For Profit or For Purpose? Examining the Current Real Estate Issue

In 2023, data for the United States show 22.6 million households spent more than 30 percent of their income on rent and utilities, which is a 2.2 million increase since 2019. More than half, or 12.1 million, of those spent more than 50 percent of their income on housing costs (Pazzanese, C., 2025). The housing crisis, more than ever, is one of the most pressing issues the economy is facing. With speculative real estate practices and property investment, soaring property prices are making it difficult for first-time homebuyers to afford a house and exacerbating rental market difficulties. The pursuit of profit from landlords, shareholders, and investors has driven millions into homelessness, with a record high 653,000 homeless recorded in a single night (Soucy, Janes and Hall, 2024). 

On the other side of the spectrum, charity and public management, despite being able to promote equity and being more long-term thinking, face the challenge of scale and dynamism. This essay argues that a balanced approach blending profit with public good, such as social real estate enterprises and ethical REITs, may offer a better path forward.  

To fully understand the topic, one must understand what the housing crisis is and the factors surrounding it. The current housing crisis can be explained through 3 main factors: supply shortages, speculative demand, and affordability decline.  

1. Supply Shortages 

One major reason for the current international housing crisis is the lack of housing supply to meet the rapidly rising demand. The urban population is growing at a significant rate due to migration and natural increase; however, there is just not enough housing for people. This is because zoning laws, used to control population density, restrict the construction of apartment blocks in areas where land is scarce. In addition, complex approval procedures, lengthy planning processes, and local objections (often referred to as NIMBYism) further slowdown or stop the housing process being approved. This supply shortage puts lots of upward pressure on rent, which decreases the ability to afford for many. 

2. Speculative demand 

Speculative demand means investors and firms acquiring properties not for personal use but rather for profit, by either resale or for rental purposes. Wealthy foreign investors, Real Estate Investment Trust (REITs) firms, and private institutions treat real estate as a cash-flow machine and often are the ones who raise rent aggressively. As a result, homes become less affordable for everyday buyers, with the market shifting away from serving basic shelter needs toward maximizing profit for investors. 

3. Affordability decline 

Home prices in the United States have surged by 47.1% since the start of 2020 (Henney, M., 2024), growing quicker than wages, which rose by only 4.3% during the same period (Statista, 2024). Younger and lower-income groups now find it more difficult to afford a home as a result of this discrepancy. Rising mortgage interest rates have also pushed monthly payments to unaffordable levels, even for middle-income earners. Additionally, increasing inflation has also left households with less disposable income to allocate to housing. Furthermore, the market has seen a lack of affordable housing options, as most new developments are targeted at higher-income buyers due to greater profit. This causes many to stay in the rental market, and as a result, this creates a cycle of unaffordability. Together, these economic pressures have placed enormous strain on housing affordability across much of the world. 

All together, these factors reveal a concerning issue with housing not being treated as a human need but rather as a money-making asset. This shifts the real estate market from one centered around shelter to one that is driven by return, and to understand it, it is necessary to examine the economic ideology that has shaped the modern market. 

The pursuit of profit has driven remarkable economic growth however history has shown it can generate significant social problems. Since the popularisation of capitalism through Adam Smith’s The Wealth of Nations, scholars have debated the balance between private gains and the public good in the economy. Smith believed that when people chase after their own profits, they unintentionally benefit society through what he called the “invisible hand” of the market (Smith, 1776). Capitalism encourages efficiency and innovation, as there is a monetary incentive for it. In contrast, left-wing economies such as those in the communist bloc prioritised equal distribution of wealth between people, which led to inefficiency and low output due to a lack of motivation.  

Investors with the highest bid will undoubtedly win. Alonso’s Bid‑Rent model (Figure 1) (Corner, 2022) predicts that properties with the greatest monetary return, such as luxury retail and premium offices, will be closest to the CBD, while lower‑value housing is pushed outward (Alonso, 1964). Developers, therefore, target run‑down inner‑city sites for high‑margin regeneration or opt for dense, upscale typologies, a pattern that amplifies the supply gap in affordable neighbourhoods. 

Figure 1. 

The hope of profit has gotten in the way of tackling the property issue. The first profit motive has led to much speculative trading of properties. This speculative flipping has grown particularly intense in the growing urban areas, where investors purchase homes, renovate, and sell very quickly (often within 6 months). Such turnover does little to enhance long-term housing stock but has a major effect on local pricing, pushing it further out of reach for regular buyers. Speculative hoarding has seen skyrocketing housing prices, so much so that it has exceeded average income growth. 

Beyond speculative buying, institutional landlords such as private equity firms or REITs have also become a major buyer in the housing market. With the key goal of delivering maximum returns to investors, these institutions have been one of the main reasons for the rent hike. Many of these firms employ algorithmic rent-setting tools that optimise pricing based on local demand, supply scarcity, and tenant turnover rates, rather than affordability or social outcomes. In cities where institutional ownership has grown rapidly, such as Atlanta or Berlin, studies have shown that rent increases significantly outpace wage growth, and eviction rates rise with a report saying some private equity firms had extremely aggressive eviction records, with one filing notices against 30 percent of their tenants in one year (Evicted in Atlanta, 2018). This turns housing into a financial product, an asset to be traded, further alienating it from its sole purpose as a human necessity. As private equity and private institutions buy more housing stock, communities lose the ability to afford these houses. 

