Keith Rand of Mill Creek Residential | The Future of Housing In America

Transcript

Announcer 00:02

Welcome to American Building, a weekly recorded show whose mission is to share an alternative perspective of what we build in America, and why. Together we discover how the work of the real estate industry connects to every American. In season two, we focused on how buildings changed as a result of the pandemic. In this season, we're revisiting conversations from previous seasons, to see where Americans put their heads down at night. Together, we will discover the many definitions of home across the New York City metropolitan area, which includes over 23 million Americans. Each week, we'll visit a new building and explore complex and confusing issues related to housing access to see what they can teach us about ourselves, and our country will meet those who work to develop in thoughtful and impactful ways, who build neighborhoods to be more sustainable, affordable, accessible, or inclusive, who labor to create thriving communities, and transform the lives of generations to come. Through their stories, we will humanize often polarizing topics. Profound, surprising, and hilarious. This show is for developers and builders with boots on the ground for innovators trying to find ways to improve our industry, for the policymakers and public employees. And for any person who has walked by a building and wondered why. And now your host award winning architect turned developer and startup founder Atif Qadir, AIA.

Atif Qadir 01:53

This is American Building. And I'm your host, Atif Qadir. I'm the founder of Commonplace. Join me as it take a drive by the skylines and strip malls, crosswalks, and rail crossings, balconies, buildings and boroughs to discover a new generation of housing. Let's build common ground.

Atif Qadir 02:26

In this episode, you will learn about what is actually stalling housing production across the country in an easy to understand framework. Also, we'll discuss the future of housing in America as we wrap up season three of the American building podcast. In this episode, I am sharing a new conversation I had with developer Keith Rand Keith is vice president at Mill Creek residential, the third largest residential rental development company in the country. His projects are in Greater New York City, which was also the focus of season three of this podcast. Previously, he worked in senior roles at Stonehenge and grey star. He began his career at Silverstein properties and JP Morgan Chase. He also has interned at a fascinating array of places relevant to our discussion today, including the city of New York. Keith is a graduate of Duke University, the Wharton School at the University of Pennsylvania, and the Kennedy School at Harvard. Enjoy the conversation. And if you are interested in more stories related to housing and impact, visit the commonplace website. commonplace is the company I founded to make it easier to finance impactful Real Estate projects. So Keith, welcome to the show.

Keith Rand 03:51

Thanks for having me.

Atif Qadir 03:53

Absolutely. So I'm going to start with home. What does home mean to you, Keith?

Keith Rand 04:00

Home really means where my friends are my soon to be growing families going to be. I think specifically being a New Yorker, it has a lot less to do with, necessarily even the apartment that I'm living in, it really has to do with the people because, you know, we live so much of our lives in this external built environment. And you know, when we're all well moved into our first place in the city, we worked we lived in very, very small quarters. So really kind of the public realm feels as much as home to me as even four walls. I go to sleep in between there every night.

Atif Qadir 04:43

My apartment might have been marginally larger than my friends because I went to Brooklyn and I skipped over Manhattan, but I definitely appreciate what you mentioned.

Keith Rand 04:50

Yeah, my first apartment in New York was a six story walk up where I could actually scramble eggs in the kitchen, from the The loveseat that I could squeeze into the quote unquote, living room. So, yeah, we've definitely had all that journey.

Atif Qadir 05:06

I love it. And then previous to New York, you're from West Virginia, which is a state that is probably not well understood by many Americans. So tell me about how your upbringing in West Virginia plays into your personal image, your personal conception of what home means to you?

Keith Rand 05:25

It's a really great question. So just as like a point of context, West Virginia has 1.7 million people. New York City has eight and a half. So the city has five times as many more people in the entire state, I grew up on 83 acres. Another New York reference point would be central parks 140 acres. So I essentially grew up on just a little bit less than a 10th of Central Park. You know, I felt so fortunate to be growing up in a place like West Virginia, where there are a lot of people who are really looking after, after me for being in a relatively small town. And it definitely imbued with me some interesting values. West Virginia is a place that kind of takes a lot of the best things in that region, the country a little bit of a, a Midwestern humility, a southern warmth. Then I fortunately, after my experience in New York, and able to take all those characteristics and somehow transformed into a New Yorker over the years.

