On a policy level, what can be done about the surge in investment properties that is making it harder to purchase a home as a primary residence.

On a policy level, what can be done about the surge in investment properties that is making it harder to purchase a home as a primary residence.


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I'd favor [YIMBY policies](https://en.wikipedia.org/wiki/YIMBY) and a [land value tax](https://en.wikipedia.org/wiki/Land_value_tax). YIMBY policies—such as changing zoning and other laws to allow hi-rise or other dense-housing development, especially in key areas such as near businesses and public transit hubs—would increase housing supply and thus reduce prices. LVTs would further incentivize production of housing on high-value, under-utilized land like dirt parking lots, and thus also increase housing supply.


Agreed. I think a lot of people here YIMBY policies and assume it means that everyone would be living in skyscrapers which simply isn't the case. Paris has a population density of 53,000 people per square mile without a single sky scraper meanwhile New York has a population density of 27,000 people per square mile and is the densest major city in the US. Building dense cities does not mean that everyone has to live in tiny concrete boxes in the sky.


Well, there is that one skyscraper...admittedly they learned from their mistake and moved all future ones to the East.


Do you mind elaborating on which one you're talking about? Sounds interesting


Probably the Tour Montparnasse. All other skyscrapers are in the La Défense business district. It really sticks out like a sore thumb lol


Damn. [It sure does](https://en.wikipedia.org/wiki/Tour_Montparnasse#/media/File:14e_arrondissement.jpg)


I also don't know why skyscrapers have become such a bad word. Understandable if you live in a small city and the tallest building is like 10 stories. But the folks living in places with like 20 skyscrapers already complaining about a 21st? Come on. Being able to fit a lot of stuff into a small physical foot print is a legitimately important tool for major urban areas.


* Traffic * Parking * Lack of commercial services to support the increase in population.


1. Public transportation 2. Public transportation 3. Said skyscraper, is, shockingly, able to support many of the commercial services people need. Plus. They are built in major urban areas were the amount of commercial services is not the major problem.


And awful for green space (when you have many skyscrapers in proximity). They block light, create wind tunnels, and trap noise, making for a miserable pedestrian life.


Paris is the first city thst should come to mind when you hear about lack of affordable housing.


Tokyo is a better example. The city is massive with a growing population, but because of simple zoning and a relaxed attitude toward building, you can purchase a new home in the Tokyo metro for [$354,000 US](https://resources.realestate.co.jp/news/how-much-does-it-cost-to-buy-a-house-in-tokyo-october-2020-update/).


Japan has the advantage that people there generally don't view housing as an investment. [Most houses in Japan are torn down after the owners move out because people don't want to live in "used" houses.](https://www.theguardian.com/cities/2017/nov/16/japan-reusable-housing-revolution) As a result new construction is very easy.


That sounds catastrophically wasteful unless they reuse all the previous material in some fashion...


Honestly I think the west goes way too far in the other direction. Japan is probably extreme in rebuilding everything every 30 years, but the United States is full of ugly old mass produced houses built right after world war 2. A lot of those should be torn down and rebuilt with modern housing.


I definitely agree. A really old house often lacks effective insulation and the ability to do proper central air which can mean massively inefficient heating and cooling. There is just in general more sketchy things going on making hundred year old houses not very functional and I think much more wasteful in the long run than rebuilding a proper modern home.


New York City has actual houses with yards in the city limits though, you need to compare Manhattan. Paris apartments are typically smaller


I’m generally in favor of YIMBY policies, but can’t help but wonder how long it diverts the problem of affordable housing, since eventually you reach a point where all the “beautiful” parts of the country have big high rises and they can only build up so high. Plus to the NIMBYs point it does destroy the beauty of an area in favor of more people being to live there. Akin to how you used to be able to drive down PCH (Pacific Coast Highway) and see beach front 99% of the trip, but now entire beach towns have the view blocked by housing and you have to park in a designated area to see the ocean.


If Seattle (a desirable part of the country) allowed *six* story buildings city-wide (not skyscrapers), you would increase density by a factor of ten. It'll be a long time before the city of Seattle-proper houses 7 million people, and that's not including any changes to suburbs. I hear your point, but you may be underestimating just how low density this country is.


If Seattle allowed every residential area to be a duplex, triplex, or quadplex instead of a single family home there would be almost no change the the skyline while there would be 2-3 times more housing.


The City did this a couple years back. Single-family homes used to require owner occupancy if the owner intended to rent a portion of the property to others. The City no longer requires this, which allows owners to live off-property nkw - every home in Seattle can now be used as a duplex or triplex, with some minor (usually access) restrictions. Lots of people are building 800-1,000 sqft. additional dwelling units (ADUs) in their back yards for $300K and getting $2K/mo. Rent on the ADU's or converting old basements for $100K for a similar return on investment. Both of these ventures are profitable for the owner for both monthly cash flow and for increased property value and increase the supply of housing for tenants.


Fair point. Maybe it’s a longer timeframe than say 50 years.


Yep. And to your point about the PCH - if the housing were clustered, you could house a lot more people on/near the water, *and* have more open waterfront for the public (there are plenty of Euro beach/mountain towns like this). We've chosen possibly the worst possible option.


> We've chosen possibly the worst possible option. I think I'm starting to see a pattern here...


I live in berlin, which typically has a very strong yimby attitude, and I think they do a good job of solving that by having lots of apartments or houses close together, with shops at ground level, and then big flat sections of parks or other nice spaces. Also there are so many housing units that it’s kinda hard for the beautiful parts to be overcrowded since those rents will be more expensive and people will just find something cheaper.


Berlin... how is housing there overall? I remember reading an article on how bad the rent control was but I’m no expert. Can you chime in? Berlin’s Rent Controls Are Proving to Be a Disaster https://www.bloomberg.com/opinion/articles/2021-03-02/berlin-s-rent-controls-are-proving-to-be-the-disaster-we-feared


As far as I can tell, it wasn't a disaster, but it was cancelled by the courts here. There's apartments available from \~300 all the way up to like 4000 euros a month, and most of them are right next to public transit. There's two train stations within a kilometer of my apartment and a bus stop right outside of it, its great. The best part in my opinion is that housing really is everywhere, and people can afford to live almost everywhere even the fanciest parts.


> people can afford to live almost everywhere even the fanciest parts. Wealthy people in America specifically don't like this. Which is ultimately bad for the health of neighborhoods and bad for city revenue and bad for the local economy. But they hate the poors.


