How private equity is changing housing

Trace the problem back. Where does it start?

Why is PE investing in homes? Because they can make money. Why does buying a home make money? Because the value appreciates. Why does the value appreciate on an asset that literally deteriorates over time? Because of restricted supply. Why is there a supply shortage?

The root cause of this issue is supply. Zoning, mostly, is to blame. There are down stream issues, like the capacity of the construction industry, but that is an effect of the current environment not a root cause in and of itself — if there is money to be made, construction will grow as fast as it can.

Fix supply, and you fix the issue. This is a uniquely (English) western world problem. Go look at western countries that speak English vs. non-English housing starts. It’s just a cultural failure. You can blame corporations all you want but at the end of the day most people in the anglosphere expect a return on the largest purchase of their lives, even if it comes at the cost of materially worsening the lives of those around them.

One should ask why it is that housing / land is more profitable than those investments in which banks and private equity previously invested. And then when you follow that line of reasoning (too much capital and credit -- thanks quantitative easing! -- poor performance on bonds due to low interest rates and restrictions on the quality of investment vehicles) and you'll see that the root cause is probably more financial rather than _just_ too little housing.

Debts need to be cleared, losses need to be accepted, and leverage unwound. Building more housing just gives banks and private equity more stuff to buy.