Sold! 14 Units in Vancouver, Washington

The seller of Shady Lane (1977) was motivated to sell due to a rapidly changing market (i.e., interest rates increasing, additional regulation of rental properties in Washington, etc.) and sought to exchange into multifamily rental properties elsewhere.

For more details about this transaction, contact an HFO broker today at (503) 241-5541.

Fed Raised Interest Rates by a Quarter of a Percent, Plans to Raise Rates Again in December

The Federal Reserve raised its benchmark interest rate by a quarter of a percentage point, bringing the rate to between 2 and 2.25%. This is the eighth time since 2015 the Federal Reserve has raised the benchmark interest rate, and it plans to do so again in December. Fed Chairman Jerome Powell cited the low national unemployment rate as the primary reason for raising the rate again, though he acknowledged that not all Americans are feeling the effects of a strong economy. Fed officials also hope that raising interest rates will help mitigate inflation caused by the federal tax cuts passed last year.  Read more.

Seattle Judge Upholds Cap on Move-In Fees for Renters as Portland Commission Mulls Changes

In one of several ongoing cases between multifamily owners and the City of Seattle over regulations, a judge has ruled that the city can limit deposits renters can be asked to pay Seattle passed an ordinance in January of 2017, limiting nonrefundable fees to one month's rent and pet fees to an additional 25% of monthly rent. The ordinance also required landlords to allow deposits to be paid in installments over six months. Read more in the Seattle Times.

Recently, Portland City Councilor Chloe Eudaly has been working with the Rental Services Commission on a similar proposal. Eudaly's proposal would:

• Limit the amount of "last month's rent" collected as a security deposit to 50% of total monthly rent.
• Limit the amount of a security deposit to the equivalent of one month's rent if the landlord does not collect last month's rent.
• A landlord may not charge for interior painting except what is necessary to repair specific damage made to a wall beyond ordinary wear and tear.
• Defines "ordinary wear and tear" specifically in numerous instances.
• Requires the landlord take 3.6% annual depreciation of movable property value into account when charging for repairs.
• Requires landlord to provide a list of the current depreciated value of the movable property to the tenant at the time of move-in.
• Tenant has a week to complete and submit a condition report noting any damage to the unit.
• Outlines inspection guidelines.
• Requires landlords keep security deposits in an account with or without other security deposit funds that are separate from owner's funds. The account may be a checking, savings, money market, or client trust account. The landlord must provide the bank institution name and account number in writing to the tenant. Interest accrued must be repaid to the tenant when refunded, less a 5% deduction for administrative costs.
• A tenant may request a receipt of the account and interest earned up to once each year.
• Outlines notification requirements and termination timelines.
• The Landlord must report terminated tenancies to the Portland Housing Bureau on a specific form within five business days.
• Failure to comply with any requirements result in landlord liability to the tenant for:
• Security deposit
• A penalty in the amount of 2x security deposit
• Attorney fees and costs

Read the September 20, 2018 draft here. 

Tenant Screening Proposal on Hold

The Oregonian reports that Commissioner Chloe Eudaly's proposal to change tenant screening criteria has been put on hold due to opposition from landlords and developers, including affordable housing providers. Eudaly's chief of staff, Marshall Runkel, says Eudaly plans to develop the proposal in conjunction with relevant interest groups and bring it to the Council when it is ready. Read more.

Sold! 27 Units in Kelso, Washington

The owner of Elliott Heights (1968) wanted to exchange this well-maintained property into another asset with more units. HFO’s extensive experience and knowledge of area investors garnered multiple offers on the listing. The final sale price set a new high value for 1960s-era product in the area.

For additional information about this transaction, contact an HFO broker today at (503) 241-5541.

City Proposes Requiring Unreinforced Masonry Placards by March 1, 2019

On Wednesday, October 3rd 2-5pm the Portland City Council may vote on this draft ordinance requiring placards of unreinforced masonry buildings effective March 1, 2019.

Proposed URM Placarding and Tenant Notification Ordinance

Background.
To reduce the risk posed by unreinforced masonry (URM) buildings, the City Council directed staff from PBEM, PDC, and BDS to develop policy recommendations, including proposed code changes and an incentive program(s) to support the implementation of retrofit efforts.

