Rental Housing Journal Valley December 2016 by Professional Publishing, Inc

Rental Housing Journal Valley

December 2016

2. Apartment Rents Weakning 3. Residential Landlord Tenant Update 2016 5. Dear Maintenance Men – Water and Wax Removal

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2.4 – 5.4% Vacancy Rates

Trump Policies Could Affect New Housing Costs as New Buyers Enter the Market in 2017

Has the Willamette Valley Rental Market Flattened Out?

he rental market in the Willamette Valley has been on one heck of a ride over the last few years. The Apartment Report recently came out and revealed vacancy rates as low as 2.4% in Gresham and as high as 5.4% in Northwest Portland, with Salem and Eugene coming in at 2.9% (historically, vacancy rates of 6-7% have been considered “normal”). In the Portland metro market specifically, we are seeing an average overall vacancy rate of 3.71% and rental rates of $1.47 per square foot per month. In the Salem market those figures are at 2.9% and $1.14; the Eugene market is at 2.94% and $1.16. However, these figures are very close to what they were at the beginning of 2016, so we are seeing signs that the rental market has officially started to level off. Within my company (www.IRCEnterprises.com), vacancy rates have run

continued on page 7

n 2017, recent trends will reverse course as the housing market’s economic recovery enters a new stage. Renting will become more affordable, more Americans will drive to work, and the homeownership rate will bounce back from historical lows. Millennials will play a significant role in increasing the homeownership rate. Nearly half of all buyers in 2016 were first-time buyers, and millennials made up over half of this group of buyers. Here is Zillow’s look ahead at the 2017 housing market:

Zillow’s 2017 Predictions

1. Cities will focus on denser development of smaller homes close to public transit and urban centers. 2. More millennials will become homeowners, driving up the homeownership rate. Millennials are also more racially diverse, so more homeowners will be people of color, reflecting the changing demographics of the United States. continued on page 4

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

Landlords and Property Managers Bullied and Harassed Over Rent Increases

By John Triplett, Rental Housing Journal

Portland landlord says he and his property managers have been bullied and intimidated over rent increases after he purchased a small apartment building and had to raise existing rents to afford his new mortgage payments. He said demonstrators have picketed his personal residence. The have placed notices on the doors of neighbors, camped overnight on his lawn, defecated on his lawn and marched into his property managers’ offices scaring the staff, according to his spokesman, John McIsaac. The landlord, Landon Marsh, raised rents “only to the lower end of current market rates in Portland,” said McIsaac in a recent interview. McIsaac said the rent increases came after Marsh purchased the small apartment PRSRT STD US Postage PAID Portland, OR Permit #5460

complex, did substantial work to improve the condition of the building and raised rents to cover his costs and mortgage. Unfortunately the rent for one tenant went up by 40 percent and the tenant complained to the Portland Tenants United group.

Telling the landlords’ side of the story

McIsaac said he is speaking out because many in the landlord and property management industry do not feel their side of the story has been told, and that more attention has been focused on what the activists’ demonstrations, and what the tenants say. “I represent the landlords and property managers who do not want to have exorbitantly high rents, we want more housing stock,” McIsaac said. continued on page 4

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Rental Housing Journal Valley

Apartment Rents Weakening? Rent growth Slowing

By: Cliff Hockley, President, Bluestone & Hockley Real Estate Services

n September 14 of 2016, Mark Barry, MAI local apartment appraiser, updated brokers and investors at a local Morgan Chase Bank presentation. In his speech he highlighted the significant sales volume in 2014, 2015 and 2016, but issued warning signs. He indicated that apartment rents were beginning to flatten as vacancies were beginning to increase. He said: Vacancies are beginning to rise mainly in the urban core as new construction goes up, which equals more competition. In Portland we are seeing significant rent concessions in class A properties within urban core. There are many properties offering first month rent concessions with one year leases. (Some are even offering two months free.) Properties on the outside (farther East, South and West) have more stable rents. As inner core prices begin to rise people will be moving outward. Currently, 9,000 units are under construction, mostly in the 30 units and under range. With 25,000 more currently proposed, competition is increasing no matter what. Not all new construction currently proposed will be built as not all will be able to get the rents they are planning on. Properties that are pushing rents are seeing higher vacancies because the market is so competitive. According to Mark Barryâ&#x20AC;&#x2122;s research, Studios have the highest vacancy rate at

5% with 1, 2 and 3 bedroom units around 2%. (In a recent phone survey (early October 2016) of local residential property managers the vacancy rate has increased to over 3 %.)

