NAA Industry Insider: Judge Rules Amenity Fees Illegal in Massachusetts

 

September 2, 2014
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TimeWarnerCableApril14
Judge Rules Amenity Fees Illegal in Massachusetts
Digested From "Judge Says Equity's Tenant Fees Illegal"
Boston Herald (08/29/14) Goodison, Donna

U.S. District Court Judge Rya Zobel this week dealt a blow to apartment giant Equity Residential, ruling that the upfront, nonrefundable fees it has charged Massachusetts apartment residents -- including "amenity," "move-in," application, and pet fees -- are illegal because they violate the state's security deposit law. David Pastor, a Boston attorney representing three former Equity residents, remarked, "The judge found . . . the security deposit statute limits to certain enumerated charges what the landlord can charge [before or] at the commencement of the tenancy, and those are first month's rent, last month's rent, a security deposit, and a charge for a lock and key installation." In addition, Zobel ruled that the case can be consolidated with another federal lawsuit pending against the Chicago-based REIT and granted it class-action status. The potential number of Massachusetts residents impacted was not clear as of presstime. Equity currently leases 31 apartment communities in the Bay State containing nearly 6,680 rental units.

The next step in the case is a Sept. 30 status conference, with Pastor expecting a short trial to determine damages. Zobel denied a request to block the REIT from charging other Massachusetts residents the upfront fees. He says an injunction can be granted only if there is no adequate legal remedy. While that means Equity Residential could continue charging the fees, Pastor doubts it will. He concludes, "Equity will be smart enough to realize that they declared these fees unlawful, and if they continue to charge them, someone else may sue them."

Market Trend Insights


RealPage-Sept.14
Who Does D.C.'s Luxury Apartment Boom Favor?
Digested From "Luxury-Apartment Boom Favors D.C.'s Millennial Renters"
Bloomberg (08/27/14) Perlberg, Heather

While apartment rents nationwide are approaching all-time highs due to demand from young Americans who are waiting longer to become homeowners, a glut of construction in Washington, D.C., has limited gains in leasing costs and given bargaining power to residents who can afford higher-end housing. Axiometrics Inc. reports that rents in the D.C. metro area, including the Maryland and Virginia suburbs, declined 0.1 percent in the second quarter versus national average gains of 3.3 percent. That follows a jump in inventory, with 14,840 newly constructed units coming to the region this year -- an 86 percent increase from 2013. Those who rent at the upper end of the market, where most of the new construction is concentrated, have enjoyed the most benefits.

The average monthly rent in the District of Columbia itself is currently $1,605, or 39 percent higher than the U.S. average last quarter, reports Axiometrics. Stephanie McCleskey, the Dallas-based firm's vice president of research, comments, "As supply comes online, landlords are forced to reduce rents to fill up and stabilize the new properties." That gives residents leverage and options for housing that some would not otherwise be able to afford. Apartment owners and managers are offering such concessions as one month's free rent or removing fees for parking or pets. Meanwhile, the high cost of land makes building affordable housing a challenge.

Who's Driving the Rental Trend in the Pittsburgh Area?
Digested From "Young Adults Drive Home Rental Trend in Western Pennsylvania"
Pittsburgh Tribune-Review (08/28/14) Spatter, Sam

According to U.S. Census Bureau data, builders nationwide broke ground on more apartment communities during the last year than in any similar period since 1989. In Pittsburgh, though, construction of apartments cooled off during the first half of the year. New permits plummeted by 50 percent from last year, partly because of a severe stretch of winter weather, according to the Tall Timber Group. Investors, especially from out of town, are putting money into converting and upgrading apartments in and around Steeltown to capture their business. The competition among young adults who see apartment living as a more affordable and flexible option than purchasing a residence is pushing prices higher. Cindy Kamin, a commercial real estate broker with CBRE, states, "Landlords are not providing rent concessions. Rental rates are increasing 3 percent to 5 percent annually compared to 2 percent in the past. There has been high-paying job growth here, partially because of Marcellus shale, resulting in high rental rates a lot of newcomers to this region can afford." The increasing number of young professionals making Pittsburgh home are doing so in newer, trendy apartments that fit into their lifestyle, and developers are quickly looking to cater to that growing demographic.

