naahl & uli symposium | october 11,...

Naturally Occurring Affordable Housing

NAAHL & ULI Symposium | October 11, 2016

Slicing And Dicing Rental Housing

U.S. Rental Housing Inventory By Units

1

2

3

4

5

6

Sources: U.S. Census Bureau; CoStar Portfolio Strategy As of August 2016

1 - 4 Units23.5 Million

55%

Market Rate&

Market/Affordable16.0 Million

37%

Rent Subsidized3.3 Million

8%

Slicing And Dicing Rental Housing

U.S. Rental Housing Inventory By Units

4

5

6

Sources: U.S. Census Bureau; CoStar Portfolio Strategy As of August 2016

1 & 2 Star5.6 Million

13%

One- And Two-Star Rating Criteria

CoStar Building Rating System (BRS)

Three-Star Rating Criteria


Four-Star Rating Criteria


Five-Star Rating Criteria


CoStar Building Rating System

4 Star

5 Star

1 Star

2 Star

3 Star

EXTERIOR INTERIOR

Affordability Issues More Significant At Top End Of Market

Rent As A % Of 100% Area Median Income By Star Rating

Rating

Row Labels

3/31/2013

6/30/2013

9/30/2013

12/31/2013

3/31/2014

6/30/2014

9/30/2014

12/31/2014

3/31/2015

6/30/2015

9/30/2015

12/31/2015

3/31/2016

6/30/2016

2013

2013

2013

2013

2014

2014

2014

2014

2015

2015

2015

2015

2016

Source: CoStar Group As of 16Q2

15.3%

16.5%

17.8%

19.6%

23.4%

26.4%

10%

12%

14%

16%

18%

20%

22%

24%

26%

28%

2013 2014 2015 2016

Rent As A % Of Income

1 & 2 Star 3 Star 4 & 5 Star

1 & 2 Star Rents Remain Affordable In Most Metros

1 & 2 Star Apartment Rents As A Percent Of 100% Area Median Income

As of 16Q2Sources: ESRI; CoStar Portfolio Strategy

1 & 2 Star Represents A Major Portion Of The Market

Number Of Units By Star Rating

1 & 2 Star

5,501,144

36.2%

Source: CoStar Group As of August 2016

36.2%5,501,144

41.5%6,310,441

22.3%3,393,118


The Vast Majority Of Multifamily Properties Are 1 & 2 Star

Number Of Properties By Star Rating

1 & 2 Star

253,467

75.4%


75.4%253,467

19.8%66,684

4.7%15,827


1 & 2 Star Properties Can Be Found Almost Anywhere

1 & 2 Star Units By Metro

Sources: ESRI; CoStar Portfolio Strategy As of 16Q2

Los Angeles And New York Dominate

1 & 2 Star Properties By Metro

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25


18.4%

11.6%

4.3%3.7%

2.9%2.6%

2.0% 2.0% 1.9% 1.7% 1.4% 1.4% 1.4% 1.3% 1.3% 1.2% 1.1% 1.0% 1.0% 1.0%

0

5

10

15

20

25

30

35

40

45

50Los A

ngele

s

Ne

w Y

ork

Ch

icago

San

Die

go

San

Fra

ncis

co

East

Bay

Mia

mi

Ora

ng

e C

ounty

Sea

ttle

Min

nea

polis

Bosto

n

Inla

nd E

mpire

Phila

delp

hia

San

Jose

Port

land O

R

Fort

Laud

erd

ale

No

rthern

NJ

Washin

gto

n, D

C

Cin

cin

nati

De

nver

Number Of Properties (000s)

Almost Half Of 1 & 2 Star Inventory In 50+ Unit Buildings

Number Of Units By Building Size And Star Rating


0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

5-9 Units 10-19 Units 20-49 Units 50-99 Units 100-199 Units 200+ Units


Number Of Units (Millions)

Most Units Built More Than 35 Years Ago

1 & 2 Units By Building Age


0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1900-09 1910-19 1920-29 1930-39 1940-49 1950-59 1960-69 1970-79 1980-89 1990-99 2000-

Number Of Units (Millions)

