Apartment investors have been taking advantage of low interest loans through the “green financing” programs offered by Fannie Mae and Freddie Mac. “About 40 percent of our Fannie Mae and Freddie Mac business is green,” says Kyle Draeger senior managing director in the multifamily division of real estate services firm CBRE.
The loans have proven to be extremely useful to value-add investors, who typically renovate properties to improve the income produced by the apartments. So many borrowers qualified for the green incentives in 2017 that federal regulators have raised the requirements for new loans in 2018, and so far this year the green lending business still seems to be going strong.
The “green” programs often slice roughly a third of a percentage point off interest rates offered by the government-sponsored entities (GSEs).
Millennials, Millennials, Millennials. Peruse some industry trades or attend a multifamily conference, and you might get the impression that the renting population consists entirely of this generation.
The focus on Millennials in multifamily is certainly understandable. According to the Pew Research Center, in 2015 Millennials became the largest generation in the U.S. workforce. Furthermore, they are set to become the largest living adult generation next year. So, of course, they are at the very heart of the renter pool.
However, the truth is that renters are a diverse group. As Baby Boomers age, they are selling their homes and opting for the ease and convenience of apartment living. And as Generation Z reaches early adulthood, they are emerging as a sizable segment of the renting population. The post-Millennial cohort will account for 33 percent of the global population by 2020, and they already contribute $44 billion annually to the U.S. economy, according to Commscope.
Development in the Tampa Bay region is still booming. Local governments are struggling to keep pace with the influx of development activity. Land inventory is low and market demand is high. This is causing a renewed interest in rezoning property of all types, across the spectrum of uses throughout the region.
In the urban areas density is increasing and infill development opportunities are becoming more attractive. In suburban areas, large land assemblages are being rezoned to create mixed-use developments, designed to mimic the urban core by providing walkable work, live, play opportunities. The demand for single-family homeownership is outpacing the supply, which is putting pressure on the conversion of agricultural land for single-family development. Meanwhile, land previously entitled for single- family developments is converting to allow more intense housing products, such as townhomes and paired villas.
Freddie Mac and Fannie Mae lenders are providing the overwhelming majority of permanent loans to apartment properties.
“Fannie Mae and Freddie Mac are probably still the premiere lenders for leveraged apartment buyers,” says Mark Isaacson, co-founder of Redwood Capital Group, a real estate investment management firm focused on the multifamily sector. “Both are very competitive right now.”
Agency lenders are making more permanent loans than ever on apartment properties. Borrowers chose loans from agency lending programs for nearly two-thirds of the permanent financings completed in 2017 despite limits set by federal regulators (loans to certain kinds of apartment properties, including affordable housing, are not limited by the caps).
Developers opened a tremendous number of new apartment units in 2017. But the percentage of apartments that are occupied has barely shifted, despite competition for potential residents. Rents continue to grow in most markets.
That’s good news as multifamily developers look forward to another busy year in 2018 with even more new apartment properties scheduled to open. “The onslaught of new supply is certainly testing the ability of the multifamily market to absorb incoming projects,” writes Victor Calanog, chief economist with real estate research firm Reis Inc. in his “First Glance” report for the first quarter of 2018.
If the apartment markets can survive another onslaught of new construction in 2018, the next few years should be easier, as the number of new units coming on-line drops.
The city’s multifamily market displays solid fundamentals and a diverse economic profile, although it remains challenged by a substantial amount of new supply.
Miami’s multifamily market is heading into a healthy 2018. It displays solid fundamentals and a diverse economic profile, although it remains challenged by a substantial amount of new supply. While rent growth started decelerating in mid-2016, population and job gains have been cushioning the drop, producing healthy demand and ensuring that new units are slowly but steadily absorbed. The metro’s average rent climbed to $1,593 as of January, up 1.8 percent in 12 months.
Unemployment rates were lower in February than a year earlier in 319 of the 388 U.S. metro areas, according to the Bureau of Labor Statistics.
Nearly concurrent with the national employment report released late last week, the Bureau of Labor Statistics also reported that unemployment rates were lower in February than a year earlier in 319 of the 388 U.S. metropolitan areas, higher in 48 areas, and unchanged in 21 areas. That is arguably better for commercial real estate absorption than national numbers, since company growth and site selection tends to take place on a local basis.
Following the Chinese government’s announced restrictions on outbound capital flow, the country’s investments in U.S. commercial real estate dropped significantly in 2017, according to Cushman & Wakefield’s 2017 China-U.S. Inbound Investment Capital Watch report.
Chinese investment in U.S. commercial real estate dropped dramatically in 2017 after China’s State Council implemented a framework regulating outbound investments, according to a report released by Cushman & Wakefield on Tuesday. In March, the Chinese government further clarified capital controls under which investments in real estate and hospitality assets are classed as restricted, but not prohibited.
The Tax Cuts and Jobs Act is the most monumental tax change in 30 years. What does it mean for multifamily?
The Tax Cuts and Jobs Act (TCJA) was signed into law on Dec. 22, 2017. This sweeping tax reform is the most monumental tax change in 30 years and will have an impact on the single-family and multifamily housing markets.
The TCJA widens the individual tax brackets while lowering the top tax bracket from 39.6 percent to 37 percent and maintaining the bottom tax rate at 10 percent.
Pre-TCJA, taxpayers could claim a personal exemption of $4,050 for themselves, their spouse and each dependent. The TCJA suspends all personal exemptions. The standard deduction is increased from $12,000 to $24,000 for families, and the child tax credit is increased from $1,000 to $2,000.