PRO M U L T I H O U S I N G ESSENTIAL KNOWLEDGE FOR MULTIHOUSING NOVEMBER DECEMBER 2019 ■ Pillars 2020: Stepping it up VOL. 27, ISSUE 6 ■ MHPMAG.COM Luxury cruis se vac a ation fo or tw wo when the ey lease with w you millennials s vacation n 6-7 times s a year r 61% 65% gen Xers vacation 1-2 times a year 70 % boomers vacation 1-2 times a year S VEY: Q SURVEY Q-SAMPLE SAMP 2018 It’s a value-add that prospects will love. e AIM Cruise Incentives also make renewals somet thing to look for o ward to as residents renew their le ease knowing they can also plan their next de estination. Luxury cruise packages ($ $1,798 value) can run as low as a $139 per FHUWL̰FDWHEDVHGRQTXDQWLW\ 7RGD\ȃVUHQWHUVDUHDOODERXWWKH experience. Make sure your property delivers. AIM Cruis se Incentives makes it simple. AIMcru uise.com 866.541. .9090 x1 info@AIMcru uise.com PRO M U L T I H O U S I N G mhpmag.com 30 PO Box 1757, Zephyr Cove, NV 89448 Ph: 925 838 2111 Publisher Linda Hoffman lhoffman@mhpmag.com Pillars 2020: Stepping it up The trend toward walkable neighborhoods topped the list of features in this year’s Pillars of the Industry finalists. Cover: Perched 80 feet above the street in Honolulu, Hawaii, an ocean-view glass-bottomed pool cantilevers 15 feet over the pedestrian walkway at the entrance to the 318-unit Anaha, a finalist in Pillars’ best condominium category. 24 Unlocking big data How will big data, artificial intelligence and the internet of things change multifamily? It already has. 40 Developing expertise Where do multifamily housing professionals learn the latest tools and tricks of the trade? One of the nation’s largest shows: NAHB’s International Builders’ Show. EDITORIAL 925 984 2651 Editor-In-Chief Michael Rudy mrudy@mhpmag.com Energy Editor Gary Fauth, Ph.D. gfauth@mhpmag.com Conservation Editor Steve Dorman sdorman@mhpmag.com Correspondents Wendy Broffman wbroffman@mhpmag.com Peggy Shaw pshaw@mhpmag.com ADVERTISING 925 948 2651 Media Sales John Clemens jc@mhpmag.com SUBSCRIPTION Alicia Nicks subscriptions@mhpmag.com PRODUCTION Design & Production Image Advertising, Inc. art@imagead.com For subscriptions, reprints, back issues, log on to mhpmag.com CHANGE OF ADDRESS Multihousing Pro , Circ. Desk PO Box 1757 Zephyr Cove, Nevada 89448 Multihousing PRO (ISSN 1530-2326) is a business periodical published bi-monthly. Postmaster: Send address changes to Multihousing Professional magazine, PO Box 1757, Zephyr Cove, Nevada 89448. Periodical postage paid at Senatobia, Miss. Multihousing PRO has also published as Apartment Professional. 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I certify that this statement of ownership is correct and complete. 42 As economists forecast for 2020, some already thinking past next recession Economic forecasts show future opportunities 52 OK Boomer is just the first salvo of a larger generational showdown As boomers age out of the workforce the nation’s safety net takes another hit 46 Why business leaders need to understand their algorithms Understanding how and why algorithms process data is just as important as the data itself. 58 Making disparate impact deliver fairness HUD’s Ben Carson proposes common sense changes 8 MHP Reflections 44 How marketers can overcome short-termism 48 Milling around 10 20 Shortcuts Rental prospects rank top amenities they want in a multifamily property 50 Is Airbnb’s overhaul a turning point? 54 Virtual tours and live videos give rental prospects intimate access 58 The Closer 22 Blackstone moves out of rental-homes Record-breaker for multifamily sales volume 23 National Association of Home Builders Multifamily 6 MULTIHOUSING PRO | NOVEMBER DECEMBER 2019 WWW.MHPMAG.COM T HE C OLOR OF NIGH T SKIE S, L E AT HE R J A C K E T S , A ND D B A L A N C ED B U D GE T S . O ur n e w e s t f i n i s h, m a t t e b l a c k , i s t h e e s s e n c e o f h i g h s t y l e . I t ’s a l s o s ur p r i s i n g l y a f f o r d a b l e . S e e i t n o w X A ND E R P u l l - D o w n K i t c h e n Fa u c e t Ma t t e B la c k i n o ur m o s t p o p u l a r p r o d u c t s — i nc l u d i ng t he X an de r ® a n d P r e ce pt ® c o l l e c t i on s — a t P e e r l e s s Fauc e t . c o m . The enduring strength of truth Webster defines it as “the property of being in accord with fact or reality.” Truth is a beautiful, most reliable thing. The truth of Christmas and the holidays is sometimes muffled by the hustle and bustle and stuff—but it’s always there. Truth is just like that. Sometimes soft spoken. Sometimes profound. Always present and most definitely the final word. How is this related to the rental housing business? Completely related. Immutable truths are that upon which we base our successful businesses, a fact not always acknowledged by mere mortals. Holding vigorously to truth—from the engineering of our buildings to the operations of our businesses to the metrics of our campaigns—determines our level of success. Here’s one more truth: land ownership. It’s a founding axiom of our businesses born of ancient civilization, and eventually making its way to William Bradford, the second governor of Plymouth in about 1622. The colonies experienced a miraculous pivot when they abandoned a community model for individual land ownership and rights. (Happy Thanksgiving and welcome to the greatest of all experiments in ancient principles of truth.) Consider those countries that grant their citizens rights to own real property, and