Rent control was cancelled by the Supreme Court and didn’t last long enough to do much of anything. However Bloomberg sure freaked about it since they are a very liberal publication. There are issues with housing for sure which mostly has to do with bottlenecks in construction during a period of large population growth combined with a major shift in how people live (everyone wants 1 bedroom apartments since they have no kids!)


Not a German, but I wanted to add my opinion. The last line of the article reads: "If investors fear that local property rights will be put at risk in every election, they might stop building houses in the city at all." This is the number one problem with how rent control is put into practice. You cannot put a cap on rents, while leaving it up to the free market to build housing. They will stop construction as a fuck you for the regulations. Rent control needs to be paired with the government producing supply on their own. They should push the old developers completely out, being able to produce housing with lower margins, or even at cost. Rent control has never be properly implemented anywhere as to my knowledge. It can and will work very well, if done properly.


> They will stop construction as a fuck you for the regulations. If you take away the profit incentive you have no investment opportunity. They don't stop building as an f you. They stop because there are better places to invest.


I don't like rent control for private developments, but I do like Singapore style public housing schemes.


On the other hand of that NIMBY point: a lot of the "beauty" being maintained by strict zoning/housing laws is actually weed-ridden and decrepit lots And the flip side of the "can't see the ocean while driving" argument is that with denser zoning, more people/visitors can actually *live* near the ocean. Kind of touches on the "build cities for people, not cars" argument. Single family up and down the line just means that only rich families get the privilege of a beach-front stay.


It's still only rich families with the privilege of beach front. It's just more of them now.


But its the less rich fucks. And it allows normal people to live closer too.


> eventually you reach a point where all the “beautiful” parts of the country have big high rises and they can only build up so high Thing is, we're nowhere near that point. My city has some of the highest housing prices in the world and is mostly zoned for single family dwellings.


Lol look at the other side of the PCH where it’s primarily single family homes for the next 50 miles inland.


I think New York City is working on / has passed some legislation regulating how long a property can stay vacant (e.g. penalties for investors holding buildings with no tenants for years)


And you can also increase property taxes for houses that aren’t your primary residence and lower taxes/rates for first time home owners. That way more people are buying and less people are renting. Edit: After thinking about this more, I think the core problem of this is buying a home in the first place. You need to make it economically cheaper for people to buy their first house than to continue renting. Whether it be by lowering the required downpayment or requiring lower tax rates or just straight up subsidizing the loan, any of that could work. When you have more and more people buying houses, you'll have 1) less demand for people renting but also 2) less properties being bought up just for the sake of becoming a rental/airbnb Making it more challenging for people to buy rental properties can easily turn into a vicious cycle of landlords simply passing along the cost of that. So you need to also make the alternative cheaper. If you make renting more expensive but first time home buying cheaper then people will obviously buy more.


Doesn’t that just end up increasing rent for renters who can’t afford to buy a house?


Yes; but those are two separate problems. Decreasing the gap between rent & mortgage costs will result in an increase in home ownership; it will also increase costs for everyone who still isn't able to meet that gap


No. The property owners expenses don't determine the price the renter pays. The property owner is always going to charge market rate regardless of other expenses they have to pay. Let's phrase this another way: would rents drop if property owners got a tax decrease? No. The property owner would still rent the property for market rate. Due to California's Prop 13 passed in 1978, there are property owners in San Francisco paying almost nothing in property taxes. Those units don't rent for less than similar units where the property owner is paying the full property taxes. Finally, in high rent areas property taxes are a tiny fraction of the costs of property. Most of the cost is due to scarcity. This proposal doesn't change scarcity in either direction. What a higher tax on non-primary residences does do is in makes it less likely that a property owner will choose to rent their extra property and instead makes it more likely they will sell it.


If increasing taxes on buildings won’t even have enough of an effect to force landlords to increase rent (to make up for the extra taxes), then will it really make any difference at all? It sounds like the increase in taxes would be insignificant and not have the intended effect against owning multiple properties.


In high rent areas it will probably have a miniscule effect. I don't think it is a good suggestion if your goal is to reduce rent. We have known the best way to reduce rent for a very long time: build more housing. But for some reason people want try suggest everything else but the one thing we know will work. And I feel like a broken record for point this out over and over again.


Rent rates are determined by the renters market If less people are renting, there will be more landlords competing for those renters. Supply and Demand.


True, but that's also why you subsidize first time home owners. In an ideal society you want renting to be quite low. You want people to be investing in new homes.


Ideal with respect to what criteria? Serious question.


Ideal with respect to economic perspective. You want all citizens to be investing in real estate when they settle down and stabilize their life. What benefits to society does renting off? Well it offers temporary housing for those who are in transition in life or not staying in a single place for a long period of time. However, the age at which people are buying houses is increasing. The price for houses are increasing at a rate that is greater than income. This has been offset temporarily by lowing interest rates but there's only so low you can go. What are the downsides of renting? Wealth inequality. That's exactly what is going on now. If you go to subreddits who believe in the FIRE lifestyle (Financial Independence Retire Early) the number 1 way to achieve this is through real estate. So what we are currently having is people who have money are buying more and more homes. Consolidation of assets and investments is a bad thing for the economy and society. Right now it is so easy to be and stay rich if you can buy real estate. So what does this do? Well you have the "Haves" and the "Have Nots". People with the "haves" can out buy those who "Have not". In Portland Oregon you see it all the time with people coming from California. They show up after selling their million dollar houses and drive up the prices. When they get two or more houses then their income only increases. Then they can buy even more houses. It becomes a never ending cycle on investment.


Subsidizing home ownership and penalizing renting is how America ended up in a urban sprawling mess with poor inner city and wealthy suburbs. Its not really a good policy in terms of helping anything but home ownership for the wealthy. I also disagree that renting is bad. Mass home ownership to simply have a home is however not ideal from many perspectives.


Can you explain a little more?


America has subsidized homeowners since at least the 50s, but has either not helped or actively hurt renters most of that time (and when they do help, it's double edged such as rent control). This resulted in a massive explosion in home ownership, which if it was all NYC condos wouldn't be an issue, but instead America solution was to buy farmland and crap out single use housing. At first this wasn't to big a deal, some sprawl doesnt hurt. But as land gets devoured each generation, it just went further and further out. And spread to new areas as well. The result is less concrete jungles and more concrete menaces, with mass transit rarely maturing, pollution rapidly rising, environmental damage from sprawl killing ecosystems and creating interactions with animal and man in negative ways for both, flood damage areas expanding, and inner city areas being robbed of wealth as those with means ran off to the suburbs of white picket fences and 2 cars.


