Rental Housing Journal Colorado September 2015

Rental Housing Journal Colorado

September 2015 - Vol. 7 Issue 9

3. Budgets: Don’t Miss the Opportunities to Evaluate Employees and Vendors

4. Renting Less Affordable Than Ever Before, While Mortgages Remain Affordable

5. Reasonable Accommodation/

Modification Policies for Market Rate Tenancies

7. Property Managers Prepare for More Renters and Fewer Vacancies

www.rentalhousingjournal.com • Professional Publishing, Inc

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Monthly Circulation To More Than 7,000 Apartment Owners, Property Managers, On-Site & Maintenance Personnel

Denver Apartment Research Report

Creating an Annual Operating Budget for Your Multifamily Property

Denver Metro Area, Third Quarter 2015

T

ight Vacancy Spurs Rent Growth and Investor Demand The strength and diversity of the Denver economy are encouraging new companies and households to relocate to the area, pushing up apartment demand at a rate that surpasses supply growth. New residents are attracted largely by the favorable job market and high quality of life, and as a result, population growth over the past year has been more than double the national average.

A lack of single-family homes and condo construction along with the high price of existing homes are generating demand for apartments.

These conditions have increased builder confidence and the construction pipeline has expanded accordingly with developers expected to complete a record level of new units this year. At the market level, average vacancy continues to defy expectations as the rate maintains a downward trend, albeit a slow one. On a more localized scale, however, development is heavily concentrated in a handful of submarkets

by Theresa Bradley-Banta

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multifamily real estate annual operating budget allows you to compare the actual financial performance of your property to your long-range projections for future income and expenses.

It’s important to prepare an annual income and expense forecast for your property whether you manage it yourself or if a professional third party management company manages it for you.

Important: Do not prepare an annual operating budget for your multifamily property or apartment building and then file it away and ignore it. This article will give you some great ideas for using a budget to your advantage.

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A budget allows you to establish or identify: • Performance targets.

• A baseline for property management reviews.

• Income and expense projections based on market drivers and assumptions.

• Capital improvements planning and projections.

• Problems that need to be resolved.

Importantly, a budget can help you maximize profitability and avoid unforeseen major repairs and expenses.

Budgeting and the Beginner’s Mind

continued on page 6

Professional Publishing Inc., PO Box 6244 Beaverton, OR 97007

Benefits of Creating an Annual Multifamily Investment Property Budget

believe that in any circumstance there are many possibilities. Interesting. Can we apply this to the annual budgeting process for our assets?

The over-simplified budgeting process: take last year’s budget, compare it with actual, split the differences and add 3% to revenue categories and 2% to expense categories. Done. Next!

By John Wilhoit Jr. teve Jobs had an affinity for Zen. So much for thoughtfulness, profesOne of the concepts he deployed in sionalism or being connected to realbusiness from this perspective was ity. Budgeting can be a “value add” “the beginners mind”. In its most basic proposition, assisted by the beginners form “the beginners mind” allows us to mind perspective.

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Third Party Property Manager Performance Baseline The best use of a property budget is to track how your manager is performing.

Ask your third party property manager to prepare an annual budget forecast with side-by-side comparisons of actual vs. budgeted income and expenses.

This budget then establishes a baseline for your property manager’s performance reviews. It’s a great idea to have regular meetings with your manager to review these comparisons.

How are they doing in meeting projections? What can be done to course correct when and if your targets are not being met? continued on page 2

In Any Circumstance there are Many Possibilities Annual budgeting must take into account the realities of each asset; the physical asset and its market. A picture perfect asset with 300 newly built units across the street in a market with slow absorption has to factor in the impact of the new competition. These factors should be reflected in the budget.

Tony Golsby-Smith wrote a blog for Harvard Business Review entitled continued on page 4

Advertise in Rental Housing Journal Colorado Circulated to over 7,000 apartment owners, on-site and maintenance personnel monthly.

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Rental Housing Journal Colorado

Creating an Annual Operating Budget ...continued from page 1 Some of the items to review are: Multifamily Property Income: • Vacancies against leasing projections: Is your manager on target for leasing new units or maintaining the average occupancy rate in your market?

• Lease renewal (rollover) projections: These are leases that are due for renewal during the budget period. Make initial contact with residents no later than 60 days prior to lease expiration.

If there is not a renewal commitment from your tenant there should be a follow up in 45-days.