as importantly, actively protect those rights. In the U.S., we the citizens are empowered to sell, mortgage or rent our property for our own benefit. Consider all the “facts or reality” of the promise of such property rights and their almost magnetic attraction to the human soul. They draw thousands of immigrants into the U.S., legally or otherwise, every day. Certainly not all newcomers will become property owners, but a country that respects the ancient, even spiritual, rights of land ownership is a culture based on deep-rooted truth, an enduring and greatly desired value in today’s world. The closer the proximity of truth to an enterprise, the closer it will be to commercial success. And while it is true that most unprofitable businesses fail, successful operations give owners and managers significant meaning and purpose in life entirely separate from their fiscal return. It’s that giving or providing value to others that builds our businesses, but also gives us the gratification of serving others. That my friends, is the power of truth. Merry Christmas. Happy Chanukah. May the new year bring truth and success to your service to our communities. You are greatly appreciated and valued. Linda Hoffman Publisher | lh@mhpmag.com 8 MULTIHOUSING PRO | NOVEMBER DECEMBER 2019 WWW.MHPMAG.COM HAPPY Y HOLID D YS This holiday season we shine a light on our incredible accomplish hments of 2019. Together o , we celebrate the FDA approval of human clinical trials for stem cell and gene therapy. We thank the e first cystinosis patient who received the genetica ally modified autologous stem cell transplant for o cystinosis for his bravery and courage. The stem m cell trial holds the promise of a cure for cystinosis. In our pursuit of better e treatments, CRF Funded 7 new research grants s totaling more than $1,761,223. As a community, we ha h ve one common goal, bound together r by the progress of our researchers and an un nwavering dedication to one another. We are united e in our pursuit fo or a cure. We have made extrao ordinary progress and with your continued suppo ort, generosity and love, we will cure cystinosis. How To Help To make a year-end gif i t to the Cystinosis Research Foundation visit www.cystinosisresearch.org/donate The cystinosis Research Foundation is a nonprofit, tax-exempt entity pursuant of Section 501(c)3. Federal Ta ax ID #32-0067668. cystinosisresearch.or c g | 948.233.7610 UNplugged in California re esi side dent de nts were wit nt tho h ut power for da po days y at a time tiim in the he sta ate t ’s out utag age es millio on in Cal aliif. as of Nov. 3. Wi Wind nd-induced ed fire re se seas eason on run ns Oct Oct. to Apr pril ill. Su Summ mer fire fir e se seas aso on run on uns June June e thr hrough g Sep gh ept. ept t. wildfires In October California utilities cut power to two million customers costing the region billions of dollars in productivity, spoiled food and more. Power was shut off to avoid line-sparked wildfires that might spread by high winds. In the 1990s, California’s failed attempt to deregulate its utility market began with a poorly-designed system that gave unfettered reign to power traders like Enron. The companies were allowed to limit supply and drive up prices. Far from creating market competition, the result was rolliong blackouts and corrupt investor-owned utilites. Pacific Gas & Electric (PG&E) equipment may have caused over nine wildfires at the beginning of October according to federal documents. Currently in bankruptcy from wildfires in 2017 and 2018, inspecting and properly trimming around the state’s 250,000 miles of overhead power lines is a multi-year challenge. PG&E handles 100,000 miles of lines including the state’s most remote regions. Generators, ice, gas shortage California residents and businesses experiencing days-long blackouts found local providers in low or no supply of needed generators and the gas to run them. No hot water, no hot anything Those fortunate to have generators created a run on fuel. The state with the most stringent air regulations found itself at odds as gas-powered generators fired up around the state to keep refrigerators, freezers, internet routers, EVs and cell phones charged. Painted into a corner New electric vehicle (EV) sales in Calif. rose 63.7 percent in the first half of 2019. The state accounts for half of all EVs sold nationwide. Of 950,000 new cars sold statewide in Q1/Q2, 13 percent were electrified (pure EV, hybrid or plug-in hybrid). EV owners were cautioned EV owners were issued warnings to keep their vehicles fully charged during the outages and fires. Many EV owners resorted to gas powered generators to charge their EVs. Only half the solution California mandates solar panels on all new construction. Solar panels require battery storage in order to operate in a blackout. Electricity: A shrinking market Solar panels and other micro energy generation decentralizes the state’s power grid—and profitability. In fact, utility revenue is expected to fall as much as 15 percent, or $48 billion over the next decade according to Accenture. SOURCE: CALIFORNIA NATURAL RESOURCES AGENCY, EDMONDS, CALIFORNIA NEW CAR DEALERS ASSN., STATE OF THE AIR BY THE NATIONAL LUNG ASSN., JANIE HAR, AP. Generators are common in areas prone to snowstorms and severe weather, but California’s strict emissions standards make the operation of many generators illegal. Typically not an issue with the mild