New York loses $19.5 billion in population exodus: IRS

 The Internal Revenue Service this week released more troubling data for New York, with the federal agency showing more high-earning taxpayers leaving the state.

Tracking returns filed in 2019 and 2020 showed that 479,826 people left New York for another state or country in those years. Over the same timeframe, just 231,439 people moved to the state. That means the state suffered a net loss of 248,387 residents.

And, of course, those people took their money with them. The IRS figures show the moves generated an economic exodus of more than $19.5 billion.

New Jersey and Florida were the biggest beneficiaries. More than 84,500 people moved from New York to New Jersey and took $5.3 billion. By contrast, only 37,127 New Jersey residents moved to New York and brought $2.2 billion in income.

The numbers were even starker between New York and Florida. Over the two years, 71,845 New Yorkers flocked to the Sunshine States and took $6.4 billion. Meanwhile, 26,902 former Floridians moved up north. Those individuals had a combined income of $1.2 billion.

Wirepoints, in its analysis, noted New York suffered the worst net loss of income of any state, with the $19.5 billion representing a 2.5 percent decline in adjusted gross income. The independent nonprofit research firm said New York lost $1 trillion in income through population losses since the beginning of the century.

“The problem with chronic outflows, like in the case of New York, is that one year’s losses don’t only affect the tax base the year they leave, but they also hurt all subsequent years,” Wirepoints noted. “The losses pile up on top of each other, year after year.”

The news comes a week after the U.S. Census Bureau reported that it likely overcounted New York’s population in the 2020 Census by more than 625,000 people, and state Comptroller Thomas DiNapoli reported the state lost more than 140,000 part-time taxpayers between 2015 and 2019.

As the state emerges from the COVID-19 pandemic, an emergency that likely hastened more people to move, Democrats in Albany have pushed the federal government to fix the so-called “SALT cap.” The Tax Cuts and Jobs Act of 2017 put a $10,000 cap on state and local tax deductions taxpayers may claim on their federal tax returns. Last month, the U.S. Supreme Court decided against hearing a challenge to that provision.

Republicans in the state have railed against Democratic leadership in the state Legislature and the executive chamber for tax-and-spend practices and passing laws that make residents less safe.

https://justthenews.com/nation/states/center-square/new-york-loses-195-billion-population-exodus-irs-confirms

Aspirational Pricing

 

 

 

Let’s talk real estate.

I am a magnet for residential real estate questions. Having more or less gotten the 2000s RRE mess right, I get regular questions about real estate investments, pricing, cycles, and values. I don’t always know the answer, but can usually find the person who does.

This current housing market is unusually confusing, for lots of reasons, but let’s reference a few of them.

Start with the undersupply of single-family homes. We discussed this in detail last Summer. The tl:dr is that heading into the pandemic, we had a decade of reduced demand and underbuilding, a huge lag in household formation, building up to lots of pent-up demand.

Add to this mortgage costs were the cheapest in modern times.

Third, the pandemic disrupted the usual chain of sales. Normally, this looks something like this: First-time buyers buy a home from a growing family – one kid, another on the way, needs more space. They in turn purchase from the “move up” family, who buy into a nicer neighborhood, whose seller moves into an even more luxurious home, who buy from the person moving to waterfront/lakeside/mountain views, who buy from the soon to be retired. What is notable is that the total number of homeowners remains the same as each purchase leads to a sale.

That didn’t happen this time around; people stuck in apartments or too small homes purchased second (or third) homes without selling anything. It only takes a few quarters of this activity to suck up most of the available supply.

In a very short time, these three factors – a decade of underbuilding, historic low rates, and a disruption of the sale chain – led to the unusual circumstance of high demand and low supply. Prices have spiked as you can see in the chart above (via Yardeni Research). Or, consider these annual gains (via Charlie Bilello):

Where things get interesting is how homeowners and sellers have responded to these circumstances. There have been bidding wars for the reasonably-priced homes, and in response, some sellers have put up their homes for sale at extremely high and unlikely-to-sell prices at least judging the marketplace relative to immediately prior comparable sales or simply how long they take to sell relative to average time on the market. My friend Jonathan Miller coined the term “Aspirational Pricing” to describe this approach to listing homes for sale.

Consider a favorite Zillow trick to see what this looks like. Pull up a map of your favorite locale; you can do this by typing the name of a town into the search box or by using the draw tool to encircle a given region. Now sort this by newest listing. Zillow doesn’t allow you to reverse this, so instead you have to scroll to the bottom.

