HFO Multifamily Marketwatch Podcast - March 16, 2020

COVID-19’S impact results in anti-eviction laws; Oregon Republicans’ walkout on cap-and-trade leads Governor Kate Brown to enact rules by executive order; and while housing costs rise in wealthy cities, economic growth concentrates in second-tier metros.


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As the number of COVID-19 cases in the US continues to grow, economic activity has slowed substantially for the service and tourism industries. A large number of workers who depend on significant events like South by Southwest or other major conferences as a substantial part of their yearly income are scrambling to find ways to pay their bills. Meanwhile, an even larger pool of service industry workers sees their hours cut, and tipped workers in many places are trying to survive on sub-minimum wage as customers avoid restaurants. The vast majority of these workers do not have paid time off, despite CDC guidance that workers should stay home for up to two weeks if they are sick. As a result, a movement is growing in cities across the US is pushing for local governments to protect these vulnerable residents from eviction. Outside the US, steps have already been taken to ensure impacted residents don’t lose their homes. In Singapore, the government has stepped in to ensure that renters who experience quarantine or discrimination due to the virus will not face eviction. And in Italy, the Deputy Economic Minister announced the suspension of all mortgage payments. In Miami-Dade County, the police department has temporarily suspended eviction activities. The cities of San Francisco and San Jose are working to advance new protections for renters, including a moratorium on evictions for people whose wages have been impacted by COVID-19. In Oregon, Portland Tenants United gathered 1,800 signatures on a petition asking state and local officials to suspend eviction proceedings for the duration of the crisis, regardless of whether renters can prove they lost wages due to quarantine. Portland City Council member Chloe Eudaly is among the signatories of the petition. On Thursday, Mayor Wheeler declared a state of emergency that, among other things, could enable the city to enact temporary rent control rules. As the outbreak continues, municipalities will be faced with growing numbers of vulnerable residents grappling with increasing economic precarity. Whether and how they address these issues could have longer-term economic impacts. CityLab – An Emerging Coronavirus Concern: Eviction  

The City of Portland announced earlier this year that a second court had affirmed the 2035 Comprehensive Plan, which went into effect May 2018. The plan was challenged by the Multnomah Neighborhood Association, which objected to the city’s missing middle housing plan, also known as the Residential Infill Plan. The city plans to hold a hearing on amendments to the Residential Infill Plan April 9th – likely the final hearing where public testimony will be heard. A decision is expected soon after. The Comprehensive Plan was first approved in December 2017. Six appeals were filed against various parts of the plan, but the Land Conservation and Development Commission voted to reject all of the objections. In September 2018, the Multnomah Neighborhood Association brought their case to the Oregon Court of Appeals, which upheld the earlier LCDC decision, giving the neighborhood association 35 days to file an appeal with the State Supreme Court. The neighborhood association chose not to submit such a request during that time. The 2035 Comprehensive Plan remains in effect. City of Portland – Portland’s 2035 Comprehensive Plan Affirmed

The Portland Mercury reports that former Commissioner Steve Novick has endorsed Chloe Eudaly in this year’s city council race. Eudaly defeated then-incumbent Novick in a contentious city council race in 2016, but in his endorsement announcement, Novick praised Eudaly for following through on her campaign promises. He highlighted her work on tenants’ rights, as well as the Rose Lane project to speed buses through the central city. In his speech, Novick took swipes at Eudaly’s highest-profile challenger, former Mayor Sam Adams. He said Adams’s most significant accomplishment was the Arts Tax, which, as previously reported, is extraordinarily unpopular and has high administrative costs. Novick also accused Adams, who served as the Transportation Commissioner, of letting the streets rot. Along with Novick, Commissioner Jo Ann Hardesty, Metro President Lynn Peterson, Senator Jeff Merkley, and Congressman Earl Blumenauer have all come out in support of Eudaly’s re-election. Portland Mercury – Former City Commissioner Steve Novick Endorses Chloe Eudaly for Portland City Council.

In the aftermath of a bicameral Republican walkout in the Oregon State Legislature that killed 20 bills, Governor Kate Brown has issued an executive order enacting some parts of SB 1530, the cap and trade bill that spurred the walkout. Governor Brown’s order updates carbon reduction goals in line with SB 1530, aiming for a 45% reduction below 1990 levels by 2035, and an 80% reduction by 2050. Brown is directing state agencies to update building codes to prioritize energy efficiency. Also, her executive order addresses carbon reduction in gasoline, appliances, and food waste. Emissions will also be capped for the industrial, transportation, and natural gas sectors. In all, 19 government agencies will be tasked with reducing statewide emissions. Her plan for this emissions cap resembles the system of “allowances” outlined in SB 1530 – polluters will have to obtain permits for their emissions, and the number of available permits will decline over time. $5 million in emergency funding has been allocated to implement the executive order’s provisions. SB 1530 would have created funding mechanisms with the potential to raise hundreds of millions of dollars for implementation. Still, Governor Brown lacks the ability to achieve that level of funding through executive order. Senate Minority Leader Herman Baertschiger, who recently announced plans to leave the Senate at the end of his term, argued that Brown’s order would open the state up to costly lawsuits. But Brown counters that if Senate Republicans had stayed in the Capitol to complete their work during the legislative session, the order could have been avoided. Brown’s general counsel, Dustin Buehler, believes the Republican walkouts could make courts more sympathetic to the argument that the Executive Branch is the only state entity currently able to act on climate change. OPB – Gov Kate Brown Orders State Action on Climate Change 

