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Current Season: First Draft Live
Between economic whiplash, shifting policies and market volatility that changes by the hour, you need industry insights that cut through the noise. That's exactly why we're launching First Draft Live, a new weekly series that breaks down what's happening, why it matters and what you need to know to do better business.
Join us live on Bisnow.com every Friday at 12:30 PM ET / 9:30AM PT for conversations with the industry's sharpest minds discussing the week's most critical stories, or catch the replay right afterwards — here on your podcast app of choice.
Bonner, Bisnow's editor in chief, live from New York. We have a great show for you, so I'm just gonna dive on in. My guest today is Sharon Wilson Geneau, president of the National Multifamily Housing Council. They're the trade group that represents the developers, owners, and operators of America's mammoth apartment industry. And NMHC is the organization that's been fighting on the twenty first century road to housing act for the better part of the last year.
Mark Bonner:Sharon, welcome to the show.
Sharon Wilson Géno:Thank you for having me, Mark.
Mark Bonner:So listen. Before we get in, it's my understanding that you were literally on your way to the signing ceremony for this bill when word came down that president Donald Trump had done a pretty big about face and decided he wasn't gonna sign the bill after all. At that point in late June, you spent over a year on this battle. And at the last minute, it looked like it might not happen. Take me inside that moment.
Mark Bonner:What was going through your head at that moment?
Sharon Wilson Géno:Sure. It was just very confusing because there have been so much back and forth on the substance of the bill, and the White House had truly been a very active player in those negotiations. So you don't typically see that in every bill. Often it's the back and forth between the House and the Senate, and then the White House might weigh in at some point in time. In this case, particularly around the bill, the rent provisions, we can talk a little bit more about, the White House was very active in the discussion.
Sharon Wilson Géno:So at the point and had already endorsed the bill. So at the point when we were ready to sign, there was certainly a view that everybody was on board. Very exciting that that they were going to do a signing ceremony in Statutory Hall. They do not do that all the time, really elevating the hard work that everyone had done. And I think also amplifying the fact that housing is a purple issue.
Sharon Wilson Géno:It is a bipartisan approach. So it was a really nice moment to elevate this. Unfortunately, you know, as we later learned, it got swept up in in some external issues not related to the substance of the bill, not related to housing at all. So we're all just kind of because we've been through so much already, we're all demystified. But given everything that had happened leading up to that, on the other hand, you know, you get to a place where nothing surprises me anymore.
Sharon Wilson Géno:And that's that was sort of that moment.
Mark Bonner:Okay. So let's set the table for everyone watching. Last Friday at midnight, the twenty first century Road to Housing Act became law. It's the most significant piece of federal housing legislation in decades. It took more than a year to get here.
Mark Bonner:It started as two separate bills in the house and senate, went back and forth between chambers multiple times, and finally passed with broad bipartisan majorities. And look, it touches a lot. New restrictions on institutional ownership of single family homes, a $200,000,000 grant program pushing cities to reform zoning and speed up entitlements, The end of the manufactured housing chassis mandate, an expanded cap on bank investment and affordable housing, and a reauthorization of HUD's HOME program. Notably, it does not include the BTR restrictions that had thrown that sector into chaos for months. And also notably, and here's the big twist that everyone knows about by now, the president let it become law without signing it.
Mark Bonner:As we just discussed, Trump pulled out of the ceremony at the last minute holding the bill hostage over an unrelated demand for voter ID legislation. He never signed it. He never vetoed it. He just let the clock run out. Nevertheless, Elizabeth Warren called it groundbreaking.
Mark Bonner:The law, she said, would finally stop private equity from buying up homes, which is something the president, for the record, has aggressively supported. Sharon, you were more modest and said, quote, no one thing is going to be magical, but put together, it will start creating a better environment. So after all of this whiplash, which is it for you? Groundbreaking or just the beginning?
Sharon Wilson Géno:I think you can hope both of those things at the same time. It's groundbreaking in in just what you said. The fact that we actually passed housing legislation for the first time in thirty years, that is the ground that has been broken here. And but is this bill going to fundamentally change the housing environment in The U. S.
Sharon Wilson Géno:Immediately for millions of Americans? Not likely not. It has a lot of small solutions. It's going to be really impactful for a deal here. A deal there.
