Zach WeinersmithStupid econ question:
So it looks like a lot of remaining inflation is rent. In that case, wouldn't you want to lower rates to increase home-building and home-ownership in order to reduce rent pricing?
brennen@ZachWeinersmith as a counterpoint, why not do everything possible to create a permanent underclass
MPG@ZachWeinersmith Robert Reich just posted a short YT explainer about how hedge funds started hoovering up single family homes during the 08 mortgage crisis, and they're the ones primarily driving the increase in housing costs. There is a bill currently in the Senate to address the issue... Call your senators! https://youtu.be/q9TOGxDJ0TE?si=yfqwAbWXY_GlNRYv
(Also lowering interest rates, but we have to keep investment banks from hoarding the supply)
How Wall Street Priced You Out of a Home | Robert Reich
Christian Zimmermann@ZachWeinersmith This would take a very long time to be finally reflected in rents.
Jesse@ZachWeinersmith The problem is that people borrow money for more things than housing.
John Francis@ZachWeinersmith yes. Lowering rates reduces mortgage carrying costs, less expense to be recovered by rent.
And no. Lower rates reduces mortgage carrying costs, making larger mortgages more attractive and causing more money to chase the available properties or construction driving up prices .
Govts have to work hard at ensuring supply will increase. It can't really be done just with rates. Or even just with money. It requires legislative, policy, and direct action. Like... building housing.
mivox is exhausted 
@ZachWeinersmith Banning investment companies from owning single family homes, or multiple apartment buildings, would make a much bigger difference much faster.
Wandering HermitI would expect the return of ACRS, last seen in the 80s, which gives accelerated depreciation (equivalent to lower rates) for investment real estate. Maybe this time restricted to multi-family property only.
Investment companies would move from single family homes into apartment building because of better returns, making both rents and home purchases cheaper.
Or maybe I'm just dreaming...
Daniel Gibson@ZachWeinersmith
Who is "you" in that question, and are they even interested in reducing inflation?
Assuming "you" is your government/Fed (who else would be in the position to lower rates), isn't inflation good for them (as long as it's not hyper-inflation), because it reduces the value of the national debt and increases income from sales tax?
Carl (He/Him)@ZachWeinersmith In isolation, maybe. In practice, lowering interest rates has other effects. Also, it would take years--home-building is not generally an overnight thing. And home ownership is bad for society, for many reasons. (No, I wouldn't say provocative things. What gives you that idea?)
Palmer@ZachWeinersmith realistically interest rates do not benefit affordability by the masses. If they're low, properties are bought up by those with capital. If they're high, they are rented at exorbitant rates.
We need laws that discourage and tax multiple ownership. Then use those taxes to subsidize housing costs.
Instead the US further reinforces its poverty class system.
The Sneak@JPalmerGD @ZachWeinersmith I think this is the way. Companies should be taxed at increasing rates depending on how many units they and their subsidiaries own. That would strongly discourage this sort of monopolistic behavior.
We'd also need to enforce the laws against colluding with other companies to raise rents.
But if we managed to do that I think it might be transformational...
@sneako *looks at the RealPage lawsuits*
That price fixing company should be bankrupted.
Andrei Kucharavy@ZachWeinersmith who would want that? Insane rents not only generate quasi-guaranteed revenues compared to anything else, they also drive the property value up. Due to how it grew, a lot of people’s retirements depend on it, and depend on it keeping growing.
Andrew Douglass@ZachWeinersmith the entire neighborhoods being built as rental properties is probably the primary challenge to this.
Stephen J. Anderson@ZachWeinersmith Something something Land Value Tax. But it’s not a popular idea, particularly amongst those in power, who typically own a lot of land. The USA would definitely have a philosophical and possibly constitutional problem with it.
Louis Marelle@ZachWeinersmith I cannot speak for the US or the world, but in France the housing affordability crisis has been shown to be due to low interest rates. So I think it would make it worse.
I was very surprised by this but the numbers are really clear. Housing prices divided by household earnings were extremely stable for decades, but exploded from 2002 when rates decreased.
https://elucid.media/economie/immobilier-logement-prix-marche-04-2024-crise-poursuit-baisse-pas-terminee
Robert Watkins@ZachWeinersmith building houses lowers rents the way expanding highways solves traffic jams.
