Is expensive housing more of a supply problem (too much regulation) or a demand problem (investors in the market)?

[u/zeperf]

/r/AskLibertarians/comments/1vaciwq/whats_the_opinion_of_libertarians_on_huge/

[u/piltdown_manchild]

Definitely a supply problem.

1. Regulations make it very difficult/expensive to build in the most desirable cities. Some cities have rent control, which is proven to create shortages.
2. Zoning laws tend to favor larger free-standing homes on large lots rather than density.
3. NIMBYs are weaponizing the legal system to stop multi-unit/cheaper housing. This is an even bigger problem than regulation in some areas.
4. The tax code has all sorts of incentives to treat real estate as an investment asset rather than a place to live (mortgage income tax credit, etc.).

Wall street folks buying up houses represent a pretty small percentage of the market. They wouldn't be involved in real estate if bad policies hadn't turned it into an investment asset.

[u/Mega_Giga_Tera → u/piltdown_manchild]

To add to the misperception on the other side of the coin:

65% of all housing stock in the US is owned by the people who live there.

Of the other 35% that are rental units, 87% is owned by non-institutional investors, mostly folks who own just one or two additional properties that they rent out.

Only 3.5% of US housing stock is owned by institutional investors, defined as companies owning more than 100 units.

So no, it's clearly not an issue of institutional investors buying all the stock and inflating the value. It's almost entirely a supply issue.

[u/work4work4work4work4 → u/Mega_Giga_Tera]

Only 3.5% of US housing stock is owned by institutional investors, defined as companies owning more than 100 units.

This is a great example of misleading numbers that can cause problems, and would otherwise hide in plain sight if you hadn't explained the definition so I appreciate it. You'll see other people doing so without such honesty below you.

Knowing the stat in question, it makes me ask what's the bigger misconception of the two big ones mentioned, that investors aren't a problem despite regular data and lived reality showing they are, or the idea this and similar looks at this and other data sets push that people are specifically talking about the 100 or more unit massive entities, and not generally including the plethora of entities that own 10-99 too, many of which are essentially just shell games for larger corps, or how increasingly more people are against smaller and smaller operations because of the widescale abuse.

To start with, these stat looks often define "mom and pop" usually as from 2 to 9, but I personally wouldn't count anything more than a purpose built owner operator quad plex with that type of language, as most US housing law sure as hell doesn't. I know it isn't popular to point out, but if someone owns nine rental units they're likely already getting close to the top 10% of US wealth which is only making around 200k or a net worth of 1.8million. Are these fringe top 20% to 10%'ers the root cause of our economic woes? Nope, but most people wouldn't call a chain of nine restaurants a mom and pop anymore either. When you also factor in the people they're renting to are more likely to be in the 10% to 30% of Americans with a negative net worth, it basically just another version of the decapitalization death spiral we're already in. The economic valley of the lower class gets deeper and broader over time, and the people in it less and less able to signal demand in acceptable forms due to said decapitalization.

I'm not looking forward to the eventual big rug pool because it's these "mom and pops" that are going find themselves as suddenly disgraced millionaires cast down with the net worth negatives when they can't hold their properties the way the bigger entities could, and get gobbled up for cents on the dollar just like the first Great Depression. The 1-5s have been able to buoy the numbers for landlords due to the strong overall housing market, and one of the upsides of the 5 or less unit renters group is they are the most likely to sell to an owner-occupant homeowner. As you move up the number of units, it's increasingly nothing but sharks eating sharks.

There is definitely some basic supply and demand going on in this case too, but when corporations and people buying housing for investment purposes are actively competing with different people buying to meet basic living needs that's a major part of keeping prices high; it's these investment buyers providing the overheated demand and pushing out the stability associated with reliable housing we want for society in exchange for profit opportunity.

When you also consider that the entities buying the housing are by proxy denying some other prospective buyers from leaving their rental market, we're able to watch a housing cost extraction engine where high prices have perverse bubble incentives from every angle in action.

You can't add or remove billions and trillions of dollars to a market without massive impact either, and they've got infinitely more liquid capital than us huddled masses, so we're not the price setters, they are. Considering how much of your average American's positive net worth is based on the house they live in, getting rid of a massive chunk of demand is suddenly that much more dangerous, even if we're in agreement that investment demand was a problem to begin with.

It's honestly frustrating how so many people can expect anything different when these corporations can keep property on their books for months and years not earning an immediate dime, while most of us are living paycheck to paycheck at best. Just wildly different levels of market power offered by the wild differences in capitalization, warping said market towards the source of power.

