Today’s conversation spans monetary policy, housing affordability, and long-term shifts in how policy and technology shape real estate outcomes. On the Fed, Peter downplays the economic significance of a potential investigation into Chair Powell, viewing it instead as another sign of increasing politicization rather than a material macro risk. What he does see as genuinely remarkable, and largely under-discussed, is the roughly 9% reduction in federal employment over a single year. By historical standards, this is unprecedented, achieved where prior administrations failed, and likely to have real downstream effects by constraining regulatory expansion almost by definition. Whatever one’s political view, Peter frames this as a concrete, structural change rather than political theater.

On housing, the discussion turns skeptical of headline-friendly federal interventions. Proposed purchases of $200 billion in mortgage-backed securities and rhetoric against institutional ownership of single-family homes may signal sympathy for first-time buyers, but Peter argues they are unlikely to move the needle on affordability. The binding constraint is supply, driven overwhelmingly by local zoning, permitting, and regulatory barriers—not capital availability or investor demand. Restricting institutional landlords risks removing a product that serves households without down payments, while doing nothing to address chronic underbuilding. The group agrees that meaningful progress is hard to engineer from Washington, given that homeowners themselves often support restrictions that protect values. The conversation closes by extending this local-versus-structural lens to autonomous vehicles, with Peter suggesting that truly driverless, low-stress commuting could subtly reshape both suburban and urban demand—not by eliminating distance, but by changing how people experience time and travel.

Adam:

Peter, welcome. Good to see you again.

Peter:

Good to be here. Happy New Year to everyone.

Adam:

Happy New Year. So to kick off as a reference to our last conversation, we talked about the Fed vote in December and the dissent that was showing up there. Now we have news that Powell might be being investigated. Where should our heads be here?

Peter:

Yeah, I don't think the Powell investigation has a lot of impact on the economy. It is certainly interesting. It shows that the president would like a very different Fed. I don't think that's a shock to anybody. I mean, we already have a Fed member being investigated and trying to be removed. I don't expect Powell to be reappointed chair. If there was anybody in the room who doubted that, I think at this point that's not in the cards. It does show that the Fed has become more politicized over time.

This is not new to this president. It's been happening since the financial crisis at least. Trump has an interesting, almost magician-like skill at deflecting attention on relatively superfluous things. And it's almost like, let's keep the media fascinated, that while I go about doing what I really want to do, whether it's… the bombing of Iran or Venezuela or whatever. My gut is that's what this is with Powell. Maybe we'll find something, but I'd be really surprised.

Adam:

So now that we've had Trump in office for a year, what's been the most remarkable thing that might not be at the forefront of everybody's mind?

Peter:

I think it's absolutely obvious and it has almost attracted no commentary. If anybody said a year ago that federal employment would be down 9% in 12 months, everybody would have laughed. And yet, in 12 months, the federal employee count has fallen by 9%, slightly rounding. I'm shocked. Reagan couldn't do it. Clinton couldn't. You can go right through it. And Dan, I think you were, you must have been in grade school then, but didn’t you see this in the 1990s?

Daniel:

When I was about eight months old - joking, actually not long after college - I interned in the White House for Gore's Office of Government Reinvention and saw a lot of the earnest efforts that Gore and his team made to try to improve government efficiency. They marketed it less as shrinking the size of the federal government, more as trying to be more efficient, in an effort not to scare anybody.

It was very hard to find evidence of material success. Lots of anecdotes that felt great, and I’m sure some real wins. But that 9%, which will be double digits at some point soon, is remarkable and politically really consistent with what Trump said he wanted to do.

Peter:

Yeah, I view it as a plus. I'm a small government person, but I understand some people view it as a minus and time will tell, which it is, but it's just stunning that that was achieved. Just to make the listeners clear, not 0.9%, 9%. You know, out of 3 million workers, at the beginning of last year, 9%of the positions are gone. That is a remarkable, and Dan, your experience on the inside of the beast, so to speak, there's a reason it's hard to do, and yet it happened. It's pretty stunning.

And it will shrink regulation expansion almost by definition, in that you have fewer people sitting around every day saying, what can we do? And I'm not saying it's a 9% shrinkage, but it's a pretty dramatic indicator.

Adam:

Trump also said in the last week or so that he was going to direct the purchase of $200 billion in mortgage-backed securities, I believe by Fannie and Freddie. Does this muddy the prospect for future privatization of those agencies? Is this reinforcing government control? That is not what Trump campaigned on.

Peter:

It has to muddy the waters, right? It's hard to say that we're getting the government out of the housing agencies. It's, as you say, more of a statement at this point than an order. But it is contradictory to getting the government out of it when you do it. And I found it disappointing.

I understand he's trying to reduce the interest rates for home buyers, right? Will it have an effect? Probably second order, you know, just because of the size. The market is trillions, right? It's hard to imagine how it's going to be more than a few basis points, right? It's not going to be 100 basis points, not going be 150 basis points on the mortgage rate. Could it be 12, nine, six? Yeah, that's possible. And then what happens once that buying ends? What, do you have to reload it for the next group of home buyers after them and the next group of home buyers after them. And so I don't think it gets very far.

