Capital Insights with Jack Kern

Welcome to 2009

“Voters don’t want good government, they want good entertainment!”

Louisiana Governor Earl Long, just before his wife committed him to a mental hospital for taking up with Blaze Starr, stripper and constant companion.  (I believe Blaze was a childhood idol for Sarah Palin.)
Leadership, it seems comes in all shapes and sizes. Between the old adages, “Vote early and often,” to Governor Edwards of Louisiana, who said, early in 1983, “If we don’t get Dave Treen out of office, there won’t be anything left to steal,” politics has always provided an interesting cast of characters.

With the change in administration coming in a scant week or less, it’s time to take a hard look at how many policies and practices have been implemented that affect the multihousing industry. I’m going to, for today, separate multi-housing from condo and ownership to just talk about rentals. I feel comfortable doing this because almost nobody is doing condos right now (except for broken deals) and those that are have been too busy trying to survive to complain to the editor about me. (Once again I was kidding about Pelosi – tell the Secret Service to stop following me).

So we have Hillary Clinton, secretary of state designee, who couldn’t control her own husband, much less a rogue state, like Iran, or Iraq or maybe Kentucky. She’ll probably do ok, since it seems the only thing the State Department is good at is getting Kentucky Fried Chicken restaurants built in lots of places overseas.

Then we have Bill Richardson, a gentleman of great ability from the great state of New Mexico. He’s going to be a great Commerce secretary, but, well he sort of had to drop out because of that little investigation thing. Commerce can be helpful to multifamily, but we need a nominee that sticks, not one with sticky fingers.

We now have Obama nominating Shaun Donovan, 42, presently New York Housing Commissioner, to head the national agency that enforces fair housing laws and manages affordable housing programs. Are you as worried about this one as I am? New York housing is a mess. What hasn’t become a sitcom already, like Peter Cooper Village and the Tishman Speyer organization, is already so close to coming off rent control that even the rats on the lower east side are picketing. We now need a national, irrational housing policy?

We need the Federal government to support Fannie/Freddie. There are some terrific loan programs out there that have made and will make a huge difference in our ability as an industry to add housing stock. Despite all of the additional units being built during the foreclosure years, there is still a shortage of reasonable, affordable housing for the needs of workforce adults. As we begin the 2009 real estate year, I’m struck by a couple of disturbing rumors. First, with tax receipts way down, many municipalities are looking hungrily at apartments, (like Bernie Madoff staring at a Faberge egg) and planning to implement new or raise existing taxes to regain property tax revenues. I’d hate to think the only rent increases we see in 2009 are going to recover expenses that weren’t budgeted in 2008.

We’re fortunate to have some very talented multifamily professionals that are going to be working in the White House and hopefully that will mean more sensible housing policies. That not everyone needs to own a home is probably a well known mantra by now, but that rental can be good has never had a constituency. Going all the way back to the early HUD days, rental, public and project housing were synonymous with the lowest form of housing. We need to see new policies in place that promote renting as a valuable alternative.

To be honest, I tried to get a White House job specializing in housing policy. I thought it would be fun to work in the White House, not because of the job, or the economy, or the deep sense of patriotism, or purpose that people get, but because of the parking sticker. You see, if you get a White House parking pass, you can pretty much park anyplace you want in DC. When I go to DC, I hate having to hunt around for a space or pay $9 an hour for a space guaranteed to scratch my car. I just figured, getting that parking pass would be quite the accomplishment.

I didn’t even rank high enough to get a rejection letter.

(Jack Kern is the managing director of Kern Investment Research. In the past year, the firm has handled numerous assignments in research, finance and fund raising for corporate, institutional, and Wall Street based firms. Kern is active in helping developers and builders put projects together and gain financing. He can be contacted at 301-601-1900 or JKern@KernIRC.com)