For those of you who follow the blog, you know that most times it is a pretty deep dive into a topic usually related to inventory, pricing, or strategy.
Today’s blog is not one of those. This is a shallower dive on a few different topics that we’re keeping tabs on right now. I hope you enjoy!
Facebook and Fair Housing Laws
Yep, good old Facebook can’t seem to get out of its own way lately.
Their ad targeting platforms are so good that they give anyone the ability to include — or exclude — any group based on every imaginable demographic, geographic or psychographic attribute. So if you would like to advertise to everyone except a specific religion, sex, familial status, race, or age, Facebook makes it possible.
The same vehicle that was supposed to connect us all and provide a forum for discourse actually provides really awesome tools to do the exact opposite.
Much like Historic Tax Credits were all the rage in the 2000’s, the Federal Government’s new Opportunity Zones have developers and investors extremely excited.
The basic gist of the program is that if you purchase a property in a designated ‘opportunity zone,’ it exempts exposure to the capital gain tax, either partially or wholly, depending on how long you hold it. And while all of the details are not fully fleshed out, it also appears that the opportunity zone program will also make it easier for partnerships who use the 1031 Tax Deferred Exchange technique to break up without penalty.
In layman’s terms, Opportunity Zones provide powerful incentive to free up a ton of capital currently trapped due to tax reasons and deploy the proceeds into areas that need a little push to jumpstart the revitalization momentum. Great idea, right?
In theory, yes.
But what is funny is that they used 2010 Census data to determine where the Opportunity Zones should be. Guess what? Scott’s Addition, with rents now approaching $30/SF, is in an Opportunity Zone.
Yes, there are many needy areas that will benefit greatly from the program. But Scott’s Addition? Really? Whoever was in charge obviously didn’t sign the bill while on the roof of The Hof, while playing shuffleboard at Tang and Biscuit, while drinking a cider at Blue Bee, or having a meeting at Gather, or an IPA at Ardent, or over dinner at Brenner Pass …
The 2020 Census
The 2020 census is right around the corner and I think everyone wants to know what the population of the City of Richmond will actually be. We have heard estimates that the growth rate has been anywhere from 2 to 5% per annum, depending on which study you read.
From the 1970’s to the 2000’s, the City’s population was either declining or flat. When your population isn’t growing, the supply of housing, office space, and retail space can remain constant. But when your population begins to grow, you have to start thinking about the impact that has on demand for space.
Fast forward to today and you have roughly 230,000 residents in the City –– which is not as many as the 250,000 residents of 1970, but when you consider that the average number of people per household has dropped by an entire person, we might already have a housing need greater than we did in 1970.
And for a city that has no legal authority to expand, Richmond has to make due with what it has. That can pose a big problem.
Right now, developers are repurposing almost any available property they can find into residential apartment space. And while that has helped provide a solution for the renter, it has shifted the burden to office, retail, and industrial spaces, especially as the business climate has improved. If the Scott’s Addition rental rates are any indicator, the shortage has already begun…
And for anyone who has tried to purchase (not rent) an ‘affordable’ home in Richmond, you know how difficult that has become, too. In the last 5 years, homes priced below $400k in the Fan, Museum District, Jackson Ward and Church Hill have increased by $30/SF and marketing times have been cut by more than half.
Affordability is already wreaking havoc on the residential market, and it seems to be now bleeding into the commercial market as well.
Lastly, A Clean Bill of Economic Health
Last week, a bunch of (arguably) smart people got on a stage in Richmond and said that the economy is strong nationally, as well as regionally.
That makes me feel good because most economists believe that this growth cycle has already surpassed any previous growth cycle in our history.
The fact that we are already in uncharted territory should make everyone nervous, except that it doesn’t. Everything looks pretty solid.
All I can add is that the housing factors that caused the crash in 2008 simply do not exist right now. So if a crash is imminent, it will not come as a result of the housing sector.
So if it all falls apart tomorrow, you can’t blame residential real estate and shady mortgage practices this time!
That’s All, Folks…
So that is it for now.
You may now return to your regularly scheduled programming.