Sam Zell, the billionaire real estate investor, died this week at the age of 81. That seems young to me. Or maybe I’m just being overly optimistic about life expectancy. This is around the US average.

Whatever the case, if you work in real estate, you likely know/knew of Sam. In my case, he spent a lot of time at Penn after he permanently endowed the real estate center (under both his name and his late business partner’s name).

I used to go and listen to him speak at least twice a year, and I would hang off his every word as a young student of real estate. “So wait, how does this all work?”

It was also at this time that he sold Equity Office to Blackstone for $39 billion (back in 2007, it was the largest private equity deal in history). Sam’s explanation for doing this deal was that Blackstone offered him more than what he thought the portfolio was worth, so he sold it. He took no credit for good market timing.

If you’ve ever heard Sam speak, you know that he’s incredibly direct. Generally, he also didn’t seem to give a fuck, and was happy being the only person in a Hawaiian shirt among a sea of blue and black suits.

In fact, he’s largely the reason that, as students, we used to all joke that the richer the speaker, the more funny and honest they would be. “Come on, let’s go to this one. She’s rich.” I guess this is just what happens when you no longer have anything to prove.

But none of this is to say that he didn’t care. He cared a great deal about the school and about helping young students. And for that, I say: thank you Sam. Thank you for being generous with your time.

There's a lot of debate within urbanist circles about whether or not supply alone can solve or at least mitigate housing affordability concerns. Richard Florida and others will say that, while beneficial, increasing supply isn't the be all end all. We need to be building affordable housing.

Edward Glaeser, Joseph Gyourko, and others have, on the other hand, argued that middle-income housing is a supply problem and that low-income housing is quite simply a demand-side problem, which could be solved through things like a housing voucher program.

In other words, the cost of housing isn't necessarily the problem, it's the low income levels. One of the benefits of supplementing people's incomes is that it empowers mobility. People can then move to where there are jobs, as opposed to being tied to a specific neighborhood or city.

But this debate is arguably just about the extent of the supply benefits. Intuitively, it makes sense to try and match new housing supply with demand and economic growth. But how far can that take us, particularly in high demand and high productivity cities?

Glaeser (Harvard) and Gyourko (Penn) have a relatively recent paper out called, The Economic Implications of Housing Supply, which looks at, among other things, the "implicit tax" imposed on development as a result of land use restrictions and other supply constraints.

Here are two excerpts:

We will argue that the rise in housing wealth is concentrated in the major coastal markets that have high prices relative to minimum production costs, and it is concentrated among the richest members of the older cohorts—that is, on those who already owned homes several decades ago, before binding constraints on new housing construction were imposed.

But in a democratic system where the rules for building and land use are largely determined by existing homeowners, development projects face a considerable disadvantage, especially since many of the potential beneficiaries of a new project do not have a place to live in the jurisdiction when possibilities for reducing regulation and expanding the supply of housing are debated.

If you're interested in this topic (and sufficiently nerdy), you can download a PDF copy of the paper here.

Photo by chuttersnap on Unsplash

Back when I was in grad school studying real estate, we used to refer to the below book as the “blue bible.” It is a comprehensive look at real estate finance and investments, and also development. But perhaps more importantly, it is written in a way that is clear, direct, and immensely practical to the actual world of real estate.

The reason I mention this today is because the fifth edition is out and my friend Bruce Kirsch is now an author, along with Peter Linneman. Thankfully the cover is still blue, otherwise I might be a little sad and this post wouldn’t make a lot of sense.

Bruce has an MBA in Real Estate from Wharton (at Penn) and is the founder and CEO of Real Estate Financial Modeling, LLC, which I recommend to absolutely everyone who wants to get better at financial modeling and deal underwriting.

I have a lot of people who reach out to me on a regular basis and want to ask me about getting into real estate, and in particular, development. I try my best to make time because I was once in their shoes. Usually that means an early morning coffee in Toronto’s PATH.

My advice is fairly consistent. You have two options. Try and get your foot in the door at a shop or, if you’ve got the gall, go out and try and do it on your own. I have friends who have successfully done the latter with very little in the way of formal real estate training.

Whatever your decision, knowledge of the industry will obviously serve you well. Oftentimes I’m meeting with design and/or planning professionals who bring a lot to the table, but usually lack the finance and investments knowledge. That’s when I remind them of my story: Don’t screw up the numbers.

This is also when I suggest taking one of Bruce’s classes. I’ve taken a number of them. Because to learn how to model something in Excel you have to understand how it actually works and Bruce helps you do exactly that. Garbage in, garbage out. That’s how models work.

But the other thing one should consider doing is picking up a copy of the blue bible. I have a copy sitting on my desk right now and will tell you that it’s a “must read”, whether you’re a designer and just want to learn more about the other side of the business, or you’re an experienced real estate professional.

For more on the book, click here and then on Textbook at the top. Oh, and Bruce, congratulations on the new book!