The Federal Housing Finance Agency on Wednesday announced a new refinance option for certain low-income borrowers, helping them take advantage of low interest rates and save money each month.
“Last year saw a spike in refinances, but more than 2 million low-income families did not take advantage of the record low mortgage rates by refinancing,” said FHFA Director Mark Calabria.
“This new refinance option is designed to help eligible borrowers who have not already refinanced save between $1,200 and $3,000 a year on their mortgage payment.”
To qualify, borrowers must have a Fannie Mae or Freddie Mac backed loan, for a single family home that they reside in. Their income must be at or below 80% of the median income for their area. And their loan needs to be in generally good standing – with no missed a payment in the past six months and no more than one missed payment in the past 12 months.
While there are other requirements for the credit profile, it is designed to ease the process to allow more borrowers qualify. The cost and credit requirements can keep some lower-income borrowers from seeking refinancing. This new option will ease some of the cost, such as a credit worth up to $500 for an appraisal.
FHFA, which oversees Fannie and Freddie, estimates the refinancing option could save borrowers an average of $100 to $250 a month. The new refinance option will be available to eligible borrowers beginning this summer.
A new generation of startups wants to disrupt the way houses are built by automating production with industrial 3D printers.
3D printing, also known as additive manufacturing, uses machines to deposit thin layers of plastic, metal, concrete and other materials atop one another, eventually producing three-dimensional objects from the bottom up. In recent years, 3D printers have mostly been used to create small quantities of specialized items such as car parts or prosthetic limbs, allowing consumers or businesses to produce just what they need using the machines at home or work.
Now a small number of startups around the world are applying 3D printing to home construction, arguing that it’s faster, cheaper and more sustainable than traditional construction. They say these technologies could help address severe housing shortages that have led to soaring home prices, overcrowding, evictions and homelessness across the U.S.
But 3D home construction is still in the early stage of development. Most startups in this field are developing new technologies and not building homes yet. And two of the highest profile and best-financed companies – Mighty Buildings and ICON – have delivered fewer than 100 houses between them.
To move beyond a niche market, construction firms will need to significantly ramp up production and persuade home buyers, developers and regulators that 3D printed houses are safe, durable and pleasing to the eye. They’ll also need to train workers to operate the machines and install the homes.
“To the extent that 3D printing can offer a faster, cheaper way to build even single family housing units or small units, it can address a portion of the problem,” said Michelle Boyd, who directs the Housing Lab at the University of California, Berkeley’s Terner Center for Housing Innovation. But the sheer magnitude of the housing shortage demands many types of solutions, from loosening zoning restrictions to building more high-rise apartment buildings, she said.
Proponents note that printing houses rather than nailing them together could save huge quantities of scrwood, metal and other discarded construction materials that are dumped into landfills every year.
Backers say 3D printing reduces the need for human labor at a time when home builders are struggling to find enough skilled workers to meeting housing demand. Many construction workers left the trades after the housing-fueled financial crisis more than a decade ago, and fewer young people are entering the field.
Jason Ballard, CEO and co-founder of a 3D printing construction startup called ICON, said its 3D printing system can do the work of 10 to 20 workers in five or six different trades. And unlike humans, the machines can work up to 24 hours a day, saving developers time and money.
“With 3D printing, we’re able to print exactly what we need,” said Sam Ruben, the company’s co-founder and chief sustainability officer at Mighty Buildings. The process can eliminate nearly all construction waste, he said, which can add up to savings of two to three tons of carbon per housing unit.
In Mighty Buildings’ factory warehouse in Oakland, Calif., a 3D printer deposits thin layers of a stone-like material that quickly hardens under ultraviolet light and resists fire and water. Wall panels are printed one layer at a time and then filled with an insulating foam. Robotic arms finish the surfaces into various designs.
The printer can produce the entire exterior shell of a studio home or individual wall panels that can easily assembled with simple tools, the company said. Mighty Buildings is now producing 350-square-foot backyard studios, known in the industry as “accessory dwelling units,” that can be used as extra bedrooms, playrooms, gyms or home offices.