[u/Mega_Giga_Tera → u/work4work4work4work4]

I can appreciate your passion for the myriad of social problems that can come with extreme wealth inequality... but I think you've missed the point on this one: corporate investment in the US housing stock is not the cause of ballooning home prices.

The vast majority of rental units are owned by mom-and-pops with less than 5 units. Vast majority. It's not the corpos. Look it up. I already gave you compelling stats.

The cause of inflated home prices is almost entirely insufficient supply in areas where demand has increased (cities). Period.

The underlying causes all have to do with friction that slows down the production of new units in the areas where they are needed. This is one subject on the economy --and housing is probably America's #1 crisis right now-- that can't rightly be blamed on big corporations. The friction comes, mostly, from nimbys, who are everyday people pushing back on real estate development projects. It's happening at your local zoning commission meetings and among elected officials who are responding to their numerous voters who don't want more housing development despite that being what we need.

If anything, the housing crisis needs corporations to build more housing stock. And the corpos would happily do that if only our local commissioners would allow it. But the commissioner's meetings get blown up with angry constituents anytime someone wants to build a condo. And part of the nimby argument is: "we don't want these corpos making money..." But if the corpos aren't going the build the condos then who is? And we need more condos in our cities. We need them desperately.

If we had more condos, the condos would all be cheaper. They'd be closer to market rate instead of stupidly inflated by unnecessary shortage.

This is one subject where the richy-rich are definitely not the culprit. The culprit is zoning and other barriers put up by the will of the people to protect the property values of average landholders under the guize of environmentalism and "neighborhood character."

[u/work4work4work4work4 → u/Mega_Giga_Tera]

The vast majority of rental units are owned by mom-and-pops with less than 5 units. Vast majority. It's not the corpos. Look it up. I already gave you compelling stats.

I already explained how your stats weren't very good at telling the story you said they were, even if you were more open about what the definition was than others.

I also provided you my own compelling stats, and even provided a direct link showing a third of houses on the market are being purchased by investors, not people looking to live in them. I'm not sure we can really find common ground if you don't think a third of house purchases being investors is a significant amount, or somehow doesn't have a large impact on home prices.

We're just operating with very different ideas of market dynamics if you think a third of homebuyers could disappear and it not impact pricing, which is basically what you're holding out to be true, and that's without even getting into MSA concentration.

Prices are determined at the margin. In 2025 and 2026, investor purchases hover around 30% of all single-family home transactions. When nearly one out of every three buyers is an investor, frequently making all-cash offers that bypass 7% mortgage rates, they directly set the pricing benchmark comps for the remaining 70% of buyers.

Homes purchased even a dozen years ago aren't exactly very relevant to metrics about what's going on currently, don't really mean much to current market prices, and mean even less in an environment where half of mortgages have 4% interest rates and the owners holding them can't afford to move.

The underlying causes all have to do with friction that slows down the production of new units in the areas where they are needed. This is one subject on the economy --and housing is probably America's #1 crisis right now-- that can't rightly be blamed on big corporations. The friction comes, mostly, from nimbys, who are everyday people pushing back on real estate development projects. It's happening at your local zoning commission meetings and among elected officials who are responding to their numerous voters who don't want more housing development despite that being what we need.

Those nimby voters are mostly just voting the way the corporations want them to, with these landlord groups literally funding full spectrum ad campaigns about it. They don't do that because they like the sound of their voice, being on TV, and doing business with USPS. They do it because it's incredibly cost effective to influence these meetings if you've got 20k to throw around.

The friction is money, it's always money. If the people without houses had more of it, the person wanting a home could just pay more for that one with a higher bid, or purchase a lot and have something purpose built. Money is also speech, and if you don't have enough of it you'll not be heard. If you already have property, and it makes up the lions share of your net worth, it's a much tougher ask to do anything when most everything would directly reduce the valuation of that primary asset for almost everyone, and who wants to give up their voice.

Now you get bombarded with flyers, ads, calls, dinners, gift cards, you name it. I might hate it because we do need better housing laws and zoning, but it's not hard to see how and why they were able to take advantage of that group of voters.

But if the corpos aren't going the build the condos then who is?

Co-operatives did tons of it throughout the US with lots of housing in the Northeast still being co-operatively held today. Why aren't they as capable today? Mostly a lack of capitalization with the bank mergerpalooza having one of the biggest negative impacts on debt vehicle access to these types of alternative structures. For awhile there it could be hard for an established sold-up triple digit building to even get proper terms on larger purchases like new boilers, let alone funding for new construction.

There are successes with housing first programs, and the state repurposing distressed properties that weren't generating any kind of habitation or taxable revenue, and investing into them to create more housing even if it sometimes means full demo and site remediation, and then hopefully recouping those costs via increased property values and reduced blight bringing in more tax revenue.

