Hello and welcome to another episode of the OddLots podcast. I'm Joe Weisenthal.

And I'm Tracy Aloway. Uh Tracy, I don't want the podcast to be like an entirely New York City focused podcast, but like in our defense, not only do we live here, but you know what happens in New York City, it has it has problems and it has challenges that are seen really all around the world. So it's not terrible to do a few episodes related to, you know, what's happening around in our neighborhood.

I don't think it's terrible at all. And in fact, one specific area where New York really does have national maybe even global relevance is in the housing arena, right? So, we know New York City has a shortage of housing. People have been trying to come up with ways to improve that, build more supply for a long time and also lower rents. And so that that has, you know, implications for a lot of other cities and places that might also be capacity constrained.

Totally. I mean like New York is sort of at egregious levels of housing on affordability but every city around the world I think every city that's booming has some challenges of affordability and uh building more at least in the west but I sort of think basically everywhere and so you know people always talk about trying to solve it etc. Anyway, of course, past OddLots's guest Zoran Mumani has his uh proposals for how to address housing affordability, including a rent freeze on a significant chunk of the housing stock um in the city. And so, we sort of need to get a sense of like what that means and how that you know what what the implication is for business, whether it could work, you know. Well, the broader theme here, I guess, is the role of the public sector in the private market, right? Like if we want to get really really conceptual with this, that's basically what we're talking about.

Yeah. And of course, Manny has a slew of proposals and ideas, free buses, faster buses, also has a public grocery store trial, etc. But, you know, we did that recent episode with uh Kathy Wild, the head of the Partnership for New York, which represents a lot of major employers in the city. I'm sure they're anxious about him uh for a number of reasons, but uh she said within their community, it's really the real estate industry that is the most freaked out, so to speak.

Yeah. And I'm really interested in this because people talk about the real estate industry as this sort of monolith, but of course it isn't, right? There's residential, there's commercial, there's luxury, there's more affordable. So I I want to dig into this a bit more and understand exactly what the concerns are and whether they're coming from different parts of the real estate network.

Yeah. And then there's, you know, even within real estate, there's brokers and then there's developers who are separate from landlords, etc. Anyway, we do have uh the perfect guest, someone we've had on a few times every time New York City real estate is in the news, a guy we like to chat with. We are going to be speaking with uh Ben Carlos Typen. He is the founder of a firm called Quantier, which analyzes real estate. He is also a New York City landlord and broker.

Interesting idea.

Is that the most like hated demographic in all of New York?

Yes.

Thanks for uh coming back on the show, Ben.

Thanks for having me.

Kathy Wild uh when we talked to her did say that the real estate industry is the uh of all of the sectors of the economy the most an anxious. What uh what specifically, you know, who's who's really anxious or what what about Mumani's sort of vision most sends chills down the spine of uh landlords or other players in the real estate industry?

Well, I mean, I think the reaction to Mumani is actually not that different from the reaction to Bill Delasio uh 8 years ago when when he came in or excuse me, 12 years ago. I think it's been amplified by, you know, the political environment we're in, Mam Nani's political identity, his, you know, his race, his his ethnicity, religion. But, you know, what scares these people, I think, the most. And when I say these people, I mean the people that are, you know, vocalizing their their fear, which I think don't necessarily speak for for every um portion of the real estate industry. uh as as Tracy pointed out, I think what most scares them is that Mamdani's sort of premise of city management uh does not revolve around them. Um and you know this was a a major issue during the Delasio administration that the press covered a lot where you know Delasio despite h you know appointing you know some real estate friendly u commissioners and generally having a pretty good administration that was pretty good for real estate he didn't he wasn't in the habit of kissing the ring um and sort of showing up to their gallas and calling on them and and stroking them in a way that you know in contrast Eric Adams um the the current mayor has been very uh you um good at doing. Um so I think a lot of this is sort of meta feelings about you know their place in the city, their influence in city hall and the you know depending on the policy there could be you know there's varying degrees of of tenuousness to actual policy and market implications.

So who is most scared? Give us some nuance on on the vibes.

