Builder Report Offers Reminder. Affordable Rental Units Needed
Mortgage News Daily has written much content in recent months concerning the growth ofrnthe rental market and the difficulties communities are facing in keeping up with affordable rental housing needs. The latest release of the National Association of Home Builders’ MultifamilyrnProduction Index (MPI) indicates developers are beginning to notice opportunities in the rental market and are stepping up production ofrnmulti-family housing. However, a secondrnindex embedded in the report, the Multifamily Vacancy Index (MVI), which measures the multifamilyrnhousing industry’s perceptions of vacancies, may indicate a growing misalignmentrnbetween who needs rental housing and who it’s being produced for….</p
The MPI, which tracks multifamily housingrnindustry sentiment, provides a measure of constructionrnactivity in three sectors – low-rent units, market-rent units, and “for sale”rnunits. Each of the three components canrnachieve a score of 0 to 100, the MPI is a composite score of all three. Any score over 50 indicates that more respondentsrnsee the market(s) improving than the number who see it getting worse.</p
The MPI composite increased from 40.8 inrnthe fourth quarter of 2010 to 41.7 in the first quarter of 2011. This was its thirdrnconsecutive quarterly increase. Improvement, however, was restricted to the pricierrnmarket rate rental units. That component of thernindex rose from 51.7 in the fourth quarter to 61.5 in the first quarter of 2011rnwhile the index for low-rent units dropped 3 percentage points to 45.7 and the “forrnsale” component was down 1.3 percentage points to 23.4. Expectations for production in sixrnmonths dropped four percentage points for low-rent and ten percentage pointsrnfor both market rate and “for sale” units from the perceptions held in thernprevious quarter. Unfortunately it is in the low-rent sector where needs are greatest.</p
In a detailed analysis of the AmericanrnHousing Survey the Department of Housing and Urban Development (HUD) found thatrn7.1 million households fell into the “worst case” category where over one-halfrnof the monthly income is spent on housing. rn A recent study by Harvard’s JointrnCenter on Housing found nearly three-quarters of all renters have incomes belowrnthe median income for all households including 41 percent in the bottomrnquartile and 30 percent in the lower-middle one. Only about 10 percent ofrnrenters are in the highest income quartile.</p
The Multifamily Vacancy Index (MVI) measures the multifamily housing industry’s perception of vacanciesrnin Class A, Class B, and Class C units; the lower the number on a scale of 0 torn100, the fewer the vacancies. The MBIrnincreased slightly from 33.3 in the fourth quarter to 35.0. Dropping vacancies were concentrated in thernlower two sectors with Class C (the lowest priced) apartments increasing from 38.0rnto 40.2, Class B jumping to 33.6 from 28.3 while the index for Class Arnapartments declined from 37.3 to 34.3.</p
Looking forward six months, respondents saw a tightening market in all threernsegments, but especially in Class B apartments where the index rose from 24.8rnto 33.4. </p
“Both the Multifamily Production Index and the Multifamily Vacancy Indexrnhave emerged as leading indicators that provide information about the likelyrnmovement of Census Bureau statistics of multifamily starts and vacancy ratesrnabout one to three quarters in advance,” NASHB Chief Economist David Crowernsaid. “Even though we saw a slight increase in the vacancy index in the firstrnquarter, the long-term trend is downward. Given the demographics of demand, wernexpect that trend to continue.</p
“Although the increase is cause for optimism, the multifamily market stillrnfaces significant challenges, Crowe said. “There is considerable pent-uprndemand, but the ongoing crisis in funding for new construction means that developersrnare limited in their ability to meet that demand.” </p
Related MND comments….</p
READ MORE: Affordable Housing Units Needed for Low Income Renters</p
READ MORE: The Dearth of Affordable Rental Housing</p
“With so many foreclosed properties sitting empty on the market we can expect remodeling and rehabbing to be a leading indicator of a bottom inrn the housing market”, says MND’s Managing Editor Adam Quinones. “We already know there is dearth of affordable rental housing</a available to low income renters. From that perspective, FHA should open its 203(k) program to investors if they want to accomplish their affordable housing goals."
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