Sharon Wilson Géno:To your point, the the change in manufactured housing chassis role is is very impactful for that segment of the market. But that's but that's something people have agreed on for a decade, and we still haven't been able to get it done. But the fact that we had bipartisan long term and eventually bicameral support for this was really the fundamental part of the groundbreaking. As I mentioned earlier, this is this is only the beginning. It's not the end.
Sharon Wilson Géno:And both houses of Congress in both parties have also said that they're intending to keep moving forward. And as I mentioned, I'm gonna attend an event later today, on the house side where we're gonna start talking about what happens next in housing. And that part is groundbreaking.
Mark Bonner:And this was hard one on a lot of different fronts. So let's go back in time. Back in March, you and the National Apartment Association put out a statement warning that an eleventh hour provision, a forced deposition requirement for BTR homes would have, quote, an immediate chilling effect on housing supply, affordability, and investment. That's not hedge language. That's a five alarm statement, and it wasn't hypothetical.
Mark Bonner:While that provision was still alive, one one BTR developer that Bisnow spoke to told us he watched the number of bridge lenders willing to finance this project drop from 94 to about six, all in about three weeks. The provision ultimately got stripped from the final bill, but walk me through what almost happened here. And here's the part that doesn't get said enough. Were you fighting bad policy or were you also fighting ignorance of what BTR actually is?
Sharon Wilson Géno:Think it's both. You know, we're a bipartisan organization. We're here for housing. Right? So our job is to educate and advocate for solutions that are going to move housing policy forward in this country.
Sharon Wilson Géno:Unfortunately, this last minute provision really got spun into some political dynamics here in an election year. You've got to keep in mind that. To your point, this both of these bills started last year and then found themselves in election year politics as we were starting to wrap them up. On one hand, it was a positive because polling coming into midterm elections, housing continues to be the number one, two or three issue on the mind of American voters, so that creates some urgency around doing something which was really helpful. On the other hand, a lot of other political dynamics such as the the narrative that corporations versus the little guy and somehow corporations are the problem for housing affordability.
Sharon Wilson Géno:You saw the rise of the affordability issue. Although all those things not proven perception on the part of the American voter got. Blended into this bill and what the the language that came out that was never discussed over the last year plus would have basically said that if you're building to rent and and that's a very important growing segment of the market right now, People are staying in rental housing longer. Some of them are saving for homeownership. Some of them are downsizing from being seniors.
Sharon Wilson Géno:Some of them are just mobile military families and others who are mobile families because of economic opportunity for them. They've they've been living, but they want four freestanding walls in a patch of grass. These communities are built on one lot, many cases with in their managed like apartments or think about them as horizontal apartments. The way the language came out, it would have said you can only live in those units for seven years and then they have to be sold to individual homeowners. Not only does that undermine the very fundamentals of the financing that was moving this engine to build more housing, But it also would disrupt the lives of the families living in those that may not have ever desired to or or were ready to purchase that home.
Sharon Wilson Géno:They would have had to move. It made absolutely no sense.
Mark Bonner:So is that fight over now, Sharon? Or are you still doing Build to Rent one hundred one with members every time this comes up?
Sharon Wilson Géno:I feel like we've made a lot of progress here. So people now can separate single family rental from from build to rent rental. And I I feel like we've we've made a lot of progress there. We we've gone back and forth. The House had come up with some language.
Sharon Wilson Géno:The Senate had up some language. The language that actually came out, there's still some potential interpretations related to the ability to resell built to rent community once it's been sold once. We are very confident that the everything the legislative history tells you that that it was permissible. The whole plan for this bill was not to incorporate built to rent into the exclusion around single family rental. We've sent a letter to treasury, and we're working with treasury back and forth just for them to confirm that in writing so Yeah.
Sharon Wilson Géno:Marketplace can feel confident moving forward in financing these projects.
Mark Bonner:We're gonna get into that letter to treasury in a few minutes here, but I wanna talk about the 350 home cap. That's the headline provision. The one Warren is running victory laps on. It caps single family rental ownership at 350 homes for large investors. Critics are already picking it apart.
Mark Bonner:New BTR construction is exempted. There are tenant rent to own workarounds. One multifamily economist called it, quote, saber rattling and window dressing. Does this cap change one thing about how NMHC's members actually operate?
