January 14, 2021 • 62 mins
The National Multifamily Housing Council (NMHC) is a membership organization that represents large apartment owners nationwide. NMHC is actively involved in forming national housing policy and shaping the legislation and regulations that affect the industry as well as research offering insights into apartment trends. This week we welcome Director of Research, Chris Bruen, and research associate, Claire Gray, as we discuss trends apartment owners are watching carefully as we head into a new administration and a new year.
00:00 The Data Driven Real Estate Podcast Welcomes Chris Bruen and Claire Gray from the National Multifamily Housing Council
00:56 What is the number one data trend apartment owners should watch for in 2021?
01:50 Who is the National Multifamily Housing Council?
04:13 How do you define an apartment?
08:16 What reports does the NMHC produce?
11:40 What are the insights they are seeing in different markets
12:58 What percentage of apartment rents are being paid in 2021?
14:11 How do apartment owners feel about 2021?
19:47 Will apartment construction increase in 2021?
23:45 Demographic and tenant trends in the apartment space
35:43 Conversion of malls to apartments?
38:39 Is migration impacting the apartment sector?
52:19 What research is NMHC producing in 2021
55:56 Technology trends in the apartment space
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Aaron Norris (00:06):
Welcome back to the Data Driven Real Estate
Podcast, the podcast for realestate professionals dedicated
to driving business using data.
I'm Aaron Norris withPropertyRadar and this is
episode 29. This week we havehalf the research team at the
National Multifamily HousingCouncil. We've got the Director
of Research, Chris Bruen, andResearch Associate Claire Gray.
This week, we talked abouttrends in the apartment space
nationwide. We talked aboutmigration, COVID challenges and
(00:27):
some opportunities coming up in2021. And the data that they are
following in the year ahead, youwon't want to miss this week.
Chris and Claire, really nice tohave you on the show today.
Thanks for your time. I knowChris, you're in DC. It's an
interesting time in the DC area.
So, and you're in the officetoday. So good for you.
Christopher Bruen (00:49):
Yeah.
Aaron Norris (00:50):
Claire, where are you parked today?
Claire Gray (00:52):
I'm calling in from Arlington, Virginia. So, just
over the river.
Aaron Norris (00:56):
Just over the river. All right. Well, I wanted
to start the show off by askingwhat's the number one data point
you're watching headed into2021? And, Chris, I'll start
with you.
Christopher Bruen (01:07):
The number one data point? I would say that
we're always looking at rankcollections that we're tracking
every month. Well, I guess youasked for one. So, that would be
my one.
Aaron Norris (01:24):
We'll go into more, we'll go into more. But I
like that Claire, do you haveone that you really got your eye
on?
Claire Gray (01:29):
I was just gonna say kind of building off of
Chris, like we've been trackingrent collections. But we're
finding out that, you know,occupancy, vacancy, that end of
it is also pretty important,because things are happening
differently in differentmarkets, you know, urban gateway
markets are not in the samesituation is the Midwest. So,
just both ends of the picturethere.
Aaron Norris (01:50):
Oh, that sets us up so beautifully for such a fun
conversation. So, if somebody isnot familiar with the National
Multihousing Council, how wouldyou describe it?
Christopher Bruen (02:01):
I would say so, we are an organization that
represents the US apartmentindustry. And our members
include some of the largestowners, managers and developers
of apartments, as well as otherindustry players like, like
(02:21):
brokers. Those in finance ortechnology related to the
apartment industry. And our workis, is part advocacy. We have a
government affairs team here, aswell as providing research and
insight for the industry. And,and Claire and I are part of a
(02:44):
four person, research team here.
Aaron Norris (02:49):
Very cool. Yeah, the advocacy piece is just so
important. And I've been on thehill in the single-family rental
space sort of advocating onthat. And data always seems to
do a really good job keepingthings out of the political
sometimes. It's just a reallyimportant role. So, when it
comes to data, what kind ofinformation do you find the most
(03:12):
helpful in that process?
Christopher Bruen (03:18):
In terms of what what, what data, do we
think is much important or?
Aaron Norris (03:22):
If you're going to the hill do? or is Congress
asking for specific insights?
Are there any kind of whenyou're any testimonials, that
testimonies that you're doing atthe hill? What are they looking
for? What kind of data are theyneeding to make great decisions
for housing?
Christopher Bruen (03:41):
Hmm.
I know it changes so it couldbe.
I mean, and some of this is, iskind of in the domain of our
government, government affairsteam.
Aaron Norris (03:54):
Oh, got it. Got it. Got it.
Christopher Bruen (03:55):
But it really I mean, just whatever their
objective is, it's importantthat they have an accurate
picture of, of the market. So,just, just that we're there to
provide them with, you know,accurate data.
Aaron Norris (04:13):
And that they trust the data that you're
providing them. That's always abig piece of it. You mentioned
that your members are largeapartment owners, is there a
specific size? Can we definelike, maybe talk a little bit
about what apartment looks likeacross the US? Is it multi? Is
it over 100 units per apartmentcomplex? Is it you know, five to
(04:34):
10 any insights into that?
Christopher Bruen (04:37):
Well, our definition is a rental unit in a
building with five or moreunits. But our members are all
different sizes except wedefinitely have a large
representation of professionallymanaged buildings.
Aaron Norris (04:57):
Has that changed at all over time? Apartments,
are they getting bigger orsmaller? Any trends in that
space that you're seeing?
Christopher Bruen (05:06):
Um, I don't know, if you want, if do you
have anything to add to this,Claire, or?
Claire Gray (05:12):
Um, well, I know, we, we've seen kind of over time
that apartment buildings I thinkare getting bigger and maybe the
units are getting a littlesmaller, maybe more one bedrooms
and efficiencies, especially inprobably urban markets, trying
to save space.
Aaron Norris (05:31):
I love the New York City, it makes me laugh
when somebody says efficiencybecause I've lived in one of
those efficiencies.
Christopher Bruen (05:36):
I live in one currently. And yeah, we, we
looked at this data recently,and I think since like 2006, I
believe was the year after whichthere was, there started to be a
higher share of units built thatwere either one bedrooms or
efficiencies.
Aaron Norris (05:56):
Okay. Is that the Japan model? Aren't they very
known, well known for that? Ican't remember if it's China or
Japan, like they just, it's, inorder to live in like really
great cities. It's almost like acage. It's really uncomfortable
to watch. And they have
Christopher Bruen (06:09):
I know, there's a lot of that in Japan.
Yeah.
Aaron Norris (06:13):
It's just interesting like having lived
seven years in New York, youknow, you're there for the
experience you never, when I wasthere, I was living in various
strange places. And it was just,I was there to live in a great
city, I was. And when I was intothe apartment, I was asleep so I
didn't care. But, you know,because of COVID. There's a lot
of conversation about migration.
And let's just talk about someof the trends or is there
(06:35):
anything that has reallysurprised you in the apartment
space in 2020 because of COVID?
Christopher Bruen (06:45):
I can't say anything that surprised me, I,
COVID itself is such a largeshock and surprise that. I don't
know if there's really anyexpectation there to begin with.
Aaron Norris (06:59):
Okay, Claire?
Claire Gray (07:01):
Um, yeah, I think Chris is going to get more into
that on our quarterly surveylater. But um, we survey our
members based on a few regularquestions every quarter. But we
also usually try to ask aspecial question that's a little
more topical to what's going onin the market, or what we think
they might be seeing. And ourmost recent quarterly survey in
(07:22):
October, we asked our members ifthey're seeing increased demand,
based on certain building andunit types. So, overwhelmingly,
the highest demand they wereseeing was in the garden style
apartments in both theefficiencies and one bedrooms,
and also the two plus bedroomunits. So, probably just people,
(07:43):
you're stuck at home, you wantto try to get maybe out of the
city a little more space, thatkind of thing.
Aaron Norris (07:48):
I was gonna say, I don't know if I know that garden
style. What does that mean?
Claire Gray (07:52):
It's, it's more of like a two to four story kind of
walk-up type apartment. Theymight buildings might be small,
but the property might haveseveral buildings, not like the
mid and high-rise that you mightsee.
Aaron Norris (08:04):
Got it.
Claire Gray (08:04):
In downtown areas.
Aaron Norris (08:07):
That's where I lived in New York, a lot of
walkups. And it was typicallyalways the fifth floor. Garden
style that makes it sounds solovely.
Claire Gray (08:15):
Yeah.
Aaron Norris (08:16):
Well, let's get into the quarterly reports
because your team reallyproduces a lot of really great
data. So, maybe Chris, you cantell us what's included in some
of the things you cover?
Christopher Bruen (08:26):
Yes, so we have three different
publications that we come outwith quarterly. We have our
quarterly survey, where wesurvey our members on four main
metrics, we asked them whetheror not they think that they're,
that the markets in which theyoperate there is that the market
(08:49):
is becoming tighter or looser,if sales volumes are increasing
or decreasing, and this is allrelative to the prior quarter.
And also, if equity and debtfinancing has become more or
less available. And from theirresponses, we construct an index
(09:12):
ranging from one to 150representing no quarterly
change. So, if there's an equalnumber of respondents who say
they think things are improvingrelative to those who think
things are getting worse than itwould be just at 50 there.
Aaron Norris (09:29):
Wow. So, how many owners do you survey? Just
curious?
Christopher Bruen (09:34):
We usually get around. Claire, would you
say around 150 responses?
Claire Gray (09:40):
Yeah, I was gonna say anywhere from 100 to 200. I
think it just depends. You know,sometimes in the winter time or
summer, people are out onvacation, maybe not as many but.
Aaron Norris (09:49):
Any idea how many, of those 150 how many units they
represent total?
Christopher Bruen (09:56):
It's not something that we track.
Aaron Norris (09:58):
Ah, got it. Okay, but I mean, those are 150
owners, and they, some of themare going to own many, many
apartment buildings. So, there'sgoing to be quite a few. So,
that's good to know. So, whathave you, what are you guys
seeing as far as some of thedata that you're, you're seeing?
Christopher Bruen (10:16):
Let me think so. I'm trying to recall, I have
some notes here on the firstquarterly survey we had during
COVID in April, had all theindices come in below 50. So,
conditionally indicative of, youknow, market conditions were
(10:37):
getting worse. There was prettywidespread agreement about about
that. And then in July, all theindices also came in below 50,
with the exception of the indexfor debt financing. I was after
the Federal Reserve took somepretty aggressive actions, and
(11:00):
interest rates got lower. So,you can see how maybe there is
increased availability of debtfinancing there. And then, in
our most recent survey, let metry to remember.
Claire Gray (11:16):
I think it was just market tightness was the only
one below 50.
Christopher Bruen (11:21):
Right. So, yeah, so markets got looser for
a third consecutive quarter, butbut everything else was trending
up. So, there is an increasedsales activity, and more
availability of debt and equityfinancing.
Aaron Norris (11:40):
That's a good thing and would definitely aid
in that tightness number. So,the things are moving, are you,
are you able to see insightsinto specific area like urban
markets, like New York and SanFrancisco, compared to more
rural and suburban markets?
Christopher Bruen (11:58):
So, we, we sometimes receive some data,
data from a private dataprovider called a real page, and
they have some more detailedmarket specific data. And we
have looked at occupancy changesand rent growth by markets. I'm
(12:18):
looking at the second quarterdata here. And we saw, let's
see, in the second quarter,actually rent increased in low
rise buildings. And there was arent decrease, negative rent
growth in mid rises, and evenlarger, negative rent growth in
(12:41):
high rises. So, that, that isconsistent with urban markets
taking a little bit more of ahit. And it was a similar story
with occupancy that saw adecline in occupancy, most in in
the high rise buildings.
Aaron Norris (12:58):
What are you seeing as far as the percentage
of rents being paid right nowfrom your members?
Claire Gray (13:05):
So, for a little background, we started a rent
payment tracker in April withfive private data providers that
provide property managementsoftware. And so, from April,
we've been tracking that. Andit, it did take a little bit of
a dip in April, but reallythrough, through the summer,
(13:27):
things were down a percentagepoint or two from where they
were last year, for full monthresults. So, yeah, really,
really speaking to, you know,people want a safe place to live
there. You're paying their rent.
And I know, we've heard,anecdotally that, you know,
property operators are, youknow, have these open lines of
communication with theirresidents, maybe they're helping
(13:48):
them find local, you know,rental assistance or food aid,
that kind of stuff helping tomake ends meet. So, we did see a
little bit more of adeterioration in the full month,
November results, it was downabout three and a half
percentage points from theprevious November. But we don't
have our full December resultsyet.
