September brings a lot of newness and freshness to us all. It marks the end of summer, the start of fall and leaf peeping, the beginning of the schoolyear. Add in quite a few other areas of life, things are changing, evolving, and just getting harder. We’re not over the pandemic yet and what progress was made over the summer seems to be at risk of slipping in a lot of areas, not just the collective health of the country. Uncertainty is a poison. Most relief programs that were designed to take care of some of the most hard hit individuals and communities, have ended, are ending, or are winding down and nobody is quite sure what that will do to…everything.
The recent conversations and media coverage around the controversial eviction moratoriums at the state and national level have brought to mind some interesting questions from a philosophical perspective, from a policy perspective, but also from a practical business perspective. We’ll leave the philosophical and policy debates to another time and focus on the business, the real estate, and the practical aspects of these situations.
When the pandemic started in earnest, I recall speaking to one of my clients about what they were seeing and doing in the face of all this uncertainty. They were, and still are, multifamily apartment developers and operators. Both market rate and affordable. Both have their unique and peculiar operational challenges and opportunities. The main takeaway from that conversation was that their number one priority was keeping residents safe and comfortable, then keeping them in place, if they could. Nobody wanted to move, and many landlords knew that it would be much better to keep tenants in place, perhaps giving up rent increases or other benefits, in lieu of finding new tenants in an uncertain rental market, and especially if they were faced with mass evictions. That would be bad for everyone. This client told me that they would work as hard as they could to avoid turnover and evictions at all cost. Perhaps they could see what many others couldn’t, that evictions would be difficult, costly, and in many cases, ultimately pointless. Worse than a zero-sum game for the landlord, painful and harmful to the tenants, and generally a lousy thing for the community and society at large.
There is risk in real estate investment and ownership for profit. That’s just the way it is. Much of what I teach my students centers on ways to identify, understand, and mitigate risks such that your decisions and investments are the best they can be while maintaining a firm understanding of the risks. Warren Buffett is famous for describing risk, or rather, dismissing risk as less of a quantifiable number as long as you know what you’re doing. Or something to that effect. Basically, when you understand what risks are present in any situation, and you’re able to identify them, and to a reasonable degree, you’re able to hedge against them, insure against them, or otherwise mitigate their impacts, you do well by yourself and others. The same is true in real estate, especially with multifamily residential real estate.
There is an argument in all of this that kindness and common sense will keep you in good stead, but there’s also a business case to be made for finding ways to reduce or eliminate disturbance. Some of the best advice I received when wading into teaching at the college level was from a veteran professor who had been through the war, so to speak. They told me that my job was to provide students with access to resources and support to learn and do the work, and then my number one objective was to limit disruptions to them and get out of their way so they can do the work. This same philosophy is true in the real estate business. Disruption is bad. It’s bad for tenants, owners, capital market sources, and everyone else. So why aren’t we working smarter, instead of harder? I’m not sure, exactly, except to say that there are people who can see the whole picture and others who can’t. It’s a problem if that myopathy is at customer interfacing level and it’s especially troublesome of it’s at the top. Company culture isn’t just a buzz term that makes people feel better about where they work, if you do it right, it permeates the organization all the way down to the end user. That’s important for risk mitigation and it’s important for the longevity and sustainability of the organization. There’s a whole doing well by doing good argument in there too, if you look for it.
I continue to remind you that as stewards of the built environment we constantly communicate and engage with constituents, and we have many opportunities to balance the scales of equity, inclusion, dignity, respect, and kindness. I challenge you to take action and pay attention to your surroundings.
Brett Pelletier is chief operating officer with Kirk&Company, Real Estate Counselors of Boston, MA and teaches at Salve Regina University, Lasell University, and BU’s Metropolitan College.