Rental Housing Journal Colorado
August 2017 - Vol. 9 Issue 8
2. My Multifamily Investing Philosophy and How I Do It 4. Dear Maintenance Men - Faucets, Storage and Vacancies
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Security Deposits and Everything You Need to Know About Them
Unprecedented Demand Staving Off Apartment Market Slowdown Sacramento, Phoenix, Las Vegas, Raleigh-Durham and Jacksonville Named Top 5 Markets for Multifamily Investment
T
en-X Commercial, the nation's leading online real estate digital marketplace, today released its latest U.S. Multifamily Market Outlook, including the top five "Buy" and "Sell" markets for multifamily real estate assets. The report shows that while fundamentals have begun to soften, demand across the apartment market remains strong due to positive demographic trends that continue pushing millennials and other Americans to forgo homeownership in favor of renting. The report pinpoints Sacramento, Calif., Phoenix, Las Vegas, RaleighDurham, N.C., and Jacksonville, Fla., as the five markets where investors should
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ecurity deposits. Every professional property management company requires them but some property managers don’t know the full legal picture. While it’s commonly understood that normal wear-andtear is acceptable, 26% of renters have reported that their security deposit has been withheld at some point during their life as a tenant. So what types of violations are more than a quarter of renters being cited for?
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Security deposit laws are complicated and vary from state to state. Normal wear-and-tear isn’t always easy to identify. Typically, disputes between a tenant and property manager are settled in court if the tenant thinks the basis of a withheld security deposit is simply normal aging. In Wisconsin, for example, laws prohibit property managers from retaining deposit funds to cover carpet cleaning. However, a separate fee can be required after the renter surrenders the apartment. Collecting that fee may require a lawsuit or a trip to small claims court. Renters in Washington are obligated to return their apartment or rented home to the same condition as they continued on page 4
consider buying multifamily properties. Favorable demographic trends are on full display in these regions, where employment stands at record or nearrecord levels, and a combination of high demand and light supply pipelines are bolstering rent levels. The Ten-X analysis also identifies New York City, San Francisco, San Jose, Calif., Washington, D.C., and Oakland, Calif., as markets where investors may consider selling multifamily assets. These mostly major markets seeing an onslaught of new supply pushing up vacancies and rents may already have reached their peaks, leaving them vulnerable to diminished returns for continued on page 5
Rising Rents Lead to Increased Homeless Population If New York metro rents grow five percent, 3,000 more people will be forced into homelessness
R
ising rents in the nation's booming urban areas are creating crisis levels of homelessness that will continue or even accelerate as rents rise, Zillow® research has found. The connection between homelessness and increasing rents is especially strong in places that are already facing rapidly growing homeless populations: New York, Los Angeles, Washington, D.C. and Seattle. A five percent increase in New York rents over the next year would force almost 3,000 more people into homelessness, according to a new
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Real Estate Opportunities in Investing (ROI) Finding Investing Success in Today's Housing Market
Rental Housing Journal Colorado
My Multifamily Investing Philosophy and How I Do It
This month we introduce a new blogger, Vinney Chopra, with many years of experience in multifamily investing who is dedicated to education and teaching others what he has learned in more than 35 years of real estate investing. By Vinney Chopra
I
want to discuss with you my investing strategies, my philosophy, and how I got started in real estate investing.. When I started out investing in real estate, I used to believe in single-family homes. I started buying them about 30 years ago. I also bought a multifamily home back then. As I became more exposed to the knowledge and the specific benefits of commercial real estate, it really changed my thinking process. When I got to know more about multifamily investing - or what you may call apartment investing - it really started to make sense to me. We are still in the trails of the recession that ended a couple of years ago. However, the sector that really got some good numbers and where lenders were giving money out and financing after the crash of 2008 and 2009 was the multifamily sector. That one sector came out quickly from the recession compared to the hotels, offices and so forth. The financing compared to other sectors was much
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better for multifamily. Over 13 years ago my wife said, “You are into real estate investing, motivational speaking and other things, why don’t you take an exam for real estate California broker license?” I am not a real estate agent. My wife had a license and worked for a nice company. I took the broker’s exam, I passed it on the first try, and that was very exciting to me. Real estate is very invigorating and that is why I founded a university named www.multifamilysyndicationacademy. com. I hope it is a place where you can learn a lot of great techniques, ideas and experiences of mine that you can apply right away to multifamily investing. I prefer multifamily investing to many sectors for many reasons One of the biggest reasons I prefer this sector, is there is less risk in multifamily investing in apartment buildings. For example, if you own a home and a tenant leaves, you have 100 percent vacancy. If you own five homes and two tenants leave, that is a 40 percent vacancy.
