Her argument during the high-profile falling out was that the senators were failing to protect Boston residents from rising property taxes that would make homeownership in Boston unaffordable. But the assumption that affordability is being hampered by high residential property tax rates is not supported by the latest independent data.

A recent study by the nonpartisan Lincoln Institute of Land Policy found that Boston homeowners have one of the lowest property tax rates of any major city in America. The city’s effective tax rate on owner-occupied primary residences is just 0.51 percent — less than half the national average. Among 53 major US cities, Boston places fifth lowest for property tax rates on median-valued homes (roughly $700,000).

Boston is also an outlier locally. An analysis of property taxes among Boston suburbs with more typical tax structures shows that, holding home values constant, suburban homeowners pay about 60 percent more in property taxes than their city counterparts.

Those numbers make it difficult to argue that Boston homeowners are overtaxed or that shifting even more of the city’s tax burden onto commercial property is necessary. They also make Wu’s decision to wield the issue as a political weapon against Brownsberger and Collins particularly difficult to defend.

What’s more, Boston’s effective tax rate on commercial property is already more than five times the effective tax rate on owner-occupied homes — by far the highest ratio of any city in the study. That relative disparity is no accident. It is the result of a tax system deliberately structured to favor residential property owners.

Commercial properties account for only about one-third of Boston’s assessed property value, yet, because the city applies the maximum 175 percent classification shift allowed under state law, commercial taxpayers shoulder about 58 percent of the city’s entire property tax levy. That amounts to an estimated $797 million annual subsidy from commercial property owners to residential taxpayers, reducing the average single-family homeowner’s tax bill by nearly 25 percent, or roughly $2,000 each year.

On top of that 25 percent subsidy from commercial property owners, Boston also has a residential exemption that reduces qualifying homeowners’ 2026 tax bills by as much as $4,353. Combined with the city’s questionable property value assessment practices (particularly on its highest-valued homes), many owner-occupants effectively pay taxes on only a fraction of their home’s market value.

Not surprisingly, these practices have drawn legal scrutiny. A pending class action lawsuit alleges that commercial property owners who exercised their constitutional right to appeal assessments were subjected to a retaliatory policy that artificially increased their assessed values and their property tax bills through unlawful “discretionary adjustments.”

Preferential treatment of the residential sector has broader financial and political consequences. Because commercial taxpayers absorb so much of the cost of increased city spending, homeowners are largely insulated from it. When residents are shielded from the true burden of government expenditures, there is less pressure for fiscal discipline and less incentive to scrutinize spending decisions.

Meanwhile, the commercial real estate sector is under extraordinary financial strain. Office vacancies remain historically high, remote work continues to suppress demand, and downtown office buildings are selling for a fraction of their pre-pandemic values.

Asking this shrinking tax base to shoulder an even greater share of Boston’s tax burden risks accelerating its decline. Higher taxes will further depress commercial property values, discourage investment, contribute to more distressed sales, and make Boston less competitive for employers. The cumulative effects ultimately ripple through restaurants, retailers, workers, and neighborhoods that depend on a healthy downtown economy.

None of this suggests Boston’s affordability challenges are not real. But the evidence shows that property taxes on homeowners are not the driving force. Boston already provides residential property owners with one of the most favorable property tax structures in the country.

Brownsberger and Collins opposed Wu’s tax shift not because they ignored homeowners but because they recognized that Boston cannot solve its affordability challenges by weakening the commercial tax base that supports city services. Expanding housing supply — not shifting ever-greater tax burdens onto struggling businesses — would be a more effective and durable solution.

The Legislature rejected the mayor’s proposal twice because lawmakers understood that reality. Turning that vote into a campaign issue does not change the underlying financial dynamics. If anything, the Lincoln Institute’s findings reinforce why Brownsberger and Collins got this one right.

Section 133A of the House economic development bill would allow any Massachusetts municipality to adopt a local tenant right to purchase ordinance. Once a municipality opts in, an owner seeking to sell a rental property must notify both the municipality and every tenant household before signing a sale agreement. Tenants representing at least 51 percent of the occupied units can then form an association that has privileged rights to purchase the property relative to prospective third-party buyers.

Most notable among these rights is the ability to delay such a sale via up to 212 days via a series of fixed waiting period: 15 days for the tenant association to submit an initial offer, seven days for the owner to deliver a subsequent third-party offer, 30 days for the tenant association to execute a replacement, and then a full 160 days for the tenant association to conduct due diligence, arrange financing, and close.

These delays are a huge burden, especially for sellers of small properties, for which 45 days would be more typical. Many sellers might need the money on short notice, in which case they’re straight out of luck. Even if they’re theoretically willing to wait 212 days, a tenant association could back out after 211, at which point the original third-party seller may have lost interest, market conditions may have changed, and the seller might not be able to sell the property at all. Rational market participants will price those risks into transactions through lower bids, higher financing costs, larger reserves, or a simple refusal to invest in municipalities that adopt TOPA.

The threat of these costs also creates an opportunity for blackmail. Research by the D.C. Policy Center found that tenants actually purchase their buildings in only a small share of cases where an association forms. In roughly 95 percent, the association assigns or releases its rights, often in return for repairs, concessions, or cash. Reported payouts have reached $100,000 per unit. Procedural disputes can delay sales for years, make title insurers reluctant to proceed, and create opportunities for lawyers to threaten litigation on behalf of individual tenants even after the tenant association has reached an agreement.

Plus, TOPA does not create a single additional home. Giving the current occupants of an existing building leverage over its sale may redistribute value among tenants, owners, buyers, and lawyers, but it does not address the state’s housing shortage. By increasing the cost and uncertainty of owning rental housing, it may instead discourage the investment needed to maintain old buildings and finance new ones.

A proposal this consequential should have been debated as a standalone bill. Instead, Section 133A was inserted into a sprawling economic development package alongside hundreds of unrelated priorities. The House disposed of 688 amendments through five consolidated packages with little floor discussion. That process makes it easier to pass controversial policies, but harder to examine their details or hold legislators accountable for individual votes.

We’d therefore recommend that you call your legislators (https://malegislature.gov/Search/FindMyLegislator) and urge them to oppose the inclusion of TOPA in the final draft of the economic development bill.

Before answering that directly, though, we have to go back…to the founding. The founders created three branches of government: the legislative branch to write laws, the judicial branch to interpret the laws, and the executive branch to implement and enforce the laws. This separation of powers is foundational to the structure of our government, but it hasn’t been perfectly ironclad. Congress, for instance, has the ability to create agencies within the executive branch that can, in turn, issue regulations that are downstream of and constrained by Congress’s own laws. In other words, parts of the executive branch have the ability to make rules that are similar to laws but subordinate to laws passed by Congress, preserving Congress’s authority over the broad principles and goals of rulemaking while delegating the details to agencies within the executive.