• Future profit projections from increased revenue: This could include rent increases, laundry revenue increases, the introduction of a utility reimbursement program (tenant pays utilities), etc. Where are you able to increase revenue at your property?

• Future revenue projections from new sources: Where can you find previously untapped revenue? Can you charge for amenities such as parking, storage, recycling or business/entertainment centers? Can you install vending machines in your common areas?

• Cash flow projections: With accurate cash flow projections you’ll be able to make strategic decisions about the allocation of revenue for improvements.

• Replacement reserves: Determine what percentage of gross scheduled income can be put aside for future use. For example, you might want to hold back 5% of all scheduled revenue or you can allocate a certain dollar amount annually per unit in your property.

Multifamily Property Expenses: • Projections for lowering current expenses: Are your mechanical systems operating at peak efficiency? You may be able to lower utility bills with systems that operate efficiently. Can you contest your current property tax payment amount?

• Review third-party vendors and service providers: Conduct annual reviews of your property vendors such as services that provide lawn care, cleaning, trash removal and property insurance. Let them know they will be up for annual review for cost and service. Do your service providers have pending increases?

• Utilize the know-how of your service providers: Ask your vendors for efficiency/cost saving suggestions (property improvements or services they can provide) and budget accordingly.

• Property management: Review all fees such as leasing, maintenance and onsite management (if applicable). Are you satisfied with the performance of your manager? Are their fees as projected?

Most multifamily and apartment building management soft ware programs will generate a budget-to-actual income and expense report for comparison. Ask for this report. A budget is nice but you must compare it to the actual property financials.

Investment Property Analysis Assumptions (Drivers) Using the following or similar assumptions, you or your property manager can project all income and

expenses over a 12-month period beginning with the current month. You can change these variables at any time.

It’s a good idea to run several scenarios using both conservative and aggressive assumptions.

The following assumptions are used for example only. You will need to determine your own variables based on your particular investment market.

• Vacancy (7%)

(halls, stairs, entry, mail room, laundry, etc.) every three years.

Planning for long-term improvements allows you to stagger the improvements over time. By doing this you can avoid surprise expenses. These funds are commonly referred to as replacement reserves and include: • Common area improvements such as new paint, lighting, vinyl, carpet, parking lots and driveways.

• Income Growth (5%)

• Major building systems repair or replacement such as windows, roof, boiler and air conditioning.

• Expense Growth (3%) • Cap Rate (7%) • Expense Ratio (40-45%) These assumptions will help you determine the best and worst case scenarios and will assist you in planning budgets for the long term. You can create 24-month, 36-month or 48-month projections using assumptions. For example, you can predict your property value over the long term at different cap rates and net operating income. This can help you set targets for increasing revenue and lowering expenses.

For national averages read or download the National Apartment Association 2015 Survey of Operating Income & Expenses in Rental Apartment Communities at this link.

Investment Property Capital Improvements Planning and Projections In addition to predicting regular, recurring expenses your budget should include projections for major capital improvements. For example, you might want to paint your common areas

• Individual unit upgrades.

A Final Note on Your Annual Operating Budget Use your annual operating budget as a tool. Plan to hold quarterly budget reviews with your property manager and/ or your team at the very minimum. An annual budget can drastically maximize your profits when used as designed.

Theresa Bradley-Banta is the founder and CEO of Denver, Colorado based Theresa Bradley-Banta Real Estate Consultancy, offering a highly skilled sounding board for the professional commercial real estate investor’s ideas and investment strategies. The company provides education and mentorship for entry to mid-level investors seeking reality-based strategies for buying and owning multifamily properties.

Bradley-Banta is the author of the book Invest In Apartment Buildings: Profit Without The Pitfalls. Visit theresabradleybanta.com. Reach her at (303) 733-4400 or theresa@theresabradleybanta.com

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Rental Housing Journal Colorado · September 2015

Rental Housing Journal Colorado

Budgets

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Don’t Miss Opportunities To Evaluate Employees and Vendors

udget season is right around the corner. It’s that excruciatingly tedious time full of spreadsheets and brain cramps, take-out meals and extra pots of coffee, or glasses of wine, in some cases. Managers know budgets are critical to a successful business, but they are often difficult and can sometimes feel like a 1000 piece puzzle that’s missing a few pieces and has a few pieces from other puzzles mixed in. Often, we end up rushing at the end and relying a little too much on the budget and results from the previous year and can miss some other important opportunities to fine tune our business success pushing into a new year. Two such often over looked, or at least somewhat under appreciated opportunities are taking closer examinations of our personnel and our vendors.

