Survey reveals Americans’ top investment choice: Real estate

The crash in housing prices that walloped the economy over the past decade no longer seems to haunt Americans as it did during the recession. For the first time in three years, real estate was the most popular investment option in a survey that accompanied Bankrate’s Financial Security Index.

When asked what kind of investments made the most sense, 27 percent said they’d invest in property if they had a pool of spare cash. CDs and other cash investments, the top answer in Bankrate’s 2013 and 2014 surveys, came in second at 23 percent.

Wall Street generated little interest — only 17 percent said they’d buy stocks — even though stocks have been a relatively strong investment recently. The Standard & Poor’s 500 index jumped 7.7 percent year over year from mid-July.

“We’re not seeing the bunker mentality from individual investors to the same extent of the past few years,” says Greg McBride, CFA, Bankrate’s chief financial analyst. “But the preference for real estate over, say, the stock market, does beg the question of whether or not Americans are again viewing residential housing as a golden ticket.”

Gold and other precious metals followed at 14 percent, and bonds, with yields that have hovered near historical lows in the past year, came in last at 5 percent.

Bankrate’s survey was based on a national telephone poll conducted between July 9 and 12. It has a margin of error of 3.6 percentage points.

Housing on the rise

Americans are likely encouraged by recent indicators showing the housing market’s strength. In May, sales of new homes grew 2.2 percent to the highest level in seven years, and April’s figures increased 8.1 percent from March, according to the U.S. Census. Buoyed by demand for single-family homes, existing-home sales also rose 5.1 percent in May, recording a 9.2 percent year-over-year gain, according to the National Association of Realtors.

Home values are also rising. S&P/Case-Shiller’s latest measurement of national home prices shows a 4.2 percent year-over-year gain from March to April. Since February 2012, when the index bottomed, prices have increased 26.8 percent.

Investment preferences by demographics

Bankrate’s FSI survey broke down which groups preferred each investment by varying characteristics. For instance:

  • Those living in the West or in urban areas showed a tendency toward real estate investments, at 35 percent and 31 percent, respectively. Midwesterners, though, preferred cash and stocks over real estate. People living in the South preferred real estate and cash investments.
  • Age can be a defining characteristic. The youngest group, those between 18 and 29, had the highest preference for cash, at 32 percent, while people between 30 and 49 favored real estate more than any other group, at 32 percent.
  • By income level: Those bringing home over $75,000 a year were the most likely to prefer the stock market, with 28 percent responding that they’d favor stocks over other investments. Americans in the lowest income bracket, making less than $30,000, were the most likely to trust cash investments. And 35 percent of those earning between $30,000 and $49,999 were the most likely to choose real estate over the other options.
  • Risk tolerance increases with more education. College grads are more likely to invest in stocks (29 percent) than any other education group.

What the experts say

Many financial planners say Americans shouldn’t discount stocks when it comes to investing a little extra cash. David Mullins, wealth manager at David Mullins Wealth Management, pointed out that over 10 years the S&P 500 has generated a positive return 95 percent of the time. It has never produced a negative return in a 20-year period, he says.

“The thing stocks offer that the other investments don’t are dividends,” Mullins says. “Over time, the compounding and reinvestment of these dividends makes a strong case for stock market investing for any extra money you won’t need for 10 years.”

And what about real estate, Americans’ most preferred investment option? Hank Mulvihill, principal of Mulvihill Asset Management, says that although real estate can be profitable over the long term, it’s not as easy to turn into cash as other investments. Instead, he prefers a portfolio of bonds and high-quality, dividend-paying stocks for any money that isn’t needed for 10 years. And Mulvihill doesn’t think the other investment options in Bankrate’s survey are worth considering.

“Cash is not going to become more valuable unless deflation sets in. CDs are bonds issued by banks, and pay insulting rates, so why bother?” he says. “Gold and silver are useless.”

