New Breed of Lenders Helping Pay the Rent

Several startup companies are offering loan products meant to help people pay their rent. From an article in the Wall Street Journal:

These companies, which also include Domuso and Till, are entering a market long associated with payday lenders. Compared with cash-advance loans, which come with annual interest rates as high as 700% in some states, funds from the rent-lending startups are available at much lower cost. Some are competitive with credit-card borrowing rates at less than 20%...

Other companies offering rental loans see their products as a backup for tenants in more precarious circumstances. Till, which advertises its loans as much cheaper than those of payday shops, pitches rental financing to renters and landlords as a way to avoid evictions.

Data on how often renters default on their loans is hard to come by from third parties, and most of the rental-lending companies won’t share such information. Some lenders say one measure could be the “serious” delinquency rate on unsecured personal loans, which is defined as borrowers who are more than 60 days behind on payments. It stood at 3.6% in the fourth quarter of 2018, according to the credit agency TransUnion .

Comparing Cost of Renting vs Owning in Each State

HowMuch put together a chart showing the cost of renting vs. owning in each state and it’s interesting:

Our latest visualizations use data from the U.S. Census Bureau’s most recent American Community Survey to compare the cost of renting a home and owning a home in each state. To calculate the median monthly mortgage payment, we subtracted median housing costs of houses without mortgages from median housing costs of mortgaged houses. For median rent payments, we used contract rent, which is defined as the monthly rent for a home without including payments for utilities.

Source: HowMuch.net

10 Most Commonly Collected Types of Ancillary Income

Multifamily Insiders has conducted a research study on apartment communities’ use of ancillary income and here’s their list of the top 10 most commonly collected:

Here are the 10 most commonly collected forms of ancillary income:  (Percentage shows percent of responders who collected that type of income)

Application Fees92.09%
Late Fee87.05%
Pet Rent82.73%
Early Termination71.94%
Month to Month Fee67.63%
Water58.99%
Parking/Garage Fees54.68%
Admin Fees53.96%
Trash53.24%
Washer/Dryer42.45%

Best Practices for Package Acceptance at Apartment Communities

The National Apartment Association has published a white paper outlining best practices for managing the increasing volume of package deliveries to residents. Below is an excerpt from NAA’s page where the white paper is free for NAA members. Remember, if you’re a PTAA member you’re a NAA member.

The number of packages received by multifamily consumers are growing each year, but the growth rate is slowing. RealPage analyzed package data from Sept. 1, 2014, to Aug. 31, 2018: 2015: 25 percent growth over 2014; 2016: 20 percent growth over 2015; 2017: 9 percent growth over 2016.

Total Packages: All Communities Using Tracking

Isolating the peak holiday months each year, November and December, those two months consistently account for almost 20 percent of the annual volume. Package volume during those months is still growing but has slowed each year, with yearly numbers at 31 percent, 26 percent, and 6 percent, respectively, from 2015 to 2017. The decrease in overall percentage growth year over year can be attributed to how properties are better managing their package deliveries, such as by using technology, lockers, and storage. Growth in resident self-service, secure package smart rooms, and package locker delivery systems, in addition to some communities refusing deliveries, is reducing the need for staff to handle packages in their offices.

New rental housing communities must consider providing ample space for both delivery and storage, to ensure that the space can accommodate possible future needs such as smart-lock access and refrigerated storage. New properties should also consider placing trash and recycling bins close to the package room, to facilitate packaging disposal, and ensure appropriate Internet connectivity for delivery-related software. 
 
For established communities, the most utilized package delivery methods are holding packages at the management office, allowing package carriers to deliver items directly to the resident’s door, and offering traditional, United States Postal Service (USPS) mailboxes. Many apartment leasing offices adjust the hours they’re open to accommodate package pick-up, especially during the holiday season, when package storage areas can’t accommodate high-volume delivery days. Resident satisfaction is a top priority for most management companies, so instituting a smooth package processing system, from package acceptance to resident delivery, is essential.
 
This document is free to NAA members and details best practices for such methods and explores additional solutions to consider. The pros and cons of various package management systems are reported—steps that could save administrative time, protect properties from liability, bring in potential additional revenue, and, above all else, enhance the resident experience.