High rates of renting *should* actually be more efficient in the long term for the economy as a whole (more accessible ease of movement, better economies of scale, better allocation of resources by price discrimination and so on) but it doesn't seem to work out well in the end. Rents are very sticky due to high costs of relocation and landlord's leverage that create, well, rent-seeking behaviour that doesn't add value. I think an economy with high rates of rental or at least a highly mixed rates would be ideal but it would require significant regulation to achieve. We do see it to some degree in Japan as a popular example. It's somewhat moot in America though as home ownership is also tied closely to social status and the expectations of the middle class.


I literally JUST learned about how housing is in Japan. They do NOT look at a home as an investment. They expect them to be torn down and rebuilt within 20 yrs. Completely different outlook. I found it fascinating. I guess the sh*t they've gone through in just the past 100 years will do that to a country. Also, I've been following both of your responses and this is such an informative thread. Ty!


It certainly took a spectacular crash to change Japan's real estate market to what it is today but I think it was to their benefit! I'm not sure we'd ever quite get to that point but it is possible of course. Cheers.


>I also disagree that renting is bad. Long term it objectively is, unless you consider things like being able to retire bad. Rental should not be considered a long term thing, and we should be trying to get the average person into their own home by 30 or so.


I disagree. It shouldn't matter whether someone rents or owns. It shouldn't impact government policy. There are pros and cons to both renting and buying, and we shouldn't force everyone into buying. That's exactly how you get situations like this.


But it does. Because one is an investment and the other is paying for someone else’s investment


Housing as an investment is massively overblown, which is party of the problem as well. It depends on a whole host of factors, including location. If you bought into Denver or Austin 15 years ago, you've made a fortune, if you bought into NYC or Chicago 15 years ago, you've plowed a bunch of money into maintaining an asset that has gone nowhere, meanwhile the SP 500 has tripled.


I think you've misinterpreted what he meant by investment in terms of the average buyer... Think more along the lines of a lifestyle investment than a financial one. Try retiring while you rent a place out vs when you own a home.


And as with anything, it is about trade offs and you are completely ignoring the alternatives that open up because you rent. If I buy, I am locked into a job market more or less until I sell. And renting property out isn't that simple. People seem to think about only the best case scenario when they think about renting out property. Never the worst case that could happen (e.g., tenant doesn't pay, you end up with two mortgages) If I rent, sure I am paying for someone else's investment. That's not debatable. But I also happened to triple my salary by moving cities which I put in growth stocks and I am far better off than if I bought in one market and never left. The latter isn't notional. It's exactly what I did.


Housing shouldn't be an investment. It wasn't an investment until the 1980's recession. Before that it was just considered an expense and buildings lowered in value over time as the aged. You can't lower rent and keep housing as an investment. One drives the other.


My former in- laws bought in the NYC suburbs in 1969, and by the mid-80s had made nearly 1000% on their investment. They sold and moved to SC where they paid cash for a much nicer, larger home. The world did not begin in the 80s.


> After thinking about this more, I think the core problem of this is buying a home in the first place. You need to make it economically cheaper for people to buy their first house than to continue renting. Whether it be by lowering the required downpayment or requiring lower tax rates or just straight up subsidizing the loan, any of that could work. When you have more and more people buying houses, you'll have 1) less demand for people renting but also 2) less properties being bought up just for the sake of becoming a rental/airbnb Literally just build more housing. Everything you're suggesting would just increase demand without touching supply. Stupid and what got us into this mess in the first place.


> Whether it be by lowering the required downpayment FHA loans only require 3.5% down--that's a federal program. We could probably do more, but I think realistically it's just the real estate prices. There are certain areas of this country that are just getting absurdly expensive and many people will never be able to afford to own there. But a gorgeous home outside Houston is like $200,000. So a down payment for a first time home buyer is only $7,000. If the problem is people don't have $7,000 saved, then no federal housing program is going to fix the underlying economic symptoms causing that. I think if we address other issues in this country that are central to the average American family's economic condition, particularly healthcare & child care, the rest has a good chance of falling into place.


VA loans allow homebuyers to put zero down, but then again, VA loans are only available to active duty and veterans.


Is that $200k in 2019? Or last week? Many places have seen large jumps in prices recently.


Doesn’t really matter. My point is it’s only some places that jump like that. Places like Houston haven’t jumped (that I’ve seen—I have family there). They build more houses than they need so there’s just no need for a pricing jump, there’s still room for everyone.


At 3.5% down for an FHA I don’t know how it could be any cheaper to buy a house.


It's not just 3.5% down on any home. The lender stipulates the minimum credit score, which went up last spring, most lenders won't finance a mobile home only stick built, home must be move in ready and pass a very rigorous inspection so many sellers will make it a point not to accept FHA or VA loan applicant buyers, and the homes available are listing at 100% more than they would have pre-Covid. We lost our loan approval letter last year because the lenders increased their stipulations and the local housing market is ridiculously expensive in our small town well north of Atlanta. Local businessmen are paying cash for properties, making them then look like HGTV homes with some DIY from Home Depot, and relisting them a few months later at an average of $200K more then repeating the cycle. Trying to buy our first home has become a living nightmare realizing we are at the mercy of our landlord and this housing market.