Aaron Norris (14:11):
Yeah, everybody's calculating that up. And that's,
that's interesting. And ofcourse, were waiting to see the
Congress get through another aidpackage, which came through and
rumored ours are already workingon the next one and the vaccines
coming out. So, are you gettinga sense that apartment owners
are relatively positive for2021?
Christopher Bruen (14:38):
I don't know if I've ever, it's not as if
I've spoken to any owners aboutif they're, what their outlook
is like. But I just wanted toget back real quick to the
collections to show that youknow, while those collection
figures are are positive that'snot to say that residents aren't
(15:02):
struggling to make theirpayments. And it's not to say
it, you know, we hear a lot ofinstances of owners working out
different payment plans withresidents, so. So, even though a
lot of them end up making theirpayments, there's kind of more
(15:22):
to that story.
Aaron Norris (15:24):
Okay, so you're saying.
Claire Gray (15:26):
Definitely.
Aaron Norris (15:26):
Got it.
Claire Gray (15:28):
And those percentages are upside.
Christopher Bruen (15:31):
Oh, go ahead, Claire.
Claire Gray (15:32):
I was just gonna say, it's also those percentages
are for a full or partial rentpayment, or they could be on a
payment plan. Yeah, like Chriswas saying the story's a little
more nuanced. And it's also,with the five data providers,
we're looking at a universe ofabout 11 and a half million
units. So, even a three and ahalf percentage point decrease
(15:53):
is almost 400,000 householdsthat didn't pay rent, you know,
so, when you put a number to it,it is still maybe a little bit
of a stark picture. But the likeyou were saying the COVID relief
bill, with rental assistance andexpanded unemployment definitely
came when it was needed, youknow,
Aaron Norris (16:13):
Yeah, we've brought this up a few times on
the show. I'm on the board of211 for Riverside County, which
is a Health and Human Serviceshotline. And our United Way that
runs the 211 actually got theCARES Act funding to work with
landlords to pass on grants toto pay back rent for tenants.
(16:35):
And there's some very largelandlords who got some very
large checks, which isincredibly helpful. I wish
everything was so easy.
Unfortunately, 211's are manageddifferently at every county
level. So, you don't, they'renot all structured the same way.
But I'm sure that the aid that'scoming through the CARES Act has
just been very hit and miss,depending on where these
(16:57):
apartment owners are located,unfortunately. And if they live
out of state, and they're notprofessionally managed, maybe
it's a mom and pops, you know,the tenants might have a very
different experience. If thelandlords don't know what's
available locally. It's justhard to follow all this stuff,
it's changing so quickly.
Claire Gray (17:15):
Because, that something too with our rent
tracker, it is justprofessionally managed
department, so, it doesn'tcapture any of the smaller
properties like mom and pop,like you mentioned, or
subsidized housing or militaryhousing, it's really those, you
know, Class A, Class Bprofessionally managed
departments.
Aaron Norris (17:34):
Do you get a sense of nationwide who owns apartment
buildings? Is it predominantlyprofessionally managed? Or are
there a lot of mom and pops inthe space?
Claire Gray (17:45):
There are a lot of a lot of smaller buildings,
smaller owners, even if, youknow, maybe it's a mom and pop
and they own a couple buildings.
But it could be a couplebuildings that have four units.
You know, we're really, theincome that they're making from
rent is to pay the mortgage andput food on the table. And
that's, that's it, you know.
Christopher Bruen (18:06):
We have come, we come out with our annual top
50 list, largest owners. Andwhen we do that, we, we look at
the percentage, you know whatshare that those 50 are of the
total apartment stock, whichthere are around 20 or 20, 20. 1
(18:33):
million apartments. And I can'trecall how many were in the top
50 last year. But we you know,we do report on what that
concentration is.
Aaron Norris (18:46):
Interesting. So, there are a lot of mom and pops
out there. I always tell a lotof real estate professionals in
different buckets, if especiallyinvestors, investors seem to be
very independent, not alwayspart of associations, they, I
don't know if they necessarilyunderstand the value and how
much work it takes to do thekind of research that you do,
(19:06):
and advocating on behalf of theindustry and that very political
side of lobbying and providingdata. So, join your local
associations and nationalassociations. It's, it's pretty
incredible. And on your website,you've got so many other things
you've got. You've got thequarterly survey, the rent
payment tracker, and you've gotthe construction survey too. Is
(19:26):
that the third thing that you'retalking about?
Christopher Bruen (19:30):
Well, actually, no, that's so, that,
that is an additional surveythat we started to put out
during COVID.
Aaron Norris (19:39):
Oh, wow. You decided to start a whole bunch
of new things during COVID, goodfor you.
Christopher Bruen (19:47):
Yeah, I mean, we have our three main
publications which I talkedabout quarterly survey. We also
have our market trendspublication where we you know,
report and comment on keymetrics in the industry like
rent growth, vacancy, demandlevels, that kind of thing. And
then we also have a researchnotes, publication quarterly
(20:10):
publication where we do more indepth research on just whatever
topics we find interesting orrelevant to the time. But, but
yeah, that in addition to those,we have been putting out this
construction survey throughoutCOVID. I think Claire's,
(20:31):
probably more familiar with someof the findings.
Claire Gray (20:34):
Yeah. So, we, we started this because, you know,
like, you were saying, duringCOVID, people were just hungry
for information. And we have avariety of different members.
And so, early on in thepandemic, there was a
construction moratorium. Thatkind of halted, all
construction, multifamilyincluded. So, we were trying to
(20:56):
capture what was going on withour members so that our
lobbyists could take thatinformation to the hill. So, we
started in, I think, late March,and we've done five rounds kind
of spread out with the mostrecent round happening in
October. And prettyconsistently, there have been
about 55% of respondents thatwere reporting construction
(21:20):
delays. And of those, we askedif it's in permitting or starts,
and pretty consistently over thecourse of our surveying, it's
increased the share that havesaid it's, you know, they're
experiencing delays inpermitting. I know, in our most
recent round in October, it was90% of those that were
experiencing delays, wereexperiencing them in permitting.
(21:42):
77% were experiencing delays andstarts for their construction.
We ask what's causing thedelays? Obviously, economic
uncertainty was a popularanswer, but also some of that
permitting and, permitting andentitlement. And also,
availability of finance. We askif they're experiencing delays
(22:07):
in financing, which was apopular answer, or, or if they
were unable to get financing,which it seems that the issue
where it was just delays, not somuch that they couldn't get it,
but there's just a lot of backupright now. I know, we asked
about materials. So, if they'reexperiencing a lack of materials
or price increases in materials,so early on, especially imported
(22:32):
materials, like countertops fromItaly, or things like that, that
maybe you're not thinking aboutbeing part of this big picture,
but were elevators or cabinetryor AC units. As far as price
increases, I know, lumber hasbeen an answer. Every single
(22:52):
survey people are seeing priceincreases in lumber, and also
everyone's doing home projects,because they're stuck at home.
Aaron Norris (23:00):
Sucking up all that wood
Claire Gray (23:02):
Yeah, exactly. So, so that's a lot of what we're
seeing. But our members also saythat they've, you know, adopted
new strategies to overcome someof these hurdles. Maybe it's new
technology, maybe it's healthscreenings, it's PPE, it's
staggering shifts. So, it's beenreally interesting to see kind
of what our members have beendoing to be proactive about
(23:25):
what's going on. And I thinkbecause of some of that they,
there haven't been as manyissues with labor early on, it
was like, oh, people are gettingsick, they're not showing up.
They're, they're nervous aboutgetting their family sick, that
kind of thing. But as we've goneon a, you know, worked out the
kinks and figured out how to geteverybody there safely and still
work.
Aaron Norris (23:45):
I got a, I was telling Chris, before we started
recording, I just got an email.
I am very close to the buildingindustry. And I got an email
from one of the county's healthdepartment saying that their
staff was being diverted toCOVID response and vaccinations
and that to expect more delaysfor the health, specifically
health permitting, healthdepartment. So, I was like, Oh,
boy, here we go. Yeah, doing1031 exchanges. That's not the
(24:10):
news that you want to hear.
Tenants, do you do any researchon tenants what they look like
how they've changed over theyears? Sort of at the
demographic level?
Christopher Bruen (24:27):
Yes. So, well, so we talked a little bit
about there being more onebedrooms and efficiencies. And
one reason for that is thatthere are a lot of single people
out there. There's some, beensome broad demographic trends.
(24:53):
People tend to be gettingmarried later, having kids
later. So, taking longer to makethat transition from rentership
to ownership. And also, there'sbeen a long run trend of more
young adults living with theirparents. Which kind of so,
(25:20):
there's this kind of dual effecton demand for apartments there
that on the one hand, you havepeople renting for longer. But
then you also have moreindividuals who haven't even
entered the market yet. We'restill at mom and dad. But I
(25:41):
think that might explain some ofthe unit mix out there catering
to, to singles.
Aaron Norris (25:51):
Boomers, are our seniors deciding to move down in
two exciting cities into some ofthese efficiency units just
looking for something to domaybe?
Christopher Bruen (26:00):
So, actually, we looked at that, you know, you
often hear this narrative ofdownsizing baby boomer, like,
are they moving to the city athigher rates than other
generations. And what we foundwas actually that they're not
really doing so at higher rates.
It's just that they're, they'rejust such a large generation,
you know, there, there's so manyof them, that whatever they do
(26:23):
is magnified. So, yes,obviously, as they get older,
you're going to see a lot ofthem moving into cities, but
it's not as if they're onlydoing that they're, you know,
they're they're not really thatmuch different than, than prior
generations from what we'veseen.
Aaron Norris (26:47):
Has there been, as far as apartment construction,
have you guys done any researchon the features that owners has
their building or having to lieninto sort of for the next
generation of apartmentdwellers?
Christopher Bruen (27:02):
Well, we, we do conduct it, we another thing
we do is we conduct a residentpreferences survey, because, you
know, we're trying to get a feelfor what people care about.
Aaron Norris (27:13):
Yeah.
Christopher Bruen (27:15):
Our last survey, we had responses from,
I'm trying to recall, I think270,000 renters across the US
and Claire and I, I guess wecould, we could try to recall
some of the main findings, andI'm trying to remember what,
(27:36):
what they cared about.
Claire Gray (27:39):
Things like gyms are still important. I think
more of the kind of, we callthem like, on demand, or, you
know, people want seamlessinteractions, like maybe it's a
tech in their apartment or like,key fobs, things like that.
Christopher Bruen (27:57):
High speed internet.
Claire Gray (27:57):
Roof top spaces, high speed internet.
Christopher Bruen (27:59):
It's always a big one.
Claire Gray (28:01):
Yeah.
Christopher Bruen (28:02):
You know, a lot of you know, the basics as
well like air conditioning.
Aaron Norris (28:10):
Having lived in New York, I get it. It's not
everywhere. Okay.
Christopher Bruen (28:17):
Oh, and one of the features that always tops
the list is soundproof walls.
Claire Gray (28:24):
Yes.
Aaron Norris (28:26):
Amen to that one.
I've lived below somebody in abasement apartment in New York
that like to bounce basketballsat six o'clock in the morning
quite consistently. So.
Christopher Bruen (28:39):
Yeah.
Claire Gray (28:40):
Yeah, I tell my family that I live in that
clogging insurance commercial.
You know, I'm not sure whichinsurance company it was. But it
shows the family above themclogging and you can hear them.
I get it too.
Aaron Norris (28:54):
Yeah, there's a it's definitely a different
living experience. But havinglived in downtown Los Angeles,
and it was the first time I wasin a rental unit in a while. I
was really surprised to see allthe technology, their target
market was definitely somethingdifferent that I had not
experienced in New York as astarving artist. So, in this
(29:14):
building, the fancy cars below,the huge gym, the full
basketball court, the movietheater, the office space that
you could rent. I mean, theamenities are pretty spectacular
in downtown LA and it came witha price. And then I'm looking at
trends like coliving and theprofessionalization of the space
that actually do a good jobstripping all those amenities,
(29:37):
where the concept is just oneprice gets you everything up to
I've seen some colivingcompanies do things like salt
and pepper and olive oil, andyou know, monthly cleaning, and
going as far as doing thingslike activities like hey, we've
put together a coffee with yourlocal council member. So, it's
almost like you're selling alifestyle, not just an, a unit.
(30:00):
So, has there been any pressurethat you've seen on the feature
front that's more lifestyledriven and not featured on?
Christopher Bruen (30:11):
You know, we asked about that stuff in our
survey as well. And I feel likeif I recall correctly, people,
renters that it's really kind ofsecondary to them, I think, to,
to the, to the, you know, thingslike, what they're paying and,
and that their unit has like theessentials. Okay.
