Elements of Market Analysis, Part One
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Transcript of Elements of Market Analysis, Part One
Elements of Market Analysis, Part One
Kentucky Housing Conference
October 9, 2013Lexington, Kentucky
National Council of Housing Market Analysts
Presents:
•NCHMAMembership organization
Higher level of professionalism Ethics and professional accountability
• Education• Peer review• Sharing of information and resources
Formed in 2001 in response to legislationRequirements vary from state to state
26 states adopted NCHMA standards in some form
www.housingonline.comPage 2
•NCHMA ResourcesMinimum standards and best practices
Certification in every reportModel Content - Market study index Glossary of terminologyWhite papers
Market Area Analyzing senior demand and senior markets Factors to consider with preservation properties: Section 8 and
236 Recommended practices for analyzing turnover
www.housingonline.comPage 3
•NCHMAWhite papers (continued)
Demand and C/R methodology Calculating market rent Selecting comparable properties Determining market area Best practices for rural markets Recommended practices for determining
demand Site analysis (DRAFT)
www.housingonline.com
www.housingonline.comPage 4
•Who’s in the Room?
Developer?Syndicator?Housing Finance Agency? Market Analyst?Other Professional?
www.housingonline.comPage 5
Speakers
•Jonathan Beery, Valbridge / Allgeier Company
•Patrick Bowen, Bowen National Research
•Caitlin Geary, National Council of Housing Market Analysts
www.housingonline.comPage 6
Program Agenda
Welcome & IntroductionsNCHMA Background
Introduction to Market Analysis What is a Market Study?
Project Description and Site Analysis
Determining Market Area
Economic Context
Demographics
www.housingonline.comPage 7
Page 8 www.housingonline.com
• What is a Market Study?• Types of Market Studies• Components of Market Studies• Scope of Work
Introduction to Market Analysis
•What is a Market Study?A comprehensive forward looking analysis of
the housing market in a defined market area. Housing needs in specific geography Specific need for proposed development Users
Developers Syndicators Government entities Investors
www.housingonline.comPage 9
Who are the Users/Consumers/Clients?
www.housingonline.comPage 10
Market Research
Developer
Lender
Investor
State Housing Allocator
•What is a Market Study?▫A comprehensive review of the housing
market in a defined market area.▫At a minimum, market studies include a
review of location, economic conditions, demographics, and existing and proposed housing stock.
▫“When you buy real estate, you are buying a set of assumptions about the future”.
From Dr. James Graaskamp
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•What does a Market Study do?
Depth and durability of the market Supply and demand analysis
Marketability of proposed development
Projected outcome - feasibility and conclusions
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•What is a Market Study’s Purpose?▫A market study can be used to: 1.Determine the demand for a specific
proposed development 2.Examine the overall condition of an area’s
housing market.3.Measure the impact of a proposed
development on an existing market4.Evaluate the appropriateness of a proposed
development
www.housingonline.comPage 13
•Market Studies –SCOPE Complete Market Study
Comprehensive report addressing all items in NCHMA Model Content Standards
Full Narrative or Summary report format.Something less than a market study
Rent study Capture rate demand study Memos Other examples?
www.housingonline.comPage 14
•Housing Market Issues▫Which Market Segment is Being Served▫Is the Development Appropriate▫Impact on Existing Market▫Other Issues
Special Needs Population Preservation of Affordable Housing
www.housingonline.comPage 15
•Typical Components of a Market Study include:
A. Executive SummaryB. Project DescriptionC. Location and Market Area DefinitionD. Employment and EconomyE. Demographic CharacteristicsF. Competitive EnvironmentG. Analysis / Conclusions and
RecommendationsH. Local Perspectives of Rental Housing
Market and Housing Alternatives
www.housingonline.comPage 16
•Project Description (Information to Get Started)
▫ Proposed unit mix ▫ Proposed amenities▫ Housing Consumer▫ Detailed Location▫ Construction / RehabilitationTimeline▫ Plans and specs (if available)▫ Any adverse influences in the area that are
known by the developer
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Project Description & Site Analysis
Page 18 www.housingonline.com
Site AnalysisProject LocationProject AnalysisMarket Area
•Project Location▫City, State, and Exact Location are
discussed in the narrative.▫Aerial Photo of area is obtained
Bing.com Google Maps Others
▫Map of Area is prepared▫Area Linkages are mapped
www.housingonline.comPage 19
Site Analysis Is the site appropriate
for intended use? Compatible surrounding
land uses? Neighborhood adequately
served by facilities and services?