Sharon Wilson Géno:It's a shot across the bow, frankly, and I think it even goes beyond single family rental. It was a very arbitrary number of three fifty. Where that came from, nobody knows. It's about this whole fundamental question about institutional investment in the housing space. And this is another place where people are very uninformed about who builds housing in America.
Sharon Wilson Géno:The government does not build that housing by and large. Is investors. It is retired teachers investing through their pension funds. It's middle income Americans who are in whole life insurance or are part of a portfolio that has investment in a REIT. Those are institutional investors in building the housing America needs.
Sharon Wilson Géno:And this idea that somehow fundamentally institutional investment is a problem or bad for housing, it really misses the mark. It is the thing that actually builds the housing we need today.
Mark Bonner:So give me some specific examples. Which investor or which strategy actually gets blocked by three fifty by 350 homes that wasn't blocked before? I mean, the criticism here just broadly is that this is symbolic and that this does not have real teeth.
Sharon Wilson Géno:Well, again, what is the problem? Presupposes there's a problem with owners owning large swaths of single family rental. No one's proven that as a problem yet. So is it? Are we solving a problem that we don't even know is a problem?
Sharon Wilson Géno:Maybe, but we don't have any evidence that it is in fact the problem. Frankly, again, a little bit of history here. How did more large owners become owners of single family scattered site rental? Go back to 2006, 2007, 2008 and the lead up to the February. There was a big push largely from the right to put more Americans into homeownership and really with zero down payment programs and other things and really pushing people into homeownership, many of whom maybe were really on the cusp of being ready or able to do that after the two thousand and eight crash.
Sharon Wilson Géno:Many of them were very vulnerable already. They lost their homes. What did these corporations do? They came in, they bought them, they maintained them, they mowed the lawn, they paid the taxes, they rehabilitated them and families that lost their homes to foreclosure now had a healthy place to live in the communities where they lived previously. So it really was a very important vehicle for saving parts of the housing market, particularly in a number of different cities.
Sharon Wilson Géno:Overtime, a number of those corporations have sold good trucks of that housing back into the marketplace because it made economic sense for them. So I think there's this sense that that there was still this considerable aggressive plan for corporations to buy more large sections of of single family scattered site rental that hasn't really been happening in the marketplace for some time. What I think is getting confused here again, this is this is ignorance is when people see LLC behind the name of an owner of a property, they call it a large corporation. It is often, you know, a family business, a mom and pop. It's, you know, some friends that are investing out of state in real estate on and on again.
Sharon Wilson Géno:So when just because you see the name corporation behind an ownership structure, it doesn't make it a large corporation. So it's a lot of confusion in the space right now.
Mark Bonner:Let's get into some of the other parts of the bill that no one's talking about. Like, the $200,000,000 zoning and entitlement grant program, which kills the manufactured home chassis mandate. It bumps the bank affordable housing investment cap from 15% to 20%. Some real estate leaders are calling these, quote, goodies, not game changers. Multifamily starts fell 40% month over month in May, 14% year over year.
Mark Bonner:Sharon, does does anything in this bill actually touch that number in the next eighteen months?
Sharon Wilson Géno:I think it's it will make a big difference in certain deals, right? But it won't make a big difference nationally right away. I think the two provisions you mentioned, increase in the public welfare exemption, I think that will help move a number of deals forward that were kind of stuck in the mud, perhaps, particularly in the low income housing tax credit space. So it creates some more capacity there. The the change in the chassis rule, again, I think that's pretty fundamental for the manufactured housing world.
Sharon Wilson Géno:Then keep in mind also, we've made so many advances in what manufactured housing looks like in the decades we've been talking about removing the chassis rule. So there's real opportunity there for those deals, I think. So I think you'll see the impact most immediately, probably in those two kind of niche spaces. Don't know that some of the other provisions to your point that changes in the home rule, other things are gonna take a minute to implement. They're gonna require rules from HUD and other things.
Sharon Wilson Géno:You're gonna see the benefit of that, I think, more over time.
Mark Bonner:And, also, things take time. We're in a housing crisis. We're not gonna dig our way out of that in a year. We may be dealing with that for the next ten to twenty years in some shape or form depending on what economist, you wanna listen to. But, I mean, just to put a button on this, Sharon, is the honest answer that congress just passed a housing bill that can't really move housing supply right now?
