Today’s letter is brought to you by Domain Money!I love talking about money, but I’m not a financial professional—so I don’t offer one-on-one coaching or advising. Don’t get left behind andbook your FREE strategy session to help you get started. See disclaimer below.¹ To investors, Rent for a one-bedroom apartment in New York City recently hit a new all-time high of $4,500 per month. This is a 50% increase from the $3,000/month that a one-bedroom commanded pre-pandemic. Aziz Sunderji recently explained that New York City’s rent prices are increasing at the same time that New York City home prices are softening. As real estate agent Rohin Dhar pointed out, this price increase is not exclusively the product of inflation. New York City has banned Airbnb, implemented vacancy controls, and has relied on rent controls for decades. This intervention in the free market historically creates more problems, rather than solutions. One way to see this is that the national median rent for a one-bedroom is only growing at 1.6% annually, which is lower than the current inflation number. This suggests that Airbnb and a lack of hardcore rent controls in the vast majority of the country has actually been a release valve for median rents over the last 12 months. Free market solutions are better than government solutions. This is true internationally as well — Bloomberg’s Cagan Koc and Sarah Jacob recently covered the Dutch rental market, where they noticed that government controls have had a negative impact as well. It is estimated that 96% of all rental properties in the country are now under rent control. Cagan and Sarah write:
There is a massive housing shortage in the Netherlands and citizens are having a difficult time finding affordable rentals. What else would you expect if the government got to set the price of 96% of all rentals? But the United States should not shake our heads and say “well, that isn’t happening the US.” It is true that rent control is not nearly as prevelant, but the housing shortage is very real. First, on rent control:
Sounds better than the Netherlands, right? Well, the US continues to under-build housing which spells pain on the horizon. We built about 50% less housing from 2010-2019 compared to 2000-2009. Not exactly what you want to see if you are worried about home prices and/or rent prices. I am not an expert on US housing or rents. For that, I highly suggest you subscribe to Lance Lambert’s ResiClub newsletter. I learn a ton from him daily. But I do know that you can’t let government intervention disrupt the free market or you will create significantly more problems — this is what has happened in New York City and it will likely spread throughout the country as more intervention is encouraged from a political standpoint. We usually like all-time high prices in finance, but all-time high rents are not something to celebrate. Hope you all have a great start to your week. I’ll talk to everyone tomorrow. -Anthony Pompliano Founder & CEO, Professional Capital Management Reader Note: BUILD Summit, our annual conference in NYC for founders, is coming up next month on September 26th. The event will provide top tier speakers, networking opportunities, and insightful business discussions on raising capital, scaling businesses, and building products. Current speakers include angel investor Balaji Srinivasan, Khosla Ventures’ Keith Rabois, Perplexity CEO Aravind Srinivas, Eight Sleep Founders Matteo Franceschetti & Alexandra Zatarain, and Passes CEO Lucy Guo. The event is free to attend and will be full of insights on how to operate a company at world-class level. Polina Pompliano, Author of ‘Hidden Genius’ and Founder of The Profile, and Anthony Pompliano, CEO of Professional Capital Management, discuss the US economy, interest rates decision, taxing of unrealized gains, arrest of Telegram CEO, the impact of the two astronauts stranded in space, and more. Listen on iTunes: Click here Listen on Spotify: Click here How To Invest During A RecessionPodcast Sponsors
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