Important statistics to consider: Population

In 2010, The Portlandâ&#x20AC;&#x201C;Vancouverâ&#x20AC;&#x201C; Hillsboro Metropolitan Statistical Area (MSA) was the 23rd largest in the United States, with a population of approximately 2,226,009. Since then, the Portland metropolitan region added 40,621 new residents from 2014 to 2015, a growth rate of 1.72 percent. The new estimates show the 7-county greater Portland region just shy of the 2.4 million population mark, with 2,389,228 residents as of July 1, 2015. Most of the immigrants are from California, followed by immigration from the rest of the US. Additionally most of the immigrants have a higher education and are root seekers (from 25 -35 years old).

Employment

Despite the increase in new residents, unemployment in the Portland Metro areas has stabilized. Household income is averaging $64,000 a year, slightly above the national average of $56,516. The US economy is slowing down, with a particular focus in the manufacturing sector. American manufacturing barely grew in September as a broader swath of of a strong dollar and faltering overseas markets.

The Institute for Supply Managementâ&#x20AC;&#x2122;s factory index reflects this decrease in activity. The index fell to 50.2, from 51.1 in the it has been since May 2013. Fifty is the dividing line between expansion and contraction. Out of eighteen industries, only seven grew in the past month, the fewest since December 2012. Oil-related weakness among energy companies is now spreading to computer, plastics and machinery makers. The stronger dollar combined with slower growth in emerging markets hurts foreign sales. Auto dealers and construction companies are insulated by the spending of American consumers.

nearly 110 employees, including 20 licensed brokers. The companyâ&#x20AC;&#x2122;s property management division serves commercial buildings, apartments, condominium associations and houses in the Portland / Vancouver metro area, while the brokerage division facilitates both leasing and sales of investment properties throughout Oregon and Washington.

Summary

Cliff is a member of the Institute of Real Estate Management and was named Certified Property Manager of the year in 2001 and 2003. Cliff is a frequent contributor to industry newsletters.

We are at the top of the market. In Oregon 3 -3 Â˝ % growth rate is expected due to the relocation of many businesses from out of state. The glut of new developments and lower demand for Class A multifamily properties has increased competition between units as demonstrated by the amount of free is can it continue to grow? With increased vacancy rates itâ&#x20AC;&#x2122;s hard to judge if we are seeing pre-election jitters or the beginning of an economic downturn? I am not sure facing a rejection of ever increasing rental rates. Clifford A. Hockley is President of Bluestone & Hockley Real Estate Services, greater Portlandâ&#x20AC;&#x2122;s full service real estate brokerage and property management company. Founded in 1972, Bluestone & Hockleyâ&#x20AC;&#x2122;s staff totals

Cliff earned a degree in Political Science from Claremont McKenna College and holds an MBA from Willamette University. He is a Certified Property Manager and has achieved his Certified Commercial Investment Member designation (CCIM). Bluestone & Hockley Real Estate Services is an Accredited Management Organization (AMO) by the Institute of Real Estate Management (IREM).

Bluestone & Hockley offers customized brokerage, property and asset management, as well as maintenance services to property owners and investors throughout the Portland/Vancouver metro area. The companyâ&#x20AC;&#x2122;s full-service approach benefits busy property owners and investors, who know they can count on Bluestone & Hockley for high quality real estate services start to finish. A Better Real Estate Experience. 503-222-3800

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Rental Housing Journal Valley Âˇ December 2016

Rental Housing Journal Valley

Residential Landlord Tenant Update 2016 By: The Loeffler Law Group PLLC

here have been several important changes in landlord-tenant law in 2016. First, the Seattle City Council enacted an ordinance to require landlords to rent premises on a first-in-time basis. Second, HUD officially took the position that it is improperly discriminatory to adopt a policy rejecting all tenants with a criminal history. Third, Seattle enacted legislation prohibiting discrimination based on source of income. The Washington legislature extended the time period for providing an accounting of security deposits to 21 days and created a mechanism for sealing.