There’s a further distinction between the primary executive departments (Defense, Treasury, State, Justice, etc) and the various independent agencies (SEC, CFTC, FTC, FCC, EPA, etc). The former are more explicitly associated with their respective presidential administration; it’s standard for a new president to replace the head of each department and various lower-level officials with new appointees who are more aligned with the president’s priorities. The latter are designed to maintain more continuity between presidential administrations, often via multi-member boards with fixed, staggered terms.

There are some good reasons behind this intended insulation from presidential influence, but it’s a structure that has always existed in tension with the idea of an executive branch under the control of the president. This tension came to a head in 1935 in Humphrey’s Executor v US, in which, in the midst of unprecedented consolidation of presidential power under FDR, SCOTUS ruled that the president lacked the ability to dismiss an FTC commissioner other than for cause (i.e. other than for “inefficiency, neglect of duty, or malfeasance in office”--a standard established by Congress as part of its creation of the FTC). More broadly, it affirmed Congress’s authority to create quasi-legislative or quasi-judicial agencies that are independent of presidential control despite sitting within the executive branch.

This was an important precedent that resolved, for the time being, the question of whether independent executive agencies could really be independent of the president. Another framing of this question is whether it should be possible for Congress to create a rulemaking apparatus of arbitrary breadth that is insulated from democratic control or accountability–almost a new 4th branch of government. There are serious arguments on both sides of this question, but Humphrey’s answered “yes”, setting the course for major growth of these independent agencies for the next 90 years. This process was genuinely transformative for the US–in ways both good and bad–and remains underappreciated as one of the dominant trends of 20th and early 21st century governance.

Trump v Slaughter overturned Humphrey’s. SCOTUS decided that Congress’s creation of for-cause removal protection was unconstitutional, violating the separation of powers: since Article II vests executive power in the president, the president must have the power to remove executive officers.

Tidy enough, but what about the Fed? It’s also an independent agency whose officers are appointed by the president, so why should those officers be subject to a different standard from those at the FTC and other independent agencies? According to the majority here, because the US has a longstanding history of independent central banking (with the Bank of North America and the First and Second Banks of the United States significantly predating the Fed), because the Fed is privately owned by member banks, and because central banks do not, by default, exercise the executive power, the Fed falls outside of the principle established in Trump v Slaughter.

This makes sense on one level, but runs into a major complicating factor: the modern Fed not only conducts monetary policy in its capacity as a central bank, but also acts as a bank regulator. As pointed out by Barrett and Thomas in their dissents, it’s hard to argue that this is not an exercise of the executive power–a phrase that is conspicuously absent from the majority opinion. We wouldn’t be surprised to see this particular issue come back into the spotlight in subsequent SCOTUS terms (and keep in mind that the particulars of Cook’s case, i.e. whether Trump had cause to fire her, still have to be litigated in lower courts).

Nevertheless, the preservation of the Fed’s independence is almost certainly a positive outcome for public confidence in the Fed’s ability to fulfill its role effectively, and therefore for the US (and world) economy as a whole.

On rent control, the SJC found that the proposed policy’s exemption for units in facilities operated solely for religious purposes was impermissible, as the Massachusetts Constitution explicitly prohibits petitions that relate to religion, religious practices, or religious institutions. This exclusion is literally the first one on the list; it’s unclear how both the rent control advocates who wrote the petition and the state Attorney General, Andrea Campbell, who is responsible for certifying ballot petitions (and did so last September over the objections of rent control opponents), missed this. Sloppy on both of their parts. And one has to assume some level of “motivated reasoning” on the part of the AG in overlooking so obvious an issue—again, it’s literally the very first disallowed concept—and certifying the ballot anyways. Regardless, a substantively good outcome for the state. It’s also worth noting that this court decision reflected a substantive problem with the proposal itself, and not a technical problem with other parts of the process, as we’ll see in the case of the income tax question. Since the legislature has indicated that it’s unlikely to pass any alternative rent control proposals, the state should be safe until the likely return of rent control to the ballot in 2028. By then, we hope to have a sufficient number of MA residents “rentvesting”, which will give them a stake in the system and a reason to vote for pro-growth, supply-oriented solutions that actually lower costs, while increasing real estate investment returns.

The SJC’s disqualification of the income tax cut was based not on any substantive problems with the proposal itself, which would have cut the state income tax from 5% to 4%, but on AG Campbell’s incorrect summary of the proposal. In addition to cutting the personal income tax, the proposal would have cut the state’s long-term capital gains tax, but the summary written by Campbell’s office (which is what voters would have actually seen on the ballot on election day) explicitly stated that capital gains would be excluded from the tax cuts. The SJC decided (reasonably) that this was therefore not a fair summary. Emails from last year revealed that the AG’s office actively pushed for this incorrect language over the initial objections of the initiative’s attorney. This is outrageous behavior, and the lack of accountability is stunning. This goes beyond motivated reasoning to actually inducing a valid ballot initiative to agree to an incorrect summary. We all know the power that bureaucrats have, and if the AG’s office says “it must be written as such to proceed”, you can imagine the pressure that puts on the proponents to accept. This feels like a trap was laid to get this initiative off the ballot, something that both MA House and Senate leaders publicly commented they were against. Of course the citizens want lower taxes and the government wants higher taxes, but to have this extremely popular initiative removed because of language the AG directly pushed for feels manipulative at worst, and incompetent/disenfranchising at best. The fact that voters will now be unable to decide on this important policy question because of the AG’s error is a real problem with the ballot process.

So, chalk it up to one win, one loss, and unfortunately both for decidedly strange and uncompelling reasons. I would have much rather seen rent control defeated at the ballot (because it is a bad policy) and taxes reduced by popular vote (because it is a good policy).

First, the ballot initiative, i.e. the rent control proposal that will likely end up on the ballot this November. This has been widely described as one of the most severe rent control proposals in the country. It caps rent increases at the lower of 5% or the annual increase in CPI (currently at a relatively high 4.2% YoY as of May), does not reset when tenancy changes, and would be automatically applied statewide regardless of whether a given municipality wants it or not. This proposal would grind new housing construction to a virtual halt if it were to pass–even the threat of it passing has paused billions of dollars of new investment in housing. Fortunately, the campaign against it is well-coordinated, and many key politicians–Maura Healey, Ron Mariano, Karen Spilka, and dozens of others–oppose it, but it’s still at roughly 50/50 on Kalshi. There’s also a chance that a legal challenge will cause it to be removed from the ballot, similarly to what just happened with the income tax cut ballot question.

