HFO Multifamily Marketwatch - April 27, 2020

Harvard’s Joint Center for Housing Studies reports there may be shrinking demand for rentals due to the pandemic; Oregon and Washington governors reveal a framework for gradually lifting stay at home orders, and the Oregon Emergency Board approves $8.5 million in rental support for landlords.


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Harvard’s Joint Center for Housing Studies reported earlier this month that the COVID-19 pandemic could exacerbate a slowdown in rental demand that had already started before business closures began. According to research associate Whitney Airgood-Obrycki, rental demand increased significantly between 2004 and 2016 but started to decline in 2017 and 2018. In 2019, just 400,000 new rental households were formed. Airgood-Obrycki believes that demand will drop further as cash-strapped families double up to afford rent. While the last recession pushed many homeowners into the rental market, this one is hitting service and hospitality industry workers the hardest – groups that tend to already be renters. As of March, RentCafe was already seeing a 22% decrease in searches for new rentals. But while Class A properties are likely to see far fewer applicants for vacant units, the demand for affordable housing is expected to increase substantially. While overall rents may go down, the most vulnerable tenants may find it harder to compete for these units. Also, eviction moratoriums and stay at home orders could discourage some renters from moving in the short term. There may also be a higher-than-normal number of evictions once these orders are lifted, and tenants are expected to pay back rent. Airgood-Obrycki concludes that the impacts of the pandemic will largely depend on its duration and the quality of the policy response to it. Still, in all likelihood, it will exacerbate inequalities already present in the rental market. JCHS – Rental Market Likely Headed for a Slowdown

HousingWire reports that a new rule allows banks to postpone appraisals for residential or commercial properties for up to 120 days after a loan has closed. The law was proposed by the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corp, and the Office of the Comptroller of Currency. It went into effect on April 17. FHA, HUD, VA, Fannie Mae, and Freddie Mac loans are exempt – the rule only applies to banks that are overseen by the Fed, the FDIC, or the OCC. Loans for new transactions, as well as refinances, are subject to this change. Appraisers have expressed concerns about the rule, especially in cases where a property’s value may drop over the 120 days. With current conditions contributing to higher than usual levels of uncertainty, appraisers believe that such an occurrence is well within the realm of possibility. But regulators believe the rule will expedite the lending process and get money in the hands of businesses and individuals. The new law is temporary – it will remain in effect until December 31, 2020. HousingWire – Banks Can Now Postpone Some Appraisals until 120 Days After a Mortgage Closes

According to calculations by a New York investment analyst, Oregon may be getting the short end of the stick when it comes to Paycheck Protection Program funds. The Paycheck Protection Program is part of the CARES act, which was passed by the US Congress in response to the coronavirus pandemic. Ernie Tedeschi, of Everscore ISI, found that just 42% of eligible payrolls in Oregon were covered by the program, the third-lowest percentage of any state in the nation. Joining Oregon in the bottom three were New York and California, two other Democratic strongholds. Meanwhile, over 79% of small businesses in Nebraska, North Dakota, and Kansas received funding through the program. US Senator from Oregon Ron Wyden has pledged to press the Trump administration on why there were such significant discrepancies between red and blue states, and why Oregon, in particular, received so little. Wyden argues, quote, “Relief Congress passed to help must get distributed fairly without any partisan thumb on the scale.” Tedeschi’s findings were initially published in Bloomberg News. Willamette Week – Oregon Businesses Getting Stiffed by President Trump’s Small Business Relief Program

 
Both Governor Kate Brown of Oregon and Governor Jay Inslee of Washington indicated last week that while it is still too early to fully reopen businesses and services, they are working on frameworks to slowly ramp-up state economies. A draft of Governor Brown’s framework for “Reopening Oregon” was privately disclosed to the Oregonian last week, though it will not be finalized until the first week of May. Consistently with previous statements from the governor’s office, the draft proposal indicates that the state will not be able to ease restrictions until certain conditions are met, including a decline in the number of new COVID cases and increases in testing capacity and contact tracing. The framework indicates that the first phase, which would not be rolled out until at least late May, would allow some schools, youth activities, restaurants, gyms, personal services, religious gatherings, and non-emergency medical procedures to recommence. It would still require that people in at-risk groups stay at home and that all Oregonians minimize non-essential travel, and work from home where possible. But public health officials in the Portland area are less optimistic than Brown’s office appears to be – Dr. Jennifer Vines emphasized the need for continued social distancing to keep outbreaks localized. At the same time, Health Authority director Patrick Allen warned against operating in a “halfway place” that could cause a resurgence of the disease. Meanwhile, Governor Inslee announced that his stay-at-home order will not be lifted by May 4, the date he initially set in his executive order. But he did indicate that if the number of new cases continues to drop, he may begin to lift restrictions on elective surgeries, outdoor recreation, and construction activity. Like Brown, Inslee argues that the state cannot start lifting restrictions unless there is a significant increase in testing and contact tracing. He also advocates for more resources for mental health and homeless services.