However, that does not happen in multifamily investing in an apartment building. In a 50-unit building, if two tenants leave and 48 other tenants are left behind, that is an occupancy rate of 96 percent. The other tenants are able to pay for all the expenses, the mortgage, the insurance and all other things. The vacancy has much less effect with the multifamily property. The economics of scale are great. For example, in maintenance, if you must replace the roof on 50 single-family homes across town and in different cities that is a chore. Compare that to changing the roof of 50 apartments, which may be six or eight buildings, that is six or eight roofs. It can be changed at one location. In addition, the maintenance team does not have to run around to the different single-family homes scattered around town. They can all be taken care of in a local area. For property management, in multifamily apartments the managers can take care of so many different
families at one time. The maintenance person can also fix things without traveling all over town. The third reason I like multifamily investing is the pooling of money together. The syndication part of it. By pooling money together, you can buy bigger assets, bigger apartments and get more of them. That is where the syndication part of it comes in. Also, the depreciation of the complex along with the leverage of loan makes it a very sound investment. What kinds of markets do I really consider a great market? I find emerging markets are the best to follow. If you follow the market where there is an increase of jobs and the demand for jobs, you will not go wrong. Watch to see if the employers, or the big box chains are moving into that part of town or that city. The emerging market is one that is in the path of progress where more businesses are moving - north, south, continued on page5
Rental Housing Journal Colorado · August 2017
Rental Housing Journal Colorado
DEAR MAINTENANCE MEN By Jerry L'Ecuyer & Frank Alvarez
Faucets, Storage and Vacancies
Dear Maintenance Men: When the bathroom faucet was new, turning off the hot or cold water knobs would cut the flow of water immediately. Two years later, upon turning them off, the faucet weeps a bit of water. Is this a sign the knob isn’t working? Can a clogged spout screen be fixed? With all these problems, do I need to buy an entire new fixture?
Paul
Dear Paul: Most types of faucets are repairable with standard tools and a rebuild kit. Note the brand and style of the faucet and find a corresponding repair kit at the local plumbing supply house or home improvement center. Repair kits often come with the specialized tool you may need to repair the faucet. The faucet screen can be cleaned and is housed in a removable assemble at the end of the spout. These can be spun off and the screens cleaned and replaced. Keep in mind the cost of repairs may rival the cost of replacement. If the cost of repair is more than fifty percent of the cost of replacement, we recommend the faucet be replaced with new modern fixture.
Dear Robert: It does seem bathrooms are sometimes designed as an afterthought. Sink, toilet, bath and that is it. A modern bathroom will take into consideration the need for storage, electrical devises, personal hygiene etc. The first item that comes to mind is installing a bath sink cabinet. An old style cabinet might only have a set of doors under the sink. We find this is not adequate and a cabinet should have drawers along with access to under the sink. The drawers can store hair dryers,
and all manner of personal bath items. A unique system we like utilizes the space between the studs in the wall. Cabinet doors or mirrors can be used to cover storage in the walls. The wall storage is perfect for toilet paper, rolled up towels, tooth brushes, and most other small items. Install multiple towel racks on the back of the bathroom door for additional towel storage. The space above the toilet can easily accommodate an overhead cabinet for larger items. Reversing the swing of the bathroom door from inward to outward
will greatly increase the usable room and make the bathroom appear larger.
Dear Maintenance Men: It is currently summer time and that is when we get the most vacancies. How do I keep my residents from moving?
Denise
Dear Denise: Often residents relocate during the summer months due to a change in schools their kids attend. They want to be close or within walking distance. continued on page4
Dear Maintenance Men: How can I add more storage to my utilitarian type bathrooms? The residents complain that they need to store their toilet paper in the hallway! Please list a few suggestions on what to do?
