Can’t Make It? Follow It

UPDATE Presentations from the 2009 Apartment Internet Marketing Conference are now posted.

The conference season is well underway and I, among many others, am not traveling frequently. Nevertheless, I am very interested in tracking the sessions at the ACI/American Comfort conference, the Apartment Internet Marketing Conference, and the American Planning Association’s National Conference.

Thanks to the hashtag (#) feature of Twitter, I can follow conversations, receive session highlights, and find blog posts that provide even greater detail. You don’t need a Twitter account, just visit search.twitter.com and type in the event name. A search will usually reveal the #hashtag being used for a particular event.

Once you know the #hashtag, you can type it in and pull up all posts (aka Tweets) related to that event. In this case, I’ve searched for #aci09, or the Affordable Comfort conference.

If you have a Twitter client for your desktop (such as Tweetie, Tweetdeck, or others) you can usually search from within the client for events like the Apartment Internet Marketing conference.

Perhaps the greatest benefit is that by identifying attendees at conferences of interest, you can then follow them in Twitter, email them for additional information, or just call them up.

Foreclosures: Enterprise analysis of Neighborhood Stabilization Program

The folks at Enterprise Community Partners have released a thorough interim analysis of the proposals for HUD’s Neighborhood Stabilization Program (56-page PDF Report).

Eligibility for the NSP program is limited to CDBG recipients and 1st round funding must be disbursed within 18 months of April 2009. It’s not clear when 2nd round money must be disbursed by recipients. Given the very tight cycle of rule writing, allocation, and disbursement, this lengthy research document is both well done and a welcome discussion piece.

[Note: HUD has lots of resources including a 1.5hr kickoff video.]

Enterprise’s report reviews the proposed uses of 87 of the 306 NSP funding recipients (58% of total 1st round funding) and identified 7 “promising approaches”:

1. Acquisition and discount strategies
2. Disposition strategies
3. Geographic targeting
4. Green building and rehabilitation strategies
5. Income targeting and long-term affordability
6. Leveraging NSP funds
7. Partnerships and management

Cherry picked areas of interest:

Acquisition strategies reflect the diversity of local experiences and the dispersed nature of the foreclosed properties, and include both individual property purchases and bulk asset purchases. The likelihood of one strategy or another depends not only on the pattern of foreclosure but also on the preference of the funding recipient to focus on specific neighborhoods or to make select investments in relatively stable neighborhoods to prevent further deterioration. Funds from NSP can be used for acquisition and rehab, but not for operating expenses or maintenance. This limitation highlights the need to either dispose of these assets upon rehab completion or to use secondary financing (or rental proceeds) to meet ongoing financial obligations.

Disposition seems to reflect a traditional bias in favor of ownership, and provide for homeownership counseling and DPA. I’ll note my objection to DPA, but the full case is amply made at Calculated Risk. In short, DPA increases costs to borrowers (someone has to recover the DPA), and psychologically reduces the ‘at risk’ component of home equity. What looks more promising is a loan guarantee or reserve use, such as that pursued by Chicago and Atlanta. This allows NSP recipients to maximize the utility of their funding because they can provide a guarantee of a portion of the purchase price rather than devote the full amount to the purchase. There are some lease-purchase and rental programs that do acknowledge the likelihood of depressed pricing or inability of some people to afford the obligations of ownership.

Top 100 Foreclosure Markets by MSA, 2008

Geographic targeting is a mixed bag. Enterprise notes that the funds must be disbursed within 18 months, which is far faster than the HUD’s HOZ program, which has shown the importance of extended funding horizons. Furthermore, geographic targeting could be politically difficult if results are not quickly seen or if funding is concentrated in a limited number of areas. Nevertheless, a variety of data sources, including HUD census tract data, postal service vacant address records, and locally generated data have helped reduce the amount of study required for geographic targeting.

A variety of sustainable building strategies are identified. Reducing ongoing costs are essential for stabilizing these properties in the short and long term. Any efforts to meet third party criteria are welcomed.

