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Major Takeaways: Yardi Multifamily Report – October 2019

The extended period of good performance has produced one bad side effect: legislation enacted in three states to limit rent growth and pressure to act in more states. After a period of below-par growth in housing stock, the U.S. needs more units built, but rent control moves the needle in the opposite direction.

Earlier this week, Yardi Matrix issued its National Multifamily Report for October that highlighted supply and demand, rent growth trends, and political activity as we approached the end of Q4.

Yardi

 

According to the report, multifamily rent growth inched upward in October, as the average U.S. multifamily rent increased by $1 to $1,476. Year-over-year rent growth remained at 3.2%. Despite the expected slower month during the fourth quarter, Yardi expects continuous demand a slowly growing economy to keep rent growth above its long-term average.

The multifamily sector’s continuous strength over multiple years has resulted in an elevated number of rent-burdened households. In consequence, an increase in political pressure has yielded new rent control laws in three states: New York, California, and Oregon.

According to the Joint Center of Housing Studies at Harvard University, “More than 20 million renter households spend over 30% of income on housing, and 80% of renters and 63% of owners making less than $30,000 are cost-burdened.”

Yardi dubs rent control as counterproductive as it reduces investment, limits new development which perpetuates unaffordability, increases the cost burden on those who move or enter a new market, and reduces the incentive to make capital improvements which leads to degradation of already existing stock. Outlined affordability solutions include reducing exclusionary zoning, allowing more density, and more subsidized new developments.

Click here to view Yardi Matrix’s October Multifamily National Report in its entirety

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Rent Control Battle in California and Beyond

“Certainly there is a housing shortage, so we need to be building housing, but what we are also seeking to address is the crisis of displacement…We’re seeing vulnerable communities — people of color, elderly folks, people with disabilities, single parents, low-income people and the middle class — being pushed out of California and becoming homeless.”

One of the hottest items on California’s November voting ballot is a rent control initiative called Proposition 10. The proposal intends to repeal a 23-year-old state law that tightly limits all forms of rent control within California. The desire for rent control in California has coincided with the rising cost of living throughout the state.

According to The Sacramento Bee, the nonpartisan Legislative Analyst’s Office (LAO) reports “Soaring housing costs have led to a net loss of 1 million citizens who have fled California from 2007 to 2016…and homelessness is higher here than any other place in the nation.”

Despite the widespread support from community groups like the AIDS Healthcare Foundation, California Teachers Association, California Nurses Association, and many others, the latest poll by the Public Policy Institute of California reports,

“A whopping 60 percent of likely voters say they will vote against Proposition 10, a measure on the Nov. 6 statewide ballot that would repeal the state Costa-Hawkins Rental Housing Act, which strictly limits rent control in cities across California. Repeal would restore broad authority to cities to enact any rent control law they choose.”

According to the LAO’s analysis of Proposition 10, the proposed repeals could result in more harm than good. LAO analysts warned of declined new rental construction, removal of units from the market, and the value of housing possibly dropping. Any of these factors would directly affect local government property tax revenue, which equates to ~$60 billion every year.  Furthermore, enacting new rent control laws would require millions of dollars per year to enforce, and result in a decline in income tax revenue, especially from the newly-affected property owners and investors.

It is important to consider how these restrictive laws and proposals affect citizens, property owners and investors, and a state’s overall economy. And while Proposition 10 is exclusive to California, and rent control laws vary from state to state, the negatives effects outlined in the LAO analysis showcases how impactful the ongoing battle of rent control is from a real estate professional, owner, or investor standpoint.

Click here to learn more about Proposition 10 and rent control.

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Apartment List’s Renter Confidence Survey

Recently, Apartment List, a home-finding service that offers apartment recommendations based on personal experiences and preferences, released results from its third annual Renter Confidence Survey. According to Apartment List, the Renter Confidence Survey “is the largest survey focused exclusively on renters, providing unique insight into what states and cities must do to meet the needs of America’s 111 million renters.”

The survey is based on 45,000 survey responses gathered between October 1, 2016 and December 6, 2017, to determine the best/worst cities for apartment renters. Survey respondents gave their cities an overall score based 11 rating factors such as safety, affordability, job opportunities, weather, taxes, and more. Below is a graphical representation of overall renter satisfaction by state: 

Click here to interact with the graphic above

Here are some key overall findings from the Renter Confidence Survey:

  • Overall, the top four rated cities for renters are Plano, TX, Huntington Beach, CA, Scottsdale, AZ, and Cambridge, MA.
  • Among the 50 largest U.S. cities, Raleigh, NC, Boston, MA, Virginia Beach, VA and Minneapolis, MN earned the top scores for renter satisfaction. The lowest-rated cities were Detroit, MI, Oakland, CA and Tucson, AZ.
  • Small to mid-sized cities tended to receive higher ratings than large cities. 38 percent of small to mid-sized cities received A- or higher compared to large cities’ 24 percent.
  • States rated most-highly by their renters are Colorado, Alaska, South Dakota, Minnesota, and Idaho. States with the lowest ratings from their renters are Arkansas, Lousiana, Mississippi, Wyoming, and West Virgina.
  • Millennial renters love Boulder, CO, Madison, WI, and Arlington, VA.

