California Makes Major Changes to Increase Housing

THE SELF STORAGE REPORT — EPISODE TRANSCRIPT Episode: California Makes Major Changes to Increase Housing Guest: Thaddeus Campbell — Director of Business Development, S3 Partners; host of the Stories Behind the Door podcast Host: Chris Berg — Abernathey Development Recorded: July 3, 2025 (published July 7, 2025) Video: https://www.youtube.com/watch?v=Vqx82X0m4bQ Key topics: CEQA reform after 54 years and the AB 130 infill housing exemption; Gavin Newsom holding up the $300 billion California budget over CEQA; clips from Senator Scott Wiener and the AB 130 assemblywoman; a $150,000 household losing $320,000 of buying power as rates went from 3% to 6.5%; $80,000 median income buying power falling to $311,000; Lennar, KB Home, D.R. Horton and Pulte stuck in the $400,000-$600,000 range; Lennar spending 13.3% on rate buydowns; ADP going negative for the first time since March 2023; Microsoft's 9,000 layoffs on top of 6,000 in May; a $1.25 million NOI asset refinancing at $17.5 million in 2021 versus $12.9 million today; Extra Space and Storage Mart bridge loan “loan to own” programs; 34% of Californians saying they would leave the state, up from 15% in 2004; Rick Caruso, the 2026 World Cup, 2027 Super Bowl and 2028 Olympics in Los Angeles; and an Atlanta self storage developer losing a land use fight to a strip club. Note: Speaker attribution reconstructed from raw captions. Light cleanup of transcription errors only; wording preserved. Timestamps and YouTube chapter markers removed. Turns marked [attribution inferred] could not be attributed with certainty. ————————————————————————————— Thaddeus Campbell: Hello and welcome to the Self Storage Report. I am your host, Thaddeus Campbell, host of the Behind the, uh, Stories Behind the Door. You'd think I'd know the name of my own podcast, The Stories Behind the Door podcast, and business development director for S3 Partners, joined as always by Chris Berg, host of the CRE Report, overall amazing insights into commercial real estate, also the acquisitions lead for Abernathy Holding Co. And listen, we have a ton to get to today. A lot going on in the world that affects self storage. Certainly a full plate of information to share with people. Chris Berg: Yeah, I know you want to dive into this housing affordability situation, but there's just some stunning data coming out there. And we may even get a little bit in some of the employment data that's been fascinating to watch with Microsoft with some new layoffs, but also California. They just completely transformed this thing called CEQA. 54 years it's been in existence and now they're starting to change that where we may just — hold on to your seat — we may actually see some capital flow back into the state of California from a real estate perspective. And then just how badly do people not want self storage in their neighborhood. I've got kind of a fun story to talk about that too. Thaddeus Campbell: Oh, you're — you're hitting me hard as I just got denied on a by right use in a town by a planning board. They didn't want self storage so bad that they denied a right that was in the zoning code. So, uh, I'm looking forward to — we've been talking off and on all week and really fascinating coming out of our conversation last week. I'm really excited to get to some of the stuff you're talking about because we had pondered whether or not we're coming to this inflection point where some of the policies that have restricted development in California were going to drastically change because of some of the things that were happening because of those policies. I promised everyone last week that I was going to do a breakdown. Quite frankly, we were talking about the big housing companies and some of the things that are happening there and how amazed I've been since 2022 that we've seen the housing market continue to see record high prices, which makes no sense given the fact that people are paying two, sometimes three times as much interest on a house. And I wanted to practically for people put that in a way — sometimes it's easier visually to understand something than to talk about it. So, I put together a couple of graphs that I want to go through. The first one I'm going to show is a married couple or people buying a house together, whatever that might look like, that have an income of $150,000 a year. What's a typical bank going to allow them to spend per month? About $3,500. And what was that going to look like with interest rates at 3%, right? We were sometimes seeing interest rates in the twos, you know, pre-April 2022 when the Fed started to hike rates, but I use 3% as a bottom. They would be approved to buy a house assuming a 5% down payment for $873,856. Fast forward to today. Yesterday, I think rates were at 6.47, right? So, I did 6.5. They've lost $320,000 of buying power on a home just based on how much more of that $3,500 a month is going to interest than it was at 3%, right? So again, just a sticker shock for me. Like how is it that we've seen houses over the last two or three years continue to climb? Now, I want to make this even more real because the reality is that the median income for households in the United States is not $150,000. It's $80,000. And so what happens to a family making $80,000 a year? All of a sudden, what was a $500,000, almost $466,000 house, they're allowed to buy a $311,000 house. Now, if you look at Lennar and KB Home and D.R. Horton and Pulte, their sweet spot is like $400,000 to $600,000 homes. Well, the median income in the United States can't buy one of those homes anymore, right? You're at $310,000 of buying power. So, I thought this was fascinating on a deeper level. We've been talking about the real estate cycle. Look, the piper always gets paid at some point. And it feels to me like we're coming to this place where what I expected in 2022 when interest rates hiked would come to fruition hasn't to this point. But it's almost an inevitable at some point we're going to see a massive pullback in the housing market given what we're seeing. Chris Berg: So I'm curious. So one of the things you haven't addressed is what do you think is keeping these prices elevated? Thaddeus Campbell: So, I think that we've talked about this, that people that had a 2 and a half and 3% mortgage had no incentive to sell their home, right? So, unless they got to a place where they were distressed on their mortgage — and we know this, our friend Armand we mention frequently on this show because he puts out such great data — about 40% of the houses in America have no mortgage on them. So, there's tremendous equity left in people's homes. And some of the old drivers of sales of homes, people moving for jobs — well, now we have this economy where there's far more remote work and a far greater percentage of people work for themselves or are small entrepreneurs. So, you don't have some of those old drivers of movement that you used to have. Somebody's not going to sell their house that they have a mortgage at 3% to buy a house at six and a half percent unless they absolutely have to. So, we've seen an artificial — what I think is artificial — um, shortage of houses on the market for the last few years. We referenced this a couple weeks ago. For the first time, we're seeing half a million homes more on the market than there are buyers out looking for homes. And I think it's a reflection of what happened. Why have prices risen? It's supply and demand. It was not that there wasn't — uh, there was overwhelming — it was limited supply. It was massive. There wasn't a big amount of demand, but the supply was so constricted over the last couple years that housing markets continued to rise. I think we're going to have a serious come to Jesus moment here, Chris, where we're going to see house prices, um, you know, in a way that people may not love. Although for people that have been kind of shut out from the market, it may give an opportunity for people to get in. Chris Berg: Yeah, I think I want to share a thesis then go through some information I'm looking at as well. As you look at, you know, investors were a big part of what had this big rise take — I mean, if you look at, there's one asset class that's actually performed fairly well and still you see some capital flowing into it, are these single family rentals, right? So a lot of investors are out, some of these guys can pay all cash or have in the past, and so they go lay the money down, buy and rent. And I think that's helped elevate cost, because also I think the huge, um, lack of supply, to be quite frank with you. And the reason I say this — and we talked about Lennar and their earnings calls — you know, they're spending 13.3% to either buy down the mortgage rates or give these people opportunities to get in these homes. At some point, as you talked about, they're going to have to pay the piper. There's some people out there that suggest because Lennar is allowing these buydowns and putting so much extra money in to help these people get in these homes, they could very quickly be underwater much faster than they anticipated. And if you're a first-time home buyer, you're not really thinking about that, right? You're just like, “Hey, I got a home. I'm stoked to be in this thing.” And all of a sudden, you wake up with me and you're like, “Wait a second. This whole ARM thing I signed on to, I didn't realize it was this.” Right? Thaddeus Campbell: If there's one thing we know as two people who have educated themselves a lot about the real estate cycle, is that history repeats itself in terms of people making decisions based on the current emotion, not necessarily based on educating themselves on what the results of those decisions have been in the past. And you know, I don't know how much we're seeing those ARM mortgages that, you know, people would get — ninja loans, right? They'd get no income, no job, not have to display any income at all and still go get a loan for more than the perceived value of the house in 2006, 2007. I don't know how bad we're seeing that, but here's my man Chris with some data. So, I knew you were going to come prepared to help me. Chris Berg: Well, I want to get to some of this, but I think you also bring up an interesting point that I heard recently, and I know you like when I don't share and talk at the same time. Let me see if I can figure this out. But, um, I think one thing too to watch is, like you look at these