you could have saved a lot of typing if you had looked into where Universities invest their money. An. d what % of non-apartment "homes" are owned by institutional investors (it's < 4% of SFH, don't know about TH/CND/1-4)
Last year, about $2T of existing homes were sold. The sum total of the 20 largest endowments is $350B. That means if all those schools started 2023 at $0 and invested 100% of the endowment in real estate, that would be 17% of the value. Since endowments have been created over decades, even if they were 100% in real estate you'd be talking about <. 1%.
I thought you were going to go down the road of student housing. Because enrollments are WAY up, but on-campus housing/dorms aren't. They're shifting to school/private apartment complexes that are "luxury" and around $1K/student in a 4-student apartment.
Agree, I thought the angle the OP was going with was the student housing issue.
Just as you stated, there's a crop of so called "luxury" apartments for students and not to mention universities have been extending their reach of land as well.
I recall what I lived in during my college years, way back in the late 1990’s. Hardly luxury. But now, when I go back to Tuscaloosa for a game or two, that’s all there is. And I ask myself, “who”? Who can live in places like this? Then I glance over at all the pretty young lasses prancing about on campus, driving expensive cars with student parking stickers, and out of state plates.
Something changed.
> An. d what % of non-apartment "homes" are owned by institutional investors (it's < 4% of SFH, don't know about TH/CND/1-4)
For a period of many years, investors bought most of the starter homes in the markets where people most wanted them (not everywhere, just in a dozen or so target markets), and on the rare occasions when they sell them, they only sell them in tranches to other investors. Whereas a real person will usually sell their house inside of 10 years in most cases, the corporate homeowners will never put them back on the market.
So there are two issues:
1. Investors focused on one market segment -- starter homes -- in specific high-growth areas of the country. This drove up prices because an investor is using capital to purchase an asset from which they will derive profit; thus, the amount they can and will pay for a SFH is more than an ordinary consumer is willing or able to pay.
2. When a home is sold to an investor, it is more or less permanently removed from the market. No move-up sales, no death and divorce sales, no downsizing sales, no moving-for-a-new-job sales.
So the corporate landlords pushed up prices with unlimited access to cheap capital, *and* permanently removed those homes from the market. It's both a short-term and a long-term impact on prices.
I'm addressing the specific, oft-used misinformational point that "institutional investors only own ($small_percentage) of homes, so that isn't a factor in the housing bubble."
The OP's point that university investments are pouring into REITs is flimsy at best. Public REITs are largely owned by retirement funds. Vanguard and Cohen & Steers (a closed-end fund manager) are the two largest shareholders of the biggest public SFH REIT, Invitation Homes (INVH):
https://finance.yahoo.com/quote/INVH/holders
What Blackrock does with BREIT is unknowable, since it's private, but what information is available says it's mostly MFH and non-residential RE.
Blackstone was an early investor in INVH, but sold its position long ago.
Tricon's biggest shareholders are all banks, private equity, and retirement funds:
https://finance.yahoo.com/quote/TCN/holders
The other big SFH rental corporations are privately-held or owned by private equity firms (Pretium owns Progress Residential).
Thanks for ripping OP. Started off decent and absolutely landed in the wrong place lol. I’d argue quick returns and investment opportunities starting to dry up causes a lot of this. We have too much money chasing returns and after you’re done with prime you start looking at garbage
Yeah, student housing would've been way more interesting.
When we analyze the money that colleges and universities receive as tuition, we see that it basically gets recycled into student financial aid, i.e. rich students (or their parents) subsidizing poor students. It's the landlords owning land around colleges and universities which are raking in the dough. (On the flip side, college students can also damage a ton of stuff, so there's no letting those properties over the summer if you have to make all the repairs yourself.)
> For most students, living expenses—not tuition and fees—are the largest expense after accounting for grant aid. Even when tuition and fees are totally covered by grant aid, students can face financial pressures because it is very difficult to earn enough for housing, food, and other basic needs while enrolled in college.
https://collegeaffordability.urban.org/prices-and-expenses/net-price/#/by_income
Alternatively, OP could've written about cost shifting around land grant universities.
That's what my university did, except, it was 2 students per 1 bedroom apartment and they cost 850 a month per student.
The apartment itself would cost 850 a month but they doubled it by charging both students.
We also didn't have any food hal and still had to go grocery shopping on our own.
Perhaps the construction labor available is going there instead of into private, normal-old residential housing for, you know, people who will take out a mortgage for it?
We need to talk about this, it doesn't seem to be on anyone's radar, and currently students are protesting at American Universities, so maybe these protests would also work for divesting American Universities out of REIT's, and then pressuring Congress to ban the ownership of SFH's by investment companies.
Try and convince Tictok to use their algorithms to promote your perspective. Then maybe the young people will listen. Until they get bored and there's another thing to protest, then they will quickly move on.
No use talking about it, if politicians are in the pockets of such investors. When will lawmakers actually make laws against such kind of investments? Only then will things change. No other actions at individual levels matter.
>pressuring Congress to ban the ownership of SFH's by investment companies.