Perhaps because they’ve sensed a lack of momentum for the ballot initiative, rent control advocates recently introduced a compromise proposal. Unlike the ballot initiative, this proposal is structured as a local option, meaning that cities and towns can opt into it or not at their discretion. It also has a less strict rent increase cap, at 5% + CPI up to a maximum of 10%. This proposal would be less harmful than the ballot initiative but still quite damaging. A small minority of real estate industry players have endorsed it, but they are predominantly builders/operators of subsidized housing or developers who are highly dependent on the goodwill of government-led approval processes, so their endorsements should be taken with a large handful of salt. Its advocates hope that the state legislature will approve of this proposal and pass it into law by July 1, thereby removing the need for a costly and uncertain ballot campaign, but the legislature has been unenthused so far, so I would put that at <5% chance of happening. We interpret the proposal’s existence as a positive indicator for the success of the anti-rent-control campaign.

Interestingly, NAIOP has also put forward a compromise proposal. Their proposal is also a local option with a cap of 5% + CPI up to 10%, but with a number of other provisions that soften the effects of rent control. New construction is exempted for 30 years (compared to 10 years in the ballot initiative), each municipality that adopts the policy must renew it every decade, and municipalities with inclusionary zoning requirements of 10% or more would be ineligible to adopt it. This last piece is critical–it includes the most notable cities that want rent control: Boston, Cambridge, and Somerville. These cities are unlikely to abandon their inclusionary zoning policies, which means that the adoption of this compromise would be a Pyrrhic victory for rent control advocates, so this compromise won’t go anywhere (which is likely what NAIOP intended–being seen as open to compromise while including non-starter provisions).

All in all, these conditions leave us cautiously optimistic for the ballot in November. The willingness of the advocates to compromise, the strong organization of the anti-rent-control campaign, and the general tendency of ballot questions to lose support as the election approaches are all positive indicators, and while the threat of rent control has caused us to modify our acquisitions strategy away from value-add and towards stabilized properties, we’re still quite bullish on Greater Boston in the long run.

But today, I’ll talk about what the IPO says about the state of public vs private markets in the US and what this means for companies like Groma and for everyday investors. SpaceX was founded in 2002, and it spent 24 years as a private company before its IPO. During this time, it raised $10B+ over a series of rounds, starting with seed capital from Elon and then billions of dollars from venture capital firms, private equity, pension funds, and select insiders and high-net-worth individuals. $10B is a lot of money, but building rockets and the infrastructure required to launch and land them is extraordinarily expensive. In earlier eras, companies looking to raise money for an undertaking of this magnitude would have sought to go public much earlier in order to tap into public markets, but, as the cases of SpaceX and other capital-intensive companies like OpenAI and Anthropic show, this is no longer the case.

Why? Because, over the past 20ish years (since the passage of Sarbanes-Oxley, which coincidentally passed the same year SpaceX was founded), it has become much more difficult to go public and much easier to stay private. Going public has gotten a lot more expensive and burdensome, with increased requirements for quarterly reporting and internal controls and significantly higher litigation risk stemming from reforms like Sarbanes-Oxley and Dodd-Frank (2012). The reasons for these policies are understandable–people wanted to prevent more episodes like Enron or the ‘08 financial crisis–but they do come with significant costs, one of which is pushing countless companies away from going public.

At the same time, private markets have grown and evolved. Part of this is just the push factor from the above regulations–if companies can’t raise money in public markets, they have to look for alternatives–but part of it is also genuine progress in the business models of venture capital, private equity, and private credit. These sectors now make it much easier for companies to raise funds in various ways as they grow, providing both flexibility and, increasingly, massive scale as well. Plus, the JOBS Act (2012) raised the thresholds for public reporting, creating more regulatory space for companies to stay private.

Together, these push and pull factors have created a fundraising environment that works really well for lots of startups and growth-stage companies, but there’s a big problem with this state of affairs. The enormous wealth that is created when a company goes from zero to to a trillion dollars (or even just a paltry hundred billion) is now much more likely to be legally off-limits to the vast majority of people. This plays into the broader sense that the economy is rigged, and that really getting ahead requires being an insider, or at least already fairly wealthy.

Fortunately, the current SEC and many other people in government are aware of this problem and looking for ways to improve investor access to hot new companies. We’d love to see these efforts succeed, both for the sake of the general public and for the specific case of Groma, where we’re selling real estate securities that we want everyone to be able to own and also building a tech company that we expect to one day go public.

First, Goldman Sachs is launching a tokenized real estate vehicle. This is great news on multiple levels. It’s important validation of the thesis that onchain real estate is a valuable product–an idea that has been clear to us at Groma for a while, but that gains additional weight from having a major player like Goldman endorse it. This will bring significantly more interest and demand to the space from both institutional and retail investors, creating positive spillover effects for existing assets like GromaCoin. Especially for institutions (both allocators and exchanges), tokenized securities thus far have been an awkward fit, as they sit at the intersection of novel technology, complex regulation, and risk-averse, inertia-bound players; having Goldman on board will do a lot to overcome this. It will, of course, be competition for GromaCoin, but we’re confident in our differentiated real estate thesis, our flexibility, and our ability to innovate.

Second, Morpho, the lending protocol we’re using to launch our lending and investment vaults with Birch Hill, is launching a fixed-rate, fixed-maturity lending protocol called Morpho Midnight. This is a huge step forward for those of us who prefer reliable long-term lending terms. Running a program like rentvesting can work when rates are variable, but it’s much simpler to administer and eliminates uncertainty for both borrowers and lenders when rates are set over a long period of time. This isn’t to say that the utilization-based, variable-rate approach that has been the default on Morpho so far is bad–there’s a lot to recommend it, especially in a decentralized context–but we’re enthusiastic about the potential to deploy future vaults based on Midnight.

Switching to Massachusetts politics, the campaign behind the rent control ballot initiative has released a “compromise” proposal in the hopes of the state legislature passing this proposal and eliminating the need for an extended and costly ballot campaign. While the compromise proposal is less strict than the ballot initiative in some ways, it doesn’t avoid the biggest flaw of the ballot question’s proposed policy, which is deterrence of new construction. This makes it a non-starter for both the real estate industry and for people who are serious about addressing MA’s housing shortage. The rent control advocates have gotten a few real estate groups to sign on, but these are primarily nonprofit developers who aren’t subject to the same market forces as normal real estate operators or developers, who remain broadly opposed to the compromise. The compromise also introduces rent control boards, which are nightmarishly bureaucratic and were a hated element of the pre-1994 rent control system. Fortunately, legislative leaders like Speaker of the House Ronald Mariano and House Ways & Means chair Aaron Michlewitz seem unimpressed by the compromise, and it arguably reflects a lack of confidence on the part of the campaign, which is a good signal for rent control’s opponents.

