A Merry Christmas Made Possible By Federal Officials
A holiday theme, with a re-post of this article for context to the second: National Real Estate Investor, “Lenders will keep pouring money into apartment properties over the next two years, originating about the same volume of loans in 2016 and 2017—with slight increases—that they are likely to close in 2015, according to the latest Commercial/Multifamily Real Estate Finance Forecast from the Mortgage Bankers Association (MBA), an industry trade group. That’s still going to be a big change from the last few years, when business of lending on multifamily real estate didn’t just grow a little, but instead grew incredibly quickly. So far in 2015, lenders have increased the volume of apartment loans they made by well over 10 percent compared to the year before. In 2016, experts expect more moderate growth, with less frenetic competition to make deals.”
“Lenders will likely originate a total of $224 billion in permanent loans to multifamily properties in 2015, according to MBA. That’s a 15 percent increase from the $195 billion they lent in 2014, which in turn marked a 13 percent increase from $173 billion in multifamily originations in 2013. That year marked an 18 percent increase in originations from 2012. Lending volume can’t grow like that forever. The growth this year already caught most experts by surprise. ‘The volume in 2015 is higher than most people anticipated,’ says Jamie Woodwell, vice president for the research and economics group at MBA.”
“The Federal Reserve was expected to raise its benchmark interest rates earlier this year. Instead, federal officials continue to postpone raising rates. Their next chance will be in December. In the meantime, low interest rates support high property values, encourage potential investors to buy more assets and existing property owners to refinance. All these factors increase demand for financing. And lenders continue to be eager to lend on apartment properties.”
“The lenders growing the fastest in 2015 include banks and agency lenders, who make loans to apartment properties based on the programs set by Fannie Mae and Freddie Mac. They increased the amount of mortgage debt they have outstanding to commercial and apartment properties by $15 billion in the second quarter of 2015. Giant loans on large portfolios of apartment properties account for much of the growth. The federal officials who effectively govern Fannie Mae and Freddie Mac also made this growth possible. Halfway through the year, they tinkered with the limits on how much the agencies can lend, so that many loans to affordable and workforce housing properties don’t count towards the agencies’ caps on lending.”
“Lenders will keep busy over the next two years, keeping their volume of apartment lending at about the same level they maintain today. Lenders are expected to originate $225 billion in permanent loans on apartment properties in 2016, roughly the same as in 2015. They are expected to originate $227 billion in 2017, a tiny increase. Over the long term, the volume of loans lenders make should continue to gradually grow. ‘There is natural growth in the system,’ says Woodwell. ‘Over the long term, one does see property values increasing.’”
The Idaho Statesman. “Beth Stapleton, a single mother to her son, Carter, 2, is scrambling to find a new apartment after receiving notice to vacate Westwood Apartments. The new owner is kicking everybody out in order to renovate and increasing rent rates. She thinks there’s $150 to retrieve from a retirement fund. There might be a couple of hundred more in a health insurance flex account as part of the benefits she receives from her employer, Fred Meyer. Stapleton is more worried that she won’t find another apartment by Dec. 10, the deadline given by Verity Property Management for tenants to move out of the 43-unit Westwood Apartments.”
“In a letter sent with the 30-day notices to vacate, Verity President J. Steven Fender said the new owner of the apartments — Preece Lane LLC, according to state filings — plans to renovate the complex. Stapleton said she was told the rent for her unit will increase from $595 per month to $900. ‘I appreciate that the timing is poor with the holidays coming up but the new owner is being compelled by the lender to proceed with the refurbishing of all the units as quickly as possible.’ - Letter to tenants from Verity President J. Steven Fender.”
“The Westwood situation resembles that of Glenbrook Apartments, located near the intersection of Cassia Street and Curtis Road. There, new owners Mark and Caran Daly of Eagle bought the complex as an investment. They planned to renovate and increase rent rates by more than 40 percent. Their decision forced nearly 400 tenants, most of whom were refugees, to scramble for housing. The property manager — Verity — issued 30-day notices to vacate to tenants of the complex’s 112 units. Most if not all requests for concessions to help tenants find new housing were denied, advocacy groups told the Statesman. Requests included extending the move-out deadline, returning deposits early or waiving deposit reductions for damage that would be replaced during renovation.”