Sharon Wilson Géno:It can move certain deals in certain segments of the market. And again, think the two places most impactful will be probably in the affordable space with PW cap, increase in in the manufactured housing states. But those are still relatively niche, small parts of the market. It's going to take time to move the rest of the market. And again, there's nothing in this bill that's fundamentally going to open the floodgates for more housing development.
Sharon Wilson Géno:It does open the floodgates for a bipartisan conversation, both houses of congress to do more, and that's what we're really excited about now.
Mark Bonner:President Donald Trump let this become law without his name on it. Mid fight over an unrelated bill, which we've already discussed. But he's on record saying homes are, quote, built for people, not corporations, which is the same populist instinct that produced the SFR cap in the first place. Now you're not even waiting to find out whether treasury moves slowly because you sent treasury a letter on Monday about forty eight hours after the bill finally became law, with NBA, NAA, NAHB, NAREIT, and the National Rental Housing Coalition where you're asking them to formally exclude BTR and the SFR ban. Sharon, does a law enacted this way get the same regulatory follow through, you know, HUD rule making, treasury guidance as one a president actually champions, or did his non signature hurt the momentum here?
Sharon Wilson Géno:I honestly don't think it hurts the momentum of this bill because, again, it was for, did you point out, very unrelated reasons. It has nothing to do with the substance of the bill itself. And you have such strong bipartisan support and White House involvement in the White House being on record as supporting substance of the bill. So I think we're and again, I I wouldn't even call this interpretive. I would just call it written confirmation of what the bill already says and what the legislative history tells us.
Sharon Wilson Géno:BTR is an important part of the housing market. People have now once they've been educated about it, recognize that, and I think it's here to stay.
Mark Bonner:Then why did you all feel the need to send this letter just two days after the law took effect?
Sharon Wilson Géno:Oh, it was really a response to all of our members had been asking us. They said, hey, look, you know, we get it. We're we're in good shape, but it would help us in making our financing. You know, to your point, investors get a little skittish, lawyers get a little skittish. It would help us ease those conversations if we had some written confirmation.
Sharon Wilson Géno:So that's all we're doing. Again, I think it's pretty clear from the legislation or legislative history what was intended.
Mark Bonner:Your letter says BTR investments are already on hold while investors wait for Treasury to clarify the language. In your opinion, how long can that freeze last before it does real damage?
Sharon Wilson Géno:Well, you know, keep in mind, we're we've already been struggling with this since March. So you've got deals that have been on hold since March already. So you're already three or four months into this. How long can any deal sustain, particularly deals that have taken down land or taken down construction loans? They can only support so much of the economics.
Sharon Wilson Géno:Some of those might be waiting for permitting and other kinds of approvals, and they're in the queue for that, and their outlay on that might be less. But if you're already financially obligated, either on land or on on investment capital or you're waiting to get those lockdowns on your investment capital, certainly that has a financial impact.
Mark Bonner:I mean, given what's already happened on the hill and what we have seen happen in the marketplace during the debate over this bill, it sounds like you're not taking any chances.
Sharon Wilson Géno:Exactly. I mean, there's been so much debate on this teeny tiny piece of something that came from nowhere that, to your earlier point, was based on ignorance, is based on people's complete misunderstanding of the difference between single family rental and build to rent rental, how they're financed very differently, what's adding to supply, and the affordability components of that, that I I think people were just in the end, people's heads have been spun around, and we're just trying to be sure that there's clarity on all fronts and everybody has the confirmations they need to move forward confidently.
Mark Bonner:So, Sharon, I know you're heading to the hill right after we tape. You're meeting with the House Democrats Housing Affordability Working Group. It seems to me that NMHC's near term focus isn't the next bill. It's this one, implementation based on the letter and everything you're saying. And part of the job, as we already discussed, has been surprisingly basic, educating lawmakers on what BTR actually is and perhaps how the housing market actually works in this country, which I wouldn't blame anybody for not understanding.
Mark Bonner:It's complicated. This is not easy stuff. But the fact that you're educating lawmakers, I feel like that's a remarkable admission on its own. We have an entire asset class that nearly got legislated out of existence by people who didn't understand the product. So is today's Hill meeting a companion push to Monday's treasury letter where you're trying to get congress to lean on treasury too?