The First-in-Time Ordinance

The Seattle City Council enacted ordinance 125114 in August. The “First in Time” Ordinance requires landlords to offer a rental property to the first qualified applicant based on who submitted the completed application first. The stated purpose of the ordinance is to reduce discrimination by limiting the landlord’s ability to choose to whom to rent. To comply with the ordinance, Landlords are required to process completed applications chronologically in the order in which they are received and keep records of each application’s date of submission. Landlords also should list their tenant selection criteria. The city intends to hire specialized officials to develop and implement an enforcement strategy. This likely will include “sting” operations. This ordinance will be effective January

2017. Landlords are strongly advised to revise their tenant selection criteria and procedures accordingly.

Criminal Background Checks

In April 2016, the United States Department of Housing and Urban Development (HUD) published a memorandum opining that tenant screening criteria discriminating against tenants and applicants based on their criminal history is a violation of the Fair Housing Act. HUD observed that minorities have a disproportionately higher rate of arrest, conviction and incarceration rates than the general population. A screening program or criteria prohibiting all tenants with any criminal history is therefore prohibited as it is more likely to affect minorities. This does not mean all criminal screening is banned or that a landlord is required to rent to all convicted criminals. To satisfy HUD requirements, screening criteria must be carefully tailored to prevent discrimination. This will require Landlords to review tenants’ criminal history on a case-by-case basis. Landlords are advised to consider the nature and severity of the crime, the time that has passed, and whether the tenant has complied with terms of any sentence (i.e. paid fines, completed probation, etc.).

Source of Income and Place of Employment Discrimination The Seattle City Council enacted an ordinance prohibiting landlords from

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discriminating against tenants for their source of income or place of employment. Landlords may not refuse to accept a tenant who receives a rent subsidy from a public entity such as Section 8 or a private entity such as the YWCA. Landlords are also prohibited from favoring tenants based on employer, such as providing rental incentives for employees of Microsoft or Amazon. When calculating rent for a tenant receiving a rent subsidy, the rent is effectively reduced by the amount of the subsidy. For example: a landlord requires tenants to have a monthly income three times the amount of rent, the rent is $1,000.00, and Section 8 provides monthly $800.00 subsidy. The tenant needs to only show income of $600.00, or three times the rent after applying the subsidy payment.

Lengthening the Time to Account for a Security Deposit

In late 2015, the Court of Appeals ruled that the landlord’s “passive delay” in accounting for the security deposit at the end of a tenancy “falls woefully short” of showing that circumstances beyond the landlord’s control prohibited it from accounting for the security deposit within 14 days. The landlord, therefore, must demonstrate that it actively attempted to determine its damages at the end of the tenancy within the statutory deadline. The Washington State legislature subsequently determined to lengthen that deadline from 14 days to 21 days. While the additional seven days is helpful, landlords are advised that the courts will look more carefully at how the landlord used the time allotted in determining whether

the landlord properly and timely accounted for the tenant’s security deposit.

Order of Limited Dissemination

The Legislature added a new section to the Residential Landlord-Tenant Act. RCW 59.18.367. This new section authorizing the court to order an unlawful detainer action to have limited dissemination if the case was without basis, the tenant reinstated its tenancy by law, or for “other good cause.” The tenant has the option to move the court for an order that effectively prohibits tenant screening service providers from disclosing the unlawful detainer action in a tenant screening report or using the report as a factor for determining whether to recommend that tenant for future tenancies. An order of limited dissemination does not prohibit a landlord from doing its own court search for an eviction and using that information. It only limits a screening company’s ability to disclose the information to the landlord. This new rule may be used as a negotiation tool for existing and past tenants. Tenants who desire clean rental histories may be more willing to pay old judgments or pay their rent current in order to get a landlord’s cooperation for an order of limited dissemination. Evan Loeffler is the principal at the Loeffler Law Group PLLC in Seattle. Mr. Loeffler’s practice emphasizes landlord-tenant relations and real estate litigation. He is the author of several chapters on landlord-tenant law in the Washington Lawyers Practice Manual and is on the faculty for several landlord-tenant CLE programs.