1 & 2 Star Properties Spread Out Around The D.C. Area

Washington, DC 1 & 2 Star Inventory


High Vacancy Properties Are Few And Far Between

Washington, DC 1 & 2 Star Vacancy Rates


1 & 2 Star Large Part Of Inventory In Close-In Submarkets

1 & 2 Star Construction As A Percent Of Inventory

As of 16Q2Sources: ESRI; CoStar Portfolio Strategy

Vacancies Show The Effect Of Construction

Average Vacancy By Star Rating

Rating

Row Labels

3/31/2013

6/30/2013

9/30/2013

12/31/2013

3/31/2014

6/30/2014

9/30/2014

12/31/2014

3/31/2015

6/30/2015

9/30/2015

12/31/2015

3/31/2016

6/30/2016

2013

2013

2013

2013

2014

2014

2014

2014

2015

2015

2015

2015

2016


0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

2013 2014 2015 2016

Vacancy Rate


Rent Spread Has Widened Slightly

Average Asking Rent By Star Rating

Rating

Row Labels

3/31/2013

6/30/2013

9/30/2013

12/31/2013

3/31/2014

6/30/2014

9/30/2014

12/31/2014

3/31/2015

6/30/2015

9/30/2015

12/31/2015

3/31/2016

6/30/2016

2013

2013

2013

2013

2014

2014

2014

2014

2015

2015

2015

2015

2016


$600

$700

$800

$900

$1,000

$1,100

$1,200

$1,300

$1,400

$1,500

2013 2014 2015 2016

Average Asking Rent


Core Coastal Metros Are The Priciest

1 & 2 Star Average Asking Rent By Metro

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000S

an

Fra

ncis

co

San

Jose

East

Bay

Ne

w Y

ork

Ho

nolu

luLong I

sla

nd

Ora

ng

e C

ounty

Bosto

nLos A

ngele

sS

an

Die

go

Washin

gto

n, D

CN

ort

hern

NJ

Mia

mi

Sea

ttle

Fort

Laud

erd

ale

Sta

mfo

rdD

enver

Inla

nd E

mpire

Port

land O

RH

art

ford

Austin

Baltim

ore

Palm

Be

ach

Phila

delp

hia

Sacra

mento

Ch

icago

Min

nea

polis

Na

shvill

eR

ale

igh

No

rfolk

Orlando

Pitts

burg

hS

alt L

ake C

ity

Ne

w O

rlean

sT

am

pa

Da

llas -

FW

Ho

usto

nA

tlan

taR

ichm

ond

De

troit

Milw

aukee

Ch

arlotte

San

An

tonio

Pho

enix

Jacksonvill

eK

an

sas C

ity

Cle

vela

nd

Sain

t Louis

Las V

egas

India

na

polis

Co

lum

bus O

HC

incin

nati

Okla

hom

a C

ity

Mem

phis

Average Asking Rent

South East Midwest West

But On A Comparative Basis May Be Relatively Cheap

1 & 2 Star Apartment Rents As A Percent Of Market Rent


Strong Long-Term Rent Growth In 1 & 2 Star Segment

Average Rent Growth By Star Rating

Rating

Row Labels

3/31/2013

6/30/2013

9/30/2013

12/31/2013

3/31/2014

6/30/2014

9/30/2014

12/31/2014

3/31/2015

6/30/2015

9/30/2015

12/31/2015

3/31/2016

6/30/2016


5.0%5.6%

6.4%

0%

1%

2%

3%

4%

5%

6%

7%

8%


Rent Growth

Average Annual Rent Growth Since 2013 Y/Y Rent Growth

Lower Vacancies Levels The Playing Field


Rating

Row Labels

3/31/2013

6/30/2013

9/30/2013

12/31/2013

3/31/2014

6/30/2014

9/30/2014

12/31/2014

3/31/2015

6/30/2015

9/30/2015

12/31/2015

3/31/2016

6/30/2016

Rating

Row Labels

3/31/2013

6/30/2013

9/30/2013

12/31/2013

3/31/2014

6/30/2014

9/30/2014

12/31/2014

3/31/2015

6/30/2015

9/30/2015


5.60%5.96% 5.80%

0%

1%

2%

3%

4%

5%

6%

7%

8%


Rent Growth


Average Annual Economic Rent Growth

Lower Vacancies Levels The Playing Field


Rating

Row Labels

3/31/2013