climate, but the blackouts created a new and uncharted market. Most are prepared for hours-long power outages. Days-long outages are different. Battery backups run out, even emergency lighting only lasts about 12 hours. Food spoils. There’s no hot water for showers. Community entry gates and electronically-controlled front doors stop working. Even emergency lighting in halls and stairwells fail. Rolling blackouts began in September. California’s air quality regulatory agency is temporarily waiving its restriction on the sale of generators that don’t meet California standards through December. This is to accomodate demand brought on by blackouts. Apartment communities and other businesses are not hardened for long-term blackouts. Michael Wara at Standford University calculated the shutdown could cost residents and businesses as much as $2.5 billion in losses. The surge in generator use—and their ensuing pollution—is not sitting well with California environmentalists. The Calif. Air Resource Board is collecting data on the size and number of gas and propane generators now in the state. But correlating the source and level of pollution of generators will be near impossible as the state also battles wildfires and poor air quality of major cities such as Los Angeleles. The majority of generators in California are gasolinepowered. The price of gas in California—already the highest in the nation—continues to rise. The average cost per gallon is $4.18, and as much as $5 a gallon in many areas. The huge difference in California and the rest of the nation is its stringent regulations, rising housing costs and fuel taxes. Every gallon sold in California includes a 12-cent tax on gas, and a 20-cents tax on diesel. A repeal of the gas tax failed at the ballot in 2018. High barrier to business “State and federal laws like the recently approved gas tax [in California], the Low Carbon Fuel Standard and other fuel-related taxes and fees add a little over 92 cents to each gallon of gas and have a profound impact on California’s businesses and communities, ” Kara Siepmann, a spokeswoman for the Western States Petroleum Association $/gallon >$3.54 3.31—3.54 3.08—3.31 2.85—3.08 2.62—2.85 2.39—2.62 2.16—2.39 1.93—2.16 1.70—1.93 <1.70 Bi Tech The man in the machine T U N-S H A R E -PLUS OF ALL ONLINE SEARCHES WORLDWIDE ARE THROUGH GOOGLE 90 % Programmed by humans, algorithms begin with a logic tree specifying every facet of the code’s behavior from content prioritization to blacklisting. With Google’s near monopoly, what hangs in the balance is the global economy, billions of dollars in ad revenue for Google, rental housing operators cost of operations—and the shaping of the country’s very thought and culture. HOW GOOGLE WORKS (KIND OF) Google indexes content while also programming for misspellings, wording idiosyncrasies and more. Google then places the most relevant information at the top of its search results page/section in accordance with undisclosed criteria. Google’s search results favor large companies, and both its high-revenue advertisers and internal mono chromatic culture as reported in the Wall Street Journal. MA RKE Of human hands What makes a match? Google says hundreds of factors go into search results including the location of searched words on a webpage, page links, location of searched words, creation date of a page—while removing pages Google deems as scams, deceitful or including hate speech. “Geopolitical competition and government regulations are poised to remake the digital economy,” according to recent research by consulting firm A.T. Kearney. “The global technological landscape is currently being reconstructed, subjecting the once-free and unfettered transfer of data across borders to new and greater digital walls.” This stems from the view that Big Tech is facilitating false information, monopolizing markets, honing in self-serving technology, as well as the growing concerns surrounding personal data. No matter how large or small the task to be programmed, developers determine each parameter of the executable program in devising a a specific outcome. Changes to Google’s search alghorithms are not fully disclosed though businesses have lived and died by them. The number of annual changes made to Google’s algorithm has grown from around 500 (2010) to roughly 3,200 algorythm changes in (2018). GOOGLE YOU TUBE, HOW GOOGLE SEARCH WORKS (IN 5 MINUTES); WSJ INVESTIGATIVE REPORT BY KIRSTEN GRIND, SAM SCHECHNER, ROBERT MCMILLAN AND JOHN WEST; GOLDMAN SACHS ANALYST ROD HALL—WHAT GOOGLE PAID TO REMAIN SAFARAI’S DEFAULT BROWSER Quantum supremacy: in the beginning Google AI’s quantum computer, Sycamore, is said to have reached “quantum supremacy” on Oct. 23 by completing in minutes a math problem that would take today’s supercomputer10,000 years (Nature magazine). IBM, owner of the world’s fastest two supercomputers said that it would take 12 MULTIHOUSING PRO | NOVEMBER DECEMBER 2019 its supercomputer, Summit, two-and-a-half days. Still, it will be many years before quantum computing has worked through its high rate of errors and is useful or profitable. (LEFT) GOOGLE AI’S NEW 54-QUBIT (QUANTUM BIT) PROCESSOR NAMED SYCAMORE. QUBIT IS A TWO-STATE QUANTUM-MECHANICAL SYSTEM. MHPMAG.COM The tip of the search The Federal Trade Commission is running antitrust investigations into Facebook, Alphabet/Google, and Amazon. The FTC will assess whether these firms harmed market competition by way of their mergers and acquisitions as part of “a campaign of exclusionary conduct that includes exclusionary behavior, ” said FTC chairman Joseph Simons. 