National Council of Housing Market Analysts
Presents:
Elements of Market Analysis, Part One
Kentucky Housing Conference
October 9, 2013
Lexington, Kentucky
• NCHMA
Membership organization
 Higher level of professionalism
 Ethics and professional accountability
• Education
• Peer review
• Sharing of information and resources
Formed in 2001 in response to legislation
Requirements vary from state to state
 26 states adopted NCHMA standards in some form
Page 2
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• NCHMA Resources
Minimum standards and best practices
 Certification in every report
Model Content - Market study index
Glossary of terminology
White papers




Market Area
Analyzing senior demand and senior markets
Factors to consider with preservation properties: Section 8 and 236
Recommended practices for analyzing turnover
Page 3
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• NCHMA
White papers (continued)
 Demand and C/R methodology
 Calculating market rent
 Selecting comparable properties
 Determining market area
 Best practices for rural markets
 Recommended practices for determining demand
 Site analysis (DRAFT)
www.housingonline.com
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• Who’s in the Room?
Developer?
Syndicator?
Housing Finance Agency?
Market Analyst?
Other Professional?
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Speakers
• Jonathan Beery, Valbridge / Allgeier
Company
• Patrick Bowen, Bowen National Research
• Caitlin Geary, National Council of Housing
Market Analysts
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Program Agenda
Welcome & Introductions
NCHMA Background
Introduction to Market Analysis
What is a Market Study?
Project Description and Site Analysis
Determining Market Area
Economic Context
Demographics
Page 7
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Introduction to Market Analysis
•
•
•
•
Page 8
What is a Market Study?
Types of Market Studies
Components of Market Studies
Scope of Work
www.housingonline.com
• What is a Market Study?
A comprehensive forward looking analysis of the
housing market in a defined market area.
 Housing needs in specific geography
 Specific need for proposed development
 Users
 Developers
 Syndicators
 Government entities
 Investors
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Who are the Users/Consumers/Clients?
Developer
State
Housing
Allocator
Market
Research
Lender
Investor
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• What is a Market Study?
▫ A comprehensive review of the housing market in a
defined market area.
▫ At a minimum, market studies include a review of
location, economic conditions, demographics, and
existing and proposed housing stock.
▫ “When you buy real estate, you are buying a set of
assumptions about the future”.
From Dr. James Graaskamp
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• What does a Market Study do?
Depth and durability of the market
 Supply and demand analysis
Marketability of proposed development
Projected outcome - feasibility and conclusions
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• What is a Market Study’s Purpose?
▫ A market study can be used to:
1. Determine the demand for a specific proposed
development
2.Examine the overall condition of an area’s housing
market.
3.Measure the impact of a proposed development on
an existing market
4.Evaluate the appropriateness of a proposed
development
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• Market Studies –SCOPE
Complete Market Study
 Comprehensive report addressing all items in NCHMA
Model Content Standards
 Full Narrative or Summary report format.
Something less than a market study
 Rent study
 Capture rate demand study
 Memos
 Other examples?
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• Housing Market Issues
▫
▫
▫
▫
Which Market Segment is Being Served
Is the Development Appropriate
Impact on Existing Market
Other Issues
 Special Needs Population
 Preservation of Affordable Housing
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• Typical Components of a Market Study
include:
A.
B.
C.
D.
E.
F.
G.
H.
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Executive Summary
Project Description
Location and Market Area Definition
Employment and Economy
Demographic Characteristics
Competitive Environment
Analysis / Conclusions and Recommendations
Local Perspectives of Rental Housing Market and
Housing Alternatives
www.housingonline.com
Project Description & Site Analysis
• Project Description
(Information to Get Started)
▫
▫
▫
▫
▫
▫
▫
Page 17
Proposed unit mix
Proposed amenities
Housing Consumer
Detailed Location
Construction / RehabilitationTimeline
Plans and specs (if available)
Any adverse influences in the area that are known
by the developer
www.housingonline.com
Site Analysis
Project Location
Project Analysis
Market Area
Page 18
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• Project Location
▫ City, State, and Exact Location are discussed in the
narrative.
▫ Aerial Photo of area is obtained
 Bing.com
 Google Maps
 Others
▫ Map of Area is prepared
▫ Area Linkages are mapped
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Site Analysis
 Is the site appropriate for
intended use?
 Compatible surrounding land
uses?
 Neighborhood adequately served
by facilities and services?
 Ingress and Egress?
 Adequate visibility?
 Any planned changes in the area
that may compromise its
suitability in the future?
