fha multifamily underwriting training “how to avoid a hud market rejection” robert lefenfeld...

FHA Multifamily Underwriting Training“How to Avoid a HUD Market Rejection”

Robert LefenfeldManaging PrincipalReal Property Research Group, Inc.

Southeast Mortgage Advisory CouncilHilton Head, South CarolinaMay 29th 2013

Market Study Criteria

National Council of Housing Market Analysts (NCHMA)WWW.Housingonline.org

MAP Guidelines

Market Study Objectives

Role of Market Analyst and Appraiser in the MAP Process

• Market Analyst evaluates balance of supply and demand for rental housing

• Appraiser is responsible for income (rent) and (operating) expenses.

• Based on Supply/Demand and income/expenses, Market Analyst is responsible for Absorption.

7.5.A “The purpose of the market study is to assure that there is enough sustainable demand for additional units without adversely impacting the existing supply, so as to maintain a balanced overall market”


Elements of Market Analysis


Components of Market Study:

• Site Analysis and Market Area

• Economic Context

• Demographic Context

• Supply Context

• Findings and Conclusions:

• Balance of Supply and Demand

• Affordability

• Product Positioning in terms of offering and pricing

Site Analysis Questions?

What is setting of site?

What is characteristics of general area?

What are transportation linkages?

What improvements are anticipated in area?

How is the area served by amenities?

Schools?

Perceptions of Crime

Considerations for non-residential land uses?

7.5.C.4 Project location in terms of neighborhood and any other locational considerations.

Site and Market Area

Conducting a Site Analysis

• Is the site suitable for development as rental housing?

• Surrounding land uses compatible with housing?

• Neighborhood adequately served by facilities and services?

• Is it accessible by car and public transportation?

• Planned changes in the area that may compromise its suitability in the future?


Amenity Analysis should cover:

Convenience Shopping

Comparison Shopping

Recreation

Entertainment

Medical

Mass Transit

Schools

Library

Public Transportation (Bus, subway)

Establishment Type Address DistanceShell Gas & Convenience 6100 Tidewater Dr. Adjacent

Food Lion Supermarket 3530 Tidewater Dr. 0.5 mi. S

Rite Aid Pharmacy 3600 Tidewater Dr. 0.5 mi. S

Family Dollar Discount Retail 2010 Cromwell Dr. 0.5 mi. S

Lakewood Park Recreation 1612 Willow Wood Dr. 0.7 mi. SW

Lafayette Branch Public Library Library 1610 Cromwell Dr. 0.7 mi. SW

Lafayette-Winona Middle School Public Education 1701 Alsace Ave. 0.8 mi. S

Willard Model Elementary School Public Education 1511 Willow Wood Dr. 0.8 mi. SW

U.S. Post Office Government 1112 Green St. 1.2 mi. E

Family Dollar Discount Retail 6130 Chesapeake Blvd. 1.3 mi. E

Norfolk Fire-Rescue Station #11 Emergency Services 3127 Verdun Ave. 1.4 mi. SE

Wal-Mart Supercenter General Retail 7530 Tidewater Dr. 1.5 mi. NSouthern Shopping Center (Food Lion, Dollar Tree, Ruby Tuesday) General Retail

SW Corner Tidewater Dr. & Little Creek Rd. 1.5 mi. N

Norfolk Fire-Rescue Station #14 Emergency Services 1460 Norview Ave. 1.8 mi. EBon Secours Depaul Medical Center Hospital 150 Kingsley Ln. 2.2 mi. W

Norfolk Police Third Patrol Division Emergency Services 975 Goff St. 2.6 mi. S

Maury High School Public Education 322 Shirley Ave. 3.4 mi. SW

Norfolk State University Higher Education 700 Park Ave. 3.5 mi. S

Old Dominion University Higher Education Hampton Blvd. @ 43rd St. 3.5 mi. SW

Harris Teeter Supermarket 1300 Colonial Ave. 3.5 mi. SW

Constant Convocation Center Entertainment 4320 Hampton Blvd. 3.5 mi. SW

Harrison Opera House Entertainment 160 W. Virginia Beach Blvd. 3.7 mi. SW

Scope Arena Entertainment 201 E. Brambleton Ave. 3.8 mi. SW

Chrysler Hall Entertainment 215 St. Paul's Blvd. 3.9 mi. SW

Harbor Park Entertainment 150 Park Ave. 4.1 mi. SMacArthur Center (Nordstrom, Dillards, Regal Cinemas)

Comparison Retail, Entertainment 300 Montincello Ave. 4.2 mi. SW

Wells Theatre Entertainment 254 Granby St. 4.3 mi. SWGallery at Military Circle (Macy's, Sears, JC Penney, Cinemark)

Comparison Retail, Entertainment 880 N. Military Hwy. 5.0 mi. SE


Future Improvements

Transportation - State Consolidated Transportation Programs

Other Improvements – County/City Capital Improvement Budget

Proposed public transportation service

Important to understand how community is developing; Impact on Household Growth.


A housing market area is the contiguous area within which households compete for available housing, and

within which your project will compete for qualified renters.

7.5.D Housing Market Area is the geographic area in which units with similar characteristics are in equal competition

Market Area


Impact of Market Area Definition

Population and Household Counts

General Demographics

Demand Analysis

Supply Analysis

Competitive Stock

Attainable Rents


Factors used to define a market area:

Location of Competitive Properties Accessibility Natural Boundaries Housing Product Characteristics Market Perceptions Commuting Patterns Target Market Jurisdictional Boundaries Local Agency Service Boundaries Non-geographic Factors Data availability


Is this a good market area?