Financial comfort shaky

Despite the underlying optimism in real estate, Americans’ financial security slipped in July, with the FSI hitting its second-lowest reading this year.

When it came to their jobs, 22 percent said they felt “more secure” compared with how they felt a year ago, and 14 percent said they felt “less secure.” While still positive, it’s a weaker response overall. Last month, 29 percent of those surveyed said they felt “more secure” about their jobs, compared with 9 percent who said they felt “less secure.”

They were also concerned about their level of savings. When asked about the money they’d socked away, 29 percent said they were “less comfortable” with their level of savings compared with a year ago. Only 18 percent said they were “more comfortable.”

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Market Pulse for March 2017

Market Pulse section compiled by IvyLee Rosario. To comment, email

Multifamily Starts:

According to the U.S. Census Bureau and the U.S. Department of Housing and Urban Development, starts of buildings with five or more units continued to show wide swings on a monthly basis. In December 2016, these buildings rose by 53.9 percent to a seasonally adjusted annual rate of 417,000. The significant change over the month of December follows the 38.7 percent drop in November. In October, that amount rose by 72 percent, erasing the 39.1 percent fall in September.

Over the year, starts of buildings with five or more units fell by 3.1 percent to 374,000. However, its level at the end of 2016 is 283 percent above its 2009 low, 98,000. In addition, the number of these starts in 2016 is 24.7 percent above its average level between 2000 and 2007, 300,000. In contrast, the number of starts of buildings with two to four units rose from 11,000 units in 2015 to 12,000 in 2016. In 2009, there were also 11,000 starts of two to four unit buildings. However, the number of starts of buildings with two to four units is 69.1 percent below its 2000 to 2007 average of 38,000.

CPI vs. Rent:

The headline consumer price index (CPI) rose by 2.1 percent over the past 12 months ending in December 2016. This is the first time since June 2014 that inflation has reached or exceeded 2 percent. The growth in the CPI over the year partly reflects a 5.4 percent increase in energy prices. However, food prices fell by 0.2 percent over the year reflecting declines in the first half of 2016 and then stagnancy in the second half. Excluding historically volatile food and energy prices, “core” CPI rose by 2.2 percent as shelter costs, the major component of the index, rose by 3.6 percent. Rental prices, a component of the overall shelter costs, grew by 4 percent over the year. Since the increase in rental prices over the past 12 months exceeded the rise in overall inflation over the same time period, as measured by core-CPI, then NAHB’s Real Rent Index rose, increasing by 1.7 percent over 2016. More precisely, rental prices grew by 3.9 percent over 2016 and core-CPI rose by 2.2 percent resulting in a 1.7 percent increase in NAHB’s Real Rent Index.

Existing Condo Sales and Prices:

In December 2016, sales of existing condominiums and cooperatives fell by 10.3 percent, however, over the year, the number of sales in 2016, 614,000, was 1 percent higher than its level in 2015, 608,000. Regionally, the 1 percent increase in condo and co-op sales nationwide reflected gains in the Midwest (5.1%), the West (2.7%) and the Northeast (0.9%). However, sales in the South fell by 1.1 percent in 2016. Meanwhile, the inventory of existing condos and co-ops fell by 8.9 percent over 2016. There are 194,000 condos and co-ops in inventory. Since the pace of sales growth, which was positive, exceeded the rate of inventory growth, which was negative, then the months’ supply, which represents the number of months it would take to exhaust the existing condo and co-op inventory at the current sales pace, fell, dropping by 6.3 percent in 2016 to 4.5 months. Consistent with sales growth and a shrinking inventory, median prices on condos and co-ops nationwide rose by 5 percent to $221,200 in 2016.

