Apartment Advisor Recap: The Development Issue, Part 2

Welcome back to our recap of the latest issue of the Apartment Advisor! This is the Development Issue–check out Part 1 here–and we’ve got a bit more to cover, so we’ll jump right back in. If you’ll recall, we were recapping the major development peaks of the last century–because they illustrate the evolution of the current apartment, and allow us to look to the future in new ways. Here we go!

Peak #3: Post-War Dream

  • Peak year: 1951
  • Government sponsored: Modern politicians didn’t invent the idea of an economic stimulus. After World War II, when rental housing development had failed to pick up for nearly two decades, the government began insuring mortgages in its FHA 608 program. Through the program, it wasn’t unheard of to get 115% financing.
  • Signature style: Buildings financed through the FHA 608 program came to be known as “608-ers.” Garden court style buildings had become popular in the run up to the war, and most 608 buildings were either garden courts, urban low-rises, or high-rise buildings. Archstone Belltown is an example of a 608er that still remains today.

Peak #4: Hello, Boomers!

  • Peak year: 1970
  • The age of the appliance: While apartments had downsized after the peak of 1951, the seventies saw them moving away from the 1955-1965 Pullman-kitchen motel model and back towards garden courts. Balconies (often called lanais), dishwashers, and disposals became standard features; fireplaces and washer-dryers began to show up as well.
  • Hello, boomers: Baby boomers were just coming of age between 1966-1970; for the very first time, they were moving out of their parents houses and forming new households with their spouses or on their own. Young boomers often had families fairly quickly, and average density dropped to just 33 units per acre, as renters flocked towards apartments with more space for children to play.

Peaks #5, 6 & 7: As Boomers Go, So Goes our Nation

  • Peak years: 1980, 1990, and 2002
  • Apartments grow up: In the 1980s, as baby boomers moved into their thirties, their needs changed. They often had more income, and needed more bedrooms for their families. Covered parking and garages started appearing more during this time.
  • …And up: The 1990s found the Boomers in their forties and fifties with more disposable income than ever before. As apartments competed with housing for sale, convenience, size, and security became paramount; it was during this boom that average ceiling heights jumped to nine feet. These trends continued through the early 2000s, especially as families found their way back to renting during the housing market downturn.

What Will This Peak Bring Us?

Round of golf, anyone?

So that pretty much brings us up to speed on the past. Looking at the evolution that multifamily buildings have gone through over the years, one thing is very clear: the apartment market adapts–and quickly–to the needs and styles of the day. With Dupre + Scott forecasting the current uptick in the apartment market to peak in 2015, just what are our needs and styles today–and what will they be in a couple of years?

First of all, we may need less space. As the Advisor points out, ten or twenty years ago, we filled our apartments with the things we loved–CDs, books, the list goes on. But today, we keep nearly all of those things on e-readers, phones, or in the cloud; you don’t need a lot of space to keep your culture with you wherever you are. And so we are beginning to see more micro-apartments–the Den on Brooklyn is about to begin construction in the U-District next month, with units averaging 300 square feet–as well as micro-neighborhoods, where ground-floor commercial space gives us an alternative space to recreate in.

We are also seeing the next generation of renters–trends no longer begin and end with the baby boomers. Renters today are younger, more mobile, and have different expectations on what it means to call a space home. Whatever the next few years bring, one thing is certain: the apartment market will adapt, staying relevant even as our needs evolve yet again.

Thanks for joining us! Remember to check out all of the data in the current issue of Apartment Advisor, over at DupreScott.com. Have a great Labor Day weekend!

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Apartment Advisor Recap: The Development Issue, Part 1

Happy Wednesday! As promised last week, it’s time for our recap of the latest issue of Dupre + Scott’s Apartment Advisor–and it’s a big one! The Development Issue, to  be exact, complete with one-hundred years of Seattle apartment history. Don’t worry, no need to go all Rip Van Winkle on me–we’ll keep our two A.I. posts this week relatively short and sweet. For all of the fascinating details (plus some very informative graphs), head over to DupreScott.com to subscribe.

Snapshot 2012

First, some great news: we’re in the middle of a development boom. The eighth development boom, to be exact; Dupre + Scott know their history, and since 1900, we’ve had seven others. This one is projected to peak in 2015, and the apartments that are currently being built aren’t just like the ones we’ve seen before–things are evolving quickly (as, we will soon discover, they always have). In this, the first multifamily development boom of the new millennium, we’re seeing three major changes.

First of all, builders these days are using more exotic materials than they have in the past. Take the 148-unit project that Burnstead Construction began in June, for instance: according to the Advisor, “its exterior will have a combination of Swiss Pearl panels, Ceraclad fiber siding, and brick.” My goodness–doesn’t that sound more luxurious than, say, plywood?

