Category Archives: Multi-Family Housing - Page 2

8 Threats to Apartment Owners in 2014

By Les Shaver –

As the rest of the economy has foundered, apartment owners have surged coming out of the recession. But the good times might not last forever. Here are eight things that could wreck their joyride.
1. Fannie Mae and Freddie Mac
It’s been more than five years since the speculation about Fannie Mae and Freddie Mac started, yet they remain a vital source of liquidity in the sector, especially in secondary and tertiary markets (where other lenders are less likely to go). “Fannie and Freddie are the most dominant lending sources in our industry,” says John Sebree, director of Calabasas, Calif.–based Marcus & Millichap’s National Multi-Housing Group. “If that is changed, it will have an effect on our values and our ability to finance properties.”
2. Unemployment
The apartment sector has seen great rent growth over the past few years without its customers enjoying real income growth. If the sector wants to continue to grow, employment, and wages, must increase. And, if things regress, the industry will suffer. “You put unemployment and the economy in the macro bucket,” says Dan Fasulo, managing director at New York–based Real Capital Analytics. “They’ll be hovering above everything we do and directly impacting values.”
3. Rising Interest Rates
When interest rates rise, they reduce investor-levered returns, which obviously hinders valuations. “The interest-rate market, and how much interest rates increase and over what period of time, will have a huge effect on value,” Sebree says. “If Treasuries jump 100 or 120 basis points, that will have an effect on cap rates.”
4. Overdevelopment
Simple supply and demand dictates that when more apartments show up in your neighborhood, it generally decreases the value of those properties that were there already. “Supply is an issue at the submarket and neighborhood levels,” says Ryan Severino, senior economist and associate director of research at New York–based Reis. “It’s not a uniform thing.” But in markets with oversupply, valuations will take a hit.
5. An Exodus of Capital
Already, some players, like Washington, D.C.–based Carlyle Group, are trimming their apartment holdings. If the movement gets bigger, it could hurt values. “Capital is moving out,” Fasulo says. “Your smart money players, chasing yield compression in the market, are already playing in the other sectors where there is a bigger spread.”
6. Inflation
Inflation will hit apartment owners, but, ultimately, the sector is in a good position to handle higher prices. “If we look at what inflation will do, it will increase rents, but it will increase expenses and interest rates [too],” Sebree says. “It will probably increase values, as well. If inflation happens at a higher rate than what many are predicting, the investors that have locked in long-term debt will be in better shape than others.”
7. Political Threats 
When Bill de Blasio was elected the next mayor of New York City last month, apartment owners in the city, including Fasulo (who owns units in Brooklyn) took note. “The mayor of New York has a lot of power to impact change very quickly,” Fasulo says. “Understanding the positions of the new mayor-elect, I’m not sure I’d make a bet that operating expenses for New York City apartment owners would be going down.”
8. Geopolitical Issues
Apartment industry executives, like everyone else, are susceptible to what happens in the outside world. If gridlock in Washington or recessions in other countries plunge the U.S. into recession, multifamily owners suffer. “One of my greatest concerns that I believe will impact apartment values and fundamentals is uncertainty about global economics and our government policy,” says Lili Dunn, chief investment officer forGreensboro, N.C.–based Bell Partners (though she remains hopeful the economy will remain along its path of moderate growth).

What Renters Want: The Amenity Arms Race

By Leah Etling, Contributing Editor –

Los Angeles—Gen Y likes rooftop pools, multimedia-equipped fitness suites, concierge package service and the ability to order housekeeping for their apartment. They have dogs, get lots of UPS deliveries but almost no mail, like walking places (but also need to charge their electric vehicles), and want the lobby of their apartment community to look like that of a four-star urban hotel.

Sound high maintenance? It’s a fair assessment.

Last week, a panel of multifamily experts delivered an overview of “What Renters Want: Development + Design Trends that Drive Occupancy,” at an AIA continuing education event held in Los Angeles and sponsored by Multi-Housing News, Interface and Universal Fibers.

Speakers Manny Gonzalez, principal, KTGY Group; Kelly Farrell, vice president, RTKL; and Alan Dibartolomeo, chief development officer, AMF Development Inc. didn’t pull any punches when it came to the wish list of the nation’s largest renter demographic: 20-to-mid-30-somethings.

“Gen Y rents by choice. We’ll see if they continue to rent by choice as they age. But if they keep renting, your rentals will have to be flexible enough in their amenities program to meet their needs in the future and the needs of their kids,” said Farrell, who described the demand for services among today’s typical resident.

They want to be able to order up housekeeping, but not pay for it on a regular schedule, calling for an appointment when they have been too busy to clean or Mom and Dad are coming to visit. Someone should be in the lobby to receive their dry cleaning delivery and accept their packages while they work. Rent should be payable by credit card so they can auto-schedule the payment and forget about it.

The good news is that they’re willing to pay for these conveniences.