I think the income targeting components are the most questionable and will be the hardest to implement. I would recommend additional (or substitute) qualifications that aid qualified government workers (teachers, emergency workers, e.g.), supportive housing/co-housing (which can call upon additional public and private funding), or use of an existing mechanism to identify potential renters or owners. The 18 month deadline just makes it too tight to invent a new process.

Leverage of NSP funds should produce the greatest amount of benefit and allow lenders to recoup some of their tarnished reputations. Again, the short time period in which to identify spending or property purchases will limit the spread of this technique, I believe that multiplying NSP funds through leverage is the best way to provide the greatest good. Through the use of credit enhancements, revolving loans, loss reserves, or additional HOME or CDBG funding, leverage will allow NSP recipients to achieve more for their efforts.

I’ll have to better understand the legislation and the guidance, but proper use of leverage could also support the creation of ongoing community oriented enterprises such as non-profit ESCOs or state-backed enterprises.

Crafted and implemented within a short period, the NSP represents a substantial source of funding and innovation for communities with foreclosure risks. The Enterprise report provides an excellent summation of the legislation and a welcome starting point for implementation.

[Update: Here’s HUD’s FAQ on expenditure timelines:
TIMELINESS OF USE & EXPENDITURE OF NSP FUNDS

How long do States and local communities have to spend this money?

Grantees have 18 months to obligate these funds, and four years to expend funds. Congress was very clear that this money be put to work quickly. In some areas, this level of federal funding will be unprecedented. Thus, HUD expects that grantees will have contracts signed or, at minimum, made written offers for properties within 18 months. Options or other non-binding instruments are not acceptable.

Congress was very clear that there is an urgency to deal with a national housing crisis.

How does HUD determine when NSP funds have been obligated?

As stated in the NSP Federal Register Notice page 58332, “Funds are obligated for an activity when orders are placed, contracts are awarded, services are received, and similar transactions have occurred that require payment by the state, unit of general local government, or subrecipient during the same or a future period.”

What will happen if grantees don’t obligate their funding within 18 months?

HUD will recapture the funds.

Who am I? Why am I here? (Redux)

As this blog slowly approaches 100 posts, please pardon this update on blog directions and professional background.

Since the layoff from MMA, posting has included LIHTC, green renting, (sub)urban design, and operations. Future topics will include more of the same with additional commentary on public policy and the inclusion of sustainable certifications (LEED, Green Globes, Southface, NAHB, e.g.), as seen by this unintentionally provocative guest post. The ultimate goal is to increase sustainability in multifamily by owners, renters, and lenders through incentives and rewards rather than proscription. There are market-based solutions to these goals and I hope readers will help identify them.

Within the niche of multifamily real estate, this blog aims to reflect the multiple sources of its success or failure. In addition to 11 years in development, finance, and asset/portfolio management, my undergraduate studies in political science and graduate studies in real estate finance lead to an interest in all aspects of real estate. I have always worked as an owner or (distressed) lender, so writings will almost always reflect that bias. As an owner’s asset manager, I was deeply involved in operations, so I will attempt to reflect, where appropriate and able, the challenge of property operations. While I admired the work done by the site teams, I have always had the highest expectations, so occasional jogs into operational theory are an effort to provide additional knowledge to asset managers and others who are not in regular contact with properties.

Much of my recent experience required the 1,000 ft view of troubled assets as well as the 30,000 ft view of portfolio goals within corporate funding limitations. The distressed portfolio was a nationwide mix of 20-50 REO and watchlist properties with varying levels of need and operational competence. Some required gentle guidance and recognition while others required replacement of management and a completely new plan of operation. Still others were immediately marked for sale. Much as I would like to say I could save all of the properties assigned to me, some simply were not worth the expenditure of time and treasure.

As for my time off, I am doing some non-profit consulting work on community development, foreclosure assistance, and sustainable underwriting. Should any readers have thoughts, requests, or leads, please do not hesitate to contact me, info@multifamilyguide.com

Operations: Questioning assumptions (marketing, pricing, everything else)

I started on Twitter in November 2008 and each day find a few new topics for thought and discussion.

Sometimes the posts themselves are provocative, and sometimes they lead to a provocative post. [For those who don't click through, Mark Juleen of JC Hart announces that 1Q traffic was the same or higher year on year despite dropping all print ads; Lisa Trosien asks why we don't use more negative amenity pricing.]

