Jason Hartman does a quick year in review to start the show. He also talks a bit about the attack on Capitol Hill and UBI. Then, he interviews Bob Pinnegar, CAE, President and Chief Executive Officer of the National Apartment Association (NAA), about eviction numbers and the possible expansion of Section 8. They also talk about the change in urban communities, demand for rental housing, and the appeal of major urban areas.
Announcer 0:00
New approaches to the world’s most historically proven asset class that will enable you to create more wealth and freedom than you ever thought possible. Jason is a genuine self made multi millionaire who’s actually been there and done it. He’s a successful investor, lender, developer, and entrepreneur whose own properties in 11 states had hundreds of tenants and been involved in 1000s of real estate transactions. This program will help you follow in Jason’s footsteps on the road to your financial independence day, you really can do it. And now here’s your host, Jason Hartman with the complete solution for real estate investors.
Jason Hartman 0:42
Welcome to Episode 1631 1631, thank you for joining me today. And again, happy new year, the new year is off to a great start for real estate investors. However, there is absolute craziness going on in our nation’s capital here in the good old US of A Let’s hope that that turns out as well as can be expected. And it looks like Yeah, well, you know, I think it’s a little too early to tell. So I’m not going to comment yet. But some reports are saying that antiva protesters are dressed up as Trump supporters to cause chaos and make it look make the Trump people have bad. So I don’t know, you know, this kind of stuff. It just gets absolutely crazy. And, you know, you never know who’s who. It’s, it’s absolutely, you know, counter intelligence and misinformation. And this is the way this is the way things are fought in today’s world. But today, our guest on a real estate note is the President and CEO of the national Apartment Association in a and they represent the rental housing industry. So you can hear from him as we we discuss some important things about rental housing, important to all investors, we’re gonna be talking about these moratorium issues, possible aid packages, whether it be through section eight. And remember, I predicted way back in February, a huge which, in COVID years, February is like a decade ago, even though it’s not even a year ago. But it seems like a decade, the way things have been going, I predicted a huge expansion of rental housing assistance, and I also a move toward UBI, universal basic income. As you know, we had presidential candidate Andrew Yang on the show before talking about UBI whether you like it or not whether you agree with it or not. I think it’s coming. That’s my prediction. I don’t think that that’s all bad. I really don’t I I’m I’m coming to terms with it coming to terms with it. You know, it’s like the prayer of St. Francis, right. You know, change the things you can accept the things you can’t change, or however it goes. It’s, there’s more to it than that. But that’s my, that’s my quick answer. How do you like that?
Yeah, there you go. So we’ll have him on in just a moment. And boy, there is a lot to talk about. I don’t know how we’re gonna do this with our new schedule in just three days a week, folks, but you’re gonna see more content on our YouTube channel, we just passed a one the 1 million view mark, we just broke 1 million views on YouTube. So be sure you check out our YouTube channel, we have three YouTube channels, for the real estate oriented content, the new channel, that’s well, it’s not that new, but it’s new enough. It’s new to us. It’s our newest channel, just passed a million views. So thanks to all of you who subscribed and liked and comment on the videos, we really appreciate you watching and we hear nice things from you. We hear you’re getting a lot out of it. So we are happy to be of service. Of course, the creating wealth show is three days a week, every Monday, Wednesday, Friday. And there’s a lot of news to cover already just a lot of news, but you’re gonna see a lot of this on the YouTube channel, because a lot of it is visually oriented news. And really just make sure you’re catching our YouTube content as well. Also, we’ve got two really good webinars coming up. I’m not ready to announce them yet. They’re not finished and ready. But one of them is going to be all centered around the portfolio builder calculator. It’s taken a while to get this together, folks, but you’re really gonna like it. You’re gonna like that webinar. So that’s coming up, look for that. And then we’ve got another one for the empowered investor network coming up as well. And we’ll announce those when we can. Our contest is coming to a close and by the way, I want to compliment Some of you who’ve done some great quick videos, you’re not required to do a video for this. But you can. And I mean, they’re great. And that really, really helps you make your goals with your income property portfolio more real, when you bother to make a three or five minute quick little video about your plan. Boy, that just cements it, it makes it real, it makes it solid, and it makes it much more achievable for you. And that financial freedom is going to come faster, it’s going to be more likely to come in the first place, if you make the video. So the contest is meant to, you know, it’s kind of like a personal trainer, right? to force you to do what you need to do, right. So we want to be your personal trainer.
