News & Research Listing
What offsets remain on the table, what's out and how it affects the rental housing industry.
President Biden on October 28 went to Capitol Hill and released an updated framework for the Administration’s Build Back Better “human infrastructure” plan. After months of negotiations, this new plan has been scaled back by half from its original $3.5 trillion price tag.
Major provisions include expanded child tax credit, universal preschool, investments in elder care and expansions of Pell grants and free school meals. The proposal also includes $550 billion in clean energy and other climate change initiatives including a credit of up to $12,500 for U.S.-made, union-made electric vehicles, incentives for charging stations, the enhancement of existing home energy and efficiency tax credits and the implementation of a rebate program focused on electrification. The program includes funds to address lead in in drinking water, stormwater resiliency and supports resiliency efforts in Environmental Justice communities.
Of interest to our industry, the plan invests $150 billion in affordable housing provisions including investments in rental assistance, housing vouchers and the construction and rehabilitation of an estimated 1 million affordable homes. Click here to access a more detailed list of housing dollars.
The $1.75 trillion plan is offset by tax increases on ordinary income and capital gains income that would impact upper-income Americans. Left out of the package are any changes to like-kind exchanges, increases in the ordinary income tax rates, the general 20 percent capital gains tax rate, the tax treatment of carried interest and the 20 percent pass-through deduction or the taxation of unrealized capital gains at death. A provision in the Ways and Means bill that would have restricted the ability to use IRAs to make certain types of real estate investments is also not included. Interestingly, the proposal does not include any changes to the current-law tax treatment of state and local income taxes. However, this is expected to be addressed as the package moves forward.
As of this writing, it is unclear whether the revised proposal will enable Democrats to cinch the congressional majorities they need to pass reconciliation legislation.
Following the White House’s updated framework, the House Rules Committee released an updated version of the package. Use the drop down features below to review the key tax provisions in play that would impact the multifamily industry.
Individual Income Tax Rates
Although the Framework does not increase the top 37 percent tax bracket, it imposes:
- a 5 percent surtax on taxpayers earning over $10 million in modified adjusted gross income (AGI) (i.e., adjusted gross income less investment interest expense) and an additional 3 percent surtax on taxpayers earning over $25 million in modified AGI.
Notably, there are no changes made to the 20 percent Section 199A pass-through deduction.
In sum, the top marginal income tax rate would rise to 39.04 percent from today’s 29.6 percent when the impact of the net investment income tax (see below) is included in calculations.
Capital Gains Income Tax Rates
Although the Framework does not increase the top 20 percent capital gain tax, it imposes:
- a 5 percent surtax on taxpayers earning over $10 million in modified adjusted gross income (AGI) (i.e., adjusted gross income less investment interest expense) and an additional 3 percent surtax on taxpayers earning over $25 million in modified AGI.
In sum, the top capital gains tax rate would rise to 31.8 percent from today’s 20 percent when the impact of the net investment income tax (see below) is included in calculations.
Net Investment Income Tax
The proposal would expand the current-law 3.8 percent net investment income tax to include net investment income (i.e., capital gains, interest, dividends, annuities, royalties, and rents) earned in the ordinary course of a trade or business by single filers earning over $400,000 and married couples earning over $500,000. It would not apply to any wages on which FICA is currently imposed.
Excess Businesses Losses
The proposal makes permanent a provision limiting excess business losses that was otherwise set to expire at the end of 2026. Under current law, a non-corporate taxpayer is considered to have an excess business loss if their total business deductions exceed business income plus $250,000 for single filers and $500,000 for joint filers. Additionally, while current law allows excess businesses losses to be treated as a net operating loss, the proposal would modify this treatment and not allow losses to offset wages or portfolio income in future years. Losses, however, could be carried forward.
Left out of the Framework are tax increases affecting:
- Like-kind exchanges. NMHC and NAA have long advocated to maintain current-law relative to like-kind exchanges to encourage investors to remain invested in real estate while still allowing them to balance their investments to shift resources to more productive properties, change geographic location, or diversify or consolidate holdings.
- Carried interest. The House Ways and Means Committee’s “human infrastructure” bill would have imposed a three-year holding period on so-called Section 1231 real estate gains.
