Don't Tread on Me

An apartment owner in Oregon has notified residents who have an American flag on their vehicles or apartments must take them down because the flags may be offensive to some people. After residents became upset with the censorship, the property managers decided to rescind the regulation, realizing that the heavy handed approach was going to cause way more problems than avoid.

Especially when the thing banned, (the flag in this case) would normally be used as the hyperbolic extrapolation in a counterargument against some kind of relatively reasonable prohibition. ("You can't ban guns and bikinis in the workplace! That's like banning… the American flag!) [KATU Local News]

Smoke-Free Apartments on the Rise

There have been a few cities and municipalities here in California that have either passed legislation or taken judicial action to ban smoking in apartments or mediate disputes between non smoking and smoking neighbors, and now a string of apartments are making headlines on the east coast. Individual apartments in Philadelphia, New York and Boston have all garnered press attention for smoking prohibitions. (bitterness over the World Series and smoker profiling is noted in Mr. Keith's post) [PR Newswire, John A. Keith Real Estate]

Congress Looks to Update Senior Housing Program

Last month the United States Senate held a hearing on Senate bill 118, a bill that would make it easier to administrate and fund the affordable senior housing properties that take advantage of HUD's Section 202 program. Facts furnished to the Senate panel include that around 300,000 seniors live in 6,000 of the Section 202 apartments nationwide and though demand is already high, it continues to rise. When an apartment becomes available 10 seniors apply for the vacancy. By 2020, it is estimated that 730,000 additional units will be needed to fit all those baby boomers. [Senior Spectrum]

HUD's 202 program helps fund the construction and administration of apartment communities that provide services that many elderly American rely on, such as transportation, cooking, medical facilities and cleaning. HUD will provide qualified properties with cash advances to sponsors, which do not have to be repaid as long as the project serves very low-income people for 40 years. In a row. HUD will also pay all approved costs that rents do not cover. [U.S. Dept of Housing and Urban Development]

Census Bureau Reports Shift from Owning to Renting

Multi Housing News reports that The National Low Income Housing Council (NLIHC) recently released date from its 2008 American Community Survey, (conducted using data from 2006-2008) which showed that renters are paying an increasing percentage of their incomes towards rent. Not surprisingly the hardest hit group was families earning less than $20,000 per year as average national rents grew from $763 to $824. Additionally, the percentage of apartments under $500 fell .6 percent and, at the other end of the spectrum, apartments over $1500 a month rose 1.2 percent.

The report also indicates a fundamental shift from owning to renting since 2006, which has resulted in an increased average household size of renter-occupied units. This is a trend that we have also seen continue to the present, as search data has shown an increased demand for 3 bedroom apartments since the start of the recession at the end of 2007.

NLIHC President Sheila Crowley concisely summarized the findings, saying “More families are renting, rents are going up and the lowest income households are struggling to pay for the most basic necessities." She also emphasizes the discrepancy between the realities of the housing world and the ‘ownership first' policy that Congress has pursued lo these many years.

MPF Research Conducts 3rd Quarter Survey

Greg Willet's Market Dynamics page was updated this week with data from MPF latest survey of the apartment industry. According to his analysis, vacancy rates are decelerating, even showing improvement on a quarterly basis, though he interprets this to reflect the discounts and deals that apartment owners are offering to boost occupancy rates; that national average is 92.2 percent after projections from the 3rd quarter numbers.

Geographically, occupancy rates varied expectedly, with bottom performing cities such as Phoenix, Las Vegas and Atlanta pulling down the national average. More recently, the Houston and Dallas markets are now showing occupancy softness, brought on by unemployment numbers and supply surpluses.

With rents and occupancy down, revenues are down about 7 percent across the nation and are not expected to recover until late next year.

