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Urgent: A Better Housing for Long Beach Update

Written by Apartment Management Magazine on . Posted in Blog

by Joani Weir and the Better Housing for Long Beach Team

BREAKING NEWS!

City Council Meeting

On April 2nd, 2019, the City Council of Long Beach voted to push through an ordinance for rent control. The city council deafened their ears to the vote of the people.  

The mayor and council members have voted to place a rent cap plus a base relocation charge and Just Cause Eviction AKA  Rent Control into Long Beach.   BUT do not be fooled into thinking there will not be great costs to the  renter as well as the small property owner.  We all know these new mandates will come with more inspections, fees, city administration fees etc….  Though council and city staff are going to control the rents of housing providers, they are not going to cap the fees charged to renters and housing providers.  They will not cap the bonuses and high pensions they pay themselves.  Bad policies like this is what puts property owners out of business, thus renters lose their housing.     

Council members are sending emails to their constituents denying that they voted on rent control.  Ask your council member what is the difference from their “tenant protections” and what is understood as “rent control”.  Is there a rent increase cap?  Yes.  Will you be forced to pay someone to leave who is a problem tenant?  Yes. Tenants will see it much harder to get their landlords to boot out a neighbor who is a nuisance or even one who is a criminal.  Will the cost of housing increase?  Yes. When vacancies occur, housing providers will be forced to push the rent as high as possible to make up for the the lost rental income.  This will cause less affordable housing in Long Beach.  Do not be fooled by their sly interpretation. 

Not all city council members were in support of the new ordinance for rent control. We thank Councilwoman Suzie Price, Councilwoman Stacy Mungo, and Councilman Daryl Supernaw for siding with the people against rent control.  There is still hope for Long Beach! We encourage you to thank them for their stance on this issue. 

We would also like to express a very special thank you to all who were in attendance for this specific council meeting! We estimate that we had at least 300 people in attendance from our side! The overflow of property owners and knowledgeable renters displayed our stance on rent control to the council.

The power of conversation must be greatly exhibited within these next couple of months. We have seen many people from the opposition flip over to our side just by the use of one single conversation! Get the word out! Share the facts.  There is power in truth! 

Keep Pressing On!

Let us not grow weary! We have two months to push back against the council before it is codified. We need your help! Again, let your voice be heard to the mayor and council members.  Remind them the majority of the citizens voted down Proposition 10 and signed thousands of petitions against rent control.  It is not time to silently lose your home and livelihood.  

Join us in showing our disapproval with the council’s decision by:


(1) calling or emailing all city council members.
(2) getting the word out among the people in your sphere of influence (wear your BH4LB hats!)
(3) supporting Better Housing for Long Beach by donating to keep us in the fight and
(4)Do not donate or support any council member or the mayor if they support rent control. 

Please immediately call and email Mayor Garcia and all council members and tell them to oppose all forms of rent control aka “tenant protections” and please ask them to stop the attack on small housing providers and renters in Long Beach.


MAYOR ROBERT GARCIA
333 West Ocean Blvd, 14th Floor
Long Beach, California 90802
Mayor@longbeach.gov T (562) 570-6801 F (562) 570-6538 
 
Council Members by District:

1st District-CouncilwomanLena Gonzalez
Email: district1@longbeach.gov
Phone: (562) 570-6919

 
2nd District-CouncilmemberJeannine Pearce
Email: district2@longbeach.gov
Phone: (562) 570-2222

 
3rd District-CouncilwomanSuzie Price
Email: district3@longbeach.gov
Phone: (562) 570-6300

 
4th District-CouncilmanDaryl Supernaw
Email: district4@longbeach.gov
Phone: (562) 570-4444

 
5th District-CouncilwomanStacy Mungo
Email: district5@longbeach.gov
Phone: (562) 570-5555

 
6th District-CouncilmanDee Andrews
Email: district6@longbeach.gov
Phone: (562) 570-6816

 
7th District-CouncilmanRoberto Uranga
Email: district7@longbeach.gov
Phone: (562) 570-7777

 
8th District-CouncilmanAl Austin
Email: district8@longbeach.gov
Phone: (562) 570-6685

 
9th District-CouncilmanRex Richardson
Email: district9@longbeach.gov
Phone: (562) 570-61
37

Words cannot express the appreciation that our team feels for your continued support in this fight! We are making our mark in history that will affect generations to come! If you have any questions, please do not hesitate to contact us at (562) 786-985

Fighting for You,
Joani Weir
and the Better Housing for Long Beach Team


P.S. Please donate to Better Housing for Long Beach so we can continue to fight against Rent Control. We are in this together!

http://www.betterhousingforlongbeach.com/

A Crash Course in Negotiation

Written by Apartment Management Magazine on . Posted in Blog

By Christopher Miller, MBA

While attending business school, I took a graduate-level class on the art of negotiation.  What I learned has saved me a lot of money over the years – whenever I buy a property, a car, or even when I hire someone to make repairs.  This article will review some of the main principals of negotiation and is a good start towards sharpening your own skills.

