The NYC Landlord Who Says the "Golden Age" of Being a Landlord Is Over
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00:53all investing is subject to risk vanguard marketing corporation distributor.Hello and welcome to another episode of the Odd Lots podcast. I'm Joe Wisenthal.And I'm Tracy Alley.Tracy, I'm not sure if you remember, but we did an episode recently in the outro.And like someone tweeted about this. I think your final line was, it's pretty good to be a landlord.Like we were talking about rent and you're like, it seems good to be a landlord.I stand by it. I can't believe I'm getting criticized for throwing out these truth bombs.It's good to be a landlord.
01:34No, I don't think it's even a criticism.It's like sometimes the truest things are the obvious things that no one says directlyand that someone just says, like, it seems pretty good.And like rent prices, as we've been discussing, like they never seem to go down.There are all kinds of tax advantages.It seems like to owning real estate.It's hard to build more of it.It seems pretty good.
01:58It seems good.I guess my question is, was it always this good?And will it always be this?good. I mean, the reason we're talking about it is because it does feel like there is a backlashat the moment or more of a backlash. I guess landlords are never an especially belovedsocial class. But with prices being what they are at the moment, with rents going up,particularly in places like New York City, it does feel like there is this question of whetheror not maybe the government, the state could do something to attenuate those higher rent prices.
02:30I guess there's like two questions to my mind aboutthe sort of like whether it's good to be a landlord.And one is like, okay, we do know that like probably like rent growth is going to slow.And we talked to the guy from apartment list, Chris Salviotti several weeks ago.And he's like, okay, probably like rents are going to come down a bit maybe or flat or maybe not grow.But like that's just a cycle thing, right?And then there's the question of like, is there something deeper that's not just about like the macroeconomic cycle, but is something going to like change about the business?And, you know, like, one thing that I sort of still kind of believe in markets is that, like, if there's like alpha somewhere, if there's above market returns, it can't stay forever.
03:15Eventually, like, it's got to get armed away, right?I think maybe I'm a little bit more cynical than you.I think people will try to hang on to their price advantage as long as they possibly can.Yeah.No, I mean, I agree.It's just like, they can't be like some business.They're just like permanently better than all the other businesses, right?Like, it's not how markets or capitalism are supposed to work.
03:36Like capital is supposed to flood in or supply is supposed to come on.And eventually the returns from asset A on a risk-adjusted basis should equal the returns from asset B, also, you know, on a vol adjusted basis or something like that.Well, I guess this is where we start talking about real-world constraints and policy constraints again.But yes, in theory, it should change.Right.And so we have been, you know, talking about, you know, real estate quite a lot.And I do think that in this sort of like pandemic slash post-pandemic environment, lots of anxiety about real estate.Not just like high, you know, high costs are a huge aspect of it.
04:15Availability, the types of real estate that people want.And so it's like a good question to like, how good is the landlord market been?And if we're at a period where a lot of things are changing, rates are reversing a 40-year.I was about to say I think interest rates are going to be the big factor here.Leverage.aspect of the real estate business reversing, can the golden age of being a landlord persistif many other macro things and political things are changing?Is it still good to be a landlord?
04:44Is it still good to be a landlord?All right.Well, I'm very excited about our guest.We're going to be speaking with Ben Carlos Typen.He is a real estate investor and broker in New York City.And he has a lot of views on this question and why maybe the golden age is coming to an end.or will. So, Ben, thank you so much for coming on odd lots. Glad to be here. Thanks for having me.So before we can even ask the question, is the golden age of being a landlord coming to an end,
05:13we have to first establish, was there really a golden age? And I guess the question, the wayI think about that, is it true that real estate owners, landlords, people who rented outtheir units enjoyed a period of unusually high and stable returns? Yeah. So, I mean, first, I thinkit's important to make a distinction between different types of real estate owners. So there's,you know, residential rental landlords and commercial landlords and even homeowners. I'm going totalk today mostly about residential landlords and homeowners. And you are a residential landlord. I am aresidential landlord in addition to being a commercial landlord. And I'm also also a broker that dealswith a lot of other residential landlords and investors on daily basis.
