On-Site (Seattle Metro) Rental Housing Journal - May 2014 by Professional Publishing, Inc

Rental Housing Journal On-Site

May 2014 - Vol. 8 Issue 4

3. It’s Time for Sales Managers to Tip the Boat! How to Make a Splash by Managing at all Levels

11. How to Turn an Unhappy Resident Into a Raving Fan! by Ernest F. Oriente

7. Dear Maintenance Men:

18. Occupancy by Who’s Standard

9. Why to Go Green?

23. Positioning Family Real Estate Ownership for Future Results

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How to Use a Resident Survey to Improve Your Properties By Mary Girsch-Bockfrom

t’s safe to say that property managers are constantly in search of ways to improve their properties. While some are obvious, others may not be quite so apparent. For instance, do you really know what your residents think of your clubhouse? Are they happy with property staff? Is staff response to complaints prompt or nonexistent? If you’d like to know more about what how your tenants really feel consider a survey. Resident surveys are a great way to find out what your tenants are really thinking. It’s inexpensive, convenient to distribute, and the answers are honest (as long as the survey is anonymous). But all surveys create two potential issues: what kind of questions should you ask in order to get the most out of the survey results, and how do you convince your target market – your tenants, to complete it? Here are some suggestions you may find useful: • Keep it short. Most people don’t mind filling out a survey, as long as it’s not three pages long. Anything longer and most people will either quit filling it out or simply not start in the first place. • Consider what method you will use to deliver the survey, but recontinued on page 7 Professional Publishing Inc. PO Box 6244 Beaverton, OR 97007

Puget Sound Apartment Owners, Property Managers & Maintenance Personnel

Market Overview Seattle Red Capital Group Multifamily Housing Update 4Q13 ®

Payroll Job Summary Total Payrolls Annual Change 2014 Forecast 2015 Forecast 2016 Forecast 2017 Forecast Unemployment

the late stage of its current recovery. 1,526.8m 40.2m(2.7%) 33.3m 26.5m 33.6m 26.2m 5.4% (Feb.)

4Q13 Payroll Trends and Forecast Metro job creation trends decelerated moderately over the winter months but remained healthy overall. Seattle concerns hired at a 40,200job, 2.7% annual pace in 4Q13, down from 3Q’s robust 46,700-job, 3.2% performance. Preliminary January and February data suggested that the slowdown carried over into the new year, as yearover- year comparisons slipped to an average of 38,700 jobs. Goods producing industries were largely responsible. Over the year growth in construction and manufacturing fell from 8,500 jobs in August to no net change in February. Job losses were detected in the aerospace industry. The tech sector also was softer as hiring in the computer system design and software segments declined. The RCR payroll model relies on three lags of the dependent variable, U.S. payroll growth, stock prices and the slope of the yield curve to achieve a statistically unbiased 90.8% adjusted R2. This model projects further deceleration in 2014 to the 1.8% level followed by advances in the 1.9% to 2.2% range through 2016. The forecast out-years are moderately slower in keeping with the U.S. economy in

Current Resident or

PRSRT STD US Postage PAID Seattle, WA Permit #741

Occupancy Rate Summary Occupancy Rate (Reis) 95.4% RED 50 Rank 35th Annual Chg. (Reis) -0.4% RCR YE14 Forecast 95.3% RCR YE15 Forecast 95.4% RCR YE16 Forecast 95.3% RCR YE17 Forecast 95.1% 4Q13 Absorption and Occupancy Rate Trends Seattle space demand showed no signs of lost momentum as tenants occupied a net of 1,386 units (Reis) during 4Q13, comparing constructively to 1,120 in the seasonally stronger third quarter and 1,525 in the year-earlier period. Supply levels played a major role in the trend. Developers completed 2,244 units during 4Q (7,097 units for the year), the largest one-quarter and the third largest annual vintages in the 24-year history of the Seattle Reis series. As a result, occupancy fell 40 basis points sequentially and year-on-year to 95.4%. Axiometrics same-store surveys detected a moderately larger decline: stabilized property occupancy dropped -60 bps sequentially to 94.9% in 4Q13. The phenomenon was most pronounced in the class-A sector (-90 bps); least in class-C (-50 bps). RCR models forecast that supply and demand growth should remain at historically high levels in 2014 and 2015, before reverting to long-term averages thereafter. Consequently, occupancy is likely to dip to the low95% area in 2H14, before rebounding

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to about 95.7% by mid-year 2015. Effective Rent Summary Mean Rent (Reis) $1,139 Annual Change 7.1% RED 50 Rank 1st RCR YE14 Forecast 4.8% RCR YE15 Forecast 4.0% RCR YE16 Forecast 4.6% RCR YE17 Forecast 4.2% 4Q13 Effective Rent Trends Rent trends moderated from the torrid pace observed during the third quarter but remained among the strongest in the country. Effective rents increased $14 (1.2%) sequentially to an average of $1,139, down from $22 (2.0%) in 3Q13 (Reis). Expressed on a year-on-year basis, rents advanced 7.1% for the second consecutive quarter, ranking #1 among the RED50 once more. Axiometrics surveys detected a seasonal weakening trend as stabilized same-store property rents declined about -$30 (-2.2%) sequentially to a $1,370 mean. Year-on-year comparisons decelerated to 5.7% from 7.2%, representing the smallest gain posted since 3Q10. Class-B assets were most affected, slipping –3.0% sequentially. Class-A and C rents declined –1.5% and –0.4%, respectively. RCR’s rent model (Adj_R2=96.5%) employs income, employment and vacancy variables. The model foresees gradually slowing growth through 2014-15 to about the 4% level, followed by reacceleration to the mid-4% area during 2016. Annual growth will average about 4.3% continued on page 4

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It’s Time for Sales Managers to Tip the Boat! How to Make a Splash by Managing at all Levels By Kevin Higgins, Sales Management Expert Ongoing management. Low performers, mid-level performers and even high performers need it. It does not assume high performance, and once high performing, does not assume it will always continue. Everyone needs to be managed on a consistent basis. In sales, the goal of ongoing management is participation rate. Participation rate is the percentage of sales team members who are at or above plan. For a sales team, participation rate is easy to calculate. On a team of ten people where four are above their sales plan on a YTD basis, the participation rate is 40%. Participation rate is a statistic that rarely scrutinized. Why? Sales managers are measured for making their quota. If the quota is $100 million, the sales manager’s goal to get each sales person to deliver an average of $10 million. Some will produce $15 million and others will produce $5 million; the sales manager only needs the total to add up to $100 million. The sales manager is incentiv-

ized to keep average performers. A sales person who only delivers 50% of their quota is better for the sales manager than the 0% they would contribute if the sales manager let them go. Research reveals that a participation rate of 60% or less will give sales managers a 10% chance of making their revenue plan. Sales managers must aim for a high (70%) participation rate to have a good chance of making plan, although it is not guaranteed. Given this, why do sales managers tolerate poor performance? What stops them from having tough conversations? Sales managers are nice. They do not want to rock the boat. Their strategy is hope. A sales rep’s performance can be evaluated on two criteria – behavior and results. Assessing whether a sales rep is or could be delivering results is fairly straightforward – it’s a math problem. There are four performer categories a sales manager works with: 1. High Performers = Deliver results + behave correctly 2. Coachable Performers = Be-

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have correctly but results are not 100% yet 3. Tough Performers = Deliver results + behave poorly 4. Poor Performers = Poor results + poor behaviors In an ideal world, a sales manager would have 100% High Performers. Neat concept, most likely not going to happen. What is the next best thing? One hundred percent High

Performers and Coachable Performers. This is attainable but it’s not the norm. Most leaders will have some Tough Performers and some Poor Performers. Imagine having ten direct reports with two in these groups. Not bad, manageable. Now imagine four out of ten. Life is tougher and Continued on page 15

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Seattle 4Q13..continued from front page

Effective Rent

Submarket

participate in any particular transaction or strategy. Any reliance upon this information is solely and exclusively at your own risk. Please consult your own counsel, accountant or other advisor regarding your specific situation. Any views expressed herein are subject to change without notice due to market conditions and other factors.

