Apartment Rent Growth Hits 15-Year High
U.S. apartment rent growth is at a 15-year high, according to MPF Research, the rental market intelligence division of RealPage, Inc. Mid-2015 new resident rents topped mid-2014 rates by 5.2 percent, with that annual growth including a price bump of 2.5 percent occurring during April to June. Both the annual and quarterly rent growth figures are the biggest hikes in those performance metrics seen since the 1999-2000 timeframe.
Renewal Pricing Up
Renewal leases executed in the second quarter were priced 4.3 percent above last year’s renewal rents. Renewal pricing is growing in importance for apartment owners and operators, as more residents are staying put – rather than moving – when their leases expire. In the second quarter, 51.9 percent of households with expiring apartment leases remained in place, compared to the 50.6 percent retained when leases expired a year earlier. Prior to 2010, typical resident retention upon lease expiration ran at a notably lower level of around 45 percent.
“While apartment rents are rising at a significant pace all across the country, the nation’s average price increase is being skewed quite a bit by the surging rents in the Western region of the country,” said MPF Research vice president Greg Willett. Annual new resident rent growth is at 7.8 percent in the Western region, compared to 4.1 percent in the South, and 3.3 percent in both the Northeastern and Midwestern regions. Furthermore, rent growth is accelerating much more quickly in the West than other parts of the country.
“Throughout the current economic cycle, the nation’s rent growth leaders have been in the Pacific Northwest, from Seattle down through the San Francisco Bay Area, plus Denver,” stated Willett. “What’s really driving such high levels of overall growth in the West is that price increases, well above the national norm, have spread to the region’s other large markets, including all of Southern California, Phoenix, Las Vegas, and Sacramento. These areas were slow to achieve economic recovery coming out of the recession, but now are adding jobs and households at levels that stimulate considerable apartment demand, with occupancy rates tightening and rents rising sharply.”
Among the nation’s biggest metropolitan areas, 16 have new resident rent growth climbing more than 6 percent annually, with 13 of them in Western markets.
Tight Occupancy, Increased Demand and Sustained Construction
Sizable rent growth in U.S. apartments reflects that occupancy is very tight. The occupancy figure as of the second quarter was 94.9 percent, up slightly from 94.6 percent a year earlier.
Demand for apartments across the nation’s 100 largest markets came in at 98,210 units during the second quarter, well surpassing concurrent completions that totaled 52,666 units. Annual demand for the second quarter registered at 250,157 units, just ahead of the 240,715 new units delivered.
Ongoing construction continues to hover around the mark of 400,000 apartments—a level that has been sustained for two full years—with 421,345 units under construction in the 100 largest metros at the end of the second quarter.
“While new supply tends to slow rent growth historically, that hasn’t been the case as of late,” Willett said. “Construction on luxury units in the most desirable neighborhoods results in new product rents being too high to pull many residents out of the existing stock. Nationally, the typical monthly rent for new communities is around $1,600, which is a little more than 20 percent over rents in the best properties built prior to 2010.”
MPF Research forecasts that U.S. apartments will remain essentially full in 2015-2016. “While overall occupancy should inch down very slightly, it really just reflects the volume of product moving through initial lease-up, rather than any real softening in the anticipated performance,” Willett said.
Rents will likely continue to rise. “The pace of price increase should cool a bit from today’s level, but annual growth, at roughly 4.5 percent or better, is predicted over the next 12 to 18 months,” Willett said.*
QAP Updates Across the Nation
California Will Remove First Round 9%, 4% + State Applications from Website
The 2015 First Round 9% and 4% + State applications will be removed from the CTCAC website at 12pm on Monday, July 6th. If you wish to save any of them, please click the link below:
2015 First Round Nine Percent (9%) Applications
2015 First Round Tax-Exempt Bond Financed (4%) Applications Requesting Federal and State Credits
Iowa Opens Comment Period for 2016 Draft QAP
The 2016 Draft Qualified Allocation Plans are open for public comment through 4:30 p.m. on August 25, 2015. Comments may be submitted via email. The Iowa Finance Authority will hold a public hearing on August 25, 2015, to receive public comments on the 2016 Draft Qualified Allocation Plan. The public hearing will be held from 9:00 a.m. – 11:00 a.m. at the Iowa Finance Authority, 2015 Grand Avenue, Des Moines, Iowa. Please contact Dave Vaske with any questions, 515.725.4941.
