As mega-corporations try to shape our culture, influence our politics and signal their own virtues, real estate remains relatively local and untouched.
There are any number of reasons why, but one is that local market knowledge still drives outcomes. People buy homes, lease space and rent apartments based on a wide range of interests, and locals tend to understand those best. Traffic patterns, the quality of school districts, walkability, crime and other issues can all be aggregated on a macro basis. But when it comes to choosing a place to live, people still tend to trust people at the local level.
A close examination of the apartment industry bears this out. Rare is the circumstance in which a renter or buyer makes a decision without seeing the product and having a direct conversation with a property manager or sales agent, keeping it protected and in some ways pure to the capitalist underpinnings that drive supply and demand.
The cost of housing at all levels of the income ladder has risen faster than the rate of inflation in the Puget Sound region and is causing many to point to the development community as the culprit. But a big chunk of costs today derives from a 50-year legacy of postwar regulation built into the cost of construction. Construction labor shortages and higher wages today are a component, but that’s just market forces at play, and wages, after all, are a good thing. Excessive regulation that limits the developer’s abilities and creativity is not. Washington regulated itself right out of the condominium market, for example, with well-intended laws that became too costly to cover.
The good news is that regulations are still made locally for the most part. Since most of the real estate industry is managed and sold by locals, there’s a conversation happening in the most progressive and open minded communities about how to make fixes. It’s tough stuff, though. Don’t let the word progressive throw you off. Forward-looking communities are attacking the status-quo, spending time with real estate developers and investors to better understand the regulation legacy and examining ways to increase affordability by improving the ability of the supply side to react to demand.
A new form of “woke capitalism,” to borrow the hot new label, is called for. It grows from the local level up in partnership with elected officials and the communities they serve. Because it’s local by definition, real estate has the best chance of leading that movement.
Columnist Tom Hoban is chairman and co-founder of Hoban Family Office, a real estate investment and services enterprise in Everett.