When it comes to budgeting for people, it can be very easy to look at our employees like commodities.

For example, we often take a mind set like this: Based on projections, we have budget for 5 sales reps and 3 admins. Or, this complex is big enough for a manager, 4 leasing agents and 5.5 maintenance techs.

While this sort of thinking is absolutely part of the equation, each year I like to dig a little deeper and consider the actual humans, their strengths and weaknesses in each position. Maybe Carlos and Tiffany make enough sales calls to adjust their programs to incentivize them to each produce 60% more this year, so you can cut one sale position and save a base salary. Perhaps Erin is better at multitasking than Joe, so she can handle the phones while also doing the account payable and allow him to focus on his sales support duties without distraction. Could this free up Joe for a few hours a week late in the day so he can make cold calls for Carlos & Tiffany? Or, is Joe just in over his head with the sales support regardless, and simply needs to be replaced?

I recommend doing employee reviews shortly before budget season.

Often, I find that information gleaned from reviews helps with your staffing budget process. You not only get a sense of what each employee has accomplished since their last review, you can take their temperature on where they see themselves going and what else they might be able to bring to the table in the future. Employee reviews offer a wonderful opportunity to find out what your people think about the current operation of your business and what they

feel might work better. We don’t always feel we have the time or patience to hear all employee suggestions or input, but we cannot deny the fact that such feedback can be invaluable. You never know when Erin stepping up to handle the phones, so Joe can focus on sales support will lead to an additional 3 appointments a week for Carlos and Tiffany and a nice increase in revenue while saving you in personnel expenses.

The second area of opportunity that I often see overlooked at budget time is examining the vendors that you’re using.

Again, it’s not uncommon to get annual bids from vendors, but so often it begins and ends with shopping your current providers against their competition on price. While price is important, quality, customer service, and terms are just as important.

One maintenance company might charge $10 less than the others for basic maintenance and apartment turns, but if it takes them 25% longer or if you often have to bring them out to repair their own mistakes, then it’s not worth it. Similarly, if you have to wait on scheduling, a returned phone call in a time of need, or if you have trouble getting a vendor to make good on their word, you might want to consider interviewing other suppliers.

be a better alternative to what you’re using now? What products and services have you been allocating budget to that you simply do not need? All of these are important questions to ask and do a little research on.

Payment and finance terms are also an important thing to consider when choosing a vendor.

Some vendors will require payment up front or at the time of service or delivery. Others will offer 30, 60 or even 90 days with varying interest rates. Make sure you take this into consideration with your projected cash flow situation.

If all else is more or less equal having 60 days to pay rather than paying upon de-

livery allows for a lot of flexibility when managing your cash flow.

Budgets are rarely fun, and can certainly be daunting, but it’s important to give them the time they deserve. While doing so, make sure you’re not missing any less obvious opportunities to examine what you might be able to tweak to make your operation more efficient and more profitable.

By Will Johnson Publisher Rental Housing Journal

When it comes to vendors, I like to examine what sorts of products and services I actually want and need for my business while looking at budgets.

Looking ahead into the next year, is there any products or services that your company is not currently using that could be a benefit? Is there any new technology or way of accomplishing some current business need that might

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Rental Housing Journal Colorado · September 2015

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Rental Housing Journal Colorado

Budgeting and the

...continued from page 1

“Is Your Budgeting Process Killing Your Strategy” (http://blogs.hbr.org/ cs/2011/01/is_your_budgeting_process_kill.html). This thought shines an entirely different light on the budgeting process. While it is important to work through the minutia of asset-specific budgeting, this process must also take into account effects on the larger organization.

How do we accomplish this? With the beginners mind; by believing that in any circumstance there are many possibilities. Static number crunching that entails moving last year’s actuals into next years column precludes original thought. The originality necessary in this process is taking current market dynamics into consideration during the budgeting process.

This view may require utilizing additional facets of your existing “suites” soft ware, or re-deploying marketing savings into customer premiums to gain retention. Or, taking savings from utility usage reductions and deploying these dollars into staff training with measurable results.

Consider the annual budgeting process as more than a perfunctory, number crunching, exercise. There is more to this than making assumptions and passing them up the food chain. Thinking of budgeting as a “value add” process makes the entire endeavor much more exciting, and potentially profitable.