“Preece Lane LLC bought the Westwood complex for an undisclosed price in August. The registered agent, Fender, filed to create a limited liability corporation. The filing with the Idaho secretary of state lists Steven Jackson and Cristine Clark, both real estate agents with Realty Executives in Vista, Calif., as members or managers of the company. Calls to Jackson, Clark and Verity were not returned. Verity has not staffed the Westwood office since the 30-day notices were delivered.”
“Bruce Ferrin, 59 has lived at Westwood for five years, including the last four with partner Nancy Summers, 62. Ferrin, who is disabled from a foot injury, lives on disability payments. Ferrin, who takes oxygen and suffers from respiratory problems, lives on Social Security. Ferrin said they must wait for payments before applying for apartments, tightening their window to find a rental by Dec. 10. ‘We’re trying to find a place before we’re kicked out,’ he said. ‘We took down the Christmas tree. Merry Christmas.’”
http://www.affordable-online-colleges.net/rental-crisis/
“Here’s the problem:
[2000-12]
Median Gross Rents: +6%
Median Renter Income: -13%
Those numbers don’t add up.
Traditional Affordability Rule:
Rent + Utilities < 30% Income Median income earners - aka the middle class - can no longer afford rental housing in nearly 90 cities across the United States. In total, nearly half of American renters spend more than the maximum suggested percent income on rent, and more than 1 in 4 rental households spend over 50% of income on rent. That rose 12 percentage points in one decade, and more than doubled in 50 years. Still, we’ve only looked at middle-class renters, really. It gets worse.
% Renters with incomes less than $30,000: 46
Nearly half of all renters earn less than $30,000 a year.
% Renters with incomes less than $15,000: 22
Nearly a quarter of all renters earn minimum wage or less.
That means to reach the affordability standard:
– Housing cost must be <$375/month - <%5 rentals built in last 4 years <$400/month - 50% rentals available for <$400/month are more than 50-years-old - 14% of those fail American Housing Survey’s adequacy criteria — which leads to a major affordable housing squeeze– 11.8 million low-income renters 6.9 million low-income rental units 4.9 million unit shortfall …which leads to an affordable housing gap that grew 169% in just over a decade. And it’s about to get worse.”
‘So far in 2015, lenders have increased the volume of apartment loans they made by well over 10 percent compared to the year before. In 2016, experts expect more moderate growth, with less frenetic competition to make deals…’There is natural growth in the system,’ says Woodwell. ‘Over the long term, one does see property values increasing.’
That’s swell Jamie. I’m sure you, your mortgage buddies and Mel Watts are having a fine Turkey Day. Merry Christmas! And a special shout out to Steven Jackson and Cristine Clark, both real estate agents with Realty Executives in Vista, Calif. Pass the gravy Steve and Cristine!
“loans to apartment properties based on the programs set by Fannie Mae and Freddie Mac…”
“…the rent for her unit will increase from $595 per month to $900.”
Do these two things go together? Fannie & Freddie loaning billions out to have rentals refurbished so that rents can be doubled?
Is this where so-called ‘value-add’ originates?
Hmm I’m not far off from spending 50% of my take home in rent, and rent is likely to increase and there isn’t much escape. I’m right around $12/sqft a year, I could rent a cheaper place but then I’d be paying more like $20/sqft to $25/sqft.
It was said that they can’t raise interest rates above 5% as then the government couldn’t afford the loans it has — does this mean we’re locked in to low interest rates for a long time?
I’m seeing SOME weakness in the economy but I still get a lot of people calling me trying to recruit me to other jobs.
It could be worse. You could be really in the hole and paying double your current rent every month for the next 30 years had you made the error of buying a house.
