Latest / Real Investor Radio Podcast / Ep 58: Build-to-Rent, Small Landlords, Rental Housing Industry, Rent Control with David Howard
Transcript
- Craig Fuhr (00:12) Well, hey, welcome back to another episode of Real Investor Radio. I'm Craig Feuer joined again by Jack Bevere. Jack, how are you today, Jack BeVier (00:21) Great sir, good morning, good morning. Craig Fuhr (00:22) We have so much to talk about today. have a great guest on today. So we'll just jump right in with David Howard of the National Rental Home Council. David serves as the chief executive officer of NRHC, which is a nonprofit organization representing the interest of single -family rent of the single -family rental home industry. He's responsible for managing all aspects of the nonprofits operating priorities and directing the organization's legislative and public. policy objectives. Can't wait to jump in with you, David. Jack and I usually start off with sort of, you know, what we see as one of the top, you know, happenings of the moment in our industry. And Jack, and so David, feel free to jump in and then we'll jump into a much more substantive conversation with you on what you're doing at the NRHC. But Jack, I think we would be, you know, it feels like I'm getting calls every day now from our investors looking to do 30 year fixed loans and that five year treasury has been on quite a slide over the last month or so and the rates right now for 30 year refis are looking more attractive than they have in a couple of years. So why don't you jump in and give us some thoughts on that and then I can tell you give you some color on a lot of the things that I'm hearing from these guys on a daily basis as a loan officer with the company. Yeah, jump in Jack. What are your thoughts on the five year? Jack BeVier (01:54) Yeah, like a month ago, I closed a refi for us. was about like 10 houses. And, you know, obviously we look at the DSCR loan rates, but we're also still paying attention to what the local banks and credit unions are doing. And I was, you know, I called around to all the credit unions and negotiated this like mid to high sixes rate on for, for five year, for a five year loan and was, you know, pat myself on the back for having found a six handle in the market and close that loan. And then a week later, the five year slid, whatever it was, like 40 basis points in a couple of days. And the five year treasury is the, the index that the DSCR loans most closely track with on our priced off of. So that obviously was based off of news about risks of inflation continuing to come down and actually really fueled more by a bad jobs report and concern that we may be entering a recessionary environment. So fears of recession drove the five year, all the treasury rates, you know, bond rates down. and that's great. It was, it brought a mortgage rates down as well for, for, residential consumer lending and brought the DSCR rates down as well. And so I was really kicking myself, right? Cause now I think we're, you know, rates are in the low sixes right now for 30 or fixed, based off of that move. And so obviously that makes it a lot easier. for investors to refinance and get max proceeds, right? Like they don't have, they're not as DS, they're less likely to be DSCR constrained in the underwriting. and it's, know, and from a, from a, pipeline perspective, I actually went back into our pipeline of, houses that were renovating and grabbed half a dozen of them and said, Hey, we were going to sell those to homeowners. But now actually with rates in this low sixes level, you know, we can actually afford to, afford to keep those as rentals. and so I'm hopeful that it can, that it, you know, that it keeps up. and I'm looking forward to doing my next refi at these lower rates and locking in low sixes, which I think, you know, covers can cover well, at today's home values. And I'm also thinking that it, and if it stays here, I think it's going to mean that there's better buying opportunities to, for investors to grow their rental portfolio on a going forward basis. Craig Fuhr (04:17) Mm Jack BeVier (04:17) for the past couple of years, it's been really tough, right? Because even if you wanted to add the rental value stayed up, rents have been flat ish, maybe a little bit up, but like, you know, flattish in most markets, and, where DSCR rates were, lending rates are, that it didn't cover, right? You had to put down a huge chunk of equity to, to make the debt service coverage work. So Yeah, I'm cautiously optimistic that we'll be able to keep building the rental portfolio at a little bit of a faster pace on a going forward basis. So I hope the rates stay down. I'm nervous about that, but yeah, it's better for now. Craig Fuhr (04:55) Well, you know, as one of the leading originators in the market for that product, Jack, we get calls every day from folks who might have a single rental that they want to refi as well as, you know, the very next call could be a guy who's got 12, 15, many or many more properties. And I think there's this sort of sentiment among some of perhaps even, you know, I would say probably the more sophisticated investors that I speak with that there's a sentiment that like that rate's gonna continue to fall. know, a lot of people are looking for Powell's, you know, comments in September. A lot of people still think that there's going to be two rate cuts by the end of the year, especially in this wild election season that we're having. And so, you know, give us your