July 2024 Residential Construction

And Notes on Harris' housing policies

Kamala Harris gave an interesting speech today on housing. A lot of great talk about reducing red tape and increasing supply of both rented and owned homes. A lot of irrelevant and misinformed stuff about algorithms and collusion and greedy corporate landlords. More of the targeted subsidies and tax complications that add reams to the federal legal code and don’t amount to much. Nothing, of course, about that button on the President’s desk that any of them could push at any moment to actually solve most of the national supply problem without writing any new laws, which is returning to late 20th century underwriting standards at the agencies.

And support for a terrible law that might technically be ok. That’s the “Stop Predatory Investing Act”. The support for the bill and all the rhetoric surrounding it is motivated prejudicial thinking. As I have written, taking aim at large-scale landlords is the last straw to be placed on the proverbial camel’s back. I am really scared of sticking a toe in that water. It would put us permanently on a path of increased homelessness that I’m not sure we could find our way out of. The bill’s supporters would cut off our nose to spite our face.

Prejudice leads us to ignore the symbiosis that dominates developed economies. Anti-immigrant sentiment about “taking our jobs” is an example of this sort of prejudice. It sees only the competition and not the coordination that we share with fellow residents, citizen or not. The rhetoric about corporations buying up homes and jacking up the rents comes from a similar bias.

The anti-immigrant rhetoric seems uglier because it’s punching down. But, from a self-interested point of view, the anti-corporate rhetoric probably harms us more, because the symbiosis and our dependency on capital for material progress is greater.

But, as it stands now, the bill Harris seems to be supporting appears to exempt new build-to-rent investors. It only goes after investors in existing homes.

I know. It’s dumb. I hate to depend on the reasonableness of these people for the economic well-being of the victims of our housing prejudices. But, technically, as it stands, the bill doesn’t directly stop new build-to-rent. And, Harris seems to suggest there may even be fiscal support for new build-to-rent investments.

As I have argued, until YIMBY wins seep deeply enough into the typical metropolitan area’s housing processes to markedly increase multi-family construction, and until the federal government loosens underwriting standards, essentially all the marginal growth in new housing (which we desperately need to simply stop things from getting worse) will be in large-scale build-to-rent.

Investor activity within the existing home space has been complementary to the long road to get this new source of housing moving. The thing that makes the haters mad - investors pushing up the prices of homes - was the helpful part. Prices were pushed too low when underwriting was tightened in 2008, and it has taken 16 years for rents to rise high enough to induce those investors to build new rental homes. They have to be rental homes because George and Barack and Donald and Joe and Kamala aren’t going to push that button on their desk that allows the tenants to get a mortgage.

But, we are finally there. Large-scale investors will naturally transition to build-to-rent. They would rather manage a single neighborhood than 100 individual homes scattered about town. The only reason they ever bought those homes is because the mortgage crackdown had placed them on discount.

All that said, it is a very low bar, but today’s speech was probably the best housing speech by a presidential candidate that I have heard since housing policy became oppressive in this country.

On these topics, there was an interesting development in this month’s numbers. Details below the paywall. Nobody else is going to report on this. It’ll be our little secret.