With rent control being passed in California, Oregon, and New York, government intervention in rental housing is heating up. This is something we have been predicting for a number of years given the housing shortage and relatively stagnant wages for lower to middle-income earners. We also had a lot of experience with it when we owned manufacturing housing communities where it was much more widespread than apartments so we had a sense of the conditions that would lend itself to rent control pressures.
It has been our belief at CWS that housing in totality has been undersupplied. This does not mean that apartments may not be over-supplied in certain metro areas, particularly in the urban core. This is the case because these properties are often very dense and result in the delivery of a lot of units at one time that can often result in rent discounts to entice people to rent at these communities so developers can expedite getting out of their construction loans and/or be in a position to sell their properties.
When we started to scale our apartment business in the mid to late 1990s our location decisions were based on investing in cities that would be highly appealing to knowledge-based workers. It was starting to become clear that economic growth would be driven by technological innovation deployed widely throughout U.S.
Last week we held our annual investor meeting and we had a record attendance of nearly 600 people (including employees). I told the audience that if we can grow our attendance by 7% every year that by the time we have our 100th annual meeting (this was year 49) then we should have over 11,000 in attendance.
With the tax overhaul now being law, I wanted to do a granular analysis of what the changes mean for those who own and those who rent in a high tax, high-cost state (California) and one residing in a low cost, low tax state (Texas).
I typically wouldn’t discuss Tax Reform until it has passed since it would usually be speculative, I am making an exception given that many of the parameters are known and because of its potential impact on housing. The basis of the plan was to cut the corporate tax rate first and then work around the constraints that Senate rules and supposed deficit hawks impose on the process.
It was quite a week of action for CWS, particularly for our risk management, safety, construction, operations, asset management, human resources, marketing, and maintenance teams. We have been having very early calls (at least for me on the west coast) every morning, including over the Labor Day weekend,
With the extraordinary events that took place in Houston, southeast Texas, and Louisiana as a result of Hurricane Harvey I felt that it was much more relevant to discuss this catastrophe versus part two of demographics and interest rates emphasizing Japan.
Houston: Hurricane Harvey
An estimated 27 trillion gallons of water has blanketed southeast Texas and parts of Louisiana.