Despite this being the hottest housing market in recent memory, you can find homes that have been for sale for 500, 1000 even 1500 days. And if you check the price history, you can see homes that have been listed on and off by the same seller for years and years and years.

I show a few examples of this here, but you can do the same thing with the app or website on your own.

Sale prices contain market information; listing prices are revealing about psychology…

https://ritholtz.com/2022/05/aspirational-pricing/

Real estate’s titans talk building, selling, and reinventing the city

 It was like they had never left.

The first post-pandemic edition The Real Deal’s New York City Showcase + Forum packed the Metropolitan Pavilion with real estate pros for an afternoon of panels, networking and dealmaking. The annual gathering had been on hold for the pandemic, but attendees seemed to make up for lost time as they buzzed through the venue, catching up with old acquaintances and making new ones.

Some 43 booths snaked around the convention hall as vendors showcased the future of real estate. StreetEasy and Miele brewed cappuccino, while others hawked swag ranging from notebooks to hand-rolled cigars. Cardboard cutouts of real estate titans Harry Macklowe, Stephen Ross and Gary Barnett posed with a poster for TRD’s forthcoming book, The New Kings of New York.

VIPs mingled in the Thermador green room as a series of panels convened the biggest names in residential development, commercial real estate and proptech. Here are the highlights:

Sell, sell, sell

Bess Freedman made no bones about it: The Brown Harris Stevens CEO thinks reality television shows like “Selling Sunset” are bad for residential brokerages.

“It makes the consumer think all you have to do is look cute, have a fancy car and boom — you can do a deal,” Freedman said.

Co-panelist Ryan Serhant, the “Million Dollar Listing” star, begged to differ.

His eponymous firm makes a personality-focused pitch to agents, encouraging them to develop internet followings with high-production videos.

“To give those agents the resources to build their own brands so they can generate leads in their sleep,” Serhant told the audience, “I wanted to create a platform where they could do that.”

Douglas Elliman CEO Scott Durkin took aim at the city itself. “Clean up the damn city,” he said. “It’s kind of dirty and filthy and full of garbage.”

All three panelists found a common rival: Compass. The techy brokerage has poached top agents from its competitors, but its share price has fallen by more than 70 percent since Compass went public last April.

“A lot of people went to the other side and they realized there isn’t much there,” Durkin said. “A lot of people are turning around and coming back.”

The mayor’s red carpet

In the event’s keynote address, Mayor Eric Adams encouraged New York business leaders to “stop being ashamed of being a capitalist,” although it’s not clear any ever were. In particular, he touted the importance of real estate to the city’s economy.

“What oil is to Texas, real estate is to New York,” Adams said in one of several applause lines. “We have to support our police,” was another.

The mayor, whose pro-business platform brought him widespread support from real estate, said he wants to “roll out the red carpet” for builders. That plan would include further modernizing the Department of Buildings and cutting through bureaucracy that delays construction.

Adams didn’t touch on the 421a property tax break, which Albany is poised to let expire on June 15. Without the incentive, multifamily rental projects are expected to stop. After his speech, Adams told TRD’s Kathryn Brenzel that he hopes state lawmakers will “at least” extend the program.

The mayor is expected to release his own housing plan soon. He also encouraged companies to bring their employees back into the office, joking that many people who say they are still afraid of catching Covid at the office are the same ones partying at clubs on the weekend.

Disrupt or die

A panel of proptech titans had a bold message for the audience: get with the times or step aside.

“You don’t want to be on the wrong side of what I think is an inevitable and very powerful push forward,” said Era Ventures’ Clelia Warburg Peters.

As the panelists discussed what they consider the real estate industry’s biggest transformation in centuries, they focused on the challenges forcing owners and investors to dive into the digital age. Changing consumer behaviors and the push for a net-zero carbon economy aren’t just trends, but lasting changes that require wholly new approaches.

“To adapt to a changing environment, to adapt to changing consumer needs, to adapt to a changing climate — these are elements you didn’t have to deal with before, or at least they weren’t at the top of the list,” said Brad Greiwe, co-founder and partner at Fifth Wall.

As they discussed such lofty goals, the panelists dismissed concerns that setbacks in tech valuations signal trouble for proptech as a whole.

Some old-school segments of the industry will likely change as new tech changes what is possible without (as many) humans. The brokerage business is already under threat from iBuyers, which cut out intermediaries the way Tesla cuts out dealerships.

“I don’t think agents will be totally disintermediated,” Peters said. “But I think there is a legitimate question about whether brokerages will be.”