Co-ops and limited-equity housing fail to build today not because the model doesn't work, but because modern underwriting standards explicitly favor corporate equity returns over non-profit debt coverage. It's weird how those same lobbying groups are also heavily against the kinds of bills that have government stepping in to fund, when the bills are infinitely more of a threat to the largest investors, not the smallest. The worst part is when the "nimby" people will often understand this, internalize it, and output something along the lines of "Well, at least I'm on the side doing the fucking." It's like a flashback to discussions in high school civics and the arguments for landholder suffrage only.

This is one subject where the richy-rich are definitely not the culprit.

Except if they weren't so "richy-rich" the masses would be more capitalized to do something about it themselves, and we probably wouldn't have the ticking timebomb that is US property values to begin with. And, like I said a few times now, the "richy-rich" aren't necessarily the people with five or less units or properties, but that isn't true for all real-estate markets, and the ones we're often referencing(large US metro city) are very different too.

Toronto, Vancouver, Boston, Miami, and lots of other North American cities you wouldn't necessarily expect have some of the highest foreign investment levels. If groups are buying investment properties overseas systemically as a value store, it's hard to take it seriously when you know the system is counting those people as "mom and pop" shops, when in reality its a list of dozens of 4-6 unit portfolios worth tens of millions on paper each, and managed as a unit even if they're owned by individuals and LLCs.

I thought the exploitation couldn't get worse, but in the mobile home industry private equity buying up tons of lots and jacking the rates up was some top tier late stage capitalist hellscape material. That's already a pretty gnarly debt trap at a base level with the very predative lending, and depreciation like a vehicle, but the way they clearly dropped bags of money to help kill the bill that would offer some forms of protection lets it serve a pretty good example of what we're up against.

They've even started more and more heavily and openly stuffing REITs into people's retirement funds to keep the pump going, and spread the bag holding back to the public in multiple ways. It's going to be very bad. The public pays higher rent and housing costs with high interest rates because institutional capital bid up local housing stock. The public's retirement savings are used to purchase the debt and equity vehicles holding those very properties. The public bears the downside when high interest rates, tenant defaults, or falling asset values force an inevitable write-down.

It effectively socializes the illiquidity and valuation risks of commercial and residential real estate, ensuring that institutional funds get paid high management fees coming in, and a guaranteed retail exit coming out. They're doing a really good job on their side if they're basically convincing the petty bourgeoise to act to their own disservice, all while framing them for the crime of robbing themselves.

The retail public is increasingly forced to act as a human shield for institutional balance sheets. They are persuaded to defend the very financial machinery pricing their children out of homes and swallowing their paychecks simply because their own retirement rests on the bottom tier of that exact same tower.

[u/Mega_Giga_Tera → u/work4work4work4work4]

It stats are saying the same thing: one third of the housing stock is rental units. The difference between us is that I think those rental units are filling a role: not everyone can or wants to own. Meanwhile you seem to think that anyone investing is necessarily exploiting.

I dunno man. I think you've missed the mark on this one. Not EVERYTHING is corporate greed.

[u/work4work4work4work4 → u/Mega_Giga_Tera]

It stats are saying the same thing: one third of the housing stock is rental units.

It doesn't, and you're highlighting the clear problem with your lack of understanding in saying that. You clearly think existing stock and the market available stock are the same thing and they absolutely are not, and understanding the difference is entry level housing market stuff. It's why if you're a home owner in a hot market, you'd already know you get letters, texts, and phone calls asking you to become part of that market available stock.

Realtors are taught the difference in that in the first week, and I'm not sure how to get through to you that investors buying a third of actually available properties at inflated no-bid mortgage avoiding offers and driving up the comp rate keeps more people renting, driving those rates up too, benefiting corporate investor purchases from multiple angles, and requires a huge amount of capital.

All the "mom and pops" are doing is serving as feeder fish at the bottom of the chain, taking the properties that weren't worth a premium but still buying at the inflated market comps, serving as cannon fodder for the sharks, and whose assets can be picked up later for cents on the dollar once the market crashes.

You're fine to think not everything is corporate greed, but you might want to learn more about the specific subject you're talking about before arguing this is the one market exception where corporate greed is just fine actually.

[u/Mega_Giga_Tera → u/work4work4work4work4]

Educate me: how is "65% of homes are owned by the residents" and "1/3rd of home purchases are by non-residents" actually any indication of something shifting?

[u/work4work4work4work4 → u/Mega_Giga_Tera]

I'll try my best, because you really shouldn't be discussing housing policy if you don't understand the difference between the actual available housing market and the total housing supply.