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Site Plan
• Site characteristics are usually described by:
▫ Size, Shape, Zoning, Frontage, Topography,
Vegetation, Visibility
• A typical site plan includes:
▫ Buildings, Parking, Ingress/Egress, Amenities,
Landscaping, Setbacks
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Determining Market Area
• Primary Market Area
• “A geographic area from which a property is
expected to draw the majority of its residents.”
• Secondary Market Area
• “The portion of a market area that supplies
additional support to an apartment property
beyond that provided by the primary market area.”
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A housing market area is the
contiguous area within which households
compete for available housing.
Ask yourself if the market area delineated
seems reasonable in size and character.
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• Market Area Criteria
▫ A reasonable market area is critical as it
determines the geographic scope of other analyses.
 It should be realistic in size.
 It should reflect the impact of natural and man-made barriers.
▫ Beware of radii, county boundaries, or multi-county
boundaries.
▫ Seniors market areas are generally larger than those for
family projects.
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• Delineation of Market Area
▫
▫
▫
▫
▫
▫
▫
▫
▫
▫
Location of Competitive Properties
Accessibility
Natural Boundaries
Housing Project Characteristics
Market Perceptions
Commuting Patterns
Target Market
Jurisdictional Boundaries
Local Agency Service Boundaries
Non-Geographic Factors
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Is this a good market area?
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How about this market area?
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Does this seem reasonable?
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Economic Context
• What is the environment in which project
will be operating?
•
•
•
•
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Labor Force
Unemployment
At Place Employment
Major Employers
www.housingonline.com
Unemployment Rate
Unemployment - March 2012
Largest Metropolitan Areas
12.0%
10.9%
11.0%
U.S Rate
10.0%
9.0%
9.4%
8.4%
8.4%
8.7%
8.9%
8.9%
9.6%
9.0%
7.9%
8.0%
7.5%
7.0%
7.0%
7.1%
7.0%
6.1%
6.0%
5.5%
6.2%
5.7%
5.0%
4.0%
3.0%
Source: US Bureau of Labor Statistics
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Change in Metro Area Employment Since
Recession Began: % Jobs
HOU
DAL
MIA
-0.1%
1.8%
BOS
-0.4%
DC
NY
-0.8%
1.3%
BAL
SEA
-2.1%
0.5%
Rich
-2.4%
MIN
-3.1%
Char
PHI
-3.1%
-2.5%
US
CHI
-5.1%
-3.3%
SF
-5.1%
ATL
LA
PHX
DET
% Change in Total Employment Mar-07 to Mar-12
5.1%
6.0%
4.0%
0.0%
-2.0%
-5.4%
% Change
2.0%
-8.8%
-8.0%
-8.9%
-6.0%
-7.6%
-4.0%
Not Seasonally Adjusted
-10.0%
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Change in Metro Area Employment Since
Recession Began: # Jobs
Page 32
•
www.housingonline.com
At-Place Employment Trends
Total Employment
1990 - 3Q 2009
100,000
226,507
233,799
232,734
225,577
222,072
214,637
201,469
199,880
193,411
183,253
178,194
173,420
168,148
168,050
162,909
157,441
154,544
156,530
150,000
161,296
200,000
205,439
250,000
50,000
0
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Page 33
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At-Place Employment by Sector
Employment by Sector
3Q 2009
Other
3.4%
3.9%
United States
Leisure-Hospitality
10.0%
Education Health
11.3%
Professional-Business
14.8%
5.9%
4.2%
Information
14.1%
12.8%
Financial Activities
Anne Arundel
County
12.0%
2.2%
2.2%
Trade-Trans-Utilities
19.1%
Manufacturing
5.8%
Construction
Nat Resources-Mining
4.6%
6.5%
1.4%
0.1%
Government
0.0%
Page 34
22.7%
9.3%
17.1%
16.6%
5.0%
10.0%
15.0%
www.housingonline.com
20.0%
25.0%
Commuting Patterns
PlaceofofWork
Work
Place
Travel Time to Work
Workers 16 years and over
Did not work at home:
Less than 5 minutes
5 to 9 minutes
10 to 14 minutes
15 to 19 minutes
20 to 24 minutes
25 to 29 minutes
30 to 34 minutes
35 to 39 minutes
40 to 44 minutes
45 to 59 minutes
60 to 89 minutes
90 or more minutes
Worked at home