Robert
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Rental Housing Journal Colorado
Security Deposits ...continued from page 1 rented it in, excluding normal wear-andtear. This means they’re the responsible party for carpet cleaning, unless they paid a non-refundable cleaning charge when the lease was created. In states like Massachusetts, certain disputes require the property manager to return the security deposit (and accrued interest) within 30 days of the move out date, and then file a separate small claims or civil suit for damages.
Cover all the bases. Avoid unnecessary legal challenges by conducting the initial leasing process with diligence. Start by researching local, state, and federal laws that govern real estate rental practices in your area. Consult with a real estate attorney if you aren’t confident you have all the information needed to establish deposit amounts and settle a tenant’s lawful termination of the lease. From there, create a policy that protects your company and your assets. Go the extra mile during the leasing process. Prior to allowing a renter to move in, schedule at least 30 minutes for both the renter and company representative to conduct a joint property inspection. Be sure to take notes – and take pictures – of any damage to floors, walls, windows, interior and exterior doors, appliances (inside and outside), fixtures, furniture, patio/balcony, stairs, and any other structural components. Make sure both parties sign and date an inspections form certifying its accuracy. Additionally, consider initiating a follow up inspection a few days after the tenant moves in. Many tenants find an
issue only a few days after they move in – maybe the dishwasher doesn’t drain properly or there is a missing patch of carpet in the bedroom closet. Simply send an email and ask if the tenant has noticed anything else after moving in that they consider prior damage, and ask them to return inquiry confirmation via email or written notice. The response is necessary because there have been lawsuits where a tenant claims they found damage after moving in. This will avoid a he-said/she-said kind of argument that may drag you to court.
Make the exit professional and legal. Do a preliminary walk through a few days before move-out with the renter in attendance. This gives the renter a chance to return the property to movein ready condition. Then conduct the final apartment inspection as quickly as possible, before any make-ready begins. Utilize photos, with dates included, for documentation purposes as you prepare an itemized security deposit statement. Be sure to include a complete explanation for any funds withheld. These tips will help you avoid unnecessary lawsuits and ensure that you stay within the laws governing your security deposit policies. Knowing statutory limits and being prepared is wiser than trying to defend yourself without the proper backup.
Dear Maintenance Men ...continued from page 3 The other more problematic reason is poor maintenance service. According to the 2011 national resident study, "Getting Inside the Head of the Online Renter," the number one factor in a resident's decision to renew a lease is "Quality of Maintenance Services." Additionally, the current SatisFacts Insite® Index for Work Orders indicates that 18% of all service requests are not completed right the first time. And of those, only one-third of residents received notification that there would be a delay in completing the request. What the above means is poor maintenance service can lead to higher vacancies. It does not matter if you have 10 units or 100 units; maintenance is a critical tool in the physical well-being of your property and the happiness of your residents. Think of it this way. A service call and parts may cost $250 to service a broken washing machine or water heater, resulting in a satisfied resident. However, a resident having to live with a broken washing machine or intermittent hot water may elect to move rather than dealing with the hassle of calling in repeated service requests. That resident vacating will now cost the owner thousands of dollars in loss rent and rehab work to bring the unit back to rent ready condition. Good maintenance is a year round tool to keeping your investment healthy and your residents paying the rent month after month. Questions, Questions, Questions! We need more of them!!! To be see your question in print, please send your them to: Frankie@BuffaloMaintenance.com Thank you!
Bio: If you need maintenance work or consultation for your building or project, please feel free to contact us. We are available throughout Southern California. For an appointment please call Buffalo Maintenance, Inc. at 714 956-8371 Frank Alvarez is licensed contractor and the Operations Director and co-owner of Buffalo Maintenance, Inc. He has been involved with apartment maintenance & construction for over 20 years. He is also a lecturer & educational instructor and CoChair of the Education Committee of the Apartment Association of Orange County as well as being Chairman of the Product Service Counsel. Frank can be reached at (714) 956-8371 Frankie@BuffaloMaintenance.com For more info please go to: www.BuffaloMaintenance.com Jerry L'Ecuyer is a licensed contractor & real estate broker. He is currently on the Board of Directors and Past President and past Chairman of the Education Committee of the Apartment Association of Orange County. Jerry has been involved with apartments as a professional since 1988.
