Activists are never going to listen to real estate companies’ earnings calls or read the pitch decks they send to potential investors.
A cynic would say they don’t want the truth to get in the way of a good story.
If they paid closer attention, some might realize that real estate firms, and economics in general, don’t work the way they imagine.
One person on X, making a preposterous case against a 244-unit apartment building planned for a large commercial site in Park Slope/Windsor Terrace, tweeted, “Increasing supply of market-rate apartments has no direct relationship to reducing rental costs in nearby apartments.”
He needs to come back to the real world, where the law of supply and demand is an iron-clad truth. It’s like gravity.
Unfortunately, skeptics can’t test the law the way they could test gravity by stepping off a ledge. All we can do is keep leading the horses to water by presenting the logic and the evidence. Pitch decks, for example.
Real estate people trying to raise money don’t waste time educating serious investors about basic economics. They skip to the chase, highlighting when competition is limited. The implication is obvious: Tenants and buyers have to pay more for their apartments, hotels, warehouses — whatever the company is selling or renting.
Take the investor presentation put out this month by GFI Capital Resources Group to raise capital in Tel Aviv for hospitality properties here.
“New York City is experiencing a slowdown in new hotel construction,” GFI explained on page 12. It attributed this to three factors:
- A law passed in 2021 required any hotel project to first secure a special permit, “thereby limiting supply for at least the next 5 to 7 years.” (In fact it will limit supply forever, unless the law is changed or the hotel workers union collapses.)
- Short-term rental regulations implemented one year ago have slashed the number of units available on Airbnb and other short-term rental platforms to just 3,000 from 23,000.
- About 16,000 hotel rooms have been converted to housing for migrants and homeless people, most of which “is expected to be permanently removed from the supply.” (That is, the rooms will be removed, not the migrants and homeless.)
Interest rates are a headwind, GFI acknowledged, but it predicted that “rates will decrease much more quickly than supply can come online in New York.”
Only 1,127 hotel rooms are in the planning stages citywide, according to GFI. Even if they were all built, it would increase the city’s total by less than 1 percent. That means hotel values and room prices will stay high as long as demand does.
The city’s vacancy rate for rentals also happens to be 1 percent. Anyone who denies that increasing housing would increase the vacancy rate, making it easier and cheaper to find a home than it would otherwise be, is unserious, delusional or disingenuous.
Curiously, some advocates point to the higher vacancy rate of pricier apartments as proof that more are not needed. They can’t seem to grasp that some vacancy is necessary for a housing market to be healthy. What’s bad is too much or too little.
A few politicians have had the courage to change their minds about housing — state Sen. Jabari Brisport and City Council member Erik Bottcher come to mind — but most elected officials only alter their views when they think it will help them win the next election.
But that’s better than activists, who never seem to change their minds. In part, this is just how humans are wired; look up confirmation bias. Plus, they like the dopamine hits they get by hating people who make a profit providing housing. (Landlords get a similar hit from hating socialists.)
One serial tweeter even insisted that filtering — people moving into new housing, thus freeing up less expensive units — never happens in New York City. This well-established chain reaction is plainly evident in property records.
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Another person tweeting at me about this issue finally asked, “Why do you care about my opinion of you?” Indeed, I often wonder why I engage with people whose minds appear made up.
The reason is, it will be hard to solve the housing crisis if tenants, who are two-thirds of the city’s population, don’t join the fight for more supply — or worse, if they side with those who benefit the most from the shortage: owners.