6/30/2013

9/30/2013

12/31/2013

3/31/2014

6/30/2014

9/30/2014

12/31/2014

3/31/2015

6/30/2015

9/30/2015

12/31/2015

3/31/2016

6/30/2016

Rating

Row Labels

3/31/2013

6/30/2013

9/30/2013

12/31/2013

3/31/2014

6/30/2014

9/30/2014

12/31/2014

3/31/2015

6/30/2015

9/30/2015


3.88% 4.02%

2.67%

0%

1%

2%

3%

4%

5%

6%

7%

8%


Rent Growth


Y/Y Economic Rent Growth

Market Capitalization Of 1 & 2 Star Inventory

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

Source: CoStar Portfolio Strategy As of 16Q2

$0

$20

$40

$60

$80

$100

$120

$140

$160

$180N

ew

York

Los A

ngele

s

San

Fra

ncis

co

San

Die

go

Ora

ng

e C

ounty

East

Bay

San

Jose

Ch

icago

Sea

ttle

Bosto

n

Phila

delp

hia

Mia

mi

Min

nea

polis

Ho

usto

n

Washin

gto

n, D

C

Port

land O

R

Inla

nd E

mpire

No

rthern

NJ

De

nver

Ho

nolu

lu

Da

llas -

FW

Sacra

mento

Fort

Laud

erd

ale

Baltim

ore

Atlan

ta

Market Capitalization (Billions)

Pricing Plays A Role In Values


1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25


$0

$50

$100

$150

$200

$250

$300

$350

$0

$20

$40

$60

$80

$100

$120

$140

$160

$180N

ew

York

Los A

ngele

s

San

Fra

ncis

co

San

Die

go

Ora

ng

e C

ounty

East

Bay

San

Jose

Ch

icago

Sea

ttle

Bosto

n

Phila

delp

hia

Mia

mi

Min

nea

polis

Ho

usto

n

Washin

gto

n, D

C

Port

land O

R

Inla

nd E

mpire

No

rthern

NJ

De

nver

Ho

nolu

lu

Da

llas -

FW

Sacra

mento

Fort

Laud

erd

ale

Baltim

ore

Atlan

ta

Market Capitalization (Billions) Average Price Per Unit (000s)

Pricing Plays A Role In Values


1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25


$0

$50

$100

$150

$200

$250

$300

$350

$400

$0

$20

$40

$60

$80

$100

$120

$140

$160

$180N

ew

York

Los A

ngele

s

San

Fra

ncis

co

San

Die

go

Ora

ng

e C

ounty

East

Bay

San

Jose

Ch

icago

Sea

ttle

Bosto

n

Phila

delp

hia

Mia

mi

Min

nea

polis

Ho

usto

n

Washin

gto

n, D

C

Port

land O

R

Inla

nd E

mpire

No

rthern

NJ

De

nver

Ho

nolu

lu

Da

llas -

FW

Sacra

mento

Fort

Laud

erd

ale

Baltim

ore

Atlan

ta

Market Capitalization (Billions) Average Price Per SF

Cap Rate Spreads Are Narrowing

Cap Rates By Star Rating

90

90

90

90

91

91

91

91

92

92

92

92

93

93

93

93

94

94

94

94

95

95

95

95

96

96

96

96

97

97

97


(150)

(100)

(50)

0

50

100

150

200

250

300

350

4.0%

4.5%

5.0%

5.5%

6.0%

6.5%

7.0%

7.5%

8.0%

8.5%

9.0%

05 06 07 08 09 10 11 12 13 14 15 16

Average Cap Rate

1 & 2 Star Cap Rate Historical Average (2005-Present)

4 & 5 Star Spread 3 Star Spread

Spread (BPS)

More Attractive Spreads Outside Of New York And L.A.

Cap Rates By Star Rating Excluding New York And Los Angeles

90

90

90

90

91

91

91

91

92

92

92

92

93

93

93

93

94

94

94

94

95

95

95

95

96

96

96

96

97

97

97


(150)

(100)

(50)

0

50

100

150

200

250

300

350

4.0%

4.5%

5.0%

5.5%

6.0%

6.5%

7.0%

7.5%

8.0%

8.5%

9.0%

05 06 07 08 09 10 11 12 13 14 15 16

Average Cap Rate

1 & 2 Star Cap Rate Historical Average (2005-Present)

4 & 5 Star Spread 3 Star Spread

Spread (BPS)