Building Materials:

The price of inputs to construction rose by 2.4 percent on a not seasonally adjusted basis over the 12 months ending in December 2016. This component of the Producer Price Index is composed of the price of inputs to new construction and the price of maintenance and repairs. Over the past year, the price of inputs to new construction increased by 2.4 percent. The price of inputs to new non-residential construction climbed 2.2 percent while the price of inputs to new residential construction rose by 2.5 percent. Meanwhile, the price of maintenance and repairs construction grew by 2.3 percent over the past year. The price of inputs to non-residential maintenance and repairs rose by 2.4 percent while the price of inputs to residential maintenance and repairs declined by increased by 2.2 percent. Twelve-month changes in the prices of individual building materials also showed gains. The price of oriented strand board (OSB) grew by 13.8 percent, cement (4.4%), gypsum (2.0%) and softwood plywood (8.7%).

ommentary and data were supplied by Michael Neal, a senior economist with the National Association of Home Builders (NAHB).

Michael Neal is a senior economist with the National Association of Home Builders (NAHB). In this capacity, he monitors macroeconomic and financial issues that affect the U.S. and local housing markets. Prior to joining NAHB, he worked at the Joint Economic Committee of the U.S. Congress, the Federal Reserve, the Congressional Budget Office and Goldman, Sachs & Co.

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Single-Family Housing Supply Falls to Record Low, Tight Market Strengthens Apartment Demand

Wage growth and rising household formation are generating healthy demand for housing. The for-sale market is stuck in neutral, however, as tight supply, rising mortgage rates and upward pressure on existing home prices have muted growth. Limited for-sale inventory and lifestyle changes favoring renting are keeping many would-be owners in rental housing. This supported apartment vacancy falling 20 basis points in 2016 to 3.9 percent.


An increase in new home construction would help alleviate some pressure, but rising construction costs are keeping housing starts at bay, ending the year up 4 percent from 2015. The median price of new homes sold during December increased to $318,850, due to an increased proportion of sales of homes being above $300,000. This suggests that construction of entry-level homes is not occurring at a pace needed to jumpstart the housing market.

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January 2017 Market Trends

After a tumultuous 2016, the national apartment market began 2017 on an even keel, as annual effective rent growth declined by only 1 basis point (bps) to 2.1% and the average rent level increased for the first time in five months.

Though the January rent-growth rate was essentially the same as December’s, it was 212 bps lower than the 4.3% of January 2016, reflecting the moderation of the apartment market over the past year. It was the lowest January figure since 2010.



The average rent level followed form by increasing to $1,277 per unit per month from $1,273 in December. This was the third straight year in which average rent increased by $4 from December to January. The average still has a way to go before regaining the peak of $1,293 recorded in August 2016.


January’s rent-growth steadiness was reflected in the metro numbers, with 27 of Axio’s top 50 markets – based on number of units – reporting increased rent growth, 22 showing decreased rent growth and one market holding exactly even. Just one metro – San Jose – increased rent growth by more than 100 bps, and the Bay Area market still had negative rent growth for the sixth straight month.

In fact, all three Bay Area metros reported strengthening numbers, as Oakland escaped negative territory with 0.0% rent growth in January, compared to -0.5% in December. San Jose’s rent growth increased from -2.4% to -1.0%, while San Francisco’s number went from -2.3% in December to -1.6% in January.

And Houston recorded its first increase in annual effective rent growth in 19 months, climbing to -3.5% in January from -3.9% in December.

Occupancy Continues to Dip

The national occupancy rate declined for the fifth straight month, ending January at 94.4%, a 12-bps decreased from December’s 94.5% and 26 bps lower than the 94.7% of January 2016.

Seasonality played a part in the decline, as the rate has gone down each January since the end of the Great Recession. Occupancy historically picks up in February.


While year-to-date (YTD) effective rent growth in January cannot tell what the year’s trends will be, it’s nice to know that January’s rate of 0.2% is right in line with the post-recession average.

The January YTD rate was the same as that of January 2016 and 1 bps above the post-recession average of 0.2%. The highest recovery-era January YTD rent growth was recorded in 2014, while the lowest was in 2013.

jan17mkt-4 jan17mkt-5

Where is Phoenix’s Urban Core?