Kentucky Enacts New Reporting Requirements for HOME Funded Projects
HOME funded multifamily projects still in their affordability period are now required to submit a HOME Annual Rent Approval Form, which can be found on Kentucky Housing Corporation’s website, under Quick Links, Asset Management, HOME Rental Program Tools. For 2015, all HOME funded projects still in their affordability period are required to submit an Annual Rent Approval Form by Saturday, August 15, 2015. After January 1, 2016, the Annual Rent Approval Form will be due no later than 45 days after the U.S. Department of Housing and Urban Development (HUD) releases HOME Rent Limits. The HUD published HOME Rent Limits are available on the HUD Exchange website. Failure to submit the form by August 15, 2015, could result in a finding and/or being placed on KHC’s Suspension and Debarment List.
New York City Budget Dedicates $7B to Affordable Housing Over Next 10 Years
The City of New York enacted Friday a 2016 budget of $78.5 billion. Following through on Mayor de Blasio’s promised investment of more than $7 billion in City funds for affordable housing over 10 years, an increase in City capital has been strategically allocated to support the development of 80,000 new construction units and the preservation of 120,000 across the 5 boroughs. Local investment in affordable housing is $7.45 billion in capital, which is comprised of $7.1 billion from City Capital, $279 million in HOME and $75 million in Reso A over 10 years. City Capital must account for any reductions of federal HOME and CDBG funds stemming from anticipated federal cuts and transfers to other City agencies. Click here to read more.
Texas Hosts Roundtable Discussion on 2016 QAP and Multifamily Rules
The Texas Department of Housing and Community Affairs will hold a roundtable discussion of the 2016 QAP and Multifamily Rules at the Austin-Hobby Building on Wednesday, July 15, 2015, at 1:30pm. The focus of this discussion will be on the implementation of statutory changes from the 84th Legislature and possible changes to the QAP and Rules (Subchapters A, B, C, and G).**
Supreme Court Issues Major Decision Impacting Affordable Housing
On June 25 the United States Supreme Court issued its decision in TEXAS DEPARTMENT OF HOUSING AND COMMUNITY AFFAIRS ET AL. v. INCLUSIVE COMMUNITIES PROJECT, INC., ET AL. (“TDHCA v. Inclusive Communities”), upholding the use of the “disparate impact” analysis in the Fair Housing Act. The decision upholds an important and longstanding principle of the Fair Housing Act, namely that housing policy can be discriminatory by showing that what may seem like neutral policies have the effect of furthering discrimination.
While it affirms the principle of disparate impact, the decision also indicates it could be difficult to prove based solely on a projects location or statistical disparity. The decision observes that, “From the standpoint of determining advantage or disadvantage to racial minorities, it seems difficult to say as a general matter that a decision to build low-income housing in a blighted inner-city neighborhood instead of a suburb is discriminatory, or vice versa. If those sorts of judgments are subject to challenge without adequate safeguards, then there is a danger that potential defendants may adopt racial quotas—a circumstance that itself raises serious constitutional concerns.”
“Recognition of disparate impact liability under the FHA plays an important role in uncovering discriminatory intent: it permits plaintiffs to counteract unconscious prejudices and disguised animus that escape easy classification as disparate treatment. But disparate-impact liability has always been properly limited in key respects to avoid serious constitutional questions that might arise under the FHA, e.g., if such liability were imposed based solely on a showing of a statistical disparity.”**
Top 10 Venture Firms Betting on Senior Health
Corporate and strategic investors continue to sink large sums into technology startups addressing seniors’ health, but there still is massive opportunity for growth in this sector. The rise of these technologies has major implications for senior housing providers, as some startups hold promise for improving resident care and the bottom line, while others could create challenges, such as by changing referral patterns.
So far in 2015, companies creating technology products relevant to the health of the 50-plus population have received a total of $1.3 billion in funding, according to a recently released StartUp Health Insights Report. It tracks seed, venture, corporate venture and private equity funding.
The report defines a company as “relevant” to 50-plus consumers if it is creating products or services that serve this population as well as others. It includes business-to-business companies but only if they also have a consumer touchpoint; so, for example, compliance software is excluded.
While these 50-plus relevant companies have received 46% of all digital health funding year-to-date, only 3% of those companies are specifically focused on the senior market.
“While this may be perceived as a lack of appetite from investors, we firmly believe that there is a huge opportunity gap for more companies to focus exclusively on this population,” the report states.
Cambia Health Solutions, Khosla Ventures and Qualcomm Ventures top the rankings of firms that have invested in these senior-relevant companies. Each of these firms has participated in four deals so far this year.
So far, there have been 134 deals in the 50-plus space in 2015. This puts it on track with last year, which saw 267 deals total. Funding in this space has been tracking up since 2010, when only 73 deals were recorded by StartUp Health Insights.
Among the notable deals so far in 2015, the report singles out the recent $20 million Series A round for HomeHero and the $4 million Series A round for Caremerge.