A recent article in the Wall Street Journal, which was highlighted in this week's NAA Industry Insider, writes how urban population growth has accelerated since the economy went into recession. Experts relate the migration to urban centers to the lack of a viable economy in suburbs and exurbs; housing is too expensive and jobs are scarce. [Wall Street Journal]

It appears that since 2008, cities are now growing faster than the areas surrounding them; in 2005, the largest ten U.S. Cities population increased about .5 percent each year, while the suburbs population growth was nearly double at around 1 percent. In 2008, those cities populations grew at 1 percent a year, passing the suburban growth rate of .9 percent. [Population Reference Blog]

So, how is this affecting the apartment rental market? Apartment owners should be seeing an increase in vacancies in properties located 20-30 miles outside of urban centers and renters may start seeing better deals, especially when the effect of the shadow market is considered.

Are any apartment owners who have properties in both geographical category seeing similar trends in terms of demand?

For the renters out there, does it make more sense economically to move into the center part of the city? Does it conflict with your desired lifestyle?

Could such a trend reversal be the result of people moving because they need to, or is because they want to?

Today the House will vote on HR 2454, (at press time, House Minority Leader John Boehner was filibustering the House by reading selections from a 300 page amendment, you can watch live here) the American Energy and Security Act; this bill has many implications and has been supported by liberals as a necessary measure and derided as “Cap and Tax" by conservatives and. It is the centerpiece of the Democratic environmental policy and its effects, (if passed, which looks likely) are predicted to be quite far reaching.

The goal of this omnibus energy bill is to move the entire country to more sustainable, more environmentally friendly methods of producing and consuming energy. The official statement from the Chairman of the Committee on Energy and Commerce and main co-sponsor Representative Henry Waxman (D-CA) emphasized the benefits of HR 2454, stating, “the legislation will create millions of new clean energy jobs, save consumers hundreds of billions of dollars in energy costs, promote America's energy independence and security, and cut global warming pollution."

The main provisions are include requiring utilities to generate an increasing percentage of their power from renewable sources, establishing a cap and trade system for greenhouse gas emissions for businesses, establishing a Carbon Storage Research Corporation, revamping current power grid and transmission guidelines to update infrastructure and finally–and this part majorly affects the apartment industry–establishing new energy conservation standards for buildings.

It is indeed interesting to note that a majority of funds are allocated for “Consumer Protection," which means that consumers will be provided with federal money to defray any spike in energy costs that the bill causes.

According to the analysis from the NMHC, the building code mandates that the Secretary of Energy establish a National Energy Efficiency Building Code that is 30 percent more efficient that the 2004 version of AHSRAE Standard 90.1, and by 2014 the national code is required to be 50 percent stricter than current standards (this would apply only to buildings built after the pending legislation becomes law).

The NMHC has been alerting legislators to the fact that some regions of the country, these new codes would be impossible to meet, therefore, a strict federal one size fits all policy is not a good solution. Locations with extreme temperature changes such as apartments in Minneapolis, would have a much more difficult time meeting standards than would apartments in Los Angeles.

CNN Money's online edition clues investors in on the disproportionately high dividend yields offered by REITs. While the average stock dividend from the S&P was about 2.6 percent, the average REIT dividend averaged 7 percent. [CNN Money]

HUD

HUD announced today that they would be releasing $58 million for housing counseling; the funds will be made available to “HUD-approved counseling agencies and State Housing Finance Agencies that offer a variety of services including how to purchase or rent a home, how to avoid foreclosure, how to improve credit scores, and how to qualify for a reverse mortgage." HUD will distribute 400 grants for this purpose (which averages out to $145,000 per grant) based on applications that are due by July 17th. [HUD]

This money is part of HUD's stimulus cash. Last week we explained how of the $ 4 billion HUD was granted, $3 billion was deployed by preexisting formula, leaving $1 billion available for competitive grant processes.

HUD is subdividing this money into 4 categories: energy efficiency (receiving by far the lion's share with $600 million) financing stalled projects, public housing transformation, and housing for the elderly and persons with disabilities. It is unclear from which category the above mentioned housing counseling will be taken.