Physical Vacancy

4Q12

4Q13

Change

4Q12

4Q13

Change

Auburn / Enumclaw Beacon Hill / Rainier Bellevue / Issaquah Bothell Des Moines / West Kent Downtown / Capitol Hill Edmonds / Lynnwood Everett / Mukilteo Federal Way Kent Kirkland / Juanita

$832 $998 $1,281 $1,071 $856 $1,433 $917 $907 $893 $892 $1,250

$845 $1,009 $1,364 $1,115 $893 $1,605 $953 $966 $920 $913 $1,329

1.5% 1.1% 6.5% 4.2% 4.3% 12.0% 3.9% 6.5% 3.0% 2.3% 6.3%

3.7% 7.9% 4.5% 3.5% 3.0% 5.1% 3.2% 2.3% 4.0% 3.0% 2.6%

2.7% 5.9% 5.4% 3.4% 2.4% 7.6% 3.9% 4.2% 3.0% 2.4% 4.5%

-100 bps -200 bps 90 bps -10 bps -60 bps 250 bps 70 bps 190 bps -100 bps -60 bps 190 bps

North Seattle

$1,071

$1,198

11.9%

3.3%

5.6%

230 bps

Redmond

$1,225

$1,274

4.0%

4.5%

5.3%

80 bps

Renton

$949

$988

4.1%

3.3%

2.8%

-50 bps

Tukwila / Sea-Tac

$778

$804

3.3%

2.2%

1.8%

-40 bps

4.4%

-10 bps

4.6%

40 bps

Continued on page 5

10.0%

4.5% 4.2%

6.5%

5.0% 7.1%

3.0%

$949 $1,139

-0.5%

$904 $1,063

-4.0%

Metro

14%

West Seattle / Burien

-2%

11 properties valued at $5 million or more were exchanged, consistent with third quarter results. But the character of trade changed materially, with increased participation by institutional and hedge fund investors who zeroed in on high-quality, recent construction properties. As a result, sale proceeds increased from $349mm to $671mm, and the average value of units traded rose from $201,351 to $271,736. Cap rates applicable to trophies were steady in the mid-4% area, despite increased competition among buyers, perhaps reflecting rising supply concerns. Class-B and C+ assets sold to yields in the low-5% to high-

or recommendations to buy or sell currencies or securities or to engage in any specific transactions. Information has been gathered from third party sources and has not been independently verified or accepted by RED CAPITAL GROUP. RED makes no representations or warranties as to the accuracy or completeness of the information, assumptions, analyses or conclusions presented in the report. RED cannot be held responsible for any errors or misrepresentations contained in the report or in the information gathered from third party sources. Under no circumstances should any information contained herein be used or considered as an offer or a solicitation of an offer to

The information contained in this report was prepared for general information purposes only and is not intended as legal, tax, accounting or financial advice, SUBMARKET TRENDS (REIS)

10%

Trade & Return Summary $5mm+ Sales 11 Approx. Proceeds $671mm Avg. Cap Rate (FNM) 5.2% Avg. Price/Unit $271,736 Expected Total Return 8.0% RED 46 ETR Rank 19th Risk-adjusted Index 3.16 RED 46 RAI Rank 12th

4Q13 Property Markets and Total Returns The velocity of property sales held steady during the fourth quarter as

5% range. Based on observations of recent trade, RCR elected to bump the generic cap rate 15 bps to 4.75%. Using this assumption, a 5.2% terminal cap rate and our model occupancy and rent forecasts produced an 8.0% expected 5-year unlevered annual return, ranked 19thamong the RED 46. Low model standard error boosted Seattle’s RAI to R46 #12.

through 2018.

RED CAPITAL GROUP For more information about RED’s research capabilities contact: Daniel J. Hogan, Director of Research djhogan@redcapitalgroup.com 614.857.1416

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RENTAL HOUSING JOURNAL ON-SITE

Seattle 4Q13..continued from page 4

MARKET OVERVIEW 4Q13 | SEATTLE, WASHINGTON

Seattle Effective Rent Trends Sources: Reis, Inc., Axiometrics, RCR Forecast

10%

7.1%

8% YoY Rent Trend

Weaker economic and occupancy forecasts resulted in a reduction in the compound annual growth rate of rents to 4.3% in 4Q from 5.2% in 3Q13.

4.8%

4.0%

4.6%

3.9%

4.2%

2% 0% -2% -4%

RED 46 AVERAGE

SEATTLE (REIS/RCR)

SEATTLE AXIOMETRICS SAME-STORE

-6% 4Q09

4Q10

4Q11

4Q12

4Q13

4Q14f

4Q15f

4Q16f

4Q17f

4Q18f

Seattle Home Price Trends

Y-o-Y % Change

Sources: S&P Case-Shiller and FHFA Home Price Indices and RCR Forecasts

15.0% 12.5% 10.0% 7.5% 5.0% 2.5% 0.0% -2.5% -5.0% -7.5%

12.6%

Flat price trends in 4Q13 contributed to weaker home price forecasts using both the FHFA and Case-Shiller Home Price Indices.

10.0%

U.S.A.

2011

2012

2013

2014f

SEATTLE FHFA

2015f

SEATTLE CSI

2016f

2017f

2018f

Seattle Payroll Employment Trends Source: BLS, Institute for Economic Competitiveness at UCF & RCR

3.5%

2.7%

Y-o-Y % Change

3.0% 2.5% 2.0%

2.2%

2.0%

1.8%

U.S.A.

SEATTLE

1.7%

1.4%

1.5% 1.0% 0.5% 0.0% 2011

2012

2013

2014f

2015f

2016f

2017f

2018f

Average Occupancy Rate

The information contained in this report was prepared for general information purposes only and is not intended as legal, tax, accounting or financial advice, or recommendations to buyOVERVIEW or sell currencies or securities or to engage WASHINGTON in any specific transactions. Information has been MARKET 4Q13 | SEATTLE, gathered from third party sources and has not been independently verified or accepted by RED CAPITAL GROUP. RED makes no representations or warranties as to the accuracy or completeness of the information, assumptions, analyses or conclusions presented in the report. RED cannot be held responsible for any errors or misrepresentations contained in the report or in the information gathered from third party sources. Under no circumstances should any information contained herein be used or considered as an offer or a solicitation of an offer to participate in any particular transaction or strategy. Any reliance upon this information is solely and exclusively at your own risk. Please consult your own counsel, accountant or other advisor regarding your specific situation. views expressed herein are subject to change withSeattle Occupancy RateAny Trends out notice due to market conditions and other factors. Source: Reis History, RCR Forecasts

98%

RED 46 AVERAGE SEA TTL E (REIS/ RC R)

96%

95.4%

RED CAPITAL Research | April95.3% 2014

94%

95.4%

95.6%

95.1%

The supply outlook now appears to be moderately heavier than previously understood. Consequently, the occupancy outlook is now

92%

moderately weaker than in the third quarter..

90% 4Q09

4Q10

4Q11

4Q12

4Q13

4Q14f

4Q15f

4Q16f

4Q17f

4Q18f

Units (T12 Months)

Seattle Absorption and Supply Trends Source: Reis History, RCR Forecasts 7,185

7,500 6,750 6,000 5,250 4,500 3,750 3,000 2,250 1,500 750 0

ABSORPTIONS

COMPLETIONS

4,494

4Q09

4Q10

4Q11

4Q12

4Q13

4Q14f

3,005

2,497

2,192

4Q15f

4Q16f

4Q17f

2,682

4Q18f

Seattle Cap Rate Trends Source: eFannie.com, RCR Calculations

Average Cap Rate

6.5% SUBMARKET TRENDS (REIS) 6.0%

5.7%

5.4% 5.5%Submarket 5.3%

5.2% 4Q12

5.0%

Auburn / Enumclaw 4.5% Beacon Hill / Rainier Bellevue 4.0%/ Issaquah Bothell 1Q11 2Q11 3Q11 Des Moines / West Kent Downtown / Capitol Hill NOTABLE Edmonds TRANSACTIONS / Lynnwood Everett / Mukilteo NOTABLE TRANSACTIONS Federal Way Property Kent Name (Submarket)

PA CI F I C R EGI ON

$832 $845 $998 $1,009 $1,281 $1,364 $1,071 4Q11 1Q12 $1,115 2Q12 $856 $893 $1,433 $1,605 $917 $953 $907 $966 $893 Property Class/ $920 $892 Type (Constr.) $913 $1,250 A / MR $1,329 (2013)

Kirkland / Juanita / Capitol Hill) 206 Bell (Downtown North Seattle $1,071B+/ LR (92/08) $1,198 Catalina Community (Bellevue) Redmond $1,225B+/ MR$1,274 Muriel’s Landing (North Seattle) (2012) Renton Apartments (West Seattle) $949 C+/ GLR (1987) $988 Westhaven Waterford the Lakes (West Kent) $778 C+/GLR (1989) Tukwila at / Sea-Tac $804 West Seattle / Burien Metro

SEA TTLE

Effective Rent 5.2% 5.2% 5.2% 4Q13 Change

1.5% 4.5% 1.1% 6.5% 3Q12 4.2% 4Q12 4.3% 12.0% 3.9% 6.5% Approx.3.0% Date of Transaction 2.3% 6.3% 3-Nov-2013 11.9% 28-Feb-2014 4.0% 27-Mar-2014

4.1% 28-Mar-2014 1-Apr-2014 3.3%

5.2% 4Q12

Physical Vacancy 5.0% 5.2% 4Q13

4.6%3.7%

7.9% 4.5% 1Q133.5%2Q13 3.0% 5.1% 3.2% 2.3% 4.0% Total Price (in 3.0% millions) 2.6% $39.1 (Alloctd) 3.3% $16.4 4.5% $21.6 (Alloctd.) 3.3% $27.0 $48.1 (Alloctd.) 2.2%

2.7% 5.9% 5.4% 3.4% 4Q13 3Q13 2.4% 7.6% 3.9% 4.2% 3.0% Price per unit 2.4%

Change

-100 bps 4.5%

-200 bps 90 bps -10 bps 1Q14 -60 bps 250 bps 70 bps 190 bps -100 bps Estimated Cap Rate -60 bps