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Landlords and Property Managers Bullied ...continued from page 1 “In Portland, 85 percent of the landlords are small operators. They might have their retirement tied up in these properties, but they don’t make a ton of money off of them. So the stereotype is that all of the property owners are huge, out-of-state multimillion-dollar concerns. That is not the case. A lot of these property owners have day jobs,” McIsaac said.

the rents – and he stuck to this – at the very low end of market rates. So he’s not a profiteer by any stretch of the imagination,” McIsaac said. He said in his opinion, “This guy is a liberal, progressive classic Portlander. He is a caring, altruistic, sensitive man.”

The story of one small landlord

Portland Tenants United is a growing tenants union dedicated to organizing tenants to take action to strengthen and enforce tenants’ rights and protections, according to their Facebook page.

Group pushing rent control and end to no-cause evictions for Portland

McIsaac said that with the hysteria over rent increases, “the activist group has targeted a couple of landlords in particular. They are not going after the big guys who own thousands of units. They are going after the little guys who own like 20 units. “And this one guy, Landon Marsh, who is my client, is in the hospital interior-design business. He is a one-man consulting business. He does not do property development for a living. He has investment properties. They are small ones. All three buildings he owns combined make up 20 units.”

en,” Eudaly said in a press release. “My election, and the passage of Portland’s housing bond, present a clear and obvious mandate to City Council to act.” Eudaly admits state laws prohibit local rent control measures. But she wants city commissioners to commit “municipal disobedience,” do it anyway and fight the resulting lawsuits, she told the Portland Tribune. Portland Tenants United is focused on lowering the eviction rates in Portland by organizing tenants to vocalize their concerns. Gabriel Erbs, organizer for the group, insists the fight is far from over, according to a report on Portland Patch. “Tenants can be evicted, for whatever reason or no reason at all, at the landlord’s whim,” he said.

Landlord and tenant tivists have clashed

At a recent press conference, Portland

Where this all started with apartTenants United and City Commissionment building purchase er-elect Chloe Eudaly, promoting some“He bought one building around seven or eight months ago out in a semi-blighted part of East Portland, a working-class area,” McIsaac said. “It was built about seven years ago. And it needed some repairs just from wear and tear. The tenants asked him to make these repairs and he said, ‘Yes I will do that.’ “ “So he set to making the repairs. But he had bought the building at market value. And market value right now is a hell of a lot higher than it was seven years ago – it’s a lot higher. “He said that he was going to have to raise the rent. But he said he would keep

thing called “Keep Portland Housed,” called for a freeze on rent and an end to no-cause evictions in Portland until there is a policy in place to improve conditions for renters.

ac-

Tensions escalated late in 2016 at the Portland Art Museum during an awards ceremony. Multifamily NW, an association promoting quality rental housing, was holding its annual ACE awards ceremony for its members when protestors

Property management groups say more apartment units needed

Leader says group wants municipal disobedience and rent control

“We’ve been in an officially declared housing emergency for over a year. Despite that, tenant protections – the most critical component to preventing homelessness – have not meaningfully improved, and conditions continue to wors-

didn’t take long for tempers to flare, according to koin.com. The television station reported that, “Tensions were high. Some choice words were exchanged as well as some apparent shoving as protesters came face to face with ceremony attendees. Shouts calling the multifamily association attendees ‘parasite’ and ‘bloodsucker’ rang out from protesters.” A small group of protesters stormed past security into the museum to disrupt the event. They were soon removed by security, according to katu.com. Deborah Imse, executive director of Multifamily NW, said in response to the protest, “Over the past few years, rents in Oregon have risen while incomes have lagged behind, creating an urgent housing crisis. In order to thrive, the region needs to work together to create more quality housing options for families of all incomes. “With demand for housing continuing to increase, we must take action to reduce rental costs by increasing the variety of housing types available to people of all incomes and creating more subsidized affordable and market-rate units,” Imse said in the statement.