Secondly, developers are paying more attention than ever before to the principles of green building and LEED certification. In fact, Seattle’s building codes are such that most buildings would nearly qualify for silver LEED certification just upon being built to code–neat!

The third major change comes with the rise of the micro-unit. Small units can be built modularly and are more efficient, renters are generally younger these days (with small-to-nonexistent live-in families), and common spaces to stretch out and socialize in are more prevalent.

But to fully understand these recent changes, let’s jump back in history: far, far back, to the early 1900s. We’ve pulled key info from each of the previous development boom eras for you below.

Peak #1: Gold Rush Boomtown

  • Peak year: 1910
  • Units opened this year: 800
  • Amount spent in real estate purchases this year: Developer John Davis wrote of $55 million spent in real estate purchases that year in the Seattle Sunday Times–that would be equivalent to $1.37 billion today. The astounding thing is that $1.37 billion is exactly the amount that investors spent on 5-unit and up properties in King, Pierce, and Snohomish counties in 2011.
  • Average density: 135 units per acre
  • Architectural and cultural trademarks: Italianate architecture and high-density buildings, with an average apartment size of less than 500 square feet. It was the era of the Murphy Bed. Automobiles had not yet taken root in our culture, so parking did not have to be accommodated.

Peak #2: Those Roaring Twenties

  • Peak year: 1928
  • Units opened this year: 1,800
  • Average density: 111 units per acre
  • Architectural and cultural trademarks: This was the era of the grand lobby–developers had copied hotels, hoping to lend a sophistication to the idea of renting, and it worked. The average cost of automobiles had dropped and they were subsequently increasing in popularity; developers were now planning for an average of one parking space for every two units.
  • A sharp drop and a sudden stop: The Depression put a quick end to this particular boom in 1929; we wouldn’t see development peak again for another 20 years.

Aren’t you just dying to know what happened next? Tune in on Friday for more fun facts to know and tell, including a recap of the Post-War peak, the peaks of the seventies, eighties, and nineties, and some more breakdowns of our housing needs as they stand today (iHome, anyone?). See you then!

Ten Days of Buzz: August 11-21, 2012

It’s Ten Days of Buzz! This week, we’ve got next-gen amenities, new apartment construction, renter’s tax credits and multifamily investments…enjoy!

“Apartments have undergone a metamorphosis in just the past few years. Developers are using more exotic combinations of materials on their building exteriors than we’ve ever seen.”

Dupre + Scott. Apartment Advisor – the Development Issue, DupreScott.com, 8.2012. (Bonus: check back next week for a rundown on the latest Apartment Advisor!)

“Permits for the construction of new apartments are up 110 per cent relative to 2009 compared with a 26 per cent rise in overall construction permits. One-in-three construction permits issued this year is to build an apartment whereas a decade ago the figure was less than one-in-five.”

Robin Harding, Contributor. New apartments boost US building sector, The Financial Times, 8.11.12.

“Its value would lift 250,000 families out of poverty and lift four of five of the poorest families it assists out of deep poverty.”

The Center on Budget and Policy Priorities, in a new report. Policy Center Proposes Renters’ Tax Credit, HousingFinance.com, 8.12.12.

“When the construction dust settles sometime next year on a new generation of apartment communities going up in Franklin, there will be yoga rooms, java lounges, pet spas and outdoor TVs, in addition to the apartments themselves.”

Nancy Mueller, contributor. Newest apartment units overflow with amenities, The Tennessean, 8.14.12.

“According to new housing construction and housing starts data released today by the US Census Bureau, multifamily housing starts in the U.S. West region hit a six-year high and there were approximately 19,300 housing units of all types started in the West during July 2012.”

Ryan McMaken, Contributor. Multifamily starts hit 6-year high in West region of US, Examiner.com, 8.15.2012.

“As the property markets are stabilizing and occupancy rates are going up and the tenants are doing better, that gives more stability to these investments and that makes them more attractive.”

Jeffrey Ackerman, Managing Director at CBRE Group Inc. Commercial Rebounding With Less-Than-$5 Million Sales, Bloomberg News, 8.16.12.

“All of the factors that would cause us to do more deals are here. You have to take a little risk on apartments, but it will pay off…there are 80 million gen Y kids that want to live in apartments.”

Stephan Kachani, VP of sales at Lone Oak Fund. Good Time to Invest in Multifamily Development, GlobeSt.com, 8/17/12.

“Rents rose 0.2 percent to $1,278 nationwide during the month of July and were up 5.4 percent compared to July 2011, according to Zillow’s rent index.”

Jeanne Lang Jones, Contributor. Zillow: Seattle rental prices rising as housing stays flat, The Puget Sound Business Journal, 8.21.12.

