Archive for September, 2014
Closing the Affordable Housing Gap Could Cost $11 Trillion Worldwide
This Bloomberg story highlights some preliminary results from an McKinsey & Co. study that explores the affordable housing challenges faced by governments around the world:
Replacing the world’s substandard housing and building affordable alternatives to meet future global demand would cost as much as $11 trillion, according to initial findings in a McKinsey & Co. report…
About 330 million households — about 1.2 billion people — now struggle with substandard housing, a number that may increase to 440 million in 11 years, McKinsey forecasts. Acceptable housing is within an hour’s commute of work and has basic services including flush toilets and running water, the report says…
The deficit presents an opportunity for construction companies — with some of largest markets in emerging economies such as China, India, Brazil and Russia. Mortgage lenders also stand to benefit; by 2025, the market for affordable-home loans could be worth as much as $400 billion a year, the report said.
Still, the biggest challenge facing policy makers is the cost and availability of land.
“Where land is available at a lower prices, on the fringes of the city, housing projects may fail due to lack of infrastucture” such as school, hospitals and access to buses and trains, the report said.
This Gym is Not for You
A property manager in New York City is making a new gym facility available only to those residents who pay market-rate rent:
A tale of two cities is dividing Stonehenge Village, an Upper West Side apartment complex where management has prohibited the rent-stabilized tenants from using a newly minted gym.
Stonehenge Partners, the company that bought the 417-unit, three building complex on W. 97th St. near Amsterdam Ave. in 2006, told residents at a meeting earlier this month that the 1,000-square-foot gym was only open to its market-rate tenants…
A 2008 city law prohibited discrimination in housing based on tenants’ income, James’ spokeswoman said. The law was written to protect tenants in the Section 8 voucher program, but the spokeswoman noted it may apply to other instances, as well…
Residents said management even shot down tenants’ requests to pay a registration fee to use the facility.
“(The gym) is aimed specifically at new and prospective tenants who expect certain amenities and incentives that are commonly available to market rate renters,” said company spokeswoman Marcia Horowitz, who added that attracting market-rate renters that pay as much as three times the amount paid by rent-subsidized tenants “and to maintain high occupancy is critical to the overall financial health of the building which is in every tenant’s interest.”
This is the second story out of New York recently about management companies treating their residents differently based on their rent rates. The first was a story about “poor doors“:
City housing officials approved of a deal to allow a developer to create a separate entrance for low- and moderate-income tenants at a new rental development on the city’s west side…
The 33-story project at 40 Riverside Boulevard will include 55 units (out of 274 total) of affordable housing for low-income households.
The folks on the Freakonomics podcast have an interesting discussion about both these stories and you can listen to them by clicking on the link below. One of the most interesting comments was economist Steven Levitt’s thoughts on why the property managers would not allow rent-stabilized residents to even pay a fee to use the gym:
..I believe in markets and prices and the usual way to deal with the provision of goods is through prices. But I think that the developers here probably have an ulterior motive…
The way that these contracts are usually written is that these apartments will remain rent-controlled, below-market apartments for as long as the current tenants live there. So in a typical setting, it would never make sense to say the old guard tenants can’t use the gym, you just find the right price, it might be a very high price, that takes into account the negative externality they may have on the new tenants, but you wanna charge that price. And it would just be a mistake to ban them completely. But, I don’t know, if I’m that developer, I just wanna get these old guard out and so maybe really the market isn’t the best tool. It’s actually making life very unpleasant in a way that prices can’t actually make life unpleasant. So the idea that you actually ban them from the gym serves a real purpose here. It tells them, look, we think you’re second-class citizens, we don’t respect you, and as long as you live here we’re going to treat you horribly. Now that’s not a very nice and a very moral way to do it, but if your objective is to make life awful for these folks and get them out, it’s proving to be a pretty effective way of doing that, I bet.
Catering to Cyclists
A new trend in apartment development seems to be targeting the cycling crowd. From a story in the Wall Street Journal:
Seattle’s Velo building in Fremont is built right off the Burke-Gilman bike and recreation trail. Opening this weekend, the 171-unit building, like Vélo North Loop, takes its name from the French word for bicycle (the two buildings are unrelated). It offers a bike-maintenance area as well as a bike wash and storage, both in the garage and on the main level. Apartments will also have bike-storage niches.
Jim Atkins, chief operating officer and managing director of Mack Urban, Velo Fremont’s developer, says the building was built with wider hallways and doorways so residents can wheel their bikes to and from their units. Lobby fabrics and floor materials were chosen in part because they could withstand wear from bike tires. Even the artwork in the building has a cycling theme.
Rents in the building range from $1,600 for one-bedroom apartments to $2,495 for two-bedrooms. Mr. Atkins estimates that 85% of renters will be bringing bikes.
