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How Can Cities Address the Affordable Housing Crisis

A few weeks ago I wrote about the prospect of the repeal of Costa-Hawkins act in California.  This measure is being pushed by tenant rights groups claiming it will help with affordable housing.  Although I do believe there is an affordable housing crisis, I do believe that the repeal of Costa-Hawkins  would only be a short term relief and significantly hurt affordable housing in the long term.  So what can cities do to address the affordable housing crisis? Cities have many tools available to them, and if utilized correctly can significantly positively impact the affordable housing market.  It boils down to simple economics, if a developer can build affordable housing, and make money doing so, then they will.  How can cities promote the development?  It starts first with the approval process.  After the cost of land and actual hard construction costs, the time cost and soft costs are the highest expenses for a developer.  The city of Dallas did this earlier last year.  They passed measures to streamline the process to construct affordable housing.  By streamlining local administrative review of plans, and lowering the costs of permits they have made it easier for developers to develop low income housing.  With faster approval processes and lower costs affordable housing becomes that much more attractive to a developer.  Another benefit for streamlining the process is that it minimizes the risk to a developer, and like any other investment development is a risk vs. reward calculation, with lower risk translating to lower demand for r......
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Multifamily Industry Pushes Construction Starts Past Million Mark

Multifamily Industry Pushes Construction Starts Past Million Mark
With all of the multifamily construction projects taking place serving as an indicator of just where the housing market is heading, for the first time since the recession, nationwide housing starts have bumped past the million-unit mark. The U.S. Department of Housing and Urban Development and the U.S. Census Bureau report that in total, production was up 15.7% month-over-month and up 21.7% over this same time last year. Translation, the seasonally adjusted annual rate of housing starts hit 1.09 million units in July and it's due entirely to the 39.6% increase we've seen in multifamily starts. Experts agree that single-family home builders are still hesitant to push for new construction expansions due to the fear that a lack of available credit and potential economic uncertainty will hinder would-be buyers from purchasing. These same experts also agree that because of this sentiment, demands for new apartment construction continue to grow. While single-family housing starts saw a minimal increase of only 0.8% or a seasonally adjusted annual rate of 649,000 units, multifamily is on pace to surpass even pre-recession production with an increase of 39.6% or an adjusted annual production of 423,000 units. Economists are encouraged by the growth in multifamily because they see the current demand for new units as a sign that more young adults are branching out and forming their own households, a trend which will one day help to boost the demand for future homeownership. National statistics show that this growth isn't focused on any one part of the country and instead......
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Is the Boom in Multifamily Hurting the Job Market?

Is the Boom in Multifamily Hurting the Job Market?
Is all the new construction we're seeing in the multifamily industry really helping the economy as much as we think? Could all the focused efforts on building multifamily units actually be taking away from the single family market's recovery and, in turn, hurt the overall job market in the U.S.? Some people are beginning to think so. Maury Harris, Chief US Economist and Managing Director of UBS Securities, told Fox Business, “Building a new single-family home adds more to the economy than the recent alternatives of building apartments or remodeling.” Harris goes on to explain that the lag in single-family construction and the boom in multifamily apartment construction has been driven by Americans' preference to rent as opposed to buy which, in the long run, has larger implications for the U.S. Economy than we think. It seems that, statistically, for every single-family house that gets built, the job market adds approximately 3 jobs and, when compared to the construction of a multifamily unit, that is about 2.5 times the total jobs an apartment unit creates. Over the long haul, some feel these numbers might add up to a lot of missed opportunities and Harris urges that the “job formation associated with likely home and apartment building this year is not trivial.” Job Multiplier statistics gathered by the National Association of Home Builders (NAHB) show that in 2013, single-family construction had 618,000 starts and created 1,806,000 jobs whereas multifamily construction had 307,000 starts and created only 347,000 jobs for a total of 2,153,000 jobs created. In 2014, the est......
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Top Dog: Multifamily Remains Construction's Hottest Properties

With all the construction that the real estate industry has endured in the last decade, it looks like one sector has risen above all others to claim the top spot in development coming out of the recession: multifamily. As the demand for new apartment units surges and rents for those units are projected to rise for a fifth straight year, experts speculate that even with a ton of multifamily construction breaking ground it’s unlikely that we’ll see any real relief anytime soon. So, even with the 6% rise in apartment rents that we saw take place over the last decade and the accompanying 13% drop the average renter saw in their income, we’re still seeing more first-time and returning tenants looking to rent. These renters are not only seeing multifamily as a financially viable solution to their living needs, but also as a lifestyle choice that puts them in a community that affords them proximity to both work and play. A growing trend that we can expect to do nothing but thrive in the upcoming years. That’s also why we’ve seen multifamily construction spending continue to increase throughout the first half of 2014. The idea of multifamily becoming the hottest sector in the real estate industry really boils down to the shifting job market. The lack of access to available credit and the struggles in the employment sector have taken ownership off the table for a majority of Americans. Also, as job markets begin to return, we’re seeing more urbanization as these new employment opportuniti......
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Real Estate Trends | 2013 Apartment Market Recap : First Half

Real Estate Trends | 2013 Apartment Market Recap : First Half
We’re taking a look back at the first half of 2013 to assess the state of the U.S. real estate market and what we find is that, according to the statistics, all signs are pointing towards continued recovery and growth. As a matter of fact, by the third quarter of 2013, 90% of the cities in the U.S. have reported seeing a boost in real estate prices across the board. For the first time in years the home building industry has reported enough growth to actually contribute to the economic growth in their regions. The biggest reason behind this newfound growth is the fact that multi-unit residential construction has expanded in hopes of filling the growing demand for more affordable dwellings. This boost in demand stems from the fact that after the foreclosure crisis displaced thousands households and the downturn in the economy made it difficult for younger prospects to break into the purchase market. These factors have led to a stunting of the market given where the trends in population growth would have traditionally placed it. You see in the last fifty years, households in the U.S. have grown an average of around 1.5% per year. But as of the year 2000, the average household growth rate has remained around 1.0%. According to the NAHB, when this 1.0% trend is figured against the most recent Census household counts, we come up with an estimated deficit of 2.1 million households that have been delayed due to the financial crisis. That translates into an estimated two million new h......
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Looming Drywall Increases - Are you Prepared?

I was talking with someone who has knowledge about the drywall market, and he gave me some important (anonymous) information.  I hope it is helpful.  ~ Brent "You have received accurate information regarding gypsum board prices increasing in 2013 an additional 25%, (+ $2 per sheet on 5/8” Fire Rated) .  Announcements were issued as far back as July 2012 that this was imminent, as manufacturing costs have increased over the last few years and demand has increased significantly on a national level.  I received a report from the Commerce Department stating that (residential single and multifamily) construction starts in October 2012 were the highest since July 2008.  We are definitely on an upswing and I estimate that what we’re seeing with drywall will occur also with lumber, concrete, steel, roofing shingles, etc. in the very near future.  Several contractors are attempting to secure warehouse space to store materials that will spill into January on large projects already under construction.  The situation reminds me of the housing boom of 2004-2009 which coincided with the most damaging hurricane seasons in recent history (Ivan, Katrina, Wilma, and Ike) when suppliers, contractors, and importers sought relief from elevated gypsum board prices and began importing what has become known as “Chinese Drywall”.  The results of which are still being debated in courtrooms today.  My suggestion to my general contractors/developers is to adjust budgets and enforce schedules.  I have not heard of additional price increases on drywall after this one in January, but I always include a 30 da......
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