Published with permission by MultifamilyInsight.com

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Renting Less Affordable Than Ever Before, While Mortgages Remain Affordable

ent is unaffordable in three-quarters of U.S. housing markets, especially high demand markets like Miami, San Francisco, and San Jose Renters can expect to spend 30 percent of their income on rent, while buyers can expect to spend 15 percent of their monthly income on a monthly mortgage payment.

Rental affordability worsened yearover-year in 28 of the 35 largest metro areas covered by Zillow.

Denver, Los Angeles, San Francisco, San Jose, and San Diego are unaffordable for both renters and buyers.

Paying for a mortgage is still affordable, while rent takes up more income than ever in most major metro areas, according to a Zillow® analysis of U.S. rental and mortgage affordability in the second quarter of 2015.

Rental affordability worsened over the last year, while mortgage affordability stayed essentially the same. Renters in the U.S. can expect to put 30.2 percent of their monthly income toward

rent – the highest percentage ever. Before the real estate bubble and bust, U.S. renters could expect to spend about 24.4 percent of their incomes on rent.

Buyers should expect to pay 15.1 percent of their income towards mortgage payments, which is still less than what they spent historically. From 1985 through 2000, homeowners spent about 21.3 percent of their monthly income on mortgage payments.

In Denver and four California metros, both renters and buyers can expect to pay more of their income towards either rent or mortgage payments than in pre-bubble years. In hot San Jose, renters and buyers should each plan to put about 42 percent of their incomes towards housing.

“Our research found that unaffordable rents are making it hard for people to save for a down payment and retirement, and that people whose rent is unaffordable are more likely to skip out on their own healthcare,” said Zillow Chief Economist Dr. Svenja Gudell.

“There are good reasons to rent temporarily – when you move to a new city, for example – but from an affordability perspective, rents are crazy right now. If you can possibly come up with a down payment, then it’s a good time to buy a home and start putting your money toward a mortgage.”

Mortgage payments will continue to be affordable even if mortgage rates rise as expected. If rates reach six percent next year, home buyers can still expect to spend 30 percent or less of their income on mortgage payments in 265 out of 290 (91.4 percent) of the metros Zillow analyzed, and mortgage payments will be considered more affordable than in pre-bubble years in 72.1 percent of metros.

Rents, on the other hand, are already unaffordable compared to historic norms in 77 percent of metros, and with relatively stagnant wage growth, this likely won’t improve as rents keep climbing. continued on page 6

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Rental Housing Journal Colorado · September 2015

Rental Housing Journal Colorado

Reasonable Accommodation/Modification Policies for Market Rate Tenancies

By Clifford A. Hockley, President, Bluestone & Hockley Real Estate Services s the reasonable accommodation rules under the Fair Housing Act* continue to receive national press and more tenants use the rules to ask landlords to accommodate their special needs, it makes sense for landlords to codify their response to reasonable accommodation requests in order to maintain consistency.

To ensure consistency when it comes to a property manager’s enforcement of reasonable accommodation policies, we have drafted a set of common sense rules to serve as a guide and adapted by landlords. Note: The suggested rules discussed below do not apply to low income government delivered or tax credit properties. Those properties have additional rules that need to be followed.

Tenants may request changes in housing policies to accommodate disabilities Tenants and/or applicants have the right to request a change in the rules, regulations, practices, or procedures of the property they want to live in if they have a disability and the requested change will better enable them to use and enjoy the property they rent.

Common reasonable accommodation requests include, but are not limited to: • Designation of a handicap parking space

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tenant or applicant household will receive a written approval or denial issued from the corporate office. Make sure their current and correct contact information is included in their request and in the property management client database

Procedures • Obtain the request in writing to ensure that all parties agree on the accommodation that has been requested and that the documentation of the request exists for future reference.

• Address the request for reasonable accommodation/modification as soon as possible (within five days after receipt to the main business office).

A significant delay can be viewed as denial.

• Require verification for all requests if the need is not visually obvious. For example, when a resident who uses a wheelchair requests a parking spot close to the resident’s front door, the resident’s disability and need for accommodation is obvious. This situation does not warrant the need for obtaining verification from a third party. If a similar request is made by a person who does not have an obvious mobility impairment, you may need to request that the resident’s need for accommodation be verified by a third party professional. Create a policy that when the need is not vi-

sually obvious you will need to verify with a third party professional. Use a consistent form.

