How private equity is changing housing

I'm as pro capitalism as it comes but private equity should not be allowed to operate in the consumer housing market. They can develop and sell houses but cannot hold is my point of view.

Same. I remember growing up in the 90s, after the fall of communism, hearing that capitalism beat communism because in capitalism you can own things.

MFW I now live in capitalism and can't afford to own anything.

IMO the main problem with them is that actual competition isnt really possible. Most of the time, you just can't develop newer/denser housing where they are taking over neighbourhoods, so no real competition is possible which allows them to distort the market for their own gains.

One of the things communism did right was housing - in the Eastern Bloc home ownership was above 90%. The quality was not great, not terrible. But bad shelter is infinitely better than no shelter. I also think that it also excelled in K12 education. Whether because the german style system that was common in europe pre WWII was just left alone - I don't know. But until the mid 90s we really didn't had the school reformers to fuck it up. Right now we are as good as producing illiteracy as the rest of the west.

Another market where PE is incompatible with human life is healthcare. It becomes a race to maximize profit at the expense of worse patient outcomes and worse healthcare availability for all. They close redundant, less profitable hospitals (usually rural). Same with pharma: they jack the prices on common meds and only develop profitable ones, not effective ones or needed ones.

Not to be pedantic, but this would make you not so "pro capitalism as it comes". The ability to develop and sell houses, but not hold them (in service of rent-seeking) runs contradictory to the very core tenant of capitalism, which is private property and free markets. Socialism and supply/demand-markets are not mutually exclusive; it sounds like you're more amenable to a socialist or mixed-market system than you give yourself credit for.

More broadly, housing cannot be relied upon as an investment vehicle and remain affordable. Whether it's private equity or others is a moot point. The perverse incentive is there in that housing appreciates in value because of artificial scarcity. It's a 1-1 relationship.

I don't think this is contingent at all on the capacity to buy and hold, but on policies that limit building and financial instruments related to housing. The 30-year mortgage even. So now similar to the case with Social Security and public pensions abroad, politicians are playing a game of hot-potato not wanting to be the ones to have to make changes and upset the large aging voting bloc. Similar, too, because it's a generational wealth transfer.

Many items through market exchange have gone down in price over time owing to increases in efficiency (see: coffee makers). This can't be blamed on markets qua markets. It's adversarial policy that harms young workers.

It won't change anything. Private equity is always a nice scapegoat, but it just exploits the same market forces as any other economic actor.

If you ban private equity, it's going to be mom&pop redevelopment companies doing the same. I give you an example of Vancouver. It banned foreign purchases: https://www.kelownarealestate.com/blog-posts/canadas-ban-on-...

The impact was literally non-existing. The prices continued to grow as Vancouver 's housing density keeps increasing.

Except whenever you have inelastic demand or supply you are no longer in a free market.

One could argue that PE is both A. ) the ultimate form of capitalism and B. ) explicitly creates inelastic demand. A truly free market will always succumb to dominating forces that create the inelasticity (or at least that's what history has consistently proven).

it is stymied in part owing to regulatory requirements that makes getting loans at good rates impossible for small developers.

Notwithstanding that, the populist fantasy is that developers won't build more "because they are greedy", as though that math works out. If developers don't leave money on the table, then they'd want to build where the demand exists and it does. They face a number of constraints and bottlenecks, not just for materials/labor, but managing risk. Risk makes loans expensive, everything is built on credit. Some of that risk is compounded by the threat of litigation by NIMBYs, or regulatory requirements, or environmental review, etc.

The only reason capitalism works is because it turns everything into a struggle for existence, which is the best motivator. Every company is forced to compete (assuming there is no moat created by politics eg. Intellectual Property or contract law) or the company will go under.

But it also means that the people who can’t compete in this type of Darwinism only survive because of the empathy of others who do (whether that be family/friends, politics, or charities).

I’m worried about the breadth of industries that PE has infected in the US.

What does “home ownership” mean in a country where there is no private property?

That is the point. Capitalism has never included free markets in its honest definition. They are nuisance for the capital owners. But when they are forced to participate in the free market - then a big part of the surplus generated by the companies is captured by the society. See that was Marx error - instead of socializing everything, he should have just made sure that no monopolies, monopsonies and enough state capacity exist to make the unfree markets free. Send this message back in time and we will save couple of hundred of million people.

Capitalism actually prefers to control the markets.

>> Not to be pedantic, but this would make you not so "pro capitalism as it comes". The ability to develop and sell houses, but not hold them (in service of rent-seeking) runs contradictory to the very core tenant of capitalism, which is private property and free markets.

I think you're right. A lot of people confuse capitalism for working for a living - because that's what capitalists want the middle class to think it is. Capitalism is really about getting capital to work for you so you don't have to. Building and selling homes is a form of working. Holding homes for rent is capitalism.

There was a lot of private property in the socialist countries. I am not sure from where this thought even came to you. What was impossible was owning big private enterprise. But small businesses - like a restaurant or a shoe repair shop were allowed. You were also allowed to own houses, cars, appliances, clothes and almost everything else. Land was a bit weird - you could own, but not too much - basically stuff that was small enough to evade the collectivisation process.

I don't know the specific rules in Vancouver, but yeah, a lot of those attempts were illusory/perfunctory...

If you can afford to have one, or multiple, $2M+ condos that you just "park" your wealth in to leave them vacant, the presence of a $10K or $20K fee/tax a year is in the "chump change" category.

See my reply downstream.

almost, but rent-seeking is an odd form of capitalism, because in its pure form it isn't providing value.

nothing in the real world is in its pure form, and some business are able to provide value which they cannot charge for because they can rent-seek on other areas, so there is always nuance.

but an economy where rent-seeking is the main path to wealth is an economy in really poor shape.

The socialist sense of “private property” refers specifically to ownership of physical (or at least, nonfinancial) means of production, other than by the workers whose labor is applied to it.

It does not refer to all ownership by individuals of real and personal property, restrictions on other personally-held property are separate concerns from the abolition of private property, and socialists regimes, including those in the Soviet bloc, frequently have retained private home ownership, which is not fundamentally inconsistent with socialist theory.

Im capitalist in the belief of truely free markets. Im against monopolies or monopoly like structures. I can make a case for private equity being a cartel as well knowing how they use algorithmic platforms to price rentals thus collaborating on pricing while pretending they don’t. After all its a third party setting prices.

Rent seeking is the end result of capitalism as an economic system. The goal of a capitalist is to accumulate capital (wealth), and rent seeking allows you to do this without expending any effort. Any capitalist acting rationally within the system of capitalism will desire to seek rent.

Just about right!

Vancouver has fewer vacant units than the average for the country.

> The number of vacant homes in Vancouver has fallen below 1000 as of 2024. The latest Annual report shows low vacancy rate of 0.49%. [the average is 2.7%]

Guess what happened with the housing prices? Right. They kept increasing. The housing density went up, so the prices must also increase.