Delaware Statutory Trusts: A Potential Solution for the Weary Landlord

 

In her recent interview with HFO-TV, Toija explains the basics of Delaware Statutory Trusts, which are gaining some popularity among multifamily owners.

by Toija Beutler, Attorney/Manager, Beutler Exchange Group

After the trauma of the last couple of years, there are a lot of weary landlords. COVID-related issues and new landlord-tenant laws have altered the landscape for these folks. While my recommendation would be to hire a property manager, many just want out of multi-family.

One option might be a Delaware Statutory Trust (DST) purchase. The DST is fractional ownership of real estate. Typical properties might be medical office buildings, apartments, a portfolio of pharmacy properties (RiteAid, CVS), sometimes an Amazon distribution center.  

There are many appealing aspects of the DST. First, sponsor companies find the property, obtain the financing and close on the property. They then sell fractional interests to investors.

1. Passive. DST’s are professionally managed by the sponsor. The investor won’t be getting calls in the middle of the night. They just get their fractional share of the lease income.  
   
   
2. Quality Properties. The regulations require these to be passive investments, so they will be Class A, institutional-grade properties, not “value add.”  
   
   
3. Availability. Whenever the investor’s sale closes, they will have multiple options to choose from within the 45-day identification deadline. And there won’t be bidding wars with other investors wanting in on the deal. 
   
   
4. Debt in Place. Investors who need “replacement debt” to satisfy their 1031 are well served by these properties. The debt is already in place and is non-recourse.
   
   
5. Diversification. The investor can pick perhaps two or three DST’s as replacement properties, diversified by product type and state.  
   
   
6. Real Estate Deductions. The DST interest is real estate and reported as such. Therefore, the investor will continue to write off expenses and take depreciation as they would with any property.
   
   
7. Transfer at Death. DST interests will pass to heirs as would any real estate with a step up in the basis.
   
   
8. Liquidity. The regulations don’t permit a refinance of the property, so pulling cash out during the course of the investment can be seen as a negative. (The Investor has no access to the equity until the property is sold. The average hold period is around seven years.) However, many sponsor companies offer a conversion feature.  A couple years out, the property may be contributed to a real estate investment trust (REIT).  At that point, the investor no longer owns real estate. Instead, they own shares in the REIT, which can be sold (taxable) but provide the desired liquidity.
   
   
9. Securities. While the DST is real estate for 1031 exchanges, they are also a security and must be purchased through a licensed financial advisor. Therefore, the Weary Landlord will need to find a financial advisor specializing in this product.

The DST isn’t suitable for everyone, but it can be a viable option for a Weary Landlord looking to exit active management and remain in real estate.

 

Sold! 12 Units in Canby

 

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HFO is pleased to announce the sale of the Holladay Apartments in Canby. Congratulations to Adam Smith and the rest of the HFO team!

Sold! 48 Units in Beaverton

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HFO is pleased to announce the sale of Royal Crest Apartments, 48 units in Beaverton, Oregon. Congratulations to Rob Marton and Greg Frick and the rest of the HFO team!

HFO Multifamily Marketwatch - December 20, 2021

This week: The Oregon legislature has approved additional rent assistance funding and extended the eviction moratorium, and the Portland metro area sets a new record for multifamily sales volume.

Listen to our latest podcast.

Oregon Housing Blog: Additional Oregon Rental Assistance Requests Now Total $248 Million

The Oregon Housing Blog is offering a breakdown of the total amount of money requested by Oregon in additional rental assistance from the federal government. 

Multnomah County has requested roughly $12 million and the City of Portland has requested $47.7 million in additional funds (a total of $59.63 million). Oregon's requests for additional rental assistance now total $248.56 million with 24% of that money requested by Portland and Multnomah County. 

Rental Housing Journal: State Software For Emergency Rental Assistance is Hurting Families

by Deborah Imse, Multifamily NW

State officials continue to applaud themselves for standing up for vulnerable Oregonians amid the pandemic. In a recent op-ed, (“Legislators must protect families facing eviction with special session fix,” Dec. 5,) Sen. Kayse Jama, D-Portland, and Rep. Julie Fahey, D-West Eugene/Junction City, wrote of their proposal, aimed at a legislative special session this month, to extend protections against eviction for tenants waiting for the state to process their applications for rental assistance. But what the legislators should really have focused their attention on is why another failed state software system has left as many as 10,000 Oregon families facing housing instability.

Known as Allita 360, the software for processing rental assistance applications was purchased without a competitive bidding process or stakeholder input. The state has been aware of problems with the software since February when it launched a fund to compensate landlords for missed rent. Yet, it stuck with the software for the May rollout of the Oregon Emergency Rental Assistance Program. As with the landlord fund, the emergency rental assistance program has been plagued by system crashes, ineffective notification processes, and a serious lack of clear communication from administrators. Applications have piled up, leaving renters’ requests for help in limbo for months. And landlords have spent hours — if not days – online, with no assurance that their renters’ applications had even made it into the program.

Read the full article.

Spokane Report: Increasing Density Could Help With High Demand

The Spokesman-Review reports that the Counselors of Real Estate's CRE Consulting Corps released a study this week recommending a regional update to zoning codes to allow for infill, collaboration with community groups, and revising local codes to allow more density. 

Read or download Action Steps to Increase Spokane's Housing Supply. 

Portland Metro Busts Through $3 Billion in Apartment Sales Setting a New Record Year

Two recent apartment sales helped Portland exceed its prior multifamily sales record. The Portland Business Journal reports that the recent sales of these two large properties helped propel sales to a new level:

• 423-unit Seven West in Beaverton (purchased by Graystar) for about $145 million 
• Downtown Portland's 178-unit 10th @ Hoyt (sold by Prometheus Real Estate Group) for about $75 million. 

In Special Session, State Struggles to Get it’s Act Together on Housing Issues

In yesterday’s day-long special session, Oregon legislators bickered among themselves over mask mandate even while attempting to do something constructive over housing issues. In the end they reached agreement on more funding and indefinite eviction extensions until all renters who applied for aid actually receive money from the state. It’s a tall order. Read more in The Oregonian. 

HFO Multifamily Marketwatch – December 13th, 2021

This week we have an update on Oregon Rental Assistance, Market Report for Seattle, and have some highlights from Multi-family NW Rental Survey.

Listen to our latest podcast.

Oregon Moving Rental Fund Check Processing to Out-of-State Contractor

Willamette Week reports that the State of Oregon is in the process of removing local community nonprofits as the distributor of rent relief funds, even though the local groups have awarded more money. Read more.

Sold! 84 Units in Vancouver, Washington

 

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HFO is pleased to announce the sale of the 84-unit Plaza on Ellsworth Apartments in Vancouver, Washington. Congratulations to brokers Todd Tully, Greg Frick, and the rest of the HFO team!

