CDBG_-_Policies_-_Market_Analysis.pdf

CDBG/HOME PROGRAM

POLICY AND PROCEDURES

SUBJECT: NEIGHBORHOOD MARKET STUDY AND ANALYSIS – RENTAL PROJECTS

PURPOSE

The purpose of these guidelines are to assist project owners, developers, and consultants in developing a neighborhood market study. These standards outline the content, data, analysis, and conclusions to be included in neighborhood market study for rental housing. These guidelines do not establish a format or presentation for the report.

The purpose of the market study and analysis is to ensure that there is sufficient demand for the type of housing and the federal housing funds requested. The market analysis should have definite conclusions which are based on evidence in the market study.

The five-year Consolidated Plan, Annual Action Plans, and Analysis of Impediments to Fair Housing Choice and its corresponding annual work plans guide the priorities for policy and program design decisions.

Factors outlined in these documents and others will also be used in considering whether there is adequate need for each project.

Items marked with an asterisk (*) are included in the Application for New Rental Construction.

BACKGROUND

The Consolidated and Further Continuing Appropriations Act of 2012 (P.L 112-55) (http://www.gpo.gov/fdsys/pkg/PLAW-112publ55/content-detail.html) imposed new requirements on projects that receive FY 2012 funds from the HOME Investment Partnerships Program (HOME). The purpose of these requirements is to improve project and developer selection by participating jurisdictions (PJs) and ensure that there is adequate market demand for HOME projects. (Reference CPD Notice 12-07 http://portal.hud.gov/hudportal/HUD?src=/program_offices/administration/hudclips/notices/cpd ).

Prior to entering into a legally binding written agreement to provide HOME funds to an activity, the PJ must:

• Underwrite the project or evaluate the underwriting of another funder;

• Assess the development capacity and fiscal soundness of the developer; and

• Examine neighborhood market conditions to ensure adequate need for each project.

This requirement is applicable to activities involving acquisition, construction, or rehabilitation of rental or homebuyer projects, including projects involving down payment assistance.

ELIGIBLE ENTITIES FOR CONDUCTING A NEIGHBORHOOD MARKET STUDY & ANALYSIS

Depending on the size and scope of the project, Dane County may:

• Review and document a neighborhood market study conducted by a developer, partner, or other funder in the proposed project;

• Contract with a third party for a neighborhood market study and/or analysis;

• Conduct a neighborhood market analysis in-house using available data.

TIMING OF NEIGHBORHOOD MARKET ANALYSIS

A Neighborhood Market Study and Analysis is to be conducted prior to the time that the County enters into a legally binding written agreement with the subrecipient or project owner.

CONTENT

The following content, along with the data sources, shall be included in the Neighborhood Market Study:

Executive Summary

Each market study should include a concise summary of the data, analysis, and conclusions, including the following:

1. A concise description of the site and the immediate surrounding area.

2. A brief summary of the project including the proposed number of units, rent levels, and population to be served.

3. Precise statement of key conclusions reached by the analyst.

4. Precise statement of the analyst’s opinion of market feasibility including the prospect for long-term performance of the property given housing and demographic trends and economic factors.

5. Provide recommendations and/or suggested modification to the proposed project.

6. Provide a summary of market related strengths and/or weaknesses that may influence the project’s marketability, including compatibility with surrounding uses, the appropriateness of the location, unit sizes and configuration, rent levels, amenities, and number of units.

7. A summary of the positive and negative attributes and issues that will affect the property’s performance and lease-up, as well as, factors that will mitigate or reduce any negative attributes.

Location and Market Area

1. Identify the location of the project and the neighborhood market area along with the census tracts, street names, or other geography forming the boundaries. Include a map that clearly delineates the location of the project and the neighborhood market area. Provide an explanation for the basis of the boundaries.*

2. Provide photographs of the site and neighborhood including adjoining land uses.

3. Describe the advantages of the neighborhood in which the project will be located noting access to social, recreational, educational, commercial, and health facilities and services, as well as, other municipal facilities and services. A map may be used to identify the location of the services in relation to the project site.*

4. Describe the disadvantages of the neighborhood in which the project will be located noting any conditions that may be detrimental to family life, substandard dwellings in the area, or other undesirable conditions. If the neighborhood is undergoing a revitalization, describe how this project will facilitate this redevelopment.*

5. Identify the travel time and cost via public transportation or public automobile from the neighborhood to places of employment providing a range of jobs for lower-income workers.

Demographic Trends

1. Describe the demographics (gender, age, race/ethnic, income level) of the neighborhood where the project will be sited and the community immediately surrounding the project and compare it against the municipality or Dane County as a whole.

2. Provide an overview of the demographic trends and projections for the neighborhood where the project will be located. Include reference sources for the date and the methodology for analyzing the data.