Last, in the midst of a lawsuit against Boston’s assessing department for its alleged retaliation against commercial properties that appealed their valuations, long-serving assessing department commissioner Nick Ariniello has just stepped down from his role. To put it mildly, this is not something that I would do if I were confident that my department’s practices were legally defensible, and while there’s still a while to go in the lawsuit, I’d say this is a good sign for the plaintiffs’ prospects, and correspondingly for the future health of Boston’s property tax system.

In total, rentvesting has resulted in 21 individual renters investing $765,132 into the Groma Real Estate Trust. These renters have collectively gained a total of $23,764 of net equity, or $1,132 per renter on average.

Whether or not $1,132 feels like “a lot” to you is going to depend on your background and assumptions. If you’re used to thinking about investing, it’s tempting to think “the average renter invested $36.4k, $1,132 is 3.1% of $36.4k, and a return of 3.1% over a year is worse than treasuries, making it pretty mediocre”.

But this is a misleading way to think about rentvesting for a few reasons. First, renters aren’t putting in the full annual investment amount up front–they’re investing it gradually over the course of a year. This means that, for instance, the investments made on May 1, 2026 have barely had any time to produce returns, and the average share duration is a bit less than six months (since the number of participants has grown since the initial batch). So 3.1% over six months translates to a 6.3% annual return, which is not bad but still not especially exciting when the S&P is generating double-digit average annual returns over the past five years.

But I think the key piece of context here is that the opportunity cost of rentvesting is effectively zero. You’re not taking, say, $3000 of cash out of your pocket, investing it in the Groma Real Estate Trust, and thereby foregoing the opportunity to invest that $3000 in some other asset that might perform better. You’re getting a zero-opportunity-cost $3000 that you wouldn’t have had otherwise with which to make that investment and begin realizing those gains. That’s the power of rentvesting: giving renters access to leveraged investing while covering their downside.

And I’d be remiss not to mention what this means for Groma. After netting out the cost of borrowing from the dividends and fees we’ve received from the newly created shares, our total cost was $782–about 0.1% of the total investment. It’s pretty common for asset managers to pay 10+x more than this to raise new capital, so this is an incredibly efficient fundraising method for us. And this is using last year’s real estate performance, when dividends hadn’t stabilized yet. Under stabilized dividends and our expected long-term borrowing equilibrium, that amount of rentvesting would have been profitable for Groma to the tune of about $9000–we’d be earning money for something that firms usually pay for.

All this leaves us very excited for the next steps: public rentvesting launch later this year, and then continuous scaling upward from there. Looking forward to sharing this progress with you.

The bill is a broad housing package aimed at increasing housing supply, modernizing federal housing programs, expanding manufactured/modular housing, streamlining environmental and local development barriers, improving mortgage access, and adding restrictions on large institutional ownership of single-family homes. It’s Congress’s response to widespread public dissatisfaction with the state of housing affordability, and it’s probably the most ambitious piece of supply-oriented federal housing policy in 2+ generations.

But, as we’ve discussed before, some parts of the bill are counterproductive slopulism. Many people mistakenly believe that the high cost of housing is caused by institutional investors buying up housing supply. This is wrong for many reasons (for instance, institutional investors own a tiny percentage of single-family housing, and the areas where they own the most housing actually tend to be more affordable than areas they avoid), but people nevertheless believe it–it’s easier to have “big corporations” be the bad guy than to confront the local zoning and permitting policies that play a bigger role in keeping housing scarce and expensive.

So, a Senate version of the bill from March of this year included a provision that banned large institutional investors from buying single-family homes (defined, counterintuitively, to include duplexes as well). While it excluded “build to rent” (BTR) homes from this ban, it required institutional investors to sell these properties to individual homeowners within seven years of their construction. This provision was widely condemned by housing experts, who pointed out that it would significantly deter new construction of this type of housing while doing almost nothing to address the underlying problems.

On Wednesday, the House edited the Senate’s version in a few major ways. It eliminated the requirement that institutional investors sell BTR homes within seven years, which will make a major difference in keeping that business model, which is a major source of new supply in many markets, viable. It also created additional exemptions from the overall ban on institutional purchases of “single-family” homes, including both manufactured homes and properties that “when occupied, ha[ve] always been occupied by a renter”. This gets back to some of the principles that have always driven Groma’s property acquisition strategy: we want to expand ownership opportunities, not take them away, so we exclusively purchase properties that are already rentals and then make shares in them available to more investors than was previously possible.

Again, this isn’t to endorse the remaining parts of the institutional investor ban, which are not good policy for the reasons discussed above. Nevertheless, the House’s new edits take a highly toxic part of the bill and make it considerably less so. Grading on a curve, that’s pretty good.

The pre-amendment May draft included several notable changes from the earlier January draft–these changes are explained in detail by Alex Thorn here. The most consequential ones are as follows:

• Stablecoin yield: This has been arguably the most contentious element of digital asset policy over the past year. The Genius Act, which passed into law last year, prohibited stablecoins from paying “yield”, but left open a number of potential mechanisms by which they could reward their holders in ways that are functionally identical to yield. The banking lobby, which is unsurprisingly quite influential in Congress, has been very unhappy about this, worrying that it might make it harder for them to attract deposits. The banking committee’s January draft placed some further restrictions on stablecoin reward structures, and the May draft tightened these even further, allowing only reward structures that are not economically identical to bank deposit yield. The crypto industry broadly thinks this goes too far, and the banks think it doesn’t go far enough, but it may have been a necessary step towards getting the bill this far.

• DeFi protections: The May draft expanded the scope of protections for software developers and auxiliary service providers in DeFi. This makes it easier for these parties to provide neutral infrastructure like baseline protocols, oracles, or validation without exposing themselves to liability for those tools’ misuse by bad actors. Knowing facilitation of crime still creates liability (standard mens rea), but this makes it easier for people and companies to build useful tools without worrying about others misusing them (similar to the Telecommunications Act of 1996). Overall a great provision.

• SEC rulemaking authority: Whereas the January draft created joint rulemaking authority for the SEC and CFTC over all tokenized real world assets, including both securities and commodities, the new draft draws a clearer line between the two, giving the SEC more discretion over securities (and implicitly leaving more room for CFTC discretion over commodities, though that will have to be made explicit in the agriculture committee draft). This is good news for the SEC’s ability to continue issuing no-action relief and staff guidance to innovators in the space, which has been a big theme under the current Atkins administration.

• Housing funding: As a non sequitur that shines some light on the sausage-making process that is Congress, the Clarity Act now includes a provision that makes the awarding of Community Development Block Grants, a federal grant program that funds state-level housing and infrastructure projects, scale based on states’ rates of housing growth. This is a good change–it rewards states for removing barriers to housing construction–but it has nothing to do with digital assets. It’s just there to win the support of John Kennedy (R-LA) and to somewhat placate Elizabeth Warren (D-MA).

