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Yesterday I indulged in a prediction not just about housing in the next year, but about housing in the coming decade. My argument is that when put together, anger about housing prices, socialist activism, and an incurious media and academia will lead to so much incremental regulation that, in effect, government will be running all rental housing in the country by 2030. Why is this happening? How do housing activists end up believing that the government must intervene dramatically in the housing economy?And whats the real solution to housing inflation?

A leading reason why were skidding toward government control of housing is because housing policy has been inappropriately saddled as the cause and the solution of various social ills. One of the best examples of this addled thinking is the battle over single-family housing. Lately, its in fashion to call single-family zoning racist. There is no doubt that in most American cities, many neighborhoods were deliberately set up to exclude African American families. This is something that is extensively documented by theMapping Prejudice Project, a collaborative effort by the University of Minnesota and Augsburg University.

But ramblers are not racist, people are. And when I talked with a planner in Minneapolis, the objective of their significant zoning changes were not to abolish a typology,but to expand possible housing supply.As Ive also pointed out, zoning not only segregates uses but also people. This is why zoning lent itself to a racist use and to the proliferation of costly commutes from home to work, work to shopping, and between anything and everything people want to do. Its far more accurate to blame zoning pushing apart uses like housing and commercial for climate change than to blame one zone, single-family, for racism. Yet, in this case, the association has stuck.

As Ive also said before,what is racist is the overregulation of housing production because that makes all housing scarce and therefore expensive. When that happens, higher costs disproportionately impact people of color since they are disproportionately in poverty. The real civil rights issue isnt gentrification from housing production or a zone, but local governments that boost equity in single-family homes and raises rents in multifamily housing through onerous regulation; the resulting inflation means money being siphoned from poor peopleinto the accounts of wealthy, and mostly white homeowners. What would help is not abolishing single-family zoning butgetting rid of zoning all together.

The assumption that one government housing policy created something bad like racism then leads to thinking that by government taking action against that policy will lead to fixing that problem. Single-family zones created racist outcomes like segregation, so then abolition of those zones will end racism. We see this in complaints aboutthe ratio of blacks to whites changing in some neighborhoods. This has to be stopped, were told, by limiting new housing in those neighborhoods to stop gentrification. But it turns out, that people move out of neighborhoods for lots of reasons, and redevelopment of older ethnic neighborhoodsis beneficial for everyone.

This thinking in the left about housing applies to multifamily rental housing too. The book Evicted suggests that, Eviction is a cause, not just a condition, of poverty. So a person can be fine at the end of one month, evicted at the end of the next, and then pushed into poverty. It isnt a job loss combined with a big medical bill that leads to lack of payment of rent then eviction; it is the eviction itself that is the cause of poverty. Eviction isnt just one of the results of economic hardship it is the cause of the hardship therefore we shouldnt allow eviction, or tenant screening, or increases in rent. Government can make all the right decisions about where people should live and what they should pay.That will eliminate poverty!

When housing policy causes and solves all problems, then it is easy to see why theNational Economic and Social Rights Initiative says,It is the governments obligation to guarantee that everyone can exercise this right to live in security, peace, and dignity. This right must be provided to all persons irrespective of income or access to economic resources. Establishing housing as a right, like speech, means the government must act to be sure it is protected, something that a market, they argue, cant do. But freighting housing policy this way overpromises and underdelivers.

And keep in mind that socialists want to hand the same government institutions that created racist policies in the first place not just in housing but policing to take control of rental housing. That only makes sense if the socialists control the government.

Perhaps theyd be right about housing policy if somehow the production of housing was beyond the control of the government. In a place where, for example, food production was limited and entirely dependent on the weather, it might make sense to ration food. But that is simply not the case with housing. The production of housing is, ironically, something government can control. The only reason why housing is problematic in the United States is because there isnt enough of it being produced, something that is due to the imposition of limits on producing it by government.

Government can solvehousing problems with housing policy, specifically limiting how much it requires from those who produce and manage housing. Rather than expecting government to own and operate all housing, rationing it to people who need it through a bureaucracy in hopes of curing societys ills, activists should be urging government to do less, and get out of the way of seller and buyer. In those cases where a person truly doesnt have the means to pay rent, then we ought tosubsidize that persons ability to pay rent with cash. In a government manufactured housing crisis stoked by activism, the last thing we need is the government to take over housing.Tomorrow Ill post about how we can stop this.

Read more from the original source:
Prediction For 2030: Government Can Help Housing By Doing Less - Forbes

Progressive (NYSE:PGR) and Kinsale Capital Group (NASDAQ:KNSL) are both finance companies, but which is the better investment? We will contrast the two companies based on the strength of their dividends, institutional ownership, valuation, profitability, earnings, risk and analyst recommendations.

Dividends

Progressive pays an annual dividend of $0.40 per share and has a dividend yield of 0.5%. Kinsale Capital Group pays an annual dividend of $0.32 per share and has a dividend yield of 0.3%. Progressive pays out 9.0% of its earnings in the form of a dividend. Kinsale Capital Group pays out 17.9% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Progressive has increased its dividend for 1 consecutive years and Kinsale Capital Group has increased its dividend for 2 consecutive years. Progressive is clearly the better dividend stock, given its higher yield and lower payout ratio.

Analyst Ratings

This is a summary of recent recommendations for Progressive and Kinsale Capital Group, as reported by MarketBeat.

Progressive presently has a consensus price target of $80.77, indicating a potential upside of 8.78%. Kinsale Capital Group has a consensus price target of $102.00, indicating a potential downside of 3.66%. Given Progressives higher possible upside, equities research analysts plainly believe Progressive is more favorable than Kinsale Capital Group.

Earnings and Valuation

This table compares Progressive and Kinsale Capital Groups gross revenue, earnings per share and valuation.

