A lot of these points seem to be specifically about the affordability of purchasing a home, but in point #4 it shifts to "housing supply." Because there are about twice as many owner occupied homes as rental units, anytime an institutional investor buys a home and converts it to a rental, the rental supply will increase by a greater percentage than the owner occupied stock declines. The core complaint about investor owned homes is not what it does to the rental market but the ownership market.
Regarding point #12, it's a trivial analysis to say that if there are any illegal workers in the home construction industry, then deporting them will reduce the labor supply in the short term. The more nuanced take is to look at what happens when foreigners, particularly poorly paid ones, enter an industry. It drives out American born workers, which then leaves the country dependent on foreign labor, which then becomes the rationale for saying we can never, ever reduce the number of immigrants from that ethnic group. Our nation, in one sector after another, gets structured around a serf class of people who are not paid a living wage and which are heavily subsidized by taxpayers (such as for their healthcare, public safety, and especially educating their children). That's happened in the meat packing industry, for example. When home construction is built around paying illegals low wages in cash (and subjecting them to a less safe work environment), other labor will avoid that industry. This is one reason why, despite massive illegal immigration, we still constantly hear that we have a labor shortage in construction. The use of illegal labor probably also helps keep the home building and construction industries fragmented, which reduces efficiency. Major corporations are far less likely to be able to get away with using illegal labor and cutting corners on safety (though they are now moving into this as well, using layers of contracting to protect themselves from liability). We'd be far better off regularizing this industry.
These are important tradeoffs, no doubt. Our point on institutional ownership is that it benefits current owners (especially in concentrated markets) while expanding access to housing for renters. This is reversing, though, as institutions have become net sellers in the single-family market.
We’d then ask what specific qualms you have with the developer→landlord model. This model does not eat away at the owner occupied stock.
On point #12, you bring up some very salient objections. What specifically do you suggest could be done to “regularize” the housing construction industry? Many of the builders subcontract the construction work and so to address the problems you bring up, small subcontractors would need to be held to account.
Regularization starts with eliminating the ability of businesses to hire illegal labor. The exact techniques that should be employed for this are a different question, but we need to be committed to forcing everyone to play by the rules. This is fundamental to restoring institutional trust and any sort of healthy functioning to our societies and institutions.
I appreciate the Boyd team’s effort to ground the debate empirically, but it’s striking how much of this analysis focuses on marginal levers while ignoring the machine that determines the bid itself.
When people buy homes in today’s system, they aren’t buying houses - they’re buying mortgages and getting a house for free. Prices are set not by the number of families, immigrants, or bedrooms per household, but by the terms and quantity of mortgage credit that the financial system is willing to extend.
You can build as much as you want, tweak property taxes, or encourage “filtering,” but as long as mortgage credit expands faster than local productivity, affordability will keep deteriorating. Housing policy keeps trying to fix the numerator (supply) while ignoring the denominator (credit-to-income).
The tragedy is that we now treat homes as a yield-bearing asset class rather than as shelter. Zoning and construction costs matter, but they’re the frictional details of a deeper design flaw: our settlement system rewards leverage on shelter as the safest collateral in the world. Until that changes, all the “ground truths” will remain shadows on the cave wall.
We acknowledge that the securitization of mortgages is a form of demand subsidization. We also acknowledge that there is a symmetry of property markets. That is, for every tenant who gets a lower rent, there is a landlord who loses an equal and opposite amount of investment income. And vice-versa -- rents rising costs the economic welfare of renters.
Our system does not in fact "reward leverage on shelter as the safest collateral in the world." Maybe it once did, in the run-up to the GFC, but since then residential real estate has revealed itself to be a highly cyclical, risky investment. Not the land itself, per se, but the real estate.
Respectfully, that’s exactly the point you’re missing.
Mortgages are the collateral backbone of global finance, second only to Treasuries. That status gives housing credit perpetual preferential funding through MBS markets, repo, and central-bank eligibility.
So yes, homeowners can lose money in a downturn, but the system never stops rewarding leverage on shelter. It’s built to. That’s why the credit spigot always reopens and why affordability keeps falling even after every “correction.” Every “correction” is just financial markets shifting their attention elsewhere until they return to exploit mortgage credit again.
Absent the securitization of mortgages (and yes, all the financial plumbing underlying it), what we'd likely see is lower home prices paired with lower homeownership attainment. Therein lies the tradeoff.
As far as demand subsidies go, I'm not quite convinced that mortgage securitization is the worst of them.