Total
#
72,052
1,320
4,449
7,024
8,546
11,429
5,577
12,281
2,798
3,385
6,985
5,667
2,591
2,243
74,295
%
97.0%
1.8%
6.0%
9.5%
11.5%
15.4%
7.5%
16.5%
3.8%
4.6%
9.4%
7.6%
3.5%
3.0%
Workers 16 years and over
Worked in state of residence:
Worked in county of residence
Worked outside county of residence
Worked outside state of residence
Total
Place of Work
In County
Page 35
#
73,716
51,586
22,130
579
74,295
Outside County
www.housingonline.com
Outside State
%
99.2%
69.4%
29.8%
0.8%
100.0%
Economic Forecast
Major Employers
Location; Size of Workforce; Prospects for future growth
or reduction
Economic Expansions
Any planned expansions in the Market; i.e., BRAC, New
Plants. Is household growth increasing demand for
services
Economic Disruptions
Major Layoffs or Closing; Vulnerable Sectors of Economy
Wage Trends
Are wages increasing or decreasing
Location of Major
Employers
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ute
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2
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NW
Ro
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Sources for Data
• Unemployment Data: http://data.bls.gov/pdq/querytool.jsp?survey=la
• NAIC codes:
• http://www.census.gov/cgi-bin/sssd/naics/naicsrch?chart=2007
• At Place Employment Data:
http://data.bls.gov/pdq/querytool.jsp?survey=en
Page 37
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Demographic Context
•
•
•
•
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Demographic Trends
Sources of Data
Growth Projections
Population Characteristics
www.housingonline.com
Change 2000-2020;
US Population by Age
2000-2020 US Population by Age
5,000,000
4,750,000
4,500,000
4,250,000
4,000,000
Starter
Households
Kids
Move-Up
Households
Empty
Nesters
Young
Senior
Old
Senior
3,750,000
3,500,000
3,250,000
3,000,000
2,750,000
2,500,000
2,250,000
2,000,000
0
5
10
15
20
25
30
35
40
45
50
55
60
65
70
Age
Age
Page 39
2000 Population
2009 Population
www.housingonline.com
2014 Population
2020 Population
75
• Projection Sources
▫ Projections
 Metropolitan Planning Organizations www.narc.org
▫ National vendors (Neilsen, ESRI)
▫ Local Governments
▫ State Data Centers
▫ U.S. Census Bureau
 C-40 report
▫ 2010 Census
▫ American Community Survey
Page 40
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Factors Impacting Population and Household
Projections
Cohort Survival Models
Births – Deaths + Migration
Economic Growth / Loss
Is there an economic stimulus that
will impact in-migration or out
migration
Household Formation
The age distribution of the
population gives you an indication of
number of persons that will form
households.
Development Patterns
Is there infrastructure and land
available to support new growth
(supply driven demand)
Page 41
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Population and Household Trends
Change 2000 to 2010
Dauphin County
Population
Group Quarters
Households
Average HH Size
Total
2000
251,798
2010
268,100
2011
268,408
2016
269,954
6,787
6,788
6,761
6,625
102,670
110,435
110,693
111,994
2.39
2.37
2.36
2.35
#
16,302
%
6.5%
7,765
7.6%
Change 2010 to 2011
Annual
#
%
1,630
0.6%
777
0.7%
Total
#
308
%
0.1%
258
0.2%
258
Change 2000 to 2010
Total
Annual
Laurel Ridge Market
Change 2011 to 2016
Annual
#
%
308
0.1%
0.2%
Total
Annual
#
1,546
%
0.6%
#
309
%
0.1%
1,301
1.2%
260
0.2%
Change 2010 to 2011
Total
Annual
Total
Change 2011 to 2016
Annual
2000
2010
2011
2016
#
%
#
%
#
%
#
%
#
%
#
%
Population
55,023
59,895
60,137
61,364
4,872
8.9%
487
0.9%
242
0.4%
242
0.4%
1,227
2.0%
245
0.4%
Group Quarters
Households
Average HH Size
1,403
22,832
2.35
1,376
25,756
2.27
1,370
25,896
2.27
1,342
26,606
2.26
2,924
12.8%
292
1.2%
140
0.5%
140
0.5%
710
2.7%
142
0.5%
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Population and Household Trends
 What is the nature of recent demographic
trends in the market area?





Has the number of households been increasing,
decreasing, or remaining about the same?
Are recent past trends expected to continue?
Are demographic projections from a reputable
third-party source?
Does building permit activity correlate with
household trends?