Houston Leads the U.S. in Multifamily Growth
Digested From "Houston Leads the U.S. in Multifamily Growth"
GlobeSt.com (08/27/14) Caplan, Anna

A new CBRE study shows that more households are making the shift from owning to renting. Net absorption increased by an annual rate of 276,200 units -- or 1.9 percent -- on a year-over-year basis, with Houston and Dallas topping the list. "Houston’s strong job growth continues to push our rental market forward," remarks Ryan Epstein, executive vice president at CBRE. "While we have absorbed the units that are being delivered, we are still seeing record rent growth, yet Houston's average rent is still affordable compared to other markets around the country." The Texas city recorded positive net absorption of 21,394 apartments -- the highest figure among the 50 largest U.S. markets and the highest figure for Houston in almost a decade. Local apartment rents are growing at the fastest pace ever. CBRE researchers calculate that Houston's same-store rent index rose by 4.9 percent on a year-over-year basis and 1.4 percent quarter-over-quarter. Finally, the most Real Capital Analytics research shows that Houston posted $1.2 billion in multifamily sales in this year's second quarter -- a 48 percent gain from the January-through-March period.

Deals and Transactions


Lowes-14April
Cityscape Residential Secures $82 Million to Develop Midwest Apts
Digested From "Cityscape Residential Secures $82 Million Investment to Develop Three New Apartment Communities Throughout Midwest"
Business Wire (08/26/14)

Cityscape Residential has closed nearly $82 million in joint venture financing over the past three months to develop a trio of new apartment communities in the Midwest. This latest round was led by two commercial banks and a long-term institutional equity partner. The three projects help to expand Cityscape's footprint in the Kansas City metro area and mark the company's first transaction in the Louisville metro area. In Kansas, Cityscape has started work on its 130-unit West End Flats at Prairiefire project in Overland Park. In nearby Olathe, Kan., Cityscape is starting construction on a 228-unit property known as Greenwood Reserve. Meanwhile, Cityscape's first apartment community in Louisville is Apex on Preston, which is made up of 312 rental units. Apex on Preston, which recently broke ground last month, is the first of its kind in the area to offer high-end interior finishes and communal amenities.

Investors Pick Up Two North Texas Apartment Communities
Digested From "Investors Pick Up Two North Texas Apartment Properties"
Dallas Business Journal (08/28/14) Carlisle, Candace

A couple of different investors have bought two North Texas apartment communities -- one in Fort Worth and one in suburban Greenville -- for undisclosed amounts. An anonymous Plano investor has purchased the 216-unit Oakwood Apartments in Fort Worth. Meanwhile, an unnamed, out-of-town investor has acquired the 100-unit Hacienda Villa Apartments in Greenville. Interestingly, each of the two communities was purchased via Auction.com. Mark Freeman, senior vice president at Colliers International, comments, "This showcases the continued strength of the multifamily market, as well as illustrates the growing interest and demand for apartment deals in tertiary markets around the Dallas-Fort Worth area."

Industry Buzz


BehrPro-Sept14
Eight Steps to a Healthy Fall, Winter Lawn
Digested From "8 Steps to a Healthy Fall, Winter Lawn"
Property Management Insider (08/25/14) Lee, Chris

A cooler and wetter summer in many parts of the United States is setting the stage for many apartment communities to have some stunning winter landscape. Conditions appear to be in place to promote healthy growth for winter grasses that are typically over-seeded on northern and southern lawns. Property management professionals say that winter ryegrass is an ideal solution to keep apartment landscapes green throughout the cooler months. Such grass blends well with Bermuda grass and other summer grasses to make for a seamless transition. The next two months will provide a great opportunity for apartment owners and managers to establish healthy winter lawns that will help boost curb appeal for residents looking to move while instilling community pride for existing residents.

The article's author offers an eight-step approach to preparing the landscape and application of over-seeding with winter ryegrass to establish a healthy lawn for the winter. Tip one, avoid damaging irrigation heads during mowing by flagging. Two, be sure to scalp the lawn by cutting summer grass low to the ground. Three, use a lawn spreader to generously distribute ryegrass seeds. Tip four entails frequently watering the seeded lawn to help germinate seeds. Next, apply fertilizer as a means of stimulating root growth. Six, mow the lawn just as ryegrass starts to take hold and emerge. Seven, address spots that did not fill in by reseeding. Finally, it is a good idea to regularly fertilize during winter season to promote the healthiest, greenest lawn possible. The article's author is president of Dallas-based Earthworks, which specializes in apartment community landscaping.