It’s part of the solution, but without the other parts, you end up back with the same problem a few years later.
Rusty Earthfire@twasink @ZachWeinersmith With housing "induced demand" would mean more people in homes, which is a major benefit, in pretty stark contrast to more cars on the road.
@RustyEarthfire @ZachWeinersmith
Except that the goal isn’t "more people _owning_ houses" (which is what building more houses promotes).
The goal is to "people in houses they can afford”.
And building homes, while _part_ of that solution, isn't anywhere near enough of the solution. Because there is more than enough housing stock in the US to house everyone, assuming the cost of doing so was free.
The end state of simply buying more houses is that you end up with more landlords charging too much rent, and a significant amount of people being unable to afford rent.
You need to stop, for example, hedge funds going through and buying up every available property in a town so that they can control the rent levels and extract money out of a captive community. (Hedge funds that are perfectly happy to leave houses vacant to prop up the prices they can charge for the other houses)
there is more than enough housing stock in the US to house everyone, assuming the cost of doing so was free.
There absolutely is not, especially not where people want to live.
As of 2022, there were estimated to be approximately 144m "housing units" (houses, apartments, etc) in the US.
With a population of about 333.3m, that's 2.3 people per dwelling.
That's not a supply problem. That's a distribution problem - and I don't mean geographic.
Looking at the US city with the highest number of homeless people - NYC – there are about 47,000 _abandoned or deliberately kept vacant_ houses. More than enough to house the 88,000 homeless people in NYC. Sure, these will mostly be in the outer boroughs, but they're still in NYC.
That's ignoring the regular rental vacancies, people keeping and using multiple properties, empty office buildings that could be used as housing stock, etc.
Ben Atkinson, PhD@ZachWeinersmith Rates do need to be lowered, but I believe the best approach is to build more affordable housing. I do not totally oppose rent controls in the very short term while the housing is built, but such regulations without increased housing supply would only make the shortages worse in the long run.
Toaster@ZachWeinersmith in the UK low rates led to land hoarding not building alas. In theory low rates -> rising prices makes building competitive, but that also increases the price of good sites. If you can afford to buy and build on 1 site… you can instead just buy 5 and wait for their prices to rise. Then you’ve got a strong incentive not to build on any, or sell to anyone who would, as it’d decrease the value of your portfolio.
John Coxon@toaster @ZachWeinersmith Yes, this. The answer is “regulation”, not “a free market”.
Propriety@ZachWeinersmith Let me weep in your general vicinity about the state of zoning in areas where rents are high. :(
A lot of cities seem to be taking the "discourage people from moving here" tact rather than the "build more housing" tact and it makes me very frustrated! Unfortunately, because a lot of people's wealth is tied up in the value of their homes, they have an incentive to discourage new home construction.
@proprietous But if we get ENOUGH zoning restrictions maybe can can justify a Mars base!
@ZachWeinersmith breathable air now requires a variance that must be granted by City Council after a community design review scheduled with the neighborhood Registered Community Organization (RCO), which is required for Zoning Board of Approvals (ZBA) review, which must happen after a review by the historic commission and the art commission.
Also if the parcel in question hasn't been updated in the city's land records database your review will be rejected. There's an 18 month update backlog.
Erwan@proprietous @ZachWeinersmith as a homeowner it's a mistake to believe you benefit from your house value rising. Because the whole housing market rises too, if you sell your house you need to buy another one at the same inflated price. The only people benefiting are investors (landlords) and older people who move to a smaller, cheaper house.
ronstieger@ZachWeinersmith no. (1) the rent in CPI includes owner-equivalent rent, so lower interest rates -> higher home prices -> higher “rent” component of CPI. (2) interest rates don’t just affect one sector, so even if it did lower rent due to more construction, it would increase inflation in other sectors. If you want to target just rent, you need to do that via regulation (reduce zoning restrictions, reduce tariffs on construction materials, don’t subsidize demand, etc.)
Joshua@ZachWeinersmith it would raise the costs of house purchases, at least in the short term. Home building would also take a long time to kick in, and for rentals especially is more supply constrained by things like what rules municipalities have for what can be built where.
Basically I'm pretty sure all the effects increasing inflation from lowering interest rates would be way larger than the small decrease on rental demand