State of Oregon Sends Checks to Wrong Landlords

Topping off weeks of reporting on the glitchy software and bounced checks comes news that the State of Oregon also sent dozens of checks for tenant rent reimbursement to the wrong landlords. Read more. 

Oregon Legislature Takes Up Rental Issues Today

As Willamette Week reports, the State of Oregon begins a special session today in which they will consider a wide range of housing legislation ranging from additional funding for tenants and landlords to an extension of the eviction moratorium. Read more. 

Sold! 39 Units in Gresham, Oregon

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HFO is pleased to announce the sale of Pine Wood Commons Apartments in Gresham. This 39-unit property was sold in early December. Congratulations to brokers Greg Frick and Rob Marton and the rest of the HFO team. 

An Update on the Efforts to Save 1031 From the Congressional Axe

HFO-TV: Toija Beutler updates us on efforts to lobby Congress to save 1031 tax exchanges this year.

Multifamily Lending Update

Blake Hering, principal of Gantry, Inc., updates owners on the multifamily lending market for the fall of 2021. The discussion includes lenders' new appetite for tertiary markets and the overall popularity of multifamily investments.

Seattle Housing Policies Lead to gain of only 4,455 Rentals Since 2018

According to a report posted on the Rental Housing Association of Washington website, while Seattle's population grew by about 50,000 people between July 2018 and May 2021, the city added only 4,455 rental housing units. 

This is far below the council's stated goal of 4,500 new units per year to meet a 25-year goal of 112,000 new rental units. 

Meanwhile, the association reports that registrations with the city of rental units decreased by 14.4% from 2018 with 4,858 units lost. "It's anticipated even more rental homes will disappear next year when rental registration reporting is due because 80% of single-family unit registrations will expire in 2021 and 2022."

The Rental Housing Association of Washington places the blame on the city's anti-housing policies, stating that Seattle chose to enact a number of policies that reduced housing creation and drove rental homes off the market, including:

• First in time: which increases property owner risk by forcing them to rent to the first qualified applicant.
• Winter eviction ban: which forces property owners to provide housing for free without any assistance.
• School year eviction ban: which forces property owners to provide housing for free without any assistance.
• De facto rent control: which caps rental rates at 10% under penalty of paying tenant moving fees.
• Long-term COVID-related eviction protections: such as extended defenses to eviction beyond the eviction moratorium, and other contract infringement ordinances.

"These anti-housing policies increase housing costs for renters and reduce the availability of rental housing. They are having the opposite effect of the City Council’s stated intentions, but the results were entirely predictable," the report states.

Oregon Admits: We Sent Bad Checks to Landlords & Renters

The State of Oregon is admitting the incredible story that it sent bad checks to Oregon tenants and landlords.

PORTLAND, Ore. (KATU-TV) — The Oregon Housing and Community Services Department confirmed Monday that hundreds of renters who were approved to get federal funding were given bad checks.

It's unclear how many checks were in the batch but a spokesperson with OHCS says 295 checks have not been cashed out of the batch.

The department says it is working to get in touch with those people.

A spokesperson provided this response to KATU.

"There was an accounting issue with one batch of checks. The checks were missing a digit from the routing number but were still able to be cashed (or reissued). We are reaching out to the affected tenants and landlords individually with information on how to cash the check or get it reissued if needed. Many people were able to cash the checks if the bank verified it through the “Positive Pay” process. We regret the inconvenience this may have caused."

KATU has spoken with one of those people. She says she was approved in July for several thousand dollars in rent assistance. In November, her landlord received a check, but when he went to deposit it, the bank told him the routing number was incorrect.

Now after months of waiting for help, they are continuing to wait. While OHCS says it is working to contact those impacted, no one has reached out to the renter who contacted KATU or her landlord. They were instructed to mail back the check but do not know when they will receive a new one.

The problem comes at a time that the state struggles to figure out how to get more assistance to renters and landlords, as federal funding has dried up. Gov. Kate Brown has called the Legislature back for a special session next Monday to address the issue.

The revelation came at the same time as reporting that Oregon has spent $71 million or nearly 20% of the entire fund on administrative costs. 

$71 Million of $360 Million in Oregon Rental Assistance Goes to "Administration" Costs

KATU-TV Reports that almost 20% of the funds sent to Oregon for rental assistance was used to pay for administrative costs. Learn more.

HFO Multifamily Marketwatch - December 6, 2021

This week: Oregon’s Governor calls for a special session on evictions; property sellers remain in the best position in the last 15 years, and we’ve got an update on the student housing market.

Listen to our latest podcast.

GlobeSt.com: Low Land Supply is Behind the Housing Crisis

By: Kelsi Maree Borland

November 29, 2021 | GlobeSt.com

The housing crisis is among the biggest challenges across the country. Home prices and apartment rents are frequently reaching new records, thanks largely to a housing shortage. While there are several factors at play—from high construction costs to limited labor—the limited availability of developable land is a fundamental challenge. No matter how much it costs to build, you have to have a land site.

“The lack of developable land today is a direct result of the Great Recession when the housing and financial markets crashed,” Noah Breakstone, CEO at BTI Partners, tells GlobeSt.com. “During these years, the development of new residential communities came to a halt for several reasons, including the lack of financing for developers and home buyers and an abundance of discounted inventory due to the wave of foreclosed homes. Today, we are seeing the consequences of a relatively prolonged gap in the acquisition, entitlement, and development of land for new residential communities nearly a decade ago.”

It can take two to four years, depending on the location, to prep ready-to-build land for new development. This includes securing entitlements and permits. “We missed several years of that process so, as a result, we have less developable land available for new construction,” says Breakstone. “This has resulted in a significant national housing deficit.”...

In Oregon, this process has been very slow for a long time, as Dr. Gerard Mildner points out in his article in HFO's December 2021 edition of The Northwest Apartment Investor. (See "The Collapse of Portland's Suburban Housing Production," on page 2). 

Oregon Governor Kate Brown Calls Special Session on Evictions as Tenants Push for Moratorium to June 2023

Oregon Governor Kate Brown has announced a special session for December 13. The governor is hoping to provide $100 million to transition from large-scale rental assistance to long-term renter protections, including eviction diversion strategies or assistance with legal representation with tenant outreach and education. Multifamily NW is not in favor of a special session and would prefer the state do as promised by cutting checks to Oregonians in need. 

Tenant groups have been pushing for a moratorium through June of 2023.

Read the story. [No subscription required.]

Baltimore Sun [Opinion] Affordable Housing Policy Shouldn't Be Left Up to Local Leaders

Baltimore land use and zoning attorney Tom Coale criticized the decentralization of housing policy, claiming it favors the housed.