> Whether it be by lowering the required downpayment This is what caused the housing market crash IN June 2004 69.2% of people owned the home they were in at an alltime high of homeownership. This was as banks were encouraged by the Federal Reserve and Congress to increase home loans. This meant finding ways for people to be approved so down payments were removed. Credit Scores were removed. People got loans. People got houses People just werent aware of the actual costs of the loans and many of those people had a history of default loan repayments ------ Prime borrowers typically have strong credit scores and obtain the most competitive interest rates and mortgage terms. In contrast, subprime borrowers typically have blemished credit and lower credit scores, may have difficulty providing income documentation, and generally pay higher interest rates and fees than prime borrowers. * To assist with this imbalance FHA makes loans with government insurance or guarantees, which primarily serves borrowers who would have difficulty obtaining conventional prime mortgages. * The borrowers are allowed to make very low down payments of 3 percent and generally pay interest rates that are competitive with prime mortgages but also pay fees or premiums to cover the cost of the guaranty. But from 1996 through 2005, FHA’s share of the home purchase mortgage market declined while the conventional mortgage banks' share increased * During this time most subprime borrowers opted for adjustable rate products (ARM) now offered through conventional mortgage banks * (in 2005, more than 75 percent of subprime loans were adjustable rate) FHA’s market share in terms of numbers of loans fell from 19 percent in 1996 to 6 percent in 2005 * Subprime buyers were attracted by their “affordability” features, such as lower initial payments and interest rates compared to FHA Loans. * Unfortunately, ARM Loans had higher ultimate costs, in part because their initial interest rates could increase 3 percentage points in as little as 2 years and two-thirds featured prepayment penalties, which can deter borrowers from refinancing into lower-cost products


What you are doing here is well intentioned but I think you are putting the government in a bidding war, more or less, with property investors. Each state has to tackle this on their own but make urban and more desirable areas much much less open to investors that aren't using such as a primary residence and make traditionally less desirable areas more open to investment and then you are making things more balanced... everybody wins? Also it should be next to impossible for non-citizens to invest in property. Every business that has to pay their employees extra because the US has turned it's real estate market into an international bank should be fighting against this if for nothing than their bottom line.


Loans are a risky way to go, in the UK the government funds a scheme called help to buy which subsidises first-time homebuyers. However, this means prices keep rising and thus the government needs to pay more and so on. A bit like the university prices in the US if I recall right.


Why do we have to subsidize people to buy houses? Buying is a personal choice. And making these changes will only serve to push more people into the buying market.


If it's good for the economy and good for the people then the government has an interest in helping people do it. And we subsidize lots of industries already.


Not sure it's as good for the economy as we want to believe. And you can argue that it has a lot of detrimental effects by pushing homeownership in the suburbs on both the environment (long commutes) and healthcare (cities more likely to walk/bike to work). And money could be spent a lot better than paving these roads everywhere, and using the land for other purposes.


"buying is a personal choice" lmao Yeah, it's a personal choice for anyone who doesn't want to work until they die. Nobody rents because they like throwing money away, they rent because their situation doesn't allow them to buy for whatever reason, and nobody wants to rent forever.


Renting is not throwing money away nearly as much as it is people pushing that narrative. People should not just assume that it's a great investment, because it's not.


This isn’t true. Owning a home means being responsible for maintenance as well as being tied to a location. There are a lot of people who don’t want to think of any of that beyond making a phone call if something goes wrong. There is value and security in that. Is it throwing money away? Not really. It is paying for someone else to deal with all the details of owning property without any of the headaches. Its paying for the ability to move rather quickly if desired. I rented for over 10 years before I bought a house. It was perfect: once a month I wrote a check. If anything happened it was the owners responsibility. The only reason I ended up buying a house is because my preferences changed.


Vacancy taxation is kind of a red herring though. Vacancy rates in expensive cities are very very low, and not a significant driver of housing prices. The toronto vacancy tax only had a negligible impact on the housing supply.


In the Bay Area, our issue is that we don't allow new building, which drives up the rents, making it a better investment option to convert to rentals, relative to other investment options. SF pioneered the "historic landmark" concept to prevent any and all development. In the East Bay, there's a huge arson problem linked to housing developments. We have activists who claim that the new housing displaces the older populations (gentrification) [https://sfist.com/2019/07/26/yet-another-under-construction-oakland/](https://sfist.com/2019/07/26/yet-another-under-construction-oakland/)


I guess one could raise property taxes the more up the ladder you are. For example owning 5 homes would be double or triple the cost of owning one. Thats all I can think of.


Unfortunately the knock-on effect of that is to remove small landlords from the market and shunt it all upwards to large companies and people with dozens or hundreds of properties like Sean Hannity and Jared Kushner. I know Reddit hates landlords but there is and will always be a serious need to rent rather than own, especially as the workforce is more mobile now than ever. I would rather do that from a human being with one or two properties than a huge conglomerate where I can’t even talk face to face with anyone and the profit is concentrated once again with shareholders and CEOs. I think the answer has to come from radically taxing empty properties, removing the incentive to keep it empty while it appreciates. Also regulate and tax the shit out of AirBNB and its clones. They are running hotels. Treat them like a hotel. Unless the host is living on the property, it’s a hotel and must be regulated and taxed as such.


Yup, my landlord is a nurse who happens to own a second home. I love her as a landlord, she’s a great lady and her husband is always available to fix problems around the place. Sometimes I forget my rent the first days of the month and it’s no big deal, always get her the money within an hour of her text reminder. Would rather deal with a random human being than some mega corporation.


I live in a big-university-football town, and the number of perfectly fine small houses that have been converted to Airbnb is so depressing. My only hope is that if the Airbnb culture ever breaks, lots of really nicely renovated houses should hit the rental market again. All of the rentals remaining in this town are utter shitholes and still over-priced because of demand.


I live next to an Airbnb and I would much, much rather have it that way instead of a traditional rental. The owner takes waaaaay better care of the property than he would if it was a traditional rental and renters generally don't do anything but devalue a property.


In many markets the exact opposite is found. Condos and HOAs are adamantly opposed to AirBnBs due to their negative effects on local property valuations and single visit transient rentals are almost always seen as worse than long-term rental tenants in terms of disturbing neighbours.


Well as long as you’re not inconvenienced.


Why shouldn't I want my neighbor to take good care of his property? That only helps my own value.


Why should you get a say over what someone else does with their property?


This is why people buy into HOAs though. Standards and rules to try and keep property values stable so a few lazy fucks don’t move in an put a few “project cars/boats” in their front yard which devalues all of the property around them.


A house you can park a trailer in front and build a tree fort in the backyard vs. one tied to a HOA. Which do you really think "devalues" the property .


Seriously? The non-HOA one by a large margin. Was that meant as an anti-HOA gotcha? And this is coming from someone who despises HOAs.


I don't, all I am expressing is my preference. Why do you get to have a say over what someone else does with their property?


Not OP, but the answer is "because their actions are driving up the costs of housing and the rest of us would like to buy a house someday"


I mean technically they are lowering the cost of housing.


Could it be written so that the costs scale with number of properties? With a proper scale it would cause diminishing returns with additional properties, and eventually you'd hit a point where it wouldn't be profitable to buy more. I'm not sure how you could prevent a loophole where someone has shell companies to own property for them though.


