The Cost of Owning a Home Surges

That’s why many millennials are giving up on home ownership. And that’s why many businesses that depend on people moving are struggling.

Good Morning!

Here are today’s highlights:            

• TikTok has been especially effective for businesses that don’t have big advertising budgets.

• Ami Kassar finally managed to get the chaos out of his business, and that’s helped him try to get the chaos out of his personal life.

• The Economist reports that the world will eventually have to confront a $25 trillion bill for property ownership.

• In Boston’s North End, the mayor had to choose between restaurant owners and a group of residents.

MARKETING

A TikTok ban would help bigger businesses at the expense of smaller businesses: “I recently caught up with Nadya Okamoto. She's the Gen Z co-founder behind August, a New York City-based maker of period-related products. Okamoto is no stranger to policy work. Her four-year-old company is involved in advocacy efforts directed at taking down the tampon tax (that's the sales tax charged by 21 states on period-related products) and expanding access to menstrual care ... Okamoto has also been outspoken against a TikTok ban. ‘We've been able to grow organically’ on TikTok, she says, noting that for smaller brands the platform ‘levels the playing field.’”

• “While Okamoto already has an impressive social-media footprint—with more than four million followers on TikTok and another 300,000 on Instagram, plenty of nascent startups are nowhere close. Blocking this tool now may stifle innovation and competition, Okamoto adds.”

• “It's a less expensive alternative to sites like Instagram and Facebook, which are owned by Meta, for reaching customers. Okamoto says she's heard of companies her size spending upward of $200,000 a month on advertising. Regardless of marketing budget, ‘you're competing with much larger brands,’ she adds. ‘So I think for us, it's an amazing opportunity for small businesses to grow.’”

• “If customers can't access TikTok, businesses like Okamoto's could see drops in organic reach-and the platform has served as a prime advertising avenue for her. ‘That's really important as a period care brand that can't do a lot of advertising because we're a regulated category.’” READ MORE

So-called made-for-advertising websites are taking advantage of brands: “The ad industry is railing against online publishers that get visitors largely by advertising clickbait headlines around the web, then turn a profit by serving a barrage of ads to anyone who bites. These ‘made for advertising’ sites stand accused of giving visitors a poor experience, delivering dubious results for advertisers and elevating carbon emissions because they run many more energy-consuming instant auctions for their ad inventory than websites with typical ad loads. MFA sites also often aggressively refresh the ads they display, potentially showing visitors the same ad thousands of times in a single session, according to a report by the research firm Adalytics.”

• “That means unwitting brands could be paying astronomical prices to reach one consumer. For example, Comcast paid an ad rate to reach one consumer on an MFA site that was far higher than the rates advertisers pay in the Super Bowl, the Adalytics report said.”

• “Warnings against MFA sites are being undermined by inconsistent definitions and cases of sites being erroneously included on ‘block lists’ designed to help advertisers avoid them, experts say. Some publishers of sites labeled MFA also say their businesses are being unfairly targeted. If marketers want to appear on their sites, the publishers and others say, that is their prerogative.”

• “And the way the online advertising ecosystem works might actually encourage brands to use the demonized sites. ‘If I’m a marketer, and I want to buy lots of cheap reach, and I just need to increase brand awareness, I’m actually OK if some of my ads show up on some of these sites, because people saw my damn logo,’ said Shiv Gupta, founder of ad tech education company U of Digital.” READ MORE

THE ENTREPRENEURIAL LIFE

Ami Kassar got the chaos out of his business. That has freed him to try to do the same with his personal life: “I have always struggled to prioritize personal care, exercise, and my own health. But none of the efforts I have made to change unhealthy behaviors has lasted long. None of the warning signs I have received has been enough to change my behavior. My exercise and diet habits have been a historical outlier for an otherwise rational person. So, finally, with the newfound time I felt I had as I crossed the business chasm, I decided to hire a health coach. I signed up for a 10-week program with Danny Martoe, whom I had heard speak a few months ago at an EO event in Minneapolis. Shortly after signing up with Danny, two experiences further triggered my need for change. Back in February, I went on an EO forum retreat. Our activities started with a bike ride. About 3.5 miles into the ride, on some trails with a few hills, I began to feel as though I was on the verge of collapse. I did not collapse, but this was a stark reminder that I needed to take my health seriously.”

• “At the very beginning of the program, Danny sent me for a DexaFit test to evaluate my body-fat composition, bone density, and other variables. While the results should not have been a surprise to me, they rocked me. The analysis came back and told me that I had a biological age of 59, Actually, I am 55. ... To top it off, the test also measured my visceral fat. I am too embarrassed to share that score.”