After suffering a severe housing price collapse during the doldrums of the Great Recession, Phoenix is roaring back to life, particularly its apartment market. Phoenix rents grew by an average of 6.3% in 2016, the fifth highest growth rate among the top 50 metro areas in the country.

However, unlike other major metro areas, Phoenix lacks a clearly-defined residential “urban core.” Phoenix features a “polycentric” form of development, with multiple employment and residential centers, as opposed to the sort of concentric (common/single center) development that characterizes older cities like Chicago. Polycentric development patterns often result in sprawl, and Phoenix is, according to some measures, the 12th most sprawling metro among the top 50 metros in the US (less spread out than Dallas, but more so than Atlanta and Houston).


As suburban development exploded in post-World War II Phoenix, the central business district downtown began to hemorrhage residents and retail in the 1960s, leading to the appearance of a hollowed-out urban core. Apartment development in Phoenix illustrates the declining fortunes of downtown Phoenix. The vast majority of apartments in Phoenix were built during the 1980s (some 80,000 units were built from 1981-1990), but only 3,519 of those units were built in the true downtown area of Phoenix —only 4% of total multifamily development.


Apartment development in downtown Phoenix accelerated in the early 2000s and through the present day: Some 9% of all new units delivered in Phoenix from 2001-2010 were concentrated in the downtown area, and 6% were delivered downtown from 2011-2017. Part of this may represent the preference of Phoenix residents for suburban lifestyles over urban ones. On the other hand, given the sprawling nature of the Phoenix metro area, it’s possible that urban-minded residents are indeed living in urban areas — but not downtown. Polycentrism means more than one center, and Phoenix very likely has multiple urban cores.

Because the most expensive apartments with the highest rental rates are built in dense, urban areas (primarily due to the lifestyle preferences of the renters), it follows that the highest-priced properties in a given metro are, by and large, urban properties. Likewise, because we assign asset class grades based on rent levels, the top-of-the-line product (Class A+) also tends to represent urban core properties.


Based on this logic, the South Scottsdale submarket of Phoenix is most clearly an urban core submarket in that the average rent per square foot in South Scottsdale apartments is 13 cents more expensive than the next most expensive submarket, North Tempe. Yet, considering the difference in rental rates at the top of the market, there is also good reason to include North Tempe, Central Phoenix South (the true central business district/downtown), Northeast Phoenix and North Scottsdale/Fountain Hills. This is a very broad definition of urban core to be sure; but it follows from Phoenix’s historic pattern of development, as well as the type of clustering of high-end products that we see in urban cores across the country.

When we track the effective rent growth of the different conceptions of Phoenix’s urban core(s), we find some interesting results.


First, we look at the true central business district/urban core of Phoenix (Central Phoenix South submarket). Of note is the remarkable similarity in performance between the presently-considered urban core and the weighted average of the suburban submarkets. In 2016, for example, the average gap between rent growth in Central Phoenix and the suburban submarkets was 2.1%, compared to the national average urban/suburban gap of 2.3%. In general, suburban submarkets are outperforming urban core submarkets across the country.


If we instead use South Scottsdale (the priciest submarket in Phoenix) as the urban core, the average gap between suburban performance and urban core performance in 2016 widens to 3.9%, which is more in line with national trends. In fact, after testing different urban core definitions in Phoenix, South Scottsdale represents the most urban-core-like submarket in Phoenix.


However, there remains a demographic challenge that may impede a full urban core renaissance (however urban core is defined), particularly insofar as the apartment market is concerned. About 36% of the entire US population ages 25-34 (prime renter years) has a bachelor’s degree or higher. In Phoenix, on the other hand, only 28% of all 25-34-year-olds have a bachelor’s degree or higher.