FHA loans, right? Those are typically first-time home buyers, low percent down. Remember, there was no student loan debt that was being taken out of the system at that time. So, a couple things to watch is, I think some people, especially in private credit, are concerned about — based on what I've been studying — is that because the student loan wasn't necessarily on their credit score at the time, they had people with very elevated credit scores going, “Oh, the dude's got a — I don't know, I'm not an expert on credit scores, but let's just say 700, right? Hey, I feel good about offering money to someone with a 700.” Well, now all of a sudden these come back on the books. Their credit score is much lower. They've got an extra 500, 600 bucks going out of disposable income and they're struggling to make those payments. So, I think that is one thing for people to watch and just see where that goes. I don't know if it ends up in disaster, but I think it's going to be a very fascinating thing to take a peek at. So, here's what I want to share that I think is really interesting. And you and I kind of talked about what we're going to share, but some of the data — okay, hopefully this is going to work. Some of the data that you bring up, I think, uh, is backed up by what's happening here. This is something I just saw this morning. Um, you know, it's twice as expensive now to own than it is compared to rent. I mean, it's just shocking to see. It hasn't been this bad since 2006. So, I think that's an interesting data point. Um, this guy I think does a really nice job, Nick Gerli, as far as talking about what's going on in the housing market. But same thing here, showing that look, you're talking about, it is just absolutely unaffordable right now to people own a home when it's taking up, you know, 30 plus percent of their income. And he says here, long-term norm is around 29%. Last time there was a correction, it was about 22%. We are a ways away from that. Thaddeus Campbell: Yeah. Sorry to interrupt, but you brought up earlier investors buying single family rentals. And we've talked about — I can remember when Warren Buffett said a single family home is the best investment you can make. Everyone got all up in arms about investors. I can, you know, I can think of a few nationally prominent Congress people who are screaming from the rafters. You and I are free market capitalists. We understand that the market always corrects, right? And if somebody goes and over buys something, the market's going to correct it. To your point where it's more expensive to buy a house, ultimately the people that are buying those houses to then rent — the rental income has to be an investment, right? It has to return more than the cost of owning the house. I think what we're going to start seeing here is that rents are not going to support those investments of a single family house for investors. And so you're going to start to see — by the way, another reason that a lot of the inventory was not available the last few years, as you mentioned, because a lot of those homes were going off-market deals to investors, right? Wholesale companies that specialize in going and finding as-is homes were selling them directly to investors and they never came back on the market. They weren't getting refurbished and then sold to an actual homeowner. They were being sold to investors and held for investors. Well, are we going to see the reckoning for those folks also where all of a sudden the rent they're collecting from that house doesn't cover what it costs them to own it? Chris Berg: Well, I think I want to sort of tie a button on this before we get into the California piece. And so, what does all this mean for self storage? I want to come back to this to show, hey, I think you and I both would agree that you've got a larger percentage of renters that are using storage versus homeowners, number one. But then I want to throw this data on here. Look, I know the BLS information, uh, Bureau of Labor Statistics, came out this morning. It looked positive, but when you actually dive into the numbers, the actual growth in employment was from state government and healthcare, which is always kind of a driver for overall employment. The thing, like, not necessarily where we want our employment to be in a growing economy. By the way, what I like is ADP is strictly, like, they just do private companies, right? So, when you look at this ADP data and all of a sudden you see, oh my gosh, this is the first time since March of 23 that it's actually negative. What I want to tie back into storage is this. This goes back to what you and I talked about a week ago. Microsoft announced this week another 9,000 layoffs on top of the 6,000 they announced in May. Point being, when people all of a sudden become unemployed — we've seen high unemployment rate in graduates this year — um, you see more and more opportunities to rent. Again, I'm never going to pull for unemployment, but boy, if you're going to be in an asset class, self storage is one that typically, you know, bodes well when you see a higher level of unemployment. And we might be heading into an area of, uh, stagflation depending on how some of these other, you know, macroeconomic