- What made you follow real estate? How did you turn it into a career?
After completing a B.A. and M.A in economics and statistics from The Hebrew University of Jerusalem, I worked as a policy analyst for the Monetary Committee at the Bank of Israel, which is the equivalent of the Federal Reserve’s Federal Open Market Committee (FOMC) in the US. My research focused on Israel’s housing markets and informed the interest rate decisions at the Bank of Israel. Fascinated by the key role that housing plays in people’s lives, I decided to follow an academic career in real-estate.
When I moved to the United States to pursue my PhD at Stanford, I was shocked by the state of homelessness in the San Francisco Bay Area. Especially memorable were conversations I had with single mothers who were forced to live with their children in RVs because, despite working multiple jobs, they could not afford to rent. It inspired me to write my dissertation on homelessness and evictions. Upon graduation, I joined CBS and am currently fortunate to be associated with the Millstein Center here.
- What have you uncovered in your research that confirmed or negated a premise of yours?
My research primarily focuses on how to alleviate housing insecurity. One of my findings is that rental assistance programs are more effective than instating stronger tenant protections against evictions. Simply stated, when eviction protections make it harder to evict delinquent tenants, landlords are more likely to screen low-income applicants in order to avoid costly evictions.
Rental assistance, on the other hand, lowers the likelihood that tenants default on rent in the first place, and is therefore beneficial for landlords as well as tenants. Opponents of rental assistance often argue that the cost of subsidizing rents is too burdensome. What they do not realize, however, is that homelessness and evictions also impose costs on taxpayers. For example, in NYC, the cost of every homeless person is approximately $60K annually(!). This includes the cost of homeless shelters, policing, food banks and so on. Rental assistance can therefore save money by lowering the public expenses on homelessness services .
- What is your favorite part about teaching at CBS?
This was my first year teaching at CBS and it has been a fantastic experience. I love interacting with our students. The classroom dynamics at CBS allow students to express diverse opinions, and I find this environment to be highly constructive. I also particularly enjoy students’ enthusiasm for real-world applications. Whether you are considering a career as a real-estate investor or are considering becoming a homeowner at some point in the future, the tools we teach in our Real-Estate Finance class are essential. This makes Real-Estate Finance a particularly fun class to teach, with lots of practical applications.
- It is currently disadvantageous for developers to perform capital expenditures on commercial real estate projects in NYC. They would rather keep stock offline than rent it at what is perceived as a discount. How do we mitigate this problem to make housing more affordable in the city?
The primary driver of the affordable housing crisis in NYC, and in the US more broadly, is limited supply. Increasing housing supply must be the long-term solution. There are various reasons for why supply is limited. One major driver for this shortage of housing is local regulation and strict zoning laws that prohibit high density developments. These policies are often referred to as NIMBYism.
I think Mayor Adams understands that expanding the supply of affordable housing must be a top priority for the administration. Unfortunately, from a political perspective, housing reforms are notoriously difficult to pass through legislation. For example, Mayor Adams is a proponent of extending 421a, which incentivizes real-estate development, but this has failed to pass in the state legislature.
- What is the best way to approach office vacancy in NYC?
Work from home (WFH) is one of the most dramatic shifts in real estate in the last few decades. Let’s start with the facts. Office vacancy is around 50% of what it was pre-pandemic and does not seem like it will fully rebound. Transition to WFH seems like it is the new norm, at least in the medium-term.
Vacancies are mostly high in Class B and Class C property types. The companies that are still renewing leases are typically doing so in Class A buildings. The hard truth is that even though vacancies are high, the worse is probably yet to come. The reason is that office leases are typically long term and extend between 5-20 years. To the extent that WFH continues, I’d expect to see more distress in the office sector as leases come to term and tenants do not renew them.
The current office vacancy environment is a challenge and an opportunity. On the one hand, high office vacancy is not only bad for office landlords, it is detrimental to everyone. It can instigate a dangerous urban doom-loop: Lower office occupancy means cities collect fewer taxes, this can lower public investments in downtowns, as a result push more tenants to abandon their downtown offices, and so on and so forth.
On the other hand, the current environment represents an opportunity because it seems like a prudent moment to convert offices to multifamily buildings. To the extent that office valuations continue to drop, landlords might eventually find it value-enhancing to convert. It will take time, but this is where policymakers can bridge the gap by subsidizing office-to-multi-family conversions.
- Will market rate renters have relief in 2023?
In the past six months, we have seen rents somewhat stabilizing (and even falling in some locations). Nevertheless, rents are still high compared to pre-pandemic levels. At the end of the day, what drive rents in the short run is demand. Given current supply, increases in rent depend on demand. In the short run, whether or not the economy will drop into a recession will matter for rents. Despite high interest rates, job reports seem strong, and inflation is much higher than what the Fed would like it to be. This suggests the high interest rate environment is likely to persist for a while and that a recession is possible. The financial turmoil following the collapse of Silicon Valley Bank further tightens economic activity.
- What are your thoughts on private equity firms buying single family homes? Is this good for the market or bad for the market?
The jury is still out on that. We don’t have decisive evidence on how institutional investors impact single family housing markets. On the one hand, these large investors compete with first time homeowners and might crowd them out. On the other hand, they create a market of single-family rentals. It used to be practically impossible to rent a single-family house with a backyard a decade ago, but this is now changing.
Olamide Fadairon '23 has graduated from CBS with a concentration in finance. Prior to Columbia, Olamide spent three years as an underwriter for Pembrook Capital Management, a Real Estate Debt Fund specializing in affordable housing, Before Pembrook, Olamide worked at Morgan Stanley for three years in an Operations rotational program. In addition to his professional work, Olamide acts as an ambassador to imentor, a program that pairs college-graduated professionals with high school students for a minimum period of three years, and has done so since 2015. In August of 2022, Olamide founded & incorporated an affordable housing non-profit, Hillspring Community Partners. Olamide has also served on the Alumni Council for the Collegiate School for Boys in NYC since 2018. Olamide holds a B.A. in International Politics and Economics from Middlebury College where he was the captain of the Men’s Track and Field Team.