thoughts on, and David, you can feel free to jump in anywhere. Don't let us just drone on here. Give us your thoughts on that Jack because as you said these DSCR loans are so closely tied to the five year. Are those folks gambling right now a little bit in terms of a couple extra bips of a decrease? Because I think a lot of them are thinking that there's going to be a much larger decrease in the rates over the next six or so months. At least that's what they're telling me. you know, like to get both of your thoughts on that. I mean, it's a little bit of looking into the crystal ball, Jack, but, but, you know. Jack BeVier (06:20) Yeah. Yeah, I mean, I hope so. But I'm not I'm not counting on it for our business. Like I'm when like it was such a big drop in the five year that my nervousness is that it's going to bounce back because things don't you know, because things don't tend to drop and then drop a heck of a lot a lot further unless there's like truly actionable like we're going into a recession and there's like, you know, and there's data to really support that. I think that it's more of like you know, you know, to me, it looks like more of a fear, right fear of a recession that previously wasn't priced in and as heads cool. And people come back, you know, from August vacation, that my concern is that it's going to come that it's going to bounce back up before, you know, and maybe, you know, a year from now, it'll be lower, perhaps, hey, I hope so. That's too crystal ball for me to speculate on, right, frankly, especially going into an election. But But, you know, I don't know for Dominion, for our rental portfolio, I'm anxious about getting my next port refi in right now. David Howard (07:28) Yeah, and for us, we're at sort of an interesting position, which we can talk a little bit more about, in that we've got a fairly diverse membership of owners of single -family rental home portfolios, owners of all shapes and sizes, all geographies, coast to coast, north to south. And so we hear a lot, we talk to a lot of folks, we talk to a lot of folks here in DC. Craig Fuhr (07:28) Any thoughts there? David Howard (07:53) were certainly more knowledgeable about the in the workings of interest rates and mortgage rates than i am but the real question seems to be what kind of a trend is this how far is it going to extend to jack's point is this more of a temporary blip why is it happening if rates are going down because of what we saw in the employment report a couple of weeks ago that's probably not that much of positive Is there something bigger going on at a macro level? It's hard to see that anything significant or substantive really happens in this environment through the elections in November, either with the Fed or with the banks or the GSEs or anybody else, frankly. Again, barring some kind of drastic occurrence or happening in the marketplace. Should unemployment all of a sudden unexpectedly jump up or? you know, something like that happened. Assuming it doesn't, again, the real question is what kind of a trend does this represent? I think there's a lot of uncertainty in the marketplace. I think that's where we've been over the past 12 to 18 months. I'm not sure that people have a real good handle on where the economy is. We came out of a point in time where we had interest rates at all time, historic. in in the twos, certainly in the low threes, are we gonna return to that level? What does that mean in terms of how we move forward? How do we get all of these millions of homeowners who came in at a two handle or a three handle? What is their appetite to take something higher when they transition to a new home or a larger home or what have you? There are all these questions that are sort of out there that largely come from, again, this last three, four, five year period has been, in my opinion, very unusual for the housing market. There's been a lot happening that we just haven't experienced before. And so I think the longer term question is where do we go from here? And that sounds pretty obvious, I know, but, hopefully we'll talk a little bit more about that, but I think that's the real question. Craig Fuhr (10:16) Well, it's an interesting time, Jack. I mean, to see such a precipitous drop in such a short period of time, I mean, the phones are ringing off the hook because I think this it's a time where, you know, in terms of the rates, I should say that I think a lot of investors have been hoping for. I just wonder if, you know, if if if it gets better, if those rates get better and if maybe some of the guys that are still sitting on the sidelines waiting, you know, might get a surprise. in the next several months rather than, you know, a happy ending. So, yeah, we'll keep an eye on that. Jack BeVier (10:49) Yeah, I mean, for me, there's a there's a big difference right between 7 % rate and 6 % rate from a debt service coverage ratio perspective, like given where housing values are right now in, you know, in median rental markets, I know that that's impossible, right? California is way different than whatever Gary, Indiana, but like the different but for like, you know, kind of the middle of the road, classic rental portfolio markets, where investors can find some cash flow and Craig Fuhr (10:55) Hmm. Jack BeVier (11:18) and meet debt service coverage ratio covenant requirements. The difference between 7 % rates and 6 % rates is or seven and a half percent rates and six and a half percent rates is huge, right? Like that's