things work out. Thaddeus Campbell [attribution inferred]: I want to show a couple things that are going to, to your point, about why I think self storage is even now a really good opportunity over the next few years. It's not going to seem like that as I start to show this, but I'm going to get you to the premise and why. Um, I'm going to share first and foremost. This is — we're going back to 2020, 2021. I'm showing an asset. Somebody owns it, right? A developer, an investor owns a self storage facility and it's generating $1.25 million of net operating income a year. And in 2020, 2021, early 2022, they would go to a bank or life insurance, CMBS, whatever that might look like, to refinance that property. For those of you who don't know, in commercial real estate, usually mortgages are a 25 or 30-year amortization, but there is a 5-year balloon in almost every mortgage that's done in commercial real estate. So, the expectation is that you're going to refi that loan every 5 years. So flashback to 2020, 2021. Somebody goes to the bank on this $1.25 million NOI. DSCR, debt service coverage ratio: the bank will lend them as much money as they can pay 80% of their net operating income towards that mortgage, right? So think of 1.25, break it up into quarters. You got five quarters on the table. The bank says, “Hey, you can keep one of those quarters as your profit. We're going to give you a mortgage for the other four quarters and you're going to have to pay us that every year.” That breaks down to $83,330 a month in a mortgage payment. Well, what that equated to, Chris, was a $17.5 million mortgage. You could go out at 3% and the bank would give you $17.5 million against your asset's income. Well, let's fast forward to today when a really good loan on that same facility is at 6%. You might get lower than that with different avenues, but 6% is a pretty strong interest rate right now for an existing asset. Well, instead of $17.5 million, the banks now all of a sudden — you can see the same monthly payment, $83,333 — they're giving you 12.9. Well, why is this important? And how does this get to where I'm talking about? Well, when you go out and you refi your asset for $17.5 million that you maybe built for 12 or 13, there's a few million dollars of profit there. What investors are almost always going to do is they're going to recycle that money into another investment in the asset class they know and understand and that has made profit for them. In this case, self storage. Well, now we're in this instance where you're getting dangerously close over the next couple of years, as these 5-year balloon payments come up, to your next refi may not cover 100% of what you owe on your previous refi, especially if you got a little greedy and maybe overleveraged a little bit more than you otherwise would because the cost of the capital was so cheap. Now, if you go back and you get a $13 million loan from the bank, is it paying off your previous loan where all of a sudden you don't have that 3 or 4 million to go and reinvest and do another development project? And I think we're seeing data that's starting to support this. We're going to see significantly less self storage developments this year, next year, the year after than we've seen for the past few years. Again, I've been kind of amazed. 23 and 24 were very strong years from a development aspect. I was surprised that we had that many developments come online, but we're coming to this point where we're going to see less developments. At the same time, you're talking about more and more renters. People — we've talked about over the last few weeks — smaller size houses, right? Storage is more and more in demand with younger generations. They're using it at a higher level. Well, if we build less facilities every year and there's more people needing the service, it's again supply and demand. This is why I think for those people that are in a situation right now where they can build facilities, they're going to be very well positioned when they open up, especially if we go through the cycle you and I think is coming, which is a downturn in the economy. You know, by the time they get open into stabilization, I think the people that can build right now are going to be in a really, really good position. Chris Berg: Very well said. I thought you might maybe go a different direction because I know how much you love putting the developer hat on. But the guys that obviously developed back in, you know, 2021, 22 — I know some organizations, companies out there that are specifically putting a strategy together to go out there and have conversations with owners, operators, developers that did build back then. Cheap money, overpaid probably, um, just not going to be able to DSCR it, right? And so now they're going to be in trouble. Some might get a bridge loan, you know, you don't know, which we've seen a lot of that, by the way. A lot of developers that are very well established, management companies — Extra Space has one, Storage Mart has one. There's a bunch of people out there that are doing it where they're providing bridge loans. Listen, it's not the cheapest capital you're ever going to find. But, you know, because nobody that underwrote a project