05:58So what is this goal, tell us to establish for us that there, in fact, has been a golden age.So I think in order to understand there's a golden age, you have to understand the historythat preceded it.Okay.So, you know, there's this great paper by this professor, Katerina Null from the University ofBonn that looks at the housing prices over time from 1870 to present.And she studies 14 countries, including the United States.and what she found is that up until around 1950, depends on the country, in the United States
06:30is probably the late 60s, housing prices were relatively flat, and then after that they've exploded.And that's housing data rent and otherwise is notoriously difficult to capture because it's such a disparate,distributed market. But that backs up with qualitative observations as well.So like there's this great book that I recommend everyone read about the history of these New York City real estate families called skyscraper dreams.And there's a recurring theme in this book of sort of the residential, the families that specialize in apartment buildings complaining about not being at getting as rich as quickly as the office developers or the office landlords.Because, you know, partly because of rent control, but it was just a sleepier business.So what changed in the mid-20th century?A couple of different things.
07:21We're all familiar, I imagine, with the story of like the subsidization of homeowners and single-family homes and the suburbs.And simultaneously, as that was occurring in terms of the public's investment in the apartment business and rental housing,it shifted from public housing to private sector solutions, whether it's, you know, Freddie Mac subsidizing multifamily developers or even, you know, nonprofit developers.And simultaneously with that, land use controls were implemented to protect the investments of homeowners.That's sort of the best, the most generous way to describe it.It also did things like enforce de facto segregation and school segregation and all sorts of other less noble things.So in the late 70s, after all this had happened for a decade or two, what you had is this coalition form of homeowners and conservative interests,both business and otherwise teaming up to pair back rent regulations where they existed,
08:27ban them where they didn't exist,and generally implement a set of policies that discriminated against renters either directlyvia things like property tax policy or indirectly because most renters at that time were ofsome sort of marginalized status socioeconomically.So they all, you know, they all.also paired back the state's ability to regulate landlords, both in practice, but I'd say morecrucially in terms of state capacity to actually effectively punish landlords for misbehavior.So, for instance, in the original rent stabilization program in New York City, there was a way
09:09for the buildings if they were violating certain standards to be, their rents to be, you know,paired back and the state could take to take control of these buildings in a more assertive waythat that was then removed. So let's, you know, before I get to like the more specificconsequences, let's talk about like what that actually created from market structure perspective.Homeowners become this very powerful political block. Their relative permanence increases theirpropensity to vote and they team up with conservative interests to weaken the state.The idea that everyone becomes a homeowner becomes gospel and homes become used asinvestments. But this was always sort of a Ponzi scheme because you know the you're protecting
09:53the investments by putting up barriers to entry. So you know one generation buys in gets rich off of itand then housing prices get too expensive so that the next generation can't buy in or if they dothey're buying in a much more vulnerable terms. Burdensome. Yeah, you know, they're higher,loaned the values themselves are arguably inflated. So all this leaves the rental market.as a market with essentially unlimited demand,a growing pool of participants on the demand side.And unlike other utility markets,which is basically what housing is,
10:33it's vastly and wildly unregulated.So it would be like Enron in the early 2000s and late 90sthat was just going wild on deregulated energy markets,except we've been doing it all over the country for decades.Today's show is brought to you by Vanguard.To all the financial advisors listening, let's talk bonds for a minute.Capturing value and fixed income is not easy.Bond markets are massive, murky, and let's be real.
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11:48Vanguard Marketing Corporation distributor.Renno mishap?That's embarrassing.You know what's not embarrassing?Using fig for a home improvement loan.A quick, simple, and transparent offer in minutes.Borrow Better with FIG. Visit fig.ca.Can I just ask a really basic question, but like, if you're a landlord, how are you making
12:11most of your money? Is it by getting the monthly rent or is it by building up a real estateportfolio and then selling it or flipping it at some point in time? Like, what is the mix?And I know you made the point about the difference between mom and pop landlords versus the bigcorporations. Can you just talk a little bit more about the different business models?Sure. So partly that depends on the,the business model of the landlord, but also depends on the market. So New York City is much moreof a appreciation-based market than a rent-than a yield market, whereas, you know, someplacein, you know, the Sun Belt might be more yield-focused than appreciation-focused. So in New York
12:48City, you typically make your money selling or refinancing or by generating scale. Scale obviouslyhelps in every market. Whereas, you know, in otherless core markets, the more of the return is in the yield.And this is a good segue into sort of the other dynamic that produced this situation is that,you know, we have this vast unregulated rental market.And simultaneously, we have an institutionalization of the business of multifamily.And this is kind of a, you know, this is a broader economic trend, you know,that happened with corporations in the latter half of the 20th century.