Sure. So I think the most scared groups are rent stabilized landlords because you know Mam Dani has pledged to freeze rents on rent stabilized apartments and then large developers the sort of you know the biggest developers who not only have business models that largely depend on sort of being in a you know informal cartel um and having you know the best possible best relationships with the the people that you know make policy in the city and and the you know the most powerful players but also, you know, have a a greater sense of civic duty and and their role in civic society. And I think Mani's rhetoric and some of his policies threaten their sort of sense of uh their own place within the city.

You know, it's interesting, Tracy. I'm thinking back, you know, we did that not long after we interviewed Mandani. We interviewed the Jersey City mayor who didn't win his primary nomination for governor. So, not everyone who comes on odd lots uh automatically win. But one of the things he said that was really interesting is that by you know he said he he talked about depoliticizing. Yeah. And that you know essentially by making it sort of more streamlined the process to get approvals that there are these developers who maybe their edge was that they really knew how to play the game within these boards within you know the community. Suddenly like that is a marginal edge that disappears in a system that is much more straightforward. And Mumani himself, if I'm not mistaken, Ben, has also talked about he does want more development. He's talked about market rate development and he's also talked about just sort of making that process if the developer meets certain requirements, labor pay, etc., just much more straightforward, which again would seem to speak to your point that perhaps some of the most threatened entities would be those ones who are big and best positioned to sort of play the politics side of the game. Yeah, I I think streamlining does not necessarily benefit the most entrenched incumbents. Um I think that they wouldn't necessarily fare badly under Imamani administration, but they um at least if if one takes Mani's policy pronouncements at face value would not be in the driver's seat. you know, the the Albanian guy in the Bronx who's building a small multif family building, he's going to be in a lot more position to benefit from these streamlined policies than, you know, the type of people that are being quoted in the New York Times.

By the way, Tracy, before I forget, you know, Ben talked about the similarities with Delasio. It's funny because I think there was a quote, we're recording this July 16th, I think I saw a quote yesterday from Kathy Wild in the news that was basically like, "Mumania is like Bill Delasio except we like him." like he's likable essentially, but you know

that's pretty funny.

I mean, yeah, I get it. Um, okay. So, part part of this discussion I I understand why developers might be concerned about like losing their competitive advantage when it comes to navigating city hall and all of that. Are there any concerns beyond initial approval for projects? Is there a concern, for instance, about an emphasis on public housing perhaps crowding out private development?

I think there's a generalized concern that the Mamani administration and its vibes are going to depress private investment, whether that's in existing housing or building new private housing. However, even under that scenario, which I I don't really agree with and think is kind of a cynical view, there would be beneficiaries of that scenario. So, let's say that does happen. Rent stabilized rents are are frozen and private investment in new development and new housing plummets.

They're going to upcharge the market rate.

Exactly. Market rate rents would increase considerably. So in under that scenario, the market rate landlords would do very well and the rent stabilized landlords who are already not doing well would continue to not do well and the affordable developers who only build uh housing with public subsidy which you know Mam Donnie wants to spend you know uh considerably more on on subsidized housing would also benefit. So you know it really speaks to the the many different stakeholders within the real estate industry who I who have different and and sometimes conflicting interests.

If demand for residents in New York City broadly is stable or continues to grow as it has been in this scenario where in theory developers just want to pull back, the landlords who have exposure to the market rate market rate units, you'd think they would do very well.

Yeah. And and in fact, I have clients who are market rate developers who are out in the market fundraising right now on with this argument to say that if we should you should fund this project of ours right now because we're going to be the last buildings to to be developed before mom Donnie comes in and freezes everything and therefore we're going to have the best product in the market and be able to charge the highest price.

That's amazing. So the cost shift is already happening basically.

Yeah. But like again we're people are freaking out. I'm not sure that that is necessarily uh grounded in reality, but I think a lot of the the rhetoric both public and private we've seen in in light of Mam Dani's primary victory has is is PR and spin. You know, in real estate, everyone's always trying to find an angle to say why their project is best or why why their project should be funded or why I'm not making this decision and why, you know, why I look smart because of that. So, you know, we're still very much in in the spin zone. Let's talk more about that because you know I feel like one of those cliches which probably has some truth is that yeah people who freak out and like let themselves get hysterical don't do as well as business as people who adapt to the new environment and sense the opportunity. So you've described one set of people who may be thinking opportunistically right now which is the people who might have the opportunity to build something before rent freezes come into place. they're going to have the pricing power uh by this. What else are the opportunities that people sense about? Yeah. Okay. Maybe we don't like the policies, but there's a money-making opportunity under the Mani uh administration. Who else is sort of licking their chops, so to speak?