Who Is Apartments.com's New President?
Digested From "CoStar Group Promotes Brad Long to President at Apartments.com"
Multi-Housing News (08/14)

CoStar Group Inc. this past week promoted Brad Long to president of Apartments.com, its online apartment rental marketplace. Long will be tasked with managing the sales and marketing operations of Apartments.com and enhancing the user experience on the website itself. He will report directly to CoStar Group founder and CEO Andrew C. Florance. Long has been on staff at Apartments.com for the past eight years, having most recently served as vice president of sales. He succeeds Dick Burke, who is exiting the company to pursue other opportunities. CoStar Group acquired Apartments.com earlier this spring to complement the online marketplaces it operates for other forms of commercial real estate like office buildings and retail properties. CoStar Group maintains the industry's biggest multifamily housing database with more than 320,000 apartment communities and 17 million rental units across the United States.

Legal/Legislative Did You Know


Xfinity
Thousands of Bay Area Apartments Need a Quake Fix
Digested From "Thousands of Bay Area Apartment Houses Need a Quake Fix"
Contra Costa Times (09/02/14) Carey, Pete

Last month's 6.0 Napa earthquake, the largest in the Golden State in two decades, has again drawn attention to the dangers of older apartment communities that do not meet current seismic standards. Thousands of Bay Area apartment communities with structurally weak first stories could collapse in a major earthquake, risking the lives of those who live in them. Unfortunately, there is no coordinated effort in the region to retrofit these risky structures. Some cities have acted aggressively to solve the so-called "soft story" problem. Officials in Oakland and San Francisco have both launched ambitious retrofit programs. Three other markets -- Berkeley, Alameda, and Fremont -- have also pushed retrofitting the buildings. Others like San Jose have done little, citing costs and concerns over legal liability. "This could be our Katrina," warns Oakland Mayor Jean Quan, referring to the deadly 2005 hurricane. Quan is currently working on an ordinance to require owners of approximately 1,400 Oakland apartment communities to retrofit them. Many are older apartment buildings that house lower-income families. These soft-story structures were erected during the 1960s and '70s with "tuck-under" parking on the ground floor. Such structures tend to collapse on the open parking area during an earthquake. Fortunately, most can be easily retrofitted with steel reinforcing. The problem is it can cost as much as $80,000 for a 20-unit building -- a huge bill for what are often "mom-and-pop" apartment owners.

The Search Is on for Which Redwood City Apts. Have Sprinklers
Digested From "Latest Apartment Fire Sparks Redwood City to Find Out Which Buildings Don't Have Sprinklers"
San Jose Mercury News (08/25/14) Eslinger, Bonnie

Redwood City, Calif., has seen several apartment fires over the last 13 months, including one this past weekend. As a result, city officials are taking inventory of the local rental housing stock to see which buildings lack sprinklers. In addition, the city is exploring ways it might be able to give building owners financial incentives to install the sprinklers, even though they are not legally required in older construction. Deputy Fire Chief Stan Maupin remarks, "It's expensive, we understand that. But we've had a string of fires in apartment buildings, so we needed to take a look at it." The Golden State started mandating fire sprinklers in new apartments in 1989, but did not require older apartment communities to be retrofitted with them.

Report: Proposal Could Raise Mortgage Costs
Digested From "Report: Proposal Could Raise Mortgage Costs"
Wall Street Journal (08/27/14) Light, Joe

A report by Mark Zandi and Cristian deRitis of Moody's Analytics and Urban Institute senior fellow Jim Parrott suggests that proposed new requirements for private mortgage insurance could hike mortgage costs for thousands of borrowers who put down less than 20 percent on a home. Fannie Mae, Freddie Mac, and their regulator are hammering out new criteria for private mortgage insurers that want to do business with the firms. The goal is to ensure that private mortgage insurers can pay claims if loans go bad. A preliminary draft of the rules, however, has raised warnings that the proposal would cause carriers to raise premiums. As presently drafted, the new rules on average would cause borrowers to pay an extra 0.15 percentage point in mortgage insurance premiums, according to the Moody's and Urban Institute report. Borrowers with low credit scores who put 5 percent down could pay an extra 0.7 percentage point, while those with high scores who put 10 percent down might see their premiums decrease 0.07 percentage point. The due date for comments on the draft is Sept. 8.