It reminds me of when you're an undergrad and you're in a class and you're trying to come up with good ideas on a problem and somebody says, what if? And at first blush it sounds like, yeah, that could help. And then the more you think about it, you think about the weight of that money versus the total amount of money, and maybe the idea is more mixed.

And then you had the other part of the announcement, well, pronouncement, saying private equity shouldn't be owning single family homes.

It was one of the great things that, let's just call it private equity, stepped up en masse to buy single family homes. They still don't own very many of them when you really get down to it. Very small percentage. And it did help home prices through a very difficult time, which did help a lot of people who were not selling in that they could refi or whatever. And it has been a great boon for people who don't have down payment money, but want a yard and a school.

I'm being overly simple in defining single family home. But those people care about schools and about a yard. But I may not have the down payment. And the down payment has become more difficult as home prices have risen because we've underproduced homes for the last 14 years to the tune of 3.5 million.

So the institutional house-buyers did allow for is somebody like you to say, I've got a kid, they're old enough, I care about school. I want them to have a yard. I don't have the down payment but I can get out of a two bedroom or three bedroom apartment and get into a home and yes, I don't get the upside of the appreciation, but I don't have the capital to buy a home. Private equity owners are not driving out home buyers. They are giving an opportunity to people who want single-family homes and don't have the down payment. And that's a fair number of people.

Adam:

I think the unintended consequence of Trump’s idea is that you're taking away a product that people want, and people who don't have the down payment are less able to rent what they want.

The real problem in housing when it's all said and done, and the research on this is pretty clear, is simply supply. It's been looked at, it's been analyzed. If you make stuff expensive and risky, less of it gets built.

And that's what you're seeing. It's not in my backyard. It's piles of regulations. It's environmental. It's this, that, and the other. Each of them may have their own rationale, but it is making homes more expensive, period.

Daniel:

So the $200 billion of mortgage-backed security purchases plus the pronouncement about large corporate interests being disallowed from owning single-family homes, are two signals. They're homeowner friendly. They're especially friendly signals to first-time home-buyers. But I don't know that they move the needle. What could the government even do to move the needle, to make homes more affordable?

Peter:

It's very difficult because most of the restrictions that make home building difficult are not national in scope. Yes, you could argue some of the environmental ones are. But most of them are local in scope. How many inspections do you need? And what is the impact fee? They're mostly local.

That's why there's large variations across the country in supply demand imbalances. Could the federal government come up with some type of carrot and stick where it says, I'm just thinking out of the blue, “We're not going to give you Medicaid money unless what you do is get rid of a whole bunch of housing restrictions.” I suppose.

I don't know if it's a carrot or a stick. The federal government could do that. But it's actually similar, Dan, to the problem with education, it’s more than just giving money or denying money.

Education is a local government issue, right? And this is a local government issue. And short of just saying, we're going to give you more money in general or less money in general, there's not a lot that the feds can do, maybe with the exception of some of the environmental stuff, right?

Daniel:

We in the investment space face the sort of same problem that home buyers do, which is the mortgage rates have not changed dramatically. They've been trading in a 100 basis point band for years.

Peter

I think at the federal level, these problems are very similar to education. There are problems, but they're local in nature. Not everything can be solved from above. And when you have these localized problems, I think it's very difficult to solve at a national level. We need lesser regulations, particularly in the communities that make it very difficult to build.

But why don't people like that at a local level? Remember, two-thirds of households own their homes. And regulations are not coming out of a vacuum. They're coming out of a political machine that says, I like it when my home value goes up. And if we slow the supply, my home value goes up and my wealth goes up. And so I think it's very difficult from Washington to do a lot about that.

Adam:

I'm based in Denver. They're making a clumsy attempt to improve permit timing and getting something out of zoning.

I've got investments in San Francisco. They've had a political change and there's a lot of support to not be the poster child for inefficiency anymore. And they've got these motivations at the state level and at the city level to improve efficiencies. But you're watching the people that are trying to do it. They've never done it before. They've never had the incentive. They've just thought the same way for so long when they show it's just the way they do it. And now you're asking them to try to make it more efficient for developers.

Peter

And you add to it that many of them are true believers in no growth. As you were saying that, I was reflecting on Dan's comment about his experience with Gore. There are reasons these things exist. And they may be venal reasons, or they may be inertia, or they may be well thought out reasons. Overcoming those is not as simple as good intentions.

Adam: It will certainly be resistant to it. Yeah. So one thing I wanted to get your take on to pivot is so at some point last, towards the end of last year, Waymo released a lot of safety, a big safety data report that was something like a hundred million driverless miles.

And I think there's an implication on real estate that could be interesting.

Daniel:

Peter, let me take you out of your expertise and then put you right back at it for a second. Waymo released an amazing amount of data showing that their safety records for injuries and deaths and accidents had 85 to 95% lower occurrence rates than human-driven miles. People started talking about Waymo as a sort of public health benefit; it sparked a whole new conversation. And Waymo itself is growing, as you may know, they're coming to 11 new cities in 2026, including Denver, which is their first cold weather city. We see them driving around Denver now.

