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Headlines
Finance and Capital Markets
Limited Financing Stymies Rehabilitation of Rentals
Geithner Says Closer to Fannie, Freddie Reform
Market Conditions
So Long, Stigma; Apartment Convenience Is Luring Would-Be Homebuyers
Apartment Vacancy Rate Falls to Decade Low
Rising Student Loan Debt Could Create Longer Renters
For Developers, Apartments Still a Safe Bet
REO-to-Rental Initiative
Firm Uses Technology to Create Scalable Foreclosure-to-Rental Company
Nonprofit Eyes REO-to-Rental Initiative
Property Operations
Consumer Ratings Changing Many Industries, Even Higher Education
Elk Grove Council Rejects Ban on Apartment Smoking
Mold Claims for Damages Get New Life
NMHC: New Energy Codes Could Prove Too Costly
Rent Control and Affordable Housing
Rent-Control Consequences
Housing Policy
The Simple Math: Downtown Development Yields Much Greater Yield for Local Governments
NMHC News
NMHC Seeks Vice President of Property Operations & Technology
2012 NMHC 50 Now Available
New NMHC/NAA Analysis: New Energy Codes Could Add Thousands Per Unit to Apartment Construction Costs
NMHC Annual Student Housing Income-Expense Survey Underway
Can’t Miss Event: Rental Reset: The NextGen Apartment Industry – May 16-17 in Scottsdale
NMHC Apartment Strategies/Finance Conference – May 15-16 in Scottsdale
Send Your Emerging Leaders to NMHC's May 15 E.L. Networking Event
Finance and Capital Markets
Limited Financing Stymies Rehabilitation of Rentals
Echoing NMHC's argument that even with improving capital markets, debt financing is not widely available to all properties in all markets, a report from the Institute for Housing Studies at DePaul University says limited financing options are available for rental properties with five to 49 units in the Chicago market.
These smaller multifamily properties have seen community banks impose stricter underwriting standards, and it also costs more to finance smaller buildings than larger ones. This means current owners are having trouble refinancing maturing debt at lower interest rates, which would make it possible for them to rehabilitate their properties. From 2005 to 2010, 93 percent of these properties that received a mortgage were deemed "credit constrained," versus 34 percent of buildings with 100 or more units.
From "Limited Financing Stymies Rehabilitation of Chicago Rentals"
Housing Wire (03/29/12)
Geithner Says Closer to Fannie, Freddie Reform
U.S. Treasury Secretary Timothy Geithner recently told Congress that the White House is getting closer to a plan to wind down Fannie Mae and Freddie Mac and to "work with Congress on something that might result in legislation."
Housing experts quickly disputed the idea that Congress could fast-track GSE reform legislation. Mark Calabria, director of financial regulation studies at the Cato Institute, says that there is "absolutely no consensus in Congress on anything that looks like GSE reform." Calabria and other observers believe Geithner's statement was meant to indicate prior to the election that the administration is making progress on reform efforts.
Brian Gardner, SVP at Keefe, Bruyette & Woods, said he "wouldn't be surprised if Treasury put some document out over the next couple of months. But it is to 'check the box' before the next election."
From "Geithner Says Closer to Fannie, Freddie Reform"
MarketWatch (03/28/12) Robb, Greg
Market Conditions
So Long, Stigma; Apartment Convenience Is Luring Would-Be Homebuyers
More people with the means to own a house are choosing to rent instead, even paying more on rent than they would on a mortgage. Indianapolis area developers report a noted increase in empty nesters in particular.
In J.C. Hart Co.'s newest communities in Indianapolis, baby boomers who sold their houses in order to rent make up around 25 percent of renters. A few years ago, 90 percent of the firm's renters were between the ages of 24 and 32; that number has shrunk to about 60 percent to 70 percent today.
That change has implications for the kinds of apartments the firm is building: more townhome-style units and direct-access garages, for instance. While renters by choice might become a common demographic in larger cities, Indiana Apartment Association Executive Director Lynne Sullivan says, "We're seeing a lot more renters by choice, which is something we've never seen before."