Atif Qadir 06:26

So over the course of this third season of the podcast, we focused on the New York City metropolitan area. But even within this area, there's a wide array of urban suburban and rural projects that we talked about, and the issues facing rural states and rural regions are shared, but also are different. So given that you went from a very rural experience to a very urban experience, are there specific things that you can compare and contrast between the two in terms of challenges that people you knew there versus folks that you know, here face when it comes to housing?

Keith Rand 07:04

Yeah, when it comes to housing, you know, even more generally, the poverty is looks very, very similar. Even if people might be of different political beliefs, they might be of different backgrounds. A poverty affects people in many different ways. And it's just been that much more acute in places like New York City where there's such a significant affordability crisis, my home state isn't as affected by an affordability crisis more as an opportunity crisis of jobs leaving the state, and you know, for young people to be able to live and grow and kind of meet their potential. But some of the challenges are very, very similar.

Atif Qadir 07:45

So a lot of your career has been focused on housing related problems. So walk us through the different projects or initiatives that you're particularly proud of over the course of your career.

Keith Rand 07:58

You know, I've been fortunate to be involved in a little bit of everything, everything from acquiring buildings on Park Avenue, I've been involved in my Chase Community Development Days, financing multiple, affordable housing projects throughout New York. But I think that probably what I have most proud of even though is a very short time was working for the Bloomberg administration, where we made some very serious inroads to reevaluate inclusionary housing program, working with the New York City Housing Authority for improving operational processes to ensure that renovations were getting done more quickly. And, you know, I hope that my biggest contributions are just still further down the road.

Atif Qadir 08:45

So in terms of the work that you did a while you're at the City of New York, could you highlight one or two things there that you think was particularly formative at that beginning in your career?

Keith Rand 08:55

Yeah, I'd say what I'd say was one of the most inspiring things about the Bloomberg administration was just the quality of people that join the organization. It's because so many people believed in Mike at the end of the day, and they believed that there was real change. This was right after my first semester at the Harvard Kennedy School. And I spoke to a lot of my Kennedy school classmates when we got back. And I have to say a lot of them were really dismayed from their public sector experiences, that the whole experience was bogged down by politics. And if you agree with Mike Bloomberg, if you did, for those who had even a small opportunity to work as part of his administration, the goal every day was trying to figure out how to make a better New York. And he was passionately, passionately following that. And he really had a group of people that were trying to execute. And we're trying to put politics as a tertiary consideration versus a primary one, which was, you know, extraordinarily refreshing time.

Atif Qadir 09:57

I would absolutely agree. I think that New York City has has had an array of mayors, um, before and after Bloomberg. But in particular, I think one thing that has been consistent for all of them is the depth and the breadth of the housing crisis for the city of New York. So what we saw this season is unique to New York City in the greater metropolitan region, but also not very unique. And what I want to start talking to you about and learning is a framework that our listeners can use to understand what does the housing crisis actually entail? So for you, as you think of the issues and the opportunities in housing, how do you break them down in a way that makes sense for you?

Keith Rand 10:40

Yeah, I think we just need to set the table a little bit. Back in 2000, for every job in the New York metro area, there were 0.9 homes. And over the last 10 years, we've created almost 1.2 million jobs, but we've only created about 400,000 homes. So if you use that 2000 metric, we are under producing homes in the region by as much as 60%. And you know, this bad situation is just quite frankly, is getting worse. The primary tax abatement for New York City is called the 421-A or better known as the affordable note New York program. That expired in June of last year. And since it's expired, new housing permits have dropped almost by 90% in New York City, and so we're getting even further supply and demand imbalance.