in 21, 22 that has it built right now is seeing their pro forma numbers play out. It's just not happening, right? What they projected for rents and occupancy were nowhere near what the projections were. And so, you're seeing a lot of people that are tied up against that when it comes time to go refinance. The DSCR just doesn't work. Well, that's what I was going to get to is when you get to the acquisitions piece of things, you know, the companies you see that are able to buy right now are the Extra Spaces, maybe a SmartStop. Why is that? Because they can get really cheap capital, right? I mean, it's a REIT. They got cheaper capital. They really need to spend it, to reinvest it. And so it's just a thing that's interesting to watch. Um, so just keep your eye on that because I think there's going to be some, uh, distressed assets that come available, and who ends up being able to purchase those, you know, we will see. Thaddeus Campbell: So to your point, I think what we're going to see over the course of the next 5 to 10 years is an increased velocity of the consolidation of the self storage market. I think you're going to see fewer and fewer people. I had a conversation with a broker friend of mine, Frank Dalvo — shout out, former Jumbo, former Tufts University grad. Um, and he was talking about that his list of sellers now has gotten very small, right? That the people that they're selling to are a very select group that can afford to buy stuff in this market. And so I think this idea of a mom and pop industry — you know, I had Maurice Pagota on this morning on my podcast, who in 1986 got into the self storage industry when it really was mom and pop, right? Every facility he ever went to had an apartment in it for the manager to live on site, which is sort of a yesteryear thing. There's still some of them around, but nowhere near as common. Um, that idea that we're a mom and pop industry, I think five years from now, you're not going to hear it talked about at all. Right, it's going to be heavily driven by REITs and a few large private equity companies. Chris Berg: Yeah. You know, if you look at Extra Space — some people, and I don't know if this is the right moniker, but would call their bridge program a loan to own program, right? I mean, they know all the data inside this asset class. They can give you the bridge. Hey, if you make it, great. If not, we can come in and take this thing over at a very discounted price. So, it's good from a cash flow standpoint for their shareholders, but potentially could be very good for their balance sheet as well. So, it's really a win-win. And I think consolidation is a great way to put it. Thaddeus Campbell: Yeah. Listen, I think there's a lot of developers that got into this, you know, coming out of what happened in COVID, people that were in multifamily, that were in office space, saw self storage as a place of refuge and got into some projects that maybe were a little bit out of their normal scope. And the big boys are going to benefit from that. We know that. That's the way capitalism works, right? The people that really understand an asset are going to benefit from other people's mistakes. And I think it's only going to heighten and speed up the consolidation of our industry. Whether that's a good thing or not, I don't know. I know how I'm going to play it from, you know, from my side of it as an investor and as somebody who's in real estate. I know how that influences my decisions and what I'm going to choose to do. Whether I'm right or not, you know, if we're still here in five or six years doing the Self Storage Report, you'll know whether or not my premise was right. But that's where the data leads me to think for sure. Chris Berg: It's going to be interesting how it plays out. So let's talk a little bit about California. So California reforms what's called CEQA. It's the California Environmental Quality Act. It's been around for 54 years, a very, very long time. A lot of lawsuits around it. You know, you try to get something built and the environmentalists come out, they file and just continue to delay, delay, delay, which obviously was cutting off a lot of capital from California, where even you and I last week started to say, “Hey, our tides may be beginning to turn because you're going to see hopefully less and less.” So, I'm just going to kind of throw it out there to you, really to our audience. Thaddeus Campbell: So, can we change our title to the Nostradamus Report, by the way? Can we just — can we make a new moniker for our show? I just — listen, I'm gonna pat us on the back a little bit. We literally said that like five days before this CEQA thing was ruled, where we said, “Hey, are we gonna start to see some blowback against these overburdensome regulations?” And no sooner do we say it than this is a massive thing. So, I'm sorry for interrupting. I'm going to let you keep going. Chris Berg: Oh, actually so funny, because you and I play off each other and it ends up like working out perfectly, because if you want to go there and rebrand the show that way, I'm going to throw out a thesis that is very Nostradamic-like in my thesis around CEQA and we'll see how it plays out. And actually I'd love some sort of live