Housing supply vs demand vs landlords


#1

Are there any good solutions to this?

If there are ‘x’ vacancies at a location and x + y people want to live there, then ‘y’ people are going to be excluded, no matter how we slice it. Unless we’re actually building a lot more stock of high-density econo-boxes, which tend to lower property values and thus are fought tooth and nail by residents, all we’re debating is who gets excluded.

And since people who currently live in an area tend to be against cheap densification, do we strip them of having a say in how their community is to be managed?

All of which comes down to saying that I don’t have a solution - every mechanism for relieving the housing crisis simply shifts the nature and location of the unhappiness.


To keep their bond-ratings, hedge-funds have to publicly demonstrate that they are the most ruthless of landlords
To keep their bond-ratings, hedge-funds have to publicly demonstrate that they are the most ruthless of landlords
#2

A solution to hedge funds being arsehole corner-cutting slumlords for tenants of single-family homes they picked up on the cheap after 2007? Not really, because “hedge funds”. They’re greedpigs and being landlords is not their core business. I’d like to see any landlord who advises his tenants to monkey around with the wiring or pipes have the property’s insurance revoked but that’s the best we can hope for in our “the market solves everything” country.

The larger question of solutions for high-demand cities dealing with skyrocketing housing prices due to low stock is mostly a separate one, worthy of its own discussion topic.


#3

I think the bigger issue here is the % of income that goes to rent. People being excluded (sometimes quite forcefully) from the market is just the edge of the issue. When average rent goes from 18% of income up to 30%, that’s a pretty big redistribution of wealth right there.


#4

On top of that, the tax changes that just went into effect significantly increased the incentive for businesses to own income-producing real estate, and took away many of the subsidies that helped people own their own homes. It’s almost as if Congress were trying to further divide us into a nation of landlords and tenants.


#5

In pretty much any US msa there exist enough vacant or underutilized “x” such that all “y’s“ fit within the set of x.

Well except that how we slice it causes the problems so maybe we should try something else beyond micro 101?


#6

While “hedge funds” are a convenient bogeyman, the real problem is housing supply vs. housing demand.

Large corporate owners of any form tend to maximize income rather more efficiently than small, thus pushing the outer edge of nastiness, but unless the history of landlords from my youth was an anomaly, the vast majority of the small ones are only a little behind.

I think this is another case of looking at a symbolic awfulness that affects some instead of addressing the (just ever so slightly less) awfulness that affect vastly more people and require real policy decisions with real policy trade-offs instead of an easy “off with their head”.

Absolutely in agreement. However, I think the “hedge funds” angle is a diversion from the far deeper issue of rents that is way more consequential to the majority of the population.

We have. If you lived in certain districts, remember rent control, personal connections, and “key money”?

We need to address the real supply issue, along with the real social issues that are byproducts of strongly increasing supply. Bulldozing residential neighbourhoods in order to build large-scale block housing gets people housed at rates they can afford.

And yes, that’s going to offend a hell of a lot of people. If the solutions were easy and didn’t involve real sacrifice, don’t you thing they’d already be done?


#7

At its base, obviously, but there are a whole bunch of complicating factors on top of that which exceed the scope of this discussion (as @doctorow is aware). The phenomenon of banks/hedge funds/private equity firms becoming landlords with increasingly large single-family holdings despite a complete lack of core competency is now one of those factors.

We’re not going to get close to addressing the rampant and nasty avarice in the larger market if slumlords and other bad small-time actors can point to the corner-cutting and gouging done by these Wall Street greedpigs and call them “best practises.” That makes the “securitise ALL the things!” financial services crowd more than just convenient bogeymen for supposed NIMBY liberal hypocrites.

You bring up a lot of interesting points and debatable assumptions (e.g. high-density housing lowering property values), but I’m going to request that @orenwolf split it off into a separate topic.

ETA: I just added a General catch-all thread on urbanism-related issues here:


#8

They are self-insuring and have probably run the numbers to suss out the probability of successful repair vs the house burning down and decided there was an edge. (“Renter lives don’t matter.”)