In Maryland, a study by the Department of Housing and Community Development indicated a current shortage of 85,000 units of affordable apartments, with an additional 97,200 families eligible for affordable housing expected to move to the state by 2030. 

He called on the state legislature to expedite the construction of housing units to prevent the worsening deterioration of housing conditions. 

"Unfortunately, housing policy isn’t set in our state capitol, but rather in the county seats and city halls that have been delegated that power by the state. And, in doing so, local leaders accountable to those who already live there must decide whether they will pass laws to benefit those who don’t. By operation, the priorities of the housed are elevated over those of homeless people."

Read the full piece in the Baltimore Sun. 

Sold! 51 Units in SE Portland - 20 on Hawthorne

 

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HFO is pleased to announce the sale of 20 on Hawthorne. This 51-unit multifamily building in one of Southeast Portland's most vibrant neighborhoods is a mixed-use asset offering first-floor retail. Congratulations to Tyler Johnson and the rest of the HFO team! Call our office for additional details on this sale.

Sold! 4 Units in North Portland, Oregon

 

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HFO is pleased to announce the sale of 3026 N. Williams. Congratulations to brokers Todd Tully and Jack Stephens and the rest of the HFO team!

Report: Washington State Economy Beats Projections

In January the 2022 Washington legislative session will convene to write and pass a supplemental budget. That task will be easier with the good news that there has been a steady uptick in state revenues throughout 2021.

Last week the State of Washington Economic and Revenue Forecast Council projected revenue collections for the 2021-2023 budget cycle are nearly $900 million above the original forecast, and projections for the next two-year cycle (2023-2025) jumped by more than $965 million.

Friday's meeting was the final forecast before Governor Inslee releases his draft budget proposal before January 10th when the session begins. Budget leaders in both the Washington State House and Senate will release their own proposals. 

Seattle Received more than 1,300 Federal Housing Vouchers - So Far 10 People Have Used Them

The Seattle Times reports that three Seattle-area housing authorities received hundreds of vouchers to get people off the street and into housing, but six months later, only 10 have been used. Read the story.

HFO Multifamily Marketwatch - November 22, 2021

This week: U.S. vacancy rates and rents break records, multifamily housing construction rose in October, and Oregon toys with extending the eviction moratorium once again.

Listen to our latest podcast.

Home Construction Backlog Surges, Worsening Shortages, Even as Multifamily Starts Increase

Highlights:

•     Housing starts fall 0.7% in October
•     Single-family starts drop 3.9%; multi-family up 6.8%
•     Building permits rise 4.0%; single-family gain 2.7%

WASHINGTON, Nov 17 (Reuters) - U.S. single-family homebuilding tumbled in October while the number of houses authorized for construction but not yet started jumped to a 15-year high, underscoring the disruption to the housing market from an ongoing shortage of materials and labor.

Though the report from the Commerce Department on Wednesday showed an increase in permits for future homebuilding, the rise was concentrated in the volatile multi-family housing segment. This will do little to alleviate an acute shortage of houses on the market, which has led to record annual gains in home prices.

"Residential housing construction activity continues to flounder," said Christopher Rupkey, chief economist at FWDBONDS in New York. "There are zoning problems, higher land costs, a lack of labor, and inflation has inflated the cost of raw building materials."

Single-family housing starts, which account for the largest share of the housing market, dropped 3.9% to a seasonally adjusted annual rate of 1.039 million units last month. The fourth-straight monthly decline pushed starts to the lowest level since August 2020. Homebuilding fell in all four regions, with large decreases in the Northeast, Midwest, and West.

Permits for buildings with five units or more surged 6.5% to a rate of 528,000 units. Housing completions were unchanged at a rate of 1.242 million units. Single-family home completions dropped 1.7% to a rate of 929,000 units.

The stock of single-family housing under construction increased 1.4% to a rate of 726,000 units last month, the highest since May 2007. Multi-family homes under construction rose to the highest level in more than 47 years.

Over time the housing backlogs and more inventory could help to bring more homes on to the market and cool the house price inflation, which has sidelined some first-time buyers. A lot will, however, hinge on the supply of building materials and other inputs as well as labor.

"The recent slowdown in project completions has limited home sales in new communities," said Mark Vitner, a senior economist at Wells Fargo in Charlotte, North Carolina. "That said, the growing backlog of projects should keep builders busy for the next couple of years."

Source: Reuters. Story by Lucia Mutikani. Read full story.

Headline Roundup: Rent Control in St. Paul Minnesota Halts Construction and Worsens Crisis, Sending Politicians and Bureaucrats Scrambling

News reports and editorials are reporting on the chaos caused by the implementation of rent control in St. Paul.

On November 2nd, St. Paul voters approved a ballot initiative limiting rent increases to three percent annually without exemptions for new construction or inflation, making it the strictest rent control ordinance in the nation. City Mayor Melvin Carter III is now considering amending the bill as developers begin to halt construction and investors pull out from projects that were already underway. 

Some are arguing that Mayor Carter did not do enough prior to the vote to inform residents of the implications of rent control. Many St. Paul residents are unclear about the specifics of the new ordinance, such as the implementation date and whether or not the bill can still be amended.

Star Tribune: Rent control vote creates St. Paul mess. Developers halt projects as confusion surrounds the strict ordinance and the approval of the rent control bill creates confusion among residents and policymakers. 

Las Vegas Review-Journal: Rent control backfires in St. Paul [Editorial] Historical evidence demonstrates that rent control fails to address the root cause of housing affordability issues. What we're seeing in St. Paul is no different.

National Review: St. Paul Rent-Control Initiative Backfires, Unleashes ‘Chaos’ in Housing Market. Democratic leaders are already seeing the harmful implications of the new ordinance. Now, they're trying to find solutions.

Reason: Developers Halt Projects, Mayor Demands Reform After St. Paul Voters Approve Radical Rent Control Ballot Initiative. St. Paul's rent control bill does not include exemptions for new construction, causing a number of developers to halt projects.

Star Tribune: Rent-control flip adds insult to small landlords' injury. [Opinion] Small property owners are disproportionately impacted by Mayor Carter's decision to support rent control.

Roundup source: Growing Homes Together https://www.growinghomestogether.org

Forecasters: Jobs to Grow Fastest in Bend, Portland

A recent Oregon Employment Department report made headlines this week as state forecasters indicated job growth in central Oregon will soar 18.5% in the coming decade. Portland metro ranks second at 18.1% with the mid-valley coming in a close third with growth projected at 17.3%. Read the story. [No subscription required.]

Roundup: Seattle Recovers, National Occupancy Rates and Rents Break Records

Yardi Matrix reports:

• In the Puget Sound area, Rent rose to $2,046 in September, a 2.0% uptick on a T3 basis and 40 basis points above the national rate. Through Q3 2022, nearly $2 billion in multifamily deals have closed, and 26,470 apartments were underway as of September. Click here to download the full report. 
  