Nationally, commuting by bike grew by 62% between 2000 and 2013 in the U.S., according to the League of American Bicyclists. In 2002, there were seven bike-sharing programs world-wide offering subscription-based, short-term bike rentals, according to MetroBike, a bike-sharing consultancy. Today, there are 750…
In some cities, bike infrastructure is prompting real-estate development. Many of the newest luxury apartment and condo buildings in Minneapolis are rising along the city’s Midtown Greenway, a 5½-mile-long bike and pedestrian trail converted from an abandoned rail corridor. Soren Jensen, the executive director of the Midtown Greenway Coalition, says that historically, buildings in the area were constructed with main entrances facing vehicular roadways.
You might think that this doesn’t apply here in the Piedmont Triad, but Greensboro’s Greenway is already generating interest from developers – in fact one of the stops on this year’s PTAA Bus Tour was the Greenway at Fisher Park – and Winston-Salem has a greenway that is partially developed. In fact you’d be hard pressed to find a municipality that doesn’t have the development of walking/biking infrastructure as part of its comprehensive plan. Add to that the demographic trends we’re seeing and catering to the cycling community starts to make all kinds of sense.
When the “Internet of Things” Impacts the Apartment Industry
An interesting article on Wired.com looks at how the ‘internet of things” could impact landlords in New York City in the immediate future:
To guard the safety and health of tenants, New York and many other cities require landlords to keep inside temperatures above a certain level from October until May. But not all building owners and managers follow the rules. Each year, heating complaints are either the number one or number two most frequent complaint to New York’s government services and information line, 3-1-1, says Tom Hunter, the spokesperson for a volunteer effort called Heat Seek NYC, citing data from the siteNYC OpenData…
Tenants can sue landlords over this, but historically, they’ve had to rely on their own hand written records of how cold their apartments get. And these records haven’t always held up in court. Heat Seek NYC hopes solve that problem by building internet-connected heat sensors to monitor the conditions of apartment buildings in order to provide a reliable, objective record that tenants and advocacy groups can use in court…
Heat Seek NYC founders William Jeffries and Tristan Siegel met earlier this year atThe Flatiron School , one of many “code bootcamps” popping up around the country to teach students the basics of programming in a matter of months. As he said in a recent interview, Jeffries thought a web app for recording and reporting apartment temperatures using a programmable sensor device called Twine would make a good class project, and Siegel jumped at the idea…
One of the obvious limitations to such a scheme is the need for internet access. The team overcame this limitation by creating a system that depends on two different devices: cells and hubs. Cells are distributed throughout the building, and report their data back to the hub, which then transmits all of the data to the web. The cells can all connect locally with each other and to the hub, so only one tenant needs to have access to the internet to provide connectivity to the hub. In cases where there’s no one in the building that can provide internet access for the hub, Heat Seek NYC will provide a free WiFi hotspot.
While this story doesn’t have direct relevance to the apartment industry here in the Piedmont Triad region of North Carolina, the technological concepts will very likely become applicable soon. We’ve been hearing about the “internet of things” for several years now, but it’s mostly been theoretical. Stories like this highlight how quickly that can change and it doesn’t have to be radically expensive.
Think about the practical applications that the technology in this story could have if you simply thought of it as a management tool versus an enforcement tool. A property manager could use something like this to monitor temperature swings in their communities, and if they noticed exceptionally high or low temps they could have maintenance check to make sure the thermostat in a unit is working correctly. If it is then they can make a necessary repair and if it isn’t they can work with the occupant to make sure they understand how the thermostat works and how they can save money if they use it differently.
It doesn’t take much imagination to think of other applications that could benefit manager and resident alike, and it’s probably a matter of when, not if, we’ll see these new technologies coming on line.
Renters in Winston-Salem Get Say in On-Street Parking Decisions
Winston-Salem’s tightening its procedures for citizens to request bans for on-street parking and renters will be allowed to weigh in. From the Winston-Salem Journal:
Under the old rules, adjacent property owners could request that on-street parking be banned on their streets. If fire, police and city transportation officials agreed, the signs could go up and the on-street parking would end…
At the Sept. 9 committee meeting, Council Member James Taylor proposed that for rental properties the tenant and owner each get one vote. For properties occupied by the homeowners, the owner would get two votes. That motion passed, with Taylor and Council Member Dan Besse in favor, Council Member Robert Clark opposed and Council Member Derwin Montgomery abstaining…
When the issue came before the council Sept. 15, Clark proposed a substitute motion to leave the decision with only property owners…
Clark’s substitute motion failed on a 4-3 vote, with Montgomery and Council Member Jeff MacIntosh supporting Clark’s motion.
Taylor then brought back up the idea of giving renters a say, and that motion passed 6-2, with Clark and MacIntosh opposed.
Phillips Foundation Backs Housing First Initiative With $1 Million Grant
The Phillips Foundation, which was established by Phillips Management founder Kermit Phillips and is today administered by his family, made a $1 million grant in 2013 to the Partners Ending Homelessness to launch the Housing First Initiative, which is an effort to end chronic homelessness in Greensboro and is based on a program that has proved effective in other parts of the country. From the announcement:
Phillips Foundation provided a $1 million grant in 2013 to launch this initiative.Those resources allowed Partners Ending Homelessness to hire an international consultant, build out their staff and program, and systematically identify vulnerable individuals who had the most urgent needs.Salvation Army of Greensboro manages the housing portion of the program, and Psychotherapeutic Services, Inc. has developed an Assertive Community Treatment Team (ACTT) for long-term housing support and case management. ACTT is the highest level of mental health service available short of hospitalization. With these teams now in place and working together, the program is ready to scale.