• Oregonian – How Could Oregon Reopen amid Coronavirus? Read Details from a Draft Report the Governor’s Office Didn’t Want Shared
• OPB – When Can Oregon Reopen? Not Anytime Soon, Officials Say
• Oregonian – Washington Gov Jay Inslee Says State Won’t Be Able to Lift Coronavirus Stay-Home Rules by May 4
• Seattle Times – Inslee Says Elective Surgeries, Outdoor Recreation and Some Construction Could Restart as Washington Begins to Recover from Coronavirus 

As of April 27, low-income families in Portland can begin applying for $250 Visa gift cards to cover expenses. The City has allocated $1 million for cash assistance - $200,000 will go toward the gift cards, while the rest will be given to 19 local nonprofits that will provide up to $500 per household within their networks. The nonprofits serve a number of vulnerable communities, including people with disabilities, homeless residents, immigrants, refugees, domestic violence survivors, at-risk youth, and communities of color. In order to apply for the gift cards being distributed by the Portland Housing Bureau, residents must show how they have been impacted directly by the COVID pandemic. This can include job loss or a cut in hours worked, missed work due to childcare needs, increased childcare expenses, or having to take care of yourself or a relative who is sick with the virus. Only those who made 50% or less than the area median income prior to the state of emergency are eligible. On the scale provided by the City, this includes individuals making less than $30,800 per year, or 4-person households making under $43,950 per year. Applications are being accepted by 211info. Oregonian – Portland to Give $250 Gift Cards to Low-Income Families to Help with Expenses

The Oregon Legislature’s Legislative Emergency Board met last Thursday to vote on over $30 million for coronavirus response efforts. While more funding is likely to be available after the May 20 revenue forecast is released, the funding allocated in this session will come from the current two-year general fund and lottery budget. Among the eleven agenda items, the committee voted on were $12 million in rental assistance for people experiencing a loss of income. The support also includes hotel vouchers for homeless residents and $10 million in small business assistance for businesses with no more than 25 employees. Both of these items were approved with unanimous votes. Of the $12 million allocated for rental assistance and emergency shelters, $3.5 million will go toward hotel vouchers for homeless residents and farmworkers in need of quarantine. In comparison, $8.5 million will go to landlords on behalf of tenants who are unable to pay rent. The $8.5 million will be distributed to local jurisdictions based on a preset formula that takes into account both total population and level of need. Renters who make less than 50% of the area median income will qualify for these subsidies. House Republican Leader Christine Drazan asked whether this threshold will take into account lost wages since the crisis, or whether only those who made 50% AMI before business closures will be eligible. A legislative staff member indicated that these details will be determined in contract negotiations with continuums of care. The $10 million in business assistance will be distributed by predetermined agencies, which some of the members of the committee pointed out are primarily located along the I-5 corridor and in Bend. Local governments will have the ability to match these funds through existing emergency programs, and Speaker Kotek believes the total amount available will be close to $15 million. For all of the agenda items, the specifics will have to be hammered out by state agencies and the groups charged with distributing the funds. While a handful of committee members expressed concerns over this, all were in agreement that emergency actions are needed to ensure people and businesses across the state are provided with essential financial resources. Northwest Apartment Investor Blog – Oregon Legislative Emergency Board Approves $8.5 Million in Rental Assistance
 
The Oregon Occupational Safety and Health Division announced that it will begin conducting spot checks of workplaces to evaluate whether they are complying with coronavirus safety measures. According to the Daily Journal of Commerce, Oregon OSHA received 2,887 COVID-related complaints between March 2 and April 12, more than the total complaints typically received each year. Many of these complaints were from workers on large construction sites, who allege that social distancing practices are not being followed. On one job site, a worker with COVID symptoms was told he could be fired for not reporting to work. OSHA plans to conduct on-site inspections of 12 workplaces to ensure safety regulations are being followed. OSHA intends to prioritize investigations of employers that it deems most likely to continue failing to comply with the new safety rules.
DJC – Officials Starting to Check Out Oregon Workplaces

Finally, the LA Times reports that the high cost of building affordable housing in California is increasing at the same time that the demand for affordable housing is set to skyrocket due to the impacts of the coronavirus. The LA Times interviewed developer Ginger Hitzke, whose 10-unit affordable housing project in Solana Beach is now estimated to cost nearly $1.1 million per unit, making it the most expensive affordable housing project in the state. When Hitzke first proposed the plan in 2009, it was an 18-unit building that was expected to cost around $414,000 per door. In 2010, Hitzke was asked to reduce the size of the building and then waited four years for the City Council to approve the project. The City Council’s approval required Hitzke to build an underground garage with 53 parking spots under the 10-unit building. Over the next four years, she battled two separate lawsuits filed by a neighboring condo association. In 2019, construction costs increased again, bringing the price per unit to $1,073,214 and causing a funding gap. In December 2019, the state pulled its funding from the project because construction had not yet started. In March, Hitzke informed the City she wanted to back out of the development agreement. The City had promised the affordable, family-sized units to residents who had lost their homes in 1992 after a local motel was demolished. These residents were promised new housing by 1999, but many are still waiting. As business closures and layoffs continue due to the ongoing pandemic, the competition for the small number of affordable housing units is expected to increase dramatically. But California’s history of delaying and adding to the cost of affordable housing has kept the supply of these units artificially low. Governor Newsom has begun work on simplifying the process for developers to get funding for affordable housing, but this will do little in the short term to help vulnerable renters. They may find themselves without a place to live by the end of the year. LA Times – Affordable Housing Can Cost $1 Million per Apartment in California. Coronavirus Could Make It Worse