So far the company has delivered six units and has another 30 under contract, starting at $115,000 each, which doesn’t include the cost of installation and site work. Two units can be combined to make a 700-square-foot dwelling. The company’s home construction costs are about 40 percent lower than that of traditional homes in California, Ruben said.
Most of the modules are assembled in the factory, transported by truck to the owner’s property, then put into place using a crane. The unit size is limited by the dimensions of the truck bed and the clearance heights of tunnels and overpasses.
Backed by more than $70 million in venture capital, Mighty Buildings is planning to build more factories with a goal of producing 1,000 housing units next year. It’s also creating software that allows developers to custom design printed buildings . Ultimately, the company plans to produce townhouses and multistory apartment buildings, Ruben said.
Mighty Buildings is teaming up with a Beverly Hills, Calif.-based developer, the Palari Group, to create a planned community of 3D printed homes in the desert resort community of Rancho Mirage in California’s Coachella Valley.
The solar-powered development, set for completion next spring, will have 15 lots with a 1,450-square-foot primary home plus a 700-square-foot secondary home and swimming pool in the backyard, costing around $850,000, said Basel Starr, Palari’s CEO and founder.
Those lots sold out quickly and there’s a waiting list of 500 homebuyers, Starr said. He’s planning similar developments in other parts of California.
Austin, Texas-based ICON has used 3D printing technology to produce low-cost housing. It’s printed homes for the chronically homeless in Austin as well as poor families in Nacajuca, Mexico. Instead of producing homes in factories, it brings its Vulcan printer to work on-site, squeezing out long tubes of concrete layer by layer that dry quickly to form the walls of a house.
“The factory comes to you, imprints the house right where it intends to be. We chose that method to eliminate a lot of the shipping costs and then also to give ourselves a lot of design freedom,” said Jason Ballard, ICON’s CEO and co-founder.
Its current technology can reduce construction costs by up to 30 percent and build a house twice as fast as traditional methods because the 3D printer does nearly all the work, Ballard said.
“The benefits that automation and digitization had brought to so many other industries with regard to speed and affordability were completely missing from the construction industry,” Ballard said. 3D printing, he said, “was like the most powerful automation of all the automations we could discover.”
LOS ANGELES: The distribution of COVID-19 vaccines is fueling optimism that Americans will increasingly return to the ways they used to shop, travel and work before the pandemic.
That would be a welcome change for companies that own office buildings and hotels, or those that lease space to restaurants, bars, department stores and other retailers. These have been the hardest-hit areas of commercial real estate over the past year as the pandemic forced many businesses to shut down temporarily or operate on a limited basis.
But even as the U.S. economy appears set to roar back to life this year, as many economists now predict, demand trends for commercial real estate could take longer to recover as businesses reassess their post-pandemic needs.
This means higher vacancy rates and declining rents this year, especially for retail and office property owners, said Thomas LaSalvia, senior economist with Moody’s Analytics.
“We see such potential and plenty of anecdotes and early data of actual shifts in how we work and how we shop,” he said. “The structural changes that are going on still give us pause to say that we’ve entered a recovery in terms of office or retail.”
So far this year, the commercial real estate market has seen some positive trends, as many businesses that had to shut down or operate on a limited basis are being given the green light to open by governments amid a pullback in new coronavirus cases and a ramped-up rollout of vaccines.
In March, the national unemployment rate fell from 6.2% to 6% and employers added 916,000 jobs, the most since August. That included 216,000 positions at restaurants, hotels and bars – the sector most damaged by the pandemic.
And this week, the International Monetary Fund forecast that the U.S. economy will grow 6.4% this year. That would fastest annual pace since 1984 and the strongest among the world’s wealthiest countries.
Still, commercial real estate owners face uncertainty as tenants reevaluate their needs. Will businesses that rented office space and spent the last year with most or all of their employees working from home need as much space? Will retailers that shifted more of their operations online during the pandemic cut back on storefronts? Will businesses resume spending on travel after having embraced video conferencing?
