As Rents Increase, Middle-Income Earners Struggle to Find Affordable Housing

It seems that the gap between affordable rental units and expensive luxury units is widening. However in contrast to conventional thought, luxury units are not seeing spikes in pricing. Instead, rents for units designed for middle income households are spiking, leaving many with few options for affordable housing. Developers have contributed a great deal to the issue, as they focus on building more luxury units rather than affordable ones. The Wall Street Journal has recently documented the phenomenon occurring in the country’s largest metropolitan centers, noting high construction costs, and growing populations.

According the CoStar Group Inc., more than 80% of new units available in metro areas are luxury rentals. Although the demand for middle-income rentals is seemingly at an all-time high, few of such rental units are actually being built. Nationwide, the scarcity of such units is driving prices up, leaving many with few options in terms of housing. Working-class households are either forced to pay higher rents, or driven into lower-income units and neighborhoods.

Despite the high demand, developers are refusing to build more units that cater to middle-income individuals. For developers, construction costs do not justify building lower-tier housing. Class B and C apartments, which are designed for middle-income and working class owners have become more expensive to build. Because of high construction costs, Class B apartments especially have outpaced rent increases compared to luxury Class A apartments. Axiometrics Inc., a Dallas-based apartment research firm, reports that rents for Class B apartments have jumped 5.8 percent in the second quarter of 2015. These rental units are often low-rise suburban apartments with outdoor pools, business centers, and ample green space.

According to New York University’s Furman Center and Capital One Financial Corp, fewer affordable units are available to middle-income earners. In Miami for example, renters looking for affordable rents can only afford 33 percent of available units in 2015, which is down seven percentage points from 2006. Philadelphia’s case has seen an even greater drop of 10 percentage points from 45 percent to 35 percent since 2006. Amazingly though, luxury units are still drastically more expensive than Class B or C rentals. Rental units for Class A luxury apartments average $1700 per month, while Class B rents average $1200, and Class C units average $850 per month.

In the article, The Wall Street Journal uses the Verona Complex in suburban Denver to showcase this phenomenon. Philadelphia-based Resource Real Estate which owns the complex has poured $3-4 million in upgrades into the mid-tier housing units. Since renovations began, tours and open houses have risen 25 percent. In order to keep up with high demand, the firm has teams working double shifts to finish all units for new renters. Rising prices are burdening many renters though, as more and more households are classified as “rent burdened”. Rent-burdened households mean that more than 30 percent of their incomes are spent on housing.

Technology: New York City Real Estate

This is the age of fast, readily available information. Technologies influence over industry is seemingly endless. A city like New York, which attracts the best and brightest individuals of their industries, deserves just that: the most innovative and efficient real estate technology.

In the realm of real estate, the potential to make management and building data readily accessible is overwhelming with the use of technological advancements. For real estate professionals, both on the commercial and residential scale, online platforms can assist in efficiently and intelligently completing work. Analyzing trends become simpler, market changes are easier to detect, resulting in more concrete advice derived from solid information from data which is accessed more efficiently.

The marriage of real estate and technology is expanding to all facets of the industry, with New York real estate investors surging approximately $62 million into platforms aimed to enhance the system for both residential and commercial real estate.New York City as a tech grid

That $62 million is almost 20 percent of the $322.5 million that has been invested in tech companies globally in 2015, the majority of that money–$221.8 million–has gone towards tech companies focusing exclusively on commercial real estate. The remaining $100.7 million went towards companies dealing with residential real estate.

Of the five-hundred commercial and residential real estate professionals polled for the RE:Tech report, about 85 percent of those working in commercial real estate said they were taking the time to understand how these new platforms have potential impact on their business. Overall, 45 percent of those polled believe their brokerage is interested in folding new real estate technology into their business strategy.

And it’s a smart decision to make: NYC-based real estate tech companies raked in $28 million in the first quarter of 2015, and $34 million in the second. One of those companies, VTS, a platform for asset management and leasing, recently announced its fundraising of $21 million. Honest Buildings, a management platform for building owners, raised $5 million in fundraising this past summer.

Real estate investment is seeing a surge in the induction of crowdfunding platforms into the industry since the federal JOBS Act passed in 2012. Sharestates, a crowdfunding marketplace, has raised over $30 million since January of this year, and Cadre, an online investment platform, raised $18.5 million. This is a distinctive indication that the business is evolving and adapting to be as responsive as possible to client needs.


Visit Blue Rock Real Estate online to learn more about the leading private equity real estate asset management company.

 

Investing in Real Estate

For the past decade, the real estate market has been experiencing some fluctuations. For years, it’s gone back-and-forth as being regarded as a safe investment. Now as we’re entering the end of 2015, investing in real estate is once again a relatively safe choice. Jerold Novack

While most investors are still experiencing feelings of unease after the 2008 market crash, investment portfolios are once again being diversified with real estate investments since 2013. Some are even saying investing in real estate is safer than investing in gold.

And why would’t they? Real estate investments tend to have an excellent long-term yield in addition to being a great hedge against inflation. The trend to invest locally is popping up, as discussed on the Blue Rock Real Estate website. The driving force behind the trend, according to Richard Spillane of Spillane Money Management, is that investors buy properties in familiar neighborhoods partly for the income and partly for the diversification. The attraction to the properties is that investors can actually “get their arms around” them.

While there are still a few investors ready and willing to invest in properties that are miles, states, and oceans away, Elke Mariotti, a CFP and an agent with Signature Premier Properties in Huntington, N.Y., said the appeal to investing locally is in its simplicity.

In today’s market, real estate investing is more about capital preservation, as there is little impact on commercial real estate yields due to the spread between cap rates and interest rates remaining so great. U.S. real estate is a fully-priced market, and investors know it.

In the last year, Chinese investors have surged nearly $6 billion in United States commercial real estate properties, $4.5 billion of which went directly to properties in Manhattan. Foreign capital is beginning to look at secondary markets as lucrative, and are clearly taking advantage of it.

Jerold Novack Blue Rock Real Estate

 

The Charles Makes History

A unique, luxury space located in the Upper East Side of Manhattan, The Charles was designed by Ismael Leyva Architects, developed by Bluerock Real Estate, LLC built in 2013. The condominiums are all four-bedroom, four-bathroom spaces that take up the entire floor with elevator access inside each apartment. The Charles

Located on First Avenue between East 71st and East 72nd Street, the 32-floor, 27-unit architectural marvel sits in a coveted, quiet neighborhood between the East River and Central Park. Recently, the luxurious residence made headlines for a record-breaking sale according to real-estate appraiser Jonathan Miller: the highest amount ever paid for a home on the Upper East Side east of Third Avenue.

Two buyers, who are related to one another, purchased the spaces on the 29th, 30th, 31st, and 32nd floors to create an approximately 11,750-square-foot quadruplex. The spaces (two duplex apartments, one penthouse apartment) sold for a total of $58.635 million.

And for that price, the buyers will not only get a large, luxurious and unique space in one of Manhattan’s wealthiest neighborhoods, but The Charles also features concierge and doorman services, a gym facility, as well as a children’s playroom.


 

Visit the Bluerock Blog for links to more press about this historical sale.

 

Bluerock Residential Growth REIT Announces First Quarter 2015 AFFO per share of $0.13 vs. Guidance of $0.10-$0.11 per share; Pro Forma AFFO per share of $0.29 vs. Guidance of $0.26 – $0.28

Bluerock Residential Growth REIT, Inc. (NYSE MKT: BRG) (“the Company”) announced today its financial results for the quarter ended March 31, 2015. READ MORE>>>