How about this market area?


Does this seem reasonable?


Secondary Market Areas

Less relevant to rental than retail

Secondary source of buyers/renters

Typically assumed as bonus demand over and above demand derived by Primary Market Area

Often a comparison geography to the Primary Market Area


At Place Employment Trends

Labor Force and Unemployment Rates

Major Employers – Contractions or Expansions

Commuting Patterns

7.5.E.1 A discussion of current economic conditions and employment characteristics

Economic ContextEnvironment in which project will be operating

Larger than the market area

Jurisdictions with functional integration

Metropolitan Areas

Counties

Cities

Economic ContextDefine the Local Economy

Unemployment Rates

Annual Unemployment 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Q2Labor Force 430,406 430,706 436,622 439,252 439,469 445,698 451,401 448,242 453,877 457,150 462,138 464,524 464,882Employment 414,532 412,503 415,302 418,515 419,705 425,796 432,913 432,234 434,094 423,623 426,518 432,133 433,435Unemployment 15,874 18,203 21,320 20,737 19,764 19,902 18,488 16,008 19,783 33,527 35,620 32,391 31,447

Unemployment RatePrince George's County 3.7% 4.2% 4.9% 4.7% 4.5% 4.5% 4.1% 3.6% 4.4% 7.3% 7.7% 7.0% 6.8%

Maryland 3.6% 4.1% 4.5% 4.5% 4.3% 4.1% 3.8% 3.4% 4.3% 7.4% 7.8% 7.0% 6.9%United States 4.0% 4.7% 5.8% 6.0% 5.5% 5.1% 4.6% 4.6% 5.8% 9.3% 9.6% 8.8% 8.3%

Source: U.S. Department of Labor, Bureau of Labor Statistics

Labor ForceEmployment

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

10.0%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Q2

Prince George's County Maryland United States

Une

mpl

oym

ent

Economic Context

At Place Employment

Quarterly Census of Employment and Wages (QCEW)

Data is from the employer reporting of employees covered under the unemployment insurance program.

It counts only filled jobs, whether full or part-time, temporary or permanent, by place of work.

Individuals holding more than one job are counted for each job.

Major exclusions from UI coverage include self-employed workers, most agricultural workers on small farms, all members of the Armed Forces, elected officials in most states, most employees of railroads, some domestic workers, most student workers at schools, and employees of certain small nonprofit organizations.

Economic Context

Change In At Place Employment

8701,259

1,594

-266

23

3,026

-2,424

-4,903

-529

-10.0%

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

-6,000

-4,000

-2,000

0

2,000

4,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Change in At Place Employment

Annual Change in Prince George's County At Place EmploymentUnited States Annual Employment Growth Rate

Ann

ual C

hang

e in

At P

lace

Em

ploy

men

t

% A

nnual Grow

th

Economic Context

At-Place Employment by Sector

29.0%

0.1%

8.3%

2.7%

19.0%

1.9%

4.0%

12.8%

9.9%

9.2%

3.1%

16.4%

1.5%

4.2%

9.0%

19.2%

2.1%

5.7%

13.4%

14.7%

10.3%

3.4%

0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0%

Government

Nat Resources-Mining

Construction

Manufacturing

Trade-Trans-Utilities

Information

Financial Activities

Professional-Business

Education Health

Leisure-Hospitality

Other

Employment by Sector 2011

United States

Prince George's County

Economic Context

Long Term Change in Employment by Sector

1.5%

-4.6%

-1.8%

-4.3%

-1.3%

-2.6%

-1.2%

-0.5%

1.7%

2.7%

-1.7%

0.4%

1.1%

-1.9%

-3.2%

-0.3%

-2.9%

-0.3%

0.6%

2.5%

1.1%

0.5%

-5.0% -4.0% -3.0% -2.0% -1.0% 0.0% 1.0% 2.0% 3.0% 4.0%

Government


Construction

Manufacturing


Information



Education Health

Leisure-Hospitality

Other

Annualized Employment Change by Sector, 2001-2011

United States


Economic Context

Short Term Change in Employment by Sector

3.5%

-31.0%

-25.1%

-21.7%

-8.8%

2.7%

-12.8%

-13.3%

6.6%

9.7%

-8.7%

-0.5%

3.5%

-27.7%

-15.4%

-5.8%

-11.7%

-9.0%

-3.2%

9.1%

-0.3%

-0.7%

-35.0% -30.0% -25.0% -20.0% -15.0% -10.0% -5.0% 0.0% 5.0% 10.0% 15.0%

Government


Construction

Manufacturing


Information



Education Health

Leisure-Hospitality

Other

Employment Change by Sector, 2007-2011

United States


Economic Context

Economic Forecast

Major Employers Location; Size of Workforce; Prospects for future growth or reduction

Economic Expansions Any planned expansions in the Market; i.e., BRAC, New Plants. Is household growth increasing demand for services

Economic Disruptions Major Layoffs or Closing; Vulnerable Sectors of Economy

Wage Trends Are wages increasing or decreasing?