“It’s a generation that if they have the money, they want to be served,” said Dibartolomeo, whose firm competed a Glendale project near Americana at Brand and the Glendale Galleria that features a 26,000 square foot rooftop skydeck, replete with a dog park and hot tub.

The only disadvantage of creating such posh living spaces is that residents really do seem to think they’re at a resort.

“They really believe they’re in a hotel. And there’s a downside to that: they think they can barbecue and cook and just walk away and leave it, and somebody will clean it up. Almost everything is ‘somebody else will take care of it,’” Dibartolomeo said.

Describing some of the private student housing communities that have been developed across Southern California, Gonzalez implied that multifamily would likely have to raise the luxury bar to keep up with rising expectations. Does your community’s swimming pool feature a lazy river?  How about a fitness center that rivals the offerings of the neighborhood’s most high-end health club?

“If your community isn’t big enough to do something like this, then don’t even try to do it. Get them a membership to the adjacent club. If you can’t go all the way, don’t just go halfway,” Gonzalez advised. He added, “It’s what I call the amenities arms race. Everything’s getting bigger, how much can we do? All the money seems to be going into the amenities: ‘My pool’s bigger than your pool.’”

A few other trends the panel identified:

  • Black box theaters are out, outdoor theaters—where weather permits–with movable furniture are in.
  • Business centers are out, but universal wireless network coverage and scattered “creative spaces” are in.
  • Printers and a couple of computers on site are still popular for that moment when the household printer is out of ink and you need to print boarding passes for a flight or tomorrow’s homework assignment.
  • Multimedia fitness “suites” where you can do a yoga, pilates or P-90X workout alone or with a few friends are hot.
  • Some new construction doesn’t bother to wire for landline phones. Direct data connections are the alternative.
  • The most important amenity? Five bars. “If you walk in and your phone doesn’t have five bars, you’re walking out,” Gonzalez said.
  • Green isn’t as important as you think, though it may matter to owners, builders and lenders. “The leasing people don’t sell it too hard. They may mention it, but it’s not an amenity that really sells,” Dibartolomeo said.
  • Got an In-and-Out burger nearby? You’re golden. A Whole Foods? High five. Neither? No worries. Settle for a designated food truck parking space and invite local trucks to set up a regular visitation schedule. “It’s a great opportunity for them that costs you absolutely nothing,” Gonzalez noted.
  • Micro units need some kind of separation barrier between living space and sleeping space. It gives the feeling of a one-bedroom unit, even if the entire apartment is less than 500 square feet.
  • Kitchens can be smaller than we’re accustomed to, especially with new reduced-footprint appliances. But entertaining is still important, and expandable spaces to host a larger crowd are requested.
  • Location still matters—a lot. “You’ve got to build it where the rest of the amenities are already provided by the city that’s there,” Dibartolomeo observed.

Multifamily Players Dare to Hope GSEs Won’t Be Dismantled

By Erika Morphy –

WASHINGTON, DC-There is a growing sense in the multifamily industry that, despite the strong push to privatize housing finance, Fannie Mae and Freddie Mac may not be unwound. It doesn’t hurt that both GSEs have posted strong profits in recent years. Also, as politicians get closer to the reality of what it would entail to sell off parts or all of the GSEs, the more practical-minded they become about the mission. The intense lobbying campaign by the industry has likely had some sway as well, says one player. “I think Congress didn’t realize how important the GSEs are to housing finance—they liquidity they provide in the capital markets, especially the multifamily side,” this person tells “They certainly didn’t realize how profitable the multifamily side is.”

To be sure, the official party line in Washington is that the GSEs are headed for an exit at some point. Certainly the Federal Housing Finance Agency continues to push the GSEs to conserve, to scale back lending and otherwise shrink. Also the GSEs themselves are positioning their operations for the day when the private markets will be the main source of finance in this space. Earlier this month Fannie Mae priced its inaugural credit risk sharing transaction under its Connecticut Avenue Securities (C-deals) series—transactions is which The GSE transfers some of the retained credit risk to investors in exchange for sharing a portion of the guaranty fee payments.

Then there are the comments Fannie Mae’s CEO Timothy J. Mayopoulos, made at the recent Mortgage Bankers Association meeting.

He spoke of building a sustainable housing finance system and on his list of what would comprise such an ecosystem was private capital that stands “in front of the government to withstand market downturns. The amount of this private capital needs to be substantially higher than the capital the GSEs historically held.”

Reporting the Results of a Due Diligence Investigation

By Azad Khalighi –

Must the results of a Phase II Environmental Site Assessment be reported to regulatory agencies?

Frequently in the area of real estate due diligence, persons who engage consultants for a Phase II Environmental Site Assessment (Phase II ESA) face the question of whether or not they need to report data to regulatory agencies, and if so, who is ultimately responsible to do so.  The answer to this question varies on a case by case basis, depending on three primary aspects: the regulatory jurisdiction of the project; the scope and results of the investigation; and the purpose of the investigation.