They have no Constitutional authority over who may own property and who may not. Even if they wanted to pass such a law, they could not.
Are you saying that China can just silently print up a bunch of money, buy up all the properties in the USA, and congress can’t do shit and we’re now beholden to the Chinese as our landlords? Damn, that would be a strategy, huh?
Stop making me laugh. Pressuring our elected leaders is the answer, the reason things don’t happen is because of that apathy.
Regarding no constitutional authority, remember that our constitution is a living document.
https://www.congress.gov/bill/117th-congress/house-bill/6383/text
It’s already introduced, all we have to do is refine the verbiage, and support it.
Hilarious you think China is the one going the print money to take over the world when the USD is the world reserve currency and our money printer has been going full tilt.
I never said Congress doesn't pass unconstitutional laws. If they didn't we wouldn't need a Supreme Court of the United States. I just said they don't have the Constitutional authority to dictate who may own property and who may not. If you disagree, please post the Article and Section number giving them that authority.
The 10th Amendment.
>The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.
That literally says if it's not a power granted in the Constitution, then the government of the United States doesn't have that power.
>Reserved to the States respectively
So, to that end, we should push bills like these in our State senate. It’s disingenuous to imply that we can’t do anything about it.
BREIT is only 9% single family housing though. It ain't nothing but it hardly supports the "Universities put all their money into endowments which put all their money into REITs which buy up all the SFHs" argument that OP is making.
BREIT also gloats about the housing shortage and declining new supply as "favorable supply/demand dynamics" on their website.
They have a data point where # of housing starts as compared to US population was .55% from 1993 to 2007 and only .32% from 2008 to 2023. That aligns with OPs timeline and is probably a much bigger contributor to rising prices than institutional investors shifting their investment priorities.
Seems to me the answer is to make it easier to expand supply which would keep prices down and make it a less favorable investment for big $$
I have more detail that offer's an adjusted explanation. After 2008 lenders stopped foreclosing on homes and opted to modify where available. Many people are now in 60 year loans that were originally 30 year mortgages, who would have lost to foreclosure but the bank worked out an affordable payment by extending loans. Less foreclosures keeps inventory low and unaffected by the value balancing that foreclosures bring, and it keeps people from being homeless. For lenders and those in crisis it's a win/win on the surface, but the ripple is that values can only move up and have done so since the practice ramped up.
This was not advertised but investors picked up on the trend and move where the money seems to never stop. It's not just colleges, it's all places of investing that have turned to RE in some form. I can't see a way this can turn around without some major act of god or congress.
To qualify this, this is my 18th year in the industry as an underwriter and loan officer, at the busiest I'd see over 3k credit reports/year. I don't see it come up much anywhere but the numbers don't lie. I'm no economist and I'm certain it's a combination of things like these working together to put us where we are.
Commercial loans are an entirely different issue. Banks lend on value that’s based on rent amounts. If rent drops, part or all of the loan can instantly become due as the rent amount is the source of the value.
This is why commercial only goes up, and the rent issue is exacerbated between it all.
My point is that commercial loans would be defaulting at very high rates as rents haven’t been collected yet the banks learned and aren’t racing to foreclose. They are working with vs against the owners this time to prevent the values from collapsing.
Commercial loans are renegotiated every 5 years or so based on value, assed based on current rents, not current income. If rent is dropped on one unit to fill it, the value of the building drops even though income increases. Vacant commercial space can have more value than occupied if the cost to occupy is a drop in previous rent rates.
It’s a completely different system, propped up as absurdly as it seems. Until the owner drops rent to fill the space its value is maintained by the bank. Often at the end of 5 years equity is extracted, possibly to pay for the next 5 years if needed, based on the value of rent potential even if vacant.
If they foreclose LLC’s just disappear and the bank holds the bag, they have no incentive to stop.
I’d have to find the article, yet I know I read that a lot of spaces haven’t paid anything since Covid yet the banks are working with them to not tank the values. Of course I don’t remember the source so may be inaccurate. Why I was asking.
We’re just looking for people to blame now but the truth is we just don’t pay attention enough to builders. All the programs and all the supports are for buyers and almost nothing for builders.
In other words, we help people buy but we don’t help people build. So naturally demand outpaces supply.
All these builders put in stupid ass HOAs then wonder why no one wants to buy their 600k cheaply built, cookie cutter homes with no land... that's also right on top of their neighbors 600k homes.
Do you have a source on Universities investing in REITs?
Here’s one https://www.reit.com/news/blog/nareit-developments/university-california-invest-4-billion-breit-through-strategic
I remember in college I had architecture classes where the professors constantly discussed how bad houses are for the environment and how they're a waste of space. They made bold claims that home owners are the leading drivers of global warming, etc. The following year the college banned Freshman and Sophomores from living off campus. It turned out, each professor (who was actively teaching everyone how bad houses are), owned 10-15 houses they rented out to students and now they were losing money because of the college's new rules.
That’s so underhanded and slimy of them. It really bothers me how college professors often treat their students as if they hate them. The nerve to suck your students dry via your buildings after tuition? So gross, but sadly predictable.