Not really. Mentioned this elsewhere but corporations being taxed more for owning multiple property is going to rapidly become a mess since most companies don't want to deal with maintaince and other property issues, so property management companies end up renting space out and companies that aren't property management do their thing Combined with some companies being designed around multiple property (Wal-Mart, Amazon, Verizon, tmobile, ATT, CBS, and more) also will be punished for this. Any loophole built for them, builds for landlords.


I think it would be easy to write in a distinction between commercial use properties and residential use properties. We're talking strictly residential properties being rented out here.


>Combined with some companies being designed around multiple property (Wal-Mart, Amazon, Verizon, tmobile, ATT, CBS, and more) also will be punished for this. None of those are zoned for residential, none of those factor into this discussion at all


But I think if it was strictly based on how many properties you owned, the barrier for entry is a lot lower than you are making it sound. A person with one or two rentals is gonna be paying WAYYYYY less than the corporate owners of dozens.


Then you will suddenly end up with landlords who have 5 separate LLCs. Solutions can't be punitive. Government will never move as fast as the market when it comes to playing whack a mole.


Except those homes are usually owned by LLCs and other incorporations, not people.


Funny how Reddit always up-votes this stuff without thinking... In this case, what happens if you raise property taxes 2 or 3x on people who own more than one property? Right, virtually every landlord in the country has their expenses rise by thousands of dollars a year per unit. So, are they going to eat that? Or, are they going to raise their rents by the exact same amount? Right, they are going to raise rents dramatically. Congratulations, you just made rents even more expensive - across the board!


> Or, are they going to raise their rents by the exact same amount? Right, they are going to raise rents dramatically Of are they going to sell some of their properties since people aren't willing to pay that high rent, instead living further away, and instead the landlords sell the property to a smaller landlord or to a resident owner.


Couldn't we just incentivize new construction then to lower the demand for those rentals vs. trying to artificially stop market forces through taxation? Building a new house in my town is easy. Go three miles north to our sister city that happens to be in another state and building a house is a royal pain in the ass due to overly complex and zealous government interference. Guess which town is seeing more housing starts and generally is much more affordable?


>Couldn't we just incentivize new construction then to lower the demand for those rentals This is the known best solution to reduce rents, but we seem to want to try everything but this. It's maddening. We don't even need to incentivize it. Due to high demand the incentive is already there. We just need to stop blocking it.


Incentivising high density housing would be a good long term policy though.


Looking at lumber and labor prices I wouldn't say buIlding a house is easy anywhere right now.


Lumber prices will go down. I am in the trades though and it's true that labor has gotten expensive. I have nearly 30 years of experience and own my own company but I really have no trouble at all staying busy by bidding at around $100 per hour as a carpenter. There is way more demand for this type of work than there are people willing to do it. That's great for me but it does add a lot to building or remodeling costs.


So keeping Lumber prices low helps housing prices....except Only 25% of the home's price is from cost of supplies * At best 30% of the costs of all supplies is from Lumber. * Or about 7% of the overall home price is based on Lumber Prices. * 1 percent to 2 percent change in home prices based on lumber's price increase * So much has been added to homes now that Lumber isnt as big of a costs. SmartHome Appliances have increased the amount of stuff a home is sold with. Upgrades to non wood parts around the home are more common. All devaluing the importance of Lumber, while lumber substitutes have also gained a larger share of the supplies market. * From trex decking over lumber, and Cabinets that are now using less lumber as Engineered Woods like Particleboard and Plywood gain


What if you only raise the tax for companies and people with more than 5-10 properties? That way small landlords can keep their rents down and prevent the big funds from raising them without becoming uncompetitive. That would push them to selling excess properties.


Yeah, make property owners shoulder the brunt if they are using property to make an income.


This would also raise costs of rentals.


Well, sure. We don't -want- the default model of home ownership to be "one person takes out a mortgage, rents out the home to a second person, and pays for the mortgage with the proceeds". The solution is pretty simple. You increase residential property taxes and then reduce them proportionately for owner-occupied housing (or, if you feel like you need to increase the stock of housing, also exempt apartment complexes from the increase). The objective is to make the additional property tax a massive disincentive to hold the house for investment purposes. This would probably work better than trying to specifically discriminate against foreign buyers, people who held x number of properties, etc. It would cause quite a bit of short-term dislocation, though. People who are currently renting out properties are going to want to dump them to avoid getting hit by the taxes, but it'll be hard to find buyers for "a property for which you'll get punched in the gut by the tax man and which comes saddled with a renter who will not pay you enough to cover the loan". Of course you can always pay that renter to leave the property, given enough cash...


We already do heavily subsidize owner occupied properties, from not having to pay capital gains taxes on the increase, to being able to deduct interest on the mortgage. We should not push everyone to buy, and we shouldn't constantly incentivize it so much. Keeping people in apartments that have less of an interest in home ownership does wonders for keeping car commutes down, and reducing sprawl of all these houses eating up more forestland.


At the expense of houses suddenly becoming more affordable?


Most renters can't pull a mortgage, that's why they rent.


If the house was cheaper, the mortgage could be the same price as their rent. You're arguing one hypothetical number is larger than another hypothetical number. Lol


The standards for getting a mortgage are much more rigorous than renting. Many renters are groups of unrelated people that alone couldn't afford the mortgage. Do you own a home?


No, but I have the income and credit. It's honestly really hard justifying buying a house right now. I know I qualify for a FHA, but I'm seeing the market in a bubble, so I'm holding out.


Yeah, same situation. Houses that were worth $300k just 2ish years ago are well into the $500k range. Houses that are basically falling apart are getting bought with no inspection for well over the asking price. I’m gonna wait until the dust settles to see how this all shakes out.


You realize that’s generally not gonna happen in any desirably suburb or city, right?


I agree with your analysis. I would like to buy another home as a rental but I think the market is too hot right now to justify it. I think once interest rates go back up we will see the market cool off.


What are the odds the interest rate will go up substancially?