there's an inflection point right there, right? It's a really important one, right? And values have been stubbornly high, right? Like even despite this huge increase in interest rates, we really haven't seen except for on a very micro basis, housing price decreases, certainly not on the level that that's commensurate with the affordability or the cost of the payment increase that's happened. And so, for me, it's locking in the wind, right? Like at, low, you know, at low to mid sixes, it works and let's lock in the wind and buy the next house, right? Like sitting on the sidelines, keeping my cash stuck in a property that allowed that, that, prevents me from adding the next unit that because I'm, because I'm hoping to get another 25 basis points or 50 basis points of rate decrease and trying to time that market. I feel like that's not a I feel like that's not a wise way to run a business by trying to time the market, right? Like, if you're bullish on American real estate, keep buying American real estate and it and then we're DSCR rates right now the math works. So lock in the for me, what we're doing is lock in the win and let's go buy more houses and build the portfolio faster rather than trying to time the market to squeeze out an extra 75 bucks of cash flow. Craig Fuhr (12:45) indulge me for another couple minutes on this, both of you locking in the wind jack. So how in terms of how you would structure alone these days, would you would you lock in that win it in the low to mid sixes with a five year prepay? Or are you more interested in doing like a shorter prepay, maybe fix three years? You know, give me your thoughts on that. Jack BeVier (13:06) When rates were in the sevens, I was a, a, a, a three to one or a lower prepay or lower prepayment penalty advocate, because I did think that rates were going to come down from there. Once we get into the inflection point of, pass that inflection point where that service coverage ratio works, like, you know, not DSCR constrained at 70 or 75 % loan to value. I'm much more lock it in and tuck it away, lock it in and tuck it away. go do the next one. And so then I'm more of a buyer of the five, four, three, two, one, buy down option to get the, to really maximize debt service coverage ratio in the we've, you know, we're gonna, we're gonna, you know, we're gonna win in the longterm zone. So that's, that's how I'm thinking about it. David Howard (13:55) You know, other important aspect here is, curious Jack, to see what you're experiencing with your SFR owner clients. There is still incredible demand for single family rental housing. There's incredible demand obviously for all kinds of housing, whether you're looking to purchase a home as an owner occupant, multi -family housing. Although multi -family is a little bit of a different story just because there's been so much new supply coming on the market. In terms of single -family rental housing, demand still remains quite strong. We hear that consistently from our members, again, really in all markets, even in some of those markets, maybe some of the Florida markets, where pricing has come down a little bit. So I would say for folks out there who are looking to finance single -family rental homes and single -family rental home portfolios to make sure you've got a good handle on demand but again what we're seeing is demand remains quite strong and obviously there's a limit to how far you can push rents I get that but again this is a market where housing is still very much in demand. Jack BeVier (15:06) Yeah. And supply just doesn't seem to be on the single family side. Not, it's not catching up, you know, not catching up yet. You're not catching it fast enough. Yeah. So that's still the tailwind behind the whole, the whole scenario. David Howard (15:13) That's right. Craig Fuhr (15:21) Well, David, thank you so much for joining us today. let's go ahead and jump into, you know, first of all, I guess you're how you came to the NRHC. And then let's let's have a, you know, substantive discussion about what you all are doing there as advocates for SFR owners. David Howard (15:42) Yeah, I appreciate that. And let me start by saying I also appreciate you guys having me on this morning. It's great to be with you. Appreciate all of your listeners tuning in as well. As you mentioned at the beginning, NRHC, the National Rental Home Council, is the nonprofit trade association that represents the single -family rental housing industry. And so our members include owners, operators, builders, industry vendors, industry partners, suppliers, et cetera. within the single -family rental home space, really of all shapes and sizes. On the owner sides, we've got very large providers of single -family rental housing portfolios, all the way down to the individual owners, folks like you and me who might own one home or two homes or fewer than five homes. So again, members come really in all shapes and sizes. And the benefit of that is, again, it gives us a really good read on what's happening in the single -family rental home space. Again, we hear from CEOs of large companies and we hear from, again, people like you and me who own a couple of homes in a very specific market. I've been with NRHC now as the CEO for about five years, well actually five years exactly next month. Came here from the Home Builders Institute, which is the workforce development arm of the National Association of Home Builders. So was there for close to three years and before that I've got a