from Portland Tenants United showed up. Dozens of protesters gathered across the street from the museum. It

Any solutions to the Portland housing issue, property management organizations say, should be market-based. A spring 2016 apartment report released by Multifamily NW says that “Portland’s current development pipeline includes an impressive 21,600 proposed units.”

continued on page 6

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Pursuant to RCW 59.18.150, this is your 48 hour notice that g the dwelling unit your landlord or their and premises located agents will be at (Address) _______________ Rods 1) Type _______________ Breed _______________ Size ______ Age __ Weight ___ Color ____ Name ________ __________ WA-RT Ice Trays G-20 _____ Washin _____ gton _____ Rods _____ Vaccinations: Yes____ No____ License Number: ______________ _____________ on Floor CHECK-IN/C Shelves/Drawer between the hours 2) Type _______________ Breed _______________ Size ______ Age __ Weight ___ Color ____ Name ________ Floor HEC of (Date)K-OUT CONDIT and Vaccinations: Yes____ No____ Carpet/Vinyl/W License Number:ood ______________ ION(Time) Disposal REPORT(Time) . Light Fixtures 3) Type _______________ Breed _______________ ________ Light Fixtures Size ______ Age __ Weight ___ Color ____ Name DishwasherTENANT(S): __________ The entry will occur Vaccinations: Yes____ No____ License Number: ______________ for the following purpos Doors/Woodwo __________ __________ ADDRESS: _____ __________rk_____ Doors/Woodwork _______________e: __________ __________ Counter Tops Additional Security Deposit Required:$ _______________ _______________ _____ Locks __________ _____ ______ CITY: __________ ______________________________ __________ Locks _____ _______________ _______________ _____ ___UN _____ IT: __________ Cabinets _______________ __________ STAT ________ AGREEMENT ____ Ceilings _______________ E: ________ Rating Scale = (E)Ex ZIP: _____ Ceilings ____________ __________________ cellent (VG) Very Tenant(s) certify that the above pet(s) are the only pet(s) on the premises. Tenant(s) Sink Good (G)Good Electric Outlets understands that the additional pet(s) are not permitted unless the landlord gives ten (F)Fair (P)Poor Electrical Outlets IN Out ant(s) written permission. Tenant(s) agree to keep the above-listedFloor pets in theLIVING premises In Landlo AREAS rd Out Garbage subject to the following terms and Cans conditions: KITCHEN In Windows Out Walls Phone BEDRO Windows

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503-933-6437 Rental Housing Journal Valley · December 2016

Rental Housing Journal Valley

DEAR MAINTENANCE MEN: Water and Wax Removal

By Jerry L’Ecuyer & Frank Alvarez

Dear Maintenance Men:

I have a bathroom sink that is slow draining. I have already snaked the drain and found no stoppage. When I remove the pop-up assembly and have an open drain, water whooshes down with no problem. However, with the pop-up in place, water backs up into the sink and drains very slowly. Paul

Dear Paul:

Most bathroom sinks have an overflow hole near the top edge of the sink. This hole serves two purposes; 1: Acts as a safety drain to keep the sink from overflowing should the water rise above a certain level in the sink. 2: The overflow hole also serves as an air vent for the sink when the water levels are above the pop-up plug. The overflow hole allows air to escape through the drain and the water to evacuate more efficiently. What has happened is hair, toothpaste, grime etc. have built-up and sealed off the overflow drain where it exits just below the pop-up assembly plug. Most snakes are too big to go through the overflow drain. Alternatively, a speedometer cable will work great or even a long zip tie will work. Push the cable or zip tie down through the overflow hole at the top of the sink and push any gunk out into the drain. Use water to help push the debris out the overflow drain, a funnel works great to direct a good flow of water. If you

cannot get the overflow to drain, disassemble the main drain assembly to gain access to the overflow drain exit. Once the overflow drain has good airflow, the sink should drain a bit faster. If this does not solve the problem completely, look at restricting the water flow coming out of the faucet. Use a restrictive aerator to cut down on the GPM of the faucet. My property has 100-gallon gas fired water heating that serves four units. It is about 8 years old. The tenants are complaining of very little hot water. I have checked the tank and the thermostat is working, the water is hot. Are my residents making up stories? What am I missing? Thorne

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.