After four years and three different committees, Council heard recommendations and passed a resolution on June 13th among other things directing staff to develop an ordinance to:

1. Require a placard on all URM buildings that have not been retrofitted to prevent collapse in the event of a “major earthquake”
2. Require URM building owners to notify tenants/renters through rental agreements that their building is an unreinforced masonry building and unreinforced masonry buildings may be unsafe in an event of a major earthquake
3. Strengthen existing triggers in Title 24.85 requiring seismic retrofits of URM buildings

Placarding and Tenant Notification Requirements
The ordinance requires URM owners to post a placard according to the following timeline: The placard shall be 8”x10” durable placard with lettering in a 50-point bold font, posted in a conspicuous location on the exterior at the main entrance with the following message: “This Building is an Unreinforced Masonry Building. Unreinforced Masonry Buildings may be unsafe in an event of a Major Earthquake.”

• Publicly-owned buildings: On or before January 1, 2019
• Non-profit buildings: On or before November 1, 2020
• All other buildings: On or before March 1, 2019
• Building owner must notify existing tenants that the building is an unreinforced masonry building, and unreinforced masonry buildings may be unsafe in the event of a major earthquake.
• In addition, every lease or rental agreement entered into or renewed after the timeline for placarding noted above, must contain a statement that: “This Building is an Unreinforced Masonry Building. Unreinforced Masonry Buildings may be unsafe in an event of a Major Earthquake.”
• Building owners must record an agreement not to remove the placard and acknowledgment of compliance with tenant notification requirements.

Exceptions to Placarding and Tenant Notifications
Buildings that have been retrofitted to the following standards will not require a placard or tenant notification:

Collapse prevention standard for BSE-2 seismic hazards or life safety for BSE-1 seismic hazard as defined in American Society of Civil Engineers (ASCE) 41-17 or ASCE 41-13 are not required to post a placard or notify tenants.

For buildings that were retrofitted before January 1, 2018, either

a.       Life Safety standard using FEMA 178, FEMA 310, or ASCE 31; or

b.       Oregon Structural Specialty Code 1993 edition or later

Enforcement
Portland Fire and Rescue will inspect the placement of placards as part of their inspection program and will work with BDS Enforcement Section in enforcing the requirements for placards
BDS Enforcement Section will use its existing enforcement program and authority to enforce the requirements for placarding and tenant notification.

Appeals
Building owners who receive notice to place placards and notify tenants but believe that their building is not a URM, or that the URM building has already been retrofitted to meet the standards above, may file an appeal through the bureau’s administrative appeals procedure.

Additional Information

1. BDS intends to notify all eligible URM property owners about the placarding and tenant notification requirements by December 31, 2018
2. BDS will create administrative rules that clarify how to provide documentation to show compliance with the new regulations
3. BDS will provide guidance on how to file appeals

Strengthening Existing Seismic Triggers for URM Buildings in Title 24.85

1. Roof replacement – removal of greater than 50% of total roof area within a 15 year period requires wall anchorage for both in plane and out of plane forces and parapet bracing.
2. Costs of alterations or repair - When costs associated with building alterations or repair in a five year time period or fifteen year time period exceeds the square-foot costs outlined in the ordinance, entire building must be improved to resist seismic forces to meet ASCE 31 41 criteria.

Rental Services Commission Reschedules Meeting to Tuesday, Oct. 16th

The Rental Services Commission (RSC) serves as the primary public forum for discussion of rental housing law and regulation, and renter-owner programs and services in the City of Portland. The group recently paused (for now) its plans to set up regulations on tenant screening and security deposits.

RSC meetings are open to the public and public testimony is invited. Agendas and meeting materials will be posted online here. For more information, visit www.portlandoregon.gov/phb/RSC. Click here to sign up for the Rental Services Commission email list to receive meeting notices and related updates.

Next meeting: Tuesday, October 16, 2018
Time: TBA
Place: Portland Housing Bureau, 421 SW 6th Avenue, Suite 500, Portland 97204

This post updated September 25, 2018 with additional information.
This post updated October 8th with cancelation of 10/10 meeting rescheduled to 10/16.

HFO-TV: Housing Underproduction in Oregon and Washington with Mike Wilkerson (Part I) [Video]

HFO partner Greg Frick interviewed ECONorthwest principal Mike Wilkerson on the state of housing production in Oregon and Washington.