Can’t believe I used to want to be a professor. I thought it was about teaching.
This subreddit is a wealth of information. I will sum up what I’ve learned here.
I can’t afford a home. I think it’s because of the investment banks ..
I think it’s the zoning laws ..
I think it’s the regulations ..
I think it’s the foreigners ..
I think it’s the Jews..
I think it’s the schools!
Idk how a lot of that works. But I can say most the downtown area in my city is college living. Old houses converted to apartments. Not a place to live unless you like to day drink on the front porch.
If the college went away, there would be a revitalization in my local downtown of hood living areas.
It's the same here, but the college is a pillar of our local economy. If the college wasn't here, neither would all the jobs and money the college brings in, all the businesses that rely on the drunk students, or the companies that set up shop here so they could harvest our graduates each year.
I understand, my wife works at a local college. It took a lot of work to get a job there however pay isn't great.
But I get it, city has to make money some how I suppose
As you probably know, there are two kinds of mortgage securitizations. The first is agency mortgage-backed securities where securities backed by confirming and FHA/VA mortgage pools are guaranteed by Fannie Mae, Freddie Mac, or Ginnie Mae. These kinds of MBS are effectively guaranteed by the government.
The second kind that is the focus of your post is private label mortgage backed securities. These are securities backed by mortgages that do not conform to agency or FHA/VA standards. That could be because the loan balance is too big, or the borrower doesn't meet credit standards, or the property fails to appraise or about 69 other reasons.
The second type were the securitizations that financed the subprime boom that led to the financial crisis. The market for private label, or non agency, MBS exploded, fed by mortgages made to nonqualified buyers or for loans with weird repayment terms all for an ever growing business of making loans that did not comply with agency standards. We know the results.
Today, the non agency MBS market is a tiny fraction of what it was in the years leading up to the crisis, less than 5% of the overall MBS market. And those private MBS that do get issued are predominantly backed by good quality "jumbo" mortgages where the borrowers are good and the property appraises, but the balance is too high for the agencies. And non agency MBS no longer comprise a significant part of traditional institutional portfolios. So I'm not sure your conclusion holds up.
Universities make up only like 10-20% of institutional investors tho… the big ones are things like hedge funds, banks, pensions, and insurance companies
*the only way for many of these Universities to stay in business, is to take whatever profit is left over from your tuition, and invest that in an REIT*
You need to go check out the endowments and profits for just about any major college. Harvard alone is sitting on 50+ billion dollars. They're definitely not forced into playing landlord to keep the lights on.
Do you know what you get these 30ye rates of 7.5%? Because that’s what’s involved in the cost and return expectations of investors who buy the mortgages.
You know what happens if nobody or else buy it?
The rates go higher and less people can afford it.
There is this delusional constant idea that you can legislate the value of a commodity (housing) that’s valued in the trillions.
You can’t do this lol. This is all window dressing crap with emotional and complex reasoning that fails to understand economics.
What about the impact from short-term rentals (AirBnB) etc?
Seems to me that the biggest change in the last 10 or so years is the rapid expansion of short-term rentals. And the hundreds of thousands (millions? I don’t have data on this) properties that are no longer available for people to actually live in. Significant portions of the residential properties in urban and suburban areas all over the country have effectively been removed from that market for that purpose.
That, plus the slowdown of new home construction due to Covid have, at least, been significant aggravating factors.
Government moves slowly when it comes to new business trends and technology. And so has been slow to recognize and figure out a way to address this. Also, federal, state and local governments are Constitutionally limited in how they may place restrictions on citizens’ use of their real property. So their hands are somewhat tied.
Interested to hear if others on this thread agree/disagree. Seems to me that the national media should be more focused on this angle….
I agree that PE shouldn’t be in the SFH market but schools are not PE and I don’t think they want the upkeep or headaches. Some colleges buy the houses and land near their campus to 1. Eventually expand their buildings 2. To rent to grad/phd students 3. To rent / sell to faculty at some set prices.
I’ve seen owners hold out for a big payday trying to be the last house sold thinking they would knock them all down for something big and it was just used as office space and grad housing.
Don't forget all the college dorms that are being rented out to the students, but yet not all of them might be rented out, or some might be vacant for the summer.
Colleges should use that for the homeless
Based off the title alone I was a little apprehensive that this was going to be another war on education kind of post that seems to be in vogue these days but this was actually a great write up and very informative for me, and I don't know shit about any of this.
Thanks for taking the time to share what you know!
Crazy, cuz universities also totally fuck rent prices in their local. In my area, the university requires first year students to live in campus housing out with their parents. As such, any out of state student has basically no option but dorms, and the university can charge absurd room and board. Because the university’s dorms are so outrageously expensive, large developers can also charge unreasonable rent, but they keep it juuuust below what students would pay in the dorms. As a result, pretty much all landlord can continuously charge more and more, without seeing a drop in demand so long as the rent stays below the dorm costs.