The relatively low higher-educational attainment levels in Phoenix suggests a population of renters that is less likely to be able to afford the top-tier urban core rents. And, perhaps more importantly, this likely means a pool of renters that are simply not as interested in urban core lifestyles as the renter pools in other major metro areas.


n general, urban core submarkets across the United States are underperforming suburban submarkets. In December 2016, urban core rents grew, on average, by only 0.1% while suburban submarkets grew, on average, by 2.7%. This is typical for where we are in the current cycle.

Unlike many other major metros, Phoenix is unique in that it doesn’t have a clearly identifiable urban core, but also in that the places that most approximate an urban core in Phoenix feature relatively strong rent growth (though still below the suburban average). Supporting relatively strong urban core rent growth in Phoenix is the metro area’s late recovery from the housing crash, which means that Phoenix is rising just as other, early recovery metros are falling. Additionally, ASU’s tremendous enrollment growth in recent years along with improved transportation options has increased demand for a more urban-minded lifestyle.

On the other hand, Phoenix’s divergence from the national trend of underperforming urban core areas might imply that what we’ve tentatively identified as the urban core(s) has more in common with suburban submarkets than it does with urban core submarkets around the country.

Irrespective of urban or suburban properties, Phoenix is expected to continue posting strong rent growth figures over the next several years—well above the metro area’s long-term average. A truly strong urban core could be in the cards in the not-too-distant future.

Sacramento No. 1 for 11th Straight Month

Sacramento reported the highest annual effective rent growth among the Axio top 50 markets – based on number of units – for the 11th straight month, but its 9.5% rent growth in January was the lowest for the No. 1 spot since June 2014.

That was the last time none of the top 50 markets had double-digit rent growth. In the 31 months since, the three metros that ascended to the top spot – Oakland, Portland and Sacramento – all came in at 10% or higher.

The list of top markets underwent some change in January. Charleston, SC re-entered the chart at No. 8, while San Diego returned at No. 14. The Northeast region gained representation last month, as the Nassau County-Suffolk County market joined the rankings at No. 17.

Memphis, Dallas and Charlotte fell off the list.


Please contact us for any further information.

Jay Denton

Senior Vice President, Analytics


Main Office: 214-953-2242


Stephanie McCleskey

Vice President, Data Acquisition


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NATIONAL MULTIFAMILY Commentary Multifamily Demand Will Still Outweigh Supply In 2017

Ben Stacks, SVP and NYC area market manager at Capital One.

NEW YORK CITY—For the past several years, Capital One has surveyed multifamily industry participants at the RealShare Apartments conference to assess market sentiment for the coming year. Starting last year, the firm began using the survey as a platform for blog posts from our senior bankers, who explain the implications of the findings and also add their own perspectives on the coming year. This year, the firm’s Ben Stacks, SVP and NYC area market manager, discusses one particular question in the survey that perfectly captures the moment for the multifamily market—“What will the balance be between supply and demand in the coming year?” Attendees at the 2015 conference believed that demand would outweigh supply by 15 percentage points in 2016.  For 2017, that margin dropped almost in half.

The views expressed in the commentary below are Ben Stacks’ own.

While many industry participants believe that demand is running ahead of supply, the general sense is that the market will tighten somewhat in 2017. Certainly, that’s what we are seeing in New York. In pockets of softness—areas like Williamsburg, Long Island City, and some neighborhoods in Manhattan—landlords have been offering free rent and other concessions to prospective tenants. On the other hand, landlords in other markets across the country—Seattle and Los Angeles come to mind—are having no trouble increasing rents.

Nationwide, Overbuilding Is Not a Long-Term Concern

This sentiment is confirmed by a response to another question we always ask our RealShare survey participants: “What keeps you up at night?” Of the potential choices, overbuilding came in last at just 20%.

There are good reasons for this sentiment. The fundamentals for a vibrant multifamily sector remain in place, unemployment has been steadily dropping, and the stock market has been doing well of late. In addition, a number of regulations—primarily the Basel III requirements—have kept multifamily building in check.  This effectively means that banks will continue to be more selective about their construction lending.