Rising Percentage of Old Buildings in Cities Indicates Housing Construction Isn't Keeping Pace with Historical Trends

A new study by Apartment List finds that despite a current building boom most cities in the U.S. haven't been keeping up with historical rates of construction over the past decade. Across the U.S., 66% of the rental housing stock is over 30 years old, up from 41% in 1980. Meanwhile, less than 10% of the rental housing stock is 0-10 years old, down from over 20% in 1980.

In Portland, the share of rental housing units 0-10 years old went from 25% in 2000 to 10% in 2016. In Bend, the change was more dramatic - dropping from 34% to 10% over that same period. Eugene and Medford have also seen a decline in the share of new housing units.

As a result of the slowdown in housing construction compared with historical levels, older properties have seen the highest rates of rent growth since 2000. In the Portland Metro Area, rents for units built prior to 1960 increased 26% between 2000 and 2016. Meanwhile, rents for units built in the 1990s increased 12% during the same period. This indicates that the slowdown in construction is preventing the process of "filtering," where units become more affordable as they age.

In conclusion, Apartment List recommends removing local zoning barriers, innovating on the design end to build more affordable housing, and increasing public subsidies.  Read more.

Sold! 65 Units near Spokane, Washington

Lakeside Apartments (2009) is an attractive asset that sold before hitting the open market. The property benefited from stable occupancy and increasing rents in a high demand rental market. HFO secured a buyer who was in the process of moving equity from out-of-state.


For more information about this transaction call an HFO broker today at (503) 241-5541.

Affordable Housing Developers Send Letter Opposing Tenant Screening Proposal

Eight of the city's affordable housing developers sent a letter to Portland's City Council earlier this week in opposition to the new rental screening criteria being proposed by Commissioner Eudaly. In the letter, the developers state, "The criminal history standards are too permissive. Our primary concern is for the safety of other tenants and existing communities." Commissioner Fish's chief of staff, Sonia Schmanski, says that the feedback of affordable housing providers will be heavily factored into his evaluation of the proposal. Commissioner Eudaly's office has scheduled a meeting with affordable housing developers for next week. Read more.

Faced With Countywide Shortfall of 27,000 Affordable Housing Units, Mayor Sends Email Touting Progress on Roughly 3,100

In an email to supporters this morning, Portland Mayor Ted Wheeler touted the City's successful inroads in the fight for affordable housing. The problem is, while Portland real estate experts and economists indicate that the county as a whole is short at least 27,000 affordable units to meet immediate demand, Wheeler's email cites funding for far fewer.

According to HFO Research, Wheeler's email cites current and future funding for approximately 3,117 units to be delivered over the next couple of years -- even as the need continues to grow.

Below is Wheeler's email and--in italics--HFO's citations and total unit estimates. 

Wheeler's email:

1. We are implementing a fee on short-term rental units, including Airbnb, to create additional homeownership opportunities. Because short-term rental companies have a significant impact on the availability of rental units, we are modestly increasing the fee to create a dedicated fund for homeownership opportunities in our gentrifying neighborhoods in our community.[Note: This is anticipated to raise $1.1 to $1.28 million annually or the equivalent of 3-8 units/year]

2. We are leveraging Portland dollars to create 1,300 units in five to seven years with a Housing Bond. We are delivering well ahead of schedule on this promise—announcing four projects totaling more than 560 units of permanently affordable housing planned or purchased to date under the Bond only 18 months in. We are also pushing for a constitutional amendment statewide to allow us to leverage our dollars by combining them with private resources to create more housing units. [The housing bond was passed in November 2016 and, after an initial purchase, the city put spending on hold for nearly a year while it figured out its spending criteria. Units: possibly 1,300 total units although rising construction costs will likely result in fewer. The Daily Journal of Commerce reported September 25th that the city had purchased or committed to acquire 263 affordable housing units and build 384 new units for a total of 647.]

3. We are implementing Tax Increment Funding in urban renewal areas– We have over 600 units (and hundreds more on the way) in the construction or permitting process in our urban renewal districts. [These funds total $61.6 million and are still several years out from completion. Units: An estimated 600, pending additional income.]