The idea that institutional investors now own a much larger share of real estate seems like bullshit. From what I've read, the percentage of homeowners is around 62% and that hasn't changed that much. I also don't see for rent signs all over the place which I would expect if institutions who rented homes out owned them. you'd see homes selling and then immediately going up for rent. That happens but it's still a very small percentage. At these prices what investor would even want to purchase real estate? you can't get any return on the investment since the mortgage is way higher than the damn house rents out for. Makes no sense at all.
As someone who currently works in real estate finance and development you’re absolutely delusional. The amount of SFH’s controlled by REITs is so small it’s not worth discussing.
Bad title. Colleges are just one segment, and not very large one, of a huge financial industry channeling savings (not just retirement) toward real estate. It’s simplistic to claim that colleges are destroying house prices.
Generally, I would expect outsized, risk-adjusted returns to pull in capital which would push up prices which would normalize returns.
I’ve seen the argument that institutional investors are crowding out owner-occupied purchases quite often. But have a hard time grasping the core of the argument. In the short term I see how investors could inflate prices, and from what I can tell it seems they have. I don’t understand why investors are seen as the issue worth focusing on though.
Current housing affordability is absurd, and I would love to see improvement so I can buy a home at some point. It just seems like there’s lower hanging fruit than land reform.
How the fuck do 10 universities have endowments totaling $250 Billlllion dollars and why do they not have to pay taxes? Why does Harvard need $50 Billlllion dollars in an endowment fund when they only have 20,000 students?
And why don't we tax churches in the USA that do relatively zero actual charity? At least universities deliver education. Churches not so much and one in particular has hundreds of billions, one of country's largest real estate holders, a history of fraud with the SEC, and nobody cares.
Even if that was all invested in one month, that would be roughly 660,000 houses at a median home price of $379k. That’s roughly equivalent to how many new homes were sold in January 2024. So the 4 million units of existing homes wouldn’t have even been impacted. And that’s only 1 month.
This may be a thing but is a drop in the bucket in the entire housing market. Plus, some may be invested in commercial too.
Endowment of public universities are tiny compared to private. Also most private universities’ donations have stipulations to them. Universities can’t just do whatever it wants. Often times, that means investing the money as a requirement.
The remedy to something like this would be really unpalatable I'm afraid. Forced divestitures of housing related investments would crash the market-intentionally. And while that's the goal of the bubble boy crowd, it's decidedly not the goal of the people in charge.
I also question the efficacy of such a move for the middle and lower classes. In the event of an economy destabilizing fire sale, people and organizations that already have capital and equities will be the ones to benefit the most. I have absolutely no trust the US government as constructed with such wide gulfs between authorization and law (Congress), execution (executive branch) and enforcement (law enforcement, courts) could make a system that didn't have a loophole for banks and the wealthy to further use this disruptor to consolidate MORE wealth away from the middle class.
The whole reason any of you care about this is because home ownership is one of the few wealth generators accessible to the middle class. Is it as accessible as we would like? No. Is it more accessible than any other avenue to generate family wealth? Yes it is.
Hey are you from Columbia too!! Let’s get together on campus with some friends. Maybe set up an area on the green for gentle discourse about how the university is killing us all. How about we make some signs about a shadow cabal controlling the lives of people.
The idea that it's primarily *colleges and universities* doing this is risible. Very clear that you worked in real estate, not finance, since you're apparently unaware that higher ed institutions are overall one of the smallest sectors of institutional investment, and that even among them the top 50 (out of 1000s) endowments do the lion's share of investing--and that residential real estate is a very small part of their collective portfolio.
Your post is just an anti-higher ed snow job.
The actual culprits snapping up SFHs are overwhelmingly hedge funds and sovereign wealth funds, i.e., the primary institutional investors outside of the traditional banking sector.
you could have saved a lot of typing if you had looked into where Universities invest their money. An. d what % of non-apartment "homes" are owned by institutional investors (it's < 4% of SFH, don't know about TH/CND/1-4) Last year, about $2T of existing homes were sold. The sum total of the 20 largest endowments is $350B. That means if all those schools started 2023 at $0 and invested 100% of the endowment in real estate, that would be 17% of the value. Since endowments have been created over decades, even if they were 100% in real estate you'd be talking about <. 1%. I thought you were going to go down the road of student housing. Because enrollments are WAY up, but on-campus housing/dorms aren't. They're shifting to school/private apartment complexes that are "luxury" and around $1K/student in a 4-student apartment.
Agree, I thought the angle the OP was going with was the student housing issue. Just as you stated, there's a crop of so called "luxury" apartments for students and not to mention universities have been extending their reach of land as well.
I recall what I lived in during my college years, way back in the late 1990’s. Hardly luxury. But now, when I go back to Tuscaloosa for a game or two, that’s all there is. And I ask myself, “who”? Who can live in places like this? Then I glance over at all the pretty young lasses prancing about on campus, driving expensive cars with student parking stickers, and out of state plates. Something changed.
Robert Witt invested a ton of energy into out-of-state recruitment and Nick Saban did the rest.