13:26And even with other sectors of real estate.So like 20 years ago or 30 years ago, the self-storage business was a very mom and pop business.But now it's this hugely institutionalized business.So this has happened in a particular acute way in multifamily because of just how big of a market it is, how longstanding of a business it is, and how relatively homogeneous the product is.Well, I was going to say, too, I mean, I know like if there is this inherent challenge of creating new units and everyone and we talk about like the, you know,the sort of barriers to entry.I have to imagine that scale becomes a very big advantage in knowing how to navigatethese permitting certain, like, how do you do construction in New York City?
14:13The entities that have done it over and over and over again have to have a pretty significantadvantage over a smaller or less institutionalized.I mean, I get there's a difference between developer and landlord, but it just feels like,with all of these things, there must be quite a few advantage.to scale on this type of stuff?Yeah, I mean, there's definitely a difference between landlords and developers, but I thinkyour broader point is correct, which is, and this has been particularly enabled by technology,this used to be a very inefficient business, and the institutionalization has sucked all of
14:48the inefficiency out of this business through, you know, technology that has been implementedto, you know, price rents more efficiently.the disaggregation of functions.So historically, you know, the apartment ownerswhere, you know, everyone was sort of in the same company.And now all these different roles have been distributedinto other companies, their specialists that providethird-party services.
15:14It's become a business where everyone is getting their cut.And scale puts you in the best position to, you know,reap the benefits of economies of scale.So your argument is that, you know,a process beginning, I guess,in the 1950s of deregulation combined with institutionalization of the rental market starts to changethe profit dynamics for landlords.Can you talk a little bit more about exactly how that happens and how it sort of develops up
15:45until, I guess, today?It's really demographic-driven.It was designed to serve this growing class of homeowners.A growing class of college graduates enters the real estate business.historically it was a business that a lot of people without that much education could get into.And they start applying modern business processes to pricing units more efficiently,to operating the buildings more efficiently, just picking it every possible part of the businessto extract profit out of it. That has served the industry very well, but it has not served,
16:26arguably the greater public very well. And I think that's sort of where these dynamics thatthese twin dynamics of demographic change prompting policy and technology prompting institutionalizationare now going to flip back the other way and we're starting to see the beginnings of that.So I wanted to obviously like talk about this flip and some of the demographics and all that.But before you do, can you just expand? You made one point about disparate property tax treatmentthat you said, like, put renters at a disadvantage. Can you clarify, like, what is in the codethat is so advantage or advantageous to landlords? Sure. So as a general matter, around the UnitedStates, homeowners are viewed as the most important political block in any jurisdiction,
17:16and their property taxes are kept low, and particularly the increases in their property taxes.So municipalities really have very few levers for generating revenue in this country.So they need some place to make up the revenue.So as a result, apartment buildings start taking on a larger and larger share of the burden.This works different ways in different jurisdictions.But in New York City, for instance, buildings over 11 units make up an increasing share of the revenue for taxes.this also applies to commercial properties, whereas buildings of one to three units haveartificial or caps on the amount that their assessment can grow every year.
18:02And even buildings of four to 11 units, excuse me, four to 10 units, also have caps,although albeit is not as good as the one to three families, which is sort of a reflectionof the same political dynamic in that the people that, at least policymakers, believed,own these small apartment buildings are closer to a voter. It's sort of your yo-man, your landlord,not the big bad landlord. So these groups have been given preferential property tax treatment,and the apartment buildings, and in turn, their residents, have been getting increasinglyunfavorable property tax treatment. So the landlord business, what exactly are the risksthat landlords are taking on and how should they be compensated for that? Because when I think of a landlord,
18:49it's like, okay, maybe you have a bad tenant who doesn't pay their rent on time. That's a little bit of a risk.But in general, it feels like there are a lot of protections around the business. And it also feels likethere's a tendency for real estate prices to mostly go up, especially in New York. Right. So dealing withproblematic tenants and also operational increases. So let's talk about the tenants.The tenant side, that varies widely from landlord to landlord.So, you know, our tenants, generally speaking, are pretty wealthy.I have never had to evict someone.And, you know, we rarely have issues.
