- By Linda Hoffman, Publisher
- Published April 2012
Days of change
Times, they are a-changing.
From rent control to principal forbearance to mounting regulation to healthcare, our world is evolving at a rapid clip. It is the best of times.
It is the worst of times. If you are underemployed, under water, under-insured, life is a storm cloud.
If you are a landlord in a growing number of markets, your rents are solid.
"Savvy owners are taking advantage of occupancies and are raising rents as leases come up for renewal and for new tenants," says Michael Barron, a VP at Marcus & Millichap. "In the 10 years that I have done this, it's the strongest that I have seen the market in terms of a little bit of a price increase. It's still a price-sensitive market."
"Some owners will not experience this," Barron said. "In areas with higher income or higher occupancy, owners can raise rents a little more than in lower-income or lower-occupancy areas. In a working class or low-income area, a $10- to $20-a-month rent increase will cause someone to move next door to get a lower rent."
At the current pace, inventory will only tighten. Financing remains generally locked, and regulations, both federal and local, continue to saturate most markets.
At press time, a cost analysis of the 2012 International Energy Conservation Code (IECC) was published by the National Multi Housing Council and National Apartment Association. Analysis found that the new energy codes stand to make construction costs nearly prohibitive for multifamily developers.
"We support building efficiency," said Paula Cino, NMHC director of energy and environmental policy. "These codes are meant to set minimum requirements, and they set a very expensive minimum. In some cases it would take more than 200 years for the energy savings produced by the codes to pay for the required upgrades."
Cino added that much of a building's energy use is outside the scope of building codes and could force expensive changes for shell construction.
"In many areas of the country, these codes would require dramatic changes to the way apartments are designed and constructed," Cino explained, citing insulation thickness that impacts designs in all zones, not just the North.
Alas, one more reason apartment inventory will remain constrained, and that high rents aren't all about profit.
Staying alert and informed is the only resolve for such an elastic business environment. For our part, Multihousing Pro is committed to deliver the stories that are most relevant to profitable multihousing business.
I would also like to make a personal plea for a friend of mine, Jeff Stack of Saris Regis. Folks, he's one of our own. Long an esteemed developer and owner in multifamily, Jeff's daughter, Natalie, suffers from a horrible disease called cystinosis. Its debilitating effects are heartbreaking, and the prognosis, somber.
Over the years, Jeff's tenacity is golden in championing research for a cure. He's holding a fund raiser at the end of April. If you can attend, wonderful. If not, any contribution would be greatly appreciated, and go directly into research for a cure. To Jeff's testament, his group has made a number of notable strides in moving toward eradicating this disease. One day, one dollar, could make the break through.