Aside from these substantive elements, it’s worth noting that Clarity passed out of the banking committee with all 13 Republican votes and two of eleven Democratic votes, for a total count of 15-9. The two Democrats voting in support were Angela Alsobrooks (MD), who played a major role in brokering the stablecoin compromise, and Ruben Gallego (AZ), the ranking Democrat on the Digital Assets Subcommittee. Good on them for supporting innovation despite the unfortunate partisan valence of crypto policy these days.

Next, the Senate agriculture committee, which has authority over the CFTC, has to produce its own draft, which then has to be reconciled with the banking draft, and then that version has to be reconciled with the House’s version, which passed last July. Lastly, the President has to sign it, which is almost guaranteed if it gets that far.

Big picture, this is not a perfect bill, but still considerably better than no legislative action on crypto because it establishes clear policy that will prevent regulators from swinging too much from one presidential administration to the next. It’s very hard for most businesses to operate under this kind of uncertainty, so I and the rest of the Groma team will be rooting for Clarity to pass despite its imperfections.

But that argument is not unique to digital assets. Every issuer would prefer lower compliance costs. Traditional companies raising capital also face expensive audits, legal review, disclosure obligations, and liability risk. Those requirements exist because investors need more than an issuer’s promise that everything is fine. They need reliable, independently verified information about the entity, its finances, its obligations, and the risks they are taking.

Blockchain transparency does not eliminate that need. On-chain data can show token movements, balances, and smart contract activity, but it does not necessarily reveal off-chain liabilities, related-party arrangements, compensation, governance conflicts, market-making deals, custody risks, or how proceeds are being used. A digital asset may live on-chain, but the business and people behind it usually do not.

That is why executive certifications are not an adequate substitute for independent review. They may create accountability, but they still ask investors to rely primarily on the issuer’s own assurances. The point of audits is that someone outside the issuer checks the facts.

To be clear, there are lots of elements of the blockchain space that will require novel/distinct treatment from traditional financial assets and structures. Decentralized exchanges and vaults function sufficiently differently from their tradfi analogues (to the degree that those analogues exist or can be clearly identified) that existing rules become nonsensical when applied to them; the SEC has acknowledged as much, and will hopefully publish new rules to govern these structures in the near future. But, when a digital asset clearly satisfies the criteria for being considered a security, the mere fact that it’s digital shouldn’t exempt it from normal security regulation.

Groma has historically focused on the small multifamily asset class–that is, non-amenitized multifamily rental properties with 2-20 units. The difficulties of managing this class of properties, as opposed to traditional/large multifamily, have kept it largely out of bounds for institutional investors, creating opportunity for operators who can solve the relevant logistical problems and reap the returns of this untapped market.

As we’ve grown, it’s become increasingly clear that many of the same dynamics apply to multifamily properties with 21-49 units, meaning that operators and sponsors looking for exposure to small multifamily properties can look at the broader set of 2-49-unit properties for a larger, but structurally similar, opportunity. We semi-jokingly call this combination of small and mid-market assets “smidmarket”, or, as our PR team would prefer, “mini-multi”. Regardless of name, we believe this asset class will play an increasingly important role for institutional allocators seeking to avoid the challenges of both traditional multifamily assets (low cap rates) and single-family rentals (regulatory risk).

This growth will drive demand for better data and research on many aspects of this market segment; to that end, this report seeks to explore the question of which geographical markets are best suited to mini-multi aggregation investment. To do so, it evaluates the factors that we believe are most relevant to the mini-multifamily asset class, identifies metrics to quantify these factors, and applies them to major US markets to create metric-specific and overall rankings.

Overall Ranking

Overall market rankings are based on a weighted index of all individual metrics.

These metrics are:

1. Small and Midmarket Multifamily Stock

2. Renting Discount

3. Governance Risk

4. Population Density

5. Growth Constraints

6. Climate Risk

7. Economic Fundamentals

8. Institutional Interest

Mini-Multi Stock

Weighting: 6

We ranked markets based on both their aggregate supply of small and mid-market multifamily units and the proportion of their multifamily housing stock in midmarket properties. Both of these factors contribute significantly to the efficient acquisition and management of properties in this class.

Renting Discount

Weighting: 2

In most metro areas, renting a home is cheaper than buying, but the degree to which this is the case varies between metros. In some metros, e.g. Detroit, renting and buying are almost at parity, whereas in others, e.g. San Francisco, renting is thess than half the price of buying. Markets where this renting discount is greater are ranked higher for mini-multi investment, as the relative unaffordability of homeownership makes rental demand less price-sensitive. The renting discount is shown here both as a percentage of the buy price and as a raw value.

Governance Risk

Weighting: 4

States and cities vary widely in terms of their fiscal discipline and expected future obligations that threaten to increase property tax liabilities in ways that are broadly not factored into current valuations.

Population Density

Weighting: 2

Small and mid-market multifamily properties typically have fewer amenities than large multifamily properties. This increases the importance of neighborhood characteristics like walkability.

Growth Constraints

Weighting: 4

Many real estate rankings consider growth-friendly policies a plus, but the buy, optimize, operate, and exit nature of the small and mid-market multifamily aggregation strategy means that these properties tend to benefit from regulatory constraints on new construction. We incorporate both per capita residential construction rates and a survey of land use regulations.

Climate Risk

Weighting: 2

Our climate risk ranking combines data on natural disasters, flooding/rising sea levels, air quality, and extreme heat/humidity. In addition to worsening resident quality of life and thereby decreasing demand, these factors have a major impact on insurance rates, a core driver of operating costs–especially for smaller buildings without the latest mitigation technology.

Economic Fundamentals

Weighting: 6

This metric incorporates current and future return expectations for multifamily properties as well as metro area job growth. These metrics apply to all multifamily assets.

Institutional Interest

Weighting: 2

Portfolio exits are a major driver of overall financial performance. This means that sponsors need to be confident that they will be able to find a large buyer at the end of their hold period, which provides an advantage to larger, better-known markets.

Notable Portfolio Sales

Institutional interest in mini-multifamily properties is growing, and portfolio sales of this asset class to institutional buyers have accelerated over the past few years. Given the importance of the exit transaction to investment performance, these portfolio sales should be seen as a secondary indicator of institutional interest. This is not currently factored into our rankings given that this is a sampling, not a complete listing, of all portfolio sales data for this asset class.

Outlook

With interest rates already having fallen 170bps from their 2024 peak and up to 50bps expected over the course of 2026, the nominal price anchoring of many “mom and pop” sellers of small residential assets is becoming less of an obstacle to acquisition by IRR-oriented professional buyers. Consequently, we expect transaction volume in this sector and in single-family to increase over the coming quarters. Notably, though, institutional single-family investors have been spooked by recent executive and legislative policy proposals to prohibit or punitively tax further single-family acquisitions by large investors. Many of these allocators are now looking for assets that present a similar return opportunity without the policy risk; mini-multi may fit the bill.

