California Developers’ Conference

The 2018 Annual California Developer’s Conference, co-hosted by Century, brought together affordable housing developers, lenders, and investors to share insights, connections, and hors d’oeuvres at the Beverly Hills Hotel. Panels covered federal, state, and local issues and developer concerns in a post-tax reform world. Chris Thornberg returned as keynote speaker to paint a positive picture of the economy while encouraging developers to support all types of housing development, noting that market-rate housing helps free up rent-controlled housing to low-income residents. You can download Mr. Thornber’s presentation and the presentation from the Federal Update panel, below.

Chris Thornberg’s Keynote Presentation

Federal Update Presentation by Michael Novogradac, Todd Crow, and Fred Copeman

Developers and investors think big at Developers’ Roundtable

The 15th Annual California Developers’ Roundtable hosted by Downs Pham & Kuei, LLP and Century brought together an overflowing crowd of California’s top affordable housing developers, lenders, and investors at The Peninsula Hotel in Beverly Hills on March 3, 2015.

“The mood was upbeat to say the least. Optimistic energy and conversation filled the room upon hearing the positive market outlook on interest rates, rental housing starts, the increasing need for Affordable Housing, especially in California. An impressive array of speakers and attendees were on hand to reinforce the depth of experience and ability this group has to continue to make a positive impact on Affordable Housing going forward. We are in good hands to meet the changing environment and challenges of this mission,” said Mr. Kelly Sands, President of ICON Builders, who attended the conference.

This year’s panel discussed, among other topics, the local economic forecast and market conditions, the future of debt financing, and developer opportunities. According to Christopher Thornberg, Founding Partner of Beacon Economics and a speaker at the event, “California was among the nation’s stronger economies in 2014 with the labor market turning a corner, but there is also growing inequality of income and wealth, and a lack of housing that has resulted in an exodus of families with incomes of under $100,000 from the state.

Six years ago, the employment outlook and real estate industry were facing tough times. However, as 2015 begins, economic indicators are more favorable. “With the increase in financial resources and new funding through state and federal programs, the outlook for affordable housing looks encouraging,” said Aaron Wooler, SVP of Century, in the debt financing panel.

While developers are waiting for the new AHSC and VHHP funding sources, as well as LIHTC and bond allocations, the event gave everyone an opportunity to discuss larger issues and also share some creative tidbits. Peter Barker, President of Valued Housing, said, “Opportunity arises with innovative thinking. For example, obtaining an independent appraisal commissioned by a developer showed a FMV significantly above purchase price, which helped to generate additional credit in the recapitalization model.”

It was exciting for Century to be a part of this year’s California Developers’ Roundtable, and we hope to see everyone back next year.

 

 

See Aaron at the NH&RA Developers Forum

Aaron WoolerOur Senior Vice President, Aaron Wooler, will be speaking on the “Policy & Programs in Context: How Will Affordable Housing Fare in 2013 and Beyond” panel at the National Housing and Rehabilitation Association’s 2013 Spring Developers Forum held Wednesday, May 8th, in Marina del Rey. Learn about the future of affordable housing finance and speak with Aaron about your next project. You can find event and registration information at the event site.

Some Cause for Celebration

Everyone knows about the “Fiscal Cliff,” which was probably more like a small hillock.  And by now, most folk know that Congress and the President figured out a last minute (actually, it was after the last minute, but who’s counting) compromise to avoid the tax increase components of the problem.  But the popular press has concentrated on the costs and benefits for individuals, families and big businesses.  There were some features in the H.R. 8, the American Taxpayer Relief Act of 2012 (ATRA), that will change some rules for developers of affordable housing as well.

Read more

Small Area FMRs – What Will They Mean for Landlords?

The Small Area Fair Market Rent (SAFMR) program may have many effects on the subsidized housing landlords.  One of the desired outcomes may be that lower income tenants will have the opportunity to move to housing in higher cost neighborhoods.  However, another effect may be that landlords in lower cost neighborhoods will see a loss of income and become reluctant to rent to Housing Choice Voucher tenants.

Each year, HUD calculates and publishes Fair Market Rents (FMRs).  The FMRs are the basis for determining payments made to landlords on behalf of lower income tenants for a variety of programs, primarily the Housing Choice Voucher.  FMRs are set for an area, most often a county or metropolitan area, and represent the amount that would have to be paid for housing (including rent plus utilities) for privately owned, decent and safe rental housing with suitable amenities within the area.  The FMR is set so that most housing within the area, excluding luxury units, would be affordable to a tenant holding a Housing Choice Voucher.

However, because counties can be very large and diverse, especially in densely developed metropolitan areas, there are some neighborhoods where the FMR is much too low to allow Voucher holding tenants to rent, and in other neighborhoods, the FMR is more than the surrounding submarket rents.  In order to try to adjust the FMR system to these market areas, HUD has developed the Small Area FMR (SAFMR), publishing applicable rents for the Housing Choice Voucher (HCA) and Moderate Rehabilitation Single Room Occupancy programs on October 5, 2012.  Read more

Has the Granny Flat Finally Arrived — as the Graduate Flat?