Ingress and Egress? Adequate visibility? Any planned changes in the
area that may compromise its suitability in the future?
www.housingonline.comPage 20
Site Plan•Site characteristics are usually
described by:▫Size, Shape, Zoning, Frontage, Topography,
Vegetation, Visibility•A typical site plan includes:
▫Buildings, Parking, Ingress/Egress, Amenities, Landscaping, Setbacks
www.housingonline.comPage 21
• Primary Market Area• “A geographic area from which a property
is expected to draw the majority of its residents.”
• Secondary Market Area• “The portion of a market area that supplies
additional support to an apartment property beyond that provided by the primary market area.”
www.housingonline.comPage 22
Determining Market Area
A housing market area is the contiguous area within which households compete for available housing.
Ask yourself if the market area delineated seems reasonable in size and character.
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• Market Area Criteria▫ A reasonable market area is critical as it
determines the geographic scope of other analyses. It should be realistic in size. It should reflect the impact of natural and man-made
barriers.
▫ Beware of radii, county boundaries, or multi-county boundaries.
▫ Seniors market areas are generally larger than those for family projects.
www.housingonline.comPage 24
•Delineation of Market Area▫Location of Competitive Properties▫Accessibility▫Natural Boundaries▫Housing Project Characteristics▫Market Perceptions ▫Commuting Patterns▫Target Market▫Jurisdictional Boundaries▫Local Agency Service Boundaries▫Non-Geographic Factors
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Is this a good market area?
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How about this market area?
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Does this seem reasonable?
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• What is the environment in which project will be operating?• Labor Force• Unemployment• At Place Employment• Major Employers
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Economic Context
Unemployment Rate
5.5%5.7%
6.1% 6.2%
7.0% 7.0% 7.1%7.5%
7.9%
8.4% 8.4%8.7%
8.9% 8.9% 9.0%9.4%
9.6%
10.9%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
10.0%
11.0%
12.0%
Unemployment - March 2012Largest Metropolitan Areas
U.S Rate
Source: US Bureau of Labor Statistics
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Change in Metro Area Employment Since Recession Began: % Jobs
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-8.9
%
-8.8
% -7.6
%
-5.4
%
-5.1
%
-5.1
%
-3.3
%
-3.1
%
-3.1
%
-2.5
%
-2.4
%
-2.1
%
0.5%
-0.8
%
-0.4
%
-0.1
%
1.3%
1.8%
5.1%
-10.0%
-8.0%
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
DE
T
PH
X
LA
AT
L
SF
CH
I
US
PH
I
MIN
Ch
ar
Ric
h
SE
A
BA
L
NY
BO
S
MIA
DC
DA
L
HO
U
% C
hang
e
% Change in Total Employment Mar-07 to Mar-12
Not Seasonally Adjusted
Change in Metro Area Employment Since Recession Began: # Jobs
• www.housingonline.comPage 32
At-Place Employment Trends161,2
96
156,5
30
154,5
44
157,4
41
162,9
09
168,0
50
168,1
48
173,4
20
178,1
94
183,2
53
193,4
11
199,8
80
201,4
69
205,4
39
214,6
37
222,0
72
225,5
77
232,7
34
233,7
99
226,5
07
0
50,000
100,000
150,000
200,000
250,000
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Total Employment1990 - 3Q 2009
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At-Place Employment by Sector
16.6%
0.1%
6.5%
5.8%
22.7%
2.2%
4.2%
14.8%
11.3%
12.0%
3.9%
17.1%
1.4%
4.6%
9.3%
19.1%
2.2%
5.9%
12.8%
14.1%
10.0%
3.4%
0.0% 5.0% 10.0% 15.0% 20.0% 25.0%
Government
Nat Resources-Mining
Construction
Manufacturing
Trade-Trans-Utilities
Information
Financial Activities
Professional-Business
Education Health
Leisure-Hospitality
Other
Employment by Sector 3Q 2009
United States
Anne Arundel County
www.housingonline.comPage 34
Commuting PatternsTravel Time to Work Place of Work
Workers 16 years and over # %Did not work at home: 72,052 97.0%