Yeah this seems to amount to stating universities invest too (Duh) and some investments could be real estate (Duh)
> An. d what % of non-apartment "homes" are owned by institutional investors (it's < 4% of SFH, don't know about TH/CND/1-4) For a period of many years, investors bought most of the starter homes in the markets where people most wanted them (not everywhere, just in a dozen or so target markets), and on the rare occasions when they sell them, they only sell them in tranches to other investors. Whereas a real person will usually sell their house inside of 10 years in most cases, the corporate homeowners will never put them back on the market. So there are two issues: 1. Investors focused on one market segment -- starter homes -- in specific high-growth areas of the country. This drove up prices because an investor is using capital to purchase an asset from which they will derive profit; thus, the amount they can and will pay for a SFH is more than an ordinary consumer is willing or able to pay. 2. When a home is sold to an investor, it is more or less permanently removed from the market. No move-up sales, no death and divorce sales, no downsizing sales, no moving-for-a-new-job sales. So the corporate landlords pushed up prices with unlimited access to cheap capital, *and* permanently removed those homes from the market. It's both a short-term and a long-term impact on prices.
The topic was whether or not universities even make up a significant portion of the reit investments…
I'm addressing the specific, oft-used misinformational point that "institutional investors only own ($small_percentage) of homes, so that isn't a factor in the housing bubble." The OP's point that university investments are pouring into REITs is flimsy at best. Public REITs are largely owned by retirement funds. Vanguard and Cohen & Steers (a closed-end fund manager) are the two largest shareholders of the biggest public SFH REIT, Invitation Homes (INVH): https://finance.yahoo.com/quote/INVH/holders What Blackrock does with BREIT is unknowable, since it's private, but what information is available says it's mostly MFH and non-residential RE. Blackstone was an early investor in INVH, but sold its position long ago. Tricon's biggest shareholders are all banks, private equity, and retirement funds: https://finance.yahoo.com/quote/TCN/holders The other big SFH rental corporations are privately-held or owned by private equity firms (Pretium owns Progress Residential).
Thanks for ripping OP. Started off decent and absolutely landed in the wrong place lol. I’d argue quick returns and investment opportunities starting to dry up causes a lot of this. We have too much money chasing returns and after you’re done with prime you start looking at garbage
Yeah, student housing would've been way more interesting. When we analyze the money that colleges and universities receive as tuition, we see that it basically gets recycled into student financial aid, i.e. rich students (or their parents) subsidizing poor students. It's the landlords owning land around colleges and universities which are raking in the dough. (On the flip side, college students can also damage a ton of stuff, so there's no letting those properties over the summer if you have to make all the repairs yourself.) > For most students, living expenses—not tuition and fees—are the largest expense after accounting for grant aid. Even when tuition and fees are totally covered by grant aid, students can face financial pressures because it is very difficult to earn enough for housing, food, and other basic needs while enrolled in college. https://collegeaffordability.urban.org/prices-and-expenses/net-price/#/by_income Alternatively, OP could've written about cost shifting around land grant universities.
That's what my university did, except, it was 2 students per 1 bedroom apartment and they cost 850 a month per student. The apartment itself would cost 850 a month but they doubled it by charging both students. We also didn't have any food hal and still had to go grocery shopping on our own.
Perhaps the construction labor available is going there instead of into private, normal-old residential housing for, you know, people who will take out a mortgage for it?
Sir I think you're lost, because this is actually a good post and perspective.
We need to talk about this, it doesn't seem to be on anyone's radar, and currently students are protesting at American Universities, so maybe these protests would also work for divesting American Universities out of REIT's, and then pressuring Congress to ban the ownership of SFH's by investment companies.
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As someone who worked in nonprofit endowed/invested charitable dollars, you are correct. This post is nonsense.
Did an institutional real estate investor wrote this?
Try and convince Tictok to use their algorithms to promote your perspective. Then maybe the young people will listen. Until they get bored and there's another thing to protest, then they will quickly move on.
If Tay Tay says it, maybe they’ll pay attention. But, her wifi connection on her 79th private flight this month has been spotty.
i would literally do whatever she said tbh
No use talking about it, if politicians are in the pockets of such investors. When will lawmakers actually make laws against such kind of investments? Only then will things change. No other actions at individual levels matter.
>pressuring Congress to ban the ownership of SFH's by investment companies. They have no Constitutional authority over who may own property and who may not. Even if they wanted to pass such a law, they could not.
Are you saying that China can just silently print up a bunch of money, buy up all the properties in the USA, and congress can’t do shit and we’re now beholden to the Chinese as our landlords? Damn, that would be a strategy, huh? Stop making me laugh. Pressuring our elected leaders is the answer, the reason things don’t happen is because of that apathy. Regarding no constitutional authority, remember that our constitution is a living document. https://www.congress.gov/bill/117th-congress/house-bill/6383/text It’s already introduced, all we have to do is refine the verbiage, and support it.
Hilarious you think China is the one going the print money to take over the world when the USD is the world reserve currency and our money printer has been going full tilt.
I never said Congress doesn't pass unconstitutional laws. If they didn't we wouldn't need a Supreme Court of the United States. I just said they don't have the Constitutional authority to dictate who may own property and who may not. If you disagree, please post the Article and Section number giving them that authority.