4.5% $320,820 5.6% $170,547 5.3% $216,000

190 bpsp.f. 4.4% 2307.5% bps 805.4% bps

2.8% $142,105 $139,859 1.8%

-404.5% bps

-505.4% bps

$904

$949

5.0%

4.5%

4.4%

-10 bps

$1,063

$1,139

7.1%

4.2%

4.6%

40 bps

10.0%

6.5%

3.0%

-0.5%

-4.0%

14%

10%

-2%

RED CAPITAL Research | April 2014

RED CAPITAL GROUP For more information about RED’s research capabilities contact: Daniel J. Hogan, Director of Research djhogan@redcapitalgroup.com Rental614.857.1416 Housing Journal On-Site • May 2014

James P. Hensley, Senior Managing Director Head of Mortgage Origination jphensley@redcapitalgroup.com 770.753.6472

RENTAL HOUSING JOURNAL ON-SITE

Rental Housing Journal On-Site • May 2014

RENTAL HOUSING JOURNAL ON-SITE

Dear Maintenance Men: By Jerry L'Ecuyer & Frank Alvarez

Dear Maintenance Men: I am starting my planning for a major kitchen cabinet remodeling project in my rental units. However, I am having a difficult time making material and design decisions. What recommendations can you give? Allen. Dear Allen, When doing a kitchen or bath material selection, cohesive and functional design is important. Kitchen and bath rehabs are some of the

most expensive work you can do in an apartment unit and proper planning is a must. In order to appeal to a larger segment of the population, try to keep the interior color scheme to neutral earth tones. Cabinetry quality varies greatly. Don’t let the cabinet fronts fool you. Manufactures designed their cabinets to look good at first glance. Keep in mind, being in a rental environment, the cabinets also need to hold up to abuse. Look at the actual construction of the cabinet box or frame. There is no need to use custom cabinets to fit your existing layout. The use of prefabricated modular

cabinetry can greatly reduce the time and cost to have a finished kitchen or bathroom. Using real wood cabinet fronts with 3/8” plywood sides is essential for durability. The drawer fronts and sides should be connected with a dovetail or other positive lock construction. Drawers that are held together by nails will not hold up to tenant abuse, nor will particle board constructed cabinets. On a side note; if you are gutting the kitchen or bathroom, use this time to relocate and add more electrical outlets and under cabinet lighting.

Dear Maintenance Men: I am looking into alternative methods to cleaning my apartment carpets. I am aware of both dry chemical carpet cleaning and steam cleaning. What is the difference and which do you recommend? Martin Dear Martin: The two primary methods of carpet cleaning are dry cleaning and hot water extraction or steam cleaning. First, let’s dismiss a couple of misconceptions; dry cleaning is not Continued on page 12

Resident Survey ...continued from front page member to make it as simple as possible for tenants to respond. • Provide an incentive to respond if possible. While you’ll want to keep some survey responses confidential, a survey on clubhouse improvements or amenities does not have to be. • Eliminate ‘yes/no’ answers on the survey. If your tenant says ‘yes’ they would recommend the property, or ‘no’ they wouldn’t

Rental Housing Journal On-Site • May 2014

isn’t nearly as important as knowing why or why not. • Choose a few areas you wish to include on the survey and stick to those. For instance, it you’re thinking about upgrading the clubhouse, ask what tenants like about the existing clubhouse – then list some potential new features you are considering and measure the responses. • Same thing goes with staff. If

you’re concerned about staff response to tenant complaints or interaction with tenants, ask tenants about it on the survey. Questions about the level of courtesy tenants feel they receive or if their concerns are always handled promptly can help to point out problem areas that you may not be aware of. • Perhaps the most important thing to remember is that it’s pointless

to send out a survey just for the sake of sending out a survey. Study the tenant responses, look for patterns, and start immediately to address those concerns. PropertyManager.com a Service of AppFolio

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Apex Cherry Creek 203 Units 252 Units Tacoma, WA Tacoma, WA Forest Meadows Apex Cherry Creek Sold: April 2014 Forest Meadows Cherry Creek 107 U nits 252 U nits Sold: April 2014 203 Units 107 Units A 252 U nits Price: $ 26,500,000 Oak H arbor, W A Tacoma, W A Tacoma, WA FOR SALE PENDING SOLD Oak Harbor, WA Price: $ 18,225,000 Tacoma, WA 14 Sold: April 2014 Sold: November 2N013 Sold: April 2014 Sold: ovember 20 Sold: A pril 2 014 000 Price: Emerald P ointe L an Village at Seeley Lake Stoney Creek Emerson Sold: $21,500,000 Price: $2,275,000 Apex Cherry Creek ForestPrice: Meadows $The 26,500,000 $4,895,000 Price: $18,225,000 Winthrop Lakewood – 522 units Lakewood –Tacoma, 231 units Tacoma – Oak 41 units Price: $ 18,225,000 203 Units Tacoma,WA 2252 Units WA 107 Units Harbor, WAPrice: $4,895,000 Sold: April 2014 Apex The W inthrop 5.5 A of Land F Forest Mcres eadows Sold: April 2014 Sold: November 2013 Cherry C reek Cherry C reek The W inthrop 194 U nits s Apex Price: $26,500,000 Price: $18,225,000 Price: $4,895,000 203 Units 107 Units 252 U nits Forest Me Cherry Creek 252 Units 194 U nits Hanna H eights Puyallup, W A WA U nits 03 Units hts Tacoma, WA Tacoma, WA Tacoma, WA 252 U194 Oak Harbor, WA 107 UO nits Tacoma, W A 014 Tacoma, WA Units In E scrow oma, W35 A Sold: A pril 2 014 Sold: N ovember 2 013 Sold: A pril 2 014 Tacoma, W A In Escrow Oak HSold arb Sold: Tacoma, W A April 2014 0,000 $26,500,000 A pril 2Price: 014 Price: $4,895,000 In E scrow Tacoma, W A Price: $18,225,000 Price: $ 2,100,000 Pr Price: $ 18,225,000 Sold: Novem Sold: A pril 2 014 In E scrow A Unpriced O ffering $26,500,000 Unpriced O ffering In Escrow Price: $4,8 Price: $ 18,225,000 Unpriced O ffering SOLD PENDING SOLD Unpriced O ffering fering

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Chelsea HannaHeights Heights Sold: $18,800,000

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Chehalis Sold: $2,012,000 EmeraldAvenue Pointe Land

Chehalis units 5.5 Acres–of60 Land Puyallup, Emerald WA Pointe L Robert Di Pietrae & Jim Jensen In Escrow 5.5 Acres of La Price: $2,100,000

Emerald Pointe Land The Winthrop 194 Units 5.5 Acres of LPuyallup, and WA 194 U nits Tacoma, WA 35 Units Puyallup, WA In Escrow Tacoma, W A The WIn inthrop In Escrow Tacoma, WA Escrow Price: $2,100,0 In Escrow Unpriced Offering In Escrow 194 U nits Hanna H eights Price: $ 2,100,000 Unpriced Offering Unpriced Offering ointe Land Emerald P Tacoma, WA 35 Units The Winthrop g E 5.5 Acres of Land The W inthrop 194 U nits In Escrow SOLD SOLD FOR SALE W A Tacoma, Puyallup, WA 194 Units Hanna Heights Tacoma, WA Emerald P Bella Vista GardensSold: $8,200,000 Lauriston / West Land In O Escrow Sold: $3,480,000 Bayview Sold: $1,300,000 Unpriced ffering In Enits scrow Bremerton SilverThe Ridge Tanglewilde W inthrop In E scrow Tacoma, W A 35 U Kensington Bremerton 24 units 183 Units Bremerton, WA 44 Units Tacoma, WA 8.4 Acres of–Land Olympia, WA Price: $2,100,000 5.5 Acre Tacoma – 25 / 38 units Jim Jensen Available W A Offering Available Available Unpriced Jim OJensen ffering 194 U nits eights Unpriced In E scrow Tacoma, Unpriced Offering Unpriced Offering Unpriced Offering Puyal ng In Escrow Tanglewilde L and Unpriced O ffering Tacoma, W A Silver Ridge In E Silver R idge In Escrow WA Unpriced Offering 8.4 Acres We would like o f Land

Heights Hanna

Silver Ridge 44 U nits WeWe would like Price: $ Bremerton G ardens would like Unpriced O ffering w dens Jim Jensen, CCIM, Senior Vice President U nits to thankOlympia, our44 clients WA Lan Tanglewilde 44 U nits to thank our clients Tacoma, W A to thank our clients Jim Jensen, CCIM, Senior Vice President Silver R idge 183 Units Jim CCIM, Senior Vice President 4041Jensen, Ruston Way, Ste. 103 | Tacoma, WA 98402 d emerton Offering for representation G ardens Tacoma, WA 8.4 Acres of Lan 253-509-7157 | jjensen@hpapts.com 4041 Ruston Way, Ste. 103 |Way, Tacoma, WA 98402 WA 98402 4041 Ruston Ste. 103 | Tacoma, Available 44 U nits for representation for representation Tacoma, W A Available | jjensen@hpapts.com 253-509-7157 jjensen@hpapts.com 183 Bremerton, Units |253-509-7157 WSenior A Tanglewilde LOlympia, and on these multi-family WA Silver Kenny Dudunakis, PartnerRidge Tacoma, WA WA Available on these multi-family Unpriced O ffering We would like Bremerton, W A University on these multi-family Available 8.4 A cres o f L and Kenny Dudunakis, Senior 600 Street, Ste. 1625Partner | Seattle, WA 98101 Available O ffering Kenny Unpriced Dudunakis, Senior Partner transactions. Available 44 U nits Available 206-521-7216 | kdudunakis@hpapts.com 600 University Street, Ste. 1625 | Seattle, WA 98101 Available Unpriced Offerin transactions. Unpriced Offering 600 University Street, Ste. 1625 | Seattle,Tacoma, WA 98101 W A Olympia, WA Offering to thank our clients transactions. 206-521-7216 | kdudunakis@hpapts.com Jim Jensen, CCIM, Senior Vice President Unpriced Unpriced O ffering 206-521-7216 | kdudunakis@hpapts.com Unpriced Offering Offering Available 4041 Ruston Way, Ste. 103 | Tacoma, WA 98402 ring Unpriced Available

253-509-7157 | jjensen@hpapts.com

Unpriced Offering Kenny Dudunakis, SeniorSilver Partner Ridge UWA nits 600 University Street, Ste. 1625 | 44 Seattle, 98101

for representation Unpriced Offering Tanglewilde Land on these multi-family 8.4 Acres of Land transactions.

