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2014: issue 6-7
NAHB’s Supreme Court Victory Stops EPA in its Tracks In a major victory for NAHB, the U.S. Supreme Court ruled that the Environmental Protection Agency (EPA) does not have the authority to require multifamily and commercial builders to obtain costly preconstruction permits for greenhouse gasses emitted from the buildings they construct. The case against the EPA was brought by NAHB and its coalition partners and revolved around whether the agency has the power under the Clean Air Act to regulate greenhouse gas emissions from stationary sources that could include everything from factories, refineries and power plants to apartment and commercial buildings. “Because of the way the EPA
interpreted the [Clean Air Act] statute, the agency sought to treat apartment complexes as if they are power plants,” NAHB Chairman Kevin Kelly
said in an official statement. “That makes absolutely no sense and would have dealt a major setback to the housing recovery. Today’s verdict strikes an important blow against federal agencies overreaching their authority.” If the EPA had prevailed, it could have forced many builders and developers to obtain an expensive pre-construction permit for greenhouse gas emissions, which would severely curtail apartment and mixed-use development. Some singlefamily and potentially even masterplanned community development could also have been affected. Based largely on EPA’s own estimates, the cost of the permit alone could have been about $60,000 per
multifamily property, with costs due to delays averaging about $40,000 across all building sizes. For a property with 50 or more apartments, costs due to delays could have reached up to $200,000. The Supreme Court decision stops EPA in its tracks and represents a significant win not only for multifamily builders, but for all builders that deal with excessive and unlawful EPA rules.
levels of student debt and general lack of confidence in housing as an investment, at least in the short term. "We see a number of strong longterm driving forces increasing the rental population and creating demand. Employment rates for millennials draw closer to the national average; the housing recovery is gaining traction, which will push home prices higher; and shorter job tenures create a need for housing mobility," notes Kevin Finkel, an executive vice president with Philadelphia-based Resource Real Estate, an investment firm. "On the supply side, increasing building material costs will put pressure on the construction of new properties. If interest rates start to trend with economic recovery, added borrowing costs will also inhibit new construction." Strength in the rental market is fueling a flood of new apps and websites. Swapt, deemed by its creators as the Yelp of apartment rentals, will likely launch out of beta this month. It combines property
listings with reviews from renters in a rental search system. It comes on the heels of start-ups like RadPad, PadMapper, HotPads, Apartment Finder, Comfy Rentals and Lovely. All aim to simplify the rental process, giving landlords and tenants easier access to listings and offering the ability to pay monthly rent on a mobile device. "If you look at the rental market, it's the most competitive it's been ever," said Eric Wolfe, CEO of Swapt and a former multifamily analyst at Citi. "The reviews are designed to give people the confidence they need to rent and rent quickly. There is a good amount of money to be made on lead generation." Wolfe, 31, and a renter himself, does believe demand will soften as the echo boom generation ages into its late 30s and turns to homebuying. He also believes new supply will soften rent growth. "Demand is still going to be there," he added. "I do think there is room for more unique sites in the space."
Apartments fill as rental demand keeps on surging
Diana Olick CNBC Look up into any window of the closest apartment building and odds are you'll see someone living there. National apartment occupancy in May soared to the highest level in at least six years, according to Axiometrics, an apartment data and research company. Ninety-five percent of all units are filled, even as thousands of new units are becoming available. "It's a pleasant surprise because it's coming at a time when new supply is flooding the market," said Stephanie McCleskey, Axiometrics' director of research. "One reason occupancy is rising is that, not only are people moving into these new units, but they're also moving into Class B units at a lower price point." It is especially a surprise to investors, who pulled out of multifamily real estate investment trusts (REITs) last year, as all eyes focused on surging home sales. The S&P index of residential REITs is now up nearly 14 percent from a year ago and up nearly 20 percent year-to-date. Some of the top performers in the sector: Preferred Apartment Communities, Essex and AvalonBay. Weakening affordability in the homebuying market is clearly favoring rentals.
"The rent-buy math remains generally favorable for our Apartment coverage universe," wrote researchers at Deutsche Bank in a recent report. "Though pending supply remains a concern for certain apartment markets in 2014 and 2015, recent revenue growth trends were better-thanexpected suggesting that strong demand, buoyed by improving rentbuy dynamics, is helping to offset increases in supply." About 180,000 new apartment units have become available throughout the U.S. in the past 12 months, according to Axiometrics. Still, growth in rental prices in May was the strongest it's been in 16 months, at 3.5 percent. "The year-to-date effective rent growth numbers portray an apartment market that may be having its strongest year since the Great Recession ended," said Jay Denton, vice president of research at Axiometrics. Despite the slow recovery in home sales, several factors still fall in favor of renting. Younger Americans are faced with weaker employment, high