For seniors’ projects, trend of age-qualified
households
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Age Distribution
Laurel Ridge Market
Number
Percent
Number
Percent
62,460
23.3%
13,050
21.7%
Under 5 years
17,721
6.6%
3,547
5.9%
5-9 years
16,673
6.2%
3,482
5.8%
10-14 years
16,907
6.3%
3,578
6.0%
15-17 years
11,159
4.2%
2,442
4.1%
Children
Young Adults
53,381
19.9%
11,330
18.8%
18-20 years
9,118
3.4%
1,843
3.1%
21-24 years
12,359
4.6%
2,565
4.3%
25-34 years
31,904
11.9%
6,922
11.5%
104,132
38.8%
24,977
41.5%
35-44 years
36,803
13.7%
8,640
14.4%
45-54 years
42,584
15.9%
10,444
17.4%
55-61 years
Seniors
24,746
48,435
9.2%
18.0%
5,892
10,780
9.8%
17.9%
62-64 years
10,605
4.0%
2,525
4.2%
65-74 years
19,374
7.2%
4,315
7.2%
75-84 years
12,636
4.7%
2,715
4.5%
Adults
85 and older
TOTAL
5,819
2.2%
1,225
2.0%
268,408
100.0%
60,137
100.0%
Median Age
38
Page 44
2011 Age Distribution
Laurel Ridge Market
Dauphin County
17.9%
Seniors
18.0%
Age
Dauphin County
41.5%
Adults
38.8%
18.8%
Young
Adults
19.9%
21.7%
Children
23.3%
0%
40
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5%
10%
15%
20%
% Pop
25%
30%
35%
40%
45%
Household Type
2010 Households by Household Type
31.2%
Living Alone
31.7%
10.7%
Non Married Households
w/o Children
12.0%
Household Type
Laurel Ridge Market
5.7%
Female hhldr w/ Child
8.4%
Dauphin County
2.0%
Male hhldr w/ Child
2.7%
28.8%
Married w/o Child
26.4%
21.5%
Married w/ Child
18.8%
0%
5%
10%
15%
20%
25%
30%
35%
% Households
Laurel Ridge Market
#
%
#
%
Married w/ Child
20,780
18.8%
5,548
21.5%
Married w/o Child
29,196
26.4%
7,424
28.8%
Male hhldr w/ Child
2,978
2.7%
523
2.0%
Female hhldr w/ Child
9,261
8.4%
1,462
5.7%
Non Married Households
w/o Children
13,248
12.0%
2,765
10.7%
Living Alone
Total
Page 45
Dauphin County
34,972
31.7%
8,034
31.2%
110,435
100.0%
25,756
100.0%
Source: The Nielsen Company; Estimates, Real Property Research Group, Inc.
www.housingonline.com
Trends in U.S. Rentership Rate
40.0%
39.0%
38.0%
2012Q1
34.6%
Renters
1968
36.2%
Renters
37.0%
36.0%
2004
31% Renters
35.0%
34.0%
1980
34.43%
Renters
33.0%
32.0%
31.0%
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012Q1
30.0%
Annual Average Rental rate
Page 46
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Total Income
$15,000
$24,999
$34,999
$49,999
$74,999
$99,999
$124,999
$149,999
$199,999
over
Median Income
$52,874
Laurel Ridge Market
Number
Percent
1,157
4.5%
1,903
7.3%
2,210
8.5%
4,139
16.0%
5,666
21.9%
4,084
15.8%
2,859
11.0%
1,491
5.8%
1,112
4.3%
1,276
4.9%
25,896
100.0%
$65,618
2011 Household Income by Area
$200+K
3.1%
4.9%
Laurel Ridge Market
4.3%
3.0%
$150-$199.9K
$125-$149.9K
4.0%
Dauphin County
5.8%
$100-$124.9K
Household Income
less than
$15,000
$25,000
$35,000
$50,000
$75,000
$100,000
$125,000
$150,000
$200,000
Total
Dauphin County
Number
Percent
11,461
10.4%
11,029
10.0%
12,375
11.2%
17,833
16.1%
23,044
20.8%
14,557
13.2%
9,185
8.3%
4,421
4.0%
3,355
3.0%
3,432
3.1%
110,693
100.0%
11.0%
8.3%
$75-$99.9K
13.2%
21.9%
20.8%
$50-$74.9K
16.0%
16.1%
$35-$49.9K
8.5%
$25-$34.9K
7.3%
$15-$24.9K
0%
5%
11.2%
10.0%
4.5%
<$15K
10.4%
10%
% Households
Page 47
15.8%
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15%
20%
25%
Income by Tenure
2011 Household Income by Tenure
$200+K
1,235
40
$150-$199.9K
1,051
61
$125-$149.9K
1,408
82
$100-$124.9K
2,205
654
$75-$99.9K
Household Income
Renter Households
3,151
933
$50-$74.9K
3,510
2,156
$35-$49.9K
1,881
$25-$34.9K
1,352
858
$15-$24.9K
834
2,258
Owner Households
1,069
Renter Households
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
Percent
Number
Percent
$15,000
507
6.3%
650
3.6%
$15,000
$24,999
834
10.4%
1,069
6.0%
$25,000
$34,999
858
10.7%
1,352
7.6%
$35,000
$49,999
1,881
23.5%
2,258
12.6%
$50,000
$74,999
2,156
26.9%
3,510
19.6%
$75,000
$99,999
933
11.7%
3,151
17.6%
$100,000
$124,999
654
8.2%
2,205
12.3%
$125,000
$149,999
82
1.0%
1,408
7.9%
$150,000
$199,999
61
0.8%
1,051
5.9%
$200,000
over
40
0.5%
1,235
6.9%
8,005
100.0%
17,891
100.0%
Median Income
# of Households
Page 48
Number
less than
Total
650
507
<$15K
Owner Households
www.housingonline.com
$49,392
$75,838
49
Questions?