From "So Long, Stigma; Apartment Convenience Is Luring Would-Be Homebuyers"
Indianapolis Business Journal (03/06/12) Schouten, Cory
Apartment Vacancy Rate Falls to Decade Low
Reis reports that the national apartment vacancy rate fell to a decade low of 4.9 percent, a 0.30 percent drop, in the first quarter of 2012. Asking rents, on the other hand, rose 0.5 percent from the previous quarter to $1,070 per month, with effective rent climbing to $1,018 per month, up 0.9 percent -- the largest increase since the first quarter of 2008. However, rent increases are likely to be short lived as up to 200,000 new apartments become available.
From "Apartment Vacancy Rate Falls to Decade Low"
Reuters (04/04/12) Jones, Ilaina
Rising Student Loan Debt Could Create Longer Renters
The Consumer Financial Protection Bureau (CFPB) reported that total student debt outstanding rose to more than $1 trillion in 2011, up 16 percent from earlier estimates from the Federal Reserve Bank of New York. The rise in debt could cause consumers to postpone buying houses, which government officials say could slow the housing market's recovery even further.
While obtaining a college education is deemed a good investment, it is likely to delay other life milestones, such as getting married or buying a house, say economists.
Heavily indebted graduates will have a tougher time saving money for a down payment on a house, and it likely will make it harder for them to qualify for mortgages. Student loan debt is a burden not only for Americans in their 20s but also for parents who co-sign for those loans and for mid-career professionals who go back to school.
From "Student-Loan Debt Tops $1 Trillion"
Wall Street Journal (03/22/12) Mitchell, Josh; Jackson-Randall, Maya
For Developers, Apartments Still a Safe Bet
Real estate developers find that multifamily housing and apartments are one segment of the market where they can invest and garner favorable returns. The Urban Land Institute's Real Estate Consensus Forecast indicates that economists and analysts foresee at least three years of favorable returns in the apartment and multifamily housing segment. The forecast says that apartment vacancy rates will remain near 5 percent through 2014, and developers hope to meet demand by building more apartments, particularly in cities.
Panelists at a recent event discussing the ULI report debated how significant the "back-to-the-city" movement is beyond a few cities. While one analyst suggests we are still a suburban nation, the discussion did not distinguish between close-in suburbs and greenfield suburbs farther away from urban centers.
Although multifamily construction has tripled over the past year and a half, it still remains half of the historic norm and sheer demographics support strong demand for a number of years going forward.
From "For Developers, Apartments Still a Safe Bet"
The Atlantic Cities (03/29/12) Berg, Nate
REO-to-Rental Initiative
Firm Uses Technology to Create Scalable Foreclosure-to-Rental Company
Waypoint Real Estate, an Oakland-based investment firm, is pioneering a new approach to convert foreclosed single-family housing into rental properties on a large scale basis. The private-equity real estate fund, which currently owns 1,100 houses, is using technology -- cloud computing, proprietary algorithms, and iPads -- to create a virtual assembly line for buying, renovating, and renting houses on a large scale. Waypoint says it is out to show institutional investors that a technology-driven platform could amass single-family houses the same way Sam Zell and other real estate giants create portfolios of apartment units.
Institutions have largely shunned the $3 trillion house rental market, believing it too scattered and impractical to be profitable. But Waypoint has secured a $25 million investment from Columbia University and a $400 million investment from private equity firm GI Partners. Reports indicate that Starwood Capital Group and Zell also are poised to enter the foreclosure-to-rental market.
Related Stories: New York Times (4/3/12), Fox Business (3/27/12), Bloomberg Markets (3/13/12)
From "Foreclosures Give Rise to a New Industry"
Washington Post (03/31/12) Robinson, Edward
Nonprofit Eyes REO-to-Rental Initiative
The Raleigh, N.C.-based nonprofit Builders of Hope views the REO-to-Rental program as a solution to the affordable housing problem in the United States. Using a $100 million fund, its Upcycle program will purchase and rehabilitate foreclosed and vacant houses, turning them into affordable rentals. The organization wants to secure 1,500 to 2,000 units this year.