- Taxation of unrealized capital gains at death. NMHC and NAA support the retention of current-law stepped-up basis rules. Changes to current law could either diminish or discourage the ability of heirs to make improvements to inherited property. Affordable housing inventory could be lost as a result.
- Estate taxes. Notably, NMHC and NAA signed an October 28 letter opposing changes to grantor trusts and valuation rules in the House Ways and Means Committee’s “human infrastructure” bill. That bill proposed to bring grantor trust a decedent owns into that decedent’s taxable estate. Additionally, the bill would have prohibited the use of valuation discounts when non-business assets, including real estate, are transferred.
- Modifications to the types of investments accredited investors may make with IRAs. The House Ways and Means Committee’s “human infrastructure” bill would have restricted the use of IRAs to make certain types of real estate investments.
Low-Income Housing Tax Credit & Rehabilitation Tax Credit
While the House Ways and Means Committee’s version of “human infrastructure” legislation included provisions to expand the Low-Income Housing Tax Credit (LIHTC) and the Rehabilitation Tax Credit, these provisions are not included in the new framework.
We joined an October 25 letter sent by the A Call To Invest in Our Neighborhoods Coalition to President Joseph Biden, Speaker Nancy Pelosi (D-CA), and Senate Majority Leader Charles Schumer (D-NY) asking that final legislation expand LIHTC authority by more than 50 percent. The letter also expresses support for reducing to 25 percent (from 50 percent) the amount of a project that must be financed by tax-exempt private activity bonds in order to access 4 percent LIHTCs. The House Ways and Means Committee-passed reconciliation bill includes these provisions as part of its proposed changes to LIHTC, and it is estimated the bill would provide an additional 1.4 million units.
Energy Tax Incentives
The proposal would modify energy tax incentives available to the multifamily industry. Firms meeting baseline requirements would receive a base credit, but they would have to meet prevailing wages and apprenticeship requirements to receive a bonus credit.
Specifically, firms can quintuple the base credit if they pay all contractors and subcontractors prevailing wages. Projects would also have to be staffed by apprentices (5 percent of labor hours must be performed by apprentices for projects commencing construction in 2022, 10 percent in 2023, and 15 percent thereafter, with a minimum of one apprentice for each contractor or subcontractor employing at least four workers. Exemptions would be permitted if apprentices are unavailable.
Energy Efficient Commercial Buildings Deduction
Beginning in 2022, the base credit for buildings with four or more stories that exceed 25 percent of ASHRAE standards in effect three years before a building is placed into service would be $0.50 per square foot for energy savings. It would increase by $0.02 per square foot for every percentage point by which energy savings exceed the 25 percent baseline threshold, up to $1.00 per square foot. Bonus amounts, as described above, are available for taxpayers meeting applicable labor requirements.
Additionally, taxpayers would be able to take a deduction for energy efficient lighting, HVAC and building envelope costs placed in service as part of a retrofit. The value of the deduction would be based upon how much energy savings is achieved. A minimum 25 percent reduction would be required to realize a $0.50 per square foot gain in the base credit.
The base credit would be increased by $0.02 per square foot for each additional percentage point in energy savings, up to $1.00 per square foot. Bonus amounts, as described above, are available for taxpayers meeting applicable labor requirements. We have long sought a provision to address investment in building energy retrofits that result in significant energy savings relative to building’s own baseline energy performance to be eligible for the credit. The provision would be effective through 2031.
New Energy Efficient Home Credit
The proposal would extend the New Energy Efficient Home Credit (which applies to buildings of three or fewer stories) through 2031. For multifamily units acquired after 2022, a base credit of $500 is provided for units that participate in the ENERGY STAR Multifamily New Construction Program while meeting both national and regional program requirements. It is, however, unclear whether units will decide to participate in this program. A credit of $2,500 per unit is available if the building meets the applicable labor requirements described above. Finally, a base credit of $1,000 is available to multifamily homes certified as zero energy ready under the Department of Energy Zero Energy Ready Home Program
The National Apartment Association is taking legal action to recover damages housing providers suffered under the CDC’s eviction moratorium and ensure that similar measures can never again be enacted.