 …And that’s it for this week! See you next week, when we’ll have more rental market news for you–including info on the latest issue of the Apartment Advisor. Happy Friday!

Five Ways to…Comply with New Tenant Screening Laws

Did you know that new regulations went into effect this year detailing what you must tell your tenant when you screen them? That’s right, it’s a whole new set of regulations. While a fact sheet for tenants can be found here (thanks, Orca!), we’ve summed it up from the landlord side below–it’s five new musts from Washington landlord-tenant law.

1. You must give your tenant written information explaining your screening process.

You must explain what kinds of information you will access to conduct the tenant screening. Will you look at their credit report? What about a criminal background check? Do you check rental references? All of this must be communicated to the tenant–along with the criteria that might cause you to turn their application down.

If you’re using an agency that screens tenants for you (a consumer reporting agency), you must give the tenant the name and address of that agency, inform the tenant that they have a right to a copy of the free report if the application is denied, and explain that the tenant has a right to dispute inaccurate information if it is provided in the report.

2. If you charge for tenant screening, you must  inform them how much–and you must not make a profit on it.

Many landlords choose to pass the cost of tenant screening along to the tenant. If you charge for screening, you must inform your tenant (in writing, as always) how much they will be charged, and you must only charge for the actual cost of the screening (no mark-ups!). If you perform the screening yourself, you may charge the tenant “what a normal screening company” would charge, to cover the cost of phone calls and the time you spend performing the screening.

3. If you deny a prospective tenant’s application, you must identify which criteria or source disqualified them.

If you choose to deny an application based on information uncovered during the screening, you must inform the tenant, in writing, why you are denying the application. The written notice may be provided as a form, with the reason you denied the application checked off. Potential reasons for denial included on the sample form (click here to view the full template provided by the Northwest Justice Project) include:

  • Information contained in a consumer report
  • The consumer credit report did not contain sufficient information
  • Information received from previous rental history or reference
  • Information received in a criminal record
  • Information received in a civil record
  • Information received from an employment verification

You must date and sign the form or written notice.

4. You must not screen an application without notifying the prospective tenant in writing–if you subsequently deny the application, you could be in hot water.

According to the new Washington state law, any tenant who is not informed that they will be screened–and whose application is subsequently denied because of criteria found in that screening–has the right to take you to court. They have the potential to be awarded court costs, attorneys’ fees, and up to an additional $100.00

5. You must apply tenant screening completely consistently.

This part is probably not news to you, but it’s very important: tenant screening must always be applied consistently. Let’s say two potential tenants have the same iffy credit score; in the case of the woman,  you choose not to deny her based on the score, while in the case of the man, you do deny him on the basis of that score–that’s discrimination, and it’s illegal (even if you only approved the woman because she seemed nice). In order to avoid intentional or unintentional discrimination on the basis of race, national origin, sexual orientation, religion, family status, or any other protected class, you must apply the same screening criteria to everyone who applies. But hey…you knew that!

Thanks for tuning in! Check out the fact sheet for tenants from WashingtonLawHelp.org here for more information. And as always, please note that this blog does not constitute legal advice.

State of the Nation’s Housing: Harvard’s Good News for the Rental Market

Have you seen The State of the Nation’s Housing 2012 yet? Published by the Joint Center for Housing Studies at Harvard, the study clocks in at 40 pages–not really coffee table reading! But it has some great data about the rental housing and multifamily markets, as well as some conclusions about the housing market as a whole. We’ve pulled some of the best quotes from the study for you–let’s dive in, shall we?

“…Stronger sales should pave the way for a pickup in single-family construction over the course of 2012; nevertheless, a number of conditions may keep the recovery in the owner-occupied market relatively subdued.”

The study starts with the lay of the land, looking at the for-sale housing market of 2011–when housing prices continued to drop and construction of new single-family homes was at an all-time low. The end of 2011 and the beginning of 2012 has shown signs that the owner-occupied market will begin to pick up, as prices hit bottom and consumer confidence climbs.

However, the market for single-family homes is unlikely to skyrocket, or even to make more than modest gains, this year–that’s due to a backlog of homes in foreclosure, as well as the 11.1 million homeowners who are currently underwater on their mortgages. So let’s move right on over to the post-Great Recession’s housing market golden child: the rental market.

“The bright spot continues to be the rental market…indeed, the number of renters surged by 5.1 million in the 2000s, the largest decade-long increase in the postwar era.”

Where have these staggering increases come from–who exactly is renting in 2012? One facet of the boom is the fact that there are greater numbers of young, minority, and lower-income households forming; but they’re not the only ones renting these days. There has also been quite a bit of movement from owning to the rental model from middle-aged white married people with moderate incomes, partially due to the high incidence of foreclosures during the recession.

