Page 1


APARTMENT INVESTOR 2020: A Look Ahead By Greg Frick, Partner, HFO Investment Real Estate

The multifamily investment market, both nationally and locally has seen stellar performance over the past several years. The Pacific Northwest region continues to have investment dollars looking to capitalize on the strong fundamentals of this region. Low unemployment with robust job creation has continued to fuel in-migration to the Pacific Northwest. This trend of strong population growth combined with high barriers of entry to the delivery of new supply has fueled sustained rent growth. With market-driven rent growth, we have seen a significant increase in political pressure. Cities and states have implemented or are considering measures attempting to limit rent increases. As an example, Oregon recently became the first state to pass statewide rent control. At the municipal level, the City of Portland has been at the forefront of passing legislation that has made it more expensive to operate rental housing in the city. We hope that as elected leaders try to address the need for affordable housing, they enact policies that make it easier to build units instead of penalizing the people who provide housing. Such examples include: • Reducing exclusionary zoning • Allowing more density • Easing the cost of red tape and fees for developers It’s hard to imagine why, in setting goals to bring more housing to the market, you would penalize the people providing and building such housing. That’s like saying, “food is too expensive, so let’s add a tax on food.” Elected leaders need to explore creative ways to help families in need, such as expanding the voucher program and potentially other solutions we’ve researched and discussed in this newsletter. On the investment side, the low interest-rate environment coupled with large amounts of capital looking for yields continues to drive cap rates to historic lows. Investors who have been in the game for a long time have had to adjust their cap rate expectations to stay competitive. The political environment has been and will be something we will continue to have to navigate. I hope that legislators genuinely want to solve the housing affordability issues and will work with stakeholders to produce solutions. Housing is a complex issue – when politicians rush to implement “soundbite” solutions, it can create inefficiencies that are counterproductive to the goals of their communities. I hope we will continue to work with local leaders to come up with solutions that do not add to the cost of building new housing.


December 2019 INDEX

Government Activity Timeline


A Recap of 2019 and a Look Ahead


Submarket Vacancy Rates and Concessions


Regional Market Round-Up


Washington State Excise Tax


Regional Economy Remains Strong


Development Pipeline


Affordable Housing


Construction Defect Litigation


HFO-TV & Podcast Update


Portland Inclusionary Zoning Update


Impact of Oregon’s Rent Control Law


Asbestos: Don’t Get Caught!


Is Financing a Part of your Plan?


Addressing Homelessness


Current Trends in 1031


2020 FORECAST Up • Interest Rates • Transaction Volume • No. of Transactions Flat • Employment • Rents Down • Permits • Vacancies

HFO Investment Real Estate LLC • 2424 SE 11th Ave • Portland, OR 97214 • (503) 241.5541 •

Government Activity Timeline 2014

URM Upgrades

City of Portland 1/2014 City establishes URM Seismic Retrofit project/building policy committee. 9/2016 Portland holds hearings on mandatory URM upgrades. 10/2017 First City Council review of URM Policy 11/2017 Final URM building policy meeting and final draft report 6/2018 Portland City Council votes to work on financing options, timelines, and temporarily exempting educational and religious nonprofits. The council decides to take a final vote on seismic retrofitting timeline requirements in 2019, spinning off warning signs/tenant notification for immediate action (see URM Placards/Warnings on following page). Recommendations ultimately fail under public pressure and litigation. 9/2019 Back at square one, City works to establish new, more representative committee after embattled first committee’s recommendations fail on multiple counts: errors in URM list, failure to notify and involve non-profits including churches, and mandatory timeline without funding that would result in significant demolitions.


UGB Expansion

Portland Metro Government 1/2015 Metro decides against expansion of Urban Growth Boundary.

Residential Infill

City of Portland | State of Oregon 7/2015 Project begins 4/2018 Public review and testimony concludes

10/2018 Metro anticipated to expand the urban growth boundary by 2,181 acres in Beaverton, Hillsboro, King City, and Wilsonville

7/2018 Portland Planning and Sustainability Commission delays vote on increasing homes in single-family neighborhoods to fall 2019. 8/2019 Oregon eliminates single-family zoning in Oregon cities with populations over 25,000, effective 2020.

Housing Emergency Declarations

City of Portland 10/2015 Portland City Council first declares housing emergency; the emergency has been reconfirmed through 2021. Vancouver, WA 4/2016 Vancouver Council declares housing emergency for lowincome residents. Milwaukie, OR 4/2016 City Council declares housing emergency, which has been extended in six month increments through at least December 2019. Josephine County, OR 11/2017 Josephine County Board of Commissioners declares a housing emergency through November 2019.


HFO Investment Real Estate • (503) 241.5541 •

90-day Notice for No-cause Evictions

City of Portland 10/2015 Portland approves 90-day notice requirements for rent increases and evictions. City of Milwaukie 4/2016 Milwaukie approves 90-day notice requirement for no-cause evictions. State of Oregon 2/2019 Multiple changes statewide to no-cause evictions including 90-day notice at the end of the first year

Note: Chart prepared by HFO research based on news reports and data available from the City of Portland, reliable news outlets, and other sources. It is believed to be accurate to the best of our ability. We encourage your independent verification of these facts.


Inclusionary Housing

City of Portland 6/2016 Concept development 10/2016 Public hearing

Affordable Housing Bond

10/2019 Portland has acquired 263 units and has 1,161 additional units either under construction or slated for rehabilitation.

12/2016 Council hearing on program and code 2/2017 Effective date 9/2019 Through September 1, 2019, Portland received 72 permit applications for projects of 20 units and over for 4,408 units. There are a total of 402 affordable rental units approved and 99 pending.


Security Deposit Policy

City of Portland 2/2017 Commissioner Eudaly begins work on Security Deposit Policy.

City of Portland | Metro 11/2016 Voters pass $258.4 million levy to create 1,300 units of affordable housing.

Metro 11/2018 Metro proposes $652.8 million bond levy to create/acquire/renovate housing for 7,500 - 12,000 area residents. July 2019 Metro reports progress toward completion of 339 units (8.9%) of goal.

Renter Relocation Fee

City of Portland 2/2017 City passes renter relocation fee requirement. 3/2018 Relocation fees made permanent and applicable to all owners.

9/2017 The City has feedback from tenants, advisory committee, and elected officials. 8/2018 Hearing postponed multiple times 6/2019 City Council adopts new deposit regulations effective 3/1/2020.

90-day Right of First Refusal

Tenant Screening Ordinance

City of Portland 10/2017 Commissioner Chloe Eudaly begins work on screening criteria policy. 8/2018 Commissioner Eudaly announces plan.

City of Portland 10/2017 Daily Journal of Commerce reports Commissioner Chloe Eudaly plans to craft a policy giving tenants and the City the right of first refusal on the sale of any rental units.

6/2019 Portland City Council adopts mandatory screening policy effective 3/1/2020.

9/2018 Portland Mercury reports on Eudaly's plans for 90-day notice requirement. 10/2019 Nothing additional on these plans has surfaced.


Landlord Registry

City of Portland 7/2018 City Council requires landlords to register all rentals with tax returns filed beginning April 2019; 100% mandatory by April 2020 8/2019 City implements $60 per unit housing tax retroactive to Jan. 1, 2019 and payable with 2020 taxes

URM Placards/ Warnings

City of Portland 9/2018 City reveals draft building signage deadlines: • 1/1/19: public buildings • 3/1/19: private buildings • 11/1/20: nonprofits 10/2018 Placard warning requirements adopted 10/2019 Placard requirements repealed after federal court injunction; city pays owner legal fees


State of Oregon 2/2019 Oregon becomes the first state in the nation to pass statewide rent control, capping rent increases at 7% + CPI

The Northwest Apartment Investor


A Recap of 2019 and a Look Ahead at the 2020 Market By Rob Marton and Jack Stephens HFO Investment Real Estate

As thousands of new units came to market this past year, overall market rents remained relatively flat. Certain submarkets saw rents increase as others declined slightly. Vacancies have remained stable and even declined in the face of all those new units being delivered. In Oregon, State and the City of Portland continued to pile on market regulations and restrictions. After Oregon’s first-in-thenation statewide rent control passed, California wasn’t far behind--and Washington State will likely be next. This interesting series of developments has led some investors to jump ship as others gird themselves for the long haul, with an eye toward the continued influx of residents as businesses continues their expansion

Market Vacancy and Rents 10.0%

VACANCY 4.42% 4.40% 4.37% 3.71%

7.5% 5.0% 2.5% 0%

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 (Oct.)

Oregon and Washington have been the national economic winners of late, with increases in wages and income. The poverty rate in Portland fell by more than 1 percent from 2017-2018 and the median household income climbed by 2.6 percent. Statewide, the median household income climbed 3.4 percent topping the U.S. average for the first time in decades. In fact, the West Coast states have seen inflation-adjusted median household income increases of more than $9,000 since 2013 according to the U.S. Census Bureau. But it was the State of Washington that led the pack with more than $11,000 in inflation-adjusted household income gains an increase of more than 17 percent from 2013-2018.

Government Intervention in the Free Market

After some governmental bodies declared housing emergencies, what should have happened next--the encouragement of new housing supply--didn’t happen. Instead, the state and local governments have continued to saddle developers and the owners of rental properties with additional costs and regulations that have made the development of new housing prohibitively expensive.


HFO Investment Real Estate • (503) 241.5541 •

Source: Multifamily NW Apartment Report

While the Portland MSA market was seeing some softening with an increase in vacancies through the fall of 2018, the year-over-year rate has decreased by 0.5 percent. The U.S. Census Bureau pegged Q3 2019 vacancy rates for Portland metro at 4.7 percent and Seattle at 4.6 percent.


$1.90 $1.74 $1.80 $1.62 $1.70 $1.57 $1.60 $1.47 $1.50 $1.40 $1.30 $1.20 $1.10 $1.00 $0.86 $0.90 $0.80 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 (Oct.)

