00:00When you heard about this news or saw the Truth Social post here, what was your main reaction immediately?
00:06Well, good to see you. I think my first reaction was, oh, no, not this again.
00:12This this narrative has been floating around out there for a couple of years.
00:15It's patently wrong. Banning investors from putting capital into the housing market is not going to make affordability any better.
00:24And we spent a fair amount of time in Washington with policymakers. And I thought we had agreement on this up until up until this morning.
00:32Well, I am curious. And I'm just going to play devil's advocate for a second, Sean.
00:35There are a lot of people that look at Blackstone or they look at Amherst and other investors in this space.
00:39And they will say that the affordability crisis, meaning the increase that we're seeing in either the price of a home to buy or the rent that you would pay,
00:48is being driven more so by investors like yourself rather than just sort of normal organic market functions.
00:56How do you respond to that? It's a fascinating narrative. It's just it's just the math is not there.
01:01Our market share isn't large enough to move home prices.
01:03As you know, mortgage rates went from three percent to seven percent.
01:07And that made housing unaffordable for a vast cross section of the U.S. nation.
01:11And as you also know, the government spent trillions and trillions of dollars in response to covid well beyond real response to covid.
01:20It became an opportunity to spend on every pet project that people had imagined for the last 30 years.
01:24And that devalued the dollar against assets. And it hurt all of us.
01:28Incomes went up about 15 percent. The cost of housing went up about 30 percent.
01:31So this is a government spending created problem.
01:34And large investors make for fun scapegoats during election years.
01:40But the hard truth is there are real families that might be affected by this.
01:46We serve about 200000 people that live in homes that there is no other way for them to live in unless we own it and operate it as a rental.
01:54The facts are that homeownership in this nation is higher than it's been in a very long time.
01:58So there's not some big loss to investors in the housing market.
02:01And this is a political narrative that that is pushed forward for political purposes.
02:06It's not going to make any economic impact.
02:09Well, Sean, you mentioned that, you know, you spent time in Washington talking with policymakers.
02:13Your understanding was that you're on the same page.
02:16Maybe you were up until this morning.
02:18But what is the path forward look like?
02:20Have you been in touch with any from anyone from the administration today?
02:24Do you have plans to be?
02:26I'm sure we'll speak to them.
02:28I spent a fair amount of time with senior people in the administration a few months ago talking about this.
02:34And look, I think that I think that politics are weighing in here because the midterms polls don't look very good.
02:40And affordability ranks as the number two or number three issue and priorities across the nation as it well should be.
02:46But we're looping in housing affordability to be a solution for groceries and other issues.
02:51So, look, our track record is undefeated when we go and sit down with people who actually look at the numbers and look at the service we provide, the people we serve, and really the consequence of not providing mortgages to the average American family any longer.
03:03It takes a very high FICO score.
03:05It takes a lot of a very large down payment.
03:07And fewer and fewer American customers are served by the American mortgage market.
03:10And that should be the real focus, because if people can't get mortgages, it doesn't matter what the house costs.
03:16They're not going to be able to buy it.
03:17Well, Sean, you make the point that you take a look at the percents here.
03:21And institutional investors really make up a small fraction of who actually owns these single-family homes.
03:26But that being said, I mean, the narrative does exist.
03:29There is that narrative out there that, you know, you have these big corporations buying up large swaths of American housing supply.
03:37And, I mean, how do you navigate and run a business sort of in the face of that narrative?
03:43Because for better or worse, it exists.
03:45No, it's true.
03:47The narrative has power.
03:48It has strengths.
03:48Even if it's patently incorrect and patently false, it sounds good.
03:52And people want someone to blame.
03:54The cost of housing is too high relative to incomes.
03:57And they need something.
03:58Everyone wants someone to blame.
04:00And, of course, Washington, D.C. doesn't want to go look in the mirror for this blame.
04:03They want to go blame someone else.
04:04So it is hard to run a business in this environment.
04:07Where there's, you know, sort of the religion of short-termism and topic of the day in something that's important as the U.S. housing market.
04:16So this will serve to chill capital formation.
04:19Investors will have to now think hard about allocating capital to the sector.
04:23It was politically unpopular during the Biden years because this narrative was out there.
04:27And all it does is it makes it more difficult for platforms like ours to provide more housing opportunity to that cross-section of the population that is not served by the mortgage market.
04:40And that's what we do.
04:41That's what we're going to continue to do.
04:43And this will pass because when we sat down with the most ardent critics of our business and they really understood the financial profile of the customer I serve, someone with a 625 FICO who's living in a $350,000 house for $2,000 a month, they realized there is no better solution than the one we provide.
05:01I am curious, though, Sean, when you look, I mean, one thing about your company, too, I mean, you guys obviously have a lot of data that you're able to collect on the housing market to kind of see where trends are going.
05:11You know, when this whole news broke, the first thing we did here at Bloomberg was really try to figure out sort of what the impact of investors like you have on this market.
05:18And it was hard to quantify.
05:19I mean, the Fed has done some studies and it seems that the impact is relatively minimal, at least based on the data that they have.
05:26Why can't you just sort of you are not and I mean that in the Royal, not just you specifically, but why can't you and your colleagues just kind of put that all in a binder, go down to Washington, show them what the impact is and lobby them on a solution that actually does address the affordable housing issue?
05:42Well, well, we did. And you're right. That is the solution. And I'll try harder. I went to school to learn math.
05:50I didn't go to school to learn a political narrative, but I clearly should have. But that that is exactly what we'll do.
05:56And I got to tell you, the answer to what the problem is, is politically unpopular.
06:01The answer is more subprime mortgages and calling the mortgage crisis the subprime crisis did everyone a disservice.
06:10It wasn't a subprime crisis. It was a fraudulent mortgage crisis.
06:15And it wasn't because we lent money to people with credit scores below 750.
06:19That's not what caused financial crisis.
06:22What caused financial crisis were fraudulent mortgage originations made by made to consumers who are exaggerating their income by bankers who are exaggerating the buy the loans.
06:31So we called that subprime. And that means we shut down lending to American families that have missed a couple of car payments in the last five years, who got who got delinquent on a credit card once in the last four or five years.
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