STRATFORD — Many business owners see Stratford as a business-friendly town.
It is one of the more affordable communities in Fairfield County, which is a benefit for the town, according to Economic Development Director Mary Dean. Stratford also has access to transportation, with the train station downtown and its easy access to Interstate 95.
One barrier to entry for local business, though, is a limited inventory of available commercial real estate, some say.
The town has taken some steps to alleviate this, Dean said. They recently asked the Zoning Commission to place a moratorium on new self-storage facilities, which take up large areas with limited parking that make the properties difficult to recycle for other uses in the future, she said.
Apart from town-owned property and regulatory measures like the requested moratorium, there is not much else the town can do to increase this inventory, she said.
“If it’s not town-owned, we can only work with the various owners and real estate agents trying to make sure we’re on top of any new opportunities or openings there are for businesses that are interested in coming into Stratford,” Dean said.
Steve Hodson, president of Hodson Realty, Inc., said that inventory for certain sectors of the commercial market are limited in town. Specifically, the number of industrial warehouse and small-scale retail spaces are in short supply. The market for office space, though, is where there is the most availability as the way the workforce conducts business has fundamentally changed during the pandemic, he said.
This lack of supply could cause people to look to other nearby locales if what they are looking for is not available, he said.
“It’s always a supply and demand in the economy,” Hodson said. “If there’s less supply and more people looking for smaller spaces, and it becomes a challenge, they may broaden their search and they look at other communities.”
Hodson said there has not been a lot of new construction in Stratford, since there is “really no appreciable vacant land” in town. He said most of the land in town is already “built up.”
One way developers have began to increase this stock is through mixed-use development, he said. A popular choice across the region is to add a commercial space in the ground floor of an apartment complex. The complex at 382 Ferry Boulevard is one example, he said, as initial concepts included a mixture of 119 apartments and a retail space.
Jon Angel, president of Angel Commercial in Southport, said that the current market is strong and it’s largely due to an “abnormally low inventory of available buildings” across the region.
“I’ve been in business for over 32 years locally, and I will tell you that in my entire span of conducting business in these areas, I’ve never experienced the lack of availability like we are right now,” Angel said.
Angel said the barrier to entry for new business “has risen dramatically” over the last two years.
The rise in the demand for e-commerce has heightened during the pandemic. The U.S. Census Bureau estimates that online retail sales totaled over $870 billion in 2021, a 14.2 percent increase over 2020 sales.
Thus warehouses and distribution centers have popped up in areas of need, including in nearby municipalities. Among others in the past two years, Amazon bought a warehouse in Trumbull in 2020 and a developer purchased a 14-acre plot of land in Stratford to build on in February. Pointing to the strength of demand in the area, Angel, who brokered the 14-acre land deal, said it was based entirely on speculation.
Initial anecdotal data suggests that the prices for warehouses have risen over 40 percent year over year, according to Alexander Van De Minne, a real estate professor studying commercial prices at the University of Connecticut. Better data for the past two years has not come out yet, he said, and much of it is proprietary. He said his department is raising funds to improve access to market data.
Van De Minne said the retail market has been split, with larger retail settings like malls and strip malls suffering while “street retail” is improving in the state.
“We’ve seen people move from the cities to Connecticut especially, or also all the way to Hartford even that never happened before,” Van De Minne said. “And the local street retail, especially, restaurants, etc., they really benefited from it.”
Small suburban offices have ticked up in-state as well, he said, as some have not wanted to return to their Manhattan commutes.
“There is some logic in it that should see some growth, because a lot of the workers they stay at home and they don’t want to commute to Manhattan every day,” Van De Minne said. “So we might think that there’s more demand, and there’s some anecdotal evidence, for local suburban offices that’s closer to the place where the people live.”
The future of the real estate market is slightly murky as the Federal Reserve has begun raising the federal interest rate. Van De Minne said the impact this will have on the market is not entirely straightforward, since real estate investors typically look into the future.
mike.mavredakis@hearstmediact.com
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With mortgage rates rising and inventory opening up, many experts believe that the red-hot pandemic housing market has peaked. That has homeowners considering selling while prices are still sky-high and renting until the market cools so they can buy once again at a more reasonable price and pocket the difference.
It’s a great plan — as long as you can sell high and rent low at the same time.
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“I advise any home seller not to cash out of their current home unless they have a better, more right-sized, profitable and best-life home or apartment lined up to buy or rent next,” said Baron Christopher Hanson of Coldwell Banker Realty. “In other words, selling for a high price and then having to turn around and buy or rent at an even higher price or unfavorable rate is not a good idea.”
The trick is to sell in a hot market and rent in a cooler one nearby.
“The best markets to sell a home and then rent are typically bustling and in-demand job market cities and high tourism or waterfront towns whereby more affordable or rural rental housing exists several miles outside of the sexy city center,” Hanson said.
Here’s a look at where that strategy might work.
Phoenix
When it comes to places where sellers are holding all the cards, expert after expert who spoke with GOBankingRates mentioned Arizona in general and Phoenix specifically.
