What’s the public good that is met that we should give out that break? How about not and we pay teachers more, or fix potholes, or lower everyone else’s taxes? Why do we subsidize owning property to rent it to others?

Airbnb: The dream of capitalism: innovate, plant your flag, then profit. Some regulation shows up that busts your dream it’s a taking and not fair, unamerican, communist even.

Consider a moment your neighbors - or really just the people that live next to that house you bought to rent and profit off? Shouldn’t you be paying them for the daily inconvenience of having a hotel in their midst? Race it all to the bottom and turn every place into a s-hole so you can profit. Why not open a dry cleaner while you’re at it.

You think that opposition just came from hotel industry? It also came from the neighbors that were sick of airbnb. How about you ask airbnb for a handout since they didn’t police bad offerings and/or engage with the local zoning board?

[Evans, Marv]

Originally Posted by wdfifteen

So much truth here. Thank you.

Yes, absolutely.

[look 171]

Originally Posted by zakthor

Interest: what is your point? Business gets that deduction, and many more. Current tax structure is an encouragement for non owner occupied housing. I could literally swap deeds with my neighbor, we rent from each other, and we both save >1.5% per year. Why is that good tax policy? What’s the public good that is met that we should give out that break? How about not and we pay teachers more, or fix potholes, or lower everyone else’s taxes? Why do we subsidize owning property to rent it to others?

Airbnb: The dream of capitalism: innovate, plant your flag, then profit. Some regulation shows up that busts your dream it’s a taking and not fair, unamerican, communist even.

Consider a moment your neighbors - or really just the people that live next to that house you bought to rent and profit off? Shouldn’t you be paying them for the daily inconvenience of having a hotel in their midst? Race it all to the bottom and turn every place into a s-hole so you can profit. Why not open a dry cleaner while you’re at it.

You think that opposition just came from hotel industry? It also came from the neighbors that were sick of airbnb. How about you ask airbnb for a handout since they didn’t police bad offerings and/or engage with the local zoning board?

Sounds like you don't like it because the tax break didn't benefit you. I don't like AirBB on my street, but can or should we have that right to stop what our neighbors do with their place? Should your neighbor be able to stop you from renting a room or renting out your car like Turo? Hey buy expansive car, put it up for rent few times a year, write that off. You don't seem to mention anything about that?


You kept on about the tax benefit on business but that how the tax laws are written. I kept asking you to explain about how current tax structure benefit owners with none occupy housing?

Going out for a bike ride, be back with popcorn.

[look 171]

Originally Posted by zakthor

Airbnb: The dream of capitalism: innovate, plant your flag, then profit. Some regulation shows up that busts your dream it’s a taking and not fair, unamerican, communist even.

This is just as easy to say, one day, all you season teachers will no longer make 100k+. all salary will be capped at 65k. Same as they change the way one day and allow those owners to rent 10 days out of the month and slap all kinds of fee for them to operate. Just so you know, I hate Air BB.

Pay teachers more. Gimme a break. Remember, I use to be one. Some should get more, more need to be let go or reduce to min wage. That's a discussion for another time.

[jyl]

Originally Posted by 1990C4S

I think the primary benefit is forced savings, the mortgage payment can't be missed. Renting and investing wisely would also work, but people lack discipline.

Renting and investing wisely doesn’t get the huge subsidies that home ownership gets. Your can’t deduct rent from taxes. You can’t invest $80 of borrowed money for every $20 of your own money. Even if you could, you couldn’t borrow that money at a fixed rate for 30 years, loans guaranteed by government and pegged to Treasuries that are the most liquid, safe securities in the world, and non-recourse to you. And you can’t live in a stock and bond portfolio.

Home ownership is heavily subsidized in the US, it is intentional and a good thing, to promote home ownership by ordinary folks.

Institutional ownership reduces the availability of houses for people to buy, pits ordinary buyers against institutions able to pay cash and raise money at institutional rates, and over the long run will reduce home ownership.

It is also bad for mom and pop landlord investors. Institutional home investors have lots of advantages, due to their scale. Maintenance, legal, leasing is in-house. The institution’s borrowing cost is much lower than mom and pop.

It is also bad for communities. When most of the houses in a neighborhood are rentals, there is less skin in the game, people have less reason to care about the community, schools, taxes, etc.

Finally, it’s not great for tenants. Institutional owners are aggressive about raising rents, they have software that lets them push rent increases to the max every year. Their business model favors tenants who turn over every few years, they don’t want families to stay in the house for decades.

It is pretty good for investors. For all that I bemoan the societal effect of institutional home fleets, I like the stocks pretty well.