HUD is certainly pushing energy efficiency for PHAs across the country, putting two thirds of its competitive money toward that cause. Applications are due in 5 days! [HUD]

Couple Scams HUD, Goes Directly to Jail (does not collect $200)

A couple in New Haven, Connecticut were arrested for devising a plan to scam that city's public housing agencies out of money that should have gone to needy families. While working for public housing agencies, the perpetrators were able to send HUD's checks to the account of a nonexistent landlord. The couple extracted close to $400,000 from this account over the past 6 years. The couple was fined for the amount they embezzled as well as sentenced to time in prison (one year for the wife, 46 months for the husband).[Hartford Courant]

Former Homeowners Seek Section 8 Apartments

The Nampa housing authority has seen a major increase in applicants for public housing vouchers from former homeowners. The recent influx of applications by 2 parent families with no renting history seems to indicate that the people are losing their jobs, not able to make their mortgage payments and are foreclosed upon and then eligible for federal public housing assistance.[Idaho Press]

The Vagaries of the Houston Rental Market

Houston apartments are now 11 percent cheaper than they were one year ago, according to Houston-based Apartment Data Services, which reports that an oversupply of newer buildings has depressed the average metropolitan average rent. Renters are finding the best deals, including the waiving the security deposits and three months free rent at newly opened apartments in Montrose, the inner loop and Galleria areas.

Western Houston, by contrast, has sustained demand because of job growth in the energy sector as well as newly available single family homes for rent in highly-rated school districts. [KHOU 11 News]

NAA/NMHC Secure LIHTC Grant Provisions

The NAA/NMHC successfully secured two Low Income Housing Tax Credit (LIHTC) provisions, the first of which allocates $2 billion for direct equity grants to states that will help states complete stalled low income housing projects.

Secondly, states will be allowed to exchange 40 percent of 2009 and unused 2008 LIHTC allocations for cash grants from the Treasury Department at 85 cents on the dollar.

NMHC Ranks Top 50 Apartment Owners and Managers

On April 2nd, The NMHC released its annual rank of top apartment owners and managers, which bore witness to some notable changes due chiefly to nationwide economic troubles.

In a release from last Thursday, NMHC President Doug Bibby expressed cautious optimism, citing the changing lifestyles and demographic trends as well as the fact that there were fewer changes in the rankings than were expected.

The only major trend in this year's rankings was the decrease in the amount of REITs on the list, which dropped from a high of 14 in 2005 to 11 this year; Mark Obrinsky, NHMC head economist explained the trend explaining that the credit crunch has forced REITs to sell properties in order to pay down debts.

We concluded that the release of this report was timed to coincide with the developing economic stimulus plan, which is scheduled to be heard on the House floor tomorrow. The proposed legislation is basically a supplemental appropriations bill, which puts portions the $875 billion in federal funding up for grabs at the discretion of designated subcommittees.

The report therefore makes a case for why a large portion of this spending should be directed to metro areas (local city governments).

Some key findings from that report included:

• Unemployment rates had increased from last year in 359 of 363 metropolitan areas; only 5 metros will post employment gains this year.
• Unemployment rates in 2009 are expected to rise above 10 percent in 70 metros.

It is important here to reiterate that the 363 metropolitan areas are home to 86 percent of U.S. employment and 90 percent of wage income; this fact alone, supports the U.S. Conference of Mayor's argument for an infusion of federal programs and funding into metropolitan areas where growth has been stunted by the contraction of available credit.

Below is a chart which features the ten cities that are projected to have the highest drops in unemployed persons in 2009. 4 out of the 10 are expected to have over 8 percent unemployment by the end of the year.

This week and next, we'll be comparing these unemployment figures with Marcus and Millichap's 2009 outlook for the apartment rental market. Unemployment figures are indeed an important factor in overall market performance, but it is important to look at each city individually in order to ascertain how vacancy rates and rents will increase or decrease.

For the apartment management professionals out there, let us know the trends in your market or feel free to request information from us to help you make better decisions for marketing your apartment rentals.