As part of a five-year agreement with investors, the fund will be replenished if spent, so the nonprofit could ultimately spend a total of $500 million. Builders of Hope Founder Nancy Welsh says, "As basic and simple as what we do is, there's really nobody else out there doing it on scale. Everybody's afraid of rehab, particularly the inventory that needs major rehab." Of the 500 units the organization has acquired since its inception in 2006, 80 percent are multifamily.
Related stories: Marketplace (3/19/12)
From "Social Entrepreneurs: Nonprofit Eyes REO-to-Rental Initiative"
Multifamily Executive (03/12) Ascierto, Jerry
Property Operations
Consumer Ratings Changing Many Industries, Even Higher Education
As the empowered customer becomes more prominent in all businesses, industries are struggling to adapt to rating sites, including apartment firms. This New York Times article shows how some forward-thinking professors are embracing student feedback to improve performance and illustrate how satisfaction surveys can be employed by other sectors.
Classrooms in colleges across America are using surveys to improve instruction and engage students, while online courses are incorporating tools in the dashboard to help professors determine which students are stuck and where. Professors say that the feedback helps demonstrate to students that they care about their education, and others say they have an implicit contract with their students to provide them a top-notch education.
From "Feedback From Students Becomes a Campus Staple, but Some Go Further"
New York Times (03/29/12) Lewin, Tamar
Elk Grove Council Rejects Ban on Apartment Smoking
In California, the Elk Grove City Council has decided to reject a proposed ban on smoking in apartment communities. After hearing a number of complaints from residents about exposure from second-hand smoke, a majority of council members decided that government regulation was not the solution. "We need to be careful about using a chainsaw to solve a problem that can be solved with a scalpel," said Councilman Gary Davis. The council considered several options to the problem, including a ban on smoking in apartments throughout the city. Instead, the council called for mediation or resolution with the owners of a subsidized senior housing complex that had been at the center of the issue.
From "Elk Grove Council Rejects Ban on Apartment Smoking"
Sacramento Bee (03/30/12) Kalb, Loretta
Mold Claims for Damages Get New Life
Four years ago, an appellate court in Manhattan blocked millions of dollars in legal claims related to mold after finding that the scientific evidence of a link between mold and health problems was in dispute. However, the ruling recently was overturned by a five-judge panel in the same court, which stated that scientific literature was now "indicative of a causal relationship." The decision has major implications for property owners and co-op and condo boards in New York.
Real Estate Board of New York counsel Eva Talel is concerned that the decision will provide an opportunity for individuals claiming personal injury related to mold, and she hopes the ruling will soon be clarified by the New York Court of Appeals. The 2008 appellate-court decision that found no scientific consensus that mold caused illnesses put a damper on personal-injury mold suits in recent years. Lawyers say the decision influenced courts in areas outside Manhattan and the Bronx.
From "Mold Claims For Damages Get New Life"
Wall Street Journal (04/01/12) Barbanel, Josh
NMHC: New Energy Codes Could Prove Too Costly
A joint study by the National Multi Housing Council (NMHC) and the National Apartment Association indicates that new energy codes could make multifamily construction cost-prohibitive. The study looks at the costs of implementing the 2009 and 2012 International Energy Conservation Code (IECC).
Compliance costs for high-rise buildings for the 2009 IECC would be $90 to $140 per unit in warmer climate zones but $940 to $3,410 per unit in cooler climates, based on building location and design characteristics. Compliance costs for low-rise buildings for the 2012 IECC would be $480 to $720 per unit in the two warmest climate zones and $1,820 to $2,160 per unit in the next two warmest climate zones.