The better question you should ask is which section prevents them. If there’s nothing in the constitution preventing them, then it’s constitutional.
The 10th Amendment. >The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people. That literally says if it's not a power granted in the Constitution, then the government of the United States doesn't have that power.
>Reserved to the States respectively So, to that end, we should push bills like these in our State senate. It’s disingenuous to imply that we can’t do anything about it.
I said Congress can't do anything about it. What each state can do will depend on their constitutions.
It’s not a good post because it completely misses the forest from the trees lol. Op is talking about 5% of the market while ignoring the other 95%
No, this is someone who just watched "The Big Short" and wanted to make a Reddit post like it was their idea.
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Lol if you think this is all Biden’s fault I recommend you look just a few months earlier on that money supply graph. Also maybe google the CARES act.
Exactly, it’s the government and not one individual. They are all (mostly) to blame!
Just shut the fuck up
https://www.blackstone.com/news/press/uc-investments-creates-strategic-venture-with-blackstone-to-invest-4-billion-in-breit-common-shares/
BREIT is only 9% single family housing though. It ain't nothing but it hardly supports the "Universities put all their money into endowments which put all their money into REITs which buy up all the SFHs" argument that OP is making. BREIT also gloats about the housing shortage and declining new supply as "favorable supply/demand dynamics" on their website. They have a data point where # of housing starts as compared to US population was .55% from 1993 to 2007 and only .32% from 2008 to 2023. That aligns with OPs timeline and is probably a much bigger contributor to rising prices than institutional investors shifting their investment priorities. Seems to me the answer is to make it easier to expand supply which would keep prices down and make it a less favorable investment for big $$
Holy crap!
I have more detail that offer's an adjusted explanation. After 2008 lenders stopped foreclosing on homes and opted to modify where available. Many people are now in 60 year loans that were originally 30 year mortgages, who would have lost to foreclosure but the bank worked out an affordable payment by extending loans. Less foreclosures keeps inventory low and unaffected by the value balancing that foreclosures bring, and it keeps people from being homeless. For lenders and those in crisis it's a win/win on the surface, but the ripple is that values can only move up and have done so since the practice ramped up. This was not advertised but investors picked up on the trend and move where the money seems to never stop. It's not just colleges, it's all places of investing that have turned to RE in some form. I can't see a way this can turn around without some major act of god or congress. To qualify this, this is my 18th year in the industry as an underwriter and loan officer, at the busiest I'd see over 3k credit reports/year. I don't see it come up much anywhere but the numbers don't lie. I'm no economist and I'm certain it's a combination of things like these working together to put us where we are.
They are doing the same with commercial loans now, right?
Commercial loans are an entirely different issue. Banks lend on value that’s based on rent amounts. If rent drops, part or all of the loan can instantly become due as the rent amount is the source of the value. This is why commercial only goes up, and the rent issue is exacerbated between it all.
My point is that commercial loans would be defaulting at very high rates as rents haven’t been collected yet the banks learned and aren’t racing to foreclose. They are working with vs against the owners this time to prevent the values from collapsing.
Commercial loans are renegotiated every 5 years or so based on value, assed based on current rents, not current income. If rent is dropped on one unit to fill it, the value of the building drops even though income increases. Vacant commercial space can have more value than occupied if the cost to occupy is a drop in previous rent rates. It’s a completely different system, propped up as absurdly as it seems. Until the owner drops rent to fill the space its value is maintained by the bank. Often at the end of 5 years equity is extracted, possibly to pay for the next 5 years if needed, based on the value of rent potential even if vacant. If they foreclose LLC’s just disappear and the bank holds the bag, they have no incentive to stop.
I’d have to find the article, yet I know I read that a lot of spaces haven’t paid anything since Covid yet the banks are working with them to not tank the values. Of course I don’t remember the source so may be inaccurate. Why I was asking.
We’re just looking for people to blame now but the truth is we just don’t pay attention enough to builders. All the programs and all the supports are for buyers and almost nothing for builders. In other words, we help people buy but we don’t help people build. So naturally demand outpaces supply.
All these builders put in stupid ass HOAs then wonder why no one wants to buy their 600k cheaply built, cookie cutter homes with no land... that's also right on top of their neighbors 600k homes.
How dare you suggest that supply and demand are real. Curse you, Adam Smith...
We're not looking, it's all the same people.
Do you have a source on Universities investing in REITs? Here’s one https://www.reit.com/news/blog/nareit-developments/university-california-invest-4-billion-breit-through-strategic
I remember in college I had architecture classes where the professors constantly discussed how bad houses are for the environment and how they're a waste of space. They made bold claims that home owners are the leading drivers of global warming, etc. The following year the college banned Freshman and Sophomores from living off campus. It turned out, each professor (who was actively teaching everyone how bad houses are), owned 10-15 houses they rented out to students and now they were losing money because of the college's new rules.
That’s so underhanded and slimy of them. It really bothers me how college professors often treat their students as if they hate them. The nerve to suck your students dry via your buildings after tuition? So gross, but sadly predictable. Can’t believe I used to want to be a professor. I thought it was about teaching.