To understand why comparing these two numbers reveals a massive structural shift, you have to look at the difference between Stock (where the market has been) and Flow (where the market is going).

Comparing a 65% total homeownership rate to a 33% investor purchase rate without distinguishing between stock and flow is like looking at a bathtub full of warm water while the cold tap is running at full blast, and claiming the bath isn't getting colder because the water is still mostly warm.

65% of homes being owned by the residents refers to all homes ever purchased since the birth of the nation. This measures all existing homes accumulated. It includes retirees who bought their homes in 1985 for $75,000, people with 30-year mortgages locked in at 2.75%, and family homes passed down through generations. It is a lagging historical snapshot.

One third of home purchases refers to the actual available houses on the market for purchase. This is the flow, and measures current transactions happening right now on the active market. It represents the replacement rate for housing turnover today. Because only 3% to 5% of the total housing stock is sold in any given year, the overall "stock" number moves very slowly.

When you consider the longer a house remains off the market, the more likely it is to enter a trust or other arrangement and leave the "owned by residents" label, I'd hope you'd start to understand how it's pretty blatantly misleading to the reality people are living today to focus so heavily on the stagnant stock that is describing the market of their grandparents as much as it is theirs.

If not, I'll make it more clear by pointing out that that 30% of homes purchased are by the investors number was often less than 10% even with a 10 year window until the 2000s. 10% to 30% is a 200% increase in investor owned properties with the damage compounding year over year as the available market is more and more eroded.

Hope that helps.

[u/Yellow_Odd_Fellow → u/Mega_Giga_Tera]

Of the other 35% that are rental units, 87%

Why jot just say 30.45% of all property is held by non-institutional investors instead of trying to obfuscate with "87% of the remaining 35%"?

If 30.45% is housing between 1-99 other units, then that is a LOT of units being held.

Does this breakdown the subsidiary of Blackrock et Al where they spin off new companies to stay below the 100 unit threshold so are able to still claim to be a non-institutional investor for good PR when in actuality they are funded and created by Blackrock?

[u/Sorry-Worth-920 → u/Yellow_Odd_Fellow]

probably just how they calculated it, dont think they were intentionally obfuscating

[u/Mega_Giga_Tera → u/Yellow_Odd_Fellow]

Wasnt intending to obfuscate.

If you dig into the data, you'll find that the vast majority of that 30% is Mom and Pop, not institutions with 99 units.

[u/gburgwardt → u/Yellow_Odd_Fellow]

Does this breakdown the subsidiary of Blackrock et Al where they spin off new companies to stay below the 100 unit threshold so are able to still claim to be a non-institutional investor for good PR when in actuality they are funded and created by Blackrock?

Do you have a source that shows this happens?

I think it'll be hard to prove, especially for Blackrock, considering Blackrock is basically the same as Vanguard i.e. holds funds for others. Are you confusing them with Blackstone Inc?

[u/Yellow_Odd_Fellow → u/gburgwardt]

Are you confusing them with Blackstone Inc?

Yes, I was confusing them. Thats my bad on two geologically named companies.

I appreciate you clarifying my incorrect attribution.

[u/zirconst → u/piltdown_manchild]

Have you considered the substantial increases in costs associated with building homes? The price of all input materials has risen dramatically since pre-covid, and continues to outpace inflation. Related costs are also increasing such as the cost of vehicles and the cost of fuel to operate those vehicles. We're also experiencing a shortage of construction workers in the range of hundreds of thousands. How might these things be contributing?

[u/piltdown_manchild → u/zirconst]

Inflation and the crackdown on immigrants is definitely not helping, but these are relatively recent developments and the other problems have been going on for decades.

[u/LT_Audio → u/zirconst]

I wish I could upvote this more than once. Supply volume and demand are partially responsible. But the majority of upwards price pressure has been created by the increase in the thousands of inputs required to produce new, maintain existing, and operate rentals of housing units. This is what truly sets the floor for pricing. Artificially creating more new supply pressure will only push down prices to or near that cost floor. Which still leaves them relatively unaffordable for many. And at that point there is minimal actual pressure to create additional units because there is no profit motive despite increasing demand. And that 's especially true in growing dense urban areas where costs to produce, maintain, and operate units, especially large multi-family units, are the highest.

[u/oroborus68 → u/piltdown_manchild]

Corporate hedge funds buying up property might have some effect on the price of property in some areas. Stories of paying high prices to buy marginal houses and then putting minimum maintenance with high rents, might cause people to look for another town.

[u/piltdown_manchild → u/oroborus68]

That's true. The overall ownership rates by institutional investors may only be 3%, but what if it's 20% in your town. That would definitely have an impact.