In New York, the January expiration of the city’s 421-a housing program is a significant factor. This program provided property tax breaks to developers who set aside units for low- and moderate-income tenants, and its expiration kept development in line with demand in 2016. The legislature is expected to restore the program early this year, but the hiatus has unintentionally helped keep the softness we’ve seen from spreading.

In addition, a 39% increase in survey participants who say that construction loans will be the most important type of financing for their business in 2017 attests to the pent-up demand we are seeing nationwide.

Enthusiasm for Multifamily Remains Unabated

Each year we begin the RealShare survey with a question designed to gauge general market sentiment: “Are you going to be a net buyer or seller in upcoming year?” Fifty-one percent of the respondents declared they would be a net buyer, up from 47% from last year. Despite concerns over a narrowing gap between demand and supply this year, our respondents’ enthusiasm for multifamily remains unabated. Their consensus: 2017 will be another solid year for our business.

Several economic factors have resulted in net positives for the multifamily sector and prices in core markets are at an all-time high. But just how long can the market continue on this trajectory? Join us at RealShare Apartments East on Feb. 28 and March 1 for insights on succeeding in the right markets as well as navigating and finding opportunities in the more challenging ones. Learn more.

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Native American Communities Explore New Territory

A rugged patch of land is being transformed into a 41-unit affordable housing development on the Santo Domingo Pueblo in New Mexico.

Scheduled to be completed around May, the project will connect residents to the nearby New Mexico Rail Runner train station, making The Domingo Housing Project a rare rural transit-oriented development. “A lot of people use the station to go to work, school, doctors’ appointments,” says developer Greta Armijo, executive director of the Santo Domingo Tribal Housing Authority.

Located within walking distance of the new housing, the train station is used by many of the pueblo’s artisans who journey an hour each day to Santa Fe to sell their turquoise jewelry and pottery.

The pueblo has a population of a little over 5,000 people but only 500 homes within the community, according to Armijo. The new, $10.2 million development will go a long way to meet the community’s housing needs. It’s about two miles from the pueblo’s main village and will be a mix of single- and two-story units in a style specific to the Santo Domingo Pueblo. The homes respect the tribe’s historical preference for density and shared community spaces while placing residents in close proximity to needed amenities.

“It will have a similar layout to the historic village,” says Armijo, who has led the housing authority for five years. “It’s culturally significant.”

In addition, the housing complex is close to the recently reopened Santo Domingo Indian Trading Post. A walking and bike path designed by local artisans is also in the works. Project supporters hope the effort will make the area a destination for visitors. It would be a source of economic development, notes Joseph Kunkel, executive director of the Sustainable Native Communities Collaborative, an organization that works on culturally and environmentally sustainable development with American Indian and other indigenous communities nationwide.

“You have all the components that potentially make up a community, and, if done correctly, the community could flourish,” he says. “This affordable rental project has the ability to turn renters into potential future homeowners. It’s a unique opportunity for the community and tribe.”

Kunkel, who recently completed an Enterprise Rose Architectural Fellowship, assisted in the planning and development of the project. The program partners early-career architects with local community development organizations.

“By putting affordable housing next to public transportation, you’re giving those individuals access to Albuquerque and Santa Fe for jobs, education, healthy food, access off the rez,” Kunkel says. “It could become a precedent for other tribes that have access to public transportation. This is showing why it’s important to think about planning and where you strategically develop housing.”

The Domingo Housing Project is being financed largely with low-income housing tax credits (LIHTCs) awarded by the New Mexico Mortgage Finance Authority (MFA). The credits, which were syndicated by Raymond James Tax Credit Funds (RJTCF), are providing approximately $8.4 million in equity.

“These 41 units will provide much-needed and affordable housing to the Santo Domingo tribal community and exemplifies the mission and value of the LIHTC program,” says Ben Shockey, acquisitions manager at RJTCF, which has a strong track record of providing housing credit equity to tribal communities.