The Goal of a Negotiation

First – the goal of any negotiation should be to keep both the buyer and the seller happy.  As a buyer, you may wonder “What do I care if the seller is happy?”  Well, if you’re having carpet installed and the seller isn’t happy with the deal he made, he’ll probably do a lousy job for you.  It’s pretty much impossible to buy something for an amount that doesn’t make financial sense to the buyer.  It has been my experience that sellers are more open to a good-faith negotiation if they know that I am willing to let them make a living.  (Not a fortune – a living.)

Research – the MOST Important Part of Negotiating

Many folks seem to have learned negotiation by watching reality tv, and feel that being a jerk is the way to get the best deal. 

Your research is the most important part of negotiation – much more than what you say or how you say it.  Over the last 15 years, I have saved enough money buying cars to have bought me an extra car – and a nice one, too.  This is because I don’t skimp on research.  I ignore the MSRP of new cars, (since nobody expects to sell them for that much, anyways), and instead focus on the invoice price – what the dealer is paying for the car.  I will then do additional research to find out what buyers are paying for cars today.  The minimum price that buyers are paying is often below the invoice price – this is due to special incentives the manufacturers pay to dealers and an annual bonus that is paid depending on the total volume of cars sold.  Some of these dollar amounts can be found online, others (the annual bonus) can be much more elusive.  Now that you have all of this information, you are ready to select a price that you are willing to pay.  (This will be your offer.)

Find the BATNA for Each Party

Next, you’ll need to identify the BATNA of each party in the negotiation.  BATNA stands for Best Alternative to a Negotiated Agreement and, in it’s simplified form, represents what happens if a buyer and seller don’t come to an agreement.  Examining each party’s BATNA will tell you who has the most leverage in a negotiation – who is negotiating from a position of strength.  You’ll want to design your approach with this strength (or weakness) in mind. 

In my car argument above, let’s say that I make an offer to the car dealer by telephone.  If the offer is rejected, that car dealer has sold one less car this month and the car salesman has lost out on a commission – meaning that he may go home with an empty wallet at the end of the day.  I, on the other hand, still have my money in my pocket and still have a car to drive.  I need to remember, then, that I have the upper hand in that negotiation.  

Let’s use another car example.  About 10 years ago, I bought my wife a new car (and got a great deal by using my strategies.)  We were left with her old car quickly collecting dust on the side of our house.   I listed the car for sale online, and a potential buyer came by to look at the car for his teenage son.  Let’s look at both sides of this negotiation:  I have a car that I don’t need anymore.  The car certainly isn’t gaining value while it’s rotting away in my side yard, and I really don’t have a lot of time to be waiting for and meeting potential buyers.  If we don’t come to an agreement, my potential buyer will go home with his money in his pocket – he may be motivated to buy his son a car, but he’s probably not THAT motivated.  I, on the other hand, am stuck with a car that I don’t want or need anymore.

I recognized that my potential buyer has the upper hand in this negotiation.  Realizing this, my strategy was to make sure the first potential buyer I saw drove away with the car and left his money in my pocket.  I listed the car for a bit more than what I thought it was worth – his first offer was for $1,000 less than my asking price.  Rather than “split the difference,” I wanted to incentive him to buy the car now – so my counter was $750 less than asking.  ($250 more than his offer.)  He accepted, paid me, and drove the car away.  We were both happy.

Make Each Offer a Meaningful Offer

When I negotiate, I make each offer a meaningful offer.  By meaningful, I mean that it is an offer I expect the seller or buyer to take.  If an apartment property is listed for $1 million, I won’t pick a number out of the sky and offer $400,000.  If, however, my research into neighboring comparable sales and market CAP Rates indicate that the property is worth $400,000 – that very well could be my first offer.  If $400,000 is a fair price for the property, and I really like it, I may not want to pay more than $425,000 for it.   If, instead, I expect to pay around $800,000 for a building; a frivolous offer of $400,000 is just wasting everyone’s time.

This month, we discussed some basic principles of negotiation.  Negotiating to buy a car works the same manner as negotiating to buy real estate, to sign a new lease with a tenant or to hire a painter to renovate a unit.  Find out what this service should cost, choose your price and negotiate with potential buyers or sellers.  As always, it’s impossible to fully cover a topic in just a few pages, but this outline can give you a good start and can certainly save you substantial amounts of money the next time you’re negotiating for goods or services.  My toll-free office number is (877) 313-1868.

Christopher Miller is a Managing Director with Specialized Wealth Management and specializes in tax-advantaged investments including 1031 replacement properties.  Chris’ real estate experience includes work in commercial appraisal, in institutional acquisitions for a national real estate syndicator and as an advisor helping clients through over three hundred 1031 Exchanges.  Chris has been featured as an expert in several industry publications and on television and earned an undergraduate business degree and an MBA emphasizing Real Estate Finance from the University of Southern California.  Chris began his real estate career in 1998, began working in the partial interest industry in 2001 and has been a broker advising clients since 2003.  Call him toll-free at (877) 313 – 1868.