Claire Gray (30:36):
I would say also, you know, sometimes we break it
out by age or income orgeography and I feel like, for
younger renters, sometimes it'sthe best would be nice to have
not need to have kind of thingsaside from you know, AC and high
speed internet is a need to havefor everyone. But I, we found
that the younger renters, Ithink, are also we asked if
(30:57):
they're open to like colivingsituations, or if they would be
open to short term rentals intheir building. And generally,
they were more open. I think weasked if they would definitely
or would possibly be interestedin that. And they were
definitely more open to it thanthe renters that are a little
bit older, living in apartments.
Aaron Norris (31:19):
A little more flexible. Okay.
Christopher Bruen (31:21):
Yeah.
Aaron Norris (31:22):
I'm just thinking about owners, or I definitely
have some people in my life thatare, you know, they've done
single family for a long time,and they're getting into the
commercial space, and sointerested in exploring
apartments and what that wouldmean, and I'm sure it's very
market driven, as far as thefeatures and maybe the
demographic that you're chasing,you know, if you're in some
markets, it is just a storyabout essentials. But if you're
(31:45):
in markets that are highlycompetitive, and people have
choices, and you want a specifictarget rent, you got to play
ball a little bit. But yeah,just, just curious. I was gonna
ask you on the, on theconstruction side, are you
expecting a good amount ofconstruction this year?
Christopher Bruen (32:04):
So, I was just looking at kind of what our
completions figures have been.
And I had the tab open, had thetab open. But completions have
actually been, we're actually upa little bit in the third
quarter. At some of the highestlevels we've seen, so, even
though permits and starts weredown, so I guess they're there,
(32:27):
despite delays, there were stilla lot of units coming online
there. So, I would, I wouldexpect, you know, for the year,
you know, the, I guess the firsttwo quarters were a bit lower,
but, but not by much. So, Ithink we're still looking at
pretty high levels ofcompletions there.
Aaron Norris (32:48):
Okay, with it starts we're lower, we might not
see that, you know, for anotheryear or so, right? It might slow
down next year is almost likethe COVID pause for
construction, and then mightpick up a little bit. You know,
affordable housing is a is ahuge conversation. I know in the
single-family space, I'm here inCalifornia, it's almost like a
joke. It's like, yeah, we can'tbuild affordable housing in
(33:09):
California, is there a lot ofpressure on your industry to
somehow pick up the slack inthat department?
Christopher Bruen (33:17):
Sure, you know, we track the percentage of
apartment households that arewhat we call burdened, or
severely burdened who are payingover 30% of their income, on
rents, that's, that's costburdened and severely burden
would be paying over 50% oftheir income on rent. And these
(33:40):
have been figures that have beengoing up, since as far back as
we've been tracking, you know,like, back to the 80's. Burden
levels just keep getting higher.
And this is partly an incomeissue. If you look at income
growth over time, it's been verylackluster, especially for those
(34:01):
without college degrees, verystagnant income growth. And for
those with very low levels ofincome, it's, it's almost
impossible to build housingthat's affordable, you know. So,
there's the income side, andthen you have some of the areas
(34:23):
of the country where you justhave really high levels of
population growth, and notnearly enough construction to
keep up with that.
Aaron Norris (34:41):
Yeah, a lot of people putting pressure on fewer
and fewer rentals. So, yeah, theprices are just gonna keep going
up and people get pushed out andit gets very political. You
know, what, what can we in theindustry even do? I don't know.
Christopher Bruen (34:54):
And actually, there's a, if you look at, so,
and I know it seems like in thepast decade or so we've been
building a lot of apartments.
But meanwhile, we've seen, youknow, vacancy levels go down,
like high rent growth. And youthink, why is this happening? It
seems like we're building a lot.
(35:14):
But if you zoom out and look ata longer-term perspective, we
haven't been building. So, thisis, this is when, you know, you
know, millennials have beenentering the housing market now.
But when boomers entered, wewere building much more
apartments, back in, you know,the early 70's. And through the
(35:37):
80's, much higher levels ofapartment completions.
Aaron Norris (35:43):
I see that. I follow the data here a lot in
California, and this came up.
Where was I speaking, I wasspeaking at a Realtor
Association. Somebody asked meabout builder and like, you
know, part of the problem isthat it's almost like we took a
full decade off of creatingbuildable lots. We haven't
turned raw land into buildableplaces where builders can have
at it. So, we're behind. Andthat is not a fast process. The
(36:06):
entitlement process is not fun.
One of the opportunities I hearcoming up more often is the
concept of mall renovations, forcities that don't want their
mall to become the next Amazondistribution center, maybe
building in density in new ways.
Are you part of moreconversations as cities sort of
(36:29):
rethink their master plans andbuilding in density?
Christopher Bruen (36:39):
I don't know if we, our department has been
part of any of thoseconversations per se. But I.
Aaron Norris (36:44):
Well you should be.
Christopher Bruen (36:45):
I should. I'm just thinking I have a good one
I'm going to one of my bestfriends is in Indianapolis and
his apartment building was in anold mall. A really interesting
building.
Claire Gray (37:00):
Yeah, I know here in Arlington, I've heard more
about like office conversionsinto apartments as well.
Aaron Norris (37:08):
Really? Yeah, that's a whole different COVID
conversation, right? That not asmany offices are needed, or the
hospitality? Can we convert themsomehow? I wasn't expecting the
office thing that come up,though. That's interesting.
Claire Gray (37:22):
It could just be one particular building. I just
know, in my little, well not alittle neighborhood. But in my
neighborhood, that's what I'veheard.
Aaron Norris (37:29):
We have, we have quite a few real estate
investors that they'll heardifferent things as we're
talking and go Oh, okay. And theprocess of going down to a city
and sometimes you don't know,until you ask you go down to the
planning department and see whatthey're willing to do. And I was
in downtown LA working rightbefore the downturn, and they
(37:49):
were converting actually quite afew things like the Edison the
old utility building into acondo building, so, is going on
quite a bit. So, you just neverknow, downtown LA has completely
changed over the last 15 yearswith residential. Is there any
cities that look like they'regoing to just be really hot in
(38:10):
the next couple years, forapartments?
Christopher Bruen (38:14):
I mean, so we generally try to stay away from
forecasting and.
Aaron Norris (38:20):
Got it. That's fine.
Christopher Bruen (38:21):
In future in that way? Yeah.
Aaron Norris (38:23):
What are the interesting things shall we talk
about in the apartment space?
It's definitely not my, mywheelhouse, necessarily. But I'm
fascinated with the trends andsome of the data, as people sort
of consider sort of how totackle next year, this year.
Christopher Bruen (38:39):
Hmm. Well, I guess one topic I maybe should
have talked a little bit moreabout before, when we were
talking about migration is thatwhen, when COVID did hit I, I
conducted a little study to tryto anticipate how something like
(39:02):
this would affect where peopleare moving. And like I said
earlier, we didn't have much togo on in terms of like, other
pandemics. But I did want toplay with that idea of you know,
(39:24):
I actually, actually focused onyoung adults, I wanted to play
with that idea of young adultsare choosing whether or not to
live with their parents or, orif they're going to form
households and if they formhouseholds, if they're going to
rents, if they're going to ownor if they'll rent if if they
are going to have roommates, youknow, and figured, figured that
(39:48):
a lot, a lot of this is, a, youknow a function of income. So, I
what I did, at the time, I wasusing 2018 data, and I just
wanted to see the relationshipbetween the likelihood of, of,
of either living with theirparents or renting it alone or
renting it with roommates, or,or owning a home relationship
(40:11):
between that, that likelihoodand a number of factors like
your age, your income, youreducational attainment, your
race. And then once I constructthat model, I, you know, you can
play with it and see whathappens if you decrease people's
(40:35):
incomes, you know, what wouldhappen. And I think my findings
were kind of as you wouldexpect, with lower incomes, you
get a lower likelihood thatpeople are going to buy homes,
you have a higher likelihoodthat people are going to live
(40:55):
with roommates if they'rerenting, and you have a higher
likelihood that people are goingto live with their parents. And
in fact, what we have seen,we've been tracking through the
Current Population Survey, theshare of young adults living
with the parents, and duringthis COVID, period, they've
(41:17):
reached the highest share sincethe Great Recession.
Aaron Norris (41:22):
Really. Wow.
Christopher Bruen (41:25):
This is this is, you know, that share has,
there has been a longer termtrend there as well. Yeah. As I
spoke to before, we have seenmore young adult, young adults
living with their parents, buteven in the shorter term,
because of COVID. That's, that'sspiked.
Aaron Norris (41:45):
I've definitely heard that I mean, the
millennials, let's be honest,millennials were called the
boomerang generation, you know,staying at the parents home for
a really long time. And some ofthem are buying habits though,
too, were really interesting.
They were renting a lot longer.
But when they got intohomeownership, they were jumping
in some states like California,their median purchase price was
on par with what boomers werebuying. And that was just a few
(42:06):
years ago, it was sointeresting. So, that kind of
information is just so importantto understand the trends because
it could really change what youbuild, where you build.
Interesting.
Christopher Bruen (42:19):
And it has implications for the apartment
industry, obviously, you know,those folks living with their
parents, presumably, that's pentup demand for apartments that
eventually though, you know,those people are going to want
to form their own households.
But maybe they're going to takelonger to do so. And, and when
they do form their households,they might take longer to buy a
(42:42):
home, you know.
Aaron Norris (42:47):
One of my, my favorite micro living stories is
the oldest mall in Rhode Island,it was, I think, maybe in
America got converted to microunits, 300 square foot. And
there's this YouTube videotalking about a nurse that she
trains in for the week, and shelives there, and then she
doesn't live there. Do you thinkCOVID will change some of those
(43:08):
sort of, I don't know, I don'teven know what you call those
kind of people that are lookingat these efficiency units
because they're executives or,you know, they just don't want
to drive the hour or two, inmarkets like New York or San
Francisco. Think anything mightchange there is when it
specifically comes to apartmentdemand and these efficiency
(43:30):
units or one bedroom?
Christopher Bruen (43:32):
I mean, is your hypothesis there that there
will be less demands for theefficiency? Because because
they'll be working from home or?
Aaron Norris (43:41):
Yeah, exactly.
Christopher Bruen (43:44):
I think you know, that's something
everyone's been trying tospeculate about. And but it's
not something you could really,I don't think there's any any
data that will help you there.
It's, it's trying to predictpeople's future behavior, you
know, are people going to revertto how things were beforehand?
Or are you going to keep, are wegoing to start going into the
(44:05):
office like we did before? And Idon't, I don't know if I have an
answer. I don't know how youfeel Claire.
Claire Gray (44:13):
I was going to say with the our quarterly survey
special question that askedabout where our members were
seeing demand in those likeparticular property and unit
types. We also asked them howlong they thought so again, this
is just totally opinion, butmost of them, we gave them the
option of like through thepandemic or six to 12 months
(44:36):
beyond the pandemic, and then,and then longer timeframes as
well. But those two were theones that were most popular. So,
I think people probably feellike there's a, you know, return
to city, that kind of thing.
Aaron Norris (44:50):
I think so, there's a different reason why
you live in the city and I don'tknow, I guess I just feel like a
lot of people are just dying toget back to normal.
Christopher Bruen (44:58):
And this is just you know, me speaking, I, I
could have moved out of the cityand I've chosen to stay in my
tiny apartment. And so, youknow, people like me still see
the benefit and are eagerlyawaiting for things to be
reopened. And, you know,obviously there's much more to a
(45:19):
city than being close to whereyou work. There's a lot, there
are a lot of, you know,amenities restaurants, bars that
people like being here for.
Aaron Norris (45:29):
Yeah. It's about lifestyle, quality of life. And
it's just it's so different. Ijoke about is there going to be
like buyer's remorse in a yearwhen they finally get to
experience their first winter inMinneapolis or, you know,
experience Florida's humidityfor the first time over summer?
Like, I'm going back, I'm goingback.
Christopher Bruen (45:47):
Well, it's interesting, you mentioned that,
you know, buyer's remorse, Ithink that's been another kind
of narrative that. I don't know,if I have, I've seen any data on
it. But that, you know, a lot ofpeople are buying homes. And,
you know, like I said earlier,like, if, you know, when the
economy takes a hit, all elsebeing equal, you're gonna expect
(46:10):
I think, fewer home purchasesand, and COVID is maybe a bit
different. And and you mighthave people who are already
going to buy a home, we thought,Okay, this is my chance to get
out in New York. And, and, youknow, you hear stories of people
who, who have tons of money, andmaybe it's not an issue for them
to do so. But I, you know, longterm, I can't see how COVID will
(46:39):
increase home purchases in thatway, you know, you don't
necessarily have to buy a hometo move to the suburbs, or to
move out of the city.