Office forecast

There are plenty of reasons for office and retail landlords to worry, but it wasn’t all doom and gloom at a panel on the future of commercial real estate. Chris Shlank, founder and managing partner of Savanna Fund, joined Will Silverman of Eastdil Secured and Bob Knakal of JLL Capital Markets to talk about the changing world of offices in New York.

The group agreed that some amount of office-to-residential conversions will make sense, but it will not be the silver bullet that some housing activists envision because the building code for homes is so different. Some aging offices could become something else, though.

“The bottom 20 [percent] is going to be ripe for alternative use,” said Shlank. “It’s going to be the middle 60 that I think about and I worry about.”

Conversions would require rezoning and complicated renovations. One idea popular with the panelists was a reinstituted 421-g program — a tax incentive to help conversions pencil out.

“Without that tax abatement the numbers are really, really hard to work,” Knakal said.

The group also discussed what Silverman calls the “downsize upgrade,” where lessees grab less but nicer space than they currently have. These moves have become particularly popular near Grand Central, which bodes well for SL Green’s One Vanderbilt.

With staff commuting in for only part of the week and less willing to switch trains, the focus is less on ping-pong tables and meditation rooms and more on quality and transit-hub proximity.

“In four years, all of us owners and advisers are going to laugh at each other at how much money we spent on amenities that no one uses,” Shlank said.

Building the skyline

Several of New York’s most accomplished developers addressed the audience at the May 19 event.

Gary Barnett, the founder and president of Extell Development, joined TRD’s publisher Amir Korangy to dish on tenant holdouts, foreign buyers, rising rents and the risks of developing in the city.

The conversation opened with some humility, as the billionaire builder admitted discounting his luxury units early in the pandemic.

“When Covid hit everything, we cut pricing across the board. But since the beginning of 2021, we’re seeing a tremendous pickup in the market,” Barnett said.

While rents have soared, Barnett disputes that they are out of control.

“Saying rents went up 30 percent is totally inaccurate,” Barnett said. “All it did was stabilize back to normal.”

Developers have more to worry about than dramatic statistics. Barnett touched on holdout tenants, a problem that has bedeviled him and his competitor Miki Naftali , CEO of the Naftali Group.

As lawyers have wrung huge settlements for project-blocking clients, Barnett said government bureaucracy and the court system have moved too slowly to protect developers’ rights. A tenant lawyer’s quest for a windfall also means slower housing construction and higher costs.

“He may get a great deal for a client, but is that good for society?” said Barnett, touting the tax revenue from his projects.

Later in the afternoon, Naftali and BRP Companies co-founder and CEO Meredith Marshall spoke with TRD’s Editor-in-Chief Stuart Elliott about the challenges facing development in the city.

A major cause for concern was the likely expiration of the 421a tax break, which Marshall called “malpractice.”

Naftali said 470 Kent Avenue, his firm’s Williamsburg development site , would illustrate the effect of 421a’s demise. The firm planned to set aside a large block of rentals as affordable, but without the tax break, Naftali will sell all the units as condos.

“What choice do we have?” Naftali said. “We’re going to sell them; we’re going to make money. How does that help anybody?”

Marshall warned that construction workers would depart for cities with more active pipelines. “Able-bodied workers are not going to hang around,” he said.

https://therealdeal.com/2022/05/24/real-estates-titans-talk-building-selling-and-reinventing-the-city/

DiNapoli: Brooklyn Leads NYC’s Economic Recovery

 Brooklyn’s economy is showing signs of recovery that outpace the rest of New York City and point to a strong rebound for the city’s most populous borough, according to an analysis released today by New York State Comptroller Thomas P. DiNapoli.

“The pandemic halted Brooklyn’s booming economy in 2020 and exacerbated some existing inequities,” DiNapoli said. “As the economy has gradually improved, however, Brooklyn is showing a return to its pre-pandemic job growth. To help the borough bounce back stronger than ever, we must address long-standing issues, like housing affordability, child poverty and food insecurity.”

“New York City is coming back, and we’re going to bring all five boroughs with us,” said New York City Mayor Eric Adams. “We need to build back our city more prosperous and equitable than it was before, and I’m excited to see Brooklyn leading the way, with much more good news to come from across the entire city.” 

“If anyone knows one thing about Brooklyn it’s how resilient it is thanks to the incredibly determined and adaptable people who call the borough home. Therefore, it comes as no surprise that Brooklyn is outpacing other boroughs in New York in its recovery from the COVID-19 pandemic,” said Brooklyn Borough President Antonio Reynoso. “Comptroller DiNapoli’s report further demonstrates how well Brooklyn is positioned to overcome the challenges not only posed by the pandemic, but by other societal challenges that were exacerbated by COVID. But we must not lose momentum. Let’s focus on further increasing employment opportunities, creating safe havens and homes for diverse communities, and making our streets safer to ensure our continued success.”