• “So I used some of my newly found free time to jump headfirst into this health program, which involves rigorous diet changes, exercise programs, and check-ins. I am only three weeks in, but much to my amazement, much has changed. I am down 10 pounds, have completely changed my diet, and am fitting in five exercise sessions a week.” READ MORE

REAL ESTATE

The hidden costs of owning a home are surging: “Homeownership affordability fell to its lowest level since the 1980s last year as mortgage rates reached a 23-year high and home prices set new records. Borrowing costs have eased somewhat this year, with the average rate for a 30-year home loan down about a percentage point since October. But other prices related to homeownership keep rising and show little sign of abating. Property taxes and home-maintenance costs are climbing in much of the country. Non-mortgage costs including property taxes, maintenance, utilities, and insurance make up more than half of homeowners’ overall costs, according to a 2022 analysis by Fannie Mae economists.”

• “Worst of all, home insurance premiums are soaring. Rates rose by more than 10 percent on average in 19 states in 2023 after a series of big payouts related to floods, storms, wildfires and other natural disasters across the U.S., according to an Insurance Information Institute analysis of data from S&P Global Market Intelligence. More Americans also moved to disaster-prone areas in recent years, increasing the exposure to these events.”

• “Maintenance costs soared during the pandemic due to supply-chain issues and strong demand for renovations, said Marco Zappacosta, Thumbtack’s chief executive. The pace of price increases has slowed, he said, but demand for home maintenance services continues to outpace the supply. Almost half of owner-occupied U.S. homes were built before 1980, and these buildings need maintenance as they age. ‘There aren’t enough professionals to serve all these homeowners,’ Zappacosta said.”

• “Home-buying affordability fell last year to the lowest level since 1985, according to a National Association of Realtors index that factors in family incomes, mortgage rates and median single-family home prices. But the factors driving homeownership beyond the reach of many Americans have shifted dramatically from four decades ago.” READ MORE

The long-term outlook for homeowners around the world is even worse: “Climate change is doing vast damage to property all around the world, and not always in the places or the ways that people imagine. Hurricanes, wildfires and floods are becoming more common and more severe—but so are more mundane banes. In London, for instance, the drying of the clay on which most of the city stands during summer heatwaves is causing unexpected subsidence, landing homeowners with big bills. A similar problem afflicts Amsterdam, where many older buildings are built on wooden piles inserted into the boggy soil in lieu of conventional foundations. Extended dry spells in summer are lowering the water table, drying out the piles and exposing them to the air. This allows the piles to rot, prompting the buildings above to sag. Unlucky homeowners can be saddled with bills of €100,000 ($108,000) or more for remedial work.”

• “The upshot is an enormous bill for property-owners. Estimates are necessarily vague, given the uncertainties not just of the climate but also of government policy. But MSCI, which compiles financial indices, thinks that over the next 25 years the costs of climate change, in terms both of damage to property and of investments to reduce emissions, may amount to almost a tenth of the value of the housing in institutional investors’ portfolios. If the same holds true of housing in general, the world is facing roughly a $25 trillion hit.”

• “The impending bill is so huge, in fact, that it will have grim implications not just for personal prosperity, but also for the financial system. Property is the world’s most important asset class, accounting for an estimated two-thirds of global wealth.” READ MORE

Millennials are giving up on home ownership—and renovating their apartments instead: “Across the country, millennials who are being forced to rent further into adulthood than previous generations are valuing present experiences over saving for a stable future that may never come — financial risks be damned. ‘I'm not getting my deposit back, and I'm totally OK with that,’ the writer and actor Franchesca Ramsey joked in a TikTok showing her painting the walls of her Los Angeles rental with elaborate patterns and colors.”

• “That mindset reflects a hard reality: Homeownership rates for millennials, the oldest of whom are in their early 40s, surpassed 50 percent for the first time in 2022. A 2018 Urban Institute report found that only 37 percent of millennials had purchased a home by the ages of 25 to 34, whereas 45 percent of Baby Boomers had been able to purchase a home by those ages.”

• “In a 2022 survey by Apartment List, a quarter of millennials said they expected to rent forever. And housing experts say that when it comes to homeownership, millennials are the most screwed generation.” READ MORE

REGULATION

A dispute about outdoor dining in Boston has gotten nasty: “In January, the owners of 21 Italian restaurants filed a civil lawsuit in federal court, arguing that the mayor’s decision to ban on-street dining in the North End is unfair and showed bias toward people of Italian descent. Last week, the city filed a motion to dismiss, saying the ban does not show anti-Italian bias because it treats all restaurants located within the North End the same way and does not target businesses ‘having Italian ethnicity and/or Italian national origin.’”