Source: Multifamily NW Apartment Report

Rent per square foot has continued its upward climb, although some submarkets saw declines. Multifamily NW data indicated 2019 year-over-year rent increases of 7.4 percent which was heavily influenced by rents at new assets and doesn’t account for concessions.

Institutional Transactions of ($10 million and up)

In 2018, there were 38 apartment transactions priced over $10 million. Through the end of September 2019, there had been 35 apartment transactions priced over $10 million. Annualized 2019 sales to date results in a projected 43 transactions accounting for roughly $1.68 billion in sales. If trends hold, that would surpass 2018’s $1.61 billion in institutional sales volume by roughly 4.6% As in 2018, many of 2019’s institutional sales to date have been in the suburbs surrounding Portland, including a high percentage in Vancouver, Washington.

Institutional transactions this year include: • Griffis South Waterfront; 294 units in Portland sold for $116.1 million; $395,000 per unit • Rivage Apartments; 260 units in Portland sold for $91 million; $294,498 per door

Non-Institutional Transactions (under $10 million)

Turning to Portland metro non-institutional transactions below $10 million, we have seen 77 transactions through the end of the third quarter, accounting for over $306 million in dollar volume, with projected sales for the year at $382 million. Projecting for the remaining quarter, sales for 2019 are estimated to close out roughly 22% below 2018’s sales volume of $491 million.


Portland Metro Area permits for 5+ units have risen steadily from a low of 1,007 units permitted in 2009 to 9,979 in 2017, and 7,274 in 2018 and 7,505 projected for 2019 based on applications through Q3 totaling 6,004. Still, experts say housing has not accelerated enough to meet currently estimated regional demand of 25,000 affordable units. (See Recap and Forecast, page 6)



• Green Leaf River Pointe; 387 units in Vancouver sold for $68.8 million; $177,778 per door • Meadow Wood; 334 units in Vancouver sold for $54.75 million; $163,922 per door

10,000 8,000 6,000

• Stevens Creek; 140 units in Happy Valley sold for $38.325 million; $273,750 per door

4,000 2,000

• Slabtown Flats; 88 units in Portland sold for $35 million; $397,727 per door


2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 (est.)

• Bethany 5; 67 units in Portland sold for $19.2 million; $286,567 per door

Source: US Census Bureau




$3.0 $2.5



$2.0 $1.5 $1.0 $0.5 $0

200 180 160 140 120 100 80 60 40 20 0

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 (est.)

$10 Million Plus

Under $10 Million

Transaction Volume

Source: CoStar Multi-Family 10+ Units – Portland Metro Area

6,000 5,000



4,000 3,000 2,000 1,000 0

404 Pre-IZ

(submitted 6/6/16-1/31/17)


(privately financed, >20 units – since 02/01/17)

Approved (including 1 condo)

Vested Units

97 Pending

45 Completed

Affordable Units

Source: City of Portland Housing Advisory Commission

The Northwest Apartment Investor


RECAP AND FORECAST (CONT.) Inclusionary Housing

Since Portland’s new Inclusionary Housing requirement went into effect in February 2017, only 59 private rental projects and 11 government projects of at least 20 units have submitted building permit applications. As of October 1, the City reported 97 affordable units in the pipeline within privately financed projects. So far, city leaders appear relatively unconcerned by this drop-off in permitting activity.

What, me worry?

Governments appear to be adopting policies to resolve the issue of affordable housing but are going in the wrong direction. Developers and economists we interviewed

this year continue to argue that our state’s housing issues can best be solved by enticing development rather than constricting it. We agree. It’s our position and our forecast that current city policies will continue to shrink the development pipeline, leading to evertightening vacancy rates, reduction of concessions, speedier absorption of new units while providing higher profits for investors willing to manage the headaches of increased regulations. Rob Marton is a partner and Jack Stephens a senior broker at HFO. They can be reached by phone at (503) 241-5541 or by e-mail at or

Submarket Vacancy Rates and Concessions for Greater Portland, the Valley & Bend According to Multifamily Northwest’s latest survey of nearly 62,000 units, the Portland Metro fall 2019 vacancy rate of 4.4% is the same as the previous year, despite construction and opening of thousands of additional units. Vacancy Rates – Portland/Vancouver Metro

Current vacancy rates are highest in Lake Oswego/West Linn (6.6 percent), Wilsonville/Canby (5.7 percent) and Hillsboro North of Highway 26 (5.7 percent). Year-overyear vacancy rates have fallen from 6.3 percent in NW Portland and 6.1 percent Downtown to 4.9 percent in both submarkets. In the past year, SW Portland vacancy rates have fallen from 5.7 percent to 5.0 percent, and Inner/ Central NE has dropped from 4.9 to 3.6 percent. Vacancy rates are lowest in Inner/Central SE (3.3 percent), West Vancouver, Milwaukie, Beaverton (all 3.5 percent), and the Oregon City/Gladstone submarket, now at 3.6 percent.

Rent Rates – Portland/Vancouver Metro

In the past year, rent rates in the Portland MSA have increased at significantly variable amounts ranging from a decrease of 0.5 percent Downtown and in Inner/ Central SE to a high of 12 percent in North Portland and St. Johns. Other submarkets demonstrating significant increases in the past year are NW Portland (10.9 percent), Hillsboro (8.9 percent), and Troutdale/ Fairview/Wood Village/Gresham (8.3 percent). Many


HFO Investment Real Estate • (503) 241.5541 •

other submarkets demonstrated increases from 3.5 percent to 7 percent.


While the Clackamas, Oregon City/Gladstone, Hillsboro, and Bend/Redmond submarkets report zero concessions, the submarkets of Downtown Portland, Eugene/ Springfield, Tigard/Tualatin/Sherwood, and Aloha report concessions ranging from 20 percent of all properties surveyed in Downtown Portland and the Eugene/ Springfield submarkets, to roughly 16 percent in Aloha, Tigard, Tualatin, and Sherwood.

Valley Update

In the Willamette Valley, Salem has a vacancy rate of 5.2 percent, Eugene/Springfield 4.0 percent, and Bend/ Redmond 3.1 percent. Rents in those markets have trended upward with rent increases averaging 8.26 percent in Salem and 4.6 percent in Eugene/Springfield, while rents in Bend and Redmond decreased 0.63 percent in the past year among those surveyed.

Regional Round-Up WASHINGTON Recent Statewide Changes Tenancy Preservation Program (2019)

Washington’s Tenancy Preservation Program (2019 amendments to RCW 59.18.410(3) and 43.31.605(c)) became effective on June 29, 2019. The program reduces homelessness by providing relief to low-income tenants facing eviction for non-payment of rent. In court-approved cases, the Washington State Department of Commerce issues a temporary loan to landlords to preserve tenancy. Tenants have up to 90 days to repay the loan. All private and nonprofit landlords that offer rental housing in Washington qualify for the program. A court-ordered agreement is required to submit a claim application.

Landlord Mitigation Program (2018)

Washington State’s Landlord Mitigation Law (RCW 43.31.605) became effective June 7, 2018. It provides landlords with an incentive and added security to work with tenants receiving rental assistance. The program offers up to $1,000 to the landlord in reimbursement for some potentially required move-in upgrades, up to 14 days’ rent loss, and up to $5,000 in qualifying damages caused during tenancy.

Tacoma / Pierce County Multifamily Construction Population City: 216,279 (up 9.1% since 2010) County: 891,229 (up 12.1% since 2010)

Pierce County Vacancy Rates** 2019: 4.3% (Q3) 2018: 4.3% (Q4) 2017: 5.0% (Q4)

Seattle-Tacoma MSA Multifamily Permits* 2019: 15,879 (estimate annualized from Q3) 2018: 17,450 2017: 16,315

Tacoma Area Unemployment Rate 2019: 5.6% 2018: 4.9% 2017: 5.4%

*annualized through 08/19 **Source: CoStar

Population Growth

Tacoma (pop. 211,400) is currently the third-largest city in the state. Its growth rate is exceeding that of Spokane (pop. 222,000). If current trends continue, it could become Washington’s second-largest city.

The U.S. Census reported that at the end of 2017, the median rent in Tacoma was over $1,000 for the first time in the city’s history. Rent per square foot has been steadily climbing in the city over the past few years. According to CoStar, rent as of August 2019 was $1.49 per square foot – up from $1.44 a year earlier.


In March of 2018, Tacoma’s Downtown, Hilltop, and Dome District were among the top 20 fastest gentrifying areas, according to Rentcafe. The area’s zip code has seen several new museums, hotels, and waterfront improvement projects—resulting in a 103 percent increase in home values over 15 years.

Local Government Update

As of February 2019, a new law requires: • 60 days’ notice for no-cause evictions, both for monthto-month and fixed-term leases • 120 days’ notice before an eviction resulting from demolition, rehabilitation, or change in use Landlords are required to: • Pay 50 percent of renters’ relocation assistance. • Accept move-in costs such as security deposits and last months’ rent in installments. The Northwest Apartment Investor




Spokane / Spokane County Rental Rates Population City: 219,190 (up 4.6% since 2010) County: 514,631 (up 9.2% since 2010)

Spokane MSA Multifamily Permits * 2019: 1,255 (est.) 2018: 1,013 2017: 1,697

Spokane County Vacancy Rates** 2019: 2.0% (Q1) 2018: 1.3% (Q1) 2017: 2.9% (Q1)

Spokane County Unemployment Rate – Sept. Benchmarks 2019: 4.9% 2018: 4.4% 2017: 4.6%

As of August 2019, the average rent in Spokane was $1,008—up from $784 in 2016.

Job Market

Spokane has seen steady job growth over the past several years. From January 2018 to August 2019, the area added 11,437 jobs. The largest employer is Fairchild Air Force Base, followed by the Providence hospital system. Spokane County is the fifth-largest aerospace cluster in the United States—home to 120 manufacturers, suppliers, and distributors. In 2019, California-based Mullen Technologies announced plans to open a facility in West Plains, just outside of Spokane, where it will manufacture its electric sportscar.

