Supreme Court Strikes Down Two-Month Extension of Evictions Ban

 

The U.S. Supreme Court late Thursday struck down the Biden administration’s two-month extension of the nationwide moratorium on evictions. The unsigned 6-3 ruling said the Centers for Disease Control and Prevention, which extended the moratorium amid rising COVID-19 cases, lacked the authority to do so.

“If a federally imposed eviction moratorium is to continue, Congress must specifically authorize it,” the court wrote.

The extension on the eviction ban, originally imposed by the CDC last September, targeted “specific areas of the country where cases are rapidly increasing, which likely would be exacerbated by mass evictions,” CDC said earlier this month.

The Associated Press reported that White House press secretary Jen Psaki said the administration was “disappointed” by the ruling. She added that President Joe Biden “is once again calling on all entities that can prevent evictions — from cities and states to local courts, landlords, Cabinet Agencies — to urgently act to prevent evictions.”

---

Source: Supreme Court Strikes Down Two-Month Extension of Evictions Ban

Up to 8M Apartment New Lease Signings Expected in Next Six Months

 

With peak Delta variant cases soon to hit this month followed by a likely retreat, apartment renters appear poised more than usual to get out and move, according to an August survey by Apartments.com.

The internet listing service is forecasting up to 8 million new leases to be signed in the next six months, as 53 percent of renters surveyed plan to move before spring.

The survey is based on 20,000 respondents among renters who have set up online search accounts and who submitted leads to apartment communities in the past two years. The information was presented during Apartmentalize last week in Chicago, a conference hosted by the National Apartment Association.

Change in visits to physical locations as tracked by Google from April 1, 2020, to August 15, 2021, saw a 35 percent increase in persons going to retail and recreation; a 41 percent spike in using transit; and a 38 percent increase in being at the workplace.

The pandemic held back renters from moving for various reasons, such as financial concerns (57 percent); no available apartments that fit their needs (46 percent); personal health and mental health worries (37 percent); could not visit the property in person (36 percent); job loss (28 percent); death of loved ones (8 percent) and COVID-19 cases (7 percent).

Some 44 percent of renters now say the country opening up and increasing vaccination numbers are factors impacting their likelihood to move in the next year. Looking for a New Place

Turnover is expected to rise as 59 percent said they intend to live somewhere else entirely once their current lease expires. Just 24 percent of respondents to the Apartments.com survey said that they expect to renew their lease, which is down from 47 percent who said so before the pandemic. Up to one-third of renters said they wanted to move to a new state.

Renters are optimistic about what a new place means for their lifestyle. Key factors driving their desire to move to include more space (35 percent); upgrading to a nicer place (33 percent); and a change in lifestyle (31 percent).

Renters are seeking to spend more money. When asked: “Thinking about your budget, how much do you plan to spend on rent compared to your current rent?” one-third said more; 18 percent said less and the remainder said, “about the same.”

No More Waiting Around

Renter decisions (the search cycle) are happening more quickly; the average renter today takes only 31 days to find a new apartment, down from 46 days pre-COVID and 38 days in Q2. Robust virtual tools, including 3D Tours, HD Video, Hi-Res Photos are more popular than ever in helping renters learn about communities and make faster decisions, Apartments.com reports.

And today, renters are considering fewer communities. On average, apartment seekers are considering 12 communities at the start of their search; they then conduct more research about each one; then 75 percent of renters say they will only seriously consider one to three of those.

---

Source: Up to 8M Apartment New Lease Signings Expected in Next Six Months

Chicago’s Downtown Rental Market Comes Back Hotter Than Pre-Pandemic Levels

(iStock)

When Jason Lee, newly graduated from MIT Sloan business school in Boston, got an offer to work as a consultant at the Chicago office of one of the country’s largest firms, he debated whether to work remotely for a couple of months or pack his bags and head straight to the Windy City, where the office had opened for employees who chose to return.

“One partner moved to Boulder during the pandemic and is working from there, another consultant is in Michigan, but typically, we are all in Chicago,” Lee said.

More than 90 percent of the people from his 900-person office were coming back to work. That’s what convinced the aspiring first-year consultant to be in Chicago on the first day of work.

Lee is one of the many who flocked to downtown Chicago from out of state, contributing to the rebound in downtown rentals. At the same time, many Chicagoans who fled to the suburbs during the pandemic are now returning to the city. Some who bought in the ‘burbs were able to sell at a profit as the housing boom continues there, and others had sheltered with parents or family and are now coming back, said Kyle Stengle, senior managing director at Marcus & Millichap.