Aaron Norris (46:51):
Yeah, and it's part of it's just a function of
lower listings right now. Imean, in some markets, it's just
so insane, I was talking to arealtor in the Palm Springs area
that they've never had in areally high dollar category, you
know, multiple offers, likeoffers when they used to
experience only two realtors inSan Diego and Palm Springs
(47:13):
talking about Bay Area, peoplecoming down. Because their
median purchase price of a homeof theirs, I think something
like 1.7 million where in SanDiego and Palm Springs that's
half that easily. So, it's justso interesting if the remote
work does stick long term. Andyou know, the office says I only
need you up here once a week,twice a month, you know, all of
(47:35):
a sudden buying a house for inSan Diego and taking a flight up
to San Francisco, it might work.
I don't know. I guess that's thething I'm waiting for the one
data point that I'm reallyinterested is to see if remote
work is going to stick. And ifwe've if off businesses like
this model, being on zoom allthe time, I don't know.
Christopher Bruen (47:59):
Well, even within our company, before COVID
even hit, we had more peopleswitching sometimes full time,
remote work, partly as afunction of you know, we have
limited office space and someonewants to work from home.
Aaron Norris (48:18):
All right, so you guys were already used to it.
And, and this has forced theentire nation all at once to get
really good at thisconversation. So, that's what
I'm excited about. We'll see.
Claire, have you been working onany kind of research that gets
you excited?
Claire Gray (48:33):
I also did a research notes like Chris was
talking about his earlier on. Iworked on one in September that
kind of looked at which rentershave been most affected by the
job losses that we'veexperienced during the pandemic.
So, that was really interesting.
Because you know, there are somepublications from like Urban
(48:55):
Institute or Turner center thatlooked at how renters have been
impacted, but we kind of wantedto take it a step further and
look at apartment rentersbecause that's what we're
dealing with. So, we found thatthere were some occupations that
face significant job loss thatalso employed a greater share of
apartment residents. Some ofthose being accommodation and
(49:19):
food services, arts,entertainment and recreation.
So, apartment, residents make upabout 12 and a half percent of
the adult population in the US,we looked at where they made up
a greater portion of some ofthese sectors and sub sectors,
we use data from the currentemployment statistics survey
(49:41):
from BLS to see job losses andthen we use the American
Community Survey to look attheir occupation codes and
shares of apartment residents inthose occupations and match them
up. And so for example,accommodation and food services
18% of that workforce isapartment residents, which is a
(50:01):
higher share than the USpopulation on the whole. I know
motion picture and soundrecording face like a 50%
employment loss from the startof the pandemic through August,
that was the timeframe we werelooking at at the time. And I
think it was about 21% of thoseemployees are permanent
(50:24):
residents. arts andentertainment, or arts and
spectator sports, about 18% ofthose residents or those
employees are permanentresidents. And they also face
pretty significant job losses.
So, just those industries whererelative to the size of the
industry, they face great joblosses. Because one thing motion
(50:49):
picture and sound recording, nota huge industry, but when you
look at relative to the size ofit, the share of job loss was
pretty significant.
Aaron Norris (50:58):
Like in cities like LA, though, that's that's a
sizable portion of theworkforce. So, yeah, I could
definitely see how that wouldimpact. Yeah.
Claire Gray (51:07):
Yeah, exactly. We did take a look also at kind of
the geographic concentration,and it is, you know, it's kind
of the tourism driven industriesthat really were hit the
hardest. And so in places likeLA and New York, had a high
share of those apartmentresidents that have faced job
losses. But we also saw that inMiami and Orlando and Las Vegas
(51:31):
for those more tourism drivenones. And then, of course, the
arts and entertainment also inNew York and LA are really hard
hit.
Aaron Norris (51:39):
That makes sense.
What is, um, what's your guys'process? Where, where does the
concept of doing research startfrom? Is it your, your members?
Is it Congress, you wake up inthe middle of the night, just
have a dream about this nextdata set you want to find out?
Christopher Bruen (51:58):
Sometimes it comes from members, they'll
contact us and ask us all sortsof questions that they're
interested in. And sometimeswe'll find it really
interesting, too. I thinksometimes it's just, you know,
one of us will think of it andwe'll all agree that it's a
worthwhile idea.
Aaron Norris (52:19):
Very cool. So, anything on the radar for 2021,
that you're just dying totackle?
Christopher Bruen (52:27):
Um, let me think,
Aaron Norris (52:30):
Or data that you wished existed that you don't
have?
Christopher Bruen (52:36):
I guess, you know, one topic that's come up
recently, that we've beenthinking about is, you know, we
get this question a lot. How,what's the average length that
people are staying in anapartment? And we've never had a
good way of getting that back.
So, so, we normally look atlike, different census, census
(52:59):
surveys, which are differentcross sections every year. So,
it doesn't, doesn't follow thesame people over the years. And
what we are able to see in, whatwe, what we typically track is
like the percentage of apartmentrenters that have moved in the
past year.
Aaron Norris (53:21):
Okay.
Christopher Bruen (53:22):
Which is, which is interesting in itself.
Especially since, I don't knowif you're, if you're aware that
internal mobility as has beendeclining for decades in this
country.
Aaron Norris (53:37):
What do you mean by that?
Christopher Bruen (53:38):
That people are moving less frequently.
Aaron Norris (53:42):
Oh, you mean as a geographical location or just in
general? Like I parked in thisapartment, I'm staying here for
a really long time.
Christopher Bruen (53:49):
Yeah, the latter,so.
Aaron Norris (53:51):
Okay.
Christopher Bruen (53:51):
So, in any given year, you know, the
percentage of people who havemoved in the past year has been
declining. And, you know, we've,we've, even after taking into
account differences in income,education, all these things.
There's, there's still thisdecrease in mobility that we
(54:14):
haven't been able to completelyexplain.
Aaron Norris (54:17):
That's interesting, because that's
happening in the single-familyhome space, though, as well,
like.
Christopher Bruen (54:21):
Oh, yeah, absolutely, in every space.
Yeah.
Aaron Norris (54:25):
Interesting. I really didn't know that, that
was happening in the apartmentspace. And, hmm.
Christopher Bruen (54:30):
Well, obviously, you know, apartment
residents move more frequentlythan people in single family
but, but yet, still at a slowerrate than they did like 10 years
ago. But anyways, aside fromthat interesting trend, which
I'm always looking to try to getto the bottom of, we are looking
(54:50):
at ways to maybe use thoserates, the percentage of people
who have moved in the past yearto approximate what the average
length of stay is for differentsubpopulations.
Aaron Norris (55:06):
That'd be a really interesting metric. Because if
you're an apartment owner andyours is just really messed up,
you're like, I have a reallycrappy manager. It is. That's a,
that would be a really cool datapoint. Okay.
Christopher Bruen (55:17):
Yeah.
Aaron Norris (55:18):
All right, Claire, you have anything interesting
you want to tackle in 2021?
Claire Gray (55:23):
Gosh, I'm sure there is, it hasn't. I would say
it hasn't come to me yet. Butit's.
Aaron Norris (55:29):
Fair enough. Any tech trends that, well,
actually, I wanted to ask realquick, you mentioned that you
work with some of these softwareproviders, which they might have
some of this data. I mean, howawesome has that been, that more
apartment owners are leaning onthese technology providers? So,
you have access to that? That'scool.
Claire Gray (55:50):
Yeah, it's definitely been helpful for us
tracking what's been going onthrough the pandemic.
Aaron Norris (55:56):
Because I know mom and pops probably wouldn't
capture all the bullet pointsthat they can have give you
access to that for sure.
Technology trends in, I attendedCES last year. And one of the
things I was fascinated with themost was, there is a company
that worked with apartmentbuildings. And at the time, they
were working with a number ofvery large operators in Los
Angeles, where they were puttingsensors, sensors on the AC and
(56:20):
the water heater. And they had apartnership with utility. And
when the utility needed to burnoff extra electricity, so they
didn't have to sell it off thegrid. They would just hike up
the AC and the property owneractually made money. It was
really fascinating to me. Haveyou heard of any really cool
(56:40):
technology that has gotten youreally excited about the
apartment space in the lastyear?
Claire Gray (56:48):
We, we have an annual operate, it's called
OPTECH. So, it's Operations andTechnology Conference that took
place in November virtually forus, which is really interesting.
And there's always a lot ofprogramming. So, sometimes it's
it's hard to even take all of itin. I know something that they
talked about a lot with COVID.
You know, apartment operatorskind of had to make this like
(57:10):
automatic switch to virtualleasing, virtual tours, that
kind of thing. And you know, isthat here to stay, which it
seems like in some scenarios, itis people are just, they want to
see their unit, but maybethey're fine with a video or
something like that. So, that'ssomething that kind of came out
of necessity at the beginning ofCoronavirus. Some people had
(57:33):
adopted it beforehand, but not aton and just know it's whether
or not it's here to stay. That'ssomething that people were
talking about a lot, just thatautomated component.
Aaron Norris (57:46):
All right. Chris, you see anything that got you
excited from that conference?
Christopher Bruen (57:52):
I'm trying to remember. I don't know if we had
a Innovation Challenge thisyear, Claire?
Claire Gray (57:58):
I don't think so.
Christopher Bruen (57:59):
But I'm trying to recall where the
winner was last time. And whatthat was.
Claire Gray (58:06):
I think it had to do with modular building.
Aaron Norris (58:10):
Ah.
Claire Gray (58:11):
Which is really interesting.
Christopher Bruen (58:13):
I think you're right. And, and that's a
topic that always comes up. Andit always seems fascinating, but
I I've never really got into theweeds to, to know how much of an
impact that might have on theindustry.
Aaron Norris (58:29):
It's still really expensive out here in
California, we have AccessoryDwelling Units. That's been a
huge conversation because ofaffordable housing, and the
state has mandated it. Andthere's definitely a supply
chain issue right now. Labor isan issue out here like you guys
we've already talked about. Butit's still just too expensive.
(58:50):
So, 3d printing, modular. I'mreally excited about it, but it
still has to come down in pricea little bit. But IKEA just
raised their hand. They'rebuilding Tiny Homes now. And you
know, fun fact, Amazon severalyears ago invested in plant
prefab they actually domanufacturing here in California
very close to where I live. Andthey do multi, they have a multi
(59:10):
called Nest. And so, it's verymodular, but it's built off site
and brought in it and it speaksCalifornia's language, it's
green, because it's done in awarehouse and you know, all this
kind of stuff. If they can, ifthey can make it affordable. I
just think that's got to be thefuture with robotics. And I just
I love this stuff. So, plantfree have like, one of the only
(59:32):
ones that I know about in thecommercial space right now, but
I've seen others with them. Ohgosh, what is it called? The
shipping containers and piecingthem all together?
Claire Gray (59:45):
I don't know seeing that. I was gonna say Um, I
don't remember if it was lastyear, maybe the year before.
Someone maybe HUD put on like aninnovation type challenge on the
mall here in DC. And I'm prettysure someone 3d printed tiny
house on the mall, you know,just very cool exposure to that
(01:00:07):
kind of technology.
Aaron Norris (01:00:08):
Yeah, Icon, Bill Mighty buildings they're trying.
Icon is out of Austin, Mightybuildings is based out of here
in California. So, they're herebut the average price point is
just it's just really high PlantPrefab has a modular unit that's
Um, I think it's, it gets thestarting point is around 180
grand. So, you're like, Oh,that's a little steep. But it's
(01:00:33):
coming. So, I'm excited now withIKEA in the mix, you know. Who
knows what's next? So, let'stalk a little bit we've we've
run out of time, how can peoplefind specifically your work?
Where can they go on the websiteand stay in touch?
Christopher Bruen (01:00:48):
Well, I think you know, our website's gotten a
little bit better over theyears, it's a little bit easier
to navigate. If you could justgo to NMHC.org and go to
research and insight should bepretty easy from there to find
what you're looking for. And ifyou want to contact Claire, or I
individually, if you go toAbout, to Staff, you can find
(01:01:11):
our contact info. You know,there might have been things
done in this interview thatwe've forgotten or that you want
to know more about just youknow, feel free to give us a
call or shoot us an email.
Aaron Norris (01:01:23):
Very cool. And right. I will I will make sure
to post the links in the shownotes. And thank you so much for
being here.