*annualized through 08/19 **Source: CoStar

Olympia / Thurston County Renter Population Population City: 52,555 (up 12.1% since 2010) County: 252,264 (up 13.5% since 2010)

Olympia-Lacey-Tumwater MSA Multifamily Permits* 2019: 627 (annualized estimate) 2018: 726 2017: 102

Vacancy Rates** 2019: 4.0% 2018: 3.2% 2017: 2.7%

Thurston County Unemployment Rate (Q3) 2019: 4.8% 2018: 4.1% 2017: 4.4%

*annualized through 08/19 **Source: CoStar


HFO Investment Real Estate • (503) 241.5541 •

54.8 percent of households in Olympia are renteroccupied, and 44.1 percent of residents have a bachelor’s degree or higher.


Due to Olympia’s status as Washington’s state capital, roughly a quarter of all jobs in Olympia are in Public Administration. The largest private employers in Thurston County are Providence Saint Peter Hospital, Walmart, Safeway, South Puget Sound Community College, and Xerox.

Multifamily Construction

According to CoStar, between 2010 and 2018, over 1,800 units opened in the Olympia-Tumwater Metro Area, with a confirmed 548 units currently under construction. The vacancy rate in the City of Olympia was 3.6 percent as of the third quarter of 2019, down from 5.0 percent in the third quarter of 2017—the lowest vacancy rate the city has seen since the recession.



Tri-Cities / Benton & Franklin Counties Population Growth Population MSA: 296,224* (up 16.9% since 2010)

Kennewick-Richland MSA Multifamily Permits** 2019: 883 (annualized estimate) 2018: 330 2017: 359

Benton | Franklin County Vacancy Rates** 2019: 1.6% 2018: 1.1% 2017: 2.2%

Kennewick-Richland-Pasco Area Unemployment Rate (Q3) 2019: 4.7% 2018: 4.2% 2017: 4.5%

The Tri-Cities area population has grown by 54.4 percent since the year 2000.

Employment Growth

The Tri-Cities area includes significant employers in the scientific community, including Batelle/Pacific Northwest National Laboratory, CH2M, along with large utilities, medical centers, school districts, and food processors. According to the Tri-City Development Council, 82.8 percent of the metro area population has a high school, college, or graduate degree, and there are more scientists and engineers per capita in the area than anywhere else in the nation. The average hourly wage in the Tri-Cities is $26.29. *annualized through 08/19 **Source: CoStar

Washington State Excise Tax The Washington State legislature voted to enact a change in the Real Estate Excise Tax (REET) law on April 25th. The legislation was a focus of efforts to make the state tax system more progressive. The law enacts a new, graduated rate scale for real estate, replacing the flat tax of 1.28 percent. Effective January 1, 2020, the new rates will be as follows: • 1.1% of the selling price below $500,000 • 1.28% of the selling price between $500,000 and $1.5 million • 2.75% of the selling price between $1.5 million and $3 million • 3.0% of the selling price greater than $3 million Local real estate excise taxes are in addition to the state tax. Combined state and local REET rates for Vancouver, Tacoma, Spokane, Bellevue, and Seattle range from 1.6 percent to 3.5 percent. A drawback of the new legislation is that it does not specify whether the selling price threshold applies on a parcel-by-parcel, transaction-by-transaction, or another aggregate basis. Multifamily owners will want to consult with their attorney or tax professional for guidance, as Washington State has also increased its attempts to reduce efforts at planning around REET taxes by increasing enforcement measures, lookback timelines, and evasion penalties.

The Northwest Apartment Investor


OREGON Statewide Programs Rent Control (2019)

Oregon implemented statewide rent control of 7 percent plus CPI determined annually; see accompanying articles for details.

Eugene-Springfield / Lane County Employment Population City of Eugene: 171,245 (up 9.5% since 2010) City of Springfield: 62,979 (up 6% since 2010) County: 379,611 (up 7.9% since 2010)

Eugene/Springfield Multifamily Permits* 2019: 190 (annualized estimate) 2018: 492 2017: 0

Lane County Vacancy Rates** 2019: 4.0% (Multifamily NW Fall Apt Report) 2018: 1.3% 2017: 2.9%

Unemployment Rate (Q3) 2019: 4.5% 2018: 4.5% 2017: 4.4%

*Source: Census Bureau **Source: CoStar


Lane County’s population grew by 7.9% between 2010 and 2018, while the city of Eugene saw population growth of 9.5% over the same period. In the city of Eugene, 51.7% of housing units are renter-occupied.

Government, education, healthcare, professional services, and leisure and hospitality sectors make up more than 50 percent of the MSA’s total workforce. The largest employers in Lane County are PeaceHealth, the University of Oregon, the US Government, the City of Eugene, and the Lane County government.* The Eugene-Springfield Metro Area is also home to an emerging technology sector, known locally as the Silicon Shire. Several local tech companies now boast over 100 employees in the metro area, including 3Cinteractive, Alacrity Services, Datalogic ADC, Inseego, Presidio, and Symantec. 38.9 percent of Eugene residents have a bachelor’s degree or higher, and the median household income in Lane County is $47,710.

Housing & Local Politics

According to local organizations, the Neighborhood Economic Development Corp and Cornerstone Community Housing, Eugene had the nation’s second most constrained housing market in 2017. Between 2012 and 2018, the average sale price for a home in Lane County increased from $200,900 to $309,000. Despite the need for new housing, the city permitted 111 fewer single-family houses in 2018 than it did in 2017. As of June 2019, 137 permits were issued for multifamily units in the Eugene-Springfield Metro Area. If this pace continues for the rest of the year, only 274 new units will be permitted– compared to 492 in 2018. In May 2019, Springfield saw the highest rent increases in the state at 8.3 percent, while rents in Eugene increased by 4 percent. Eugene has only recently expanded the urban growth boundary to accommodate parks, schools, and office space. The City has not passed any legislation that would provide additional protection for renters above what is required by state laws, despite a persistent housing shortage. Under recently passed HB 2001, Eugene must come up with a plan for allowing duplexes and triplexes in single-family neighborhoods.

10 HFO Investment Real Estate • (503) 241.5541 •



Medford / Jackson County

Population City: 82,347 (up 9.9% since 2010) County: 219,564 (up 8.1% since 2010)

Medford/Jackson County MSA Multifamily Permits 2019: 175 (annualized estimate) 2018: 232 2017: 47

Medford Vacancy Rates (Q3)** 2019: 1.7% 2018: 1.7% 2017: 1.8%

Medford Area Unemployment Rate 2019: 4.7% 2018: 4.9% 2017: 4.7%

*Source: Census Bureau **Source: CoStar


Medford’s population grew by 9.9 percent between 2010 and 2018, while Jackson County’s population grew by 8.1 percent over the same period. Nearly 27 percent

of Jackson County residents over the age of 25 have a bachelor’s degree or higher, and 48.3 percent of Medford homes are renter-occupied. The median income in Jackson County is $48,688.


The largest employers in Jackson County are Amy’s Kitchen, Asante Health System, Harry & David, Lithia Motors, Pacific Retirement Services, and Providence Health Systems.


Between July 2012 and 2018, the median home price in Jackson County increased by 80 percent. As the county continues to grow, housing affordability is a growing problem for residents. Approximately a third of Jackson County residents spend more than 50 percent of their income on rent. In February 2018, the Medford City Council passed a 0.3 percent construction excise tax within the city limits—lower than the 1 percent allowed in Oregon. Medford plans to give 15 percent of the funds generated to a nonprofit for nutrition, housing, and senior programs, 35 percent to low-income housing projects, and 50 percent to programs that build houses for residents making up to 120 percent area median income.

HFO Sale: Green Leaf River Pointe

387 Units in Vancouver, WA • $68.8 million

The Northwest Apartment Investor


Regional Economy Remains Strong, even as Outlook Uncertain By Josh Lehner, Economist, Oregon Office of Economic Analysis

The current economic expansion is now the longest on record, celebrating its 10th birthday over the summer. The financial data flow remains solid overall, and classic recession catalysts such as an overheating economy have not reared their heads. The good news is that expansions do not die of old age, and the outlook calls for ongoing, but slower growth. Expansions do tend to die due to bad behavior and policy mistakes. As such, the risk of recession is rising. Revisions to GDP and employment reveal a weaker and slower-growing economy than previously believed. The brief boost provided by federal tax cuts is in the rear-view mirror. Past interest rate hikes by the Federal Reserve also cooled economic activity. As well, the trade war escalation is spilling over and weighing on the economy to a more significant degree.

the state and across all populations. Income gains are rising the fastest among low-income Oregonians who rely upon the labor market for their only real source of income. Additionally, poverty rates among the state’s communities of color are at multi-decade, possibly historic lows. There remains a substantial racial gap in terms of most socioeconomic data. However, it is narrowing in a healthy economy. More Oregonians of all backgrounds are working more hours and at higher pay.

Businesses are wary as they delay investments and slow their pace of hiring. All of this has financial markets on edge, and the Federal Reserve is now taking out insurance rate cuts in hopes of heading off a recession. Time will tell whether this is the top of the cycle or just a rough patch.

While Oregon continues to see substantial income growth, the latest census data reveals parts of the state taking a bit of a breather. Specifically, income growth in the Bend and Salem metro areas slowed to the rate of inflation last year. In the Portland region, educational attainment and home ownership rates held relatively steady after significant gains in the previous few years. How much of this reflects year-to-year noise in the data and how much signals a real shift is still an open question.