Regarding “SOME” weakness in the economy, as far as anyone can see, the economy has never been weaker. Remember….
US Labor Force Participation Rate Falls To 37 Year Lows In October
http://data.bls.gov/timeseries/LNS11300000
I appreciate that the timing is poor with the holidays coming up but the new owner is being compelled by the lender ??
What a bunch of BS that is…
state lists Steven Jackson and Cristine Clark, both real estate agents with Realty Executives in Vista, Calif., as members or managers of the company..‘We’re trying to find a place before we’re kicked out,’ he said. ‘We took down the Christmas tree. Merry Christmas.’” ??
Could not wait until spring or early summer you Heartless Basturds….
+1. Sad when LLs have no empathy for their tenants. I certainly would not want to be looking for a place to move into right now!
How about this?
‘Most if not all requests for concessions to help tenants find new housing were denied, advocacy groups told the Statesman. Requests included extending the move-out deadline, returning deposits early or waiving deposit reductions for damage that would be replaced during renovation’
You scratched the kitchen counter. I’ll take that out of your deposit.
But you are going to replace the counter-tops?
Rules are rules.
Rentals are the cheapest in December! I’ve noticed that if I moved in December I could probably save a good bit on rent.
And a fraction of the cost of buying any month of the calendar.
I am going to Thanksgiving dinner at my brother’s home this year. He is a bankster and the others there of similar ilk. Years ago, they chose not to invest in an HVAC service business with me and have invested in high end real estate. They have a nice place here is Fl, another in CO and several in New York. She believes they will be going up forever and he may have some better idea of what is a risk. I will get to see how it all plays out. But there is one thing I have seen in this life, whatever the price and the measure.
Karma is a bitch.
Next year I will have plans to sever at the soup kitchen and will be unable to attend.
Ben
Great info. Explains what’s happening to 1960 apt complexes in Thousand Oaks (So Ca). Dumps are now very nice. I was wondering what was up. Now, will some of these places fall under the LIHTC apt umbrella, with the Feds paying most of the new market rate rent?
Steady Stream of Capital Continues to Flow in LIHTC Market
‘A time machine has sent the low-income housing tax credit (LIHTC) market back to the roaring days before the recession. And, it looks like it may stay there for the near future. Despite expectations for a correction, prices have remained strong throughout the year. In early October, investors reported seeing recent bids as high as $1.18 and $1.21 in the hot Community Reinvestment Act (CRA) markets.’
“My expectation is we will continue to see robust demand among investors for tax credit investments,” says Todd Crow, executive vice president and manager of tax credit capital for PNC Real Estate. “Based on where the market is today, my opinion is we are at all-time highs in tax credit pricing. From my vantage point, it looks like there is more room on the downside than the upside. It’s hard to see yields going much lower or prices going much higher. I also don’t see any real pressure on the downside. Absent some external shock to the system, a significant change in the overall economy, I expect 2016 to be a bit milder version of 2015.”
‘A change in prices will likely be moderate, according to Crow, who is also president of the Affordable Housing Tax Credit Coalition. “I don’t know if I would call it a correction,” he says. “Maybe just a little bit of the froth out of the market.”
“I think this is probably the most competitive year that many people have been through,” says Beth Stohr, director of new production, affordable housing tax credit investments, at U.S. Bancorp Community Development Corp. “I’ve heard people say this is 2006 all over again. It does feel like we’re back at the other peak in the marketplace. It’s a very competitive time.”
This is a tax credit hand-out to the “investors”, and it’s obviously driving deals, not making anything affordable. Note how many of these reports mention frenzy, froth, etc.
‘With little fanfare or formality, over the last two months Freddie Mac has rolled out two programs that provide financing for workforce housing renovation or rehabs. One program, ingloriously called Moderate Rehab Loan Program supports major renovations of a property. It is a hybrid offering befitting this specific scenario. That is, it is not quite a pure construction loan, but it also couldn’t be characterized as permanent lending either.’