Claire Gray (01:01:29):
Thanks Aaron.
Aaron Norris (01:01:31):
Thank you for listening to the Data Driven
Real Estate Podcast, you canfind show notes and links to
some of the resources mentionedin the show at
datadrivenrealestate.com. Clickthat join the community, and
you'll be forwarded to thePropertyRadar community where
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upcoming guests and askquestions there. We'd love to
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(01:01:51):
Please don't forget to like,favorite, subscribe and share on
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Thanks for listening, and we'llsee you next week.
Welcome back to the Data Driven Real Estate
Podcast, the podcast for realestate professionals dedicated
to driving business using data.
I'm Aaron Norris withPropertyRadar and this is
episode 29. This week we havehalf the research team at the
National Multifamily HousingCouncil. We've got the Director
of Research, Chris Bruen, andResearch Associate Claire Gray.
This week, we talked abouttrends in the apartment space
nationwide. We talked aboutmigration, COVID challenges and
(00:27):
some opportunities coming up in2021. And the data that they are
following in the year ahead, youwon't want to miss this week.
Chris and Claire, really nice tohave you on the show today.
Thanks for your time. I knowChris, you're in DC. It's an
interesting time in the DC area.
So, and you're in the officetoday. So good for you.
Christopher Bruen (00:49):
Yeah.
Aaron Norris (00:50):
Claire, where are you parked today?
Claire Gray (00:52):
I'm calling in from Arlington, Virginia. So, just
over the river.
Aaron Norris (00:56):
Just over the river. All right. Well, I wanted
to start the show off by askingwhat's the number one data point
you're watching headed into2021? And, Chris, I'll start
with you.
Christopher Bruen (01:07):
The number one data point? I would say that
we're always looking at rankcollections that we're tracking
every month. Well, I guess youasked for one. So, that would be
my one.
Aaron Norris (01:24):
We'll go into more, we'll go into more. But I
like that Claire, do you haveone that you really got your eye
on?
Claire Gray (01:29):
I was just gonna say kind of building off of
Chris, like we've been trackingrent collections. But we're
finding out that, you know,occupancy, vacancy, that end of
it is also pretty important,because things are happening
differently in differentmarkets, you know, urban gateway
markets are not in the samesituation is the Midwest. So,
just both ends of the picturethere.
Aaron Norris (01:50):
Oh, that sets us up so beautifully for such a fun
conversation. So, if somebody isnot familiar with the National
Multihousing Council, how wouldyou describe it?
Christopher Bruen (02:01):
I would say so, we are an organization that
represents the US apartmentindustry. And our members
include some of the largestowners, managers and developers
of apartments, as well as otherindustry players like, like
(02:21):
brokers. Those in finance ortechnology related to the
apartment industry. And our workis, is part advocacy. We have a
government affairs team here, aswell as providing research and
insight for the industry. And,and Claire and I are part of a
(02:44):
four person, research team here.
Aaron Norris (02:49):
Very cool. Yeah, the advocacy piece is just so
important. And I've been on thehill in the single-family rental
space sort of advocating onthat. And data always seems to
do a really good job keepingthings out of the political
sometimes. It's just a reallyimportant role. So, when it
comes to data, what kind ofinformation do you find the most
(03:12):
helpful in that process?
Christopher Bruen (03:18):
In terms of what what, what data, do we
think is much important or?
Aaron Norris (03:22):
If you're going to the hill do? or is Congress
asking for specific insights?
Are there any kind of whenyou're any testimonials, that
testimonies that you're doing atthe hill? What are they looking
for? What kind of data are theyneeding to make great decisions
for housing?
Christopher Bruen (03:41):
Hmm.
I know it changes so it couldbe.
I mean, and some of this is, iskind of in the domain of our
government, government affairsteam.
Aaron Norris (03:54):
Oh, got it. Got it. Got it.
Christopher Bruen (03:55):
But it really I mean, just whatever their
objective is, it's importantthat they have an accurate
picture of, of the market. So,just, just that we're there to
provide them with, you know,accurate data.
Aaron Norris (04:13):
And that they trust the data that you're
providing them. That's always abig piece of it. You mentioned
that your members are largeapartment owners, is there a
specific size? Can we definelike, maybe talk a little bit
about what apartment looks likeacross the US? Is it multi? Is
it over 100 units per apartmentcomplex? Is it you know, five to
(04:34):
10 any insights into that?
Christopher Bruen (04:37):
Well, our definition is a rental unit in a
building with five or moreunits. But our members are all
different sizes except wedefinitely have a large
representation of professionallymanaged buildings.
Aaron Norris (04:57):
Has that changed at all over time? Apartments,
are they getting bigger orsmaller? Any trends in that
space that you're seeing?
Christopher Bruen (05:06):
Um, I don't know, if you want, if do you
have anything to add to this,Claire, or?
Claire Gray (05:12):
Um, well, I know, we, we've seen kind of over time
that apartment buildings I thinkare getting bigger and maybe the
units are getting a littlesmaller, maybe more one bedrooms
and efficiencies, especially inprobably urban markets, trying
to save space.
Aaron Norris (05:31):
I love the New York City, it makes me laugh
when somebody says efficiencybecause I've lived in one of
those efficiencies.
Christopher Bruen (05:36):
I live in one currently. And yeah, we, we
looked at this data recently,and I think since like 2006, I
believe was the year after whichthere was, there started to be a
higher share of units built thatwere either one bedrooms or
efficiencies.
Aaron Norris (05:56):
Okay. Is that the Japan model? Aren't they very
known, well known for that? Ican't remember if it's China or
Japan, like they just, it's, inorder to live in like really
great cities. It's almost like acage. It's really uncomfortable
to watch. And they have
Christopher Bruen (06:09):
I know, there's a lot of that in Japan.
Yeah.
Aaron Norris (06:13):
It's just interesting like having lived
seven years in New York, youknow, you're there for the
experience you never, when I wasthere, I was living in various
strange places. And it was just,I was there to live in a great
city, I was. And when I was intothe apartment, I was asleep so I
didn't care. But, you know,because of COVID. There's a lot
of conversation about migration.
And let's just talk about someof the trends or is there
(06:35):
anything that has reallysurprised you in the apartment
space in 2020 because of COVID?
Christopher Bruen (06:45):
I can't say anything that surprised me, I,
COVID itself is such a largeshock and surprise that. I don't
know if there's really anyexpectation there to begin with.
Aaron Norris (06:59):
Okay, Claire?
Claire Gray (07:01):
Um, yeah, I think Chris is going to get more into
that on our quarterly surveylater. But um, we survey our
members based on a few regularquestions every quarter. But we
also usually try to ask aspecial question that's a little
more topical to what's going onin the market, or what we think
they might be seeing. And ourmost recent quarterly survey in
(07:22):
October, we asked our members ifthey're seeing increased demand,
based on certain building andunit types. So, overwhelmingly,
the highest demand they wereseeing was in the garden style
apartments in both theefficiencies and one bedrooms,
and also the two plus bedroomunits. So, probably just people,
(07:43):
you're stuck at home, you wantto try to get maybe out of the
city a little more space, thatkind of thing.
Aaron Norris (07:48):
I was gonna say, I don't know if I know that garden
style. What does that mean?
Claire Gray (07:52):
It's, it's more of like a two to four story kind of
walk-up type apartment. Theymight buildings might be small,
but the property might haveseveral buildings, not like the
mid and high-rise that you mightsee.
Aaron Norris (08:04):
Got it.
Claire Gray (08:04):
In downtown areas.
Aaron Norris (08:07):
That's where I lived in New York, a lot of
walkups. And it was typicallyalways the fifth floor. Garden
style that makes it sounds solovely.
Claire Gray (08:15):
Yeah.
Aaron Norris (08:16):
Well, let's get into the quarterly reports
because your team reallyproduces a lot of really great
data. So, maybe Chris, you cantell us what's included in some
of the things you cover?
Christopher Bruen (08:26):
Yes, so we have three different
publications that we come outwith quarterly. We have our
quarterly survey, where wesurvey our members on four main
metrics, we asked them whetheror not they think that they're,
that the markets in which theyoperate there is that the market
(08:49):
is becoming tighter or looser,if sales volumes are increasing
or decreasing, and this is allrelative to the prior quarter.
And also, if equity and debtfinancing has become more or
less available. And from theirresponses, we construct an index
(09:12):
ranging from one to 150representing no quarterly
change. So, if there's an equalnumber of respondents who say
they think things are improvingrelative to those who think
things are getting worse than itwould be just at 50 there.
Aaron Norris (09:29):
Wow. So, how many owners do you survey? Just
curious?
Christopher Bruen (09:34):
We usually get around. Claire, would you
say around 150 responses?
Claire Gray (09:40):
Yeah, I was gonna say anywhere from 100 to 200. I
think it just depends. You know,sometimes in the winter time or
summer, people are out onvacation, maybe not as many but.
Aaron Norris (09:49):
Any idea how many, of those 150 how many units they
represent total?
Christopher Bruen (09:56):
It's not something that we track.
Aaron Norris (09:58):
Ah, got it. Okay, but I mean, those are 150
owners, and they, some of themare going to own many, many
apartment buildings. So, there'sgoing to be quite a few. So,
that's good to know. So, whathave you, what are you guys
seeing as far as some of thedata that you're, you're seeing?
Christopher Bruen (10:16):
Let me think so. I'm trying to recall, I have
some notes here on the firstquarterly survey we had during
COVID in April, had all theindices come in below 50. So,
conditionally indicative of, youknow, market conditions were
(10:37):
getting worse. There was prettywidespread agreement about about
that. And then in July, all theindices also came in below 50,
with the exception of the indexfor debt financing. I was after
the Federal Reserve took somepretty aggressive actions, and
(11:00):
interest rates got lower. So,you can see how maybe there is
increased availability of debtfinancing there. And then, in
our most recent survey, let metry to remember.
Claire Gray (11:16):
I think it was just market tightness was the only
one below 50.
Christopher Bruen (11:21):
Right. So, yeah, so markets got looser for
a third consecutive quarter, butbut everything else was trending
up. So, there is an increasedsales activity, and more
availability of debt and equityfinancing.
Aaron Norris (11:40):
That's a good thing and would definitely aid
in that tightness number. So,the things are moving, are you,
are you able to see insightsinto specific area like urban
markets, like New York and SanFrancisco, compared to more
rural and suburban markets?
Christopher Bruen (11:58):
So, we, we sometimes receive some data,
data from a private dataprovider called a real page, and
they have some more detailedmarket specific data. And we
have looked at occupancy changesand rent growth by markets. I'm
(12:18):
looking at the second quarterdata here. And we saw, let's
see, in the second quarter,actually rent increased in low
rise buildings. And there was arent decrease, negative rent
growth in mid rises, and evenlarger, negative rent growth in
(12:41):
high rises. So, that, that isconsistent with urban markets
taking a little bit more of ahit. And it was a similar story
with occupancy that saw adecline in occupancy, most in in
the high rise buildings.
Aaron Norris (12:58):
What are you seeing as far as the percentage
of rents being paid right nowfrom your members?
Claire Gray (13:05):
So, for a little background, we started a rent
payment tracker in April withfive private data providers that
provide property managementsoftware. And so, from April,
we've been tracking that. Andit, it did take a little bit of
a dip in April, but reallythrough, through the summer,
(13:27):
things were down a percentagepoint or two from where they
were last year, for full monthresults. So, yeah, really,
really speaking to, you know,people want a safe place to live
there. You're paying their rent.
And I know, we've heard,anecdotally that, you know,
property operators are, youknow, have these open lines of
communication with theirresidents, maybe they're helping
(13:48):
them find local, you know,rental assistance or food aid,
that kind of stuff helping tomake ends meet. So, we did see a
little bit more of adeterioration in the full month,
November results, it was downabout three and a half
percentage points from theprevious November. But we don't
have our full December resultsyet.
Aaron Norris (14:11):
Yeah, everybody's calculating that up. And that's,
that's interesting. And ofcourse, were waiting to see the
Congress get through another aidpackage, which came through and
rumored ours are already workingon the next one and the vaccines
coming out. So, are you gettinga sense that apartment owners
are relatively positive for2021?
Christopher Bruen (14:38):
I don't know if I've ever, it's not as if
I've spoken to any owners aboutif they're, what their outlook
is like. But I just wanted toget back real quick to the
collections to show that youknow, while those collection
figures are are positive that'snot to say that residents aren't
(15:02):
struggling to make theirpayments. And it's not to say
it, you know, we hear a lot ofinstances of owners working out
different payment plans withresidents, so. So, even though a
lot of them end up making theirpayments, there's kind of more
(15:22):
to that story.