“Brooklyn’s impressive economic growth in the face of a devastating pandemic is a testament to the people of this great borough,” said Attorney General Letitia James. “In order to continue building on this success, we must address the extreme inequalities that still impact too many hardworking families. That means real solutions for creating real affordable housing, supporting small businesses, and investing in smart and sustainable projects. Comptroller DiNapoli’s report is an important tool to study the challenges we’re still facing and a useful roadmap for continued investment and growth in the years to come.”

“The COVID-19 pandemic brought a harrowing halt to Brooklyn’s tremendous economic growth and further shed light on inequalities that plague our communities,” said Congresswomen Nydia Velázquez. “Even though we are still fighting the pandemic, Brooklyn’s economy is showing signs of a resurgence, thanks to strong recovery efforts across levels of government. In order to sustain this recovery, we must continue to take bold actions to tackle the inequalities that were exposed by the pandemic.”

“As a lifelong Brooklynite, it’s heartening to see that the economy is recovering so robustly,” said Public Advocate Jumaane D. Williams. “At the same time, the pandemic worsened housing insecurity, hunger, inaccessible health care and other structural inequalities that plague the borough and our city as a whole. My office will continue to partner with all levels of government to bring this economic recovery to every corner of our city, while also fighting to make New York the best place to both work and raise a family.”

“The Comptroller’s report highlights how our recovery from the COVID-19 pandemic is contingent on continuing to develop sound policies that center equity and justice,” said City Council Member Crystal Hudson. “Brooklyn remains the most exciting place to be, with the hum of new and emerging businesses, its rich diversity, and its ever-growing cultural attractions. However, the pandemic exposed the precariousness of too many of our neighbors’ wellbeing and the Comptroller’s report makes this clear. Despite strong indicators that our borough’s economy, its job market, and our overall health are rebounding after more than two years, we continue to see striking disparities in income, health and affordability between low-, moderate- and high-income neighborhoods across Brooklyn. We will never truly recover until every person in every neighborhood experiences material improvements in health, housing, income, and every other facet that is a key determinant of our health and wellbeing.”

“This report shows that Brooklyn has so much to be proud of, as well as crucial points of economic disparity that continue to plague our borough,” said City Council Member Chi Ossé. “As we recognize our striking successes in recovering from the pandemic, we have to remember that those who were suffering most before its onset both bore its worst effects and remain the slowest groups to recover. We are thankful to have such detailed reporting on the progress and needs of our borough, and understand our obligation to address the highlighted areas of need in Brooklyn.”

"Brooklyn's resiliency has enabled us to weather the COVID storm better than most, and now we are leading the recovery, but our small businesses still have a ways to go," said Randy Peers, President and CEO of the Brooklyn Chamber of Commerce. "Inflationary pressures due to supply chain issues, a soft labor market, and lingering commercial rent arrears are the top challenges we will face in the year ahead."

Brooklyn is home to nearly one-third of NYC’s population (2.7 million) and is the city’s fastest growing borough with a 9.1% increase in population from 2010 to 2020. Its economy reflected that growth in the decade before the pandemic.

Pre-Pandemic: Strong Business and Employment Growth

DiNapoli’s report found that between 2010 and 2019, Brooklyn’s employment growth of 48% was far higher than in any other borough, or than the citywide growth of approximately 29%. Much of the job growth was driven by employment in hospitality businesses.

The number of private sector businesses in the borough grew nearly 32% in the same period – faster than in any other borough – mainly due to expansion of micro-businesses (those with fewer than 10 employees). Businesses in the information sector, which includes internet publishing and broadcasting, more than doubled.

Brooklyn also saw total wages (which reflects both average salaries and the number of jobs) rise nearly 75% – far faster than any other borough. This growth was primarily because the number of jobs in Brooklyn increased rather than a significant growth in salaries.

Pandemic Underscored Disparities and Posed New Challenges

Despite Brooklyn’s overall economic success, the pandemic exacerbated existing inequalities in the borough, with rates of unemployment, poverty, median rents, broadband internet access and health outcomes varying widely from neighborhood to neighborhood.

While some Brooklyn neighborhoods saw the largest increases in median household income in the city since 2010, several remain among the city’s lowest median household incomes. Among the borough’s 18 neighborhoods, median income varied from a low of $31,350 in Brownsville/Ocean Hill to a high of $155,250 in Park Slope/Carroll Gardens.