feedback from you to poke holes in it. But let's start with that question. So 54 years it's been there. Why change CEQA now? And what I want to go through for is a thesis. And many people say, “Hey, this is great.” And it is great, but this is very political. So you got to ask yourself, hey, is this for the people or is it for power? And I want to share with you what I mean. So let's go through some data here and then you can, uh, poke holes in this thesis, that since this is now the Nostradamus show, the Nostradamus Report, we're expert prognosticators. All right, perfect. Let's see if I can find what exactly it is that I want to share. Here it is. So, um, this is from the Public Policy Institute of California. Housing costs have got Californians considering to move out of state. It has been a dramatic shift. You can see here from the data, you know, back in 2004 about 15% of the people polled said, “Hey, I would move out of the state.” Um, that has now increased to 34%. A large part of this is just because you can't afford to live here, right? So 34% of the people are starting to move out of the state. The reason that is important is just because you got to think about it this way. What's coming up in 2030, since we're going to do the Nostradamus thing? 2030 is going to be the next census, right? And when you have people moving out of a state, that means that you start to lose U.S. House seats, which is exactly what happened in 2020 in California. They actually lost one U.S. House seat. So, what's really fascinating in my opinion — and again, we'll see where this plays out — but in 2030, who has a high potential of being president at that time? We all know Gavin Newsom's running in 2028, who's now the governor of California, right? So, he sees — we also know that there's a high likelihood, given what typically happens in the cycle, that a Democrat is positioned to have a good chance to win the next election just based on historical cycles in the presidency. So you want to start to think about, because the media is going to have you playing checkers while the politicos are playing chess. And here's what I mean. So Gavin sees this and says, “Hey, if I can be in that office in 2030 during my first term and we can continue to hold seats in California to give me more power from an executive position” — right? Because now California can hold population, maybe even grow — “then in my second term, which would start in 2032 to 2036, man, I can't get reelected. I got nothing to lose. I'm going to have more House seats. I can ram my agenda through as much as I want.” Because when you understand that, when you get down to the corner of what happened here — I know a lot of people don't want to get into politics, but I'm just sharing with you another perspective to see what's happening here. And the reason I want to go this route is because I really want to empower people to say, hey, look, your voice does make a difference. I'm going to share with you specific clips in a moment to prove it. But if you really get engaged and you want to make change, you can. But what you've got to understand out there, because many people don't think like politicians, is you've got to understand how to usurp their power, how to threaten their power, because when you can do that, then you can start to get them to actually do things in your favor. Now, to the point, the reason I think this thesis has got some strength to it is that, uh, Gavin Newsom said, hey, I'm not going to sign the entire budget. It was a $300 billion budget. I will not have the budget go through if we don't get these CEQA reforms done. So he sees the power play. And to speak to this very specifically, I want to share with you a clip. This is from, uh — oh man, am I sharing my screen or no? Thaddeus Campbell: Not yet. Chris Berg: Okay, let me see if I can figure out how to do this. Uh, this is the clip from Senator Scott Wiener. He was a big part — there was a couple bills, one out of the Assembly, one out of the Senate that, you know, got this done. But he was a big part of working with the governor, getting this through. But I want you just to listen closely to what he has to say about what really started to push this, uh, through the legislature and obviously get the governor to jump on board and hold the entire budget hostage. Senator Scott Wiener (video clip): Uh, and when you look at the political dynamic in the country today, there's deep, deep frustration about whether government is actually able to work to meet the needs of people, uh, to make life more affordable for people, to allow people to survive and thrive, raise families and so forth. And that frustration and the perceived failures, sometimes real failures, by government, whether around housing or childcare or, uh, energy or so many other critical needs, uh, can lead people, uh, into a certain political space. And we saw that happen in the last election, where it opens the door for people to come in and make all sorts of claims, uh, and get elected. Uh, and it is so critically important for California to show that we can get things done to make people's lives better and more affordable. And that's what these bills are about — uh, to make it easier and faster to