This does not constitute an offer to buy or sell any security.  Investments in securities are not suitable for all investors. Investment in any security may involve a high degree of risk and investors should review all “Risk Factors” before investing. Investors should perform their own due diligence before considering any investment. Past performance and/or forward-looking statements are never an assurance of future results. Examples given in this article are for illustrative purposes only.  Individual results may vary based on IRS tax changes, market conditions or tenant occupancy.  SANDLAPPER Securities, LLC nor Specialized Wealth Management/Chris Miller do not give tax or legal advice. We recommend that you seek advice from your tax and/or legal professional before investing. Securities offered through Sandlapper Securities, LLC. Headquarters: 800 E. North Street, 2nd Floor, Greenville, SC 29601. Member FINRA/SIPC. Specialized Wealth Management is not affiliated with Sandlapper Securities, LLC. California Insurance License # 0I80282.  Copyright 2018 Specialized Wealth Management. All rights reserved.

The Next Gen of Renters: Mom and Dad – Renters over 60 Grew by 43% in a Decade

Written by Apartment Management Magazine on . Posted in Blog

by Florentina Sarac

Today’s demographics look substantially different than they did only a decade ago due to America’s older population growing significantly and at a very fast pace. According to Census data, the U.S. is a rapidly aging country, with more than 22% of the current population being aged 60 & over.

The overall aging of the population is not just the result of the economic hardship following the 2007 Great Recession, reflected in declining birth rates, but also the result of the Baby Boom cohort, America’s largest living adult generation, passing age 53 in 2017.

Our research shows that as the 60+ cohort grew bigger and faster, it also helped push the national median age from 36.7 in 2007 to 38.1 in 2017, the highest it’s ever been.

Taking into consideration the decline in births, as well as the higher life expectancy, this trend will likely continue uninterrupted. But which parts of the country have contributed more to this rapid graying of America?

The oldest cities by median age in the U.S. are popular retirement spots

Our top 30 oldest cities all have a median age over 39.6 and are mostly retirement cities in Florida, California, or Arizona. In fact, Florida is home to 12 of the oldest cities, with Cape Coral, first in our top, boasting a median age of 47.9, followed by Hialeah, with 46.5. Sunny Scottsdale, AZ is third in our top, with a median age of 46, proving once more its high popularity among retirees in search of warm days and entertainment.

The population’s median age increase is also reflected in the median household age that saw a steady increase over the 10-year period, reaching 52 in 2017.

Renter households over 60 are up by 43%, outpacing owner households and growing faster than other age groups

As expected, renter householders tend to be younger, with a median age of 42 in 2017, compared to owner householders that had a median age of 56 in the same year. Moreover, the rapid aging of householders is visible throughout the 10-year period analyzed with both renter and owner householders getting older. But the median age of renters has been slowly closing the gap over the last decade.

Renter households aged 60 and over drove the past decade’s surge in renters, with a 43% increase, from 6.551M to 9.37M in 2017, greatly outpacing younger age groups. While those aged 35 to 59 grew by 17% from 16.325M to 19.111M, renters aged under 35 witnessed the slowest increase rate of 7%, growing from 13.987M to 14.898M in a decade. Likewise in net numbers, the U.S. gained more new senior renter households in the past ten years than in either of the two younger renter age groups.

Stemming from a decline in homeownership, older renter households increased faster than older owner households – 43% versus 31%. The rapid growth of the 60+ population is also visible across owner households as the only increase in the 10-year period between 2007 and 2017 was witnessed by seniors over 60. Those aged 34 and under saw a 19% decrease and owner households between 35 and 59 decreased by 12%.

Past studies we conducted show that the older population is no longer enthusiastic about homeownership, with many seniors starting to downsize and move into rentals. As their children move out, they find themselves alone, in a big house that costs a lot to maintain, causing them to rethink their housing choices.

Austin boasts the highest 10-year percentage change in the share of older renter households

Out of the 30 most populous cities in the U.S., 16 experienced an increase of over 40% in the 60+ renter household share between 2007 and 2017. Austin, TX takes the first place as the city with the highest percentage change in the share of 60+ renter households, increasing by 113% in the 10-year period. Phoenix, AZ is also present in this top with the second highest increase of 112% and it’s followed by another Texas city: Fort Worth, with 95%.

On the other hand, New York had the largest share of 60+ renter households in 2017 – of 27% or 572,130 renter households. It’s also important to point out that New York is the only one in our top to have more 60+ renter households than under 34. However, this might not come as an absolute surprise if we think about the city’s infamously high rents, generally unaffordable to those under 34.

The second highest share of 60+ renter households is claimed by Baltimore, MD – of 25%, followed by Detroit, MI and San Francisco, CA with 24%. All top 11 cities have over 20% shares of older renter households, including Las Vegas, NV, Philadelphia, PA, Boston, MA, Chicago, IL, Los Angeles, CALousiville, KY, and Washington, D.C.

By 2035, the 60+ renter share is projected to keep growing while that of all other age groups will decrease

According to our projection based on the trend witnessed between 2007 and 2017, we expect the year 2035 will mark a major demographic shift with the share of 60+ renter households reaching somewhere around 31% and becoming the second highest share among all age groups. Despite being the majority, those aged between 35 and 59 will likely see a decrease in their share of renter households, dropping from 44% in 2017 to an estimated 43% in 2035. However, the most notable decline is projected to take place among those aged 34 and under, with their to decrease from 34% to 27% by 2035.