In 2019, half of all rental households were considered rent-burdened, with at least 30% of their income going towards rent. To make matters worse, over one-quarter of renters faced a severe rent burden, putting at least half of their income toward rent. The pandemic brought Brooklyn’s housing affordability crisis to the forefront, as job and income losses affected residents’ ability to pay rent.

Disparities in income also were reflected in COVID case rates, hospitalizations and deaths, with lower income areas of Brooklyn bearing more of the brunt of the pandemic than higher income areas. However, cases and death rates varied widely across Brooklyn neighborhoods, with the lowest case rate recorded in the Gowanus/Park Slope/Windsor Terrace area and highest in East New York. As of March 2022, Brooklyn’s cumulative COVID-19 case rate was second lowest of the five boroughs, and cumulative hospitalization and death rates were third lowest.

Amid the Pandemic: Signs of Strong Recovery and Continued Growth

Much like other boroughs, Brooklyn’s recovery has been bolstered throughout 2020 and 2021 by the numerous pandemic relief programs that were available or expanded, such as the federal Paycheck Protection Program and Restaurant Revitalization Fund (RRF) and the city’s Open Streets: Restaurants programs.

In Brooklyn, women-owned businesses, as well as businesses in either low- and moderate-income (LMI) areas or historically underutilized business (HUB) zones were awarded higher shares of RRF grant dollars than citywide.

DiNapoli’s report found that Brooklyn’s employment market is already making a comeback with 100,000 jobs regained between the start of reopening in the second quarter of 2020 (which included a May unemployment peak of 21.2%) and the third quarter of 2021. Recovery in this period was fastest in many face-to-face services, and in the information sector. The trend should continue, especially in the leisure and hospitality sector, as well as in the construction and transportation and warehousing industries.

Additional findings:

• Education and health services were the largest employment sectors in Brooklyn. Leisure and hospitality, the borough’s third largest sector, had the fastest growth of all sectors between 2010 and 2019 with staggering growth of 109%.
• Brooklyn is home to immigrants from more than 150 countries, accounting for 35.4% of its population, second only to Queens. The top five countries of origin among Brooklyn’s immigrant population are China, Jamaica, the Dominican Republic, Haiti and Ukraine.
• The median age in Brooklyn was 35.6 years in 2019, lower than the citywide median of 37.2 years.
• In the decade leading up to the pandemic, major crimes in Brooklyn (i.e., murder, rape, robbery, felony assault, burglary, grand larceny, and grand larceny auto) fell by 16%, compared to a 9% drop citywide. In 2021, major crimes in Brooklyn grew by 1%, lower than the citywide 7% increase. Compared to 2020, the number of hate crimes in Brooklyn grew by 44% to 134 in 2021, mostly reflecting anti-Jewish incidents (58). Citywide, hate crimes grew by 97 percent.

To meet residents’ needs and ensure an equitable recovery in the borough, it is critical for city and state officials to collaborate with business owners, nonprofits, community leaders and other stakeholders to effectively disseminate government resources to area businesses, individuals and families that are still in need and maintain a welcoming business climate.

Report
Recent Trends and Impact of COVID-19 in Brooklyn

https://www.osc.state.ny.us/press/releases/2022/05/dinapoli-brooklyn-leads-nycs-economic-recovery

DFW Is The Nation’s Most Active Real Estate Market

 People have been moving to North Texas in droves as companies seek to harness the gains of the state’s relative affordability and business-friendly environment. DFW’s real estate market, named by StorageCafe as the most active in the nation, is a testament to the Metroplex’s success despite challenges posed by the pandemic.

Between 2012 and 2021, DFW outpaced 50 other major U.S. metros in terms of combined new construction across all major real estate sectors, StorageCafe’s analysis found. In total, the Metroplex saw more than 556,000 permits issued for residential construction and close to 331M SF of new industrial, office and retail space.

Metros trailing DFW in the top five were Houston, New York, Phoenix and Atlanta. The report pointed to Dallas’ strong job market and healthy economy as major propellants. 

“Not only did the pandemic not slow the market, but 2020 and 2021 saw the highest numbers of permits issued for new single-family homes in the entire decade — 44,000 and almost 50,000, respectively,” the report read.