To better understand the intricacies of housing finance, Armijo and her team partook in the Tribal Housing Excellence Academy, an initiative launched by Rural Community Assistance Corp. (RCAC) and Native Capital Access (NCA) to provide technical assistance to and coach Native American communities in best practices for developing housing.

“Our biggest message is that they need to be accessing resources they haven’t yet tapped into,” says Eileen Piekarz, rural development specialist at RCAC. “Some organizations in Indian country have been successful in reaching out for tax credits, HOME funds, Federal Home Loan Bank grants, or even just conventional loans, but there are so many Native communities that haven’t used those funding sources. Our pitch is to take advantage of those opportunities they haven’t yet gone after.”

The Santo Domingo group learned about LIHTCs and won an allocation from the MFA on its first attempt. It also secured funding from other sources, including the New Mexico Housing Trust Fund, the Primero loan program, and federal HOME funds from the state agency, says Isidoro “Izzy” Hernandez, the MFA’s deputy director of programs.

Assembling the funding has been the most challenging part of the project, according to Armijo. “You’re trying to throw a hook out into a big ocean and see who’ll [bite] on your project,” she says.

Accessing capital

Dave Castillo knows the problem well. He recalls a story about a tribal official who once asked, “How is it that the United States can put a man on the moon but not a bank on an Indian reservation?”

Accessing financing is a big hurdle for many tribal housing authorities, says Castillo, CEO of NCA, a Tempe, Ariz.–based nonprofit that helps meet the community and economic development needs of Native American communities by providing them with technical assistance and financial capital.

The difficulty accessing capital is “due largely to a lack of precedence, institutional knowledge, relationships, and administrative infrastructure all vital to financing transactions,” Castillo says. “Trust land has limited use as collateral. Conventional bank standards are inflexible, and networking with equity investors is constrained by geographic, social, and business isolation.”

Generally, there exists some misunderstanding and mistrust between tribal government and business sectors, Castillo says.

He praises the Domingo Housing Project, which received gap financing from NCA.

“If more tribes modeled their affordable housing projects after this one, I believe financial institutions would flock to Indian Country,” Castillo says. “The Domingo Housing Project and the Santo Domingo Tribal Housing Authority as the developer represent the ideal affordable housing development project in Indian Country. It meets a critical housing need and is forward-thinking in its transit-oriented design.”

The development has received strong support from the appointed tribal leadership, and the integration of decision making with an active board of commissioners reflects a true community-based effort, according to Castillo.

“Most important, Indian housing professionals leading the project have shown extreme diligence throughout the development process, demonstrating almost flawless execution of industry best practices,” he says.

The Sokaogon Chippewa Housing Authority has transformed an old motel into affordable housing in Wisconsin.

LIHTC investors show their interest

Several states, such as Arizona, California, and North Dakota, have tribal set-asides in their qualified allocation plans (QAPs) that spell out how they award housing credits. This helps Native American communities access needed LIHTCs.

In New Mexico, the MFA doesn’t have a separate set-aside, but it awards points to projects that involve qualified tribal organizations. However, many states emphasize projects in urban centers with points for walkability and proximity to services. “It’s difficult for rural projects, especially tribal developments, to meet those requirements,” says Elizabeth Glynn, CEO of Travois, a Kansas City, Mo.–based consulting firm focused on promoting housing and economic development for American Indian and native Alaskan and Hawaiian communities.

Construction costs are also a big challenge. The remote location of some Native American developments makes it difficult to obtain workers, and the cost of materials can be higher than usual.

The good news is that LIHTC investors have been very open to projects on tribal land. Travois sees four or more offers on every development, according to Glynn. The firm recently worked with the Sokaogon Chippewa Housing Authority, which completed the Sokaogon Supportive Residences near Crandon, Wis., in 2016.

The housing authority turned an abandoned motel that had been owned by the tribe into needed affordable apartments. “It’s a great example of how tribes have used their resources in an innovative way,” Glynn says. “It was a major renovation.”