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“The greater Phoenix housing market is strong this year,” said Ava Martin, founder of Quality Water Lab. “The typical value of the property in this area has increased by 31% and the prices are expected to rise more in the next 12 months.”
Cristina Cason, real estate investor and co-founder of Texas Family Homebuyers, is more emphatic in her opinion of the situation in the Southwest.
“The Phoenix, Arizona, market is a hot mess right now,” Cason said. “More than 50% of houses sold above the listing price. The average increase in selling price was about 33%. On the other hand, the rental market has fared much better. The rental price has stabilized, and it makes more sense to sell your house and rent.”
California’s Bay Area
As Hanson said, the best markets to sell and rent will be pricey metropolitan hubs with in-demand job markets, a description that fits the Bay Area perfectly.
“If you live in San Jose, California, you should look to sell your house and rent until the market cools down,” said John Riedl, CEO of Easy Cash Offer Florida. “As of 2021, the average home sale price in San Jose exceeds the $1 million mark. This is an opportunity too good to turn down, even if you weren’t initially planning to move.
“The real estate market in the city is very hot at the moment due to the after-effects of the pandemic, and you don’t know how long it will last, so now’s the time to act. You’re probably going to make a profit of over 30% if you act fast.”
Then, of course, there’s the city after which the Bay Area is named.
“San Francisco is one market where you should consider selling your house and renting until the market cools down,” said Tim Schroeder, licensed Realtor and owner of Learning Real Estate. “The massive imbalance between supply and demand in the city has caused housing prices to soar. Currently, the average sale price is over $800,000, so it’s an excellent opportunity for homeowners to make their move. The ROI will be incredible. You can rent until the market cools down, then buy again at the right time. You’ll be left with a significant profit this way.”
Las Vegas
In Sin City, one key metric shows just how out of balance the seller’s market has become — and if you can sell high there, Nevada offers plenty of low-cost places to rent nearby.
“In Las Vegas back in February, inventory was at 0.7 months,” said Jennifer A. Chiongbian, real estate broker and founder of ProRealEstateWriter.com. “For March, it was at two months. A balanced market has six to seven months’ worth of inventory. Selling your home now and renting makes sense to take advantage of the tight market and higher prices, which will eventually correct.”
Pittsburgh
The big city on the far end of Western Pennsylvania — which has plenty of nearby low-cost towns for renters — is currently offering sellers a golden opportunity. But not for long.
“In the Pittsburgh market, sellers have a brief window right now to benefit from the heavily weighted and somewhat inflated seller’s market,” said JoAnn Echtler, a Pittsburgh real estate agent. “With interest rates ticking up almost weekly, we are already seeing signs of a drop-off in buyers, especially in the lower price points.”
With money getting more expensive to borrow, buyers can’t afford as much home and simply won’t be able to put in offers above asking price, as they still are now.
“This could mean a substantial drop in cash-out equity for the seller,” Echtler said, “enough that selling now and taking on a short-term lease — which is still affordable in this market — makes sense. I’ve had quite a few sellers choose this path in the past year.”
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Funding is surging for life sciences real estate development.
Breakthrough Properties, a joint venture of Tishman Speyer and Bellco Capital, announced today that it closed $3 billion in direct capital and co-investments, to scale a global portfolio for early-, mid- and late-stage life sciences companies. The Breakthrough Life Science Property Fund finances the JV’s ongoing developments, which are in various stages of design, construction and pre-development, and fuels new development opportunities throughout the United States and Europe.
The fund was raised from a group of institutional investors, sovereign wealth funds and high net worth individuals spanning four continents. Excluding recapitalizations, it is the largest real estate fund dedicated exclusively to the life sciences sector, according to CBRE and JLL research.
CBRE estimates $25 billion in equity will be deployed into health care real estate this year due to the overwhelming bullish sentiment in its most recent investor survey, along with the resiliency of the sector during the pandemic and persistent demand. Indeed, Breakthrough’s funding announcement comes shortly after Blackstone announced its inaugural royalty and structured credit-focused life sciences fund, called Blackstone Life Sciences Yield, at $1.6 billion.
Through a range of campus developments, lab conversions and StudioLabs, and a proprietary flex lab program, Los Angeles-based Breakthrough said it provides a range of property types for the life sciences sector, from venture-backed discovery companies to established big pharma anchors.
“There is an acute and accelerating need for well located, cutting-edge lab space,” Tishman Speyer CEO and Breakthrough co-Chairman Rob Speyer said in a statement. “The Breakthrough Life Science Property Fund can enable us to deliver more of these projects across the U.S. and Europe.”
Breakthrough was founded in 2019 and has become one of the most active players in the life sciences sector with 4.6 million square feet of projects in the pipeline across San Diego, Boston/Cambridge and Philadelphia, as well as Amsterdam, Oxford and Cambridge in Europe.