Rental Housing Journal On-Site • May 2014

RENTAL HOUSING JOURNAL ON-SITE

Why to Go Green? By Pam McKenna Let’s face it; people have started to roll their eyes at the term “going green”. We see it in politics, on the news, in fashion, through construction, and in technology. The term has been co-opted by ad agencies to sell products and we receive a constant stream of messages; reduce your carbon footprint, eat organic, turn down the thermostat, take colder showers, ride your bike, recycle and reuse…. it can be overwhelming! Yet, you shouldn’t underestimate the impact you can have by making a few changes. Everything we do has an impact on our environment, how you shop, how you eat, how you travel and how you operate your business. A record number of property management companies are focusing on going green, which means avoiding waste and improving the natural environment. So how can you have an impact at your community through the way you manage? Start by reviewing your building’s energy efficiency. An energy audit can be performed by a trained professional and in some areas can be completed for no out of pocket costs to the owner. The audit should include weatherization, added insulation, window replacement, heating and cooling upgrades and common area lighting. Look for local programs like the Energy Trust of Oregon that create a higher rate of return for your ownership not only through reducing utility costs but through rebate programs. Go paperless in the office. This will reduce your operating costs and increase your business productivity. Electronic signatures are legal today allowing you to create a seamless leasing process from start to finish. Software today will allow you to rent apartments online through the website, complete your lease once approved, submit work orders online, communicate with your residents directly and creates a more efficient way to conduct business with less data entry and wasted paper. Educate and encourage your residents to be Eco-Friendly. Did you

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know you can actually reduce your carbon footprint based on where and how you live? Maintaining an environmentally friendly building for your residents is an added value and is a very strong selling point in the Northwest. Set up a community garden with fresh vegetables. Not enough space for this at your community? Plant an herb garden in pots for residents to use. Help your residents find local farmers markets for fresh locally grown produce. Encourage residents to shop and eat local, within walking distance if that is an option. Create green spaces around your building with healthy trees and plant materials that improve the air quality. Post building energy usage to validate the impact the residents have by monitoring their usage. Offer convenient composting and effective recycling options. Advertise your public transportation options

and provide a Tri-met Transit Tracker digital display in your lobby. Post Google Bike Maps to encourage use of nearby paths and trails. For move in gifts, provide refillable bottles with green cleaning products and reusable grocery bags. Review your maintenance practices. Walk with your landscaper to develop ways to reduce water usage such as smart irrigation based on evapotranspiration controllers that determine irrigation efficiency. Choose products that are sustainable and environmentally-friendly. Install motion sensors in maintenance closets and shops. Check that faucets are working correctly with low flow aerators and showerheads. Install digital thermostats for more precise controls. Save cardboard boxes from move-ins for new rentals and upcoming move outs to reuse. Switch to electric golf carts instead of gas

powered. Start using low VOC paint and participate in the appropriate paint recycling programs. Use the Ipad or smart phones for maintenance requests. Only order online and reduce the number of orders placed to reduce delivery truck use. Learning how to manage resources more efficiently can improve your bottom line. It creates a positive environmental impact for your residents and the surrounding community. Going green is not just a fad or a trend – it is a viable option for those looking to respect the environment and improve things for future generations. I challenge you to be the advocate for your community, to improve the bottom line for your owners and reduce the impact your business has on the environment.

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ualifying prospective renters can seem especially challenging when you must establish their eligibility to rent based upon income. While it is necessary to determine if callers and visitors can qualify to rent at your community, coming right out and asking someone for their annual income can be perceived as an invasion of privacy. (Would you like a total stranger to ask: “How much money do YOU make?”) Recently I was asked the following question on this subject: Q: We are a tax credit property with certain income restrictions, but not everyone who calls or stops by is aware of this. I try to find out about monthly or annual income right away because I don’t want to waste their time or mine. However, I am getting the impression that people are embarrassed or put off by my line of questioning. What’s the best way of figuring out if people are incomequalified without offending them? A: Whether your community has income restrictions or not, every community has a set standard or policy for qualifying prospec-

tive renters based on their income. Whether someone must make twice the monthly rental rate or make no more than a specific amount annually, everyone who applies to rent must qualify “financially” in some way. As such, there is no need to treat anyone differently or label someone as “unqualified.” It’s all a matter of using effective communication so that everyone will understand what the criteria is to rent at your community. Rather than saying, “I need to know how much money you make,” you could take another approach. Perhaps after you have established a rapport with the phone caller or visitor you could say something like this: “I need to let you know that our community has certain income restrictions, based upon the number of people in your family. For a household of four, your income may not exceed $32,000. Does this work for you and your family?”

to qualify for an apartment at your community. In addition, you are showing respect and consideration for their privacy, as well as preserving their dignity. Would you want to be treated any differently if you were in their situation? If you have a question or concern that you would like to see addressed next month, please ASK THE SECRET SHOPPER by making contact via e-mail. Your questions, comments and

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Rental Housing Journal On-Site • May 2014

RENTAL HOUSING JOURNAL ON-SITE

How to Turn an Unhappy Resident Into a Raving Fan! by Ernest F. Oriente, The Coach {Article #213…since 1995}

his can happen when you least expect it: An unhappy resident has just arrived in your leasing office while your telephone is ringing, budgets are due in 25 minutes and six future residents are waiting to tour your wonderful apartment community. Time to panic, right? Not a chance! Read this article and use these three easy steps to handle an unhappy resident while turning them into a raving fan. Listening carefully: The moment you realize you have an unhappy resident, take a deep breath and ask this person in a soft voice, if they would be kind enough to join you in your office. This gives you a few seconds to gather your thoughts and will give the two of you the privacy to have a reasonable conversation. Plus, you really do not want your current residents nor any future residents to hear this unhappy conversation. Next, ask your team to hold all your telephone calls, clear your entire desk and take out a blank sheet of paper to take notes. At this point, ask your unhappy resident to begin telling you exactly what the

Rental Housing Journal On-Site • May 2014

problem is. Take detailed notes while listening patiently, making certain not to interrupt him/her while they are speaking. Remember, your resident is not attacking you personally, so keep your cool during this entire conversation. Once your resident is finished explaining why they are unhappy, ask him/her this key question, “Is there anything else you would like to tell me?” This is a key question because it signals to your resident that their turn is now done and you are ready to address and answer their concerns. Tip From The Coach: Before addressing the concerns from your resident, let’s be certain we understand what’s at stake when handling resident problems and why it’s important to handle each resident as if they were liquid gold. A typical resident pays $800 per month or $9,600 per year. In addition, anticipate that each of your current residents will refer two prospects a year to your apartment community, which represents another $19,200 in new revenue and if each of these referrals send you two more referrals this year, that’s

another four more new residents at $38,400 annually. So, $9,600 + $19,200 + $38,400 = $67,200 in potential new revenue, per resident, per year. Can you clearly see why we must convert unhappy residents into raving fans? Diffusing the situation: Once your resident has shared with you exactly why they are unhappy, start your half of the conversation by thanking them for their comments. Next, say to your resident, “Let me see if I understand you completely.” Restate this person’s concerns as you slowly read from your notes. Reading your notes slowly does two things: 1) It gives your resident a chance to calm down; and 2) It shows that you were truly listening to what they had to say and are ready to take action. Now, apologize if you or your team made any mistakes and look for at least one or two points with which you can agree. By conceding a point or two right away, you show that you are not defensive about their concerns and that you really want to solve their problems, not duck blame or make excuses. Tip From The Coach: When-

ever you are interacting with a current resident or a future resident, customer service experts call this a “moment of truth”. When you are dealing with an unhappy resident, this is called the “pinnacle of performance”. SuperStars in the property management profession do not mind handling an unhappy resident because they see this as an opportunity to shine—to win this resident’s longterm loyalty. Converting an unhappy resident into a raving fan: OK, now comes the easy part. Ask your unhappy resident exactly what action steps they would like to see you take. Promise your resident that you will do everything necessary to fix or handle the concerns they have shared with you and tell them exactly when and by what time, they can expect the problems to be handled. Now, look to resolve these problems as quickly as possible--well in advance of the day and time you promised your resident. Motorola calls this, “underpromise, over-perform” and they have used these magic words to cre... continued on page 19