19:33Whereas there's lots of landlords that have, you know,tenants that have a more marginalized socioeconomic status.and that's trickier.However, the demand for that is very high,and the yields that those properties trade forare generally higher.So landlords are compensated for that risk.And furthermore, with the institution
19:59and the growth of Section 8 rental subsidies,a lot of the rents being paid by marginal tenantsare effectively underwritten by the government.So how much risk is a landlord really takingon a Section 8 building?from a tenancy perspective. From the perspective of operating expenses, as we talked aboutproperty taxes, you know, are being constrained in some cases, but in other cases they are not.And that's, you know, where operational efficiency comes in. So, you know, operational costs are
20:31the most important costs for landlords to control. And in some ways, they're in theirleast amount of control. So at least with financing costs,You have some decision over when you make that, when you incur that cost.But for, you know, fuel, maintenance, like, you really don't, I mean, maintenance to a lesserto give it, fuel and another more recurring costs, you don't have as much control.I was just, so I want to ask about financing because, of course, you know, we sort of talked aboutin the intro, lots of things are shifting.And one thing that seems to be shifting is like maybe this 40-year steady decline in interest
21:09rates.Can you talk a little bit about from your experience?like your mix of like equity, borrowing, et cetera.And if there is, you know, this like sustained reversal,what does that do to your economics?Well, it doesn't do that much or won't do that much to my economicsbecause I'm going to get out of this business.But the...
21:30You're going to stop being a landlord altogether?I'm going to stop being...It's not so much, it's bad.We can get into the reasons why further.But like, I think going forward certain types of players in this business,are going to make money, or going to make sort of above average returns.And the rest will make, you know, utility or bond like returns.And if I'm going to buy a bond, I'd rather buy tips.
21:54And if I'm going to invest, you know, I'd rather invest in real estate that is less managementintensive than residential.Well, okay, just before we get, because this is the heart of the question, why youwant to get out.But before we get to that, were you staying in?Can you talk a little bit about it?So I'm financing.I think, you know, as you pointed out, we've been, you know, coming out of this 40-year period where interest rates have been very low.
22:18And a lot of business models have been built on, you know, very cheap capital.And as a result, yields have become very low in certain markets, really most markets.And I think that's a particular challenge in markets that were depending on,One of two things.Regulatory arbitrage and appreciation.So in, you know, we talked about the difference between marketsin which the main component of the return is yield versus the appreciation.The yield markets, they're going to not be as challenged from a sort of, you know,
23:01being able to sell for the right price perspective.Certainly some people will.But a market like New York City, that's a little more challengingbecause if you buy at a 5% return,and you finance that at a three and a half percent return,and you're assuming that you're going to be able to sell that at a four and a half,or you were when you bought it four years ago,that's not a realistic assumption anymore.
23:22So, you know, depending on your leverage level,you have a different set of options to either continue onor extricate yourself in that situation.A little too relaxed during yoga?That's embarrassing.You know what's not?Debt.Consolidate your debt with a loan from fig.
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24:57That's Bloomberg this weekend.Saturdays and Sundays starting at 7 a.m. Eastern.Make us part of your weekend routine on Bloomberg television, radio, and wherever you get your podcasts.Can you talk a little bit more about what you see changing now other than the higher interest rates?Like what is the mix that is going to pressure the rental business?Sure.So, you know, we have this, the demographic decisions, a demographic-driven policy decisions that were made in the mid to late 20th century,are now coming home to Roost.
25:34You have this growing class of renters.You know, you have increasing rent burdens, evictions,or destroying lives, just like foreclosures are.And I think most crucially, this crisis is now including people from that very powerfulpolitical bloc.And so far as, you know, people of my generation, in our generation, really,who would have been homeowners 30 years ago are now not going to be homeowners.Or if they are, they're going to pay much more for it and become homeowners much
26:01later in life and view it more as a housing cost stability vehicle. You know, there's this,there's this joke about the 30-year mortgage being a homeowner rent control. And I think that sortof logic is now seeping into the homeownership market and it's becoming less of a,slowly, becoming a less of a gambling market. So you now have this big demographic of peoplethat are concerned with rental costs. So this is, this seems really key, which is thathave this idea of like, what a good voter is, what a good citizen is like. And for years,that person was a homeowner. Right. And now the basic idea is that there is becoming a meaningfulvoting politically influential bloc that is much more likely today to be a tenant than a homeowner
26:53than they were 30 years ago. And so the political wins are over time just like, oh, the voters,these ideal voter is not necessarily a homeowner.Right.And it's also, you know, that sort of new renter block is teaming up with the old renterblock because it's not like we didn't have renters and they weren't organized before.It's just that, you know, politicians could sort of ignore them because they're of a marginalizedbackground or because they are perceived to not vote as much or whatever reason they came up with.So this is manifesting itself in two and a half different ways.