4. We utilize public and private sector partnerships to increase housing opportunities. Portland continues to work with longtime partner Kaiser Permanente, who recently joined Mayors and CEOs for U.S. Housing Investment. Kaiser committed a record $200M into a new community investment fund to preserve and expand affordable housing. [Units: total number unclear. Preservation would mean 0 new units. If all $200 million were spent on expansion, perhaps 200-300.]

5. We utilize methods of creating permanent affordability. We continue to partner with our local land trust housing provider, Proud Ground, and our local Habitat for Humanity affiliate to create permanently affordable homeownership opportunities for Portland area residents. [Habitat for Humanity: 20-25 homes per year; Proud Ground: about 20. Total: roughly 45 annually.]

6. We work with local and state agencies to create funding availability for permanent supportive housing units. This funding opportunity marks the first-time funding to build affordable housing has been bundled with funding for the services residents will need to thrive in that housing. By packaging construction capital and support services funding together for the first time, the City and its partners hope to achieve a minimum of 50 permanent supportive housing units. (Units: 50.]

7. We are using a Smart Cities PDX Priorities Framework to ensure our growth is equitable. As the City evaluates new technologies, uses of information, and related partnerships, we must ensure they promote equity, address inequities and disparities in our city, and provide tangible benefits to the people of Portland. We intend to expand this framework into how we approach housing—promoting equity and addressing inequities and disparities in our city. [Units: 0.]

8. We are increasing renter protections with an expungement program. The pilot program reduces barriers for those with a criminal record trying to rent homes and increases access to housing opportunities. Those with violations, misdemeanors or low-level felonies are eligible for expungement. [Units: 0.] 

9. We leverage market rate developments to include affordable housing. The Multiple-Unit Limited Tax Exemption program incentivizes those with market rate developments in the pipeline to include affordable housing units in their projects, so we can more quickly put more affordable housing units on the ground. [Units: 605]*

10. We utilize Inclusionary Zoning. We require any new development of 20 units or more to have affordable housing units included in the development. [Units: 209 under construction, future number uncertain as this policy has appeared to have a chilling effect on applications for development of units inside the City of Portland of more than 20 units.]

We have focused our efforts on leveraging funding sources, and maximizing strategic investment opportunities because I want to ensure that Portland remains a city that is accessible and affordable for everyone. I don’t want millionaires to be the only people who can afford to live downtown. I don’t want service industry workers to have a two-hour commute. I want a city where we actively create housing options at every income level and for people of all ages. 

Portland City Council has consistently voted in favor of more housing despite otherwise important and competing values—and I want to be clear that our efforts have paid off. 

Annual production and permitting levels are higher than at any point in the last 15 years. In 2017, there were 14,000 units in the production pipeline, including permits. More than 600 affordable housing units came online in 2017—more than double the number of units in the prior year. 

Note: Above, the mayor cites production and permitting of market rate and affordable units, the vast majority of which are market rate units and not affordable housing. 

*Page 9, City of Portland Residential Property Tax Exemption Programs 2016-2017 Annual Report, June 2018.

Oregonian Editorial Board: Eudaly Proposed Protections Miss the Mark

This Sunday's Oregonian editorial focused on Commissioner Eudaly's proposed tenant screening guidelines. The editorial states that rather than helping the Portland's housing crisis, the draft regulations are an example of how city policies simply make things worse. Read more.

Eudaly to Propose New Rules Requiring Landlords to Give 90-Day Notice to City When Selling Property

According to the Portland Mercury, after she introduces new tenant screening criteria on September 18th, Portland City Council member Chloe Eudaly plans to focus on crafting new rules that would require landlords to give the city and tenants 90-day notice before a rental property is put on market. The proposed new rules could also potentially give the city and tenants the first opportunity to purchase the property. Read more.

This proposal isn't a new one for Eudaly, who began discussing it with news reporters back in October of 2017.

Sold! 17 Units in McMinnville, Oregon

HFO sourced this listing from an owner ready to sell for the right price and a quick closing timeframe. With the high number of transactions handled by HFO in this tertiary market, we had the unique ability to identify a buyer who was able to meet the seller’s quick closing timeline. For details on this transaction contact an HFO broker at (503) 241-5541.