‘The other product is called Bridge to Resyndication. As the name suggests, it is a bridge loan for Low Income Housing Tax Credit developers that need capital to reposition existing LIHTC properties for recapitalization under the program.’
‘The Moderate Rehab Loan program joins an existing Freddie Mac rehab loan program, but aimed at financing light renovations, EVP David Brickman told GlobeSt.com. Rehab loans, especially when the construction is at the infrastructure level or for a complete gut renovation, can be difficult to secure in the private market, mainly because these projects require more active monitoring from the lender, Brickman said.’
‘Brickman expects Freddie Mac will buy back roughly about $1 billion of these loans next year. The Bridge to Resyndication program targets an even narrower use case; indeed it was crafted with St. Paul, Minn.-based Oak Grove Capital to recap a specific property.’
‘However, many of the first wave of affordable housing properties financed with LIHTC are nearing the end of the initial 15-year compliance period and it is expected that more borrowers will be coming forward to access the program.’
As I understand it, the 15 year thing is when the tax credits run out. So you just sell it, at a much higher price of course, the new owners slap on some paint, raise rents, and start collecting the credits all over again. Oh, and don’t forget, the depreciation for tax purposes starts over again too. The same building.
This is a tax credit hand-out to the “investors”,
+infinity, Ben. Reading those articles, I could almost hear the hogs snuffling and grunting at the trough of government largess with taxpayer monies.
“This is a tax credit hand-out to the ‘investors’,
Which supports prices, which (presto) generates equity, equity that immediately translates to generated wealth.
Generated wealth for something like two-thirds of citizens (voting citizens) who are homebuyers.
Incentives, never underestimate the power of incentives.
can be difficult to secure in the private market, mainly because these projects require more active monitoring from the lender
If that doesn’t scream “lending but not doing due diligence”, I don’t know what does!
The federal government should not be in the business of low-diligence lending with public funds.
Here we go; how are these affordable rents amounts set?
‘If the root causes of Grand County’s housing shortage are complex, then the possible solutions are even more so. In communities like the Fraser Valley where the cost of development is high, certain federal programs can subsidize the development of attainable housing.’
‘One of the more popular programs is the low-income housing tax credit (LIHTC) program. Introduced as part of the Tax Reform Act of 1986, the LIHTC program issues billions of dollars of tax credits for the acquisition, rehabilitation and construction of affordable housing every year.’
‘Currently, Wapiti Meadows in Fraser is the only LIHTC property in Grand County. The rooms at Wapiti Meadows are income-restricted, and the Colorado Housing Finance Authority, which administers the LIHTC program in Colorado, determines the maximum rents, said Property Manager Antoinette McVeigh.’
‘The rents and income limits are based on area median income (AMI).’
‘AMI doesn’t incorporate incomes from non-family single and roommate households, which can make the figure higher than the average income of all households in the area, according to Winter Park’s Housing Needs Assessment. McVeigh said the AMI in Grand County, $54,000 per year, seems high to her. “I think there it’s skewed,” she said. “I think there are some really high income earners that push those incomes to be a little higher.”
‘Wapiti Meadows offers units from 40 to 60 percent of AMI, but for resident Shanna Ganne, the maximum rent has become unaffordable.’
‘Unfortunately, there aren’t many other options. The Section 8 Housing Choice Voucher Program, a federal housing assistance program, has a 34-person waiting list in Grand County.’
Voila! You get to raise rents and collect the tax sop:
‘AMI doesn’t incorporate incomes from non-family single and roommate households, which can make the figure higher than the average income of all households in the area’
And as noted in the first link in the comments above, lumping SF households with renters will “skew” it even morer.
‘LIHTC Champion‘
Bob Moss strives to protect and expand the tax credit.
By Christine Serlin
‘Bob Moss has come a long way from his days sitting in a model apartment as a property manager in Portland, Maine, in 1985 for affordable housing developer Joe Wishcamper. Now you’ll find him walking the halls of Congress, rallying support to protect and expand the low-income housing tax credit (LIHTC) program as a principal and national director of governmental affairs for CohnReznick, one of the nation’s largest accounting firms.’