Less than 5 minutes 1,320 1.8%5 to 9 minutes 4,449 6.0%
10 to 14 minutes 7,024 9.5%15 to 19 minutes 8,546 11.5%20 to 24 minutes 11,429 15.4%25 to 29 minutes 5,577 7.5%30 to 34 minutes 12,281 16.5%35 to 39 minutes 2,798 3.8%40 to 44 minutes 3,385 4.6%45 to 59 minutes 6,985 9.4%60 to 89 minutes 5,667 7.6%
90 or more minutes 2,591 3.5%Worked at home 2,243 3.0%Total 74,295
Place of Work
Workers 16 years and over # %Worked in state of residence: 73,716 99.2%
Worked in county of residence 51,586 69.4%Worked outside county of residence 22,130 29.8%
Worked outside state of residence 579 0.8%Total 74,295 100.0%
Place of Work
In County Outside County Outside State
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Economic Forecast
Major Employers Location; Size of Workforce; Prospects for future growth or reduction
Economic Expansions Any planned expansions in the Market; i.e., BRAC, New Plants. Is household growth increasing demand for services
Economic Disruptions Major Layoffs or Closing; Vulnerable Sectors of Economy
Wage Trends Are wages increasing or decreasing
0 1
miles
2
SITE
Fulton County
NCR Corp.Emory Eastside Med. Center
EMS Technologies
Intercept Group
Atlanta Journal
Primerica Financial
Scientific-Atlanta
US Postal Service
Location of Major Employers
www.housingonline.comPage 36
Sources for Data
• Unemployment Data: http://data.bls.gov/pdq/querytool.jsp?survey=la
• NAIC codes: • http://www.census.gov/cgi-bin/sssd/naics/naicsrch?chart=200
7
• At Place Employment Data:
http://data.bls.gov/pdq/querytool.jsp?survey=en
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• Demographic Trends• Sources of Data• Growth Projections• Population Characteristics
Demographic Context
Change 2000-2020; US Population by Age
2000-2020 US Population by Age
2,000,000
2,250,000
2,500,000
2,750,000
3,000,000
3,250,000
3,500,000
3,750,000
4,000,000
4,250,000
4,500,000
4,750,000
5,000,000
0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75
Age 2000 Population 2009 Population 2014 Population 2020 Population
KidsMove-Up
HouseholdsEmpty
NestersYoungSenior
OldSenior
Starter Households
Age
www.housingonline.comPage 39
•Projection Sources▫ Projections
Metropolitan Planning Organizations www.narc.org ▫ National vendors (Neilsen, ESRI)
▫ Local Governments▫ State Data Centers▫ U.S. Census Bureau
C-40 report▫ 2010 Census▫ American Community Survey
www.housingonline.comPage 40
Factors Impacting Population and Household Projections
Cohort Survival Models Births – Deaths + Migration
Economic Growth / Loss Is there an economic stimulus that will impact in-migration or out migration
Household Formation The age distribution of the population gives you an indication of number of persons that will form households.
Development Patterns Is there infrastructure and land available to support new growth (supply driven demand)
www.housingonline.comPage 41
Population and Household Trends
Dauphin County Total Annual Total Annual Total2000 2010 2011 2016 # % # % # % # % # % # %
Population 251,798 268,100 268,408 269,954 16,302 6.5% 1,630 0.6% 308 0.1% 308 0.1% 1,546 0.6% 309 0.1%
Group Quarters 6,787 6,788 6,761 6,625
Households 102,670 110,435 110,693 111,994 7,765 7.6% 777 0.7% 258 0.2% 258 0.2% 1,301 1.2% 260 0.2%
Average HH Size 2.39 2.37 2.36 2.35
Laurel Ridge Market Total Annual Total Annual Total
2000 2010 2011 2016 # % # % # % # % # % # %
Population 55,023 59,895 60,137 61,364 4,872 8.9% 487 0.9% 242 0.4% 242 0.4% 1,227 2.0% 245 0.4%
Group Quarters 1,403 1,376 1,370 1,342Households 22,832 25,756 25,896 26,606 2,924 12.8% 292 1.2% 140 0.5% 140 0.5% 710 2.7% 142 0.5%Average HH Size 2.35 2.27 2.27 2.26
AnnualChange 2010 to 2011
Annual
Change 2010 to 2011 Change 2011 to 2016
Change 2011 to 2016
Change 2000 to 2010
Change 2000 to 2010
www.housingonline.comPage 42
Population and Household Trends What is the nature of recent
demographic trends in the market area? Has the number of households been
increasing, decreasing, or remaining about the same?