Generally, if environmental impacts detected during a Phase II ESA exceed regulatory risk-based standards, action is required.  Who these findings should be reported to, and what kind of cleanup action is required at the property, is determined by the relevant agency that provides oversight for that site.

There are many different regulatory agencies which often have overlapping jurisdiction and each Phase II investigation is different in scope and purpose.  To be certain whether environmental concerns found during the Phase II ESA must be reported, property owners should discuss these aspects with their environmental consultant.  Sometimes, such information is best relayed from the agency regulators themselves, while in particularly complex cases an attorney in the field of environmental law can provide the best advice.

Regulatory Jurisdiction

A property owner may be required to report analytical data from a Phase II ESA if oversight is required in that jurisdiction.  In some instances, a jobsite is under regulatory oversight, and the scope of a subsurface investigation is in accordance with that agency.  Under these circumstances, the agency’s caseworker will most likely require the data to be reported.  Reporting the data to the regulator with pre-existing oversight is generally the duty of the responsible party, and consultants can submit the data on their behalf.

Importantly, risk-based standards are regulated on both a State and a Federal level.  The Federal Environmental Protection Agency (EPA) has jurisdiction across the nation, and publishes standards and foundational requirements per region for local regulatory agencies and departments to use as a template.  In addition to Federal regulators, States have multiple agencies with overlapping jurisdictions such as water quality boards, environmental protection boards, toxic substances control and more, each enforcing various regulatory action levels.  Within these state agency jurisdictions are county and city departments, which also overlap in jurisdiction, such as fire departments, public health departments, water agencies and more.

Each regulatory agency enforces different action/screening levels, which vary across the country.  In Montana, for example, levels are regulated by standards known as Risk-Based Screening Levels (RBSL), New Mexico follows the SSL (soil screening levels) program, Hawaii uses Environmental Action Levels, while standards are set by the Risk Evaluation/Corrective Action Program (RECAP) in Louisiana and the Significant Environmental Hazard Condition Notification Thresholds (SEHCNT) in Connecticut.

Additionally, the majority of city and county environmental departments will require a boring permit for drilling projects encountering groundwater, and a minority of them will require a permit for drilling, even if groundwater is not encountered.  Often times these permits have a closure process that requires all data to be reported.  Property owners should refer to their environmental consultants about whether or not their Phase II ESA project falls within one of these jurisdictions, and if so, prepare to release all analytical data to that department.  A city or county environmental department may report significant data from their permit package to a regional or state agency for regulatory oversight.

Scope and Results

A Phase II ESA scope of work generally includes, but is not limited to, drilling for the analysis of soil, soil gas, and/or groundwater.

Many State EPAs have published various regulatory standards for reporting and clean-up of these elements, such as the Generic Numeric Cleanup Standards for Groundwater and Soil in Maryland, the Soil Cleanup Target Levels in Florida, the Statewide Standards for Soil and Groundwater in Iowa and the Soil Evaluation Values (SEVs) in Colorado.

The Federal EPA has also developed Maximum Contaminant Levels (MCLs) as a health-based protective drinking water standard.  Generally, investigations which include the scope of groundwater sampling use MCLs as a guideline for the risk assessment, however often times other regulatory agencies enforce stricter groundwater and drinking water standards as well.  When a Phase II ESA concludes that groundwater concentrations exceed regulatory standards, the property owner may be required to report that data, if that jurisdiction’s agency requires it, if there are possible sensitive receptors which could potentially be affected, and if any required permitting process requires the data for closure.

The Federal EPA has published Regional Screening Levels (RSLs), and similarly, the California EPA has published Human Health Screening Levels (CHHSLs) for soil and soil gas. Screening levels are generally applied for the science of toxicology and risk assessment, and are not typically used as reporting limits, however some circumstances may still require that data be reported with respect to screening levels.

The advisory and terms of such published screening levels should be reviewed on a case by case basis to confirm any reporting obligations.  Additionally, it is important to consider many state and local agencies have established jurisdictional clean-up numbers which can overrule the requirements for reporting data exceeding these screening levels.

Since each project is different, responsible parties must not rely on generalized information, and should always discuss the conclusions of a Phase II ESA report with their environmental consultant.

Purpose of the Investigation:

Health and safety codes in most jurisdictions across the country indicate that responsible parties and consultants have the absolute duty to immediately report any contamination to soil, soil gas, or groundwater which has been discovered as a risk to public health and safety, or the environment.  Responsible parties should refer to their consultants about whether or not there have been such discoveries that pose a risk to the environment or public health at their site.

A Phase II ESA report may also recommend further investigation, or conclude that remediation is required, and it can be in the property owner’s financial interest to voluntarily report the findings, and remediate the site under regulatory oversight.

Ultimately, it is important for all responsible parties and consultants of a Phase II ESA to understand that each project is different, and similar scopes may still result in different reporting obligations depending on jurisdiction, results, and purpose.  To be certain, the responsible party of a Phase II ESA should never blindly rely on generalized information, but rather discuss their reporting obligations with their environmental engineering consultant, attorney, or local regulatory agency.