In terms of net numbers, the 60+ cohort is expected to grow to an estimated 18.6M by 2035 and will become the second largest group of renter households, surpassing those aged 34 and under.

This growing share of older Americans is bound to have an impact on the U.S. real estate market. This is a cohort of people that witnessed firsthand the impact of the 2007 housing crisis and the re-shaping of the economy, forcing most of them to give up their homeowner status and move into rental apartments. It’s important for developers to acknowledge the particular housing needs of older renters and make sure that they are being met.

Florentina Sarac is a creative writer for RENTCafé, where she covers everything from real estate news to market reports. She holds a BA in English and Spanish, as well as an MA in Multilingual and Multicultural Communication.

This Housing Market Clue Predicts Pending Economic Slowdown: A key indicator of economic health is steadily declining, and it’s raising red flags.

Written by Apartment Management Magazine on . Posted in Blog

By Jessica Guerin

When it comes to the health of the economy, the housing market is the canary in the coal mine, providing clear and early clues of pending trouble. And that’s why analysts track its performance intently, looking at a multitude of indicators that might signal the looming recession some are forecasting.

Now, one critical clue from the housing market has emerged to suggest economic growth is likely to backslide, and that is a steady decline in single-family authorizations.

In essence: Construction activity appears to be slowing.

Single-family housing authorizations – what some call a key predictor of economic recessions – represent building permits requesting permission to commence construction. In contrast, housing starts signal that construction has already begun. 

According to the latest data released by BuildFax, single-family housing authorizations fell for the third consecutive month in February, declining 4.24% from the previous month. This also represents a 5.75% decline year over year.

The data left BuildFax to conclude that, “without relief from this steady decline in single-family housing authorizations, an economic slowdown is likely forthcoming.”

Existing housing maintenance and remodeling volumes are also down, continuing a four-month decline. Maintenance volume was down 5.53% year over year, while remodeling volume was down 10.07%.

But at the same time, spend for both maintenance and remodeling increased, which BuildFax attributed to recent spikes in construction labor costs.

Interestingly, some cities are defying national trends, posting increases in new construction and maintenance in February.

Dallas, New York City, Chicago and Washington, D.C., saw activity in new construction and maintenance rise.

BuildFax said Chicago saw the greatest increases, with new construction up 60.15% and maintenance up 19.51%, which the report said could be a result of the city’s strategic five-year housing plan to solve affordability problems.

“It’s yet to be seen whether housing activity in these cities will eventually slow as it has on a national level or if these will be key metros to watch as the U.S. potentially heads towards an economic slowdown,” BuildFax wrote.

BuildFax CEO Holly Tachovsky said the performance of these indicators over the next several months will be key to determining the overall impact on the economy.

“There have been persistent declines across key housing indicators for four consecutive months. However, we anticipate some economic relief as we head into 2019’s spring home buying season,” Tachovsky said.

“Mortgage rates have reached recent lows leading to increased potential for home sales, which is oftentimes followed by a surge in remodeling activity,” she continued. “The performance of single-family housing authorizations, maintenance and remodeling activity through this next season will shed light on whether declines in the housing market will spread to the broader economy.”

Jessica Guerin is an editor at HousingWire covering reverse mortgages and the housing wealth space. She is a graduate of Boston University and has a master’s degree from Northwestern’s Medill School of Journalism. She worked previously as the editor-in-chief of The Reverse Review magazine, which was recently acquired by HousingWire.

A Tale of Two Studies: Proposals to Solve California’s Housing Crisis

Written by Apartment Management Magazine on . Posted in Blog

By Daniel M. Yukelson, Executive Director

You have heard it before, but it is worth repeating: There is no denying it, we have a housing crisis here in the Golden State of California.

Since the 1970’s, California has been experiencing an ever-increasing housing shortage, and by 2018, California had the 49th lowest ratio of housing units per resident.  Our current housing shortage has been estimated at 3 to 4 million housing units, or roughly 20% to 30% of California’s current housing stock.  The cause of this shortage is the imbalance between supply and demand resulting from strong economic growth that has led to the creation of hundreds of thousands of new jobs, and that in turn has led to increased housing demand.  However, while the economic “boom” continues, we have failed to construct enough new housing units to meet the demand.  To give you an idea of how bad the shortage is, for California as a whole, from 2011 to 2016, our state added only one new housing unit for every five new residents.

Some of California’s failure to keep up supply with growing housing demand lies in failed housing policies and over-regulation.  Laws such as rent control, the California Environmental Quality Act (C.E.Q.A.), zoning laws and others have discouraged or slowed down developers from constructing new housing units.  Local jurisdictions and “not in my backyard” (a/k/a, NIMBY) residents have slowed down or stopped entirely construction of new housing units in many areas.  The truth is that California does not currently have enough quantities of land that is zoned for housing to meet future demand.  Something has got to give!

Two Studies, Multiple Housing Proposals

This past year, two studies were published that attempt to solve the California Housing Crisis by offering a variety of solutions meant to thwart homelessness, provide more housing units particularly affordable housing, and to help stabilize the population of California renters.  These studies are “Finding Common Ground on Rent Control” published by the Termer Center for Innovative Housing at the University of California at Berkeley (May 2018) and the “CASA Compact” published by The Committee to House the Bay Area (January 2019). 

