May 22, 2015
MainStreet quoted me in Is Airbnb Making It Impossible For You To Rent That Dream Apartment?. It opens,
The accusation is blunt: Airbnb, say some, is sucking up apartment units that otherwise would be available to renters. In San Francisco, that claim is spoken so loudly – by so many politicians – a city agency just filed a report on it.
Similar claims are heard in Santa Monica, Calif., in Manhattan and some Brooklyn neighborhoods, a few areas in Seattle and also a sliver of Boston and adjacent Cambridge. True? False? Is that Airbnb host putting vacationers up in what should be your prime Greenwich Village flat?
Some think such accusations are just distracting from the main issue at hand: housing inventory shortages.
“It’s a diversion,” says Richard Green, the Lusk Chair in Real Estate at the University of Southern California. “Politicians are not dealing with what they should be dealing with to address housing unavailability so they are singling out Airbnb.” His nuanced point is that in most markets the number of Airbnb units is trivial and so whatever impact it has on apartment availability is minimal.
The San Francisco government report does not disagree: “the Budget and Legislative Analyst estimates that between 925 and 1,960 units citywide have been removed from the housing market from just Airbnb listings. At between 0.4 and 0.8%, this number of units is a small percentage of the 244,012 housing units that comprised the rental market in 2013.”
Read the San Francisco report. It said that under 1% of apartments have been removed from rental channels due to Airbnb. How important is that? What does it mean?
What is unique about San Francisco – also Manhattan and a few other places – is that apartment vacancy rates are fiercely low. In a recent survey, it stood at 4.1% in San Francisco and that means this is the type of town where would-be renters get in line early whenever a decent unit goes up for rent. Add back in those Airbnb units and, yes, that might be a happy day for some tenants. But not many.
The other unique feature: San Francisco, Manhattan and a very few other places attract large tourist populations, especially Millennials, and that has been a sweet spot for sharing economy rentals. Take tight supply, add in high hotel prices and a flood of tourists and there is the recipe for cries about any apartment that seems to be lost to the longterm tenant market.
In a lot of markets – from Phoenix to Houston – vacancy rates are already high, tourist numbers are low and nobody really thinks Airbnb is having any impact on local rentals.
But in some cities it just may be. Harry Campbell, TheRideShareGuy.com, said of Airbnb: it is “having a huge impact in coastal communities [of Los Angeles] like Venice/Santa Monica where mid level chain hotels can run upwards of $300-$400 a night. It just doesn’t make much sense for landlords to rent their apartments out traditionally when the profits are so much higher using Airbnb.” (Santa Monica, in mid May, enacted legislation banning short-term rentals such as Airbnb. Nobody knows how it will be enforced or if it will withstand legal challenges.)
At least one Portland, Ore. Airbnb host emailed Mainstreet to admit that two apartment units that had been rented to regular tenants are no longer. Explained that host: “From the point of view of a former landlord, the Airbnb experience is far superior. Airbnb guests are, on the whole, responsible, considerate and never late with rent since this is collected in advance by Airbnb.”
Either way, however, the calculus is not one-sided, not even in those premium markets like San Francisco. Green added: “You could also say that Airbnb is increasing the stock of affordable housing units by letting some keep their apartments by occasionally renting them out. It’s entirely possible Airbnb produces as many units as it loses.”
In that regard, listen to Kip (last name withheld) — a self-described 60+ woman living alone in Beverly Hills in a two bedroom apartment. A few times a month, said Kip, she rents it out through Airbnb. “That helps me with the cost of living,” she said. She stressed she would never take in a roommate but is happy with having guests a few nights a month. “It’s helped me boost my flagging income,” she said.
Christopher Nulty, an Airbnb spokesperson, had fighting words in response to the San Francisco report in particular.
“This comes from the same people who want to ban new housing in the Mission [a San Francisco neighborhood], ban home sharing and make San Francisco more expensive for middle class families,” he said. “Home sharing is an economic lifeline for thousands of San Franciscans who depend on the extra income to stay in their homes.”
So, who’s telling the truth?
“When evaluating claims about Airbnb, it is important to keep in mind whose ox is being gored,” said David Reiss, a professor at Brooklyn Law School. His point: In some cases, maybe Airbnb brings some harm. In other cases, it does good. Matters just aren’t simple or black and white.
- HUD released “Effect of QAP Incentives on the Location of LIHTC Properties” which examined the patterns of Low Income Housing Tax Credit (LIHTC) developments.
- The Government Accountability Office (GAO) releases its report on the status of the Community Development Capital Initiative (CDCI), which is intended to service the underserved communities after the Great Recession.
- The Center on Budget and Policy Priorities (CBPP) releases its National and State Housing Data Fact Sheets on rental assistance and the Housing Choice Voucher (HCV) program.
May 21, 2015
Institutional Investor quoted me in Will New Attorney General Loretta Lynch Shake up Wall Street? It opens,
Those unhappy with the lack of personal accountability for the 2008–’09 financial crisis are running out of time to see justice served: In the U.S., the statute of limitations for many bank-related criminal charges is ten years. But the recent appointment of Loretta Lynch as the first black woman to the post of attorney general could present a window of opportunity.
Given mounting public frustration over the failure to punish financial executives who helped push the world to the brink of another Great Depression, Lynch may be well positioned to act where her predecessor, Eric Holder, was unsuccessful. The U.S. Department of Justice has often talked up its efforts to hold individuals responsible for crimes they may have committed, but there hasn’t been much progress. Last year, however, saw an uptick in the size of bank settlements related to the crash, including a $16.65 billion deal with Bank of America Corp. and a $7 billion agreement with Citigroup.