Behind the turmoil and uncertainty remains an economy that is mostly doing well. In particular, consumer spending is holding up even as sentiment waned a bit in recent months. We know consumers will spend until given a reason to be scared, which typically means the fear of job loss. The best leading indicator for the labor market is initial claims for unemployment insurance, which provides a measure of layoffs. At present, initial claims remain at or near historic lows. Newly released census data shows household finances as healthy. Oregon’s median household income is at a record high, on an inflation-adjusted basis. For the first time in more than 50 years, Oregon has surpassed the national median household income. The local economy’s stronger growth this cycle is translating into more money in the pockets of Oregonians as the sweet spot (or feelgood part) of the business cycle continues. These improvements have spread to every corner of

12 HFO Investment Real Estate • (503) 241.5541 •

Of particular note are the ongoing developments in the housing market. Multifamily permitting activity remains strong. Much of the statewide business occurs in the Portland region, of course, and despite concerns over local policies and overbuilding, permitting activity is holding up. Encouragingly, multifamily permits elsewhere in the state are at their highest levels since the early 2000s, driven by increases in Corvallis, Eugene, and Medford over the past 18 months. Near-term absorption is helped by continued inmigration and by home ownership rates among 20- and 30-somethings that dropped slightly in Portland last year. Given rising household incomes, low-interest rates, and millennials aging into their 30s, it is likely that ownership will continue to increase in the years ahead.

Longer-term absorption will be helped by population growth and also possibly from higher rates of household formation of existing residents. Today, headship rates among 20- and 30-somethings are at multi-decade lows, and they continue to fall. If headship rates today were the same as in the early- or mid-2000s, the Portland region would have 36,000 more households overall. That is equivalent to nearly three years of new construction. Societal changes and increased schooling are part of the story, as are lower levels of housing affordability. However, moderating rents and the healthy multifamily supply may encourage higher rates of household formation. If so, this latent housing demand may help the market find

an equilibrium sooner rather than later. The near-term outlook is driven by business cycle dynamics, most of which point, at best, toward moderating growth. The regional economy is at its strongest vantage point in at least two decades, providing some cushion for the next recession whenever it comes. Over the long run, the Pacific Northwest’s comparative advantage remains our ability to attract and retain working-age households. The influx of new residents provides an ample supply of young, skilled labor for local firms to hire and expand. They also offer ongoing demand for housing units of all types.

HFO PORTLAND MARKET DEVELOPMENT PIPELINE Units Under Construction and Planned Units

Close-In Eastside

Close-In Westside

7,547 Units | 26.55%

North Portland

5,325 Units | 18.25%

Outer Eastside

3,132 Units | 10.74%

Outer Westside

3,823 Units | 13.10%

South Waterfront

4,777 Units | 16.37%

404 Units | 1.38%

Washington (Clark County) 3,967 Units | 13.60%

6,000 5,000 4,000 3,000 2,000 1,000 0

Prospective 20,306 units

Planned 10,332 units

Under Construction 18,843 units

Requested early assistance or design advice

Submitted building permit application

Building permits issued for project

Close-in Eastside Outer Eastside

Close-in Westside Outer Westside

South Waterfront North Portland

Washington (Clark County)

HFO research staff track the total number of all known units currently under construction and planned. Currently, these total 29,175. The chart above was last updated in November 2019. If all of these units were built, the chart shows where they would be located. Source: Newspaper reports, city permit offices, HFO research. Copyright 2019 HFO Investment Real Estate. All rights reserved. Reproduction without permission strictly prohibited.

The Northwest Apartment Investor


Affordable Housing By Jennifer Shuch, Senior Research Analyst, HFO Investment Real Estate

Over the past year, American cities have faced an affordable housing shortage. As this problem persists, local and national policymakers have developed solution strategies for the housing market. Zoning

First created to separate housing from industrial areas, zoning became a way to segregate groups of people. In large urban areas zoned for low-density, single-family dwellings, people who cannot afford to purchase those homes are shut out. Within the constraints of geographic and urban growth boundaries, high-density building restrictions further exclude lower-income people. In September, the Terner Center for Housing Innovation published “Land Use Politics, Housing Costs, and Segregation in California Cities.” Author Jonathan Rothwell found that much urbanized California land is inefficiently allotted for single-family housing. Areas with strict land-use regulations and opposition to infill are high. There are significantly fewer Black, Hispanic, and blue-collar workers. Rothwell concludes that rules on density can be tied to high housing prices. A May 2019 ProPublica article found that wealthy Connecticut cities use zoning to prohibit affordable multifamily units. Thus, Connecticut is one of the nation’s most segregated states by race and class. America’s policymakers have taken note of these findings. In 2018, Minneapolis voted to allow duplexes and triplexes in all residential areas as part of its 2040 Comprehensive Plan. Portland’s Residential Infill Project (RIP) was sidelined in late June when the Oregon Legislature passed House Bill 2001. This bill removed single-family zoning in cities with at least 10,000 residents. In municipalities with 25,000 residents and smaller towns in the Portland metro area, duplexes, triplexes, fourplexes, and cottage clusters will be allowed in single-family zones. Cities with at least 10,000 residents will be required to allow duplexes. The new rules take effect on January 1, 2020. House Bill 2001 did not stop Portland’s plan for the

14 HFO Investment Real Estate • (503) 241.5541 •

Residential Infill Project. In September, the Bureau of Planning and Sustainability (BPS) presented the City Council with changes to the RIP to allow for increased density in single-family neighborhoods. In compliance with HB 2001, the plan permits up to four units on most residential lots in single-family areas. BPS further recommends that Portland allow up to six units on residential lots if half of those units are affordable to households below the area median income. The City Council plans to hold its first meeting on the newly revised RIP on December 11th. The federal government lacks the power to overrule local zoning decisions. Instead, incentive plans to upzone cities have gained traction. Last year, the US Department of Housing and Urban Development (HUD) considered revising the Affirmatively Furthering Fair Housing Rules to make HUD funding contingent on zoning reform. Many cities that use HUD programs, like Community Development Block Grants (CDBG), are already reasonably dense. In September 2019, Oregon Congressman Earl Blumenauer released his report “Locked Out: Reversing Federal Housing Failures and Unlocking Opportunity.” Blumenauer suggests the creation of federal incentives to end exclusionary zoning and increase multifamily housing. It’s not clear if such incentives would be useful in areas where zoning practices prevent needed housing construction. After HUD proposed incentives tied to CDBG funding, Brookings Institute Fellow Jenny Scheutz noted that this change would not reduce segregation in the nation’s most restrictively zoned, affluent suburbs. In April, HUD and the US Department of Justice warned municipalities against zoning practices that could violate the Fair Housing Act (FHA). Their report explicitly outlined actions that would be considered illegal under the FHA, including banning or restricting

the development of multifamily housing due to assumptions about potential tenants; refusing to provide shelter; and land-use policies that would deny equal opportunity for the disabled.

Urban Job Growth and Wage Stagnation

Since the recession, major U.S. cities have seen much job growth. Construction levels in those cities have not rebounded. Apartment List reports 38 percent fewer housing units permitted in 2018 than in 2005. Cities like Charlotte, NC, that are building more units per capita, are showing slower growth than before the recession. As residents flock to cities with strong job growth, they are finding fewer available housing units. Wages have stagnated for all but the highest earners. London-based researchers Neil Lee and Stephen Clarke’s recent paper in Research Policy found that cities with significant high-tech job growth have seen lower than average pay for low-skill service work. For every ten high-tech jobs created in the U.S., seven others are needed, including six low-wage service positions. In 2018, Oregon’s most significant job gains were for those paying $60+ per hour and those between $15 and $19.99 per hour. Statewide, the 2018 median hourly wage was $17.79. Those earners cannot compete with high-income workers in the housing market. Over time, new luxury housing can become less expensive as buildings age—if construction keeps up with job growth. Since the recession, unemployment has reached historic lows in cities like Portland, but new housing development has not approached the levels seen in 1990 or 2000. Policies like statewide rent control and the City of Portland’s inclusionary zoning program may be exacerbating the problem. Todd Litman of the Victoria Transport Policy Institute reports that mandatory inclusionary zoning policies can decrease the overall production of housing units. In Litman’s example, a 0 percent inclusionary zoning requirement leads to 1,000 new units in a given year, with one half falling into the “high-price” category and the other into the “moderate-price” category. As the number of affordable units required by an IZ program increases, the number of expected new units decreases. A 20 percent affordability requirement would result in 850 units built, with 425 of those being high-priced, 255 moderately-priced, and only 170 low-priced. If lack of supply exacerbates affordability issues, cities must determine whether policies that further restrain supply are meeting policy goals.

Reshaping the Landscape of the Region Since its founding in 1982, Ball Janik LLP has become widely recognized as an industry leader in the areas of real estate and land use.

We serve public and private clients in all phases of commercial development, leasing, acquisitions, dispositions, financing and equity arrangements, restructuring, and workouts. | | 503.228.2525

The private real estate market cannot be expected to solve the problems of income inequality and wage stagnation. Instead, cities are working to fund low income and workforce housing. New laws passed in Washington facilitated the state-wide building of affordable housing. In 2018, Washington legislature passed a law requiring the state to identify and catalog dormant state-owned land suitable for affordable housing development. It also allowed municipalities to transfer, lease, or dispose of public property for public benefit. In September 2019, the city of Seattle announced plans to transfer three surplus parcels of city land to nonprofit developers at no cost. The city will also contribute $2.22 million to site development. According to the Homestead Community Land Trust, which is developing a 6,000 square foot parcel in Phinney Ridge, the land transfer creates a 20 percent cut in costs.