Word around town in May was that downtown apartments were still offering good deals, and people like Lee wanted to snatch them before they were gone.

“I came at the tail-end of when apartments were giving concessions to new renters. I received two months free of rent for my 12-month lease,” said Lee.

Renters absorbed nearly 9,900 units from April to June, the strongest quarter for leasing in more than 10 years, according to the company’s market report.

The biggest gains were from people like Lee, moving from out of state, according to Luxury Living Chicago Realty, a Chicago-based apartment leasing firm that tracked relocations from out of state as well as the suburbs.

“Relocation renters are up about 10 percent to about 50 percent compared to both 2019 and 2020”, said Aaron Galvin, co-founder, and CEO of Luxury Living Chicago Realty.

“Of that 50 percent, 35 percent came from out of state and 15 percent came from the suburbs this year,” said Galvin.

In 2020, 40 percent of all new leases for Luxury Living Chicago Realty came from relocation renters, explained Galvin. Of those, 25 percent came from the suburbs and 15 percent from out-of-state.

“That fuels confidence that people are coming to Chicago for new jobs, for universities and grad schools.”

Strong demand for rentals pushed asking rents in July above pre-pandemic levels. The median price for a two-bedroom apartment in Chicago in July was $1,405, approaching the level of March 2020, the last pre-pandemic month, according to Apartment List, a rental listing site. In August, median rent increased 1.2 percent to $1,423 from July and 4.4 percent from a year earlier.

“Vacancy rates are at an all-time low. [There is] really high occupancy in the rental market,’’ said Rob Warnock, senior research associate at Apartment List.

Downtown apartment occupancy rates dropped to 86.5 percent in the fourth quarter of 2020, the lowest level since at least 1998, said Integra Realty Resources, an appraisal and consulting firm. Occupancy rates bounced up to 94.5 percent in the second quarter this year, data from IRR shows.

“We don’t have many vacant units left to lease. That always puts pressure on rent,” said Ron DeVries, senior managing director at IRR at the Chicago office. “If you combine that with the fact that we don’t have any new units from the pipeline right now that are ready to break ground, I think that will push up the rents further.”

Though most market analysts expect the rental market in Chicago to remain strong, further growth in the nation’s second-largest downtown market will depend on the timing and extent of workers’ return to offices. That picture is less clear with the emergence of new variants of Covid.

Across the country, companies have taken a mix of approaches to bringing workers back to offices. In part that has to do with the type of company. “In places like San Francisco it might be even slower to return to work if a lot of the downtown businesses are in the tech industry and therefore easily convertible to a remote environment, whereas if somebody was making the comparison, New York, for example, more financial and legal firms are less receptive to remote work,” said Apartment List’s Warnock. Returning to the office might spur more residential migration in Manhattan than it would in San Francisco, explained Warnock.

In downtown Chicago, about 11,530 apartments will be delivered by the second quarter of 2023, according to a Marcus & Millichap’s market report. There were 6,463 units completed during the 12 month period ended in June.

As IRR’s DeVries puts it, there is going to be a “two-year window” before new deliveries will impact the supply of apartments. “The food scene is really good here, the bar scene is great, Chicago is one of the best cities to be in,” said Lee. Paying about $2,000 in rent every month isn’t too bad considering he is living downtown in a one-bedroom apartment, he said. Lee plans on staying in Chicago as long as his office is there.

---

Source: Chicago’s Downtown Rental Market Comes Back Hotter Than Pre-Pandemic Levels

Pandemic and Pricing Pressures Building, Apartment Construction Strategy Gets a Rethink

 

Mid-sized cities near large markets are gaining a greater focus for apartment developers as the country moves away from the pandemic, and for many, away from the big cities.

With flexible work arrangements and many living in the big city because of it, some renters are looking to improve their quality of life and their school districts. And even if they have to go to the office once or twice a week, the big city is still within reach commute-wise.

These were the comments of Jake Bloom, Vice President of Development, Spy Rock Real Estate Group, who said that about 56 percent of renters in his communities come from out of state.

Renter migrations, materials pricing, and paying more attention to the environment were among the key topics four developers discussed Tuesday at the MFE Conference in Las Vegas, hosted by Zonda. The panel also featured Tim Gokhman, Managing Director, New Land Enterprises; Beau Daniel, Developer, Bristol Development Group; and Andrew Colbert, Senior Project Director, WinnDevelopment.

“With so many unknowns, you need to make sure your designs have plenty of options,” Bloom said. “With an 18-month build time, what you need today might be what you need later.