Lastly, in order to create an artificial scarcity and raise rental prices, institutional investors may also engage in strategic vacancies, which involves purposefully leaving units unoccupied. Some investors, particularly in high-demand cities like San Francisco or New York, believe that growing market scarcity will enable them to charge more later rather than accepting lower but stable rents. Algorithmic pricing systems, which optimize revenue by suggesting rent increases based on local demand patterns, serve as the basis for this. Although this strategy allows investors to be profitable, it effectively removes livable units from the market, further worsening the housing crisis. This again distorts the function of housing and prioritizes investors’ return over occupancy, deepening the housing crisis for those most in need. 

In contrast to the profit-driven market, such as San Francisco or New York, the Vienna government provides municipal housing for its citizens. It is reported that at least 75-80% of Vienna's population is eligible for social housing (Lennartz et al., 2012). This system isn’t just for the very poor; it takes a universal approach that fosters social cohesion in communities with mixed incomes. Because of this, about 60% of the population lives in housing that’s either owned or subsidized by the city, striking a balance between affordability and quality urban living. The result of the Vienna Model was one of the lowest rent burdens in Europe (around 21% of income on average), and Vienna consistently ranks as one of the world’s most livable cities (Omotosho et al., 2020). Through this model, housing is treated as a universal right, not an income-producing asset, Vienna has resisted the trend of unaffordability and social stratification, especially when compared to a city like New York, so rent only plays around a quarter of a Viennese’s income (see Figure 2) (Lorenz, 2023). 

 

Figure 2. 

Similarly, Singapore’s Housing and Development Board (HDB) plays a crucial role in providing public housing for more than 80% of its residents. Thanks to robust government backing, the focus is on keeping homes affordable, ensuring quality, and fostering a sense of community design. This approach cleverly merges state-controlled landownership with efficient service delivery, which helps to minimize speculative pressures in the housing market. 

This, however, does not mean that all profit-seeking behaviours in the housing market are necessarily negative. Social REITs, ethical developers, and community land trusts can balance financial returns with social and ecological value (Moghayedi et al., 2021). A great example would be the UK’s Resonance Affordable Housing Fund, which is not a charity as highlighted in their investment proposition; it has a 3% minimum expected rate of return, and does provide income to investors, but at the same time delivers affordable housing. A similar concept is also seen in social REITs, for example, the US’s Community Development Trust (CDT). This trust focuses on creating affordable housing within the community. Although CDT isn't publicly traded like REITs, it operates on a similar model: gathering equity and debt to buy or develop properties while providing consistent returns to its investors. Lendlease, a real estate company based in Australia and with a global reach, it has spearheaded significant urban regeneration projects that blend affordable housing, public spaces, sustainability, and long-term community growth. Take their Elephant Park project in London, for instance; it transforms a struggling social housing estate into a vibrant area with mixed-income homes, job opportunities, and a brand-new public park (Scheba et al., 2021). Despite being a listed entity, Lendlease chooses to emphasize long-term value creation, environmental performance, and community welfare besides shareholder returns. These instances show that profit and purpose can coexist, especially when incentive structures are framed around long-term impact over short-term gain. 

Governments can also harness profit motives using fiscal tools, incentives, and planning strategies to better align development with the needs of the public. One effective approach is the Empty Home Tax, which aims to deter speculative investors by imposing a tax on properties that sit vacant for too long. Vancouver, for example,  in Canada, imposed a form of tax known as the Empty Home Tax in 2017 to tackle their housing crisis, and after that, Vancouver saw a 58% decrease in vacant property from when the tax was introduced to 2023 (Vancouver, n.d.). Most notably, there was an increase of 8,824 rental units from existing condominiums that were converted to being offered as long-term rental units in 2019 (See Figure 3) (Brealestate, 2020). To tackle this problem, the government could also introduce the use of Land Value Tax (LVT), which effectively discourages speculation and encourages development by taxing the value of land rather than the buildings on it. Looking at Singapore, there is evidence of a similar system being used to effectively mitigate the problem with privatized rent extraction, in the sense that the ownership of land can be separated from the ownership of the home (Ryan‐Collins & Murray, 2021). 

 

Figure 3. 

In conclusion, in addition to supply and demand, housing is seen as a financial asset rather than a fundamental human right that has also greatly contributed to the housing crisis. Profit-driven models are not always bad, even though they have increased evictions, speculation, and unaffordability. As seen with examples of social REITs and ethical developers, profit and social outcomes can coexist. Governments can further implement public solutions like Vienna's housing model and policy instruments like the Empty Home Tax or Land Value Tax to tackle the crisis. The way forward would be to combine the two, rather than have to decide between profit and the public interest: a housing system where financial sustainability supports long-term affordability, community stability, and equitable access for all.