The Northwest Apartment Investor


Buying or Selling an Apartment during Construction Defect Litigation By Kevin Eike, Attorney at Law

As construction defect issues plague multifamily projects in Oregon, I often get the question from brokers, owners, and managers: “What do we do if we have construction defects and wish to sell the property?” In this article, I will present a study of one such case involving a 64-unit property currently in the middle of construction defect litigation by an owner who wishes to sell. The property, which we shall call “Defect Village,” was built in 1980. It comprises 12 buildings, 64 units and has on-site management. Shortly after purchasing the property in 2011, the owners set in motion a large capital improvement project that involved replacing all of the siding and roofing to add value, increase rents, and improve the cap rate—sound familiar? The work was completed by 2013 by three different contractors at the cost of nearly $1 million. As time went on, the owner began experiencing leaks, moisture issues, and tenant complaints. Each time, the owner had his on-site maintenance and/or outside contractors make repairs. By 2018, the list of problems and repairs became overwhelming, and the owner reached out for help from the broker who represented him in the purchase seven years earlier. The broker referred the owner to my office, and we evaluated the potential construction defect claims against all guilty parties, including the former manager and contractors involved in the 2011-2013 capital improvement project. After assembling a Forensic Consulting firm and a contractor, we performed an invasive investigation at the property. We made 32 individual investigative openings in the siding and roofing, according to ASTM 2128— the industry-standard guide to investigating leaking buildings. We documented our findings. It became readily

16 HFO Investment Real Estate • (503) 241.5541 •

apparent that the siding and window replacement in 2011-2013 was experiencing systemic failures due to the contractor ignoring applicable industry standards, building code, and manufacturer specifications. Faced with no other choice, we sent a Notice of Defect Letter to the contractors, as required by Oregon Revised Statute 701.565. Under Oregon’s Notice of Defect statute, owners are required to send such a notice by certified mail detailing all of the defects, explaining the remediation necessary, and indicating they intend to commence court action absent remedy by the contractor. As a matter of practice, I send my Notice of Defect letters to Liability Insurers for the contractors as well, to solicit their involvement. Under Oregon law, once a contractor receives a Statutory Notice of Defect Letter, they have 14 days to notify any subcontractors and 90 days to perform inspections, offer to repair, or offer to pay for repairs detailed in the notice. In practice, very few contractors or their insurers ever make any offer to make or pay for repairs, as was the case with Defect Village. After waiting for the 90 days required by ORS 701.565, we filed suit against the contractors, who performed the defective work at Defect Village, seeking over $2 million in repair costs. Our legal theories were breach of contract, negligence, and negligence per se. The typical life cycle of a multi-family construction defect litigation case in Oregon Circuit Court is between 1218 months. Cases involve extensive written discovery, numerous depositions, and multiple mediations. While the vast majority settle through mediation, around 5 percent of cases proceed to trial or arbitration. Defect Village was three months into its life cycle when the owner expressed a desire to sell the property as part of

his plan to sell all his Oregon properties. He wanted to roll the equity from his entire Oregon portfolio into a single out-of-state property in a 1031 Exchange. Accomplishing this was a challenge since Defect Village was tied up in litigation, which likely wouldn’t be quickly resolved. At Eike Law, P.C., we live by the motto, “Every problem has a solution.” The solution in Defect Village was to hire a contractor to perform repairs to approximately onethird of the project, get the repair costs quantified and then list the property for sale. The sale notice would disclose the construction defects and litigation and seek a buyer who would purchase the property at a discount with knowledge of the need for repairs for the remaining two thirds of the property, and the cost of those repairs (based on the already incurred cost of repairs to the first one third of the property). Such a buyer could see the repairs already accomplished at the first one-third of the project and envision the project fully repaired. The buyer would also have a pretty good idea of the time required to fix the remainder of the project, the impact on tenants, and other relevant issues.

assistance of a real estate and construction attorney. Competent legal representation is critical in the drafting and negotiation of the contract with the contractor and consultant, who will perform the repairs to ensure any pricing agreed upon with the seller can be transferred to any potential purchaser if they so choose. If the buyer prefers not to use the contractor used by the seller to complete repairs on the remainder of the project after the sale closes, the contract is drafted in such a way that the buyer is not committed to using that specific contractor. I think we can all agree that having widespread construction defects with seven-figure repair costs— in a property an owner is looking to sell—is not an optimal situation for the owner, manager, broker, or any prospective buyer. That said, it is something a seasoned real estate and construction attorney can handle in a manner that facilitates the sale if the proper amount of diligence is performed. Kevin Eike is a Portland attorney specializing in real estate and construction law. He can be reached by email at or by phone at (503) 372-6755 or through his website at

Selling Defect Village will necessarily involve complex disclosures and addenda dealing with the pending litigation, which party retains the right to the proceeds of the lawsuit and other issues—all requiring the

AFFORDABLE HOUSING (CONT.) Washington HB 1406, which passed in 2019, allows cities to apportion state-generated sales tax funds for affordable housing projects. King County plans to divert nearly $100 million for this purpose over the next 20 years without raising county residential taxes. Lawmakers hope this will help build some of the 244,000 new affordable homes the county estimates it will need to supply by 2040. In his report, Congressman Blumenauer acknowledged the severe lack of new affordable housing funding. He notes that in the 1950s and 1960s federal housing assistance focused on the production of public accommodation. In the 1980s and 1990s, federal funding for public housing construction and maintenance saw deep cuts. The Faircloth Amendment in 1999 prohibits federal funding for the creation of public housing if it would increase units owned by a given housing authority over existing levels. Blumenauer suggests a repeal of the Faircloth Amendment and allocation of $10 billion per year in federal funding for public housing. Many Democratic candidates engaged in current

primaries for the presidential election have also put forward plans for housing reform. While Senator Bernie Sanders is calling for federal-level rent control, Senators Cory Booker, Kamala Harris, and Elizabeth Warren, along with former HUD secretary Julian Castro, all advocate for a renter tax credit for those who spend more than 30 percent of their income on housing. Like Blumenauer, Senator Warren advocates for investment in housing funds. Her plan dedicates $500 billion to build 3.2 million new housing units nationwide.


Housing affordability has grown from the problem of “superstar” cities like New York and San Francisco to a widespread issue. The post-recession building slowdown—along with income inequality and urban job growth concentration—has created a perfect storm of affordability issues. A sharp decline in federal public housing investment has left cash-strapped municipalities holding the bag. Moving forward, cities and states must prioritize the need for a general increase in housing supply and target that increase for lower-income households. The Northwest Apartment Investor





• We offer a library of hundreds of videos on topics of interest to multifamily owners with local economists and other housing industry experts.

Weekly Podcasts In the past 12 months, our podcasts have been downloaded nearly13,000 times. Join HFO Senior Research Analyst and host Jennifer Shuch for a 10-minute weekly update on select news of interest to the industry.

• 12-month views Oct 2018-Oct 2019: Our annual minutes watched exceeded 42,000 (more than 700 hours) and our videos were viewed more than 6,500 times. RECENT POPULAR VIDEOS

OREGON RENT CONTROL | SB 608 AN UPDATE ON STATE AND PORTLAND HOUSING LAWS Ball Janik Partners Adele Ridenour and Ciaran Connelly presented information on 2019 legislation making headlines across the country. 2019 WASHINGTON STATE HOUSING LAW UPDATE Attorney Charles Kovas provided the latest on 2019 Washington State Landlord/Tenant laws.

Inclusionary Zoning Update – Portland By Jennifer Shuch, Senior Research Analyst, HFO Investment Real Estate Portland’s inclusionary zoning policy went into effect on February 1, 2017. Many developers submitted projects in January to beat the deadline, resulting in what appeared to be a pipeline of 19,000 units. At the time the policy was enacted, the City identified the need for at least 23,000 additional housing units for low- and moderate-income residents. Under Portland’s IZ policy, buildings with more than 20 units in the Central City Plan District and the Gateway Plan District are required to ensure that: • 20% of units are affordable at 80% Median Family Income (MFI), or • 10% of units are affordable at 60% MFI. In all other areas of the city, 15% of units must be affordable at 80% MFI, or 8% of units at 60% MFI. In December 2018, Multnomah County worked with the City of Portland to offer developers with projects in the pipeline before IZ the opportunity to participate in the Multiple Unit Limited Tax Exemption (MULTE) program. While the MULTE program had already been reworked to match IZ program rules, this new option was named the “Incenting the Pipeline” MULTE program. It more closely resembled what had been available in the past. This iteration of the MULTE program provides 10-year

18 HFO Investment Real Estate • (503) 241.5541 •

property tax exemptions for affordable housing units. Unlike IZ, the length of affordability for the tax-exempt units is only 10 years. In 2017, the City and County agreed to forgo up to $15 million in tax revenue over five years but declined to make new funds available for the program. To expand the MULTE program, they limited the program to eligible projects submitted before IZ. As of November 2018, that amounted to 42 projects with 8,000 units. The City reported in its July 2019 update that six projects over 20 units and 16 projects with

fewer than 20 apartments with previously vested permit applications are voluntarily following the city’s IZ rules. This expansion of the MULTE program to cover those already vested may not be sufficient to offset the impacts of the construction slowdown in Portland. In addition to scrapping projects that do not pencil out under the city’s IZ policy, there is evidence that some developers may be under-building for five years to avoid the program’s financial impacts. According to Mike Wilkerson of EcoNorthwest, while Portland has seen a decrease in overall multifamily building permit applications, there has been a simultaneous increase in projects with fewer than 20 units.

HFO Current Listing: The Savona

24 New Units in Portland, OR • $4.795 million

Units applied for 2018:

2,138 units in projects vested before IZ 1,709 units subject to IZ 1,167 units in projects under 20 units While there were 400 building permits in 2016 for multifamily assets with 12-19 units, that number soared to 600 in 2018.