long history of working for real estate trade associations here in DC. I worked for the Urban Land Institute for about 10 years here in DC. Before that the National Association of Real Estate Investment Trust. So again, for the past 20 years or so, I've really cut my teeth in the real estate and housing world here in DC, dealing with policy issues, policy with a small p that is, both legislative and regulatory issues of a federal nature, but also doing a lot of work in states and local markets across the country, which I think has served me well for this position. Obviously, all real estate is local. We spend probably 40 to 50 percent of our time working. on federal policy issues here in DC and the rest of the time on state and local issues. Candidly, I think that mix should probably change a little bit. We probably should be spending more of our time in the states and local markets. And we're doing some things internally here to really put some more resources to our efforts and our presence in states and local markets across the country. Candidly, there's just been so much happening here in DC over the past three, four years, really dating back to the COVID years that required us to really beef up our presence here in DC, dealing with things like eviction moratorium, talk of rent caps and rent control and things like that really, really demanded a lot of our attention. So again, as we kind of moved away from that, we've been able to look back to building up our presence in state capitals and counties and cities across the country, which is something we're going to be doing more of, certainly as we move through the fall into 2025. Craig Fuhr (19:15) Yeah, I can't imagine that your time spent is all rainbows and lollipops as you're dealing with, you know, the target that appears to be still on the back of many landlords, you know, across the country these days. So can't wait to jump into, you know, some of the some of the policy agendas that you guys are trying to shape with that. But Jack, I you have a lot of questions. Jack BeVier (19:35) Yeah, well, I was going to say, let's do, let's do that. So what have been the big issues that you've been working on over the past couple of years? and, for the, you for those not on, for those who are not currently members, though everyone should be good at national rental home council .org. And is that the right website? David Howard (19:52) It's actually rentalhomecouncil .org. Yeah, www .rentalhomecouncil .org. And yeah, just to put in a plug for membership, we're really only as strong as the membership allows us to be. We need to have more owners in the membership. We need to be bigger to be more effective. And so I would say for all of you listening out there, please visit the website. Take a look at the membership program. We've got great pricing options. Jack BeVier (19:55) rental home council. David Howard (20:23) We do really, really effective job communicating what we're doing from a policy standpoint to the members. We were talking before the show here, and Jack, you made the point. And there's a lot happening from a policy standpoint that is directly impacting owners of single -family rental homes, and it hit your pocketbook. And so we do everything that we can to make sure we're providing information to owners. single -family rental home space working with them so they know what they can expect and pushing back on legislative and regulatory issues as they come about that might be harmful to the industry, might be harmful to owners in this space and again we could only do that to the extent that the membership is growing and the membership is behind us so please take a look at that and again if you have any questions feel free to shoot me an email it's David Howard my email address is DHoward at rentalhomecouncil .org. So I would say to your question, Jack, it really starts with something you said earlier, which is housing supply. We've really been pushing the message that there's not enough housing in this country. Housing of all types, whether it's for sale, single -family housing, multi -family housing, apartment living, or in our case, single -family rental housing. And when I look at the world of single -family rental housing, obviously there's both. sort of the traditional scattered site existing home model but you of late there's been a lot of activity on the new build side of the equation build to rent we're seeing more and more members in what I should say companies and owners builders in the build to rent space join NRHC and become more active in NRHC and so as a consequence we've really been building out the program of work to support that sector of the housing market, which I think is really, really exciting. And hopefully we can spend some time talking about that later in the call. You know, everybody knows single -family rental housing has been around forever, really as long as anybody can recall. Although, I think it's only been recently that there has been a need for the single -family rental housing to have a trade association like... in our HC to speak on behalf of the industry and to represent the industry both here in DC and in state capitals and in talking to the media, talking to reporters, educating policymakers and decision makers about the industry. again, that's really what we spend the lion's share of our time doing from a policy standpoint. It's really about educating policymakers, whether they're here in DC, whether they're in states across the country, whether