Monday, September 29, 2008

The fight is not over

It looks like we're cutting it close on our petition drive for the apartments on 35th Avenue and Southern. However, based on several recent trade articles, including this one, we will probably have several more opportunities in the near future.

If developers and contractors must stay in business, they must therefore keep looking for "low-hanging fruit." This means that they will find inexpensive land, inexpensive labor, and inexpensive financing for their projects (or else find an opportunity in a downtown market with very high barriers to entry). The most likely projects that will qualify for all of the above are apartments in markets with reasonable rental demand. Where the demand is lacking for high-end apartments, such as in bedroom communities, they will have to look for the next best thing: assured income from Section 8 rentals.

This again highlights my point that the developer is simply being opportunistic in trying to build multifamily. Once more, I challenge the belief that we must sacrifice our community's integrity to provide short-term income for one developer. It isn't fair to the neighbors who bought into another plan for their community.

3 comments:

Patrick said...

And by the way, my primary concern, as I hope has been made clear, is regarding rezoning. In locations where apartments make sense, or where the community can benefit from redevelopment of a blighted area, it's a different story.....

Patrick said...

And here's the entire article, in case the publisher removes it:


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Impending Bailout Package To Have Little Impact on Multifamily Financing
Published: September 29, 2008

By Anuradha Kher, Online News Editor

Washington, D.C.--Days into debate and discussions on Capitol Hill regarding a $700 billion bailout package to stabilize the financial industry, the House of Representatives voted this afternoon against the bill in its current state. The vote against the measure was 228 to 205, with 133 Republicans joining 95 Democrats in opposition. One hundred and forty Democrats and 65 Republicans had backed the bill. Over the weekend, support for the bailout had seemed strong, with several politicians declaring it close to passing.

After Its failure today, the Dow plunged 778 points. The Dow closed down 6.89 percent, beating its previous record for an intraday drop of 721.56 points, set during the first trading day after the Sept. 11, 2001 terror attacks. However, in percentage terms, the decline measured well under the more than 20 percent drops seen on Black Monday of October 1987 and in the Depression.

While the passage of the bill was expected to have had a calming effect on the economy, multifamily industry experts believe its impact on financing in the multi-housing sector would be small and indirect.

“Whatever the bailout deal is right now, it has to be modified and tweaked. It will eventually be approved because there is no other solution,” Bill Hughes, a senior vice president and managing director of Marcus & Millichap Capital Corp. (MMCC), tells MHN.

The bailout not passing today, he says, “will not have any impact on multifamily financing but Citi’s takeover of Wachovia will have some because Wachovia is a Fannie Mae DUS lender.”

However, the cost of money for multifamily deals will go up due to an increase in perceived risk in the markets. “I don’t think this will change the way lenders look at deals--they will continue to be conservative. Even when the bailout package passes, there will be no direct impact on multifamily. It is not a panacea and won’t have an immediate impact other than calming the markets.”

David M. Abromowitz is a senior fellow at the Center for American Progress, focusing on housing policy and related federal and state programs and issues. He is also a partner at the law firm Goulston & Storrs. Abromowitz tells MHN, “From everything I have seen lately, multifamily deal volume is down and there is difficulty in finding credit. The thinking was that if there is a quick enough bailout, it would have the same impact on multifamily financing as it would on the economy.”

He says that the multifamily market thrives better when the homeownership market is not flooded with cheap and easy loans. Since those loans are never coming back, there is good news for multifamily, he says.

“There is a lot of uncertainty nationally and internationally and there’s an atmosphere of fear in lending. The prolonged uncertainty is clearly bad for multifamily financing,” says Abromowitz.

He believes that it is important to keep an eye on Fannie Mae and Freddie Mac to see if multifamily financing will continue effectively. “So far the understanding is that the GSEs will continue to do that. Having said that many deals just won’t get done because they won’t be economically viable till spreads return to normal,” Abromowitz says.

John A. Courson, Chief Operating Officer of the Mortgage Bankers Association (MBA) issued a statement, saying, "We hope Congressional and Administration negotiators will immediately regroup and find common ground upon which they can build a new agreement. Restoring liquidity to the credit markets is crucial to both stabilizing Wall Street and keeping the U.S. economy moving forward.

"The credit crunch is not only preventing financial institutions from being able to access capital but is also preventing large and small businesses from being able to borrow money, money they use to operate their businesses, upgrading facilities and equipment and hiring and paying workers. If businesses don't have access to that capital, they will stop growing and the economy will stagnate."

Patrick said...

Eh, it appears that the 35th Avenue battle is over. They won, we lost. But let's feel comfortable that people will stop building new houses here for a while (except for the custom homes closer to the foothills).