Multifamily Properties Research Articles

Quantifying the electric service panel capacities of California's residential buildings

This study seeks to quantify the size distribution of existing installed electrical service panels within California's residential buildings, a potentially significant barrier to future decarbonization efforts. A large sample of historical building permit data was collected for municipalities throughout the state, from which permitted panel upgrades were extracted and analyzed. These data were used to develop a method for estimating panel capacities that incorporates information about historical code requirements for panel sizing in new construction with a statewide database of parcel-level building attributes. Overall, we find that 3% of single-family (SF) and 10% of multi-family (MF) properties in California have panels in the smallest size range, which will most likely require upgrades. However, 32% of SF and 59% of MF properties have panels of intermediate size, which will likely require the addition of load management systems to support comprehensive electrification. Future panel upgrade needs are expected to be more acute within disadvantaged communities, where the proportion of SF homes with the smallest-sized panels is 4x that in more affluent neighborhoods. We discuss the implications of these and other results within the context of existing and planned future state policies related to residential electrification.

The role of multi-family properties in hedging pension liability risk: long-run evidence

PurposeUsing data spanning 145 years for Sweden, the authors investigate the benefits of holding multi-family properties for investors who aim to hedge wage growth.Design/methodology/approachThe authors assess the risk-adjusted excess return that results from adding multi-family properties to a mixed-asset portfolio that aims to track wage growth. The authors also analyse the macroeconomic determinants of asset returns. Finally, the authors test whether a causal relationship exists between the growth rate of real wages and that of real net operating income.FindingsThe benefits from holding multi-family properties are the greatest for low-risk allocation approaches. For more risky strategies, the role of real estate is more muted, and it varies greatly over time. Holding real estate was most beneficial during the first two decades of the 21st century. Multi-family properties are found to be the only asset class to be positively related to wage growth. The authors show that the net operating income acts as the transmission channel between wages and property returns.Practical implicationsThe paper assesses whether the growing interest of pension funds for multi-family properties is warranted in the context of a portfolio that aims to track wage growth.Originality/valueUsing long term data makes it possible to use a rolling windows approach and hence to consider multiple outcomes for an allocation strategy over a typical investment horizon. This permits to assess the dispersion of performance across several periods rather than just one as is commonly done in the literature. The results show that the conclusions that would be drawn from looking at the past two or three decades of data differ substantially from those for earlier time periods.

Redevelopment values in multi-family properties: Evidence from en bloc sales in Singapore

“Teardown” or redevelopment is an effective policy tool to increase supply elasticity in land-scarce cities. In Singapore, redevelopment of older multi-family properties requires the consent of majority owners to sell their units collectively in a process widely known as “en bloc” sales. Using the resale transaction data in Singapore from 1995 to 2018, we find that private multi-family properties with redevelopment potentials sell at significant premiums of at least 36.7% on average. The resale values of properties with redevelopment potentials increase by 5.5% to 8.3% after the consent of the majority owners to sell the redevelopment rights is obtained. The anticipative effects are observed in resale transactions as early as one year before the en bloc sale events. The price premiums increase from 8.4% to 13.64% when resale transactions occur in 7 to 12 months and within 6 months from the en bloc event. The results are robust and orthogonal to supply constraints in the markets.

An Analysis of U.S. Multi-Family Housing, Eco-Certifications, & Walkability

This paper examines the persistence of differentiated pricing in the multi-family housing related to eco-certification. In examining a sample of market rents for non-specialty, multi-family properties both across the U.S., as well as those areas that enjoy the highest concentrations of LEED certified apartments, we find rental premiums of 10.2% and 14.7%, respectively for those properties with LEED certification. The addition of the continuous Walk Score, to control for variations in urban form, results in premiums of 7.4% and 9.6%, respectively. These findings are directionally consistent with those found in earlier studies, and demonstrate a persistence in rental premiums for certified properties over time, and with increased LEED adoption.