The National Apartment Association (NAA) on July 27 filed a lawsuit in the U.S. Court of Federal Claims to recover damages on behalf of rental housing providers that have suffered severe economic losses under the U.S. Centers for Disease Control and Prevention’s (CDC) overreaching federal eviction moratorium.
As NAA members and the broader industry understand all too well, the CDC’s prolonged order directly harms those who provide critically needed rental homes, jeopardizes the long-term viability of housing infrastructure and sets a dangerous precedent for future disaster-response measures. NAA is the first to take legal action seeking compensation for the CDC’s policy and to ensure that similar “emergency measures” cannot be enacted again.
The suit, NAA et al. v. The United States of America, is open to all rental housing providers who have been damaged by and are operating in a state or locality under the federal eviction moratorium. It argues that the CDC order has curbed several rights under the U.S. Constitution including: The right to access the courts, the freedom to contract with others absent government interference, the right to demand compensation when property is taken by government action and the limits of federal government power. NAA is confident that the CDC will be found to have acted illegally based on court rulings to date, including the most recent decision from the Sixth Circuit Court of Appeals affirming that the CDC’s order was unlawful.
Apartment owners and operators have continued good-faith operations throughout the public health and economic crises of the COVID-19 pandemic and are now left to shoulder $26.6 billion* in debt not covered by federal rental assistance. As a low-margin industry where just 10 cents of each rental dollar is considered “profit,” this debt is unsustainable and could devastate countless small businesses while simultaneously damaging housing affordability. Though NAA is proud of the unprecedented adaptability and flexibility of our members and the broader industry, we firmly believe that it is time to make rental housing providers and their residents whole again.
Relief efforts to date have fallen short of fully supporting the rental housing industry and its residents. While the federal government has allocated roughly $47 billion in federal rent relief, it took more than nine months for Congress to do so. Further, that amount also does not cover the full and continuously growing amount of rent debt – current estimates indicate an additional $26.6 billion on top of Congress’ $47 billion rental assistance funding. The government’s prolonged inaction, paired with a sluggish rollout and the CDC eviction moratorium, has only allowed unfunded rent debt to continue to balloon.
Since the onset of the pandemic, NAA has aggressively advocated to protect the interests of the rental housing industry. We have called out the dangers and short-sightedness of eviction moratoria and asked for its sunset to both the 116th and 117th Congresses, in meetings with both the recent and current White House administrations and across all levels of media. NAA was among the first to take legal action challenging the CDC’s authority last September by joining the National Civil Liberties Alliance lawsuit, Richard Lee Brown, et al. v. Secretary Alex Azar, et al.
The COVID-19 pandemic was devastating, and if we do not act, the housing affordability crisis may grow into a catastrophe where the government could invoke more “emergency” remedies. With the meter on rent debt still running, political will waning and Congress moving past COVID-relief measures, NAA is putting up the greatest fight yet and asking the courts for two things: Fair compensation for damages suffered under the unlawful CDC order and an assurance that the federal government can never do this again.
NAA is proud to take action for our members and work to stabilize the industry. The rental housing industry cannot be held solely responsible for an unfunded rent debt while the federal government trades one crisis for another. Ultimately, making housing providers and their residents whole again will help secure the long-term health of the rental housing industry and ensures households across the income spectrum have continued access to rental housing.
*$57.3 billion in rent debt at the end of 2020 (Urban Institute) + $8 billion in Q1 2021 (MBA) + estimated $8 billion in Q2 2021 (MBA, Q2 numbers expected soon) - just under $47 billion in allocated rental assistance = $26.6 billion in unfunded rent debt (and climbing)
Pet fees are up while late fees are down.
As the COVID-19 pandemic continues to cast a long shadow over the rental housing industry, ancillary revenue would seem to be a low priority. In previous years, collecting ancillary fees was an important — though legally fraught — concern. But now, with job losses mounting around the country, many apartment operators are simply focused on collecting rent on time.
For example, Haven Realty Capital, based in El Segundo, Calif., is sacrificing the flow of one ancillary revenue stream in exchange for trying to keep its residents in place. “Month-to-month premiums were waived to allow flexibility for residents who had lease expirations during the pandemic months,” says Sudha M. Reddy, Managing Principal of Haven.