RENTAL HOUSING JOURNAL ON-SITE

Dear Maintenance Mencontinued from page 7 technically dry, but more of a “moisture-controlled” process and steam cleaning does not use steam, it is a process of hot water under high pressure. Carpet dry cleaning methods use chemical cleaning solutions to extract dirt. There are three methods: Dry Foam: The foam is applied to the carpet and allowed to dry, then vacuumed up along with the dirt. Dry Chemical: A cleaning solution is applied to the carpet and a machine spins a large bonnet from side to side to absorb the dirt from the carpet. Dry Compound: An absorbent mixture resembling wet sawdust is spread over the carpet. A machine brushes the mixture into the carpet to absorb the dirt. When the mixture dries, it is vacuumed out, taking the dirt with it. The dry method does not get as much of the deep dirt out, but is very effective at cleaning the visible portion of the carpet and the carpet may be ready for traffic within an hour. The wet carpet cleaning method uses hot water extraction to force a hot water based cleaning solution into the carpet under high pressure

and then sucks it back out of the carpet along with the dirt. There are two water extraction methods: Portable Extraction: The carpet is cleaned by a small machine using hot tap water and powered by the electricity source in the house. This is the typical DYI method of steam cleaning; some professionals also use this system. Truck Mounted Extraction: This uses a large cleaning machine mounted on a truck or van. The water is heated to a higher temperature and is shot into the carpet at a higher velocity than is possible in portable machines. Out of all the methods listed above, we recommend the Truck Mounted Extraction method. We believe it is the most effective way to clean, mostly because the heat kills bacteria and the extra power separates dirt. These powerful machines also pull most of the water back out of carpets, leaving them damp but not wet. The carpet may be ready for traffic within a few hours or more. One a side note: Most major carpet manufactures listed on the CarContinued on page 13

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RENTAL HOUSING JOURNAL ON-SITE

Dear Maintenance Mencontinued from page 12 pet and Rug Institute (CRI) website (A nonprofit trade association), recommend the use of hot water extraction systems to clean carpets. Dear Maintenance Men: I am running into a hot water issue with my 100-gallon gas fired water heater. The tank is about 5 or 6 years old. The tenants are complaining of not getting enough hot water. I have checked the tank and the thermostat is working, the water is hot. Everything seems fine, so why are my residents not getting the hot water they need? Jim Dear Jim: The water heater may need a bit of maintenance. The first thing to do is clean out the sediment at the bottom of the tank. This will require a shutdown of the heater for a couple of hours and some hands and knees work. Most 100-gallon gas water heaters have a clean-out port at the front of the tank. The port is either round or oval. Be sure to get a new clean-out port gasket before starting this job. Once the water is drained and the port opened, remove all the sediment from the tank. You can expect to haul out one to two buckets of calcium buildup. (Sediment removal

should be done once a year.) Removing the sediment will greatly improve the heating efficiency the water heater. Because of the age of the tank; while you have the port open, check the inlet dip tube and the anode rod inside the tank. If the anode rod is corroded, replace it by pulling it out from the top of the tank and inserting a new one. The anode rod is a sacrificial zinc rod that helps keep the tank from corroding. The second item to check is the cold-water inlet dip tube. Cold water entering the heater is routed to the bottom of the tank by the dip tube. If the tube is corroded, broken or missing, the tank will develop hot and cold areas, leading to complaints about short-term hot water. The dip tube is located inside the cold-water inlet pipe. Replacements for both the anode rod and dip tube can be found at most plumbing supply houses.

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Rental Housing Journal On-Site • May 2014

RENTAL HOUSING JOURNAL ON-SITE • Executive Director – Jim Wiard • President – Gail Duke – Vice President – Kris Buker • Secretary – Becky Sanders • Treasurer – Brett Stevens • Vice President of Suppliers Council – Barry Savage • Immediate Past President – Jay Olson

Advocacy Update

s the Washington state affiliate of the National Apartment Association, WMFHA is able to stay abreast of not just local and state legislative issues and industry trends, but also national issues of importance to our members. We continue to be in touch with our Congressmen and women in Washington D.C. to share information on issues which impact our industry. For instance, in an effort to reform America’s housing finance system and the multifamily activities of GSEs Fannie Mae and Freddie Mac, the NAA and National Multifamily Housing Council have joined to work with the Senate Banking Committee to produce a bill that will help ensure that the $1 trillion apartment industry can meet the needs of the 35 million renters who now call an apartment a home. The bipartisan Johnson-Crapo legislation transitions Fannie and Freddie away from their current conservatorship but retains many of the successful components of the multifamily programs currently operating at these Government-Sponsored Enterprises. Elements of this bill preserve a government guarantee for multifamily mortgages, maintain the current

network of multifamily lenders and servicers, retain the current privatecapital risk sharing mechanisms, establish a separate office of multifamily housing within the new Federal Mortgage Insurance Corporation (FMIC) and address the shortage of affordable housing through key provisions. In other national concerns, WMFHA encourages property management companies to be aware of a recent trend in fair housing complaints regarding the hearing-impaired. The National Fair Housing Alliance (NFHA) has filed eight housing discrimination complaints with the U.S. Department of Housing and Urban Development against major apartment complex owners for discriminating against the hearing impaired across the country Specifically, utilizing two testers who were equally qualified financially, but one was hearing impaired, NFHA conducted 304 tests of 117 apartment complexes in 25 states. Of those tested, one out of four reportedly treated hearing impaired callers differently from hearing callers in a manner that appeared to violate the Fair Housing Act. According to one news outlet, the reported issues stem from testers

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who called apartment community leasing offices using an electronic communication tool called IP Relay that relies on the use of an operator to translate the call. The complaints say that the representatives who took the calls at the properties may have hung up on callers using the service. Their treatment by the leasing agent was documented and compared. Results were then compiled in a report that concluded “one out of four companies treated deaf callers differently from hearing abled callers in a manner that appeared to violate the Fair Housing Act.” The report also offers recommendations for ways HUD, Congress and the rental housing industry can overcome rental discrimination. This investigation, and others like it, are largely funded by grants from HUD. Fair housing enforcement occurs in many ways and it is not uncommon for enforcement to be initiated by testing programs like these. Apartment owners and managers are reminded to review the law and obligations imposed on them with their employees to reduce potential liability. In an interesting case, the Ashland City Council in Oregon is considering a proposal to expand its definition of recognized protected classes under its Fair Housing ordinance to include students. This proposal is in response to claims by students that they are often denied housing opportunities based solely on their status as a student. The council voted in early April to have the Housing and Human Services Commission examine the issue. Ashland is home to Southern Oregon University (SOU), a mid-sized liberal arts college of about 7,000 students. According to some SOU undergraduates, advertisements for rental housing outright state that students need not apply. Presently, students are not a protected class under city, state or federal laws. The council directed the commission to collect input from students, property owners and managers to find an equitable solution; specifically, the council wants property owners to explain why students may be undesirable residents and what students can do to increase their application’s chance of success. One councilor expressed doubt that

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students need to be a protected class, but noted that they should have some sort of options when it comes to finding rental housing. The Houston City Council has passed an ordinance that targets potentially dangerous cases of hoarding in apartments, townhomes and condominium communities. The Texas city started with multifamily housing because of the increased risk of endangering others. The new law prohibits occupants from accumulating “objects or substances of a nature or in a quantity reasonably likely to create a hazard to the safety or health of an occupant of another dwelling unit on the same or a contiguous property.” The ordinance also clarifies circumstances under which police must obtain a warrant to enter a dwelling unit in response to a hoarding complaint, making it easier to deal with the problem. Under the ordinance, if neighbors become aware of or suspect a hoarding situation, they can call the police to check the “welfare” of the occupant. If a problem is discovered, the resident must cooperate with efforts to alleviate the problem, or be subject to daily fines of up to $500. With the number of reported hoarding cases on the rise, municipalities are attempting to mitigate for the health and safety concern of both immediate and neighboring residents. Extreme cases of hoarding have contributed to severe infestations and fires. One in three Americans rent, and 17 million of those households are building their lives in an apartment. Apartments are helping meet the housing needs of people across all income levels in every corner of the country. The home ownership rate has fallen to mid-1990’s levels. We are lucky to be in such a robust and needed industry and through affiliation with associations like WMFHA, we can all work together to improve the professionalism and business climate of the apartment industry and support and celebrate all facets of our industry. For information on joining the Washington Multi-Family Housing Association, visit www.wmfha.org and review all that we have to offer.