A lot of these points seem to be specifically about the affordability of purchasing a home, but in point #4 it shifts to "housing supply." Because there are about twice as many owner occupied homes as rental units, anytime an institutional investor buys a home and converts it to a rental, the rental supply will increase by a greater percentage than the owner occupied stock declines. The core complaint about investor owned homes is not what it does to the rental market but the ownership market.
Regarding point #12, it's a trivial analysis to say that if there are any illegal workers in the home construction industry, then deporting them will reduce the labor supply in the short term. The more nuanced take is to look at what happens when foreigners, particularly poorly paid ones, enter an industry. It drives out American born workers, which then leaves the country dependent on foreign labor, which then becomes the rationale for saying we can never, ever reduce the number of immigrants from that ethnic group. Our nation, in one sector after another, gets structured around a serf class of people who are not paid a living wage and which are heavily subsidized by taxpayers (such as for their healthcare, public safety, and especially educating their children). That's happened in the meat packing industry, for example. When home construction is built around paying illegals low wages in cash (and subjecting them to a less safe work environment), other labor will avoid that industry. This is one reason why, despite massive illegal immigration, we still constantly hear that we have a labor shortage in construction. The use of illegal labor probably also helps keep the home building and construction industries fragmented, which reduces efficiency. Major corporations are far less likely to be able to get away with using illegal labor and cutting corners on safety (though they are now moving into this as well, using layers of contracting to protect themselves from liability). We'd be far better off regularizing this industry.
These are important tradeoffs, no doubt. Our point on institutional ownership is that it benefits current owners (especially in concentrated markets) while expanding access to housing for renters. This is reversing, though, as institutions have become net sellers in the single-family market.
We’d then ask what specific qualms you have with the developer→landlord model. This model does not eat away at the owner occupied stock.
On point #12, you bring up some very salient objections. What specifically do you suggest could be done to “regularize” the housing construction industry? Many of the builders subcontract the construction work and so to address the problems you bring up, small subcontractors would need to be held to account.
Regularization starts with eliminating the ability of businesses to hire illegal labor. The exact techniques that should be employed for this are a different question, but we need to be committed to forcing everyone to play by the rules. This is fundamental to restoring institutional trust and any sort of healthy functioning to our societies and institutions.
So if that's the goal we should target the construction subcontracting industry!
I appreciate the Boyd team’s effort to ground the debate empirically, but it’s striking how much of this analysis focuses on marginal levers while ignoring the machine that determines the bid itself.
When people buy homes in today’s system, they aren’t buying houses - they’re buying mortgages and getting a house for free. Prices are set not by the number of families, immigrants, or bedrooms per household, but by the terms and quantity of mortgage credit that the financial system is willing to extend.
You can build as much as you want, tweak property taxes, or encourage “filtering,” but as long as mortgage credit expands faster than local productivity, affordability will keep deteriorating. Housing policy keeps trying to fix the numerator (supply) while ignoring the denominator (credit-to-income).
The tragedy is that we now treat homes as a yield-bearing asset class rather than as shelter. Zoning and construction costs matter, but they’re the frictional details of a deeper design flaw: our settlement system rewards leverage on shelter as the safest collateral in the world. Until that changes, all the “ground truths” will remain shadows on the cave wall.
We acknowledge that the securitization of mortgages is a form of demand subsidization. We also acknowledge that there is a symmetry of property markets. That is, for every tenant who gets a lower rent, there is a landlord who loses an equal and opposite amount of investment income. And vice-versa -- rents rising costs the economic welfare of renters.
Our system does not in fact "reward leverage on shelter as the safest collateral in the world." Maybe it once did, in the run-up to the GFC, but since then residential real estate has revealed itself to be a highly cyclical, risky investment. Not the land itself, per se, but the real estate.
Respectfully, that’s exactly the point you’re missing.
Mortgages are the collateral backbone of global finance, second only to Treasuries. That status gives housing credit perpetual preferential funding through MBS markets, repo, and central-bank eligibility.
So yes, homeowners can lose money in a downturn, but the system never stops rewarding leverage on shelter. It’s built to. That’s why the credit spigot always reopens and why affordability keeps falling even after every “correction.” Every “correction” is just financial markets shifting their attention elsewhere until they return to exploit mortgage credit again.
Absent the securitization of mortgages (and yes, all the financial plumbing underlying it), what we'd likely see is lower home prices paired with lower homeownership attainment. Therein lies the tradeoff.
As far as demand subsidies go, I'm not quite convinced that mortgage securitization is the worst of them.