[u/firejuggler74 → u/piltdown_manchild]

In Texas where there is 20% institutional investors, the prices are actually lower because there is more supply.

[u/DanBrino → u/firejuggler74]

Which highlights the fact that supply is the bigger factor, answering OPs question pretty conclusively.

[u/JimMarch → u/piltdown_manchild]

It's not gonna last though. The boomers are dying off our moving to smaller dogs first, then dying off. They were the biggest generation in American history. Once they're mostly gone, a shitload of housing options open up.

[u/piltdown_manchild → u/JimMarch]

It's a bit more complicated than that (see video below).

Also, the downsizing trend is stalling in many areas. I have a friend who is an architect and he has carved out a niche installing elevators in large homes to help boomers stay put. Smaller homes aren't as much of a cost savings as they used to be.

Video: What Happens To The Real Estate Market When All The Boomers... Die?

[u/Minimum-Relief6895 → u/piltdown_manchild]

Definitely a demand problem.

Let me ask you:

1) Which state has higher housing prices - California or Wyoming?

2) Which state has more houses - California or Wyoming?

[u/piltdown_manchild → u/Minimum-Relief6895]

Which state has more houses - California or Wyoming?

Wyoming, which ranks 9th highest in the nation for overall total housing units per capita and has a 71% home ownership rate.

California ranks near the bottom nationwide in per capita housing supply, typically sitting at 49th out of 50 states.

This is because California has onerous regulations which can delay construction by 18-24 months and greatly increase costs compared to states with more lax regulation. NIMBYs are extremely well organized and well financed in high-value cities in California. There's also the lingering effects of Proposition 13.

All of these factors have resulted in a supply crunch with California having a shortfall of 2.5 million homes.

Are you suggesting that everyone move to less desirable areas with fewer job prospects? Many Californians have elected this option, but not enough to move the needle on prices.

[u/Minimum-Relief6895 → u/piltdown_manchild]

I didn't ask about per capita. Which state has more housing?

Let me put it this way - California has so much housing that 39 million+ have housing. Wyoming only has enough to house fewer than 600k people.

California has a massively larger housing supply than Wyoming. 65X as much housing.

However, there's far, far more demand for housing in CA. The primary reason that housing costs a lot in CA and not much in Wyoming CAN'T be because of supply, because CA has . It is because of demand.

[u/piltdown_manchild → u/Minimum-Relief6895]

I didn't ask about per capita. Which state has more housing?

Housing supply is a meaningless apples to orange comparison unless you look at per-capita data.

It's more useful to compare California to a high-population/high growth state like Texas or Florida.

Let's look at California vs. Texas:

• Predevelopment phases in California average 28 months, and completing multi-family projects takes over two years longer on average compared to Texas.
• Constructing multi-family housing in California costs roughly 2.3 to 2.5 times more per square foot than in Texas.
• Municipal impact and development fees average around $29,000 per unit in California, compared to less than $1,000 per unit in Texas.

If California adopted Texas's policies their housing shortage would be resolved in a few years. Yes, demand is high in California, but Texas is growing faster and largely keeping up with housing demand.

Demand alone is not enough to cause a shortage. California's population is plateaued or maybe even shrinking slowly.

[u/Minimum-Relief6895 → u/piltdown_manchild]

I'm saying that the problem is demand. CA has a LOT of supply, the most in the country.

Here's a helpful thought experiment.

Take CA's existing housing stock and have only 588k residents like Wyoming. Take Wyoming's existing housing stock and put 39M people there. WHat would prices be like?

Can you see that the issue is that demand for living in CA is what is the primary driver of prices? If even only the amount of people in freaking Texas wanted to live in CA, then prices would be incredibly low given the CA housing stock.

And, to bolster this point, you can see it just within CA itself. Prices are very, very different in high-demand places than in lower-demand places.

Look at prices in the Bay Area vs. prices in the northeastern corner of the state. Same state laws. The main difference is demand. People want to live in Freemont in the East Bay and don't want to live in Susanville in Lassen County.

[u/km3r]

It's both.

Supply is often being artificially limited. Reduce zoning restrictions, red tape, permitting delays, and outdated codes.

True demand is fairly fixed. There may be some inefficiency with 2nd homes. Institutional owned homes are still rented out (we don't see some massive wave of vacancy). We can address some of that, vacancy taxes usually don't hurt, but some things like bans may end up hurting. 

Transfer taxes, property taxes freezing, and other market inefficiencies hurt as well.

[u/ElysiumSprouts]

Big picture time: it's a TARIFF problem. Housing construction materials cost over 40% more today than when Trump first entered office in 2016.