#9

If the landlords weren’t so fucking greedy the rental prices would be affordable!
(And yes, still profitable.)


#10

This is part of the scheme that seems to get very little attention when the worst happens. Insurance offerings for folks working in the gig economy may be set up in similar way. It makes me wonder if corporations are still taking out life insurance policies on people with companies as the beneficiaries.


#11

The core problem remains that the high-end optimisation is being done by sociopathic slow AIs known as private equity funds always put the comfort, safety, and ability to pay of the actual humans living in these homes far below other priorities.

I think there’s room for more humane big corporate approaches to being a landlord (especially value-investing ones), but private equity firms and hedge funds and banks left holding mortgages show little interest in them.


#12

Do you really think the hedge funds are significantly worse than most other large landlords?

My experience with landlords had nothing to do with sociopathy, but certainly had everything to do with most of them trying to charge what the market would bear. Honestly, they didn’t seem all that different from having a hedge fund landlord absent the super-egregious examples (and I’ve read lots of super-egregious non-hedge-fund landlord stories.

Also, is being expected to do one’s own minor repairs really new? We replaced a shattered outlet cover and fixed a dripping faucet as a matter of course - albeit with no landlord provided manuals. On the other hand, we used the 1980’s version of the Internet - a parent who was actually competent.

I’m also pretty certain we’d have been booted as soon as possible if we were slow on the rent. And at the time, I didn’t consider it sociopathy, after all I’d leave an employer that was slow paying me.

Of course, legislation (which I imagine is present in California) protected me as a tenant, as it should - tenants require more protection than an employer. Such landlord-tenant legislation makes it somewhat difficult to expel a resident for non-payment immediately. But those were given by the government, not the landlord.

Perhaps I’ve always assumed that landlords are restrained by market and not by ethics, which is why I want to attack the market. That’s the vulnerable constraint.

Now I will say that landlords who share a dwelling are often quite different. But then rents often depended on being on the landlord’s good side. Be a quiet, friendly tenant who volunteered to help, and you could look at rent that was 3/4 market price. But then do we want people’s ability to live in the city to depend on how socially compatible they are with an arbitrary landlord?


#13

I do. As bad as many large corporate landlords are, their core focuses are property management and dealing with tenants. The core focus of a private equity firm or a hedge fund or a bank (in this case one saddled with foreclosed homes) is very different – it’ll squeeze profits from a property ruthlessly, and if it means cutting corners on maintenance or kicking an otherwise good tenant out because the computer says he’s one day late on the rent they’ll do it.

A critical question one asks about any company when presented with its report or prospectus is: what business is it in? A corporate landlord’s mission statement will look very different from a hedge fund’s.

For someone whose core business is being a landlord, yes. I know plenty of landlords (corporate and individual) and I’m confident that every last one would laugh in horror at the idea of telling a tenant who isn’t a certified tradesperson to go ahead and fiddle with live wires or take a wrench to the pipes. Putting aside the risk of death or injury or serious damage to the property, a landlord doing that might as well hang a sign that says “sue me” around his neck. He’d quickly lose his insurance, too.

As someone noted above, the hedge fund will self-insure and roll the dice. The health of the tenant is a small factor in whatever actuarial calculations they do before it says “do it yourself.”

That’s true, but what’s described here goes beyond collecting the rent and normal evictions. A normal landlord will usually take extenuating circumstances into account rather than going for an immediate eviction; for example, the ones I know will give a particularly good and respectful tenant some leeway if he doesn’t pay exactly on time on the known-quantity principle. It’s only when the tenant makes a habit of it or falls 90+ days behind that these landlords will usually take action.

In contrast, private equity firms are narrowly focused on making the quarter’s numbers, and evict at the drop of a hat in the hope that they can bring a new “human unit” in quickly to pay what they consider market rate for the home.


#14

Oh! Well at this point, I defer to your experience and knowledge. All my experience is anecdotal and what I’ve read.

I will also add if they were actually talking serious wiring, they well deserve the multi-million dollar suits (or property destruction for plumbing) they’re going to be hit with. When I was renting, we assumed responsibility for the sorts of things that a typical householder would likely repair (running toilet sort of level) themselves, but nothing serious.