they're county commissioners. city council members, what have you. There's a lot of, first of all, just misinformation about the single family rental housing market. What is it? How large is it? What is the value that the market brings to the housing consumer? And so first and foremost, we try to right the ship in addressing a lot of that misinformation and talking about the important role that the market plays. We do a lot of work around research, data production. Again, that's part of this effort to educate decision makers and policy makers about the industry, putting the numbers in front of them, if you will, and laying the foundation to have a substantive conversation about, again, the role that this industry plays and the role that owners of single -family rental housing play in the broader housing market. Jack BeVier (24:11) What are the, what are the major, what, what are the, were you spending the most of your energy? Like what are the big issues that are hitting the industry? And if you could help me also like contextualize it a little bit because in our HC, I understand was founded, right. Frankly, initially funded right by the largest owners and you guys have been like, you know, which, which totally makes sense, right? Like, because you got to fund it somewhere. I'm just as a quick aside, I'm on the board of a, David Howard (24:19) So over the, yeah, over the. Jack BeVier (24:40) a nonprofit trade organization in Baltimore that represents landlords and developers, landlords and small developers in Baltimore city. It's called a small developers collective, but it's, we run it as a nonprofit, but I can't get little landlords to pay dues. So it's a volunteer board because I can't get folks who own eight properties to open their wallets to fund anything. And so. David Howard (24:49) -huh. Craig Fuhr (25:06) You know, Jack BeVier (25:06) It's an issue, right? But at the same time, you want to speak for the entire industry. And frankly, you know, as you're very well aware, the vast majority of single family rental properties are not owned by the institutions. They're owned by your mom and pop landlord type. So how do you guys strike the balance between trying to speak for the entire industry when the reality of things is that only the biggest folks are the ones who are funding, who have enough vested interests to see the wisdom in paying dues. David Howard (25:18) That's right. Yeah, there's so much there. We could probably talk for three days about a lot of those issues that you raised. Hopefully you'll invite me back and we can cover what we can't cover here today. But you're absolutely right. So in 2014 -ish, a handful of large owners of single family rental home portfolios came together and really set the course for what was to become NRHC. They realized the industry was Craig Fuhr (25:42) We've got that kind of time, David. Go on, go on. Jack BeVier (25:44) You Craig Fuhr (25:47) Yeah. David Howard (26:05) was getting to a point where it needed to have some sort of cohesion, some sort of representation. And again, that led to the establishment of NRHC. Several of those folks who were involved in those early conversations are still involved with NRHC. And so it's great to have that sort of legacy perspective on the industry and the organization. you're right, those companies were very supportive early on. They remain very supportive. But I will tell you, they're also, and this started from my first day at NRHC, they were also very clear that NRHC cannot be an organization that just serves the needs of large owners of single family rental homes because candidly, there aren't that many of them. And so, obviously we spend a lot of time on this sort of media driven narrative around. quote unquote, institutional investors, which is a term I really dislike. And I always have to kind of smile because it's, you know, this narrative that the large owners are buying every home and every market across the country is so far from reality. It's almost comical. Large owners account for a very, very small share of the market and they know that, we know that. And so they were very clear early on. my tenure that if we're going to survive and more importantly if we're going to be effective, we need to represent a broader swap of the industry. And so we've been doing a lot over the past couple of years to build out the benefits, the values that we provide for smaller owners because you guys know the numbers and your listeners know the numbers. 90 % of single family rental homes in this country are owned by individuals and small local businesses. depending on how you define small local businesses, it's probably even more than 90%. So it's clearly a market that is driven by the small owners out there. That doesn't mean that they don't have a voice and that they shouldn't be involved because what we're seeing over the past, what we've seen over the past four to five years, and this is getting around to your question about policy issues, what we've seen over the last four or five years is owners of rental housing now have to deal with issues that they never really had to deal with 10 years ago, 20 years ago. And your perspective, Jack, and Craig would be really interesting on this. I think you would support that contention. There's so much happening from a policy standpoint that impacts the owner of one home or two homes. I'll give you one example. You in the early days of the COVID crisis, we were all dealing with eviction