3. If the project will be serving a special needs population, describe the demographics of the special needs population in the community where the project will be sited and compare it against Dane County as a whole.

Demand for Rental Housing

1. Provide a description of the market, including the characteristics of households likely to be attracted to the development. Include information on the total population in the market area, number of households, age profile, and household incomes. Include the same information for income eligible households in the market area.

2. Provide a breakdown of households in the market area by tenure for the past ten years along with a five year projection.

3. Provide information on the number of substandard rental units in the market area.

4. Provide information on the vacancy rates for rental housing in the market area for the past 10 years.

Displaying this information in a tabular or graphic form is preferred.

Current Supply of Rental Housing

1. Provide a table listing existing comparable properties that includes: name of property, address, year built, condition, type of occupancy (i.e., family, seniors, special populations), number of units and configuration (bed/bath), unit size (sq. feet), amenities, rent levels, occupancy rate, number of persons on the waiting list, utilities and whether these are paid by the tenant or owner.

2. If the project will serve a special needs population, describe other housing in the area that helps to meet the needs of that population.

Absorption Rate

1. Calculate the market absorption for the number of units being proposed taking into consideration the total number of households in the market area, the number of rental households, the number of households in the projected income range, and the estimated number of households in the income group.

2. Document the length of time the project will take to lease-up the planned rental units.

Conclusion

1. Describe the need for this particular type of housing units. Document gaps and potential areas for growth.

Other Requirements

The following information is to be included as part of the neighborhood market study:

1. Date neighborhood market study was prepared, name, e-mail, and contact number of analyst preparing the study;

2. Description of the relationship between the analyst preparing the study and the entity for which the report is prepared;

3. Certification that recommendations and conclusions are based solely on professional opinion and best efforts;

4. Statement of qualifications.

THRESHOLD FOR ADEQUATE MARKET NEED

Category Threshold Criteria

Location and Market Area Location is likely to attract the identified target population.

Location builds on existing and emerging neighborhood amenities and anchors.

Project is in close proximity to existing transportation and infrastructure assets (sidewalks, bus routes, etc.)

Project is compatible with surrounding uses.

Demographic Trends Market for the proposed type of rental housing is growing or stable.

Demand for Rental Housing Vacancy rates of existing comparable rental housing in the neighborhood are low – i.e., 7% or lower.

Vacancy rates for the specific type of rental housing being proposed are decreasing or stable.

Services and amenities for proposed development are comparable to or exceed the services/amenities of competing properties.

If the proposed project serves a special needs population, there is sufficient demand for this type of project.

If the proposed project serves a special needs population, there are amenities to meet the unique needs of this population.

Current Supply of Rental Housing Proposed project will not adversely impact existing affordable housing developments.

Absorption Rate Project will be able to lease-up the planned rental units within the timeframe specified in the project pro-forma.

Effect of Subsidy Project is competitive.

Conclusion Market analysis supports the need for additional units of rental housing for this location and market.

Category Threshold Criteria

Market analysis supports the long-term positive performance of the property given housing and demographic trends and economic factors.

RESPONSIBILITY FOR CERTIFICATION

CDBG Program staff will certify that all of the required elements of the market study are in place.

ANALYSIS AND COMPLIANCE DOCUMENTATION

The Neighborhood Market Analysis form will be completed by the assigned CDBG Program staff and used in determining compliance. It will be retained in the project file.

/cdbg – policies – market analysis.doc

Adopted by the CDBG Commission: 5.30.2013

Neighborhood Market Analysis HOME Rental Projects

Project

Address

City

Developer

Study By

Jurisdiction Minority % Neighborhood/Tract Minority %

Standard Project Comments Compliance

Location and Market Area Location is likely to attract the identified target population.

Location builds on existing and emerging neighborhood amenities and anchors.

Project is in close proximity to existing transportation and infrastructure assets (sidewalks, bus routes, etc.)

Project is compatible with surrounding use.

Demographic Trends

Market for the proposed type of rental housing is growing or stable.

Demand for Housing Vacancy rates of existing comparable rental housing in the neighborhood are low – i.e., 7% or lower.

Vacancy rate for the specific type of rental housing being proposed are decreasing or stable.

Services and amenities for proposed development are comparable to or exceed the services/amenities of competing properties.

If the proposed project serves a special needs population, there is sufficient demand for this type of project.

Standard Project Comments Compliance

If the proposed project serves a special needs population, there are amenities to meet the unique needs of this population.

Current Supply of Rental Housing Proposed project will not adversely impact existing affordable housing developments.

Absorption Rate Project will be able to lease-up the planned rental units within the timeframe specified in the project pro-forma.

Effect of Subsidy Project is competitive.

Conclusion Market study supports the need for additional units of rental housing for this location and market.

Market study supports the long-term positive performance of the property given housing and demographic trends and economic factors.

Reviewer Date of Review

/cdbg – policies – market analysis.doc