Industry News

Multifamily Construction Soars in August

Multifamily construction soared by 53% during the month of August, according to new government figures.  The comparison, compiled by the U.S. Census Bureau and Department of Housing and Urban Development, is to the same month a year ago. In the multifamily space builders broke ground on 147,000 units (annualized) compared to 103,000 in July and just 96,000 in August of 2009. The figures suggest that builders believe American consumers may be shifting to rentals as opposed to home ownership, despite historically low mortgage rates and falling home prices.

Total housing starts (encompassing single and multifamily) rose 10.5% in August on a sequential basis to 598,000 units. Compared to the same month a year earlier, total starts rose 2%. Single-unit starts rose slightly from July but fell 9% compared to August 2009. The improvement in starts comes a day after the National Association of Home Builders said builder confidence in housing remains low with the trade group's chief economist, David Crowe, declaring, "The stall in the nation's housing market continues." Source: National Mortgage News

Sturdy Business Spending Offers Ray of Hope

New orders for a wide range of long-lasting U.S. manufactured goods rose in August and business spending plans rebounded strongly, the latest sign a sharp summer slowdown in the economy is abating. Other recent data shows that new home sales were flat last month underscoring the many obstacles to the recovery. Still, the durable goods report diminished concerns of a double-dip recession and implied a modest pick-up in output. "For people looking for a double-dip recession, the durable goods report told you that the third quarter is going to look pretty good for capital spending,” said John Canally, an economist at LPL Financial in Boston.

The housing market is showing some signs of stability after a downward spiral following the end of a tax credit for home buyers in April. Data this week showed home building rose in August and sales of previously owned houses crawled off a 13-year low. But a 9.6 percent unemployment rate and still tight access to credit are keeping potential homebuyers on the sidelines. "We need to see stronger job growth and reduced uncertainty before households will be ready and willing to jump back into the housing market.”  With housing still struggling for footing, builder KB Home resorted to cost cutting, resulting in a smaller-than-expected third-quarter loss. The home builder issued a cautious outlook for the near-term. Although other data such as private-sector employment and retail sales have also suggested an easing of the harsh conditions that gripped the economy in the second quarter, domestic demand remains lackluster as households struggle with falling wealth. Source: Reuters

Large Multifamily Developer Accused of Housing Discrimination

The National Fair Housing Alliance and two of its member organizations recently filed a housing discrimination lawsuit in the United States District Court for the Southern District of Indiana, in Indianapolis, against the SC Bodner Company, its president, MBA Construction, and owners of six apartment complexes.  The fair housing organizations allege that defendants discriminated against people with disabilities by failing to provide apartments with accessible features required by the Fair Housing Act. In their investigation, the National Fair Housing Alliance, the Savannah-Chatham County Fair Housing Council, and Metro Fair Housing Services, located sixteen Bodner properties that they have reason to believe are out of compliance in eight states: Alabama, Arkansas, Georgia, Indiana, Nebraska, Oklahoma, South Carolina, and Tennessee. Since 1991, the Fair Housing Act has required builders and architects to include accessible design features in most apartment complexes to provide equal access to housing for the growing number of Americans with disabilities.  

Staff from fair housing organizations conducted onsite investigations at six Bodner properties located in the southern cities of: Port Wentworth, Macon, Granger, Evansville, Lexington, and Memphis.  At these buildings, they found numerous features in the buildings' common spaces and within the apartment units that made the buildings inaccessible to people with disabilities.  These include inaccessible building entrances, high thresholds that make it difficult to pass between rooms, environmental controls beyond the reach range of wheelchair users, and insufficient space in kitchens and bathrooms for use by persons in wheelchairs.  SC Bodner is among the most active developers of multifamily housing in the nation.  This lawsuit marks the fourth design and construction lawsuit that the National Fair Housing Alliance has filed in recent years in its attempt to correct rampant discrimination in the multifamily housing market. Source: PR Newswire

Healthcare Reform Affects Senior Housing

With the passing of the healthcare reform legislation in March, the foundation was laid for change in the healthcare system. This includes a sector of multifamily housing – senior housing. The Community Living Assistance Services and Support Act is a part of that overarching healthcare reform focusing on government-sponsored, long-term care insurance, which will significantly revalue skilled nursing facilities, according to a 2010 study by Encino, California based Marcus & Millichap’s National Senior Housing Group. The healthcare reform’s decrease in Medicaid payouts will lower the value of the skilled nursing business overall.  There are four main types of senior multifamily housing: Independent Living, Assisted Living, Skilled Nursing, and Continuing Care Retirement Communities. Of these, the skilled nursing segment will be the hardest hit by the reform. This is primarily due to the high cost associated with the care, as well as the reduction of the Medicaid reimbursements.

Skilled nursing facilities depend heavily on government aid, with nearly 80 percent of their revenue coming from Medicare and Medicaid. Those looking to invest in skilled nursing facilities will also be impacted by the C.L.A.S.S. Act. According to the study, the business operations at a particular facility are the most important factor in determining value and skilled nursing prices never advanced with those of other commercial real estate. Yet, at the same time, the demand for senior housing is increasing, as the average life span is getting longer and families do not have the time for long-term care, causing occupancy and revenue rates to rise. Of course, as the bill will not be implemented until 2014, the ramifications are still speculations on the part of those in the multifamily industry. Source: Multifamily Executive

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