Aaron Norris (15:24):
Okay, so you're saying.
Claire Gray (15:26):
Definitely.
Aaron Norris (15:26):
Got it.
Claire Gray (15:28):
And those percentages are upside.
Christopher Bruen (15:31):
Oh, go ahead, Claire.
Claire Gray (15:32):
I was just gonna say, it's also those percentages
are for a full or partial rentpayment, or they could be on a
payment plan. Yeah, like Chriswas saying the story's a little
more nuanced. And it's also,with the five data providers,
we're looking at a universe ofabout 11 and a half million
units. So, even a three and ahalf percentage point decrease
(15:53):
is almost 400,000 householdsthat didn't pay rent, you know,
so, when you put a number to it,it is still maybe a little bit
of a stark picture. But the likeyou were saying the COVID relief
bill, with rental assistance andexpanded unemployment definitely
came when it was needed, youknow,
Aaron Norris (16:13):
Yeah, we've brought this up a few times on
the show. I'm on the board of211 for Riverside County, which
is a Health and Human Serviceshotline. And our United Way that
runs the 211 actually got theCARES Act funding to work with
landlords to pass on grants toto pay back rent for tenants.
(16:35):
And there's some very largelandlords who got some very
large checks, which isincredibly helpful. I wish
everything was so easy.
Unfortunately, 211's are manageddifferently at every county
level. So, you don't, they'renot all structured the same way.
But I'm sure that the aid that'scoming through the CARES Act has
just been very hit and miss,depending on where these
(16:57):
apartment owners are located,unfortunately. And if they live
out of state, and they're notprofessionally managed, maybe
it's a mom and pops, you know,the tenants might have a very
different experience. If thelandlords don't know what's
available locally. It's justhard to follow all this stuff,
it's changing so quickly.
Claire Gray (17:15):
Because, that something too with our rent
tracker, it is justprofessionally managed
department, so, it doesn'tcapture any of the smaller
properties like mom and pop,like you mentioned, or
subsidized housing or militaryhousing, it's really those, you
know, Class A, Class Bprofessionally managed
departments.
Aaron Norris (17:34):
Do you get a sense of nationwide who owns apartment
buildings? Is it predominantlyprofessionally managed? Or are
there a lot of mom and pops inthe space?
Claire Gray (17:45):
There are a lot of a lot of smaller buildings,
smaller owners, even if, youknow, maybe it's a mom and pop
and they own a couple buildings.
But it could be a couplebuildings that have four units.
You know, we're really, theincome that they're making from
rent is to pay the mortgage andput food on the table. And
that's, that's it, you know.
Christopher Bruen (18:06):
We have come, we come out with our annual top
50 list, largest owners. Andwhen we do that, we, we look at
the percentage, you know whatshare that those 50 are of the
total apartment stock, whichthere are around 20 or 20, 20. 1
(18:33):
million apartments. And I can'trecall how many were in the top
50 last year. But we you know,we do report on what that
concentration is.
Aaron Norris (18:46):
Interesting. So, there are a lot of mom and pops
out there. I always tell a lotof real estate professionals in
different buckets, if especiallyinvestors, investors seem to be
very independent, not alwayspart of associations, they, I
don't know if they necessarilyunderstand the value and how
much work it takes to do thekind of research that you do,
(19:06):
and advocating on behalf of theindustry and that very political
side of lobbying and providingdata. So, join your local
associations and nationalassociations. It's, it's pretty
incredible. And on your website,you've got so many other things
you've got. You've got thequarterly survey, the rent
payment tracker, and you've gotthe construction survey too. Is
(19:26):
that the third thing that you'retalking about?
Christopher Bruen (19:30):
Well, actually, no, that's so, that,
that is an additional surveythat we started to put out
during COVID.
Aaron Norris (19:39):
Oh, wow. You decided to start a whole bunch
of new things during COVID, goodfor you.
Christopher Bruen (19:47):
Yeah, I mean, we have our three main
publications which I talkedabout quarterly survey. We also
have our market trendspublication where we you know,
report and comment on keymetrics in the industry like
rent growth, vacancy, demandlevels, that kind of thing. And
then we also have a researchnotes, publication quarterly
(20:10):
publication where we do more indepth research on just whatever
topics we find interesting orrelevant to the time. But, but
yeah, that in addition to those,we have been putting out this
construction survey throughoutCOVID. I think Claire's,
(20:31):
probably more familiar with someof the findings.
Claire Gray (20:34):
Yeah. So, we, we started this because, you know,
like, you were saying, duringCOVID, people were just hungry
for information. And we have avariety of different members.
And so, early on in thepandemic, there was a
construction moratorium. Thatkind of halted, all
construction, multifamilyincluded. So, we were trying to
(20:56):
capture what was going on withour members so that our
lobbyists could take thatinformation to the hill. So, we
started in, I think, late March,and we've done five rounds kind
of spread out with the mostrecent round happening in
October. And prettyconsistently, there have been
about 55% of respondents thatwere reporting construction
(21:20):
delays. And of those, we askedif it's in permitting or starts,
and pretty consistently over thecourse of our surveying, it's
increased the share that havesaid it's, you know, they're
experiencing delays inpermitting. I know, in our most
recent round in October, it was90% of those that were
experiencing delays, wereexperiencing them in permitting.
(21:42):
77% were experiencing delays andstarts for their construction.
We ask what's causing thedelays? Obviously, economic
uncertainty was a popularanswer, but also some of that
permitting and, permitting andentitlement. And also,
availability of finance. We askif they're experiencing delays
(22:07):
in financing, which was apopular answer, or, or if they
were unable to get financing,which it seems that the issue
where it was just delays, not somuch that they couldn't get it,
but there's just a lot of backupright now. I know, we asked
about materials. So, if they'reexperiencing a lack of materials
or price increases in materials,so early on, especially imported
(22:32):
materials, like countertops fromItaly, or things like that, that
maybe you're not thinking aboutbeing part of this big picture,
but were elevators or cabinetryor AC units. As far as price
increases, I know, lumber hasbeen an answer. Every single
(22:52):
survey people are seeing priceincreases in lumber, and also
everyone's doing home projects,because they're stuck at home.
Aaron Norris (23:00):
Sucking up all that wood
Claire Gray (23:02):
Yeah, exactly. So, so that's a lot of what we're
seeing. But our members also saythat they've, you know, adopted
new strategies to overcome someof these hurdles. Maybe it's new
technology, maybe it's healthscreenings, it's PPE, it's
staggering shifts. So, it's beenreally interesting to see kind
of what our members have beendoing to be proactive about
(23:25):
what's going on. And I thinkbecause of some of that they,
there haven't been as manyissues with labor early on, it
was like, oh, people are gettingsick, they're not showing up.
They're, they're nervous aboutgetting their family sick, that
kind of thing. But as we've goneon a, you know, worked out the
kinks and figured out how to geteverybody there safely and still
work.
Aaron Norris (23:45):
I got a, I was telling Chris, before we started
recording, I just got an email.
I am very close to the buildingindustry. And I got an email
from one of the county's healthdepartment saying that their
staff was being diverted toCOVID response and vaccinations
and that to expect more delaysfor the health, specifically
health permitting, healthdepartment. So, I was like, Oh,
boy, here we go. Yeah, doing1031 exchanges. That's not the
(24:10):
news that you want to hear.
Tenants, do you do any researchon tenants what they look like
how they've changed over theyears? Sort of at the
demographic level?
Christopher Bruen (24:27):
Yes. So, well, so we talked a little bit
about there being more onebedrooms and efficiencies. And
one reason for that is thatthere are a lot of single people
out there. There's some, beensome broad demographic trends.
(24:53):
People tend to be gettingmarried later, having kids
later. So, taking longer to makethat transition from rentership
to ownership. And also, there'sbeen a long run trend of more
young adults living with theirparents. Which kind of so,
(25:20):
there's this kind of dual effecton demand for apartments there
that on the one hand, you havepeople renting for longer. But
then you also have moreindividuals who haven't even
entered the market yet. We'restill at mom and dad. But I
(25:41):
think that might explain some ofthe unit mix out there catering
to, to singles.
Aaron Norris (25:51):
Boomers, are our seniors deciding to move down in
two exciting cities into some ofthese efficiency units just
looking for something to domaybe?
Christopher Bruen (26:00):
So, actually, we looked at that, you know, you
often hear this narrative ofdownsizing baby boomer, like,
are they moving to the city athigher rates than other
generations. And what we foundwas actually that they're not
really doing so at higher rates.
It's just that they're, they'rejust such a large generation,
you know, there, there's so manyof them, that whatever they do
(26:23):
is magnified. So, yes,obviously, as they get older,
you're going to see a lot ofthem moving into cities, but
it's not as if they're onlydoing that they're, you know,
they're they're not really thatmuch different than, than prior
generations from what we'veseen.
Aaron Norris (26:47):
Has there been, as far as apartment construction,
have you guys done any researchon the features that owners has
their building or having to lieninto sort of for the next
generation of apartmentdwellers?
Christopher Bruen (27:02):
Well, we, we do conduct it, we another thing
we do is we conduct a residentpreferences survey, because, you
know, we're trying to get a feelfor what people care about.
Aaron Norris (27:13):
Yeah.
Christopher Bruen (27:15):
Our last survey, we had responses from,
I'm trying to recall, I think270,000 renters across the US
and Claire and I, I guess wecould, we could try to recall
some of the main findings, andI'm trying to remember what,
(27:36):
what they cared about.
Claire Gray (27:39):
Things like gyms are still important. I think
more of the kind of, we callthem like, on demand, or, you
know, people want seamlessinteractions, like maybe it's a
tech in their apartment or like,key fobs, things like that.
Christopher Bruen (27:57):
High speed internet.
Claire Gray (27:57):
Roof top spaces, high speed internet.
Christopher Bruen (27:59):
It's always a big one.
Claire Gray (28:01):
Yeah.
Christopher Bruen (28:02):
You know, a lot of you know, the basics as
well like air conditioning.
Aaron Norris (28:10):
Having lived in New York, I get it. It's not
everywhere. Okay.
Christopher Bruen (28:17):
Oh, and one of the features that always tops
the list is soundproof walls.
Claire Gray (28:24):
Yes.
Aaron Norris (28:26):
Amen to that one.
I've lived below somebody in abasement apartment in New York
that like to bounce basketballsat six o'clock in the morning
quite consistently. So.
Christopher Bruen (28:39):
Yeah.
Claire Gray (28:40):
Yeah, I tell my family that I live in that
clogging insurance commercial.
You know, I'm not sure whichinsurance company it was. But it
shows the family above themclogging and you can hear them.
I get it too.
Aaron Norris (28:54):
Yeah, there's a it's definitely a different
living experience. But havinglived in downtown Los Angeles,
and it was the first time I wasin a rental unit in a while. I
was really surprised to see allthe technology, their target
market was definitely somethingdifferent that I had not
experienced in New York as astarving artist. So, in this
(29:14):
building, the fancy cars below,the huge gym, the full
basketball court, the movietheater, the office space that
you could rent. I mean, theamenities are pretty spectacular
in downtown LA and it came witha price. And then I'm looking at
trends like coliving and theprofessionalization of the space
that actually do a good jobstripping all those amenities,
(29:37):
where the concept is just oneprice gets you everything up to
I've seen some colivingcompanies do things like salt
and pepper and olive oil, andyou know, monthly cleaning, and
going as far as doing thingslike activities like hey, we've
put together a coffee with yourlocal council member. So, it's
almost like you're selling alifestyle, not just an, a unit.
(30:00):
So, has there been any pressurethat you've seen on the feature
front that's more lifestyledriven and not featured on?
Christopher Bruen (30:11):
You know, we asked about that stuff in our
survey as well. And I feel likeif I recall correctly, people,
renters that it's really kind ofsecondary to them, I think, to,
to the, to the, you know, thingslike, what they're paying and,
and that their unit has like theessentials. Okay.
Claire Gray (30:36):
I would say also, you know, sometimes we break it
out by age or income orgeography and I feel like, for
younger renters, sometimes it'sthe best would be nice to have
not need to have kind of thingsaside from you know, AC and high
speed internet is a need to havefor everyone. But I, we found
that the younger renters, Ithink, are also we asked if
(30:57):
they're open to like colivingsituations, or if they would be
open to short term rentals intheir building. And generally,
they were more open. I think weasked if they would definitely
or would possibly be interestedin that. And they were
definitely more open to it thanthe renters that are a little
bit older, living in apartments.
