Hawaii affordable housing guidelines could include $1 million homes – ET RealEstate

HONOLULU: Affordable housing guidelines set by a Hawaii state agency could rate two-bedroom homes costing $1 million as affordable for some households eligible for government-subsidized housing.

The guidelines established by the Hawaii Housing Finance and Development Corp. were aimed at helping developers produce affordable housing, the Honolulu Star-Advertiser reported Sunday.

There is little likelihood developers could produce and sell $1 million homes to satisfy an affordable-housing condition under state and county requirements typically tied to projects receiving zoning changes, development bonuses and fee waivers.

“These formulas get to be so crazy that they get to be above market price,” said Kenna StormoGipson, an analyst with the Hawaii Budget and Policy Center. “Their guidelines clearly need revamping.”

Household income, family size and interest rates are primarily used to compile annual housing affordability tables.

Similar formulas are used by Honolulu and the Hawaii Community Development Authority, a state agency regulating development in Honolulu’s Kakaako neighborhood, where some of Oahu’s priciest condominium towers have been built.

“The pricing of these homes is really based on what buyers value them at with all of the restrictions that are placed on them,” said Race Randle of Howard Hughes Corp., the developer of Ward Village in Kakaako.

The Hawaii Housing Finance and Development Corp. begins with federal data for Honolulu’s median household income, which was $101,600 last year. Median income is the figure at which half of all households earn more and half earn less.

The calculation is adjusted so median income results are defined by family size. The corporation’s rules allow households earning as much as 140% of the median income to qualify for subsidized housing. The limit equates to $123,480 for a single person and $176,260 for a family of four.

Under current guidelines, families of four in Honolulu earning 140% of the median income can qualify for subsidized housing priced as high as $1,026,800.

During last year’s state legislative session, then-Sen. Laura Thielen and Sen. Sharon Moriwaki, both Democrats, and Sen. Kurt Fevella, a Republican, introduced a resolution calling for the agency to review and compare its affordable home price methodology against other places with high housing costs, such as San Francisco.

The resolution, which called for the agency to report analysis results to the Legislature before this year’s session, did not receive a hearing and was not adopted.

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Dropbox to sublease some offices in transition to remote working – ET RealEstate

BENGALURU: Dropbox Inc said on Thursday it would sublease some of its office spaces as the file hosting service transitions to a remote working model.

The firm, which has a sprawling warehouse-styled office building in San Francisco‘s South of Market neighborhood, is one of the many technology companies to make work from home a permanent arrangement for employees after the trend rose during coronavirus lockdowns, reducing the need for large offices.

“As part of the ‘Virtual First’ strategy, we will retain a portion of our office space to be used for team collaboration and a portion will be marketed for sublease,” Dropbox said.

The firm, which now considers remote work as the primary experience for all employees, laid off 11% of its workforce last month saying it now needs fewer resources.

Social networking companies Twitter Inc and Facebook Inc and payments firm Square Inc also let people work from home permanently.

Facebook Chief Executive Mark Zuckerberg had said that he expects half the company’s workforce would eventually do their jobs outside offices in five to 10 years.

Dropbox, which had only three profitable quarters as a public company, posted a bigger loss for the fourth quarter, hit by a one-time impairment charge of nearly $400 million related to its real estate assets.

The company’s net loss widened to $345.8 million in the three months ended Dec. 31, from $6.6 million last year.

However, on an adjusted basis, the company earned 28 cents per share, above the average analyst estimate of 24 cents, according to Refinitiv IBES.

The beat was helped by the company’s quarterly revenue crossing the half billion mark for the first time on over a million new paying user additions and higher average revenue from each of them.

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Homebuyers’ down payments rise as US house prices climb – ET RealEstate

LOS ANGELES: Even with mortgage rates hovering near all-time lows, rising home prices are putting more pressure on buyers to come up with a bigger down payment.

In the April-June quarter, the median down payment on a single-family U.S. home was $13,955, a 15.3% increase from a year earlier, according to industry tracker Attom Data Solutions. In the first three months of 2020, it vaulted 29% from the same period in 2019.