What City Passed Inclusionary-Housing Changes?
Digested From "Denver City Council Passes Inclusionary-Housing Changes"
Denver Business Journal (08/27/14) Armbrister, Molly

Changes to Denver's inclusionary housing ordinance are scheduled to go into effect on Dec. 1 if Mayor Michael Hancock signs the measure approved by city council members. The alterations are aimed at making more low-cost housing available. Hancock has expressed support for the measure and is expected to sign it. The city's inclusionary housing ordinance has been in place for 12 years now, having been passed originally as part of a campaign to encourage more housing units for moderate-income Denver residents to be constructed. The changes passed this week will help the original ordinance function better, states Laura Brudzynski, aide to Denver Councilwoman Robin Kniech who sponsored the amendments. The law requires that for apartment communities containing more than 30 rental units, 10 percent of the apartments must be built to be affordable for people making moderate incomes. More specifically, the apartments must be affordable to those who make 80 percent of area median income, which is nearly $42,000 annually for an individual. Developers have the option to pay cash-in-lieu of building the affordable apartments. While the percentage of units that must be built will stay the same, the cash-in-lieu amount will change under the new ordinance. It will be tiered depending on the area in which the apartment community will be built.

AvalonBay Clears Legal Hurdles to Begin Hospital Demolition
Digested From "AvalonBay Set to Begin Demolition at Former Princeton Hospital Site"
Newark Star-Ledger (New Jersey) (08/26/14) Mulvaney, Nicole

Demolition of a former hospital in Princeton, N.J., is now expected to begin Sept. 4 one week after city council members unanimously accepted AvalonBay's agreement with changes to the environmental testing required for the site, which will be turned into 280 apartments. Of those, 56 will be designated affordable housing units. Earlier this year, the town called for more testing than is required by the state Department of Environmental Protection (DEP). AvalonBay refused to sign off on anything beyond DEP standards and filed a lawsuit against the town. Mayor Liz Lempert and other municipal officials that questioned the council's authority to impose further testing. After court-ordered mediation, the new compromise agreement calls for steps toward greater environmental safety on AvalonBay's part while issuing demolition permits on Princeton's behalf. If the town were to face the developer in court, town attorney Trishka Cecil expects AvalonBay would probably win. In that event, Princeton would have to issue demolition permits without any of the benefits of the added testing. AvalonBay received planning board approval for the project in July 2013. However, the discovery of at least one medical waste incinerator on the site since then raised new concerns over environmental safety. Council members demanded stricter testing back in April, which prompted AvalonBay to file its lawsuit.

NAA Announcements


2014 July Mission Banner
Cutting-Edge Amenities in New Developments: Gold or Pixie Dust?

Owners and management companies commanding top-of-market rents are creating the right living experience for residents through forward-thinking, high-end amenities in new communities.

Register today for the MAXIMIZE: 2014 Multifamily Asset Management Conference, Oct. 13-15 at the Omni Amelia Island Plantation Resort in Amelia Island, Fla. Learn from multifamily owners, managers and developers whose strategy relies on building and operating the highest quality, most forward-thinking deals during the exclusive keynote presentation, “Cutting-Edge Amenities in New Developments: Gold or Pixie Dust?”

Presenters Ken Veltri, Senior Vice President, AMLI Residential; Sue Vickery, Managing Director, Trammell Crow; and Cindy Park, Senior Vice President, Prado Group, will illustrate the lifestyle-experience elements and amenities that drive top rents and outline others that fall short of qualifying as differentiators. Expect a spirited conversation about how to design attractive resident experiences that payoff without creating unintended operational complexity.

Register before Sept. 3 to save $100 and be part of the industry’s exclusive forum for connections, strategies, best practices and tactical innovations focused on accelerating real returns on real properties. We encourage you to complete your hotel reservation today as rooms are expected to sell out. Please ask for the NAA group rate when making your reservation online or via phone at 800-THE-Omni (800-843-6664).
The 2014 NAA Education Conference & Exposition: The New Face of Your Identity

Ratings, reviews and social media have gained substantial ground in the rental housing space, and with that trend, so too has customers’ ability to directly affect a brand. In fact, more than 81 percent of consumers use ratings- and reviews-oriented websites to learn more about your apartment community, making it imperative to closely monitor and understand what your residents have to say about you in the virtual world.