• All reasonable accommodation / modification requests will be reviewed and approved or denied by the property/portfolio manager, director of residential services and the upper management team of the property management company. Notification of approval or denial will be provided from the corporate office to the tenant or applicant household in writing within five working days after the request is received by the corporate office.

No request should be rejected without first offering an alternative in writing. Rather than merely rejecting the resident’s request, which might enable the resident to accuse management of failing to accommodate, it makes more sense to offer an alternative accommodation that can provide the landlord with a defense in the event of a complaint, even if the resident rejects the offer.

For conventional properties (not federally financed), landlords must allow the tenants/applicant, to make reasonable modifications at their cost. Typically, modifications at the resident’s expense are approved unless the resident cannot verify his need for the modification, the modification creates a struc-

tural or safety problem for the building, or it makes the space unusable by other patrons of the property.

If the modifications of the property might interfere with the next resident’s use of the apartment, the resident must agree to return the interior of the apartment to its unaltered condition upon the termination of the lease.

When the final determination is made on the resident’s request, the decision of the accommodation or modification will be documented by a letter to the tenant or applicant.

All requests (accepted as well as rejected) for accommodation or modification will be saved in the tenant’s file for future review if necessary.

Additions to Accommodation Policies The following language can be adapted or added to existing policies and agreements: The Landlord (your company name here) complies with the Fair Housing Amendments Act of 1988, Section 504 of the Rehabilitation Act of 1973, and the Americans with Disabilities Act (ADA). This property will comply with any legislation protecting the individual rights of tenants, applicants, and/or

continued on page 6

• Installation of grab bars in the bathroom • Installation of a wheelchair ramp • Installation of a flashing light smoke detector for a hearing impaired tenant • Accommodation of a service or companion animal • Release from a rental agreement without a lease break penalty If a tenant asks you if they can modify their unit or have an accommodation to a community rule because of their disability, your response should be: “We’ll be happy to consider that. Can you please submit a request for a reasonable accommodation/modification to help us understand the need better?

We have a form to use for your convenience.”

Make sure the tenant provides the name, address, telephone number and email address for the third party professional who will verify that the applicant/resident is disabled and needs the accommodation requested.

Publisher Will Johnson – will@propubinc.com Designer/Editor Kristin Flores – kristin@propubinc.com

Advertising Sales Will Johnson – will@propubinc.com Terry Hokenson – terry@propubinc.com Larry Surratt – larry@propubinc.com

Rental Housing Journal Colorado is a monthly publication published by Professional Publishing Inc., publishers of Real Estate Opportunities in Investing & Real Estate Investor Quarterly

www.rentalhousingjournal.com The statements and representations made in advertising and news articles contained in this publication are those of the advertiser and authors and as such do not necessarily reflect the views or opinions of Professional Publishing, Inc. The inclusion of advertising in this publications does not, in any way, comport an endorsement of or support for the products or services offered. To request a reprint or reprint rights contact Professional Publishing Inc. PO Box 6244 Beaverton, OR 97007. (503) 221-1260 - (800) 398-6751 © 2015 All rights reserved.

NOTE You should never ask the tenant what their disability is. The tenant’s medical professional will indicate if the tenant has a disability, and if their request would help them to more fully use and enjoy the property that they are renting, or will rent.

Keep in mind that just because a request has been made, it doesn’t mean the landlord has to say yes. The key word in this process is “reasonable.”

Tell the tenant that once the completed reasonable accommodation request is reviewed by the corporate office, the Rental Housing Journal Colorado · September 2015

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Rental Housing Journal Colorado

Denver Apartment Research Report...continued from page 1

Reasonable Accommodations ...continued from page 4

and vacancy in those areas is rising.

Nonetheless, demand for rental units is high and many of these new complexes are recording short lease-up periods.

The strong need for apartments is enabling the monthly average rental rate to climb at one of the fastest paces in the nation this year.

Tightening operations, accelerating rents and higher first-year yields than are available for properties in other primary markets are drawing a wealth of investors to the Denver metro. Consequently, adequately priced assets are receiving multiple offers and prices are escalating. High-net-worth individuals remain the dominate force in the market, pushing up deal flow in the $1 million to $5 million tranche. Cap rates for assets in this bracket generally average in the low- to high-6 percent range depending on quality and location. In the first half of the year, overall transaction velocity is already significantly higher than the same span last year as the pending rise in interest rates motivates owners who are considering trading up to alter their timelines. Though more owners are impelled to list their properties, for-sale inventory is falling short of demand, further intensifying competition among buyers.

staff that may subsequently be enacted.