Sometimes we have to nag you, sometimes we have to get you to do things you don’t want to do, but we’re gonna pay you for it. We’re paying 1000 bucks, $1,000 cold hard cash for this. two winners will win $500 each. And like I said before, this is not a big giant bunch of people that have entered, you have a very high probability of actually being a winner. It’s not like there are 1000s of people entering this contest. It’s small, it’s a small number, your odds are very good. So be sure you go to Jason hartman.com slash contest and enter the contest. Okay, I want to do a little quick urine review before we get to our guest today. And we talk about the rental housing industry, of which we are all so happy to be a part of. So 2020 was such a big, long year, and there was so much going on that I thought it would would just be a good idea to do a little urine review. And I bet I bet a lot of you don’t even remember this because it seems like it was so long ago. But remember how last year started with this huge story of these terrible brush fires in Australia, where Australia was just burning down. I mean, it was so sad to see all of that devastation and the animals kill you know me, I’m a huge animal lover, that that was just tragic. But then COVID stole the stage right? By February at 6000 cases were recorded globally by the end of February. And then there was in March, there was a 2 trillion with a T $2 trillion aid package from the US government. And that relief bill was was signed. You know, we talked all about that. We reported on it many times throughout the year. And then there was this huge drop, where travel just went, you know, it just disappeared. I mean completely. The whole travel industry just died by April. It was a 66% drop in air travel from the previous year. And it got even a little bit worse than that, I believe after April. And then remember, I shared with you my example. Remember I taught you in March about supply demand shock and unusual economic malady. As I taught you about that. And I showed you an air travel example that I personally researched. It was really telling how that happened with air travel and how that economic malady of supply demand shock occurred. And I predicted that that would occur in housing. And boy, It sure did. I was right again. I was right again. Sometimes you don’t always want to be right. But hey, I know that it’s absolutely amazing what’s going on with the real estate market. It is off to just a record pace.
Again, I think it’s going to be a banner year for investors this year. And you know, our investors had a fantastic year last year all the naysayers. I remember the comments. You know, when you when you have a YouTube channel, you really realized like a lot of people in the general public ages start to sweat. No, they’re not are not too smart. And a lot of them gave me a really hard time for being so bullish. I remember on one video I did, I was asked by someone interviewing me, where’s the real estate market going? And I said the only true answer and this was very early in the game. The only true answer I or anybody can give you his I don’t know. And I got all these trolling comments on that saying, of course he knows he’s been a real estate salesman. Here’s a promotion. You know, he’s just, he’s just promoting real estate. He’s always promoting real estate. And you know, these were the naysayers saying the market was gonna crash well. Haha, I guess I was right, wasn’t I? I mean, I said, I don’t know, I was just being, you know, accurate and humble. I didn’t know. But I was pointing out some very bullish things like what I accurately predicted I was the first one to predict the suburban tsunami, okay, where this there was this mass migration to the burbs, you know, that happened in the market boomed and prices went through the roof and supply demand shock happened, just like I said it would. But all those people, they’ve got egg on their face, they’ve got pie on their face, you know, there’ll be right someday, no market goes on forever, there will be a an adjustment very least if not a crash eventually. But, you know, look at all the opportunity, people miss out on on the way to the next cycle, right. So don’t be one of those people. Don’t be one of those people. And then they’ll say, three years from now, see, I was right, there was a crash, but they missed five years of an upcycle. So, and of course, you know, that, as I’ve taught you, you know, over the last 17 years, that income property is a multi dimensional asset class. And in my three dimensions of real estate presentation, in that little module that I, I’ve taught you over the years, you know, if you’re new to the show, go to Jason hartman.com, use the search bar there and just type these keywords in and you can find all the content on that.
