Phone Won't Stop Ringing For NMHC President Wilson Géno, RER CEO DeBoer. Here's What Members Are Asking
The tumultuous state of the U.S. economy has touched every industry, but commercial real estate, in particular, has been impacted in several profound ways. The collapse of Silicon Valley Bank left the fate of billions of dollars of CRE loans in question while rising interest rates continue to impact CRE lending, and the slow return to office is leaving building owners with underutilized assets.
CRE professionals are searching for answers amid all this uncertainty, turning to experts who can help them make sense of a seemingly endless string of complex challenges. On this week’s Walker Webcast, Walker & Dunlop CEO Willy Walker sat down with Real Estate Roundtable President and CEO Jeff DeBoer and National Multifamily Housing Council President Sharon Wilson Géno to wade through some of the major economic and political issues impacting CRE and learn what their top concerns are right now.
DeBoer said current economic conditions and the collapse of SVB were a wake-up call for those who had grown used to “easy money” over the past 12 years with low interest rates. He said that he believes members of Congress are very focused on this issue and will exercise a great deal of oversight to try to reinstitute some of the regulatory provisions that had been rolled back over the last few years.
Wilson Géno added that small banks have been critical to the multifamily sector and any regulations that could cause these banks to re-evaluate their role could severely impact the development of the housing the U.S. so desperately needs.
“We're hoping that ultimately things calm down and that the resource of regional banks remains an important part of the construction lending side,” Wilson Géno said.
Walker asked DeBoer if his phone has been “ringing off the hook” for the past few weeks with calls from non-multifamily members of the Real Estate Roundtable saying they have a liquidity crisis and are unsure of where they will get the funding for their next office or retail project. DeBoer didn’t deny it, and said that the concept of additional regulations and expanding liquidity are kind of counter to each other.
“The phones are ringing a lot in the office sector, but also, as [Wilson Géno] said, I think we all ought to be concerned about these regulations and if they criticize office loans too much, they're going to have to reserve against them,” he said. “There's going to have to be a lot more equity put in that's going to take away the possibility of capital being lent on all kinds of assets across the country.”
Wilson Géno said people have been calling her with questions about public agency lending, since Freddie Mac and Fannie Mae exist to provide liquid capital to the housing sector at times of more volatile private market circumstances.
“The ripple effect of what happens in office, and what's happened at SVB and [Signature Bank] is going to push down on the multifamily banking side,” she said. “Our members are looking ahead and saying, ‘OK, what's going on with the agencies? And how can I be sure that I continue to rely on that?’”
The discussion turned toward the White House’s Blueprint for a Renters Bill of Rights and how the additional regulatory constraints it may impose could impact the multifamily market. Wilson Géno said there could be a measure in the bill that could put some type of rent control on properties financed by the agencies.
“I do see the agencies and the other federal agencies struggling with what they know best, which is that they step in between the regulatory sort of government side of it, and they have to interact with the private markets,” she said. “And they know that these kinds of overcorrections on the regulatory side are gonna hurt.”
Walker urged all landlords who may be listening to the webcast to do a better job of communicating the ways they are working with renters to help them afford their homes in difficult times, since the vast majority of the stories being reported are focused on renters being evicted.
“If you are concerned about this issue, and you have cases where you have extended help, or allowed someone to sit in an apartment for six months rent-free, those stories need to make their way to Washington,” he said.
As many office buildings across the country struggle to return to full occupancy, converting these buildings into multifamily housing has been floated as a possible solution to the U.S.’ housing supply crisis. With that in mind, Walker asked if HUD should be doing construction loans to convert office buildings to multifamily.
DeBoer said that not every underutilized building is a good candidate for multifamily housing since it requires a certain type of property, but regardless, there are many of those conversations underway and even more developers considering them.
“Whether HUD should provide financing or not, that's an interesting idea,” he said. “I haven't really considered that.”
He said that instead, he and Wilson Géno have both been focused on a tax credit idea that would encourage owners to try and make these types of conversions. Wilson Géno added that there had been “some legislation kicking around the last Congress” to expand the Opportunity Zone legislation to make it more user-friendly for multifamily and adaptive reuse and that she’s looking forward to seeing affordable housing initiatives in the upcoming budget proposal.
“I think this is an attempt by the administration to do what they said they were going to do last May, which is, try to make good on this housing supply plan,” she said. “The problem, as [DeBoer] pointed out, is all the pay-fors are 1031s and other tax incentives that are also investing in housing, including preserving and developing new affordable housing. So you're giving with one hand and taking away with the other.”
Tune in on April 12 for a special episode of the Walker Webcast, The Most Insightful Hour in CRE — Live and Unplugged, with Peter Linneman. Register here.
This article was produced in collaboration between Walker & Dunlop and Studio B. Bisnow news staff was not involved in the production of this content.
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