> Basic needs really shouldn't be investment material.
Companies providing and selling food, energy, and consumer staples are investment materials. I don’t get why housing should be a special carve-out and don’t see a workable answer to how to provide food for everyone while banning all investment in companies that grow or sell food.
These companies are invested in precisely because these are basic needs. The company gets the capital it needs to operate, consumers get a reliable supply of food, energy, and clothing, employees get steady jobs providing these staples, investors get a relatively safe store of value and some income. Who exactly loses in these investments in supply basic food, energy, and consumer staples?
>Companies providing and selling food, energy, and consumer staples are investment materials.
>companies that grow or sell food.
House builders would be the analogous party to that. The parent comment is describing landlords, specifically part-time landlords who buy up family homes and turn them into rental properties. Your analogy doesn't apply to those landlords.
A supermarket is in the business of buying food in bulk and then offering portions of food suitable for a shorter time period. A gas station buys 8000 gallons of gas from a tanker and offers it by the gallon at retail. Target/Walmart buy pallets of jeans and offer them individually to consumers. The supermarket didn’t grow the food, gas station refine the fuel, nor did Target manufacture the jeans.
A landlord is in the same business but for housing: buying in bulk (in this case in the time dimension) and selling a shorter time period’s worth of housing.
No, a grocery store is like a sub-developer, buying in bulk and splitting it up.
There is no other physical necessity sold on a time dimension. I cannot rent you water, or rent you food. Once the grocery store has sold a certain amount of food, they have to re-enter the market and buy more. Once a gas station has sold a certain amount of gas, they have to re-enter the market and buy more. Once a sub-developer has sold a certain number of homes, they have to re-enter the market and buy more.
A landlord does not. A landlord is not the same thing.
Its an interesting way of describing landlords, but we have now worked our way back to GP's original criticism, just stated in a different/less-tangible way: For landlords, the simple act of buying housing (a basic need) allows them to extract a profit in the time dimension, and it shouldn't work like that.
Seriously, what is your proposal for how it should work? Presumably the people renting the housing would have bought it themselves if they had the financial resources to do so (unless they just like having housing with no real downside investment risk).
So what would they do without a landlord? If the builders didn't have people to sell the property to, they wouldn't build them and the housing just wouldn't exist.
> Presumably the people renting the housing would have bought it themselves if they had the financial resources to do so
It's actually quite the opposite. By literal definition, every renter that's paying their rent can already afford the housing they currently occupy, because every renter is already paying for (their entire unit) as well as (all cost of maintenance) and (some extra profit for the landlord)
So by definition, every renter is always already paying more than it would cost to own, operate, and maintain their unit. Every renter on the planet (who isn't like, behind on rent) has already proven they have the financial resources to own their unit.
> So what would they do without a landlord?
Save money every month. (By the exact amount of profit the landlord currently makes).
So if you want to move out of your parents house to attend college or to begin your career, you can do so by simply purchasing an entire dwelling in perpetuity and will save money doing so?
I don't know where "in perpetuity" comes from. Nothing stops you from selling your small apartment condo later or whatever.
But yeah, generally speaking, adults should be able to own their buy and own their own housing, and be able to reside there as long as they choose to. For the same reasons we expect people to be able to own their own coats and shoes and laptops and such, and hold on to it as long as they are alive. And if people change jobs or move to a new city or start a family or whatever, they sell their old one and buy the new one.
The “in perpetuity” doesn’t mean you can never sell it, but it does mean that at the moment of purchase you’d have to pay for the discounted cash flow value of consuming that housing for the expected lifetime of the building and for using the land for the expected lifetime of the land, because that’s what you’re buying: the perpetual right to exclude others from that dwelling and land/shared land until you decide to sell it.
That is unlikely to be affordable or practical for 18 year old high-school graduates starting work or starting college away from home.
If instead of requiring people to pay for the perpetual right to occupy and exclude others, you allow them to pay for that right for only one year or one month at a time, well, that’s what renting already is.
> If instead of requiring people to pay for the perpetual right to occupy and exclude others, you allow them to pay for that right for only one year or one month at a time, well, that’s what renting already is.
No, that's what property taxes are -- and they're already paid out little bits at a time. (Here, twice yearly). Rent vs buy has nothing to do with the "right to occupy", the taxes do, and renters and owners both pay their property taxes in full (renters taxes are rolled up into their monthly rent, but same thing).
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Every benefit a landlord offers is a lie -- it's a benefit the renter setup, and the landlord is stealing credit for. A landlord does not "maintain" any property (the renter does, the renter pays money that gets spent on a property management service that does the work). A landlord does not pay any taxes for the land (the renter does, through monthly rents). A landlord did not build the structure on the property (a construction firm did, using money exclusively paid for by current and future renters). A landlord does not protect the property from risk or damage (the homeowners insurance / property insurance company does that, paid for entirely from monthly rents from the renter tenant).