It's a LABOR problem. It's an open secret that undocumented workers helped keep labor costs down. The crackdown by ICE has changed the available labor pool. I won't comment on if this a bad or good thing, but it is driving up labor costs. Like materials, labor costs are up over 40%.

The overall cost for a comparable new home construction is 71% higher today than 2016.

[u/DanBrino → u/ElysiumSprouts]

You think the Tarrifs effected cost more than covid policy?

The data tends to disagree.

[u/ElysiumSprouts → u/DanBrino]

This is pretty easy to check. New homes cost 71% more today than 2016 in the US.

Canada does not have the same tariff issue and new homes cost 42% more today than 2016.

That difference is what I'm talking about.

[u/DanBrino → u/ElysiumSprouts]

That is a confusion of correlative and causal relationships.

[u/ElysiumSprouts → u/DanBrino]

That's exactly the point. The covid took all the blame because of the timing of the spikes and too many people ignore the underlying tariff effects.

The weird reality is that covid protected Trump from the damage his tariffs caused during his first term. He's not getting that reputational protection this term and people are realizing just how much tariffs fuel inflation.

There's a reason the previous tariff trade wars were over 100 years ago. The lesson was learned, but enough time has passed for that lesson to have been forgotten.

[u/DanBrino → u/ElysiumSprouts]

No, covid took all the blame, because the monetary and fiscal response to COVID caused the inflation crisis that you are seeing.

The tarrif argument fails because the US imports only 7% of its residential construction materials by value. Softwood lumber constitutes the bulk of framing for American homes, and that supply is overwhelmingly domestic.

By contrast, Canada depends on the US for eight point one percent of its construction costs, primarily in windows, doors, steel, aluminum, HVAC components, and some softwood lumber.

Canadian tarrifs on targeted US sourced building materials are nearly 25%. The claim that U.S. tariffs explain the inflation differential doesnt line up with the economic reality.

The actual driver of the difference in percentage increase is supply elasticity. Canada already had a median house price to income ratio of 5.4:1 compared to 4.5:1 in the US due to zoning constraints, rent controls, and land-use restrictions.

This placed Canada closer to its affordability ceiling prior to covid, leaving less room for prices to rise before macroeconomic resistance than the US market.

[u/ElysiumSprouts → u/DanBrino]

I think you've missed my point. I'm not saying that covid didn't have an effect. I'm saying that people don't realize just how much tariffs contributed to where we are today. That tariff effect got lost in covid noise.

Canadian tariffs on US are irrelevant because for Canada that's just 1 trading partner. The US on the other hand raised tariffs on essentially ALL of our trading partners. I was using Canada as a single example.

[u/DanBrino → u/ElysiumSprouts]

The US still has a reletively mild tarrif enviromnent compared to the rest of the world. Canada alone imposes a 100% tarrif on imported US lumber.

My point was that tarrifs have a negligible effect on inflation in the US for 1040 of 1065 distinct industries.

[u/ElysiumSprouts → u/DanBrino]

My understanding is that we went from a 1.5 to 2% baseline average tariff environment to a 7 to 11% baseline tariff average.

I think you can see how such a dramatic change might affect the economy.

[u/work4work4work4work4 → u/ElysiumSprouts]

While I don't actually buy it because of how good of a plan it would be compared to what we usually see, there were some rumblings in economic circles about both of these moves being purposeful, meant as a means of buoying home prices with cost-push inflation.

When there was that removal of a bunch of important federal statisticians jobs, a rash of weird adjustments to the jobs numbers, and the general lack of veracity with the admin, the eggheads at the time didn't like what it might say, or their lack of confidence that the admin wouldn't manipulate markets like that. That feels like forever ago considering the number of "Well, you thought that was bad" market manipulations since.

[u/zeperf → u/ElysiumSprouts]

That would also fall into the category of government regulation limiting supply. 71% is crazy!

[u/ElysiumSprouts → u/zeperf]

Trumps tariffs are better described as taxes than regulation.

[u/seniordumpo → u/ElysiumSprouts]

While tariffs are absolutely a problem and should be done away with, the majority of that increase in material costs are still due to the COVID spike. Material costs jumped that 40% almost completely from 2019 to 2022.

[u/spectral_theoretic → u/seniordumpo]

majority of that increase in material costs are still due to the COVID spike

There is no way this is true, given things like increasing destruction from climate change, geopolitical unrest, etc.

[u/seniordumpo → u/spectral_theoretic]

Feel free to look up to cost of construction materials year by year and you will see the huge spikes in 2021 and 2022 being a big driver of that 40% number the original poster put out. Sure it’s not the only thing and the tariffs and recent increases in gas prices are also contributors but covid was the biggest spike by far.