Some industry observers believe Lynch, who turns 56 on Thursday, could use this momentum to target people. “If she does anything differently [than Holder did], she may push her folks to try to make those cases against individuals higher up the corporate ladder,” says Glen Kopp, former assistant U.S. attorney in the Southern District of New York and a New York–based partner in the white-collar practice at law firm Bracewell & Giuliani.
Lynch’s critics have griped that she may be not be strict enough with Wall Street. They point to her 1980s stint with law firm Cahill Gordon & Reindel, which has counted among its clients BofA, Credit Suisse Group and HSBC Holdings, and to a spell early last decade at Hogan & Hartson (now Hogan Lovells), where she practiced white -collar criminal defense.
Detractors say both positions, as well as her tenure at the Federal Reserve Bank of New York from 2003 to 2005, have compromised her ability to prosecute big banks by establishing relationships that she may not wish to jeopardize as attorney general. During Lynch’s lengthy confirmation process, Republicans criticized her for being too soft on HSBC in a 2012 settlement; the British bank agreed to pay $1.92 billion in a money-laundering case after New York and federal authorities decided that criminal charges might bring down the institution.
But many in the legal community believe the more likely outcome will be somewhere in the middle.
“The financial industry will be dealing with an extremely well-informed AG who will seek to balance the competing concerns that arise when investigating and prosecuting large enterprises like those that dominate Wall Street,” says David Reiss, a professor at Brooklyn Law School with expertise in property, mortgage lending and consumer financial services matters.
- Federal Reserve Bank of New York Quarterly Report on Household Debt and Credit finds that delinquencies, foreclosures, and bankruptcies improve as household debt stays flat.
- NYU Furman Center Report: Building New or Preserving Old, finds that in neighborhoods with high rents, leasing underdeveloped NYCHA-owned land for private development could generate either substantial annual lease payments for NYCHA or significant numbers of affordable units. This would help the city meet two of its housing goals: creating new units of affordable housing without additional subsidy, and generating new revenue to help fill NYCHA’s budget shortfall.
- National Association of Realtors Summary of April 2015 Existing Homes Sales Statistics details the 3.3% slowdown by region and other factors.
- National Low Income Housing Coalition’s Out of Reach 2015 details the affordability of rental units nationwide. According to the study, the 2015 National Housing Wage is $19.35, meaning that someone working full-time, 40 hours a week, would need to earn $19.35 per hour in order to afford a modest two-bedroom rental unit while spending no more than 30% of household income on housing costs.
- In 13 states and the District of Columbia, the Housing Wage is more than $20 per hour.
- The 2015 Housing Wage is now 2.7 times the federal minimum wage of $7.25.
- There is no state in the country where someone earning either the state or federal minimum wage can afford even a one-bedroom apartment renting at the HUD Fair Market Rent (FMR).
- Rights at Risk in Privatized Public Housing, by Jaime Lee, Tulsa Law Review, Vol. 50, 2015, pp. 759-801.
- Making Firms Liable for Consumers’ Mistaken Beliefs: Theoretical Model and Empirical Applications to the U.S. Mortgage and Credit Card Markets, by Alexei Alexandrov, Consumer Financial Protection Bureau, Apr. 27, 2015.
- Discrimination at the Margins: The Intersectionality of Homelessness & Other Marginalized Groups, by Kaya Lurie, Breanne Schuster, & Sara Rankin, Seattle University School of Law, May 6, 2015.
- Supply Restrictions, Subprime Lending and Regional US House Prices, by André K. Anundsen & Christian Heebøll, Norges Bank Working Paper 18, 2014.
- Global Liquidity, House Prices and the Macroeconomy: Evidence from Advanced and Emerging Economies, by Ambrogio Cesa-Bianchi, Luis Felipe Céspedes, & Alessandro Rebucci, IDB Working Paper No. IDB-WP-576.
May 19, 2015
The Special Inspector General for the Troubled Asset Relief Program (SIGTARP) released a report, Treasury’s Opportunity to Increase HAMP’s Effectiveness by Reaching More Homeowners in States Underserved by HAMP. The Introduction opens,
TARP’s signature foreclosure prevention program, the Home Affordable Modification Program (“HAMP”), has struggled to reach the expected number of homeowners Treasury envisioned for the program. According to Treasury, TARP’s housing support programs were intended to “help bring relief to responsible homeowners struggling to make their mortgage payments, while preventing neighborhoods and communities from suffering the negative spillover effects of foreclosure.” Treasury announced that HAMP itself aimed “to help as many as three to four million financially struggling homeowners avoid foreclosure by modifying loans to a level that is affordable for borrowers now and sustainable over the long term,.” The only long-term sustainable help provided through HAMP is a permanent mortgage modification, which become effective after the homeowner successfully completes a trial period plan. Through December 31, 2014, according to Treasury data, 1,514,687 homeowners have been able to get into a more affordable permanent HAMP modification (of which, 452,322 homeowners, or 29%, subsequently redefaulted on their HAMP modifications), while there have been 6,165,544 foreclosures nationwide over the same period based on CoreLogic data.” (1, footnotes omitted)
There is a lot of soul searching in this report about why HAMP has been so ineffective and the report offers tweaks to the program to improve it. But perhaps the problem is structural — a program like HAMP was never really in a position to make a bigger impact on the foreclosure crisis.
When compared to the federal government’s intervention during the Great Depression, HAMP seems too modest. President Roosevelt’s Home Owners’ Loan Corporation bought out mortgages from banks in bulk and then refinanced them on more attractive terms than the private sector offered. HAMP, on the other hand, has trouble getting homeowners to apply to the program in the first place.
Bottom line: HAMP is too retail and what we needed and need is something that could be done wholesale.