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Rental Housing Journal Colorado · August 2017
Rental Housing Journal Colorado
Multifamily Investing Philosophy ...continued from page 2 east or west. Local agencies are showing up. There is exciting growth in these statistics. That is the place to go. We moved into one market that has served us really well in my company. We have seen some assets gaining 60 to 100 percent in value in 18 to 36 months. That is quite remarkable. We are very happy with these results. What are the guidelines we look for emerging markets? Here is what we look for: • Stable industries • Large businesses • Presence of service industries • New jobs • Appealing lifestyle • High potential of renters vs. home owners • Stable capital • Universities in the market • Big box retail shopping hubs and health clubs Most of these big box retail and shopping hubs do a lot of research before they come to town. They are investing large sums of money into that part of the city or town. If that is happening, we know that things are going to move in the right direction. They are waiting for many people to come to that area to buy their goods. That is great indicator for emerging market. Of course, the airports, infrastructure, roads, transportation and utilities all need to be there. So, what else do I really consider when we do successful execution of syndication and buying of assets and so forth? My philosophy is to talk to the seller’s broker always! For commercial real estate, do not involve the buyer’s broker at all. It just complicates things. You do not get the real answers and we cannot really bind with the seller. Make sure there is a story behind the asset One key thing is to make sure you know the story behind the asset. Why is the owner selling the asset? What is the time line? How soon do they want to sell it and so on? What kind of renovations have been done in the last three years? How much money was spent? What was done with that money? What interior or exterior of multifamily or commercial real estate did they really improve on? How old are the appliances, the roofs and the boilers? In addition, when was the last insurance claim that was done on the property? Definitely ask the broker for market comparisons on the rent. Where are we going to take the assets in the next three to seven years? What is the exit strategy? You always want to buy with the exit strategy already formed. The most realistic answer comes straight from the horse’s mouth, because if it the listing or the seller broker they whack you in-between. I do believe in having a real estate attorney. Maybe a friend or a confidant that is a team member. Someone who could really look through all the contracts and guide you
along. These negotiations are more straight forward if you are dealing with a selling broker. They like us too because they are getting commissions from both sides. I also like to ask what might be the minimum that the seller might expect. Also what is the time line? For example, if there is a deadline I like to know that so negotiations can begin correct timely manner. We also want to make the job easy for the brokers, lenders, inspectors and investors. That helps us build great relationships and a great reputation. If a good reputation precedes you, you will be able to get more people investing in your multifamily investing deals. Remember the good people like the brokers, attorneys, managers, banks, lenders, and investors are the team members who really make our business. We want to make sure that they see us as easy people to work with.
Rental Housing Journal Colorado · August 2017
We have talked about how to build a great team. If you do business and it is easy, straight forward and with integrity, then investors will like to work with you. You want to make working with you easy for them. Maintaining good relationships in multifamily syndication is a big key to success. About the author: Vinney Chopra is the Founder and CEO of Moneil Investment Group and President of Ideal Investments Group. His latest accomplishments include acquiring 12 multifamily assets in the last 28 months worth $132 million. His last two syndications were sold out in just a few hours, and one in 36 hours raising $4.7 million and another one $6 million in eight hours. Between the two syndication companies he founded, Vinney’s team acquired and managed over $236 million worth of assets. He is a mechanical engineer. After graduating from The George Washington University
and finishing his Master’s in Business Administration in Marketing, he shifted his focus to marketing and motivation. He was a professional fundraising consultant and motivational speaker for more than 35 years. Vinney and his wife started their real estate investments in 1983. He currently owns singlefamily homes and multifamily units in Texas, California, Atlanta, Arizona and India. Many times, people call him “Mr. Enthusiasm” or “Mr. Smiles.” He likes to bring great value to everyone he comes in touch with.
