The Capital Needed to Build More Housing

0:28They told us to expect change. The thing about AI for business, it may not automatically fit the way your business works. At IBM, we've seen this firsthand. But by embedding AI across HR, IT, and procurement processes, we've reduced costs by millions, slash repetitive tasks, and freed thousands of hours for strategic work. Now we're helping companies get smarter by putting AI where it actually pays off, deep in the work that moves the business. Let's create smarter business, IBM. If you follow markets, you know the value of long-term thinking. You plan, you diversify, you prepare for volatility.

1:08But even the best strategies can't prevent every bad day. For more than 75 years, Cincinnati Insurance has helped individuals and businesses navigate tough moments with expertise, personal attention, and independent agents who focus on relationships, not transactions. The Cincinnati insurance companies. Let them make your bad day better. Find an agent at c-i-n-f-i-n dot com. Bloomberg Audio Studios. Podcasts. Radio. News. You're listening to Bloomberg Business Week with Carol Masser and Tim Stenevec on Bloomberg Radio. Really interesting note from our Bloomberg Intelligence team out about how U.S.

1:53housing affordability favors renting over owning. Here's what the team writes, Carol. Potential U.S. homebuyers are staying on the sidelines as affordability dominates and confidence in the economy and housing is weak. This is based on Bloomberg Intelligence's proprietary survey. Yeah, it doesn't help. I think at one point we saw some movement in mortgage rates to the downside. That was getting things starting to move a little bit. But I think we've seen a little bit of a move back up. Yeah, so these analysts, Drew Redding and Jeff Langbaum, they say that single-family rental operators, Invitation Homes, and AMH also stand to benefit as affordability constraints slow the conversion of renters to owners.

2:28All right, so let's get to it, because back with us is Ron Eliasoff. He is founder and managing director of Northwind Group. It's a real estate private equity firm in Manhattan that has transacted on over$6 billion worth of debt and equity investments, residential, commercial, senior living, and health care properties. His firm has about$2.5 billion in assets under management. He's back here in our Bloomberg Interactive Broker Studio. Good to have you here with us. How are you? I'm great. Thank you, Carol and Tim, for having me. How's the year going? Honestly, for us, it started really strong.

2:57What we're seeing, it's true what you said on the private home and buyers on the sidelines. What we're seeing in the investment sales market, transactions between professional buyers are actually much higher. The bid-ask spread between buyers and sellers has narrowed, and we're seeing a much increased transaction volume. And for us, it's been a record year so far with almost$1.2 billion of loans originations. You said professional buyers. What do you mean? So institutional? Developers, institutions. I think for the private home buyers, they're on the sidelines, as you mentioned, because mortgage rates are still high.

3:28And there's not a lot of product out there. We're seeing scarcity of supply. What do you attribute your good year just as of in the middle of March? So there's a lot of year left. What do you attribute the strong start to? I think the end of last year had a big political uncertainty. Who would be the next mayor, for example, in New York City? Now we know the market likes predictability. So we know who the new mayor, we understand the policy and investment sales can happen because now people can kind of fathom and understand what they should account for in their underwriting. What is the policy that you understand it to be?

4:02Has it really been? Honestly, if you look through and focus, it actually seems that he's pro-development, as funny as it seems. He wants to build. He understands the supply side needs to get handled. Yeah, look what he'd said to President Trump in Washington, D.C. He brought a version of a New York Daily News cover, the old Gerald Ford cover, right? New York City, Ford to City, Drop Dead. Yes, he did. Trump to City, let's build. Yeah, in Long Island City, I mean, that will take 10, 15 years to get done. It's a big project. Big project, but I think that's the kind of stuff the city needs to think about and try and create.

4:38It's not going to be solved in two to three years. You need a long-term horizon plan to create more units. But is it affordable housing? Because, you know, as a developer, walk us through kind of the math of that, like what you need to have happen in terms of what the rents need to be in order to make it a viable project. So in order to make it a viable project, almost in New York City specifically, you need some tax incentive program to exist. So for the office-to-resi conversion, we've seen 467M, which basically it's a trade-off. you get a 35-year tax break, but you have 25 % affordable. I think you want to see programs like 421A be reinstated, J51.

