Millennials and Rent Control

Back in February, I wrote a long post imploring the Young Professionals Network (YPN) of the National Association of REALTORS to take up housing affordability as their issue:

Homeownership is not under attack; if anything, homeownership is widely subsidized and supported, in large part because of REALTOR political action. Think about it. Mortgage interest deduction alone is a giant gift to homeowners. What is under attack is becoming a homeowner, at least for the younger generation.

Let’s not kid ourselves — this is going to be hard. You’re going to have to convince us GenX and older folks, both consumers and REALTORS, that this is a step we have to take. Whatever the ideas are that y’all come up with, they have to drop the price of homes to a level where the average Millennial can afford to even dream about ownership one day. Just telling them they can take out larger and larger loans when they have the largest student debt load ever is not going to do the trick, y’all. So that’s going to be a tough slog. We know this. You should know this going into it.

But go into it you must.

This is the YPN’s generational challenge.

The comments on that post were generally supportive of the idea, and I’ve heard privately from a number of people suggesting that housing affordability was a key issue that they were trying to address. But as of this writing, I’m just not seeing a surge of energy and discussion and action coming out of the YPN about this generational challenge.

But I saw a video today on my Youtube feed that reminded me that in the midst of all of the massive transformation going on in real estate, this issue remains potentially explosive. I wanted to do a bit more connecting a couple more dots.

Let’s get into it.

The Video: A Millennial Financial Counselor

First, watch this video from Graham Stephan, and it has over 195K views as I write this. Graham Stephan has 783,548 subscribers on YouTube, and he is a former real estate agent from Los Angeles. His biography video is an interesting watch to get his story of how he came from modest backgrounds and became a millionaire by the age of 26.

So here we have a Millennial guy who made a fortune in real estate, who is a former successful REALTOR, who has a popular YouTube channel offering financial advice (particularly to fellow Millennials), and this is what he says:

Most of you already know everything he’s saying. Millennials aren’t buying houses because of a number of reasons — student loans, cost of education, depressed wages, etc. etc.

Just about the only issue Graham did not address, that I did in my Millennial Red Dot, was the lack of marriage related to the fact that there are not enough eligible men for marriage for most single women.

But as a former real estate agent, and as a real estate investor, Graham is pointing out that renting is very convenient. You don’t have maintenance costs. You don’t have the opportunity cost from locking up the down payment. You don’t need the property to appreciate by at least 6% in order to cover your transaction cost. And so on.

He also points out the downsides to renting: rents are not fixed, you’re not building any equity (forced savings), you can’t improve the property, and you can be evicted.

When it’s all said and done, Graham is not surprised that Millennials are not buying homes. On average, they don’t have the money that previous generations did. The expectation to buy a home is lower.

Instead, what he thinks is that it’s a great time to be a landlord. So as a real estate investor himself, Graham is thrilled that his competition is lower, his rents can be higher, his profits are higher, etc. This is a “win-win” in his view if you are a landlord.

Impossible to disagree with any of that.

The Politics of Rent Control

What he does not address is the political impact of an entire generation — the largest cohort in history — not becoming homeowners. I did. Here’s what I wrote in February:

Yet… the alternative is the end of homeownership for all but the minority of Elites and the rise of renter nation… which then results in a new political order where housing is no longer the “third rail of American politics.”

And yes, NAR is a powerful force in American politics, partially because of the enormous amounts of money it spends on lobbying and on campaign contributions, and partially because of the 1.3 million REALTOR members it has. But let’s be clear about this: another reason, and possibly the major reason, for the power of the housing lobby led by NAR is that 75% of Boomers and 60.4% of Gen-Xers are homeowners. Only 42% of Millennials are today, and given the divide between the Elites and Non-Elites, and the economic uncertainty that surrounds all but a minority of the younger generation, it is far from clear that Millennials will cross the 50% homeownership threshold.

All political bets are off if 55% of Millennials and Gen-Z are renters, y’all. Because they’re not just the consumers of the future, but also the voters of the future.

In that context, let me present two more YouTube videos for you to watch.

Julia Salazar (D), New York State Senator, on Rent Control

First, we have a young, charismatic Millennial political leader. Julia Salazar is 28 years old and is a New York State Senator from Brooklyn. She, like her most famous colleague, Alexandria Ocasio-Cortez, is a member of the Democratic Socialists of America. Here’s what Wikipedia has to say about the DSA:

The DSA is not only by far the largest socialist organization in the United States in the 21st century, it is also the largest socialist organization in the United States in over a century. By the end of 2017, membership in the organization had risen to 32,000, primarily because of the influx of youth in reaction to the presidency of Donald Trump. As of September 2, 2018, membership stood at 50,000 and the number of local chapters had increased from 40 to 181. As of December 2017, the median age of its membership was 33, compared to 68 in 2013. In the 2017 election, fifteen candidates who were members of the DSA were elected to office in thirteen states, most notably Lee Carter in the Virginia House of Delegates, adding to the twenty members already holding elected office nationwide. In November 2018, two DSA members, Alexandria Ocasio-Cortez and Rashida Tlaib, were elected to the House of Representatives while eleven were elected to state legislatures. [Emphasis added]

Whatever you might think about the DSA, it does appear that this is a youth movement. Millennials are flocking to the DSA in droves. Julia Salazar is one of the rising young leaders, and here is what she had to say about rent control:

That video was in February. In June, Gov. Cuomo signed “historic” pro-tenant legislation into law:

It’s official: Tenants of rent-regulated apartments across New York state will soon benefit from new protections thanks to the passage of a landmark bill reforming the state’s rent laws—one that the real estate industry has arduously fought.