Page 49
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National Council of Housing Market Analysts
Presents:
Elements of Market Analysis, Part Two:
Assessing the Market and Drawing Conclusions
Kentucky Housing Conference
October 9, 2013
Lexington, Kentucky
Speakers
• Jonathan Beery, Valbridge / Allgeier
Company
• Patrick Bowen, Bowen National Research
• Caitlin Geary, National Council of Housing
Market Analysts
Page 51
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Program Agenda
Re-Introduction
Supply: Rental Market Trends and Conditions
Calculating Market Rent
Net Demand
Drawing Conclusions
Page 52
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Supply: Rental Market Trends
and Conditions
• Analysis of Trends and Conditions from
regional to local to primary market area
• Use 2010 Census data to establish housing profile of
PMA
• Profile number of housing units, owner/renter mix
and number of vacant housing units
• Evaluate building MF and SF permits for recent
activity
• Other important housing characteristics are rental
units by type, gross rents, year of construction and
rent overburdened
www.housingonline.com
Building Permit Data from US Census Building Permit Website
http://www.census.gov/const/www/permitsindex.html#estimates
Variable:
Single-Family
Two-Family
Three and Four Family
Five or More Family
Total
Housing Data Profile from US Census American FactFinder Site http://factfinder.census.gov/home/saff/main.html?_lang=en
Variable
YEAR HOUSEHOLDER MOVED INTO UNIT
HOUSING VALUES / GROSS RENT
SELECTED MONTHLY OWNER COSTS (SMOC)
SELECTED MONTHLY OWNER COSTS AS A % OF HH INCOME
POPULATION AND HOUSEHOLD GROWTH
GROSS RENT AS A % OF HH INCOME (GRAPI)
Page 54
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HOUSING OCCUPANCY
UNITS IN STRUCTURE
YEAR STRUCTURE BUILT
ROOMS
BEDROOMS
HOUSING TENURE
From Desk identify all inventory in PMA
existing and planned
Field survey should be comprehensive to evaluate housing
continuum (LIHTC, older/newer market rate, gov. sub.,
luxury), current conditions and identify comparable
properties
All Tax Credit properties should be surveyed
SF affordability and shadow market for-rent single-family
homes and condos may need to be surveyed to measure
market rents, and competing supply.
First-time homebuyer programs
Page 55
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Field surveys will consist of various
property types:
Comparable property is representative of the
rental housing choices of the subject’s Primary
Market Area and is similar in construction, size,
amenities, or age to the subject.
Competitive property is comparable to subject
and competes at similar rent levels, and tenant
profile, such as age, family or income.
Page 56
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Purpose of surveying comparable
properties:
 Evaluate which properties are truly
competitive: Principle of Substitution
 Evaluate the Primary Market Area (PMA) or the need
for a Secondary Market Area (SMA)
 Evaluate subject’s market position
 Evaluate Section 8 reliance and affordability issues
 Evaluate tenant profile/targeted market
 Evaluate utility allowances and preferences
Page 57
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Purpose of surveying comparable
Properties (continued):
 Evaluate location and accessibility
 Evaluate proximity to supporting uses
 Evaluate physical characteristics
 Evaluate demand drivers and forecasts
 Evaluate correlation between quality and vacancy
 Evaluate govt. subsidized properties
Page 58
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Purpose of surveying comparable
properties (continued) :







Conclude
Conclude
Conclude
Conclude
Conclude
Conclude
Conclude
Page 59
market rents and achievable LIHTC rents
stabilized occupancy
absorption estimate
use and need for concessions, seasonality
rent premiums and discounts
rent growth projections
to changes or recommendations
www.housingonline.com
Purpose of surveying comparable
properties (continued) Rural:
Use the apartments that exist in PMA

Trailers

SF homes
Neighboring town or market area

Similar population

Similar employment centers with similar wages

Similar home prices
Page 60
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Classify type of rural market:
Low propensity
High propensity
 Close to Suburban/Metro
 Well defined central towns
 Transportation infrastructure
 Well diversified economies
 Recreational amenities
 Technology /Schools
 Strong pop and HH growth
 Job creation
Page 61









Removed from CBD / urban core
No defined central towns
Poor linkages to infrastructure
No diversification or weak job
base
No recreational amenities
No technology
Stagnant pop and HH growth
No job creation
Subsidized inventory & tenants
www.housingonline.com
When the field survey and analysis
is complete, you should:
Understand strengths/weaknesses of the market.