3.8 million ONLINE SEARCHES MADE ON GOOGLE EVERY MINUTE GOOGLE SEARCHES ARE FIRST-TIME CONTENT SEARCHES MHPMAG.COM $ 9 billion $ 12 billion EU FINES AGAINST GOOGLE (LAST THREE YEARS) FOR ANTICOMPETITIVE PRACTICES GOOGLE PAID IN 2019 TO REMAIN SAFARI’S DEFAULT BROWSER 1 7 of every immigrants are | immigrants are welcome here immigrants are more likely to GOOGLE OPERATES IN HEALTHCARE, PHONES, LAPTOPS, DRONES, AI, QUANTUM COMPUTING, ADVERTISING AND SEARCH. IN AUTO-COMPLETE, GOOGLE’S FEATURE THAT PREDICTS SEARCH TERMS AS THE USER TYPES A QUERY, GOOGLE FILTERS OUT CONTROVERSIAL SUBJECTS NOVEMBER DECEMBER 2019 | MULTIHOUSING PRO 13 12. 3% 9. 8% of millennial renters plan to always rent—up from 10.7 percent nationally year-over-year. of the U.S. population moved in the past year—the smallest number since 1948. wanted a new /better home or apartment of those who moved in 2019. Over 12 percent moved for a new job or transfer. 17 % rise in wages from Sept. 2017 to Sept. 2018—the largest wage increase in a decade (not counting for inflation) 2. 9% EASY STREET MHPMAG.COM 14 MULTIHOUSING PRO | NOVEMBER DECEMBER 2019 EVERCORE ISI RESEARCH; CAPITAL ECONOMICS; FREE MARKET INC. MICHAEL LEWIS; ROB WARNOCK—RENTONOMICS; CENSUS BUREAU; LABOR DEPT. Rent fuel: jobs Labor-force participation is now 63.3 percent, a solid gain from 62.9 percent year-over-year. Strong employment growth among millennials (25-34) is helping power a surge in household formations. Average hourly earnings rose 0.2 percent in Oct., even with the GM worker strike and baby boomers retiring at peak career earnings. Robust job growth has also helped support consumer spending, which helped the U.S. economy power ahead. Hiring has slowed to 176,000 in payroll gains for the last three months but still exceeds population growth. Largest employer by state Wash BOEING Vt UNIV VER MED CTR Maine MAINE HEALTH NH ND Mt Ida ST LUKE’S HEALTH STANFORD HEALTH Ore PROVIDENCE HEALTH Minn MAYO CLINIC NJ Wis UNIV. OF WIS SD Wy STANFORD HEALTH Mich GENERAL MOTORS WAKEFERN STATE FOOD UNIV NY NY DARTMOUTH -HITCHCOCK HEALTH Mass RI Conn YALE NEW HAVEN HEALTH PARTNERS HEALTH LIFESPAN SYS OF HOSPITALS Penn UNIV PENN MEDICAL Nev MGM RESORTS Neb Utah INTERMOUNTAIN HEALTH UNIV OF NEB Iowa Ill Mo Ind Ohio WV WVU HEALTH Calif UNIV OF CALIF Colo UNIV OF COLO Va Del NC CHRISTIANA CARE Kan Ky T enn Ariz BANNER HEALTH NM UNIV OF NM Okla SC Ga Md JOHNS HOPKINS UNIV Ark Miss Ala T exas La Fla Alaska PROVIDENCE HEALTH Hi Largest employer by state ALTRES INDUSTRIAL WWW.MHPMAG.COM WAL-MART HEALTHCARE,VARIOUS EDUCATION,VARIOUS OTHER 15 NOVEMBER DECEMBER 2019 | MULTIHOUSING PRO The regulation burden State governments also impose regulations on the residents and firms who do business within their borders, but until this year nobody had attempted to quantify the burden of government regulations at that level. The Mercatus Center’s RegData project has recently extended its methodology for quantifying the number of regulations and other restrictions imposed by U.S. government agencies down to the state level, where they have data for 46 states. The map ranks the states according to the number of restrictions they impose on people and businesses within their borders. It is probably no surprise that California ranks as having the heaviest regulatory burden, with no fewer than 395,503 instances where the state government either compels or forbids a given activity. New York ranks second with 307,636, followed by Illinois with 259,832, Ohio with 245,865, and Texas with 245,865. At the opposite end of the spectrum, South Dakota is the state with the fewest state government-mandated restrictions, with just 43,940. Data is not yet available for Arkansas, Hawaii, New Jersey, and Vermont. For the most part, bigger, more populated states have more regulation. For example, many are surprised to learn that Texas is one of the most regulated states. Predictably, health and environmental regulations are among the dominant forms of state regulation—but in some cases, they’re joined by things like occupational-licensing regulations. And there is less regulation in some areas than one might expect. For example, non-health care-related insurance-industry regulation, which is primarily a state responsibility, seems to be relatively light. With all this regulation on the books, it’s not surprising that many states are taking decisive action to streamline their codes. In Missouri, former governor Eric Greitens set a one-third reduction target for agencies and used restriction counts to measure progress. Most recently, Idaho leaders claim to have cut more than 19,000 restrictions when the state’s old regulatory code expired on July 1. Expiration dates can be powerful tools for reducing regulatory burdens. Indeed, one of Trump’s executive orders last week gives agencies 120 days to review all guidance documents and policy memoranda they issue. Any mandates they want to keep will have to move into a new online database; everything else will expire. When you consider that most regulations are harmful, taking steps to reduce the regulatory burden of Americans and businesses at all levels of governments is a very desirable pursuit that more elected officials, whether at the national, state, county, city, or other local level