0 1

miles

2

SITE

Fulton County

NCR Corp.Emory Eastside Med. Center

EMS Technologies

Intercept Group

Atlanta Journal

Primerica Financial

Scientific-Atlanta

US Postal Service

Location of Major Employers

Economic Context

Demographic Context

Overall Trends

Projection Process

Demographic Analysis

Demographic Context

7.5.E.2 A thorough discussion of past and anticipated future trends in the demographic character of the housing market.

Baby Boom Generation

0.0

5.0

10.0

15.0

20.0

25.0

30.019

20

1924

1928

1932

1936

1940

1944

1948

1952

1956

1960

1964

1968

1972

1976

1980

1984

1988

1992

1996

2000

2004

2008

Births per 1000 pop

U.S. Census Bureau

Demographic Context

Trends in U.S. Rentership Rate

Demographic Context

30.0%

31.0%

32.0%

33.0%

34.0%

35.0%

36.0%

37.0%

38.0%

39.0%

40.0%19

6819

6919

7019

7119

7219

7319

7419

7519

7619

7719

7819

7919

8019

8119

8219

8319

8419

8519

8619

8719

8819

8919

9019

9119

9219

9319

9419

9519

9619

9719

9819

9920

0020

0120

0220

0320

0420

0520

0620

0720

0820

0920

1020

1120

12Q

120

12Q

220

12Q

220

12 Q

320

12Q

420

13Q

1

Annual Average Rental rate

200431% Renters

2013Q135% Renters

196836.2% Renters

198034.43% Renters

Source: U.S. Census Bureau

Predictions, Forecasts, Prophecy

• A PREDICTION is a foretelling of what one believes will happen.

• A PROPHECY is a PREDICTION under the influence of divine guidance.

• A FORECAST is an analytical relationship based on assumptions and political decisions that will influence the future growth of an area or region.

Demographic Context

Demographic Context

Influences and Assumptions that Guide Projection Process

Births and Deaths – Natural Increase

Migration – Internal and External

National Shift to Service Economy – Pre Great Recession

Natural Shift to ?? Economy – Post Recession – Only Meds, Eds and Feds??

Older Labor Force – Semi Retirement

Effect of Baby Boom, Semi-Retirement; Growing Number of Senior Citizans

Baby Bust, Echo Boom - Decline in Household Size

Business Relocations and Deaths

Local Govt. Development Policy - Federal and State Economic Policy

Local Govt. Development Patterns

Demographic Context

Projection Sources

Projections

Metropolitan Planning Organizations www.narc.org National vendors (Nielsen, ESRI)

Local Governments

State Data Centers

U.S. Census Bureau

C-40 report

2010 Census

American Community Survey

Demographic Context

Population and Household Trends

Demographic Context

Cabarrus County Harrisburg Market AreaTotal Change Annual Change Total Change Annual Change

Population Count # % # % Count # % # %2000 131,063 42,6432010 178,011 46,948 35.8% 4,695 3.1% 73,064 30,421 71.3% 3,042 5.5%2012 184,397 6,386 3.6% 3,193 1.8% 76,004 2,940 4.0% 1,470 2.0%2015 194,347 9,950 5.4% 3,317 1.8% 80,498 4,494 5.9% 1,498 1.9%

Total Change Annual Change Total Change Annual ChangeHouseholds Count # % # % Count # % # %

2000 49,519 15,0902010 65,666 16,147 32.6% 1,615 2.9% 26,297 11,207 74.3% 1,121 5.7%2012 68,180 2,514 3.8% 1,257 1.9% 27,428 1,131 4.3% 566 2.1%2015 71,754 3,574 5.2% 1,191 1.7% 29,051 1,623 5.9% 541 1.9%

Source: 2000 Census; 2010 Census; Esri; and Real Property Research Group, Inc.

1,615

1,257 1,1911,121

566 541

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2000-2010 2010-2012 2012-2015

Cabarrus County Harrisburg Market AreaAnnual Change in Number of Households, 2000 to 2015

Demographic Characteristics

Family type and proportion of one-person households

Owner / Renter Distribution

Age Distribution of Population

Permanent Renters

Income Distribution by Tenure (Owners vs. Renters)

Demographic Context

• Housing Stock

• Analysis of Rental Supply Inventory Characteristics

Rent and Vacancy Trends

Construction and Absorption Levels

• Pipeline

Competitive Context

7.5.F Market study must include a comprehensive description of the current conditions of the rent market

Competitive ContextIs rental market tight or soft?

Evaluate stabilized vacancy rate and total vacancy rate

Are concessions being offered? Why?

Is the market overbuilt at one price position?

Are some projects poorly positioned in the market (i.e. overreaching in rents)?

Has there been a downturn in employment?

Rental Summary

Competitive ContextMap Year Year Structure Total Vacant Vacancy Avg 1 BR Avg 2 BR

# Community Built Rehab Type Units Units Rate Rent (1) Rent (1) Incentive/WaitlistTier I Communities

1 Residence at Waterstone 2002 Garden 255 10 3.9% $1,648 $1,964 None.2 The Courts of Avalon 1999 Garden 258 0 0.0% $1,556 $1,891 None

3 Brookside Commons 2003 Mid Rise 174 8 4.6% $1,8091st month free with 13-

mo lease4 Greenwich Place 2006 Mix 332 20 6.0% $1,327 $1,805 $500 off for 2BR TH5 Groveton Green 2013 Mid Rise 72 24 33.3% $1,364 $1,706 $500 gift card