What I'd love to talk to you about is Waymo and self-driving cars, as a consumer focused benefit. And I want to consider this by asset type. And I want to tee you up. Maybe we'll start with Office. Imagine you snap your fingers and everyone has either a self or autonomous car of their own, or they could summon an affordable driverless car. Let's start with what happens to Office.

Peter:

So I think the big precedent to what you're asking is, what do I do as the driver and as the passenger in the car? If I am able to be completely passive, I can read, I can play games, I can watch television. That's very different than if I have to be alert to take over on a second's notice.

And I think that's still an unanswered question. It's unanswered in two ways. It's somewhat unanswered technologically and regulatory very unanswered. If I've got to sit there for the potential something happens, you haven't changed the experience at all to speak of.

I think the one that would change it is if you got to the point where I can truly do whatever I want. If I want to watch a movie, I can watch a movie and it's safer than if we were being driven. Then I think it makes commuting to work a lot less of a hassle.

In that case you would see train activity in markets that have subways and so forth get hit pretty hard. Yes, it's an amazing technological achievement, but if I have to be alert, it's not much of a sensory achievement. That to me is the real question.

Daniel:

I'm imagining a Waymo style self-driving car where there is no one in the driver's seat and you are a spectator. You can work, you can nap. I wonder too about multifamily and I wonder if all of a sudden the lack of a stressful commute allows people to live more where they prefer to live.

And I don't know if that means more people move into denser areas where they want city life and walkability, or more people move into suburban areas, which they now can do because they don't need to live as close to work. And they get the benefits that we talked about before of a yard and likely a better school district.

Peter:

Well, it would probably have at the margin a slight move outward effect, right? In the sense of it's not such a drain to drive longer distances from wherever, right? A suburban center would become more attractive. It probably also makes dense urban cores more attractive because it just became easier winding through the urban traffic of central Philadelphia or central New York or central Chicago. It still takes the same amount of time, but it doesn't take the same amount of stress, right? In the one case, it's driving is time, and in the other case, driving is a continual hassle.

Daniel:

There’s another factor in this that gets overlooked. I am in the process of moving to LA, I got a Tesla, and yet they get a lot of credit for their self-driving and it is unbelievable. And I really don't need to be in the driver's seat, although they require me to be in the driver's seat, but it does everything. But the other characteristic that's amazing and under-appreciated is how fun it is to be in that car. Tesla's done an amazing job with their interiors, with their sound system, the UX and all kinds of games and other things.

So when you imagine people saying they only want to allocate 15 minutes to driving somewhere, that’s because you project, as I did and as everybody does, their current experience of driving into this new experience of self-driving cars. But I’m saying it’s likely not normal car time. It's much more experiential than that. And it's more fun, more engaging. It's even more social.

And the idea that time driving can turn into some kind of social time or aspirational time with friends or family, that it can be a good experience, we just don't associate that with driving in any real way. And they're moving toward that much more quickly than I knew.

Peter:

I'm smiling because I'm reflecting back to my youth when cars and driving were experiences. Just cars and driving. And no longer do people talk about going out on a Sunday drive, but families regularly used to just go for a Sunday drive for the reasons you're saying.

Where were we going? We were just driving. And my wife's family who lived in the country, they would go every other Sunday for an hour and a half drive. And when I was a kid, my family would go for drives because the car was kind of a cool thing. It was interesting. All five kids and my parents would get into the bench seat in the back, bench seat in the front, no seat belts.

We have seen driving as an experience before, but not for probably, what, a half a century? And you could be right in that regard, that this technology and design could create it, but in a very different way, right? It's like, I've got a great sound system. I got a better sound system there than I do at home - it's my home theater, right? I don't have a home theater, but I got a home theater in my car

Daniel:

One of the features in this Tesla is karaoke. You play a song that everybody knows and they put the lyrics on the screen and the driver's supposed to pay attention and everyone else sings. That is as social and as engaged an experience as I've ever seen in a car. I don't have a karaoke machine in my house, but I have one in my car.

Peter:

Yeah, it could be a very different experience, but it's got a ways to go. And you hit it with the Tesla. You still have to be in the seat. And I can imagine most of the world saying, yeah, the driver is not doing anything. But how many laws do we have that are requiring things that aren't doing anything?

So I just think progress will be slower. I think that about a lot of AI. I was reading about the history of electrification. It starts in Buffalo, street lights powered by Niagara Falls. It wasn't an overnight success because of the safety concerns and the system and the capital outlay. It wasn't like you went from a street being lit in Buffalo to everybody having what we have today electric, right? It was a very slow process with a lot of false starts and a lot of regulations. And if we do it 10 times faster, it's still gonna take a long time. And that's the spirit of it, I think, in a lot of ways.

Adam:

My kids are high school and college age and I've told them several times that it's a very real possibility that their kids don't get a driver's license. Things have shifted.

Peter:

And by the way, there's a very good chance their kids don't get fat and have all those complications associated with excess weight. There's a whole realm of things that are in the offing. I think it's fascinating.

Adam:

Well, that's a good note to end on. Peter, thanks for your time.

Daniel:

More to follow.

Peter:

My pleasure.

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