There are only two things I can think of that are "fair." 1. Standardize zoning laws while relaxing them. Rezone single family dwelling lots to be multi-dwelling lots. *Adding new supply can decrease the value proposition of holding a property as an investment.* 2. Charge a penalty if a residential property is kept vacant. Maybe they waive 31 or 61 days of vacancy penalty a year. *A disincentive of having an investment property sit vacant.* But I am not sure if this will solve anything. Building costs are influenced by many factors: * Price of land and permits * Price of materials * Price of labor That last one is a big deal because it isn't unheard of for construction workers to not be able to afford to live in expensive markets (which tend to be the ones with the most demand for housing), and that can lead to situations where there isn't the labor available to build. Edit: One other thing I would like to say is that municipal planners do need to keep an eye on which areas are seeing new development (housing, retail, office) and consider trying to reorganize public transit (so buses; *trains are extendable, not adjustable*) so that those new features are being serviced. If only one part of a city is getting significant new dense housing, then adding in reliable bus service is going to make living there more practical than forcing them to drive cars which create more traffic and make the new living location further away (in travel time).


The zoning thing is actually what Japan did. They took over zoning from all local governments. Making it much easier to build apartments and such. To the extent that homes actually depreciate in value instead of appreciate.


Thank you, I've been wondering about this.


> Charge a penalty if a residential property is kept vacant. RE professional here, this won't do anything but I know a lot of people think it matters so I'd gladly accept it in exchange for liberalizing land-use. As you stated, the problem is ~95% our incredibly restrictive, hyper-localized land-use rules, which is why places like Houston and Tokyo have kept rents affordable while SF/LA/NYC/London/etc have not. The reason the vacancy thing is irrelevant is that landlords and property owners are greedy, they like money, they want to get the thing rented out and collect checks. *Commercial* landlords genuinely will keep places vacant, because commercial leases tend to be much longer-term, so putting in a bad tenant or just a below-market lease can be very costly. Residential leases are one year so it is almost never worth it to hold out even for a month, unless you are confident you're gonna get ~10% higher rent if you wait a month, which is *extremely* rare. The vacancy thing is just something NIMBYs say to divert attention from the brutally obvious fact that NIMBYism is the villain in the story.


In fact, a vacancy tax would actually would have an adverse affect on the housing supply. It increases the risk of building new housing units because you know see increased losses if they aren’t rented for whatever reason (including a pandemic). I would even speculate that a vacancy tax would increase rents in the long run


The Feds could condition some funds to states, counties, and cities on changing zoning laws.


What about Vancouver BC’s policy of taxing at 25% property owners (though I forget if it’s non-primary residence, or people whose primary residence is abroad). What’s the consensus of the effectiveness of that policy?


Still early but it will barely make a dent. The foreign buyers thing is mostly mythical, there is very little evidence that they even own a big enough % of the market to make a big difference (biggest estimate I've ever seen is like ~12% in NYC), nor that they choose *not* to rent them out. It makes no sense--why turn down free money?--and is not in fact true since vacancy rates are perenially single-digit in all these NIMBY-restricted markets. https://www.sightline.org/2017/07/05/stop-blaming-foreign-home-buyers/


If say you are a Chinese or Russian billionaire and your money isn't really your money until it leaves the country you could I dunno, buy up a bunch of artwork and real estate for stupidly inflated prices.


There are some cases of actual foreign criminals buying property and art, it's just a fraction of a fraction of the market. It would be like banning pockets because criminals sometimes put drugs in them.


People underestimate how many domestically wealthy people there are.


Is that why women can't be trusted with pockets? Do they do all the drugs?


This is probably something best happened on a local government level to be honest, because there's no one size fits all, or even one size fits most, answer to this problem.


Or you can go the route that Japan went and they took over the zoning of all local governments. That's what's holding back the housing market in this nation. In Japan there's so much new residences being built, be it apartments or houses, that houses actually DEPRECIATE in value over time. And until things change over here so that houses are not seen as a money-making investment, we are always going to have this problem.


I don’t think that housing costs can be tackled at a local level. There is a shortage of homes in large part because of the strict zoning that requires all residences to be single family detached housing. No duplexes, triplexes, row houses, etc. This vastly lowers the supply of housing and results in cases like OP mentioned. Why should it be tackled at a larger level? Because if a single town changes their code then not a ton would happen (and maybe speculation in that specific town would go through the roof). But if done across a whole county, state or country then that’s a huge difference maker that is much more spread out.


I completely agree; the scope of the problem is so drastically different region to region that a national policy would seem likely to me to do more harm than good. At a local level it's all about supply and demand, anything that increases supply in areas like Manhattan or SF which are the worst off should be encouraged. Also regulating AirBNBs is definitely a solution at a local level in cities where it's fucking up the market.


The problem is it's always been a local government issue and they've generally failed miserably. Local elections are usually determined by local *homeowners* who usually have every incentive to limit more homebuilding.


Do you think it's unfair to have to pay a sort of premium on the house, paid to the government, at the time of purchase for each home after your first consecutively owned? It would make the same house cost much more for a person who already owns a home, and would then give the new homeowner the opportunity to actually afford it.


The problem with this is that it's cities and counties who set property taxes. That's where your city gets most of its money. The Federal government, and to a lesser extent the states, try to stay out of the property tax game, because it's stepping on the revenue source for a different government agency. The Federal government setting property tax law would be akin to your city enacting an income tax. It's just not done. So how does city A know what property you have in city B, and wouldn't city B be upset that *they* aren't the ones to get the extra property tax? What if city C decides it's not going to play along because they want more people to come and give them property tax money?


>The Federal government setting property tax law would be akin to your city enacting an income tax. It's just not done. NYC does this actually.


Really? TIL. That's kinda insane. Granted if NYC were a state, it would have the 13th highest population over Washington. Thanks for the info.


several cities do this-not sure why this is a "bad tax" and a property or sales tax is a "good tax", anyway


The Federal Government stays out of property taxes because property taxes are direct taxes that have strict state proportionality requirements that make them completely unfeasible.


I don't think its inherently unfair, I just think that sort of policy is best determined at a local level, where they can set the level of the premium based on conditions of the local housing market.


I’d also be nervous about the owners looking to sell and buy a new home and how that could affect contingencies. If timing doesn’t work well, they may be priced out of their new home in a different city/region. Nevertheless, I think that’s on the right path to one possible solution.


That's valid. However, I feel that a lot of local governments would just forego the policy all together, and we're right back here asking how it's possible to afford a house in that location. Taxes have such a terrible connotation in this country, you can't expect the average Joe to support the legislature when big business can persuade them to think they are going to get screwed, by use of the media. I'm not sure if the national government installing a variable rate could solve that problem, but I think if it could be instituted at the national level, it would be less likely that scummy businessmen can circumvent the law.