Dear Thorne:

Dear Maintenance Men:

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

How do I remove candle wax or gum from my rental unit’s carpet? Janet

Dear Janet:

The best way to remove candle wax from a carpet is to use a hand held clothes iron. Put an absorbent paper towel over the wax and heat the area with a hot iron. The paper towel will absorb the wax as it melts. Be careful not to burn the carpet as an iron can melt certain carpet fibers and scorch others. Start on the lowest setting. Remove any left over stain by blotting the area with a small amount of dry-cleaning solvent. (Dry-cleaning brand names to

look for: Guardsman Dry Cleaning fluid, Woolite Dry Cleaning Secret, Dryel or any dry fabric cleaner and in a pinch; lighter fluid.) Also, blotting with a mild detergent mixed with warm water may work. Make sure the detergent does not contain any alkaline or bleaches. Remove gum by either freezing the gum and removing it by pieces or using peanut butter to loosen the gum’s grip on the carpet. A product known as “GooGone”, found at Home Depot, may be used to remove gum, tar, grease and glue. Use Goo-Gone sparingly 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 Jerry L’Ecuyer is a licensed contractor & real estate broker. He is currently on the Board of Directors and Chairman of the Education Committee of the Apartment Association of Orange County. Jerry has been involved with apartments as a professional since 1988. Frank Alvarez is 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. Frank can be reached at (714) 956-8371 Frankie@BuffaloMaintenance.com For more info please go to: www.BuffaloMaintenance.com

Information Resources From the Multifamily NW website to regular communications and monthly newsletters we keep our members informed on the industry. Our biannual Apartment Report gives you the latest rent and vacancy data to stay competitive.

Professional Rental Forms Multifamily NW offers a full suite of Single-Family and Multifamily rental forms that are reviewed quarterly by a committee of experts and legal counsel. With over 100 different forms, we have you covered!

Professional Development Property Management has many facets. Whether you manage single-family or multifamily we are here to provide great opportunities for Leasing, Marketing, Financial Management, Forms Training and more! Nationally Recognized Designations through NAA are a great way to show your management expertise in the industry.

Legislative Action Government & Public Affairs Committee meets monthly to discuss the current issues facing the industry and provide support on behalf of our members. Legislative Alerts are regularly provided to members so that all are informed and ready for action.

Commitment to Charity Charity Events are a very important part of the Multifamily NW agenda. Annual golf events support housing charities around the state and the Service Committee hosts charity drives and events throughout the year.

Networking Opportunities Multifamily NW offers regular networking events throughout the year. It’s the perfect chance to connect with your peers to learn the tips and tricks that make your job easier.

Annual Events With 8 large annual events and counting, Multifamily NW is second to none for educational and networking resources. We offer great sponsorship opportunities to promote your business and are committed to promoting Members Using Members (MUM).

16083 SW Upper Boones Ferry Road, Suite 105, Tigard, OR 97224  503-213-1281  503-213-1288  info@multifamilynw.org MultifamilyNW.org

Rental Housing Journal Valley · December 2016

Rental Housing Journal Valley

Trump Policies ...continued from page 1 3. Rental affordability prove as incomes growth in rents slows.

will rise

imand

4. Buyers of new homes will have to spend more as builders cover the cost of rising construction wages, driven even higher in 2017 by continued labor shortages, which could be worsened by tougher immigration policies under President-elect Trump. 5. The percentage of people who drive to work will rise for the first time in a decade as homeowners move further into the suburbs seeking affordable housing – putting them further from adequate public transit options. 6. Home values will grow 3.6 percent in 2017, according to more than 100 economic and housing experts surveyed in the latest Zillow Home Price Expectations Survey. National home values have risen 4.8 percent so far in 2016.