Units entering the construction pipeline – City of Portland* 2016 – 3,852 2017 – 6,250 2018 – 4,116 2019 – 2,771 (through Sept. 25, 2019)

As of October 2019, 72 projects with a total of 4,412 units submitted to the city are subject to the IZ requirement.** The City of Portland is building 11 of these projects—862 units—itself. • Units complete: 45 rental units, including w (20) studios w (16) 1-bedroom w (8) 2-bedroom w (0) 3-bedroom w (1) 4-bedroom • Units approved: 404, including w (182) studios w (145) 1-bedroom w (41) 2-bedroom w (35) 3-bedroom w (1) 4-bedroom • Units pending: 97 In Oregon, urban growth boundaries are based on an anticipated future need for different land uses. Metro areas have the option to expand boundaries

HFO Current Listing: Alberta Arts Apartments

18 New Units in Portland, OR • $4.193 million

or increase density to meet the needs of current and future residents. If developers are under-building due to pressure from Inclusionary Zoning, this could have longterm impacts on the housing supply and affordability of city neighborhoods. The City of Portland has recently increased zoning density in large areas of the city as part of the 2035 comprehensive plan. If developers are discouraged from building the maximum number of units on a lot, the city will not be able to meet its goals. While the City pledged to conduct reviews of the program every six months and to change the plan as needed, recent updates to the IZ policy have sought solely to clarify existing language. In the spring of this year, City staff indicated to HFO researchers that “…at this time, there are no program changes scheduled.” The housing bureau was sent a follow-up request on October 15. So far, City officials have not responded, nor announced any plans to revisit the Inclusionary Zoning policy. *Source: US Census Bureau **Source: Portland Housing Bureau

The Northwest Apartment Investor


The Impact of Oregon’s New Rent Control Law By Tyler Johnson and Lee Fehrenbacher, HFO Investment Real Estate

The increase in new laws and regulations impacting landlords and tenants in Oregon and Portland has caused some heartburn for apartment owners concerned about the impact these policies will have on their assets. But—while there has been a dip in sales activity this year—values in the short term have been relatively unimpacted, and transactions in the suburbs have picked up. (See pages 2-3 of this newsletter for a rundown of these policies)

A sharp increase in Clark County Institutional sales

Clark County is the only Metro area county not located in Oregon. Through Q3 2019, Clark County has seen a 156% increase in sales volume compared with all of 2018 in sales over $10 million, with roughly $336.5 million invested across ten transactions. This compares to approximately $131 million across three transactions in 2018. The average sales price per unit over the same period also increased by 18.8% percent to $211,935. Three of Vancouver’s four largest post-recession deals closed in 2019. One of those transactions—the HFObrokered 387-unit Green Leaf River Pointe—sold for $68.8 million to an out-of-state buyer. This marked the fourth time the asset sold since the recession, with its value increasing by 125% since the first sale in 2010.

HFO Sale: Bethany 5

67 Units in Portland, OR • $19.2 million

20 HFO Investment Real Estate • (503) 241.5541 •

Rents increased 95 percent over the same period. One sign of the uptick in investor interest in Vancouver has been the increase in offers on institutional properties there. In August 2018, the 334-unit Meadow Wood Apartments generated more than double the number of offers typically seen for Vancouver listings. The property sold for $54.75 million at a 4.68 percent cap, after the buyer received more than 20 offers.

Effects on private client sales

Private client transactions of less than $10 million in Clark County are also on track to match or outpace 2018. While approximately $25 million across nine transactions, has closed as of Q3—compared to the roughly $63 million across 14 sales in 2018.

Since the passing of SB 608 [February 28, 2019], the following additional Clark County assets have sold: Property Birchwood Lane Edward's Duplexes Herby The Lavonne 1000 W 23rd T Street Apartments Sam's Good RV Park Somerset Terrace Green Leaf Uptown Creekside Village Green Leaf River Pointe Woodland Mobile Home and RV Park Meadow Wood Apartments

Units 36 12 18 75 5 204 66 95 167 132 387 75 334

Sale Price $3,700,000 $3,425,000 $3,700,000 $17,250,000 $800,000 $4,910,000 $2,000,000 $16,200,000 $57,750,000 $29,000,000 $68,800,000 $2,976,200 $54,750,000

Portland sales are flat

So far, 2019 sales in the rest of the Portland metro area, excluding Clark County, are on track to match 2018 sales. There have been $1.3 billion in sales through September of 2019, compared to $1.9 billion for all of 2018. There has, however, been a noticeable drop in the number of private client transactions under $10 million, according to CoStar and HFO research. In 2018, there were 112 private client transactions in the Oregon counties within the Portland metro area, which totaled approximately $414 million. Through September 2019, there were just 70 apartment sales, totaling roughly $282.8 million.

Other culprits

Despite the increase in regulations, the flattening of sales activity in Portland is likely less due to rent control than the changing fundamentals of a market in its tenth year of growth, including slowing rents and a lack of valueadd product. While the 7% plus CPI rent increase allowed by SB 608 pales in comparison to the double-digit hikes owners experienced in the wake of the recession, few owners in Oregon can argue they are achieving 9.9% increases on market rents today. That is due in large part to the delivery of thousands of new apartments in Portland’s core, which has led to the re-emergence of leasing concessions throughout the Portland market.

Sale Date 7/10/2019 7/1/2019 7/25/2019 8/22/2019 9/18/2019 9/23/2019 9/30/2019 4/26/2019 5/23/2019 5/24/2019 6/19/2019 5/2/2019 8/22/2019

HFO Sale: Meadow Wood Apartments

334 Units • Vancouver, WA • $54.75 million

you’re used to owning in California, Oregon’s regulations don’t look all that bad.” Recently, California and New York increased regulations on landlords and made it significantly harder to raise rents. Meanwhile, cities like Boston are considering re-legalizing rent control. As more cities and states follow suit, investors may view Oregon’s regulatory environment more favorably.

HFO Current Listing: Palladian Apartments

20 Units in Portland, OR $2.7 million (new price!)

And even with all the red tape, there is still investor demand for Portland assets that are priced accordingly. As one of our clients from California said recently, “when The Northwest Apartment Investor


Asbestos, the government’s new target DON’T GET CAUGHT By Clint Arp, President/Owner, J.R. Johnson LLC

This article’s purpose is to assist building owners, management companies, and contractors in the prevention of hefty fines (or possible lawsuits) associated with projects related to commercial buildings consisting of five or more units. Our government has recently decided to enforce stricter asbestos laws. Several states were already showing an uptick in enforcement activity when, in the fall of 2018, Oregon adopted additional requirements and also began more stringent enforcement. One significant law, in direct correlation to full implementation, is the requirement that all new and existing construction must be tested by an AHERA certified inspector before disturbing or demolishing suspicious materials begins. There are no (commercial real estate) predates as to when something requires testing. It seems there has been confusion in the industry regarding these existing—but newly enforced—laws. Below is an outline of what is and is not allowed. Note that many agencies are involved with enforcement. The EPA, OSHA, DEQ, and Clean Air Agency in Washington State all have varying requirements. You’ll want to educate yourself regarding each of these entities’ mandates.

THE FACTS AT A GLANCE: • DEQ requires that suspicious materials are tested for asbestos before any renovation or demo to determine if abatement is needed. All build years of commercial structures are subject to this requirement. A simple drywall patch could fall under renovation since the existing materials would be disturbed. • Asbestos testing does not take the place of lead testing requirements for pre-1978 buildings. • A single sample can be pulled for testing in Oregon by any individual. This means just one sample—not multiple samples from one unit. If multiple samples are needed in Oregon, an AHERA Building Inspector is required. • Washington State requires that a certified AHERA building inspector pull all samples—no exceptions. • A copy of the testing/survey must be stored on-site during the demo and renovation of a project. • One can presume that a single material contains asbestos and have it abated without conducting a survey. • Don’t confuse residential and commercial requirements. Residential has a build date of 2004 or older for testing and surveys. Commercial has no predate, so everything must be tested. • Anything with more than 1 percent asbestos must be handled by an abatement contractor. OSHA does not allow any amounts of exposure—potentially overriding DEQ and Clean Air Agency requirements. • Every agency mentioned can fine or penalize you or your company.

22 HFO Investment Real Estate • (503) 241.5541 •

Here’s a sample of DEQ fines and other penalties:

w A first offense can be $5,000 per violation. w A second offense can be $10,000 per violation. w A third offense can be $15,000 per violation. w One can be sued if an employee is put in harm’s way. w One can be sued for cross-contamination. If someone removed a vinyl floor in a bathroom without proper containment, training, or certification, the asbestos dust could cross-contaminate other rooms or contents. These rooms and contents would need to be cleaned or replaced with post-testing to verify safety. The disposal locations could also require cleaning if the materials were positive for asbestos. The person who conducted the demo could also be responsible or sue for health issues for the exposure that has taken place.

J.R. Johnson, LLC is an industry leader dedicated to efficient and skillful property repair and restoration services.

w One can be punished by more than one agency and be held responsible for the damages or possible damages. It is unknown how many fines or costs could be associated with a violation.

Some examples of suspicious materials

Acoustical ceiling tiles, air duct cement/tape/insulation, block insulation, building insulation, adhesives and mastics, caulks and putties, fire doors and walls, flashing cement, furnace cement, interior wall and ceiling textures (not just popcorn), joint compound/tape mud, roof paper, plaster, sheet vinyl, 9x9 floor tiles/damaged 12x12 floor tiles, soundproofing insulation, spray-applied textures (popcorn-orange peel-troweled), stucco, and vapor barriers. Please visit the DEQ/Clean Air Agency websites for the full list of materials.

Final thoughts and tips

Several local property management companies have been inspected or turned in by residents, employees, or randomly selected via site visits and permits. The agencies are serious about the required testing before demo or renovations. Please don’t take the risk since you don’t know who is watching or what their agenda is. Hire trained and certified contractors/inspectors to pass on the risk and liability. You don’t want the bad reputation, fines, or lawsuits associated with these government agencies. These are federal laws that every contractor, owner, employee, and management company must follow. Be the leader in doing it right—not the example of what can go wrong. • Come up with a plan to handle your turns, including vinyl replacement, drywall patching, mold remediation, and other general repairs. Multiple unit testing during a non-emergency/planned situation can save you over 30 percent in testing costs and general conditions.