Oh, and by the way, we’ve developed a knowledge base, where we are indexing our content for you, you know, we have so much content, we’ve got about 6000 podcast episodes, hundreds and hundreds, if not even over 1000 videos now, and just a mountain of content. And so we have started for the last maybe, I don’t know, several months, indexing that content for you into a knowledge base, that’s going to be very, very helpful. So more on that coming down the road. But you can also ask your investment counselor, because they have the details on the knowledge base and provide you access to it, where you know, it goes right to the spot in a podcast or video the exact spot where we’re talking about a certain thing. So you don’t have to wade through a whole bunch of content, you can get exactly what you need. And that’s our goal, to provide this information to you. Anyway. So the three dimensions of real estate, remember, rents and prices are mostly non correlating things. So when prices are soft, there’s upward pressure on rents. And when prices are going up, you’re in a capital gains market, but you’re not able to raise your rents as much as everybody’s moving from renter to homeowner. Whereas in the other cycle, where the prices are soft, it’s the opposite. they’re forced to stay in the renter pool, so our cash flow improves. So that’s the beautiful thing about income property, you can make money, always in any market if you just adjust your strategy. And we’ve been here for you for so many years to help you do that. And we’ll be here for you for many more years to come to help you do that as well. So we have the aid package we saw travel dry up, of course, we had the George Floyd thing, when you know he died of the fentanyl overdose, obviously combined with some police brutality, but that was not his cause of death. But, you know, your what you hear in the media is what you hear. So that’s a whole whole nother topic. It was it was an excuse to burn down cities, and create a bunch of ridiculous rockets by idiots who don’t even know what they’re protesting.
And by the way, our fantastic governor here in Florida, who I hope runs for president in the near future, he is behind a bill that will allow people to shoot looters as it should be, okay, if someone is looting your business or burning your business down? Why shouldn’t you be able to shoot them? I mean, duh, that seems so obvious, right? But in today’s nutso world, you know, nothing makes any sense anymore. Of course, it has to be a righteous thing. You can’t just, you know, you can’t just shoot people. There there would be a trial and, and so forth to find out to make sure you know, you know, some crackpot wasn’t just just shooting at people, right? But assuming that it’s a true defense of life or property. But you know, that’s just, that’s just what’s called reasonable in like normal logic, not today’s nuts. So, the world has turned upside down logic of course. Now, you probably forgot about this one, but you know, I’m I was talking about how Wall Street is the modern version of organized crime. And this was a foreign company, I think, a German company. But remember wirecard, that huge scandal. I didn’t even have time to say much about that at all last year, but 2 billion euros, almost 2 billion euros went missing. Okay, so it just went missing. And who got those? Well, the CEO took the money, obviously, right, or the CEO, or the C level, people stole the money, and all the investors in the company got screwed. So, you know, Wall Street, and it doesn’t have to be Wall Street’s just a metaphor could be any stock market, any investors in any business, they are subject to those three major problems when they don’t follow commandment number three, thou shalt maintain control, you know, they’re subject to investing with crooks are idiots or just people that are honest and competent, but take a huge management fee off the top for managing the deal. So that’s a bad deal. Don’t do it. Don’t do it. Okay. The elections in Belarus remember those? And remember that, you know, these crooked elections in Belarus. I hope that country freeze up soon. I want to go visit Belarus. As you know, I’ve been at seven countries. And that one’s been on my list for a long time. But it’s it’s the one little sort of communist holdout left in Europe. Hopefully, we’ll see some reform there. But it hasn’t happened yet.