Keith Rand 11:38

like, just as a reference, in New York, Metro rents have gone up 30%. Since 2015, home prices have risen by 50%. outside of New York, rents have risen 40 to 60%. Since 2015, and home price has gone up 50 to 80%. And this is where left people across the socio economic spectrum burdened. So it's over half of all renters in New York City spend 30% or more of their income on rent, 1/3 of renters spend 50% of their income. So we're dealing with a real real affordability crisis. I mean, when rents are over $4,000 for a one bedroom, and Manhattan, that means that's affordable for somebody who has to make over $160,000 a year. And that is not what leads to a dynamic, diverse and sustainable city, either from an environmental or from a socio economic basis. But in terms of kind of how I try to think about things, it's you know, relatively simple, I think about in terms of my like, if I'm doing one of my underwriting is I think about my performance. And think about like an income and expense statement. We could spend a whole bunch of time going through each and every one of those line items from my income and expense statement. But if we start just even talking about the on the operating expense side, insurance premiums are up over 30% from just a few years ago. Payroll is

Atif Qadir 13:22

especially flood insurance for a number of jurisdictions, and

Keith Rand 13:25

it just only getting worse with climate change, then you're talking about your maintenance expenses going up. But, you know, one of the biggest challenges for New York City, quite frankly, is just how high our property taxes are. And we tax rental homes, like we tax cigarettes in New York. And that sounds like it's a point of exaggeration. And I looked at number just to confirm, cigarette taxes are 435 a pack statement and price is $13. So that translates to a tax rate of 33%. And why do we do this? We're doing this to disincentivize people discourage the sale and consumption of cigarettes. And New York, if you own an apartment building that's not subject to a tax abatement, you're paying anywhere between 30 to 40% of revenue in taxes. So you know, for the average renter out there, you never see the check going to the government, but you're paying 37% of your of your rent to New York City and State on top of a really burdensome income tax rate in the first place.

Atif Qadir 14:41

I think the other part of that is the the US tax code which incentivizes single family home production because the mortgage mortgage interest tax deduction. So I think that when you look at it broadly, I like the way that you've broken it down to think about the problem from a A revenue or an income and an expense perspective. So one thing you mentioned is this idea that there are diffuse benefits to being able to focus on housing productions, and often that encompasses really concentrated costs. Could you talk more more about that?

Keith Rand 15:20

Yeah, it's a great question. And, you know, given the fact that I'm a developer, I'm supposed to have zero compassion for anyone who's in the NIMBY, not in my backyard crowd. But I think that we have to meet people where they are and as they are, and if you can imagine, you know, how the average person thinks about making a decision on where they live, they think about how beautiful the inside of their home is, how beautiful the neighborhood is, what amenities the neighborhood has to offer it, does it have great schools has have great parks, it has great access to transit, all these different things, right. And then when a developer comes in to change things, that can be really scary. And, you know, they might not want that they might not have their waterfront views blocked, there, subway station might be a little busier in the morning, the school might be a little bit more crowded.

Keith Rand 16:20

So what it comes down to is how do we create incentive alignment with developers and the communities that we're developing in, because these communities are facing the brunt? The cost of development. So there's a concentration on the cost side, while the diffuse benefit of you know greater affordability, more tax revenues kind of spread throughout the city. So one initiative that I discussed with a few of my friends on the political side of the world, is what I refer to as own your air. And that thought is is essentially a different tactic for approaching rezonings. In what typically happens in a rezoning is, say, for example, a neighborhoods zone for two storey buildings, and only for industrial uses, then a rezoning may be proposed that you can build eight storey buildings and you're allowed to build residential, what ends up happening is that everybody who own property in that neighborhood gets 100% of the benefit in terms of that increase in their their land and property value.

Keith Rand 17:44

In that own your air initiative with will be really rethinking that model is the existing property owner, they will get the benefit of a rezoning for to residential, so they get some upside for owning a property in verging neighborhood for years. But instead of letting that those six stories of additional FA are to crew, just to the seller, it'd be allowing the public sector to sell those rights for those six additional stories. And with those six additional stories of air rights, those are going to be used for reinvesting into neighborhoods, it's going to allow for people to have access to beautiful new parks, you schools, more police officers on the street, whatever your flavor is, in terms of public preferences. And it'd be the first real bridge to figure out the differences between the development community and the larger community which are kind of seeing these really this influx of development and balancing this concerns.