Why should you care?  Well, we believe that many of the elements contained in these studies may shape the 2019 and 2020 State legislative agendas on housing policy and may result in the proposal and passage of numerous State housing bills and local housing ordinances.  It is imperative that housing providers become familiar with the studies and become part of the inevitable debate that is certain to take place as our elected officials search for ideas to address the California housing crisis.

Terner Center for Housing Innovation: Finding Common Ground on Rent Control

The introduction to the Terner Center study starts out by citing grim details on our current housing crisis:

“California is in the throes of a serious housing crisis, with rising rents and displacement pressures touching a growing number of individuals and families throughout the state…more than half of California renter households (three million) are ‘rent-burdened,’ paying more than 30 percent of their income on housing.  Of those, 1.5 million pay more than 50 percent…Punctuating these sobering statistics are the seemingly endless daily anecdotes of families receiving exorbitant rent increases and being forced to choose between their homes and their other daily needs.”

The study cites a need for State and local policymakers to act to provide immediate rent relief.  The study then discusses the need to increase housing supply.  As a result, the Terner Center study makes two global recommendations to be adopted by California:

  • “Broad anti-gouging” rent control to be applied to units State wide, that would make it illegal to raise rents above a maximum threshold; and
  • Developer incentives to construct new and rehabilitate existing rental housing units that include a certain quantity of below market rent units.

While the Terner Center study acknowledges the many “drawbacks” of rent control, including providing benefits to those that do not necessarily need it, loss of rental housing units (e.g., the recent San Francisco study concluding that 15% of rental units were lost due to the implementation of rent control laws), and constraining new housing construction, it finds rent control as the only reliable “tool” to stabilize renters and keep them in place.  Accordingly, the Terner Center study proposes a Statewide “Anti-Gouging Cap” on annual rent increases equal to the regional Consumer Price Index plus 5%.  Now for those of us in already rent controlled jurisdictions, this sounds like a “dream come true,” but for those of us that are so fortunate, this represents only the beginning of the end.  The study does caveat that its proposed Statewide rent control limitation would not supersede more strict, local ordinance and that any violations of the Statewide rent control would be subject to both up to a $10,000 fine and up to one year in prison.

On the other hand, the Terner Center study attempts to throw our State’s developers a few “bones” by proposing to increase or preserve the State’s affordable housing stock through tax incentives.  Specifically, owners would receive an ad valorem property tax abatement for multifamily properties by committing to set aside a specific percentage of units at below market rate rents.  This tax incentive would be structured such that owners would be offered a 15-year (or more) tax abatement on the increased value of the sale and/or renovation of an existing multifamily property and on the new value of multifamily construction in exchange for setting aside a specified number of below market rent units.  In other words, the abatement would be equal to a dollar-for-dollar amount of the increase in property taxes resulting from any new assessed value.  The proposed eligibility for abatement is setting aside at least ten percent of units at below market rent for renters that fall into an affordability class of no more than 120% of the average median income for the area.

While the Terner Center study advocates the two previously mentioned recommendations for a Statewide rent control and developer incentives, it makes mention of two other, potential policies to expand rent control by amending the Costa-Hawkins Rental Housing Act.  As you may recall, Proposition 10 on last November’s ballot sought to repeal the protections we as property owners continue to enjoy Costa-Hawkins Rental Housing Act.  The Terner Center study, “as part of its efforts to stimulate new ideas for renter protections” suggests a “rolling inclusion” for Costa-Hawkins exemption from rent control (e.g., exempt new construction from rent control for 30 years) and allowing single family home rentals to be subject to rent control ordinances.  It is ironic that the Terner Center would place these draconian concepts under the banner of “to stimulate new ideas.”

The Committee to House the Bay Area: CASA Compact

The CASA Compact study bills itself as “A 15-year Emergency Policy Package to Confront the Housing Crisis in the San Francisco Bay Area.”  While specific to the San Francisco Bay Area, again we believe that many of the concepts cited in this study could find their way into new State housing laws and into local ordinances within other jurisdictions, including the Greater Los Angeles area.

The CASA Compact study cites several reasons the San Francisco Bay Area now finds itself in its current housing predicament starting with big business that has created jobs to developers that only build luxury housing; from local government officials who oppose new housing developments to environmental and labor interests that drive up construction costs; and of course, community groups that fear changes that new development might bring (a/k/a, the “NIMBYs”).  In making their recommendations, the sponsor of the CASA Compact, The Committee to House the Bay Area, brought together varying interest groups both involved in the cause of and the solution to the San Francisco Bay Area’s housing challenges, including business leaders, government officials, builders, non-profit executives, economists and housing and transportation experts.  Following its 18-month study, CASA Compact purports to deliver a “detailed, comprehensive and actionable” solutions to the San Francisco Bay Area’s housing crisis.