moratorium, right? Craig Fuhr (28:53) Mm David Howard (28:55) There was a lot of confusion. think there was a lot of, there were a lot of policymakers who decided they wanted to move quickly and that they needed to move quickly. And I don't know if I necessarily have a problem with that, but in that effort to protect renters, there was a lot that happened that I think probably happened before it should have. At one point in time, for example, in California, we counted 147 different eviction moratoria just in California alone. So, if we had more time, I would go back and share with you some of the emails and outreach we received, primarily from small owners who were not members of NRHC at that time, with questions like, I own three homes. Two of my residents aren't paying. I'm not sure what I can do to collect. There's an eviction moratoria that was just introduced by the county that I don't understand. I don't know what we can do. There were, I mean, we were inundated with questions and outreach from small owners about what they could and couldn't do vis -a -vis the eviction moratoria regulation. And again, this isn't a conversation about whether those regulations were warranted at that time. That was a very unique time in history, I get that. But that's just one example of some of the new regulatory mandates that were handed down that owners had to deal with that they never had to deal with before. Red cap, we saw a wave of red caps and red freezes and other kinds of regulations, security deposit regulations that for the first time, impacted small owners of single family rental homes. And remember, a lot of the very small owners out there are what we call in the industry, accidental landlords. They're renting out the house that they grew up in, that they inherited from their parents, or they got together with some college friends and bought a house. the plan is longer term to... use that appreciation down the road to pay for their kids' college education. We see that all the time, and I'm sure you guys do as well. And then again, for the first time, these owners were having to deal with all of these issues that were coming at them that they never really had to deal with before. And so I think that's really changed the dynamic of the marketplace. I think smaller owners realized that, first of all, they need to protect themselves. Second, they need to be aware of the policies that are out there that are impacting their business because that's what it is. And then third, would say, I think owners are really starting to hone in on the fact that there's a responsibility that they have. And I think that's relatively new as providers of single family rental housing. My belief is gone are the days that you bought a home. waited for it to appreciate in 18 months and you flipped it. That's no longer what this business is. It's certainly not what NRHC is about. We're very much interested in developing best practices, distributing best practices, making sure that owners of single -family rental homes are responsible owners, are caring for their residents, are caring for their properties, are committed to their communities. All these things that are really starting to capture the attention of of policymakers and so we need to make sure that we're right there with them and we're doing the kinds of things that we need to do to, again, care for the properties, care for the residents. And I think for the most part, most of the people we work with out there, most of the people certainly that I know and come across in this business are responsible owners, are doing the right thing, or have done things to make sure they can improve the resident experience, can make sure that they're using technology to make sure. They're interacting on a more regular basis with their residents. They're being kept apprised in real time of issues that happen with the house because let's face it, you own a rental home or in my case I own my home, there's always something that's happening in the home that you as the owner need to be aware of. so technology allows owners to interact in a more, again, real time way to get that information. And so I think there's this idea that providers of single -family rental homes are a part of the housing landscape. A lot of that means accepting the responsibility of being an owner and a provider of single -family rental homes. And so that's part of what we're trying to convey as well. And so, again, back to your question, a lot of the issues that we've been dealing with over the past few years really have been in response to, I think, relatively heavy -handed legislative and regulatory issues that or are meant to are meant to impact the behavior of owners of single -family rental homes, whether they're large companies or individuals. Again, whether it's dealing with eviction moratorium, dealing with rent caps, dealing with legislation that would limit the number of homes that owners of single -family rental properties can purchase. We see a lot of that. Craig Fuhr (34:29) Yeah, had. I'm looking forward to talking about that specifically. But Jack, let's just zoom out for one second here. did a kind of a deep dive last night on sort of the overall, you know, problem in America right now with affordability in terms of rents and and frankly, for buyers as well. But you know, I reading last night short, there's a shortage of affordable rental units of about 7 .3 million units right now in the country. And B2R starts this year, Jack, it looks like