In addition to overall ratings, renters rated specific factors that have a direct impact on their renting experience. Important takeaways include:

  • Markets with the most unsatisfied renters based on job opportunity are mostly southwest cities hit hard by recession such as Santa Ana, CA, San Bernardino, CA, Glendale, AZ, and Mesa, AZ.
  • Based on safety, renters rate Plano, TX, Boulder, CO, and Irvine, CA the highest.  Renters feel the least safe in Stockton, CA, San Bernardino, CA, New Orleans, LA, Memphis, TN, and Newark, NJ.
  • It’s no surprise Colorado and California have the highest-rated weather. Cold weather cities in the Rust Belt and Northeast have the lowest-rated weather.
  • Renters gave high ratings to college towns such as Boulder, CO, Ann Arbor, MI, Raleigh, NC, and Madison, WI for their social life.

Other important findings:

  • Only 38 percent of renters are satisfied with the cost of living in their city.
  • The top three factors renters are most satisfied with include commute time, pet-friendliness, and recreational activities.
  • The four factors that are most indicative of overall renter satisfaction are safety, job opportunities, social life, and recreational activities.
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Over 50,000 New Apartments to Come in DFW Area

The Dallas-Fort Worth area has been a hotbed for real estate construction for many years, and is set to stay on the rise as the first quarter of 2017 comes to an end. According to a recent article from The Dallas Morning News, DFW has experienced a 95% surge in new-construction starts in the first two months of 2017. The spike in new builds is estimated to result in 50,000 apartments with 30,000 of them hitting the market before year’s end.

Most of the new construction is taking place in the Frisco-Prosper and central Dallas areas. Frisco-Prosper is in the process of adding about 6,400 units to the market, and central Dallas has started construction on an estimated 5,700 new apartments.

The recent growth in new construction has been easily absorbed by the job growth in the DFW area. A large portion of the tenant base are relocating to the Dallas area for work, as the region adds about 100,000 jobs to the market every year. Furthermore, Drew Kile with Institute of Property Advisers forecasts the North Texas population increasing by 780,000 people in the next 5 years, so demand is projected to remain strong.

Click here to check out the full article by The Dallas Morning News. 

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Managing Online Reputation

Not long ago, reputations were formed through direct experiences, word-of-mouth, and paid advertising. But since the emergence of the internet and social media, a person or business’ reputation can change as fast as someone can hit ‘send’. On one hand, society’s constant connectivity can be very beneficial, as it allows people to reach large audiences faster than ever before. But just as easily it can bring a company to new heights, the speed and scope of the internet can run even the best reputations into the ground with one wrong misstep. Here are a few tips to avoid ending up on the negative side of online reviews. 

“Google” yourself. A business can’t manage its reputation effectively without understanding the status of its online perception. That understanding begins with a simple search on any and all search engines, social media platforms, customer review sites, and user forums. A simple Google search won’t suffice with such an abundance of online outlets that can directly affect a business’ reputation, so thorough research is critical.

Monitor online reviews. We’ve all heard the cliche, “The customer is always right”, which is, to a certain extent, true. It’s especially true with services such as Yelp!, TripAdvisor, UrbanSpoon, and many others, where customers can describe their positive or negative experiences with businesses behind the safety of their devices without an uncomfortable, personal confrontation with owners, managers, or employees.   One bad review can have a snowball effect, and before long, acquiring customers can seem impossible. That said, there will always be an unsatisfied customer, justified or not. Monitoring review sites allow a business to understand which aspect(s) of their product or service needs improving. In addition, if they have the ability to do so, business should reply to as many reviews as possible. It demonstrates pro-activity, a touch of personal care for each customer, and a desire to satisfy customer needs.

Maintain an active social media presence. In most cases, a business can’t reach its full potential without a social media presence. Networks such as Facebook and Twitter offer excellent opportunities to interact with and advertise to customers at little to no cost.  In addition, social media is often an accurate indication of current and upcoming trends among customers, so businesses can stay updated with their customers’ needs and adjust business strategies accordingly.

Keep it professional. Unless a business has an established focus on a specific political or social cause, it’s usually prudent to separate such opinions and stances from the business environment. Also, business’ should carefully consider the context of any created content available to the public. One offensive tweet or distasteful Facebook post can disrupt customer approval ratings, or even permanently ruin a business’ reputation.  These are just a few initial steps any business can take to harness the power of the internet to maintain or improve their online reputation. A good reputation has to be earned. It requires constant focus tobuild, and even more discipline to maintain. Ultimately, a company’s strategies and tactics can only take their reputation so far. Demonstrating excellent service and maximizing satisfaction will inspire customers to express their positive experiences to others and generate invaluable word-of-mouth no amount of marketing dollars can buy.

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Tenants Experiencing "Sticker Shock" in Dallas

In a recent local news report from Channel 8 News, Dallas, TX, renters in the area described their experience with a pattern of frequent rent increases.

According to the news report, “The newly published April 2017 Dallas Rent Report shows prices across the city remain above the national media. On average, one-bedroom apartments were leasing for $1,260. Two-bedroom units were renting at $1,760.”

While property owners gladly invite the increase in rent prices, tenants are finding it difficult to keep up. Despite new apartment complexes springing up across the city, the demand for apartments in one of the many trending areas of Dallas remains constant; which could be contributing to rising rent rates.

Click here to read Channel 8’s full article, and to see a quick video of local tenants and realtors offering their experience and expertise with rising rents in Dallas.

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21 Cities Where Renters are Outnumbering Homeowners

In their recent study of the country’s apartment renting market, ABODO, a user-friendly apartment searching service, examined the top 21 cities in which renters outnumber homeowners and what makes each market so friendly to renters.

ABODO’s research provides an abundance of detailed information including a breakdown of age groups in the renter-majority markets, renter household type, and renter growth compared to housing costs. Each breakdown also includes visual aids to help understand how some markets compared to others.

Click here to see ABODO’s research in its entirety.