DFW was not immune to the coronavirus pandemic, but it fared relatively well compared to other U.S. metros. According to the state’s comptroller, more than 1.4 million Texans lost their jobs during the pandemic, and sales tax collections declined across several major categories. Still, the state’s economy bounced back faster than others, in part due to the early loosening of restrictions. Earlier this year, the Texas Tribune reported that the state’s job market had rebounded from the pandemic and was now outpacing the rest of the country.

Multifamily construction is driving much of DFW’s growth. According to StorageCafe’s report, 27,000 new apartments were permitted in 2021, which is just below the Metroplex’s record of 28,000 multifamily permits issued in 2015.

DFW also topped the list for new industrial and self-storage construction in the nation, with about 228M SF and 23M SF delivered over the decade, respectively.

The population of North Texas is expected to more than double to 16.8 million people over the next 30 years, according to the North Texas Commission. David Eyzenberg, adjunct assistant professor at New York University, said states like Texas that have a track record of attracting new residents will be the biggest beneficiaries of new development.

“Development is usually fueled by population growth, which recently has been more about migration patterns versus immigration or birth rate,” Eyzenberg told StorageCafe. “States with pro-business regimes and less draconian lockdown rules will benefit from an influx of mobile workers, and development will follow.”

https://www.american-apartment-owners-association.org/property-management/report-names-dfw-as-the-nations-most-active-real-estate-market/

NYC Exodus To Florida Accelerates As People Fed Up With Violence And High Taxes

 New York City struggles with a sharp rise in violent crime as the new mayor fails to make the metro areas safer. Public safety is worsening and has likely resulted in a continued exodus of residents.

NYPost reports that 21,546 New Yorkers left the state for Florida during the first four months of this year, a 12% rise over the same period last year. 

The exodus of New Yorkers first began before COVID-19 because of high taxes, then accelerated during the pandemic as the city went into lockdown. Now people are leaving in droves as the metro area descends into chaos.

For some more context about the exodus, 2022 totals are 55% higher than the same period in 2019 (pre-COVID). A stunning trend that is only gaining momentum. 

New Yorkers are frightened to walk the streets, nevertheless travel in the subway, which is plagued with criminals. In April, a mass shooting in a subway car left more than a dozen people injured. Last Sunday, a Goldman Sachs research analyst was shot in the chest, in an unprovoked attack, on the subway. The analyst died on the spot.

The toxic environment of crime and high taxes have forced some Wall Street firms to move operations to the Sunshine State as an attractive place for long-term expansion. City dwellers have fallen in love with the state because there's no personal income tax. 

If migration trends persist, the number of New Yorkers leaving the state for Florida could shatter last year's figure of 61,728. 

Meanwhile, Mayor Eric Adams has been absolutely wrong about migration trends reversing. It's only accelerating as NYC descends into darkness as another failed liberal city implodes under the weight of violent crime and high taxes. An environment businesses and or households will no longer tolerate because technology has allowed them to become more mobile

https://www.zerohedge.com/political/nyc-exodus-florida-accelerates-people-fed-violence-and-high-taxes

78% of Southern California neighborhoods don’t allow apartments

 Three-quarters of Southern California’s neighborhoods are zoned exclusively for detached, single-family homes, contributing to racial segregation and limiting minority access to better schools and resources, according to a UC Berkeley study released Wednesday, March 2.

The report found that areas zoned for houses tended to be “Whiter and wealthier” than mixed-housing neighborhoods, and educational and income attainment of children raised in those neighborhoods are higher than for children from mixed-zoning areas.

The report was authored by the Othering & Belonging Institute at UC Berkeley. It’s a sequel to a 2020 study that found that 85% of residential land in the San Francisco Bay Area is zoned exclusively for single-family housing.

The study compiled land-use maps for 191 cities in Los Angeles, Orange, Riverside, San Bernardino, Ventura and Imperial counties.

The study found 76% of Los Angeles County neighborhoods have single-family zoning, compared with 66% in Orange County, 79% in Riverside County and 84% in San Bernardino County.

All the zoning in six cities is limited to single-family houses: Villa Park, Bradbury, La Habra Heights, Rolling Hills, Hidden Hills and Irwindale.

“An inordinately large amount of residential land — in fact, of all land in this region — is restricted to large-lot, detached single-family homes,” co-author Stephen Menendian said Tuesday, March 1. “What this means is that apartments, condos and other housing options are simply impossible to build … and the consequences are profound.”

The percentage of single-family zoning is closely correlated with racial composition, the study said, showing “significant racial changes” in communities with little or no multi-family housing. Low-density zoning tends “to exclude lower-income people and people of color.”

Findings in the report show there’s a sharp drop in Latino populations and a sharp rise in White populations in communities where 80% or more of the housing is restricted to single-family homes.

