Housing sector

Affordable housing sector is a seller’s market as new buyers enter the fray, says exclusive webinar panel

Like many industries, the affordable housing sector in the United States has undergone a sea change resulting from the COVID-19 pandemic. Processes and protocols have changed for affordable housing professionals, some perhaps permanently. Closings are being done virtually and some of the preliminary work such as assessments and grant applications are completely different than they were a year ago.

The ‘new normal’ that industry professionals are navigating has seen a few stops and starts since March, but the sector is now in relative comfort, which has led to a recovery in investment sales, according to Kevin Morris , Senior Director of Colliers. International’s Affordable Housing Services team.

“Through trial and error, we had to find systems and programs to do business,” said Morris, who is based in Fort Lauderdale, Florida. “We have gone through these few steps, and now we are at a point where we can implement and have implemented systems and programs that will guide us through this particular pandemic. We’re transacting now, and so in that respect it’s kind of back to normal.

Morris was one of six panelists who made up the panel of brokers and lenders at Affordable Housing Southeast, a webinar hosted by Southeast real estate company magazine. Kyle Shoemaker, Managing Director of Glen Ellyn, Illinois, Affordable Housing Investment Brokerage Inc., moderated the discussion held on Thursday, November 12.

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Eric Taylor, managing director of Greystone Real Estate Advisors, said the level of investor demand was at an all-time high for the affordable homes his firm has marketed in recent months. Taylor’s team came up with 17 or 18 offers in the third and early fourth quarters, and he said the competition was “unprecedented.”

“We’ve certainly had exceptionally competitive situations on every offering we’ve put on the market,” Taylor said. “Overall, we’ve seen some compression in cap rates, primarily due to record 10-year Treasury yields, which have been directly correlated to historically low interest rates.”

The 10-year Treasury yield closed at 0.91% on November 16, from 1.88% on January 1.

Sheri Davis, senior vice president of originations at Highland Commercial Mortgage, said the low interest rate environment has encouraged affordable homeowners to refinance or recapitalize their mortgages. Davis said the Birmingham, Alabama-based lender now has a significant volume of refinances in its portfolio.

Derek DeHay, director of the Newmark Affordable Housing Group, said bridge lenders are now re-entering the space after retreating to the sidelines in the second quarter, and that has been a catalyst for the recovery in business. investment. DeHay, who is based in Austin, Texas, described the national affordable housing sector as a seller’s market.

Morris agreed and said the increased level of competition is also partly due to a deeper pool of buyers for affordable housing assets. He said buyers are looking for the reliability of affordable housing over volatile sectors such as retail and accommodation.

“The [buyers] stepping into the affordable space is simply amazing. I get calls daily from New York, Washington, DC, California and Chicago where people are looking to invest in the affordable space, and from what I’ve seen it’s mostly new players,” said Morris. “The traditional guys are still there too. The secret is out, and [sellers] know they are now the beauties of the ball and have adjusted their price expectations accordingly.

Additionally, Jeff Rodman, senior managing director of M&T Realty Capital Corp., said rent collections have exceeded expectations for the affordable housing sector, which has helped spark investor interest. Rodman, who oversees the company’s affordable housing division, said the startling rent collection totals he’s seen at M&T are a direct result of determined on-site property managers and CARES Act stimulus funds. .

“The best way I can characterize the long-term collection is ‘So far so good,'” Rodman said.

MRI Software, a Solon, Ohio-based property management technology company, reported that rent collections in affordable housing in the United States improved in October and fell slightly for public housing. The company analyzes data from 1.5 million affordable and public housing units across the United States to create its monthly report.

IRM defines affordable housing as properties that have subsidy programs such as HUD, Low-Income Housing Tax Credits (LIHTC), and the United States Department of Agriculture (USDA), as well as state and local programs. Social housing refers to properties that are wholly owned by the government for low-income households and/or people with disabilities.

MRI Software found that rent payments increased to 82% of their amount year over year in October 2019 for the affordable housing sector. This is the first month since June that rates have topped 80% year over year for affordable housing. The report notes that improved rent collection from affordable housing owners is linked to the 17% decline in moves year-over-year. The decrease in the number of households leaving their apartments has helped to maintain the stability of the occupancy rate in the affordable housing sector.

For public housing, MRI found that rent payments reached 94% of those made in October 2019, down from September, when payments were 98% of those in September 2019.

Panelists participating in the Southeast Affordable Housing webinar said they expect rent collection to continue to improve if another stimulus package passes Congress. Hopes of securing a second stimulus check for tenants before the US presidential election have not materialized, and Rodman said all eyes are on Washington, DC, for more relief.

“To some extent, expectations are high and major adjustments will have to be made if this does not materialize,” Rodman said.

— John Nelson

To register to view the free Southeast Affordable Housing webinar, click here.

The webinar opened with a panel of developers and owners. Marc Padgett of Summit Contracting Group moderated the hour-long discussion. Other panelists included Ray Kuniansky, director of development at Columbia Residential; Granvel Tate, regional vice president of The Michaels Organization; Nick Andersen, vice president and project partner at Dominium; and Max Cruz, executive vice president of development at Housing Trust Group.