The Portland Business Journal reported last week on the potential effects of an ongoing pandemic on the real estate market. On the residential side, Windermere Real Estate chief economist Matthew Gardner believes that residential listings will slow because homeowners will be less comfortable allowing strangers into their homes for tours. And while historically low interest rates may entice buyers, stock market volatility may impact their ability to afford a down payment. Jacob Pavlik of Colliers International warns that construction costs could rise as contractors find themselves unable to access Chinese steel, which is generally less expensive than steel produced in the US. But a recent report from Cushman & Wakefield concludes that it is too early to determine the effects of the virus on the market. Researchers argue that the real estate market does not respond as quickly as the stock market to events like this, and that previous disruptive events have only caused short term negative impacts. PBJ – 3 Takeaways Regarding COVID-19’s Effect on Real Estate
 
Planetizen published a blog post from the Journal of Planning Education and Research, which examines the discrepancies between the reported median rent and the actual rent new tenants are paying in significant cities. Researchers found that figures for typical rents in an area varied across sources, and in many cases, those numbers were below what they found for new listings. For example, in 2018, the American Community Survey found that a typical two-bedroom unit in San Francisco rented for $2,017 per month. But in the most recent American Housing Survey, which looks at the entire San Francisco metro area, the median two-bedroom rent was found to be $1,722. According to the HUD’s Fair Market Rent data, however, a 40th percentile two-bedroom unit in the San Francisco Metro Area costs $3,121. At the same time, Zillow finds that the median two-bedroom unit in the city of San Francisco costs $4,197. There will be price discrepancies based on geography. In essence, figures for the city proper are unlikely to line up with those for an entire metro area, which may include suburbs of varying desirability. But the discrepancies can also be due to variation in existing leases vs. current asking rents. Data from existing leases can be impacted by policies like rent control, or factors like how long a tenant has been in a given unit. As a result, this information may not provide a renter who is new to a city and looking to rent an accurate picture of what they can expect to pay. JPER urges agencies like the Census Bureau and HUD to partner with online listing services like Craigslist and Zillow to create an accurate picture of current asking rents that can be used to determine funding levels for vouchers and assistance programs. This information could also be used by City Planners to address local housing issues. Planetizen – How Much Does It Cost to Rent an Apartment, Anyway?
 
BikePortland published a rundown of the recent transportation forum, where 20 candidates for a variety of City offices answered five questions on regional transportation issues. Candidates were asked how they would tackle rising greenhouse gas emissions, how they would make roads safer, whether they support the I-5 Rose Quarter freeway expansion, how they would address a decline in cycling, and how they would ensure low-income communities benefit from transportation investments. Several candidates argued that to reduce greenhouse gas emissions, the city should make transit free for all residents. Among the city council candidates that advocated for free transportation were Margot Black, Seth Woolley, Rachelle Dixon, Carmen Rubio, and Mingus Mapps. Candace Avalos, who is running for Amanda Fritz’s council seat, discussed her plan for a city-wide Green New Deal, which she describes as necessary for tackling emissions using an equity lens. Candidate answers varied more widely on the question of how to improve safety. While Tim DuBois and Keith Wilson focused on how to change driver behavior with policies like red light and speed cameras as well as distracted driving laws, Loretta Smith argued that road deaths should be treated as a public health epidemic. Sam Adams criticized PBOT’s lack of commitment to Vision Zero, but Commissioner Eudaly explained that ODOT controls many of the most dangerous roads. Commissioner Eudaly and Sam Chase were the only city council candidates who did not explicitly come out against the I-5 Rose Quarter Freeway Expansion. Mayoral Candidate Ozzie Gonzalez argued that the project still has the workforce and community redevelopment potential, while Sarah Iannarone called for congestion pricing, and Teressa Raiford outwardly opposed the plan. BikePortland – Metro: Region Is Failing to Meet Transportation Safety Goals

 
Finally, the New York Times reports that although the wealthiest cities in the US have continued to see their economies grow, income has become more concentrated in second-tier cities over the past three decades. While it is true that the difference in per capita income grew substantially between 2000 and 2018 since 1980, the top 5 metros have seen their share of aggregate national income slowly wane. Between 1980 and 2018, the top five cities have seen their share of national income decrease by 0.6%, while cities ranked between 6 and 10 have seen their share grow by 1.7%, and those ranked between 11 and 50 have increased by 3.1%. Upshot reporter Jed Kolko argues that this shift is occurring because the places getting richer are not getting bigger – the largest, wealthiest cities have built relatively little housing over this time, due to a combination of regulations and geography. As a result, their population growth has slowed substantially. While people at the top of the income scale can still afford to move to these cities, younger, less affluent workers have chosen to live in a larger number of less expensive metros. But these workers are not necessarily moving to the most affordable metro areas. Cities that fall outside of the top 250 metros by total income have seen their share of national wealth drop by 3.7% since 1980. NY Times – Yes, Rich Cities Are Getting Richer. But That’s Not the Whole Story

Thanks for listening – we’ll be back next week with a new edition of Multifamily Marketwatch. Be sure to check out our recent HFO TV interview with Perkins & Co Shareholder Trent Baeckl, who discusses recent updates to the Opportunity Zones program. HFO TV videos are on our website, our YouTube channel, and the HFO mobile app. And you can always stay up to date on multifamily news throughout the week by visiting or subscribing to the Northwest Apartment Investor blog.