The trend follows a steady climb in U.S. home prices this year. As of August, they were up 5.2% from a year earlier.

The rise in home prices is stretching the limits of affordability for many Americans already struggling to save for a down payment.

“Home values are increasing approximately twice as fast as typical incomes,” said Chris Glynn, senior economist at Zillow. “There’s this divergence between home values and the salaries and incomes that buyers have to keep up with that.”

That divergence shows no signs of easing, given the combination of extremely low inventory of homes on the market and fierce competition as more millennials look to transition from renting to owning.

Demand for homes has been strong this year, despite a brief slowdown in the early days of the pandemic. Sales of previously occupied U.S. homes surged 9.4% in September to a seasonally adjusted annual rate of 6.54 million, according to the National Association of Realtors.

That sales pace was the highest since February 2006, the peak of the last housing bubble, and left just 2.7 months of available homes on the market, a record low.

The thin inventory of homes helped drive up the median selling price to $311,800, up 15% from a year earlier, according to NAR.

A closely watched measure of home values, the S&P CoreLogic Case-Shiller 20-city home price index, has also been clocking rising home prices. In August, its most-recent snapshot available, prices climbed 5.2%, accelerating from a 4.1% gain in July.

Ultra-low mortgage rates have been a key driver for the housing market. The average rate on a 30-year fixed-rate mortgage was at 2.81% last week, little changed from the all-time low of 2.80% the previous week. The rate averaged 3.78% a year ago.

While low mortgage rates have made monthly home loan payments more affordable, they don’t alter the fact that most down payments are indexed to some percentage of the sale price of a home. So, higher prices lead to bigger down payments.

“The second side of that coin is that getting into the position where you have a down payment for a home to begin with has continued to get more difficult,” Glynn said.

How much a buyer opts to put down on a home can vary widely, depending on their mortgage. Some government-backed home loans require as little as 3% down, while homebuyers who want to avoid paying private mortgage insurance premiums will put down at least 20%.

The average U.S. median down payment has ranged between 10.6% and 11.8% going back to 2014, according to data from Realtor.com drawn from 35% of mortgage transactions nationwide.

A recent analysis by Zillow underscores how costly it can be to save up for a 20% down payment on a home these days. The real estate listings and data company found that it would take nearly eight months for a U.S. household making the median annual income of $83,675 to save up the $51,981 needed for a 20% down payment on a $259,906 home. That home price is based on the average of the middle-third of the housing market.

Apply the same calculus to San Francisco, with a median home price of $1.11 million, and it would take 17.1 months to come up with the $222,733 down payment on a median income of $156,373. In contrast, homebuyers in Cleveland have a more manageable hurdle, needing a little over five months’ worth of the median income of $78,731 to pull together the $33,387 down payment on a $166,936 home.

The housing market’s trends point to higher home prices and, as a result, a longer road to saving for a down payment. Home prices have to come down or incomes have to rise sharply to ease the financial pressure on buyers.

In terms of home prices, at least, that doesn’t seem likely. Zillow expects the price of a typical U.S. home to rise 7% over the next 12 months.

“What that means is an additional $3,600 toward a down payment for the median U.S. home,” said Glynn. “That means you have to save an additional $300 a month over the next year just to keep up.”

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Landlords in US are getting squeezed between tenants and lenders – ET RealEstate

NEW YORK: When it comes to sympathetic figures, landlords aren’t exactly at the top of the list. But they, too, have fallen on hard times, demonstrating how the coronavirus outbreak spares almost no one.

Take Shad Elia, who owns 24 single-family apartment units in the Boston area. He says government stimulus benefits allowed his hard-hit tenants to continue to pay the rent. But now that the aid has expired, with Congress unlikely to pass a new package before Election Day, they are falling behind.

Heading into a New England winter, Elia is worried about such expenses as heat and snowplowing in addition to the regular year-round costs, like fixing appliances and leaky faucets.

Elia wonders how much longer his lenders will cut him slack.