The Landlord (your company name here) does not discriminate against persons with disabilities in its services and structures, provides equal opportunity to all persons with disabilities, and provides accommodations to meet the needs of persons with disabilities upon request, if the accommodation is both reasonable and financially feasible.

Lease Break Fees: If a tenant has provided documentation of a Reasonable Accommodation being necessary by their medical professional, specifically with a need to vacate their unit due to medical reasons, it is common sense not to charge a lease break fee or require 30 day notice.

Developers are on track to add 12,000 apartments this year, boosting total rental stock 4.8 percent. The majority of new construction will remain focused in central Denver. In 2014, approximately 8,100 units were placed into service.

Vacancy Strong demand for housing will enable vacancy to dip 10 basis points to 4.0 percent in 2015, on net absorption of nearly 12,400 apartments. Vacancy ticked up 20 basis points in the previous year.

Rents Tight vacancy will push average effective rents up 9.0 percent in 2015 to $1,335 per month. Last year, average effective rents rose 10.4 percent.

Published Courtesy of Marcus & Millichap

2015 Annual Apartment Forecast Employment Hiring will increase 3.3 percent this year, resulting in an additional 45,000 jobs. The previous year, employers filled another 52,500 positions and the unemployment rate fell 160 basis points to 4.1 percent.

Summary The purpose of this article was to help landlords and property owners plan, develop and implement policies that will guide property managers in the consistent support of tenants who qualify for reasonable accommodations due to disabilities. Consistency in po-

lices translates into meeting fair housing requirements fairly and equitably for every tenant.

I encourage you to be consistent with your policies and protect your onsite and portfolio managers by developing clear and easy to follow rules.

P.S. Don’t forget to run your policies by your favorite fair housing attorney to make sure the rules have not changed as they so often do in Washington D.C. *Resources Authors Note: The author thanks the Fair Housing Institute for the use of their resources in the writing of this article. http://www.hud.gov/offices/fheo/library/ huddojstatement.pdf Joint HUD and Justice department release that clarifies reasonable accommodations under the fair housing act. http://www.fairhouse.net/library/article. php?id=39 Create a Reasonable Accommodations Policy for Your Property http://www.justice.gov/jmd/eeos/manual-and-procedures-providing-reasonable-accommodation http://www.fhrc.org/HRAC_Brochure.pdf

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Rental Housing Journal Colorado

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Property Managers Prepare for More Renters and Fewer Vacancies

osted on 25. Aug, 2015 by Marc CourtenayIn today’s housing market there are some unmistakable trends that I’ve commented on in recent articles. The number of owner-occupied dwellings is dropping while rental vacancies are vanishing. Put another way, recent data from varying sources—including the Census Bureau—verifies that vacancy rates have fallen to a 30-year low. Residents are finding fewer choices available to rent than at any time since 1985.

At the end of the 2nd quarter of 2015, the vacancy rate plunged to 6.8% while the year-over-year growth in the number of new households jumped from 115 million to over 117 million.

No wonder rental housing availabilities are dropping! Some developers call it “The Perfect Storm.” In the aftermath of The Great Recession that began back in 2008, fewer and fewer adults can afford to own a home. Lending qualifications have tightened as well.

At the same time, employment numbers took a huge hit. The number of unemployed soared while companies cut back on spending and operating costs.

Employment numbers have improved during the last two years, yet the actual wages paid have hardly increased.

Wages and benefits paid by U.S. employers this past spring rose at the slow-

est pace since the second quarter of 1982, the Labor Department revealed.

The employment cost index, which tracks salaries, wages, and benefits gained 0.2% in Q2, compared with a 0.7% gain in Q1.

These factors contributed to a slowdown in new construction of multifamily complexes and apartments. While new buildings have begun to be built there’s a lag time before they’re ready to rent. The construction lag helps fuel demand and, subsequently, rental rates will continue to rise for at least the next five years as the Millennial Generation continues to delay entering the homeownership market.

“Millennials” as they are often dubbed, mainly refers to the generation of people born between the early 1980s and the early 2000s. Perhaps the most commonly used birth range for this group is 1982-2004. The Millennials are also known as Generation Y, because it comes after Generation X—those born between the early 1960s and the 1980s.

The population of Generation Y is believed to be over 80 million in the U.S. alone.

This huge demographic group has been slower to leave home than their parents’ or grandparents’ generations.