You could potentially argue that the landlord is a bank, a form of financing to get money upfront and paid back later -- except they don't do that either, the Federal Government does that through a mortgage that the landlord just gets to hold for no reason, so the landlord usually isn't even risking any finances there either. A default doesn't leave a landlord high-and-dry, it leaves the general public (through the Federal Government) holding the bag.
The landlord doesn't even take on any opportunity cost risk in the US, because the US soft-mandates (though fiscal policy) that property values continuously rise on average, and passes this cost on to citizens. So, even if hypothetically all renters abandon the property in a few years, the landlord will be able to 'cash out' (sell) the property, nearly always for more than they paid for it (using appreciation paid for by past renters).
A landlords choice is literally "do I do nothing and get free money forever for no labour" or "do I cash out now, and dump the money into some other place, for the chance at more free money for no labour". That's the only "opportunity cost" they ever have to weigh.
The landlord *literally* *does* *nothing*, they provide *literally* *zero* value. They exist solely to skim money from people. It's a political choice to let these people exist and take the bulk of earned value from a given area, not some kind of need-based response to anything.
I agree with your premise that the cash flows from the tenant to pay for these things, just like employers don’t pay salaries but rather customers pay salaries and the employer just handles the money. (I disagree that property taxes are the only charge to exclusively occupy a structure. Purchase price and property taxes [and insurance] are.)
My parents were (very) small-time landlords having 0, 1, or 2 houses (or half-houses) at the time while I was growing up.
The reason that I’ve stayed away from doing it is that I saw firsthand just how much work it actually is, notwithstanding the claims from people (almost invariably never-landlords) about how easy it is.
A home needs so damn little maintenance. They're not providing that as a service. If the person owned a home maintained it - what fix a broken hot water heater for 600? And that's a reason to make more people required to rent?
The real difference (surprisingly not mentioned yet) is land for housing in cities is incredibly finite. Food, energy and consumer staples can be produced endlessly
The key here being housing in cities and I would also add in nice neighborhoods, in cities. You can still expand the city, and build more cities. For practical matters, land is not finite. Food and consumer staples are similarly finite if you only look at the nicest and most attractive versions of it. There is a constant "shortage" of michelin star food and ferraris
And are the landlords just leaving the house empty for the hell of it? Or is it being rented out to people? I know with one is more likely.
The thing is, housing is a surprisingly flexible commodity (too expensive, people live with parents/share, and then move back out if prices fall) , and encouraging everyone to buy a full on house in a suburb is a recipe to drive expensive housing.
I think you are over stating the flexibility of moving out, getting a roommate, or moving in with your parents.
What if your parents moved into a smaller residence and can't fit a family?
>And are the landlords just leaving the house empty for the hell of it?
No, but a landlord who got into the market early when properties were dirt cheap can leverage that and buy more and more for renting them out, reducing the supply and increasing the competition if you want to buy your first property and not be a renter your whole life. You know, like when you want to settle down and have kids, you're gonna be out-muscled by a landlord who already has 3 properties and is is looking to buy 2 more.
>housing is a surprisingly flexible commodity (too expensive, people live with parents/share, and then move back out if prices fall)
The thing is this is one of the reason why birth rates are so low in rich western cities. How can you expect people to start families if you expect adults to live in shared accomodations or move in with their parents?
Having access to cheap, spacious housing that's just for living and not part of someone's investment vehicle, would definitely make "nesting" an enticing proposition for young adults, like it was for the boomer generation. But if you expect them to bum around between living with roommates and living with their parents like adolescents, and their only hope of nesting being to grind away after years in university at some soul-sucking job 40+ hours/week plus commutes just to afford a bank loan for a shoe-box that they'll have to pay off till they die, then of course they'll realize this expectation of their life is a scammy wage-salve trap and say "to hell with that, I'd rather stay single, childless and free and spend my time and money on travelling, clubbing, netflix, meme-stocks and videogames".
But of course, fat chance to get governments to admit their policies of enriching the banks, property investors and the older owning class by squeezing the young is the cause of this. To them, the real reason why the young can't afford to settle down is because "these pesky millennials and zoomers spend all their money on iphones and avocado toast, so to fix this we'll allow uncontrolled mass immigration from the third world".
Housing can't be an affordable necessity for starting a family that everyone should have access to while at the same time being an investment vehicle design to enrich their owners. It's either one or the other and most of the west has chosen the latter while talking how the former is more important.
In Austria, the goverment isn't even hiding the fact that housing is officially an investment vehicle, with the conservative party throwing the blame back on the people for not having bought properties as the reason why they stay poor and can't afford to keep up with rent increases. Despicable!