Aaron Norris (31:19):
A little more flexible. Okay.
Christopher Bruen (31:21):
Yeah.
Aaron Norris (31:22):
I'm just thinking about owners, or I definitely
have some people in my life thatare, you know, they've done
single family for a long time,and they're getting into the
commercial space, and sointerested in exploring
apartments and what that wouldmean, and I'm sure it's very
market driven, as far as thefeatures and maybe the
demographic that you're chasing,you know, if you're in some
markets, it is just a storyabout essentials. But if you're
(31:45):
in markets that are highlycompetitive, and people have
choices, and you want a specifictarget rent, you got to play
ball a little bit. But yeah,just, just curious. I was gonna
ask you on the, on theconstruction side, are you
expecting a good amount ofconstruction this year?
Christopher Bruen (32:04):
So, I was just looking at kind of what our
completions figures have been.
And I had the tab open, had thetab open. But completions have
actually been, we're actually upa little bit in the third
quarter. At some of the highestlevels we've seen, so, even
though permits and starts weredown, so I guess they're there,
(32:27):
despite delays, there were stilla lot of units coming online
there. So, I would, I wouldexpect, you know, for the year,
you know, the, I guess the firsttwo quarters were a bit lower,
but, but not by much. So, Ithink we're still looking at
pretty high levels ofcompletions there.
Aaron Norris (32:48):
Okay, with it starts we're lower, we might not
see that, you know, for anotheryear or so, right? It might slow
down next year is almost likethe COVID pause for
construction, and then mightpick up a little bit. You know,
affordable housing is a is ahuge conversation. I know in the
single-family space, I'm here inCalifornia, it's almost like a
joke. It's like, yeah, we can'tbuild affordable housing in
(33:09):
California, is there a lot ofpressure on your industry to
somehow pick up the slack inthat department?
Christopher Bruen (33:17):
Sure, you know, we track the percentage of
apartment households that arewhat we call burdened, or
severely burdened who are payingover 30% of their income, on
rents, that's, that's costburdened and severely burden
would be paying over 50% oftheir income on rent. And these
(33:40):
have been figures that have beengoing up, since as far back as
we've been tracking, you know,like, back to the 80's. Burden
levels just keep getting higher.
And this is partly an incomeissue. If you look at income
growth over time, it's been verylackluster, especially for those
(34:01):
without college degrees, verystagnant income growth. And for
those with very low levels ofincome, it's, it's almost
impossible to build housingthat's affordable, you know. So,
there's the income side, andthen you have some of the areas
(34:23):
of the country where you justhave really high levels of
population growth, and notnearly enough construction to
keep up with that.
Aaron Norris (34:41):
Yeah, a lot of people putting pressure on fewer
and fewer rentals. So, yeah, theprices are just gonna keep going
up and people get pushed out andit gets very political. You
know, what, what can we in theindustry even do? I don't know.
Christopher Bruen (34:54):
And actually, there's a, if you look at, so,
and I know it seems like in thepast decade or so we've been
building a lot of apartments.
But meanwhile, we've seen, youknow, vacancy levels go down,
like high rent growth. And youthink, why is this happening? It
seems like we're building a lot.
(35:14):
But if you zoom out and look ata longer-term perspective, we
haven't been building. So, thisis, this is when, you know, you
know, millennials have beenentering the housing market now.
But when boomers entered, wewere building much more
apartments, back in, you know,the early 70's. And through the
(35:37):
80's, much higher levels ofapartment completions.
Aaron Norris (35:43):
I see that. I follow the data here a lot in
California, and this came up.
Where was I speaking, I wasspeaking at a Realtor
Association. Somebody asked meabout builder and like, you
know, part of the problem isthat it's almost like we took a
full decade off of creatingbuildable lots. We haven't
turned raw land into buildableplaces where builders can have
at it. So, we're behind. Andthat is not a fast process. The
(36:06):
entitlement process is not fun.
One of the opportunities I hearcoming up more often is the
concept of mall renovations, forcities that don't want their
mall to become the next Amazondistribution center, maybe
building in density in new ways.
Are you part of moreconversations as cities sort of
(36:29):
rethink their master plans andbuilding in density?
Christopher Bruen (36:39):
I don't know if we, our department has been
part of any of thoseconversations per se. But I.
Aaron Norris (36:44):
Well you should be.
Christopher Bruen (36:45):
I should. I'm just thinking I have a good one
I'm going to one of my bestfriends is in Indianapolis and
his apartment building was in anold mall. A really interesting
building.
Claire Gray (37:00):
Yeah, I know here in Arlington, I've heard more
about like office conversionsinto apartments as well.
Aaron Norris (37:08):
Really? Yeah, that's a whole different COVID
conversation, right? That not asmany offices are needed, or the
hospitality? Can we convert themsomehow? I wasn't expecting the
office thing that come up,though. That's interesting.
Claire Gray (37:22):
It could just be one particular building. I just
know, in my little, well not alittle neighborhood. But in my
neighborhood, that's what I'veheard.
Aaron Norris (37:29):
We have, we have quite a few real estate
investors that they'll heardifferent things as we're
talking and go Oh, okay. And theprocess of going down to a city
and sometimes you don't know,until you ask you go down to the
planning department and see whatthey're willing to do. And I was
in downtown LA working rightbefore the downturn, and they
(37:49):
were converting actually quite afew things like the Edison the
old utility building into acondo building, so, is going on
quite a bit. So, you just neverknow, downtown LA has completely
changed over the last 15 yearswith residential. Is there any
cities that look like they'regoing to just be really hot in
(38:10):
the next couple years, forapartments?
Christopher Bruen (38:14):
I mean, so we generally try to stay away from
forecasting and.
Aaron Norris (38:20):
Got it. That's fine.
Christopher Bruen (38:21):
In future in that way? Yeah.
Aaron Norris (38:23):
What are the interesting things shall we talk
about in the apartment space?
It's definitely not my, mywheelhouse, necessarily. But I'm
fascinated with the trends andsome of the data, as people sort
of consider sort of how totackle next year, this year.
Christopher Bruen (38:39):
Hmm. Well, I guess one topic I maybe should
have talked a little bit moreabout before, when we were
talking about migration is thatwhen, when COVID did hit I, I
conducted a little study to tryto anticipate how something like
(39:02):
this would affect where peopleare moving. And like I said
earlier, we didn't have much togo on in terms of like, other
pandemics. But I did want toplay with that idea of you know,
(39:24):
I actually, actually focused onyoung adults, I wanted to play
with that idea of young adultsare choosing whether or not to
live with their parents or, orif they're going to form
households and if they formhouseholds, if they're going to
rents, if they're going to ownor if they'll rent if if they
are going to have roommates, youknow, and figured, figured that
(39:48):
a lot, a lot of this is, a, youknow a function of income. So, I
what I did, at the time, I wasusing 2018 data, and I just
wanted to see the relationshipbetween the likelihood of, of,
of either living with theirparents or renting it alone or
renting it with roommates, or,or owning a home relationship
(40:11):
between that, that likelihoodand a number of factors like
your age, your income, youreducational attainment, your
race. And then once I constructthat model, I, you know, you can
play with it and see whathappens if you decrease people's
(40:35):
incomes, you know, what wouldhappen. And I think my findings
were kind of as you wouldexpect, with lower incomes, you
get a lower likelihood thatpeople are going to buy homes,
you have a higher likelihoodthat people are going to live
(40:55):
with roommates if they'rerenting, and you have a higher
likelihood that people are goingto live with their parents. And
in fact, what we have seen,we've been tracking through the
Current Population Survey, theshare of young adults living
with the parents, and duringthis COVID, period, they've
(41:17):
reached the highest share sincethe Great Recession.
Aaron Norris (41:22):
Really. Wow.
Christopher Bruen (41:25):
This is this is, you know, that share has,
there has been a longer termtrend there as well. Yeah. As I
spoke to before, we have seenmore young adult, young adults
living with their parents, buteven in the shorter term,
because of COVID. That's, that'sspiked.
Aaron Norris (41:45):
I've definitely heard that I mean, the
millennials, let's be honest,millennials were called the
boomerang generation, you know,staying at the parents home for
a really long time. And some ofthem are buying habits though,
too, were really interesting.
They were renting a lot longer.
But when they got intohomeownership, they were jumping
in some states like California,their median purchase price was
on par with what boomers werebuying. And that was just a few
(42:06):
years ago, it was sointeresting. So, that kind of
information is just so importantto understand the trends because
it could really change what youbuild, where you build.
Interesting.
Christopher Bruen (42:19):
And it has implications for the apartment
industry, obviously, you know,those folks living with their
parents, presumably, that's pentup demand for apartments that
eventually though, you know,those people are going to want
to form their own households.
But maybe they're going to takelonger to do so. And, and when
they do form their households,they might take longer to buy a
(42:42):
home, you know.
Aaron Norris (42:47):
One of my, my favorite micro living stories is
the oldest mall in Rhode Island,it was, I think, maybe in
America got converted to microunits, 300 square foot. And
there's this YouTube videotalking about a nurse that she
trains in for the week, and shelives there, and then she
doesn't live there. Do you thinkCOVID will change some of those
(43:08):
sort of, I don't know, I don'teven know what you call those
kind of people that are lookingat these efficiency units
because they're executives or,you know, they just don't want
to drive the hour or two, inmarkets like New York or San
Francisco. Think anything mightchange there is when it
specifically comes to apartmentdemand and these efficiency
(43:30):
units or one bedroom?
Christopher Bruen (43:32):
I mean, is your hypothesis there that there
will be less demands for theefficiency? Because because
they'll be working from home or?
Aaron Norris (43:41):
Yeah, exactly.
Christopher Bruen (43:44):
I think you know, that's something
everyone's been trying tospeculate about. And but it's
not something you could really,I don't think there's any any
data that will help you there.
It's, it's trying to predictpeople's future behavior, you
know, are people going to revertto how things were beforehand?
Or are you going to keep, are wegoing to start going into the
(44:05):
office like we did before? And Idon't, I don't know if I have an
answer. I don't know how youfeel Claire.
Claire Gray (44:13):
I was going to say with the our quarterly survey
special question that askedabout where our members were
seeing demand in those likeparticular property and unit
types. We also asked them howlong they thought so again, this
is just totally opinion, butmost of them, we gave them the
option of like through thepandemic or six to 12 months
(44:36):
beyond the pandemic, and then,and then longer timeframes as
well. But those two were theones that were most popular. So,
I think people probably feellike there's a, you know, return
to city, that kind of thing.
Aaron Norris (44:50):
I think so, there's a different reason why
you live in the city and I don'tknow, I guess I just feel like a
lot of people are just dying toget back to normal.
Christopher Bruen (44:58):
And this is just you know, me speaking, I, I
could have moved out of the cityand I've chosen to stay in my
tiny apartment. And so, youknow, people like me still see
the benefit and are eagerlyawaiting for things to be
reopened. And, you know,obviously there's much more to a
(45:19):
city than being close to whereyou work. There's a lot, there
are a lot of, you know,amenities restaurants, bars that
people like being here for.
Aaron Norris (45:29):
Yeah. It's about lifestyle, quality of life. And
it's just it's so different. Ijoke about is there going to be
like buyer's remorse in a yearwhen they finally get to
experience their first winter inMinneapolis or, you know,
experience Florida's humidityfor the first time over summer?
Like, I'm going back, I'm goingback.
Christopher Bruen (45:47):
Well, it's interesting, you mentioned that,
you know, buyer's remorse, Ithink that's been another kind
of narrative that. I don't know,if I have, I've seen any data on
it. But that, you know, a lot ofpeople are buying homes. And,
you know, like I said earlier,like, if, you know, when the
economy takes a hit, all elsebeing equal, you're gonna expect
(46:10):
I think, fewer home purchasesand, and COVID is maybe a bit
different. And and you mighthave people who are already
going to buy a home, we thought,Okay, this is my chance to get
out in New York. And, and, youknow, you hear stories of people
who, who have tons of money, andmaybe it's not an issue for them
to do so. But I, you know, longterm, I can't see how COVID will
(46:39):
increase home purchases in thatway, you know, you don't
necessarily have to buy a hometo move to the suburbs, or to
move out of the city.