The Role of Multi-Family Properties in Hedging Pension Liability Risk: Long-Run Evidence

The Role of Multi-Family Properties in Hedging Pension Liability Risk: Long-Run Evidence

Corporate Landlords and Pandemic and Prepandemic Evictions in Las Vegas

Research on evictions has found that large landlords are associated with higher absolute and relative numbers of evictions, and pandemic-period filings have brought additional scrutiny to large landlords and corporate landlords in particular. However, not all large landlords are equivalent, and some may be more likely to evict based on the submarkets in which they operate, and the pandemic has likely altered these relationships. This study examines trends in evictions and filings associated with two particular submarkets, extended-stay and single-family rentals, through an analysis of case-level data covering the Las Vegas metropolitan area. Through a series of multivariate analyses, I find that extended-stay properties are associated with higher eviction rates than other multifamily properties during the 12-month period immediately preceding the pandemic. Extended-stay landlords are even more likely to file and evict during the first 12-months of the pandemic. The results are mixed for single-family rentals. Corporate and other large landlords are generally more likely to file and evict prior to the pandemic, but several are no more likely or even far less likely to evict compared to smaller landlords during the pandemic. This study concludes with implications for policy and research.

Impacts of bus rapid transit (BRT) on residential property values: A comparative analysis of 11 US BRT systems

Bus rapid transit (BRT) is growing in popularity as a lower-cost alternative to light rail transit. Although the impacts of rail transportation on residential property values is well-explored, the impact of BRT on property values remains less well-understood, particularly in the United States where BRT infrastructure is more heterogeneous than the rest of the world. This paper addresses this gap by evaluating and comparing the before-and-after effect of 11 BRT systems on nearby property values in ten metropolitan areas across the United States. We used a quasi-experimental approach and hedonic spatial error models with propensity score matching to measure change in residential property transaction prices within walking distance of a BRT station. Overall model results show a mix of appreciation, depreciation, and no change in residential properties value across different BRT systems. Multi-family properties nearby BRTs with on-street dedicated lanes generally experienced the most appreciation while single-family properties around off-street busway systems experienced depreciation. BRT-lite systems without dedicated lanes associate with property appreciation in relatively dense and congested metropolitan areas with developed transit networks and high ridership. Our model results emphasize the ability of BRT to improve transit accessibility in these regions and to provide an attractive alternative to driving. Furthermore, the lack of property appreciation around busways indicates these systems may not provide nearby residents with an amenity bonus greater than its nuisance effects. Our study informs stakeholders and public officials about the broad effects of BRT on land values and invites researchers to continue investigating the role of walkability, nuisance effects, and individual BRT amenities on residential property values.

Housing preferences during the pandemic: effect on home price, rent, and inflation measurement.

With shelter comprising a one-third weight in the Consumer Price Index, an accurate measure of rent change is essential for determining factors affecting inflation measurement, economic policy, and consumer and business decisions. The pandemic led to a shift in consumer demand for more residential space, both in the home’s interior and exterior. With remote work severing the need to be located near the place of employment, some households opted for more space in lower-density areas, moving out of high-rise structures in the urban core to suburban and exurban single-family and low-rise homes, altering the price and rent-growth patterns among single-family detached, attached, and multifamily properties. While measures of rent change are available for multifamily residential properties, none exist for the single-family rental market, which makes up one-half of the residential rental market. The CoreLogic Single-Family Rent Index (SFRI) fills the gap in rent measurement. The SFRI is a repeat-transaction rent index for single-family homes and is available monthly for the U.S., by major metros, by rent price tier and by property type. The SFRI reveals that after 12 months of the pandemic annual rent growth for detached properties was more than 5 percentage points higher than for attached properties. Substituting the SFRI for Owners’ Equivalent Rent, we find that Core CPI inflation would be nearly 2 percentage points higher by mid-2021. To the extent the rapid acceleration in single-family detached rent growth has yet to be reflected in the CPI, inflation measurement will be understated with delayed signals for economic policy makers.