Progressive has higher revenue and earnings than Kinsale Capital Group. Progressive is trading at a lower price-to-earnings ratio than Kinsale Capital Group, indicating that it is currently the more affordable of the two stocks.

Institutional & Insider Ownership

78.7% of Progressive shares are held by institutional investors. Comparatively, 82.7% of Kinsale Capital Group shares are held by institutional investors. 0.4% of Progressive shares are held by insiders. Comparatively, 8.3% of Kinsale Capital Group shares are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company will outperform the market over the long term.

Profitability

This table compares Progressive and Kinsale Capital Groups net margins, return on equity and return on assets.

Volatility and Risk

Progressive has a beta of 0.64, meaning that its share price is 36% less volatile than the S&P 500. Comparatively, Kinsale Capital Group has a beta of 0.41, meaning that its share price is 59% less volatile than the S&P 500.

Summary

Progressive beats Kinsale Capital Group on 10 of the 17 factors compared between the two stocks.

About Progressive

The Progressive Corporation, through its subsidiaries, provides personal and commercial auto insurance, residential property insurance, and other specialty property-casualty insurance and related services primarily in the United States. Its Personal Lines segment writes insurance for personal autos, and recreational and other vehicles. This segment's products include personal auto insurance; and special lines products, including insurance for motorcycles, ATVs, RVs, watercrafts, and snowmobiles. The company's Commercial Lines segment provides primary liability, physical damage, and other auto-related insurance for autos, vans, pick-up trucks, and dump trucks used by small businesses; tractors, trailers, and straight trucks primarily used by regional general freight and expeditor-type businesses, and non-fleet long-haul operators; dump trucks, log trucks, and garbage trucks used by dirt, sand and gravel, logging, and coal-type businesses; tow trucks and wreckers used in towing services and gas/service station businesses; and non-fleet taxis, black-car services, and airport taxis. Its Property segment provides residential property insurance for homes, condos, manufactured homes, and renters, as well as offers personal umbrella insurance, and primary and excess flood insurance. The company also offers policy issuance and claims adjusting services; home, condominium, renters, and other insurance; and general liability and business owner's policies, and workers' compensation insurance. In addition, it offers reinsurance services. The Progressive Corporation sells its products and services through independent insurance agencies, as well as directly on Internet, and mobile devices, and over the phone. The company was founded in 1937 and is headquartered in Mayfield Village, Ohio.

About Kinsale Capital Group

Kinsale Capital Group, Inc. provides as a casualty and property insurance products in the United States. Its commercial lines offerings include construction, small business, energy, excess and general casualty, life sciences, allied health, health care, commercial property, environmental, public entity, inland marine, and commercial insurance, as well as product, professional, and management liability insurance; and homeowners insurance. The company markets and sells insurance products through a network of independent insurance brokers. Kinsale Capital Group, Inc. was founded in 2009 and is headquartered in Richmond, Virginia.

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Originally posted here:
Contrasting Progressive (NYSE:PGR) and Kinsale Capital Group (NYSE:KNSL) - Riverton Roll

The nation is in the grip of an affordable-housing crisis.

A severe shortage of homes for working-class and low-income families is pushing up house prices and rents across the country, putting homeownership increasingly out of reach for many Americans and making rents so high that it is all but impossible for renters to save. With the presidential election fast approaching, the candidates should explain what they plan to do about it.

Half of families who rent and nearly one-fourth of homeowners pay more than 30% of their monthly income toward their housing costs, a level widely considered unsustainable.

After purchasing essentials, including food, clothing and utilities, the families have little left to cover the cost of health care, bridge the gap during a change in jobs or bear an unforeseen bill of any amount. And forget about saving for retirement or a childs education.

Fueling the rapid rise in rent and house prices is a severe lack of housing supply.

Nationwide, the percent of houses that are vacant has fallen to a more than 35-year low, translating into a shortfall of an estimated 1.6 million new houses.

This gap is increasing by about 300,000 units each year, as builders are putting up close to 1.4 million new dwellings yearly, including single-family houses, apartments and manufactured housing. But the yearly demand for new housing, largely from new households and dwellings needed to replace those lost in natural disasters and to old age, is consistently near 1.7 million units.

The entirety of this shortfall is for low- and middle-priced housing. The cost of constructing houses has risen significantly since the financial crisis and builders have struggled to make the economics work to construct housing that most Americans can afford.

Soaring construction costs have been driven in part by a rise in local government fees and stiffer local zoning restrictions. During the real-estate bust a decade ago, real-estate prices and property-tax revenues evaporated, forcing many local governments to jack up permitting fees to make up the difference.

Add to that often-tight local constraints on where and what one can build, and many of the communities that most desperately need affordable housing have rules in place making that housing almost impossible to provide.

The Trump administrations immigration policies arent helping, as builders cant find the immigrant workers they need, driving up labor costs in the construction trades, particularly in the South and West, where demand for affordable houses is especially strong. Labor shortages in the transportation, distribution and manufacturing industries are also making home building more costly. And the cost of homebuilding materials has risen sharply, driven in significant part by the trade war and higher tariffs on imported steel, aluminum and other building materials.

To cover these costs, builders have been focused on putting up houses in the top end of the market where they can still make a profit. The country has a glut of luxury apartments, high-end condos and large residences, and a dearth of workforce and affordable housing.

As a result, in recent years prices for the lowest-priced houses have grown consistently twice as fast as prices for the highest-priced houses and exceed what many families of modest means can pay.

This wouldnt be such a problem if wages kept up. But they havent. Recent census data show that while the median cost of rent and utilities is up 13% over the past nearly 20 years, median income is up less than 1 percent (both inflation-adjusted).

The widening gap between the growth of wages and the cost of housing has put homeownership out of reach for more and more families, particularly families of color. The home-ownership rate for African Americans has fallen to a half-century low.