Are recent past trends expected to continue? Are demographic projections from a
reputable third-party source? Does building permit activity correlate with
household trends? For seniors’ projects, trend of age-qualified
households www.housingonline.comPage 43
Age Distribution
Number Percent Number Percent
Children 62,460 23.3% 13,050 21.7%
Under 5 years 17,721 6.6% 3,547 5.9%
5-9 years 16,673 6.2% 3,482 5.8%
10-14 years 16,907 6.3% 3,578 6.0%
15-17 years 11,159 4.2% 2,442 4.1%
Young Adults 53,381 19.9% 11,330 18.8%
18-20 years 9,118 3.4% 1,843 3.1%
21-24 years 12,359 4.6% 2,565 4.3%
25-34 years 31,904 11.9% 6,922 11.5%
Adults 104,132 38.8% 24,977 41.5%
35-44 years 36,803 13.7% 8,640 14.4%
45-54 years 42,584 15.9% 10,444 17.4%
55-61 years 24,746 9.2% 5,892 9.8%Seniors 48,435 18.0% 10,780 17.9%
62-64 years 10,605 4.0% 2,525 4.2%
65-74 years 19,374 7.2% 4,315 7.2%
75-84 years 12,636 4.7% 2,715 4.5%
85 and older 5,819 2.2% 1,225 2.0%
TOTAL 268,408 100.0% 60,137 100.0%
Median Age 38 40
Dauphin County Laurel Ridge Market
23.3%
19.9%
38.8%
18.0%
21.7%
18.8%
41.5%
17.9%
0% 5% 10% 15% 20% 25% 30% 35% 40% 45%
Children
Young Adults
Adults
Seniors
% PopAg
e
2011 Age DistributionLaurel Ridge Market
Dauphin County
Page 44 www.housingonline.com
# % # %
Married w/ Child 20,780 18.8% 5,548 21.5%
Married w/o Child 29,196 26.4% 7,424 28.8%
Male hhldr w/ Child 2,978 2.7% 523 2.0%
Female hhldr w/ Child 9,261 8.4% 1,462 5.7%
Non Married Households w/o Children
13,248 12.0% 2,765 10.7%
Living Alone 34,972 31.7% 8,034 31.2%
Total 110,435 100.0% 25,756 100.0%
Source: The Nielsen Company; Estimates, Real Property Research Group, Inc.
Dauphin County Laurel Ridge Market
18.8%
26.4%
2.7%
8.4%
12.0%
31.7%
21.5%
28.8%
2.0%
5.7%
10.7%
31.2%
0% 5% 10% 15% 20% 25% 30% 35%
Married w/ Child
Married w/o Child
Male hhldr w/ Child
Female hhldr w/ Child
Non Married Households w/o Children
Living Alone
% Households
Hou
seho
ld T
ype
2010 Households by Household Type
Laurel Ridge Market
Dauphin County
Page 45 www.housingonline.com
Household Type
Trends in U.S. Rentership Rate
Page 46
30.0%
31.0%
32.0%
33.0%
34.0%
35.0%
36.0%
37.0%
38.0%
39.0%
40.0%
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Q1
Annual Average Rental rate
200431% Renters
2012Q134.6%
Renters
196836.2%
Renters
198034.43% Renters
www.housingonline.com
Total Income
Number Percent Number Percentless than $15,000 11,461 10.4% 1,157 4.5%$15,000 $24,999 11,029 10.0% 1,903 7.3%$25,000 $34,999 12,375 11.2% 2,210 8.5%$35,000 $49,999 17,833 16.1% 4,139 16.0%$50,000 $74,999 23,044 20.8% 5,666 21.9%$75,000 $99,999 14,557 13.2% 4,084 15.8%
$100,000 $124,999 9,185 8.3% 2,859 11.0%$125,000 $149,999 4,421 4.0% 1,491 5.8%$150,000 $199,999 3,355 3.0% 1,112 4.3%$200,000 over 3,432 3.1% 1,276 4.9%
Total 110,693 100.0% 25,896 100.0%
Median Income
Laurel Ridge MarketDauphin County
$65,618 $52,874
10.4%
10.0%
11.2%
16.1%
20.8%
13.2%
8.3%
4.0%
3.0%
3.1%
4.5%
7.3%
8.5%
16.0%
21.9%
15.8%
11.0%
5.8%
4.3%
4.9%
0% 5% 10% 15% 20% 25%
<$15K
$15-$24.9K
$25-$34.9K
$35-$49.9K
$50-$74.9K
$75-$99.9K
$100-$124.9K
$125-$149.9K
$150-$199.9K
$200+K
% Households
Hou
seho
ld In
com
e
2011 Household Income by Area
Laurel Ridge Market
Dauphin County
Page 47 www.housingonline.com
Number Percent Number Percent
less than $15,000 507 6.3% 650 3.6%
$15,000 $24,999 834 10.4% 1,069 6.0%
$25,000 $34,999 858 10.7% 1,352 7.6%
$35,000 $49,999 1,881 23.5% 2,258 12.6%
$50,000 $74,999 2,156 26.9% 3,510 19.6%
$75,000 $99,999 933 11.7% 3,151 17.6%
$100,000 $124,999 654 8.2% 2,205 12.3%
$125,000 $149,999 82 1.0% 1,408 7.9%
$150,000 $199,999 61 0.8% 1,051 5.9%
$200,000 over 40 0.5% 1,235 6.9%
Total 8,005 100.0% 17,891 100.0%
Median Income
Renter Households Owner Households
$49,392 $75,838
507
834
858
1,881
2,156
933
654
82
61
40
650
1,069
1,352
2,258
3,510
3,151
2,205
1,408
1,051
1,235
0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000
<$15K
$15-$24.9K
$25-$34.9K
$35-$49.9K
$50-$74.9K
$75-$99.9K
$100-$124.9K
$125-$149.9K
$150-$199.9K
$200+K
# of Households
Hou
seho
ld In
com
e
2011 Household Income by Tenure
Owner Households
Renter Households
Page 48 www.housingonline.com
Income by Tenure
49
Page 49 www.housingonline.com
Questions?