Then people in their localities need to demand better from their local leaders, don’t wait for Uncle Sam to fix everything


How do you explain shortages of rental housing if there's a surge in properties bought as investments?


Because zoning laws keep apartments from being built. If it was much easier to build apartments than there would be many more options for people looking to gain residence in an area and thus the average cost of buying or renting residence in an area would go down.


There’s a moratorium on evictions which is preventing people from vacating or being vacated from properties and keeping people moving. That’s not all of it but it’s part of it.


There’s a new secondary market of “home away from home” platforms that are managed by corporations which makes them different from Airbnb, like VRBO and Sonder, which are keeping rental units off the primary market also yeah investors can just sit on properties and not rent them out if they feel like it


>also yeah investors can just sit on properties and not rent them out if they feel like it You say that in an ominous/disapproving tone, and I get it. But it really doesn't seem like a big problem. Like sure, a Saudi prince might keep an apartment vacant on billionaire's row in NYC, but surely the vast majority of investors would like cash flow and to pay down their mortgage. Are there stats on investors intentionally keeping properties vacant? If so, why would they?


The problem with housing as pure and uninhabited investments is the same problem as other investments in basic living necessities: the demand side is almost always guaranteed. People always need a place to live. Land is finite, and I think it makes sense to implement financial penalities on vacant units.


Right, but explain to me the actual problem. What profit-seeking investor would let properties go vacant *en masse* as an investment strategy? To the point that *they* are the bottleneck on supply? Surely the answer is just to build more housing


Well, basic microeconomic models taught in intro level classes predict that in markets where the seller has a large portion of the supply, it can be *more profitable* to restrict supply and inflate prices than it is to sell 100% of your inventory. Obviously these models are very simplistic and while the housing market has more nuance, locations are finite. There's never an unlimited ability to increase supply in a specific location, and that's one reason. The second reason is that value investors exist and their entire strategy is to buy with the expectation that prices will be higher when they want to sell. Sometimes the need is simply to be able to park and hold capital in assets that maintain value. That doesn't require expecting a revenue stream.


People who can't afford to buy expensive houses are filling up rentals?


So we have a housing shortage...


No, there is plenty of housing. Much of it is artificially removed from the primary market, while others are kept empty to act more as a liquid asset, like a stock that gains value and then is sold.


There are lots of things, but i think this.misses the point. Its trying to address a supply problem using demand tools. Its just not going to be very effective. We need to increase the supply of desirable housing. Make more cities better. Make it more attractive for business to bring work to mid sized communities. Create incentives or directives for developers ti build 'missing middle' type housing.


> Create incentives or directives for developers ti build 'missing middle' type housing. Definitely agree but you have it backwards here: Developers already want to do this but [it is illegal to build this kind of housing in 95% of North America](https://www.youtube.com/watch?v=CCOdQsZa15o)


Is a surge in investment properties making it harder to purchase a home? What evidence is there of that when rentals are also at capacity. Wherever both of those things are happening, that more strongly suggests just a general housing shortage, and disincenting investors could be expected to reduce new home construction. According to Freddie Mac there is a national shortage, but it is due to a strong economy creating more buyers. At very minimum in places where there is plenty of land to build on or where municipalities allow for the development of high density housing, the incentive to develop to rent or sell should make any shortage like this a shorter term problem. It is my impression that the most egregious cases of sustained high prices and rental shortages are usually the latter - cities refusing to let people build denser and up in order to "preserve the character" of SFH neighborhoods.


If people who live in an area can't afford the houses in the area they turn to renting. If renting demand increases then rents go up. If rents go up more investors get interested in investing on rental properties and higher home values result for those properties. Higher home values makes it harder for locals to buy homes in the area so it increases rental demand. Self feeding cycle.


We need to make it easier and cheaper for housing to be built. We have a massive shortage of homes and supply can help. Jenny Schueltz hits on this at [Brookings](https://www.brookings.edu/research/whos-to-blame-for-high-housing-costs-its-more-complicated-than-you-think/). Reducing costs can be done with ideas like removing parking minimums like Minneapolis did. They were able to get [20% lower](https://www.planning.org/planning/2018/oct/peopleoverparking/) rent in some areas.


Subsidize first-time home buyers and tax people for owning multiple homes. There should probably be a stipulation for people who plan to rent them out, but I’m not sure.


This happens, inconsistently from State to State, now in the form of various homestead exemptions for property taxes that result in rental properties being taxed at a higher rate, sometimes a great deal higher.


> Subsidize NO Dude cmon, this just increases demand. When demand is already crazy. How the hell do you think this helps the current lack of supply?


People renting out their extra homes doesn't help, it's a big part of the problem. Far too many people have come to the idea that they should just own multiple properties and gouge people on rent. This lets the banking industry write the volume of loans that they want without having to do anything meaningful. Even now, mortgage rates are at historic lows, but it's more difficult than it's been for a long time for first time home buyers to actually qualify for a loan, so the only people that can capitalize on those low interest rates are people that already own at least one house.


Generally you need at least 20% down to get a loan for another home if it's not your primary residence. That's what keeps people from doing it. First time buyers can do it with less than 5% down in most cases.


Then you get gouged through the nose on mortgage insurance.


I pay an extra $70 a month for PMI after taking advantage of my states first time home buyer program and put less than 5% of my own money down. Yeah I'm just losing that money, but I wouldn't characterize it as getting gouged through the nose. People should research programs they qualify for rather than just taking this advice at face value.


Isn’t it a good thing if there are lots of people investing in properties? These folks remodel houses that otherwise wouldn’t be used, accept all the risk that comes with buying a house, and compete against one another for tenants and therefore keep prices where they need to be. The more people there are investing in properties, the better it is for the average person who is happy to rent.


No, you are having a consolidation of assets in the economy. That's never a good thing. Then it becomes the only people who can continue to buy houses are the ones who own a house. Why? Because they have and are making more money.


That seems like an oversimplification. Those owners just increase the cost of rent to recoup whatever they spend on those renovations. And to make whatever money they feel like they should. And as long as those people are able to keep buying houses, the banking industry never feels compelled to make it easier for anyone to own a home, even though it's well known that home ownership creates significant financial stability.


When they don't renovate, however, there are less houses on the market, and market rent rises. Owners can only charge what someone is willing to pay, and the more options there are available, the more power the renter has to shop for whichever owner is willing to give the best price. I do not know as much about the banking industry. Anecdotally, my girlfriend, who is a teacher, had no difficulty getting approved for a loan. I agree that home ownership is related to financial stability, but does it create financial stability? Or is it more so that people who are already financially stable are more likely to buy houses?