ought to devote their own time and effort toward addressing. Excerpt Craig Eyermann is a research fellow at the Independent Institute and the creator of the government cost calculator at mygovcost.org. Regdata project provides an interactive map. Log on to mhpmag.com for the interactive map. Number of regulations (by state, thousands) 0-100 101-200 201-300 301-400 unavailable 16 MULTIHOUSING PRO | NOVEMBER DECEMBER 2019 WWW.MHPMAG.COM Personal outdoor space has a whole new meaning with Xfinity Communities. These days, residents are looking for more than nice finishes and amenities. They also want advanced technology and entertainment. Our Advanced Communities Network helps transform your property — their home — into a place where they’re connected to the things they care about most. It also gives them control of their Xfinity services and their home anytime, anywhere with our easy-to-use apps. Best of all, our 24/7 customer service means they’ll ring our phone with questions, not yours. Welcome to Xfinity Communities. This is where awesome lives. To learn more about a custom solution for your property, visit xfinity.com/xfinitycommunities. Restrictions apply. Not available in all areas. Standard data charges apply to app download and usage. NPA222368 Who will buy 21 million homes? Not I, said gen X. Who’s going to buy all the boomer’s homes? A recent story in the Wall Street Journal asked who would buy all the baby boomers’ retirement homes as they begin to age into assisted living, move in with family or die. Author Laura Kusisto suggests that the greatest impact will be felt in mostly senior-only communities located in sun-belt parts of the country like Arizona and Florida, places that the next generation—gen X—neither desire or can afford to live. (see “OK Boomer, Who’s Going to Buy Your 21 Million Homes?”—Read more on the less-than-affable expression, OK Boomer, on page 52). These highly-senior dominated areas could, in fact, turn into Rust Belts of their own, where populations and their home values fall, and where younger people simply won’t come in to save the local economy. “One in eight owner-occupied homes in the U.S., or roughly nine million residences, are set to hit the market from 2017 through 2027 as the baby boomers start to die in larger numbers, according to an analysis by Issi Romem conducted while he was a senior director of housing and urban economics at Zillow. That is up from roughly 7 million homes in the prior decade,” she writes. “By 2037, one quarter of the U.S. for-sale housing stock, or roughly 21 million homes will be vacated by seniors. That is more than twice the number of new properties built during a 10-year period that spanned the last housing bubble,” writes Kusisto. “Most of these homes will be concentrated in traditional retirement communities in Arizona and Florida, according to Zillow, or parts of the Rust Belt that have been losing population for decades. A more modest infusion of new housing is expected in pricey coastal neighborhoods of New York or San Francisco where younger Americans are still flocking in large numbers, “she writes. Perhaps one of the biggest fails of the article is the absence of one of the country’s fastest and largest growing populations. One that is obvious to those who live in border states like—Arizona and Florida. Pew: The immigrant impact The U.S. has more immigrants than any other country in the world. Today, more than 40 million people living in the U.S. were born in another country, accounting for about onefifth of the world’s migrants in 2017. The population of immigrants is also diverse, with just about every country in the world represented among U.S. immigrants. The U.S. foreign-born population reached a record 44.4 million in 2017 according to Pew Research. Since 1965, when U.S. immigration laws replaced a national quota system, the number of immigrants living in the U.S. has more than quadrupled. Immigrants today account for 13.6 percent of the U.S. population, nearly triple the share (4.7 percent) in 1970. However, today’s immigrant share remains below the record 14.8 percent The boomer bubble About 21 million homes should be vacated by seniors in the next two decades. This exceeds the number of new properties sold during a previous two-decade period. 12 MILLION, U.S. HOMES BY DECADE 10 8 6 4 2 0 1968 1978 1988 1998 2008 2008 12 MILLION 10 8 6 4 2 0 2007 2017 2027 2037 +2.6 +1.8 million million +3.4 million New home sales Homes vacated by seniors ESTIMATE: SENIORS ARE THOSE AGED 60-PLUS. OWNER’S AGE IS THE AGE OF THE HOUSEHOLD’S YOUNGEST MEMBER OVER 25. PROJECTIONS USE RETENTION-BASED APPROACH, WHICH REFLECTS HOUSEHOLDS WHICH HAVE MOVED INTO OR OUT OF HOMEOWNERSHIP (OR THE REGION) FOR ANY REASON, INCLUDING DEATH, IN WITH FAMILY OR INTO SENIOR CARE. SOURCE: ISSI ROMEM/ZILLOW. 