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Unprecendent Demand Staving Off ...continued from page 1 investors. Completions across the apartment sector slackened in the first quarter after a record 2016, totaling just 39,000 units. Absorption marched in sync with completions, however, with figures in the first quarter clocking in well below 2016 rates. Ten-X projects the absorption rate to improve during 2017, though hardly enough to absorb the 330,000 new units that will be completed over the course of the year. Vacancies rose by 10 bps to 4.3 percent in the first quarter, remaining flat over the last year. While apartment vacancy has plateaued in most markets, the supply pipeline is unevenly distributed throughout the country, making certain markets more vulnerable to rising vacancies. On a national level, the massive influx of new supply is expected to increase the vacancy rate to 5 percent by 2018 before declining demand pushes it to 6.2 percent by 2020 during a modeled economic downturn. Stalling vacancy rates have also harmed rent growth around the country. Seasonally adjusted effective rents rose just 0.4 percent during the first quarter, according to REIS. Annual growth, meanwhile, has cooled to just 3 percent year-over-year – a marked deceleration from the robust increases the sector enjoyed earlier in the cycle. Other discouraging fundamentals include the decline of deal volume to a three-year quarterly low of just below $27 billion. Multifamily cap rates stood flat in the first quarter at 5.2 percent after a rise in late 2016. Despite uneven fundamentals, several demographic trends continue to prop up the multifamily market. Household formations remained steady at a healthy pace of around 1.6 million in 2016. A solid labor market continues to drive absorption, as debtridden millennials increasingly delay marriage and homeownership in favor of renting. As youth employment and wages continue to rise, the 31 percent of 18- to- 34-year-olds currently living at home should be drawn into the market, creating a key demand source that has yet to be fully tapped. "The current state of the multifamily sector is a perfect example of the timehonored notion that 'demographics is destiny.' While softening fundamentals indicate that the sector is poised for a slowdown, that shift has yet to arrive in earnest," said Ten-X Chief Economist Peter Muoio. "While many large metro areas are increasingly exposed to both cyclical risk and massive oversupply, the overall market is being sustained by significant societal shifts that is driving strong, sustained demand. As long as gainfully employed millennials and other Americans continue to choose renting over homeownership, a majority of multifamily investors can be confident
that rents will continue to rise."
outlooks in the nation.
The Multifamily Sector's Top Five 'Buy' Markets: Sacramento Rents in California's capital are growing at a breakneck pace, as a modest supply pipeline has kept vacancies at near-record lows. The market is further boosted by consistent gains in overall employment, which, driven by robust increases in the government sector, posted growth in the mid-1-percent range over the last year. The city's population also jumped 1.3 percent in 2016, outpacing the national average. Sacramento's overall market strength is expected to help it weather the Ten-X recession downturn scenario in 20192020, with solid gains in NOI projected to continue during that span.
Jacksonville Jacksonville's apartment sector is being boosted by strong demographics, with the market's population expanding at three times the national rate. Employment has seen a similar increase, with thriving education/healthcare and professional/business services sectors anchoring the region's strong economy. According to REIS, effective rents are enjoying solid growth in the mid-3 percent range. A manageable supply pipeline will allow vacancies to fall to a cycle-low 4.3 percent by year's end, according to Ten-X projections, while NOI growth should hover around 5 percent this year before falling to the mid-3 percent range through 2020.
