There's just so much emotion-driven anti-landlord sentiment. I don't get putting the best cap rates in the entire real estate world on what I think has the most frightening populist tail risks. You guys need to understand: 75% of dem primary voters under 40 voted for Bernie Sanders. Have you ever listened to Chapo Trap House? When every underemployed 25 year old is on Facebook leftist groups sort-of-joking about putting their landlords into gulags, doesn't this make you think maybe we should be adding a few hundred bps to our required yield to compensate for guillotine risk?
Real estate is the ultimate rule-of-law bet. I've seen way more deterioration in the social contract on that (from both parties) over the past few years than seems priced in by a 20% move.
interesting, haven't really felt the need to thoroughly quantify this risk as it relates to luxury/semi-luxury housing, saw it as more of a risk to my NEN which is more of a slumlord type in boston. (which I actually completely blew out of at a 25% loss to add to this basket). NEN is/was cheaper, thought this stuff was lower risk/more liquid/higher quality.
The most direct address of it I've seen is in Essex's deck (slide 21), text copied below:
Housing costs remain a key political and business issue across the country with many states implementing various forms of rent control legislation including Oregon, Colorado, Florida, Illinois, Massachusetts, and New York
California’s AB 1482 will cap renewal rents at CPI + 5%, providing renter protectionswhile not destroying the incentive for new home development
Essex has a long-standing guideline capping renewals at 10% and expects AB 1482 will result in approximately 10 bps impact to 2020 same-property revenues, primarily due to short-term rentals
California’s legislatures passed several housing related bills aimed at incentivizing affordable housing development
A referendum to amend Costa Hawkins will be on the November 2020 ballot. A similar proposal was soundly defeated by voters in 2018 and the apartment industry is aligned to protect the incentive to build new homes
It is highly likely that California’s 2020 ballot will contain a proposal to modify Prop 13 for Commercial and Industrial Properties, creating a rolling 3 year re-assessment for property taxes. Fortunately, Apartment properties are not affected by the proposal
“Since 2005 California has only produced 308 housing units for every 1,000 new residents. Add in the fact that California will be home to 50 million people by 2050, and it’s obvious we’re not on pace to meet that demand…we need to generate more funding for affordable housing, implement regulatory reform and create new financial incentives” –