5:14I think the public and policy and office holders understand it. What are these policies that you just mentioned? You get a tax break for 25 years or 30 years or more. Okay, got it. And in exchange, you give 25 % of the units to be affordable at reduced rents. Those were the different ones that you were mentioning. Yeah, there's all sorts of types. Yeah. It works. It worked in the past. It needs to be reinstated. you need money for it, you need a budget for it, right? The wrong way of doing it is increasing property tax and saying, well, the city will figure out some way. I think doing these tax incentives for developers is the right solution.

5:48You know, there's this sort of existential question about New York City and employment, and it has to do with AI and the way that companies are thinking differently about employees as a result of this technology. Does New York City remain the place where people want to be in an environment where companies don't need as many employees? It's a great question. Right now, numbers showing that, yes, I mean, the city is growing between 60 ,000 to 80 ,000 people a year, mostly younger people coming here for the job opportunities. What will happen in three to five years with AI implementation? I think it's a little bit too soon to tell.

6:24I personally think New York is here to stay for the long run. Some jobs will go, but you might have new tech companies coming in. And right now, the biggest office driver of the market is tech companies coming in and taking office space. It used to be financial firms. Now it's tech companies. So I think jobs will move from one, you know, kind of vertical to another. You know, we had a developer in here, a housing person, real estate. Forgive me, the name's escaping me. But they talked about that in the future, they talked about workforce housing and developing. They do a lot of work in the South.

6:58And one of the things that they've got. Was it Thomas Carroll of Ballast? I think so. Well done, well done. Talked about that in the future, Ron, that he's thinking about a universal income that will be paid to employees and workers and citizens because they will lose their jobs because of AI. And he's thinking about that down the road to build housing that accommodates that sector. Are you guys at that point at all in terms of the impact AI might have on our world? I think we're at least five years out from that. It's very interesting to discuss it. We had a big debate in the office today. Will they tax AI, right?

7:36Will AI usage in firms will actually get taxed, and that will be a way to eventually pay for maybe that sort of program? I think it's too soon to really. There's a lot of great ideas and thoughts and debates. I think we're not there yet. Not there yet. Well, my concern in an environment like that would be about potentially driving capital away. I mean, you look at what's happening with billionaires from California moving to Florida. You know, and there's an entire conversation we could have about that and sort of the tax policy that's being put forward that Governor Gavin Newsom is even against.

8:08But does that happen in an environment if we do tax that type of product? I think what you're going to see is the top 10 leading MSAs are here to stay, will expand. There might be some movement. Some billionaire will move from one city to the next. But in general, you're going to see New York, Miami, L.A., Chicago, Boston, Washington, D.C. These cities are here to stay. They're going to have a diverse mix of people living in them, from the billionaires to, you know, blue-collar workers. And you have to accommodate everybody. So, okay, so we were going to get to a story earlier about more people riding the New York City subways as a result of congestion pricing.

8:45And it's this sort of infrastructure conversation that I'm increasingly thinking about. Maybe it's when the snow kind of moves away and potholes start showing up in the roads. So what do you want to ask? The infrastructure of New York and making sure that that it's... Look, we have pipes under the city that are over 100 years old that are constantly breaking. And, you know, utilities can only do so much. But how do you keep up infrastructure in an environment like this for a city that wants to grow and attract people? It's not just the city. I think you look at the U.S., there needs to be a massive investment in infrastructure across the country.

9:21I think if you look at the next 100 years, what this country needs is to build better infrastructure from roads to airports to seaports to data to subways and mass transportation. I mean, the country is growing population-wise. You have to make that investment. You want to see where jobs are going to go. You're going to have a lot of jobs creating the next wave of infrastructure. See what's happening in JFK right now. how much money is being poured into operated. That's the kind of things that needs to happen in the city and across the country. Whoever thought we'd be saying how nice LaGuardia is.

9:55It is. There were times when I went to LaGuardia like 10 years ago when they'd have a bucket, it would be ranting and they'd have a, or wouldn't even be ranting, and they'd have a bucket sitting there like collecting water. There are some gates you have to walk a long, long way though to get to. Infrastructure investment is over their eyes. And in five years, you'll say how amazing JFK is. And right now, nobody wants to go there. I'm looking forward to it. One of the things I want to ask you about is the old, like aging baby boomers. The oldest baby boomers are turning 80 in 2026. And so I just think about the aging of America.