“We still have a mortgage. We still have expenses on these properties,” he said. “But there comes a point where we will exhaust whatever reserves we have. At some point, we will fall behind on our payments. They can’t expect landlords to provide subsidized housing.”

The stakes are particularly high for small landlords, whether they own commercial properties, such as storefronts, or residential properties such as apartments. Many are borrowing money from relatives or dipping into their personal savings to meet their mortgage payments.

The big residential and commercial landlords have more options. For instance, the nation’s biggest mall owner, Simon Property Group, is in talks to buy J.C. Penney, a move that would prevent the department store chain from going under and causing Simon to lose one of its biggest tenants. At the same time, Simon is suing the Gap for $107 million in back rent.

Michael Hamilton, a Los Angeles-based real estate partner at the law firm O’Melveny & Myers, said he expects to see more retail and other commercial landlords going to court to collect back rent as they get squeezed between lenders and tenants.

Residential landlords are also fighting back against a Trump administration eviction moratorium that protects certain tenants through the end of 2020. At least 26 lawsuits have been filed by property owners around the country in places such as Tennessee, Georgia and Ohio, many of them claiming the moratorium unfairly strains landlords’ finances and violates their rights.

Apartment dwellers and other residential tenants in the U.S. owe roughly $25 billion in back rent, and that will reach nearly $70 billion by year’s end, according to an estimate in August by Moody’s Analytics.

An estimated 30 million to 40 million people in the U.S. could be at risk of eviction in the next several months, according to an August report by the Aspen Institute, a nonprofit organization.

Jessica Elizabeth Michelle, 37, a single mother with a 7-month-old baby, represents a growing number of renters who are afraid of being homeless once the moratorium on evictions ends.

The San Francisco resident saw her income of $6,000 a month as an event planner evaporate when COVID-19 hit. Supplemental aid from the federal government and the city helped her pay her monthly rent of $2,400 through September. But all that has dried up, except for the unemployment checks that total less than $2,000 a month.

For her October rent, she handed $1,000 to her landlord. She said her landlord has been supportive but has made it clear he has bills to pay, too.

“I never had an issue of paying rent up until now. I cry all night long. It’s terrifying,” Michelle said. “I don’t know what to do. My career was ripped out from under me. It’s gotten to the point of where it’s like, ‘Am I going to be homeless?’ I have no idea.'”

Some landlords are trying to work with their commercial or residential tenants, giving them a break on the rent or more flexible lease terms. But the crisis is costing them.

Analytics firm Trepp, which tracks a type of real estate loan taken out by owners of commercial properties such as offices, apartments, hotels and shopping centers, found that hotels have a nearly 23% rate of delinquency, or 30 days overdue, on their loans, while the retail industry has a 14.9% delinquency rate as of August.

The apartment rental market has so far navigated the crisis well, with a delinquency rate of 3%, according to Trepp. That’s in part because of the eviction moratorium, along with extra unemployment benefits from Washington that have since expired.

“There are bad actors, but the majority of landlords are struggling and are trying to work with a bad situation,” said Andreanecia M. Morris, executive director of HousingNOLA, a public-private partnership that pushes for more affordable housing in the New Orleans area.

Morris, who works with both landlords and tenants, said that government money wasn’t adequate to help tenants pay their rent, particularly in expensive cities. She is calling for comprehensive rental assistance.

She fears that residential landlords will see their properties foreclosed on next year, and the holdings will be bought by big corporations, which are not as invested in the neighborhoods.

Gary Zaremba, who owns and and manages 350 apartment units spread out over 100 buildings in Dayton, Ohio, said he has been working with struggling tenants – many of them hourly workers in restaurants and stores – and directs them to social service agencies for additional help.

But he is nervous about what’s next, especially with winter approaching and the prospect of restaurants shutting down and putting his tenants out of work. He has a small mortgage on the buildings he owns but still has to pay property taxes and fix things like broken windows or leaky plumbing.

“As a landlord, I have to navigate a global pandemic on my own,” Zaremba said, “and it’s confusing.”

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