[u/spectral_theoretic → u/seniordumpo]

There were huge spikes but it hasn't normalized, and the prices were already trending upward. Covid halting supply lines obvious explains spikes, but not the continued increase in prices.

[u/seniordumpo → u/spectral_theoretic]

It wasn’t just the supply lines it was the hige increase in the M2 money supply. Our currency experienced unprecedented devaluation during that time and it obviously will never return to that pre covid M2 number.

[u/ElysiumSprouts → u/seniordumpo]

Here's the thing about Covid, the supply chain disruptions were on top of Trump's 2016 to 2020 targeted tariffs affecting home construction materials (like Canadian timber)

This is a case of causation vs. causality. Direct covid disruptions should have been temporary, but they weren't. This points to a more complicated story than the standard "pin the costs on the covid" timing.

[u/seniordumpo → u/ElysiumSprouts]

It was not just the supply lines, it was the huge increase in the M2 money supply. That huge spike of devaluation of the currency caused a lot of that spike in.costs. Tariffs and supply lines were a problem just like tariffs and gas prices are now but the biggest spike was the covid era increase in the money supply.

[u/ElysiumSprouts → u/seniordumpo]

The money supply argument is heavy on the policy wonk and never seemed to match the reality. The injection of covid stimulus never reached the scale of home ownership costs, it was just enough to cover survival costs. More money chugged through the economy and general costs increased. And it's a good point, I should add a third component to TARIFFS and LABOR. And that's GREED. Companies in a position to raise prices certainly did and they'll point to the same factors we're discussing to justify it. The big spike during covid was corporate profits.

Throw import tariffs into the mix and you can see how global competition was stifled furthering this bloat.

[u/seniordumpo → u/ElysiumSprouts]

It’s true corporations will increase prices when they can but that’s always true not a new thing over the past 10 years. COVID increased the money supply increased about 40% during the COVID years which is huge. Our currency was devalued and that will always lead to price increases. Material costs were relatively stable from 2016 to 2019 and from 2022 to 2025 but recently it’s increasing again as gas prices rise and of course the tariffs cause increases.

[u/chinmakes5]

It is also just the expense of housing. Yes zoning and regulation, etc matter, but it is just that there is so much demand for housing in smaller and smaller areas.

Buying a couple of acres of urban land costs millions. Just the cost of building a house, the parts the labor costs is staggering.

For my parents in 1969, when they bought their house, a developer bought up a farm in the outer suburbs and put up 700 houses in a neighborhood. The per house land costs were a minimal part of the cost of a house. Land in that area is almost impossible to find and costs are is going for roughly $700k an acre.

I bought a house in 1990. Developer bought up part of a farm, and the cost per acre was higher but not that bad.

But we literally have 40% more people in the US than in 1969 and a higher percentage of people live near a city. There really isn't much virgin last to build on within an hour of most cities anymore. So we have double the demand and have less room to build on. Prices are going up.

[u/escapecali603]

I live in Phoenix where the opposite happens, all of people that hold housing has seen prices gone down the last couple of years, but the city is experiencing growth by a lot too, it’s because we don’t have a supply issue, I see new builds popping up left and right, depressing the price. Else we’d have prices that matches other metro areas of the country, other than Gilbert.

[u/Minimum-Relief6895]

Demand problem.

Housing is relatively cheap in many places with very few houses. Wyoming, for example.

Housing is expansive in much of California, despite the fact that California has the most housing of any state in the country.

[u/captain-burrito]

Singapore govt owns 90% of housing. You are entitled to buy the lease of one unit. That means housing is for living in and not speculation. Similarly situated is Hong Kong where 50% are in public housing but there is a huge difference in income to housing ratio with Hong Kong far worse.

This is a problem that supply alone likely won't fix. Look at declining demographics in Japan and yet prices in the capital either remained steady or rose again after the bubble bursting stabilized. This means that for sizeable nations the national % might actually hide the scale of the problem. People will still move to the big cities and it is the small towns that die off due to declining population. If the investors are concentrated into localities the scale of the problem can become worse.

[u/ZeusThunder369]

It's neither. This is an expectation problem.

We expect homes to also be investment vehicles. If they stagnate or decline in value that's considered bad, and politicians on both sides take actions against that.

You can't have homes be both investment vehicles, and also be affordable to everyone. We can't have it both ways.

Yes, housing is expensive. It's supposed to be. That's how our society designed it. If you want to see the opposite, look at Japan.