27:29One is the YIMB movement, which for those who are not familiar, is the Yes,and My Backyard movement, which advocates for building more housing, particularly in high-demandareas.Arguably, it's a successor movement to the fair housing movement from the late 20th century.I was one of the founders of the biggest group that does is the New York City called OpenNew York.And in parallel, we have a resurgence of the rent regulations.regulation movement and sort of
28:01brought tenant protection movement broadly.And I think it's important to keep in mind that likeAmerica is pretty unique in being adeveloped country and having vastly unregulatedrental market. Like we have you knowunusually low homeownership rate contrary to whatpeople think, but unlike countries with similarly lowhomeownership rates, we typically don't have rent controls. So like
28:23Germany has comparably low homeownership rates, they have rentcontrols. France has comparably lowhomeownership rates, they just reinstit, a parish just reinstituted them. So, you know, we've seenthis resurgence of, you know, rent regulation and even in, not just in places like New York andCalifornia, but in Minnesota, in even in Orlando, they had something on the ballot this last year.And I think this is a good segue in, for both of these, into how the consequences of institutionalization.because institutionalization has created real estate entities that are much better targets of organizing from political perspective.They might not be, you know, Blackstone might not be as vulnerable as your mom-pop landlord for organizing an individual building.
29:12But in terms of like getting policy passed and creating a political coalition, it's much more compelling.This is interesting, you know, like you hear like labor people talk about like actually it's kind of good that Amazon is becoming a huge employer.Because if you can get unions into Amazon warehouse, you've radically.like changed the American labor market.Or at least you have one identifiable entity to target, right?And so then if you have these big institutional landlords, then like you have a, right,I hadn't thought about that, like you have a thing to organize again.It's also already sort of happening because you hear so much nowadays about institutional
29:47investors buying up single family houses for rent or for flipping purposes.Right. And it's not like single family landlords didn't exist before.But now we're talking about it because it's Wall Street.Yeah.And the third, I'll get into the third one in a moment,but this is also a function of technology because the same similar technologiesthat made it easier for institutions to be created and organize themselvesare now making it easier to organize among tenants.
30:22And historically, if you, if a bunch of people in different buildingsall over the city had under different, or we're living under the same landlord, like, how are theygoing to find each other? But now, you know, there's all this public data. There's the, you know,the internet. There's all different ways for people to get together and build coalitions thatdidn't exist before. Can I ask you, you know, you mentioned the MB movement. We talked aboutsome of this on a recent episode and you're a part of an organization. You know, I see all the tweetsand stuff. Can you talk specifically about, like, how it's moving the dial, like, beyond the tweets?that it actually is affecting the economics of the business?
30:59Sure.I'll first talk about how it's affecting the politics.Like in California, they've passed a bunch of huge laws.You know, they've banned single family zoning.They've up zoned, you know, commercial quarters all over the state.In New York State, the governor recently came out with proposalsto build 800,000 new homes over the next decade,which is over double the amount that was built the last decade.
31:23And in terms of the economics of the business,I think what it's mainly changed so far is where developers are willing to take chances on trying to rezone.It hasn't so much changed the economics of your as of right typical day-to-day development becausethe NBUmo is very young and there hasn't been that much built yet.But now a developer might be more likely to take a chance on a, on,a rezoning in a rich neighborhood, which actually is going to be much more profitable for them,but would have than doing a poor neighborhood, but was seen as very politically challenging,because, like, Open New York got Soho and Noho rezoned for housing,
32:09which people thought never would happen.So it's mainly changing the sort of political environment for participants in the real estate industrythat are involved in development.And the actual economics of being a landlord,haven't changed in a direct way.It's been more disparate, like you saw in the journal,recently came up with this big storythat everyone was reading about how rents have fallen over the country
32:37because supply, so much supply is coming out of the line.The NB movement can take some credit for that,but it's also just these developers are responding to market signalsthat there's not enough supply.It feels to me like there's still a lot of institutional capitalflowing into this business.I mean, certainly we've talked.talked about, you know, the big players who are snapping up single family homes, and that's been
33:01a major talking point for a couple years now. But why is it, why does the industry presumablystill see the rental market as a profitable one? Like, there still seems to be a lot of interestand money flowing into the space. And presumably it's coming in at, you know, the type of yieldsand values that we've seen in previous decades. I think the industry sees the industryexcuse me, the multifamily marketfor, as a profitable opportunity,for all the reasons we've been talking about.The demand is insatiable.