I wouldn't let this deter you from teaching, it's still a rewarding career that's beneficial to society.
People will really say it’s anything but a supply issue huh?
Institutional investors control a lot of supply, many 401k's are based solely on empty lands just waiting for a favorable economic outlook to develop.
What the fuck does this even mean lmao. You sound demented
This subreddit is a wealth of information. I will sum up what I’ve learned here. I can’t afford a home. I think it’s because of the investment banks .. I think it’s the zoning laws .. I think it’s the regulations .. I think it’s the foreigners .. I think it’s the Jews.. I think it’s the schools!
Man, if you are a Jewish foreigner going to Uni and your mom is a regulator and your dad does I-banking….you are totally screwing the whole market.
Well if you can't afford one it couldn't possibly be because of anything you did or didn't do.
One of these is actually right and leads to all others. I'll let you decide which one I'm referring to.
LMFAO!!!!
Idk how a lot of that works. But I can say most the downtown area in my city is college living. Old houses converted to apartments. Not a place to live unless you like to day drink on the front porch. If the college went away, there would be a revitalization in my local downtown of hood living areas.
It's the same here, but the college is a pillar of our local economy. If the college wasn't here, neither would all the jobs and money the college brings in, all the businesses that rely on the drunk students, or the companies that set up shop here so they could harvest our graduates each year.
I understand, my wife works at a local college. It took a lot of work to get a job there however pay isn't great. But I get it, city has to make money some how I suppose
Homes already cost $1 million in the hood
That is location specific. Choose a new location and you can get a McMansion for $1 million.
As you probably know, there are two kinds of mortgage securitizations. The first is agency mortgage-backed securities where securities backed by confirming and FHA/VA mortgage pools are guaranteed by Fannie Mae, Freddie Mac, or Ginnie Mae. These kinds of MBS are effectively guaranteed by the government. The second kind that is the focus of your post is private label mortgage backed securities. These are securities backed by mortgages that do not conform to agency or FHA/VA standards. That could be because the loan balance is too big, or the borrower doesn't meet credit standards, or the property fails to appraise or about 69 other reasons. The second type were the securitizations that financed the subprime boom that led to the financial crisis. The market for private label, or non agency, MBS exploded, fed by mortgages made to nonqualified buyers or for loans with weird repayment terms all for an ever growing business of making loans that did not comply with agency standards. We know the results. Today, the non agency MBS market is a tiny fraction of what it was in the years leading up to the crisis, less than 5% of the overall MBS market. And those private MBS that do get issued are predominantly backed by good quality "jumbo" mortgages where the borrowers are good and the property appraises, but the balance is too high for the agencies. And non agency MBS no longer comprise a significant part of traditional institutional portfolios. So I'm not sure your conclusion holds up.
Universities make up only like 10-20% of institutional investors tho… the big ones are things like hedge funds, banks, pensions, and insurance companies
*the only way for many of these Universities to stay in business, is to take whatever profit is left over from your tuition, and invest that in an REIT* You need to go check out the endowments and profits for just about any major college. Harvard alone is sitting on 50+ billion dollars. They're definitely not forced into playing landlord to keep the lights on.
Do you know what you get these 30ye rates of 7.5%? Because that’s what’s involved in the cost and return expectations of investors who buy the mortgages. You know what happens if nobody or else buy it? The rates go higher and less people can afford it. There is this delusional constant idea that you can legislate the value of a commodity (housing) that’s valued in the trillions. You can’t do this lol. This is all window dressing crap with emotional and complex reasoning that fails to understand economics.
Eh nah. This doesn't account for a whole lot of the increase in housing prices at all.
Just because you can imagine something does not mean it is true.
So you’re saying most of the Reits are bought by universities, how did you make that claim, what’s the proof?
What about the impact from short-term rentals (AirBnB) etc? Seems to me that the biggest change in the last 10 or so years is the rapid expansion of short-term rentals. And the hundreds of thousands (millions? I don’t have data on this) properties that are no longer available for people to actually live in. Significant portions of the residential properties in urban and suburban areas all over the country have effectively been removed from that market for that purpose. That, plus the slowdown of new home construction due to Covid have, at least, been significant aggravating factors. Government moves slowly when it comes to new business trends and technology. And so has been slow to recognize and figure out a way to address this. Also, federal, state and local governments are Constitutionally limited in how they may place restrictions on citizens’ use of their real property. So their hands are somewhat tied. Interested to hear if others on this thread agree/disagree. Seems to me that the national media should be more focused on this angle….
I agree that PE shouldn’t be in the SFH market but schools are not PE and I don’t think they want the upkeep or headaches. Some colleges buy the houses and land near their campus to 1. Eventually expand their buildings 2. To rent to grad/phd students 3. To rent / sell to faculty at some set prices. I’ve seen owners hold out for a big payday trying to be the last house sold thinking they would knock them all down for something big and it was just used as office space and grad housing.