Portland Housing Bureau's City Rental Services Commission Cancels Scheduled Sept. 18th Meeting on Screening Criteria

On Thursday, Sept. 13th at 9:30 am, the Portland Housing Bureau sent an email notification that the City of Portland Rental Services Commission meeting scheduled for Tuesday, September 18th from 2:30-5 pm has been canceled.

The email states simply "The meeting will be rescheduled, and we will send a separate notice for the new date."

The Proposed Rental Screening Criteria is a new ordinance proposed by Commissioner Eudaly that would severely impact and restrict an owners' ability to determine who rents their property.

Words can't sufficiently describe how complex, confusing, and difficult this ordinance would be to implement. You simply have to read it for yourself.

The Portland Housing Bureau Rental Services Commission has been discussing and working on the screening criteria in advance of its slated hearing/vote before the full city council on October 18th.

You can find a list of City Commissioners and their contact information here.

The Portland Housing Bureau Rental Services Commissioner includes representatives of the Multifamily Industry. You may want to review the list and contact people you know to share your thoughts. 

The Future of Portland's Electronic Permitting? City Says: 2019

Builders have complained for decades about the City of Portland's difficult permitting process. One developer opted out of building in Portland because 17 groups from six different bureaus have to review construction permits. 

As we first reported here in July 2017, the City of Portland has been trying to get an online permit system going since 2012. It has spent millions on the project and after five years had to fire a Georgia-based vendor, basically starting from scratch.

In April, 2017 Commissioner Chloe Eudaly terminated the Bureau Director responsible for the boondoogle.

To give a better image to the reboot - the project has been rebranded. It was originally known as the "Information Technology Advancement Project." Today, it's called the "Portland Online Permitting System" or POPS.

In a video released last month, the City of Portland indicates it is testing some initial functions this year. It will roll out a user interface in 2019 with several additional modules planned, but no timeline for completion mentioned. Have a look at the video:

Milwaukie Mayor Considering Renter Relocation Assistance Policy

The Portland Tribune reports that Milwaukie Mayor Mark Gamba is working on a housing affordability strategy to combat what he sees as a crisis for renters in his city. He has come out in favor of Metro's $652.8 million affordable housing bond, and is working to streamline the development process and create a strategy for "missing middle" housing. Along with these efforts, he also plans to meet with developers, renters, and landlords over the next few weeks to discuss a mandatory renter relocation assistance policy. Portland has required landlords to pay renter relocation fees under certain circumstances since February 2017 - the law was made permanent earlier this year. Read more.

UPDATE: "Screening Criteria and Security Deposit Reform" Public Hearing Date Postponed

On August 20th, The Oregonian reported that the City of Portland would hold a hearing on "screening criteria and security deposit reform" on September 20th based on information contained in a Facebook post by Commissioner Chloe Eudaly.

The hearing date was postponed to Thursday, October 18th but on Monday, September 25th, Eudaly announced she was pausing this push for the time being in response to pushback from developers and landlords, including many in the affordable housing community.

Eudaly's proposed ordinance would limit security deposits and could require landlords to use set screening criteria that takes into account a renter's criminal history, credit history, and housing record. Read more.

The same day as The Oregonian story, Willamette Week ran a story on landlord outrage.

This post has been updated with information as of September 25, 2018.

Sold! 20 Units in McMinnville, Oregon

HFO sourced this McMinnville listing (1983) from an owner ready to sell for the right price and a quick closing timeframe. With the high number of transactions handled by HFO in this tertiary market, we had the unique ability to identify a buyer who was able to meet the seller’s quick closing timeframe. For more details on this transaction contact an HFO broker today at (503) 241-5541.

HFO-TV: Director of Portland State University Center for Real Estate on Portland's Affordability Crisis [Video]

Dr. Gerard Mildner, director of the Portland State University Center for Real Estate, offers his insight into housing issues in the Portland, Oregon metropolitan area.

Sold! 22 Units in Corvallis, Oregon

The Arcade Apartments (1969) is located adjacent to Oregon State University. The resident profile is predominately students due to its location, but the asset was rented as market-rate by the unit and not by bedroom. The sellers had completed extensive interior and exterior updates throughout the property over the last 10 years. Updates included a new roof, exterior paint, seal coat and exterior doors and lighting. 