This in turn is exacerbating the growing wealth gap. In generations past, the primary way lower- and middle-income households were able to build wealth was by owning a home.

More than investing in the stock market, more even than investing in their 401(k) and other retirement accounts, the middle class built wealth through the simple act of paying their monthly mortgage. But with fewer families able to buy a house, and more renters spending so much of their income just to keep a roof over their heads, housing is increasingly more of a drain than a source of wealth building.

The affordability crisis is also undermining labor mobility, another pillar of the American economy. Unlike in much of the rest of the world, Americans have historically been willing and able to move where there is economic opportunity. In todays economy, the best job opportunities are often in the nations big urban areas, but this is also where housing is least affordable.

Many are thus faced with the Hobsons choice of long commutes, unaffordable housing or forgoing good jobs altogether. Paralyzed by this, Americans arent moving as much, and our economy is diminished as a result.

And then it isnt hard to connect the dots between the affordability crisis and the mounting problem of homelessness. Homelessness is a complex problem with many causes, but it isnt surprising that the big cities in California and the Northeast have among the least-affordable housing markets and the largest number of homeless.

An increasing number of communities, including ones in California, Oregon and New York, are responding to the affordability crisis by imposing rent controls. At best this is a short-term financial salve for struggling renters. At worst it may exacerbate the problem, by limiting the returns to builders and their incentive to construct more dwellings.

What is needed instead are policies that reduce the cost of building houses more Americans can afford. Most obvious is beefing up the tried-and-true programs dedicated to reducing the cost of development, including the Low-Income Housing Tax Credit and the New Market Tax Credit. These tax breaks have proved effective in addressing precisely the supply problem at issue. But instead of expanding them, last years tax cut reduced their value to developers.

The new Opportunity Zone tax credit, which provides tax incentives for investments in distressed neighborhoods, could also have a meaningful impact on the construction of affordable housing. But officials at all levels of government must do more to ensure that private investors target the neighborhoods that truly need the help.

Tax incentives alone wont be enough, however. The Housing Trust Fund and Capital Magnet Fund, which were established in the midst of the financial crisis to finance more affordable housing, should be scaled up. The Housing Trust Fund provides money to state housing authorities for the development of affordable rental units.

Housing authorities have flexibility in allocating these funds, because they are often in the position to assess how best to address their states affordability challenges. The Capital Magnet Fund provides financial support to Community Development Financial Institutions and other nonprofit developers for increasing the supply of affordable housing.

Both of these programs have the infrastructure and flexibility necessary to scale up and get affordable housing where its most needed.

Finally, communities should be given strong incentives to ease overly restrictive zoning and lower high fees for building houses. Critical federal funds for roads and other infrastructure should be tied to how well communities are addressing their needs for workforce and affordable housing. Community development block grants could also be tied to such metrics.

However, policies to increase the supply of housing will take time to reap benefits. In the meantime, we need to ease the financial pressure on those hit hardest by the affordability crisis.

This means fully funding the nations primary federal housing voucher program, as currently, three in four families eligible for such rental vouchers cant receive them. It would also make sense to increase the value of the vouchers to provide low-income families the chance to move to low-poverty, higher-opportunity neighborhoods. Doing so has been shown to boost lifetime earnings and open a window to escape poverty.

More than a decade after the housing market took down the economy, the nation finds itself in the throes of a different kind of housing crisis. Its effects are subtler, and perhaps for this reason it has gone largely ignored.

But the nation must address this housing crisis in earnest, lest an entire generation of families whose parents found in housing a critical path to building wealth, find it blocking the way.

Some of the presidential candidates have put forth plans to address the affordable-housing crisis. Indeed, virtually every candidate putting forward a plan has taken on the supply side with admirable muscle. But none have put housing policy at the top of their political agendas.

Given the depth of the affordable-housing crisis and the existence of good, practical ideas to address it, it is time for the candidates to give it the attention it deserves.

Jared Bernstein, chief economist to former Vice President Joe Biden, is a senior fellow at the Center on Budget and Policy Priorities. Jim Parrott is a nonresident fellow at the Urban Institute and owner of Falling Creek Advisors. Mark Zandi is chief economist at Moodys Analytics.

Excerpt from:
The conundrum that affordable housing poses for the nation - Seattle Times

Mobile homes appreciate at rates on par with site-built homes.

Most people think mobile homes cannot be a solid investment because they are simply too easy to acquire. They depreciate, right? In fact, as someone who has fix and flipped more than 500 units, I have had other investors tell me that they dont deal with trailer trash. Remember the adage: It is the man with a little knowledge who feels he knows everything and the man with a lot of knowledge who realizes how little he actually knows.

Long has been the belief that mobile homes depreciate. For those who think there is an appreciation, they believe it is at a drastically slower rate than the site builds. They also believe they only appreciate if they are attached to land.

In researching the up-to-date data released from the Federal Housing Finance Agency and disseminated by the Urban Institute, this assumption is finally challenged and ultimately thrown out. In fact, the opposite is true, and this could mean major changes regarding the affordable housing crisis plaguing the nation. The index for home price on manufactured and mobile homes is growing at an average rate of 3.4 percent annually. What about site-built homes? They were growing at an annual rate of 3.8 percent. However, in the last few years, the prices of manufactured homes and mobile homes increased faster than that of traditional housing/properties.

One of the reasons these trends have been so misleading is that these houses arent as present in areas of the United States where the housing market recovery on a whole was more noticeable. These houses are more likely to be found in areas where recovery from the housing crisis was diminutive. California, for example, contains more than 17 percent of the entire U.S. housing market. Yet, in looking at the number of units shipped, only four percent of the manufactured housing market is represented in California.

Headline areas those featured for having had a noteworthy boom from the housing market crash simply arent areas that mobile homes have occupied. This unintentionally excludes their rise, leaving them out of the picture to those who take news at face value and make assumptions without digging deeper.