Lennar, a well-known and fairly traditional home builder active in California, made the news recently because they are offering a new product in their Crescent Heights at Sky Ranch subdivision in Santee, a suburban city east of San Diego.  One of the three models offered incorporates what they are calling their NextGen, Home Within a Home.  Essentially, this is a studio apartment, with a separate one-car garage, included within the same structure as a fairly standard 4-bedroom (plus ‘Bonus Room’), 3-bath, 2-car garage suburban home.  The studio unit has its own separate entrance from the outside, kitchenette and space for a stacked washer and dryer.

The home is priced at $610,000, and has about 3,650 sq.ft. in total, or about $167/sq.ft.  For the San Diego market, it is in about the middle of the price range.

Is there a market for this “new” type of home?  Lennar seems to think so, and the national press has been talking about the demand for multigenerational housing for some time.  CNN Money wrote about it in April 2012, a year ago, the New York Times pointed out that it was a new trend a year before that, a recently published book, Together Again, notes articles going back to at least 2005 on their promotional website, AARP has a whole blog site dedicated to the issue.  It has been discussed in various “learned journals” (I happen to like the article in New Geography). Read more

Is There a Two-tiered Mortgage Market Based on Race?

Red-lining has long been a topic of concern in the housing industry.  I have known people who actually saw the maps in bank offices, with the big red line surrounding minority neighborhoods on it, or the predominantly minority Census Tracts colored red.

Red-lining was a very real and pervasive problem until Congress stepped in with the Home Mortgage Disclosure Act (HMDA) and the Community Reinvestment Act (CRA), and bank regulators began to impose sanctions on mortgage lenders who demonstrated bias in their lending practices.

No doubt, there are still banks and mortgage brokers who have not gotten the message, and there is still bias in out society, in home mortgages as well as other areas.  But I was surprised to see the news articles about a recent study that seemed to show that not only was racial bias still practiced, but that Black and Latino borrowers were being broadly discriminated against in major American cities.  This study, produced by the California Reinvestment Coalition (CRC), Empire Justice Center, Massachusetts Affordable Housing Alliance (MAHA), Neighborhood Economic Development Advocacy Project (NEDAP), Ohio Fair Lending Coalition, Reinvestment Partners, and Woodstock Institute, reviewed HMDA data for 2010 and compared conventional and government-backed prime mortgage lending in seven cities, based on borrowers’ race and ethnicity, and the racial and ethnic composition of neighborhoods.

Then I read the report itself.   Read more

Property Values are Rising Again! Hooray for Higher Taxes??

Several sources have reported that home sales prices appear to have turned the corner and are now rising.  DataQuick shows increases in sales prices over the past five months, and year-over-year increases. While foreclosures remain high, the increase in sale prices is seen as a positive sign that the market is recovering.

 

ClearCapital also reports that the market may have turned toward a recovery, saying “The recovery has generally started in lower priced segments for most markets seeing gains, however demand in the West is now outpacing supply and driving prices up in the low, mid, and even high priced homes.”

This is good news for many home owners, home buyers and the real estate industry as a whole.  And it is doubly good news for cities, counties and local districts who rely on the property tax for part of their revenues supporting public services.

As property values rise, property taxes will rise as well, helping to pay for schools, parks, libraries, public safety and other services provided to residents and local businesses by public agencies.  And those taxes will rise relatively rapidly, despite the limits imposed by Proposition 13.

“How can that be?” you ask, “Didn’t Prop. 13 limit increases in property taxes to no more than 2% per year?” Read more

A Very Telling Employment Chart

While the unemployment rate continues its slow decline and job creation chugs along, a very telling chart from the St. Louis Fed (reproduced and enhanced below) shows how the percentage of men (RED line) who are employed has fallen during, and not recovered after all US recessions in the past 50 years. The percentage of employed men has fallen from 84.4% in 1952 to 64.4% in May 2012, while the percentage of employed woman has increased from 33.7% to 53.2%.

Employment trends, especially short-term trends, are key drivers in the apartment industry. I’m not sure what impact this long-term trend will have, but it would seem to have some effect on household formation.

And the data and chart-making tools at the St. Louis Fed site are pretty cool.

(Hat tip to Slate’s Moneybox blog)

And now, for something completely different to address to the foreclosure problem.

As prior posts here, and innumerable articles in the media, blogs and other sources, remind us, there is still a serious mortgage default and foreclosure problem, particularly in California.

Enter Mortgage Resolution Partners, who have apparently been shopping a new idea on how to dig out from under this problem.  A story from Reuters says this mortgage firm is proposing that governments use their eminent domain power to condemn, not the homes, but the mortgages.

A big part of the problem with the real estate market is that many borrowers are “upside-down,” or “underwater.”  That is, the home owners have negative equity–they owe more on their mortgage than their home is worth in today’s market.  A recent report estimates that nearly one in three home buyers owe more than their home is worth, and altogether, the difference between the real value of the homes and the mortgages is $1.2 trillion. Read more