What are trends in market, where in the RE cycle.
Who are your Tax Credit competitors and how are they
performing.
Who are your Market-rate competitors and how are they
performing.
What are the strengths and weaknesses of your property
and how does it compare.
Page 62
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Findings
• Calculating Market Rent
• Demand
• Affordability
Page 63
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Calculating Market Rent
 The rent an apartment, without rent or
income restrictions or rent subsidies, would
command in the open market considering its
location, features, and amenities.
Page 64
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Calculating Market Rent (Cont.)
• Adjustment Process
Start with Asking Rent
 Upward if COMP is inferior
 Downward if COMP is superior
 No adjustment if COMP is similar
Remember!
You are adjusting the COMP to the Subject
Page 65
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• Adjustment Process
Quantifiable –Extracted from market
 Utility adjustments
 Amenities / view / design / services
 Seasonality
Qualitative
 Appeal
 Location
 Quality / Condition
Units of comparison
 Per unit
 Per square foot
Page 66
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One Bedroom Units
Subject Property
Comparable Property #1
Chesterfield County, VA
Chesterfield County, VA
A. Rents Charged
Subject
Data
$ Adj.
Street Rent
$895
$894
In parts B thru D, adjustments were made only for differences
B. Design, Location, Condition
Data
$ Adj.
Utilities Included
None
Hot Water,W/S,Trash
($45)
Rent Concessions
$0
None
$0
Structure / Stories
3-Story Garden
3-Story Garden
$0
Year Built / Year Renovated
2010
2006
$10
Condition / Street Appeal
Excellent
Excellent
$0
Town Center Micro Location
Excellent
Above Average
$21
C. Unit Equipment / Amenities
Data
$ Adj.
Number of Bedrooms
1
1
$0
Number of Bathrooms
1
1
$0
Unit Interior Square Feet
734
792
($15)
Balcony / Patio / Porch
Yes
Yes
$0
Microwave
Yes
Yes
$0
Dishwasher/Disposal
Yes / Yes
Yes / Yes
$0
Washer / Dryer: In Unit
Yes
No
$35
D. Site Equipment / Amenities
Data
$ Adj.
Parking ($ Fee)
$0
$0
$0
Fence/Gate
No
No
$0
Club House
Yes
Yes
$0
Pool
Yes
Yes
$0
Fitness/Workout Room
Yes
Yes
$0
Computer Room / Bus. Center
Yes
Yes
$0
E. Adjustments Recap
Positive
Negative
Total Number of Adjustments
3
2
Sum of Adjustments B to D
$66
($60)
F. Total Summary
Gross Total Adjustment
$126
Net Total Adjustment
$6
G. Adjusted And Achievable Rents
Adj. Rent
Adjusted Rent
$900
% of Effective Rent
100.7%
Estimated Market Rent
$930
Rent Advantage $
$35
Rent Advantage %
3.80%
Page 67
Comparable Property #2
www.housingonline.com
Comparable Property #3
Chesterfield County, VA
Data
$ Adj.
$895
Data
Trash
None
3-Story Garden
2004
Excellent
Average
Data
1
1
775
No
Yes
Yes / Yes
Yes
Data
$0
No
Yes
No
Yes
No
Positive
5
$77
$ Adj.
($10)
$0
$15
$0
$42
$ Adj.
$0
$0
($10)
$5
$0
$0
$0
$ Adj.
$0
$0
$0
$10
$0
$5
Negative
2
($20)
Chesterfield County, VA
Data
$ Adj.
$885
Data
None
None
3-Story Garden
2005
Excellent
Excellent
Data
1
1
770
Yes
Yes
Yes / Yes
No
Data
$0
Yes
Yes
No
No
Yes
Positive
4
$68
$97
$57
Adj. Rent
$952
106.4%
www.housingonline.com
$ Adj.
$0
$0
$0
$13
$0
$0
$ Adj.
$0
$0
($9)
$0
$0
$0
$35
$ Adj.
$0
($5)
$0
$10
$10
$0
Negative
2
($14)
$82
$54
Adj. Rent
$939
106.1%
• Red Flags
Too many or too large adjustments,
indicating lack of good comparables.
Comparables located long distances from
subject.
No precedent for conclusion market place.
No new construction in market area. Why?
PRICE IS THE BEST AMENITY!
