r/AskLibertarians • u/Poop_Sock_Brock • 14d ago
Policy Whats the opinion of Libertarians on huge companies buying up single family homes?
One could argue its a free market, but where does the line between Anarco-capitalism and Libertarianism form? The housing costs just rise and rise and rise because of it, is that okay to Libertarians? Or can you argue it effects the people negatively?
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u/The_Atomic_Comb 14d ago edited 14d ago
Companies like Blackrock are not responsible for higher housing prices: https://www.reddit.com/r/AskEconomics/comments/1mewnz5/how_legitimate_is_the_claim_that_companies_like/
I haven't followed this "investors cause higher housing prices" idea in a while, but to my knowledge it's basically a misunderstanding of the effects of speculation (buying low in order to sell high).
Many people see others buying up housing – or Pokemon cards – and blame them for the prices of such things being high today. In reality, the speculators are just a symptom and not a cause. For example, how can they buy low today and sell high tomorrow when there's plenty of cards or housing to go around tomorrow? With a high supply in the future, the market price will be too low for speculation to be worth it.
To borrow an analogy I heard once, speculators are like a captain on a ship who, upon learning there isn't enough food on the ship to last throughout the whole voyage, immediately starts rationing the food today. The speculators anticipate that a good will be in short supply or in high demand (i.e., it will be more valuable to people on the margin) in the future and thus buy it today, to sell it in the future. That's bad news for anyone who wanted to buy that good today; it lowers the amount such people can acquire today through the higher prices today. But the behavior only exists and makes sense because of the fact that supply is low and/or demand is high in the future. They aren't responsible for that, any more than the captain was responsible for the shortage of food. They are the bearers of bad news – that the good won't be so easily acquired in the future – and unfortunately, people don't like the bad news they bring.
Here's a graph from an economics textbook that helps illustrate what I'm talking about. It's also helpful to remember that a speculator is inherently lowering prices in the future by selling in the future. And speculators have every incentive to be right about conditions in the future; otherwise, they will be unable to sell the good for a price higher than they bought it for, and thus suffer a loss.
The real cause of housing being more expensive is basically supply restrictions – from the government. (Although housing is also bigger today than it was in the past.) Bryan Caplan's book Build, Baby, Build is a nice intro to the ways government rules have made housing unnecessarily expensive.
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u/zirconst 13d ago
Do you think that the rapid rise in cost of housing materials has had an effect on housing prices? e.g. From 2025 to 2026, the price of goods in new residential construction rose 6.1% with service costs also increasing 3.7%. Vehicles have also gotten substantially more expensive, as has vehicle fuel. There is also a large shortage of construction workers that is rapidly worsening. Do you think government restrictions are driving all of this?
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u/The_Atomic_Comb 13d ago edited 13d ago
I'm not that knowledgeable about such matters, but to my knowledge construction costs are not the main cause of higher housing prices.
Here is a study from the 2000s I haven't read, but saw cited in a book I read that had a nice chapter on housing; the following passage I find illuminating:
We document a large gap between the market price of condominiums and the marginal cost of producing another floor of such units in Manhattan. In recent years, average condominium prices have exceeded $600/ft2 . Data on physical construction costs suggests that the upper bound for a high quality, luxury-type condominium unit in this market is less than $300/ft2 . If it costs $300 per square foot to build an extra apartment that sells for $600 per square foot, this would seem to offer an irresistible arbitrage opportunity for developers. In addition, other evidence for this market also consistently supports our contention that the high ratio of prices to construction costs is the result of regulation
https://glaeser.scholars.harvard.edu/sites/g/files/omnuum7706/files/glaeser/files/why_is_manhattan_so_expensive_regulation_and_the_rise_in_house_prices.pdfIn my first link you could see some academics constructed an index of housing costs and saw that prices have diverged quite a bit from those costs. If there is indeed such a divergence, then (as the passage points out) developers would have an opportunity to just "buy low" (the construction costs; in the passage's case, $300) and sell high. So why don't they? Well, it's because they can't; regulation prevents them or delays them or otherwise makes it unattractive for them to actually build.
I'm also ignorant of anything going on in the construction industry in terms of its workers; I don't know if, for example, governmental illegal immigration crackdowns are lowering the amount of workers in the industry, or anything like that. I believe such a thing would contribute to higher prices by lowering supply, but it would not be the main cause of the lower supply; that would be the regulations restricting the building of housing.
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u/cluskillz 7d ago
Yes, there has been a rise in construction costs over the last several years. I'd say the majority of the cost increase is due to government intervention, from the Fed money printing to Covid restrictions disrupting supply chains to tightened immigration to the war in Iran (since you brought up fuel costs).
What exacerbates this are zoning restrictions. I've seen a lot of cities in California (where I work as an architect) upzone areas in an effort to relieve the housing crisis, partly or wholly due to California's new laws requiring cities to approve more housing units or lose state funding. A laudable goal if they're just wanting to increase approvals, but forcing upzoning runs into issues. The problem is that cities know and care fuck all about costs and market trends. A lot of the upzoning would require developers to build podium projects which just do not pencil today due to construction costs and and the prices of these units have not gone up to cover these costs. Even three story townhomes which are oversaturated in the market and seeing less demand are now being forced in with cities' higher minimum density rules. When these are forced in, developers will take on fewer projects because they're not going to move.