Investment buyers and owner-occupants both provide the cash to the homebuilders to allow them to go build the next home. You can't sell a home without a buyer.
I don't think requiring anyone who wants housing to be financially able to buy an entire home is sensible, meaning that some entity needs to be in the business of paying for more housing than they personally need to allow people to have housing who can't or don't want to buy an entire dwelling unit.
Maybe you want the government to have a monopoly on that activity, but someone needs to provide it or you end up with far less access to housing and far more people living on the street than currently.
Housing is also subsidized in the US, the FHA, USDA and VA all have housing subsidy programs. States and local governments also operate housing subsidy programs.
>Companies providing and selling food, energy, and consumer staples are investment materials. I don’t get why housing should be a special carve-out and don’t see a workable answer to how to provide food for everyone while banning all investment in companies that grow or sell food.
Companies providing and selling food are providing a service. Large investors that buy in bulk, keeping new hosing out of the market to keep prices high, are not really providing anything - they are just a different kind of consumer.
I would make a parallel with the relation between gamers and bitcoin miners in the graphic cards market: miners can pay more and buy in bulk, which makes prices rise and prices out gamers. Only in this case, the people who are being priced out are no longer able to cover a basic need.
"I don’t get why housing should be a special carve-out "
Capital and leverage.
Wealthy and access to capital can build, rent and make giant returns.
Students paying off debt cannot even get the minimum down payment.
If everyone rented, and, if transition costs were very simple i.e. you could 'jump homes with ease' - then this would be less of a problem.
Also I would add stability. A government job which can be had for life, they will get a mortgage. A private sector worker or freelancer, may have blips in income, a bad blip means no mortgage payment which is very bad.
The consistency required for 25 years of paying off something lends power to the entrenched kinds of workers.
> Students paying off debt cannot even get the minimum down payment.
This is huge. My wife and I are pretty privileged and own a very modest fixer-upper home on the very edge of a coastal metro area. We somehow managed this only after a decade of paying off ~150k of student loans that our parents encouraged us to take out when we were effectively children.
I have friends who are software engineers who own big houses in the city who skipped a 4 year degree altogether or their parents were able to pay for their education.
The difference between them and me? They were able to pocket that 150k as opposed to giving it to some useless university administrators and various federal lenders.
Private utility companies are often subjected to regulatory board controls. Their local monopoly is limited by a representative (supposedly) of the public's interests. That low-risk investment has its potential returns limited to what a board deems "reasonable".
Some states regulate residential housing, or at least taxes on it, to limit what municipalities and counties may do with their taxing authority. It wouldn't be much of a stretch to regulate the rents charged by "housing provider" individuals or companies to be, on average, 1/3 of average local income.
> I don’t get why housing should be a special carve-out and don’t see a workable answer to how to provide food for everyone while banning all investment in companies that grow or sell food.
The economy exists to support everyone's life, not the other way around. Just because you can argue someone can make a quick buck selling a basic necessity, that does not mean it's ok to deprive a whole community of basic necessities.
Take for example water. Would it be ok to hold everyone hostage over access to it, and even lobby for municipalities to stop the public sector from encroaching onto a service provided by a private business, just because Nestle and the likes bottle and sell it?
The current delta between the have and have-nots, and the profound impact that "small" real estate investments have on pushing access to housing far out of reach of your average middle and upper-middle class family, is a collosal social and economical red flag. Access to housing has a profound impact on everyone's lives and even community. You accept jobs based on access to housing, and the amount of time wasted supporting said job is time eaten away from the time you spend doing far more important things like caring for your children and family. Being deprived from that just because a faceless investor wanted to park his bailout money somewhere and decided to dump it in real estate hurts society.
i think you misunderstand. the tail has been wagging the dog for some time now. it is not for the market to adapt to our needs, it is for us to adapt to the market and hopefully we can extract what we need.
> it is not for the market to adapt to our needs, it is for us to adapt to the market and hopefully we can extract what we need.
The market isn't a magical entity which demands human sacrifices. It's quite possible to keep it reigned in with a combination of banning private property investments[1] with public housing and urban renewal projects. Cut down on detrimental demand and increase supply.
Companies providing and selling food, energy, and consumer staples are investment materials. I don’t get why housing should be a special carve-out and don’t see a workable answer to how to provide food for everyone while banning all investment in companies that grow or sell food.
These companies are invested in precisely because these are basic needs. The company gets the capital it needs to operate, consumers get a reliable supply of food, energy, and clothing, employees get steady jobs providing these staples, investors get a relatively safe store of value and some income. Who exactly loses in these investments in supply basic food, energy, and consumer staples?