California Requirements Study

According to the California Health and Safety Code, any release of a reportable quantity of hazardous substance shall be reported to the department in writing within 30 days of discovery (See California Health and Safety Code, Section 25359.4):

       – A “reportable quantity” means either (1) the quantity of substances as listed in Part 302 (commencing with Section 302.1) of Title 40 of the Code of Federal Regulations, or (2) any quantity of hazardous substance that may pose a significant threat to public health and safety, or to the environment [See 25359.4(c)].

– According to the Department of Toxic Substance Controls, Fact Sheet Update for Reporting Nonemergency Hazardous Substances Releases, the term “discovery” as used in 25359.4 means when a person finds, learns, or otherwise acquires knowledge that a hazardous substance has been released.

– A release must be reported unless (1) it is permitted, (2) it is authorized, (3) it requires reporting to the Emergency Management Agency, (4) it has already been reported to the Emergency Management Agency, and (5) the release occurred prior to January 1st, 1994 [See 25359.4(b)].

According to the California Fire Code, the Fire Chief shall be notified immediately when a  release or an unauthorized discharge escapes containment, is contained but presents a threat to health or property, or becomes reportable under state, federal or local regulations (See California Fire Code, Section 8001.5.2.2).

Any person who causes or permits any hazardous substance or sewage to be discharged in or on any waters of the state, shall, as soon as that person has knowledge of the discharge, immediately notify the California Emergency Management Agency of the discharge in accordance with the spill (See California Water Code, Section 13271).

DFW Apartment Market Good for Landlords, Investors–For Now

By Dees Stribling, Contributing Editor –

Dallas—Even though the Dallas-Fort Worth area never quite suffered the housing slump that many other U.S. markets did, the area’s relatively robust economy is creating new households that are tightening the apartment market. In fact, according to the recently released 2Q report by investment specialist Marcus & Millichap, employment gains in the Metroplex will be nearly 3 percent in 2012, nearly double the national average, and job seekers will be moving into the area, especially from less-than-robust markets in the Midwest and on the West Coast.

“As a result, leverage in lease negotiations will remain firmly on the side of apartment operators through the end of the year, spurring strong revenue gains,” the report predicts. In short, DFW apartment landlords are going to be in clover for the time being.

By the end of 2012, asking rents will have risen 3.4 percent to an average of $823 per month. Effective rents will rise at a faster clip of 4.2 percent as owners pare concessions, pushing the average to $744 per month by year-end, the report says.

But Marcus & Millichap also notes that there will (eventually) be some headwinds for landlords. Year-over-year, home sales in the market are up 20 percent, an indication that more renters are transitioning into single-family homes. Foreclosure activity is up more than 10 percent in 2Q12 from the second quarter of 2011, mitigating attrition from apartments to the housing market. But as foreclosure activity begins to abate and new construction of multifamily rental properties accelerates next year, apartment operators may have to react quickly with concession offerings to maintain the current tight occupancies.

New apartment construction is predicted to be quite vigorous in the coming quarters. Apartment completions will nearly triple in 2012, as about 8,100 units will come online by the end of the year. “Based on the rapidly expanding development pipeline, another dramatic increase in deliveries appears likely next year,” the report says.

In the meantime, investors are getting into the market while the getting is good. Transaction velocity will continue to escalate this year as out-of-state investors target large, better-quality deals in the Metroplex, the report anticipates. Despite cap rate compression through the past several quarters, local apartment properties continue to spin off stronger returns than similar assets in coastal markets.

For example, Class A cap rates for Metroplex multifamily can start as low as 5.5 percent, which still offers a 50- to 75-basis point premium over East Coast and coastal California metros. While investor demand for top-quality DFW assets remains elevated, prices are hovering near new construction costs, which may hamper the pace of appreciation over the next year. At the same time, though, the Class B sector may record further price growth, as many investors priced out of the Class A market shift their appetites to large Class B+ properties. Within this segment, prices for well-located 1980s assets have pushed above $40,000 per unit, changing hands at cap rates in mid-7 percent range.

U.S. Apartment Market Sustains Strong Performance During Q3 2013

Apartment occupancy remained tight during the third quarter while rents continued to climb at a pace above the historical norm giving the U.S. apartment market another strong performance during the third quarter of 2013, according to MPF Research, the Carrollton-based apartment market intelligence firm.

The healthy quarterly performance reflected strong leasing activity at new developments coming on-stream plus solid pricing power at most already-full existing properties.

In this exclusive video report, Greg Willett and Jay Parsons from MPF Research highlight the nation’s latest apartment occupancy and rent growth statistics as well as other key performance indicators.

For additional information, read the related press release.