7 Cascades Overlook 1995 Mix 441 44 10.0% $1,281 $1,6112 mo free on 13 mo

midrise lease8 Apartments of Owings Park 2002 Garden/TH 174 8 4.6% $1,172 $1,579 None9 View at Mill Run ## 2011 Mid Rise 375 62 16.5% $1,285 $1,555 2 months free

10 Riverstone at Owings Mills 2003 Garden 324 6 1.9% $1,193 $1,508 Daily Pricing11 Park of Winterset 1999 Garden 176 5 2.8% $1,404 $1,431 None12 The Gardens of Annen Woods 1986 Garden 132 8 6.1% $1,260 $1,391 None13 Pleasant Ridge 1990 Mid Rise 78 0 0.0% $1,355 None14 Gates of Owings Mills ## 1998 Garden 125 4 3.2% $1,205 $1,339 None19 Owings Run Apartments 1993 2012 Garden 504 26 5.2% $1,255 $1,220 None20 Lakeside Mill 1989 Garden 192 6 3.1% $965 $1,167 None

Total/Avg. 1999 2012 3,612 231 $1,301 $1,555Reported & Stabilized Total/Avg. 3,165 145 4.6%

Tier II Communities

21 Allyson Gardens II 1990 2000 Garden 196 9 4.6% $950 $1,156 None23 Watermill Apartments 1965 Garden 284 1 0.4% $950 $1,088 None24 Painter's Mill 1974 2007 Garden 260 3 1.2% $894 $1,076 None25 Morningside Heights 1962 1980 Garden/TH 1050 54 5.1% $873 $1,014 None26 Allyson Gardens 1968 Garden 200 10 4.6% $829 $975 None27 The Village of Chartleytowne 1975 Garden/TH 692 60 8.7% $938 $926 None28 Preserve at Owings Crossing 1962 Garden 800 79 9.9% $800 $901 None29 Garrison Forest 1973 2007 Garden/TH 500 18 3.6% $779 $870 None

Total/Avg. 1971 1999 3,982 234 $877 $1,001

Total/Avg. 1989 2001 7,594 465 $1,139 $1,362Reported & Stabilized Total/Avg. 7,147 379 5.3%

Communities in Intial Lease-Up.## HUD Insured(1) Rent is contract rent, and not adjusted for utilities or incentives

Detailed Rental Information

Competitive Context

Total One Bedroom Units Two Bedroom Units Three Bedroom Units

Community Units Units Rent(1) SF Rent/SF Units Rent(1) SF Rent/SF Units Rent(1) SF Rent/SF

Tier I Plus CommunitiesResidence at Waterstone (2) 255 75 $1,558 1,031 $1.51 141 $1,874 1,555 $1.22 60 $2,238 1,619 $1.38The Courts of Avalon (2) 258 86 $1,457 958 $1.52 129 $1,792 1,244 $1.46 43 $2,175 1,395 $1.56Greenwich Place 332 60 $1,272 893 $1.42 230 $1,739 1,320 $1.33 42 $2,136 1,573 $1.36Groveton Green 72 88 $1,322 889 $1.49 104 $1,622 1,127 $1.46 22 $1,977 1,417 $1.40Brookside Commons (2) 184 136 $1,595 1,794 $0.90 32 $1,674 1,794 $0.93Excalibur (2) 147 $1,559 1,336 $1.18 $1,764 1,407 $1.25

Total/Average 1248 $1,402 943 $1.49 $1,697 1,396 $1.22 $1,994 1,534 $1.30Unit Distribution 1248 309 740 199

% of Total 100% 24.8% 59.3% 15.9%

Tier II CommunitiesAllyson Gardens II 196 61 $935 800 $1.17 135 $1,136 992 $1.17Morningside Heights 1050 $873 685 $1.27 $1,014 907 $1.14 $1,337 1,155 $1.16Painter's Mill 260 40 $852 895 $0.95 103 $1,006 1,223 $0.84 13 $1,177 1,483 $0.79Richmar Apartments 459 $785 612 $1.28 $994 966 $1.05 8 $1,225 940 $1.30The Village of Chartleytowne 692 $890 805 $1.11 $955 1,029 $0.95 $1,095 1,334 $0.82Watermill Apartments 284 91 $830 750 $1.11 100 $938 800 $1.20 88 $1,103 1,264 $0.87Allyson Gardens 200 57 $805 770 $1.05 71 $923 832 $1.13 54 $1,200 1,024 $1.17Preserve at Owings Crossing 800 386 $810 660 $1.23 250 $911 873 $1.07 150 $1,200 1,160 $1.03Garrison Forest 500 30 $733 476 $1.54 414 $825 700 $1.21 50 $1,100 1,000 $1.10

Total/Average 4,441 $835 717 $1.16 $967 925 $1.05 $1,180 1170 $1.01Unit Distribution 2,246 665 1,073 363

% of Total 50.6% 29.6% 47.8% 16.2%

Total/Average 5,689 $1,009 787 $1.28 $1,259 1113 $1.13 $1,529 1326 $1.15Unit Distribution 3,349 974 1,813 562

% of Total 58.9% 29.1% 54.1% 16.8%

(1) Rent is adjusted to include only Trash and incentives(2) Rent is adjusted for garage parking by floorplan or community (-$60 for garage space or -$90 for unit garage).

