Featured speakers at the NAHB Multifamily Finance Subcommittee meeting during IBS included representatives from Fannie Mae, Freddie Mac, Prudential Capital, and AGM Financial Services, who covered all aspects of multifamily finance in today’s market environment.  

Fannie Mae and Freddie Mac, even during conservatorship, are providing the vast majority of financing for multifamily rental properties. While both are concentrating on preservation and refinancings, Fannie Mae also is reviving its construction loan participation program. Fannie will purchase up to 75% of a construction loan, with underwriting based on the assumption that there would be a Fannie Mae permanent take-out. 

The insurance companies are slowly coming back into the market but remain cautious. AGM Financial reported that in 2010, FHA’s loan volume was significantly higher than in the previous year, and although the process of working with FHA can be challenging, it remains an affordable construction financing option.

For more information, e-mail Claudia Kedda or call her at 800-368-5242 x8352.

Yesterday, the U.S. Department of Housing and Urban Development  (HUD) proposed new regulations intended to ensure that its core housing programs are open to all eligible persons, regardless of sexual orientation or gender identity.

“This is a fundamental issue of fairness,” said HUD Secretary Shaun Donovan.  “We have a responsibility to make certain that public programs are open to all Americans.  With this proposed rule, we will make clear that a person’s eligibility for federal housing programs is, and should be, based on their need and not on their sexual orientation or gender identity.”

 HUD is seeking public comment on a number of proposed areas including:

• Prohibiting lenders from using sexual orientation or gender identity as a basis to determine a borrower’s eligibility for FHA-insured mortgage financing. 
   
• Clarifying that all otherwise eligible families, regardless of marital status, sexual orientation, or gender identity, have the opportunity to participate in HUD programs.  
   
• Prohibiting owners and operators of HUD-assisted housing, or housing whose financing is insured by HUD, from inquiring about the sexual orientation or gender identity of an applicant for, or occupant of, the dwelling, whether renter- or owner-occupied.  

HUD currently requires its recipients of discretionary funds to comply with local and state non-discrimination laws that cover sexual orientation or gender identity.  In July, the Department issued new guidance that treats discrimination based on gender nonconformity or sex stereotyping as sex discrimination under the Fair Housing Act, and instructs HUD staff to inform individuals filing complaints about state and local agencies that have lesbian, gay, bisexual, and transgender (LGBT)-inclusive nondiscrimination laws.

Apartment Construction Is Inadequate to Meet Growing Demand

By Keat Foong, Executive Editor, Multi-Housing News

The supply of apartments is falling seriously short of what is required to meet the increasing demand generated by renters in a slowly recovering economy, according to the National Association of Home Builders (NAHB).

“My message to you today is very simple,” said Sharon Dworkin Bell, senior vice president of multifamily at NAHB, at a press conference at NAHB’s International Builders Show (IBS) this week in Orlando, Fla. “Although the economy is recovering, it is recovering very slowly. We are seeing a great deal of demand, but because of the serious lack of debt and equity capital, although we are building more, it is not enough. And because we are not creating enough supply,” there will be a shortage of multifamily rental housing. As a result, apartments will become even more expensive.

Speakers at a press conference and at educational sessions say that although there may be some evidence construction financing is thawing to a limited extent, with the exception of FHA-insured financing the flow of money is still for the most part being limited to the top sponsors—stronger and larger developers—and trophy properties in primary markets.

Although there are “billions and billions of dollars chasing cash-flowing deals” on the acquisitions side, the traditional construction lenders, the national banks, have not resumed their normal levels of lending, and only the local and regional banks are providing capital, notes Jay Jacobson, national partner for acquisition and investment for Wood Partners.

NAHB Chief Economist David Crowe projects that 2011 will be a better year for multifamily construction. NAHB is forecasting construction of 133,000 multifamily units in 2011, representing a 16 percent increase over 2010. (About 45,000-50,000 units of the 2011 starts are composed of affordable housing, and 20,000 units of  condominiums.) Multifamily construction is expected to register at 114,000 units in 2010, on par with 2009 levels. Crowe attributes the low levels of multifamily construction in part to difficulty obtaining financing especially for smaller developers.

Although multifamily starts are forecasted to be higher in 2011, they are nevertheless much lower than the 250,000 to 300,000 additional units per year that would be required to meet demand: About 100,000 units of new multifamily housing per year are needed just to keep up with the loss of housing through obsolescence and disasters. In addition, the industry has yet to compensate for the past two years’ extremely low volume of multifamily development. “On a net basis, there is virtually no new supply of units,” observes Bill McLaughlin, executive vice president of the REIT Avalon Bay Company.