Unauthorized Pets Pose Problems, Technology Might Provide the Solution

Potential fraud related to Emotional Service Animals have been hogging the animal-related headlines in the apartment world over the last few years, but unauthorized pets continue to pose a large, and growing, problem for managers. From an article on NAA’s blog:

This often occurs when pet-free residents acquire a pet, pet sit or have pet visitors after initial move-in and do not report the pet activity to the community. With the rising popularity of gig economy businesses related to pet care, such as Rover and Wag!, more residents engage in some form of pet activity. To them, it might be ambiguous whether an animal they bring onsite is considered to be a pet at the community, if only temporarily.

The solution could be adopting technology that allows for pet screening up front instead of pet reporting policies:

For example, if Jason from 201-B adopts or pet-sits a dog that ends up biting a resident, the victim won’t take long to question the dog’s presence at the community.

Even if Jason’s dog is as sweet as can be and schmoozes nearby residents into becoming regular treat dispensers, the community is losing revenue. Jason certainly isn’t paying pet rent if he acquired the dog after his move-in date and never reported it and the dog might not comply with community regulations. Apartment operators often leave money on the table and increase their risk when pet-free residents such as this one end up acquiring a pet. The leasing team is often focused on other areas of business and are unable to stop and validate each dog they see during the course of their day.

Encouragingly, innovative solutions from third-party providers such as PetScreening.com, offer a way to close this loophole by requiring all residents – even those without pets – to acknowledge pet policies line-by-line during the application process. Pet owners set up an account and enter their pet’s medical and behavioral history for a small annual fee, enabling the community to have more visibility into their pet population and report any future incidents to a centralized database. Pet-free residents set up a free profile that requires them to report any new pet activity.

You can read the full article here.

Rents Up, Vacancy Down in Piedmont Triad Apartment Market

Real Data just released their March, 2019 survey report for the Piedmont Triad and the results show that the apartment market continues to be very strong here in the Piedmont Triad. They report that the average vacancy rate is 3.7%, down from 5.5% in March of 2018, and average rent is $898 ($0.943/SF) versus $842 ($0.888) this time last year. From their market summary:

The Triad apartment market continues to tighten with an average vacancy rate at just 3.7%. Over the last year demand has been strong with 2,595 units absorbed, easily offsetting the 1,487 units added to the supply over the same time period.

The development pipeline included 2,081 units under construction and another 4,462 units proposed. Guilford County is the most active with 1,183 units under construction and an average vacancy rate at 3.3%.

The region has posted strong rent growth of 4.5% over the past twelve months…

With demand expected to remain strong, the average vacancy rate should hold close to 4.0% over the next year. Rents will continue to grow an an annual rate of 4% to 4.5%.

You can buy a copy of Real Data’s full report here.

Freakonomics: Why Rent Control Doesn’t Work

There’s no doubt that man communities in the United States, including here in the Piedmont Triad, are dealing with housing affordability challenges. There’s also no doubt that elected officials in cities, counties and states are looking for possible solutions to the affordability problem. Unfortunately some of the solutions that, on the surface, seem to make sense can actually make the problem worse.

One of the solutions that many elected leaders consider is rent control. Just this year Oregon became the first state to enact a statewide rent control law. Some cities, like New York, have long had rent control laws and yet their residents still have some of the highest rents in the country. So what gives?

That can be a complex question to answer, but thankfully the folks at Freakonomics have produced a show that does a great job of explaining why rent control actually makes the affordability challenge worse, not better. It’s well worth a listen so here’s a link to either listen to the podcast or read a transcript:

Freakonomics: Why Rent Control Doesn’t Work

And here’s just a small excerpt from the show:

DIAMOND: When you pass rent control, the landlords of the property suddenly getting covered by rent control are losing so much money, they no longer really want to rent their apartments out at the prevailing new prices, so they decrease their supply of rental housing to the market. And if there’s less supply, that’s going to drive up prices. 

DUBNER: Okay, so, let me just make sure I have it pretty straight. You find evidence that rent control increases gentrification, one component of which is the displacement of low-income tenants. On the other hand, you also find evidence that low-income people, including minorities — at least those who are in rent-controlled units already — they’re likely to disproportionately benefit from rent control.