Rental Price Position

$300 $500 $700 $900 $1,100 $1,300 $1,500 $1,700 $1,900

Subject (30% AMI)

Subject (40% AMI)

Garrison Forest

Subject (50% AMI)

The Gates of Owings …

Butler Ridge

Preserve at Owings …

Watermill Apartments

Bright Meadows

Allyson Gardens

Painter's Mill

Subject (60% AMI)

The Village of …

Richmar Apartments

Allyson Gardens II

Morningside Heights

The Gates of Owings …

Apartments of …

Summit at Owings …

Pleasant Ridge

Greenwich Place

The Towns at Harvest …

Figure 5Range of Net 1, 2, and 3 Bedroom Rents

Reisterstown Road Market Area

1-2 Bedroom 2-3 Bedroom

Source: Real Property Research Group, Inc. January 2010

Rent

Competitive Context

Net Rent and Size

Archstone Wheaton Station

Ridgewood

Village Square

Westerly Park

The Warwick

Privacy World @ Glenmont

Kensington House

Westchester West

The Cameron

Portico @ Silver Spring Metro

1200 East West

The Veridian

Lenox Park

The Bennington

Georgian

Gramax Towers

Summit Hills

Alexander House

SubjectRPRG Proposed

600

650

700

750

800

850

900

$900 $1,100 $1,300 $1,500 $1,700 $1,900 $2,100

One Bedroom Rent by Unit Size

Wheaton Communities

Silver Spring Communities

Subject-Current

RPRG Proposed

Squa

re F

eet

Net Rent

Competitive Context

Market Analysis should comment on

reasonableness of rent.Not necessary to do rent

grid.

Pipeline

Other rental projects planned or under construction.

Local building/planning department(s)

Tax Credit Allocations

Regional Surveys

7.5.G The market study must include separate estimates of the number of rental units currently under construction and number in planning during specified forecast period.

Competitive Context

Supply and Demand Key Questions

Oversupply of Pipeline Units? Will the market area need any additional units by the time the

proposed project would be ready for occupancy? Enough income-qualified consumers (Capture Rate)? Potential oversupply of LIHTC units (Penetration Rate)? Need for more affordable units to accommodate growth and

alleviate substandard housing conditions?

7.5.H Demand Estimate and Study

Findings and Conclusions

Net Demand

Demand

Household Growth

Demolitions

% of Renter Households Supply

Pipeline

Subject Balance of Demand and Supply

7.5.H.1 Estimate of demand must be based on a calculation of incremental demand…


NetDemand

Net DemandProjected Change in Household Base Units

January 2013 Households 40,731January 2016 Households 42,138Net Change in Households 1,406

Add: Units Removed from Housing StockHousing

StockRemoval

RateUnits

Removed2013 Housing Stock 42,650 0.370% 1582014 Housing Stock 43,171 0.370% 1602015 Housing Stock 43,700 0.370% 162

479Net New Demand for Housing Units 1,886Average Percent Renter Households over Analysis Period 65.0%Net New Demand for Renter Units 1,226

Add: Multifamily Competitive Vacancy Inventory Vacant

Stabilized Multifamily Communities 5,673 243Subtotal Stabilized Communities 5,673 243

Communities Under Lease Up 0 0Total Competitive Inventory 5,673 243

Market Vacancy at 5% 284Less: Current Vacant Units -243Vacant Units Required to Reach 5% Market Vacancy 41

Net Demand for New Rental Units 1,266

Planned Additions to the SupplyTotal Units 95% Occupancy

Parc Rock 360 342Avant at Rock Town Center 359 341

Subject - Boulevard at Loger Station 448 426Total New Rental Supply 1167 1,109

Excess Demand for Rental Housing 158


Components of Inventory Change

A Characteristics C Present in

2007 D 2007 units

present in 2009

E Change in character-

istics

F ‘07 units lost due to conversion

/merger

G ‘07 house or mobile

home moved out

H ‘07 units changed to

nonresidential use

I ‘07 units lost through

demolition or disaster

J ‘07 units badly

damaged or condemned

K ‘07 units lost in other ways

TOTAL Lost to Stock

Total exclude MH Annual

Total Housing Stock 128,203 126,119 - 193 411 288 491 302 400 2,085 1,674 837 0.15% 0.32% 0.22% 0.38% 0.24% 0.31% 1.63% 1.31% 0.65%

Occupancy Occupied units 110,692 100,730 8,880 124 263 125 227 130 212 1,081 818 409

0.11% 0.24% 0.11% 0.21% 0.12% 0.19% 0.98% 0.74% 0.37% Vacant 13,109 5,072 7,299 60 110 91 204 151 122 738 628 314

0.46% 0.84% 0.69% 1.56% 1.15% 0.93% 5.63% 4.79% 2.40% Seasonal 4,402 2,362 1,775 8 38 72 59 21 66 264 226 113

0.18% 0.86% 1.64% 1.34% 0.48% 1.50% 6.00% 5.13% 2.57%Region (All Units)

Northeast 23,505 23,213 - 49 29 61 33 51 69 292 263 132 0.21% 0.12% 0.26% 0.14% 0.22% 0.29% 1.24% 1.12% 0.56%

Midwest 29,602 29,202 - 58 51 34 110 76 71 400 349 175 0.20% 0.17% 0.11% 0.37% 0.26% 0.24% 1.35% 1.18% 0.59%

South 48,881 47,783 - 48 280 156 287 155 171 1,097 817 409 0.10% 0.57% 0.32% 0.59% 0.32% 0.35% 2.24% 1.67% 0.84%