Whether your property needs repair due to construction defects or catastrophic damage, including fire, flood, mold, or biohazard contamination, J.R Johnson, LLC can restore your property to its original or better condition. Our experts are available 24/7 –365. Call us at (503) 240-3388 or visit us online at • Develop a folder or spreadsheet to keep all testing documentation organized. You only need to test the locations once and abate once if it is positive. The proof of the testing and results must be maintained on-site. • Hire a certified AHERA inspector to take your samples. • TEST EVERYTHING BEFORE YOU DISTURB ANY MATERIALS. If it comes back negative, you are free to complete all repairs in-house or with a contractor— including water damage and fire damage emergencies. The DEQ will allow you to cut out three square feet of drywall to source a leak; OSHA requires testing since they say that there is no safe level of exposure. Let others be the expert for you; the agencies will not accept the excuse of “I didn’t know that.” J.R. Johnson, LLC can handle all testing, abatement, restoration, construction, painting, and roofing needs. Our company can also provide specific maintenance education if requested. 24/7, 365 days a year. Call us at 503-240-3388 or visit us online at The Northwest Apartment Investor


Know Your Plan. Is Financing a Part of It? By the Team of AMF Capital

Today’s markets are fraught with pressures from every direction. Among them are discussions of politics, global cap and trade, local economies, and what the Federal Reserve will do next on interest rates. All these uncertainties make for a fascinating marketplace when it comes to navigating the world of commercial real estate investing, and the timing in what to do next and when. When the market is in a constant state of flux, always rely on the fundamentals of what makes sense. A good piece of advice taught long ago was, “make the best decision you can, with the information available to you at that date and time.” When evaluating the decision on a piece of real estate and what type of a loan to secure, stick to the tried and true method; rely on the fundamentals. Relying on fundamentals is difficult when there are so many unknowns. Defining your decision can be timeconsuming. It takes time to learn the current market and identify which key factors may or may not affect financing for the purchase or refinance of a piece of real estate. Make no mistake: if you own or want to own real estate, financeability is one of those fundamentals. If either the property or its owner can’t be financed, buying and selling are much more difficult. To get started, work with experienced loan advisers in

24 HFO Investment Real Estate • (503) 241.5541 •

your marketplace. Be sure to locate a loan advisor, not just a mortgage broker. In today’s market, most mortgage brokers are simply middlemen between you and one or two lending platforms. An advisor can help you come up with a plan, know how to work with what you have, understand what you want to do with the investment, and can help to structure financing to meet your objectives. At AMF Capital, we ask questions that make our clients think about their objectives. While every individual has their own goals, there are several options to get there. Asking those questions not only enables our advisors to structure a proposal, but it also helps our clients identify the critical steps and challenges needed to navigate their strategy. A good loan advisor will listen to a client’s goals and make them their own. An advisor will identify which key factors work in a client’s favor, which branch of lending will find those factors most desirable and present the best loan options available to fit a client’s plan. A good loan advisor will help their clients evaluate their best lending options. Every day at AMF, we’re asked, “what’s your best rate?” and our typical response is “zero

percent.” While everyone looks to find the lowest rate, there are other things to consider. For example, zero percent is the best rate; however, is it the best loan? The lending community is not new at this game, and they will make a profit one way or another. A zero percent loan, if available, would have concise terms and very high costs. For what you pay and how long you get it, it may not be the best money for your time. Therefore, it is essential to understand all the dynamics that make up a loan; this should be a critical piece of your dialogue with your advisor. If a mortgage broker says they can offer the same rate at lower fees, what else are you getting, and is it worth the perceived savings? Many mortgage brokers work with the same few lending sources and try to make a deal fit one of their lender’s boxes. Through inexperience or limited lending exposure, understanding the complexities of the project may be outside of their expertise. Remember, the bitterness of poor quality and service remains long after the enjoyment of a lower price. A good loan advisor understands how the ownership of a property (the “vesting structure”) affects financing. Some vesting structures are more complicated than others. Most investors are looking to insulate their real estate from outside liabilities; they may involve multiple partners or entities. A good loan advisor knows which questions to ask you, your CPA, 1031 exchange accommodator, and attorney to help protect your exposure to taxable events and technical defaults. Vesting may determine the requirement of a full or non-recourse loan; these types of loan structures will have different interest rates, costs, and loan-to-value restrictions. A good loan advisor considers a variety of property types and locations throughout the U.S. In today’s marketplace, different lenders have appetites for specific kinds of properties; others are looking to expand or diversify. A mortgage broker or a bank customer may get a lender to consider making an exception, but the terms or costs for that loan may be more than other options. Sometimes we meet clients who have already been through their lending channels only to find, after losing time in the market, the loan was not deliverable. Sometimes the answer isn’t in one of the three banks that a mortgage broker uses; sometimes, the answer is in a small institution with a not-so-sexy name that happens to like your tenant base, location, or property design. A good loan advisor is going to get to know you. Do

Market Changing? Are you unsure about what impact that has on your loan options and investment strategies? As part of your team, AMF CAPITAL works closely with our clients to evaluate, strategize and deliver loans. It’s simple! By understanding the changing markets, we set realistic expectations for our partners, allowing them to plan their strategies more accurately and safely. Our team is in the market day in and day out. With over $500,000,000 in closed loans under our belt, AMF Capital is your source for information and loan success.

Expand your team of professionals with AMF Capital. For current rates or a quote, please visit our website at or call (503) 659-3399 for more information.

you have things that need to be addressed, like credit challenges or a life-changing event? A good advisor can help you identify which lending channels will work with those dynamics. While these are just a few items to consider when determining the finance plan, they play a significant role in the success of your loan. With the changing marketplace, it is crucial to know how your ideas will affect the success and deliverability of your financing options. Selecting the best advisor and establishing a plan will allow you to achieve your investment goals and objectives. AMF Capital consists of trusted advisors to investors in the Northwest market and is a finance partner that can help deliver on your plan. Learn more at or ask any HFO broker for a referral.


Wraparound Services Needed to Address Homelessness By Jennifer Shuch, Senior Research Analyst, HFO Investment Real Estate

In the United States, and particularly on the West Coast, cities face increasing homelessness. The most successful solutions link residents with the services they need to become—and remain—successfully housed. As Professor John Minnery of the University of Queensland says, homelessness is a complex issue:

In the past, debates on causes have polarized around sociostructural causes concerned with changing labor markets, poverty, the housing system, and the nature of the welfare state, on the one hand, and individualist and psychological factors reflecting individual agency, including alcohol dependence, substance use, social and behavioral problems and the like, on the other hand…Neither approach, by itself, properly identifies the full complexities of homelessness. It is now clear that there is a continuum of causes that crosses both structural and individual issues.1 Cities have limited ways to mitigate structural problems, such as stagnant wage growth, unemployment rates, or systemic poverty. Communities can excel by connecting people with effective programs and resources. High rates of homelessness in urban markets may require social services to play a more significant role in finding or creating housing.

Preventing Homelessness

The conversation around homelessness has primarily been limited to tenant protections. To protect tenants, some laws—such as Portland, Oregon’s recently enacted tenant screening ordinance—likely go too far. In Portland, landlords will be required to rent units at 50 percent of a tenant’s monthly gross income. Without additional governmental assistance, more renters may be locked into leases and more vulnerable to eviction and homelessness due to financial obstacles. In their book Homelessness: Prevention Strategies and Effectiveness, Martha Burt, Carol Pearson, and Ann Elizabeth Montgomery cite housing subsidies, permanent supportive housing, housing court mediation, cash assistance for rent or mortgage arrears, and rapid exit from a shelter as tools to keep people housed.

Burt et al. argue that predictors of homelessness often work in combination and may not be entirely reliable. Only 20 percent of families that face eviction end up homeless. Eviction reforms may help tenants stay in a given unit, but are not adequate to prevent homelessness. The authors conclude: “Communities can use the identified predictive factors…to screen families for high homelessness risk and then target their resources toward the highest-risk families.” When other factors contribute to a family’s homelessness, one-size-fits-all solutions are inadequate. Such policies must allow for communities and service providers to identify those most vulnerable, based on a variety of criteria, before intervening. The goals of specific housing policies must be clarified to help citizens determine whether a policy is intended as tenant protection or homeless prevention.

Housing First & Rapid Rehousing

Recent years have seen the rise of “housing first” policies to address homelessness. “Housing first” refers to policies that aim to house vulnerable residents before requiring them to meet standards of income, substance use, or other factors. Finland’s housing-first policy, established by its federal government in 2008, created 3,500 homes. Long-term homelessness there has decreased 35 percent

Minnery, John. “Approaches to Homelessness Policy in Europe, the United States, and Australia.” Journal of Social Issues, Vol. 63, No. 3. 1997. Page 643.

26 HFO Investment Real Estate • (503) 241.5541 •

since 2008; in the capital city of Helsinki, only one 50-bed shelter is still operational. According to Helsinki mayor Jan Vapaavuori, the program’s success was strengthened by the presence of social services tackling addiction, mental and physical health issues. Finland’s housing program is administered by multiple agencies: the Ministry of Environment, Ministry of Social Affairs and Health, the Criminal Sanctions Agency, the Housing Finance and Development Centre of Finland, and Finland’s Slot Machine Association. Funding comes from public sector sources and interest-subsidy loans. Between 2008 and 2011, the cost was €170 million (approximately $190 million); between 2012 and 2015, €15 million ($16.8 million) per year was allocated. Finland’s 2016-19 action plan awarded €78 million ($87.5 million). New York’s Institute for Children, Poverty & Homelessness issued a 2015 report which determined that the city’s rapid rehousing program did not address many issues that contribute to long-term homelessness. Among the barriers cited were poor educational attainment, domestic violence, chronic health conditions, and insufficient work experience. Like Professor Minnery and Mayor Vapaavuori, the ICPH study concluded that New York’s homeless families need “a single comprehensive network of support services, capable of addressing families’ specific needs with a view toward their longterm housing stability and independence.” In Washington, D.C., a 2017 program increased rental subsidy values to move more people to high-opportunity areas. By February 2019, the City had issued vouchers to tenants in approximately half of the units at the upscale Sedgewick Gardens. Many voucher holders were previously homeless and had moved to the complex from the streets or shelters without being screened for health or behavioral issues. Support services were not part of the program. After numerous complaints from building residents—market-rate renters and other voucher holders—the city staffed the building with social workers at night. But on-site social workers are not equivalent to services to provide holistic follow-up care. While many formerly homeless residents smoothly transitioned into the apartment units, those who faced mental health and addiction issues would likely have benefited from other supports. Pierce County, Washington offers a program that uses rapid rehousing to place high-barrier tenants into marketrate units. This successful program provides support services to tenants and landlords. The county government works with the nonprofit organization Associated

Ministries to facilitate its Landlord Liaison Program or LLP. Associated Ministries provides case managers to help tenants with the application and leasing process and mediation of landlord-tenant disputes. The County and State grant funds to assist landlords who take on highbarrier tenants. LLP notifies rapid rehousing agencies, who recommend applicants for participating landlords. Landlords use LLP’s criteria to evaluate potential tenants. Because of social service support, the program provides better targeting of residents who would benefit from this system and ensures that they get into and remain in a stable home.

