Landmark Links June 1st – Fish Out of Water


Lead Story… Curbed ran a provocative blog post this week, posing the question “Can tech outsmart the housing shortage?”  Author Patric Sisson rightly pointed out that tech was by and large late to the real estate space but has been making headway with ventures ranging from WeWork to Fifth Wall Ventures to AirBnb.  The amount of new capital pouring into the real estate startup space is unprecedented, as pointed out by Omri Barzilay of Forbes earlier this year (emphasis mine):

The last decade has witnessed an exponential growth in real estate tech startups. Globally, the number of startups rose from 176 in 2008 to 1,274 by 2017. In the same period, cumulative investments in these startups soared from $2.4 billion to $33.7 billion.

However, as pointed out in the Curbed post, very little of this capital has been effectively deployed in the residential housing space to help relieve today’s crippling shortages, which ironically tend to be most acute in tech-dominated markets.  So why haven’t tech startups been impactful in dealing with today’s housing shortages?  I want to provide a bit more color from Curbed before explaining why (emphasis mine):

In real estate, as in other industries being transformed by technology, you can measure the commercial and cultural shift through language. An entire glossary of new terms—coliving, microunits, smart homes, and coworking—have taken root thanks to a speedy adoption of new technology.

These companies have endeavoured to solve some pretty vexing problems: They’re building community (WeWork). Making cities more affordable (Starcity). Helping people stay in their homes (Airbnb). Streamlining and simplifying the process of finding a roommate and paying rent (Common). Helping new businesses grow and thrive (WeWork again).

But are these companies fundamentally “disrupting” housing? And, perhaps more importantly, are they using their funding and talent to truly solve U.S. cities’ acute housing shortage and affordability crisis?

If that’s the bar to which these companies are being held, it’s arguable that they’ve fallen very short. As urbanist, author, and editorial director of SPUR Allison Arieff told Curbed, “Don’t try and disrupt everything. Focus on actual problems.”

Over the past decade or so, the tech industry has been largely focused on monetizing excess capacity – so-called disruption.  Each of the startups listed above along with ventures like Uber, Lyft and even Amazon (to an extent) have a business model defined by finding an under-utilized good (vacant office space, empty car seats, a guest room), creating a marketplace for that good and then collecting a fee as compensation for providing a means for owners to monetize it.  However, housing does not have an excess capacity problem.  In fact, it has the exact opposite – a scarcity problem.

The tech startups that focus on housing tend to be oriented towards concepts like co-living which is little more than a very expensive version of a business that has been around forever – the Single Room Occupancy unit or SLO.  In addressing housing this way, tech startups are personifying Abraham Maslow’s famous quote: “If all you have is a hammer, everything looks like a nail.”  There are only so many units in existing buildings that can be partitioned off to provide beds (and little else) for city residents.  Those units may also be fine for 20-something singles but are hardly conducive to raising a family.  More from Curbed (emphasis mine):

Younger generations, saddled with astronomical urban real estate prices, yet drawn to the economic activity and energy such cities offer, will always be willing to cram themselves into increasingly tiny spaces. When it comes to housing, cities need a bigger pie, not more fashionable ways to sell smaller slices—served with a side of community. But tech is more than happy to build a better cubbyhole.

If tech startups are going to make a dent in the housing shortage, they are going to need to do more than wring efficiency out of excess capacity that largely doesn’t exist.  Instead, efforts needs to be put into streamlining approvals and developing better building technology.  There are some companies focusing on construction – Katerra comes to mind for one.  However, these segments of the market tend to be more difficult to scale, more human and require more human input.  In the end, the solution is both simple and complex at the same time: if a housing startup is to be successful it must first build a lot of houses.


Help Wanted: The case for low-skilled immigration is stronger than ever from an economic standpoint as available jobs go unfilled.

Tapping the Brakes: Financial turmoil in Italy, Turkey and Argentina has led to investors unwinding bets that the Fed will pick up the pace of interest rate increases.

Best and the Brightest: More than half of the most valuable US tech companies were founded by first or second generation immigrants.


Foot in the Door: Amazon believes that selling you groceries is the key to selling you everything else which is why Whole Foods plays such a key role in their business plan moving forward.

Rollback: How the Volker Rule’s proposed revision could add liquidity to CMBS.

Parking Needed: The warehouse boom is making truck parking an increasingly in-demand product type.


Unexpected: The relationship between mortgage rates and real house prices is far less stable than commonly thought.

Sensing a Trend: There should be no doubt that excessive student debt is hindering home buying among young people.  However, one must also take the choice of major into account.  Borrowing $300k for a master’s degree in history or $86k for a Ph.D. in music composition as two of the subjects in this NYT feature article did is probably not a wise idea whether you prefer to be a renter or an owner.

Not Just A City Problem: Rural America has a problem that mirrors its urban counterpart – plenty of jobs but not enough housing for workers who don’t qualify for public assistance but can’t afford a luxury home.


Lifeline: Families in the dystopian hellscape that is 2018 Venezuela are finding some refuge in mining cryptocurrency, which is still profitable there thanks to the government giving away electricity for free.

The House Always Wins: Sports betting is a substantially lower margin business than commonly believed.

Long Way Down: General Electric was once the envy of the corporate world.  Then it decided to become a finance company in the run-up to the Great Recession and an oil services company in the days before the oil bust and everything went to shit.  Here’s a great recap of everything that went wrong.

Two Weeks Notice: High profile young traders who made a fortune trading cryptocurrency are bailing on Wall Street banks.

Chart of the Day

Boom goes the dynamite…..

Italy 2 Year

Source: Wall Street Journal


Lock Them Up: Butcher shops in Great Britain are being vandalized regularly because vegans.  Reminder: a vegetarian is someone who eats a plant-based diet.  A vegan is someone who tells you that you need to eat a plant-based diet.

Sure: An Indian man had to go to the hospital to have a 6 inch shower head removed from his rectum after he “accidentally slipped” in the bathroom.  In related news, I accidentally enjoyed a glass of wine with dinner last night.

Destined for Greatness: A woman named Crystal Methvin was arrested for possession of crystal meth because Florida (h/t Henry Baskerville).  For those of you tracking such things at home, there are now no less than two women residing in the great state of Florida who are named after crystal meth.

Landmark Links – A candid look at the economy, real estate, and other things sometimes related.

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Landmark Links June 1st – Fish Out of Water

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