Elements of Market Analysis, Part Two: Assessing the Market and Drawing
Conclusions
Kentucky Housing Conference
October 9, 2013Lexington, Kentucky
National Council of Housing Market Analysts
Presents:
Speakers
•Jonathan Beery, Valbridge / Allgeier Company
•Patrick Bowen, Bowen National Research
•Caitlin Geary, National Council of Housing Market Analysts
www.housingonline.comPage 51
Program Agenda
Re-Introduction
Supply: Rental Market Trends and Conditions
Calculating Market Rent
Net Demand
Drawing Conclusions
www.housingonline.comPage 52
Supply: Rental Market Trends and Conditions
www.housingonline.com
• Analysis of Trends and Conditions from regional to local to primary market area
• Use 2010 Census data to establish housing profile of PMA
• Profile number of housing units, owner/renter mix and number of vacant housing units
• Evaluate building MF and SF permits for recent activity
• Other important housing characteristics are rental units by type, gross rents, year of construction and rent overburdened
www.housingonline.comPage 54
Building Permit Data from US Census Building Permit Websitehttp://www.census.gov/const/www/permitsindex.html#estimates
Variable: Three and Four FamilySingle-Family Five or More FamilyTwo-Family Total
Housing Data Profile from US Census American FactFinder Site - http://factfinder.census.gov/home/saff/main.html?_lang=en
VariableYEAR HOUSEHOLDER MOVED INTO UNIT HOUSING OCCUPANCYHOUSING VALUES / GROSS RENT UNITS IN STRUCTURESELECTED MONTHLY OWNER COSTS (SMOC) YEAR STRUCTURE BUILTSELECTED MONTHLY OWNER COSTS AS A % OF HH INCOME ROOMSPOPULATION AND HOUSEHOLD GROWTH BEDROOMSGROSS RENT AS A % OF HH INCOME (GRAPI) HOUSING TENURE
From Desk identify all inventory in PMA existing and planned
Field survey should be comprehensive to evaluate housing continuum (LIHTC, older/newer market rate, gov. sub., luxury), current conditions and identify comparable properties
All Tax Credit properties should be surveyedSF affordability and shadow market for-rent single-
family homes and condos may need to be surveyed to measure market rents, and competing supply.First-time homebuyer programs
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Field surveys will consist of various property types:
Comparable property is representative of the rental housing choices of the subject’s Primary Market Area and is similar in construction, size, amenities, or age to the subject.
Competitive property is comparable to subject and competes at similar rent levels, and tenant profile, such as age, family or income.