Atif Qadir 18:51

So the this idea of this contention between private sector developers and the public sector something that earlier this season, I spoke to Melissa Burch, formerly of LendLease. And now the New York City EDC, about how she lays out the issues associated with this, like complex interactions between the public sector and the private sector. And there was five categories that she described them interesting getting your take on each of them, so overview all of them. So first, is the complex array of federal and state policy related to housing production and the financing of housing, then local entitlements and that entire process of zoning and land use for housing, design and construction processes, which include everything from building codes to material supply to manufacturing and assembly processes and all the logistical challenges associated actually building in dense urban communities.

Atif Qadir 19:54

Access to capital, which is what my company commonplace focuses on, and Last one is distribution and ownership. And this has, I think, come to the forefront over the past couple of years with the incredible growth in buyers. What are some of those that really speak to you as issues that you've come across in your career, so far ones that you think are the most important for us to tackle in terms of being able to address housing production?

Keith Rand 20:28

Really great question. And even though the federal government does still have a relatively large footprint and how we finance housing, in terms of government block grants, on a day to day basis, really the largest impediment for building more housing in this country is local and state government policy. You know, what we saw was a really valiant attempt by the cultural administration to build a really, really great housing platform that would ensure significant improvements and affordability. But the challenges that she had this most recent year, are very reflective of the challenges that we have from the private side. And it really gets to that kind of core value was talking about earlier as creating that incentive alignment between the communities where we're developing, and the developers, how do we have appropriate zoning to build at density and scale to attract a broad range of investors, capital sources and developers?

Keith Rand 21:39

How do we create a streamlined process, you'll hear many stories of developments around the New York metro area that take not just one or two years, but take as long as 10 1215 year while some of my friends in the development side and other markets tacis can complete a development project within or can get a project started within six to nine months.

Atif Qadir 22:05

And I think when you look at our industry relative to what I call our sister industries, like aviation, and automotive, those are ones where the demand and the scale of the problem is also very large. But they've focused largely on standardization, while our industry has focused much more on a very bespoke solution to much of what we do. And so I can definitely appreciate that that perspective that you brought,

Keith Rand 22:35

the example that I would actually give for this is like imagine if Apple had to create the different type of phone for every town across the country. And that's really what it is. And it wasn't even, it's almost even more than like having a different for each and every town. The language changes from town to town. What counts is a story What does not count as a story, what count is a rentable foot, what does not count as a rentable foot, how is building crit measure, you can be in five towns that are all next to each other and they're getting met, you're building a different way. And the lack of standardization creates multiple challenges, it ends up becoming a, it's been a much more fragmented industry than it needs to be. So there's not the level of economies of scale. And it creates these little city and regional fiefdoms, where only a handful of developers have the skill, knowledge and expertise in relationships, to be able to shepherd a project through versus making the whole process significantly more competitive through some degree of standardization.

Atif Qadir 23:52

I think the equivalent can be when it comes to development is that developers are expected to use the metaphor of a baker developers are expected to know how to bake every type of bread that's been made, but also bake every type of bread that hasn't been made. And oh, yeah, they're not actually taught ever how to run the bakery, too. Yeah. And I think that that aspect to it is what makes this scale. So, so challenging. I'm curious about now looking forward.

Atif Qadir 24:22

So there's a whole array of challenges that now are in and around the housing production issue that we've been talking about. First, millennials now or the dominant generation in our country are also the poorest generation in our country's history, and also the one that has been least inclined towards marrying or building homes together, which really even exacerbates the issue of housing under supply. We're also at the point where climate change is severely impacting London insurance rates. For example, in my home state of New Jersey, and Florida is at the point where there's a state insurer of last resort, that is covering about 30% of the properties in the state. And the idea or the conception of a, of a major catastrophic hurricane in Florida, which would bankrupt the remaining private insurers would likely lead to the bankruptcy of that entire state. So that's like another thing in this context. And then we have the challenges related to supply chain to actually get materials here, for example, steel, concrete, the other stuff, that's the bread and butter of our industry. So when you start now contextualizing the housing challenge amongst all these other issues, which are the ones that you feel are the most pressing are the ones that keep you up at night?