Asian populations also increase in single-family neighborhoods, while Black populations showed gradual declines as the proportion of single-family zoning rises.

At least one city official questioned the conclusions of the study, saying zoning and demographic makeup “are totally separate issues.”

“A lot of people want single-family houses,” said longtime La Habra Heights City Councilmember Brian Bergman. “I don’t think it’s a fair analysis.”

Because of new state mandates requiring cities to plan for more housing, Southern California cities already are in the process of revising their zoning to accommodate more apartments, accessory dwelling units and up to four homes on a single-family parcel, local officials said.

The institute’s findings are based on zoning, which doesn’t always reflect the actual types of buildings in a community, Menendian said. He noted non-conforming uses either predate zoning rules or were allowed as an exception.

The study also found that neighborhoods with mixed zoning tended to have lower levels of educational and professional achievement and a “disturbing correlation” between pollution and housing.

A comparison of children raised in the 1980s showed that those from exclusive, single-family neighborhoods had higher school performance scores, higher high school and college graduation rates and tended to have higher incomes as adults, Menendian said. The level of particulate matter from auto pollution, a contributor of asthma, declines as the percentage of single-family-only zoning increases, as does the potential risk to lead exposure.

In general, zoning is used to regulate development to ensure compatible land use, as spelled out in a city’s master plan. But scholars have argued that exclusionary single-family zoning had sinister origins in the early 20th century, fostering racial segregation without mentioning race.

“The use of zoning for purposes of racial segregation persisted well into the latter half of the 20th century,” author Richard Rothstein wrote in his book, “The Color of Law,” which documented the history of racial segregation in America.

“In too many zoning decisions,” he wrote, “the circumstantial evidence of racial motivation is persuasive.”

State lawmakers have approved single-family zoning reform primarily to address the housing shortage. A state housing plan released Wednesday said California needs 2.5 million additional homes by the end of the decade to address its shortfall, at least 1 million of which must be affordable to low-income households.

California and Oregon adopted laws allowing duplexes in single-family neighborhoods. Under California’s Senate Bill 9, owners can split their lots in two and even build up to four homes on the property; and under Senate Bill 10, developers can build up to 10-units on a single-family lot in transit-rich or urban infill areas if the local jurisdiction approves it.

The institute identified at least 13 Southern California cities “most in need of zoning reform” because they allow little or no multifamily housing and have failed to meet state-mandated goals for building low-income housing. Among them are Bradbury, Rolling Hills, Rolling Hills Estates, La Habra Heights, Villa Park, La Cañada Flintridge, Chino Hills and Moorpark.

Menendian said reforms could include adding multifamily and mixed-use zoning in single-family neighborhoods, loosening restrictions like setbacks and acreage minimums, and limiting the ability of neighbors to block denser housing.

Bergman, the La Habra Heights councilman, said the UC Berkeley study fails to take into consideration his town’s challenging topography. The city of 5,682 residents is built on hilly terrain with narrow, curvy roads that are part of an extreme fire hazard zone. Unlike a typical city, it lacks businesses, sidewalks or even sewers.

“We don’t have the infrastructure to support the kind of housing you’re talking about,” Bergman said. “It’s easy for someone from Berkeley to say you need this or that. But they haven’t been down here and walked the community.”

A Chino Hills official disputed the accuracy of UC Berkeley’s map, saying many hillside slopes included in the city’s single-family zones are too steep to build on. While the institute’s map shows 96% of Chino Hills is zoned for single-family homes, multifamily homes actually make up 21% of the city’s housing stock, Community Development Director Joann Lombardo said in an email.

“Chino Hills consistently rezones properties as necessary to respond to changing demographic demands,” said Lombardo, noting that the city is converting underused commercial and golf course properties to multifamily housing and adding multifamily to flatter areas to the south. “Chino Hills has and continues to designate new sites to high density.”

https://www.american-apartment-owners-association.org/property-management/78-of-southern-california-neighborhoods-dont-allow-apartments-study-finds/

The Good, The Bad, And the Ugly of Mobile Home Park Investing

 Most Americans only know about “trailer parks” based on what they see on television or the movies. The problem is that if we only relied on the entertainment industry for our investment facts then we would all bet our money on things that Hollywood cherishes, like stocks of companies that manufacture evening gowns. Besides a fair and balanced approach to information it’s also important that we also look at both sides of any investment because one pitfall can ruin a perfectly good path to prosperity. With that in mind, here are the factual “good, bad and ugly” realities regarding mobile home park investing.