www.housingonline.comPage 57
Purpose of surveying comparable properties:
Evaluate which properties are truly competitive: Principle of Substitution
Evaluate the Primary Market Area (PMA) or the need for a Secondary Market Area (SMA)
Evaluate subject’s market position
Evaluate Section 8 reliance and affordability issues
Evaluate tenant profile/targeted market
Evaluate utility allowances and preferences
www.housingonline.comPage 58
Purpose of surveying comparable Properties (continued):
Evaluate location and accessibility
Evaluate proximity to supporting uses
Evaluate physical characteristics
Evaluate demand drivers and forecasts
Evaluate correlation between quality and vacancy
Evaluate govt. subsidized properties
www.housingonline.comPage 59
Purpose of surveying comparable properties (continued) :
Conclude market rents and achievable LIHTC rents
Conclude stabilized occupancy Conclude absorption estimate Conclude use and need for concessions,
seasonality Conclude rent premiums and discounts Conclude rent growth projections Conclude to changes or recommendations
Purpose of surveying comparable properties (continued) Rural:
Use the apartments that exist in PMA Trailers SF homes
Neighboring town or market area Similar population Similar employment centers with similar wages Similar home prices
www.housingonline.comPage 60
High propensity Close to Suburban/Metro Well defined central
towns Transportation
infrastructure Well diversified
economies Recreational amenities Technology /Schools Strong pop and HH
growth Job creation www.housingonline.comPage 61
Low propensity Removed from CBD / urban
core No defined central towns Poor linkages to
infrastructure No diversification or weak
job base No recreational amenities No technology Stagnant pop and HH growth No job creation Subsidized inventory &
tenants
Classify type of rural market:
When the field survey and analysis is complete, you should:Understand strengths/weaknesses of the market.What are trends in market, where in the RE cycle.Who are your Tax Credit competitors and how are
they performing.Who are your Market-rate competitors and how are
they performing.What are the strengths and weaknesses of your
property and how does it compare.
www.housingonline.comPage 62
•Calculating Market Rent•Demand•Affordability
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Findings
The rent an apartment, without rent or income restrictions or rent subsidies, would command in the open market considering its location, features, and amenities.
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Calculating Market Rent
•Adjustment ProcessStart with Asking Rent
Upward if COMP is inferiorDownward if COMP is superior No adjustment if COMP is similar
Remember!
You are adjusting the COMP to the Subject
www.housingonline.comPage 65
Calculating Market Rent (Cont.)
•Adjustment ProcessQuantifiable –Extracted from market
Utility adjustments Amenities / view / design / services Seasonality
Qualitative Appeal Location Quality / Condition
Units of comparison Per unit Per square foot
www.housingonline.comPage 66
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One Bedroom Units
A. Rents Charged Subject Data $ Adj. Data $ Adj. Data $ Adj.Street Rent $895In parts B thru D, adjustments were made only for differencesB. Design, Location, Condition Data $ Adj. Data $ Adj. Data $ Adj.Utilities Included None Hot Water,W/S,Trash ($45) Trash ($10) None $0Rent Concessions $0 None $0 None None $0Structure / Stories 3-Story Garden 3-Story Garden $0 3-Story Garden $0 3-Story Garden $0Year Built / Year Renovated 2010 2006 $10 2004 $15 2005 $13Condition / Street Appeal Excellent Excellent $0 Excellent $0 Excellent $0Town Center Micro Location Excellent Above Average $21 Average $42 Excellent $0C. Unit Equipment / Amenities Data $ Adj. Data $ Adj. Data $ Adj.Number of Bedrooms 1 1 $0 1 $0 1 $0Number of Bathrooms 1 1 $0 1 $0 1 $0Unit Interior Square Feet 734 792 ($15) 775 ($10) 770 ($9)Balcony / Patio / Porch Yes Yes $0 No $5 Yes $0Microwave Yes Yes $0 Yes $0 Yes $0Dishwasher/Disposal Yes / Yes Yes / Yes $0 Yes / Yes $0 Yes / Yes $0Washer / Dryer: In Unit Yes No $35 Yes $0 No $35D. Site Equipment / Amenities Data $ Adj. Data $ Adj. Data $ Adj.Parking ($ Fee) $0 $0 $0 $0 $0 $0 $0Fence/Gate No No $0 No $0 Yes ($5)Club House Yes Yes $0 Yes $0 Yes $0Pool Yes Yes $0 No $10 No $10Fitness/Workout Room Yes Yes $0 Yes $0 No $10Computer Room / Bus. Center Yes Yes $0 No $5 Yes $0E. Adjustments Recap Positive Negative Positive Negative Positive NegativeTotal Number of Adjustments 3 2 5 2 4 2Sum of Adjustments B to D $66 ($60) $77 ($20) $68 ($14)F. Total Summary
Gross Total AdjustmentNet Total Adjustment
G. Adjusted And Achievable Rents
Estimated Market Rent $930Rent Advantage $ $35Rent Advantage % 3.80%
% of Effective Rent 100.7% 106.4% 106.1%Adjusted Rent $900 $952 $939
$6 $57 $54
Adj. Rent Adj. Rent Adj. Rent
$894 $895 $885
$126 $97 $82
Chesterfield County, VA Chesterfield County, VA Chesterfield County, VA Chesterfield County, VA
Subject Property Comparable Property #1 Comparable Property #2 Comparable Property #3
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•Red FlagsToo many or too large adjustments,
indicating lack of good comparables.Comparables located long distances
from subject.No precedent for conclusion market
place.No new construction in market area.