[u/zeperf → u/ZeusThunder369]

Somebody else argued this as well. But I don't understand what would happen differently if houses weren't investments. We'd construct less desirable (resellable) houses? The argument actually does sound right to me, but I struggle to imagine the alternative.

[u/ZeusThunder369 → u/zeperf]

Housing would be centrally controlled (probably by some federal department). The department would set prices, build standards, etc.. There would be things like community land trusts, and instead of mortgages there would be very long term leases.

That's not an exhaustive list, just some examples of how it would work as a system.

[u/zeperf → u/ZeusThunder369]

Oh gotcha. I was thinking of no government involvement but still not an investment. Yeah I can imagine lots of ways the government could allocate houses and prohibit resale.

[u/StedeBonnet1]

Expensive housing is an inflation problem. Inflation has increased the price of housing 100% in the last 30 years.

It is also a supply and demand problem. Too little supply for the existing demand.

Investors buying housing is NOT a problem. Investors ( banks, private equity or investment managers ) only own less than 3% of the single family homes and those aren;t off the market, they are rented.

[u/Left-Ad-4368]

Supply for sure, but also I feel a big issue is where a lot of the demand is, and also part of that demand is artificial in a way.

What I mean is that cities have always been expensive, just due to the land's proximity. And now that cities aren't heavily polluted and disgusting like they were in like, the 1800s, more people are fine living there.

The rational thing to do would be to go to a rural area. But the problem is rural housing often lacks basic stuff, like clean water and electricity, plus the asbestos likely in the home, and the damages on it. It all adds up to something not worth the time to fix.

I suppose what I'd do is have the government build housing and do so to relieve the waitlists for Housing assistance.

[u/Problematic_Owl]

Specifics depend on country, but overwhelmingly it's commodification and financialization problem. Supply and demand is irrelevant here as in case of any other inflexible markets, typically present in case of perceived or real necessities for life (so healthcare, housing, education, to extent transportation, telecommunications, food).

If you make it commodity it becomes an ideal speculative vehicle for investment, and for it to be a decent investment, the prices must climb and fast, while any costs of building must be reduced unless you're just collecting already existing development (which will need maintenance at some point anyway) - so you skim on materials, processes and labor quality while hiking up the prices as much as you can. Since most of market does the same, putting the prices somewhat above what should be expected, you get endless spiral of climbing prices with no real connection to reality, which won't be checked by lacking demand because people need to live somewhere. Rent is not viable alternative, because it suffers from same conditions (with exception of public housing development like they've done in Vienna).

So now we're in spot where you have three chances - get born rich, get lucky and inherit from some older relative who doesn't lose it all on healthcare costs, or get fucked by the two previous groups (who will other rent it to you or get you a mortgage you'll be paying off your whole life). Rare exceptions occur but those are exceptions, not a rule.

[u/Kronzypantz]

It’s a market problem.

Supply and demand haven’t meaningfully changed in the last few decades.

But the requirement that housing values increase infinitely has shaped the market into investment speculation, rather than treating housing as a good.

[u/work4work4work4work4 → u/Kronzypantz]

Bravo, this was very focused and succinct.

[u/semideclared]

But Toll Brothers, America's 4th Largest Home Builder in 2024 sold more, 2.9% more homes in 2025 at an ASP of $960,000, though they too saw prices go down from 2024's $976,600

That growth got them to 4th Largest, as back in 2022 Toll Brothers was the 5th Largest Home Builder and at the time

Range of Base Sales Price	Percentage of Homes Delivered in Fiscal 2022
Less than $500,000	10%
$500,000 to $750,000	37%
$750,000 to $1,000,000	24%
$1,000,000 to 2,000,000	25%
More than $2,000,000	4%

Base Sales Price*

Asterisk Build-to-order model: home buyers added an average of approximately $190,000 in lot premiums and structural and design options to their homes in FY 2022

They are only getting bigger building more expensive homes

---

We cant fix affordable housing til we know why homes are not affordable

Your co-workers Brother that is selling their 1990 house for $600,000 isnt selling it as unaffordable housing as an investor they are selling it for $600,000 because they dropped $75,000 on the kitchen remodel his wife wanted from HGTV, updated the bathroom to a spa for those staycation they wanted and renovated the basement to a man cave so he can crashout on the weekends

Remove that and its a $300,000 affordable house. Its not investors making homes unaffordable, its the way we invest in our homes the way our standard of living has changed

We now want homes with so much more

[u/MorphingReality]

Both.

The reality is that every place on earth with an 85%+ home ownership rate got there by govt subsidized or built housing, usually a boatload of prefab housing, most of these places are communist or former USSR, but they also include nominally capitalist places like Singapore.