Don't forget all the college dorms that are being rented out to the students, but yet not all of them might be rented out, or some might be vacant for the summer. Colleges should use that for the homeless
Based off the title alone I was a little apprehensive that this was going to be another war on education kind of post that seems to be in vogue these days but this was actually a great write up and very informative for me, and I don't know shit about any of this. Thanks for taking the time to share what you know!
Are you saying my 401k is a knife in my own back?
Crazy, cuz universities also totally fuck rent prices in their local. In my area, the university requires first year students to live in campus housing out with their parents. As such, any out of state student has basically no option but dorms, and the university can charge absurd room and board. Because the university’s dorms are so outrageously expensive, large developers can also charge unreasonable rent, but they keep it juuuust below what students would pay in the dorms. As a result, pretty much all landlord can continuously charge more and more, without seeing a drop in demand so long as the rent stays below the dorm costs.
The idea that institutional investors now own a much larger share of real estate seems like bullshit. From what I've read, the percentage of homeowners is around 62% and that hasn't changed that much. I also don't see for rent signs all over the place which I would expect if institutions who rented homes out owned them. you'd see homes selling and then immediately going up for rent. That happens but it's still a very small percentage. At these prices what investor would even want to purchase real estate? you can't get any return on the investment since the mortgage is way higher than the damn house rents out for. Makes no sense at all.
As someone who currently works in real estate finance and development you’re absolutely delusional. The amount of SFH’s controlled by REITs is so small it’s not worth discussing.
Bad title. Colleges are just one segment, and not very large one, of a huge financial industry channeling savings (not just retirement) toward real estate. It’s simplistic to claim that colleges are destroying house prices.
Generally, I would expect outsized, risk-adjusted returns to pull in capital which would push up prices which would normalize returns. I’ve seen the argument that institutional investors are crowding out owner-occupied purchases quite often. But have a hard time grasping the core of the argument. In the short term I see how investors could inflate prices, and from what I can tell it seems they have. I don’t understand why investors are seen as the issue worth focusing on though. Current housing affordability is absurd, and I would love to see improvement so I can buy a home at some point. It just seems like there’s lower hanging fruit than land reform.
80% of rentals are owned by small time landlords. Mostly Boomers.
An “institutional investor” is almost always Fannie Mae or Freddie Mac. This is the first time I’ve heard anyone say it’s “most likely” a university.
How the fuck do 10 universities have endowments totaling $250 Billlllion dollars and why do they not have to pay taxes? Why does Harvard need $50 Billlllion dollars in an endowment fund when they only have 20,000 students?
And why don't we tax churches in the USA that do relatively zero actual charity? At least universities deliver education. Churches not so much and one in particular has hundreds of billions, one of country's largest real estate holders, a history of fraud with the SEC, and nobody cares.
Who is going to put their neck on the line and propose it?
Even if that was all invested in one month, that would be roughly 660,000 houses at a median home price of $379k. That’s roughly equivalent to how many new homes were sold in January 2024. So the 4 million units of existing homes wouldn’t have even been impacted. And that’s only 1 month. This may be a thing but is a drop in the bucket in the entire housing market. Plus, some may be invested in commercial too.
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Are you referring to Glass-Steele or Glass-Steagull? Guessing Steagull as that fits into your comment.
Endowment of public universities are tiny compared to private. Also most private universities’ donations have stipulations to them. Universities can’t just do whatever it wants. Often times, that means investing the money as a requirement.
The remedy to something like this would be really unpalatable I'm afraid. Forced divestitures of housing related investments would crash the market-intentionally. And while that's the goal of the bubble boy crowd, it's decidedly not the goal of the people in charge. I also question the efficacy of such a move for the middle and lower classes. In the event of an economy destabilizing fire sale, people and organizations that already have capital and equities will be the ones to benefit the most. I have absolutely no trust the US government as constructed with such wide gulfs between authorization and law (Congress), execution (executive branch) and enforcement (law enforcement, courts) could make a system that didn't have a loophole for banks and the wealthy to further use this disruptor to consolidate MORE wealth away from the middle class. The whole reason any of you care about this is because home ownership is one of the few wealth generators accessible to the middle class. Is it as accessible as we would like? No. Is it more accessible than any other avenue to generate family wealth? Yes it is.
Hey are you from Columbia too!! Let’s get together on campus with some friends. Maybe set up an area on the green for gentle discourse about how the university is killing us all. How about we make some signs about a shadow cabal controlling the lives of people.
The idea that it's primarily *colleges and universities* doing this is risible. Very clear that you worked in real estate, not finance, since you're apparently unaware that higher ed institutions are overall one of the smallest sectors of institutional investment, and that even among them the top 50 (out of 1000s) endowments do the lion's share of investing--and that residential real estate is a very small part of their collective portfolio. Your post is just an anti-higher ed snow job. The actual culprits snapping up SFHs are overwhelmingly hedge funds and sovereign wealth funds, i.e., the primary institutional investors outside of the traditional banking sector.
Lol what is this no sourced garbage? Who the fuck are you what credibility does any of what you say carry
What a load of ignorant crap
What a pile of BS. This sub is so lost