maybe 112 ,000 units will come online this year for bill to rent. And what I learned was, is that it's kind of unlikely that any, 0 % of those units will be considered affordable sort of by, you know, those standards. so I think one of, Jack and I have actually, you know, taken some of the info that your organization puts out and we've actually discussed it on prior episodes and getting back to sort of the legislation for that we're seeing around the country in places like California, Minnesota, you know, where the where they are, there's serious legislation being considered right now to limit the number of homes that any particular company, whether it be institutional or not, can have in those jurisdictions. And so I think California was a thousand, you know, David Howard (35:56) Hello. Craig Fuhr (35:56) thousand houses. Minnesota was 10. I'm sorry, I apologize. Let me make sure I got that right. Yeah, it was, I'm sorry, that was 50 or more units, I believe. So, you know, maybe you could discuss more of that and and and sort of some of that legislation that's that's being proposed. David Howard (36:10) you Yeah, I'll tell you. Jack BeVier (36:15) And is that is that real? Right? Like, that's my question, right? Like, it's clickbait, right? I click it because because like some knucklehead, like, like, left of communist, like, you know, delegate put introduces a bill. And so the media picks up on it because it gets clicked on. like, as a business owner, should I actually be scared of this stuff? Like, where is it real? Where is it just like, you know, just grandstanding? David Howard (36:29) you So, know, it's interesting. Getting back to Minnesota, the initial legislation read no corporate entity could own or build single -family rental homes in the state. So if you were an LLC that owned two properties, could, you, no, that was Minnesota. That was the Minnesota. And so, you we lobbied heavily on that piece of legislation and eventually that kicked up to 10 homes. So you couldn't own more than 10 homes, but. Jack BeVier (36:58) You talking about California right now? Minnesota, okay, got it. Craig Fuhr (37:00) No, Minnesota. David Howard (37:11) And then in California, where we've been active for a number of years, California had several bills out this session that we thought would be very harmful, not just to owners of single family rental homes, but ultimately the people who need housing the most. And that's really the problem with, I believe, these bills, these regulations that seek to limit the number of homes that owners can own, whether they're corporate entities or individuals. when we talk about the fact that there's a supply problem, there's a supply problem because we haven't developed enough housing. you're right. to, Zillow came out with a report a couple of weeks, a couple of months ago showing we're four and a half million homes short. Realtor .com's number was much higher. It was like 7 .1, 7 .2 million homes. Everybody agrees we don't have enough housing in this country, of all types. The reason we don't have enough housing, the reason we haven't developed enough is because we've under -invested in housing. And I think that's important to remember because investing in housing for a lot of policymakers has a negative connotation. We've got lots and lots of really good data to push back on that. You need to have investment to support housing development. And when, whether it's... federal policymakers or state policymakers or local policymakers seek to prevent that flow of investment to support housing. Ultimately, it leads to shortages of housing. And that's why I think these bills are so problematic. And you're right, in California, were some, bills that were introduced sought to limit homes owned by quote unquote institutions and they pegged institutions that anyone that owned a thousand or more or more properties. You know, one of the problems with that is this year it's a thousand, next year it's 500, the year after that it's 250, or whatever it is. But the real problem there is it doesn't get to the root cause of problem, which is we're not building enough housing and we're not investing enough in housing. And so we... Craig Fuhr (39:24) But let's say my, you know, getting back to Jack's point, and you've been around the block enough to know, David, that some of this legislation starts off very pie in the sky, but and doesn't get a whole lot of traction, but they willow away sort of cut away, you know, you know, make it sort of more palatable for others in the legislatures to sponsor and vote. And so what what's your take on you know, what appears to be some pretty, you know, pretty tough legislation being proposed. What's your take on sort of how it evolves over this legislative session and into the next legislative session? It doesn't feel to me like these issues go away. They just kind of get to a place where they can get more buy -in and what, you know, what's your take on where the buy -in lands on stuff like this? David Howard (40:17) Yeah, you know, it's interesting. And Jack, getting back to your question, should business owners be concerned? I think they should be concerned. They should have this on their radar. What I've learned about legislation and regulation, whether it's here in DC or in states in my 20 plus years of dealing with these sorts of things is bills never really seem to go away, right? You might defeat them, but they always... have a way of coming back. And so some of the bills that we