Paula Cino, director of energy and environmental policy at NMHC says, "We support building efficiency. These codes are meant to set minimum requirements, and they set a very expensive minimum. In some cases it would take more than 200 years for the energy savings produced by the codes to pay for the required upgrades. In many areas of the country, these codes would require dramatic changes to the way apartments are designed and constructed."
Related stories: MortgageOrb (3/29/12), Sacramento Bee (3/28/12)
From "NMHC, NAA Probe Impact of New Energy Codes on Apartment Construction"
Citybizlist Washington, D.C. (03/27/12)
Rent Control and Affordable Housing
Rent-Control Consequences
New York City Mayor Michael Bloomberg recently signed a three-year extension of the city's rent control laws. Although supporters of rent control believe the measures are needed to ensure affordable housing, observers insist that these laws cause more problems for the housing market.
Nicole Gelinas of the Manhattan Institute says, "The rent regulation itself causes the shortage because [property owners] know they're not going to get a good return for massively investing in upgrading their housing, so a lot of the existing housing deteriorates."
Others believe that ending rent control would give developers an incentive to build units for low- and moderate-income households, rather than focus on luxury housing that is not subject to rent control. They also point out that wealthy politicians and celebrities -- including former New York Gov. David Paterson, Congressman Charlie Rangel, and actresses Mia Farrow and Faye Dunaway -- have occupied rent-stabilized apartments despite being able to afford market-rate housing.
Related stories: New York Times (3/26/12), New York Observer (3/27/12), The Real Deal (3/27/12), Curbed (NY) (3/27/12)
From "Rent-Control Consequences"
Wall Street Journal (03/30/12) Riley, Jason L.
Housing Policy
The Simple Math: Downtown Development Yields Much Greater Yield for Local Governments
Cities on the brink of bankruptcy do not have to choose between raising taxes or cutting services. They also can generate a great deal of wealth by rehabilitating underutilized buildings.
Per-acre, our downtowns have the potential to generate so much more public wealth than low-density subdivisions or massive malls by the highway, says Joe Minicozzi, new projects director for developer Public Interests Projects which just transformed a vacant JCPenney building into a mixed-use residential property. And for all that revenue they bring in, downtowns cost considerably less to maintain in public services and infrastructure.
Minicozzi points out that Asheville's Super Walmart two-and-a-half miles east of downtown has a tax value of $20 million, but it sits on 34 acres of land, yielding about $6,500 an acre in property taxes. The remodeled JCPenney downtown is worth $634,000 in tax revenue per acre.
His calculations suggest that a downtown 357-unit multifamily property in Sarasota, Fla., pays off its infrastructure in three years. A suburban subdivision on a 30-acre site will take 42 years to pay off. After two decades, that downtown multifamily community will have made the city $33 million in net revenue. The suburban subdivision will still be $5 million in the hole.
From "The Simple Math That Can Save Cities From Bankruptcy"
The Atlantic Cities (03/30/12) Badger, Emily
NMHC News
NMHC Seeks Vice President of Property Operations & Technology
NMHC is looking for an exceptional property management professional to join our team and direct a new initiative to expand the information the Council provides on a broad range of issues, including property operations, emerging technologies, environmental sustainability, risk management, human resources and related topics.
In this highly visible position, which reports to the Senior Vice President of Public Affairs and Industry Initiatives, the candidate will produce content targeting senior real estate executives, including webinars, best practice guidance, white papers, online forums, benchmarking studies, industry articles and other products as appropriate.
He/she will work with NMHC member committees to develop the content for NMHC’s annual Apartment Operations and Technology (OpTech) Conference & Exposition and other NMHC membership meetings. The position will also lead NMHC’s Multifamily Information & Transactions Standards (MITS) data standards initiative.
The ideal candidate will have a B.A. or B.S and a minimum seven years of experience related to apartment management at a headquarters or regional level or higher with strong understanding of policy and corporate-level deployment of emerging technologies, training and operations activities.
We encourage you to share these two great opportunities with anyone you believe would be a good fit for the Council. Complete position descriptions and information on how to apply are available at www.nmhc.org/goto/6571.