Bankruptcy filings, flooding, real estate prices and Leading Index

PurposeFlood damage to uninsured single-family homes shifts the entire burden of costly repairs onto the homeowner. Homeowners in the United States and in much of Europe can purchase flood insurance. The Netherlands and Asian countries generally do not offer flood insurance protection to homeowners. Uninsured households incur the entire cost of repairing/replacing properties damaged due to flooding. Homeowners’ policies do not cover damage caused by flooding. The paper examines the link between personal bankruptcy and the severity of flooding events, property prices and financial condition levels.Design/methodology/approachA fully modified ordinary least squares (FMOLS) regression model is developed which uses personal bankruptcy filings as its dependent variable during the years 2000 through 2018. This time-series model considers the association between personal bankruptcy court filings and costly, widespread flooding events. Independent variables were selected that potentially act as mitigating factors reducing bankruptcy filings.FindingsThe FMOLS regression results found a significant, positive association between flooding events and the total number of personal bankruptcy filings. Higher flooding costs were associated with higher bankruptcy filings. The Home Price Index is inversely related to the bankruptcy dependent variable. The R-squared results indicate that 0.65% of the movement in the dependent variable personal bankruptcy filings is explained by the severity of a flooding event and other independent variables.Research limitations/implicationsThe severity of the flooding event is measured using dollar losses incurred by the National Flood Insurance program. A macro-case study was undertaken, but the research results would have been enhanced by examining local areas and demographic factors that may have made bankruptcy filing following a flooding event more or less likely.Practical implicationsThe paper considers the impact of the natural disaster flooding on bankruptcy rates filings. The findings may have implications for multi-family properties as well as single-family housing. Purchasing flood insurance generally mitigates the likelihood of severe financial risk to the property owner.Social implicationsNatural flood insurance is underwritten by the federal government and/or by private insurers. The financial health of private property insurers that underwrite flooding and their ability to meet losses incurred needs to be carefully scrutinized by the insured.Originality/valuePrior studies analyzing the linkages existing between housing prices, natural disasters and bankruptcy used descriptive data, mostly percentages, when considering this association. The study herein posits the same questions as these prior studies but used regression analysis to analyze the linkages. The methodology enables additional independent variables to be added to the analysis.

Small and medium multifamily housing: affordability and availability

Housing units in small and medium multifamily (SMMF) properties, defined as buildings with 2 to 49 units, comprise over 20% of the U.S. housing stock. Using the American Community Survey and American Housing Survey, this study fills an important gap in the literature by examining the affordability and availability of these housing units. This analysis reveals that SMMF units contain the largest percentage of the lowest-income households and the majority of rental units across the country. It employs models of filtering and quality-adjusted rents to decompose the factors that make these units accessible to such households. Even after controlling for these factors, their affordability persists, and their market share is declining. These findings raise concerns about the future availability of these affordable units. Policy-relevant conclusions are drawn about their role in the future of local, regional, and national economies.

Questioning stereotypes about US site-based subsidized housing

Purpose There is a dearth of basic analysis about how the demographics of residents living in the US Department of Housing and Urban Development (HUD) subsidized properties relate to the quality of housing. This research vacuum is often filled by popular stereotypes. This study aims to address this gap by examining the relationship between the demographics of residents and inspection scores. Design/methodology/approach Two data sources are drawn from the analysis: the 2018 HUD Picture of Subsidized Households database and HUD’s 2018 REAC Public and Multi-Family Housing Inspection Scores. Linear and logistic regression analysis were conducted, and selected data were mapped using GIS software. Findings The analysis examines the demographics of site-based subsidized properties in relation to inspection scores. In 2018, HUD identified 31,225 traditional public housing and other site-based multi-family properties in its Picture of Subsidized Households database. Residents living in these properties are often stereotyped as a homogeneous group that is predominantly composed of single, minority women with children who are welfare dependent. Similarly, properties are often portrayed as dilapidated, high-rise projects in segregated urban communities. The results from the analysis do not support these stereotypes about HUD-subsidized multi-family properties. By contrast, the results indicate that a diverse group of households lives in HUD-subsidized multi-family properties. Originality/value There is a need for scholars, advocates and practitioners to more aggressively challenge the popular stereotypes about site-based subsidized housing. In particular, there is a need for enhanced public scholarship focused on the dissemination of evidence-based research.

Practical Applications of Multifamily Development:Can You Always Lease It Up?

Practical Applications Summary In Multifamily Development: Can You Always Lease It Up?, from the 2019 Special Real Estate Issue of The Journal of Portfolio Management, authors Mark Fitzgerald, Chenchao Zang, and Will McIntosh (all of USAA Real Estate Company) seek to validate the conventional wisdom that investing in multifamily property development is safer than investing in the development of other types of properties, because multifamily properties tend to have short lease-up periods. The authors examine the distribution of lease-up periods for US multifamily developments from 2008 to 2018. They also examine how the length of a property’s lease-up period affects its rents.

Redevelopment Values in Multi-Family Properties: Evidence from En bloc Sales in Singapore

Redevelopment Values in Multi-Family Properties: Evidence from En bloc Sales in Singapore

Why Are Small and Medium Multifamily Properties So Inexpensive?

