Your October Newsletter from CALCAP!

CALCAP CONNECTIONS

October 2023

Principal's Corner

Affordability In The Spotlight

Affordability is becoming a frequent topic of concern. Globe Street recently reported that an astounding 70% of renter households have a gross income less than the US median and is hindering their ability to pay rent. The rent-to-income ratio has reached 40%, making it one of the least affordable rental markets ever, according to CoreLogic. Historically, ratios of around 33% have been deemed to be an acceptable amount of income going towards rent. Stagnant wage growth, combined with soaring costs of goods and services, has further exacerbated this situation.

At the same time, renters are also being priced out of home ownership. A combination of rapid home price appreciation and rising interest rates have caused the monthly cost of home ownership to rise a staggering 78% over the last 3 years! The National Multifamily Housing Council (NMHC) reported this month that, “It has never been more expensive to buy a home.” The average cost for a newly purchased home is now almost $1,300 more per month than the cost of renting a professionally managed apartment.

In response to these concerns, the Biden Administration earlier this year unveiled a blueprint entitled the “Renters Bill of Rights.” This white paper is intended “to increase fairness in the rental market and further principles of fair housing.” Under pressure from activists, and some lawmakers in Congress, the Federal Housing Finance Agency (FHFA) is also currently reviewing a proposal to impose rent control on all apartments with loans backed by Fannie Mae and Freddie Mac. The two GSE’s combined essentially guarantee the loans for more than 12 million apartment units in America. While we fully support fair housing in the rental market, we also believe that sweeping rent control is not a viable solution.

Rent control always seems like a good idea and an easy fix. While it provides good talking points for politicians it fails to address the real cause of the housing crisis—lack of affordable supply. Rent control actually worsens the supply shortage because it discourages developers from building new units and causes existing owners to limit capital improvements which further deteriorates existing housing stock. Although these policies are intended to help lower income households, they also end up subsidizing higher income residents. Furthermore, some of these residents end up illegally subleasing their apartment at higher rates for a profit rather than living in the unit themselves. Rent control has unintended consequences which would prove disastrous on a national level. We are watching this closely.

Edward M. Aloe

Founder and CEO

626-229-9057

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Latest Headlines...

Rents dropped again in September: Realtor.com

Renting now more affordable than buying in almost all major markets

The Wall Street Journal reported on Sunday that the premium on buying a home versus renting one is at its highest level since 1996. The average monthly mortgage payment in September was 52% more expensive than the average apartment rent, according to data from real estate firm CBRE.

An influx of new multifamily units on the market drove prices down, improving affordability for units of all sizes.

In September, the annual completion rate of multifamily buildings with five or more units increased 10.1% month-over-month and 15.0% year-over-year. The addition of new apartments to the market prompted prices to decline, improving affordability.

On a yearly basis, median asking rents fell for two-bedroom units(-0.7%), for one-bedroom units (-0.3%) and for studios (-0.5%), while remaining well above pre-pandemic levels.

As prices ticked down, renters flocked to affordable units, the Realtor.com report found. Indeed, within three months of completion, 69.8% of the affordable rental units (renting for $1,850 or less) were taken. Meanwhile, during the same timeframe, 57.2% of units worth over $1,850 were rented.

View Article Here

61% of ADUs are built for multigenerational housing: survey

Accessory dwelling units (ADUs) can add much-needed space to support multigenerational living at an affordable price point

According to a recent survey conducted by OnePoll, 61% of homeowners cited multigenerational housing as their primary motivation for constructing an ADU.

Multigenerational housing can also provide a residence for aging parents or family members in need of additional support or caregiving. According to the same survey, one in four homeowners either house a disabled family member in their ADU or have plans to do so in the future.

Notably, accessibility was an important consideration for 73% of homeowners who have an ADU, whether for the purpose of aging in place in the future or for accommodating current residents.

Multigenerational living is not a new concept. In various parts of the world, it is deeply ingrained in the culture, and it was also common in the United States prior to the 20th century. Families in many parts of the world support one another with childcare and eldercare, fostering robust support systems that cater to all needs.

View Article Here

RentCafe: Solo Renters Surge Nationwide

Baby boomers and millennials lead the way for renters living alone.

Who’s living alone? Baby boomers and millennials account for the largest shares of solo renting, while very few Gen Zers are going it on their own since a renter living alone needs an extra annual income of $8,600 compared with an average renter.

Baby boomers make up the largest share of renters living alone, with over 5.3 million in the ranks. According to RentCafe, those renting alone need an income of just under $50,000 to afford it. This is approximately $16,300 more than what the average renter needs to afford rent, based on Census Bureau individual income estimates.

About 4.8 million millennial renters opt for solo living, either by choice or necessity. Those renting alone have an average income of $55,973, which is about $22,300 above the average renter’s income.

View Article Here

On the lighter side...

About CALCAP Advisors

About CALCAP

California Capital Real Estate Advisors, Inc., and its affiliate entities (CALCAP Asset Management, CALCAP Properties, CALCAP Lending, CALCAP Senior Healthcare, and CALCAP Strategic Opportunities, collectively known as “CALCAP”), is a California-based investment company founded in 2008 and headquartered in Pasadena, California. The Company sponsors alternative real estate investment opportunities focused on demographically driven housing. CALCAP has been able to consistently provide both individual and institutional investors with outstanding returns over the last 14 years. The Company uses a highly selective and disciplined investment approach, focused on delivering superior risk-adjusted returns. CALCAP currently has over $650mm in Assets Under Management. To learn more visit www.calcap.com.

Social Mission

CALCAP CARES is a 501(c)(3) private foundation organized to encourage employees to find a way to give back to the neighborhoods where we invest. CALCAP has created "GiveTime4Autism" as its initial program which gives employees the opportunity to donate unused vacation and sick days for a very worthy cause.