This is great for our residents, who can now own part of our ecosystem, and great for Groma too, since it means we can raise money from more people than ever before. We’re of course not the only way to invest in real estate, but we do think that this opens up a genuinely novel option for non-accredited investors who want exposure to performant real estate. A quick review of the options, with the disclaimer that none of this is investment advice:

• Homeownership: Homeownership is great! You get a stable place to stay and customize to your liking, and in many cases also a leveraged, tax-advantaged bet on an appreciating asset. There’s a reason it’s so popular. But, especially in today’s economy, I shouldn’t have to list its shortcomings: a large down payment and high interest rates leading to elevated mortgage payments, which make it unaffordable for many. It’s also a highly illiquid and non-diversified bet, which can be risky if the local economy does poorly.

• Single-Asset Investing: You might have a hunch that a specific neighborhood is going to do well, and you may even know someone who’s raising money to do a big development project or buy a differentiated asset with hopes of high returns. But it’s very rare for this kind of investment to take checks below the mid-five-figures, and often even higher. You’ll also have to deal with long lockup periods and a lack of diversification.

• Public REITs/ETFs: These are highly liquid and highly diversified, but generally lack the compelling returns you’ll find in other categories; 5% annual returns across dividends and appreciation is pretty typical. They’re open to everyone, but not that exciting.

• Private REITs: These often outperform public REITs, but they have all kinds of restrictions and idiosyncrasies: inflexible redemption windows, inability to purchase or sell directly, and minimum investments that, while lower than a down payment or an institutional-size check, still exclude many investors.

Our hope is that the Groma Real Estate Trust will combine competitive returns (7.85% last year and aiming to improve on that this year) with the compelling access of Reg CF, creating a new opportunity for tens of millions of community investors. If you’re a longtime reader, you already know about how our tech-enabled real estate thesis makes this possible. But if you’re new, our Wefunder page explains it in detail. Either way, we’d love to have you on board for this next stage in our journey!

Investments start at $100. Learn more and invest today: wefunder.com/Groma

First, some background on decentralized finance, or “DeFi” (if you’re not already familiar with the basics of GromaCoin and rentvesting, read up here). DeFi is a system of tools built on blockchain that enables disintermediated access to a wide variety of financial services. This includes basic peer-to-peer trading, lending and borrowing, and structured products based on simpler underlying assets. Assuming you can figure out the user interfaces (not always an easy task!) it can provide quick and efficient access to many tools that are harder for the average investor to take advantage of in the traditional financial system. High net worth individuals can call up their banker or broker to take out a cheap loan against their portfolio, but this generally isn’t available for the average investor.

DeFi is growing quickly, with $100B+ in “total value locked” and 30-40% compound annual growth rate. It’s dominated by permissionless assets like stablecoins and pure digital tokens like BTC, ETH, and SOL. It makes sense that these assets would come first, as the lack of access controls reduces compliance-driven friction and means that basically everyone with the requisite knowledge can participate. But it also means that, at a systemic level, yield is either fueled by speculative borrowing against the appreciation of pure digital assets or closely correlated to the US treasuries/money market funds that back most stablecoins. As these yields have gone down, there is significant onchain demand for real world assets with more competitive risk-adjusted return profiles.

This, of course, is where GromaCoin comes in. With 7.85% total return in 2025 and targeting 8-10% this year, combined with lower volatility, it’s a major step up from treasuries. But it’s also not trivial to take a permissioned security token like GromaCoin, with KYC/AML and other compliance requirements, and plug it into decentralized systems built around fully permissionless assets. Many of the top lending protocols are sufficiently decentralized that it would be effectively impossible to build KYC/AML checks into them, and even those that _could_ often decide that it’s simply not worth the added complexity.

The utility of the Birch Hill vault is in bridging the gap between high-quality tokenized securities and DeFi architecture. Birch Hill has built a rigorous risk management and compliance layer that sits on top of the permissionless infrastructure built by Morpho and Yearn. This enables whitelisted users to contribute GromaCoin while tapping into the broader permissionless stablecoin lending markets. This, in turn, creates the following opportunities:

• Tailored Yield Products: We think GromaCoin is great on its own, but some people may want an asset with somewhat tweaked risk/return parameters. The investment vault(s) we’re building will enable this by creating a structured investment product on top of GromaCoin.

• Scaling Rentvesting: One of the most important drivers of rentvesting’s success will be the ability to borrow cheaply against GromaCoin/GromaREIT shares. We can already do this fairly effectively with our existing banking relationships, but the DeFi infrastructure we’re setting up will be much more scalable and likely also cheaper–the average stablecoin borrowing rate across Morpho today is 4.17%. This would make rentvesting considerably more profitable for Groma, allowing us to scale it up much more quickly.

• Easy Liquidity: Lots of people (including rentvestors, but that’s a special case) might want to have exposure to real estate values while also having more cash on hand than dividends alone provide. Lending vaults like ours enable users to borrow some amount of stablecoins against their GromaCoin holdings, meaning they can continue to experience appreciation while getting cash upfront–and the dividends can help cover any interest on these loans.

Together, these are a useful toolkit for both institutions like Groma and retail investors. Both of our teams are currently sprinting towards a launch later in Q2. Once it’s live, we’re excited to open it up to everyone, with GromaCorp itself and members of the Birch Hill and Groma teams as our enthusiastic first users.

This year’s rent control proposal would limit annual rent increases in most rental units to the lower of 5% or the annual CPI increase, i.e. inflation. There are a few carve-outs, e.g. for newly constructed properties, small owner-occupied properties, and subsidized/below-market units, but it would still cover roughly 70% of rental units in the state. Notably, and unlike other recent rent control proposals that were structured as home rule petitions or “local option” measures, it would be applied to every city and town in the state, regardless of whether those municipalities want it. It’s a pretty extreme policy relative to those that are in effect in other parts of the US, both in terms of the strictness of its rent cap and the lack of choice that it gives to local governments.

Rent control is broadly understood to have a wide variety of negative effects. Arguably the most important is its deterrence of new housing construction. Developers are much less likely to build new housing if it’s unlikely to be profitable, and the new construction exemption doesn’t help much with this–even if the developer isn’t planning on holding them past the 10yr expiration, someone will, and the price that someone will pay reflects the eventual application of rent control. This impact is especially important given that Massachusetts has a goal of adding 222,000 new housing units over the next decade. Governor Healey has noted that funding for several developers has already pulled out as a result of the ballot question. There’s no way this will happen under rent control, meaning that our housing shortage would end up being much more severe than it would otherwise.