When comparing Texas, North Carolina, Louisiana, Florida, and Alabama to California, these states encompass 41 percent of the market for manufactured housing, but they have seen price appreciation increase at a slower rate than it has on average nationally. This is area-based. Not home-based. And that makes a big difference. We simply arent comparing apples to apples.

To learn more about Mobile Home Millions, visit mobilehomemillions.com.

Link:
A Solid Investment - Think Realty

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Global Manufactured Housing Market 2020 Growth, Trend, Size, Share, Analysis and Forecast to 2025 - Instanews247

While any presidential election year figures to be heavy on political talk, this year, many commercial real estate industry titans believe politics will dominate the commercial real estate conversation, far beyond the battle for the White House.

The United States is already in a contentious election cycle, and the House of Representatives has already voted to impeach President Donald Trump. Unpopular policies inreal estate circles, including rent control,vacancy fees and inclusionary zoning, are gaining steam in the countrys biggest cities.

But some say commercial real estate will shrug off all the political nastiness as it continues to chug along. After all, the industry has already overcomethe omens of potential economic recession last year, including theinverted yield curve when short-term bonds offered better returns than the 10-year Treasury a moderating gross domestic productand a decline in business spending.

The punchline is we have been studying these types of events for over 50 years. These types of geopolitical events don't have any material impact on the economy over a length of time, CBRE Research Chairman Spencer Levy said. People overreact to it.

But if theres anything real estate investors hate, its uncertainty. And the political uncertainty at play has caused many in the market to hold off on making major capital decisions, calculating that it is too risky to make any big moves.

I think the elections could, with so much divide in the country ... people are just so mad about it, saidMichael Bull, the founder of brokerageBull Realtyand host of the radio program Americas Commercial Real Estate Show. That could slow down some expansion and some growth.

Bisnow/Jon Banister

CBRE Americas Research Chairman Spencer Levy

Where commercial real estate will feel most of the effects of politics, though, will be on the local level. Some areas of the country have already seen agrassroots backlash againstgenerous tax incentives and abatements for private developments.

I do [believe] we'll see smaller incentives or incentives that go away altogether for big projects that truly don't impact disadvantaged areas, OA Developmentpartner Brian Granath said.

Peebles Corp.founder Don Peebles also said developers may need to expect to have less political persuasion on a local level because of not only a growing backlash against municipal tax largess, but also the widening disparities with income in many cities. Plus, politicians are harnessing the power of social media to raise campaign funding from individuals instead of relying on large donations from business leaders and developers.

The influence on the political process the industry has had for many decades is diminishing and very rapidly, Peebles said. More [backlash] is coming and the developers aren't going to even be able to fight it off.

Politics is the connective threadfor many of Bisnow's 2020 commercial real estate predictions, after interviews with nearly a dozen national experts:

1. Rent Control Becomes MorePrevalent

Three states instituted rent control measures on apartmentslast year, and a host of major cities are forcing developers through zoning regulations or as part of an incentive package to hold rents down on some of their new units.

While many experts contend that the answer to affordable housing is to build more and otherwise get out of the way, the push for regulated rents will only gain momentum in the new year, especially aswhen many municipal officials are up for election, according to CBRE's 2020 outlook.

It's a politically charged topic, Conway said of housing affordability. "So where do you get the most immediate relief? Rent control."

Avison Youngprincipal Kirk Rich who was recentlytapped by Atlanta Mayor Keisha Lance Bottoms to serve on the Atlanta Housing Authority's board of commissioners said governments are compelled to grapple with ways to curb housing cost escalations near schools and jobs in urban centers.

The pressure surrounding any affordable housing within any major urban market is increasing and troubling, Rich said. We have priced-out workforces as well as other diverse communities that deserve access to housing close to jobs and schools and other things most others take for granted.

Already, apartment investors are shying away from New York City and certain places in California due to rent control, pushing investors to cities with looser regulations, Bull said. And developers may be strapped from building more housing in cities where steeper affordability requirements are in place as well.

[Government officials] are trying to get elected and trying to make everyone happy. Mostly, they're not real estate experts, he said.

Multifamily construction will jump in 2020.

2. Multifamily Construction Rebounds

Apartment developers will likely continue to ride the jet stream of optimism that younger millennials and even baby boomers are more inclined torent overbuying homes.

Developers are expected to unleash 330,000 new apartment units in 2020, up from 303,000 this past year, according toYardi MatrixSenior Research Analyst Tara Jeffcoat.But this time, developers will likely outstrip demand.

Apartment demand is projected to be 240,000 units, a 20% drop from 2019, according to CBRE. That would shrink rent growth to 2.4% and elevate the vacancy rate to 4.5%, still below the historical average, CBRE reported.

TranswesternEastern Region President Bruce Ford, however said the fresh stock of college graduates may help boost apartment rent rolls.

I think what we're going to witness in the April to June time frame, with this graduating class across the country many of those students will have already secured jobs before they entered the market to rent and lease their housing, Ford said.

3. ModularConstructionBecomes More Popular

Rising construction and land costs and a continued labor crunch will have another effect other than rising development costs in 2020: development innovation.

The growing need for affordability in housing especially will have more developers using modular construction and other prefabricated methods to building apartments, hotels, low-rise offices and even some retail, Conway said. And in an effort to boost housing stock, more developers may be willing to chance manufactured housing, where building costs are substantially lower.

Verified Market Research predictsthat the total value of modular construction will be $131.9B in 2020 and more than $181B by 2026.

I think we're going to see a lot of innovation in affordable housing, Conway said."With modular, it's not just a residential story, it's a commercial story."

4. Office Demand WillSlow Down

Even with the debacle thatbecame the WeWork meltdown late last year, few see any major changes to office demand across the U.S.