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Tip the Boat! ...continued from page 3 tough moments happen on a daily basis. At six out of ten, it is probably tough to get out of bed in the morning. Ongoing management of performers involves monthly (minimum) One-on-Ones, observational coaching with feedback, sit downs to try and help – all the day-to-day routines to try and lift behavior and results. When these fail to work, that’s when it’s time for the performance conversation, which has five key steps: 1. Set a clear standard and set milestones of performance for the direct report. 2. Inform the direct report where they are not meeting the standard and set milestones. 3. Give the direct report the opportunity to meet the standard and set milestones. 4. Offer assistance to meet the standard and set milestones. 5. Advise the direct report of the consequences of not meeting the standard and set milestones. Sales managers know how to do this – the issue is getting up the nerve. Sales managers need to have the conversation as soon as needed – putting it off spares no one. Sales reps who want to be with you will step it up and improve. Those who are not capable/not interested will show very quickly (weeks not months) af-

ter the performance conversation. If things still don’t improve, the sales manager can move to the final warning, consulting with HR to effectively handle this and how to go your separate ways if that is required. Kevin Higgins is CEO of training organization Fusion Learning, recognized by Selling Power as one of the top 20 sales training companies in North America and as one of Canada’s Top Small and Medium Employers for 2014. He is the author of Engage Me: Strategies From The Sales Effectiveness Source.

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Occupancy by Who’s Standard

By Jo Becker, Education/Outreach Specialist, Fair Housing Council

n our last article, we looked at the work of Tim Iglesias and the legal implications of, as well as the disparate impact of overly restrictive occupancy standards, including twopeople-per-bedroom policies. In this article, the last in the twopart series, the work of Ellen Pader, an anthropologist and Associate Di-

rector of the Housing Research Center at the University of Massachusetts Amherst we look at the historical and cultural perspectives behind our country’s occupancy policies. I recently read Ms. Pader’s Housing Occupancy Standards: Inscribing Ethnicity and Family Relations on the Land, published in the Journal of Architectural and Planning Research in the winter of 2002. Despite being more than a few years old, it is packed with – what for me – was

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stunning revelations about the deep and particularly contrived history of occupancy standards in the US. As you read along with me, I ask that you do so with an open mind. Step outside the lens of your role as a housing provider to gain greater perspective. Warning: Ms. Pader’s vocabulary is rich but dense; I hope the excerpts I have selected here are not too arduous. That said, I strongly suggest you download the entire document (available at www.FHCO. org/occupancy.htm) and read it over a cup of something yummy some long, rainy evening. I’ll start you off with the verbose preface to Pader’s paper:

THE PREMISE “Attempts to define family and the appropriate sociospatial arrangements for an idealized “normal” U.S. household formation have had profound influences on the design and size of houses, apartments, and communities throughout the twentieth century. Based on ethnographic, historical, social, political, and legal research, this paper explores the sociopolitical construction of occupancy standards… It concludes that the regulations drive from a combination of upper-class English ideals and outdated scientific knowledge, with

concomitant moralistic and assimilationist aspirations on the part of the policy makers. Today, these social ideals still implicitly underlie much of our current urban design, affecting the ethnic, racial, and economic structure of cities, and by extension, homelessness, coercive segregation, and access to services.” THE CONFLICT “The conflict at the base of this article is how we define and conceptualize housing discrimination on the basis of national origin and by extension… familial status… This inevitably leads to an exploration of how mundane daily practice and macrolevel social policies are inextricably entwined with one another. The daily practice in question here is sleeping arrangements… This directly influences where households with restricted means and more than four or five household members can live. I am retheorizing the definition of “national origin” away from its legal definition of the place of origin of one’s self or one’s ancestors – and toward an anthropological definition of what it means to be from… a particular geographic locale. This means reframing the standard question derived from the 1949 Housing Continued on page 20

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Raving Fan ...continued from page 11 ate a multi-billion dollar company. Next, take the time to either call this resident or visit them in-person, to tell them the concerns they had shared with you are now fixed and resolved. In addition, take a few minutes to write a small note apologizing again for their unhappiness and thanking them for expressing their concerns. At last, your resident should be completely satisfied that you have addressed their important concerns and you have earned their respect and goodwill. Tip From The Coach: Ready to convert your former-unhappy resident into a raving fan? Consider purchasing the book “Positively Outrageous Service”, written by T. Scott Gross. His book gives you a step-by-step plan for creating raving fans, and will give you lots of fun and great ideas for converting very unhappy residents into your best referral sources. I have read his book several times and highly recommend you read his pearls of wisdom. In fact, once you are done reading his book, you will realize that handling unhappy residents is really the best way to win new friends! Want to hear more about this important topic or ask some additional questions about raving fans? Send an E-mail to ernest@powerhour.com and The Coach will E-mail you a free Power-

Rental Housing Journal On-Site • May 2014

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Occupancy ...continued from page 18 Act which set the goal that all citizens should enjoy “a decent home and suitable living environment.” Thus, rather than asking “Do all households, regardless of national origin or familial status, have equal access to decent housing?,” I ask “Do all households, regardless of national origin or familial status, have the same opportunity to decide for themselves what they consider acceptable and preferred living arrangements, and, therefore, have equal access to decent housing?” …The basic questions are: What is the basis and justification for current standards – which are generally some variation of no more than two people per bedroom? How did this ratio become normalized and win over three people per bedroom, for instance; and why did bedrooms come into the talk of restricting occupancy anyway? Even culturally mediated definitions of what should be counted as a bedroom have found their way into codes and legislation. How did occupancy standards come to be such a bone of contention? …This is not a call to remove occupancy standards altogether and return to the severely densely populated and ill-kempt tenements of early 1900s New York City; this is a call for a reappraisal of currently accepted standards. …Debates around regulating occupancy standards place us firmly in

the blurry jurisdictional boundaries between courts and Congress. Here, I will walk in that blur as I draw on some of the social, cultural, historical, political, and legal data that make up my argument as to why most current occupancy standards should be deemed illegal… …Current occupancy standards and their rationales are historical and cultural artifacts that have been accorded the status of universal truth. …The basic strands of my argument… are: First: The general justification for current standards presume [they are] reasonable to the ordinary person. If I can demonstrate that they explicitly derive from, and refer to, upperclass, English and Anglo-American definitions of reasonable, and that definition is in fact unreasonable to many of the ethnicities in the U.S. exactly on account of where they or their ancestors are from and what it means to be from there, then surely the prevailing definitions of “ordinary” and “reasonable” categories lose their privileged positions. Second: The standards tend to be further justified under the rubric of providing for the health, safety, comfort, and convenience of the inhabitants. I argue that it is not [what] is being protected by the 2:I standard as purported. Rather it is a very spe-

cific, culturally constricted definition of moral health, safety, comfort and convenience. This is not to argue that less restrictive occupancy standards would similarly have no legitimate physical health, safety, and comfort rationale. What is crowded to some is exactly what is comfortable to others; what is comfortable to some is exactly what is lonely to others. Such differing reactions to spatial relations are largely the consequence of socialization and cultural practices, with implications beyond occupancy standards (Werner , et al., 1997). [It should be noted that it] …is not just people who cannot afford more who share bedrooms. In countries as different as Mexico and China people commonly choose to share bedrooms while leaving other bedrooms unused. In a demographic study of household density in the U.S. using 1990 census data, researchers found that Latino and Asian households often have more than two people per bedroom even when their income is the same as White and Black households of the same size, again suggesting choice is at play, not economic necessity (Myers, et.al, 1996). …Sharing household space with extended family members is a common way of living throughout much of the world, and a common way of getting through hard times, or even strange times such as first entering a

new country. I have often been told when I have interviewed people from a wide range of ethnic backgrounds, a home full of kin is not considered crowded as long as there is room on the floor. …[And], what might have been justifiable on health grounds early in the twentieth century… has become antiquated due to modern medicine and technology. …I often wonder what current policy-makers would say if they knew that their health and safety rationale was based on nineteenth century concepts about miasmas and vitiated, or impure air. This cutting edge scientific knowledge of the late nineteenth century proved, without doubt, that one’s own breath was full of deadly carbonic poisons and that some 40% of deaths in New York City were directly caused by breathing one’s own self-inflicted noxious air – you could drown in your own exhaled breath (Townsend, 1989; lanes, 1876). This led to the perceived need to ensure the right combination of ventilation for dispelling the poisons to match the number of people in an enclosed space. THE HISTORY …[W]hile the occupancy standards might be facially neutral, that is they are equally applied to everyone across the board, their effect certainly is not, and their intent often is ...continued on page 21

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Occupancy ...continued from page 20 not either. …In large part, occupancy standards derive from the tenement conditions of 19th / early 20th century New York, the Lower East Side in particular with its densely populated immigrant households. As Social Darwinism was losing clout, other ways of denigrating the humanity of the largely Jewish, Polish, Italian, and Slavic populations were taking its place. It must be remembered that each of these non-WASP ethnic groups was considered a separate race; they were what historian David Roediger (1991) calls the ‘not-yetwhite,” a concept with significant implications here. Turn of the century urban tenements were pretty miserable. No one was responsible for cleaning the streets, buildings tended to be dirty, dark, poorly maintained, and often unsanitary (DeForest and Veiller, 1903; lanes, 1876; Lubove, 1962; Veiller, 1910). …Like public and low-income housing today, there is a conflation of the now decrepit physical environment left to deteriorate by the government or private landlords with the moral character of the inhabitants. …I wonder, should it be the character of the people who leave the housing to deteriorate, not the residents who have to live in that decrepitude, that is conflated with the condition of the property?