Aaron Norris (46:51):
Yeah, and it's part of it's just a function of
lower listings right now. Imean, in some markets, it's just
so insane, I was talking to arealtor in the Palm Springs area
that they've never had in areally high dollar category, you
know, multiple offers, likeoffers when they used to
experience only two realtors inSan Diego and Palm Springs
(47:13):
talking about Bay Area, peoplecoming down. Because their
median purchase price of a homeof theirs, I think something
like 1.7 million where in SanDiego and Palm Springs that's
half that easily. So, it's justso interesting if the remote
work does stick long term. Andyou know, the office says I only
need you up here once a week,twice a month, you know, all of
(47:35):
a sudden buying a house for inSan Diego and taking a flight up
to San Francisco, it might work.
I don't know. I guess that's thething I'm waiting for the one
data point that I'm reallyinterested is to see if remote
work is going to stick. And ifwe've if off businesses like
this model, being on zoom allthe time, I don't know.
Christopher Bruen (47:59):
Well, even within our company, before COVID
even hit, we had more peopleswitching sometimes full time,
remote work, partly as afunction of you know, we have
limited office space and someonewants to work from home.
Aaron Norris (48:18):
All right, so you guys were already used to it.
And, and this has forced theentire nation all at once to get
really good at thisconversation. So, that's what
I'm excited about. We'll see.
Claire, have you been working onany kind of research that gets
you excited?
Claire Gray (48:33):
I also did a research notes like Chris was
talking about his earlier on. Iworked on one in September that
kind of looked at which rentershave been most affected by the
job losses that we'veexperienced during the pandemic.
So, that was really interesting.
Because you know, there are somepublications from like Urban
(48:55):
Institute or Turner center thatlooked at how renters have been
impacted, but we kind of wantedto take it a step further and
look at apartment rentersbecause that's what we're
dealing with. So, we found thatthere were some occupations that
face significant job loss thatalso employed a greater share of
apartment residents. Some ofthose being accommodation and
(49:19):
food services, arts,entertainment and recreation.
So, apartment, residents make upabout 12 and a half percent of
the adult population in the US,we looked at where they made up
a greater portion of some ofthese sectors and sub sectors,
we use data from the currentemployment statistics survey
(49:41):
from BLS to see job losses andthen we use the American
Community Survey to look attheir occupation codes and
shares of apartment residents inthose occupations and match them
up. And so for example,accommodation and food services
18% of that workforce isapartment residents, which is a
(50:01):
higher share than the USpopulation on the whole. I know
motion picture and soundrecording face like a 50%
employment loss from the startof the pandemic through August,
that was the timeframe we werelooking at at the time. And I
think it was about 21% of thoseemployees are permanent
(50:24):
residents. arts andentertainment, or arts and
spectator sports, about 18% ofthose residents or those
employees are permanentresidents. And they also face
pretty significant job losses.
So, just those industries whererelative to the size of the
industry, they face great joblosses. Because one thing motion
(50:49):
picture and sound recording, nota huge industry, but when you
look at relative to the size ofit, the share of job loss was
pretty significant.
Aaron Norris (50:58):
Like in cities like LA, though, that's that's a
sizable portion of theworkforce. So, yeah, I could
definitely see how that wouldimpact. Yeah.
Claire Gray (51:07):
Yeah, exactly. We did take a look also at kind of
the geographic concentration,and it is, you know, it's kind
of the tourism driven industriesthat really were hit the
hardest. And so in places likeLA and New York, had a high
share of those apartmentresidents that have faced job
losses. But we also saw that inMiami and Orlando and Las Vegas
(51:31):
for those more tourism drivenones. And then, of course, the
arts and entertainment also inNew York and LA are really hard
hit.
Aaron Norris (51:39):
That makes sense.
What is, um, what's your guys'process? Where, where does the
concept of doing research startfrom? Is it your, your members?
Is it Congress, you wake up inthe middle of the night, just
have a dream about this nextdata set you want to find out?
Christopher Bruen (51:58):
Sometimes it comes from members, they'll
contact us and ask us all sortsof questions that they're
interested in. And sometimeswe'll find it really
interesting, too. I thinksometimes it's just, you know,
one of us will think of it andwe'll all agree that it's a
worthwhile idea.
Aaron Norris (52:19):
Very cool. So, anything on the radar for 2021,
that you're just dying totackle?
Christopher Bruen (52:27):
Um, let me think,
Aaron Norris (52:30):
Or data that you wished existed that you don't
have?
Christopher Bruen (52:36):
I guess, you know, one topic that's come up
recently, that we've beenthinking about is, you know, we
get this question a lot. How,what's the average length that
people are staying in anapartment? And we've never had a
good way of getting that back.
So, so, we normally look atlike, different census, census
(52:59):
surveys, which are differentcross sections every year. So,
it doesn't, doesn't follow thesame people over the years. And
what we are able to see in, whatwe, what we typically track is
like the percentage of apartmentrenters that have moved in the
past year.
Aaron Norris (53:21):
Okay.
Christopher Bruen (53:22):
Which is, which is interesting in itself.
Especially since, I don't knowif you're, if you're aware that
internal mobility as has beendeclining for decades in this
country.
Aaron Norris (53:37):
What do you mean by that?
Christopher Bruen (53:38):
That people are moving less frequently.
Aaron Norris (53:42):
Oh, you mean as a geographical location or just in
general? Like I parked in thisapartment, I'm staying here for
a really long time.
Christopher Bruen (53:49):
Yeah, the latter,so.
Aaron Norris (53:51):
Okay.
Christopher Bruen (53:51):
So, in any given year, you know, the
percentage of people who havemoved in the past year has been
declining. And, you know, we've,we've, even after taking into
account differences in income,education, all these things.
There's, there's still thisdecrease in mobility that we
(54:14):
haven't been able to completelyexplain.
Aaron Norris (54:17):
That's interesting, because that's
happening in the single-familyhome space, though, as well,
like.
Christopher Bruen (54:21):
Oh, yeah, absolutely, in every space.
Yeah.
Aaron Norris (54:25):
Interesting. I really didn't know that, that
was happening in the apartmentspace. And, hmm.
Christopher Bruen (54:30):
Well, obviously, you know, apartment
residents move more frequentlythan people in single family
but, but yet, still at a slowerrate than they did like 10 years
ago. But anyways, aside fromthat interesting trend, which
I'm always looking to try to getto the bottom of, we are looking
(54:50):
at ways to maybe use thoserates, the percentage of people
who have moved in the past yearto approximate what the average
length of stay is for differentsubpopulations.
Aaron Norris (55:06):
That'd be a really interesting metric. Because if
you're an apartment owner andyours is just really messed up,
you're like, I have a reallycrappy manager. It is. That's a,
that would be a really cool datapoint. Okay.
Christopher Bruen (55:17):
Yeah.
Aaron Norris (55:18):
All right, Claire, you have anything interesting
you want to tackle in 2021?
Claire Gray (55:23):
Gosh, I'm sure there is, it hasn't. I would say
it hasn't come to me yet. Butit's.
Aaron Norris (55:29):
Fair enough. Any tech trends that, well,
actually, I wanted to ask realquick, you mentioned that you
work with some of these softwareproviders, which they might have
some of this data. I mean, howawesome has that been, that more
apartment owners are leaning onthese technology providers? So,
you have access to that? That'scool.
Claire Gray (55:50):
Yeah, it's definitely been helpful for us
tracking what's been going onthrough the pandemic.
Aaron Norris (55:56):
Because I know mom and pops probably wouldn't
capture all the bullet pointsthat they can have give you
access to that for sure.
Technology trends in, I attendedCES last year. And one of the
things I was fascinated with themost was, there is a company
that worked with apartmentbuildings. And at the time, they
were working with a number ofvery large operators in Los
Angeles, where they were puttingsensors, sensors on the AC and
(56:20):
the water heater. And they had apartnership with utility. And
when the utility needed to burnoff extra electricity, so they
didn't have to sell it off thegrid. They would just hike up
the AC and the property owneractually made money. It was
really fascinating to me. Haveyou heard of any really cool
(56:40):
technology that has gotten youreally excited about the
apartment space in the lastyear?
Claire Gray (56:48):
We, we have an annual operate, it's called
OPTECH. So, it's Operations andTechnology Conference that took
place in November virtually forus, which is really interesting.
And there's always a lot ofprogramming. So, sometimes it's
it's hard to even take all of itin. I know something that they
talked about a lot with COVID.
You know, apartment operatorskind of had to make this like
(57:10):
automatic switch to virtualleasing, virtual tours, that
kind of thing. And you know, isthat here to stay, which it
seems like in some scenarios, itis people are just, they want to
see their unit, but maybethey're fine with a video or
something like that. So, that'ssomething that kind of came out
of necessity at the beginning ofCoronavirus. Some people had
(57:33):
adopted it beforehand, but not aton and just know it's whether
or not it's here to stay. That'ssomething that people were
talking about a lot, just thatautomated component.
Aaron Norris (57:46):
All right. Chris, you see anything that got you
excited from that conference?
Christopher Bruen (57:52):
I'm trying to remember. I don't know if we had
a Innovation Challenge thisyear, Claire?
Claire Gray (57:58):
I don't think so.
Christopher Bruen (57:59):
But I'm trying to recall where the
winner was last time. And whatthat was.
Claire Gray (58:06):
I think it had to do with modular building.
Aaron Norris (58:10):
Ah.
Claire Gray (58:11):
Which is really interesting.
Christopher Bruen (58:13):
I think you're right. And, and that's a
topic that always comes up. Andit always seems fascinating, but
I I've never really got into theweeds to, to know how much of an
impact that might have on theindustry.
Aaron Norris (58:29):
It's still really expensive out here in
California, we have AccessoryDwelling Units. That's been a
huge conversation because ofaffordable housing, and the
state has mandated it. Andthere's definitely a supply
chain issue right now. Labor isan issue out here like you guys
we've already talked about. Butit's still just too expensive.
(58:50):
So, 3d printing, modular. I'mreally excited about it, but it
still has to come down in pricea little bit. But IKEA just
raised their hand. They'rebuilding Tiny Homes now. And you
know, fun fact, Amazon severalyears ago invested in plant
prefab they actually domanufacturing here in California
very close to where I live. Andthey do multi, they have a multi
(59:10):
called Nest. And so, it's verymodular, but it's built off site
and brought in it and it speaksCalifornia's language, it's
green, because it's done in awarehouse and you know, all this
kind of stuff. If they can, ifthey can make it affordable. I
just think that's got to be thefuture with robotics. And I just
I love this stuff. So, plantfree have like, one of the only
(59:32):
ones that I know about in thecommercial space right now, but
I've seen others with them. Ohgosh, what is it called? The
shipping containers and piecingthem all together?
Claire Gray (59:45):
I don't know seeing that. I was gonna say Um, I
don't remember if it was lastyear, maybe the year before.
Someone maybe HUD put on like aninnovation type challenge on the
mall here in DC. And I'm prettysure someone 3d printed tiny
house on the mall, you know,just very cool exposure to that
(01:00:07):
kind of technology.
Aaron Norris (01:00:08):
Yeah, Icon, Bill Mighty buildings they're trying.
Icon is out of Austin, Mightybuildings is based out of here
in California. So, they're herebut the average price point is
just it's just really high PlantPrefab has a modular unit that's
Um, I think it's, it gets thestarting point is around 180
grand. So, you're like, Oh,that's a little steep. But it's
(01:00:33):
coming. So, I'm excited now withIKEA in the mix, you know. Who
knows what's next? So, let'stalk a little bit we've we've
run out of time, how can peoplefind specifically your work?
Where can they go on the websiteand stay in touch?
Christopher Bruen (01:00:48):
Well, I think you know, our website's gotten a
little bit better over theyears, it's a little bit easier
to navigate. If you could justgo to NMHC.org and go to
research and insight should bepretty easy from there to find
what you're looking for. And ifyou want to contact Claire, or I
individually, if you go toAbout, to Staff, you can find
(01:01:11):
our contact info. You know,there might have been things
done in this interview thatwe've forgotten or that you want
to know more about just youknow, feel free to give us a
call or shoot us an email.
Aaron Norris (01:01:23):
Very cool. And right. I will I will make sure
to post the links in the shownotes. And thank you so much for
being here.
Claire Gray (01:01:29):
Thanks Aaron.
Aaron Norris (01:01:31):
Thank you for listening to the Data Driven
Real Estate Podcast, you canfind show notes and links to
some of the resources mentionedin the show at
datadrivenrealestate.com. Clickthat join the community, and
you'll be forwarded to thePropertyRadar community where
you can ask questions about thecurrent show and even see
upcoming guests and askquestions there. We'd love to
engage with you in thecommunity. So check it out.
(01:01:51):
Please don't forget to like,favorite, subscribe and share on
your favorite platform whereyou're listening to the show. It
helps us out a great deal.
Thanks for listening, and we'llsee you next week.
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