I think the good news is our headline for 2020 from a commercial real estate perspective, it's going to be a good year, similar in many ways to 2019, CBRE's Levy said.

In its 2020 outlook, CBRE is projecting companies will absorb 20M SF across the country, well down from the total projection this year of 37M SF. As of the third quarter, companies leased 29.6M SF more than they emptied in the U.S., according to Newmark Knight Frank.

CBRE is projecting some 51M SF of new office completions this year, down from 59M SF in 2019.

Technology companies shouldcontinue to be the force behind the majority of the leasing activity, according to CBRE. As has been the story for much of this past decade, the central business districts in major cities are expected to keep winningthe majority of corporate America's office attention and demand.

But there will be a shift that will accelerate next year: Some companies begin to eye smaller cities that mimic the amenities and walkability seen in larger urban cores, Levy said.

We think that the reurbanization in the U.S. and globally will continue into the next decade, saidULIexecutive director of sustainability and economic performance Billy Grayson.

5. Industrial To Stay Strong

Industrial real estate should continue on its hot streak again in 2020, thanks in large part to the continued retail evolution to online shopping. Levy said that the question of whether the U.S. is finally at the top of its hot industrial market has been asked repeatedly for years, and is being asked again this year.

The short answer is, 'Not yet,' Levy said.

Still, developer exuberance may race ahead of actual tenant demand. CBRE predicts that developers may unleash upward of 30M SF more industrial space than actual demand in 2020. But new supply addressing niche needs, such as cold storage and last-mile distribution, should do well regardless, Levy said.

E-commerce demand for last-mile facilities of 150K SF or less will accelerate in 2020 as companies race to offer same-day delivery to customers, with continued rent appreciation as well, CBRE's report stated.

I don't think industrial is going to slow down for 2020. I think everyone is still pretty much in on industrial, Jeffcoat said.

Courtesy of Transwestern

Transwestern Eastern Regional President Bruce Ford

Transwestern's Ford said there is one particular potential for headwinds in industrial, namely the continued waging of the trade war, not only against China, but even the push to renegotiate the North American Free Trade Agreement with Mexico and Canada.

What does trade do in terms of an economic slowdown in terms of manufacturing and agriculture? That's the primary concern, Ford said.

6. Capital Will Flood U.S. CRE

In a flight for yield and investment-grade quality, commercial real estate investors will continue to flock into the U.S., warts and all, thanks to the spread of negative interest rates throughout the globe.

While yields on U.S. commercial real estate continue to get squeezed, even a return of 4% to 5% is more appealing than staying in some European banks where storing money in an account actually costs customers.

I think that the United States, and by extension the United Kingdom, are the two cleanest dirty shirts in the laundry, Levy said.

Granath said he expects the Federal Reserveto cut rates one more time this year, but avoid dipping into negative territory.

I think they lower rates one more time and I think we're entering into dangerous territory ... cut to a point where if we do enter a recession, there's nothing we can do left to help the markets," he said. "Because entering negative would be ... a sign that the markets are worse off than they actually are."

More here:
Predicting 2020: Politics, From The Election To Rent Control, Will Loom Over CRE - Bisnow

By Craig SwansonTrustee, Keep Sedona Beautiful

Sedona AZ (January 3, 2020) Keep Sedona Beautiful urges you to contact Yavapai County to make your feelings known about the proposed Spring Creek Ranch development, if you havent yet done so.

On Dec 19, Yavapai County Planning and Zoning narrowly voted to recommend against the Spring Creek Ranch mega-development, but the final determination is up to the County Supervisors.

At the Planning and Zoning hearing, much was made of the fact that only 15 residents wrote in to the County supporting the proposal, while 245 wrote letters or email opposing it. In response, the developer stated that they will be marshaling more support prior to the Supervisors meeting.

Those Supervisors will meet on Wednesday Jan 15 at 9:00 AM at 10 S 6th Street in Cottonwood to hear this matter and decide on whether or not to allow 282 acres along Spring Creek to be rezoned and developed.

Rezoning to Planned Area Development (PAD) would allow the developer to put 1,900 Manufactured Homes, 400 RV pads, 400 apartment units and a 200 unit Assisted Living facility on either side of Spring Creek. You can learn more about this proposal byCLICKING HERE.

If you havent yet made your voice heard, please write or email County Development Services, and write or email each of the County Supervisors.

In your email and/or letter, youmustinclude your name and address, or the County will not consider it.

YavapaiCounty Development Services:

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Accessory dwelling units (ADUs) should get a new lease on life in 2020 due to a heavy push for affordable housing perfectly timed with state regulation and advancements in construction technology.

The ADU housing approach is a fast and creative way to address affordable housing. ADUs, which have been around for years, go by a variety of names: casitas, pool homes, in-law suites, granny flats, guesthouses and secondary dwelling units, among them.

They are getting more attention amid the housing crisis as a way to leverage existing city infrastructure preventing urban sprawl and costly system expansions. Construction of ADUs creates jobs as well as additional tax revenue. And since ADUs are typically smaller than a traditional home, they are less costly to build. With so many wins, why havent ADUs gone viral?

Interior of Los Angeles ADU courtesy of Dossier Capital. Converted garage interior post-renovation.

Developers have another name for NIMBYs, or the not-in-my-backyard crowds: theyre BANANAs. The build-absolutely-nothing-anywhere-near-anything movement is real, loud, costly and frustrating for states attempting to address affordable housing. When affordable housing projects land at a city, unhappy citizens protest the elected officials they put in office and projects get nixed.

But, NIMBYs cant take all the credit. Berkeleys Terner Center for Housing Innovation produced a report, Residential Impact Fees in California, and found some cities in California were charging upward of $50,000 in impact fees for accessory dwelling units. This is particularly troublesome since ADUs range from 350-1,200 square feet and are placed on existing sites with existing infrastructure. Exorbitant impact, park, utility and school fees are just a few ways cities are stifling the ADU movement in California which has been pushing ADUs since 2017.