U.S. Apartment Market Performance Highlights Q3 2013

Occupancy: Occupancy in the nation’s 100 largest metros averaged 95.4 percent during the third quarter. Occupancy has been hovering around the essentially-full mark of 95 percent for two years, with slight moves seen from one quarter to another aligning with normal seasonal patterns.

Rent Growth: Effective rents for new leases grew 1.2 percent during the quarter, taking the annual pace of increase to 3.2 percent.

Apartment Demand: Demand for 47,107 apartments registered across the country’s 100 largest metros against 44,799 units finished during the third quarter.

Top 10 Rent Growth Leaders: Oakland Surges to Top Spot

Among large individual metros, Oakland moved into the #1 position on the list of the country’s annual rent growth leaders as of the third quarter. Pricing for new leases grew 7.9 percent during the past year. Denver-Boulder’s ranking also improved, as the market’s 6.8 percent annual rent growth pace was the second-best nationally. While San Francisco slipped from its previous top spot for annual rent growth, pricing power remained strong. The next three positions also went to metros in the red-hot Pacific Northwest region.

Rent Growth Leaders in Q3 2013
Rank Metro Annual
1 Oakland 7.9%
2 Denver-Boulder 6.8%
3 San Francisco 6.6%
4 (Tie) San Jose 5.9%
4 (Tie) Seattle-Tacoma 5.9%
6 Portland 5.7%
7 Miami 5.0%
8 Houston 4.8%
9 (Tie) Austin 4.2%
9 (Tie) Nashville 4.2%


Metros that just missed the cut-off point for the best-performers list included Fort Worth, West Palm Beach and the southern California trio of Orange County, San Diego and Los Angeles.

Wind Speeds Change, But Little Difference for Design

By Jeffrey B. Stone, Ph.D., Florida Building Commissioner –

A comparison of the wind maps for Florida between the new 2010 Florida Building Code (which became effective in March 2012) and the previous edition of the code shows an increase of 20 to 30 miles per hour for wind speeds along much of Florida’s coast. What used to be a design wind speed of 130 or 140 mph is now 160 or 170 mph, raising eyebrows among designers. Location of speed contours have also changed.

However, if developers think this will mean drastic changes for the design of buildings, they are being misled. That’s because the design methodology associated with the higher wind speeds has also changed in the new version of ASCE 7 Minimum Design Loads for Buildings and Other Structures (2010 edition). While designers must use the new higher winds speeds, they are factored in such a way that wind pressures—the design forces that exterior walls and roofs of building must be designed to resist—have not significantly changed for the majority of buildings.

“This could be causing some confusion among designers,” says Brad Douglas, PE, vice president of engineering for the American Wood Council, the major standards producer for the wood industry. “If designers are using the new wind speeds with their old design tables or software, they are making a costly mistake.”

The current wind speed maps are based on new uniform recurrence interval wind speed contours developed by wind researchers. But the ASCE 7 standard also carries new factors to use with the new maps, which results in wind pressure on buildings being about the same for most buildings. Near the shoreline, pressures may increase for some buildings; in other regions, design pressures have actually gone down.

This does not mean that construction requirements in hurricane prone areas have been relaxed. On the contrary, all buildings in Florida, even residential buildings, are now required to be designed by qualified designers in order to make sure building construction can resist hurricane-force winds. This has been a considerable transition for the residential construction industry, which used to rely on prescriptive framing techniques. Industry is meeting the demand for current design documents that are based on state-of-the-art structural engineering, but can be used by builders and code officials as well as designers. One example is the American Wood Council’s, Wood Frame Construction Manual 2012 (WFCM), which is based on ASCE 7– 2010.

One challenge that continues to hound builders is keeping the siding and roofing on their buildings when high winds strike. “The key to meeting these requirements is using products that have been tested for the specific application, and installing them correctly” says Douglas.”If you don’t protect the integrity of the structure with adequate attached siding and roofing, they could come off and expose the rest of the structure to much greater damage.” In addition, greater emphasis is being placed on the performance of windows and doors. Codes are evolving to ensure these components are designed to effectively mitigate damage. In addition, the Florida Building Commission provides a thorough product review and approval program that verifies building envelope products comply with the wind provisions of the Florida Building Code.

From Fannie + Freddie to FHA

By Keat Foong, Executive Editor –

Multifamily housing has been the fortunate beneficiary of Fannie Mae, Freddie Mac and FHA financing programs. While the two Government Sponsored Agencies are now targeted for elimination, the Federal Housing Administration (FHA) multifamily loan insurance programs, as it turns out, may not necessarily escape existential threats either. It appears the same questions about the role, size and risks of the government agencies can also be applied to the FHA.

In the latest development, the Protecting American Taxpayers and Homeowners (PATH) Act, which has been introduced in the House, proposes to impose affordability requirements on multifamily properties receiving FHA insurance. “FHA is clearly facing legislative challenges,” agrees Claudia Kedda, senior director, Multifamily and Affordable Housing Finance. “Efforts to reform the single-family program have put pressure on HUD to also take steps to mitigate risk on the multifamily side.”

