briefcase | invest smarter | Issue #123

Tired of paying your mortgage? Let’s all go perma-camping!

The biggest headwind facing housing is not interest rates or prices, or even supply itself. It’s zoning.

So it’s time to gather around the campfire, but we won’t be singing American Pie this time.

We’ll be telling you tales of zoning reform. The good, the bad, and the spooky. Let’s begin with the latter.

🔥🔦 …Hands the flashlight to Peter the Intern 🔥🔦

There was a zoning committee known for being strict and uncompromising. The committee approved or denied building permits for the town, ensuring that everything met the town's strict zoning laws.

One day, a strange request came before the committee. Mr. Blackwood wanted to build a large, imposing apartment on the outskirts of town. Mr. Blackwood was known to be reclusive, and many committee members hesitated to approve the request.

However, after reviewing the plans and finding no legal reason to deny it, they reluctantly approved the permit.

Construction of the apartment began, and the townspeople couldn't help but feel uneasy as they watched the structure rise higher and higher, casting shadows on neighboring family homes. Strange things started happening in the town soon after, with reports of eerie noises coming from the construction at all hours of the night.

The committee members who had approved the permit were starting to regret their decision. One by one, they began to experience unexplainable occurrences. Some heard strange whispers in their homes, while others felt they were being watched as they walked through town.

One night, as the committee members gathered for a meeting, they heard a loud knock at the door. When they opened it, there stood Mr. Blackwood, dressed in a long black cloak.

He had come to ask the committee members for a favor.

"I need you to approve one more permit for me," he said. "It's important that I complete my project."

The committee members were taken aback by Mr. Blackwood's request, but they heard a low, menacing growl before they could respond. Suddenly, the room was filled with an icy chill, and they saw the shadowy figure of a large black dog emerge behind Mr. Blackwood.

The committee members were frozen in fear, unable to move or speak. Mr. Blackwood took their silence as a sign of approval and left, with the black dog following close behind him.

The next morning, the townspeople woke up to find that the apartment had disappeared, leaving an empty lot behind. The committee members were never the same again, haunted by the memory of the black dog and the reclusive Mr. Blackwood, who had somehow managed to manipulate them into approving his final, sinister permit.

🔥🔦 Peter the Intern passes off the flashlight 🔥🔦

In the early 1990s, Algin Management completed a 31-story apartment building on NYC’s East 96th Street. It was to be a home for high-income renters who wanted to live near Central Park, with a concierge, gym, sun deck, and even fancy marble bathrooms.

Upon approval from the city, construction began on the new apartment building back in 1985. A year later, through the work of local zoning advocates, it was found that the city and developer had potentially erred in their submissions and approvals and that only 19 stories were allowed in this zoning area.

The building was nearly complete when all the appeals were exhausted in the early 1990s. So what did the developer have to do? Decapitate the building by chopping off 12 floors 😱😱.

A court recently blocked UC Berkeley from building a student housing apartment in the affluent (aka largely white) People’s Park neighborhood.

The housing complex sought to accommodate 1,000 UC Berkeley students and 125 formerly homeless people. But, community opposition went to the state appeals court, which found that the university "failed to assess potential noise impacts from loud student parties in residential neighborhoods near the campus" as required by the California Environmental Quality Act (CEQA).

We can only assume this means that people are pollution? Sorry, scratch that, the wrong type of people are pollution.

To be fair, drunken freshmen signing beatboxing off-key Lizzo songs at 3 am is irritating. (Actually, we have no idea what kids do these days…)

But an environmental threat? I guess forcing students to live further out by denying nearby student housing and adding longer commutes to school is totally fine and environmentally sound!

The following tale comes to us from YIMBYs—Yes In My Backyard—all over North America, who are chalking up W after W in the battle for smart zoning reform and modest densification. Let’s check the scoreboard…

More and more, we are seeing decision-makers of all political stripes embrace the basic fact that in order to improve supply and affordability, we need to get out of the way of construction and sensible densification.

What’s spooky is the speed at which this idea—aka YIMBYism—is taking over, and this should be applauded.

So What? Like the eerie disappearance of Mr. Blackwood and his dog, the NIMBY movement will slowly evaporate.

Free market development can be more balanced when we are more permissible with smarter and modest densification. Access to housing improves, cities grow up rather than out, tax revenue increases, and new housing types and urban design concepts emerge.

Now…How do we put out this campfire?

🤷🏿‍♀️ What Slowdown? CoStar shrugs off suggestions of a sluggish real estate market as revenue jumps 13% in Q1 — Inman

🤷🏻‍♂️ What Slowdown? New home sales prove that Wall Street was wrong about the housing market — Housing Wire

🤷🏽 What Slowdown? New home sales soar to 1-year high in March, as purchases increase 9.6%, marking the fourth-straight month of increases — Inman

🤷‍♀️ What Slowdown? After seven months of declines, home prices increased 0.2% in February — TRD

👉 That Slowdown: Fannie Mae predicts a subdued sales market for the remainder of 2023 due to low inventory — Fannie Mae

👉 That Slowdown: Apartment prices fell 10.3% YoY in March and 1.9% MoM — Multifamily Dive

🤩 Europe Looking Pretty: European banks have less exposure (6%) to commercial loans than do American (18%) ones, suggesting more pain on this side of the Atlantic — Reuters

🤯 First Last National: The bank is down 93% in 2023, and is exploring “strategic” options — CBS

🤯 Totally Unrelated: For decades, First National offered wealthy depositors billions in jumbo mortgage loans that required no principal payments — Business Insider