  
• Nationally, U.S. asking rents increased by $23 in October to a new record high, driven by an ongoing surge in demand that began last spring. 
  
  
• Average U.S. occupancy rates also broke records, reaching a high of 96.1 percent in September. 

The Portland Housing Bureau announced:

• Metro government has approved seven "concept endorsements" for funding from the regional affordable housing bond. The request is for $88.6 million in Metro bonds. The seven projects would add 805 new units and retain affordable status for 89 existing units for a total of 894 units. The projects would likely be completed in the next few years.  

Sold! 7 Units in St Johns

 

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HFO is pleased to announce the sale of The Edison, 7 units in the St Johns neighborhood of North Portland. Congratulations to Lee Fehrenbacher and the rest of the HFO team. Please call our office for additional details on this transaction.

Oregon and Counties Receive $525 Million for Housing Assistance. Blogger Asks: Where has it Gone?

The Oregonian reported over the weekend that the state will stop taking rent assistance applications because it is running out of money. A local blogger is questioning what has happened to all the money and points to flaws in the story's accuracy.

The Oregon Housing Blog reports there was incorrect information in this story by The Oregonian on rental housing assistance. 

The Housing Blog states that Oregon has or will receive $360,826,176 in housing assistance. This amount is acknowledged in a media release from Oregon Housing and Community Services. (OHCS)

According to the Housing Blog: 

"Neither the press release or the Oregonian story report who and what non-rental assistance activities are being funded with the remaining $71 million/20% of the total $360 million. [$360 million-$289 million [from press release]=$71 million/$360 million= 20%.

"The Oregonian Story Also Doesn't Include $165 Million in Direct Local Emergency Rental Assistance (ERA) Allocations, Bringing Total Oregon ERA Allocations to $525 million. 

"That $525 million is $136 Million/ 82% More than the OHCS $289 Million in the Story. 

"Missing from the Oregonian story is any reference to the direct TREASURY ERA local allocations to 6 counties and the City of Portland which total another $165 million. These allocation bring total Oregon ERA allocations, (excluding tribal allocations of another $21 million) to $525 million." 

Multifamily Marketwatch - November 15, 2021

This week: Build-to-rent single family homes are picking up steam, and what’s the impact of the infrastructure bill on multifamily?

Listen to our latest podcast.

Sold! 49 Units in Beaverton, Oregon

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HFO is pleased to announce the sale of 49-unit Fairwood Apartments in Beaverton. Congratulations to Lee Fehrenbacher, Tyler Johnson, and the rest of the HFO team!

Sold! 21 Units in SW Portland, Oregon

 

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HFO is pleased to announce the sale of 21-unit Curry Court in SW Portland. Congratulations to Greg Frick and the rest of the HFO team!

Sold! 14 Units in Milwaukie, Oregon

 

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HFO is pleased to announce the sale of 14-unit Maple Grove Court in Milwaukie, Oregon. Congratulations to Jack Stephens, Lee Fehrenbacher, and the rest of the HFO team!

2021 Awards: HFO Again Ranks Tops Among Corporate Philanthropists

For the fifth time in the company's 22-year history, HFO has been recognized by the Portland Business Journal among the area's top corporate philanthropists in its size category. 

The recognition was announced recently at the Business Journal's annual celebratory event. HFO ranked 3rd in its category overall. Total cash contributions for HFO was $83,509. HFO is pleased to support numerous charities throughout the year, including the nonprofits Harbor of Hope, Transition Projects, and Face to Face Portland.

"We're grateful to our clients for putting their trust in us," said HFO marketing director Aaron Kirk Douglas. "Their ongoing support of our business makes it possible for us to continue growing our philanthropic impact on the communities we serve."

Each year, the Business Journal ranks the most generous corporate philanthropists in four categories. For years HFO has ranked among the top 25, but this year marks the fifth time HFO has been in the top 10 for area businesses with annual revenue of $10 million or less.

HFO regularly contributes to charity for each transaction of the client's choice. The company utilizes a matching fund from which it makes annual year-end donations to select nonprofits.

Sold! 36 Units in Gresham

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HFO is pleased to announce the sale of 36-unit Shenandoah Garden Apartments in Gresham. Congratulations to Jack Stephens, Greg Frick, and the rest of the HFO team!

Oregon Forecasters: State Will Add 300,000 New Jobs in 10 Years Even as Job Growth Slows

Oregon will create a little more than 300,000 jobs in the next decade, recovering quickly from the epidemic and expanding at fewer than 1% faster than during the prior decade.

Oregon employment will rise by 17% between 2020 and 2030, compared to 21% in the prior decade, according to projections released Thursday. The last ten years saw the nations strongest labor market on record.

Forecasters project that nonfarm employment will top 2.1 million workers in 2030, up from 1.8 million last year.

Leisure and hospitality, the industry most severely hampered by COVID-19, will lead the way in the next decade, expanding by 46%, according to forecasts.

That's nearly quadruple the growth rate in the prior 10 years, and it suggests forecasters believe bars and restaurants will eventually experience a complete recovery from the financial stress they have endured over the past 20 months.

Health care (19% growth), professional and business services (19%), information (15%) and construction (13%) are among the top-growing industries in Thursdays forecast.

Economists predict manufacturing will expand by 11% by 2030 -- but thats only enough to recoup the factory jobs lost during the epidemic. At about 200,000 manufacturing jobs in 2030, factory work will remain well below its peak of 229,000 in the late 1990s.

Which areas perform worst in the forecast for the next decade?

Newspapers and book publishers, which have been in a bind for years because of reorientation to social networks and online news, are expected to lose another 700 jobs, resulting in an 18% decline, while radio and television broadcasters, who have had similar problems, will lose 17% of their jobs.

Computer manufacturing (a subcategory that doesnt include chipmakers like Intel) is projected to fall 21%, as well as telecom companies, with a 16% drop in net income.

Mike Rogoway | mrogoway@oregonian.com | Twitter: @rogaway 

First time subscriber? The Oregonian is having a 50% off special - get one full year of electronic access for $60. Sign up here.

Multifamily Marketwatch Podcast - November 8, 2021

This week: Portland’s real estate reputation trends up, construction spending turns down, and the predicted national rise in evictions has yet to materialize.

Listen to our latest podcast.

NYT: Ballot Initiatives to Increase Housing Won Big Tuesday, Possible Harbinger for 2022

By Jennifer Steinhauer

Nov. 3, 2021

A slew of initiatives aimed at addressing the nation’s housing crisis passed on Tuesday, a test run for ballot choices in 2022 as more cities and states take aim at rising rents, a continued explosion in short-term rentals and the depressed housing stock nationwide.