Mark’s experience with non-print advertising echoes the experiences summarized earlier. I won’t rehash the post, merely to recommend that with costs under such scrutiny and a change in outreach methods underway, these types of experiences should be studied and tried.

Lisa’s post about negative amenity pricing prods us to think more thoroughly about product and pricing.

Our starting rent for a floor plan type should be a ‘basic apartment’. [The] base price should be set from our most standard types. Then, when we should look at our inventory and find the ones with detrimental items, such as horrible views, smaller spaces, undesirable locations, etc., we should subtract rent from those unit types.

An added benefit seems to me that it moves you away from a ‘bait and switch’ perception. If you base your pricing off the least attractive unit, you are almost compelling a prospect to spend more to get what they actually want and generating a certain amount of resentment for your trouble. Pricing in the middle (and entering at a higher base rate) allows the prospect to make the choice of purchasing as much apartment as they actually want. This also gives us a chance to listen more closely to the prospect and help match the prospect with the appropriate unit.

Although this is well-trod ground, pricing transparency links cost to benefits by creating a more quantitative ‘value proposition’. Per HBS’s Working Knowledge series:

Some companies view price bundling as a necessary tool to promote initial sales: If they eliminate price bundling, they could eliminate the sale. However, organizations could psychologically unbundle those offerings to promote consumption. One way of doing this would be to highlight the prices of individual items in the bundle after the payment has been made.

Using this unbundling as a guideline, you might want to create your own value propositions. Lower the price for distance from parking, older appliances, or lower ceilings. In this market, everything has a price (to owners and residents) and you might be surprised to learn what you don’t have to spend.

As an example from the archives, on one of my properties, the leasing agents complained about the difficulty of renting ‘basement apartments’ which were typically on the back of the building and darker than others because there were only windows on one facade. The basement apartments could more accurately be called ‘ground floor’ apartments, ideal for pet owners or shift workers who want a quieter unit. In addition to repositioning the units, we also reconfigured the landscaping, providing for more shade and using river rocks to create a constricted area for our four-legged residents. For those renters, no discount on these ‘undesirable units’ was required. Not only did we make more on those units by targeting a certain renter profile, we also improved the psychology of the leasing agents by highlighting the benefits of every floor plan. Please note that pet owners and shift workers are not a protected class for Fair Housing purposes.

[Additional info on pricing psychology from NYT and of course, Wikipedia.]

Better Homes: We can rebuild them. We have the technology.

A couple of articles came on construction techniques came across the transom in the latest issues of Builder and EcoHome magazines.

The first article summarizes the traditional with a twist methods used by FirstCoast Homes to achieve Energy Star-ratings for all of its starter and move-up homes. Their efforts combine design, construction technique, and appropriate appliance upgrades, which limit the total cost to an estimated $1,000 per home.

[Note: As always, I try to bring additional value via hyperlinks. Take a look at all of them for additional information]

The 5 ways revealed to Builder:
1. Improve upon traditional methods through proper installation and 3rd party evaluation of various systems. Be sure to read this ode to traditional techniques from the February 2008 edition of EcoHome.
2. Build a tighter envelope through foam sealing penetrations, caulking baseplates, and use low-expansion foam around portals. These techniques and more reduce potential air intrusion “by about 30%,” according to FirstCoast. Duct blaster and blower tests ensure that the building is tight before the irreversible work begins. (Johns Manville believes 5-25% of ducted air is lost through leakage.)
3. Correctly install the right insulation by using a mix of foam around penetrations and fiberglass elsewhere. Make sure contractors install it right and protect it from crushing, moisture, and other damage during buildout.
4. True value engineering identifies areas to spend smarter, not just less. By reducing the number of windows, FirstCoast reduces the direct cost of windows, but also the size of the HVAC system, saving an additional $400-800 per house.
5. Identify other revenue sources by working with utility companies, and government incentives to reduce the cost of homes, appliances, and testing.