Breakthrough’s rapidly growing portfolio includes The 105 in Boston, which is fully leased to CRISPR Therapeutics and will open later this year. In 2021, Breakthrough broke ground on its 515,000-square-foot Torrey View development, a 10-acre research and development campus in San Diego that signed a major pre-lease with the biosciences arm of global medical technology company Becton, Dickinson and Company. Its Torrey Plaza campus, an office-to-lab conversion, is leased to a range of innovative companies, including Tandem Diabetes Care, Janux Therapeutics and Protego Biopharma.
Gregory Cornfield can be reached at gcornfield@commercialobserver.com.
APRIL 15, 2021: Close up of field hospital and troop tents at Russia’s Opuk training area in Crimea. (Satellite image: Maxar Technologies.)
GEOINT 2022: NATO is mulling a new, and somewhat surprising, effort to directly buy imagery from commercial providers in a move that industry sources say appears to have irked the US spy satellite agencies that have traditionally filled that role. Interested companies have until the close of business today to respond to NATO’s request for information (RFI).
Alliance member nations, too, have been asked to identify “emerging and/or existing” remote sensing capabilities that could help NATO’s military command produce “imagery intelligence,” or IMINT. IMINT is provided primarily by satellites, as well as by aerial photography.
The US is the largest operator of military intelligence, surveillance and reconnaissance (ISR) satellites, and is outwardly supportive of the effort, which an IC official said could improve NATO’s production of geospatial intelligence (GEOINT) products.
“We want NATO to produce timely, relevant, and trusted GEOINT that can be easily shared with the Alliance, and we work with NATO towards that end,” Melissa Planert, deputy director for international affairs at the National Geospatial-Intelligence Agency (NGA), said in an email.
“NGA’s position is that we also strongly recommend NATO seek diverse imagery sources, products and services from across the Alliance and from commercial vendors,” she added. “A diverse selection of imagery and analysis providers will only benefit GEOINT contributions to NATO intelligence requirements, and strengthen NATO policymakers’ understanding of the complex security situation.”
NGA is responsible — in its role as GEOINT functional manager and a combat-support agency for the Defense Department — for providing imagery and ISR analytics to military commanders, including at NATO. NGA collects satellite imagery from the National Reconnaissance Office and US and selected foreign commercial providers.
In fact, one NGA official told Breaking Defense that the NATO RFI was spurred by concerns from allied military officials that budget cuts to the agency might affect their ability to receive timely US imagery and support.
But despite Planert’s assurances, industry sources said they’ve felt the US Intelligence Community is much less receptive to the idea of NATO using its collective budget to acquire commercial imagery and analytical services.
One industry official said that for NGA and NRO, “it’s all about control” of the information.
Exploratory First Step
The RFI was issued last month [PDF] by Headquarters Supreme Allied Commander Transformation (HQ SACT), based in Norfolk, Va. SACT is one of only two NATO strategic commands, and is responsible for research, development and acquisition of new technology. French Gen. Philippe Lavigne was appointed as commander this past September.
A SACT spokesperson told Breaking Defense in an email that the RFI doesn’t represent a formal bidding process, rather is a first information-gathering step.
“The purpose of this RFI is to involve industry/academia and Nations, through collaboration, in an examination of current and future capabilities. This is the exploratory phase of the process and does not represent a commitment to acquire any such services,” the spokesperson wrote. “NATO looks forward to working with industry/academia and Nations to ascertain if they possess prospective products, systems or sub-systems that will then help inform NATO’s capability development decision-making process.”
It is unclear that if a decision is made to institute a formal procurement whether it would be the first time NATO has sought to collectively purchase its own IMINT.
The SACT spokesperson said that the NATO commands have worked with commercial imagery providers in the past during exercises. Further, Allied Command Transformation (ACT) “regularly works with nations and industry to identify prospective products that would support capability development in various fields.” However, the spokesperson was unable to confirm by press time whether there had ever been a formal acquisition program.
NATO only in 2019 declared space a legitimate operational domain, and in January this year finally released a first-ever alliance space policy. That policy calls on allies to voluntarily ensure compatibility among their national space assets, while pledging members to develop collective requirements and the means of fulfilling them — including the use of commercial capabilities.
Alliance commanders do have access to remote sensing imagery provided by member states. However, besides the US, only a handful of the 29 allied nations operate remote sensing satellites, military or commercial. According to a study [PDF] by CNA’s China Aerospace Studies Institute, US allies own or operate only a total of 69 remote sensing sats. Germany operates the most, with 16 birds. By contrast, US national security and commercial operators have more than 500.
Thus, the US is the primary provider of space-based ISR to NATO — although there have historically been problems with sharing images and analysis based on data from uber-classified spy-sats. This is one reason why there has been a public push by top military commanders to declassify space capabilities.
Indeed, in the run up to Russia’s invasion of Ukraine, it took a decision by President Joe Biden himself to release imagery of the conflict from US spy satellites, Ronald Moultrie, DoD undersecretary for intelligence and security, told the USGIF GEOINT 2022 symposium near Denver this week. This includes pushing US commercial firms to provide Ukraine’s government, and release to the global public, their own imagery of Russian military actions, which have reportedly included human rights violations.
