Building For Customers Who Don’t Exist
A report from Bloomberg on New York. “For Manhattan landlords, Christmas usually comes in July, a month when demand for apartments surges and rents go up. Not this year. Leasing costs in the borough dropped 1.9 percent from July 2016, the first decline for the month in at least five years, according to a report by appraiser Miller Samuel Inc. and brokerage Douglas Elliman Real Estate. As the market contends with an unrelenting wave of new supply, owners are using the summer as way to get ahead of the competition. They’re offering rent discounts and deal sweeteners in a rush to fill their units before the slower, cooler months set in. ‘The last thing anyone wants to do, especially now, is rack up vacancies,’ said Gary Malin, president of brokerage Citi Habitats, which released its own report on the rental market. ‘If you rack them up now, going into a slower time, its going to be even harder to achieve your price.’”
From Bisnow on California. “San Francisco, Oakland and San Jose are ideal markets to sell multifamily assets, according to the latest findings from Ten-X. These major Bay Area markets have received additional supply, which has pushed up vacancies. Rents also may have peaked, leaving multifamily assets vulnerable for diminished returns. In San Francisco, multifamily completions have outpaced absorption since 2014. Vacancies have risen and rent growth started to weaken last year. Employment growth has slowed from upper 4% in early 2016 to about 2% in 2017 related to a slowdown in the city’s critical information sector. Ten-X expects the region will face net operating income declines of about 4.7% through 2020.”
“San Jose can expect similar prospects. New supply hitting the city is pushing vacancies up to the 4% range. Overall job growth has cooled slightly despite a robust information sector, and slow population growth is limiting potential expansion. Rents are expected to contract in 2018 and vacancies are expected to climb above 7%. Ten-X expects annual net operating income to decline 3% from 2017 to 2020.”
From LA Weekly on California. “Construction cranes dot the skylines of Hollywood and downtown. And statewide, more new housing units were built last year than in any recent year. But that progress may be about to stall in Los Angeles. A report by the Building Industry Association of Southern California, or BIA, says that applications for new housing units in Los Angeles have fallen dramatically this year. ‘The San Fernando Valley has projects that are no longer moving forward,’ says Stuart Waldman, president of the Valley Industry Commerce Association. ‘They just couldn’t pencil out anymore.’”
The Denver Post on Colorado. “Denver is poised to have a glut of luxury apartments and Denver hopes to buy down rents for low income residents. Denver Mayor Michael Hancock announced Tuesday that the city is close to scoring a major corporate partner to help launch a pilot program to buy down rents for as many as 400 apartments in Denver. Residents making between 40 percent and 80 percent of area median income would be eligible to apply for the vouchers that could pay down their rents. The goal would be for the rent to not exceed 35 percent of the individual’s income.”
“Here’s the brilliant part of the plan, however. Those individuals would be putting 5 percent of their rent into an escrow account, so at the end of two years, in theory, the voucher recipients could have saved the beginnings of a down payment for a home.”
“Former Denver Post reporter Emilie Rusch reported that Denver is likely to have a glut of luxury apartments in coming years. Rusch found the good news was that 13,370 apartment units are online to open in Denver by the end of the year, but the really bad news is the majority of those will be at the top end of the rental market in prices. As those units sit empty, prices should come down.”
“It’d be a shame if this voucher program rewarded the bad behavior of developers building for customers who don’t exist in a fantasy world where on-demand yoga, tanning beds and dog groomers aren’t luxuries beyond the financial means of most.”
From KRIS TV in Texas. “It was supposed to be the center piece for revitalization of downtown Corpus Christi, but four years after construction began, The Cosmopolitan still sits empty. The luxury apartment complex is located in the heart of downtown. The ownership group most recently said tenants could begin moving in on April 1st of this year. However, that was just one of multiple promised grand opening dates that never happened.”
“‘We offer a host of property amenities, such as a resort style pool, with a resident operated swim up bar and cabanas,’ a voice message for The Cosmopolitan states. A website features colorful artist renderings that depict a selection of floor plans, and a street level state-of-the-art fitness center and retail shops. Marketing encourages Corpus Christi residents to ‘Live, Work, Play’ and ‘Live downtown for real.’”
“‘It is a huge letdown,’ said former downtown business owner Matt Scott. The Corpus Christi native lobbied for The Cosmopolitan back in 2012. ‘I remember going to City Council meetings in support of it,’ he said. ‘It just completely backfired.’”
“Construction also stalled in March of last year, when the rising cost of construction and other factors left The Cosmopolitan short on cash to pay its contractors. Eight liens on the property were filed at the Nueces County Courthouse by unpaid contractors. An email currently being sent out to interested renters once again promises an opening date by the end of the month. ‘You are getting in touch with us at a great time, as we anticipate having units available for tours in the upcoming weeks, and currently have move in reservation dates Late August and September,’ the email reads.”
From the Los Angeles Times. “Los Angeles and New York City top the list of U.S. cities with the most poor people laboring under heavy rent burdens, living in substandard housing, or both, according to a U.S. Department of Housing and Urban Affairs study. More than half of Los Angeles’ 1 million very poor households, or 567,000, spent more than half their income on rent or resorted to undesirable housing in 2015, the study said.”
“In New York City, 44% of the very poor also struggled to afford housing, but because there were more of them — 1.8 million — the number falling into what the study called the ‘worst-case housing needs’ category was higher, 815,000. More than half of very low-income people in Miami, Phoenix and Riverside also struggled to pay the rent, the study said.”
“Rising rents have been linked to Los Angeles’ explosive homelessness problem, which grew 23% last year, to 58,000 people countywide, officials reported based on a January street and shelter count. A report by Zillow found that 2,000 more people would be pushed into homelessness by a 5% rent hike — just over the 4.5% jump the company forecasts for L.A. next year. The company said rent increases are closely tied to burgeoning homelessness in cities including Los Angeles, Seattle and New York City, where there is little low-income housing for those priced out of rapidly gentrifying neighborhoods to go to.”
“Nationwide, HUD reported that the number of households with worst-case housing needs ballooned 66% since 2001, with record increases between 2007 and 2011.”
