Cryptocurrency permeates housing policy, HUD muscles its way into a new headquarters, and Cincinnati will not have a new football stadium. From the wild and wooly world of real estate, here are our Hits and Misses for the week of June 23-27.
Hit: The Future is Here. For the longest time, the concept of using cryptocurrencies in mortgage transactions seemed like a fringe notion. Not any more – Federal Housing Finance Agency Director Bill Pulte announced on X that he “ordered the Great Fannie Mae and Freddie Mac to prepare their businesses to count cryptocurrency as an asset for a mortgage.” Pulte’s directive called on the government-sponsored enterprises to “consider only cryptocurrency assets that can be evidenced and stored on a US-regulated centralized exchange subject to all applicable laws.” He also called for a review of the “risk mitigants” involved in this endeavor. No deadline was set, but Pulte asked that the directive “should be implemented as soon as reasonably practical” – we’ll keep an eye on this to see how this groundbreaking initiative evolves.
Miss: An Eviction to Accommodate the Housing Chief. Perhaps the strangest story this week involved the announcement that the Department of Housing and Urban Development (HUD) is moving its headquarters out of Washington, DC, to Alexandria, Virginia. There is one itty-bitty problem with this relocation – HUD is taking over the headquarters of the National Science Foundation (NSF), which has not been assigned a new location. The American Federation of Government Employees Local 3403, the union that represents NSF workers, rightfully condemned the eviction of the agency’s roughly 1,830 employees, stating that “NSF employees are being displaced with no plan, no communication, and no respect.” Neither HUD Secretary Scott Turner nor Virginia Gov. Glenn Youngkin seemed perturbed by the NSF eviction, making no mention of this dislocation in announcing HUD’s new headquarters.
Miss: An Unlikely Spokesman for an Unlikely Cause. A joint venture seeking to bring casino gambling into the heart of New York City has partnered with Rev. Al Sharpton (of all people) on a new effort to persuade low-income households to invest in this endeavor. Caesars Palace Times Square is the joint venture bid from SL Green Realty Corp, Caesars Entertainment, and Jay-Z’s entertainment company Roc Nation to create a gaming and entertainment destination to 1515 Broadway in Times Square, and they tapped the controversial civil rights activist and TV personality to encourage local low-income households to become involved in the project with investment opportunities starting at $500. Seriously, is that the best investment for people with limited financial resources? Sharpton conveniently failed to disclose how much he is being paid to shill for this project, but the fact this flim-flam celebrity was tapped as a spokesman is emetic.
Hit: Hello, Frisco, Hello! Congratulations to the international luxury retailer Bulgari on the opening of their new store in San Francisco’s Union Square. We reported on the store’s lease earlier this year, and we are glad to see this 3,500-square-foot upscale store opening at a time when too many high-profile retailers have fled San Francisco due to the city’s fraying quality of life. Let’s hope that Bulgari’s arrival will signal an end to the fear and chaos that has ravaged San Francisco’s commercial real estate sector – hopefully, the city will start to see a much-need resurrection and revival with new stores and a new wave of prestigious tenants.
Hit: There’s No Place Like Home. The Cincinnati Bengals announced yesterday that they will not be pushing for the construction of a new stadium, but instead will renovate Paycor Stadium, their home since 2000. The Associated Press reports the team and Ohio’s Hamilton County reached a tentative deal to make $470 million in renovations at the stadium, with the team contributing $120 million to the project and the county providing $350 million – though just how that will be funded has yet to be determined. Still, the deal is much less than the $830 million the Bengals originally proposed, and it will keep the team at Paycor Stadium through 2036, with the possibility a 10-year lease extension – and that’s better than a multi-billion-dollar new stadium.
Miss: Money That Was Not Well Spent. Tuesday’s Democratic Party primary election in New York City resulted in the upset victory of the self-identified Democratic Socialist Zohran Mamdani to become his party’s nominee for mayor. Mamdani’s main rival was disgraced former New York Gov. Andrew Cuomo, who attempted a political comeback with millions of dollars in backing from the city’s prominent real estate and property management entities and executives. But Cuomo’s enervated campaign failed miserably as Mamdani made elaborate promises of rent freezes and billions of dollars in public funding for new affordable housing. This was the ultimate lose-lose situation – a big loss for the real estate industry by sinking a fortune into Cuomo’s disastrous comeback and an even bigger loss for city residents who may soon find themselves saddled with a mayor who will create a municipal miasma with unsustainable policy pursuits.
Phil Hall is editor of Weekly Real Estate News. He can be reached at [email protected].
Photo: Benbatt / Getty Images
I was surprised to see WRE tag the Democratic Socialist Zohran Mamdani as a “MISS” (a bad outcome) for New York, as this WRE article says that his policies for building affordable housing is NOT sustainable.