The economic fiascos of the past 15 years have made it more daunting for Millennials to strike out on their own.

According to a Pew Research Center analysis, a young adult in the 18-to-34-year-old age range is more likely to live with his or her parents now than in 2008.

Reasons include student debt and increasing housing costs.

This reality has powerful ramifications for the overall economy and for the housing industry specifically. As a result, property managers all across America are becoming active in the possible solutions.

Working in close cooperation with local and regional housing authorities,

property managers are networking to come up with viable ideas. Some are forming ad hoc task forces to make things happen. As a critically important election year approaches, property managers are also letting political candidates know that landlords, property owners, and residents are deeply concerned. Historically low vacancy rates coupled with a rising number of motivated applicants leads to shortages and rental rate inflation. Consider taking an active role in offering ideas that will benefit all involved.

Published courtesy of PropertyManager.com

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Rental Housing Journal Colorado

Renting Less Affordable Than ...continued from page 4

Metro Area United States New York-Northern New Jersey Los Angeles, CA Chicago, IL Dallas-Fort Worth, TX Philadelphia, PA Houston, TX Washington, DC Miami-Fort Lauderdale, FL Atlanta, GA Boston, MA San Francisco, CA Detroit, MI Riverside, CA Phoenix, AZ Seattle, WA Minneapolis-St Paul, MN San Diego, CA St. Louis, MO Tampa, FL Baltimore, MD Denver, CO Pittsburgh, PA Portland, OR Sacramento, CA San Antonio, TX Orlando, FL Cincinnati, OH Cleveland, OH Kansas City, MO Las Vegas, NV San Jose, CA Columbus, OH Charlotte, NC Indianapolis, IN Austin, TX

Current Percentage Historic Percentage Forecasted PercentCurrent Percentof Monthly Income of Monthly Income age of Monthly Income age of Monthly InHistoric Percentage of Spent on Mortgage Spent on Mortgage Spent on Mortgage come Spent on Rent Monthly Income Spent on Payment (Q2 2015) Payment (1985-2000) Payment at 6% (Q2 2015) Rent (1985-2000) 15.1% 21.3% 19.5% 30.2% 24.4% 25.6% 32.2% 32.1% 41.3% 25.3% 39.9% 34.6% 50.2% 48.9% 35.6% 13.7% 23.1% 17.6% 30.8% 21.8% 12.2% 20.2% 16.5% 28.7% 21.5% 14.6% 20.7% 18.5% 30.0% 19.3% 12.2% 14.8% 15.9% 30.6% 23.5% 17.5% 23.3% 21.8% 26.8% 16.8% 20.5% 20.6% 26.2% 44.5% 27.5% 12.3% 19.8% 16.0% 25.8% 18.3% 21.7% 26.0% 27.2% 34.4% 27.0% 41.4% 37.0% 54.7% 46.7% 29.9% 10.0% 17.4% 13.1% 25.3% 17.7% 23.6% 25.8% 31.4% 36.2% 31.1% 17.3% 20.6% 22.4% 28.1% 21.7% 22.7% 25.7% 30.3% 31.6% 23.2% 13.7% 19.8% 17.5% 25.6% 19.7% 34.1% 32.8% 43.4% 43.7% 33.9% 11.0% 17.1% 14.3% 24.2% 20.1% 14.6% 18.8% 18.9% 32.4% 26.8% 15.5% 22.0% 19.4% 29.3% 24.8% 21.1% 21.0% 28.1% 35.0% 23.4% 10.7% 15.9% 13.7% 24.6% 26.9% 21.6% 22.2% 28.8% 32.1% 22.6% 26.0% 29.8% 34.1% 33.5% 31.1% 12.7% 18.6% 16.5% 29.6% 24.9% 16.1% 21.0% 20.9% 32.7% 22.6% 11.2% 19.8% 14.4% 26.9% 19.6% 10.8% 20.0% 13.9% 27.1% 21.2% 11.1% 21.2% 14.4% 25.5% 16.0% 16.2% 24.8% 21.4% 27.1% 22.9% 41.9% 35.1% 55.3% 41.5% 25.6% 11.8% 20.3% 15.3% 26.2% 19.8% 13.2% 18.8% 17.1% 26.8% 18.0% 10.9% 23.5% 14.2% 26.0% 18.6% 16.5% 18.4% 21.5% 31.6% 21.3% SOURCE Zillow

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Rental Housing Journal Colorado · September 2015