How has the rental housing industry evolved over the past 20 years, and what trends do you anticipate shaping its future trajectory?
LISA RUSSELL
The rental housing industry evolved over the past 25 years using innovative technology. In the early 2010s, we started to see the expansion of proptech, independent applications that integrated into Yardi or RealPage. Our industry was slow to adopt technology or to make major innovative advancements until we were forced to in 2020. This sudden rush to use technologies has left many owners/operators now working backwards to create new strategies. Some of the early applications have not worked and integrations have not gone smoothly. There is now a burnout or backlash from the onsite teams due to the increased volume of applications that need to be mastered to do their jobs.
Business Intelligence tools were introduced to assist with oversight of entire portfolios but failed to address onsite confusion and added another dashboard to learn and manage. In 2023, the breakthroughs in A.I. went mainstream with ChatGPT. As a result, the future of real estate will again take a new path of growth and development. The exciting features of A.I. will be the elimination of mundane repetitive tasks, increased data awareness, the ability to communicate companywide from a consistent source and the speed that information will be generated to make informed decisions. This is a new frontier for our industry, and we will see major shifts in the coming years.
ROBERT KNAKAL
The rental housing market in assorted key states and cities has evolved to the point where certain politicians and policy makers, many of whom have never owned real estate, treat real estate owners as a disfavored class. The government unsuccessfully tried to provide government housing many years ago.
The private sector, given equitable tax incentives, has come forth with the necessary shelter. The new politicians, devoid of historical context, are now making the same real estate mistakes, which will only hurt the people they are trying to court for votes.
GARRETT SUTTON
Over the past 20 years in the NYC rental housing market, there have been many changes, most of which have gone against property owner’s interests, particularly since 2018. In fact, the rent law changes in 2019 have not only exerted tremendous downward pressure on values, it has many lenders facing significant challenges. Probably the legislative changes that have had the most deleterious impact on the market are the marginalizations to the Major Capital Improvement (MCI) and Individual Apartment Improvement (IAI) programs. In the mid-1970s, many property owners opted to burn their buildings down rather than invest in them. The MCI and IAI programs were implemented, creating a 30% return for invested capital into the housing stock. In 1977, in NYC, 14% of the apartments were in such terrible condition they were deemed uninhabitable. The incentive created by the IAI and MCI programs motivated the
private sector to invest 10s of billions of dollars into the housing stock. By 2019, the dilapidation rate had fallen to 0.04% and living conditions for tenants throughout the city were greatly improved. The 2019 rent laws marginalized both of these programs, creating a disincentive for the private sector to invest in the housing stock. This will lead to a slow but inevitable deterioration of the quality of buildings that people are living in. In the future, I believe the rent laws will have to change back to create an incentive for the private sector to invest in these properties. Many investors are buying at today’s lower prices with the anticipation that the political pendulum will swing back. Other market participants feel the horse has left the barn and they just want out of New York altogether.
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