“That decision was not taken lightly,” he said. Rather, it was a “gutsy decision to say: ‘We are going to disclose some of the most insensitive, sensitive intelligence that we have, but it’s important enough for us to do.’”
Mixed Messages From The IC?
A number of industry sources told Breaking Defense in the run up to and during the GEOINT conference that IC officials were resistant to the concept of NATO using its collective funds to buy commercial imagery, rather than simply rely upon that provided by NGA/NRO and other NATO members. These sources said that IC officials were instead pushing NATO not to move ahead with a formal acquisition.
“NRO wants everything to go through them,” one company rep said bluntly.
Industry sources said that in early discussions they perceived that NGA/NRO officials were trying to discourage them from responding to the RFI. However, in a recent weekly phone call between commercial providers and NGA officials, these sources said, the agency was actually encouraging. And while company representatives were reluctant to say on the record whether their firm had responded to the RFI, suffice to say there is a lot of interest.
“If allies are asking for solutions, industry would be dumb not to answer,” the industry rep said.
One NGA official privately confirmed the recent phone call, and suggested to Breaking Defense that there must have been a breakdown in communications regarding NATO’s request.
Planert, for her part, said the agency is on board with US firms making a pitch. “Industry should certainly consider supporting NATO’s request, in line with established licenses, agreements, and compliance requirement,” she said in her email.
That said, it remains unclear whether NGA or NRO themselves intend to respond directly to the NATO RFI.
In response to questions from Breaking Defense during a press briefing at GEOINT on Monday, Vice Adm. Robert Sharp, outgoing NGA director, said his agency “is responding to and working closely with NATO” everyday, noting that NGA has personnel embedded with “international partners.” But he indicated that NGA had not directly answered the RFI’s call.
“When you say RFI, I wouldn’t necessarily say it’s an RFI. It’s knowing needs, knowing requirements, right, which drives how you collect what you collect where you collect it. So, that’s a cooperative process from us,” he said.
NRO’s head of commercial operations, Pete Muend, would not address the question directly when asked by Breaking Defense at a separate GEOINT press briefing.
“I’ve certainly read the RFI, as many of us have across the community, but I’d have to defer you to NGA, and others across the community, in terms of how they would want to respond,” he said.
Researchers are off base when they claim the rate Medicare pays hospitals and health systems for services is an appropriate benchmark for commercial insurance rates. This approach ignores limitations that nearly always result in underpayments and lets commercial health insurers off the hook for intentionally increasing costs and failing to pass on savings to consumers. It is misguided and wrongly paints hospitals as the source of all problems in the health care system.
Here are a few facts:
#1. Medicare reimbursement rates do not cover the actual cost of the care provided.
This is widely acknowledged and clearly backed up by the data. According to AHA survey data, Medicare paid 84 cents for every dollar spent by hospitals caring for Medicare patients in 2020.1 This resulted in $75.6 billion in underpayments for Medicare services in 2020. Even the Medicare Payment Advisory Commission (MedPAC) recognizes that Medicare underpays.2 For example, MedPAC found that in 2020, hospitals and health systems experienced a -8.5% margin on Medicare services in 2020. MedPAC projects that this margin will fall to -9% in 2022, and it declined even further when excluding COVID relief funds.3 Put simply, Medicare rates are set too low to serve as a reasonable benchmark for commercial plans. Holding them up as an appropriate benchmark for commercial rates threatens access to care and puts more hospitals at risk of closure.
#2. Medicare rates are slow to respond to inflation, supply shortages and increases costs for staff.
Medicare payment rates are established in rulemaking. Once finalized, they are in place for a year before they can be updated. Due to data lags, payment rate changes are typically made based on older data.4 For example, Medicare rates for fiscal year 2022 were not adjusted for recent increases in inflation, supply costs, and growth in labor costs due to shortages, which has added significant financial pressure for hospitals. In fact, given the arcane nature of Medicare rate setting, CMS’ recently proposed inpatient payments for 2023 would be lower than inpatient payments made in 2022. This is nonsensical given rising inflation and a continued a public health emergency.
#3. Medicare rates are subject to political pressure
As policymakers attempt to balance the federal budget, they frequently rely on steep Medicare rate reductions to make up for budget shortfalls elsewhere. For example, the Budget Control Act of 2011 imposed, among other things, mandatory across-the-board reductions in certain types of federal spending, known as sequestration. The result is an automatic and arbitrary cut to all Medicare payments. Benchmarking commercial claims to Medicare payment rates mean these arbitrary rate cuts would have far-reaching ripple effects for care provided to all patients.
#4. Chronic underpayments threaten the communities hospitals serve.
One-third of hospitals already operate in the red, and the COVID-19 pandemic has only worsened the financial pressures that hospitals face. In 2020, a record number of rural hospitals closed in a single year. Arbitrarily reducing commercial rates will only exacerbate this financial pressure. Ultimately, it will make it that much harder financially for hospitals serving rural and historically underserved communities to keep their doors open or continue providing the same breadth of services.