One other group that's licking their chops is the developers that specialize in building affordable housing, which are both for-profit and and nonprofit developers. And you know they have done pretty well or they did very well under the administration. They've done well during the Adams administration. They consistently do well because you know the Mdani wants to build more government subsidized housing than any uh previous mayor. But it's not like the the developers and the labor for building that housing is just going to materialize out of the government. You're going to be using private sector players to do this. M so these groups or the these players are taking a a different approach than some other you know pure market rate developers in the real estate industry and trying to craft sort of a separate piece with the Bombani administration to say like hey you know we we want to help you meet your goals we know you want to spend a lot of money this is good for you know for for both of us and I think another group ironically and they're not so much licking their chops because I think they're they're very scared is the rentstabilized building owners because you know as as we've discussed on our one of our previous podcasts you know this is a distress sector and it's sort of been heading for a reckoning and I think Mdani's policies are going to lead to an acceleration of that trend so that something gives here and I think it could give in a in a sort of cynical way you know at at the Supreme Court or or it could give in a you know more optimistic way by by sort of Mamani being uh something like Nixon to China and going to Albany and crafting some sort of new regime for these buildings that you know does not burden tenants but also um stabilizes them and make sure that they don't collapse which is not really in the interest of anyone.

Yeah, this is good context because the long-suffering rentstabilized uh building owners have been trying to loosen regulation for a long time and I think they even sued um on a constitutional basis and clearly the goal is to try to get this to the Supreme Court,

but in that context, you mentioned labor really quickly and I want to go back to that because one of the proposals that Mumani has is using unionized labor to build all this affordable housing and I'm curious how feasible that is, what the availability is and how that actually feeds into costs.

Sure. So when talking about this issue, I think it's important to keep in mind that this is not a Mum Donnie issue. The construction unions all were backing Cuomo. This is really a New York issue at large. We'll see how how Mum Donnie, you know, they the unlike most of the other powerful unions, the construction unions still have not abandoned Cuomo. They have not um endorsed mom donn yet.

That said, there's obviously organized labor's job is to advocate for the most wages and and best benefits for their members. They also need to make sure that their members keep working. So right now we're in a situation with this tax program that was negotiated uh in two uh legislative sessions ago where in for particularly large projects the uh labor requirements are are viewed as as too ownorous and and no one is building buildings that qualify under this this this wage standard. So there needs to be some sort of peace that is brokered here. And I think this could be an opportunity, you know, with all the credibility that Mdani has built on the left to craft a peace between labor and and developers to make it so that we can build housing with unionized labor, but um it doesn't break the bank.

It's interesting. I you point out this is something I've been thinking about but you point out that for example most of the unions uh supported Cuomo some of them such as the construction union which I hadn't realized uh still backing Cuomo Cuomo also won the endorsement I think though they've switched of the hotel workers uh union which I also want to talk about but it's interesting to me because when people think about a leftwing mayor and how it can go wrong they reach for uh the example of Brandon Johnson in Chicago Brandon Johnson came out of the union machine. I mean, he was part of the teachers union in Chicago. Manny, for all his, I'm sure, ideological affinity for organized labor. He doesn't come out of that machine the same way Brandon Johnson, let alone to some extent Cuomo did. So, it does feel like there is a potential for some sort of, you know, shifting of the plate, so to speak.

Yeah. I mean, who knows what's going to happen, but I think the

it's hard to argue that our that coalition politics and and politics generally in New York City have not been scrambled by this event.

And I I think it it remains to be seen how how all that shakes out. Um, and whether these groups that, you know, have been operating in relative concert, you know, perhaps at the expense of of other constituencies remain allied or whether new alliances were formed. um to solve some of the city's problems.