Statement from Zillow Chief Economist Dr. Svenja Gudell:

“There are pros and cons to both existing homes and new construction, and the choice for home buyers can often be difficult. For those considering new construction in 2017, it’s worth considering the added cost that may come amidst ongoing construction labor shortages that could get worse if President-elect Trump follows through on his hard-line stances on immigration and immigrant labor. A shortage of construction workers as a result may force builders to pay higher wages, costs which are likely to get passed on to buyers in the form of higher new home prices.

“Those looking for more affordable housing options will be pushed to areas farther away from good transit options, in turn leading more Americans to drive to work. “Renters should have an easier time in 2017. Income growth and slowing rent appreciation will combine to make renting more affordable than it has been for the past two years.” Zillow

Zillow® is the leading real estate and rental marketplace dedicated to empowering consumers with data, inspiration and knowledge around the place they call home, and connecting them with the best local professionals who can help. In addition, Zillow operates an industry-leading economics and analytics bureau led by Zillow’s Chief Economist Dr. Svenja Gudell. Dr. Gudell and her team of economists and data analysts produce extensive housing data and research covering more than 450 markets at Zillow Real Estate Research. Zillow also sponsors the quarterly Zillow Home Price Expectations Survey, which asks more than 100 leading economists, real estate experts and investment and market strategists to predict the path of the Zillow Home Value Index over the next five years. Zillow also sponsors the bi-annual Zillow Housing Confidence Index (ZHCI) which measures consumer confidence in local housing markets, both currently and over time. Launched in 2006, Zillow is owned and operated by Zillow Group (NASDAQ: Z and ZG), and headquartered in Seattle.

Landlords and Property Managers ...continued from page 4 “More housing is the solution, and our priorities are to help increase supply and educate politicians on the fact that simply adding fees and making business harder has the reverse effect on the problem they want to solve,” Multifamily NW’s Imse wrote in an email to the Portland Mercury. “As the organization representing property owners and managers, Multifamily NW has adopted a solutions-oriented approach to address the housing shortage. The market data we collect, along with reviews of affordable housing policies across the country and the experience of our members, have shown us the best way to create affordability in the housing market: adopting proven strategies that add to the housing supply,” Imse wrote in an article on Oregonlive.com in early 2016.

Activists were protesting at one event and then went over to the office of the

property management company Marsh had been using to handle his rentals. “They marched into the A&G Rental Management LLC office and intimidated the people working there. Drove some of them from the main area back into their offices. They had to lock themselves in their offices. And the principals were not in the office at the time, so they basically attacked the support staff – not physically – but screaming, bullhorns, stomping, just marching through this office. It’s not very big, maybe a grand total of 1,000 square feet. So 30 of them came in there so it was pretty unpleasant,” McIsaac said.

Challenge of buying apartments at market rates

“The bottom line is, if somebody buys Barrier to constructing new aparta new rental property at market rate from ments need to be removed “To increase the overall housing supply, we need to remove barriers to building. This includes updating zoning codes to allow for a wider variety of housing types at a range of price levels. “At the same time, we should streamline the process for development review and permitting new construction while retaining standards for high-quality buildings. Under the current process, approvals can take a year or more, adding to project costs and delaying the construction of much-needed market-rate and affordable units,” Imse wrote.

Landlords Trying To Do The Right Thing Caught in the Middle

McIsaac said Marsh tried to work with the existing tenants on payment plans and provide plenty of lead time and help moving if they decided not to pay the rent increases. Most tenants decided to stay, he said.

No lawsuits have been filed.

“But they have come up with some non-factual statements about how he has treated tenants and what he has said to them. And he has bent over backwards, and so has the rental company, to make it easier for tenants,” McIsaac said. “So it is interesting here in Portland the media has not jumped on him, they have been extremely neutral on him. The head of the tenants union has taken it upon herself to negotiate with landlords on behalf of the tenants and she is not a lawyer, not a property owner, she’s just an activist,” McIsaac said.

Activists marched into property management office

somebody else who owned it for 10 years, the owner is going to sell it at market value. The new owner is going to have to raise the rents to make the monthly mortgage.