Besides possible legislative pressure to overhaul the decades-old FHA financing insurance program, developers who use the FHA mortgage insurance programs, whether for construction or acquisition financing, are also meeting other challenges: FHA’s impending exhaustion of loan commitment limit of $25 billion, the reorganization and reduction of the number of HUD field offices, and FHA risk mitigation measures.

All these pressures on FHA are coming at a time of unprecedented demand for the FHA multifamily and healthcare insurance programs. As a sign that the economy is improving, commitment authority is being used at a significantly faster pace than last year, says Kedda. “FHA, Fannie Mae and Freddie Mac continue to provide the bulk of financing for multifamily rental housing at this time,” says Kedda.

On the legislative front, the PATH bill would require FHA multifamily loans to meet occupancy and rent requirements based on area median income, as well as separate FHA from HUD. The bill, sponsored by Jeb Hensarling (R-Texas), aims to “slim down FHA in general,” comments Steve Wendel, executive managing director of Berkeley Point Capital LLC. “There is political pressure from Congress, and political debate on the proper size of FHA and the government’s role.”

Steps to mitigate risks on the multifamily side have already been undertaken, but there is pressure to narrow FHA’s mission, and impose capital reserve requirements on the insurance fund which is not currently required by statute, adds Kedda. “These are concerns for NAHB,” says Kedda because they can affect the availability and cost of financing for a broad range of housing.

Stillman Knight, president and CEO of The Knight Company, and deputy assistant secretary for Multifamily Housing Programs at the FHA office at HUD from 2003-05, would not brush off the seriousness of these legislative initiatives. “I am very concerned that the conversation on the Hill represents a significant threat to the traditional role of FHA,” says Knight.

Knight says that of the three concerns, supplemental funding, multifamily reorganization and FHA reform, “the greatest threat in my mind is the idea on capitol hill that housing no longer fulfills a public purpose and should be financed by the private sector without a government backstop. Our housing finance system is the envy of the world, and we will not make it better by abandoning the basic principles that made it so. Since 1934, FHA has been able to provide a cushion during recessions and for underserved areas of our great nation. It does so by serving a broad range of capital structures providing diversity and strength to its business model and its mission.”

Kedda adds that the vast majority of FHA-insured rental properties already serve households well below the 115 percent of area median income limit that is included in the draft discussion bill. Such income limit requirements may also mean requiring developers and property managers to income certify over the life of unsubsidized loans, which is “burdensome, costly and unnecessary,” she says.

For Wendel, besides the legislative threat, the greatest challenge facing FHA is the plan to consolidate the HUD multifamily field offices over the next three years. The biggest question is “how you can manage a major consolidation and retain staff at the same time. A lot of the staff may choose not to move,” says Wendel. A related question is the impending retirement of the experienced and skilled staff, with more than half the staff eligible for retirement in the next few years, said Wendel.

“Certainly, the [HUD field office reorganization] is going to be difficult on the staff and the customers who build relationships in the local offices—no question about that,” adds Knight.

Loan commitment is another issue that has emerged in recent months, as it has in prior years. In June, HUD announced that because it was approaching its $25 billion loan commitment authority for FY 2013, it would have to prioritize remaining applications. Priority will be applied in the following order: projects affected by Hurricane Sandy, affordable transactions, and market-rate transactions.

As NAHB points out, the commitment authority does not cost the federal government money, as the FHA mortgage insurance premium generates enough revenue to cover the cost. FHA has requested an additional $5 billion for the remainder of FY 2013. However, NAHB said, it is unlikely that Congress will grant HUD the additional commitment authority before the August recess, although in years past industry efforts to convince Congress to pass bills to provide enough commitment authority until the new fiscal year have been successful and the programs continued uninterrupted.

“In this very difficult economic environment, and with continuing issues related to the FHA single-family programs, there is great reluctance by Congress to allow a bill to solve this problem,” says Kedda.

On the plus side, HUD did request $30 billion in commitment authority for the FHA multifamily and healthcare programs for the next fiscal year, FY 2014, which starts in Oct. 1. So far, both the House and Senate appropriations committees have included the higher funding number of $30 billion in the HUD appropriations bill, says Kedda.

Nevertheless, as an indication of the high level of demand for the program, even this increased funding for FY 2014 may not be enough. “There are many commitments that are waiting in the queue right now for Oct. 1 authority to be available, and those will continue to stack up,” reports Tyler Griffin, vice president of originations at Beech Street Capital. “This means a large number of transactions will be committed in the first quarter of HUD’s FY 2014, causing some concern about the authority again running out before the second half of FY 2014.”

Griffin suggests that the resulting delays caused by the dwindling FHA authority can kill deals in an environment of rising interest rates. Other deals that were time-sensitive had to be refinanced via alternate sources, whether the GSEs, or CMBS. However, only about 20 percent of Beech Street’s transactions have been affected by lower proceeds or had to be refinanced. Many “HUD borrowers are generally prepared for timing issues and have started working on their transactions with a good cushion in place. A 45-day wait for new authority hasn’t put them in the red,” says Griffin.