The “key” recommendations of the CASA Compact, each termed a “Compact Element,” are summarized below:

Compact Element details
Just Cause eviction policy Purpose.  Ensure that renters are protected from arbitrary evictions by adopting a policy requiring specific “just causes” (both fault and no-fault) for termination of tenancy, such as failure to pay rent or violation of lease terms.  Require housing providers to provide relocation assistance for covered “no fault” evictions.Exclusions.  Excluded from coverage are certain government owned housing, transient hotel occupancy, dormitories, and single owner-occupied residences.  Relocation benefits would not be applicable for owner move-ins.Waiting Period.  The “just cause” protections and relocation benefits would apply only after one-year of tenancy.Local Ordinances Supersede.  There would be no preemption of more restrictive local ordinances. 
Rent Cap Purpose.  Establish a rent “cap” that limits annual increases in rent to a reasonable amount.Proposed “Cap” on Rent.  For an emergency period (15 years), no increase to exceed the Consumer Price Index for a region plus 5%.  The “cap” on rent increases would apply to the renter and not the unit (in other words, vacancy de-control would be permitted).  Housing providers would be able to “bank” unused rent increases for 3 to 5 years up to a maximum of 10% to 15%.Pass-Throughs.  Housing providers would be permitted to “pass-through” certain cost increases to renters, including water and other utilities through use of a Ratio Utility Billing System (R.U.B.S.).Local Ordinances Supersede.  There would be no preemption of more restrictive local ordinances.
rent assistance and access to legal counsel Purpose.  For low income renters facing eviction, provide access to legal counsel and emergency rent assistance.Exclusion.  Tenants of property owners or master tenants residing in the same dwelling unit are not eligible for legal assistance.  Emergency rental assistance is to be limited “Cap on Assistance”.  Assistance would not exceed $5,000 to $10,000.
Remove regulatory barriers to accessory dwelling units (Adu) Purpose.  Extend San Francisco Bay Area best practices regarding accessory dwelling units to every jurisdiction by removing regulatory barriers.  Allow multiple ADUs on multifamily properties and “small” and “tiny” home building codes.
Miniumum zoning near transit Purpose.  Establishes minimum zoning standards in areas served by high quality transit services, including housing near jobs, and increases minimum building height within specified areas.Tenant Protections and Preservation.  All sites rezoned under this element would be subject to tenant protections.  Onsite affordable housing would be required at levels no less than current California bonus density laws or developers would have an option to contribute to an affordable housing fund as an “in-lieu” fee.
good governement Reforms to Housing Approval Process Purpose.  Establish government standards for streamlining the entitlement and permit process for residential development.Proposed Standards.  Jurisdictions would not require more than three de novo public hearings on a zoning compliant residential project.   Building permits would expire after 24-months in order to encourage more timely construction.  Adoption of deferral programs that allow builders to pay some fees later in the development process.
Expedited approvals for Financial Incentives and Selct Housing Purpose.  Ensure timely approval of zoning-compliant housing projects and create financial incentives for enabling on-site affordability.Proposed Standards.  Streamlined review process under state law for residential projects that meet certain criteria.  These projects should be granted statutory exemptions to compliance under the California Environmental Quality Act (C.E.Q.A.) and would be subject to limited discretionary review process.Qualifying Projects. Among other qualifications, (1) Complies with existing zoning standards; (2) located in urbanized area; (3) restricts units to 20% middle income that may range from 80% to 150% average median income (AMI).Financial Incentives.  (1) 15-years of property tax increment abatement; (2) “cap” on certain impact fees; (3) density bonus of 35%; (4) parking reduced to 50% of local standards at developer discretion; and (5) relief from strict liability standards for housing ownership.
Unlock Public Land for Affordable Housing Purpose.  Promote utilization of publicly owned land (surplus and/or underutilized) for affordable housing.  Amend the State’s housing element to allow residential uses on developable public land regardless of zoning.
Funding and Financing the CASA Compact Purpose.  Raise $1.5 Billion in new, annual revenue from a broad range of sources, including property owners, developers, local governments and taxpayers to fund implementation of the CASA Compact elements.  (Note: annual goal to expand the implementation of these elements Statewide would be significantly greater.)Potential Funding Sources.  Sources include, among others: (1) tax on vacant homes; (2) parcel tax; (3) commercial linkage fees; (4) gross receipts tax; (5) employer (per head) taxes; (6) sales tax (e.g., additional ¼ cent); and (7) general obligation bonds.
Regional Housing Enterprise Purpose.  Establish a regional leadership entity to implement the CASA Compact.  The entity must be governed by an independent board.

In addition to the ten elements outlined in the table above, the CASA Compact makes the following additional recommendations as “calls to action”: (1) Reestablishment of redevelopment agencies; (2) lower voter threshold for housing funding ballot measures; (3) increase incentives for cities to develop housing vs. commercial development, e.g.,  so-called “Fiscalization of Land Use;” (4) address homelessness through intervention policies that provide relief and housing; and (5) grow and stabilize the State’s construction labor force.

Implementation of the recommendations contained in the Terner Center study or of the CASA Compacts elements will take time and require many new State legislation and local ordinances be passed, and will take incredible leadership by our new governor, Gavin Newsom.  There is no telling which of the recommendations or elements, or derivatives of them, will resonate with our State legislature or other elected officials to be carried forward.  Some aspects suggested in the two studies are things we, as property owners, can live with and continue to be successful.  Other aspects will be very challenging for our industry.