[For h]ousing reformers – who came from the middle- and upperclass establishment – …[t]he dominant belief of the era was that bad housing conditions, including too many people per unit according to their standards of uncomfortable crowding, directly produced illness, crime, intemperance, promiscuity, and the breakdown of the family. Their goal was to bring order to what they considered to be disordered, and thereby dangerous. The reapportionment of domestic space was one step in the orderly Americanization of these not-yet-white immigrants. A 1905 survey [found] about 50% of the apartments housed three or four people per room, while 25% had five or more people (Takaki, 1993). The fairly new discipline of Public Health fought for the first building codes in New York State in 1867 through their organization, the American Public Health Association (APHA). They wanted to contain the spread of contagious disease, both within the slums and from moving uptown. Improving physical health was only one part of their mission; improving what they assumed to be a lapse in moral health was more important for justifying the push toward assimilation through restructuring domestic space, and in particular, sleeping arrangements. …[W]hat constituted overuse of sleeping rooms to the Reform-

ers (and most rooms were sleeping rooms in the tenements) was lack of physical privacy. The ability to gain privacy by having one’s own physically bounded space to sleep and think, was by now perceived as an essential necessity for healthful living. Too many people sharing, children sharing bedrooms with their parents, and of course, sharing with lodgers, almost inevitably means that there can be no provision for privacy or decency, and results in sexual precocity and in many cases promiscuity, which may, of course, in time lead to a criminal record. (Gries and Ford, 1932:xx) This clearly articulated environmental deterministic view from the 1932 reports of President Hoover’s Commission on Housing and Home Ownership is no different than the earlier views of [other] reformers. Ironically, these moralists did not consider that many people in a room was a form of surveillance which might even mitigate sexual abuse. If any sleeping arrangement is to be suspect… it should be private sleeping rooms with their closeable and lockable doors. THE STANDARD …The first occupancy standard in the U.S. was enacted in 1870 [in] San Francisco [and] required a minimum of 500 cubic feet of air space per person. However. it was disproportion-

ately enforced in Chinatown where low-paid, single, working Chinese men had no choice but to share rooms with less air space each than mandated. In 1876 California made this minimum a state-wide law. …In 1879 New York City passed its first occupancy standard. It required 600 cubic feet of air space per person. This derived in part from the scientifically “objective” belief in miasmas and vitiated air, that one’s own breath contained poisonous carbonic acids. It was believed that without a minimal amount of space ...continued on page 22 and renewable air, people could literally drown in their own breath (Townsend, 1989; lanes, 1876). By 1901 this was decreased to 400 cubic feet for each adult and 200 for each child, still with an underlying, scientific health justification. These early… laws provide an important caution: Where does the line between caring for the plight of others and discrimination lie? It is not always a clearly defined or overt line. When does the desire to improve material conditions of the disenfranchised run a collision course with ethnocentrically derived moral platitudes? …The reformers of the Progressive movement were largely responsible for getting occupancy standards enacted in order to improve the slum

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Occupancy ...continued from page 21 conditions and did at least replace the prevailing genetic interpretation of why certain groups predominated in many northern urban slums, with an environmental determinist interpretation, which is a step up. …Progressive concerns with the design and use of low-income immigrant housing were not simply altruistic. …Overcrowded and unsanitary apartments in urban neighborhoods also made ‘productive’ living very difficult (1988:82). …housing was seen as an important political tool, to enhance both assimilation and worker productivity. The emphasis on physically bounded privacy as a moral and even political good was part of the turn of the last century public discourse. Thus, in a 1905 speech, United States Commissioner of Labor, Charles P. Neill pronounced that: [H]ome, above all things, means privacy. It means the possibility of keeping your family off from other families. There must be a separate house, and as far as possible separate rooms, so that at an early period of life the idea of rights to property, the right to things, to privacy may be instilled. (Wright, 1981:126) …In the 1939 publication, Principles for Healthful Housing, the [American Public Health Association] wrote: ‘A room of one’s own’ is the ideal

in this respect; but we can at least insist on a room shared with not more than one other person as an essential minimum. Such a room should be occupied only by persons of the same sex except for married couples and young children. The age at which separation of sexes should occur is fixed by law in England at 10 years, but some American authorities would place the figure 2 years lower. Sleeping-rooms of children above the age of 2 years, according to psychiatric opinion, should be separate from those of parents. (p. 16) …The British Act was explicitly a basis for the American Public Health Association’s (APHA) reports entitled Standards for Healthful Housing. [These] then became the basis for the standards adopted by HUD and non-governmental standards creating agencies since the 1950s. …In 1950 the APHA published: “privacy in the home should be one of the fundamental objectives of design… (p. 15-16).” They also published a confession of sorts: The minimum occupancy standards necessary to attain the goal of “healthful housing ...closely approximates actual practice in the high- income groups” (1950: xx, italics added), making explicit that one sector of society, the high-income primarily white northern European Protestant, had become the marker for all.

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…the home design guidelines found in HUD’s handbooks and most housing codes reiterate and help maintain certain culturally acceptable notions of proper personal and social behavior. The same culturally imbued structural principles about privacy, privatization and proper moral behavior underlying the 2:1 codes guide the standard definition of a bedroom: “a bedroom cannot be a passthrough to another room” (HUD, 1985:6-5). …Conflated with this are questions of whether “a room used for sleeping” has to be a room labeled as a bedroom, and whether any non-passthrough which is not for instance, a bathroom or kitchen, can be counted as a bedroom for the purposes of establishing maximum occupancy. The ambiguity here is at the basis of much legal and political action. [An unpublished 1940 paper for the APHA explicitly states], “The health justification is to prevent interruption of sleep, but the moral argument is more commonly used” (APHA Archives). …These statements explicitly and intentionally privilege one culturally specific lifeway, discriminating in the creation of the standards against people with different preferred modes of living, and against Iow-income families with children.

…These seemingly neutral and healthy sociospatial relations found their way into the child raising dictates of a person who highly influenced how many of us were raised, Dr. Spock the baby doctor. Starting in the late 1940s, and continuing into later editions of Baby and Child Care, he wrote that children should ideally have a room of their own “where they can keep their own possessions under control and have privacy when they want it.” (1976:201) In the 1980s, another great arbiter of American culture, Dear Abby, wrote in What Every Teen Should Know: Youngsters “need a room to retreat to” in order to help them grow as individuals… (Van Buren: n.d.). …[The moral argument] is based on the U.S. emphasis on individualism objectified in the continual reiteration of the necessity of physical privacy within the home to attain a particular concept of physical, psychological, and social health. As I have suggested, in societies which value and practice interdependency, in which individualism and physical privacy are a punishment, a form of alienation, not a goal to be desired, one commonly finds house plans and social and spatial relations which ...continued on page 23

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Occupancy ...continued from page 22 correlate with and reinforce the concept of interdependency rather than independency (Pader, 1993). RECENT DEVELOPMENTS Various municipalities and policymakers are trying to change the local occupancy codes to limit the number of people who may live in a unit… Not surprisingly, it is whoever are the current unwanted populations, the not-yet-white populations, that these codes are being used against. For instance, in 1992, Brisefio v. the City of Santa Ana, the lawyer for Mr. Brisefio claimed the city had racist intentions and was trying to rid the city of the growing number of people of Mexican origin (Brisefio v. City of Santa Ana, CA, 6Cal. App. 4th 1378 1992). The judge feared that the impact of the proposed ordinance would be greater homelessness and could find no compelling reason to permit the city to have a more restrictive policy than the state. Other municipalities have passed restrictive occupancy policies and then lost them in court. IN SUMMARY …My point then is not to suggest that people from some ethnic groups prefer to be packed like herrings in a barrel. Rather, it is to set a stage for less ethnocentric, more culturally inclusive occupancy standards. Of course most people would like to be in a position to choose whatever size home they want, and then choose for themselves how to apportion the space – maybe by giving each person their own physically bound private space, or maybe by sharing all spaces with immediate and extended family, or maybe some other configuration altogether. In conclusion, I argue that what we are talking about here is not physical and psychological health and safety as the codes are supposed to protect, but moral health and safety from the perspective of early 20th century upper-class and mostly northern European reformers, transposed and naturalized into the late 20th / early 21st century policies, and priorities about individualism, privacy, personal property, the body, responsibility, and social justice among other beliefs. Then, they were explicit about their rationale. Now it is just accepted as natural behavior. And it is the people brought up to

believe in the lessons of individualism through privately possessing one’s own space, as psychologically and physically essential for health, who write the policies, and who decide what is, indeed, reasonable to the ordinary person – and who decide what that ordinary person looks like. In actual number, I would guess that the ordinary person they are talking about is in the minority, leaving out most ethnic groups, of all colors. …What is needed is more discussion about reframing the definition of national origin to include what it means to be from a particular geographic locale within the context of understanding the intimate connections between social and spatial relations in the home, at the levels of the individual, the household, and of the larger society of which they are a part. And then to accept the preference for sharing as equally legitimate as the preference for privacy. To do less than this is being complicit in discriminatory housing policies. …Sometimes I wonder what current debates would look like if the dominant mindset was [different]. Would more people be housed? Would extended families and large families have greater opportunity to select where they want to live? Would apartment developers move from the current trend of emphasizing two-bedroom units (which under current regulations tend to have the effect of eliminating many families with children) to larger ones to allow more nuclear and extended households to find housing of choice?” I told you Ms. Pader was loquacious! That said, her paper illuminates much little-known history and purports some challenging, if not compelling, arguments. A reminder that more information, including additional FHCO articles on this topic, is available at www.FHCO.org/occupancy.htm. Of course, you can find information about familial status and race, color, national origin and other protected classes at the Council’s site as well. This article brought to you by the Fair Housing Council; a nonprofit serving the state of Oregon and SW Washington. All rights reserved © 2014. Write jbecker@FHCO.org to reprint articles or inquire about ongoing content for your own publication.