The property had been owned for more than 30 years by a family that decided to exit multifamily ownership. The asset was offered for sale with a sister property, Santana Court. HFO managed the process by targeting investors with interest in the Corvallis area and owners of student housing throughout the the nation.  Our extensive relationships with financially qualified investors enabled us to locate a motivated and well-qualified buyer eager to acquire assets in Corvallis. For additional information about this transaction, contact an HFO broker at (503) 241-5541.

HFO-TV: Portland Planner Troy Doss on Portland's Central City 2035 Plan [Video]

After years of work, Troy Doss provides some detail and an in-depth overview of Portland's newly adopted Central City 2035 Plan.

Portland Reschedules Vote on URM Placard Warning Signs for Weds. October 3 at 2 pm

In June of this year, the Portland City Council released its recommendations for its staff in creating a policy for mandatory seismic retrofitting of unreinforced masonry (URM) buildings in the city.

Among those recommendations was a direction to:

...develop a placarding ordinance, with an effective date of March 1st, 2019 and enforced by Portland Fire and Rescue with an appeal process administered by the Bureau of Development Services, for all URM buildings that are not retrofitted to a level expected to prevent collapse in an earthquake and that placard shall be no smaller than 8 by 10 inches and shall state clearly in a conspicuous place at the entrance of the building printed in not less than 30-point bold type: "This is an unreinforced masonry building. Unreinforced masonry buildings may be unsafe in the event of a major earthquake.", and return to Council for adoption within 3 months. 

Originally scheduled for Wednesday, September 12th, the vote has been rescheduled to October 3 at 2 pm at City Hall. 

Commissioner Chloe Eudaly has been supportive of this requirement, saying, "Every tenant and occupant has a right to make an informed decision on whether they want to live in an URM."

Owners of URM buildings have pushed back against these requirements, arguing that the city should not be penalizing buildings that are up to code. Furthermore, the city's list of URM buildings is not entirely accurate - some of the buildings included on the list have already been upgraded. For those that have been upgraded, engineers from the city are not always available to verify this

Local attorney and URM building owner Walter McMonies, who served on the City's URM Task Force, points out that the URM Policy Committee advocated for positive reinforcement, rather than public shaming. According to McMonies, "Imposing negative placarding on all listed URMs as of March 1, 2019, will stigmatize buildings that may not even be URMs and will make it much more difficult for the owners to market or lease units, obtain mortgage financing, sell their building, etc." 

A cost estimate from the City of Portland finds that the median cost of retrofits for Class 3 buildings would be $48 per square foot (costs range from $43 to $65 per square foot). But as McMonies points out, banks are wary of lending to URM buildings. The city's PropertyFit program could help fill some of the funding gaps, but capital providers involved in the program still have discretion over whether they will choose to invest in a retrofit.

City staff has been instructed to return to the Council with a final URM retrofit policy for adoption by June 2019.

According to an e-mail sent on September 4, 2018 by Jonna Papaefthimiou of the Portland Bureau of Emergency Management:

The Council URM resolution passed in June 2018 also directs staff to:

• Implement mandatory retrofitting ONLY for critical facilities, schools, and government and for-profit assembly spaces like community centers and theaters.  Code changes are expected in June 2019. 

• Develop more financial incentives for building owners. 

• Develop cost estimates and a strategy to retrofit City-owned URM buildings.

• Set up two new committees:

• one to make recommendations for retrofits to for-profit buildings; and

• another for URMs owned by non-profits, like churches.

[The city's] next step will be to assemble the new committees.  Thanks to all who have offered to participate!  Please look for an online application in the October update. 

 If you want to be added or deleted from the city's e-mail list for updates on this issue, please email URMS@portlandoregon.gov.  

Sold! 70 Units in Eugene, Oregon

Bailey Hill Meadows (1980/19860 is a well-maintained property located in Eugene, Oregon. The property had many recent exterior upgrades including new windows, paint, deck replacement and seal coat. The unit mix is predominately one-bedroom apartments, but due to its distance from the U of O campus, the resident profile was not predominantly students.

The unit mix was a challenge, as it gave the property a perceived higher turnover rate. HFO was able to use its expert knowledge of the market to explain to investors the benefits of the asset’s qualities and location. The seller was in a tight timeframe under contract on a 1031 exchange property, but we found the right investor with financial wherewithal to meet the seller’s obligations. For additional information about this transaction, call an HFO broker at (503) 241-5541.