The epicenter of the action was in the West, particularly in Colorado, where housing prices have skyrocketed in recent years, with short-term rentals helping lead the way. In Leadville, a scenic former silver mining town, voters overwhelmingly approved a new 3 percent tax on visitors staying in hotels, motels and short-term rentals, which will be used to create more affordable housing.

Measures to increase fees on short-term rentals passed in Telluride, Avon and Ouray; Vail approved a sales tax increase for housing.

“If folks want to play in the beautiful mountains of Colorado, then individuals must also be able to live and work in those same towns,” said Corrine Rivera Fowler, the director of policy and legal advocacy at the Ballot Initiative Strategy Center.

Other cities and counties around the country passed similar initiatives. In coastal Lincoln County, Ore., where tourism is a major economic driver, the sole item on the ballot was a measure that would require the phasing out of short-term rental homes in unincorporated residential areas — and it prevailed in spite of a large spending campaign by opposing groups. Houses used for short-term rentals have pushed up rents n tourist towns, making them unaffordable for workers. In some cities, houses targeting short-term rentals have been built faster than cheaper units for lower-income residents.

In both Minneapolis and St. Paul, Minn., residents approved rent-control measures, and in Boston, Michelle Wu won the mayor’s race after calling for a form of rent control.

Other cities approved funding measures such as bond issues or dedicated tax revenue for housing. In Albuquerque, voters approved new bonds that would finance the construction and rehabilitation of low- and moderate-income housing.

Experts expect more of the same in the next election cycles.

“As housing availability decreases and housing costs increase in cities, especially big cities across many states, voters will continue to see more housing-related measures on the ballot,” said Josh Altic, the ballot measures project director at Ballotpedia.

Important Opportunity Zone Deadlines: December 31, 2021 and Beyond

The online platform www.Realized1031.com provided the following information regarding upcoming deadlines for opportunity zone (OZ) investors, real estate developers, and qualified opportunity zone fund (QOZF) managers. 

Some investment deadlines have already passed, but there is still a basis step-up deadline that hasn’t passed, providing investors with some time to take advantage of this tax benefit.

In this article, we’ll go through the details of what to expect for OZ deadlines in 2021 and beyond. Note that some of these dates have been extended due to COVID-19. The final dates are shown below.

December 31, 2021 — Second of two annual asset tests for Qualified Opportunity Zone Businesses and QOZF. This is also the last date that investors can contribute capital into a QOZF and receive a 10 percent step-up in basis. A 10 percent step-up in basis reduces the investor’s original capital gains by 10 percent.

Looking out past 2021 and up to 2026, deadlines are focused on investments for eligible capital gains. You’ll notice this set of deadlines falls at the end of each June.

Beyond 2021

• Starting in 2021, eligible gains can be invested on a rolling annual basis.
• June 28, 2022 — Eligible capital gains recognized in 2021 must be invested by this date.
• June 28, 2023 — Eligible capital gains recognized in 2022 must be invested by this date.
• June 27, 2024 — Eligible capital gains recognized in 2023 must be invested by this date.
• June 28, 2025 — Eligible capital gains recognized in 2024 must be invested by this date.
• June 28, 2026 — Eligible capital gains recognized in 2025 must be invested by this date.
• December 31, 2026 — Deferment on original gain ends, and gain is recognized.
• April 15, 2027 — Income taxes for 2026 are due. This includes tax payments due on your original deferred gain.
• June 28, 2027 — The last date to invest 2026 capital gains. This is also the final deadline to invest in a QOZF for the 10-year gain exclusion.
• 2028 — The first year in which some of the earliest Opportunity Zone investments may be sold and qualify for the 10-year gain exclusion.
• December 31, 2028 — Expiration of the designation of Qualified Opportunity Zones. QOZFs may still be active after this date to receive the 10-year exclusion. Expiration should not have any effect on receiving this incentive.
• June 28, 2037 — The earliest date on which the last Opportunity Zone investments may be sold and qualify for the 10-year gain exclusion. Applies to 2026 through June 28, 2027, deferred gains that were invested into a QOF.
• 10-year gain exclusion also starts ending on this date for deferred gains invested into QOZF from 2026 through June 28, 2027. If held for 10 years, those investments can now be sold.
• December 31, 2047 — The ability to eliminate gains on a taxpayer’s QOF investment could cease upon the expiration of QOZ designations.

CoStar: Portland is Closing-in on a Record Volume of Multifamily Transactions

The Portland Business Journal today cites CoStar reports in a story highlighting Portland's active multifamily market. CoStar says the metro area needs a little more than $400 million in apartment deals before the end of the year in order to beat the 2016 sales volume record of $2.978 billion. 

So far in the year, the area has tallied $2.567 billion, according to CoStar, which included complexes of five or more units and didn't count residential condos and co-ops.

Portland is still popular because it costs about half as much per door as multifamily housing in Seattle or the Bay area, and homeownership continues to be expensive. Multifamily construction is down and rents are edging higher. 

Seattle Times Editorial Board: End Eviction Moratoriums Now

The Seattle Times editorial board has called for an end to the state's eviction moratoriums, saying they are unnecessary and are harmful to property owners. 

"Eviction moratoriums were useful tools to ensure renters stayed housed during the uncertainty of pandemic job losses. While these important emergency measures kept people facing job losses housed, they also caused their own hardship for landlords with their own bills to pay.

"But now that the economy is slowly recovering, unemployment claims are falling, relief funds are flowing and new renter protections are in place, state and local leaders should let blanket bans expire."

Click to read the full article, no subscription is required.

WSJ: Fears of a Significant National Rise in Evictions Have Not Materialized

WSJ: When the federal moratorium on evictions ended in August, many feared that hundreds of thousands of tenants would soon be out on the streets. More than six weeks later, that hasn’t happened.

Instead, a more modest uptick in evictions reflects how renter protections at the city and state levels still remain in parts of the country, housing attorneys and advocates said. Landlords, meanwhile, say the risk of an eviction epidemic was always overstated and that most building owners have been willing to work with cash-strapped tenants.

Both groups also think that federal rental assistance, slow to get off the ground earlier this year, is now helping prevent many new eviction filings.

Eviction filings in court—which are how landlords begin the process of removing tenants from their homes—were up 8.7% in September from August, according to the Eviction Lab, a research initiative at Princeton University that tracks filings in more than 30 cities. But the rate is still low on a historic basis, and, at 36,796 filings, it is roughly half the average September rate pre-pandemic.

Sign in to your WSJ subscription to read the full article.

