Landlords are definitely not the reason that new construction is so much more expensive. They want the lowest possible construction cost, not the highest.
Corporate landlords are absolutely driving the prices up, combined with 3 decades of low interest and investors treating real estate like a speculative market. The material cost of housing is miniscule. North American homes are made out of paper and plywood.
They’re not construction prices lol. Construction costs are like 5% of the total value of a home. The other 95% of the value of a home is due to houses being treated as assets in a speculative market.
Landlords want the prices to increase because it increases the value of their asset, which allows them to leverage it for greater loans to buy more assets, etc etc to eventually sell at hilariously inflated prices for massive ROIs. Or alternatively to charge massively inflated rental costs pegged to the value of the home. Higher value, higher rent, more $$$ in the landlord’s pocket.
So far costs of homes have only gone up since the 70’s. A house worth 200k 20 years ago is now worth 1.2 Mil. It is an excellent rate of return. The market shows no signs of slowing down, forget about getting cheaper. If you have the capital to invest, it’s basically free money. Or at least, it has been for the past 5 decades. I don’t see why it would stop now. Maybe climate disasters or war, we’ll see.
I wasn’t exaggerating. Go to any new development site. American homes are literally made of plywood and paper. Materials used for houses now are largely the same as 20 years ago. If the same house that cost 200k 20 years ago now costs 1 Mil, the cost of materials did not increase by 400%.
For background, I work in the construction industry. You’re right that most of the cost increase isn’t because of the bill of materials, but that has never been the biggest cost in homebuilding (or at least not for the last 100 years). It used to be perfectly doable to build a multi-unit for $150k per door, and now it’s difficult to keep it under $300k (note that this is in a midsize city, those costs are obviously much higher in a larger one due to far higher cost of land). By far the bulk of that increase is labour and subcontractor costs. I leave it to you to do the math on the rent required to turn a profit on a $300k apartment.
Have you considered that the reason labor prices have increased is because the cost of living has increased so much, primarily driven by housing prices?
Eh… Contractors are charging what they are charging now because they can, not necessarily because materials and labor costs justify it. I’ve been slowly rehabbing my basement this year, and I’m doing most of the work myself because the quotes I’ve been getting to have somebody do it for me are so steep that about half the time they would cover me setting up a whole competing company from scratch in addition to material costs. That’s not an exaggeration. For what the plumber wanted for a repipe I could buy all the tools I need, attend training, get certification and a license, set up an LLC, and go into business for myself, and still have enough money left over to cover my costs on the project.
Not that I think all that profit is going into the pockets of the tradespeople doing the work, well compensated as they are, but at the end of the day it’s down to high demand and a shortage of skilled labor due to decades of us devaluing the trades as a career. If I’m in the top third of the income distribution and the only reason I can afford to maintain my very modest house is because I have the skillset to do it by myself, something’s gone haywire.
Heres the thing. Landlords buy up housing, this shrinks the market, this increases housing prices, this creates a demand for new homes, this increases demand for supplies and the price of labor for construction.
Landlords obviously don’t want higher construction costs, but they do want more properties. Higher construction cost is a consequence of that, not the goal.
Landlords are definitely not the reason that new construction is so much more expensive. They want the lowest possible construction cost, not the highest.
Corporate landlords are absolutely driving the prices up, combined with 3 decades of low interest and investors treating real estate like a speculative market. The material cost of housing is miniscule. North American homes are made out of paper and plywood.
If that’s the case, can you explain to the rest of us why landlords want high construction prices?
They’re not construction prices lol. Construction costs are like 5% of the total value of a home. The other 95% of the value of a home is due to houses being treated as assets in a speculative market.
Landlords want the prices to increase because it increases the value of their asset, which allows them to leverage it for greater loans to buy more assets, etc etc to eventually sell at hilariously inflated prices for massive ROIs. Or alternatively to charge massively inflated rental costs pegged to the value of the home. Higher value, higher rent, more $$$ in the landlord’s pocket.
So far costs of homes have only gone up since the 70’s. A house worth 200k 20 years ago is now worth 1.2 Mil. It is an excellent rate of return. The market shows no signs of slowing down, forget about getting cheaper. If you have the capital to invest, it’s basically free money. Or at least, it has been for the past 5 decades. I don’t see why it would stop now. Maybe climate disasters or war, we’ll see.
Maybe in Manhattan, but otherwise this is an absolutely pants-on-head ridiculous claim.
I wasn’t exaggerating. Go to any new development site. American homes are literally made of plywood and paper. Materials used for houses now are largely the same as 20 years ago. If the same house that cost 200k 20 years ago now costs 1 Mil, the cost of materials did not increase by 400%.
For background, I work in the construction industry. You’re right that most of the cost increase isn’t because of the bill of materials, but that has never been the biggest cost in homebuilding (or at least not for the last 100 years). It used to be perfectly doable to build a multi-unit for $150k per door, and now it’s difficult to keep it under $300k (note that this is in a midsize city, those costs are obviously much higher in a larger one due to far higher cost of land). By far the bulk of that increase is labour and subcontractor costs. I leave it to you to do the math on the rent required to turn a profit on a $300k apartment.
Have you considered that the reason labor prices have increased is because the cost of living has increased so much, primarily driven by housing prices?
Eh… Contractors are charging what they are charging now because they can, not necessarily because materials and labor costs justify it. I’ve been slowly rehabbing my basement this year, and I’m doing most of the work myself because the quotes I’ve been getting to have somebody do it for me are so steep that about half the time they would cover me setting up a whole competing company from scratch in addition to material costs. That’s not an exaggeration. For what the plumber wanted for a repipe I could buy all the tools I need, attend training, get certification and a license, set up an LLC, and go into business for myself, and still have enough money left over to cover my costs on the project.
Not that I think all that profit is going into the pockets of the tradespeople doing the work, well compensated as they are, but at the end of the day it’s down to high demand and a shortage of skilled labor due to decades of us devaluing the trades as a career. If I’m in the top third of the income distribution and the only reason I can afford to maintain my very modest house is because I have the skillset to do it by myself, something’s gone haywire.
Heres the thing. Landlords buy up housing, this shrinks the market, this increases housing prices, this creates a demand for new homes, this increases demand for supplies and the price of labor for construction.
Landlords obviously don’t want higher construction costs, but they do want more properties. Higher construction cost is a consequence of that, not the goal.