Yet, the Real Estate industry pushes very hard for taxpayers to fund “low income housing”, often very expensive NEWLY BUILT housing that gives Developers substantial density bonuses (more allowed housing units than the zoning would normally allow), and, in exchange for the density bonus, the developer must allocate a small portion of the total units for “low income” units.
Developers (and the real estate industry) also sweeten the “low income” housing incentives for developers by pushing to reduce standard requirements for parking spaces, parkland spaces, street setbacks, landscaping, architectural standards, and less environmental review for the impacts that such high density housing will have on the community and the city and its services (like water, sewer, and electricity).
(This pattern of huge developer incentives is common in California, not sure about New York)
It is often UN-clear if those same “low income” units must always be sold in the future as “low income” units to future low income buyers, but, oftentimes (as in CA), that restriction (if required at all) is removed after a few years, and those low income units are allowed to be sold at “market rate” (after the restricted time period ends), and that means that taxpayers are then called upon, yet again, to fund another very expensive and temporary round of “low income” units.
The very few lucky lottery winners who are selected to be the first “low income” buyers do very well, especially if they resell at market rate in the future (and pocket the profits), and that is just a transfer of taxpayer money to those low income people, and that could have been done more easily (and likely at lower cost) by just giving the low income buyers money at the start to buy existing condos (NOT newly built) at market rate.
I want housing to be more affordable, but I think taxpayers need to wrap their heads around one key element. Taxpayers are getting ripped off, and from my view, the rip off is from developers and their core investors (perhaps real estate brokers?? and politicians??).
Taxpayer funded low income housing is NOT sustainable and is wildly unfair.
Taxpayers are being asked to fund low income housing for workers who simply are NOT paid livable wages in many areas of the country, particularly in expensive, densely populated cities, and that is the core problem (LOW WAGES), NOT the lack of affordable housing.
Many businesses (fast food, many grocery stores, restaurants, hotels, landscaping, maid service, hospitals, schools, etc.) unfairly benefit by paying wages that are not even close to livable wages, YET, those businesses still sell their services and products AT MARKET rates, so the business owners save a lot (make big profits) by paying such low salaries, yet that savings is NOT passed on to their customers. Taxpayers are asked to bridge the wage gap with taxpayer paid low income housing (and even taxpayer funded medical benefits).
Furthermore, many, if not most, of the taxpayers who pay for low income housing do not buy from those businesses, so taxpayers very often are subsidizing the the wages for workers who work at businesses that the taxpayer does not frequent.
Why should taxpayers have to subsidize housing for underpaid worker?
Most of those businesses make huge profits and could easily pay livable wages.
Many of the most profitable businesses actually run classes for their underpaid workers to teach them how to access low income subsidized housing, medical care, and other taxpayer funded subsidies. It’s insane! The investors in these businesses are laughing as they rake in huge profits at taxpayer expense.
In California, a lot of the low income units are being built within density bonus projects that are located in the most expensive areas and locations, sometimes right next to the beach and in expensive ski resort towns. Taxpayers who may never be able to afford to visit those locations are being asked to subsidize the businesses that sell their services and products to high wealth people who can easily afford to vacation and even own second homes in those luxury areas. Your tax dollars are funding low income housing for low paid workers so that rich people can buy at an expensive restaurant in an expensive town.
It is twisted to see the real estate industry and developers bugle incessantly about the evils of socialism and the sanctity of unbridled capitalism, while, at the same time, endlessly sucking on the fat straw of taxpayer funded subsidies that allow these businesses to UNDER-pay their workers and provide them no benefits (like medical coverage) while vacuuming up huge profits.
This is Capitalism for the rich to collect UNfair profits, and it is socialism for the taxpayers who pay the subsidies.
If a business wants to set up within a community, then they should design a business model that can pay fair and livable wages to their employers, and then set a price for their products and services that covers that added cost. IF the consumers in that area will NOT pay that price, then move your business elsewhere or come up with a business model that cuts some costs, but NOT at taxpayer expense.
The solution (in my view) is to index minimum wages to the cost of living within micro-regions, and require businesses to pay those livable wages IF the worker(s) prove that they live within a reasonably short commute to their work place. I also want to see wages that include medical coverage. Customers of those businesses will then see a true reflection of the actual costs of running a business, rather then obscuring that with taxpayer funded subsidies.
The farm, ranching, and extraction industries also suck on taxpayer funds by NOT paying taxes, receiving all sorts of credits and depletion allowances, and getting endless subsidies to cover all sorts of ups and downs in their businesses (subsidies that other businesses do NOT enjoy). These industries also enjoy Public Lands lease rates that are 15x to 25x under market rates (compared to if they had to pay market rate leases on Private lands). This is another way that taxpayers get ripped off.