Rent control also reduces spending on maintaining/upgrading existing rental housing: If landlords can’t charge enough to cover these costs, they often just won’t happen. This results in lower renter quality of life and also makes it harder to improve energy efficiency, especially in older buildings. Additionally, rent control incentivizes owners of existing rental units to convert them to condos, or in some cases to take them off the market altogether–see NYC’s 50,000 vacant units. This means that fewer units are left over for renters, increasing prices in the remaining market-rate rental units.

And, perhaps most importantly for the majority of MA voters who are homeowners as opposed to renters or landlords: rent control reduces property values. When rental properties earn less, they are worth less. This is basic math. But this impact isn’t limited to rental properties; it spills over to owner-occupied homes. The Tufts Center for State Policy Analysis estimates that this proposal would lower statewide property values by 14% over the next decade. This is bad for homeowner’s personal finances, of course, but it would also be disastrous for local government budgets, which are heavily dependent on property taxes. Cities and towns would then have to choose between deep budget cuts to critical service–education, transportation, police and fire departments–or big tax hikes, and at a time when many budgets, especially Boston’s, are already under significant stress.

As I’ve said before, the only way to sustainably make housing more affordable is to add more supply. Rent control runs counter to this goal and causes numerous other harms in the process. Groma has worked hard to build an operational stack that enables us to operate cost-effectively in a revenue-capped environment, so we’ll be okay in either case, but most developers, owners, and operators don’t have this advantage. It’s therefore critical for the state that we focus on more productive policy solutions to the housing crisis.

The past few weeks have been one of the most disruptive periods in recent memory for the software industry. The immense productivity gains enabled by agentic AI tools–Claude Code, Codex, Cursor–in the development of software have called into question the business models of companies whose revenue is dependent on software licensing. If one person can spin up enough instances at trivial cost (trivial, at least, compared to the cost of traditional human-based development), the logic goes, they can sell the functional equivalent of market-leading SaaS products at a far lower price, outcompeting incumbents and commoditizing the space.

This should be great for software consumers, but terrible for existing software sellers–a judgment that has been dramatically reflected in the markets. IGV, a broad index of the sector, is down 21% since the beginning of the year. While I was originally writing this paragraph, Anthropic announced Claude Security, and cybersecurity stocks dropped 6% in 20 minutes. Allocators are spooked–tech has been one of the most popular and lucrative places to park money for the past few decades, but they’re no longer as confident that this will be the case going forward.

The obvious question, then, is: where can I put my money that is safe from an AI production complex that can trivially reproduce digital systems? There are lots of ways to approach this question, but here I’ll focus on two that I find particularly interesting: land and networks.

Land is hard to make. It’s not impossible–see Boston in the 19th century or Dubai today–but it’s pretty rare, and likely to be a regulatory nightmare in most developed countries at this point. This underlying scarcity, coupled with AI’s comparative disadvantage relative to humans in

many of the types of physical labor that are required to improve land

(e.g. by building upon it), makes ownership of land and of real estate more broadly one of the better-insulated-from-AI investment strategies.

Networks, it turns out, are also hard to make, for both humans and AIs. Suppose you could Claude Code a perfect clone of Uber’s app + systems overnight–or even one that’s 10% better in terms of routing efficiency and passes on the savings to drivers and riders. If all of the drivers and all of the riders could coordinate perfectly, they would all switch over to the new app. But in the real world, this kind of coordination doesn’t exist, and there’s no reason for an individual driver to switch over to an app that starts with zero riders, and vice versa. Plus, there would be an arbitrary number of superior clones, so it’s not as if there would be an obvious option for users to switch to.

This is the power of networks–the value of each node is proportional to the number of other nodes to which it connects. Networks make existing systems, whether physical or digital, sticky in a way that’s hard to overcome with just code. This is also where most of land’s value comes from: an acre of land in downtown Boston is worth more than an acre of land in rural Nevada, even if the same structures could theoretically be built on both plots, because it has much more valuable connections to nearby people and economic activity.

This is a dynamic that I frankly don’t see changing even as AI becomes more powerful and ubiquitous. Land will retain value, networks will retain value. The closer your business model is to land, or a network (especially a network with physical elements) the easier you should sleep at night. And if you’re a pure SaaS play, don’t panic, just focus on tying your software value to land and/or networks, and that should increase your moat materially.

P.S. Groma is hiring! We’re kind of a land/networks play (AI to run properties, Blockchain to enable democratized ownership) and we’re not planning on getting apocalypsed anytime soon. Check out our job opportunities at

groma.com/careers

After a long time in “semi stealth”, Groma is now in pre-launch mode. To reflect this, our homepage and whitepaper now tell the story of GromaCoin, the real estate coin for the world, backed by the world. It’s a cleaner, more focused version of the Groma vision, building on all of the parts of it we’ve talked about in the past–the small multifamily asset class, the performance improvements enabled by Grobot and by our iteratively improving operational model, and all of the legal and financial work that’s been done to enable us to bring GromaCoin to the general public–but with the focus now squarely on the value proposition of bringing institutional-grade real estate on chain.

The homepage tells the most condensed version of this story we’ve shared so far, highlighting GromaCoin’s uniqueness in the current on-chain environment. The past month has demonstrated more than ever the value of having a stable on-chain store of value, but stablecoin yield is going down (and is threatened by policy changes), and people are looking for a more compelling return profile. As a compliant and performant real estate token, GromaCoin provides this better than any existing options.

In addition to bringing real estate’s desirable attributes to blockchain, GromaCoin attaches blockchain’s best characteristics to real estate. GromaCoin holders will soon be able to lend or borrow against their GromaCoin in ways that have been inaccessible to most retail investors, creating extra yield or spending power. I’ll share more on this in the coming weeks as we hammer out the details, but we expect it to be a game changer.

And for a deeper dive than what’s on the homepage, the whitepaper provides a 3000-word (pretty short by our standards) account of where we are today and where we’re going in the next year. While there are some nods to our long-term vision, it’s a much more tactical, near-term-oriented paper than the previous versions (remember v1?).

We’re now almost entering open beta, so thoughts and feedback welcome.

Tokenized real estate has been in the news recently for both good and bad reasons. In this thread, I’ll explore the basic premise of real estate tokenization, why it can be a valuable pattern generally, and some potential pitfalls.

Fundamentally, “tokenizing” real estate means creating tokens, i.e. digital assets, on a blockchain that denote some ownership interest in real estate. Beyond this, the details can vary widely. You might want to tokenize a single property, either in whole or in fractional parts, or you might want to create many instances of a single class of token representing fungible shares of a wider property ecosystem (this is what Groma does).