How much of this just boils down to uh people wealthier people not liking higher taxes? Because I imagine, you know, if they're trying to get a message out there saying that they don't like taxes probably doesn't resonate with a lot of New Yorkers, but saying that because of higher taxes or because of all these other policies, there's going to be less development of property, less affordable housing. Is that just them trying to spin it that way?

I personally I think so and you know our media environment is structured as such that there's not really much downside in doing that. So you know you hear about remember a couple years ago there was a lot of stories about David Ter that from Appaloosa Capital Management moving to Florida to to duck a income tax increase in New Jersey. We know there's a media frenzy about this but no one covered that he moved back. And

I'm always saying this no one's going to stay in Florida. Give me a break. And I you know I think you know the the data or and analysis that has been done is this shows that like millionaire tax flight actually is largely a myth and occurs at a much lower rate than it does for for middle and lower income people and you know there's all sorts of groups that sort of take advantage of this dynamic. So, for instance, a luxury real estate broker um will be, you know, p going to the press and say, you know, I'm getting my phone is ringing off the hook on people that want to sell their apartments here or move to Palm Beach. You know, does that get them the attention of more people who might be thinking that way? Yeah. But does it reflect market reality or or is anyone, you know, testing to see if that they've been proven wrong? No. And I think, you know, we're this isn't just a New York City phenomenon. We're seeing a lot of dissonance between people's sort of ideological and policy priors and actual economic analysis. And I and I think a really good example is a mayor who raised taxes including on upper earners several times in New York City, friend of the pod, Michael Bloomberg. And a lot of these same people who are complaining um about Zoron think that Bloomberg was their model mayor and and and really want to go back to the Bloomberg economy. So, you know, people are sort of flailing about looking for any possible way to spin, you know, their own preferences.

Friend of the pot is a

How are you going to

Well, I was going to do the standard disclaimer. It has become standard, but uh Michael Bloomberg is of course the owner of Bloomberg LP, which runs Bloomberg Media and Bloomberg News. So, there we go. That's the disclaimer.

I like describing him as friend of the pod.

Right. And um I would encourage everyone to to Google um Crystal Ball Young, who's a uh professor uh at Cornell, who's done a lot of work on this uh very issue. And the something you you know Kathy Wild mentioned uh in in your interview and and something you hear across business leaders generally and and particularly in commercial real estate rather than than multif family is the importance of our workforce. And if if people who the the talent that fuels New York City cannot afford to live here, that is bad for New York City's economy. Yeah. And

would you know lowering the cost of housing uh be bad for some landlords? Yes. But it would would it be good for a lot of other sectors of the city including you know the office real estate sector?

Yes. Similarly with child care would I don't know who anyone who's really opposed to child care like I think that's a problem for everyone and it would uh help employees and employers but also help real estate owners because if you remember during the Bas administration they rolled out universal prek. It's not like there's all this empty space in public buildings near people's houses that you're going to put, you know, childcare facilities. This these are going to be rented in private buildings and result in a huge amount of leasing uh velocity that will often occur in space that is otherwise hard to lease.

When we spoke to Kathy, she did bring up crime. And you know, initially, maybe you don't make a direct connection between economic policy and crime, but the argument is if there's lots of crime going on in the city, people are going to want to move away to that New York City flight exodus point. How are landlords or the real estate industry thinking about that particular aspect? Is it important to them? because that would be maybe a reason to go for someone like an Eric Adams,

right? I I think it's very uh important to the real estate industry and and you know a lot of people are uh scarred by the experience of the 1970s and 80s uh in New York even if the contributing factors for New York's issues back then are are u myriad and complicated. You know, everyone agrees that, you know, having a a crimeridden city is is not in the interests of building owners and and property values and really the city at large given how much of our budget is based on property taxes. And, you know, Mi has said that he's, you know, considering keeping on Jessica Tish, the current police commissioner, that and that he's not going to reduce NYPD headcount. I think the real estate industry is very skeptical of this, but you know, the cooler heads within it are are sort of keeping in mind that New York City is ultimately a creature of the state and we have a very moderate governor. we have a more moderate than um Mandani uh legislature and the legacy or you know of the New York state constitution but also the fiscal crisis in the 1970s provides Albany with a lot of ways to make sure that the city does not go off the deep end on on issues like this.