The full impact of these assessments may not be known for a while, as commercial property leases tend to run between five and 15 years. Still, some of the economic fallout from the pandemic is already visible in national commercial real estate industry data.
The vacancy rate for retail space increased to 10.6% in the first three months of this year from 10.2% a year earlier, according to Moody’s Analytics. And average effective rent, what’s left after taking out concessions offered by landlords to woo tenants, dropped 1.5%.
Moody’s Analytics is projecting vacancy rates for retail properties will climb to 11% or 12% as businesses reconsider their space needs after last year, when the percentage of retail purchases made online nearly doubled to 20%.
“We actually expect that to rise closer to 25% by 2025,” LaSalvia said. “This pandemic forced a lot of people to pull the bandage off in terms of being willing and able to shop online.”
For office space, vacancies rose to a rate of 18.2% in the first quarter from 17%, while average effective rent fell 1.8%, according to Moody’s Analytics.
Before the pandemic, office vacancies had been trending around 15% to 16% nationally. LaSalvia expects that to climb to 20% by 2022, then decline gradually to 17% by the end of the decade.
Hotels have had it particularly rough. Occupancy rates sank a year ago after global leisure and business travel all but ground to a halt. The monthly occupancy rate had been running well above 60% in 2019 and stood at 65.7% in February 2020. Two months later, it sunk to 20.6%, according to data from Moody’s Analytics.
Occupancy improved to about 45% last summer, before easing again. It was 34.4% in January, down from 66% a year earlier.
Meanwhile, the average revenue per available room, or RevPAR, a key hotel industry metric, was $30.27 in January, down 64% from a year earlier.
Hotel occupancy is expected to pick up this summer, as more people receive a COVID-19 vaccine and feel more at ease about travel. Last month, U.S. airport security checkpoints recorded sharp increases in traffic, including more than 1.5 million people in a single day, the largest number since the pandemic began.
“The summer leisure season will be pretty good,” LaSalvia said. “But the business travel is going to hold us back a little bit this year and it’s going to take maybe a couple of years before that really picks up again.”
Gov. Andrew Cuomo announced last July that New York would spend $100 million in federal coronavirus relief to help cash-strapped tenants pay months of back rent and avert evictions.
By the end of October, the state had doled out only about $40 million, reaching 15,000 of the nearly 100,000 people looking for help. More than 57,000 applicants were denied because of criteria set by lawmakers that many said was difficult to meet.
New York’s experience played out nationwide, with states failing to spend tens of millions of federal dollars aimed at helping renters avoid eviction. Burdensome requirements, poorly administered programs and landlords refusing to cooperate meant tens of thousands of tenants never got assistance. Some states also shifted funding away from rental relief, fearing they’d miss a year-end mandate to spend the money – a deadline that got extended.
The problem, housing advocates said, was that the federal government didn’t specifically earmark any of the coronavirus aid for rental relief, leaving states scrambling to set up programs with no guidance on how the money should be allocated. As much as $3.43 billion in federal aid was spent on rental assistance, according to National Low Income Housing Coalition. But advocates said more should have been done, given tenants faced as much as $34 billion in unpaid rent through January, according to a report released by the National Council of State Housing Agencies.
States’ rental relief programs “were a very mixed success. It was sort of a patchwork of programs,” Maryland Democratic Sen. Chris Van Hollen said in February. “There was a lot of experimentation – some successful, some not.”
Several states have since made changes, hoping to be better positioned to handle their portion of more than $45 billion in rental assistance coming from Congress in the coming months.
Last year, Pennsylvania, Louisiana, Mississippi and Kansas were among the states that struggled to distribute rental assistance. Kansas set aside $35 million but siphoned off $15 million for other uses, realizing only on Dec. 27 that it had more time to spend the money.
Mississippi allocated $18 million for rental relief but committed less than $3 million by December. The state said the U.S. Department of Housing and Urban Development determined the grant program it relied on could not help tenants behind on rent, only those at risk of homelessness. A HUD spokesman denied that, saying the money could be used for rental aid.