An article in the Greensboro News & Record highlights the early success they are seeing with the program:
The effort in Greensboro is already paying dividends:
The early results reflect the experiences of the first five participants in the year before joining the program and in the six months after joining program.
In addition to paying for a consultant who has worked with other communities, the money has been used to develop an Assertive Community Treatment Team for long-term housing support and case management, the highest level of mental health service available short of hospitalization.
“Although $1 million seems like we are spending a lot of money, the statistics are showing we are saving a lot of money,” said the Rev. Mike Aiken of Greensboro Urban Ministry, one of the partners in Ending Homelessness.
“People are being housed and supported. We were absolutely sold on it.”
The number of emergency room visits also dropped, from eight to none. The cost of housing these people dropped from $30,650 in shelters to $8,927 in rent for their new homes. And the number of nights spent in jail dropped from 28 to none.
This is consistent with the results other states are seeing with the Housing First program. From an article in The New Yorker:
n 2005, Utah set out to fix a problem that’s often thought of as unfixable: chronic homelessness. The state had almost two thousand chronically homeless people. Most of them had mental-health or substance-abuse issues, or both. At the time, the standard approach was to try to make homeless people “housing ready”: first, you got people into shelters or halfway houses and put them into treatment; only when they made progress could they get a chance at permanent housing. Utah, though, embraced a different strategy, called Housing First: it started by just giving the homeless homes…
…Housing First has saved the government money. Homeless people are not cheap to take care of. The cost of shelters, emergency-room visits, ambulances, police, and so on quickly piles up. Lloyd Pendleton, the director of Utah’s Homeless Task Force, told me of one individual whose care one year cost nearly a million dollars, and said that, with the traditional approach, the average chronically homeless person used to cost Salt Lake City more than twenty thousand dollars a year. Putting someone into permanent housing costs the state just eight thousand dollars, and that’s after you include the cost of the case managers who work with the formerly homeless to help them adjust. The same is true elsewhere. A Colorado study found that the average homeless person cost the state forty-three thousand dollars a year, while housing that person would cost just seventeen thousand dollars.
Here at PTAA we’re in early discussions with Partners Ending Homelessness and The Salvation Army to see how our members might be able to participate in the program and as those discussions progress we will let you know how you might be able to participate and help.
Apartment Construction Pace Hits 25-Year High
According to Freddie Mac VP and Chief Economist Frank Nothaft, apartment construction is at a 25-year high, but the good news is that those units are being absorbed thanks in part to a continuing drop in home ownership rates:
Freddie attributes these absorption rates to the decline in the overall U.S. home ownership rate, which fell to 64.7 percent in the second quarter of 2014. That was the lowest mark since 1995. As home ownership falls, apartment vacancies have also dropped to their lowest level in 14 years.
Here’s a video of Northaft’s comments:
Nationwide Apartment Supply Wave Starting to Impact Fundamentals
From an item published by CoStar Group:
New apartment completions and construction starts continue to trend upward, and the new supply of units is beginning to show up in rising vacancy rates in a number of high-growth U.S. markets…
Vacancy rates in the 54 largest markets tracked by CoStar Group remain at a 10-year low. However, the trend has clearly begun to reverse course. The national vacancy rate has risen roughly 30 basis points over the last three quarters to about 5.5% as supply has overtaken demand, and CoStar is forecasting another 50-basis-point rise in vacancies through the second half of 2014.
Translation – it isn’t happening in secondary or tertiary markets like Greensboro-High Point or Winston-Salem. It’s also restricted to high-end properties:
And while new construction for multifamily housing has picked up in recent months, analysts have also noted that demand for rental housing continues to show strength. As a result, the vacancy uptick has been restricted to Four- and Five-Star properties in markets such as Boston, Austin, Minneapolis and Washington, D.C. Vacancies in Three Star properties haven’t yet seen much movement.
“While the impact of new product will certainly trickle down to the Class B space, it hasn’t happened yet,” Yuen said.
Three Forsyth County Apartment Communities Qualify for Credits
From the Winston-Salem Journal:
Three Forsyth County apartment complexes have qualified for federal tax credits and other financing, the N.C. Housing Finances Agency said Tuesday.
Abbington Gardens in Winston-Salem will receive the largest amount in Forsyth at $767,200 for 96 new family units by KRP Investments LLC. Friar Woods Apartments in Kernersville will receive $668,400 for 84 new family units by Landmark Asset Services Inc.
University Place in Winston-Salem received approval for a tax-exempt bond valued at $5.23 million and a tax credit of $289,367 for a rehabilitation project of 97 apartments for the elderly by N.C. Housing Foundation Inc.
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