18 MULTIHOUSING PRO | NOVEMBER DECEMBER 2019 WWW.MHPMAG.COM Housing wave 75.9 million 65.9 million U.S. live births 19-year span 19-year span 5 MILLION SILENT GEN BABY BOOMERS GEN X MILLENNIALS 4 3 2 1 0 1930 1940 1950 1960 1970 1980 1990 2000 2010 GEN Z & BEYOND share in 1890, when 9.2 million immigrants lived in the U.S according to Pew. Most immigrants (77 percent) are in the country legally, while almost a quarter are unauthorized, according to new Pew Research Center estimates based on census data adjusted for undercount. Yale: The undocumented impact Generally accepted estimates put the population of undocumented immigrants in the U.S. at approximately 11.3 million. But a paper by three Yale-affiliated researchers suggests all the perceptions and arguments based on that number may have a faulty foundation; the actual population of undocumented immigrants residing in the country is much larger than that, perhaps twice as high, and has been underestimated for decades. Using mathematical modeling on a range of demographic and immigration operations data, the researchers estimate there are 22.1 million undocumented immigrants in the U.S. Even using parameters intentionally aimed at producing an extremely conservative estimate, they found a population of 16.7 million undocumented immigrants. A country made of more than organic generations While many argue the fiscal burden of illegal immigrants on the nation, others like Council of the Americas, funded by the Rockefeller Brothers Fund have concluded: “The most pronounced impact of immigration on housing values is in thriving Sun Belt cities that remain affordable and in declining Rust Belt cities where immigration acts as a barrier against even greater declines in home values. The data concludes that while immigration increases home values in many areas, it is not adding to the affordability crisis plaguing some of America’s most expensive cities, or pricing people out of expensive, highly desirable communities.” Sources Wall Street Journal; Pew Research; Yale: Mohammad Fazel Zarandi, senior lecturer, MIT Sloan School of Management, Jonathan S. Feinstein, John G. Searle professor of economics and management, Edward H. Kaplan, William N. and Marie A. Beach Professor of Operations Research, Professor of Public Health & Professor of Engineering; Jacob Vigdor, professor of public policy and economics at Duke University; Council of the Americas; U.S. Census and American Community Survey. WWW.MHPMAG.COM SOURCES: CENTERS FOR DISEASE CONTROL AND PREVENTION (BIRTHS); PEW RESEARCH CENTER (GENERATION BIRTH YEARS) Pew: Immigrant share of U.S. population % of U.S. population that is foreign-born 16% 12 8 4 0 1850 9.7% 14.8 13.6 1965: Immigration and Nationality Act passed 1890 4.7 1970 2017 SOURCE: U.S. CENSUS BUREAU, “HISTORIC CENSUS STATISTICS ON THE FOREIGN-BORN POPULATION OF THE UNITED STATES: 1850-2000,” AND PEW RESEARCG CENTER TABULATIONS OF 2010 and 2017 AMERICAN COMMUNITY SURVEY (IPUMS) Yale: Illegal immigrant share of U.S. population Illegal 35 immigrants population 30 (millions) 25 20 15 10 5 1990 9 1995 9 2000 0 2005 2010 0 2015 0 Current widelyaccepted estimate Conservative estimate Average estimate NOVEMBER DECEMBER 2019 | MULTIHOUSING PRO 19 Rental prospects rank top amenities they want in a multifamily property The option of in-unit laundry left other amenities out to dry—cleaning up as the most in-demand apartment feature that renters seek, with 3 out of 4 prospects preferring a unit with a washer and dryer, according to the 2019 PERQ Multifamily Field Guide. The renter insight report analyzes national and regional data collected from 193,000 consumers on 320 property websites that use AI-driven marketing cloud and web conversion technology to collect valuable prospect data in real time. Read on to see what else the industry data revealed and how apartment communities use those analytics to gain an advantage. Top 5 apartment amenities renters seek Modern appliances and walk-in closets tied for the second-most wanted apartment amenity for the 50,505 prospects who ranked their favorite amenities while researching apartment communities online. Rounding out the list of Top 5 Amenities: Balconies, followed closely by wood flooring. While the top amenities remained roughly the same throughout the country, some regions showed preference to certain amenities over others. 20 MULTIHOUSING PRO | NOVEMBER DECEMBER 2019 In the Northwest, prospects chose open floor plans and didn’t rank modern appliances. Renters living there are 40 percent more interested in balconies than the national average, and showed the least interest in luxury appliances compared to other regions. Balconies also made the Top 5 in the Southwest with 11 percent of prospects picking it, putting it fourth in that regional list. Midwesterners preferred patios and dishwashers more often than other areas of the country. Dishwashers ranked in the West as a top priority as well. “We’re definitely seeing the same dynamics as what was found in the PERQ prospect survey,” says Lisa Harris, regional manager at Texas-based W3 Luxury Living. “Of course, prospects have to find a place that fits into their budget, but we’ve found they are looking for good locations and spaces that are a reflection of who they are and they want the social aspect of what that brings.” Additional perks include parking, pet amenities and internet access The number of people using online streaming services to binge watch the latest TV series or tune in to cheer on their favorite sports team continues to rapidly rise, so it’s not too surprising fewer renters require cable access. Sixty-six percent said they do not need cable service, yet 88 percent do want internet as part of the apartment amenities package. As any property manager knows, bad parking situations can invite ruthless online reviews and resident dissatisfaction, with paying renters battling visitors for preferred spots in overcrowded parking lots. When given an option, a quarter of prospects surveyed nationwide preferred covered parking