HomeHero seeks to take the home health agency out of the equation and directly connect clients with caregivers. Caremerge is a care coordination and communication platform for the senior care industry. It has partnered with senior living heavy-hitters such as Life Care Services.
While it is not mentioned by name in the report, Seniorly is another tech startup generating buzz. It is offering senior living referrals with a local emphasis in Northern California and has raised $550,000 from angel investors and other sources.***
- Cash Gill plans to attend the Missouri Real Estate Appraisers Commission Quarterly Commission Meeting September 29th – 30th in Jefferson City, MO.
- Gill Group plans to attend the Georgia Association of Housing and Redevelopment Authorities (GAHRA) Annual Conference and Exhibition September 20th – 22nd in Savannah, GA.
- Gill Group plans to attend the CAHR Quarterly Board Meeting September 15th – 16th in Washington, DC.
- Cash Gill attended the Missouri Real Estate Appraisers Commission Quarterly Commission Meeting June 17th – 18th in Jefferson City, MO.
- Gill Group attended the National Council for Affordable Rural Housing’s Annual Meeting June 14th – 16th in Washington, DC.
- Gill Group attended the National Council of State Housing Agencies’ (NCSHA) Housing Credit Connect June 1st – 4th in Los Angeles, CA.
- Cash Gill spoke on a panel entitled “Successful Development in Challenging Markets”
- Gill Group attended the Middle Atlantic Regional Council of the National Association of Housing and Redevelopment Officials’ (MARC NAHRO) Spring Conference May 19th – 22nd in Ocean Springs, MD.
- Gill Group attended the Tennessee Association of Housing and Redevelopment Authorities’ (TAHRA) Spring Workshop April 20th – 22nd in Murfreesboro, TN.
- Cash Gill presented a session Tuesday, April 21st entitled “Appraisals, Market Studies, Rent Comparability Studies and Rent Reasonableness Studies for RAD and LIHTC Transactions”
- Cash Gill attended the Missouri Real Estate Appraisers Commission Quarterly Commission Meeting April 15th – 16th in Jefferson City, MO.
- Gill Group attended Bank of Advance’s Annual Meeting March 19th – 22nd in Norfork, AR.
- Gill Group attended the Maco Companies’ Annual Meeting March 12th – 15th in Biloxi, MS.
- Gill Group attended the Council for Affordable Rural Housing’s Quarterly Board Meeting March 4th – 5th in Washington, DC.
- Gill Group attended Mississippi’s Annual Affordable Housing Conference February 23rd – 25th in Natchez, MS.
- Gill Group attended NH&RA’s Annual Meeting February 18th – 20th in Key Largo, FL.
- Gill Group attended CARH’s Midyear Meeting January 27th – 29th in St. Pete Beach, FL.
- Cash Gill spoke on a panel Wednesday, January 28th entitled “Preservation Challenges and Opportunities”
- Gill Group attended 40+ meetings and conferences throughout the United States in 2014.
GROWTH (2014 - Highlights):
- Gill Group began the process of working with owners of affordable housing to develop a web-based program that will work hand-in-hand with our services. It will give the users of our appraisals, market studies, capital needs assessments and many other services easy access and real time usage.
- Gill Group added 2 offices with appraisers, market analysts, engineers and architects.
- Within the offices are 11 architects, one MAI appraiser, one general certified appraiser, four market analysts and 12 additional support staff.
- Gill Group attended 22 conferences and meetings throughout the United States in 2013
GROWTH (2013 - Highlights):
- Gill Group expanded our cutting-edge market analysis software and added our own in-house developed needs assessment software for CNAs, PNAs, PCNAs, PCAs, RPCAs, and every other acronym for this type of service.
- Gill Group added 4 offices with appraisers, market analysts, engineers and architects.
- Within the offices are three architects, one MAI appraiser, two general certified appraisers, five market analysts and 10 additional support staff.
- Gill Group expanded the footprint of its subsidiary, National Title & Escrow, to cover the entire United States with a local presence.
- Gill Group attended 20 conferences and meetings throughout the United States in 2012
GROWTH (2012 - Highlights):
- Gill Group developed cutting-edge market analysis software that will allow us to do preliminary analysis that is subject-specific in any market in the United States within minutes.
- Gill Group added 11 offices with appraisers, market analysts, engineers and architects.
- The offices now employ an additional 34 people.
- Gill Group expanded coverage of its subsidiary, National Title & Escrow, to cover the entire United States.
- Gill Group expanded coverage of its subsidiary, Gill Insurance Group, to cover the entire United States.