Keith Rand 25:45

It's a great question. And honestly, there's so many different levers to pull. In this regard. One of the things that, I think is, understand the challenge within particularly for this market, is actually cost of land. And just as a kind of a quick reference point, you typically would see land trade in relatively prime areas in New York City, for $400 per build, plus or minus.

Atif Qadir 26:16

And my buildable foot, you don't necessarily mean just the ground floor, I mean, everything about it on the floors.

Keith Rand 26:20

Yeah. So if you had a 10,000 square foot site, and you could build at Florida area ratio of 10. That means you could build 100,000 square feet. So I'm thinking of that in terms of the buildable square feet. And so you would see land traded primaries for about 350 400. And well north of that, to the point where using some properties along Central Park would trade for 1500 square foot. It's been treated like it's an intractable problem. But really, what we need at the end of the day, is touching on kind of earlier, is we need to add more supply, we need to we need to build more. And we need to have more buildable, such as the my suggestion earlier regarding on your air, the pressing concerns regarding real estate taxes are a serious serious impediment to development.

Keith Rand 27:22

And we need to be coming up with very thoughtful ways of how we actually can lower property taxes for rental housing in New York, because that's the housing that serves everyone from the zero to the 99%. And you know, there are a few different ways which some of which may be relatively controversial within the real estate development industry. But something else a little arcane. But as important to understand how real estate taxes work in New York City, is understanding how they work for condos and Co Ops,

Atif Qadir 28:00

which is a large portion of the home stock in the city of New York.

Keith Rand 28:06

Correct. That's the majority of the owner occupied stock of New York City. And for condos and Co Ops, they are required to look at comparable rental valuations to come up. So something could have sold a condo down the hallway from you could have sold for X million dollars, they're not allowed to look at that sale. And what you've seen is that the high end of the condo market here is going for as high as $10,000 per square foot. And so the city is looking at a 10,000 square foot condo, and they're looking at a valuation or rental building that was built in the 80s. So it's three or four blocks away. And so in practices, what's happened is you have $200 million condos. And just for everyone who's outside of New York, this is for a single condo or has been actually trading at $200 million. And

Atif Qadir 29:06

that sounds like some of the projects that I worked on when I was at Extell development,

Keith Rand 29:10

you know, very, you know, very similar in terms of like the ticket prices as projects been able to garner and some of those $200 million condos are valued as if they're worth $9 million. And, you know, we'd hear all of these concerns can be perceived legislators, city council members, about why is it just only luxury is being built in the market. It's a logical conclusion with the tax system we have in place, the luxury market and, you know, we readjusted and rebalanced and we allowed for the property tax rates to be lower for rental housing, you'd see an increase in supply without a question. We also do a really really bad job of evaluating vacant property in New York City

Atif Qadir 29:59

Do you mean undervaluing?

Keith Rand 30:01

Yes, exactly undervaluing vacant property. Every property owner in New York City, every commercial property owner has to submit what's called an RPI, which stands for a real property income and expense form. And, essentially, long story short, you'll show your revenue and show your expenses. If you have that you can see subtract that out, and you get to a net net operating income, they apply a cap rate to it, and they come up with your that's one of the metrics they use to come up with your assessed value. So if you own a piece of property in prime Manhattan, and you do a surface parking lot there, your property valuation will be next to nothing. And for those who are in the speculation game, it's great.