10:25One of the things that you guys are big time into, and I think before we got going, you said 30 % of your portfolio or your world is healthcare. Talk to us about the growth that you're seeing in that area and what kind of developments. We shifted our strategy about eight years ago, more towards the skilled nursing side. We've been investing in senior living, senior housing, and then what we identified is people stay at home longer. They become actually more frail, and then a lot of them now skip from going from their home to an assisted living, and they go straight, unfortunately, to a skilled nursing setting.

10:55So we're big believers in skilled nursing setting. We've done last year over$2 billion of skilled nursing transactions, mostly on the financing side. And what we've seen is occupancy is going up gradually. It's hard to create new supply because a lot of states in the country cap the supply. certificate of need or other forms of capping supply. We hear that a lot. So even though it's perceived as a more, and it is a more highly operational environment and a complex operational environment, we really believe in it. And we're seeing great results in it. And we're seeing more institutions invest in it.

11:28It's perceived, we call it social infrastructure. Yes. Where does the labor come from for skilled nursing, especially with the decline in immigration here in the U.S.? Well, that's a good question. I mean, the number one job in the country that's open it's needed is nurses yeah healthcare is where we see all the growth yeah without healthcare there would be nothing and a lot of nurses often come from overseas yes they do but also local and a lot of these if you look in a lot of states it's local workforce right people in the community that work there um it's not foreigners at all uh and i think it's it's it's the number one growing job right now in the country nurses uh nurse practitioners and and the need is only going to continue and grow.

12:08Yeah. It's, I feel like the strains that we're seeing in healthcare. And AI can't do it. No. No. Before you... I would sometimes, like I feel like I've gotten like an IV or like a blood draw. Not an IV. And I wish like a robot had done it because I was like, that wasn't, but some have been pretty amazing. Yeah. I feel I'm pretty lucky. But helping somebody change their clothes, take a bath. Yeah. Oh yeah. And most importantly, company and socialize. Although we do talk about that there's a lot of older people that it's terrible, but are alone in it. You think about some kind of robotic creature, right?

12:44There are solutions for that. Yeah, the more aging baby boomers that are in their early 80s that stay at home. But when you're more frail, you need to be in that setting. Agree, agreed. 30 seconds, 40 seconds left. All the worries about private credit, and we're looking at private markets. Are you feeling the impact of any of that? Not in real estate direct lending. I mean, where we're seeing all the news right now is in corporate, private credit, corporate lending, a lot of exposure to software companies that are taking a hit, obviously, because of AI. In real estate, we're in asset-backed lending.

13:13We're focused on the value of residential real estate in New York City. That hasn't moved. I mean, it has moved. It went up, not down. So in real estate, we feel very comfortable. We haven't seen that pain at all. So great to have you here. Thank you so much. Really appreciate it. Ron Eliasoff, he is founder and managing partner of Northwind Group, joining us here in our Bloomberg Interactive Broker Studio.

13:36We buy insurance for peace of mind, but every year millions of claims are denied. Not because people did anything wrong, but because their policies quietly excluded what happened. Insurers know every detail. Policyholders rarely do. That's why My Policy Advocate exists. For just 27 cents a day, their platform reads your policies and explains where you are vulnerable. They don't sell insurance, they deliver transparency. Before you trust your policy to protect you, let My Policy Advocate tell you what it really says. Go to MyPolicyAdvocate.com. Ryan Reynolds here from Mint Mobile. The message for everyone paying big wireless way too much.

14:13Please, for the love of everything good in this world, stop. With Mint, you can get premium wireless for just$15 a month. Of course, if you enjoy overpaying, no judgments, but that's weird. Okay, one judgment. Anyway, give it a try at MintMobile.com slash switch. Upfront payment of$45 for a three-month plan, equivalent to$15 per month required. Intro rate first three months only, then full price plan options available. Taxes and fees extra. See full terms at MintMobile.com. It's tax season, and by now, we're all a bit tired of numbers. But here's an important one you need to hear. $16 billion.

14:46That's how much money in refunds the IRS flagged for possible identity fraud. But it's not all grim news. LifeLock monitors millions of data points per second and alerts you to threats you could easily miss on your own. If your identity is stolen, they'll fix it. Guaranteed. Save up to 40 % your first year. Visit LifeLock.com slash iHeart. Terms apply.