West 26,214 25,920 - 38 50 37 60 20 88 293 243 122 0.14% 0.19% 0.14% 0.23% 0.08% 0.34% 1.12% 0.93% 0.46%

Tenure (Occupied Units) Owner occupied 75,647 68,551 6,642 48 124 57 96 40 90 455 331 166

0.06% 0.16% 0.08% 0.13% 0.05% 0.12% 0.60% 0.44% 0.22% Renter occupied 35,045 27,331 7,086 76 139 68 132 91 122 628 489 245

0.22% 0.40% 0.19% 0.38% 0.26% 0.35% 1.79% 1.40% 0.70%Metro Status

In Central Cities 36,122 35,494 77 48 88 135 139 140 627 579 290 0.21% 0.13% 0.24% 0.37% 0.38% 0.39% 1.74% 1.60% 0.80%

In Suburbs 59,794 59,005 80 182 133 187 80 128 790 608 304 0.13% 0.30% 0.22% 0.31% 0.13% 0.21% 1.32% 1.02% 0.51%

Outside Metro Area 32,287 31,619 35 180 67 169 83 132 666 486 243 0.11% 0.56% 0.21% 0.52% 0.26% 0.41% 2.06% 1.51% 0.75%

Source: American Housing Survey, Components of Inventory Change 2007-2009; Prepared by Ecometrica, Inc. for U.S. Department of Housing & Urban Development Office of Policy Development & Research; May 2011


Southern Maryland2000 2010 Change 2000-2010 2013 2018

Housing Units Number Percent Number Percent Number Percent Number Percent Number PercentOwner Occupied 76,246 78.0% 93,153 77.8% 16,907 77.1% 95,644 77.1% 100,853 76.6%Renter Occupied 21,511 22.0% 26,538 22.2% 5,027 22.9% 28,450 22.9% 30,726 23.4%Total Occupied 97,757 100.0% 119,691 100.0% 21,934 100.0% 124,093 100.0% 131,579 100.0%

Total Vacant 7,803 10,334 9,863 10,457TOTAL UNITS 105,560 130,025 133,956 142,036

Waldorf-La Plata Market Area 2000 2010 Change 2000-2010 2013 2018Housing Units Number Percent Number Percent Number Percent Number Percent Number PercentOwner Occupied 20,759 74.8% 26,396 75.9% 5,637 80.3% 27,232 75.3% 28,950 75.2%Renter Occupied 6,986 25.2% 8,367 24.1% 1,381 19.7% 8,927 24.7% 9,572 24.8%Total Occupied 27,745 100.0% 34,763 100.0% 7,018 100.0% 36,159 100.0% 38,522 100.0%Total Vacant 1,010 2,136 2,093 2,230TOTAL UNITS 28,755 36,899 38,252 40,752Source: U.S. Census of Population and Housing, 2000, 2010; Esri, RPRG

74.8% 75.9% 80.3% 75.3% 75.2%

25.2% 24.1% 19.7% 24.7% 24.8%

0%

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2000 2010 2000 - 2010New Households

2013 2018

% o

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Renter Occupied

Owner Occupied

Waldorf-La Plata Market Area


Varied Rentership Rates


Chesterfield County2000 2010 Change 2000-2010 2013 2018

Housing Units Number Percent Number Percent Number Percent Number Percent Number PercentOwner Occupied 75,874 80.9% 89,603 77.5% 13,729 62.7% 91,482 76.1% 96,206 75.3%Renter Occupied 17,898 19.1% 26,077 22.5% 8,179 37.3% 28,662 23.9% 31,497 24.7%Total Occupied 93,772 100.0% 115,680 100.0% 21,908 100.0% 120,144 100.0% 127,703 100.0%


Market area 2000 2010 Change 2000-2010 2013 2018Housing Units Number Percent Number Percent Number Percent Number Percent Number PercentOwner Occupied 29,060 84.9% 34,067 79.1% 5,007 56.7% 34,810 77.6% 36,623 76.4%Renter Occupied 5,187 15.1% 9,003 20.9% 3,816 43.3% 10,071 22.4% 11,302 23.6%Total Occupied 34,247 100.0% 43,070 100.0% 8,823 100.0% 44,881 100.0% 47,925 100.0%Total Vacant 1,184 2,268 2,245 2,397TOTAL UNITS 35,431 45,338 47,126 50,323Source: U.S. Census of Population and Housing, 2000, 2010; Esri, RPRG

84.9% 79.1%56.7%

77.6% 76.4%

15.1% 20.9%43.3%

22.4% 23.6%

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2000 2010 2000 - 2010New Households

2013 2018

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Market area


City of Pittsburgh2000 2010 Change 2000-2010 2012 2017

Housing Units Number Percent Number Percent Number Percent Number Percent Number PercentOwner Occupied 74,927 52.1% 64,807 47.6% -10,120 134.5% 62,886 46.1% 62,167 45.1%Renter Occupied 68,812 47.9% 71,410 52.4% 2,598 -34.5% 73,538 53.9% 75,724 54.9%Total Occupied 143,739 100.0% 136,217 100.0% -7,522 100.0% 136,424 100.0% 137,891 100.0%