In October, the city of Los Angeles released findings on its $1.2 billion affordable housing bond (Proposition HHH) showing since 2016, of the 6,000 housing units in process, the average per unit cost is over $500,000. The mouth-dropping cost combined with news of a 16% increase in LAs homeless population to 36,000 means LA and other California cities need other options.

October 2019 was one for the ADU history books. California Gov. Gavin Newsom signed 18 real estate related bills including five on ADUs making good on his promise to address Californias serious lack of construction and shortage of affordable housing.

Californias handful of bills addressing ADU issues were far reaching and took away local control from city governments, effectively eliminating NIMBY pushback.

Updates necessitate that cities standardize size requirements, update set back rules, approve permits within 60 days, clarify parking rules and launch a five-year owner-occupancy moratorium. It also drastically cuts impact fees. The goal is to make ADUs cheaper, faster and easier to get through the building-approval process.

Since the state is allowing and recommending ADUs count toward affordable housing numbers which only a small fraction of cities in California are meeting we can expect to measure the impact starting in 2021 after a year of tracking ADU numbers.

Thankfully, two technology trends are gaining traction that will address two key issues for the ADU market: skilled labor shortages and construction costs.

Converted garage in Los Angeles into a one-bedroom ADU around 500 square feet. View from the ... [+] backdoor of main house.

According to the NAHB/Wells Fargo Housing Market Index in 2019, the cost and availability of skilled labor was one of the top challenges builders faced in 2018 and expected to face in 2019. It will likely receive top billing again in 2020. Thats where prefab construction comes in.

Not to be confused with manufactured homes, prefabricated homes are also built in an indoor plant and shipped and erected on site, however, they fall under the same code as stick-build homes. The smaller size of ADUs fits in perfectly with prefab manufacturing and companies are taking notice, including the likes of Amazon.

Amazon announced an investment into Plant Prefab via the Alexa Fund in 2018. Plant Prefab positions itself as a fully integrated architecture firm able to design, build and install the prefab home of your dreams. From the 406 square foot AD1 model to the affordable multifamily Nest model (not to be confused with Alphabets Nest brand), Plant Prefab is making waves in the affordable housing space.

Other prefab manufacturers are also targeting the ADU market including prefabADU, adobu and California Modulars to name a few.

Prefab manufacturers will get additional competition via 3D printed homes in the next few years. Apis Cor, Mighty Buildings, Haus.me and ICON are just a handful of 3D printed home manufacturers. A select few are specifically targeting the affordable housing space.

In 2018, ICON built a 350 square foot home in 48 hours with the printed structure costing $10,000. ICONs stated goal is getting that cost to $4,000. Apis Cor alerted Facebook followers in October to expect news on affordable housing projects in California and Louisiana. Theyve partnered with the Housing Trust Fund of Santa Barbara County to create a one-story affordable home prototype.

Prefabricated and 3D printed home technology are gaining momentum at a time when skilled labor and affordable housing shortages are forcing state legislators to look at all options. If California successfully pushes ADUs into the mainstream, other states will follow. 2020 will likely be the year of the ADU.

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2020: The Year Of The ADU - Forbes

Multifamily development presents a significant gap. The U.S. needs to build an average of 328,000 new units every year through 2030, according to the National Multifamily Housing Council. Yet the nation has produced that many apartments only once since 1989. Major tech companies such as Apple, Microsoft, Facebook and Google have collectively pledged billions for affordable housing initiatives on the West Coast, but that commitment addresses only one aspect of a national crisis.

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To explore the causes and potential solutions of this critical issue, Multi-Housing News invited four multifamily leaders to participate in a roundtable: Christopher Ptomey, executive director of the Terwilliger Center for Housing at the Urban Land Institute; Inna Khidekel, partner at Bridge Investment Group; Jeffery Hayward, executive vice president & head of multifamily at Fannie Mae and Richard Burns, president & CEO of The NHP Foundation.

What do you see as the major threats to the affordable housing supply?

Ptomey: The major challenge is that in many areas of the country you see household formation and job creation at a faster rate than the housing that is being produced. Since we have substantial shortages, supply continuing to lag and not meeting demand forces prices to go higher and higher. Getting cities to plan to produce the amount of housing they need is a continuing challenge and a big driver of challenge in many parts of the country. In many higher-cost cities, a need to preserve any affordable housing that is currently there is a challenge, as well. Having sufficient production to meet demand is most important. Needs to be forward looking.

Khidekel: There are a lot of structural issues prohibiting supply. The cost of construction is up around 81 percent this cycle relative to the last. Class B construction has declined from 61 percent to less than 20 percent of new supply. There is an oversupply on the high end of the housing spectrum, despite the fact that over two thirds of the U.S. workforce earns under 80 percent of the Area Median Income. (Meanwhile,) 96 percent of whats being built requires an income of $75,000 annually.

Hayward: The first threat is that there wont be enough apartments for people of modest (means). Everything getting built is Class A, high-rent, in major cities. If youre (willing) to pay high rents, youll have an apartment, but (who) is left behind is the local (firefighter), barber, cook, police officer. For them, there are not as many apartments.

Part of that is (the combination of) things happening in the marketplace: the three Ls. First land is really expensive. The cost of labor is the next issue, where there isnt an ample supply of labor and the labor in place is aging. Last thing is lawwhat it takes to get something new built out of the ground. We have to solve those three problems. There are programs in place trying, but thats not for the middle income. There isnt a place for them, and thats the biggest threat.

Burns: A rise in interest rates. In September, we saw overnight short-term rates briefly spike to over 10 percent. This was due to a temporary lack of liquidity and has since been addressed by the Federal Reserve.