or a garage and 34 percent would like an additional parking space. Pets also placed high on the list of prospects’ priorities with 33 percent indicating they own at least one. Twice as many pet owners have a dog versus other types of animals. To serve those furry family members, many properties offer amenities like dogwash stations, conveniently placed poop bag disposal, and even doggie spas. At W3 Luxury Living properties, where the majority of residents own a pet, the onsite staff hosts special pet socials such as Yappy Hour and adoption events to entice new animal lovers to live there. They stock dog treats in all of the offices and regularly hire photographers to come take pictures of residents with their four-legged roommates. WWW.MHPMAG.COM “I’d estimate up to 65 percent of our residents have pets,” Harris says. “Dog parks/runs and spaws are really standard for W3.” Use amenity data to improve lead follow-up More than 80 percent of renters begin their apartment search online. Give them what they want and make it as convenient as possible to do research and gather information about the apartment community without having to contact someone in a leasing office. As they’re researching your property online, utilize technology to capture as much data as possible on the prospect so you can personalize the process and provide superior customer service—both online and in person. Lead data empowers leasing specialists to connect with prospects on a personal level and helps them stand out during the lead follow-up process by highlighting their preferred amenities in the pitch. Be sure your leasing staff points out a prospect’s favorite amenities and focuses on popular community features when giving a tour. Take full advantage of prospect data In addition to learning about the individual needs of prospects, collecting online consumer data on a property website also helps a multifamily company improve its digital marketing success and attract ideal renters looking online to find the few communities they’ll actually visit in person. Mission Rock Residential, a Denver-based multifamily property company managing 107 apartment communities across the country, uses the prospect data collected online to increase effectiveness of digital advertising campaigns and boost search engine optimization (SEO). According to Vice President of Marketing Marcella Eppsteiner, that data-based approach is critical in highly competitive markets like the Dallas-Fort Worth area, where the cost of Google PPC and social ads is getting more expensive as the competition and population numbers continue to increase. She says in markets where her assets utilize AI website software to collect prospect data, the properties enjoy a lower cost per lease because of the detailed consumer journeys they receive on each website visitor who engages with the content. “We can gather some psychographic information from the engagement pieces on our website, and then use that dynamically on a monthly basis,” Eppsteiner says. “We evaluate those insights and then tweak and optimize our SEO strategy, and maybe even change the content within different advertising sources.” Eppsteiner explains other ways they use WWW.MHPMAG.COM the amenity data to get a property noticed. If prospects in a certain market prioritize upgraded amenities over another location, the company rearranges the website photo gallery and adjusts social media accounts to highlight the stainless steel appliances and granite countertops before other community amenity photos. Don’t miss the mark when promoting your property amenities Ultimately, your leasing consultants may be missing the point if they only promote an apartment community’s luxury, high-end features to a prospect who prioritizes budget and simplicity over pretty things. Consider this: 48 percent of prospects across the U.S. described their ideal apartment as “comfortable, yet economic,” while 35 percent chose the words “simple and budget friendly.” Only 17 percent of those surveyed by PERQ picked luxury features as their priority. Chris Berry, senior regional manager at First Communities, tells this warning tale to illustrate how off the mark some leasing agents can land when they ignore the consumer data at their disposal. Responsible for the Southeast region of the Atlanta-based multifamily company’s portfolio, Berry once visited a competitor’s property and pretended to be an interested prospect wanting a tour. He says he was mortified when the agent continuously suggested he give away his beloved dog because he was such a great match for the property—aside from the nopet policy. “She said it four different times during the tour, too. I was like, ‘Oh, my gosh!’” Berry says. “Be helpful and pay attention. The data we gather on our website helps us be more personable and tailor our responses in email or on the phone. Don’t just send a cookiecutter response telling the prospect something they already know. They’ve already been to our website.” Author Kristy Esch, PERQ NOVEMBER DECEMBER 2019 | MULTIHOUSING PRO 21 Blackstone moves out of rental-homes Blackstone Group Inc. sold the last of its stake in Invitation Homes Inc., the company it created after the housing crisis to scoop up tens of thousands of foreclosed single-family properties from the courthouse steps, spruce them up and rent them out. Blackstone began whittling its position in March through a series of bulky stock offerings. Blackstone