Why?
PRICE IS THE BEST AMENITY!
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•Demand▫Household Growth▫Demolitions▫% of Renter Households
•Supply▫Pipeline▫Subject
•Balance of Demand and Supply
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Net Demand
DemandHousehold Growth Units
2009 Households 69,2292012 Households 73,772Net Change in Households 4,543
Add: Units Removed from MarketHsg Stock
Removal Rate Lost Units
2009 Housing Stock 72,455 0.480% 3482010 Housing Stock 74,017 0.480% 3552011 Housing Stock 75,612 0.480% 363
1,066Net New Demand for Housing Units 5,609Percent Renter Households in 2012 19.1%Net New Demand for Renter Units 1,072
Add: MF Competitive Vacancy Inventory VacantStabilized Multifamily Communities 6,617 481Deep-Subsidy Multifamily Communities 2,500 0
Subtotal Stabilized Communities 9,117 481
currently vacant
Vacant as of Jan 1,
2009
Communities under lease up 561 208 96Total Competitive Inventory 9,678 577
Market Vacancy at 5% 484Less: Current Vacant Units -577Vacant units required to reach 5% Market Vacancy -93
Total Rental Demand 979
Planned Additions to the SupplyTotal Units 95% Occupancy
project x 250 238project y 500 475Subject 200 190
Total New Rental Supply 950 903
Excess Demand for Rental Housing 77
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Growth and Substandard Housing
Unit Type All 2 BR 3 BRGross Rent $331 $331 $383Income Ratio 35% 35% 35%Minimum Income $11,349 $11,349 $13,131Maximum Income (2/BR) $34,200 $29,460 $34,200
Demand From New GrowthHousehold Growth, 2000-08 588 588 588 X Percent Income Qualified 41.3% 33.5% 38.2%X Percent Renter 41.5% 41.5% 41.5%X Appropriate Household Size 100% 100% 100%Demand From Household Growth 101 82 93
Substandard Renter HousingInadequate Plumbing 121 121 121 Overcrowded Housing 1,238 2,014 2,014 Total Substandard Units 1,359 2,135 2,135 X Percent Income Qualified 41.3% 33.5% 38.2%Substandard Renter Housing 561 715 815
Rent OverburdenRenters Paying Over 35% 1,238 1,238 1,238 X Percent Income Qualified 41.3% 33.5% 38.2%Total Rent Overburden 511 415 472
Total Demand 1,173 1,212 1,380
Less Comparable Units Built Since 2000 (96) (48) (48) Units Built Since 2000 (80) (32) (48) Less Units Under Construction (84) (42) (42) Less Units Planned (43) (22) (21) Total Units Since 2000 (303) (144) (159)
Net Demand 1,077 1,164 1,332
Proposed Units - Subject 69 45 24
Capture Rate 6.4% 3.9% 1.8%
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• Capture rate is the percentage of age, size, and income qualified renter households in the primary market area that the property must capture to fill the units.
Calculation:Capture Rate is calculated by dividing the total number of units at the property by the total number of age, size and income qualified renter households in the primary market area.
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Calculating Capture Rates & Penetration Rates
• Penetration Rate is the percentage of age and income qualified renter households in the primary market area that all existing and proposed properties that are competitively priced to the subject that must be captured to achieve the stabilized level of occupancy.
Calculation:Penetration Rate is calculated by dividing the total number of units at the property and all existing and proposed properties, to be completed including the subject by the total number of age, size and income qualified renter households in the primary market area.