Conclusion
Hospitals and health systems need to be able to invest in programs that improve care and support the communities they serve. Policymakers should be strengthening payment rates from Medicare, not holding them up as the gold standard. Arbitrary rate cuts that fail to address underlying cost pressures would only hinder hospital and health systems’ ability to serve their communities and be prepared for the next public health emergency.
Benjamin Finder is AHA’s director of policy research and analysis.
- https://www.aha.org/fact-sheets/2020-01-07-fact-sheet-underpayment-medicare-and-medicaid
- https://www.medpac.gov/wp-content/uploads/import_data/scrape_files/docs/default-source/reports/mar21_medpac_report_to_the_congress_sec.pdf
- https://www.medpac.gov/wp-content/uploads/import_data/scrape_files/docs/default-source/reports/mar21_medpac_report_to_the_congress_sec.pdf
- https://www.brookings.edu/blog/usc-brookings-schaeffer-on-health-policy/2022/03/29/what-does-economy-wide-inflation-mean-for-the-prices-of-health-care-services-and-vice-versa/
With companies rethinking both how and where they work, being a commercial real estate broker today means playing the role of therapist as much as leasing expert. Experienced agents Brian Woolsey and Ben Jensen saw an opportunity to create a new sort of commercial real estate firm—one that prioritizes psychographics over square footage. In late 2020, they left Cushman Wakefield to launch the boutique firm Monarch.
Engaging with Monarch begins by taking a proprietary online survey the duo named the “Belonging Barometer” or B2 for short. Designed to help clients think about work holistically before choosing a space, the B2 assesses a company’s predictable growth, work styles, and technology. The survey factors in average employee attitudes about office work and company culture to make suggestions such as prioritizing access to fitness and evaluating your carbon footprint—which Woolsey and Jensen say is fast becoming an imperative to recruit and retain good talent.
“It’s never been more critical that the office be a magnet, not a mandate,” Woolsey says. “The Belonging Barometer allows us to have a conversation about things that are not as obvious. There’s so much more that goes into creating a successful work environment than square footage and terms.”
Minneapolis-based Monarch’s process persuaded advertising agency Griffin Archer to move from the North Loop to Linden Hills, walking distance to cafes, shops, and salons.
“Since everyone is so used to working at home, we got used to some of those conveniences,” says Ryan Boekelheide, vice president and director of account service. “It’s nice to have those comforts near the office so it’s a place people want to come.”
For education-technology company Arux Software, the Belonging Barometer narrowed the search for a larger space, says Derek Buschow, vice president of growth and strategy. “Monarch considered everything from how close people want to sit to each other to hangout space, a lounge area, and a cafeteria.” Now settled at the 15 Building in downtown Minneapolis, 75% of its 25-person team comes in regularly.
Insights From Monarch’s Belonging Barometer
Amenities aren’t an option. The younger your employee base, the more amenities, like a coffee bar or fitness center, are expected.
Prioritize community. Team building is an important aspect of the office, so consider locations with access to restaurants, bars, and even volunteer opportunities.
Read more from this issue
Environment counts. People spend longer in spaces that make them happy and energized. Plants increase oxygen levels in the air, and access to natural light is shown to improve mood and reduce eyestrain and headaches.
Food for thought. Data shows that providing employees with food is a big bang for the buck; particularly as employees return to the office, gathering for food and drink will become a key part of office culture. Healthy choices help to control energy flow.
If you don’t follow the housing market closely, you might not know how much the price of an average home in American Fork, Utah, increased between March and April.
Or what the Canadian government announced April 8.
Or who is the largest landlord in Spain.
But these seemingly disparate things are all connected and spell trouble for not only for housing in general, but for democracy more broadly. They could even affect the size of American families in coming decades. Let me explain.
As thorough reporting in the Deseret News has already noted, there has been a huge shift in the residential property market in recent years. This change is not confined to the U.S., but is truly a global phenomenon.
The shift started after the Great Recession and has been building steam since that time. As a prelude to the Great Recession, speculative investors began buying up dodgy mortgage securities, and the housing market eventually came tumbling down like a house of cards, with many families losing their homes (and investors losing a lot of money).
The weak point in the scheme were the mortgages; their value depended on homeowners making their payments and many defaulted. But what if you eliminated the weak point? What if speculators simply bought the houses and condos outright, and instead of flipping them, they held on to them?
That’s a whole new game. Now the profit derives not from collecting mortgages, or even from selling flipped homes. Now the profit derives from rents and selling rent-based securities (SFRs), because in a context where new building has stagnated for various COVID-19-related reasons, landlords hold a lot of power. And now powerful Wall Street investment firms are landlords who have shown they wield:
Power to raise rents by an average of 23% nationwide in the last year, and up to 40% in some locales, as well as tack on numerous new fees (some patently extortionate), not to mention the euphemistically called practice of “re-tenanting.”
Power to foist all repair responsibilities onto tenants.
And power to evade SALT deduction caps.
In other words, landlords have the power to make an immense amount of money without needing to be socially responsible. One renter described her Wall Street landlord as “a huge, billion-dollar slumlord.”
