RubinBrown Apartment Stats 2019

EXECUTIVE SUMMARY

worse given the threats to the supply. Unsubsidized low- income housing units are under constant threat of being lost to upgrading or removal, while subsidized contracts are at risk of converting to market rate units. Affordability restrictions on 533,000 LIHTC units, 425,000 project-based Section 8 units, and 142,000 other subsidized units are set to expire within the next 10 years. Conclusion Vacancy rates are showing signs of increase to historical rates, but according to a national real estate investor survey, market participants view the multi-family industry only slightly less positively than in previous years and expect lending and investment conditions to remain favorable. According to Fannie Mae, despite elevated levels of new supply over the next 12 to 18 months, investment in existing multi-family properties is expected to remain similar to 2018 levels. The multi-family cap rates are currently at 5.4%, which is down from 5.6% at the end of 2017; it is unlikely cap rates will compress further. It is expected that national multi-family cap rates will increase slightly but remain under 6.0%. The outlook for the multi-family industry remains positive based on tenant demand. RubinBrown’s 2019 Apartment Stats mirror many of the trends previously discussed. Overall, vacancy rates remain historically low, but experienced increases during the year. Additionally, the low-income vacancy rates remain lower than government-assisted projects, a consistent trend as the need for low-income housing far surpasses the supply. Lastly, monthly rents continue to increase, driven partially by the need for additional multi-family housing. RubinBrown invites you to utilize this study as a development and management tool to compare your financial operations to the operating results of your peers. This study also provides sound comparable data to utilize in formulating an acquisition model. Like all compilations of data, it will be most useful when carefully and properly interpreted. We sincerely thank everyone who took time to participate in RubinBrown’s survey.

Overall, tax reform has led to lower equity pricing for low- income housing tax credit deals. Also, more importance is being placed upon the upfront financial projections that are prepared prior to the closing on a low-income housing tax credit partnership. There are more issues than ever that need to be addressed prior to closing on this type of transaction due to the new tax law. According to Fannie Mae, almost half of single family renter households (20.2 million) are cost burdened. This means more than 30% of their income is spent on rent and utilities. Furthermore, over a quarter of all renters pay more than half of their household income for housing. The Joint Center for Housing Studies of Harvard University states the cost-burdened share of renters doubled from 23.8% in the 1960s to 47.5% in 2016 as housing costs and household incomes have steadily diverged. Adjusting for inflation, the median rent payment rose 61% between 1960 and 2016, while the median renter income grew only 5%. In 2017, approximately half of assisted households (2.2 million) received housing vouchers for use in the private rental market, a decline of 86,000 from 2016, according to the Joint Center for Housing Studies of Harvard University. Allocations for rental assistance have fallen well behind the need. Although the 2018 spending bill increased HUD funding, renewals of rental assistance contracts continue to use a larger percentage of the budget. According to the same study, households that qualify for assistance have several barriers that stand in the way of finding affordable housing such as wait times for HUD subsidies, averaging 18 months for public housing and 32 months for vouchers. Even once obtaining the voucher, recipients face the challenge of finding eligible housing within 60-120 days or surrendering the vouchers. Additionally, many cities have closed their waiting lists for both types of assistance. The National Low Income Housing Coalition reports that the gap between supply and demand for affordable and available rental units to very low-income households is 7.7 million. According to the Joint Center for Housing Studies, this shortfall could become much

Real Estate Services Blog The RubinBrown Real Estate Services Blog is a value-added approach keeping clients and contacts informed about current, relevant topics affecting the real estate industry. www.RubinBrown.com/RealEstateBlog

RubinBrown Apartment Stats 2019

2