Phoenix Effective rents in Phoenix have increased 4.6 percent over the last year, and Ten-X Research forecasts rents to jump by more than 5 percent through 2018. Much of the growth can be attributed to tightening availability, as vacancies remain in the mid-4-percent range despite a healthy supply pipeline. Employment in the city is at an all-time peak despite slowing growth in several key sectors, while population increases remain at healthy levels. Even with a cooldown in rents under the Ten-X recession downturn scenario, investors should continue to see healthy returns through 2019-2020. Las Vegas Las Vegas' multifamily market is being bolstered by steady population growth and employment that has reached an all-time peak despite recent softening in the leisure/hospitality segment. The city enjoys a favorable supply-demand dynamic, as vacancies are expected to decrease from the mid3 percent range to roughly 2.6 percent by the end of 2018. With rents at record highs, Ten-X Research projects stellar 5.1-percent average annual NOI growth over the next two years. Tight vacancies and solid rent growth should keep NOI gains in the mid-2-percent range during the expected downturn in 2019 and 2020. Raleigh-Durham Thanks to a strong and outsized professional/business services sector, total employment in Raleigh-Durham is now 14 percent above its prerecession peak. Regional population is also growing at more than twice the national rate, helping to drive torrid annual rent growth of between 4 and 5 percent for multifamily properties. Although a recent influx of supply has kept vacancies in the 5-percent range, Ten-X Research expects local demand to stay resilient during the 2019-2020 recession downturn scenario, giving the area one of the brightest apartment
The Multifamily Sector's Top Five 'Sell' Markets: New York City New York City is suffering from an unprecedented supply boom of market-rate apartments following the completion of nearly 10,000 units since early 2016. Another 40,000 marketrate units are due to deliver by the end of 2018, which should drive vacancies above 11 percent. Though metro employment is at an all-time high, the pace of job growth has cooled, and the city's population is growing at its slowest rate since 2007. Effective rents have already begun to contract, and will decline by 2.7 percent annually through 2020. NOI will march in lockstep with rents, declining by an annual average of 4.5 percent in the same timeframe. San Francisco Multifamily completions have outpaced absorption in San Francisco every year since 2014, leading to a steadily rising vacancy rate. Rents weakened last year in response to increasing availability. While the city's unemployment ranks well below the national average, the pace of employment growth has slowed from the upper-4-percent range in early 2016 to the mid-2-percent range in 2017, due in large part to a slowdown in the city's critical information sector. According to Ten-X projections, the region is likely to face annual NOI declines of roughly 4.7 percent through 2020. San Jose Slackening demand and a surge of new supply have dampened multifamily prospects in the Silicon Valley hub of San Jose, pushing vacancies up to the low-4-percent range. While the area's information sector remains strong, overall job growth has cooled significantly. Unemployment is tight at roughly 3.4 percent, though a slowdown in population growth is limiting the potential for future expansion. Effective rents, which saw meteoric growth earlier this cycle, have seen
dramatically slowed expansion, and rents are expected to begin contracting in 2018, as vacancies climb above 7 percent. The region is expected to see annual NOI declines averaging 3 percent from 2017-2020.
Washington, D.C. In a market where government accounts for three of every 10 jobs, uncertainties about federal hiring have all but put employment growth on hold. While unemployment exceeds the national average, D.C. demographics are booming, with the city experiencing population growth of 1.6 percent in 2016. Trouble for the market is looming in the form of a supply surge that will introduce some 12,000 new apartments by the end of 2018. Ten-X forecasts that demand will be unable to keep up with incoming supply, pushing vacancies above 9 percent by the close of 2020, and stagnating NOIs for multifamily investors. Oakland Employment levels are at an all-time peak in Oakland, propelled mainly by the professional/business services and education/healthcare sectors. While population growth in Oakland exceeds the national average, the market is subject to negative spillover effects from declines in San Francisco's information industry. Apartment vacancies remain low at 3.4 percent, but that figure represents a 40-basis-point increase in the last year. Under the Ten-X 20192020 downturn scenario, completions are forecasted to heavily outweigh demand and trigger rent contractions. Modest NOI gains in 2018 are projected to give way to average declines of 4.4 percent per annum in 2019 and 2020. About Ten-X Ten-X is the nation's leading online real estate transaction marketplace and the parent to Ten-X Homes, Ten-X Commercial and Auction.com. To date, the company has sold 292,000+ residential and commercial properties totaling almost $48 billion. Leveraging desktop and mobile technology, Ten-X allows people to safely and easily complete real estate transactions online. Ten-X is headquartered in Irvine and Silicon Valley, Calif., and has offices in key markets nationwide. Investors in the company include CapitalG (formerly Google Capital) and Stone Point Capital. For more information, visit Ten-X.com. SOURCE Ten-X Commercial Related Links http://www.Ten-X.com
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Rental Housing Journal Colorado Circulated to over 7,000 apartment owners, on-site and maintenance personnel monthly. Call 503-221-1260 for more information www.rentalhousingjournal.com 6
Rental Housing Journal Colorado ¡ August 2017
Rental Housing Journal Colorado
Rising Rents ...continued from page 1 analysis from Zillowi. In Los Angeles, the homeless population would grow by roughly 2,000, and Seattle would see its homeless population increase by nearly 260. While the connection between the rising cost of housing and homelessness is generally accepted, Zillow's statistical analysis is the first to forecast for each city how many people will be pushed into homelessness as rents increase over time. Relying solely on the number of homeless people counted during a onenight survey is an imperfect method. Previous research has found that as few as 59 percent of unsheltered homeless people are included in a given countii. Weather, the number of volunteers and even the count methodology can Metropolitan Area Atlanta Baltimore Boston Charlotte Chicago Dallas Denver Detroit Houston Los Angeles Miami Minneapolis New York Philadelphia Phoenix Pittsburgh Portland, OR Riverside San Diego San Francisco Seattle St. Louis Tampa Washington, D.C.