build more homes, uh, to build childcare, to build food banks, to build so many health centers, so many of the things that… Chris Berg: So you get the gist of that. Thaddeus Campbell: Yes. I mean, 100%. Pretty abundantly clear, uh, what they're trying to do there. Chris Berg: But you know, I want to give some, uh, credit here to the assemblywoman. She was a big driver of this. But I think she talks about it as well. Again, it's political. That's their world. But at the end of the day, could this be a very positive thing from a housing perspective in California? I would say so. We just want to play a clip here for people as well. Assemblywoman (video clip) [attribution inferred]: …and what I think you saw today is leadership in the Assembly, in the Senate, and the governor saying enough is enough. We're ready to take courageous votes, courageous action to solve one of the most devastating problems in our state. The cost of housing is outrageous. It is too damn hard to build housing and all the other things that we care about. And today we took affirmative action to say we are ready. We told the world we are ready to be open for business, the business of building housing. That is what we need to do in the state of California. Housing at all income levels: low-income subsidized housing, market rate housing, missing middle housing. And what we voted on today in AB 130 was a clean CEQA exemption for infill housing. Chris Berg: I mean, I know that you maybe follow California like I do, but this is a really, really big deal from a potential capital influence. What's going to happen? And I want to go one more step further after I share this with you. Can you see my screen here, buddy? Thaddeus Campbell: I can. Chris Berg: So, just to speak to exactly what you spoke about a few minutes ago, the cost of housing. You can see here, here's California wages since 2020, not growing nearly as fast as even the California rents, let alone — dudes, look at these, these are the home prices for mid-tier and bottom tier homes. Thaddeus Campbell [attribution inferred]: Yeah. You know, it's grown, compared to wages, it's just absolutely stunning. Chris Berg: So, I think from a positive perspective, what I want to share with people is that when you hear, uh, hey, you've done number one a great job helping these people go look, we got to do something here, it's got to be more affordable. Now, if they can make some of these changes to CEQA — and there's a high probability that Rick Caruso, billionaire real estate developer, is gonna run for mayor in LA. You've got the World Cup in 26, Super Bowl in 27, um, you've got the Olympics in 28, and if Rick Caruso's mayor, I become pretty long on Los Angeles. Thaddeus Campbell: So, you're fond of saying this, and I don't disagree in any way. You know, as California goes, so goes the country. It's one of the things we talked about when SB 79 was something we were discussing in depth, that, you know, things tend to come out of the petri dish in California and very quickly spread to the rest of the country. I thought this was fascinating. I don't know if you remember what the first thing I responded to you via text was when you sent me about California overturning the CEQA exception — you know, giving, excuse me, making the CEQA exception. Do you remember what my response was? I responded that was very presidential of Gavin Newsom to do, right? So my mind immediately went to the political ramifications. And listen, the Democratic party, I think — and you, in the clip you played from Senator Wiener, he very clearly alluded to the idea that people's frustration with government is the only reason he thinks that Trump became president. I don't think that's the only reason that Trump became president. I do think it might be the truest statement that I've ever seen somebody that's a politician make, when he said that citizens are very frustrated about a feeling that the government is not operating on their behalf. To your point earlier, I think it is incredibly important that — and by the way, one of the ramifications of this gap between what it costs to rent or what it costs to own and what you make, is that you end up working more and you have less time for the civic involvement that used to be a hallmark of our country, right? And so I'm going to say and urge people, we're very lucky. We work in an industry in self storage where there's so many amazing people. We talked about Gary Sugarman and being involved with everything with SB 79, William Warren Group, president of the California SSA. There's thousands of people like that across our industry, across America, doing those day-to-day things in the political arena to defend and protect our asset. It's important that the citizens of our country take those steps as well. I thought that was something that you alluded to. So wildly important. Don't just think that this is helpful for your sake, because to me it's very clear that this is a play by Gavin Newsom to try and put himself on a bigger stage nationally and gain more attention from — who is it that ultimately elected Trump? It was not Republicans that got him into office. It was the middle of the road people that swung away from the Democratic party, right? That 