Page 68
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Net Demand
• Demand
▫ Household Growth
▫ Demolitions
▫ % of Renter Households
• Supply
▫ Pipeline
▫ Subject
• Balance of Demand and Supply
Page 69
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Demand
Household Growth
2009 Households
2012 Households
Net Change in Households
Add: Units Removed from Market
2009 Housing Stock
2010 Housing Stock
2011 Housing Stock
Units
69,229
73,772
4,543
Hsg
Stock
72,455
74,017
75,612
Removal
Rate
Lost Units
0.480%
348
0.480%
355
0.480%
363
1,066
5,609
19.1%
1,072
Net New Demand for Housing Units
Percent Renter Households in 2012
Net New Demand for Renter Units
Add: MF Competitive Vacancy
Inventory
Stabilized Multifamily Communities
6,617
Deep-Subsidy Multifamily Communities
2,500
Subtotal Stabilized Communities
9,117
Vacant
481
0
481
currently
vacant
Communities under lease up
Total Competitive Inventory
561
9,678
Market Vacancy at 5%
Less: Current Vacant Units
Vacant units required to reach 5% Market Vacancy
Total Rental Demand
208
Vacant as
of Jan 1,
2009
96
577
484
-577
-93
979
Planned Additions to the Supply
project x
project y
Subject
Total New Rental Supply
Excess Demand for Rental Housing
Page 70
Total Units 95% Occupancy
250
238
500
475
200
190
950
903
77
www.housingonline.com
Unit Type
Gross Rent
Income Ratio
Minimum Income
Maximum Income (2/BR)
All
$331
35%
$11,349
$34,200
2 BR
$331
35%
$11,349
$29,460
3 BR
$383
35%
$13,131
$34,200
Demand From New Growth
Household Growth, 2000-08
X Percent Income Qualified
X Percent Renter
X Appropriate Household Size
Demand From Household Growth
588
41.3%
41.5%
100%
101
588
33.5%
41.5%
100%
82
588
38.2%
41.5%
100%
93
Substandard Renter Housing
Inadequate Plumbing
Overcrowded Housing
Total Substandard Units
X Percent Income Qualified
Substandard Renter Housing
121
1,238
1,359
41.3%
561
121
2,014
2,135
33.5%
715
121
2,014
2,135
38.2%
815
Rent Overburden
Renters Paying Over 35%
X Percent Income Qualified
Total Rent Overburden
1,238
41.3%
511
1,238
33.5%
415
1,238
38.2%
472
Total Demand
1,173
1,212
1,380
Less Comparable Units Built Since 2000
Units Built Since 2000
Less Units Under Construction
Less Units Planned
Total Units Since 2000
Net Demand
Proposed Units - Subject
Capture Rate
Page 71
(96)
(80)
(84)
(43)
(303)
1,077
69
6.4%
(48)
(32)
(42)
(22)
(144)
1,164
45
3.9%
(48)
(48)
(42)
(21)
(159)
1,332
24
1.8%
www.housingonline.com
Growth and
Substandard
Housing
Calculating Capture Rates
& Penetration Rates
•
Capture rate is the percentage of age, size, and
income qualified renter households in the primary
market area that the property must capture to fill the units.
Calculation:
Capture Rate is calculated by dividing the total number of units at
the property by the total number of age, size and income qualified
renter households in the primary market area.
Page 72
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•
Penetration Rate is the percentage of age and
income qualified renter households in the primary
market area that all existing and proposed properties that are
competitively priced to the subject that must be captured to
achieve the stabilized level of occupancy.
Calculation:
Penetration Rate is calculated by dividing the total number of units
at the property and all existing and proposed properties, to be
completed including the subject by the total number of age, size
and income qualified renter households in the primary market
area.