At sister publication EcoHome, green building consultant Mark LaLiberte highlights 5 common errors made in all construction:
1. HVAC ducting through unconditioned space needlessly reduces the effectiveness of your heating and cooling system. Put the ducts in soffits or between floors to maintain their ambient temperature. Research from WSU provides great detail on HVAC in conditioned spaces.
2. Tightened envelopes without intentional ventilation can cause stale air, odors, or moisture to accumulate. Install a whole house ventilation system to bring about 50CFM of fresh air 3-4 times per hour.
3. Improper flashing and drainage leads to moisture buildup and reduces the effectiveness of insulation and moisture barriers. Multifamily folks know all to well the hazards of moisture and mold growth, so this should be well-trod ground. For additional information, Freddie Mac offers a Moisture Management Plan to help identify sources of moisture build up.
4. Poorly installed/selected installation reduces energy efficiency and adds to costs (see above). Exposing it to moisture during the installation process can cause a cascade of additional systemic failures. Watch out for improperly insulated thermal bridges, particularly metal studs that have contact with exterior surfaces. This can be an unfortunate method of reducing the effectiveness of your HVAC system.
5. Excess waste leads to excess costs and can be offset by better reuse of construction materials but more importantly through increased standardization of all materials. All systems have a ‘commodity size’ and making use of these common measurements reduces the potential for waste and on the interior, unsightly seams.

Rent Green: Useful links for further reading

We’ve mentioned previously that the Intertubes are full of information about living sustainably. A couple of articles on “Green Renting” might be helpful to fill out your knowledge:

1. Utne Reader’s “Green Renting Revolution” (January 2009) By the way, failing to include links in your article is just not acceptable in 2009.
2. Green Renter, provides a small (but growing!) database of self-selected ‘green apartment communities’ in major metropolitan areas. I think there’s still more work to be done, but additional information can be found courtesy of Sustainable Industries.
3. National Geographic (!) provides a smooth interface to some useful information at The Green Guide. The Home & Garden section shares useful information about household cleaners.
4. Apartment Therapy posts eclectic items on apartment living. One of their recurring features is a focus on small spaces. You can find more of this vein by using a tag search.
5. Planet Green has a multi-page discussion via one of their “How-to” guides. They include a helpful 10 point list of property tips. (additional How-to guides available)
6. Grist’s Umbra Fisk lists some ways to be a Greener Renter.

(Image by Peter O. Zierlein / www.peterozierlein.com)

Rent Green: Coffee Grounds and Eric Corey Freed

Shamelessly appropriating the theory behind “Can’t Someone Else Do It?, EPA’s Greenversations posted a recent article about reusing coffee grounds. Among the uses were:
1. Composting or fertilizer
2. Dye paper
3. Flea (and odor) repellant (!)
4. Grease absorption

In our townhouse, coffee grounds are sprinkled around exterior door and window sills to repel ants for an effective and pet friendly insect barrier.

Two weeks ago, Eric Corey Freed, author of Green Building & Remodeling for Dummies offered tips on a greener home to the New York Times. For “space reasons” the NYT only ran 5 of the tips, causing Joe Romm at Climate Progress no end of distress for highlighting impractical, overly simple, or questionable recommendations. Additional correspondence revealed that the NYT cut Eric’s list of 21 to a random 5. Leaving aside the somewhat heated and holier-than-thou storms that occasionally blow across the green world, Joe also embraced the “Can’t Someone Else Do It?”. He linked to, and critiqued, “100 Ways to Conserve“.

Taking just Freed’s 21, many can be used in a rental situation, including:
1. Insulate and turn down the water heater to 125F. (And use the vacation setting)
2. Reduce the amount of water flushed.
3. Replace incandescent bulbs with CFL.
4. Turn off unused lights and electronics.
5. Replace thermostat with a programmable model. Even on a 60 year old house with 80 year old wiring, it only took me about 15 minutes.
6. Request low or no VOC paints.
7. Caulk or seal around tubs and windows. Weather seal doors.
8. Install a low flow showerhead. I replaced one a few weeks ago.
9. Never buy bottled water again.
10. Install a ceiling fan (sometimes you can get one installed at lease renewal).

(Via Greenversations and Green Building Law Update.)