10 to 15% in the middle that swung and voted him in in both instances. And so I think Gavin Newsom — and maybe he's got the, you know, the benefit of California is his first and foremost thing — to me I look at it and say he's trying to send a message to those moderate Republicans, moderate Democrats that tend to be the swings in a presidential election, that I'm the guy to back in 2028. We'll see how that plays out. Chris Berg: I think the button I want to put on this obviously is always bring it back to storage. And so, hey, if you start to change CEQA, now you're going to have more infill taking place, could even potentially change some of the aspects of CEQA for storage itself, depending on where you're at and things of that nature. But point being is you're going to keep more people here in California. We know how difficult it is to build storage here. It's basic — my buddy Sam Zell — supply and demand, right? You got more people coming in, there's more demand, harder to put supply online. It just bodes well for, I think, California self storage assets long-term, as long as people will put some capital in and start building. Thaddeus Campbell: Uh, this is a great transition into our tease for next week. I want to give a shout out to my friend Steve Ross. Uh, he's been doing feasibility studies in the self storage space. He actually started doing feasibilities while he was working for Extra Space in the 1990s when they started doing them for the first time. He now does it on his own. But he shared some great data with me this week on national square foot per capita averages that I want to get into next week. Our friends at Tract IQ also shared a bunch of information with us relative to square foot per capita. To your point about California, one of the most underserved areas of the country as far as square foot per capita of storage, and that's played out in rates. Rates are very, very high in California. That is not good for consumers, right? And so if you want to talk about the effect of government putting heavy regulations on development, the ultimate person paying the price for that in the state of California is people that want to go rent a self storage facility, because they're in some cases paying two, three times what the national average is. If you're in LA and you're in San Francisco, the fact that developers can't develop is ultimately hurting our consumers. So we'll dig into that information when we see you guys next Thursday at 1 p.m. Eastern. Chris Berg: Perfect timing. That's — one more thing I want to share. Thaddeus Campbell: Right. You talking about — let's go. Chris Berg: So the harder it is to build, the less supply. I think we all can sort of make that assumption. Correct. So just to have some fun here to put a button on things. Um, I don't know if you saw this story or not out of the Atlanta area. Have you heard about this, my friend? Thaddeus Campbell: I have not. You teased me about it and I haven't heard about it yet. Chris Berg: You didn't share the full story off air. So I get full reaction live. City — and I want to share with people just how much some NIMBYs don't want self storage in their neighborhood, which again means less supply, thus typically higher rates. So Americans need more self storage but they don't want it close to them. This is from Bisnow. It's not often that a developer loses a land use battle to a strip club. Thaddeus Campbell: The community said no to self storage, and are like, “Yeah, you know what? That other thing, we might be okay with that.” Oh my goodness. Is that the bottom of the barrel? Oh, that — that could you lose out to a worse use in the world of zoning? Chris Berg: I don't want to get into the use. I just want to share with people, hey, supply and demand. Supply and demand is economics. Thaddeus Campbell: Goodness gracious. Yeah, that opens up a whole rabbit hole we don't need to go down. He's Chris Berg, AbernathyHoldingCo.com. You can see him on the screen. He's looking for land to develop self storage in California. I am Thaddeus Campbell — Abby, I told you, Abernathy Holdings. I am S3 Partners. I'm not S3 Partners by myself. I work for S3 Partners as the director of business development. We're looking to build storage and small bay flex nationwide. Feel free to reach out to us. As I implore you guys every week, if you have little tidbits like Chris and I have been sharing through the course of the show, shoot us an email, reach out to us on LinkedIn. We love nothing more than having you folks participate and share information with us so we can then bring that out to the wider audience in self storage. So grateful for all the feedback, all the people reaching out to us to let us know what they think of the show. And looking forward to joining you guys weekly on the Nostradamus effect. Is that what we're calling it? Chris Berg: The Nostradamus, uh, Report. Thaddeus Campbell: There we go. The Nostradamus Report. We'll see if we can't keep being incredible prognosticators. That's it for this week. We're going to sign off. We'll see you guys next Thursday, 1 p.m. Eastern time. Uh, as my friend Chris lives in California, we'll say 10:00 a.m. Pacific time. Hope to see you guys next… — END OF TRANSCRIPT —