change from year to year, affecting the accuracy of the count. This new research predicts the total number of people experiencing homelessness, expanding on the counted number. Rents are at record highs across the country, and income growth did not keep pace as rents grew, making paying the rent increasingly unaffordable. Seattle and Portland, Ore. have declared states of emergencyiii in response to the number of people experiencing homelessness. The median rent payment in Los Angeles requires 49 percent of the typical household income, leaving little opportunity to save in case of an unexpected medical bill, or loss of a job – events which could push a family into homelessnessiv.
"We've seen so much pressure in rental housing markets that it's created a rental affordability crisis that has spilled over into a homelessness crisis at lower income levels," said Zillow Senior Economist Dr. Skylar Olsen. "Often, the rental demand in these markets isn't being met with a sufficient supply. There are several cities grappling with this problem, but there is no one-size-fits-all solution for everyone. This report puts a number on the link between rising rents and homelessness, highlighting the very real human impact that rent increases are having across the country." Homelessness rates in New York, Los Angeles, Washington, D.C. and Seattle increased by at least four percent between 2011 and 2016, and these cities
have a strong relationship between rising rents and growing homeless populations. Philadelphia, Chicago, Minneapolis, Detroit, and Pittsburgh also show a significant connection between rising rents and homelessness rates. Not all markets in this analysis have a strong relationship between rents and the number of people experiencing homelessness, indicating that they have found a way to interrupt the trend. Even as rents have risen in Houston and Tampa, for example, the homeless population in each city fell. Other cities where the homelessness rates also fell include Chicago, Phoenix, St. Louis, San Diego, Portland, Detroit, Baltimore,
Counted Number of Homeless Estimated Total Number of Estimated Additional Homeless PeoPeople, 2016v Homeless People, 2016 ple with a 5% Increase in Rent 4,546 5,447 83 3,488 4,088 79 6,240 6,418 128 1,818 2,139 68 6,841 7,614 189 3,810 3,866 77 5,728 6,320 73 2,612 2,872 106 4,031 5,032 120 46,874 59,508 1,993 4,235 4,624 109 3,056 3,359 131 73,523 76,411 2,982 6,112 6,281 147 5,702 6,918 135 1,156 1,318 75 3,914 4,674 55 2,165 3,207 110 8,669 11,149 184 6,996 8,752 68 10,730 12,240 258 1,713 1,879 57 1,817 3,090 69 8,350 8,498 224
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Estimated Total Number of Homeless People, 2017 5,605 4,121 6,557 2,249 7,641 4,019 6,457 2,898 5,224 61,398 4,701 3,531 76,341 6,345 7,162 1,375 4,807 3,352 11,455 8,815 12,763 1,926 3,204 8,703 Zillow
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iv https://www.zillow.com/research/ q1-2017-housing-affordability-15563/
i Zillow worked with a postdoctoral researcher in the Department of Statistics at the University of Washington for this analysis.
v Counts come from the U.S. Department of Housing and Urban Development. HUD continuums of care were matched with the corresponding metropolitan areas.
ii https://www.ncbi.nlm.nih.gov/pmc/articles/ PMC2446453/ iii http://www.pewtrusts.org/en/ research-and-analysis/blogs/stateline/2015/11/11/cities-states-turn-to-emergency-declarations-to-tackle-homeless-crisis
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