The bill, known as the Housing Stability And Tenant Protections Act of 2019, will not only strengthen some of the laws that are already on the books, but also extend them to even more rent-burdened tenants across the state—and codify them permanently, rather than having the laws sunset every few years.

It passed both the state Senate (with a 36-26 vote) and the Assembly (who voted 95-42) on Friday afternoon, and was delivered shortly thereafter to Gov. Andrew Cuomo, who wasted no time signing the new protections into law.

So that’s Oregon, New York, and a number of other states looking hard at rent control legislation… despite the opposition from the real estate industry, and despite just about every economist of every political stripe denouncing rent control as a terrible idea.

2020 Democratic Candidates on Housing

The second video is interesting mostly because of the special guest being interviewed.

Pete Harrison, as was mentioned in the video, is the Senior Housing Advisor for an organization called Data for Progress, a progressive political data and polling organization. He evaluates the housing plans of three Democratic candidates for President, but here’s a long article he wrote in January about rent control.

The key grafs are:

It’s making a comeback. The rent control movement, which is growing rapidly among activists, academics, and public policy makers, is a testament not only to the gravity of the housing crisis facing low and middle income renters in all types of living arrangements, but also to the disgust that they share with a political and market system that so far has utterly failed to address it.

The growing political alignment around renters’ rights unites downwardly mobile millennials — whose student debt has depressed their ability to buy homes — and long time renters, many of whom people of color who have been purposefully excluded from homeownership for generations. It is an increasingly potent electoral force.

Of course it’s an increasingly potent electoral force. If you were a Millennial living in any of the top 10 cities where Millennials go because those are where the jobs are, wouldn’t you think hard about supporting progressive policies on housing?

As of the end of 2018, only 36.5% of people under 35 owned a home. This was touted as an improvement and it was… from 36% in 2017 to 36.5% in 2018. But that still leaves Millennials some 8% lower in homeownership rates compared to previous generations for all of the reasons mentioned above.

If 63.5% of voters under the age of 35 are renters… and you’re a politician seeking to win (not just make a statement, but actually win an election)… what kinds of housing policies would you embrace?

Always an X Factor: Politics

Fact is that politics and legislation and regulation are always, always the unknown X factor in any investment strategy. Graham could be 100% correct about how the lack of Millennial homeownership is great for landlords. If you have some money saved up, the thing to do might not be to buy a house, but to buy an investment property and become a landlord… even as you’re paying rent yourself to some other landlord.

But all of that calculation has to be completely reset if you have rent control legislation.

Even as a buyer, the whole rent vs. buy decision has to be considered in light of government policy. Maybe statewide rent control means it’s just cheaper and better to rent for as long as you possibly can… at least until the inventory turns into such crap and prices drop low enough that you’re better off buying at that point.

That’s just the big bogeyman: rent control. Just about every government policy, even a minor adjustment to the tax code, would color one’s decision about renting vs. buying. It is the big X factor in just about every business and personal financial decision.

So… when are y’all going to act? When will the industry, particularly the younger REALTORS who are Millennials themselves, going to do anything about this issue?

Tick, Tock

I know a lot of Millennial REALTORs, many in leadership. They’re constantly talking about technology, technology and more technology. There was a whole session at a recent YPN event I attended when a Millennial REALTOR spent almost an hour talking about CRM, about YouTube, about Google, email marketing, automated postcards, mobile apps, and web leads. Not once did anyone mention politics, except in one brief fundraising appeal for RPAC.

Very rarely do I hear YPN REALTORS talk about the political time bomb of Millennial homeownership, even though that bomb is going to go off when they are in the middle of their careers in real estate. The Boomers can just retire if some political bomb goes off; they’ve done their time and made their money. What about the 32-year old team leader who is just now starting to hit her stride?

Inman Connect is coming up next week in Las Vegas. I know there are going to be a fair number of younger REALTORS coming, many for the first time. I know they’re going to spend a ton of time listening to speakers talk about technology, disruption, Zillow, Redfin, iBuyers, etc. etc. I know vendors are going to be pitching them all kinds of technology products to improve this or that. They’re going to have a great time meeting new people, networking, and partying with friends.

Could I suggest that maybe the younger REALTORS at least discuss the political time bomb of Millennial voters who are not likely to become homeowners anytime soon? Because I don’t think time is on our side on this issue and I don’t know that we have any kind of a consensus within the industry on what to do about it.

Tick. Tock.



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Rob Hahn

Rob Hahn

Managing Partner of 7DS Associates, and the grand poobah of this here blog. Once called "a revolutionary in a really nice suit", people often wonder what I do for a living because I have the temerity to not talk about my clients and my work for clients. Suffice to say that I do strategy work for some of the largest organizations and companies in real estate, as well as some of the smallest startups and agent teams, but usually only on projects that interest me with big implications for reforming this wonderful, crazy, lovable yet frustrating real estate industry of ours.

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1 thought on “Millennials and Rent Control”

  1. The future of the youngsters in this country is not what their parents told them on the american dream.A wonderful young well educated man told me a month ago, “my parents are not rich and I might be stuck in their home forever.I certainly can not afford to buy a house and I really do not want to live with another 2 roommates renting a place.Even though I am very well educated and I can find a job very easily in my occupation, the money I earn is not enough to buy a house, no way.”

    Welcome to America 2019. With all the new great technologies and well educated people we have in our country, we reached to a time where most people cannot afford to buy a house and those who rent, hardly can make it.But the government will continue to talk on Iran, N. Korea, China, and other subjects that no one really cares.

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