Can we talk about um the last four years? I mean, it's a weird four years because, you know, the you're starting the baseline in 2021 sort of during the worst of the post-pandemic chaos. There's been a decent amount of building, I think. However, it's a really expensive city. There's a reason the affordability line was, I think, so effective in this uh recent mayoral primary. Like, oh, you know, do you have a scorecard for how uh Mayor Adams did on housing?

H I'd give him a C.

Okay. I I think uh C++ maybe B minus.

All right. Say more.

I think the the land use policy

my children go to a progre one of my children goes to a very progressive school. They don't have grades. They just have this kind of stuff. So you can uh you can give the the sort of like a qualitative assessment

feedback. Sure. I I think the the land use policy was generally pretty good. you know, the city of Yes, which which you may have heard of, which is, you know, the biggest change to the zoning code in in uh probably 70 years. The income support policy, so which, you know, a lot of our our housing woes are, you know, obviously the rents are are too damn high and prices are too damn high, but also wages are too damn low. Um, and you know, we need to make sure that people can afford to pay uh rents. We need to make sure that people can afford to pay the rent that it costs to finance a new new building. And the Adams administration has fought sort of the expansion of of voucher funding. Where I think it's fallen short on housing is dealing with sort of structural issues with our housing market, particularly the property tax system. And they are not the first administration to fall short on this issue. But I think it speaks to how much Adams's non-housing policies and sort of extracurricular activities have impacted his ability to address structural issues like property taxes.

Can you just explain? Yeah.

So New York City's property taxes property tax system has two sort of major distributional issues. One is that a neighborhood like Park Slope is way undertaxed relative to a poorer neighborhood like Canari. the same two properties paying the same amount of property taxes in those neighborhoods. The property in Crown Heights will be worth five times more and is paying the same amount of property taxes as the property in Karsi. The other distributional issue is multif family versus single family uh or one to three family and uh multif family and commercial are taxed way more than their relative value contribution to the city's total property tax role. Uh, and this is a a long-standing issue. There's been, you know, report after report and commission saying, you know, here's what we should do. And no one has sort of figured out how to go to Albany to craft a new regime that, you know, addresses these issues, which, you know, in addition to producing a lot of, you know, discriminatory impacts are really hampering our housing production and on existing housing operating costs. And I I think this is a particularly ripe time when it to address this issue because of the crisis with a certain segment of the rent stabilized buildings because these buildings are way overt taxed. So one could see you know in in a best case scenario the Mdani administration is you know it's instituted its rent rent freeze. You know buildings are starting to have trouble. The Mdani administration doesn't want to see these buildings. You know they don't want collapsing buildings. That's not good for tenants. It's not good for their their political optics. Uh it's not good for city the city's, you know, uh image. So Albany says, "All right, we're going to craft, you know, create a new class for these rent stabilized buildings, and it's going to lower their taxes, and that's going to alleviate, you know, the burden on these owners from keeping their rents very low."

How much of this sort of existential concern being expressed by the real estate industry goes away if interest rates come down significantly? I think a lot of it but it's still ve it would still be very much there. I think it would become acute become less acute but would persist because uh a lot of this is about these are long-standing conflicts between the real estate industry and um you know between landlords and tenants between you know what political faction runs New York and those cleavages would would remain even if interest rates are lower. I think interest rates would bail some people out and increase transaction volume and delay the the time at which someone uh that's in trouble might go bankrupt, but the structural issues would remain.

Can you real quickly just explain the roots of the tax disparity or why say a unit in Brooklyn Heights is relatively underted? Bomb Dani got into a little bit of trouble because I think somewhere on his website at one point it said something about historically white neighborhoods and people are like, "Oh, he wants to tax white people more." It happens to be true, however, that a lot of the neighborhoods that benefit from this structure do happen to be more white. But what is the origin of why certain neighborhoods are undertaxed given their sort of like, you know, their economic base?

Sure. So I this the current property tax regime was crafted in the early 1980s as a result of a court case and it instituted caps on the amount that assessments can increase.

Okay.

Uh and

as a result. Yeah. So like Canary in 1982 was maybe a comparable income, you know, middle income, lower middle income area that as it is now, whereas Park Slope was a much less well-off area than it is now. And the property values in places like Park Slope and Williamsburg and and to some degree a place like Brook Brooklyn Heights have skyrocketed, but the the tax burden on those properties have not gone up commensurately.