Page 73
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• To calculate the capture rate, the
appropriate income range for residents to
qualify for the project must be established
• Maximum allowable income for the subject project is
based on the household income necessary to qualify
for the largest unit offered at the site
• NCHMA occupancy guidelines are as follows:
One-bedroom: 1-2
Three-bedroom: 4-6
Two-bedroom: 2-4
Four-bedroom: 5+
• Persons per housing unit can be adjusted by analysts
based on other factual data
Page 74
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Income Caps and Bases
Base
• Minimum income required to live at the property is
based on the gross rent (including all utilities) offered
at the subject site
• Accepted ratio of rent to income is 35% for families
and 40% for seniors
Caps
• Based on HUD income caps
Page 75
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60% Units
One Bedroom
Two Bedroom
Base Price
Minimum Maximum
Number of Units
40
Net Rent
$665
Gross Rent
$755
% Income Spent for Shelter
35%
Income Range
$25,886
$31,170
Range of Qualified Hslds
6,041
5,239
# Qualified Households
802
Unit Total HH Capture Rate
5.0%
Base Price
Minimum Maximum
Number of Units
40
Net Rent
$770
Gross Rent
$900
% Income Spent for Shelter
35%
Income Range
$30,857
$37,440
Range of Qualified Hslds5,282
4,390
# Qualified Households
892
Unit Total HH Capture Rate
4.5%
Range of Qualified Renters
2,727
# Qualified RenterHouseholds
Unit Renter HH Capture Rate
Gross Capture Rate
Number of Units
60% Units
60% Units
2,279
448
8.9%
Range of Qualified Renters
2,303
# Qualified RenterHouseholds
Unit Renter HH Capture Rate
80
Total Households
Band of Qualified HHs # Qualified HHs
Income $25,886 $37,440
HHs
6,041
4,390
1,651
4.8%
80
Renter Households
Band of Qualified HHs # Qualified HHs
Income $25,886 $37,440
HHs
2,727
1,805
922
8.7%
Page 76
11,732
1,805
498
8.0%
Total HH
Capture Rate
6,437 Renter HH
Capture Rate
www.housingonline.com
Affordability @
35% Rent
Burden
Capture Rates
& Penetration Rates
Penetration
Rate
All
All
$450
$450
35%
35%
$15,429
$15,429
$34,200
$34,200
Capture Rate
Unit Type
Gross Rent
Income Ratio
Minimum Income
Maximum Income (2/BR)
Total Qualified Renters
Existing Households, 2006
X Percent Income Qualified
X Percent Renter
Total Qualified Renters
Other LIHTC Units
Existing LIHTC Units
LIHTC Under Construction
Proposed Units - Subject
Proposed Units - Other App
Total LIHTC Units
Total Qualified Renters
Total LIHTC Units
Capture / Penetration Rate
Page 77
9,189
43.8%
41.5%
1,670
9,189
43.8%
41.5%
1,670
0
0
0
69
69
208
84
43
69
404
1,670
1,670
69
404
4.1%
24.2%
www.housingonline.com
Interpreting Capture Rates
5% Capture Rate
(need to get 1 in every
20 eligible households)
33% Capture Rate
(need to get 1 in every 3
eligible households)
Income-qualified
households
Page 78
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• There are no definitive right or wrong
capture rates
• Capture rates and penetration rates must be
considered within context of market
• Senior projects more likely to consider support
from homeowners
Page 79
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14%
Capture Rate
12%
Rural Markets
Too Many Units
10%
8%
6%
Urban Markets
Best Opportunity
4%
2%
0%
0%
10%
20%
30%
Penetration Rate
Page 80
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40%
50%
Other Factors Impacting Demand
• Location—Surrounding land uses may attract or
prevent renters from moving to the site
• Proposed Rents— Look at households able to pay
the proposed rents, not the willingness to do so
• Housing Markets—Rental markets with high
vacancy rates; Foreclosures
• Employment “Shocks”
• Credit Markets
Page 81
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Special Note for Rehabilitation Projects
• Two capture rates should be calculated for
Section 8 rehabilitation projects
▫ without Section 8 / RD Subsidy (assumes Tax
Credit rents)
▫ with Section 8 / RD subsidy (down to $0 income)
• Resulting capture rates demonstrate
importance of maintaining Section 8
Page 82
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Drawing Conclusions
•
•
•
•
Page 83
Rent Analysis
Project Evaluation
Absorption
Projected Project Performance
www.housingonline.com
• Achievable Tax Credit Rent
 The rent an apartment, with LIHTC rent and
income restrictions, could command in the
open market considering its location, features,
and amenities.
• Pro Forma Rent
 The rent proposed by a developer, market
analyst, or underwriter for a LIHTC property
based on risk or mission goals and objectives.
Page 84
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• Market Advantage provides
insulation to market risk over long-term.
Limited universe of renters
Rent Advantage
Annual re-certifications
Perceptions
Maximum LIHTC Rent • Industry Benchmark = 10%
• Exceptions:
Strong markets with strong rent
Achievable LIHTC Rent
growth.
Stagnant/rural markets with few
alternative housing choices.
Pro Forma Rent
Superior Product provides advantage
Market Rent
Page 85
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▫ Projected Absorption Levels
 Historic Pattern of New Units Absorbed Annually
 Performance of Recently Completed Projects
 Adjust Estimate to Reflect Market Conditions
 Economic and Demographic Forecasts
 Units in Pipeline
 Occupancy Levels
Page 86
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• Projected Project Performance
▫
▫
▫
▫
▫
▫
Rents
Concessions
Absorption Rate
Stabilized Occupancy
Rent Appreciation
Impact on existing rental market
Page 87
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88
Questions?
Page 88
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