In a recession, apartment operators are justifiably focused on just “keeping heads in beds.” Operators may even need to think twice about imposing ancillary fees.
But in the longer term, the COVID-19 lockdown may present new revenue opportunities, if residents receive financial relief and the unemployment situation stabilizes. If trends such as teleworking become commonplace, the COVID-19 lockdown could change the way residents use energy and bandwidth and give operators the chance to consider residents’ high-speed connections to the outside world.
Not Pressing the Issue
The general rule for multifamily ancillary revenue is about 5 percent of total income, but many of the fees are also accompanied by attendant costs. In the short term, Max Sharkansky, Managing Partner of Trion Properties, based in West Hollywood, Calif., is more concerned about on-time rent payments.
“We [could] charge higher pet rates and higher lease-break fees, but we’re just not pressing that issue because it’s tough out there,” Sharkansky says. “We’re signing leases, we’re doing fine, our collections are in the mid-90s. But we’re also in a 12 percent unemployment market, so I don’t know if this is an optimal time to start increasing our fees.”
As the amenity wars heated up during the past decade, ancillary revenue took a back seat to services, such as dog walking. But as the recession lingers, those services are also in jeopardy.
“It’s so hard to compete on what has become a commodity,” says Brian Zrimsek, Industry Principal of the tech firm MRI Software, based in Solon, Ohio. “The apartment can only be so big; the pool can only be so grand. So we found operators moving to adding services, dog-walking services, laundry pickup services and yoga classes — amenities as a service. But when a recession comes, that’s the first thing to go.”
This strategy is a throwback to the 2008 housing market collapse. “In 2008 they lowered prices and increased terms to lock people in,” says Zrimsek. “They’d rather have sure but thin revenue. In good times, it’s okay to have a little nickel-and-diming for things. We’re also seeing concessions come back. It would not surprise me if things that people charge for in the best of times they change their mind on now.”
Sorry, You’re Late
Early in the pandemic, municipalities, states and the federal government moved to curtail evictions and late fees to help keep residents in their homes. Now, six months into the crisis, what were once seen as temporary measures are being extended in many parts of the country as the apartment business takes the hit.
At Haven Realty Capital, late fees have traditionally been a large revenue stream, followed by pet rent and admin fees. “[But] late-fee revenue has dropped to zero since April,” Reddy says. “The moratorium on late fees has also eliminated the incentive to pay on time, resulting in a delay in our collections at some of the properties.”
It’s the same story at Trion Properties, as Sharkansky simultaneously eyes what’s happening in collections and the state legislature. “We’re in California, and not allowed to charge late fees,” he says. “In California, it’s open-ended. It’s a function of when they remove the emergency order. In Oregon, it was set to expire but was then extended to Sept. 30. We still get the majority of our rents in the first week [of the month], but the next 20 to 25 percent are paying in the following three weeks.”
As many residents have been hunkered down for months now, apartment operators are seeing an increase in their energy and data consumption. Even before the pandemic, says Todd Richman, Senior Vice President at Morgan Properties, based in King of Prussia, Pa., marketing contracts with cable providers and Internet providers did well for his company.
Richman is predicting that addiction to Netflix and Zoom dependence is going to raise the income from fees. “I would assume that once we see the numbers, we might have higher income from these services,” he says. “With people working from home, they may have had to upgrade to a better Internet service, they may have ordered more services. It’s possible it’s remained the same. But I’m expecting Internet penetrations to be higher than they’ve ever been.”
Laundry rooms are another small but reliable revenue source for Morgan, and Richman is expecting to see an uptick — again, because people are spending more time at home.
Trion’s Sharkansky also is bullish on laundry. Trash collection, water usage, pest control and sewage fees are also looking up. “Ratio utility billing [RUBS] is huge,” he says. “Although I don’t know if you can qualify that as ancillary income; it’s more of an expense reimbursement, but it’s on the income side of the P&L.”
Doggy Day Care
The pandemic has been a huge boon for pet adoption, according to a number of sources. The consensus is that people who had been putting off getting a dog or cat because they didn’t spend enough time at home suddenly have no excuse.