What makes you think a landlord can just, “make whatever money they think they should”? The market dictates that, and it doesn’t always ensure you’ll make any money at all. But more importantly, why are you against someone creating value by providing housing? That literally how most people make money whether they are selling food, computers, or dildos.


True but housing is different. It's like not computers or dildos or even food. It's the single biggest purchase you will make in your life. Viewing it through the lens of simple supply/demand is poor because even our existing economy has shown that a free market enables wealth inequality. Typically landlords with have rent that will be more than the mortgage. So then you have a vicious cycle of landlords or real estate people buying up more and more property. That's a problem.


The problem isn't investors the problem is bad zoning which artificially limits supply. Additionally rural areas are declining in population as people move to the cities which means cities need more housing to accommodate the influx of rurals plus the US is still receiving more immigrants. 48/50 states have grown in population since the last census and we need housing to accommodate them. Populations also just move over time. The manufacturing towns and the mining towns used to support a lot more people than they do today and so naturally we need to just expect population migrations from economically hard hit zones to economically productive zones. The best way to bring down housing prices is to revamp zoning to allow for denser housing developments and abolish single family zoning requirements. By increasing supply you bring down prices. Additionally investing in things like high speed rail would also allow people a broader range of where they can live while still commuting to work. Rent control policies also can disincentivize new construction projects and thus artificially reduce supply which, ironically, then results in higher rent prices. Removing parking requirements will also help make things denser and thus allow for more housing to be built as well as making public transit more economically viable.


How you address it isn't from a government level from through lending institutions. You make it cheaper/easier for primary home buyers and more expensive for investor/2nd home buyers. Easy as that. - Interest rates for home buyers reduced, Investors are increased making it more costly from an investment standpoint, therefor less attractive - Higher fees: more upfront costs again make it less attractive of an investment at market value. If it's distressed or needs too kuch work those fees could be washed away with the purchase price being reduced. - Better access to credit for home owners. Easier to buy, easier to get into ownership -GET RID OF PMI! It's honestly bullshit. 1st time buying a house and have little money? let's add $200/mo to your mortgage. Buying an investment with 25% down? No PMI for you. When shit hits the fan who will default? the guy who will be homeless without his home or the guy that his investment isn't paying off the way he thought? Thats my 2 cents. Oh, and allow for denser housing! allow for duplexes to be built and purchased by owner occupied buyers. unreal how much wealth that will generate for future owners.


You can require that residential purchases be exclusively for residents of the US, no corporations, foreign nationals, or other foreign entities. ​ Violation would mean immediate seizure and resale.


Just to be clear, you can be a resident of the US and a foreign national at the same time. I am in such a position and I’m looking to buy property. My only other criticism is that if you are in a position to buy a second property as an investment, it’s smart to place the ownership under an LLC so that if anything goes wrong, or if you are sued, you don’t lose your primary residence.


>You can require that residential purchases be exclusively for residents of the US, no corporations, foreign nationals, or other foreign entities. So... Does this mean we no longer will permit any rental property? Because in general you don't want to personally run a business without corporation, it's a protection from being sued into oblivion.


No, permanent residents can rent out their property all they want.


This won’t be a popular take, but please raise the interest rates already. Money is too easy to get right now. Investors and fringe buyers all want in because the money is almost free. Raise the rates taking the bottom buyers out of the market and help combat inflation at the same time. We have a supply and demand problem. We need less buyers and more sellers. We have more buyers than before, not less properties than pervious years like many think. Also start the foreclosures already. We have over 2.3 million mortgages in the US that are more than 90 days late that haven’t even started the process. Most won’t actually be foreclosed, as they will sell because they still have lots of equity. This isn’t like 09. The longer we kick the can down the road the bigger the problems we create for the housing economy, and the higher the prices go.


Lots of people saying we need to make it more difficult to invest. Who do you think builds all these houses that people buy? Investors building out apartment complexes and single family homes raises overall supply. If the only available housing were houses that were built by average consumers, many more people would be homeless and the housing market would be much worse. We need policy that favors investors and encourages the development of real estate if we want housing to be affordable.


You are completely missing the point. Literally no one is arguing against developers building new homes. The argument is against people or organized groups buying existing single family homes for the express purpose of speculation or long term rental income.


I've seen several articles, but they seem to take the problem as a given. How can we be sure what is causing the issue?


Zoning (artificially limiting the supply of housing in urban areas) and over-regulation in the construction industry (it takes an ungodly amount of time and energy to get approved for large-scale development which adds insane costs to new construction).


Supply and demand. In areas people want to live people also want to invest. When there is a limited supply of housing then the investors have more room to profit so they can make money while paying more for those properties. Investors come from everywhere while owners come mostly from the local area, so the locals tend to lose out on the limited supply.


Investors tend to take advantage of the market when supply is high, driving down prices. You’d have to be out of your mind to buy a property for investment today.


They are currently buying out of speculation, expecting the rapid appreciation to continue.


Literally Georgism but that's been memory-holed because it's not a sleek and "radical" compared to Marxism or other fanatic ideologies.


Nothing at the Fed Lvl. We talk about the housing market as a whole but it is made up of thousands of tiny markets. Compare the Bay Area to Houston. The Bay Area has home prices skyrocketing due to policy decisions at the local and state level. Permits take years to get, owners are forbidden from tearing down old homes rio build new and zoning restrictions limit options. Oh, don't forget the large swaths of green belts set aside from developing. These items, and many more, artificially increase the costs of homes. On the other hand, houston has minimal zoning restrictions and home are readily available and affordable. Prices tend to rise at the same rate as inflation which matches the finding of a Harvard study on property values after the 2008 crash. It's up too local and state governments to fix the housing issues in each locality. A Fed one size fits all approach will lead to other unintended problems.


Houston has zoning restrictions in the form of extensive HOAs, especially in the last few years with builder owned HOAs. Basically, they are building properties and "selling" them under an HOA that they control and take back the house for noncompliance. Also, Houston can keep expanding in like 270 degrees. San Francisco does not have such luxury.


San Francisco does not have that luxury, and yet most of the bay area is covered in these single story ranch houses, and people are trying to jump through hoops to try other solutions, and ignore that it's clearly a density problem.