> Now they can't own them. So they sell them. Now you have a LOT of residential properties on the market, and a lot less entities that are legally allowed to purchase them than before. Of course prices will come down.
It's an interesting thought experiment, I'm not sure what the outcome would be.
In the real world we also have a lot of people who want to rent, so someone else needs to own those rental properties. But for the sake of a thought experiment, let's ignore that part.
There's a town with 1000 houses and 1000 families. 500 families own their house, the other 500 are owned by MegaCorp who rents them to the remaining 500 families (who'd prefer to buy but can't).
If MegaCorp is ordered to sell all their 500 houses overnight, I agree prices will drop. Because not every one of those 500 renting families will be ready to buy overnight, it means the ones who do can negotiate down on price. But that's not how divestitures are usually done, precisely due to this shock to the market.
If MegaCorp is ordered to sell one house per month until all are sold, I suspect prices go up a bit. Because even though the buyers know every house will eventually be sold, it's going to take 500 months so many would rather get in earlier so they'll be bidding against each other, rising prices in the early years of this program.
My main point is that "a lot less entities that are legally allowed to purchase them" is not that important. Because MegaCorp is a pass-through entity, they don't occupy a house, they just want the income stream from it. Ultimately it is still occupied by a family, whether by direct purchase or via renting. So removing MegaCorp from the picture does not reduce demand, there's still 1000 houses and a 1000 families. (It does remove their profiteering from renting, so that part is still a win.)
Of course, reality is more complex since there are renters who want to rent as well as families moving both into and away from this town, so modeling this precisely is too much work for a HN comment.
It's an interesting thought experiment, I'm not sure what the outcome would be.
In the real world we also have a lot of people who want to rent, so someone else needs to own those rental properties. But for the sake of a thought experiment, let's ignore that part.
There's a town with 1000 houses and 1000 families. 500 families own their house, the other 500 are owned by MegaCorp who rents them to the remaining 500 families (who'd prefer to buy but can't).
If MegaCorp is ordered to sell all their 500 houses overnight, I agree prices will drop. Because not every one of those 500 renting families will be ready to buy overnight, it means the ones who do can negotiate down on price. But that's not how divestitures are usually done, precisely due to this shock to the market.
If MegaCorp is ordered to sell one house per month until all are sold, I suspect prices go up a bit. Because even though the buyers know every house will eventually be sold, it's going to take 500 months so many would rather get in earlier so they'll be bidding against each other, rising prices in the early years of this program.
My main point is that "a lot less entities that are legally allowed to purchase them" is not that important. Because MegaCorp is a pass-through entity, they don't occupy a house, they just want the income stream from it. Ultimately it is still occupied by a family, whether by direct purchase or via renting. So removing MegaCorp from the picture does not reduce demand, there's still 1000 houses and a 1000 families. (It does remove their profiteering from renting, so that part is still a win.)
Of course, reality is more complex since there are renters who want to rent as well as families moving both into and away from this town, so modeling this precisely is too much work for a HN comment.