[dennis in se pa]

If you do downsize and can afford it, it’s best to hold onto your house and rent it out, for reasons mentioned above. It will double value in not too long a time. Then you will have had income and appreciation.

[look 171]

Originally Posted by jyl

Renting and investing wisely doesn’t get the huge subsidies that home ownership gets. Your can’t deduct rent from taxes. You can’t invest $80 of borrowed money for every $20 of your own money. Even if you could, you couldn’t borrow that money at a fixed rate for 30 years, loans guaranteed by government and pegged to Treasuries that are the most liquid, safe securities in the world, and non-recourse to you. And you can’t live in a stock and bond portfolio.

Home ownership is heavily subsidized in the US, it is intentional and a good thing, to promote home ownership by ordinary folks.

Institutional ownership reduces the availability of houses for people to buy, pits ordinary buyers against institutions able to pay cash and raise money at institutional rates, and over the long run will reduce home ownership.

It is also bad for mom and pop landlord investors. Institutional home investors have lots of advantages, due to their scale. Maintenance, legal, leasing is in-house. The institution’s borrowing cost is much lower than mom and pop.

It is also bad for communities. When most of the houses in a neighborhood are rentals, there is less skin in the game, people have less reason to care about the community, schools, taxes, etc.

Finally, it’s not great for tenants. Institutional owners are aggressive about raising rents, they have software that lets them push rent increases to the max every year. Their business model favors tenants who turn over every few years, they don’t want families to stay in the house for decades.

It is pretty good for investors. For all that I bemoan the societal effect of institutional home fleets, I like the stocks pretty well.

This is so true, John.

Speaking of raising rent, I need to do that. None of my rents have gone up a dime for the past 5 years while inflation, maintenance and everything else that come with the ownership has gone through the roof.

[WSH]

How can "corporations" own the majority of homes in just 6 years ?
Most folks now are NOT selling--even if they want to trade up/downsize--because they're in ~3% mortgages. You'd have to be crazy to sell, even at a great price.
Your mortgage rate will double, at least, on a new home purchase
I know a couple of RE agents and they all say the same thing....cant find homes FS in neighborhoods their clients want because buyers can't afford 2X mortgage on their next home

[jyl]

Originally Posted by look 171

This is so true, John.

Speaking of raising rent, I need to do that. None of my rents have gone up a dime for the past 5 years while inflation, maintenance and everything else that come with the ownership has gone through the roof.

The institutional rental house REITs I track were raising rents like crazy in 2021, 2022. Double digits each year. Since they don’t want long term tenants (average stay is a few years), it doesn’t matter if rent increases drive tenants out - turnover is a feature not a bug. For everyone but the investor/company, it’s a bad thing.

Institutional landlords were recently found to be in effect collaborating to drive rents up - not by talking directly with each other, but by using the same software which, obviously, knows the rents and units of all its user companies and can do the collaborating “in software”. That was on the apartment building side, I think.

Mom and pop landlords are human, many of them actually have consideration for their tenants (though not raising rent to at least semi keep up with inflation feels like too much consideration, in my book).

The other thing institutional landlords are doing, in Oregon, is manipulating rent control to hurt mom and pops. When the state enacted statewide rent control a few years ago, it 1) allowed rent increases of 7% over that year’s CPI inflation, 2) didn’t apply to buildings less than 15 years old, 3) added a bunch of complicated rules and processes for renting, and 4) prohibited cities from having their own rent control laws. The institutional and developers were in bed with the most powerful legislator who pushed the law (she is now our governor, and still in bed with them). So the institutional landlords basically got rent control that means nothing if you raise rent every year (which they do, but mom and pops often don’t), that applies to mom and pops (who tend to own older buildings) but not to institutions (who tend to own newly developed buildings, here anyway), that favors landlords with the in-house leasing and legal staff to comply with the regulations (which mom and pop lack), and removed the threat of any more meaningful rent control at a local level.

The institutional rental house companies have been getting deeply into “build to rent”. They are having whole developments built for them, entire neighborhoods all owned by the same company, raising rents to the max and pushing profitable turnover of tenants. How much must it suck to grow up in a place like that, where the entire neighborhood is controlled by the landlord and all your friends leave every few years - well, you will too. That’s not a community.

[berettafan]

Originally Posted by jyl

I think institutional ownership of houses is bad.

Most Americans don’t have securities or a pension or lots of retirement savings; their house is their primary asset.

Houses are a good long term investment because you buy them with tons of leverage (for $20 down, you get $100 of house, if it goes up 10%, that’s 10% of $100 rather than 10% of $20).