With your real estate hat on, who's going to win?

Mom Nani. I I think it's I think these these efforts to draft another candidate or or um you know reboot the the Cuomo campaign are totally doomed and the real estate industry I think is is really internally is is very split over what to do and you know some are going to back Mayor Adams, some are going to back Cuomo, some are trying to craft a piece with Mandani and some of them are just going to stay out.

Ben Tyen, thank you so much for coming back on OddLotss. always love uh getting your your levelheaded perspective on what's happening in our city.

Thank you so much, Ben.

My pleasure.

I always really like talking to Ben. I had not realized the sort of I mean there was a lot there that was interesting that sort of that source of the disparity in property taxes. It makes a lot of sense that if you just can't raise property taxes at a certain clip, how you know relatively undertaxed any sort of booming neighborhood such as Williamsburg will inevitably end up being. Yeah, that seems like a problem given that like a big chunk of the recent story of New York City is gentrification and all these neighborhoods where like

a warehouse that used to cost I don't know a h 100,000 in the 80s now costs like 10 million or whatever. Um, the other thing I thought was really interesting, it sort of hammered home that point that we discussed previously, but the idea of the competitive advantage for large landlords basically being they can network in city hall, they can presumably do the paperwork and all of that stuff. And so if an administration comes in that jeopardizes that particular advantage, then they're not going to like it,

right? like maybe the rules for development will be more stringent, but if they're just sort of uniform where it's like okay, and I don't know how it could ever be in real estate, but let's just say, you know, in the sort of abstract and you check these four boxes and you are approved to build a new development, then intuitively um yeah, that would sort of undermine the relative advantage enjoyed by a big powerful entity that sort of knows the system, so to speak. On the other hand, of course, maybe there are smaller property developers who really like the idea of a streamlined process, doing away with things like the parking requirement and stuff like that, dual staircases versus single. I don't know. I I and I do think like you can't you know if you're anxious about what uh the Mumani administration is going to bring you you can't really sim simultaneously argue that it's going to stifle development and rents right if development gets stifled then the market rents go up

and if uh you know and so there will be this balancing effect you know obviously there are the landlords who are deeply exposed to the rent stabilized market we've talked about them before, but they're hurting right now as it is. I also do think at some point maybe we should talk about the prospect of a Supreme Court case in the next couple of years that eliminates rent stabilization or rent regulation period poss. You know, you mentioned the sort of cynical possibility of Mumani being an accelerant that gets that case in front of the Supreme Court at some point could have big implications.

This entire conversation has reminded me that I need to uh call my super and get something fixed in my apartment. So, this was useful. This is what I miss about being a renter is I don't have uh someone that I can call as easily. There are some advantages. There are some advantages to being a renter, you know.

All right. Shall we leave it there?

Let's leave it there.

This has been another episode of the All Thoughts podcast. I'm Tracy Aloway. You can follow me at Tracy Aloway.

Actually, I do have a super. I just have to pay him now for it where it used to be all these various uh repairs and stuff. The burden fell on my landlord before. Now the uh the burden

that's not too bad cuz like the the big problem with supers I feel is just availability or the big problem with getting something fixed is finding someone and getting them in.

Anyway, every time something breaks I have to pay for it now. They don't tell you that when you become an owner.

Pretty sure they do.

And I'm Joe Weisenthal. You can follow me at the stalwart. Follow our guest Ben Carlos Typen. He's at Bendito. Follow our producers, Carmen Rodriguez, at Carmen Arman, Dashel Bennett atbot, and Kaleb Brooks at Kalebrooks. For more OddLots content, go to bloomberg.com/odlotss where we have a daily newsletter and all of our episodes, and you can chat about these topics 247 in our Discord, discord.gg/odlotss.

And if you enjoy OddLots, if you like it when we talk about New York City housing policy, then please leave us a positive review on your favorite podcast platform. And remember, if you are a Bloomberg subscriber, you can listen to all of our episodes absolutely adree. All you need to do is find the Bloomberg channel on Apple Podcast and follow the instructions there. Thanks for listening.