Agenda - Council Work Session - 11/24/2009

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RENTAL HOUSING MARKET CONDITIONS Summary of Rental Housing Market Conditions The following highlights current trends and market dynamics that will have the most impact on the market potential for new workforce rental housing in Ramsey: · The most significant demand for housing is currently from extremely low-income house- holds, or those earning incomes at or below 30% AMI. There are no vacant units among subsidized properties in the inventory, which indicates pent-up demand for additional hous- ing for this segment ofthe market. Supply has not kept up with demand, as there have been no new subsidized projects constructed in the Market Area in over 25 years. · The current economic conditions are no doubt impacting the rental market in the area. Many households have experienced job loss, foreclosure and other loss of assets that have substan- tially changed their financial picture. Although some ofthese households will now qualify for income-restricted housing (i.e. affordable housing), many have moved in with family members or friends or have doubled up as roommates in order to reduce costs. Hence, de- mand for affordable housing is currently less in the area because of a temporary increase in vacancies. · Some households who comprise the market for market rate housing have taken advantage of incentives for homeownership and have left the rental market. As the affordability of home- ownership continues to be cost competitive with rental housing, demand for market rate rental may dampen somewhat. However, there are still households who prefer the more con- venient lifestyle of rental housing, and rental units will continue to be in demand among this market segment. · Overall, market rate housing is currently at market equilibrium based on vacancy rates of about 5.0%, which indicates that existing supply is sufficient for the demand in the market- place. As household growth occurs and as economic conditions improve, additional demand will be generated for rental housing. In the near-term, demand may continue to be somewhat soft. · Older market rate product indirectly satisfies some demand for affordable housing due to the similarity in rents. However, new product continues to capture a portion of the market that prefers contemporary features and amenities and is willing to pay more to obtain these fea- tures. Households in the market for affordable housing will choose the housing that offers the most value for their money. Therefore, new affordable housing units will have market support among workforce households even though older market rate product is available. MAXFIELD RESEARCH INC.