The motel had been largely vacant for 10 years, with the tribe occasionally using it in an emergency to house people who needed a place to stay, says Jeff Ackley, executive director of the housing authority and tribal administrator.

He knew that, with some work, the building could find a better and more permanent use. “Hotel rooms are typically small,” Ackley says. “We had to figure out how we could squeeze in 24 units and make it a comfortable living space.”

He and his team rehabbed the property and added an extension to the building so all the units would have full-size bathrooms and kitchens. It serves veterans, tribal members, and nontribal members earning no more than 30%, 50%, and 60% of the area median income. The approximately $2 million was financed largely with LIHTCs. RBC Capital Markets—Tax Credit Equity Group was the syndicator, providing nearly $1.6 million in housing credit equity, and Travois served as the LIHTC consultant and architect.

Additional financing included a $414,000 Affordable Housing Program grant from the Federal Home Loan Bank of Chicago through member Bay Bank, which also provided bridge financing during construction.

Although Sokaogon Supportive Residences is a small development, it was still a complex deal. “It was an acquisition–rehab project, but it was also an adaptive-reuse project, and there was a portion that was new construction,” says John Galfione, vice president at RBC.

Fortunately, Ackley’s housing authority was able to bring different resources to the table.

“It targets a population that’s not always easy to serve, especially in more-rural areas,” says Galfione. “It brings together a mix of veterans, disabled, and homeless households.”

The building is easily accessible from the main road and is located near a health clinic, a recreation center, and other amenities.

“It’s a beneficial transformation of an old, unused building,” Galfione says.

Donna Kimura is deputy editor of Affordable Housing Finance. She has covered the industry for more than a decade. Before that, she worked at an internet company and several daily newspapers. Connect with Donna at or follow her @DKimura_AHF.

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Apartment Demand, Rent Growth Stay Strong


“The apartment sector’s winning streak has run seven full years so far,” Willett says.

RICHARDSON, TX—“Rent growth doesn’t have to reach best-ever readings to be strong,” says Greg Willett, chief economist at RealPage. The firm said Tuesday that while rent growth is expected to slow in the near term from the 5%-plus pace set in 2015, cooling to 3.8% in the year that just ended, it’s still well above historical norms.

RealPage says the nation’s 100 largest metro areas saw apartment demand of 328,559 units in 2016, up 24% from the previous year’s net move-in total. Demand recorded for ’16 was the third largest calendar year volume posted during the past three decades, just behind 2000 and 2010.

“The apartment sector’s winning streak has run seven full years so far,” Willett says. “Job production continues at solid levels, encouraging new household formation. While apartment construction is substantial, significant building is justified by the very strong demand tallies,” which last year exceeded deliveries by more than 30,000 units nationwide.

As is usually the case, fourth-quarter renter demand didn’t keep pace with deliveries. Q4 saw completion of 87,939 units nationwide, representing the biggest block of quarterly new supply seen since the mid-1980s.

Not only the pace but also the market concentration of new completions factored into the recent vacancy picture. Apartment occupancy stood at 96.3% at year’s end, up from 95.9% in late ’15, and RealPage notes that nearly all of today’s vacancies in most locales can be found in the very expensive brand new completions moving through initial lease-up. Conversely, “it can be very tough to find available units in the middle-tier to lower-end price ranges,” according to RealPage.

And while rent growth nationally is occurring at a slower pace lately, several metro areas are continuing to post above-average annual increases for new renters. Leading the way in ’16 was Sacramento at 9.3%, followed by Riverside-San Bernardino at 8.5%, Seattle at 7.8%, Phoenix at 7.1% and Las Vegas at 6.8%.

Read the original article here.

Paul Bubny

paul-bunny_avatar_1453917953-136x136Paul Bubny is managing editor of Real Estate Forum and He has been reporting on business since 1988 and on commercial real estate since 2007. He is based at ALM Real Estate Media Group’s offices in New York City.

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