Keith Rand 30:52

You have low carrying costs, you get the wait for the opportune moment to finally develop your site. But from the perspective of an urbanist, who wants to see eyes on the street, and the words of Jane Jacobs, who wants to see activity, who wants to see housing built now versus 10, or 15 years from now, it's really, really bad for the city. And this idea isn't, isn't mine by any stretch of the imagination. It was actually proposed about 130 years ago, by Henry George, was it his masterpiece, the progress and poverty and I'll give you a sense of how much time has changed. It was the most popular book in America in the 1890s, after the Bible,

Atif Qadir 31:41

but and people really liked their Bible in the 1890s. So that

Keith Rand 31:45

was a very popular book back then back then. So. But if you survey economists from left to right, they will all tell you that a land tax is the most effective tax we possibly can have with very few inefficiencies. And if we shifted our taxation methodologies in New York to taxing land, instead of the improvements of land, you'd have a lot of people who are in the speculation game, move out, you'd have a lot of vacancies in New York, which, you know, the vacant, they can retail storefronts, and CPC pure that those things would be less of an incentive to be as patient waiting for your next retail tenant. It's something that would materially move the needle and create a much better incentive structure for property owners developers to build more in the city.

Atif Qadir 32:42

So help me understand in that particular situation, if somebody had owned a home, that was a several generations, their family and the actual land could support much more than as currently there. If the land were to be the property extra based on land, as opposed to the improvements, then that particular person would likely see a lot more taxes that they would have to pay because of the opportunity cost of not building larger, which probably relates to the whole point of encouraging people to actually build.

Keith Rand 33:14

Yeah, I think there's a really delicate balance and thinking about single residential property owners versus large commercial owners and probably being treated differently. And you know, with concerns around gentrification, allowing people to essentially defer any additional taxes until sale of the asset to ensure that the people that builds a lot of these wonderful communities can actually stay there. But once that property actually trades, it shouldn't be stuck in this perpetual under taxation, and there should be an opportunity for the redeveloped parcel to build more housing that the city desperately needs.

Atif Qadir 33:59

So a lot of what we've talked about so far appears in federal policy in the form of a housing supply plan at the White House as proposed. So I want to turn our conversation towards that and to get us started, I'm going to talk through the intro to the fact sheet that basically summarizes this policy proposal. So President Biden believes that everyone deserves to live in a safe and affordable home. Whether you rent or own having a place to live that you can afford in a neighborhood with opportunities is the foundation for so much else in life. It's also the foundation for so much else in our economy.

Atif Qadir 34:41

A lack of quality, affordable housing hinders the job market and holds back economic growth by making it harder for workers to access good paying jobs. It drives up costs for families and inflationary pressures. It also increases commutes and inefficient energy consumption, which exacerbates Climate change, and the lack of affordable housing opportunities perpetuates the ongoing segregation discrimination that our country committed to eradicate nearly 60 years ago. Okay, so there's more of the intro, but let's talk about some of the proposals that are a part of that. So one of the elements that's here is about investing in the preservation of affordable housing, the preservation of buildings overall. So help understand help our listeners understand about the costs associated with the ongoing maintenance of buildings and why that is a potential area of opportunity.

Keith Rand 35:35

You so we're seeing rising construction costs. Across the country, building new affordable housing is extraordinarily extraordinarily expensive. And so if we're trying to balance the fiscal concerns, along with ensuring that we are maximizing affordability in any given market, the most efficient way from tax dollars is to ensure that we're not losing any of our existing affordable housing stock. So that has been a priority initiative and Biden administration. It's something that's been very focused on in terms of New York City, and it's had higher relevance across the country as people are valuing what the cost is.

Atif Qadir 36:18

So there's a number of tax base proposals that have appeared in various ways since 2016. So Senator Ron Wyden from Massachusetts has been really active in this area, as well as a Senator Cory Booker from my state of New Jersey. But one that that I'm particularly interested in is a variation of things that relate to existing housing tax credits. So one of them is a middle income housing tax credit, as an extension or expansion of the Low Income Housing Tax Credit. And other one is the scale and the supply of the Low Income Housing Tax Credit itself being raised. And then one. That is, I think, speaking to the single family home market is a new neighborhood homes tax credit, and amongst these different areas, especially in a bunch of different levers and a bunch of different geographies. Do you think that these types of tax credits would encourage more housing production across the country?

