THE SET-UP: Let’s start with an excerpt from a Fast Company story on the housing crisis:
U.S. homelessness reached a peak in 2024: 653,000 people, or approximately the entire population of Boston. Rent has risen nearly 20% since 2019, and the cost of a new home has risen nearly 50% since 2020.
That FC story is worth a click. It notes that housing-starved cities will be on their own during Trump’s Re-Presidency. Cities will also be “on their own” to face the homelessness crisis … unless Trump decides to crack down on rough sleepers.
So, I added a threat that shows the breadth of the problem. And keep in mind that every story was published within the last two days.- jp
TITLE: The Housing Affordability Crisis Is Going Global
https://www.wsj.com/economy/housing/housing-affordability-crisis-europe-global-3e0d969a
EXCERPTS: The housing affordability crisis that has frustrated young Americans for a decade has now taken hold in many big cities in Europe and beyond. The common threads: robust job growth, rising demand and not enough new development, causing rents and sales prices to rise faster than wages.
Globally, homes are now less affordable than they were in the run-up to the 2008 housing crisis, according to research published by the International Monetary Fund. The research compared median household income with the income required for an average-price home across 40 countries.
The resulting housing crunches are eroding living standards for poor and middle-class workers, intensifying wealth inequality and stoking political tensions.
Ireland, after years of anemic construction, now has the European Union’s most expensive housing, according to a broad measure of rent, maintenance costs and utilities by Eurostat, the European Union statistics agency. Average rent in Dublin doubled over the past decade, while the median home price rose 75%, government statistics show.
Some of the sharpest rental increases have occurred in central and Eastern Europe. In Hungary and Lithuania, rent grew more than 60% from 2015 to 2023, according to Eurostat. And in each of those countries, home prices more than doubled over that period.
The tiny Baltic nation of Estonia posted the sharpest increases in both rents and home prices of any European country over the 10 years through 2022, according to Eurostat. While Estonia’s tech-heavy economy has lifted incomes and living standards, home construction hasn’t kept pace in the capital of Tallinn.
In the 50 years through 2021, the countries with the sharpest rise in home prices around the world have been New Zealand, the U.K., Canada, Australia and Ireland, according to the Organization for Economic Cooperation and Development.
In Vancouver, British Columbia, the median home price of $1.1 million was 17 times the median household income as of this spring, up from 10 in the early 2000s. British Columbia’s population grew 19% over a 10-year period ending in 2023, but home construction lagged behind, mainly because of high construction costs, according to a September report from the Canadian Centre for Policy Alternatives, a progressive research group. Prices have risen so rapidly that Canada banned foreigners from buying homes.
In Sydney, Australia, where rising construction costs have prompted developers to put many projects on hold, home prices have climbed from nine times the average income in 2019 to 12 times in early 2024.
While higher prices enrich existing homeowners, they have driven up monthly mortgage costs for new buyers and, by extension, rent, in part because more people have been priced out of buying. The average age of first-time home buyers has risen rapidly in many countries, including the U.S., U.K. and Ireland. In the U.S., half of households spent at least 30% of their incomes on rent and utilities in 2022, a record high, according to Harvard University’s Joint Center for Housing Studies.
TITLE: Private equity firms buying up local housing for rental property investments
https://www.journalgazette.net/business/private-equity-firms-buying-up-local-housing-for-rental-property-investments/article_655e7e42-b1b0-11ef-8f4f-97e51b16c49c.html
EXCERPTS: Private equity firms are increasingly investing in residential property in northeast Indiana with the goal of generating steady income, housing experts say.
Some homes are converted into rentals with a one-year lease, effectively taking them off the market for those looking to become homeowners, and others are advertised as short-term rentals through Airbnb or Vrbo. Either way, the properties are taken off the market at a time when communities nationwide are experiencing a shortage of affordable housing.
Private equity firms are estimated to own more than 500,000 homes across the U.S. and are expected to control 40% of the single-family rental market by 2030, according to AngelList. The software provider to investors and startups has offices in New York and San Francisco.
The boom in private equity ownership “is really controversial, especially among housing advocates,” said Charles Marohn, president of Strong Towns, a Minnesota-based nonprofit specializing in urban housing development.
Steve Zacher, The Zacher Co.’s president and managing broker, said occupancy in the office and retail slices of the commercial real estate market declined during the coronavirus pandemic and haven’t fully bounced back. As a result, he said, residential real estate has become more attractive to some investors.