Ownership Concentrated In Regional And Local Players

Top Owners Of 1 & 2 Star Properties

Rank

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

29

30


0

40

80

120

160

200

0

2,000

4,000

6,000

8,000

10,000

12,000E

dw

ard

Ro

se

& S

on

s

Prin

ce

ton E

nte

rpri

se

s

Mo

rga

n M

ana

gem

en

t

Hen

de

rsen

-We

bb

Pan

ge

a R

eal E

sta

te

Elo

n P

rop

ert

y M

an

ag

em

ent

Reg

ion

al M

an

age

me

nt

Pam

a M

an

ag

em

ent

Wa

rren

Pro

pe

rtie

s

Kush

ne

r C

om

pan

ies

Mo

narc

h I

nve

stm

ent

Hart

ma

n &

Tyn

er

J.K

. R

esid

entia

l Serv

ice

s

RO

CO

Re

al E

sta

te

New

Life M

ulti-

Fa

mily

Mg

mt

The

Pe

ters

on

Co

mp

anie

s

We

ste

rn N

atio

na

l G

roup

Mo

rga

n P

rope

rtie

s

Esta

tes N

Y R

eal E

sta

te S

erv

ice

s

Go

ldbe

rg R

ea

lty A

sso

cia

tes

Chu

rch

ill F

org

e P

rop

ert

ies

GF

I C

apita

l Re

so

urc

es G

rou

p

Mid

dle

sex M

an

ag

em

ent

Kam

so

n C

orp

ora

tion

Sam

ue

l G

eltm

an

& C

om

pan

y

Units Properties

Units Properties

Shaw Lupton

[email protected]

Ethan Vaisman

[email protected]

Appendix

CoStar Building Rating System

Average 1 & 2 Star Asking Rents By Metro

Rank Metro Name Average Asking Rent Rank Metro Name Average Asking Rent

1 San Francisco 2,589$ 28 Minneapolis 882$

2 San Jose 2,188$ 29 Nashville 875$

3 East Bay 1,973$ 30 Raleigh 860$

4 New York 1,763$ 31 Norfolk 841$

5 Honolulu 1,742$ 32 Orlando 840$

6 Long Island 1,696$ 33 Pittsburgh 835$

7 Orange County 1,551$ 34 Salt Lake City 821$

8 Boston 1,484$ 35 New Orleans 806$

9 Los Angeles 1,477$ 36 Tampa 805$

10 San Diego 1,362$ 37 Dallas - FW 796$

11 Washington, DC 1,321$ 38 Houston 795$

12 Northern NJ 1,249$ 39 Atlanta 794$

13 Miami 1,180$ 40 Richmond 765$

14 Seattle 1,103$ 41 Detroit 761$

15 Fort Lauderdale 1,094$ 42 Milwaukee 761$

16 Stamford 1,060$ 43 Charlotte 729$

17 Denver 1,042$ 44 San Antonio 729$

18 Inland Empire 1,034$ 45 Phoenix 713$

19 Portland OR 1,030$ 46 Jacksonville 702$

20 Hartford 1,012$ 47 Kansas City 682$

21 Austin 991$ 48 Cleveland 677$

22 Baltimore 987$ 49 Saint Louis 670$

23 Palm Beach 987$ 50 Las Vegas 646$

24 Philadelphia 975$ 51 Indianapolis 645$

25 Sacramento 950$ 52 Columbus OH 635$

26 Chicago 898$ 53 Cincinnati 635$

27 Minneapolis 882$ 54 Oklahoma City 610$


These CoStar Portfolio Strategy materials contain financial and other information from a variety of public and proprietary

sources. CoStar Group, Inc. and its affiliates (collectively, “CoStar”) have assumed and relied upon, without independent

verification, the accuracy and completeness of such third party information in preparing these materials.

The modeling, calculations, forecasts, projections, evaluations, analyses, simulations, or other forward-looking information

prepared by CoStar and presented herein (the “Materials”) are based on various assumptions concerning future events

and circumstances, which are speculative, uncertain and subject to change without notice. You should not rely upon the

Materials as predictions of future results or events, as actual results and events may differ materially. All Materials speak

only as of the date referenced with respect to such data and may have materially changed since such date. CoStar has no

obligation to update any of the Materials included in this document. You should not construe any of the data provided

herein as investment, tax, accounting or legal advice.

CoStar does not represent, warrant or guaranty the accuracy or completeness of the information provided herein and shall

not be held responsible for any errors in such information. Any user of the information provided herein accepts the

information “AS IS” without any warranties whatsoever. To the maximum extent permitted by law, CoStar disclaims any

and all liability in the event any information provided herein proves to be inaccurate, incomplete or unreliable.

© 2016 CoStar Realty Information, Inc. No reproduction or distribution without permission.

naahl & uli symposium | october 11,...

Documents