Keith Rand 37:17

Without a question, and there are some very thoughtful initiatives here. I think the biggest challenge, though, quite frankly, is that there's a lot of inefficiencies to pretty much any of these very, very large scale programs. And you know, as well as I do, like, say, for example, even though Low Income Housing Tax Credit Program has been extraordinarily helpful, building new affordable homes across the country, there are a lot of inefficiencies with the program. There's inefficiencies around syndication, which eats about 10% of the value plus or minus.

Atif Qadir 37:53

And syndication is essentially the sale of a tax credit in order to raise current current money to actually capitalize a deal.

Keith Rand 37:59

Exactly. And then the complexity of these transaction, a lot of times, eaten up by legal fees, consultancies. And so when you're looking at actually how many dollars are going towards the actual projects in order actually really going to the people at the end of the day, it's really more like 75 or 80 cents of every dollar. I think we have a really bad history in this country of being very paternalistic, with people who are in lower socioeconomic groups. And generally, if you look through studies, when you end up actually giving people money, people actually are usually very good stewards of that money. And you know, one thing I would love to see the Biden administration focus on more is thinking about how we can fully fund the section eight voucher program.

Keith Rand 38:50

You know, what I think about is a type of flexibility that provides for a household, you know, if like a single mother of three wants to take a new job, it's across town. And that means that she's going to have to commute an extra two hours, she might not take that job, even if it might be a step up in life, simply because she doesn't want to lose her housing unit which might be associated with an individual home, and not something that's portable. Giving that flexibility to consumers at the end of the day is just great from like a utility standpoint,

Atif Qadir 39:22

and a free market perspective as well.

Keith Rand 39:25

And it from a free market perspective as well, because I don't think any developer can, should say at least that their audition and that we know exactly where all of our dollars should be targeted to for every person who fires affordable housing. And it really empowers consumers in a very, very different way. And what I love to see to is just quite frankly, much more flexibility with the vouchers and be able to use it towards mortgages and be able to use that as a point of credit when applying for Homes and really allow empowering consumer to make decisions that are best for them versus a more of a traditional kind of top down government approach, with some very significant like administrative overhead.

Atif Qadir 40:15

I think the a lot of what you described is embedded in this thesis of the poor people don't deserve nice things. And I think that embedded in that as often to certain assumptions of the race of the people that are poor, that don't deserve nice things. And I think that separate from any position that one might have about race and how it intertwines with housing, I think purely from an economic perspective, reducing the frictional costs associated with deploying something like low income housing, tax credits, and all of the checks all the balances all the people that are a part of that process.

Atif Qadir 40:51

And simply putting that money in the person's hand to go to any free market apartment and be able to rent there, I would imagine not only is great from the user's perspective, because now they are given agency for their own decisions, from the maintenance of the housing from the owners perspective, because now there's an interchangeability between a market rate tenant versus one that's given benefits. And then there's I think, overall, the perhaps less of an inclination towards globalization, when you have a higher concentration of affordable housing together.

Keith Rand 41:22

Yeah, I think it has a great opportunity for increasing diversity within neighborhoods. And you mentioned the landlords and the tenants separately, that I really think it has an opportunity for creating better relationships between those two groups, because some landlords aren't appropriately incentivized to take care of their tenants if they're in affordable housing, because there's not the profit motive that's there. But by creating a more of a voucher based system, you have the opportunity to for alignment, if that landlord doesn't provide, you know, best in class service for that price point, that tenant will be able to walk down the street. And by creating that incentive alignment, you decrease the need for such robust regulatory state, and which hopefully, in turn can be reinvested into our communities.

Atif Qadir 42:19

I don't imagine that there's, there's anything more free market economics than that is basically let the dollar do the talking. So I think the one of the last areas I want to explore related to this policy proposal and looking forward is this idea of homeownership. So millennials are at the lowest rate of homeownership of any modern American generation, at the age that we're at currently. And there's this idea of this really kind of perverse thought that there are, there are a sizable number of millennials that can't afford the home that they grew up in, because of the flatlining of real incomes since the 19 9090s 2000s. And the incredible increase year over year in the prices of homes, particularly in Metro New York City. So give me a perspective on how you think that this proposal or other methods could be used to increase the percentage of the amount of homeownership in the United States.