NMHC: Rent Control and Eviction Moratoriums Can't Solve The Undersupply

 

National Multifamily Housing Council President Doug Bibby outlined how rent control measures and eviction moratoriums fail to address the root causes of the housing affordability shortage facing the U.S. In place of failed policies, Bibby offers a roadmap to address the underdevelopment of housing that has plagued the U.S. for decades. He also argues for the expansion of and improvements to the Section 8 housing program. Read more in Multifamily Executive Magazine.

Up for Growth: Asking You to Take Action Now on Housing

By Mike Kingsella, CEO, Up for Growth Action

After weeks of negotiations, President Biden today announced a new framework for his Build Back Better package, and is urging lawmakers to advance the bill in Congress.

Thanks to effective outreach by our bill endorsers and Up for Growth members over the past month – your calls, letters and emails to members of the U.S. House and Senate – the vital Unlocking Possibilities Program remains in the bill.

While we’re a long way from final passage, the announcement represents a significant victory in the battle for housing equity in America, as it reaffirms the Administration’s commitment to address the nation’s housing shortage and signals to future negotiators that this vital program is off the table.

However, we still need your help. Until passage is assured, we must redouble outreach efforts. Too many members of Congress are still undecided or in the “no” column on the overall package and must be made aware that a critical new housing program hangs in the balance.  In addition, we must urge our pro-housing champions on the hill to continue outreach to their colleagues and request that they remain firm on this major commitment. Here’s what you can do:

• Contact your senators and representatives and ask them to urge colleagues to support the Build Back Better framework that includes the Unlocking Possibilities Program – a groundbreaking provision that would empower states and local governments to address the nation’s affordable housing crisis.
  
  
• Remember to share the letter we sent to Congressional leaders on October 1 – signed by 16 organizations – urging Congressional leaders to preserve these vital housing provisions in the budget reconciliation package.

As outlined in the revised framework, the legislation will “create more equitable communities through investing in community-led redevelopments projects in historically under-resourced neighborhoods and...incentivizing state and local zoning reforms that enable more families to reside in higher opportunity neighborhoods.”

In fact, the Unlocking Possibilities Program is the only provision in the Build Back Better Act focused on eliminating exclusionary zoning and artificial barriers to housing, and we are pleased that Congress is poised to take meaningful action to advance this program.

As we await additional details and watch closely for next steps on Capitol Hill, we will be sure to stay in touch. Again, thank you for a great effort this month to advance the cause of affordable, accessible housing for communities nationwide.

Washington/Seattle Perspective: Rental Housing Policies Aren't Working

by Cory Brewer, a vice president of residential rental operations and veteran property manager.

I have spent a lot of my time this year trying to get an important message across: Legal regulation is killing rental-housing supply in Seattle.

Whether it is via written article, calls and emails to elected officials and meetings with their staffs, or TV and radio interviews with news media, the message has been consistent.  I’ve laid out facts and offered carefully reasoned predictions.  I’ve partnered with my colleagues from around Washington State to compare data and share stories.

One thing is abundantly clear:  Lawmakers have put a target on the backs of corporate landlords, and their crusade against this existential bogeyman has resulted in nothing but collateral damage.

Over the course of countless state legislature, city, and county council meetings I have heard testimony from local mom-and-pop housing providers about concerns over “renter-protection” policies aimed at “profiteering” corporate landlords … but you know who never calls in to voice opposition?  Corporate landlords.

Why?  I propose to you that in the end, the only group that stands to gain from “renter-protection” policies are, ironically, the corporate landlords that they are intended to harm.  These corporations are often not local, and in many cases may not even oppose the legislation because – even while anti-landlord by definition – the policies do little more than to drive out the mom-and-pop competition.  Large corporations built on the economy of scale can absorb short-term losses and come out the other end way ahead when renters have fewer choices.

Some will say that the loss of single-family rental homes is no problem because so many new housing units are being added to the Seattle market.  The problem is that three+ bedroom houses are being “replaced” by one-bedroom apartment units, which are not suitable replacements at all.  The city of Seattle runs the RRIO program (Rental Registration & Inspection Ordinance) as a way to, among other things, attempt to establish a database of the rental-housing stock in the city.  Their 2020 report indicates a loss of 4,858 property registrations compared to the previous year (a drop-off of 14.4 percent).  During the same time period the UNIT count only decreased by 0.65 percent.  So what is going on here?  Clearly single-family houses are going away, and apartment units are “replacing” them.  Apartment units don’t work for everyone, especially in this new age of working and schooling from home.

This is becoming, as I predicted, increasingly difficult for those that the “renter-protection” policies are supposedly meant to help: low-income renters.  I recently spoke with Chris Klaeysen, an adviser with the Seattle Housing Authority, which administers Section 8 housing assistance vouchers to low-income renters.  Here is what he had to say: “Generally we do find that Seattle has a shortage of larger (3+ bedroom) units.  This obviously creates a difficult situation for the families we serve.  Many of the new buildings coming online have primarily studios and one-bedroom units.”

Read more in the Rental Housing Journal.

Portland Metro Area Unemployment Declines to 4.7%

The State of Oregon Employment Department reports today that since peaking in April 2020 at 13%, the metro area unemployment has declined from a 2020 high of 13% to 4.7%.

Other employment numbers released today:

• Salem, Oregon - 4.7%
• Linn County - 5.2%
• Lane County - 5.2%
• Deschutes County - 5.1%
• Jefferson County 6.1%
• Crook County - 6.5%

NAA/NMHC: Less than 25% of Rental Aid Has Been Disbursed

 

The National Apartment Association and the National Multifamily Housing Council recently reviewed U.S. Treasury Data and found that less than 25% of Rental Housing Assistance set aside to help renters and property owners for losses during the pandemic have been disbursed.

Washington, D.C. – The National Multifamily Housing Council (NMHC) and National Apartment Association (NAA) issued the following statement on the disappointing news that less than a quarter of emergency rental assistance aid has been distributed to residents and property owners in need.

Over the course of the pandemic housing providers across the country have gone above and beyond to help and support residents dealing with financial challenges. From payment plans, waived fees, changes to lease terms and support in finding and securing rental assistance, housing providers have been deeply creative and innovative to keep their residents safely and securely housed.

However, after a year and a half of pandemic-related costs, the nation’s housing providers and residents continue to face serious challenges meeting their financial obligations. Residents are struggling to pay their rent and property owners always had to continue paying their taxes, mortgages, payroll, insurance costs and more. Housing providers across the country are facing untold millions of dollars in rental arrears. Accordingly, it is critical that rental assistance funds are distributed as quickly and efficiently as possible.

In order to facilitate the distribution of rental assistance aid to residents and housing providers alike, NMHC and NAA, on behalf of the nation’s 40.1 million individuals who call an apartment home, ask policymakers to make the following improvements to expedite rental assistance distribution:

• Reject the addition of counter-productive eviction moratorium provisions.
• Direct grantees to allow housing providers to apply on behalf of residents under a notification safe-harbor, prioritize arrearages and remove the 18-month limit on assistance.
• Allow ERAP to reimburse rental property owners, without qualification, on properties where a renter has moved out.