If you do away with no-cause evictions, then you also do away with the ability to evict bad actors who are drug dealers or domestic abusers, because that is what the law exists for,” McIsaac said. “His (Marsh’s) other properties have long-term tenants – his other two properties – and so it’s just a crazy, uncomfortable situation. I think the property managers and the landlords are really willing to work with tenants because of the type of city we have here – but the tenants union has refused conversations and any negotiations that are not absolutely in their favor,” he said. “And they have a couple of politicians on their side,” McIsaac said. “Some politicians support no-cause evictions and rent control. But they don’t know the facts. If they did, they would not do it. The Portland Tenants Union is funded by the national Service Employees International Union (SEIU). No-cause evictions are No. 1 and rental control is No. 2 but I think there are other things lurking underneath if they can get these laws passed. “If you have rent control you cannot improve your buildings. You have to be an altruistic millionaire to improve a building with rent control because rent is where you derive your income.”

Rental Housing Journal Valley · December 2016

Rental Housing Journal Valley

2.4 – 5.4% Vacancy Rates ...continued from page 1 between 0% and 1% for the last couple of years, and as of this writing we are at 0%. We typically average 1.5-2.5% below the market average, so I am sure our vacancies will follow the market very soon. What’s an investor to do? Above all, in times of increasing vacancy rates you must focus on making your properties and your customer service something new tenants seek out and current tenants want to hang onto. That is you cushion against the uncertainties of the rental rate environment. I don’t foresee rent levels dropping due to the upward trend in vacancy rate, but I imagine that we will see them level off over the next few quarters. But whether rental rates go up or down from here is largely in our local municipalities’ hands, in my opinion. Rents have increased enough in the area to attract investors who are happy to build apartments, purchase single family homes as investments, or keep the home they move out of as a rental property, which increases the housing stock somewhat. If the cities of the Willamette Valley would like to help ease the current tight housing situation further, they should also be speeding up the zoning and permitting process to add living units to the market, and possibly even offer incentives like the city of Salem’s Tool Box Program (through which investors can get grant money from the city if they add residential units in the downtown core). One thing our economy, cities, and state have done very well is to make greater Portland a sought-after place to live. By 2020 this region is projected to grow by 231,100 people. Oregon averages three people per household, so that equates to an additional 77,033.33 residences needed, although from what I have seen, I feel this estimate is low. In the Willamette Valley, there are currently about 11,000 units under construction, and another 28,000 proposed and waiting to be approved. Some of these projects will not get the approvals they need to begin construction, but most will. The question is, will it take six months or two years? Whatever the timeline, that still leaves us entering the 2018-2019 biennium with a 38,000-unit deficit. Regardless, I am optimistic that our local governments will start enacting changes that help speed up bringing units to market. If they do, we have a chance to

keep pace with population growth. This also means as the market corrects itself that the days of 10-20% per year rent increases will disappear. My guess is that we will see an average annual rent increase of 3-5% over the next four years for those units that are currently priced at the top of the market. Of course, there are still plenty of units out there priced well below market that will be playing a little bit of catch-up as long-term tenants with artificially low rents move out. So, what’s next? Are rental properties still worth investing in? In my opinion the answer is still a resounding yes! Oregon’s population growth doesn’t show any signs of slowing. Adding rental units must happen to simply keep up with demand and maintain this leveled-off state of the market. At current rents, the rental market is a profitable investment. With that said, interest rates are going to gradually be on the increase, and there will be a point at which the cost of financing can change the profitability of rental properties. Variables like these, though, are why investing in rental properties without the help of a professional can be challenging. Make sure that you do your homework to become your own professional and/or hire a firm like www.IRCEnterprises.com to help you purchase and manage your investment properties. One of the great things about being a real estate investor is that no matter what the market is like, there is always a way to make a profit. It’s just a matter of becoming an informed student of the market and of the many ways that you can profit from it, which is where membership in Northwest REIA can help. Christian Bryant President of IRC Real Estate & Property Management President of PAROA & NWREIA www.IRCEnterprises.com Christian@IRCEnterprises.com

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Rental Housing Journal Valley

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Rental Housing Journal Valley · December 2016