33:34There are controlson how much supply can be added,and it's a very capital-intensive business.So it's a good way to deploy capital.I'm not suggesting that there's going to besome sort of crash.In fact, I think institutionalizationwill continue apace,
33:50because institutions havea lower cost of capitalthan your mom and pops,and they have the economies of scale and ability to execute so that they can make money in this environment.And I, or in this sort of new environment that I'm positing.And they are one of groups, and I think just representative of the big group more broadly,that's going to make money in this environment,which is that people that can actually add value.
34:19So institutions are adding value from scale.Operational efficiency developers are adding value from actually producing houses,What I'm the people that I think are going to be the losers in this scenario or relative losers are landlords, you know, of which there are many, that are really, have really just been riding rents and not really like adding much.Yeah, the purest rentiers in the market.Can you talk about the other prong when you say the return of sort of like tenants rights, whether it, what is, is it rent control? Is it eviction restrictions? Like, what does that look like in the year 20s?Can I tack on to that, which is you mentioned the tax code.And of course, there are a lot of tax benefits that are meant to incentivize home ownership.And I've often, this might be a weird question, but I've often wondered, like, why don't renters get some tax breaks?
35:10You know, it's not really optional to pay your rent.Anyway.No, I completely agree, Tracy.And, you know, the biggest expenditure of the federal government on housing is the homeowners interest deduction or mortgage interest deduction.And, you know, there's various ways that that could be replicated, because I doubt it's going to be paired back.Four renters, it could be universal Section 8, it could be some sort of renter's tax credit.I don't know.But I think, you know, as this demographic shift portends political coalitions and change, that will, that's certainly on the menu of things just like Joe mentioned.
35:50what happens in where, in what order is going to vary widely based on the state.So in New York State, the big push right now is for good cause eviction, which is sort of a very light touch rent regulation.That passed in California in 2018.It passed in Oregon.They have it in D.C., a couple other places.They had a New Jersey since the 1970s.and that so I think that sort of thing is right sorry what is good cause eviction good cause eviction is basicallydefense in an eviction case that if a landlord um if a tenant defaults on the lease a and the landlord
36:37has raised their rent by this is defined differently in different places an unconscionable amountokay the tenant can use that as a defense for not being evicted um and this is umparticularly valuable theoretically in instances in which a, let's say, the conditions in thebuilding are really bad, a tenant complains, and then the landlord says, oh, you know, I'm justnot going to renew your lease, or I'm going to give you a huge rent increase so that you don'trenew your way.That is a de facto eviction.Right.
37:08So that sort of soft rent regulation, I think, is going to become more prevalent.You know, the Supreme Court could certainly, you know, change some of this.In the main, there's different ways that, many different ways that tenants' rights can be increased,whether it's some form of rent control to right to counsel, to universal Section 8 or vouchers.And the point is that there's a growing political coalition to agitate for these measures,whatever they may be in a given political environment.So if you're no longer a landlord, well, first of all, how serious?are you about that statement? And then secondly, what do you do instead? So I am still a landlord.
37:55This is not going to be a fire sale. And I will always be a landlord because we're still commerciallandlords. But, you know, it's going to be an orderly liquidation. Because, you know, I don't,this is really a secular shift. This is not going to happen overnight. And plenty of people disagreewith me. So they're welcome to buy my properties. I think we inadvertently, like this episode is justCall Ben, he has properties for sale.But I think from a brokerage perspective, you know, I'll continue to work with, you know,players that I think are either, you know, want to get out as a result of this dynamicor institutions that, you know, I think will benefit or developers.