The Seattle-based real estate brokerage and mortgage origination firm compiled data for the all-cash home sales in the U.S. metro areas with at least 4,000 residential sales this year. Although the results don’t offer a perfect picture of private equity activity, the thinking is that not many average homeowners can afford to write a check for hundreds of thousands of dollars.
The median sale price for an existing home in the U.S. was $404,500 in September, according to the National Association of Realtors.
Although Fort Wayne isn’t among the cities Redfin studied, the numbers reflect the nationwide trend. The highest percentage was in Naples, Florida, where 60% of residential properties were sold in all-cash transactions. The median listing price is currently almost $750,000 in Naples, where more than 4,800 homes are available to rent, according to Realtor.com.
It’s not just warm-weather communities that appear on Redfin’s list, however. Toledo which is 100 miles northeast of Fort Wayne, ranks 11th with 42% of this year’s residential buyers paying all cash. That’s a 68% surge from six years ago, when it was 25%.
Claudia White, with 5 Star Realty, said she’s been contacted by several hedge funds interested in buying homes in Fort Wayne. When a property is listed at $115,000 to $125,000, the private equity funds offer to buy them for $150,000 cash, she said.
White has had clients who struggled to find affordable housing, even with her help. Even though she would receive a fee after facilitating any home sale, White has declined to work with private equity buyers.
The ownership groups – small and large – handle the investments in distinctly different ways.
“The difference between the Ma and Pa investor and a private equity investor is what they do with the equity,” Marohn said.
[P}rivate equity firms use properties’ equity as collateral for loans to buy more houses or stocks. If residential real estate prices drop so that the collateral no longer justifies the size of the loan, the lender can demand its money back and the borrower – the private equity firm – has to sell the property fast and potentially at a loss, Marohn said.
That’s why big investors are willing to outbid local house hunters – the firms need property values to remain high, he said, echoing White’s experience. And they need interest rates to be low enough to increase demand for real estate, Marohn said.
“The investment market in real estate is really, really fragile,” he said.
Although it helps the local housing market when homeowners sell to families who plan to move in, selling to private equity firms can be more attractive, experts say.
Many times, sellers don’t know who is making an offer because it comes through a real estate agent, Strong Towns’ Marohn said.
When private equity firms are involved, they typically offer cash and can close on the sale in days, he said. An offer from someone who already owns a home might be contingent on sale of that property – which can take an unknown amount of time.
Even if a homeowner has a flexible schedule and prefers not to sell to an investor, the amount offered might be too tempting to pass up, Marohn said.
Because private equity firms want property values to remain high to serve as collateral for their bank loans, they have an incentive to make generous offers, said Marohn, who added that home prices aren’t being driven by what the average individual homebuyers pays for a property.
“Our market is so full of credit,” he said.
TITLE: The Cost of Anticompetitive Pricing Algorithms in Rental Housing
https://www.whitehouse.gov/cea/written-materials/2024/12/17/the-cost-of-anticompetitive-pricing-algorithms-in-rental-housing/
EXCERPTS: Algorithmic pricing weakens competition because it can facilitate price coordination among landlords who would otherwise be competing. Our analysis indicates that if price coordination was eliminated, there would be an economically meaningful decrease in price mark-ups for rental units using pricing algorithms.
Rental pricing algorithms use extensive market data to predict and recommend profit-maximizing rents. RealPage is the primary provider of rental pricing algorithms for multifamily housing. Its main pricing software is “AI Revenue Management” (AIRM, formerly “YieldStar”), but RealPage also owns “Lease Rent Options” (LRO), which it acquired from its main competitor in 2017. The two software products are used in at least 10% of all rental units nationally. Using data on software usage from a RealPage report and the American Community Survey, we estimate that in the multifamily housing sector nearly 1 in every 4 rental uses a RealPage pricing algorithm.[2]
We find that coordinated rents from algorithmic pricing cost renters in algorithm-utilizing units $70 a month, or 4% of rent, on average nationally. In six major metros, the cost exceeds $100 a month. Monthly costs of price coordination for units using RealPage software by metro are shown in Figure 2. The total cost to renters in 2023 was approximately $3.8 billion.