Gill Group has published the following:
- New York Real Estate Journal - How can low-income housing facilities translate into high profits?
- New York Real Estate Journal - Up, up and away: Home mortgage interest rates and gasoline prices continue ascending.
- Tax Credit Advisor - Boston MSA Market Snapshot
- Tax Credit Advisor - Seattle MSA Market Snapshot
- Northeast Industrial Development Resource Guide - What Appraisers Know About Investing.
- Affordable Housing Finance – Urban and Rural Market Studies.
- Tax Credit Advisor – LIHTC Appraisals 101
Cash Gill, MAI has had the opportunity to speak on the following topics:
- (Indianapolis, IN) National Council of Affordable Housing Market Analysts - Maximize Your Market: Understanding the Methodology Behind Market Studies.
- (Reno, NV) Nevada Council of Affordable and Rural Housing - Don't Get Caught in the Red. New Guidelines for Audits and Inspections.
- (Washington, DC) The Institute for Professional and Executive Development - Nonrecourse HUD Deals - So You Closed Your Nonrecourse HUD Deal. Now What? And Is It Really Nonrecourse?
- (Arlington, VA) Council for Affordable and Rural Housing - Property Valuation: The Correct Way to Value Properties.
- (New Orleans, LA) National Council of Affordable Housing Market Analysts - Affordable Housing Site Analysis
- (Las Vegas, NV) Nevada Council of Affordable and Rural Housing - Auditing and Accounting Guidelines for Section 42 Low Income Housing Tax Credits.
- (Washington, DC) Council for Affordable and Rural Housing - Rural Development Appraisals and Market Studies
- (Miami, FL) Council for Affordable and Rural Housing - The Equity Market - Impact on Rural Housing
- (Washington, DC) Council for Affordable and Rural Housing - How to Foster Affordable Green and Rural Housing Needs Assessments
- (Indianapolis, IN) Affordable Housing Association of Indiana - Market Analysis – Best Ways Use Market Studies to Ensure Application Points
- (Portland, ME) Enterprise Buyer/Seller Conference for RRH 515 Properties – Valuing the Product. What Is My Development Worth?
- (Washington, DC) National Housing and Rehabilitation Association – Financing and Underwriting Special Needs Housing.
- (Atlanta, GA) National Council of State Housing Agencies – Comprehensive Market Analysis.
- (Chicago, IL) AHF Live – Strategies for Rural Deals.
- (Dallas, TX) Crittenden Multifamily – Financing Special Use Properties.
- (Washington, DC) Council for Affordable Rural Housing – Rural Housing Preservation
- (Denver, CO) National Council of State Housing Agencies – Rural Housing Strategies
- (Denver, CO) National Council of State Housing Agencies – Y15: Preservation and Disposition Seminar
- (San Antonio, TX) Rural Rental Housing Association – LIHTC Legislative Update
- (Key Largo, FL) Council for Affordable Rural Housing – How National Appraisal Practices Impact USDA Assisted Properties
- (San Francisco, CA) National Council of State Housing Agencies – Changes and Challenges in Rural Housing Development
- (Chicago, IL) AHF Live – Preservation of Older LIHTC Deals
- (Franklin, TN) Regional Affordable Housing and RAD Training – Valuation, Feasibility and Capital Needs Assessments
- (Columbus, OH) Council for Rural Housing & Development of Ohio – Rural Housing Market Research
- (South Bend, IN) Great Lakes Capital Fund’s University of Affordable Housing – Valuation Risks Using Financing for RAD Deals
- (Chicago, IL) National Council of State Housing Agencies – Rural Development Opportunities
- (Orlando, FL) National Association of Housing and Redevelopment Officials – Affordable Housing Appraisals, Market Studies, Rent Comparability Studies and Rent Reasonableness Studies
- (Alexandria, LA) Regional Affordable Housing and RAD Training – Valuation, Feasibility and Capital Needs Assessments
- (Ft. Lauderdale, FL) Southeastern Affordable Housing Management Association (SAHMA) – Rent Comparability Studies 101
- (Indianapolis, IN) Midwest Buyer/Seller Conference – CNAs and Appraisals
- (Chicago, IL) AHF Live – Acquisition Challenges and Opportunities
- (St. Pete Beach, FL) CARH – Preservation Challenges and Opportunities
- (Nashville, TN) TAHRA – Appraisals, Market Studies, Rent Comparability Studies and Rent Reasonableness Studies for LIHTC and RAD Transactions
- (Los Angeles, CA) NCSHA – Successful Development in Challenging Markets (June 3, 2015)
*as seen on multifamilybiz.com
**as seen on housingonline.com
***as seen on seniorhousingnews.com