Daniel said he’s putting more emphasis on light and fresh air. “We’re including an 8-foot slider on our balconies – not the standard 6-foot one,” he said. “The construction team looks at us crazy, but doing this can really make a 450-square-foot apartment look a lot bigger. And having work-from-home space is desirable.” Gokhman said his team insists on having a balcony in every unit layout as part of its efforts toward creating biophilia, defined as the innate human instinct to connect with nature and other living beings. This concept is foundational to biophilic design, which utilizes natural materials, patterns, and phenomena to maintain a connection to nature within the built environment.

“And what we’re hearing a lot is people want to be together alone,” Gokhman said. “A lot of people who move to our properties in the Milwaukee market have never been here and don’t know anyone. They don’t want an apartment building that is [isolated]. They want to have plenty of space apart to feel safe, but they don’t want to be alone. With our common areas, we’re using modular furniture so the space can be programmable based on what function it has.”

Supply Chains Breaking the Budget Supply chain management and price inflation are negatively affecting developers’ timeframes and construction frames, as well as their bottom lines. The panelists could not firmly predict how long this rising pricing environment would last, estimating from 15 months to two years. “Only the passage of time can restore this,” Daniel said. Colbert said he’s trying to be smart about what and when he buys materials. “I’ve never received so many emails from companies that are trying futures traders with the market,” he said. Gokhman said the labor markets are tighter and developers will need to bring their supply chains more locally. “We might pay a bit of a premium to do that, but in the long term, the pricing all smooths out,” he said.

His company has used construction methods more inclined to wood and not concrete and he said that allows them to do the work with only one-third the labor.

The pricing and availability of windows, for one thing, has been a nuisance, Bloom said, pointing to a consolidation of window manufacturers into a single supplier, and that supplier was hit recently with a cyberattack, making things more difficult. ESG Should be a Priority Gokhman also called attention to ESG efforts in the multifamily industry, citing an attendee poll during the conference that showed little interest in the subject one day, but then had three leading CEOs mention it as a priority the next day. “Our industry does not realize that this is coming and that the market will demand upon us that we adjust,” he said. “Currently, real estate is the generator of 40 percent of the [unhealthy] carbon emissions in this country. That is not sustainable.”

---

Source: Pandemic and Pricing Pressures Building, Apartment Construction Strategy Gets a Rethink

Treasury To Release Final Rental Assistance Funds To Most Efficient Jurisdictions

The final phase of the Emergency Rental Assistance program created by federal stimulus bills over the past two years has begun.

On Tuesday, the U.S. Treasury Department announced it would release the remaining $13B allocated by Congress for distribution to states and local jurisdictions that have already reached benchmarks for success in getting those funds to renters and landlords.

With a federal eviction moratorium no longer in place, the ERA program and the potential for applicants to use those funds to pay off rent debt is the only thing standing between at-risk tenants and eviction in many parts of the country. At the end of August, Treasury released guidance to assist jurisdictions in speeding up what had been a disappointingly slow rollout of local rent relief programs.

As part of the announcement, Treasury reiterated plans to redistribute funds allocated to jurisdictions with the slowest paces of distribution. The agency has not yet set a deadline for that decision or a specific threshold that would trigger redirecting rental assistance aid elsewhere, but it set late September as a target in its August release of guidance.

In announcing the allocation of the additional $13B to high-performing jurisdictions, Treasury singled out a few areas that have done particularly well in getting their rental assistance dollars to tenants and landlords. Among them is Philadelphia, which has a temporary court order in place forcing landlords to apply for ERA and enter an eviction diversion program before any eviction hearing can proceed.

As of Sept. 10, the Philadelphia Department of Planning and Development had distributed 81% of the roughly $105M it received across multiple rounds of rent relief allocations, including 61% of the $23M included in the American Rescue Plan, the most recent federal stimulus bill, according to publicly released city-data.

At the beginning of September, Gregory Heller, the official leading the city's rental assistance program, told Bisnow that Philadelphia was on pace to run out of federally allocated funds before the end of the month. The latest release of money from the Treasury Department has likely pushed that time frame back a bit.

The other jurisdictions held up by Treasury as examples of successful rental assistance programs included Houston, New Orleans, Des Moines, Iowa, the Hawaiian island of Oahu, and Leon County in Florida.

---

Source: Treasury To Release Final Rental Assistance Funds To Most Efficient Jurisdictions

Millennials Aren’t Abandoning Apartments After All

 

One shift expected from the pandemic was the movement of millennials away from apartments and toward single-family housing. Recent data and analysis show, however, that this trend may be petering out, according to a new report from Moody’s Analytics. Instead, multifamily fundamentals look bright for both the short and medium-term, it finds.