2012 NMHC 50 Now Available
The NMHC 50, our annual ranking of the largest apartment owners and largest apartment managers, is now available.
This year's survey reveals the degree to which top apartment firms pursued a number of financial, management and operational strategies last year to capitalize on the surge in the rental market and position their companies for longer-term success.
The result was the Top 50 owners and Top 50 managers each grew their collective portfolios by more than 60,000 apartment units in 2011.
For the complete rankings, an analysis of the data and additional articles on apartment market trends, please go to www.nmhc.org/goto/2012NMHC50.
NMHC thanks its partner, Kingsley Associates, a leading real estate research and consulting firm, for its help conducting the NMHC 50 research and analysis.
New NMHC/NAA Analysis: New Energy Codes Could Add Thousands Per Unit to Apartment Construction Costs
NMHC/NAA are pleased to announce the publication of an important new research report examining the nation’s most widely adopted building energy code—the International Energy Conservation Code (IECC).
If adopted on the local level, these codes will require meaningful changes in the ways apartment buildings are designed and constructed. Our new report, Impact of the 2009 and 2012 International Energy Conservation Code in Multifamily Buildings, offers a detailed comparison of the 2009 and 2012 IECCs compared to the 2006 edition.
It is designed to aid member firms in preparing for upcoming code requirements where the more stringent codes are adopted. It is also developed to be a tool for local apartment advocates to help local jurisdictions understand the real implications adopting these codes will have on housing costs in their localities.
NMHC Annual Student Housing Income-Expense Survey Underway
NMHC's annual Student Housing Income-Expense Survey is now underway. Student housing firms are encouraged to complete the survey by the May 18 deadline.
The final report helps off-campus student housing providers benchmark their financial performance against their peers. Last year’s report included information on compensation, maintenance, utilities and more from properties accounting for roughly 200,000 beds.
Click here for additional details, or contact NMHC's Vice President of Student Housing Jim Arbury at 202/974-2321 or jarbury@nmhc.org.
Can’t Miss Event: Rental Reset: The NextGen Apartment Industry – May 16-17 in Scottsdale
Join NMHC members in Scottsdale, AZ, May 16-17 for provocative discussions on the future of the apartment business.
There is no arguing that right now consumer preference favors renting like never before. But can the industry adapt in ways that would make this phenomenon a longer-term societal shift?
Noted author and social critic Richard Florida will be on tap to talk about what the industry can change to ensure rental housing has a bright future long-term. He will be followed by a CEO panel examining current trends in society and how our industry might respond to them.
For more information and registration details, go to the Spring Board of Directors Meeting.
NMHC Apartment Strategies/Finance Conference – May 15-16 in Scottsdale
Leading industry CEOs, CFOs, lenders, investors and senior-level staff officers will gather at NMHC’s Apartment Strategies/Finance Conference May 15-16 in Scottsdale, AZ.
Open to NMHC members and non-members, conference topics will include:
- The Expansion is Here, But Does It Have Legs?
- Update on Apartments Around the Country
- Where Are the Best Investment Opportunities: Core? Non-core? Distressed?
- Revenue is Up – How Much is Included in the Rent?
- Can CMBS Have an Impact in 2012?
- Agency Debt – What is Changing?
- Is Dodd-Frank a Downer or a Speed Bump to Get Over?
For more information and registration details, go to Apartment Strategies/Finance Conference.
Send Your Emerging Leaders to NMHC's May 15 E.L. Networking Event
NMHC’s Emerging Leaders program will host a regional networking reception on May 15 at Primebar in Scottsdale, AZ. The event is being held in conjunction with NMHC's Apartment Strategies/Finance Conference and our Board of Directors Meeting.
Attendance is limited to the first 75 who register. Any employee from an NMHC member firm who is under 40 and has at least five years of industry experience is welcome to register. (Limit 3 registrants per firm.)
More information and online registration are available here.
Abstract News © Copyright 2012 INFORMATION, INC.
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