Permanent Supportive Housing

Permanent supportive housing has emerged as a solution to the struggle of shelter systems and rapid rehousing programs to meet the increasing needs of homeless residents. This program combines the idea of “housing first” with services tailored to potential problems of homeless residents. These programs enable social service providers to meet people on-site. In Portland, OR and Seattle, WA, many existing supportive housing units are in SRO-hotel or group living arrangements. The Oregonian recently reported a $20 million undertaking by the City of Portland to renovate and build SRO units as permanent supportive housing. SROs are among the city’s least expensive units, usually renting at less than $600 per month. The City works with groups, including Do Good Multnomah and Central City Concern, to ensure that such housing helps to get and keep people off the streets. Despite allegations that SROs lack the dignity and privacy of traditional housing units, some residents attest that living in permanent housing and sharing community spaces has helped turn their lives around. Seattle resident Robert Champagne, who appeared in Seattle is Dying, the KOMO News documentary about Seattle’s homelessness problem, told Crosscut that he has lived in Interbay Place for over three years. Interbay Place is a permanent supportive housing project run by the Downtown Emergency Service Center. Champagne pays $265 per month for his unit, which includes a small bedroom and kitchenette, and he continues to work with a case manager to improve his self-care. Though the film portrayed him as a symbol of hopelessness, Champagne sees himself as an example of how access to permanent supportive housing can change the story for formerly homeless individuals. (See Wraparound Services page 29)

The Northwest Apartment Investor


Current Trends in 1031 By Toija Beutler, Attorney at Law

We keep our finger on the pulse of 1031 exchanges at all times–here’s the latest.

In answer to the question, “What is the IRS looking for when they audit an exchange?” Three things:

Real estate only. The Tax Cuts and Jobs Act eliminated

1. Boot. Boot is considered anything the taxpayer receives

1031 exchanges of personal property. For example, aircraft, equipment, contents of hotels and apartments, collectibles, and the like are no longer “qualified” property. Taxpayers should anticipate paying taxes on the sale of these types of assets.

Recession. What recession?

Our office continues to process over 100 exchanges a month, and the phones are ringing off the hook with would-be clients consulting on future transactions. If investors are concerned about a possible looming recession, we do not see that in our office. We continue to see all property types moving through these exchanges–apartments, small plexes, rental houses, small commercial buildings, hotels, mobile home parks, and similar properties.

Reverse Exchanges. Speaking of phones ringing off the hook – we get four to five calls a day inquiring about reverse exchanges. The current market is more challenging than in previous years. Clients on the hunt for a new property have finally found “the one” but haven’t sold their old holdings. They want to close on the new property first and sell the previous later. Reverse exchanges require the exchange company to take ownership of one of the assets. Consequently, these exchanges are far more complicated and expensive than the standard “forward” exchange. Meeting with the IRS. Earlier this year, representatives from the IRS met with our professional organization, the Federation of Exchange Accommodators. There were several takeaways: 28 HFO Investment Real Estate • (503) 241.5541 •

that isn’t “like-kind” real estate—often in the form of cash. Sometimes it is a relief of debt or the receipt of “personal property” – appliances and equipment. (See above.)

2. Related party transactions. For the most part, buying

from a relative is not permitted. There have been three Appellate Court rulings on this point in recent years. Only in limited circumstances can a taxpayer buy from their granny, sister, or son.

3. Compliance with the 45-day identification requirement.

Forty-five days to identify replacement properties (usually only three) is too short a time and too short a list. And, yes, clients have to buy from the list. The IRS is aware that taxpayers try to game the system, so now they require proof of compliance.

There was extensive discussion, without any clarity, on partnership breakups at the time of a sale/exchange. If a partnership owns a property, then the partnership must undertake an exchange. If partners want to go their separate ways out of the sale, advanced planning is required well before the property is listed.

Meeting with the California Franchise Tax Board.

In a recent panel discussion, representatives of the California Franchise Tax Board (CAFTB) reported on their examination of 1031 exchanges. Why does this matter to non-California residents? California (and New York) are taking an aggressive stance on 1031 exchanges. And, as goes California, so go many other western states.

Providing 1031 Tax-Deferred Exchange Services

1031 Questions?

We have the answers!

• Forward Exchanges • Reverse Exchanges • Improvement Exchanges

5665 Meadows Road, Suite 140, Lake Oswego, OR 97035 Phone 503.748.1031 | Toll Free: 844.414.1031 | Fax 503.345.7207 Like the IRS, the CAFTB is looking for boot, related parties, and compliance with the 45-day identification requirement. Additionally, they look for: 1. Cash taken out via a refinance of either the relinquished property or the replacement property. They tax the cash as if it were boot in the exchange. 2. Partnership breakups right at closing of the relinquished property. These exchanges are being disallowed.

Your takeaway? 1031 exchanges are the product of a tax law that continues to evolve. Consultation with your professionals on current practice and understanding is essential before undertaking any new trade. Toija Beutler is attorney and owner of Beutler Exchange Group. She graduated from Lewis and Clark Law School and joined the Oregon State Bar in 1982. After leaving private practice, she began her 1031 career in 1992. Toija can be reached by phone at (503) 748-1031 or via email at

WRAPAROUND SERVICES NEEDED TO ADDRESS HOMELESSNESS (CONT.) A report from the Rand Corporation finds that Los Angeles County’s push toward permanent supportive housing has reduced homelessness and saved millions of dollars. Since 2012, the County’s health department has operated the Housing for Health program. By 2018, 3,500 people entered the program. Rand tracked 900 participants for a year before and after they entered housing. Participants spent 75 percent less time in the hospital and made 70 percent fewer visits to the ER. Before being housed, their use of safety-net services cost the county $34 million. After being housed, costs fell below $14 million. Study participants were able to avoid a significant number of hospital visits while in supportive housing. The program’s success is in its connection to vulnerable residents and social service providers. Assistant Policy Researcher Melissa Felician, who worked on the Rand study, emphasized: “You can house people, but there’s so much care that’s needed afterward.”


Homelessness is not easily predicted and is often the result of personal and societal problems. Efforts to get and keep people off the streets requires targeted and localized solutions. It is unlikely that a single organization will solve this problem. Specialized caseworkers are needed to help homeless residents receive the interventions necessary to remain housed. This navigation works best when homeless and vulnerable residents are placed first into permanent housing. Municipalities must also determine whether their programs function as tenant protections or are geared to prevent homelessness. Not all low-income renters are at risk of becoming homeless. City officials must understand how various factors work in tandem to create situations where families become homeless. Making clear the goals of proposed policies, and how those policies will work toward those goals, will empower residents to determine the programs that will best serve their communities. The Northwest Apartment Investor



Meadow Wood Apartments

334 Units • Vancouver, WA • $54.75 million

Somerset Terrace

Stevens Creek Apartments

140 Units • Happy Valley, OR • 38.325 million

Hampton Hills Apartments

The Lavonne

75 Units • Vancouver, WA • $17.25 million

Stratford Apartments

95 Units • Vancouver, WA • $16.2 million

110 Units • Vancouver, WA • $12.45 million

65 Units • Beaverton, OR • $10.5 million

Parkside Apartments

Royal Crest

Hancock East

96 Units • Lebanon, OR • $10.1 million

48 Units • Beaverton, OR • $7.225 million

44 Units • Portland, OR • $5.9 million

Kingswood Apartments

Madrona Hills Apartments

Barbur Place Apartments

117 Units • Klamath Falls, OR • $4.7 million

30 Units • Portland, OR • $3.575 million

30 HFO Investment Real Estate • (503) 241.5541 •

24 Units • Portland, OR • $3.2 million


Cody Hagerman Partner

Gregory Frick Partner

Tyler Johnson Partner

Rob Marton Partner

Jack Stephens Senior Broker

Lee Fehrenbacher Senior Broker

Todd Tully Broker

Adam Smith Broker

Khari Gates Broker

Rand Hoffman Broker

Peyton King Broker Assistant

Steve Wendt Broker Assistant

Donna Brunner

Aaron Kirk Douglas

Director of Operations

Jennifer Shuch

Senior Research Analyst/Podcaster | Newsletter Contributor |

Mary Beth Christopher

Marketing Director • CCO

Property Analyst/Underwriter

Tien Nguyen

Nick Quandt

| Newsletter Editor |

Graphic Designer


Robert Stigile

Transaction Coordinator

Rachel Reuter

Assistant Director of Operations

| Newsletter Graphics |

The Northwest Apartment Investor


INVESTOR ROUNDTABLE Miller Hall – World Forestry Center (near the Oregon Zoo) Wednesday, January 8th, 2020 11:30 am - 1:30 pm Multifamily investors are invited to sign up for our annual event. Speakers John W. Mitchell and Victor Calanog of Moody’s Analytics REIS offer regional and national economic forecasts for our region and the national multifamily market. Capacity is extremely limited and will quickly reach capacity.

E-mail or call (971) 717.6340

RSVP today! HFO Investment Real Estate (503) 241.5541 • Sponsored in part by

From the entire HFO team

Happy Holidays! HFO Investment Real Estate (503) 241.5541 •