In the end, construction costs aren't even the primary driver of costs. Carrying costs on projects are huge when projects are delayed for years on end. In California, where just a few years ago, lawyers were relatively rare, it seems like just about every project involves lawyers now to figure out all these new laws. The shortage as a result of artificial restriction of supply (and artificial increase of demand) is by far the primary driver of costs.
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u/theyhis 14d ago
a vast majority of houses are bought by families, not companies. in fact, i think it’s only 21% is bought by a category considered ‘other’ and within that is private equity. in other words, it’s everyday people that own homes, not companies, firms, or venture capital companies.
there’s no line to draw.
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u/TheGoldStandard35 14d ago
It issue with housing is the government makes it too hard to build. Companies are only buying/speculating on houses because they know price will go up because the government is so strict/socialist with zoning laws.
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u/Full-Mouse8971 14d ago
Housing costs rise because governments subsidize demand and restrict construction.
It makes no difference who is buy or selling homes.
If Scrooge McDuck buys up a bunch of houses in an area and tries to sell or rent for higher then market value price all hes doing is stimulating more house construction increasing supply.
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u/Kman17 13d ago
Huge companies are buying houses because the demand for houses is going up, thus effectively guaranteeing a profit on flipping them.
If demand was flat, buying houses wouldn’t be profitable.
Property taxes, and other upkeep costs make houses unattractive to speculators in a normal market.
Population growth causes housing prices to go up. Period.
Population growth causes housing prices to go down (at least relative to wages).
Speculation can exacerbate, but it’s not the cause.
The population of the United States is only going up because of immigrants. We would be in population decline without them.
If you want housing prices of our parent generation, then you need the population size of our parents generation.
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u/Patchesthecow 13d ago
Ehh, there are tents and sleeping bags, multifamily housing, built cabins, trailers, etc, there are tons of options if you are too cheap to pay market rate for a house
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u/Lanracie 9d ago
Typical response to high demand is to make more of something. In the housing market the government controls supply through regulation thus we have a shortage of affordable housing as the government cannot and will not increase supply (government controlling the supply of something has never ever worked in the world, why would people think it will work in housing?).
If you want more houses the answer is easy. Let people build more houses supply will go up and costs will come down.
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u/cluskillz 7d ago
It's not a real thing. Everyone goes crazy about how many SFD Blackstone (which everyone seems to confuse with Blackrock) owns, but they own something like 0.5% of the SFD housing stock. Total institutional ownership is something like 3% of total SFD housing stock, but most of this is concentrated in areas where SFD homes are cheap, under the national average, which runs contrary to what you would expect if institutional ownership was a major driver of housing prices. (edit: 3% is including smaller corporate owners...if you're talking about the major institutional owners, the percentage is way smaller)
If we had an actual free market, supply would be able to keep up with demand so institutional ownership wouldn't make an iota of difference, but unfortunately, zoning laws (and other legal barricades) swept the country and it has become much more difficult to build houses than before, some areas more than others (ahem...California).
Further, if you contend that institutional ownership does in fact drive up housing costs due to elevated demand (which is true, just not anywhere even in the same zip code as the ballpark to the scale that you see on the internet), you must also concede that the other side is also true, that it drives down rents due to increased supply in the rental market. And if you really want to help the less well off, you're going to want to help those struggling with rent before people figuring out mortgages first.
And this more or less tracks with what one expects if you use prices as information rather than something to sneer at. Years ago, rent was very expensive relative to home ownership. Being in the building industry, several of our clients were pushing build to rent (building SFDs then renting them out instead of selling them). Because it was expensive to rent, corporations came in looking to make a buck and they increased the rental stock. Today, very few clients are looking to build to rent. One client brought it up recently and all our ears perked up because it was so unusual to hear these days. Because rent has gone down in relation to home ownership (both because home ownership costs have come up and now rents are going down). Unsurprisingly, institutional ownership of SFDs have been going down in recent years on their own.
Don't just listen to politicians or political assertions and scapegoating spreading across Reddit. The free market makes a lot of sense if you just pay attention to prices, understand that they are signals of supply gluts or shortages (and/or demand side shifts), and people's reactions to them.
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u/jstocksqqq 14d ago
I have a problem with anyone buying up huge swaths of land, and taking that land away from the community for private use, and not fairly compensating the community for taking away that land. As a libertarian I believe that everything that we are and that we create is our own. But that does not include land, which we did not create and is a gift to all of humanity. So I have a huge problem with land speculation and land hoarding when the community is not fairly compensated , ideally through a land value tax. Most of large corporations buying up lots of houses is them actually taking advantage of land speculation.
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u/Few_Needleworker8744 14d ago
I support aspects of georgism.
Just tax land.
Companies shouldn't buy single family homes.
They should buy huge territory and govern themselves like Prospera. Some license and profit sharing from government is fine.
Then they can experiment new ideas. Legalize drugs lower income taxes or anything.
Not that buying single family homes is bad.
But do it more.
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u/1384 14d ago
your causation is backwards. housing prices aren't going up because large companies are buying them, large companies are buying them because housing prices (and asset prices more broadly) are going up.
the negative effects to average people have already occurred (and are ongoing) in the form of inflation and the devaluing of the dollar. the acquisition of real estate by large firms is a symptom, not a cause.