Keith Rand 43:23

Yeah, so we think of homeownership and rental as almost two separate categories, but they really are all part of a larger housing ecosystem. And they are substitute goods there, maybe not perfectly substitute goods. But you know, as long as we have high rental prices in this country, we're most likely going to have high for sale prices and, and vice versa. So the real my primary focus, at least from a policy standpoint, is how do we create holistic housing affordability, there is value in homeownership there is value and having equity that can grow over time. But I think the larger question is, how do we actually homes more affordable for people, no matter if you're buying or renting?

Atif Qadir 44:12

Excellent. So as we're finishing up our conversation, are there certain things that you are expecting or looking forward to in terms of things to come for housing our country over the next couple of years?

Keith Rand 44:26

You know, I've actually been excited to see some of the progress that we've seen in state legislatures across the country,

Atif Qadir 44:32

including affordable housing referendums and cities and states, for example, like Colorado, last fall passed a four minute allocation from the state income tax boards and affordable housing fund program.

Keith Rand 44:44

California, even though it was very much a laggard, in terms of housing policy for years, is making very big strides. How to develop more housing in those markets are still significant, significant challenges there, but they have need LBO progress. We're seeing a lot of thoughtful proposals that are safe, for example, recently coming out of Austin, Texas, which is seen Absolutely. Both supply and demand demand still outstrip supply, allowing for smaller development such I think it's even for six units, they don't have to go through site plan approval. So you could get permits in a matter of weeks versus, you know, what seems short to us in New York and nine months, but long and Texas time. But you're seeing in part become part of the consciousness. And I think that we're going to hopefully continue to see some progress. And

Keith Rand 45:40

we need to continue to come up with ways to align incentives with established communities. How can we add homes, particularly in some of these high demand regions, that New York's of the world? How do we create more housing next to transit, so that we can create truly environmentally and financially sustainable opportunities? I think

Keith Rand 46:06

One of the things that is lost in the conversation many times is that these apartment homes are really thought to be only taking care of young millennials. But it really couldn't be further from the truth. We all have changes in our lives that we're not necessarily anticipating. And what you'll see in a lot of the suburban New York apartment complexes is actually a lot of people who are divorcees. They want to be able to stay close to their kids, but they can't, between their ex-spouse, they can't afford keeping two homes. You see people from 55-plus or even later stage retirees, there may not be actually great nursing homes in the area. And they use traditional apartments with additional resources so that they don't have to get kicked out of their communities.

Keith Rand 47:01

We talk to a lot of people, and they're very empathetic, and towards thinking about why their kids can't move closer to them. But somehow that's lost when it's development down the street. So I think it's a little a few different things. I think that development community needs to speak to people with, with recipients with a continuous level of respect and understanding. But there's a level of education that is required for it to be done in a empathetic and non patronizing way.

Atif Qadir 47:36

I think they that's a really beautiful and to a an episode that ends the entire season. This idea that housing in the real estate industry is probably much better served when we think of that context of our customer, the one that is actually using and living in walking and experiencing the buildings that we build. And I think that as you look across the 15 episodes from the season, we had the opportunity to not only look at 15 different amazing projects and different buildings, but most importantly, meet 15 different amazing people that are working in this industry, in order to advance housing for our country. So that's it for today. So thank you so much for spending time with us. Keep that from your busy schedule. We appreciate it very much. Thank you. Thank you, listeners.

Atif Qadir 48:28

Thanks for joining me today on American Building. If you enjoyed this episode and want to hear more, subscribe on your favorite listening app. And don't forget to rate and review. And friends, I've teamed up with writers for the New York Times and Wall magazine to launch a digital media platform to tell the fascinating stories of the impact developers and capital providers I work with a Commonplace. Check it out at commonplace.us