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• To calculate the capture rate, the appropriate income range for residents to qualify for the project must be established
• Maximum allowable income for the subject project is based on the household income necessary to qualify for the largest unit offered at the site
• NCHMA occupancy guidelines are as follows: One-bedroom: 1-2 Two-bedroom: 2-4 Three-bedroom: 4-6 Four-bedroom: 5+
• Persons per housing unit can be adjusted by analysts based on other factual data
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Income Caps and Bases
Base
• Minimum income required to live at the property is based on the gross rent (including all utilities) offered at the subject site
• Accepted ratio of rent to income is 35% for families and 40% for seniors
Caps
• Based on HUD income caps
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One Bedroom Two Bedroom
Base Price MinimumMaximum Base Price MinimumMaximum Number of Units 40 Number of Units 40Net Rent $665 Net Rent $770Gross Rent $755 Gross Rent $900% Income Spent for Shelter 35% % Income Spent for Shelter35%Income Range $25,886 $31,170 Income Range $30,857 $37,440Range of Qualified Hslds 6,041 5,239 Range of Qualified Hslds5,282 4,390# Qualified Households 802 # Qualified Households 892
Unit Total HH Capture Rate 5.0% Unit Total HH Capture Rate 4.5%
Range of Qualified Renters 2,727 2,279 Range of Qualified Renters2,303 1,805# Qualified RenterHouseholds 448 # Qualified RenterHouseholds 498
Unit Renter HH Capture Rate 8.9% Unit Renter HH Capture Rate 8.0%
Gross Capture Rate Total Households 11,732 Total HHNumber of Units Band of Qualified HHs # Qualified HHs
Income $25,886 $37,44060% Units 80 HHs 6,041 4,390 1,651 4.8% Capture Rate
Renter Households 6,437 Renter HHBand of Qualified HHs # Qualified HHs
Income $25,886 $37,44060% Units 80 HHs 2,727 1,805 922 8.7% Capture Rate
60
% U
nit
s
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Affordability @ 35% Rent Burden
Capture RatePenetration
RateUnit Type All AllGross Rent $450 $450Income Ratio 35% 35%Minimum Income $15,429 $15,429Maximum Income (2/BR) $34,200 $34,200
Total Qualified RentersExisting Households, 2006 9,189 9,189 X Percent Income Qualified 43.8% 43.8%X Percent Renter 41.5% 41.5%Total Qualified Renters 1,670 1,670
Other LIHTC Units Existing LIHTC Units 0 208 LIHTC Under Construction 0 84 Proposed Units - Subject 0 43 Proposed Units - Other App 69 69Total LIHTC Units 69 404
Total Qualified Renters 1,670 1,670
Total LIHTC Units 69 404
Capture / Penetration Rate 4.1% 24.2%
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Capture Rates & Penetration Rates
Income-qualified households
5% Capture Rate (need to get 1 in every 20 eligible households)
33% Capture Rate (need to get 1 in every 3 eligible households)
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Interpreting Capture Rates
• There are no definitive right or wrong capture rates
• Capture rates and penetration rates must be considered within context of market
• Senior projects more likely to consider support from homeowners
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0% 10% 20% 30% 40% 50%0%
2%
4%
6%
8%
10%
12%
14%
Rural Markets Too Many Units
Best Opportunity Urban Markets
Penetration Rate
Cap
ture
Rat
e
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Other Factors Impacting Demand• Location—Surrounding land uses may
attract or prevent renters from moving to the site
• Proposed Rents— Look at households able to pay the proposed rents, not the willingness to do so
• Housing Markets—Rental markets with high vacancy rates; Foreclosures
• Employment “Shocks”
• Credit Marketswww.housingonline.comPage 81
Special Note for Rehabilitation Projects
•Two capture rates should be calculated for Section 8 rehabilitation projects▫without Section 8 / RD Subsidy (assumes
Tax Credit rents)
▫with Section 8 / RD subsidy (down to $0 income)
•Resulting capture rates demonstrate importance of maintaining Section 8
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•Rent Analysis•Project Evaluation•Absorption•Projected Project Performance
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Drawing Conclusions
• Achievable Tax Credit Rent The rent an apartment, with LIHTC rent
and income restrictions, could command in the open market considering its location, features, and amenities.
• Pro Forma Rent The rent proposed by a developer,
market analyst, or underwriter for a LIHTC property based on risk or mission goals and objectives.
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Rent Advantage
• Market Advantage provides insulation to market risk over long-term.
Limited universe of rentersAnnual re-certificationsPerceptions
• Industry Benchmark = 10%• Exceptions:
Strong markets with strong rent growth.
Stagnant/rural markets with few alternative housing choices.
Superior Product provides advantage
Achievable LIHTC Rent
Pro Forma Rent
Market Rent
Maximum LIHTC Rent
▫Projected Absorption Levels Historic Pattern of New Units Absorbed
Annually Performance of Recently Completed Projects Adjust Estimate to Reflect Market
Conditions Economic and Demographic Forecasts Units in Pipeline Occupancy Levels
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•Projected Project Performance▫Rents▫Concessions▫Absorption Rate▫Stabilized Occupancy▫Rent Appreciation▫Impact on existing rental market
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Questions?