Philip Hakim

Investor

[Elon Musk @elonmusk]

Perhaps a restoration of dignity is in order

[Michelle Tandler @michelletandler]

The more I dig into this NYC rent control situation, the more alarmed I become.

This is what I'm seeing:

+ 2.4 million rent-controlled apartments in a city with a massive housing shortage and 1.4% vacancy rate.

+ A huge % of these tenants are wealthy, white boomers using the units as pieds-a-terres while they spend their weekends and summers elsewhere.

+ Meanwhile, the government is using rent control to purposely drive down the value of multifamily housing, so that it can be purchased in a fire sale by the government.

+ The small-time landlords with big rent rolls of "stabilized" units are going under. Their portfolios end up in the arms of PE and foreign money (how are Progressives okay with this?) The banks will get hit by this too.

+ Because there is such a reduction in supply (~40% of units are price-controlled), leftover supply is ~33% more expensive

+ Because NYC gov is not friendly towards landlords, there is a lack of development --> even less supply

+ Rich and homeowners overwhelmingly support these laws b/c it drives up the value of their condos & co-ops (less supply --> higher prices for condos)

+ Big PE companies like these policies b/c they can buy buildings in fire sales and wait for rent control reform (5-10 years out)

+ Meanwhile - ~2.4 million units are rotting and won't be brought up to code as tenants leave b/c the numbers don't pencil --> 50k "ghost apartments" padlocked off market now, maybe 100k soon

+ Gen Z and the working class continue to vote for these policies, hoping they will be among the lucky few to win the lottery ticket of a rent-controlled apartment

+ Meanwhile, boomers hang onto their units and pass them to their children, family members, etc.

--> NYC's housing stock is rotting slowly, going offline, and becoming more expensive

Isn't this what the Constitution is for? To protect property owners and citizens from the tyranny of the majority?

This is clearly a taking. It's clearly buying votes.

I'm floored this is happening, and nobody is talking about it because it's "politically incorrect" to critique rent control.

**Rent control is the reason housing in NYC is so expensive, and it's the reason there is a shortage.**

Boomers really pulled a fast one on this. Well done, Boomers.

[Barrett Linburg @DallasAptGP]

Here's something fascinating happening in the apartment market right now.

The cheapest, oldest apartments (Class C) are getting crushed right now.

But ONLY in cities that just delivered tons of new apartments.

Let me show you the numbers:

Denver: Class C rents down 13.9%
Naples: Class C rents down 13.5%
Austin: Class C rents down 13.3%
Phoenix: Class C rents down 10.5%
San Antonio: Class C rents down 7.2%
Dallas: Class C rents down 6.5%

What do all these cities have in common?

They just absorbed a massive wave of new apartments.
But here's the twist...

In cities that DIDN'T get a big supply wave?
Class C rents are actually RISING.

20 cities saw Class C rents go UP more than 3%.

19 of those 20 cities had supply BELOW the national average.

So what's going on?

It's basically musical chairs.

When a brand new luxury apartment opens up, where do those renters come from?

They don't appear out of thin air.

They move from slightly older apartments.

Those apartments now have vacancies. So they drop their rents to compete.

That pulls in renters from even older apartments.

And down the chain it goes.

Eventually it hits the oldest, cheapest apartments at the bottom.

And here's why they get hit the hardest:

People living in Class C apartments are already spending a huge chunk of their paycheck on rent.

To fill empty units, landlords have to cut prices A LOT.

Sometimes enough to attract people who couldn't afford market-rate apartments before.

It's like a waterfall effect.

The water (new supply) at the top pushes everything down.

But here's the important part:
This proves that building new apartments - even "luxury" ones - reduces rents all the way down the spectrum.

If it was just an affordability crisis, you'd see Class C rents falling everywhere.

In high-supply cities AND low-supply cities.

But we're not seeing that.

We're seeing a perfect split:

Lots of new apartments = falling Class C rents
Few new apartments = rising Class C rents

New supply at the top creates relief at the bottom.

Also: wages have been growing faster than rents for 3 straight years.

More people can afford apartments today than before.

The bottom line?
This is what happens when you actually build housing.

Supply works.

(Chart and analysis from Jay Parsons - one of the sharpest real estate economists out there)

[Philip Hakim @philiphakim]

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@ttmygh @British_Airways Computer says no…

[Noah Smith 🐇🇺🇸🇺🇦🇹🇼 @Noahpinion]

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