This can add some amount of convenience, for instance as a function of blockchain’s transparency or 24/7 instant settlement, but it doesn’t in itself change the economics of the real estate assets or the rules and regulations governing their ownership and transfer. That said, having real estate assets on-chain could, if done right, unlock considerable value as a function of the composability (i.e. configurability) of blockchain applications. A key use case here is collateral; even off-chain, where an individually owned house is among the world’s least liquid assets, many financial institutions (e.g. banks) are more than happy to accept a property as collateral. Real estate’s value tends to be pretty stable, the rules around its ownership are clear, and it’s hard to run away with it, which reduces a lender’s downside risk. These advantages make up for its lack of liquidity from the perspective of most lenders. But liquidity is still incredibly valuable (in most financial contexts, not just for collateral), so combining blockchain-facilitated liquidity with real estate’s other characteristics should, in theory, enable more efficient lending practices than are currently available in either traditional real estate or on-chain with non-real-estate assets.

But there are still risks to be aware of. A notable example of this is RealT, a company that sold tokenized shares of a Detroit rental property portfolio. They raised a lot of money ($94M) doing this, but there were a few problems…like not owning many of the properties they said they owned, and failing to adequately maintain many of those they did own. As a result, they’ve been sued by both investors and renters and are in pretty significant tax debt. Not a good outcome for anyone. The moral of the story here is that regardless of whether you’re investing on or off-chain, always do your due diligence. A lot of pain could have been saved here if investors had checked to confirm that RealT actually had the deeds for the properties in question–a process that would be facilitated by making them accessible on chain.

There are roughly 85M single-family homes, using the commonly understood definition, in the United States. There are far fewer 2-4 unit buildings, roughly 3M, but these provide over 9M units of generally market-rate, lower-cost housing supply. The social impact of institutional investment in 2-4-unit properties is largely beneficial, upgrading existing rental units to modern standards and keeping them available at market rates for the urban workforce. Banning such investment would either result in condo conversions (reducing rental supply) or these properties becoming dilapidated and relegated to government-designated non-profit management, which historically tends not to maintain units at the quality necessary to attract upwardly mobile residents. While a ban on institutions buying single-family homes may increase the availability of single-family homes for individual purchases, expanding “single” to mean “up to 4” is not the intended purpose of the policy and, based on our analysis, is likely to have significant negative unintended consequences.

Background

Affordability has been one of the most salient political issues of the past few years, with housing affordability taking arguably the central role within it. Especially in the most economically dynamic metro areas, the ratio of housing prices to income has increased. This has created a large class of predominantly younger Americans who are unhappy with their inability to afford the housing they would like and who are looking for policy solutions.

Prohibiting institutional purchases or ownership of single-family homes has emerged as a policy proposal to address this problem. This includes both President Trump’s recent suggestion and previous Democrat-sponsored bills such as the House’s End Hedge Fund Control of American Homes Act and the Senate’s Stop Predatory Investing Act. By either prohibiting institutional investors from buying/owning single-family homes or by making it unprofitable to do so, these proposals aim to increase the supply and affordability of homes available to owner-occupants.

Notably, both Democrat-sponsored bills define single-family homes as residential properties with four or fewer dwelling units instead of using the commonly understood definition of “single-family” as “having one dwelling unit”. In addition to being misleading, this definition is ill-suited to the bills’ ostensible goal of making homeownership more affordable and creates the potential for undesirable political and economic outcomes, especially in progressive-governed cities.

Arguments Against Banning Small Multifamily Investment

Creating Ownership Opportunities

Unlike single-family housing, which is predominantly owner-occupied, the majority of small multifamily housing is renter-occupied. In Boston, for instance, only 8% of 2-4-unit properties are owner-occupied. The remaining units, and the entirety of the other 92% of properties, are renter-occupied, providing a critical stock of middle-income rental housing.

This is a function both of the higher cost of multi-unit properties relative to single-unit properties and of the greater preference for renting in dense urban areas relative to suburban or rural areas. Institutional purchases of small multifamily housing therefore do not restrict access to traditional homeownership opportunities in the same way as institutional purchases of single-family homes.

Furthermore, institutional purchases of small multifamily housing often create opportunities for middle-class Americans to benefit financially from ownership of these assets. When these properties are wholly owned by small investors, it is difficult for non-accredited investors to gain exposure to their financial performance. Larger investment entities, on the other hand, can sell shares in their multifamily portfolios to the public directly or enable employee pension funds to invest in private vehicles. Both of these options create real estate ownership opportunities for everyday Americans and should be encouraged.

Preserving Naturally Affordable Rental Housing

In many US cities, rental housing is split between large new developments with modern amenities and older properties with fewer units and minimal (if any) amenities. The latter tend to be significantly less expensive than the former, making them, in many cases, the only source of rental housing that is affordable for middle-class renters–those who are neither wealthy nor subsidized.

Unfortunately, property taxes and regulatory complexity are increasing significantly in many cities, making it more difficult for many small, non-professional owners to operate these properties. This often leads to one of two outcomes: conversion into condos, which takes rental housing off of the market and impairs labor market dynamism, or physical degradation of rental units, leading to subpar quality of life or unit vacancy.

While city governments would ideally respond to this situation by reducing tax/compliance burdens for rental owners, the policy status quo requires more efficient operating practices to run these properties sustainably. Via a combination of portfolio scale and technical expertise, larger operators have demonstrated the ability to do this, keeping these properties livable and affordable for middle-class urban renters. In the event that 2-4-unit properties broadly are included in an investment ban, there is a strong argument for exempting this class of affordable rental properties specifically.

Preventing Progressive Capture of Cities

Progressive-governed cities have many dysfunctional tendencies. One example is the creation of an array of regulations and taxes that make it difficult for most for-profit businesses to operate while exempting progressive nonprofits that provide competing services, which are often themselves the recipients of government funding. In the aggregate, this pattern pushes for-profit businesses and the residents they serve out of cities while entrenching dependency and a voting bloc that overwhelmingly supports far-left politicians.

Because of their aforementioned operational efficiencies, institutional operators of small multifamily rental properties provide an effective model for preserving private enterprise, keeping middle-class voters in cities, and ensuring a dynamic and competitive environment in cities, rather than continuing leftward drift.

Summary

It is of significant value to preserve the plain English definition of single-family housing. Adopting the expanded definition used in previous legislative proposals has the undesirable consequence of reducing investment in core middle-market 2-4-unit rental housing in urban areas and relegating those assets to either luxury condo conversion or city-sponsored non-profit ownership. Allowing a competitive market for investment, renovation, and ownership of these assets is crucial to motivating investment in this small multifamily category, keeping downtown housing affordable, functional, and compelling to a range of income levels.

For these reasons, we urge legislators evaluating language in this bill to consider the motivations behind and consequences of defining “single” to mean “up to 4”. Sticking with the standard definition will keep any such bill targeted to its intended goal while avoiding unintended consequences.