Learn more about fair housing and / or sign up for our free, periodic newsletter at www.FHCO.org. Qs about this article? ‘Interested in articles for your company or trade association? Contact Jo Becker at jbecker@FHCO.org or 800/424-3247 Ext. 150 Want to schedule an in-office fair housing training program or speaker for corporate or association functions? Visit www.FHCO. org/pdfs/classlist.pdf. The federal Fair Housing Act (FHA) of 1968 coupled with the Fair Housing Amendments Act (FHAA) of 1988 protected the following classes in a housing: race, color, national origin, religion, sex, familial status (children), and disability. Oregon law also protects marital status, source of income, sexual orientation, and domestic violence survivors. Washington law covers martial status, sexual orientation, and domestic violence survivors, and honorably discharged veterans / military status. Additional protected classes have been added in particular geographic areas; visit FHCO.org/mission.htm and read the section entitled “View Local Protected Classes” for more information. 2 At the Fair Housing Council (FHCO), we have long recommended a policy of two individuals per bedroom plus one more individual for the unit. For example, a housing provider might limit a two bedroomhome to five individuals. This “two

plus one” formula can help insulate the housing provider from fair housing violations based on occupancy in most situations. That being said, additional factors should always be considered in developing individual policies. 3 The Keating Memo is an internal document from a HUD staff, Mr. Keating, on the issue of occupancy policies that is oft referred to and much debated. You can view the Keating Memo and subsequent guidance from HUD at www.FHCO. org/occupancy.htm.

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2. This usually works off the initial purchase costs and gives you some time to improve the operation of the property and allow it to appreciate in value.. With time and physical and managerial upgrades you can improve the prospects for consistent returns.

After the Basics Once you have completed the basics and the investment is making a significant return and has appreciated in value, you have a few choices to make about the future of that specific investment

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Future Results ...continued from page 24

there are benefits to paying it off.)

• Refinance the property and use the proceeds to reinvest in a larger property • Sell the property through use of a 1031 exchange and trade in to another property • Sell the property and pay taxes and depreciation recapture. • Gift shares of your property to loved ones or charity ( if you have an LLC) Real estate investments, especially in the short term, don’t always make money. A number of issues can present themselves throughout the process, but its important to remember not to panic and sell the property too soon. Give your self a change to renovate the property improve the occupancy rate and deal with the vagaries of the local economy. There could be external factors, such as the area’s real estate market, local employment and health of the area’s economy that are creating stumbling blocks for you. For example many years ago we managed an apartment property that was located close to a freeway and jobs. That property was like a slot machine, we never had a vacancy. Not three miles away we had another property that ran a continuous 10 % vacancy rate, and had a hard time attracting quality tenants. You would think that three miles would

not make a difference, but it did. (The same issues apply to commercial properties. ) Bottom line not all properties make money. If you make a mistake and buy the wrong property and you are not making money, try to see if you can fix it in less than twelve months. If that is not possible take your lumps and get out. If you can sell it for more that you purchased it for, you may want to wait until you have owned it to evade short term capital gains taxes. (These are higher than long term capital gains taxes, which apply after the first year) (Please confirm your particular situation with your CPA,>. Consult with real estate professionals and your CPA to understand what options you may have for selling the property or holding out for improved cash flow. The future Imagine you are now at the end of your investment career. Your assets are all in a trust and you want to have your kids enjoy the fruits of your investments. You have many choices. First you need to establish if your heirs want the real estate investments, or just want the cash. If they want the real estate investments then you have to strategize five things: • Which one of your heirs will take over from you? • What is the operating/owner-

ship structure of your entity in the event there are multiple heirs? o Will all of the future heirs have a vote in decision making or will there be a leader/manager o You may want to consider assigning a family leader ( though this may cause friction based on conflicting family needs) • Do you need money from your investments till you pass? • Do you want to give to charities? • What are the tax implications? Once you have considered these questions and assigned future leadership, what is the best course for your investment to take? Here are a few strategies we have used in the past that have seen success. • Shift from residential properties to single tenant commercial properties for ease of management. • You could invest in an UpReit and have the kids inherit the UpReit shares • You could give to a charitable organization and create a generation skipping trust, so the grandkids get the money (to avoid some state taxes) • Sell your assets and pay the taxes (not your best choice, especially if you sold assets and traded up over and over again using 1031 exchanges.) OR…

Leave well enough alone and have them figure it out after you die. ( At over $10,500,000 in estate value, combined federal estate taxes kick in, in many states estate taxes start at over $1,000,000 so the tax hit is not huge if your estate tax is under $10,500,000.( Every case is different please check with your CPA and estate Attorney). So this is not a bad idea. Summary As you plan ahead you need to always plan on your final exit from your real estate investments. As your need for cash and your desire to manage the details of your real estate empire diminishes (it may or may not), you need to simplify your decision making. The more assets you have the more confusing the variables. At that stage you may only want a pain free check every month. Worrying about tenant retention and the health of your investments should eventually become a job for the next generation. You want to reach this point but it takes years of skilled planning to position yourself, your family and your investments for future success. So, Don’t wait till the last minute to reposition your portfolio, include these decisions in your long range planning and your life will be much easier and less stressful.

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The Simple Solution to Handling Packages By Barry Hume, Package Concierge President

any of today’s consumers enjoy the convenience of purchasing everything from groceries to gadgets online rather than traveling to brick-andmortar stores. While the convenience is a great benefit, online shopping is driving the need for creative solutions to manage package volume in apartment communities – and that has made digital package lockers one of the hottest new amenities in 2014. Why is the pressure growing for these kinds of solutions? The answer is simple: Package volume is rising rapidly. A typical 250-unit apartment community receives more than 20,000 packages each year. That’s more than 50 packages per day. That kind of volume requires concierge or leasing staff to spend more than 20 hours per week managing packages – time that could be much better spent catering to other resident services. And there is no end is sight. Online sales have grown exponentially over the last decade, and eMarketer predicts ecommerce in North America will grow from $482.6 billion in 2014 to $660.4 billion by 2017.

With the growth in online sales, package management is becoming an increasingly significant part of the property management business. Owners are recognizing that on-site professionals who manage packages are spending substantial amounts of time to individually log, store and

send alerts for every package they accept. And that’s only the front end of the job. On the back end, they have to help residents when they come to pick up their packages throughout the day. For residents in apartment communities, the growth in ecommerce

has made package management a critical and valuable amenity. In fact, a 2013 National Multifamily Housing Council (NMHC) resident survey ranked access to packages as the second most important amenity, right after fitness centers. The reasons for the high importance ranking are clear: consumers don’t want to miss deliveries because they’re not home; they want to know their packages are safe and secure; and they want to have access to their packages at convenient times. And while the greater volume of packages is a boon for delivery carriers, it also raises considerable operational challenges. If no one is available to accept a package delivery, it means the delivery professional needs to return and try again. Efficiency is an important factor in carrier profitability, and re-delivery of packages takes away from route optimization. Plus, more driving means higher gas and emissions from delivery trucks at a time when carriers are trying to meet higher sustainability goals. Everyone involved in the process – residents, delivery carriers, owners and property managers – are looking for solutions to keep up with the ris-

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Rental Housing Journal On-Site • May 2014

RENTAL HOUSING JOURNAL ON-SITE

ing popularity of online shopping. So, digital package lockers have become one of the hottest new amenities in 2014 for good reason. Owners offer them as a cutting edge amenity for automating package handling – an amenity that residents are often willing to pay for. Property managers advocate for them so that they can focus on their jobs, rather than on logging, storing and retrieving packages. Carriers love them because they only need to scan a barcode and deposit their packages into

a locker; it doesn’t matter if no one is available to accept a delivery. And residents want them so they can rest easy that their packages will be safe and secure in a locker they can access at their convenience, 24/7. Ultimately, digital lockers are also a great business investment. Property managers watch prospective residents walk away from apartments if the community has no package management solution. That loss can cost a property tens of thousands of dollars a year. Not only does a pack-

age management system keep potential residents from walking away, but it also provides the potential to reduce costs and increase revenue. Depending on how a property manages to cut costs or increase fees after installing a digital locker system, a return can be achieved in as little as 12 months. And if that’s true today, just think about the payback on this amenity as the number of package deliveries keeps growing in the years to come. Barry Hume is the co-founder and

president of Package Concierge, developer of a digital locker solution for package management at apartment and student housing communities. Previously, Barry was the managing director of Primal Manufacturing and president and CEO of MATS, Inc. He holds a bachelor’s degree from Harvard University and a Master of Business Administration from The Tuck School at Dartmouth.

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