The session, “Customers: The New Face of Your Identity”—one of more than 50 offered in Denver during the 2014 NAA Education Conference & Exposition—presented strategies for effectively, promptly and positively engaging consumers within the world of social media and sites focused on ratings and reviews.

Want to ensure your brand identity and reputation remain untarnished in this brave new world of instantaneous and public feedback? You’re in luck: “Customers: The New Face of Your Identity,” as well as other unparalleled education sessions focused on Marketing and Leasing such as “Truth or Dare: Responding to Online Reviews”—are now available to you as part of the NAA Education Institute’s (NAAEI) “REWIND” program.”REWIND” delivers 20 video recorded sessions and 22 audio-synched PowerPoint sessions from the 2014 NAA Education Conference & Exposition. Order your sessions today!
Don’t Miss Your Chance to Shine! 2015 NAA Student Housing Conference & Exposition Education Session Proposals Are Due Sept. 19

Convinced you have a fantastic session idea for the 2015 NAA Student Housing Conference & Exposition, Feb. 17-18 at the ARIA Resort in Las Vegas? Don’t keep it to yourself! Individuals interested in sharing their insight are encouraged to submit a proposal through NAA’s online platform by Friday, September19, 2014.

Presenters/Panelists should plan to conduct one-hour presentation, which should include audience engagement, with no more than three co-presenters/panelists (Please be sure to include at least one property manager; submission with suppliers only will not be considered.). Please note that the submission process and requirements have changed. Visit the “instructions for submitting” area on the online platform for further guidance.
Coming in October: NAAEI Leadership Experience

If you work in a regional position or as a corporate department head in an apartment management company and would like to learn how to lead effectively across generations, delegate tasks to develop and train others and more importantly, find time to work on future business growth, The NAAEI Leadership Experience: Powered by Dale Carnegie is an investment that will pay dividends.

Where: Cincinnati
When: October 8-9, 2014

Register today!
Less Than Three Weeks Remain to Compete in the NALP Video Challenge

The National Apartment Leasing Professional (NALP) Training is getting a face-lift, and NAA’s Education Institute needs your help.

In the upcoming version of NALP Training, your real-life stories—told through video—will be used to help teach participants practical lessons about what it takes to be successful in rental housing leasing.

Before you grab your camera, make sure to review the contest rules and eligibility, and have a look at the 15 story prompts, such as “Tell us how you make sure that all of your staff members understand the benefits of customer satisfaction and loyalty.”

Videos are due by Friday, Sept. 19. Each relevant video submission will receive a $5 gift card to Amazon, Starbucks or iTunes. You will earn a $100 gift card if your video is selected for the NALP course, and the grand-prize winner will receive a tablet. If applicable all NAAEI designates who submit a video will receive one CEC.
NAAEI Designation Courses Offered Near You!

CAM:

Roanoke Valley Apartment Association
November, 2014

CAM Online

CAMT:

South Dakota Multi-Housing Association
September – October, 2014

Apartment Association of Greater Omaha & Lincoln
September – November, 2014

Lubbock Apartment Association
October – December, 2014

Connecticut Apartment Association
October – December, 2014

Roanoke Valley Apartment Association
October – November, 2014

NALP:

San Antonio Apartment Association
September, 2014

NALP Online

CAS:

Roanoke Valley Apartment Association
November, 2014

NAAEI Leadership Experience: Powered by Dale Carnegie:

Greater Cincinnati Northern Kentucky Apartment Association
October, 2014

Find more courses in your area on the NAA website.

For more information about any of the classes listed, please contact Kimberly McCrossen at 703-518-6141 ext. 121.
Did You Know?

NAA Turns 75! Yep, we made it: 75 years. Industry luminaries take a look at how far we've come and where we are heading. Learn more.
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NAAEI Leadership Experience: Powered by Dale Carnegie

NAAEI Leadership Experience: Powered by Dale Carnegie  

Responding to the need for leadership training within the apartment industry, NAAEI has partnered with Dale Carnegie Training to deliver a world-class program called the NAAEI Leadership Experience....