How private equity is changing housing

build. more. and this problem will go away.

Not if private equity just snatches it all up.

Yes build more. Also regulate the oligarchs until they no longer exist.

PE buying real estate is a long bet on housing prices. If supply increases enough, prices flatten out and then fall, and the longs get crushed.

These investments are a bet on continuing to under-build and under-densify.

this sounds nice, but neglects the fact that (1) materials cost has gone up and (2) zoning requirements exist. (1) means its just more expensive to build overall, and (2) means that a lot of proposals for apartment complexes get voted down.

Part of building more is getting government (mostly) out of it so that things like zoning laws don't hamper new development. Obviously that is very hard to do at a local level when incumbent homeowners' housing values would be cut in half overnight.

If they buy out all the supply, there will always be a shortage.

Sounds like trickle down housing to me.

Me: "should we stop allowing private equity to hold property?"

My Strawman: "nah let's build more houses to be snatched up by private equity, that way eventually maybe they'll be really nice and decide to lower prices for us someday due to the infallible balance of supply and demand that definitely hasn't been rigged to hell over the past half century. They certainly won't just continue to rig the system to benefit themselves"

So build so much they cannot rent all of it. Over supply will eventually drive down prices.

its a good bet on their part (although i hate it). we obviously can't increase supply fast enough to keep up with demand in the current regulatory climate and with an existing shortage of skilled tradesmen and ratio of tradesman retiring out vs newcomers entering construction, there doesn't seem to be a feasible way to meaningfully increase supply.

This is happening in california. In fact there are three current situations: 1/SB9 cutting R1 lots in half 2/ ADU laws, which let you build up to 3 homes/units where there was one and further, can be combined with SB 9 3/ AB2011 which lets you turn defunct strip malls into housing

Honestly, this plus things like PermitFlow make me feel like we will be able to build enough. The issue will be making sure the housing is affordable rather than expensive and empty.

>this sounds nice, but neglects the fact that (1) materials cost has gone up

That's a red herring because most of the price increase comes from increase in land prices.

https://www.aei.org/housing/land-price-indicators/

The area I live in has homes that remain empty because the investor doesn't need the capital nor the space and just holds empty units for multiple years when they eventually sell (for even more than they would have sold in the past).

Housing demand will always be > 0 as long as population is growing and hence there can never be a oversupply.

>to the infallible balance of supply and demand that definitely hasn't been rigged to hell over the past half century

How has "supply and demand" been "rigged"? A lack of supply isn't evidence of "supply and demand" being "rigged", it's it working exactly as predicted, not any different than oil prices going up when there's some geopolitical event threatening supply.

Well duh because "just make everyone underwater on their mortgage" is a bit of a silly solution that definitely won't have any second order effects.

also neglects the market's appetite for this risk of building in the current environment, which is the biggest problem. market gonna act like a market

In areas where there is demand without risk.

can you please explain how these graphics are supposed to support your argument? it's not clear to me and i'm trying to understand the georgist POV.

nonetheless, materials and the cost of labor are the most significant costs for new buildings. not land, taxes, or zoning regulations. here is one example where this is a fact: www.vermontpublic.org/local-news/2024-05-23/uvm-halts-student-housing-project-construction-costs-workforce-shortage

You're not wrong. There are multiple aspects of government involvement that require untangling which includes federally backed mortgages that allow banks to be more lax on loan terms (which is how we got 30 year loans and Trump proposing a 50 year)

who is going to do the building? Because PE is the one doing that too.

Actual NIMBY/YIMBY fights look like one level of government representing a lot of people who can't afford a primary residence fighting against a different level of government representing a lot of incumbent primary residence owners who are concerned on a personal level about the negative externalities of more people being able to live in their neighborhood. Government is happening no matter what.

> Not if private equity just snatches it all up

"As of December 2022, the five largest investors owned about 300,000 homes — just under 2% of single-family rental homes nationally."

Where institutions dominate is in rentals: "institutional investors own roughly 2% to 25% of single-family rentals in major markets" [1];.

[1] https://www.npr.org/sections/planet-money/2025/09/09/g-s1-87...

I'm not neglecting those facts. 2) is almost the entirety of the problem. the call to action of "build more" is not wishful thinking that someone will donate free houses to the public. the call to action is to vote for politicians who will remove the near-universal smothering red tape that prevents any kind of meaningful new housing construction

Switch from "national level" tab to "metro level", and select los angeles for an extreme example. Look at the the figures right of the map, that says "share of SFD units build before 1980 with a land share of" and compare the figures between 2012 and 2024. Just by eyeballing the percentages, it looks like the land share went from 50-60% to 70-80%. This is confirmed if you sum up the figures in a spreadsheet, you go from an average share of 51% to 72%.

You can compare this to overall housing prices in the LA area[1], prices in 2024 is 262.7% of 2012 prices. Suppose you have a $100k house in 2012, that will worth $262k in 2024, an appreciation of $162k. Using the land value percentages above, the land value of the houses are $51k and $188k respectively, an appreciation of $137k. That means 85% of the appreciation was in land, not because building materials got more expensive or whatever.

[1] https://fred.stlouisfed.org/series/LXXRSA

No, private equity appears to be a minority of home builders: https://www.builderonline.com/builder-100/builder-100-list/2...

Supply constraints are a symptom of the problem, which is housing is a huge leveraged investment for many. You generally won’t get policies for building more when it negatively affects the finances of a majority of voters

market has plenty of appetite but it's muzzled by selfish and short-sighted NIMBYs

exactly wrong based on my argument. did NIMBYs cause the dramatic drop in building after the great financial crisis? (no)

interesting. what about a timeframe that doesn't occur with a period of extremely low interest rates like your 2012 - 2024 time range?