In fact, one of our team members that works for us, and does some work for my real estate tools company. He lives in Minsk in Belarus, and I’m always getting reports from him as to what’s going on. So it’s really interesting to have a global workforce working for your company, you know, where you can get a lot of insight from people who really live there, and it’s not. It’s not filtered by the lamestream. Media. So the US election. Oh, boy, what a? I’m gonna say it. What a wait, oh, I don’t have a bleep sound effect. I can’t say it because I can’t bleep myself. What I sh it show. Okay, there you go. This is a family friendly show. But, you know, that election was a scam. I mean, I don’t there’s there’s there’s so much proof of just massive fraud. And regardless of whether or not the voter fraud would have turned the election, there was all sorts of pretext going into it by these disgusting, big tech and social media companies who, you know, now Google and Facebook are being sued for colluding to raise ad prices. They’re being sued under antitrust. Oh, and Google, their employees have been so oppressed by these greedy scumbags that run the company, that they formed a union. That’s a first in Silicon Valley, more power to them, power to the people. That’s what I say. That’s what I say power to the people. We’ll see how that all goes. But yeah, the election, I don’t know. Not even worth talking about it. The holidays were totally different. You know, people stayed home. They didn’t get to see their their family, their friends a lot of times and New Year’s Eve. I mean, that was just really weird. The hypocrite Mayor de Blasio of New York City, or should I say New York City is really turning into an absolute disaster. As is typical with people run, you know, hypocrites like him that run places like Detroit, or, you know, many parts of Michigan, and California and New York, they ruin it. They, they ruin those places, they really do. And so he told everybody to stay home yet he and his wife didn’t stay home, they went out and they were dancing in Time Square. So you know, there you go. But New Year’s Eve was very different this year, obviously. So that’s a little quick urine review. Without further ado, let’s get to our guests. Be sure to go to Jason urban comm slash contest and enter the contest. And here now let’s talk about the rental housing market.
It’s my pleasure to welcome Bob pinegar to the show. He’s a returning guest. He is president and CEO of the national Apartment Association. They are a trade organization representing the rental housing industry. Bob, welcome back. How are you?
Bob Pinnegar 19:24
I’m very good. Thank you for having me on again.
Jason Hartman 19:26
It’s good to have you and there is a lot going on in the world, isn’t there? Yes. So and yeah, we got to kind of have a light hearted attitude for it. It’s It’s so crazy. You know, there has been a lot of talk about the tidal wave of evictions coming at us. There’s been a lot of talk about eviction moratoriums, people not paying their rent. How significant is this? You know, the media loves to sensationalize as we all know, and at least from my chair, from our side of the industry, it seems Largely overplayed, I’m just I read it in the media, I hear about it in the media. But when I talk to our investors, it’s like a non issue, the non non payment of rents. Where do you stand on it?
Bob Pinnegar 20:13
You know, I agree with you the the media hype around this is only to further certain political agendas. I had conversations with people who have one or two units all the way up to people who operate portfolios with hundreds of 1000s of units in them. And it’s unprecedented. And that’s a word overused this year. But the way the industry has worked with residents from the standpoint of waiving late fees, to allow people to pay in multiple payments throughout a month, to setting up payment plans to working with residents, because, you know, at the same time the pandemic hit the economy was shut down. And there was an incredible concern out there what what’s going to happen to the industry? And what are we going to be able to survive this? And I think that, to a large degree, working with residents, operators have been able to fare far better than they would have had that not that not been the case. But there’s been so much out there, but we’re working to try to solve.
Jason Hartman 21:15
Right, right. So cooperating a spirit of assistance and cooperation, you’re saying is beneficial to both parties, right?
Bob Pinnegar 21:24
Yeah. Yeah, definitely. I mean, we’ve been surveying our members and asking them questions in connection with a survey we do with CRM and upwards of 80% of our members that we surveyed, have been working with residents to keep them employed. Because we all know that evictions are linked to processes that this is not a high margin business. And one eviction could easily cost you the profit margin to take the profit margin on three other units just to break even, that is not a viable business model. can you avoid, because an eviction is the last possible recourse?