The Good

Mobile home parks have some amazing attributes that have made them a highly profitable investment sector over the past half-century:

• They have the largest “moat” of any American real estate sector. Warren Buffett has long talked about the necessity of a “moat” to protect your investment – in fact, he only invests in industries with a “moat” – and mobile home parks have one of the largest in America. That “moat” is the simple fact that you have not been able to build a new mobile home park in the U.S. for over a half-century. Virtually all of the mobile home parks in America were built in a narrow range of the 1950s to the 1970s. Then city governments completely turned off the spigot.
• They have the highest rates of return of any real estate sector in the U.S. The normal target of most mobile home park buyers and owners is a 20% cash-on-cash return. No other segment of real estate can even remotely touch that number.
• The customer base is incredibly stable. The average tenancy of a mobile home park resident is around 14 years. But most mobile homes never actually leave the park because it costs $5,000+ to move one, so while the residents may come and go, the homes never do.
• The demand is off the charts. Affordable housing is one of the hottest sectors of American demand, thanks to single-family home prices averaging around $300,000 and $1,600/mo. apartment rents.
• Financing is relatively easy to obtain. Banks love mobile home parks due to very low loan default rates. There are four sources of lending: 1) seller carry 2) banks 3) CMBS and 4) Fannie Mae/Freddie Mac.
• Every single U.S. megatrend is favorable for this industry. Whether it’s the 10,000 Baby Boomers retiring per day or the population moving from urban centers to suburbs and exurbs, that’s all good news for mobile home parks.
• The “stigma” against “trailer parks” works in your favor. The very fact that most Americans have a negative stereotype against mobile home parks actually works to the benefit of buyers as it keeps competition down.

The Bad

Despite all of the items named above, mobile home parks also have some negative attributes to consider:

• • “Heavy lift” turnarounds require a strong constitution. When you buy a mobile home park in terrible condition and try to bring it back to life, there is always an initial unpleasant period where people will blame you for ruining their lives (residents have to be evicted for rules violations and non-payment of rent) and you will seem to have no friends, but that period ultimately passes and things calm down. But it can be shocking if you’ve not done it before.
  • Bringing old properties back to life can have significant capital costs. As part of the process to bring old parks back to life you will often have to write big checks to fix items like roads and utility lines. You must plan accordingly.
  • There are many mobile home parks that are not worthy of bringing back to life. Just because a mobile home park exists doesn’t mean that it’s worthy of being resuscitated. Most mobile home parks were built 50+ years ago and some markets have changed since then.
  • Collections can be tough until residents learn the system. Collecting money from mobile home park residents requires a tough stance called “no pay/no stay” and you must not waiver on this.

• Rules violations require constant monitoring. Just like collections, residents must know their limitations on the rules, which were designed for the common good. You have to play the “bad guy” until residents understand the necessity of acting like neighbors.
• Competition is high in a few states. While mobile home park competition is far lower than any other real estate sector, there are a few states in which competition has been fierce for decades, and these include most notably California, Washington, New York and Florida.

The Ugly

There are also some huge pitfalls you need to know, that can destroy your entire investment in short order and include:

• Environmental contamination. Every property – whether it’s a mobile home park or not – needs a Phase I environmental report to confirm it’s free of pollution. If you fail to get this report, and the property is contaminated, you could be on the hook for clean-up costs which might be in the millions of dollars. If the property does not get a clean bill of health, then move on.
• No operating permit. Every mobile home park will fall into one of three categories: 1) legal conforming 2) legal non-conforming (grandfathered) or 3) illegal. The first two are fine, but the last one is a deal killer. There’s no exception.
• A lagoon sewer system. This is a type of private sewer system in which the entire park’s sewage is dumped into a pit where the liquids evaporate. Virtually every state in the U.S. is trying to shut these down. However, there are occasions where the lagoon is OK for the moment, if you have a plan to replace it in the future. But you better be extremely careful.
• Severe floodplain issues. Mobile homes actually fare better than most of the other real estate sectors when it comes to flooding, mainly because they are on stilts by design. However, those “stilts” are only around 3’ high and the power of the water may destroy your park, in addition to the mobile homes. On top of that lenders hate this.
• Extremely high density. Mobile home park lots are like parking spaces for cars – the customer rents the space and pays a monthly fee. However, if the parking spaces are too small for modern cars, you won’t be able to keep the parking lot full and, over time, your revenue will die.

https://www.american-apartment-owners-association.org/property-management/the-good-the-bad-and-the-ugly-of-mobile-home-park-investing/