Renters across the nation have been unwilling to move into more expensive apartments with so much trepidation surrounding the future of the economy. Escalating unemployment rates and payroll declines have also contributed to the reduced apartment rents.

According to the U.S. Bureau of Labor Statistics' Employment Situation Summary for December, the number of unemployed persons increased by 632,000 to 11.1 million, which pushed the unemployment rate up to 7.2 percent. The number of unemployed increased by 3.6 million from a year ago, when the recession began. The largest decreases in employment came from the construction and manufacturing sectors, which had losses of 2.97 percent and 2.29 percent, respectively.

Below is a chart from the above-linked study comparing employment figures from Q3 and Q4. The Only increases were in Education and Health Services and of course, Government.

Vacancy rates also rose to 6.6 percent from 5.7 percent a year ago. Victor Calanog, Director of research at Reis said, “The quantity of rental apartments might not be suffering as much, but the price paid by households to occupy those rental units is buckling under the strain, with landlords lowering asking rents and raising the amount of concessions they are willing to provide."

With rents falling and vacancy rates rising, landlords and apartment management companies need to do the most effective job they can at reaching potential renters. This means getting the most for your advertising dollars and being able to effectively track lead data. For more information on how we can help you optimize your lead conversion visit http://www.mynewplace.com/managers.

For the apartment managers out there, have you begun to “sweeten the pot" to convert leads by offering special deals?

For renters, have you begun to see better deals in the neighborhoods that you always wanted to live in? Looks like now is a good time to start your apartment search.

One of the more contentious provisions, one that the White House had originally planned to veto, was the $4 billion dollar Community Development Block (CDB) grant. Since the bill was passed into law on July 30 HUD has had 60 days to come up with a plan on how to distribute the funds to state and local governments.

HUD Secretary Steve Preston announced the allocation plan on September 26, under the new Neighborhood Stabilization Program; we are sure that officials and technocrats at HUD were logging long hours and are glad they made the Congressional deadline with 4 days to spare. Let's see how they came up with the numbers in the above chart.

The funds are to be used, as delineated by Congress as follows (numbers reference cited section of HR 3221):

1. To establish financing mechanisms for purchase and redevelopment of foreclosed upon homes
2. To purchase and rehabilitate homes that have been abandoned in order to sell, rent or redevelop
3. Establish land banks for homes
4. Demolish blighted structures(2301(c)(3)

The funds are to be allocated to the areas in greatest need based on:

1. The number and percentage of home foreclosure in each area
2. The number and percentage of homes financed by a subprime mortgage
3. The number and percentage of homes in default or delinquency in each area (2302)

The language of the bill requires that each state is allocated at least .5 percent of the total funds, which is $19.6 million. Also of note is that if a local government is deemed by HUD to receive $ 2 million or less, than the amount is to be included in the state government grant. This is because the allocation is a one- time deal, and it would cost close to 2 million dollars to set up the staffing necessary to carry out the program at the outset.

HUD determined the need for funds for each state based on the following breakdown:

1. 70 percent on the number of foreclosures
2. 15 percent for subprime homes
3. 10 percent for loans in default
4. 5 percent for delinquent loans

HUD then determined which local governments would need funds by coming up with a model foreclosure rate based on decline in home values, percent of all loans that are deemed
“high cost" (3 points above Treasury security of comparable maturity) and unemployment rates in U.S. counties. This model foreclosure rate is then applied to each locality within the state to determine which towns and cities are eligible for funds.

There are a lot of formulas involved and a more detailed ‘governmentese' description can be found here.

The questions we have, and perhaps people out there may have some better answers, how the recent bailout of mortgage lenders will work with the state and local grantees. It sounds like state and local governments will be purchasing homes and mortgages to mitigate community blight and at the same time the U.S. government will be purchasing mortgages written off my commercial and investment banks. Did the U.S. government make a good move investing 4 billion in homes and mortgages that it would eventually have to purchase anyway?