For the argument you are making here, do you care about causation vs correlation?
To illustrate: when I lived in Sydney I heard that, when you bought a rental property on a mortgage and it's currently not occupied, you can count the mortgage payments as a loss to offset your income from other sources.
If you changed that law, so that mortgage payments can't be deducted from your income tax for empty properties, ceteris paribus you would presumably see fewer vacancies and lower rents.
But the overall background trend you observe in your post would probably still apply.
(Btw, I am not 100% sure about that law in New South Wales. If I'm wrong, just take it as a hypothetical example.)
Well, you’re going to see why soon because the single-family build-to-rent market is rocketing out of nowhere to finally fill the gap where we have made marginal new production of every other form of housing illegal, and before it comes close to filling the gap, there will be a coalition of voters and policymakers demanding that we make it illegal too.
In very simple terms, let’s say a house costs $200k to build and rents for $1,000 per month. Mortgage suppression cut off demand of owners, but not of tenants. So after the crackdown, the price of a home fell to $150k, but it still rented for $1,000.
Builders wouldn’t build a new house because nobody would pay $200k for it. Instead, over time, the rent rose to $1,350. And finally rent was high enough that buyers were willing to pay $200k to build more, and so new homes could be built again.
Why didn't we see much of the single-famliy build-to-rent market before? Were yields not as elevated until recently? Or was it some innovation on the supply side that enabled this?
Existing entry level homes were cheaper than new homes until recently, so there has been large scale landlord activity, but since it was in the existing market, it was harder to manage. Now that rents are high enough for new builds to pencil, they are switching over to whole neighborhoods, which can be managed more efficiently.
But it was going to be tough to make that model work buying $200,000 new homes when equivalent existing homes were selling for $150,000.
For the argument you are making here, do you care about causation vs correlation?
To illustrate: when I lived in Sydney I heard that, when you bought a rental property on a mortgage and it's currently not occupied, you can count the mortgage payments as a loss to offset your income from other sources.
If you changed that law, so that mortgage payments can't be deducted from your income tax for empty properties, ceteris paribus you would presumably see fewer vacancies and lower rents.
But the overall background trend you observe in your post would probably still apply.
(Btw, I am not 100% sure about that law in New South Wales. If I'm wrong, just take it as a hypothetical example.)
I don’t think this has been an important factor here. At most I think that would have small effects on the margin.
Well, this puts a point on the housing shortage. And the size of the problem. And the result which is rent inflation.
But it doesn't provide any info into why we don't build more.
Well, you’re going to see why soon because the single-family build-to-rent market is rocketing out of nowhere to finally fill the gap where we have made marginal new production of every other form of housing illegal, and before it comes close to filling the gap, there will be a coalition of voters and policymakers demanding that we make it illegal too.
Okay, But if there was a demand, why did the market not supply the product to meet the demand?
In very simple terms, let’s say a house costs $200k to build and rents for $1,000 per month. Mortgage suppression cut off demand of owners, but not of tenants. So after the crackdown, the price of a home fell to $150k, but it still rented for $1,000.
Builders wouldn’t build a new house because nobody would pay $200k for it. Instead, over time, the rent rose to $1,350. And finally rent was high enough that buyers were willing to pay $200k to build more, and so new homes could be built again.
Why didn't we see much of the single-famliy build-to-rent market before? Were yields not as elevated until recently? Or was it some innovation on the supply side that enabled this?
You could say it was yields.
Existing entry level homes were cheaper than new homes until recently, so there has been large scale landlord activity, but since it was in the existing market, it was harder to manage. Now that rents are high enough for new builds to pencil, they are switching over to whole neighborhoods, which can be managed more efficiently.
But it was going to be tough to make that model work buying $200,000 new homes when equivalent existing homes were selling for $150,000.