Uptown Market Area 2000 2010 Change 2000-2010 2012 2017Housing Units Number Percent Number Percent Number Percent Number Percent Number PercentOwner Occupied 4,157 29.1% 3,721 24.2% -436 -40.6% 3,706 23.5% 3,871 23.0%Renter Occupied 10,151 70.9% 11,662 75.8% 1,511 140.6% 12,074 76.5% 12,929 77.0%Total Occupied 14,308 100.0% 15,383 100.0% 1,075 100.0% 15,780 100.0% 16,800 100.0%Total Vacant 2,178 1,879 1,718 1,829TOTAL UNITS 16,486 17,262 17,498 18,629Source: U.S. Census of Population and Housing, 2000, 2010; Esri, RPRG

29.1% 24.2% 23.5% 23.0%

70.9% 75.8%

140.6%

76.5% 77.0%

0%10%20%30%40%50%60%70%80%90%

100%

2000 2010 2000 - 2010New Households

2012 2017

% o

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Renter OccupiedOwner Occupied

Uptown Market AreaActual Rentership Rate in 2000 and 2010 and Projected Rentership Rate for 2012 and 2017



Affordability Capture Rates - Definitions

Capture Rate

“The percentage of age, size, and income qualified renter Households in the Primary Market Area that the property must capture to achieve the Stabilized Level of Occupancy. Funding agencies may require the use of other factors in the calculation of the capture rate.”

Penetration Rate

“The percentage of age and income qualified renter Households in the Primary Market Area that live in all existing and proposed properties (which are competitively priced to the subject) that must be captured to achieve the Stabilized Level of Occupancy.”

7.5.H.3 demand estimate should identify the “effective demand pool with sufficient incomes…


Interpreting Capture Rates

Income-qualified households

5% Capture Rate (need to get 1 in every 20 eligible households)

33% Capture Rate (need to get 1 in every 3 eligible households)

An acceptable capture rate only indicates sufficient demand to support the proposed number of units at the proposed income levels. It does not include an evaluation of the subject development versus the existing rental stock.


Key Assumptions and Threshold Measurements

• The appropriate income range for residents to qualify for the project must be established

• Maximum allowable income for the subject project is based on the household income necessary to qualify for the largest unit offered at the site. Real (Tax Credit) or Artificial.

• Minimum income required to live at the property is based on the lowest gross rent (including all utilities) offered at the subject site.

• Accepted ratio of rent to income is 35% for families and 40% for seniors. Sometimes 30% is minimum.

• May vary by state or situation


Tax Credit Rents and IncomesHUD 2012 Median Household Income

Baltimore-Towson, MD HUD Metro FMR Area $85,600Very Low Income for 4 Person Household $42,800

2012 Computed Area Median Gross Income $85,600

Utility Allowance: Efficiency $01 Bedroom $852 Bedroom $1103 Bedroom $1354 Bedroom $195

LIHTC Household Income Limits by Household Size:Household Size 30% 40% 50% 60% 80% 100% 150%

1 Person $18,000 $24,000 $30,000 $36,000 $48,000 $60,000 $90,0002 Persons $20,550 $27,400 $34,250 $41,100 $54,800 $68,500 $102,7503 Persons $23,130 $30,840 $38,550 $46,260 $61,680 $77,100 $115,6504 Persons $25,680 $34,240 $42,800 $51,360 $68,480 $85,600 $128,4005 Persons $27,750 $37,000 $46,250 $55,500 $74,000 $92,500 $138,7506 Persons $29,790 $39,720 $49,650 $59,580 $79,440 $99,300 $148,9507 Persons $0 $0 $0 $0 $0 $08 Persons $0 $0 $0 $0 $0 $0

Imputed Income Limits by Number of Bedrooms:

Persons Bedrooms 30% 40% 50% 60% 80% 100% 150%1 0 $18,000 $24,000 $30,000 $36,000 $48,000 $60,000 $90,000

1.5 1 $19,275 $25,700 $32,125 $38,550 $51,400 $64,250 $96,3753 2 $23,130 $30,840 $38,550 $46,260 $61,680 $77,100 $115,650

4.5 3 $26,715 $35,620 $44,525 $53,430 $71,240 $89,050 $133,5756 4 $29,790 $39,720 $49,650 $59,580 $79,440 $99,300 $148,950

LIHTC Tenant Rent Limits by Number of Bedrooms:Assumes 1.5 Persons per bedroom

30% 40% 50% 60% 80%Gross Net Gross Net Gross Net Gross Net Gross Net

Efficiency $450 $600 $750 $900 $1,2001 Bedroom $482 $397 $643 $558 $803 $718 $964 $879 $1,285 $1,2002 Bedroom $578 $468 $771 $661 $964 $854 $1,157 $1,047 $1,542 $1,4323 Bedroom $668 $533 $891 $756 $1,113 $978 $1,336 $1,201 $1,781 $1,6464 Bedroom $745 $550 $993 $798 $1,241 $1,046 $1,490 $1,295 $1,986 $1,791

Source: U.S. Department of Housing and Urban Development

# Persons

Assumes 1.5 persons per bedroom


Affordability @ 35% Rent Burden

One Bedroom Two Bedroom

Base Price MinimumMaximum Base Price MinimumMaximum Number of Units 40 Number of Units 40Net Rent $665 Net Rent $770Gross Rent $755 Gross Rent $900% Income Spent for Shelter 35% % Income Spent for Shelter35%Income Range $25,886 $31,170 Income Range $30,857 $37,440Range of Qualified Hslds 6,041 5,239 Range of Qualified Hslds5,282 4,390# Qualified Households 802 # Qualified Households 892