Diminished supply of soft money; most affordable housing transactions have multiple sources of funds in the capital stack. Failure of Congress to pass all or part of the Affordable Housing Tax Credit Improvement Act; the bill would expand the housing credit by 50 percent and increase existing incentives to encourage developers to build rental homes affordable to extremely low-income households and to families in underserved rural and tribal communities.

Lastly, new Community Reinvestment Act regulations that affect the amount of capital available for preservation and development. Because bank investors in Low Income Housing transactions can receive the added benefit of meeting their obligations, they will pay a premium for these CRA area LIHTC credits and add much-needed equity to the sources of funds. Any effort to relax the CRA standards would tend to evaporate the premium banks pay for the CRA credits.

What encouraging signs of progress do you see in the private and public sectors?

Ptomey: I think whats most encouraging in the public sector is the level of attention housing is getting these days, (from) mayors and city council members, even in the recent Democratic (presidential candidate) debates. It certainly hasnt been an issue that got attention in the past. Its encouraging to discuss it more, but whats behind that is a larger challenge. Public policy changes over time will address these housing needs, like zoning changes. From a development perspective, we see them adjusting to provide product at a lower price point to repair the housing ladder.

Burns: There is a greater interest by institutional investors in affordable housing. For example, technology companies Apple, Google and Facebook have each announced large financial commitments to expand the inventory of affordable housing by direct investment outside of making LIHTC investments. (Another sign is) renewed allocations for affordable housing at Fannie & Freddie. To ensure a strong focus on affordable housing and traditionally underserved markets, FHFA directed that at least 37.5 percent of the Fannie and Freddie multifamily business be mission-driven, affordable housing. More emphasis on health and housingsome truly encouraging and positive steps are that major businesses and healthcare providers such as Kaiser (Permanente) and UnitedHealthcare are eager to help provide additional housing by providing capital apart from investing in LIHTC. These are most welcome investments as they may pair well with our usual capital sources to expand and grow the housing stock.

What more needs to be done?

Khidekel: There needs to be more institutional equity capital. There are lots of lending solutions, like the Community Development Financial Institutions and nonprofits stepping in to provide incentives, but thats focused on the lowest end of the population from an income perspective. The biggest need is in the missing middle. We need more focus on the preservation and rehabilitation of housing, which is the bread and butter of the U.S. workforce. Lastly, we need more capital focused on this space, as opposed to debt.

Hayward: Im a big believer in public-private partnerships. Lets deal with major cities, with more cooperation between local governments and business. If cities can think about costs of land and get that out of the way so developers can make more units, they can still make a profit. For the existing stock, its trying to stave off existing stock from obsolescence. Owners need to rehab properties to keep the supply online. More owners need to do this, and they have to do it in a green way. Be cognizant of energy savings and conserving water to keep costs down so rents dont go high.

Are there currently significant incentives for private developers to build and preserve affordable housing?

Ptomey: I dont know about incentives. There is opportunity in building affordable and workforce housing right now. What weve seen is diminishing returns on luxury in certain parts of the country, but you wont get same level of return if building affordable/workforce.

Khidekel: No. When you just provide one incentive but not others for developers, its mathematically impossible to make that housing work. Opportunity zone legislation hasnt done anything to help the market. When there is affordable associated, its a small component, usually under 30 percent. Its so hard and expensive to build today that you cant make the numbers work.

Hayward: The most successful is the LIHTC program. You get the benefit of a tax code. Some of the other things are more local, such as states issuing bonds, but in my view its all about tackling the three Ls (land, labor and law).

Burns: If were considering the incentives for non-LIHTC private developer, these are presently limited only to economic incentives. In the affordable housing space, we automatically default to 60 percent of the Area Median Income as affordable as thats where the incentive lies. A private, non-LIHTC developer might do a fantastic job of providing affordable housing by renovating a Class C apartment and renting it to tenants at or below 60 percent of AMI without ever looking at the maximum LIHTC rents.

Apple is the latest in a series of giant tech companies that have made a major financial commitment to affordable housing. Do you think these private sector initiatives make a difference?

Ptomey: I think well see more in the future as long as there is the substantial undersupply we see today. Companies want to ensure employees have access to adequate housing. Its helpful to a company to retain its workforce, and if you get to benefit from that, then its great at the household level. But unfortunately, the scale of the affordability challenge right now is (such) that these investments wont make a dent in the overall (deficit). Its a great impact, but at the end of the day policies need to be in place, paperwork needs to be done. If regulations are not in place to enable investments to have the greatest impact, we wont have a good opportunity.

Khidekel: We will see more of it happening. Its promising because its adding appropriate attention to the crisis. There needs to be recognition in order that having a sustainable business is having a sustainable workforce. In California, there is a huge issue. The problem with this is 1) its localized to specific areas for them, which is not a scalable solution; and 2) in order to make this work, theyd need to partner with nonprofits and municipalities to focus on the lowest segment, but the most at-risk workforce wont qualify for that type of housing.

What are some of the out-of-the-box solutions that you would like to see the private and public sectors pursue?

Ptomey: Not sure there are any approaches at this point. Where progress can be made is where citizens and developers can address (the obstacles) blocking what makes these properties affordable. Enable more housing on available land, looking at ways to reduce construction costs, manufacturing products, get economies of scale at work, addressing labor costs, anywhere you can get technological changes to reduce the cost around the edges will be great. You have to really look at a policy level: What is the entitlement process, can it be compressed, being able to know quicker if you can make that development or not.

Khidekel: One is construction methodologies. The U.S. is behind Europe and Asia for modular construction. Materials are either constructed in Poland or China, but less than 4 percent (of those materials) are modular. We need to take these concepts and apply them to the problem. Manufactured housing is another potential solution. The difficulty is zoning and entitlement, but there are ways to partner with local governments to create more.