As Charles Dickens book and namesake for this article, “A Tale of Two Cities,” goes:

“It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us, we were all going direct to Heaven, we were all going direct the other way—in short, the period was so far like the present period, that some of its noisiest authorities insisted on its being received, for good or for evil, in the superlative degree of comparison only.”

I think so much of Charles Dickens’ sentiments ring true for California’s housing crisis, and for property owners and renters alike.  Stay tuned!

Daniel Yukelson is currently the Executive Director of The Apartment Association of Greater Los Angeles (AAGLA).  As Certified Public Accountant, Yukelson began his career at Ernst & Young, the global accounting firm, and had served in senior financial roles principally as Chief Financial Officer for various public, private and start-up companies.  Prior to joining AAGLA, Yukelson served for 12 years as Chief Financial Officer for both Premiere Radio Networks, now a subsidiary of I-Heart Media, and 3 years for Oasis West Realty, the owner of the Beverly Hilton and Waldorf Astoria Beverly Hills where he was involved with the development and construction of the Waldorf.

TRUMP ADMINISTRATION PROPOSES 2020 HUD BUDGET: Spending plan preserves rental subsidies; increases homeless assistance and healthy housing.

Written by Apartment Management Magazine on . Posted in Blog

WASHINGTON – The Trump Administration has announced its proposed Fiscal Year 2020 Budget for the U.S. Department of Housing and Urban Development (HUD), a $44.1 billion spending plan that expands resources to prevent/end homelessness; invests record funding to reduce lead and other home health and safety hazards; and preserves rental assistance to HUD-assisted households.

The President’s Budget continues a commitment to fiscal restraint, targeting lower value HUD programs for elimination or reduction, while seeking stable or increased funding into the highest impact programs that provide housing and support for vulnerable populations.

“This Budget advances our key priorities, including empowering HUD-assisted families to achieve self-sufficiency,” said HUD Secretary Ben Carson.  “For generations, the idea of the Federal Government providing housing assistance meant only one thing—helping to pay the rent so families can have a roof over their heads. But we must also think about how we can help families to access financial programs, educational opportunities, and higher paying jobs. In short, we must think beyond investing in bricks and mortar, and think about investing in people.”

ENDING HOMELESSNESS

The 2020 Budget continues the Federal goal to prevent and end homelessness by seeking nearly $2.6 billion to support thousands of local housing and service programs assisting those living in the nation’s sheltering system and on the streets. This represents a $215 million or 9 percent increase over the Administration’s 2019 budget request.

PROMOTING HEALTHY HOMES

To protect families and their young children from potentially dangerous lead-based paint and other home health and safety hazards, the Administration is seeking a combined $290 million for HUD’s Office of Lead Hazard Control and Healthy Homes. This request doubles the investment the Administration sought last year and represents a historic contribution to State and local governments as they work to remove lead hazards from homes occupied by low-income families with young children who are especially at-risk.

CONTINUING RENT ASSISTANCE

The Budget continues support for 4.7 million HUD-assisted households by increasing rental assistance to $37.9 billion, maintaining support to all current participating households. This request includes $22.2 billion for HUD’s Housing Choice Voucher Program which will allow local Public Housing Authorities (PHAs) to maintain support to approximately 2.2 million families nationwide and represents a 7.6 percent increase over the Administration’s 2019 request. The request also includes $12 billion to renew rental subsidies to privately owned multifamily housing developments through the Project-based Rental Assistance (PBRA)Program, a $874 million increase over the President’s 2019 budget.

The 2020 Budget proposes $644 million for the Housing for the Elderly (Section 202) and $157 million for the Housing for Persons with Disabilities (Section 811) programs. These requested amounts represent an increase of $43 million and $17 million respectively over the President’s 2019 budget request.

PURSUING RENT REFORM

The current rent structure in HUD’s rental assistance programs creates disincentives to employment; imposes large administrative burdens for Public Housing Authorities (PHAs), private owners, and tenants. The Administration believes this structure generates significant and increasing costs to the Federal Government and represents a one-size-fits-all approach that adequately consider local community needs. With the Making Affordable Housing Work Act (MAHWA), submitted to Congress in April 2018, HUD proposed to reform rental assistance to address these issues.

The Budget incorporates the proposed reforms, which promote work, simplify program administration, reduce Federal costs, and increase local choice. These reforms include increased tenant rent contributions for those able to work (not including elderly/disabled households); reduced frequency of income recertifications; and additional flexibilities for public housing authorities and property owners to develop alternative rent structures. In addition, the Budget proposes uniform work for work-able households, while exempting the elderly, the disabled, those caring for a disabled family member or small child, and pregnant women.

PUBLIC HOUSING

HUD estimates that the nation’s public housing stock is experiencing a backlog of billions of dollars in capital needs resulting in the loss of thousands of affordable units each year due to severe disrepair. The cumbersome regulatory structure of the Public Housing program limits local Public Housing Agencies’ (PHAs) ability to adequately address their significant needs.  The budget again proposes to merge the Public Housing Capital Fund into the Public Housing Operating Fund with reduced overall funding. This new combined Operating Fund will be given extra flexibilities to pay for capital improvement needs.  This better supports local needs by allowing increased flexibility for each PHA to make decisions that best serve their residents.