Small and medium multifamily properties—defined as buildings having between 2 and 49 units—house over 20% of the U.S. population, yet they remain an understudied segment of the housing market. Using a rich, transaction-level dataset in eleven major urban counties, we find that they transact at a significant price discount relative to both single-family and large multifamily properties on a per square foot basis. Controlling for both unit- and building-level structural characteristics, small multifamily structures (with 2 to 4 units) transact at a 13.2% discount relative to single-family houses. Further analysis shows that neighborhood characteristics can explain 48.5% of this difference, leaving a sizable residual unexplained. We also find that medium-sized multifamily structures (5 to 49 units) are similarly discounted relative to larger multifamily buildings. This persistently remaining discount may result from asset-specific characteristics. On balance, the analysis reveals a U-shaped price gradient, with the greatest discount for the smallest multifamily properties (2 to 9 units) and a diminishing discount for greater building size

Energy Cost Burdens for Low-Income and Minority Households

Problem, research strategy, and findings: Of the three primary components of housing affordability measures—rent, transportation, and utilities—utility costs are the least understood yet are the one area where the cost burden can be reduced without household relocation. Existing data sources to estimate energy costs are limited to surveys with small samples and low spatial and temporal resolution, such as the American Housing Survey and the Residential Energy Consumption Survey. In this study, we present a new method for small-area estimates of household energy cost burdens (ECBs) that leverages actual building energy use data for approximately 13,000 multifamily properties across five U.S. cities and links energy costs to savings opportunities by analyzing 3,000 energy audit reports. We examine differentials in cost burdens across household demographic and socioeconomic characteristics and analyze spatial, regional, and building-level variations in energy use and expenditures. Our results show the average low-income household has an ECB of 7%, whereas higher income households have an average burden of 2%. Notably, even within defined income bands, minority households experience higher ECBs than non-Hispanic White households. For lower income households, low-cost energy improvements could reduce energy costs by as much as $1,500 per year.Takeaway for practice: In this study we attempt to shift the focus of energy efficiency investments to their impact on household cost burdens and overall housing affordability. Our analysis explores new and unique data generated from measurement-driven urban energy policies and shows low-income households disproportionately bear the burden of poor-quality and energy-inefficient housing. Cities can use these new data resources and methods to develop equity-based energy policies that treat energy efficiency and climate mitigation as issues of environmental justice and that apply data-driven, targeted policies to improve quality of life for the most vulnerable urban residents.

A data envelopment analysis (DEA) model for building energy benchmarking

Purpose Building energy benchmarking is required for adopting an energy certification scheme, promoting energy efficiency and reducing energy consumption. It demonstrates the current level of energy consumption, the value of potential energy improvement and the prospects for additional savings. This paper aims to create a new data envelopment analysis (DEA) model that overcomes the limitations of existing models for building energy benchmarking. Design/methodology/approach Data preparation: the findings of the literature search and subject matter experts’ inputs are used to construct the DEA model. Particularly, it is ensured that the included variables would not violate the fundamental assumption of DEA modeling, DEA convexity axiom. New DEA formulation: controllable and non-controllable variables, e.g. weather conditions, are differentiated in the new formulation. A new approach is used to identify outliers to avoid skewing the efficiency scores for the rest of the buildings under consideration. Efficiency analysis: three distinct efficiencies are computed and analyzed in benchmarking building energy: overall, pure technical, and scale efficiency. Findings The proposed DEA approach is successfully applied to a data set provided by a utility management and energy services company that is active in the multifamily housing industry. Building characteristics and energy consumption of 124 multifamily properties in 15 different states in the USA are found in the data set. Buildings in this data set are benchmarked using the new DEA energy benchmarking formulation. Building energy benchmarking is also conducted in a time series manner showing how a particular building performs across the period of 12 months compared with its peers. Originality/value The proposed research contributes to the body of knowledge in building energy benchmarking through developing a new outlier detection method to mitigate the impact of super-efficient and super-inefficient buildings on skewing the efficiency scores of the other buildings; avoiding ratio variables in the DEA formulation to adhere to the convexity assumption that existing DEA methods do not follow; and distinguishing between controllable and non-controllable variables in the DEA formulation. This research contributes to the state of practice through providing a new energy benchmarking tool for facility managers and building owners that strive to relatively rank the energy-efficiency of their properties and identify low-performing properties as investment targets to enhance energy efficiency.