While the amount of FHA commitment may still be a problem, others in the industry seem less concerned that legislative challenges will be serious. There is strong political support for the FHA program in general, including support from the HUD secretary and the Obama Administration, says Wendel. “Hensarling really wants to reduce the footprint of GSE and FHA. But personally, I don’t think there is support for that type of radical restructuring of housing,” says Wendel.

“The House proposal represents the right in its proposal to reform FHA and the housing finance system, but unfortunately, the senate proposal doesn’t vary enough from the House proposal to offer a reasonable compromise in a subsequent negotiation,” says Knight. Stay tuned.

The Top 5 Factors Resulting in Resident Loyalty

by  –

When it comes to maintaining and increasing resident retention, we seem to put a lot of focus on why our residents are not loyal to us, but what we should really be asking ourselves is “What am I doing right?” When you identify who your loyal residents are, you’ll usually find there are five common factors that correlate with their loyalty. We’ve listed them below for your convenience:

1. You Ask for AND Listen to Resident Feedback

You know that traditional satisfactions surveys don’t cut it – that you need to ask the hard questions and really listen to residents’ needs, wants, and concerns. You know that survey programs modeled after proven Net Promoter Score (NPS) methodology, give you the greatest insight into resident loyalty by answering the question “What is the likelihood you would recommend us?” Willingness to recommend is one of the strongest signs of customer loyalty(“The One Number You Need to Grow”, Harvard Business Review). Residents who are loyal will not only give you referrals, but they will stay longer and are willing to pay more.

After you take time to listen to their desires and honest feedback, you work to provide your residents with what they need or want in a home. You show them that you care about them, and caring builds trust. When you implement changes and improvements based on resident feedback, you cultivate resident loyalty, and practically, increased resident retention.

How can you get more feedback to generate resident loyalty?

    1. Ask your residents how they are doing at every opportunity, through:


      1. Loyalty-based resident surveys
      2. Personal conversations
      3. Social media channels


  1. Monitor apartment rating and review sites
  2. Review resident letters/complaints
  3. Keep current on the grapevine at your community

2. You are Fast to Resolve any Maintenance or Apartment Community Issues

When a problem does arise, you are prompt in providing the best solution. You know that resolving concerns as quickly as possible is part of the success equation. Quick action prevents small issues from becoming bigger. Using an ongoing program of loyalty-based resident surveys ensures that you have a constant flow of information and can stay apprised of any concerns so they can be addressed right away.

Because you realize your residents will share their experiences with anyone who will listen, you know that a speedy solution to problems is a winning proposition and will help generate resident loyalty (and increase lead conversion).

3. You Make Living at your Apartment Community Easy

Your staff and services are convenient for residents and you consider it part of your job to make their life easier and more enjoyable. You’ve designed your procedures and processes to deliver the kind of lifestyle that feels good to come home to. Residents know your team is there for them and will help them in any way they can. Keeping life simple is one of the best ways to generate resident loyalty.

4. You Know your Residents Have A Choice—and You Let them Know It

Unless your community is located in a remote area of Antarctica, you are not the only place your residents could choose to live. You express your sincere thanks to residents for choosing your community as their home. You offer valuable products and services that generate resident loyalty. A greater value keeps them coming back for more and will get you plenty of referrals. A mere 5% increase in resident loyalty can improve overall profitability by 25% – 100% (The Loyalty Effect, Reichheld).

5. You Create “WOW” Moments in your Community

Having satisfied customers is not enough – satisfied residents defect. Loyal residents stay and refer friends and family to your apartment community. You strive every day to create “WOW” moments by delivering a consistently positive and memorable customer experience. You know your resident’s emotional connection and reaction to their living experience is what drives their action and will ultimately generate resident loyalty.

Your focus on “WOW” experiences helps build a relationship between you and your residents based on trust. They come to expect you will adhere to good corporate citizenship, offer transparency, and hold yourself to a standard of accountability. Seventy eight percent of purchase decisions are made based on peer-to-peer recommendations, and because you consistently provide a “WOW” experience, your residents are enthusiastic enough they will stake their own reputation with a friend or colleague to refer them to you (“How Philips Uses Net Promoter Scores to Understand Customers”, Harvard Business Review).

Loyal residents are your most profitable residents. They are happier, lease longer, and will be your brand champions. Because of your personal experiences, you know who you would be willing to recommend to others and why.

What things do you do that generate resident loyalty?