Burns: Crafting creative public-private partnerships to shoulder the affordable housing burden is a solution rooted in past success and primed for the future. The industry currently benefits from the capital provided by a number of institutional investors. We recently partnered with Kingsley Associates to interview decision-makers in institutional investment on barriers to increased investment in affordable housing and some possible solutions. Takeaways included the discussion around government barriers providing the industry with an opportunity to work with top housing advocacy groups to lobby Congress to simplify the rules and look for a different set of benefits to encourage more pension fund investment; the affordable housing ecosystem needs to develop more tools to communicate accurate information and create more opportunities to present the data; those in affordable housing need to use creative and thoughtful storytellingin addition to financial returnsto engage investors; less restrictive zoning, and zoning bonuses and tax abatements for meaningful commitment to affordable housing development; and (fewer) delays getting permits and approvals.

How will rent control impact the future of affordable housing? Will it help or hurt the situation?

Khidekel: It hurts affordable housing because it reduces the incentive to do business in that area for developers and general investors, (which focus) on income levels that are too high relative to where the biggest help needs to be. Rather than helping population at risk, it forces real estate participants to exit the market. Its putting people out of business in the industry.

Burns: I think it will hurt. Under rent control, many fewer units will be built increasing, the demand for apartments, with more Class B properties being upgraded to get higher rents.

What are some solutions for affordable senior housing?

Ptomey: There are a variety of things. ULIs Emerging Trends looked at senior housing, and one (finding) is that many more Baby Boomers want to age in place, so there are a variety of ways to help make that happen. One (solution) suggested was accessory apartments. If youre living in a larger home, and at some point you want to make part of it into an apartment, you could have someone live in the home with you if you need care, or rent out the space for additional (income). A certain number (of seniors) do want to downsize and that (creates) some competition with younger, growing families looking for bigger homes. Having the missing middle typology is also messing with the need.

Hayward: Two things. 1) The LIHTC program has some age restrictions for developments. Looking at that would be a good idea for single-family seniors wanting to stay in their homes. 2) There are a ton of seniors buildings out there, but they are not part of developments where mostly seniors live. They should be more cognizant of how those buildings are financed and help with that.

Burns: HUD needs to reinstate payments for services to seniors. For (Section 202 properties), the rents must be escalated to current market rates to support preservation.

Read the CPE-MHN Guide to 2020.

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Housing Leaders on Solutions for the Missing Middle - Multi-Housing News

Progressive (NYSE:PGR) and Maiden (NASDAQ:MHLD) are both finance companies, but which is the superior investment? We will contrast the two companies based on the strength of their dividends, risk, valuation, analyst recommendations, profitability, institutional ownership and earnings.

Institutional & Insider Ownership

78.6% of Progressive shares are held by institutional investors. Comparatively, 29.9% of Maiden shares are held by institutional investors. 0.4% of Progressive shares are held by company insiders. Comparatively, 11.2% of Maiden shares are held by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock will outperform the market over the long term.

This table compares Progressive and Maidens top-line revenue, earnings per share (EPS) and valuation.

Progressive has higher revenue and earnings than Maiden.

Analyst Ratings

This is a breakdown of current recommendations and price targets for Progressive and Maiden, as reported by MarketBeat.

Progressive presently has a consensus target price of $81.17, indicating a potential upside of 12.50%. Maiden has a consensus target price of $1.00, indicating a potential upside of 23.02%. Given Maidens higher possible upside, analysts plainly believe Maiden is more favorable than Progressive.

Profitability

This table compares Progressive and Maidens net margins, return on equity and return on assets.

Volatility and Risk

Progressive has a beta of 0.66, suggesting that its share price is 34% less volatile than the S&P 500. Comparatively, Maiden has a beta of 0.92, suggesting that its share price is 8% less volatile than the S&P 500.

Summary

Progressive beats Maiden on 9 of the 12 factors compared between the two stocks.

Progressive Company Profile

The Progressive Corporation, through its subsidiaries, provides personal and commercial auto insurance, residential property insurance, and other specialty property-casualty insurance and related services primarily in the United States. Its Personal Lines segment writes insurance for personal autos, and recreational and other vehicles. This segment's products include personal auto insurance; and special lines products, including insurance for motorcycles, ATVs, RVs, watercrafts, and snowmobiles. The company's Commercial Lines segment provides primary liability, physical damage, and other auto-related insurance for autos, vans, pick-up trucks, and dump trucks used by small businesses; tractors, trailers, and straight trucks primarily used by regional general freight and expeditor-type businesses, and non-fleet long-haul operators; dump trucks, log trucks, and garbage trucks used by dirt, sand and gravel, logging, and coal-type businesses; tow trucks and wreckers used in towing services and gas/service station businesses; and non-fleet taxis, black-car services, and airport taxis. Its Property segment provides residential property insurance for homes, condos, manufactured homes, and renters, as well as offers personal umbrella insurance, and primary and excess flood insurance. The company also offers policy issuance and claims adjusting services; home, condominium, renters, and other insurance; and general liability and business owner's policies, and workers' compensation insurance. In addition, it offers reinsurance services. The Progressive Corporation sells its products and services through independent insurance agencies, as well as directly on Internet, and mobile devices, and over the phone. The company was founded in 1937 and is headquartered in Mayfield Village, Ohio.

Maiden Company Profile

Maiden Holdings, Ltd., through its subsidiaries, provides reinsurance solutions to regional and specialty insurers primarily in Europe and internationally. The company writes treaties on a quota share basis and excess of loss basis. It also offers auto and credit life insurance products through its insurer partners to retail clients. Maiden Holdings, Ltd. was founded in 2007 and is headquartered in Pembroke, Bermuda.

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Maiden (NASDAQ:MHLD) and Progressive (NASDAQ:PGR) Head to Head Survey - Slater Sentinel