Danny Haber of oWOW is a real estate developer. oWOW has an impressive portfolio of investments around the world. His companies use innovative technologies and vertically-integrated solutions.
Danny Haber is the CEO and co-founder of oWOW, a real estate development company. The objectives of oWOW are clear: solve the housing crisis in the greater Bay Area, and build affordable housing for any income. We sat down with Danny for a full interview regarding the housing market, innovations, and trends heading into 2020.
Question: What do you foresee as the biggest challenges for the housing market in 2020?
Answer: ‘Over the years, I have learned a great deal about how the housing market works. On a basic level, demand/supply considerations are largely responsible for housing prices. There are demand-side factors and supply-side factors to consider. In the US, the Federal Funds Rate plays a critical role in the process. Currently, we are looking at a rate of 1.75%, and while the correlation between the FFR and bank lending rates is non-linear, there are certain correlations. For example, increases in the Federal Funds Rate invariably make the cost of short-term borrowing more expensive. This impacts discretionary spending (personal disposable income) by way of increased payments on credit cards, short-term loans, et cetera. The impact on long-term loans such as mortgages is real too. The lower the bank lending rate, the better it is for potential homeowners. In 2020, we are going to see an increase in the demand for affordable housing, particularly in San Francisco and surrounds. I think that the pledges from Facebook, Google, Apple and other big tech companies will help to accelerate the growth of new housing units, but it’s not sufficient to meet demand. The economy is booming – that means that there is low unemployment, steadily rising wages, and increased demand for housing. Consider that in 2018, US homeownership rose to 64.8% – the highest in many years. These trends are going to continue, and we need to curtail runaway property price growth so that younger generations like the millennials will be able to afford their own homes.’
Question: Why does San Francisco always get a bad rap when it comes to housing?
Answer: ‘San Francisco and the Bay Area are unique. This particular housing market is characterized by extremely high demand, by dint of the fact that the cultural, art, and technology scene leads the world. It is a cosmopolitan metropolis and arguably the biggest liberal enclave in all of the country. It attracts tourists from far and wide, boasts an eclectic mix of populations, and is highly desirable to many people. That being said, housing demand outstrips supply by a long margin. Many years ago, Proposition 13 passed, and while it was designed to protect existing homeowners from outrageous increases in real estate taxes, it had an unintended effect on new housing developments in and around the city. Property prices that were purchased for $100,000, 30 or 40 years ago may be selling for 10 times that amount at least. If you consider that the median house price in San Francisco and surrounds is $1.3 million – $1.5 million (depending on where you look), and the average rental price ranges between $3500 – $4500 (depending on where you look), it’s clear that there is something unique going on in this city. Proposition 13 limits property tax increases, meaning that city and town councils have to find alternative ways of generating revenue on new developments that are built. This often means that expensive licensing and development fees come into the picture. Unfortunately, these costs are passed on to tenants and homeowners in the form of higher prices. When you add excessive demand into the mix, it’s a recipe for disaster. The current building rate cannot keep pace with the existing demand. If 10 homes are required every year and only 2 homes are being built, you can understand why there is such a dilemma. And why do we have such incredible demand? Silicon Valley companies! The robust growth of major tech companies like Apple, Facebook, Google, and dozens of others means that more people are working in the city, and they need somewhere to live. Since 2008/2009, we have seen hundreds of thousands of new hires, yet new housing developments are sorely lacking. These are some of the issues that we are dealing with.’
Question: What types of solutions do you foresee?
Answer: ‘We need to stabilize prices for one thing. As a property developer myself, I also understand that if prices keep rising unchecked, this is going to have an adverse effect on the success of the metropolis. Think of it this way: if low-wage workers such as wait staff at restaurants, hotel workers, teachers (yes, I know it’s a shame), municipal workers, childminders, dog walkers, policemen, firemen, emergency workers, and others cannot afford to live in a city, that city will start to fall apart. We already have the worst homeless problem in the country, with thousands of people living on the streets, in their cars, in tents, or in shelters. These are issues that we need to address quickly. From my perspective, it’s important to cater to low-to-middle-income earners just as much as it is to provide high-end units for the well-heeled. That’s why my company – oWoW- is invested in providing luxury-style living 50% cheaper than the going rate. Our model works because we are a small, integrated company with a hands-on approach to everything that we do. We focus on paring the right people together in apartments, and managing existing square footage as effectively as possible so that everybody can live comfortably in their own space. We do this by way of MacroUnits and a flexible wall system known as Magic Walls. These pre-fabricated designs are built offsite, allowing us to rapidly deploy them and rent out the apartments that we have renovated. Granted, this is a drop in the bucket for a much bigger problem that San Francisco and the Bay Area currently faces. We are doing our part, and we are seeing results.’
Question: When do you think things will turn around in San Francisco and the Bay Area?
Answer: ‘Things are already turning around. It’s hard to see the big picture when there is so much negative press making the rounds. However, we already see results in Oakland California, where we are operational. For example, our developments in 1919 Market Street, 674 23rd Street, and 316 12 Street are success stories. We can proudly say that we accommodate people across the spectrum. Our buildings house educators, tech workers, artists, entrepreneurs, pretty much every other possible vocation you can think of. It’s an eclectic mix of people to say the least. This gives us hope that it is possible to build communities in forgotten places. We take abandoned or condemned buildings, and bring them up to code so that they are places where people really want to live. More importantly, it’s the type of quality you seek at prices you can afford. Now if we can propagate this same thinking in other enclaves, it will be terrific. There are nine counties in the Bay Area, there are lots of jobs available, and it’s a competitive market for sure. There has been a notable cooling heading into Q4 2019, and counties like Alameda are attracting people that have lost confidence in property prices in San Francisco. Watch this space – its unfolding right before our eyes!