The American system is designed to encourage home ownership; mortgages are fixed rate for 30 years, almost unheard of in other countries, and subsidized by the federal government through the various agencies that effectively fund and guarantee mortgages and through mortgage interest tax deduction plus basis increase for cost of improvements.

Buying a house is low risk because mortgages are non-recourse, you can walk away, not without consequences but the bank can’t come after you personally for the mortgage.

As a result, the home ownership rate in the US is much higher than most other Western countries, and that is a large part of household wealth and retirement security.

Big picture, almost all assets in the US are owned by the wealthiest Americans - the stock market, bond market, etc are almost entirely owned by the top few percent by wealth. Houses are the last major asset class that is still mostly owned by ordinary people.

For that last asset class to shift from ordinary people to the very wealthy, via institutional home ownership, will accelerate the wealth inequality and economic stress that is already way too high.

We’re only a little bit of the way there. Institutions still own only a small percent of houses in America. We can still stop it.

Personally I’d tax the crap out of institutional home fleets, and prevent them from using federally subsidized mortgages. “Institutional” to me means over 100 houses, maybe over 50.

Simple and to the point. You are a credit to your parents and educators.

[look 171]

Originally Posted by jyl

The institutional rental house REITs I track were raising rents like crazy in 2021, 2022. Double digits each year. Since they don’t want long term tenants (average stay is a few years), it doesn’t matter if rent increases drive tenants out - turnover is a feature not a bug. For everyone but the investor/company, it’s a bad thing.

Institutional landlords were recently found to be in effect collaborating to drive rents up - not by talking directly with each other, but by using the same software which, obviously, knows the rents and units of all its user companies and can do the collaborating “in software”. That was on the apartment building side, I think.

Mom and pop landlords are human, many of them actually have consideration for their tenants (though not raising rent to at least semi keep up with inflation feels like too much consideration, in my book).

The other thing institutional landlords are doing, in Oregon, is manipulating rent control to hurt mom and pops. When the state enacted statewide rent control a few years ago, it 1) allowed rent increases of 7% over that year’s CPI inflation, 2) didn’t apply to buildings less than 15 years old, 3) added a bunch of complicated rules and processes for renting, and 4) prohibited cities from having their own rent control laws. The institutional and developers were in bed with the most powerful legislator who pushed the law (she is now our governor, and still in bed with them). So the institutional landlords basically got rent control that means nothing if you raise rent every year (which they do, but mom and pops often don’t), that applies to mom and pops (who tend to own older buildings) but not to institutions (who tend to own newly developed buildings, here anyway), that favors landlords with the in-house leasing and legal staff to comply with the regulations (which mom and pop lack), and removed the threat of any more meaningful rent control at a local level.

The institutional rental house companies have been getting deeply into “build to rent”. They are having whole developments built for them, entire neighborhoods all owned by the same company, raising rents to the max and pushing profitable turnover of tenants. How much must it suck to grow up in a place like that, where the entire neighborhood is controlled by the landlord and all your friends leave every few years - well, you will too. That’s not a community.

Oh yeah, it happenning down here too. They built blocks of these gigantic multi-storey, semi-upscale rentals that take up an entire city block.

[look 171]

I know these huge companies that are buying up single family homes and multi-units in some of the poorer areas in many mid size cities in the middle of the country only to rent it back to the folks in the community.

[jyl]

Originally Posted by WSH

How can "corporations" own the majority of homes in just 6 years ?
Most folks now are NOT selling--even if they want to trade up/downsize--because they're in ~3% mortgages. You'd have to be crazy to sell, even at a great price.
Your mortgage rate will double, at least, on a new home purchase
I know a couple of RE agents and they all say the same thing....cant find homes FS in neighborhoods their clients want because buyers can't afford 2X mortgage on their next home

See article linked below. Whether it gets to 40% or 50% in 6 years nationwide may depend on interest rates.

Institutional house owners are rather opportunistic and calculated, in deciding when to buy. Right now, they have slowed down their buying of existing houses and are instead focusing on build to rent of new houses. Smaller investors and flippers may still be buying existing houses.

What the institutions really want is another housing crash/foreclosure crisis like in 2008-2010. In 2020-2021, private equity raised a huge amount of money (my count at the time was approaching $1 trillion) in anticipation of such a foreclosure wave due to Covid. It didn’t happen, because of all the government and bank programs to prevent foreclosures. Private equity was sorely disappointed, but those funds are still out there, waiting.

That said, institutions do own about 5% of all houses now, and it is more in certain areas that they focus on (e.g. Sunbelt). https://www.cnbc.com/2023/02/21/how-wall-street-bought-single-family-homes-and-put-them-up-for-rent.html