Welcome to The Real Estate Venturist. Every other week, this newsletter will give you a behind-the-scenes look at what it’s like to be a real estate entrepreneur. As always, this is not investment advice and merely my opinion.

We’ve all seen the headlines by now. Artificial Intelligence (AI) is coming for your job. Not in 10 years or evenly phased over time, but soon. Here’s a headline from Fortune this week: “Microsoft AI chief gives it 18 months for all white-collar work to be automated by AI.” The emphasis on “all” is mine. I’ve heard other reports suggest around 40% of white-collar jobs could be eliminated in five years. That sounded daunting enough, but all white collar jobs in only 18 months? The stock market clearly doesn’t like the potential impact AI could have on software companies. Salesforce (ticker: CRM), for example, is down close to 20% over the past month on AI disruption concerns.

I’m in the camp that thinks AI is being underestimated. I regularly hear people say AI hallucinates, that it’s only good for small tasks, or that it’s no better than a search engine. They’re convinced we’re light-years away from anything truly powerful. I don’t believe that. These models are seeing consistent, exponential improvement. The time frame is shorter than most people think, and AI is likely coming for a wider range of jobs and responsibilities than we can foresee today.

Then there are the people who work in tech. They use the most advanced models and say that the free versions—that most of us use—are a year behind what sits past the paywalls. We’re 12 months in the past, while they’re in the future. The tech community is sounding the alarm and giving us fair warning. AI is already well-versed at writing code—heck, I even created an app a year ago. It’s supposedly much better today. Their firsthand experience leads them to believe a job reckoning is coming fast. I think there’s inherent optimism and panic within Silicon Valley (it’s a boom-bust market) and this is a case of both. Elon Musk promised driverless cars years ago. While they exist, they haven’t altered our daily lives. AI will be transformational, but it won’t happen overnight.

Since I invest in multifamily real estate, I’m interested in what widespread job losses would mean for my industry. If the job losses happen en masse without government intervention, such as universal basic income (UBI), or new corporate taxation, the entire economy will be in serious trouble. People would suddenly not be able to pay rent or mortgages, and spending on all kinds of goods would plummet. Demand would dry up across the board. There are simply too many industry lobbyists to allow that outcome to persist.

Now assume UBI becomes ubiquitous and people receive monthly checks from the government. That effectively becomes a fixed income for many. In that world, rent or price increases can’t occur without corresponding cost-of-living adjustments to those payments. That places a cap on apartment rents. Rents would coalesce around levels that fit most budgets and then scale down based on property condition, neighborhood, amenities, etc. There’s little upside for owners as revenue growth would be minimal.

AI could be “structurally deflationary,” at least according to Federal Reserve chair nominee Kevin Warsh. If prices fall, perhaps multifamily expenses won’t rise faster than revenue. But who pays for UBI? Taxpayers. Property taxes are unlikely to fall if new payments are required at scale. Insurance costs won’t decline either unless construction costs fall meaningfully. I’m skeptical apartment expenses would decrease enough to make meager rent growth worthwhile.

In this scenario, making money in apartments would be difficult. Little rent growth, ever-growing expenses, and elevated cap rates to compensate for the lack of growth would pressure returns. I’m watching AI developments closely in case this outcome materializes.

Others believe employment will shift rather than disappear, and that the overall economic pie will grow. Jobs lost to AI would be repurposed into new fields. Productivity gains would be large enough to create entirely new industries and roles. This cycle, they argue, has happened before. AI will be disruptive, but the result will be more economic prosperity than before.

Jason Draho from UBS, in a recent blog post, points out that higher productivity and growth from AI could add $5 trillion to U.S. GDP over a 10-year period. Draho further says, “So while investors are worried that the terminal value of some companies in 10 years will be approaching zero, this same AI disruption would likely add trillions of dollars to economic activity at that same time.”

This is a much better scenario for apartment owners. There may still be short-term pain during the transition, but growth remains possible. When people expect growth, they’re willing to pay more for something. That sounds like a better investment. Growing rents, moderating expenses from deflationary forces, and a broader employment base, all of which bode well for multifamily owners.

Beyond a low- or no-growth scenario, I worry about increased government intervention in housing. White-collar workers aren't usually high on politicians’ priority lists, but if disruption is widespread, this large voting bloc will be looking for a new home (literally and figuratively). That likely means stricter rent controls, new rental ordinances, and expanded tenant protections. I don’t see things getting easier for landlords, especially in blue or blue-leaning markets.

Even today, before AI fully takes hold, Massachusetts is debating rent control. Boston’s Democratic mayor supports it, even though it’s currently illegal. The Democratic governor opposes it, citing numerous studies showing it does nothing for affordability and makes it worse. In New York City, affordability was the dominant voting issue that helped elect a democratic socialist. Housing policies like rent control are rarely rolled back. More often, they get progressively worse.

Every apartment investor has to pick a lane. Mine is a short-term focus tied to the AI rollout. Markets like the San Francisco Bay Area are uniquely positioned. They benefit from AI-driven growth while also absorbing some of its disruption. AI companies are expanding quickly, while broader adoption remains slow. Combined with habitually low housing supply, this has driven recent double-digit rent growth in San Francisco. I expect that momentum to spread across the Bay Area, making it one of the strongest regions for near-term rent growth and property appreciation. AI may ultimately expand the economy (I hope it does), but the transition will be uneven and politically charged. Apartment investors should assume volatility, not stability, and invest accordingly.