Unit Total HH Capture Rate 5.0% Unit Total HH Capture Rate 4.5%

Range of Qualified Renters 2,727 2,279 Range of Qualified Renters2,303 1,805# Qualified RenterHouseholds 448 # Qualified RenterHouseholds 498

Unit Renter HH Capture Rate 8.9% Unit Renter HH Capture Rate 8.0%

Gross Capture Rate Total Households 11,732 Total HHNumber of Units Band of Qualified HHs # Qualified HHs

Income $25,886 $37,44060% Units 80 HHs 6,041 4,390 1,651 4.8% Capture Rate

Renter Households 6,437 Renter HHBand of Qualified HHs # Qualified HHs

Income $25,886 $37,44060% Units 80 HHs 2,727 1,805 922 8.7% Capture Rate

60

% U

nit

s


Affordability @ 30% Rent Burden


Base Price MinimumMaximum Base Price MinimumMaximum Number of Units 40 Number of Units 40Net Rent $665 Net Rent $770Gross Rent $755 Gross Rent $900% Income Spent for Shelter 30% % Income Spent for Shelter30%Income Range $30,200 $31,170 Income Range $36,000 $37,440Range of Qualified Hslds 5,371 5,239 Range of Qualified Hslds4,586 4,390# Qualified Households 131 # Qualified Households 196


Range of Qualified Renters 2,352 2,279 Range of Qualified Renters1,914 1,805# Qualified RenterHouseholds 73 # Qualified RenterHouseholds 109




Income Renter Households 6,437 Renter HHHHs Band of Qualified HHs # Qualified HHs


60

% U

nit

s


Affordability @ 120% AMI


Base Price MinimumMaximum Base Price MinimumMaximum Number of Units 40 Number of Units 40Net Rent $665 Net Rent $770Gross Rent $755 Gross Rent $900% Income Spent for Shelter 30% % Income Spent for Shelter30%Income Range $30,200 $62,340 Income Range $36,000 $74,880Range of Qualified Hslds 5,371 2,168 Range of Qualified Hslds4,586 1,583# Qualified Households 3,202 # Qualified Households 3,003


Range of Qualified Renters 2,352 639 Range of Qualified Renters1,914 456# Qualified RenterHouseholds 1,713 # Qualified RenterHouseholds 1,458



Income $30,200 $74,880120% Units 80 HHs 5,371 1,583 3,787 2.1% Capture Rate

Income Renter Households 6,437 Renter HHHHs Band of Qualified HHs # Qualified HHs

Income $30,200 $74,880120% Units 80 HHs 2,352 456 1,896 4.2% Capture Rate

12

0%

Un

its


Capture and Penetration Rate

Capture RatePenetration

RateUnit Type All AllGross Rent $450 $450Income Ratio 35% 35%Minimum Income $15,429 $15,429Maximum Income (2/BR) $34,200 $34,200

Total Qualified RentersExisting Households, 2006 9,189 9,189 X Percent Income Qualified 43.8% 43.8%X Percent Renter 41.5% 41.5%Total Qualified Renters 1,670 1,670

Other LIHTC Units Existing LIHTC Units 0 208 LIHTC Under Construction 0 84 Proposed Units - Subject 0 43 Proposed Units - Other App 69 69Total LIHTC Units 69 404

Total Qualified Renters 1,670 1,670

Total LIHTC Units 69 404

Capture / Penetration Rate 4.1% 24.2%


Calculating Capture Rates & Demand Analysis

• There are no right or wrong capture rates

• Capture/penetration rates must be considered within context of market

• In rural markets, be conservative; “don’t want to be wrong forever”

• Critical demand for several units does not mean sufficient demand

• Senior markets may consider support from homeowners


0% 10% 20% 30% 40% 50%0%

2%

4%

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8%

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14%

Rural Markets Danger Zone

Best Opportunity

Urban Markets

Penetration Rate

Cap

ture

Rate

Interpreting Capture & Penetration Rates


Other Factors Impacting Demand

• Location—Surrounding land uses may attract or prevent renters from moving to the site

• Proposed Rents—Capture rates estimate the number of households able to pay the proposed rents, not the willingness to do so

• Housing Markets—Rental markets with high vacancy rates may reflect an oversupply of available housing. The overall health of the rental market may impact the ability of a proposed development to reach stabilization despite low capture rates


Final Conclusions

Findings Evaluation of Site Evaluation of Economic Trends Evaluation of Demographic Trends Evaluation of Competitive Environment

Net Demand

Product Evaluation Unit Distribution Unit Sizes Features and Amenities Price Position (Appraiser does specific grids)

Affordability


Projected Absorption Levels

Historic Pattern of New Units Absorbed Annually

Performance of Recently Completed Projects

Adjust Estimate to Reflect Market Conditions

Economic and Demographic Forecasts

Units in Pipeline

Occupancy Levels

7.5.H.4 Study should also include an estimate of absorption period needed for the project to reach sustaining occupancy…


Impact on Existing Market

Will the subject’s success have an adverse impact on the competitive market.

• Penetration Analysis• Clustering of existing product at same

price point.• Introduction of new product at same price

point.

7.5.H.5 the market study must include an assessment of the impact the proposed project would have on existing rental developments


Questions?

Robert LefenfeldManaging PrincipalReal Property Research Group, [email protected]

fha multifamily underwriting training “how to avoid a hud market rejection” robert lefenfeld...

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