So, if I’m an affordable-housing advocate, I might say, “Oh, fine, fancy Stanford professor — who I’m sure has some kind of great income and/or housing subsidy and/or situation — I don’t care that some landlords are suffering. I don’t care that the policy is having some downstream effects that you don’t like. I need to make sure that low-income people aren’t going to get a rent increase of 50 percent overnight.” So, how do you respond to that argument?

DIAMOND: So, when you think about those initial tenants, that’s the best bet you’re going to get for the benefits of rent control to low-income tenants: the people that are already in the housing. But even though we find that those tenants are much more likely to stay in their apartment, when we look 10, 15 years later, the share of those 1994 residents that are still there is down to 10 percent or so. So 90 percent of them no longer live in that initial apartment.

And it’s that next low-income tenant that wants to live in the city, that low-income tenant is going to have a very hard time finding an affordable option, because now there’s going to be less rental housing, the prices that that low-income tenant are going to face when they want to initially move in are going to be higher than they would have been absent rent control.

DUBNER: I’m curious how generalizable you think your findings from San Francisco are for other cities.

DIAMOND: I would suspect that the actual quantitative loss of rental supply or benefits to the tenant will depend a little bit city to city, but I think the qualitative takeaway that landlords are savvy and are going to work hard to not lose money on their investments, I think is a very general point. 

Student Property in Greensboro Sold

Spring Place Apartments in Greensboro, near UNCG, was sold to a Chicago-based real estate investment company that specializes in student housing. From an article in the Triad Business Journal:

A large Triad student apartment community has sold for $23.15 million, according to records with the Guilford County Register of Deeds.

OC Ventures, a Chicago-based real estate investment firm specializing in student housing, bought Spring Place Student Apartments at 3610 Clifton Road in Greensboro, near UNC-Greensboro, through 3610 Clifton Road Associates LLC. The sale was recorded in Guilford County April 8…

Built in 2009, Spring Place has 164 units on 13.2 acres. 

RealPage Reports Rent Increases for Triad

RealPage released its rent report for the first quarter of 2019 which showed that the Triad had the fourth highest increase in the country. From an article in the Triad Business Journal:

Rent prices in the Greensboro/Winston-Salem metro area saw a 5.2 percent increase in the first quarter, with an average rent price of $830.

Greensboro/Winston-Salem ranked No. 4 in rent price increase among large metros, according to a first quarter apartment market report by RealPage Inc. (NASDAQ: RP). Phoenix, Arizona (up 8 percent), nabbed the top spot, followed by Las Vegas, Nevada (up 7.9 percent), and Atlanta, Georgia (up 5.3 percent). Charlotte ranked No. 11, with a 4 percent increase in rent prices.

Greensboro/Winston-Salem outpaced the national average, with U.S. apartment rents increasing by about 3.2 percent on an annual basis. 

Sale of Winston-Salem Apartment Community Continues Trend

The recent sale of Towergate Apartments continues a trend of apartment purchases by companies from outside the region. From the Winston-Salem Journal:

Another Forsyth County apartment complex has been sold to an out-of-region buyer, this time Towergate Apartments in Winston-Salem for $10.94 million.

The buyer is Ginkgo Towergate LLC of Charlotte, and the seller is Towergate Associates LLC of Winston-Salem, according to a Forsyth County Register of Deeds filing Tuesday. The deal closed Tuesday….

The complex was built in 1985 and has 259 units within 25 buildings on 14.65 acres.

The sale is the latest of a recent spree of apartment complex purchases in the county…

Other recent apartment complex sales include: the 209-unit Carolina Woods in Winston-Salem for $11.5 million; 213-unit Loxley Chase in Winston-Salem selling for $16.25 million; 234-unit Morgan Place in Clemmons for $14.3 million; 204-unit Twin City Townhomes in Winston-Salem for $10.15 million; 144-unit Salem Crest in Winston-Salem for $7.5 million; 96-unit Woodlawn in Winston-Salem for $3.5 million; and the 49-unit apartment complex at 1976 Maryland Ave. in Winston-Salem for $1.45 million.