Additional reforms to the emergency rental assistance program can be found here.

Without action to improve disbursement of ERAP and increased participation in the program, renters are faced with further uncertainty and a mounting debt cliff, while rental property owners move closer to foreclosure, bankruptcy, or a forced sale of the property—putting the overall stability of the rental housing sector and broader real estate market in peril.

For more than 25 years, the National Multifamily Housing Council (NMHC) and the National Apartment Association (NAA) have partnered on behalf of America's apartment industry. Drawing on the knowledge and policy expertise of staff in Washington, D.C., as well as the advocacy power of more than 156 NAA state and local affiliated associations, NAA and NMHC provide a single voice for developers, owners and operators of multifamily rental housing. One-third of all Americans rent their housing, and 40 million of them live in an apartment home. 

Multifamily Marketwatch Podcast - October 25, 2021

This week: how people in commercial real estate feel about the future; Oregon finally makes progress in distributing rental assistance, and - is this is a good time to own an apartment building? All that and more in our podcast.

Listen to our latest podcast.

Oregonian: Thousands in Danger of Eviction

A cover story in Friday's edition of The Oregonian revealed just how the state's slow action and lack of leadership are taking a toll on renters and housing providers alike. Read more. 

Meanwhile, Oregon Public Broadcasting, the Salem Statesman Journal are among the many news organizations staying on top of this story. Click the links to read more. (No subscriptions required.)

Tribune: Some Landlords Get Rent, Many Still Waiting

The Portland Tribune reports today that even though Oregon is facing a backlog of requests from tenants for back-owed rent, the state may still qualify for more federal funds to help out.

The paper reports:

The backlog remains greatest in the three Portland metro area counties, where 42.1% of completed applications have been paid through Oct. 18, compared with 54.5% statewide.

Still, the Oregon Department of Housing and Community Services and 18 community action agencies paid out a total of $133 million by a Sept. 30 deadline set by the U.S. Treasury for states to commit at least 65% of their initial shares of rental assistance. Oregon's initial share was $204 million, and Oregon is in line for more money that will be reallocated from other states failing to spend their full amounts.

According to the state agency's dashboard, 20,968 of 38,474 completed applications for rent and utility assistance have been "paid and obligated" statewide as of Oct. 18 — the figure includes payments approved by agencies but not yet redeemed by landlords — for a total of $165.6 million. Requests total $300.8 million.

For Multnomah, Washington and Clackamas counties, 9,201 of 21,882 completed applications have been paid for a total of $37.7 million. Requests total $180.4 million. (See breakout for county details.)

Read the whole story.

Multifamily Marketwatch Podcast - October 18, 2021

This week: apartment rent payments are slowing as the pandemic wears on; the nation’s shortage of housing affecting all price points and rent and vacancy trends for Oregon and SW Washington.

Listen to our latest podcast.

Sold! 9 Units in Vancouver, Washington

 

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HFO is pleased to announce the sale of Hidden Green Apartments consisting of 9 garden-style units in Vancouver, Washington Congratulations to brokers Jack Stephens and Todd Tully and the rest of the HFO team. 

Rent & Vacancy Trends Announced for Portland, Vancouver, Salem, Eugene & Bend

Multifamily NW held its semi-annual Apartment Report breakfast with fall 2021 data this morning. Here are how today's numbers compare with those from one year ago. 

Click to enlarge

RealPage: Severe Shortage of Rental Housing at Every Price Point

RealPage reports the magnitude of the demand boom is far beyond even the most optimistic forecast, following September's historic low vacancy rate of 2.7%. 

The news also included these points:

• New lease demand for year ending September 2021 increased by 50.5%
• Apartment resident retention surged to an all-time-high of 58%

Vacancy registered below 45 in 140 of the 150 largest US metros RealPage tracks in September. Orange County led the way at 1.12%, followed by Providence, RI (also at 1.12%); Riverside, Calif. (1.37%); San Diego (1.53%); Miami (1.75%); Virginia Beach (1.76%); Fort Lauderdale (1.94%); Sacramento (1.96%); Tampa (1.98%); and Detroit (2.04%).

The lack of availability also has “nothing to do” with construction completions, according to RealPage: new completions over the last year hit a three-decade high of 362,087 units, a wave that would historically be considered a major risk factor for investors but which has wholly failed to meet demand in the current cycle.

Net absorption hit 610,715 for the year ending in September, smashing prior records by more than half.

“We were bullish on apartments heading into 2021, but the magnitude of the demand boom is far beyond even the most optimistic forecast,” said RealPage director of forecasting and analysis Carl Whitaker. “And the absorption numbers could have been even bigger if not for the historic lack of availability.”

Rents also remain at record highs. National median rent growth has increased by 13.8% since January; prior averages were around 3.6% from 2017 to 2019. Increasing incomes and budgets of renters searching on their database are closely related to the increasing cost of homeownership and a tight residential real estate market, some analysts say: the for-sale market has posted a 48% drop in listings since last year, with supply seriously constricted.

“With rents rising virtually everywhere, only a few cities remain cheaper than they were pre-pandemic,” a recent Apartment List analysis notes. “And even there, rents are rebounding quickly.”

Sold! Mobile Home Park in Gresham

 

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HFO is pleased to announce the sale of Glisan Terrace - a 14-pad mobile home park in Gresham, Oregon. Congratulations to Todd Tully and Greg Frick and the rest of the HFO team!

Multifamily Marketwatch Podcast - October 11, 2021

This week: supply chain issues causing construction delays, rents across the country spike, and a Portland rental market update.

Listen to our latest podcast.

Oregonian: Most Renters Still Waiting For Aid

Today's lead story in The Oregonian concerns the continued backlog of rent assistance payouts. Although the state has made headway in tackling the problem, some counties are still behind expectations and many renters could lose their eviction protection before the money arrives.

Of the $204 million Oregon received from the U.S. government for the latest round, it had paid out or allocated 71% including administrative costs. But, only 37% of the money has actually reached landlords on behalf of renters. 

New guidelines released by the Department of the Treasury on Monday indicate that level of performance should be enough for the state to keep the money it's received. The new guidelines will allow Oregon to request more funding because it had committed more than 65% of the monies received by a September 30th deadline.

Another $156 million is already on the way according to a government executive, although the state is receiving between 1,000-2,000 applications weekly and the money is expected to be quickly depleted.

Between mid-September and October 4th, Oregon moved from being ranked 26th in the nation for distribution of rental aid to 8th place. 

The worst counties in the state for distributing funding include Marion County, which has received $10.4 million but had not paid out any rental assistance by the end of August and by the end of September had paid out nearly $575,000. 