The Environmental Doctor Is In – Part II

By Andres Simonson –

Here, I want to take you a step beyond the first two phases of the Environmental Site Assessment that I discussed in my last piece.  In other words, what happens if issues are discovered during a Phase II ESA?  If you’re a math whiz, you’ll astutely realize the answer is a Phase III.  Bravo, good job… but like a good teacher I’ll ask you to give me some context beyond the obvious.
The Phase III, also called a site characterization or remedial investigation, is the chapter of the environmental story where our suave environmental consulting protagonist overcomes adversity and faces the demons head-on.  After an unforeseen surprise, and building toward a climax of epic proportions, our hero slices through the issues standing before a brighter future.  Alright, that may be a tad dramatic (and an over inflation of my job description).
The process is actually a bit – yawn – more boring than that.  Essentially, during the site characterization we figure out the extent of impact.  Most likely, samples from the Phase II came back above some threshold.  But before we can start talking remediation and long term costs, we need to investigate the severity of the problem. Delineation is necessary.  Systematically, we’ll keep sampling and analyzing the resultant data until we can find the edges of the damaged area and assess the receptors.
But just like with the Phase II ESA, the consultants’ role during the site characterization can be viewed in the more familiar context of a doctor/patient relationship.  And just like in personal health, the K bler-Ross model of the five stages of grief can play true.  We’ve all heard them before and they occur in this order:  denial, anger, bargaining, depression, and finally, acceptance.  To illustrate, take the following hypothetical exchange between an environmental professional and the property owner of a former gasoline station.
          Consultant:  Mr. Fowler, the Phase II groundwater test results are in.
          Property Owner:  Hit me, doc.  Give it to me straight.  
          Consultant:  You may want to sit down for this, please take a seat.
          Property owner:  Ok doc, shoot. 
          Consultant:  I’m sorry, but you have benzene.
          Property Owner (blank, frozen stare):  Benzene? Bedeviled by benzene.  No, no, that’s just not possible.  Not my pristine potable perched aquifer – no way.
          Consultant:  I’m afraid it’s true, my alliterative friend – I reviewed the lab results myself.
          Property Owner (brow furrowed, fist pounding the table):  How could this happen?  #*^@!  This is just some left wing eco-nut conspiracy perpetrated by the Obama administration to steal my land, isn’t it?  You know it is!  Admit it!!!
          Consultant:  I’m going to need you to calm down, Mr. Fowler.  I can’t help you while you’re in this state.
          Property owner (staring to the heavens):   Oh man, you’re right. It’s just that I’d give anything for a clean sample.  We can reason with the EPA, right?  What are a few parts per billion of benzene between friends anyway?
          Consultant:  I understand, and I sympathize, but it just doesn’t work like that.
          Property owner (curled up in fetal position on floor):  Oh, what’s the point?  I’m doomed.  Doomed, I tell you.  Maybe I’ll just help myself to a glass full of water from monitoring well MW-3 and see what happens.    
          Consultant:  All is not lost, Mr. Fowler.  We can get through this.  Let’s just work out a scope for a Phase III and go from there in a logical, prescriptive manner.
           Property owner (sitting straight, eyes lucid):   You’re right doc.  We can do this. Benzene, schmenzene.  I don’t care if we need to inject oxygen releasing compounds or install a pump and treat system with an air stripper and granulated activated carbon tanks.  We are going to beat this thing!
           Consultant:  That’s the spirit!
As you can see, we are sometimes the bearer of bad news.  And for that reason, when delivering Phase II ESA results, an environmental professional’s knee jerk reaction might be to say “don’t blame the messenger.”  But we have to resist that impulse. Because as drilled into me by a former mentor, if we are not part of the solution, we are part of the problem.
A good environmental professional can get you through the finish line, even if he or she cannot accomplish it solo.  The environmental landscape is a jungle of regulatory vines, poisonous critters, geologic boulders, rivers of murky water chemistry, and tangled thickets of permitting thorns.  Depending on the magnitude of your particular setting, it may take a team to successfully traverse this terrain.  Yes, a machete-wielding yahoo of a consultant may promise to blaze a trail to the Pacific on his lonesome.  But you may want to take a step back before sending him a retainer.
In this sense, your environmental team might be like a medical practitioner group with specialists.  You may have your favorite primary physician with the great bedside manner, knack for reducing technical mumbo-jumbo, and most importantly these days, rates accepted by your insurance group.  But he is more than likely going to rely on a radiologist to interpret scanned images.  He’ll need an orthopedic to set that broken bone.  And so on.
So, go ahead – think of us environmental professionals as doctors of the land.   The nice part is, instead of us sticking you with the needle to draw a blood sample, we’ll only need to drill a hole in the ground to extract some groundwater.  A lot less painful.

Andres Simonson
About The Author
Mr. Simonson has over 15 years of experience in the environmental service industry, working on a wide range of projects from inception to regulatory approval. He is a proficient technical writer with extensive experience in contemporary data analysis techniques, federal and state regulatory compliance, environmental due diligence, field sampling protocols, construction oversight, budgeting and remedial system design. Mr. Simonson has a particular interest in sustainable design and green building, and has shared his expertise by collaborating on a number of professional papers, acting as a media spokesperson, serving on conference panels and blogging about various environmental topics.