saw in California, some of the bills that we saw in Minnesota, and other places, I would expect probably will come back, either in the form that we saw this year or in different forms that kind of get to the same, or are intended to get to the same place. And so to answer your question, I think business owners should, if not be concerned about... some of the stuff that's out there, should at least be aware of some of the stuff that's out there. And I will tell you, one of the most effective ways to push back on some of this legislation that's out there, we saw this firsthand, is to have owners of single family rental homes in local markets engage in the process. In California, we would have owners of properties, builders of properties, California bred companies, owners. come to Sacramento with us and meet with elected officials and their staff. And for me to get on a plane and fly to Sacramento and meet with state senators is one thing, but to have somebody from, know, Fremont or Los Angeles come to Sacramento and meet with their elected official, that makes all the difference in the world. And that's why it's really important for... I believe, to grow the membership and to make sure that we've got that diversity of membership, large and small owners, so that those folks can participate with us when we go to the Sacramento's and the Raleigh's and the Tallahassee's and Atlanta's and places like that. So yes, owners need to be aware of what's out there. I do believe a lot of the legislation that we dealt with this year, certainly a lot of the sentiment that we dealt with this year is going to come back. And then, you when you overlay what's coming out of Washington, D .C., and what we're hearing from President Biden and Vice President Harris, who I think we all assume is going to be the Democratic candidate this fall, about rent control. They've got some very specific proposals out there about national rent control. I think there are significant problems with that. for a lot of reasons. Most economists agree that rent control is not the way to go. There have been substantive studies and research produced on this point. But, you know, again, when you talk about what I consider bad ideas, coming back around, know, rent control is at the top of that list. It never seems to go away. It's been proven over and over again not to be effective. And yet, here we are talking about it in the context of national housing policy. Jack BeVier (43:32) Yeah, we had in Maryland, we had two counties put into law rent rent rent increase caps. And so that's right. Montgomery and Prince George's area. So we and I'm like, man, that's coming to Baltimore next. I can just feel it right. So I'm concerned about that. But David Howard (43:41) I think that was that Montgomery and Prince George's? Yeah. You know, the real problem, sorry to interrupt there, the real problem with that is, and if you look at the example of St. Paul, Minnesota, St. Paul introduced a very draconian rent control ordinance a couple of years ago, and it was almost a textbook example of what we've been saying would happen with rent control, and that is new investment fell off a cliff, something like 60%. And not only that, current development stopped because investors in projects that were currently being developed walked away. And the reason for that largely is, again, it throws your economics all out of whack, and you guys know that better than I. But the other thing it does is it just creates a lot of uncertainty for future investment and future development. If you're considering building a 500 unit apartment building in St. Paul, and yet there's rent control on the horizon or rent control that comes into play. All of a sudden there's some question as to what your returns look like five years down the road and 10 years down the road. And legislation like that and legislation that we've been involved with over the past couple of years, I think really serves to, if not frighten, certainly puts up a red flag for lot of investors in housing and developers of housing. because that certainty all of sudden is no longer there. Jack BeVier (45:22) Hey, let's, let's cut it short here because I want to jump into some the weeds on some policy issues that you guys have been working on and kind of where you, where you think that investors should be paying attention in terms of the issues that are going to keep coming up. But let's do that in the next episode. So Craig, you want to wrap us? Craig Fuhr (45:43) Yeah, we'll go ahead and wrap it on this one with David Howard from the NH, I'm sorry, the NRA HC. And we'll jump in for another 45 minutes or so of substantive conversation. I have to say I'm still kind of I'd still like to revisit the unit control that that's being proposed rather than the than the rent control because I we talked about California, Minnesota. I mean, it's happening in Colorado, New Jersey, New York. So, you know, for those folks who are listening, I don't live in California. I could care less about now, man. It's it's that kind of legislation is being proposed in state houses all across the country right now. And David, one of the things that we talked about prior to this first episode was what your national organization is really looking to do at a much more local level with local chapters. So I can't wait to talk about that. We'll see you guys on the next episode of Real Investor Radio. This is Craig Fewer. Jack Bevere with David Howard from the NRHC. see you on the next one.