So that’s how the rental culture began–but these days, increasing numbers of people are renting not out of fear, but because it suits their lifestyle and their needs. And according to Harvard, a whole new generation of renters is about to hit the market…

“Rental markets have yet to benefit fully from the presence of the large echo-boom generation.” 

Ah, the echo-boomers. If you’re a parent, you may have one or two living in your basement right now! Once upon a time, if you were fortunate enough to go to college, when you graduated, you were probably able to get a job; from there, housing–whether renting or buying–would fall into place. But the recession changed all of that, and many echo-boomers have had to embrace moving back in with their families upon graduating, as they commence the lengthy search for work.

Renting is generally most common at or under age 25, and due to this delay, new household formation under age 25 has been dampened considerably. But no one can live at home forever; the economy is strengthening, there are more jobs out there, and the echo-boomers will soon be striking out on their own. When they do, rest assured they’ll want to rent their homes for awhile yet. But enough about echo-boomers; let’s talk property values.

“Rental market tightening has stabilized multifamily property values after a sharp drop rivaling that in the single-family market.”

Remember 2009? Those were tough times for property values–even for multifamily housing. Luckily, it’s a bit of a distant memory these days, thanks to the ever-rising rents and falling vacancies of today’s rental market, which have buoyed multifamily property values and sent them back on their way up. According to the NCREIF, 2011 Q4 prices rose 10% over a year earlier; that’s 34.4% up compared to the 2009 low.

Meanwhile, multifamily housing starts “more than doubled from the trough to a 225,000 unit annual rate” early this year.  We’ve still got a bit of a ways to go before we hit the 340,000 yearly pre-recession average, but it looks like things are well on their way back to normal–or even better than.

 

That’s it from us today, but there’s plenty more–40 pages worth!–of good info in the report. Check it out here, or for lighter reading, check out the article covering the study in this month’s issue of Units.

The Buzz: Amazon’s Towers Come to Life while the Rental Market Softens Slightly–But the Renter Nation Lives On

Shiny: Amazon releases depictions of its proposed downtown campus.

News of Amazon’s proposed Denny Triangle towers has been flying about now for more than six months now, and now we’ve got visuals! The packet of artists’ depictions includes a bird’s-eye view of the campus, as well as plenty of close-ups on the impact of the office towers rising from downtown Seattle. The towers would each rise up to 37 stories, and include one million square feet over three blocks, on Westlake Ave. between Lenora St. and Virginia St. It’s not a done deal yet, though; the Downtown Design Review Board is currently looking over the design, and will meet on Tuesday. Check out more info in the Seattle PI.

According to Axiometrics Inc., rent growth softened in June–but only a bit.

According to the rental data firm, rent growth (that’s national sequential effective rent growth to you) between May and June 2012 was 0.52%; that’s down from 0.76% during the same portion of last year. The shift is subtle, however, and Axiometrics says that it may not stop 2012 from being the third year in a row in which the apartment market grows 4% or more nationally. “We will soon know if this is just a one-month blip or if it looks like there will be further softening in the second half of the year, though by historical standards we are still in a strong effective rent growth market,” Jay Denton of Axiometrics explains. For more, check out the full article at Mortgage Orb.

Echoes of the Great Recession inform the decisions of Generation Rent.

“As the Great Depression shaped the attitudes of a generation from 1929 until the early years of World War II, so have the financial crisis and its aftermath affected the outlook of young consumers,” says Cliff Zukin, a professor of public policy, as quoted in a new article from Bloomberg News. According to Bloomberg, we now prefer our living quarters like we like our music–available when we need it, without the permanence that buying affords. For music we turn to subscription-based cloud services, and for housing, we’re finding anything more than renting to be just a little more permanence than we’re comfortable with. Do you agree? Check out the article here.

Multifamily housing, the golden child of Generation Rent, is making gains–and friends–where it was previously banned.

In California, Alameda County–home to Hayward, Emeryville, and other Bay Area cities–has voted to approve the development of multifamily housing for the first time in four decades, in an effort to provide more affordable housing in the county (San Francisco Chronicle). Meanwhile in Enfield, Connecticut, the Planning Commission has just voted to allow new multifamily housing in residential zones for the first time in over ten years; the new regulations are being characterized as “fairly strict,” but are being hailed as a good start in the road to increased allowances for denser rental housing (Hartford Courant). No wonder the Atlanta Business Chronicle is reporting that multifamily is inspiring particular confidence with investors; some argue it’s one of the strongest spokes in the wheel that is the housing market. Click the links above to read more.

The Numbers: Vacancy Rates, Washington Net Migration, & New Rental Households

It’s time to do The Numbers. Check back every so often for this new feature, where we’ll be reporting on the stats that have the rental world talking. And we always list our sources–click on the infographic to be redirected to the original source article or press release. Here we go, in 3…2…1.