In New York, difficulties were blamed on lawmakers’ criteria, including that tenants show they were paying over 30% of their income toward rent. Applicants also had to show a loss of income from April to the end of July, when some saw an increase from extended unemployment and other benefits.
“When you have $100 million to help and only 40% is spent, something is wrong. There is no question there are a lot of people in need,” Justin La Mort, a supervising attorney at Mobilization for Justice Inc., a nonprofit legal services provider in New York.
He said the program was too focused on preventing fraud – at the expense of helping people.
Bonney Ginett, whose massage therapy business dried up during the pandemic, applied for help in July and said she was denied in October because she failed to prove loss of income. The 66-year-old New York City resident now owes more than $26,000 in back rent on her one-bedroom apartment and fears eviction.
“It’s a well-meaning program and probably should and ought to be fixed, but it’s hard to say because of how much overload their system experienced and might still be experiencing,” Ginett said. “The types of relief that could help me are supposedly there. But then you run into a brick wall.”
Lennard Katz, her landlord and a partner at Sussex Realty, said he didn’t understand how Ginett couldn’t get help.
“We believe it’s a travesty that NY State has been unable or unwilling to get money to the tenants and landlords that desperately need assistance during the Covid crisis,” he said by email.
Charni Sochet, a spokesperson for New York State Homes and Community Renewal, said the affordable housing agency “worked intensely for months to ensure rent-burdened households received the assistance for which they qualified” and that “the rent relief program quickly delivered funding to renters most in need in accordance with the specific requirements established by the Legislature.”
Pennsylvania had similar problems, spending $54 million on rental assistance and $10 million on mortgage assistance, out of nearly $175 million dedicated for the program. Just over one-third of applicants got help.
Facing the Republican-controlled Legislature’s Nov. 30 deadline to spend the money, the state Housing Finance Authority returned the bulk of it. Some of it went to the corrections department.
“There were a lot of sort of roadblocks put up for people to really effectively and easily get into the program, get the assistance and stay in their homes,” said Bryce Maretzki, director of the housing authority’s Office of Strategic Planning & Policy.
Perhaps the biggest problem was a $750 monthly cap. That’s below the median rent in Pennsylvania, making it inadequate in bigger cities with higher housing prices.
Applicants also had to be 30 days behind on rent, which Maretzki said meant someone might fall behind to qualify, only to “run the risk of losing your house and then not qualifying for the program.”
“There were many tenants who didn’t think the money would come in time, so they moved in with a family or doubled up or found less suitable housing because they didn’t think they could make the next month’s rent,” said Rachel Garland, an attorney at Community Legal Services in Philadelphia.
In Louisiana, $24 million in assistance for renters facing pandemic-related financial problems was announced July 16, with about half coming from federal funding.
Just $2.3 million has been distributed to 956 applicants, said Keith Cunningham of the Louisiana Housing Corporation, the agency administering the effort. The program was so swamped with inquiries, the online system shut down within days. And there was a lengthy application.
“Do you think the person who is reaching out to you has a fax machine or solid enough internet or a printer in their house to handle a 50-page application?” said Andreanecia Morris of the Greater New Orleans Housing Alliance.
Cunningham said the program’s size was daunting, made more challenging by a busy tropical storm season.
“No one in the state has done anything on that scope,” he said. “There was no infrastructure, no system to deliver. … We had to really build it from scratch.”
Yaeko Scott, who lost her housekeeping job during the pandemic and owes $6,000 in rent on her family’s two-bedroom apartment in New Orleans, said she’s repeatedly tried to get help.
“I’m aggravated,” she said. “Nothing is being done. Everyone is calling asking about the rent. I’m not getting anything. It’s really, really rough right now.”
Some states have made changes with new federal aid coming.
In Louisiana, roughly 7,000 applicants who were initially considered will get priority for $161 million, Cunningham said.
Pennsylvania fixed its $750 rental cby reinterpreting the law and said a different agency would handle the new funding.
New York expanded the program’s eligibility and will reconsider applicants who were initially denied.