Meanwhile, HUD will work with local PHAs to shift public housing units to a more sustainable financing model and to allow State and local governments to take a more active role to support these functions. One of these more sustainable models is HUD Rental Assistance Demonstration (RAD).  Given the scarcity of federal funds and the substantial capital needs of the nation’s aging public housing stock, the Administration proposes removing the statutory limit on the number of public housing units that can participate in RADwhich, to date, has preserved more than 100,000 units of affordable housing that would otherwise have been lost permanently.

SUPPORTING HOMEOWNERSHIP AND FAIR HOUSING

The 2020 Budget continues to support homeownership through the FHA mortgage insurance programs, providing up to $400 billion in new single-family loan guarantee authority that includes critical funding to support targeted improvements to FHA’s aging information technology systems, some of which are based upon the outdated COBOL programming language. In addition, the budget requests up to $30 billion in new loan guarantee authority for FHA’s multifamily, hospital and healthcare mortgage insurance programs.

To further support homeownership opportunities, the Budget seeks $550 billion in new guarantee authority for Ginnie Mae, a part of HUD. Ginnie Mae makes affordable housing a reality for millions of low- and moderate-income households across America by channeling global capital into the nation’s housing markets.  Specifically, Ginnie Mae provides significant liquidity, allowing lenders to obtain a better price for their mortgage loans in the secondary mortgage market. The lenders can then use the proceeds to fund new mortgage loans.

As it did last year, the Administration is seeking $62.3 million to support HUD’s fair housing mission.

ELIMINATING/REDUCING INEFFECTIVE PROGRAMS

The Administration continues to seek the elimination of the Community Development Block Grant (CDBG) Program, shifting the activities the block grant program supports to the State and local level.  Since 1980, and most recently in 2013, HUD studies found that CDBG is not well targeted to the poorest communities and has not demonstrated a measurable impact on communities. Similarly, the Administration proposes through the Budget the elimination of HUD’s Choice Neighborhoods Initiative, HOME Investment Partnerships Program, and the Self-Help Homeownership Opportunity Program (SHOP), because State and local governments can better meet their communities’ needs.

HUD’s mission is to create strong, sustainable, inclusive communities and quality affordable homes for all.
More information about HUD and its programs is available on the Internet
at
www.hud.gov and https://espanol.hud.gov.

1031 Exchanging Into a REIT: The 721 UPREIT As an Option for Investors

Written by Apartment Management Magazine on . Posted in Blog

By: Orrin Barrow, Vice President at Kay Properties and Investments, LLC

Here at Kay Properties, we have many clients who inquire about different 1031 exchange options.  Some of our investors have inquired about the 721 UPREIT (Umbrella Partnership Real Estate Investment Trust) mechanism in both DSTs and Private and Publicly Registered Non-Traded REITS.  The question that many investors ask is – Can I 1031 Exchange into a REIT?  The 721 UPREIT can be a potential answer to this question, however there are multiple items that investors must be aware of and carefully consider prior to deciding to pursue this route.

Rental Activity Safe Harbor Guidance Under New 199A Final Regulations

Written by Apartment Management Magazine on . Posted in Blog

by Michael Trainotti

On January 18, 2019, the Internal Revenue Service (“IRS”) issued final regulations and three related pieces of guidance, implementing the new qualified business income (“QBI”) deduction (“section 199A deduction”).  One part includes rental real estate activity and certain safe harbor guidelines to follow. The safe harbor, however, excludes triple net leases mentioned below. Lastly certain planning has been recently recommended by Alan Gassman, a nationally known tax expert and speaker, to tax advisors after the final regulations were issued regarding triple net leasing. 

With Today’s High Prices, Could it be Time to Sell and 1031 Exchange* into Better Value out of State?

Written by Apartment Management Magazine on . Posted in Blog

By Christopher Miller, MBA

I previously wrote an article titled “Would You Buy Your Property for What it is Worth?  If Not, Why Aren’t You Selling?”  I was looking at local apartment listings recently, and was shocked at the extraordinary values that I saw.  CAP rates in the 3% range, and GRM numbers above 20!  If you have a property that you are thinking of selling “someday,” perhaps today is a good time to cash in on these high values.  If you, understandably, don’t want to pay taxes on your gain and lose a large chunk of your principal; a 1031 Exchange is an option.  But what sort of property would you want to buy as your replacement property?  That is the topic of this month’s article.

Legal Corner

Written by Apartment Management Magazine on . Posted in Blog

By Stephen C. Duringer, Esq., The Duringer Law Group, PLCQuestion         Normally I love the smell of garlic, but enough is enough!  I’ve been receiving escalating complaints from my residents concerning a housing tenant on Section 8, who seems to use a bit too much garlic and curry when cooking meals.  The smell permeates the building and has been bothering the other residents.  Other than the garlic and curry complaints, she is a great tenant, don’t want to lose her, but I certainly can’t lose the other tenants!  What to do?