‘For the past three decades, Moss has been a key figure in the affordable housing industry and a champion for the LIHTC. Prior to joining CohnReznick two years ago, he previously had been senior vice president and director of origination for Boston Capital, the national real estate investment and advisory firm founded by Jack Manning and Herb Collins, Moss’ father-in-law.’
‘At the forefront for Moss is getting the fixed rate for the 9% LIHTC made permanent, but he says it will be challenge for this Congress to get everything done on its legislative agenda by the end of the year. “I would like to see the 9% fixed rate made permanent or at least for two years to get us into tax reform,” he says. “I believe we’ll have it regardless of the party.”
‘Moss contributes his success to his many mentors throughout his career, including Collins; affordable housing attorney Chuck Edson; Manning; David Reznick, the co-founder of Reznick Group and longtime affordable housing leader who passed away in December; and Wishcamper. “One thing these people have in common is they are so kind and it’s not about themselves,” Moss says.’
I’m a little choked up, thinking about these real estate and accounting firms, spending their hard-earned money so this guy can walk the halls of congress advocating - for wealthy clients tax credits.
One thing these people have in common is they are so kind
I just threw up a little bit in my mouth.
Another good job Government Housing Crime Syndicate….. another good job.
The schadenfreude begins when FedResGov pulls out of housing(which it certainly will and hasn’t a choice).
What is going to force them out now, after nearly a century of increaingly distortionary and disastrous intervention?
‘Why a New York orthodontist has a half-billion dollar hold on Baltimore’
‘The lot at the corner of West Lexington and North Schroeder streets is empty but for a deteriorating sign announcing a hearing about the consolidation of the building lots. Half of “Phase 1A” of a long-planned mega-development, the structure was originally slated to have its groundbreaking last fall. But like so many prior deadlines, it came and went without a shovel being turned.’
‘Welcome to the Poppleton Redevelopment play, a half-billion-dollar show of smoke and mirrors whose 10-year run (so far) would be the envy of any Broadway producer—but for the fact that there is nothing on stage.’
‘If production is ever completed, the New York developers stand to earn more than $41 million. But they say they need more help from Baltimore taxpayers—$8.5 million in Tax Increment Financing (TIF)—just to start. Soon, the Baltimore City Council gets to decide whether to buy that ticket.’
‘And it is a New York show, with a cast of characters hailing from the world of dentistry, high fashion, public television, and nonprofit housing finance—with the inevitable retired car dealer rounding out the cast. What is unsure right now is whether it is a drama, a tragedy, or a comedy.’
‘It has elements of all three. Plus a mystery: How did these characters gain control of such a large swath of Baltimore?’
‘The Poppleton project was grandly ambitious, requiring the city to buy and demolish more than 500 private properties to hand over to the developer, who pledged to build more than 1,600 units of housing and more than 150,000 square feet of retail space.’
‘Much of the housing was supposed to be “market rate”—meaning too expensive for most Baltimoreans. The 20 percent set aside as “affordable” housing was going to cost about what an average Baltimore resident could afford. The set-aside was for those making 50 percent of the “area median” income—or about $40,000 per year—City Councilman Bill Henry recalls being told at a meeting. There would be parks, sun decks, and no provision to house the very poor.’
“Theirs was the only proposal that included market rate,” says a city official with knowledge of the deal. “I think that is why they were picked.”
‘Some observers scratched their heads. Aside from the concern that one-bedroom apartments were unlikely to command the projected $1,500 per month in that neighborhood, and aside from the fact that the city was proposing to move people who had renovated their own homes, many wondered who these La Cité people were.’
‘Bythewood’s son, Daniel Jr., serves as La Cité’s president. His experience is in the world of nonprofit housing finance, specifically the assembly and sale of Low Income Housing Tax Credits (LIHTC), which now undergird nearly all new low-income housing development in the U.S. LIHTCs offer substantial tax breaks to wealthy people and institutions, and a substantial industry has arisen to administer and promote these as good policy. According to his La Cité bio, Bythewood Jr. worked for the New York Equity Fund, managing “a billion dollar portfolio of projects” under New York City’s “Neighborhood Redevelopment Program (NRP), Neighborhood Entrepreneurs Program (NEP), and the Neighborhood Homes Program (NHP).”