In April, Kitty Block, CEO of the Humane Society, told the Chicago Tribune, “I think it’s a combination of reasons. We’re going through a global pandemic, and its anxiety-provoking and it’s isolating. Those who are fortunate enough to work remotely are doing it from home, so people have the time now and the desire to open up their homes to a pet, to give that animal a chance.”
The trend is confirmed by the numbers Trion Properties is seeing. “In April, May and June we had an uptick in pet fees,” Sharkansky says. “Looking at year-over-year for June, portfolio-wide, we did about $9,400, and last year [it] was around $7,000, so we’re seeing a 34 percent increase.”
But even enforcing pet fees will likely get some pushback from residents, demonstrating, once again, that at this point in time, fees are a touchy issue
“I don’t know that the first thing a resident does when they get a pet is call the office and let us know,” says Richman of Morgan Properties. “We’re trying not to be intrusive to residents about being in their apartments. We’re not doing walk-throughs of each apartment; it would be very hard to do that.”
Scott Sowers is a freelance writer.
A new federal ruling has voided the CDC’s Eviction Order; a stay of the decision has been issued until the appeal is heard.
On May 5, a federal judge from the U.S. District Court for the District of Columbia issued a ruling voiding the U.S. Centers for Disease Control and Prevention’s (CDC) eviction moratorium order. Though the U.S. government quickly appealed the case, this ruling is another significant addition to the foundation created by the National Apartment Association’s (NAA’s) ongoing legal challenges to the CDC eviction moratorium.
Unlike previous legal efforts, this court specifically vacated the CDC order in its entirety despite the Department of Justice (DOJ) urging courts to limit the decision to parties in the case. The Judge in this case rejected that request and set the entire order aside.
In response, the government swiftly filed its appeal to the D.C. Circuit, where a three-judge panel will decide the issue. The same judge quickly granted the government’s request for a temporary administrative stay – this means that, practically speaking, the moratorium will remain in effect until the government’s appeal is ultimately decided. The stay gives the Court time to consider the merits of the DOJ’s appeal and the plaintiffs time to file any opposition to DOJ’s motion for stay. The matter will play out in the courts during the next several weeks, and it is important to remember that the CDC eviction order remains in effect until the D.C. Circuit issues its ruling.
NAA released a statement to the press on this matter and will continue to keep members apprised of updates to this case, as well as the other legal challenges to the CDC order. We understand the frustration and disappointment, but every decision in our favor is a positive step forward.
A new rule will require “debt collectors” to provide renters written notice of their rights under the CDC Eviction Order.
On April 19, the Consumer Financial Protection Bureau (CFPB) issued an interim final rule requiring “debt collectors” to provide written notice to renters of their rights under the CDC’s eviction moratorium order and prohibiting "debt collectors" from misrepresenting renters’ eligibility for protection from eviction under the moratorium. The rule will go into effect on May 3 and last through the duration of the CDC Order, which was recently extended through June 30, 2021.
To understand the rule’s applicability, it is important to note the CFPB’s definition of “debt collector,” derived from the Fair Debt Collection Practices Act (FDCPA). According to the CFPB, under the FDCPA:
[The interim final rule requirement] may include lawyers who represent landlords or property managers in eviction court to collect unpaid rent, if they start collecting the debt for [a renter’s] landlord after [renters] fall behind on [their] payments.
Further, there may be other considerations, including relevant case law that may be more conclusive about whether property managers or management firms are categorized as “debt collectors,” and whether state eviction laws and court processes separate the process to recover possession from actions to cover outstanding rent debt.
The National Apartment Association (NAA) encourages members to seek the advice of a local attorney before proceeding with an eviction to understand whether CFPB’s rule applies.
The CFPB’s rule is an unfortunate expansion of the CDC’s Order, and NAA remains in conversation with the Administration and federal agency officials about the ongoing challenges that rental housing providers face while the CDC Order and related federal requirements remain in place. In addition to being bad public policy, these efforts make compliance difficult in an area where there is already an abundance and patchwork of legal requirements complicating the CDC’s Order. This interim final ruling only adds to the confusion as federal, state and local eviction moratoria are being applied very differently in courts across the country.
It is time to end federal efforts that interfere with the eviction process. NAA will continue combating these policies and shift focus to the distribution of the almost $50 billion of federal rental assistance.