No wonder approximately 1 in 5 homes is bought by an investment firm now (in some areas, it’s 1 in 3), and homeownership rates are dropping. In the 1970s, homeownership stood at about 63%; among young adults now, it’s down to 37%, and that’s not necessarily by choice. Last year, about 15% of families looking for a home found they either could not afford a home, or there were no homes to buy. In Utah, year-over-year increases in average home prices are about 20%.
Investment firms can take those large profits from rents and plow them right back into buying additional housing stock, and they’re expanding into buying mobile home parks and college housing. Ordinary homebuyers don’t stand a chance against the money Wall Street investment firms have amassed to instantly pay cash for any property they see, with a premium above the current market value tacked on to secure the winning bid. These buyers show up to home sales with suitcases full of cashier’s checks or cash, which is why the price of a home in American Fork rose by over 6% just this past month.
And it doesn’t matter if all this outbidding leads to housing price inflation, because people will always need a place to live — and landlords can charge them premium rents to offset the premium price they paid. As the Deseret News’ Katie McKellar has noted, “A stunning 1 in 5 Utah renters are considered ‘severely cost-burdened,’ meaning they pay more than 50% of their income on rent, according to state and federal data.”
Investment buyers can even use their profits to build new units — not to sell, but to rent. “Build-to-rent developments,” they call them, and you can see them all up and down the Wasatch Front. Properties that would have been sold to ordinary homebuyers will now never be sold to ordinary homebuyers. Their occupants will simply have to resign themselves to being permanent tenants instead. There is little chance they will ever be able to afford a home of their own, along the lines of the World Economic Forum’s idea of an idyllic world: “You’ll own nothing. And you’ll be happy. Whatever you want, you’ll rent.”
So while it’s true that strategies to increase housing stock — such as innovating new building technologies that are less expensive and not subject to supply chain issues, or buying federal lands for housing construction — can help stabilize home prices and rents, if these new units are simply bought by investment firms, the underlying problem remains the same.
As Elena Botella points out, “Although the number of houses being purchased by mega-investors is currently not enough to move the market in most parts of the country, these firms’ underlying structural advantage is profound and growing.”
This megatrend lurks in the background as various advocates argue for and against density, mass transportation, zoning regulations, accessory dwelling units, rent caps and changes to the property tax codes.
Maybe it’s time to take a harder look at what’s in the background of these foregrounded debates, and ask if change in that background will be necessary in order to see progress on these other issues.
Why ownership matters
My thoughts on this topic were prompted by a superb essay, “Serfing the Future?” by Joel Kotkin and Wendell Cox, who argue that we’re entering an era of land ownership consolidation that hasn’t been seen on this scale since the days of feudalism. They assert this shift has massive implications for the future:
“Unless reversed, young people will be forced into a lifetime of rental serfdom. The assets that drove middle-class stability, wider social benefit, and subsidized comfortable retirements, will likely not be available to them. Property remains key to financial security: Homeowners have a median net worth more than 40 times that of renters, according to the Census Bureau. Shoving prospective homeowners into the rental market not only depresses their ambitions, but it also forces up rents, which hurts poorer households and even solid minority neighborhoods.
“But this impacts far more than just finances. Low affordability and high rents tend to depress the fertility rate, contributing to what is rapidly becoming a demographic implosion in many countries. … Families overwhelmingly favor less dense housing and frequently decide to have children once they buy a house. A recent National Bureau of Economic Research study draws this conclusion, seeing a 10% increase in home prices leads to a 1% decrease in births among nonhomeowners in an average metropolitan area. … High prices and density are poison to fecundity.”
Moreover, they say, democracy throughout history has depended upon small-property owners. As President Franklin D. Roosevelt said, “A nation of homeowners, of people who own a real share in their land, is unconquerable.” Dispersed property ownership is one key hallmark of democracy.
If Kotkin and Cox are right, then this shift to neofeudalism facilitated by the consolidation of land ownership by investment firms has immense ramifications for our future, whether we speak of that future in terms of poverty, demography or even robust democracy.
What’s to be done, then? Countries are starting to fight back against this trend, and the United States — and Utah — would be well advised to take a look at what they are doing, and see what can be emulated here.
A number of countries have outright bans on foreign ownership of existing residential housing stock. In fact, Canada just announced a two-year ban on real estate sales to foreigners. Australia and New Zealand already have such restrictions and also impose much higher property taxes on foreign owners of real estate. Other countries allow such sales, but only if local authorities agree to them or other tight restrictions are met. Certainly this low-hanging fruit is something that U.S. and Utah lawmakers could consider addressing forthwith.
Unfortunately, in the U.S. and Utah, in large measure, “the call is coming from inside the house.” While such bans and taxes may help decrease, for example, Chinese investment in the U.S. housing market, they won’t affect American investment firms engaged in these same practices. And American investment firms, such as Blackstone, are some of the very largest global players in this game, as well as generous donors to American politicians. Did you know, for example, that Blackstone is the largest private landlord in all of Spain?