Anyway, I’m slightly surprised that the hedge funds haven’t simply hired building management services. Do they not believe in the core competencies paradigm? (I can believe not, lots of smart-ish people have crashed on the hubris rocks of “I’m smart, therefore I know better than people who spend a lifetime in the field.”)

To me, that’s not just good ethics, it’s good business.

I also understand your concern. Making money is important, but not as important as perception. If the perception is that “smart”, seemingly successful businesses are adopting new practices, the pressure to change can be high, even if they lose money in the long term.


#15

I’m basing it on both landlords I know and financial services people I know. Very different outlooks.

That seems to be what’s being discussed. You don’t need a YouTube video to learn how to jiggle the toilet rod or flip a switch in the fusebox.

I’m not. And no, hedge fund managers and vulture capitalists don’t believe in the core competencies paradigm. They’re the current priests of the Cult of the MBA. Everything can be quantified in and boiled down to dollars, and they’re the Masters of the Universe when it comes to that. If they weren’t that smart they wouldn’t be this wealthy is the attitude.

It is, but for this particular kind of sociopathic slow AI what I’ve described above is not good business – it’s more efficient to immediately and automatically generate an eviction notice based on whatever number a black-box algorithm spits out and have the marshal there 8 hours later. Ethics, of course, are no concern of the slow AI given its design and prime directives.

My viewpoint is more that making money is important, but not as important as adding value for all stakeholders. If we were talking about Berkshire Hathaway going into the landlord business this might be a very different conversation than the one we’re having about the Blackstone Group and Colony Capital.


#16

Fanny series debt terms reek for decades at a go with wacky meta-knives for low hanging fruit, nobody wants a prebuilt gaffe, spawn points aren’t real and city terms (water, light, fire, heavy…heart!) can be a maze of pet fees at the twist of an eye; people defs kept some daft around and missed low hanging fruit!

Haven’t tried to buy spot insurance for greedpigs lately though! Just bundle that in, eh?


#17

That one is from a few years ago now, but you can find many variants on this story over many years.


#18

i would think yes. because of scale.

hedge funds have more capital. so rather than one or two crummy apartment buildings owned by a shady rental company, you have whole neighborhoods bought up by the hedge fund.

( and since the housing crisis had a race component so do these purchases, and structural racism lives and breathes for yet another generation. )

it reminds me of an isp monopoly except it’s the roof over your head, and not the internet.


#19

You’d be surprised. The amount of people that know next to nothing about how the stuff in their home, the stuff they interact with every day, actually works is a lot higher then you’d expect. And even if you have a good idea how to do something, following a youtube tutorial for something you haven’t done for a few years will usually give you a few pointers and tips that will help.


#20

I quite agree that normalization of “extreme optimization” is a real concern. But I also suspect that we’re fighting an uphill battle. I think lack of technology rather than ethics has the largest restraint on the relentless optimization that endangers society.

In other words, I don’t think the “greed-pigs” are new. It’s just they’ve been enabled with technology to optimize in ways that were impossible before. My deep fear is that lots of things (like the market, democracy, social networks, humanity) simply fall apart with perfect optimization.

Note, uphill battles still need to be fought. But I prefer to aim at the fundamentals that the hedge funds are trying to optimize. If there’s enough low cost housing by other means, then the optimum solution is to provide decent rentals at a mutually acceptable price.

I’d have a lot more sympathy “landlords are greedy” if I wasn’t aware of my own greediness. Never have I said to an employer “no, actually, you only have to pay me half of what I could get elsewhere”, even when it’s well above what it costs me to go to work (i.e. my profit).

In other words, I basically charge what the market will bear.

Now, maybe I get a pass because I don’t offer the necessities of life. I’m allowed to charge market prices because nobody requires my services, which is true.

But then we have the odd position of punishing those who are in the business of providing necessities, which seems counter-intuitive if we want more of them to be provided.

[tl;dr The right is full of simple answers to complex questions. Do we really need the left to join them?]