CORRESPONDENCE - WS-1 OPPOSITION

Home Browse Search

cent. Most of the areas with rapidly rising rents—including Las Vegas, Orlando, Sacramento, and Seattle—are located in the West and South. Other prominent metros in these two regions also had rent gains over the past few years, but these increases have either moderated (Dallas, Riverside, and Sacramento) or slowed consider- ably (Austin, Nashville, and Portland). Meanwhile, nominal rent growth in the Midwest and Northeast has remained slow to moderate, with only a handful of markets report- ing annual increases above 3.0 percent over the past year (including Cincinnati and Minneapolis). In contrast, several metros in these regions—Bridgeport, Dayton, Des Moines, Pittsburgh, Providence, Syracuse, and Wichita—posted nominal rent growth that lagged behind general inflation. Within metro areas, rent increases in once low-cost neighborhoods have been especially large. In the 100 metro areas tracked by Zillow, rents in lowest -tier neighborhoods in 2012 were up sharply by mid -2017 in metros with the highest population growth (Figure 231. In Denver and Houston, for example, annual rent increases in the lowest -cost neighborhoods exceeded those in the highest -cost neigh- borhoods by more than 2 percentage points. In metros where the population was either stable or declining, however, rents grew slowly across all neighborhood types. STRONG RENTAL PROPERTY PERFORMANCE The rental property market has been among the best -performing sec- tors of the economy. The National Council of Real Estate Investment Fiduciaries (NCREIF) reports that nominal growth in net operating income (NOI) for investment-grade properties averaged some 7.7 per- cent annually in the seven years ending in the third quarter of 2017, compared with just 2.8 percent annually on average in 1983-2010. These strong gains reflect high occupancy rates as well as rising rents. With apartment occupancy rates falling and rent growth slow- ing, however, NOI growth moderated to a 3.8 percent annual rate in the third quarter—still outpacing the national rate of inflation and in line with historical averages. Solid growth in operating incomes allows property owners to reinvest in their units. According to the National Apartment Association, real improvement spending per unit more than doubled from 2010 to 2016 (Figure 241. Owners of large apartment properties invested $1,480 per unit on average in 2016, or roughly 10 percent of gross potential rents, up from about 8 percent per year on average between 2001 and 2015. There is also little sign that single-family rentals are returning to the owner occupied market. According to the latest American Community Survey, growth in the total number of single-family rent - Owners Have Invested Heavily in Apartment Property Upgrades in Recent Years Spending per Upit12016 dollars 1,600 1,400 1,200 1,000 Soo 600 400 200 0 2007 2008 2000 2010 2011 2012 2013 2014 2015 2016 4i Repair &Maintenance 11 Improvements Notes', l ate include apartment properties with 50 or more units under professional management with stabilized operations. dollars adjusted for inflation using the GN J far All Items, Somme National Apartment Association Survey of Operating Income & Expenses in Rental Apartment Communities, 2008-2017. 23