Mark Bonner:Or in your view, is it a separate track entirely?
Sharon Wilson Géno:I think they're really separate tracks. This House Democratic Affordability Committee has been meeting episodically, and I've been I've been meeting with them over time and at other forums to really think about what's next. The the Treasury piece again, I I consider that to be important but technical in nature. This is really about exactly what we're talking about before. Okay, now we have created a foundation to really move the housing markets.
Sharon Wilson Géno:What else can we do? One of the important pieces that we're going to talk about, Congressman Fonetta from California and others have introduced the bill to create a workforce housing tax credit. That's something we've championed here for some time. It would allow for some federal financial assistance for that group of people just above where the subsidy cutoff limits are for the local housing tax credit, but still can't reach housing affordably in the marketplace. So that's one thing that we're championing in this.
Sharon Wilson Géno:There is still federal money sitting around from the transportation infrastructure bill that was passed during the Biden administration that hasn't been released for housing near transit because of the way the bill was written that really prevented it from being actually, to your earlier point, useful for housing. It was written by people that didn't understand the housing market work. People now understand we want to get that billions of dollars out the door and let's start building some housing. We're also proposing some really new progressive ideas of how could the federal government be a partner with states and localities in providing more tax abatement at the local level to incentivize the creation of more housing affordably. A lot of localities already use tax abatement and related programs.
Sharon Wilson Géno:Our members find that to be a relatively easy. It takes some time, but a relatively straightforward process. But the federal government share some of that cost to states and localities and incentivize them to reduce other barriers to housing so we can actually open doors and really move the housing markets open.
Mark Bonner:Sharon, as you well know, there's a lot of pessimists, on Capitol Hill. There's a lot of pessimism even in commercial real estate despite that it's it's sort of an industry that's got an internal sunshine and a spotless mind where optimism runs everything. But we've talked to a number of of bigwigs, in multifamily, over the last few months looking at this. And even they will say this is a nice beginning, but it's not gonna meaningfully change anything for how they do business. And they have said that it's not gonna meaning meaningfully add new supply to the market and help fight, the the housing crisis.
Mark Bonner:What do you say to those people? And what more needs to happen on this front with this bill or perhaps a second bill down the road to more firmly begin to bring in new supply to the market to solve that crisis? That's so high on everyone's mind.
Sharon Wilson Géno:No. I mean, in the history of housing policy to the history of of our country, all lasting change is incremental. And this is an incremental step toward creating what I'll call political safety in doing things that are more impactful moving forward. So we had to get through this process. And again, there were much more bold ideas originally in both of the bills in the House and the Senate.
Sharon Wilson Géno:Those did not make the cut, in part because there were political forces at work that made them more difficult to get over the finish line. Now that we've created some political safety and we've created some education, it's time. There's a bill that's an opportunity to educate again. We've really helped move the ball forward in terms of the education process. We've created that political safety, and then we can move on to the next incremental step and so forth.
Mark Bonner:So we'll just close on this. If you had to bet on one provision in this bill actually moving the needle on housing supply in the next year or two, which one would it be and why?
Sharon Wilson Géno:I think it's I'll I'll pick two. I think it's the public welfare increase because there's there's demand in the in that low income housing space and tax credit deals ready to go, and they could use some investment just to get them over the finish line because costs have increased. So I think that that is a and that's a system that's ready to go. It's a system that already works. It just needs some more capital flowing in that space.
Sharon Wilson Géno:So I think there's opportunity there as well. And then I think the removal of the chassis requirement. I mean, this is such a technical thing, but again, manufactured housing is increasingly going to be part of our housing ecosystem because technology has gotten us in a place where we can build this better, stronger, faster, cheaper, and make it look good and make it part of communities, both urban, suburban and rural. So I think there's real opportunity there to scale some deals in that space sooner as opposed to late.
Mark Bonner:Sharon, good luck to you on the hill this afternoon. Let us know how it goes, and thanks for coming on even on your way out the door.
Sharon Wilson Géno:Thank you for a great conversation.
Mark Bonner:To everyone catching us on social, on their podcast feed, or on their commute, thank you for listening. This is First Draft Live. We'll see you next time.