Apartment markets began to see strong improvements starting at the beginning of 2010, as a result of increasing demand meeting limited supply. Jacobson reports that, without exception, fundamentals are strong across Wood Partners’ portfolio nationwide. He says Wood Partners’ average apartment occupancy is currently 96.5%. New developments are leasing well ahead of pro forma, and rents are increasing at an average 4%, with some markets trending to 7 to 8%. Even the company’s Miami portfolio is showing revenue growth of 6% and very high occupancy levels. “I have been in the business 25 years, and I have never seen such pent-up demand and stability in the apartment markets,” says Jacobson.

In the affordable housing sector, the demand for housing is even stronger. “We cannot find a bad market. Everywhere we build, demand is growing bigger every year,” says tax credit housing developer Robert Greer, president of Michaels Development Company, in an educational session at IBS. Greer says whether a property is in the South, East or West, in every project his company develops, there will be 800 applications for every 100 units of two- to four-bedroom housing available. “The demand is simply growing beyond the ability of affordable housing developers to [meet]. Without more investors to provide equity, it is very difficult for us to satisfy that demand.” To overcome the falloff in equity investors during the recession, Michaels Development created its own Low Income Housing Tax Credit syndication company and directly approaches banks needing CRA credits for investment funds.

There may be even greater demand for apartments coming down the pike, as the Echo Boomers are on the cusp of household formation. Crowe suggests there is a pent-up one to two million unformed households that have delayed formation and that are waiting to be created. Given the population level, household growth should normally be 1 to 1.25% a year, but there has been only 0.5% growth in households, Crowe calculates. Many of these populations are young adults living with their parents, and they may move out of their parents’ homes once the jobs picture improves.

NAHB projects that job growth may now be finally sustainable and will reach a “decent level” of 200,000 to 250,000 per month by the end of 2012. That is presumably when demand for rentals will become even more intense. However, even if banks return to the market today, developers may not produce apartments in time to meet the demands of the much stronger market. “We would love to build more,” says McLaughlin. However, in Avalon Bay’s classically supply-constrained coastal markets, it takes more time to get developments off the ground. “Even if we start today, we will not deliver the units in 2012, 2013, when demand heats up.” In effect, a severe apartment shortage in 2012 and 2013, at least in some markets, could be assured.

“There is a huge supply of end users coming” to the market, agrees Jacobson. Jacobson says what scares him the most is that the continuing dearth of jobs may constrain many people’s ability in the future to pay for housing—either rentals or homes.

A growing elderly population and increasing racial diversity among the young are two major trends of growing consequence for builders and developers in the period ahead, according to demographers attending last fall's meeting of the Urban Land Institute in Washington, D.C.

Senior fellows from the Brookings Institution suggested that the recession had somewhat complicated the U.S. population picture, but migration trends prevailing prior to the collapse of the financial system will return.

Assessing the population mix, William Frey said that immigration had been adding one million persons annually, and although it slowed notably as the nation's economy soured, it is poised to push whites to a tipping point in 2042, when for the first time they will be in the minority, falling to 46% nationwide.

Also, Jan. 1 of the New Year marked the first 65th birthdays of members of the post-World War II baby boom, and that is the start of a 20-year boom for seniors, Frey said. Members of this out-sized generation, which is now being surpassed in size by their children, who are roughly in their 20s, "have always broken the mold," he said, and in how they face their later years, "they will be different." Numbers alone suggest significant change at the top of the population chart, with the share of the 65+ population climbing from 12.4% in 2000 to 20.2% by 2050.

At the same time, the population will continue to fan out in familiar patterns. The 2010 Census — which Frey pointed out asked only 10 questions and is therefore less informative than the Census Bureau's annual American Community Survey — portrays a wider picture of population gains in the Sunbelt and West at the expense of the Northeast and the Midwest.

Looking beyond regional shifts related to sunshine and job growth, people have been leaving more expensive coastal areas, such as those of California, and moving into the interior of the country in search of cheaper housing and less density, both of which have been easy to find in more suburban neighborhoods, according to Frey. Many underutilized parts of the country have been filling up. That trend screeched to a halt during the recession when people started losing their jobs and were forced to double up with family and friends, but "it will rev up again," he predicted.

U.S. Divided Into Three Parts

Frey has divided the U.S. into three distinct demographic regions, based on characteristics that can give builders and developers a broad sense of the populations they increasingly will be serving in those areas.

