this post was submitted on 01 Oct 2023
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I'm not saying a crash definitely won't happen, but these BFR projects are a different beast than what we had in 2008. There are lots of reasons this isn't as financially risky.
The biggest factor is how they're being financed. They're mostly doing public financing where the lender is the municipality and it's paid back with extra taxes attached to the development agreement. The interest in these deals is usually 0%. The idea is that the government makes is money off of the tax money from the residents.
If the development falls through the government will just put a tax lien on the property for the past-due portion of the 25-year 0% deal that will be bought up cheap and fast by the next group.
Interesting. Thank you for the very enlightening info. So the local government is providing interest-free loans to developers for BFR projects, when prevailing rates are over 5 percent?
If the scope of BFR subsidization is as large as indicated then it's probably buoying the housing market. A quick search found this glowing report on the BFR "boom".
https://rei-ink.com/the-build-for-rent-evolution/
Real estate developers getting free government loans from public treasuries. What could possibly go wrong?