‘But Bythewood Jr. did not oversee those programs directly, nor did he have anything to do with the actual building program. That job fell to a 6-foot-7 assistant New York City housing commissioner named Wendell Walters, aka “The Big Man,” who extorted at least $600,000 in bribes from building contractors seeking contracts under the city’s affordable housing programs, according to court records and news reports. Walters is cooperating with prosecutors and has not yet been sentenced. Bythewood was too far from that action to even garner mention in the scandal.’
“The Federal Reserve was expected to raise its benchmark interest rates earlier this year. Instead, federal officials continue to postpone raising rates. Their next chance to postpone liftoff will be in December.”
A Win-Win-Win for Affordable Housing
The affordable housing tax credit benefits the economy in many ways.
Robert D. Dietz is an economist with the National Association of Home Builders. Previously an economist with the Congressional Joint Committee on Taxation
http://www.usnews.com/opinion/blogs/economic-intelligence/2013/09/05/defending-a-tax-program-that-helps-provide-affordable-housing
The propaganda campaign to support the government-sponsored rent inflation program certainly is impressive.
The San Diego Union Tribune
Business
Growth & Development
Multihousing leading real estate recovery
By Roger Showley | 3:51 p.m. Nov. 25, 2015 | Updated, 4:05 p.m.
Apartment and condo construction increased enough in October to bring the year-to-date figure ahead of 2014’s. Apartment and condo construction increased enough in October to bring the year-to-date figure ahead of 2014’s. — John Gastaldo
San Diego County’s housing market has returned to healthy if not boom times, according to two reports issued Wednesday.
Dodge Data & Analytics said October construction starts totaled $338.4 million in October, more than double year-ago levels. The increase was almost all attributable to residential activity, which was up more than three-fold from $73.8 million to $266.4 million. Through October, residential construction starts were worth $1.7 billion, compared with $943.8 million for the same period last year.
Freddie Mac reported San Diego is 66.8 percent above the lows reached in October 2010 but 37.9 percent below its 2005 levels. The secondary mortgage lender uses account mortgage activity, employment and income in all 50 states and 100 metro areas on its Multi-Indicator Market Index of housing market health.
San Diego ranked 26th in housing market health. The top five metro areas were Fresno; Austin, Texas; Honolulu, Hawaii; Salt Lake City, Utah; and Los Angeles.
“The San Diego housing market is in range (of normal housing activity) and improving,” said Freddie Mac.
…
Ben,
Thank you for making my Thanksgiving grateful. This is great info. I didn’t learn any of this macro in my LIHTC class. (3 units-recently )
Ventura, CA Housing Prices Crater 5% YoY
http://www.zillow.com/ventura-ca-93003/home-values/
Ho ho ho, asshat Mel Watts strikes again!
Buyers in 39 Costly Counties Will Have Higher Loan Limits in 2016
http://www.realtor.com/news/real-estate-news/conforming-loan-limits-raised-for-39-high-cost-counties-in-2016/
‘The maximum limit for a loan conforming to Fannie Mae and Freddie Mac guidelines will be raised for 39 high-cost counties in 2016, the Federal Housing Finance Agency announced on Wednesday.’
‘That’s good news for buyers in newly hot markets such as Denver, where would-be buyers are struggling to afford homes. Conforming loans appeal to buyers because they tend to offer lower interest rates than nonconforming loans.’
Merely making a large collapse larger.
Misconduct.
HBB was excellent so far today. Professor Ben was on his toes (as usual), and the participants stayed focused.
Denver, CO Housing Prices Plummet 20% YoY As Housing Demand Evaporates Nationally
http://www.zillow.com/hampden-south-denver-co/home-values/