Meanwhile, eviction filings in Oregon totaled 361 in July, 463 in August and 473 in September. The numbers do not include renters who move before the rental owner takes them to court.

Portland Multifamily Market's Challenges and Opportunities

Multi-Housing News interviewed Guardian Real Estate Services’ Hollie Forsman provides insights on local market fundamentals.

Forsman said that although the pandemic rounded off a thriving decade for Portland and has constricted employment, the metro’s multifamily market continues to benefit from a steady influx of residents priced out of more expensive West Coast markets. 

Nonetheless, hurdles do exist, such as expiring eviction moratoriums, rent controls and limited supply, Hollie Forsman, director of operations at Portland-based Guardian Real Estate Services, told Multi-Housing News.

In the interview, Forsman reveals the most critical trends and challenges shaping Portland’s multifamily market right now. Read more. 

Oregon-like Statewide Zoning Legislation Likely in Upcoming Washington Legislative Sessions

AARON KUNKLER   SEPTEMBER 30, 2021 
Washington State Wire

Creating more local incentives for cities to increase density, reexamining accessory dwelling units and at times preempting local jurisdictions on zoning policy are all on the table heading into the 2022 session. 

Rep. Nicole Macri (D-43rd LD), vice chair of the Appropriations Committee, participated in a panel discussion hosted by the nonprofit Up For Growth where she discussed her legislative housing priorities for the upcoming 2022 session. Making state-level zoning a priority has also been voiced by Macri’s colleague Rep. Jessica Bateman, who sits on the Housing, Human Services and Veterans Committee. 

“The key is going to be to bring together a big team,” Macri said. 

There’s a tension between supply-side housing strategies and ones that are aimed at protecting communities that have been disproportionately impacted by high housing costs, Macri said. By introducing both renter protections and loosening zoning regulations, Macri said she’s taking cues from Oregon. 

In 2019, Oregon became the first state to nearly eliminate single-family housing by allowing duplexes to be built in all but the most remote areas. 

In 2020, she introduced a pair of housing bills that both died in committee. The first was designed to allow more dense housing, ranging from duplexes to courtyard apartments, in all areas of cities with more than 15,000 residents where single-family zoning was allowed. The second would have protected tenants from sudden rent increases, and limited how much rents could rise. 

These bills were controversial by design, Macri said, and introduced with the goal of generating conversation on how to move housing policy forward in the state. State zoning mandates have historically been unpopular, but as the housing affordability crisis worsens, Macri said lawmaker’s hesitancy may be easing. 

“We were sort of guided by this principle that state mandate bills on land use and zoning will never garner the votes… and we’ve seen as the housing crisis has gotten worse that there’s more willingness among policymakers to think about the role that states can have in both land use and also in regulation,” Macri said. 

Even if lawmakers are more willing to discuss housing issues, Macri expects upcoming proposals to still attract significant opposition. 

At the same time as she is considering zoning bills, Macri is also thinking of more ways to protect tenants and stabilize rents. These bills could be tough sells for state Republicans who view current tenant protections as going too far. 

Sold! 12 Units in SE Portland

 

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HFO is pleased to announce the sale of 12-unit Lauralane Apartments. Congratulations to brokers Greg Frick and Lee Fehrenbacher and the rest of the HFO team! 

Multifamily Marketwatch Podcast - October 4, 2021

This week, Washington State and Washington County in Oregon extend eviction moratoriums; Seattle home prices show their biggest ever 12-month gains; and why multifamily is still the most favored asset class.

Listen to our latest podcast.

Seattle Council Approves Requiring Six Months Notice of Rent Increases, Relocation Assistance

The Seattle City Council approved two bills this week that require landlords to provide six months' notice of rent increases and, in some cases, pay tenants who move after a significant rent hike. Landlords are calling the bills tantamount to rent control. Read more on Reason.com. 

Sold! 9 Units in SE Portland

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HFO is pleased to announce the sale of Christopher Crest in SE Portland. This community is convenient to Warner Pacific, Portland Community College, and Mt. Tabor Park. Congratulations to HFO brokers Greg Frick, Lee Fehrenbacher, and the rest of the HFO team!
 

Webinar: Multifamily still most favored asset class despite potential headwinds

Eighteen months into a pandemic that some thought would undermine the apartment sector for the foreseeable future, rent growth in some markets has exceeded pre-pandemic levels, while investor interest is as keen as ever. That’s despite potential headwinds, some deriving from the pandemic and others from legislation making its way through Congress. 

These are among the insights shared by a panel of industry leaders in Connect CRE’s latest webinar, “Buy, Build, Sell, Hold or Trade Apartments,” now available for on-demand replay. Sharing their expertise were Doug Bibby, president of the National Multifamily Housing Council; David Schwartz, CEO of Waterton and chair of NMHC; and Jeffrey DeBoer,  president and CEO of the Real Estate Roundtable. Daniel Ceniceros, founder and CEO of Connect CRE, moderated the conversation. 

Since the onset of the pandemic, NMHC has published a Rent Payment Tracker monitoring the rate of rent collections, and their timeliness. Bibby said that for most of the past 18 months, the Tracker has seen an average of 95% of apartment renters making full or partial payments each month. Most recently, though, that has dropped by seven percentage points. 

“We think it’s a combination of the delta variant beginning to show its ugly face and businesses beginning to get a little hesitant to reopen,” said Bibby. 

That hesitancy is having a ripple effect among small businesses located near currently empty office buildings. “We’ve got to get people back in their workplaces,” said DeBoer. “I hate it when people say, ‘We’ve got to get people back to work.’ People are working, but we’ve got to get them back in their workplaces.” 

In the meantime, there’s some $46 billion of rent relief monies allocated by Congress. Schwartz noted that rollout of the funds has been slow as it passes through multiple jurisdictions. “Some states are good at it, and some aren’t,” he said. 

Congress’ potential impact on the industry isn’t limited to the Emergency Rental Assistance Program. All three panelists weighed in on the provisions of infrastructure packages being considered by the House and Senate—sweeping legislation that naturally raises the question of how to pay for it. 

At present, DeBoer is feeling “pretty good” about the prospects for the 1031 exchange to lawmakers’ efforts to fund the wide-ranging investments in infrastructure, as well about as other tax issues pertinent to real estate. He cautioned that the infrastructure program likely will mean tax increases for the industry’s highest earners—but the increases will come because they’re making money, not because they’re making it from real estate. 

Schwartz said Waterton has been a net buyer of apartments throughout the pandemic, in an environment that has become increasingly competitive due to all the capital in the marketplace. “In spite of various challenges—potential tax headwinds and regulatory headwinds—it’s still the most favored asset class of all the food groups,” he said. 

Click here for replays of the webinar.