Moreover, the estimates likely understate the true aggregate cost of landlords using algorithms to collectively maximize profits because they do not include the price effects on rental units that do not use pricing algorithms. In other words, our analysis captures the partial equilibrium effects of price coordination, but not the full equilibrium effects. In the full market equilibrium, higher rents set by algorithm-utilizing landlords lead to higher rents set by non-algorithm utilizing landlords as well.[4] The equilibrium price effects on units not using pricing algorithms will be larger in areas where housing supply is more constrained, all else equal.
The aggregate costs to renters of the full equilibrium effects are likely large, even if the per-unit price effect is small, because many units are affected. We therefore view the cumulative estimate of $3.8 billion in 2023 as a lower bound on the true cost to renters nationally. Regardless, our estimate indicates that eliminating this cost would meaningfully decrease price mark-ups for rental housing across the country.
SEE ALSO:
Homelessness in N.H. surged 52 percent in one year, report found
https://www.bostonglobe.com/2024/12/17/metro/new-hampshire-homelessness-surges-52-percent/
Camping ban enforcement in Maine highlights patchwork of solutions to homelessness
https://mainemorningstar.com/2024/12/17/camping-ban-enforcement-in-maine-highlights-patchwork-of-solutions-to-homelessness/
Camping bans, penalties rise after Supreme Court ruling, worsening homelessness, experts say
https://www.newsfromthestates.com/article/camping-bans-penalties-rise-after-supreme-court-ruling-worsening-homelessness-experts-say-0
Pittsburgh to clear riverside homeless encampment over objections from advocates
https://www.cbsnews.com/pittsburgh/news/pittsburgh-homeless-encampment-riverside/
Charleston homeless encampment cleared. What options do the residents have?
Columbus City Council gives $329,000 for homeless services as camp evictions loom
https://www.dispatch.com/story/news/local/2024/12/16/columbus-gives-money-homeless-services-winter-camp-sweeps-planned/77029411007/
California city will spend millions of dollars to seal off a creek after a sudden homeless encampment sweep
https://www.mercurynews.com/2024/12/17/escondido-will-spend-millions-of-dollars-to-seal-off-a-creek-after-a-sudden-encampment-sweep/
Sunnyvale OKs winter hotel rooms for homeless residents
https://www.mv-voice.com/housing/2024/12/16/sunnyvale-oks-winter-hotel-rooms-for-homeless-residents/
Single mom who started nonprofit to help women combat homelessness now faces same problem as those she helps
https://www.wcpo.com/news/local-news/hamilton-county/cincinnati/single-mom-who-started-nonprofit-to-help-women-combat-homelessness-now-faces-same-problem-as-those-she-helps
Louisville church to open doors with 'Room in the Inn' program to combat homelessness
https://www.wdrb.com/news/louisville-church-to-open-doors-with-room-in-the-inn-program-to-combat-homelessness/article_3e20e0e2-bb3b-11ef-9890-6bc8802e2793.html
Traverse City allocates $250,000 for year-round shelter to combat homelessness
https://upnorthlive.com/news/local/traverse-city-allocates-250000-for-year-round-shelter-to-combat-homelessness-the-pimes-safe-harbor
Howard County expands emergency shelter to combat homelessness effort
https://www.cbsnews.com/baltimore/video/howard-county-expands-emergency-shelter-to-combat-homelessness-effort/
St. Louis looks beyond shelters to fight homelessness
https://www.stlmag.com/news/solutions/homelessness-regional-rehousing-machine/
Huntington Mayor-Elect Lays Out Plan To Tackle Homelessness
https://wvpublic.org/huntington-mayor-elect-lays-out-plan-to-tackle-homelessness/
Honolulu passes resolution to tackle homeless crisis before 2028 games
https://www.newsnationnow.com/us-news/west/honolulu-homeless-resolution/
New Honolulu facility offers interim housing, services to families
https://www.thegardenisland.com/2024/12/17/hawaii-news/new-honolulu-facility-offers-interim-housing-services-to-families/
Denver City Council approves contract extension to lease hotel shelter through Feb. 2025
https://www.denver7.com/news/front-range/denver/future-of-denver-hotel-shelter-uncertain-amid-lease-negotiations-with-the-city
Safe parking programs offer support to people living in their cars
https://www.smartcitiesdive.com/news/safe-parking-programs-offer-support-to-people-living-in-their-cars/735720/
‘It’s security:’ Missoulians living in vehicles say new program is step in right direction
https://ravallirepublic.com/news/state-and-regional/missoula-vehicle-permitting-program-homelessness-services-family-security/article_c2278406-96ea-58e9-991d-4732737c24f8.html