Multifamily News Roundup – November 2019

Housing Starts and Market Demands

Numbers released in November indicate that housing starts have risen to their highest point since the beginning of the year. The number of permits issued for home construction has in fact reached its highest number since 2007. This boon in new housing is being driven by low interests and the subsequent interest in single-family stock that stems from it. This uptick in new homes may alleviate the national housing shortage to an extent, though high construction and land costs and difficulty securing skilled labor will continue to affect the capabilities of builders and developers going forward.

Blackstone, Invitation Homes, and Elizabeth Warren

In other single-family news, Blackstone Group has completed the sell-off of its stake in investor Invitation Homes. The company purchased tens of thousands of houses across the country in the wake of the Great Recession. Invitation began as a private, joint effort by Blackstone and large real estate management companies Treehouse Group and Riverstone Residential, and went public in 2017. Blackstone began selling their stake—almost 40 percent of the company— in March 2019, and has netted roughly $7 billion.

Blackstone’s retreat from Invitation coincides with criticism from Democratic senator and presidential candidate Elizabeth Warren about the company’s decision to provide financing when they began purchasing homes in 2012. Warren argues that the central issue is that Blackstone profited from the implosion of the housing market, which caused many to lose their housings, savings, or both, and converted homes owned by individuals to rental units. Blackstone and others assert that the capital injection provided by Invitation and other institutional buyers stabilized neighborhoods that might have seen the negative impacts of blight caused by abandoned houses purchased by individuals with risky mortgages. It also provided necessary liquidity to the housing market: without large organizations like Invitation, the market would have ground to a total halt.

Big Tech Skepticism

Big Tech’s influence on the housing market was originally accidental, a product of inundating relatively small cities like San Francisco and Seattle with thousands of highly-paid workers over a short period. Several companies, including Google, Apple, and Microsoft, have offered various plans to alleviate the rise in housing prices triggered by their presence up and down the west coast.

However, impediments and roadblocks confront the tech giants. Cities and local groups of citizens have stymied efforts to build similar projects in areas where it would alleviate pressure and lower prices. The cost of labor, materials, and land in California remain astronomically high. These companies have taken steps to get around these problems (for instance, they own most of the land that will see development, eliminating one major bill), but they still plan to deliver only an estimated 40,000 units on an unclear timeline. While not insignificant, it represents a dent in the promised 3.5 million units current governor Gavin Newsom discussed on the election trail. To reach the goal of adequate housing in the state, local governments will have to, at last, approve housing with the same enthusiasm they’ve approved office parks and shopping centers.