38:33But what I'm most interested in and I'm working on a lot right now is trying to figure outways to bet on this dynamic and short, essentially.Shorting the real estate business generally, and apartments, particularly,is historically been very challengingbecause maybe you can short read stockbut like it's not a it's not athat liquid of a market and we're working onwhat we think are very creative ways
39:00to to bet on this dynamic.Well let me ask you you know you saidokay you're not really necessarily expecting a crashbut on the other hand likeyou know and we talked about this in an episodeseveral weeks ago with Connor Senthis idea that like everyone just assumedit's always a winner
39:17or for some of the reasons you describedas just like this secular shift,people moving to the cities.It's always one.Even the great financial crisis didn't hit rent.Like if you think about like, well, what is the short case?How much of it is it that group think essentiallywithin the sort of rentier class or the landlord class
39:37just like refusing to see the writing on the wall?And is there just sort of, I don't mean a bubble in the price sense,but a bubble in this sort of like thinking through thatsomething could actually change in a way that we haven't seen in decades.I never want to underestimate the ability of flows to impact a market.You're speaking Tracy's language.That said, I think it's a question of whether it is who this is a winner for.And I don't mean, you know, tenants versus landlords.
40:09I mean within sort of the investment market.So like if you're a, you know, in the capital allocation business and you want to be a bond investoror a fixed income investor, I think multifamily is going to continue to be a great business.But if you want to earn these sort of bonans or returns that you've been earning for the pastseveral decades without doing much work, then other sectors of real estate might be a betteroption for you or other sectors entirely.I just have one question, and it sort of connects this conversation with the one we had withChris Salviotti about rents actually moving.
40:42What advice do you have for people who are trying to negotiate their rent with their rent?landlord down obviously not up every situation is specific so I'll do my best to generalize but I thinkyou have more leverage than you think generally speaking if only because a landlord if you if youleave a landlord probably loses a month of rent so at the very least you should factor that monthmonth of loss and rent and maybe even a broker fee into what, you know, you're negotiating for.All right. Ben Carlos Teippen, thank you so much for coming on odd lots and good luck in yournew endeavors. And I hope you timed the market well with this episode. Thanks for having.Tracy, I thought that was really fascinating. And, you know, just this idea, it's like, yes,
41:48there's obviously certain like market changes, supply and demand, interest rates and all that.but also this idea of like political changes seemed really important here.Yeah.Maybe not something that investors are really thinking about that much.Well, a couple of things there.So one, I think it's always like, it's always a bit difficult to call a secular shift in something.But if you're going to do it, the sort of post-pandemic environment, when there does seem to be a lot of momentum behind, you know, the labor class versus the capitalist, that seems to be the time to do it.Well, and also it's like, you know, you and I rent in New York City, and we probably know a lot of people, friends who are like professionals and have good salaries, et cetera, and who rent and who feel that like buying is very risky or unattainable or like put, you know, they can't haven't saved up for a down payment or for whatever reason.
42:41And it's like this idea that's like, well, like this is like a very, you know, there's the traditional like more marginalized renter class, more professionalized and so.like this coming together seems like a very like potentially like powerful macro secular trend.Yeah.But the key thing I think is always going to be the policy and whether or not you do startto see those sort of institutional protections for renters like you do in some other countries.And I know I think we've spoken about Germany and Austria before.We're going to have to do a Germany episode, aren't we?Austria.
43:15Austria.Austria.Why the Austrian rental market is so different to the U.S.Let's do that.And also that point about like,there is a big institutional face of landlords.I thought it was super fascinating.So the way that like Amazon becomes a good, or Starbucks becomes a target of labor organizing,
43:32you start to have this similar dynamics with tenant organizing.Never underestimate the power of a scapegoat.Yeah, totally.All right.Shall you leave it there?Let's leave it there.This has been another episode of the All Thoughts podcast.I'm Tracy Alloway.
43:46You can follow me on Twitter at Tracy Alloway.And I'm Joe Wisenthal.you can follow me on Twitter at the stalwart.Follow our guest, Ben Carlos Typen.He's at So Bendito.Slide into his DMs.Made it an offer on one of his buildings.But if you're listening to him making the bearcase,
44:03I don't really know why you'd want to.Follow our producers,Carmen Rodriguez at Carmen Armin and Dash Bennett at DashBot.And check out all of our podcasts under the handle at podcasts.And for more Odd Lots content,go to Bloomberg.com slash OddLots,where we post transcripts, Tracy and I blog, and we have a weekly newsletter that comes out every Friday.Thanks for listening.
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