Home today to roughly 40% of the U.S. population and the most racially diverse of the three regions with a 53% share of whites, Melting Pot America is based in New York, New Jersey, Florida, Texas, New Mexico, California and Alaska. It is the place to disproportionately find those who have emigrated to the U.S. in recent years. It contains 70% of the nation's foreign-born residents, as opposed to 37% of native-born Americans. Seventy-six percent of those who speak Spanish at home live in these states, as do 68% of those who converse in an Asian language. English is the first language of only 34%. Immigration accounted for 45% of the growth of this region from 2000-2009; domestic population actually drew its residents down by a full 19%.

The New Sunbelt (68% white) is where the existing domestic population feels most at home, attracted by opportunities to pursue a more inexpensive lifestyle and encounter a more suburban character. Here there can still readily be found the traditional white husband and wife household with children that once was a mainstay of suburban development but has been dwindling to a 20% population share. Domestic migration accounted for 66% of the region's growth in the 2000-2009 period, while immigration also provided 30% of its boost. Geographically expansive, this region includes Virginia, the Carolinas, Tennessee, Georgia, the Pacific Northwest, Idaho, Nevada, Arizona, Utah and Colorado.

Read the full story in NBN here.

KWA Construction, LP was awarded the NAHB Multifamily Safe Program of the Year Award during the fifth annual NAHB/Builders Mutual Safety Award For Excellence (SAFE) at the 2011 NAHB International Builders’ Show.

The SAFE awards recognize the achievements of builders and trade contractors who have developed and implemented high-quality work-site safety programs, as well as government officials who have made successful efforts to advance safety in the home building industry.

KWA Construction, founded in 2004, specializes in providing general construction services for multifamilydevelopments in the Texas market. KWA's construction projects range in size from $3 million to $30 million.

Keller Webster, President of KWA Construction, LP, a member of NAHB's Multifamily Council, was recognized for the quality of his company's safety program and overall management involvement and commitment to safety.

KWA Construction’s top leaders encourage participation of all employees in training programs. Third-party experts who specialize in specific safety training are included in the process for quality assurance.  All staff associated with project construction are required to maintain up-to-date training or certification for hazards, emergency procedures, personal protective equipment policy, hazard communication, construction equipment, and accident investigation and reporting. An OSHA 10-hour course, as well as training in first aid and CPR, and the applicable federally required training are also part of the program.

KWA's safety program is managed through a variety of tools including a written safety manual, pre-construction planning meetings, and a combination of routine and surprise inspections.

The company schedules safety procedure and training reviews with subcontractors, compliance inspections, and consulting during construction activities.Their continued honest assessments of both KWA Construction and the subcontractors have helped to develop a notable reputation of excellence in safety procecdures and on-site protection.

For more information, visit www.nahb.org/SAFE, or e-mail Tonia Green at NAHB, or call her 800-368-5242 x8163.

The Fannie Mae 2010 Own-Rent Analysis is a research project conducted to better understand factors influencing consumers’ decision to buy a home (own) versus rent a home. The analysis places these factors in the context of historic behaviors, economic conditions, and demographic and lifestyle shifts.

The analysis indicates that shifting U.S. demographic trends and life events correlate to consumers’ housing decisions. The analysis shows that demographic trends such as fewer married couples and less families with children, which is resulting in shrinking households — combined with financial caution among consumers – are contributing to an increased willingness to rent.

The results are based on telephone survey interviews with 2,041 members of the United States general population (plus 1,566 additional respondents from geographic areas of interest) and research by Fannie Mae. The study identified four key themes of the “owning versus renting” decision-making process, and results are available in a series of themed reports that cut the data across consumer life stage; ethnicity/race/immigration status; and demographic, geographic, housing, and economic status.

View the results for the four major themes of the analysis: Persistence of the Homeownership Aspiration, Housing Choices Throughout the Lifecycle and the Impact of Changing Demographics, Economics of Owning and Renting Through the Cycle and Across Geographies, and Renting and Owning Behaviors by Race, Ethnicity, and Immigration Status.

View the press release and Fact Sheet here.

MARCH

2011 Legislative Conference: May 16, 2011, Washington D.C It's up to you to educate the new Members of Congress on how critical home building is to the health of the economy. Attending NAHB’s 2011 Legislative Conference held in Washington, DC, on Wednesday, March 16. Registration will open soon. 2011 Legislative Conference Tentative Schedule of Events Legislative Conference Issues Page

MAY