Jason Hartman 21:58
Right. So do you have any statistics you can share with us? Like, how you know what percentage of tenants aren’t paying rents? What do we need to know about this? How big is this problem? we both agree, it’s overhyped. But there still is a problem there. How significant is it?
Bob Pinnegar 22:13
You know, there’s been a number of groups out there that have been working in tracking various information, data points, I was looking at some lease lock information just this afternoon, and they’re looking at rent payments in the first day of the month. And so in November is their November reporting period, class a product’s 19% of rent payments received in the first day of the month, and Class C products that’s down to 13%.
Jason Hartman 22:38
Now, these are apartment complexes, right? complex. Okay, so Class A, you we’re dividing it. So class ABC, it’s it’s different in different categories. So what’s happening in class A,
Bob Pinnegar 22:49
in class a first day of the month, you’re seeing about 19% of rent payments made in class C, that drops down to 13%. Which is not surprising given the fact that in the class A products these largely tend to be jobs that lend themselves well to working from home. And so people are able to work from home and be able to make ends meet, the class C product does have a larger challenge, because this is really our naturally occurring Korean affordable housing. And so a lot of our service workers who are probably underemployed or maybe not employed, as COVID is beginning to ramp up again, as restaurants and hotels began to close down. These are the people are facing the most challenge, which is really why we’ve been aggressively lobbying for direct rental assistance can help residents that are in this space that truly need assistance.
Jason Hartman 23:41
Okay, so that’s, that’s interesting. And I definitely want to get there. So, you know, you talked about the first of the month, I mean, even in good times, a lot of people don’t pay their rent on the first of the month. But what happens by the 10th of the month, you know, do you have anything you can share there?
Bob Pinnegar 23:56
Well, there’s a, you know, there, there’s a number of pieces of information that are out there that are looking at this, I know that the national multi housing Council has the rent tracker, which has been looking at about a population of a little over 11 million rental units across the country, it skews arguably, more towards the A and B class. And they’ve been seeing that there has been some drop off from the standpoint of rent payments, but still relatively strong and things are in good shape. What I’m looking at and trying to gather information on is that C class space because again, this is older product, which tends to be lower from a rent standpoint, and tends to have people who are really struggling to make ends meet.
Jason Hartman 24:42
Now, you know, one of the things I predicted way back in February or March is that there would be some sort of national Rental Assistance Program, whether it be an expansion of section eight, and probably a pretty dramatic expansion of the section eight program. That’s been For decades, or some sort of a new program, and there’s a lot of talk about universal basic income, you know, we’ve done shows on that previously. What type of rental housing assistance program Do you think we need? And what might we get?
Bob Pinnegar 25:17
Well, there have been versions of what you’re talking about. But there hasn’t been one comprehensive program from the federal level. So a lot of the Cures Act dollars that were distributed across the country, you had various jurisdictions that put together assistance programs, Los Angeles didn’t. Fresno, California did. We’ve had Boston has put together programs. So there’s a number of jurisdictions around the country that have put together programs based upon varying cases for need. The initial legislation that was put together with the heroes act, called for it to go through the basically the homeless programs that are out there, which is very cumbersome, they tend to be small programs, they can’t be ramped up easily and quickly, to get dollars out, we’re waiting to see what comes out of the negotiations that are currently occurring between the Senate and the House of Representatives as to when they expand that out to a wider pool of resources. Because if they allow the states to then put together a program or monies can be distributed, it’s going to be done likely far more efficiently than mandating a one size fits all solution from the federal government all the way down to state and local levels.
Jason Hartman 26:32
So this would be an entirely new program, not an expansion of section eight, right?