Absorption was buoyed by job growth, as more than 3 million jobs were added to payrolls during the first half of the year, according to Moody’s economist Thomas LaSalvia.

“While the potential for impactful, structural changes in how we live, work, and play still remain, worries that large swaths of the population will head for single-family housing are losing steam,” LaSalvia writes in a recent piece in the Scotsman’s Guide. He recognizes that while millennials are indeed moving toward SFR, “the rapid acceleration in US home prices has – and will continue to – price out many of these potential homebuyers.”

Still, the asset class is facing some headwinds.

For instance, inventory gains have been lackluster relative to absorption, he says: US apartment completions hit around 60,000 units through the first half of the year, a rate that’s on pace for the sector’s slowest year in nearly a decade. Developers finished many projects in 2020, according to LaSalvia, but “they were also busy reassessing the prospect of lease-ups and potentially tighter financing for upcoming projects. This uncertainty, combined with rising material costs and labor shortages, has reduced construction activities in 2021.”

Meanwhile, the recovery appears disparate across metros: while 80 of the 82 primary markets Moody’s analyzed posted quarterly rent increases, San Francisco apartment rents are not predicted to return to 2019 levels until 2027.

“While we remain bullish on the mid-to-long-term prospects of large, dense urban centers, divergent recovery rates are likely to continue in the short term – and potentially longer as remote-work policies continue to evolve,” he says.

LaSalvia’s end conclusion: While the rebound may be somewhat uneven across metro areas, robust economic growth and the potential for a sub-5% unemployment rate by the end of this year will undoubtedly lift the rising tide of the apartment sector.

---

Source: Millennials Aren’t Abandoning Apartments After All

Senior Living Must Adapt as Demographics Transform Real Estate

 

The baby boomer generation will change senior living and long-term care even more than some experts predict, and the industry is not nearly prepared to handle the influx of boomers entering the space over the next two decades.

That is because the boomers are sitting on untapped wealth resources, and are willing to spend money to achieve positive health outcomes and prolong their lives for as long as possible. This is according to Ken Gronbach, a demographer and futurist who shared his predictions Tuesday during a webinar on how demographic trends drive transformation in real estate, hosted by real estate investment and services firm Marcus & Millichap (NYSE: MMI). The boomer generation, spanning 1946 to 1964, currently totals 78.2 million people, and the oldest wave is only beginning to consider senior living as an option. Gronbach believes the true transformation will take place when the final wave of boomers, born between 1960 and 1965, turn 75. He estimates that nearly 4 million boomers were born annually during that span. Collectively, the boomer demographic’s population total is nearly double that of the preceding generation and will bring enormous wealth with them, once they decide to exit the workforce. Gronbach estimates the boomers have a collective $12 trillion in banking assets, $20 trillion in stock, and $70 trillion in real estate holdings. Gronbach’s predictions are supported by other data and reporting. The boomers have held the most real estate wealth in the U.S. for nearly 20 years, peaking at 49.1% in 2011, according to a New York Times analysis of Federal Reserve data. And they still control 44% of the nation’s real estate wealth.

The boomers are holding on to their real estate longer than the preceding generation and preferring to age in place. This is opening up opportunities for senior living providers to offer home- and community-based services to older people in their homes, and could be further accelerated with the possible passage of the Choose Home Care Act in Congress. That bill would allow certain Medicare beneficiaries to receive extended Medicare services such as skilled nursing or rehabilitation services in their homes for up to 30 days following hospitalizations or surgeries, in addition to their usual home health allowance.

Additionally, the boomers were the only generation that did not recover their wealth lost during the Great Recession. While their average wealth is still higher than the recession low point in 2010, it remains far below what it was pre-2008. This leaves a wide swath of boomers in need of middle-market senior housing.

Recommended SHN+ Exclusives

Solving the middle-market equation will free up more personal resources for boomers to spend on health care, and Gronbach predicts spending in this sphere will increase exponentially. He is not alone.

In 2019, the Office of the Actuary at the Center for Medicare and Medicaid Services (CMS) predicted health care spending would top $6 trillion by 2027, fueled primarily by boomers. This will account for 19% of the country’s gross domestic product (GDP).

In other words, the aging population will transform real estate markets, and that extends to senior living — longer, healthier lives could mean that older adults defer moves into senior living, but providers also have a potential opportunity to appeal to this demographic and gain a share of their spending as they seek options to boost their health and wellbeing.

“[Boomers] don’t have dying on their punch list,” he said.

---

Source: Senior Living Must Adapt as Demographics Transform Real Estate