The National Rent Report from Apartment List shows rent growth across the country remained relatively flat.
More than half of the 100 largest cities in the U.S. saw rent prices decline during November. The national index from Apartment List increased 0.1%, which is the lowest month-over-month (MoM) growth in 2021. Since January 2021, median rent growth increase is nearly 18%. This is compared to 2.6% rent growth, which is what was seen, on average, between January and November in 2017-2019.
Of the nation’s 100 largest cities, 53 saw month-over-month rent declines, and this is the fourth straight month of slowed growth following the July 2.7% growth peak. The national median rent is now at $1,312, which is $117 higher than predicted had the rent growth continued its pre-pandemic path.
Locally, rent declines continue to plague larger coastal markets like San Francisco, Boston and Seattle. Rents dropped 2.7% MoM in San Francisco, and Minneapolis, Boston, Seattle and Arlington, Va., also saw rent declines in consecutive months. Since March 2020, San Francisco is down 14%, while neighbor Oakland is down 10%.
Meanwhile, Boise, Idaho, saw a 3.7% dip in rents, kicking it off the top 10 list of largest pandemic-era rent increases. However, Boise is still up 32%. Nine of the top 10 cities are in Nevada, Arizona or Florida, with North Las Vegas at a 38% rent growth since March 2020. Glendale, Ariz., and Mesa, Ariz., follow. All top 10 cities have at least 34% rent growth since March 2020. Spokane, Wash., was the lone location outside the three states in sixth.
Owner and operator Tricon Residential plans to deliver thousands of new build-to-rent homes.
Owner and operator Tricon Residential is expanding across the Sun Belt with 23 new home communities. The company announced earlier in November it was expanding to more than 3,000 rental homes in its build-to-rent (BTR) communities.
"At Tricon, we are committed to expanding the supply of accessible, high-quality housing for families who are seeking a single-family home and prefer the convenience and flexibility of a rental lifestyle,” said Gary Berman, President and CEO of Tricon Residential, in a release.
Most of the communities will be single-family detached homes with three to four bedrooms in high-growth Sun Belt markets. These include Texas, California, Arizona and Florida, and more than 600 homes will be available for rent by the end of next year. The entire portfolio will be available by the end of 2024.
“We are also focused on building sustainable communities that enrich the lives of our residents and the local neighborhoods they live in, which is central to our corporate strategy and our Environmental, Social and Governance ("ESG") priorities,” added Berman. “Our build-to-rent pipeline makes a positive contribution to alleviating America's housing shortage, while stimulating local economic growth and catering to the needs of modern residents."
Revenue management systems and bundled fees are among the many ways to improve net operating income.
As the industry acclimates to its new normal and multifamily housing companies ease the reins on operating budgets, management companies are looking for new avenues to increase net operating income (NOI). The 2021 Apartmentalize session, “Top 20 NOI Strategies to Implement Today,” discussed various strategies for improving NOI—from revenue management to bundled convenience fees.
While revenue management isn’t new to multifamily, more operators are beginning to tweak their revenue management systems on a more regular basis for optimal performance.
“I think those of us who have revenue management are now doing it daily, because that’s part of your NOI strategy,” said Ian Bingham, Senior Vice President of Client Services for Roscoe Property Management. “We’re factoring unit velocity – what was rented that day, by floor plan. If you’re not looking at pricing daily, you’re leaving money on the table.”
Many companies have taken over their own pricing, rather than relying on third-party specialists.
“They’re bringing pricing in-house, rather than using pricing advisory services, because they want to look at it on a daily basis,” said Ed Wolff, Chief Revenue Officer at LeaseLock. “They’re also keeping renewals at a minimal amount – $100 or $150 – because they don’t want to incur the turn costs. Just keep that resident intact.”
While experts are predicting another 24 months of record rent growth, pricing strategies need to remain market specific.
“Each market lives and breathes a bit differently, and everyone has a different strategy,” Bingham said. “In your major markets, our foot is on the gas because everyone in the market is doing exactly that.”
Bingham cautioned against doing away with the contactless leasing technology rolled out during the pandemic.