Bob Pinnegar 26:39
Likely it would be a new program, because the challenges that this is something that would likely be outside of the restrictions section that hasn’t placed. So you could have a much more business friendly model that allows for things to happen more quickly. The challenge with the section eight program is that it has a very cumbersome process that is inconsistent from PHA to PHA. And so you can be in one county and deal with two or three different public housing authorities, all of which have different requirements of you. And if we’re going to get money out to people who need it quickly as possible, we’re going to have to be more flexible.
Jason Hartman 27:15
And would these be direct payments to landlords,
Bob Pinnegar 27:18
the way it was envisioned was direct direct payments to residents, and then they in turn, could then make the payments to landlords. There have been various conversations about different ways, different scenarios that could occur. But the dollars that they receive would be earmarked specifically for rent, it wouldn’t be that different than during a hurricane, where vouchers are available for housing, the resident would receive them, they could then sign them over to the property owner. And that would suffice for their rent so that they can be in place, they can survive the catastrophe and then move on. And hopefully, we’d have the same thing coming out of this potential legislation.
Jason Hartman 27:55
But as a landlord, we would definitely rather see them come directly to the landlord the way section eight.
Bob Pinnegar 28:02
Ultimately you would, but you know, this is the challenge with this is things are moving, they move slowly, then they stopped and they break down and they move quickly again. And so it’s to try and to to get this process moving forward was at the was the enemy of progresses perfection. I think we just need to get monies out there at this point in time, and get those into the hands of people that need it. Because let’s face it, what was it July was when the stimulus dollars ran out from the cares act, and here we are in December, and that Moody’s calm had projected that by the time we get to January, we could have potentially $70 billion in unpaid branch across this country. And that is okay. But But you know,
Jason Hartman 28:48
the problem with it, a numbers like that, ah drives me nuts. When I hear the media or the you know, I see in an article, they say $70 billion of unpaid rent, I don’t compare to what you know, I don’t know how much is usually paid.
Bob Pinnegar 29:02
If you look at trying to break that number down, there was I saw one report that said that on average, about $6,000 per person is having a challenge, and that their apartment lists had done a report, I believe it was going into September. So going into the month of September, they estimated that 32% of all renters went into September owing some amount of rent previous now and the challenge is if you get one month behind, you could probably get yourself out of that. But if you are in a job saying less than making less than $50,000 a year and you get three months behind, it’s gonna be very difficult for you to dig yourself out of that. And in any sort of reasonable period of time. So you know, our concern is that those last rounds for those operators that are in that situation and working with residents could end up nothing at the end of the day. If bankruptcy is declared on the other side of color.
Jason Hartman 30:02
Right. You know, you reminded me when you’re talking about the program initially of I think it was Milton Friedman’s pathetic statement that said, you know, nothing is so permanent is a temporary government program. I’m sure you’ve heard that it’s it’s a great line. What is the thought about the temporary or permanent nature of this expansion of the rental housing program? Because I don’t know that I, you know, there are fundamental issues in our society that go way beyond COVID. I think COVID just exacerbated and accelerated a lot of these things, both good and bad. There are some definitely very good things that are coming out of this. No question. You know, what do you think about that is, I mean, you know, the fact that it’s not going to just be an expansion of section eight. What does that tell us? about it? Is it temporary is a permanent, does, maybe it becomes smaller? I don’t know, if any government program gets smaller, but you know, maybe less people, they fall off the eligibility as the recovery occurs? What What do you think about all that?