Beyond the Cap Rate: Valuation of Multifamily Properties

Estimating the value of multifamily properties and other commercial real estate properties is an important but difficult task for real estate investors and researchers. The commonly used capitalization rate model, which involves the estimation of capitalization rates, has limitations in practice, especially during periods of financial stress. This paper proposes a new property valuation methodology that directly estimates the value of multifamily properties by accounting for both market trends and property operating performance. Our results show that this new model significantly improves the valuation of multifamily properties, particularly distressed properties. This methodology can also be applied to the valuation of other commercial real estate properties.

Streetcars and Real Estate Rents with Implications for Transit and Land Use Planning

Modern streetcars seemed to have emerged as the darling of America’s downtown revival. Planners, however, have little experience with market responses to modern streetcars to help guide future efforts, or improve or expand current ones. This paper is the first to report the association between real estate rents and proximity to streetcar stations based on all streetcar systems launched in the U.S.A. since 1990. Using multiple functional forms, the paper shows that real estate rents for office, retail, and multifamily properties increase with proximity to streetcar stations. The analysis further tests outcomes using five functional forms: linear, semi-log, double-log, quadratic and fine-grained distance band (using one-eighth mile increments). It appears that the distance band functional form specification may be the most useful for transit and land use planning purposes. Results suggest that streetcar planning and associated land use planning should anticipate heightened demand for multifamily residential development near streetcar stations, perhaps displacing office development to about half a mile away. Retail activities may benefit from additional level of competition for location near streetcar stations by both residential and office development. Indeed, analysis finds that whereas multifamily residential rent premiums with respect to streetcar station proximity extend a mile outward, office rent premiums are lower closer to stations but rise rapidly about a half mile away, presumably outbidding multifamily residential development. Retail activities take advantage of this competition roughly to the area between the office and multifamily rent premium thresholds. Implications for fixed guideway transit and land use planning practice are offered.

Differences in conventional and seniors-oriented apartment management

PurposeFrom the consumer side, this paper aims to highlight some of the various characteristics that older renters seek out from their apartment buildings, relative to conventional multifamily residential buildings and, from the operational side, to examine some of the costs involved in daily operation of such buildings.Design/methodology/approachThe Rental Housing Finance Survey provides data that enables scholars to test empirical differences in amenities and costs between senior-oriented communities and other apartment buildings.FindingsOccupancy rates outpace the rate for all other apartment communities. Regarding amenities, senior apartment communities are more likely than other communities to have a fitness center on premises, but less likely to have a swimming pool. Market value for senior properties is usually less than properties marketed toward multi-family property tenants. This difference may be due to a higher pattern of both operating/capital expenses within senior communities. Part of these increases in operating costs is due to a higher propensity to hire professional management companies and a higher fee for managing senior apartment communities.Originality/valueLiterature on seniors living within apartment communities is somewhat sparse, particularly regarding the operational aspects of managing apartment communities. There is a dearth of information on industry success measurements known as operating and capital expenditures. This study triangulates multiple sources of data to investigate differences in cost of senior housing apartment communities, as well as amenity structures.

Energy Cost Burdens for Low-Income and Minority Households in Six U.S. Cities: Evidence from Energy Benchmarking and Audit Data

Of the three primary components of housing affordability measures - housing cost, transportation costs, and utility costs - utility expenditures are the least understood, yet the one area where the cost burden can be reduced without household relocation. Existing data sources to measure energy costs are limited to surveys with small samples and low spatial and temporal resolution, such as the American Housing Survey and the Residential Energy Consumption Survey. This paper presents a new method to estimate household energy cost burdens that leverages actual building energy use data for 13,000 multi-family properties across six U.S. cities, and links energy costs to savings opportunities based on an analysis of 3,000 energy audit reports. We examine differentials in cost burdens across household demographic and socioeconomic characteristics, and analyze spatial, regional, and building-level variations in energy use and expenditures. We find that the average low-income household has an energy cost burden of 7%, whereas higher-income households have an average burden of 2%. Notably, we find that even within defined income bands, minority households experience higher energy cost burdens than non-Hispanic White households. For lower-income households, low-cost energy improvements could reduce energy costs by as much as $1,500 per year.