Sunday Summary: Let’s Talk About Housing

On Friday, the presidential race finally turned to real estate.

Vice President Harris unveiled an economic plan in Raleigh, N.C., that included among other things a proposal for 3 million new units of housing to be rolled out during her first four years in office.

That’s a lot of housing!

Harris said she would accomplish this with a series of tax incentives to builders that focus on first-time home buyers, and a $40 billion fund for local governments to create their own specialized solutions.

But the Democratic candidate also took aim at exploding rents.

“Some corporate landlords collude with each other to set artificially high rental prices, often using algorithms in price-fixing software to do it,” Harris said in her remarks. “I will fight for a law that cracks down on these practices.” 

We can understand why this would get a prominent place in any national political campaign. Housing is one of the big issues on many Americans’ minds. “The No. 1 point of economic pain and pressure is housing affordability,” said New York Rep. Pat Ryan to Reuters back in July on the heels of a Reuters/Ipsos poll showing housing as the second-biggest economic concern for voters after wage stagnation and inflation.

Developers are picking up on these signals, too.

Just last week RXR began exploring whether to convert the 1.1 million-square-foot office tower they own with SL Green (SLG) in the heart of Times Square — 5 Times Square — into housing. (Speaking of RXR, you should definitely check out this story about how they’ve been quietly filling in capital stacks for projects in need of cash. And, speaking of Times Square, not everything is going great for every building in that particular slice of Midtown.)

Plus, GFP Real Estate and TPG Real Estate submitted their plans to the city to convert 222 Broadway into 798 apartments.

Hopefully, even more housing will be coming down the pike thanks to the rezoning plan the City Council unanimously approved last Thursday for a 46-block area around four planned MetroNorth stations in the East Bronx. According to City Council Speaker Adrienne Adams, this could clear the way for 7,000 new units.

And, while New York can often feel the most famished for housing, this is hardly just a Gotham issue. Also last week Related California brought its proposal for a $3 billion, 3,750-unit mixed-use project in Santa Ana to that city’s planning commission. The project is also due to include a 250-key hotel, 200 units of senior care facilities and another 350,000 square feet of commercial space.

Housing… but different

Of course, multifamily apartment buildings and affordable housing are not the same as condominiums. And for a long time it seemed like the market for condos — particularly luxury, high-end ones — was going strong. (At least in Manhattan.)

But right now high-end condos might have the opposite problem: Too much supply.

“If you look at just straight supply and demand, the three- and four-bedroom market, there is a little bit more supply coming than demand is absorbing at the moment,” said Brown Harris Stevens’ Steven Kliegerman in this week’s Sit-Down.

However, Kliegerman quickly added: “I think what you’re going to see over the next couple of years is that very well-located luxury products in buildings that offer a boutique number of units — under 50 — are going to continue to do very well, because the luxury buyer loves anonymity.”

Indeed, as Kliegerman also notes in the interview, luxury condos are still drawing foreign buyers to New York (particularly from Asia) — and actually out of New York, too. While it might not be particularly popular, the so-called golden visa path to citizenship in a number of countries is paved with a pricey condo.

Plus, it should be noted that the conversion hunger we alluded to earlier exists in office-to-condo. For instance, we learned last week that Isaac Tshuva’s El-Ad Group had purchased 419 Park Avenue South for $72.1 million with the plan of converting to condos.

Still, one has to imagine that any developer tackling condos is realistic about the oversupply in the market. Some condos are being designed with a built-in failsafe: A portion of the units are being reserved as Airbnb properties  — and not just as a last resort, but from the get-go.

“We always thought to ourselves that the rental base was the first phase [of Airbnb’s plans],’’ said Jesse Stein of Airbnb’s rental division. “But, at the end of the day, the idea of hosting your home should be ubiquitous with every real estate asset class, from multifamily, to single-family, to condominiums and so on and so forth.”

Now, who’s going to pay for this?

Despite all the demand that’s out there, financing multifamily remains maddeningly difficult, and for pretty good reasons.

Just last week CRED iQ reported that the multifamily distress rate jumped 100 basis points in July. It reached 8.4 percent, from 2.6 percent just seven months ago. (Woof.) That should make lenders understandably wary.

However, the right project is still getting financing.

For example, New Empire Corporation scored $72 million in construction financing for the 117-unit condo they’re planning in Long Island City, Queens.

Invesca Development Group’s PIXL Plantation development of 330 units in Plantation, Fla., won $94 million in construction loans from Madison Realty Capital and Taconic Capital Advisors.

NRP Group finagled $94.3 million to refinance its debt on The Rylan (a 390-unit apartment complex in Tysons Corner, Va.) out of Keybank Real Estate Capital.

Atria Senior Living bagged a $52 million, floating-rate, first mortgage loan for their Newport Beach, Calif.-based 168-unit Atria Newport Beach.

Urban Homestead Assistance Board and Workforce Housing Group refinanced five of their affordable properties in Far Rockaway, Queens, to the tune of $39 million thanks to Citizens Bank.

Finally, condo financing got the biggest boost of all last week when Witkoff, Access Industries and Monroe Capital secured a whopping $1.2 billion from J.P. Morgan Chase and Tyko Capital to refinance a pair of luxury towers off Manhattan’s High Line.

All of which should ease some of the worries floating around. Because there’s no place like home — provided someone could build it.

See you next week!