Bob Pinnegar 31:09
Well, you know, when the money goes away, the program will go away. And given the fact that this, what’s been envisioned now is that the states would be running the programs, it would be an arm’s length away from the federal government, which makes it more likely that things would would wind down as the current as we move beyond the crisis. But the challenge that we have for COVID that we’re going to have after COVID, is we had a housing affordability crisis going into this, oh, no question that the industry can’t build anything but class a product, just because of the cost of development and construction costs,
Jason Hartman 31:47
make workforce housing, impossible to build? You know, it’s it’s funny. Well, you know, we we do most of our work in the single family home side of the market in my company, you know, when one of our contractors, a millennial, he kept watching all my YouTube videos and saying, Well, I don’t understand if developers know that there’s all this demand from millennials, and soon to be Gen Z, or Z didn’t say that, but I’ll say it, you know, coming up, why don’t they just build for it? And I said, they can’t fit in economics don’t work. They wouldn’t be glad to build for it if they could, but there’s just no way. Because there is so much government regulation, in environmental impact in construction quality, you know, you got to have every safety feature, all the, you know, water saving features, the energy features, the quadruple pane glass, this stuff costs money. Yeah. So what do we do,
Bob Pinnegar 32:50
and it’s, you know, many of the regulations and, and rules around building today are the result of very good intentions, but nobody really looked at the cumulative impact of all of these various things that have now been piled on our development community.
Jason Hartman 33:09
So I think as a society, we need to ask ourselves, you know, from a citizens perspective, is it better to be homeless, or living in your car than it is to be living in, you know, a, what we would consider substandard building, you know, it’s warm, and hopefully clean, and, you know, at least you can call it home. Right. I mean,
Bob Pinnegar 33:34
you know, if we were to address issues of density, address issues of artificial restrictions on housing, I mean, if we’re, as a society, we’re living increasingly in urban areas, which means there’s more and more competition for that land. There’s also been a large push of, you know, building on transportation corridors, but there’s only a limited amount of supply there. And so the land becomes that much more expensive. I think we need to have a real conversation about about density, about what type of communities we want to have about the economic impacts. Because if we continue to go down this road, you’re not going to be able to have people working in the shops that you want to frequent. You know, this is something that you see in very expensive communities like San Francisco and New York, or you have small mom and pop operations, dry cleaners, convenience stores, they’re closing down because they’re getting to an age where they can’t run the store 724 and they can’t hire people, that three hours total to come into work and to go home to be able to run the store. So we’re seeing a change in our urban communities, because we refuse to deal with this problem.
Jason Hartman 34:46
Yeah, but to some extent, COVID and the civil unrest, the riots is solving that problem because people are leaving those areas. Thoughts on them.
Bob Pinnegar 34:56
I think they are you’re seeing that temporarily. But I think that people will ultimately return back to the urban cores, I think that what you’re going to want to see more of though, is more mixed use. So if you have a town that has decided that everything downtown is strictly going to be office space, and they’re not going to have walkable communities are not gonna have mixed use with with apartments and other sort of things in the downtown space, those are the ones that are going to challenge and I think, coming out of COVID, where people have figured out that you don’t need to be in the office every day to be productive, that we’re going to see over the next 10 years, a shrinking of office space. And as a result of that, there’ll be opportunities to take some of these areas and revitalize them with housing,
Jason Hartman 35:45
which areas, urban areas
Bob Pinnegar 35:47
and urban areas and in the urban in the nearby area.
Jason Hartman 35:51
But that’s been the trend for decades, and those urban areas are still super expensive. And it’s not always just the density driving the real estate cost. It’s simply the cost of construction. I mean, you know, mixed use is super expensive to build, because there’s, you know, more regulations on that. So, yeah, you know, I don’t know, I don’t think that the city holds that much allure anymore. I think once people discover, you know, that they can, they can work on zoom, you know that a lot of the benefits of the city has really disappeared, you know, as soon as those those play houses close, and, and the restaurants and all of that stuff. And I admit it will come back. But that’s going to be a long slog. And I do agree with you in in the in that long enough term, whatever that means, to where if prices come down in those areas a lot, which will be a hard fought, really, you know, it’s going to be pretty tough for maybe a decade. I don’t know how long, then I do think we’ll ultimately see some some people come back. But for the foreseeable future, I think the trend is away from the urban areas. I don’t know, what do you think?
Bob Pinnegar 37:03
Well, I mean, San Francisco, what we’re seeing, as you see rents dropping as much as 20%. In the downtown, core area, San Francisco
Jason Hartman 37:13
City, New York, same thing.