“I think the human touch is still something people want as part of the leasing process, but not everybody,” he said. “People still resonate, so I think self-guided is a better follow-up tool. But you can expand that self-guided touring window – 7 a.m. to 9 p.m., etc. – to capture a wider audience.”
Due to the surge in e-commerce, companies are turning to offsite package management solutions and repurposing package rooms and locker spaces.
“It’s given us back 200 to 500 square feet of amenity space per building,” Bingham said. “In the amenities arms race, it has given us more space.”
Operators are also revisiting security deposits to simplify the leasing process and make move-in more feasible for renters.
“I believe the day of security deposits is coming to an end,” Wolff said. “You can pay a security deposit, you can pay a provider for an alternative or you cannot do security deposits at all, and the resident can pay a monthly fee. But there is ancillary income by charging the resident that monthly amount.”
In today’s fee-based society, management companies have even started bundling fees for convenience services like concierge, trash, cable, Wi-Fi and package delivery to avoid the perception that they are nickel and diming residents for every service.
Doug Pike is a Content Manager at LinnellTaylor Marketing.
The Multifamily Market Survey from the National Association of Home Builders shows builder and developer sentiment is on the rise, as is occupancy.
The rental housing industry is preparing for a positive outlook the remainder of the year. The latest Multifamily Market Survey from the National Association of Home Builders (NAHB) found that both multifamily indices—the Multifamily Production Index (MPI) and the Multifamily Occupancy Index (MOI)—increased during the third quarter of 2021.
The MPI jumped five points to a reading of 53, while the MOI increased five points to 75, which is the highest level since the index began in 2003.
The MPI measures builder and developer sentiment on a 0 to 100 scale with anything over 50 indicating improving conditions. The three factors the MPI gages are affordable housing, market rate apartment homes and for-sale condominiums. All three factors improved in Q3—low-rent units increased six points to 55, and market rate rentals jumped nine points to 60. For-sale units inched forward two points to 47.
The MOI measures occupancies for existing apartments in Class A, B and C communities, and a reading of 50 or higher indicates increased occupancy.
“The record-level MOI is consistent with the strong multifamily occupancy rates reported by the Census Bureau, which are now higher than they’ve been since the 1980s,” said NAHB Chief Economist Robert Dietz in a release. “And an MPI back above 50 is consistent with multifamily housing starts, which have been running at a 460,000-plus annualized rate through the first three quarters of 2021 — which should make 2021 the strongest year for multifamily production that we’ve seen since the tax policy-driven surge of the 1980s. As the economy continues to reopen, housing demand is rising in higher density markets, supporting both multifamily occupancy and production.”
Rent growth across the U.S. continues to climb but at a slower pace than seen earlier this year.
Rent growth remains strong across the U.S. despite a slowdown in the fall. According to the latest National Rent Report from Apartment List, rents backed off a bit to their smallest month-over-month growth rate since February. The national index increased 0.8% from September to October to put the national median rent growth at 16.4% since January. Between 2017-19, rent growth averaged 3.2% from January to October.
The national median rent increased to $1,312, $107 higher than Apartment List’s forecast had projected rent growth continued its pre-pandemic path and in line with 2018-19 growth rates.
While the index continued its climb, 22 of the country’s 100 largest cities saw rents decline from month to month. This includes Boise, Idaho, which for much of the past several years, even before the COVID-19 pandemic, has seen exponential rent growth. However, Boise saw a 3.1% declined from September to October.
Cities that have rebounded since March 2020 have seen a leveling off—this includes major coastal markets such as California’s Bay, Seattle, Washington, D.C., and New York. San Francisco saw a 1% decline in rent prices from September to October and is down 12% since March 2020.
Meanwhile, Boise fell from the top spot as the highest growth market with it’s monthly decline and now sits in the sixth spot of the largest rent gainers since March 2020. Tampa, Fla., overtook the top spot and is ahead 36% compared to March 2020. Greater Phoenix markets—Gilbert, Glendale, Mesa and Chandler—sit between Tampa and Boise. The Las Vegas metro follows with Henderson, North Las Vegas and Las Vegas ahead of Tampa neighbor St. Petersburg. All top 10 cities have at least a 32% rent growth since March 2020.