As California gets hit with its most extreme rent control bill in state history, the skies aren’t all gloomy and some landlords are relieved to have some degree of certainty. Elite college football programs continue to attract heavy investment in their respective student housing markets and drive enrollment ALL THE WAY! The Federal Reserve cuts rates for the second time since the financial crisis to promote cheap borrowing as the yield curve inverts. All while the traditional multi-family market continues to benefit from both millennial’s and boomer’s high propensity to rent.
Here’s Why Landlords Don’t Hate California’s Rent Control Bill
The California Business Roundtable – a group of 200 CEOs that counts Blackstone’s Stephen Schwarzman among its members – supported the bill. A spokesperson for Blackstone said that the firm approved of AB 1482 because it “provides certainty and encourages new construction.” For the California Apartment Association, the 10-year sunset clause creates certainty for multi-family investors and lenders. They can now underwrite deals with AB 1482’s rent caps and tenant protection measures in mind.
Elite Football Programs and Student Housing
Elite college football programs drive more investment into student housing assets at universities associated with those programs, according to several industry sources. According to Sean Baird, director of the national student housing group at real estate services firm Colliers International “for student housing, the university is the engine powering the investment. As long as your football team is winning, donors will be pouring money into the universities, applications will continue to rise, enrollment will grow, and investors will be attracted to enter the market.”
Why the Fed Lowered Interest Rates Again
The Federal Reserve lowered interest rates for the second time this year, as it tries to guard the United States economy against trade-related uncertainty and slowing global growth. The central bank cut borrowing rates in late July for the first time since the financial crisis. The moves are part of an effort to keep borrowing cheap, credit widely available and businesses and consumers confident. Longer-term bonds have been trading at interest rates that are lower than those on
short-term securities – what is known as the yield curve inverting. It’s an unusual occurrence that often happens before recessions, and one that could signal that investors have become pessimistic about the economic outlook.
Multi-Family Rides the Wave of Economy and New Occupants
“The high propensity to rent among many newly formed households, despite a dramatic lowering of mortgage rates over the past six months, points to a true change of preference for renting over owning,” Institutional Property Advisors’ Midyear Investment Forecast states. For millennials, renting is an affordable alternative to entry-level homes that are a lot higher priced today than they were 15 to 20 years ago. For boomers, there’s a point when maintenance of a single-family home becomes exhausting. For both cohorts, living 35 or 40 minutes away from the arts and cultural opportunities in downtowns provide another incentive to rent closer.
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