Sandy

Harvard economics professor Ed Glaeser: VP Harris housing plan is "too small and too poorly targeted." To solve the housing crisis, Dr. Glaeser says we must borrow from The National Minimum Drinking Age Act of 1984. What does booze have to do with housing? Glad you asked: -- Like housing, drinking ages were highly local issue. The federal government couldn't change it directly, but they could incentivize states to change it. -- The law "demanded states raise the minimum age to buy or publicly possess alcohol to 21 — or face a reduction in federal highway funds. The threat of losing such funds is a big stick," Dr. Glaeser writes. Why should housing be a federal issue? -- "And while the merits of any battle over a particular project are debatable, the overall cost to our country is beyond doubt. We are just not building enough homes, especially in the coastal markets where there is the most demand. Per capita, there was less than half as much permitting in 2023 as in 2003 or 1973." -- "Residents have made it particularly difficult to build in the most productive parts of America, such as Silicon Valley, which means that America’s G.D.P. is much lower than it would be if people could move to where the jobs pay the most. Areas with the most upward mobility limit building the most, which makes America more permanently unequal." How could such a proposal be structured? -- Target problematic offenders with high housing costs AND low construction. "The legislation could establish minimum construction levels over three years for all counties with median housing values above $500,000. States with high-price, low-construction counties would have to figure out how to overrule local zoning codes themselves or lose federal transportation funding." In closing: "America’s housing crisis is a deep, self-inflicted wound. Ms. Harris is right to want to do something, but it is hard for the federal government to engineer change at the hyperlocal level. Tying federal transportation spending to building activity may be the best way to induce change."

KKR put out a paper last month with a strong pitch for multifamily investing, concluding: "The once-in-a-decade opportunity for real estate equity investors is complex, but also exciting." Watch for moves... Appears KKR is thinking like Blackstone signaled before announcing acquisition of AIR. Note that KKR recently announced acquisition of a student housing portfolio from (ironically) Blackstone, but this KKR report appears directed at conventional apartments. Some notables from report: - Report notes current challenges of maturing debt and peaking supply are "cyclical rather than secular." "The secular trend is toward more demand, not less." - "Performance has traditionally remained stable through economic cycles." "As owners come under more pressure to sell assets, we see an exciting opportunity coming to buy high-quality properties below replacement cost while achieving attractive long-term yields." - "A temporary period of oversupply may provide more attractive entry points." - "Owners who can carry their investments through the next two years are poised to benefit from sustained structural demand and a pronounced shortage of new supply starting in 2026." - "Scaled players will see opportunities first and have the freedom to deploy without much leverage, an essential component to success in this environment." Link to report below...

One of my clients shared this with me. Sticker shock. Not surprised also given how scarce equity capital is for new apartment development. The good news - Should cause construction costs and also new inventory to decline meaningfully! multifamilydive.com/news/mul…