If lawmakers are serious about avoiding the fate that Kotkin and Cox foresee, they must come up with effective ways of prying housing stock loose from large American corporations and investment firms. Housing must be available to be bought, not merely rented, by ordinary people in Utah and the United States. The effects are not only felt in wealth accumulation for families, in the existence of a middle class and in family reproductive trends, but also spill over into neighborhood formation; as one commenter put it, “Owning makes people take responsibility and feel more investment in their community.”
Carrots and sticks
A two-pronged approach is needed. Lawmakers must come up with ways to restrict sales of housing to corporations and investment firms and also devise ways to incentivize corporations and investment firms to sell housing stock they already own to ordinary buyers (aka “owner-occupiers”).
Various countries have begun exploring both avenues. For example, with regard to sales restrictions, the Biden administration is already (slightly) clamping down by new regulations on cash-only real estate purchases, limiting sales of FHA-insured and HUD-owned properties to large investors and proposing higher taxes for investor buyers.
Cincinnati is buying homes that might be bought by large investors, and then planning to sell them to owner-occupants. Ireland has moved to block investment firms from buying large chunks of housing stock by levying special taxes on the purchase of more than 10 properties, and by insisting that 50% of new developments go to owner-occupiers. Other locales have even set a numeric limit on the number of units that can be owned by a corporation or investment firm (and all its subsidiaries and shells), or limits on number of rental units in a given subdivision.
Other strategies include measures that prohibit bulk sales of foreclosed homes or mandate that the owner must live in the property for a year before the unit can be rented out. Still others make such sales very expensive by levying a special social impact tax on investor buyers at the time of sale or on yearly profits that can add up to the price of the home, or by placing restrictions on the bidding process itself to make it fairer to regular homebuyers, or by offering government grants to ordinary homebuyers to help them be more competitive in bidding against investment firms. (Berliners have even voted to force predatory corporate owners to divest and sell units to the government.)
The second prong of the strategy is to make holding onto the housing stock burdensome for the corporate owner. Proposals to establish special (read: higher) property tax tiers for corporate owners, or changing tax law to make certain expenses and taxes non-deductible for corporate owners have been floated, as well as devaluation of property investments for tax purposes for investment firms.
Rent increase caps are a frequently used approach to denying corporate owners exorbitant profits, though they can sometimes have unintended negative effects.
Still other countries and locales outlaw the practice of forcing tenants to repair their own units, fine vacant property owners for failure to keep up the property, impose special taxes on vacant properties or properties owned by foreigners, tighten underwriting for investor buyers, and make it far easier for tenants to fight eviction.
Some countries and locales use a carrot instead of a stick and reward corporate owners who establish “rent-to-own” contracts with their tenants (though care must be taken in crafting these) and also make it easier for renters to qualify for mortgages.
In short, neither the U.S. nor Utah is helpless in the face of this great shift toward neofeudalism. We needn’t countenance the push to turn our children into a generation of serfs, our land into some investment firm’s feudal dukedom, and our government into rule by a landed corporate aristocracy. It’s high time for federal, state and local leadership to face this serious challenge to our future, otherwise, as Kotkin puts it, “Unlike their forebears, the next generation seems likely to live increasingly as propertyless serfs.”
Valerie M. Hudson is a university distinguished professor at The Bush School of Government and Public Service at Texas A&M University and a Deseret News contributor. Her views are her own.
Buy your rental apartment building? A proposed law could help you and neighbors get the first chance
What if your rental apartment building was for sale and you and your neighbors had first crack at buying it? State lawmakers think many New Yorkers would jump at the chance and have sponsored a new bill, the tenant opportunity to purchase act, which would help renters team up and own a building collectively.
Whether you are looking for a rental or considering a lease renewal, it’s not an easy time to be a renter in New York City. Rents have increased over the past year, in some cases by 30 percent or more, and if you’re scouring listings right now, in many cases landlords are offering apartments to the highest bidder.
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Adding to the troubles of many low-income residents is an increase in private equity investors acquiring buildings—these are often groups less interested in providing stable housing and more interested in aggressively increasing a building’s earning power. It can often lead to displacement and gentrification as well as the loss of affordable housing.
To counter this, state lawmakers are pushing for more tenant protections including the good cause eviction bill and the tenant opportunity to purchase bill. The first proposal would prevent evictions unless there was good cause and would also cap rent increases. The second is sponsored by State Senator Zellnor Myrie, whose district includes parts of Brooklyn, and it would ensure property owners wanting to sell their multi-family rentals would have to offer the building to tenants first. The legislation specifically refers to private equity firms as a threat to the city’s housing amid a homelessness crisis and a reason why the law needs to change.
“Tenants would have the right to be engaged first [to consider] purchasing the building within which they live,” says Sandra Lobo, executive director of Northwest Bronx Community and Clergy Coalition, an organization that supports the bill. “It would shift the building ownership into a collective ownership model and a tenant association would be one of the first immediate steps necessary to explore this opportunity,” she says.
So when a landlord offers a building for sale, renters would have the right to form a tenant union with legal rights to both the first offer and the first right of refusal to buy the building. Certain buildings are exempt including those that are government owned or where an owner has refinanced to hold onto the property.
