00:00We love you. I'm not sure the president does. Of course, an executive order to potentially limit
00:04your business. I mean, you own a lot of homes. What is it? 90,000? 90,000. And counting? Yes,
00:10sir. Does that get constrained if this executive order, which at least for right now is somewhat
00:14symbolic, becomes more reality? Correct. I think that's important. The executive order
00:19is not enforceable, but the bill, the 21st century road to housing act is the relevant
00:24piece of legislation. In it, there's a section called 901, which outlines provisions for
00:30institutional owners of single family homes on a go forward basis. It's at this moment under great
00:36debate between the House and the Senate. The House does not have that in there. One of the key
00:40attributes of that bill in 901 is a seven year hold period. After seven years, you have to sell
00:46the assets that you purchased. BTR in particular, build to rent programs, would be sold, and that
00:54has dried up capital. Yeah. So we have a client as an example that I spoke to last night who's
00:59been a big investor in build to rent, and he has his no stamp out. And every time a project
01:06comes
01:06on his desk now, no. So capital is driving, drying up for home construction in the United States.
01:13Yeah. New home building has been declining steadily in part because of this. Yeah. And if you look at
01:19what's in the media right now and in public advocacy, about 125 public housing authorities
01:26and advocacy groups who are normally the people you look to to represent prospective homeowners,
01:33to help people get access to housing, are opposed to section 901. Now, we expect the Wall Street Journal
01:40to be opposed. We expect the American Enterprise Institute to be exposed. Right. But you don't expect
01:46housing advocacy groups in the state of Massachusetts, one of the most liberal states in America,
01:51to be opposed to section 901. Is that opposition, do you think, potentially enough to kill this
01:57legislation? Or are you worried that this would actually pass? I think the most important part
02:01of this legislation isn't 901. I would love to see 901 taken out in its entirety. Okay. The rest of
02:07the
02:08bill is a critical part of reforming housing. It would speed up the ability for home builders to build
02:15houses. And time is money, as we all know, speed up land development, speed up EPA approvals, being in a
02:21position where we can reduce the cost of housing in America for the home builder to build. Home
02:26builders are building $400,000 houses in this country today. But Americans can't buy that kind
02:31of house. But you've heard the criticism. I mean, some people would look at your business and say
02:36that's exacerbated some of the housing affordability issues. We own such a small percent of the houses in
02:42America. And even such a small percent of the houses that are for rent. Forever, Americans have
02:47almost one third of the houses in the country rented. Right. Right. When we reach peak home
02:53ownership in the dreaded 07 period, we were high 60s. Right. So the challenge we confront today is not
03:01we're driving up home prices. In fact, for us as a firm, we haven't been buying homes off what's called
03:07the MLS for several retailers. We're a net seller of houses right now. What really is the problem
03:13today is home builders can't build houses that are affordable in large part because it takes so long
03:19to develop the land. That takes capital to go through all the housing, you know, the opportunity
03:27to zone it properly. With all of that going on, taking as long as it does, home prices are $400
03:33,000 to
03:33$450,000. Americans at today's interest rates can really afford a $300,000 house. Well, to follow up
03:39on Romaine's point here, I mean, it's a soundbite that works. You know, this idea that the administration
03:45has is they're not alone in that and in putting it out there that, you know, institutional investors,
03:50they're why you're paying higher prices because, you know, they're buying up all the housing stock.
03:54So, I mean, just as an industry, as a leader in this industry, how do you combat that sort of
04:00narrative, which is pretty bipartisan? Well, I would say it's bipartisan almost in the wings.
04:07And what I mean by that, it's a minority in each party. If you look, the House is pushing back
04:12very
04:12hard on this. As I said, there's a lot of liberal advocacy groups that are opposed to this. And so,
04:20and the math just comes out and shows you that we don't own a lot of houses in America. But
04:25let me
04:25bring up another point relevant to that. There's always been Americans renting houses. When I grew
04:30up, my dad was an elevator repairman, and we couldn't afford to buy a house. And we lived in
04:36an apartment, then a two-family house, and then we rented a house. Eventually, we were able to buy
04:41a small Cape Cod in River Edge, New Jersey. If we are in a position that we're going to penalize
04:48people
04:49who want to rent houses in good neighborhoods, we're actually, in an effort to make housing more
04:55accessible, penalizing people who have 600 FICO scores and saying, your kids can't go to a good
05:01school. You can't live in a low crime rate area. We're actually creating a proposal that hurts
05:07Americans who are middle class and lower middle class. And so, I believe that we should try to find
05:13the right balance between advocating for home ownership, which we are in fate of, as well as
05:18making sure we have rental stock in good communities that allow children to go to good schools. And if
05:25you look, there's a great study by Raj Jetty at Harvard, who's part of the Opportunity Institute
05:32there. And it speaks to the fact that a child who grows up in a community that's more owned than
05:39rented makes $100,000 more in their lifetime, has a substantive decline of the risk of incarceration.
05:46Right? We need to make more homes available in ownership communities for rent, not less.
05:51Right. Well, in the meantime, I do wonder whether you anticipate that you will see more families
05:56move to the rental market. The fact that you do have mortgage rates that are still
06:00quite high in this country for a lot of folks doing the monthly payment math,
06:04it makes more sense to rent when you just look at sort of the dollars and cents of it all.
06:1040% cheaper to rent the same house than buy it. Simple as that. And so, for families who have
06:16a FICO score that doesn't qualify or doesn't have the down payment, this product allows them to
06:22live in communities they otherwise couldn't access. And I think that's critical when we think of the
06:26opportunity for people to either break intergenerational poverty, and we do Section 8 vouchers in good
06:31communities or for families who just are on the process of saving to get their kid into a good
06:37school while they save. Well, on the Section 8 business, I mean, because that's relatively new.
06:41For us.
06:42For you. But are you a believer in that? Or is that more sort of, you know, maybe creating a
06:48little bit more of a political sheen to what's going on right now?
06:51Oh, we definitely didn't do it for a political sheen. I mean, one of the advantages you have,
06:57if you're our size, is the efficiency that we can run an operation so we can use a Section 8
07:04voucher,
07:04give investors very good returns, and provide great quality housing for people because of the
07:09scale that we have. With regards to those returns, I do want to ask you just about the
07:13interest rate environment. Obviously, your business, these types of businesses rely a lot on
07:16securitization. How has that elevated interest rate environment affected you?
07:20Well, I mean, the cost of debt capital is very important in our business,
07:23just as it is for an American homeowner. And it makes it harder in this environment
07:27to find investments that are very attractive for our LPs. And our LPs span from U.S. state
07:35pension plans to private and public pension plans, insurance companies. But there is some opportunity
07:42to continue to find assets that generate the returns they need, but it's certainly harder.
07:47And before I let you go, I do want to return to the point that you were making, just that,
07:50you know, it needs to be less expensive for home builders to actually build in this country.
07:55There's a whole lot of reasons why that isn't the case. But are you at all optimistic that that
08:00is going to change in the next few years?
08:01I believe this bill, if we take Section 901 out, will be viewed as a great moment for America
08:10to be in a position to clear regulatory hurdles, make the process faster, bring more capital into
08:17the space because capital will drive home construction and make it so that we can have
08:21the opportunity to reduce the cost of building new houses.
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