Bob Pinnegar 37:16
Two months, two months, basically a two month reduction in rents. I think that you had a community, a community in the millennial older millennials, that were probably within the next couple of years considering moving to more of a suburban environment. And I think that’s accelerated that. But we also have Gen Z that’s coming up right behind them, and they’re younger, and they’re going to want a more urban environment. I think that you will see things coming back, you’ll see green shoots in urban areas. There’s some downtown cities are going to have more of a challenge than others. But when you have this revitalization of downtown’s, there were some cities that were quick to change. And there were others that were very slow to change the conditions that brought people into those downtown areas that walkability they’re still gonna want that I mean, we’re sitting here in Arlington, Virginia, so we’re three miles from DC. And we’re we have a shopping mall next to us that was in decline that’s been repositioned as a Lifestyle Center. We have office space, there’s 1200 apartment units are going in all around us. Yeah. In the short term. Is there some challenges with regards to rents? Yes. But will this area be revitalized? Right on a metro line? Yes, it will. And probably within a shorter period than we think we’ll see. We’ll see a recovery.
Jason Hartman 38:32
Bob on you said the shopping mall was redesigned into a Lifestyle Center, what is a lifestyle center.
Bob Pinnegar 38:38
So went from a lot of retail that had been very rundown to you have a theater in there, you have a essentially an escape room type operation where people can come in and try to escape from whatever environment there is a have drinks and paint area, there is a switch that cost and
Jason Hartman 38:58
also entertainment retail entertainment combo expects more
Bob Pinnegar 39:01
retail entertainment, so it’s it becomes its own magnet destination. And then you see land use change an area around it.
Jason Hartman 39:09
Yeah. Yeah. Interesting. Well, I know we’ve got a wrap it up. And you’ve got another interview coming up? What do you know, just give us any thoughts, any closing thoughts on anything? You know, it doesn’t have to be about what we talked about just whatever the association is working on seeing, you know, what investors can look for in the future?
Bob Pinnegar 39:27
I think rental housing is still going to be in demand. So if you’re an investor, and you’re looking at where should I be putting my my dollars, I think that rental housing is has been for the last decade plus, your go to place is going to continue to be that I think that technology this advancement we’ve seen through COVID is gonna continue to occur. And I think that it’s looking at new technologies and the way to do things more efficiently and more effectively are going to be the differentiators between the the good operators and the great operators that are really going to be successful. So from that standpoint, I think that we need to look at investments at technology and really questioning, just because I always did it this way. Is this still the same way I should be doing it? Because we had a almost 15 year, easy upward run. And I have conversations with many people that said, Yeah, I might be able to make a little more money or save some money. But this doesn’t really, it’s not really broken yet, so I don’t have to fix it. I think now’s the time for those people who decide to re evaluate their operations and look at doing things more efficiently. I think they’re going to be the ones that are going to really come out on top.
Jason Hartman 40:36
Yeah, I think you’re right. And you know, just one final thing, sorry. Demographics. You know, 10 years ago, back in 2010. I was saying on the show, the demographics coming at the rental housing market over the next 10 years are nothing short of phenomenal. And guess what? Now, it’s 10 years later, and I’ve renewed that statement, because we got another 10 years that’ll look phenomenal to me. Do you agree?
Bob Pinnegar 41:03
I agree with you, the baby boomers are going to continue to downsize and move into rental housing. And the young people coming out of school, you know, the jimsy. And whatever the agenda is beyond that mean, we’re going to see we’re going to see them continue to demand rental housing, they want subtly different things and what they’re looking for. But overall, there is more demand than there is supply for rental housing. That is not going to change anytime soon.
Jason Hartman 41:29
Yeah, I couldn’t agree more. And the website is an hq.org. Right.
Bob Pinnegar 41:34
Yes, that’s it.
Jason Hartman 41:35
Thanks again for joining us.
Bob Pinnegar 41:37
Thank you very much.
Jason Hartman 41:43
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