Pre-approved non-profit housing providers would also be eligible to bid for the building in cases when tenants waive or assign their rights. Renters would also get the opportunity to match any offer by a third party.
The program depends on partnerships with tenant organizations to make sure those involved get the right support and guidance. Buying a building is a complicated process and there would be requirements for a landlord to provide disclosures about operating costs, necessary repairs, and loans against the building.
As an incentive for landlords to sell to tenants (or tenant organizations and non-profits) rather than outside investors, they would get tax breaks that wouldn’t be available otherwise.
If the building changes hands under the proposed law, a tenant who chose not to buy would have the right to stay in their apartment at their current rent. There would also be restrictions—involving land trust leases and government oversight—to make sure the building continues to be affordable to future generations.
There’s no guarantee the bill will pass. Landlords and real estate investors who oppose these moves frequently argue they have every right to operate their businesses without government regulation. It’s an argument that’s particularly strong in more conservative areas beyond the five boroughs.
HELSINKI — A southern city hosting China’s newest, transformative spaceport is pushing to become a hub for commercial and international space activity.
Wenchang International Aerospace City will accelerate efforts to establish a commercial launch site and rocket assembly plants, according to ThePaper.
The efforts aim to put in place infrastructure to allow regular commercial launches by 2024. The Wenchang International Aerospace City project, established in 2020, will consist of three areas, focusing on launch, commerce and industry, and tourism.
The commercial area seeks to attract space startups and will include rocket and satellite assembly and testing plants and satellite data application centers.
Institutes belonging to China’s main space contractor, CASC, the Chinese Academy of Sciences (CAS) and other state-entities, as well as commercial launch companies iSpace and Deep Blue Aerospace, have signed contracts to establish a presence in the city.
The city, on the island province of Hainan in the South China Sea, already hosts the Wenchang Satellite Launch Center. The coastal spaceport was constructed specifically for launches of large, new-generation launch vehicles to allow China to undertake major space projects.
Rockets are delivered to Wenchang by sea from Tianjin, north China, circumventing railway networks used to transport smaller launch vehicles to inland launch sites.
Since opening in 2014 Wenchang has hosted 16 launches, including a space station module and cargo missions, a lunar sample return, and the country’s first interplanetary expedition, Tianwen-1.
Wenchang also facilitates launches of the Long March 8 rocket for commercial rideshares, and the Long March 7A. The new launchers could replace aging, toxic hypergolic Long March rockets which drop spent stages over land.
New, dedicated launch towers for the Long March 8 could be constructed to allow greater launch cadence, according to the rocket maker, China Academy of Launch Vehicle Technology.
Wenchang, which is also part of the Hainan Free Trade Port scheme, hosted China’s seventh national “space day” on April 24. During the event Wu Yanhua, deputy director of the China National Space Administration (CNSA), inaugurated an international cooperation center for satellite data and applications, and a data and application center for the BRICS remote sensing satellite constellation.
Chinese precedent and general secretary of the Communist Party of China Xi Jinping visited Wenchang Satellite Launch Center April 12, calling for the site to become a world class spaceport.
“I hope you will vigorously carry forward the spirit of ‘Two Bombs and One Satellite’ and the spirit of manned space program, eye the frontier of global space development to meet the major strategic needs of China’s space industry,” Xi said.
Wenchang is currently preparing a Long March 7 rocket to launch the Tianzhou-4 cargo spacecraft. The mission, expected to launch in early May, would be the first of six launches in 2022 to complete the construction phase of China’s Tiangong space station.
The moves in Wenchang reflect an explosion in Chinese launch plans and space activities. China launched 55 times in 2021, with more than 60 planned this year, including commercial actors. In comparison China made 19 orbital launch attempts in 2015.
China is also developing sea launch capabilities with facilities at Haiyang in the eastern province of Shandong, a new commercial launch site in Ningbo, and new launch complexes at the national Jiuquan Satellite Launch Center.
However, threats to the short-term outlook from inflation, construction costs and rising interest rates were now causing investors to revise their profit expectations, just as the market was witnessing robust growth in multifamily and industrial and reporting a continued recovery in office, retail, and hospitality.
Tina Lichens (pictured), chief operating officer at LightBox who conducted and compiled the report, said her biggest surprise compiling the study was the “frenzy of activity” in the market, even when compared to 2019, which she described as a benchmark year.
“We’ve never seen this kind of activity in terms of properties coming on to the market. It’s insane. And it’s all asset classes all across the US,” she said.
Asked why the sector was so buoyant, she said: “There are always going to be opportunities. Our debt professionals and mortgage broker clients are telling us that because there’s so much liquidity in the market, there are many more debt funds out there and more financing options than ever before.”
Despite the evident growth, doubts were now emerging inside the CRE space in response to inflationary pressures, with experts foreseeing lower profit margins compared to last year. The report also noted that despite the fact there was significant capital allocated to the CRE sector, there was limited availability of assets in certain sub sectors, such as industrial.