• “But if it’s not anti-Italian bias, it does seem like bias against businesses in one specific Boston neighborhood, since the mayor’s on-street dining ban applies only to the North End. ‘I’m not sure if there’s a constitutional right to be feeding people on your sidewalk,’ said Larry DiCara, a former city councilor and longtime chronicler of Boston political history, as well as the history of the city’s Italian Americans. ‘But from this observer, it appears the North End is being treated differently than everyone else.’”

• “City officials insist the on-street dining ban is triggered by issues unique to the North End, from the high density of restaurants and narrow sidewalks to traffic, parking, trash, and rats. The restaurant owners offer data to rebut all those arguments. But I think this fight is about something more than the width of North End sidewalks versus those in other neighborhoods. It’s about neighborhood power — and who has it in Wu’s Boston and who doesn’t.”

• “In the North End neighborhood battle, power does not seem to lie with the loud, raucous, and more politically conservative group of restaurant owners who filed suit against the city. It is likely to be found with those residents associated with the North End/Waterfront Residents Association, which, according to its website, ‘works with residents and city agencies to enhance and preserve this historic Boston neighborhood’ — and which, according to the complaint filed by the restaurateurs, is a ‘politically powerful community organization that had openly opposed the North End restaurants and pressed for the ban.’” READ MORE

FEATURE

A Black entrepreneur decided to help other Black entrepreneurs: “A dozen years ago, Janice Malone, at the time a franchisee in Mobile, Ala., looked around a group of fellow business owners and saw ‘no one who looked like me,’ she says. Minority-owned businesses weren’t having the success that they deserved, Malone says. She vowed to change that by training Black small-business owners, and ‘that’s what I did,’ she says. In 2018 she started Vivian’s Door, a nonprofit that this year was awarded an AARP Purpose Prize. Now, says, Malone, ‘I get to be a part of helping business owners live their dreams, reinvest, and build wealth for themselves and low-income and marginalized residents in their communities.’”

• “At different times over 25-plus years, Malone, who is now 69, worked as a small-business consultant and as the owner of two franchises that helped small companies build client-referral networks. She had some 1,500 clients herself at one time in Alabama and Florida, and took numerous business classes over the years.”

• “Malone shows a particular interest in Black farmers. She helped more than 100 determine their eligibility for the Discrimination Financial Assistance Program of the Agriculture Department, a program set up to help farmers who were discriminated against in the department’s lending practices before 2021.”

• “‘My grandma was that Black farmer,’ she says of their shared experience, ‘so they trust me.’ Malone didn’t realize until after her grandmother died that she didn’t own the farm she worked. Her father, too, wanted to be a farmer, but he didn’t know how. Now, by helping people ‘just like them, with the same issues and problems,’ Malone says she’s actually helping her ancestors.” READ MORE

STARTUPS

This startup claims to have a sustainable-packaging solution: “Bpacks has created what it says is the world’s first biodegradable bioplastic made from tree bark to replace petroleum-based rigid plastic containers, per AgFunderNews.Those types of plastics, traditionally used to hold produce, meat, and beauty products, are wreaking havoc on the environment: The world produces ~440 million tons of plastic waste each year, and global plastic production is estimated to reach 1.2 billion tons by 2050. Of that plastic, ~36 percent is used for packaging. And 85 percent of single-use plastics for food and beverage packages end up in landfills. Plus, tree bark from timber production normally goes to waste. An estimated 300 million to 400 million cubic meters is produced annually.”

• “Bpacks takes that leftover bark and combines it with other bio-based materials, like coffee grounds, to create pellets and sheets that can be used to make packages. The result: 100 percent bio-based packaging, with 75 percent of materials coming from production waste. It’s also ‘100 percent home-compostable,’ able to fully decompose in soil within one or two months — but it can still hold high-moisture content without dissolving.” READ MORE

THE 21 HATS PODCAST

Do You Take This Man to Be Your Business Partner? This week, Liz Picarazzi, Jaci Russo, and Laura Zander talk about what it’s been like building a business in partnership with a spouse, and they all agree on some important things. For one, they all say that, had their husband been just another employee, he probably would have been fired. All three say that in their relationships, they are the gas that drives the business, and their husband is the brake that sometimes keeps them out of trouble and sometimes frustrates their entrepreneurial instincts.

• And all three agree that some things are best left undiscussed. For example, says Jaci: “Michael doesn’t even know what we make. He also doesn't know what any of the employees make.” But the three CEOs also agree on this: In the final cost-benefit analysis, they wouldn’t want to build a business any other way.

• You can subscribe to the 21 Hats Podcast wherever you get podcasts.

Thanks for reading, everyone. — Loren