reaped about $7 billion in all, according to securities filings. That’s better than twice what the firm invested. Blackstone’s wager was that last decade’s historic collapse in home prices and advances in cloud computing and mobile technology would enable it to buy enough suburban houses to achieve economies of scale and then to efficiently manage tens of thousands of far-flung rental properties thereafter. To do so would be to tame the final frontier in real estate for institutional investors and gain a toehold in the largest asset class in the world: the U.S. single-family home. “The hardest part wasn’t buying the homes, it was building the business,” Blackstone President Jonathan Gray, who headed the firm’s real-estate business when it launched Invitation, said in an interview. “We created a company from scratch. It was 22 MULTIHOUSING PRO | NOVEMBER DECEMBER 2019 created on a yellow pad. It was an idea. Now it’s a real business.” As the number of foreclosed homes swelled and home prices hit bottom eight years ago, Blackstone and other big real-estate investors pounced. Blackstone, hotelier Barry Sternlicht and Donald Trump confidante Tom Barrack sent buyers to auctions with duffel bags of cashier’s checks and instructions to buy anything that was cheaper than it cost to build new, not too old, big enough for a family and in a good school district. Blackstone formed Invitation with a group of Phoenix investors who were buying trailer parks before the crash. They were led by Dallas Tanner, Invitation’s 39-year-old chief executive, who at the time was fresh out of graduate school. Starting with a three-bedroom stucco house on the outskirts of Phoenix that it bought at auction for $100,700, Invitation went on a $10-billion homebuying spree. Its buyers streamed into foreclosure auctions across the Sunbelt spending at a clip of more than $100 million a week. In about 18 months, it had bought 30,000 homes one by one and spent another $2 billion or so fixing them up. In 2019, Invitation Homes enlisted six designers to create the first Invitation Homes “Make it Home” Show House in Atlanta. Each member of the design team decorated a room of the home (above), providing budget-friendly designs that transformed this rental home into a dream home. When the flood of foreclosures subsided, the investors hit the open market looking for houses. They employed sophisticated househunting algorithms and increasingly built homes expressly to rent. Invitation eventually absorbed the rental empires of Sternlicht and Barrack. The two companies compete at the high end of the rental market. Their typical tenants aren’t quite 40 and have a child or two and a household income of about $100,000. The landlords have capitalized on both the willingness of relatively high earners to rent the suburban lifestyle they can no longer afford, and disinterest in homeownership from younger Americans who lack confidence in their employment and the housing market. Though homeownership has bounced back from the 50-year lows reached in 2016, it remains well below last decade’s rates. Excerpt Ryan Dezember, wsj.com WWW.MHPMAG.COM Record-breaker for multifamily sales volume In the first nine months of 2019, multifamily sales volume has been higher than during any other comparable period in the past 10 years. Despite concerns about potentially slowing economic growth and new rent control laws around the country, investors continue to go after apartment properties. The volume of U.S. multifamily acquisitions in the first nine months of 2019 was higher than during any other comparable period since this expansion cycle began a decade ago. In fact, this year might set a record for multifamily sales volume, says Alexis Maltin, manager of analytics with New York City-based research firm Real Capital Analytics (RCA). Investors spent $130.6 billion on multifamily acquisitions in the first three quarters of 2019, according to RCA. Investors continue to be drawn to multifamily properties because of strong demand that has kept rents growing and occupancy levels well above 90 percent. “From a fundamentals demand perspective… there is still a lot of race left in the apartment markets,” says Chicago-based Brian McAuliffe, president of CBRE Capital Markets. Developers have been unable to build enough new units of housing to match the growing number of new households. “The reason why fundamentals are so strong is that we have a housing crisis,” says John Sebree, director of the national multi housing group with brokerage firm Marcus & Millichap. This has attracted not only experienced multifamily players, but also investors who are new to the sector, according to McAuliffe. “We get more buyers who are showing up on bid lists that are new names,” WWW.MHPMAG.COM he says. But the amount of money chasing multifamily properties and the new, inexperienced investors entering the market are causing sector experts like Sebree to wonder if they are overpaying for assets. Cap rates on sales of apartment properties averaged 5.1 percent nationally as of November, according to Marcus & Millichap data. That’s much higher than the yield on other relatively safe investments, like government bonds or dividends on S&P 500 stocks. It’s also very low compared to cap rates on other types of commercial real estate, such as single-tenant retail (6.1 percent) or multi-tenant retail (7.1 percent). The cap rates on apartment properties are low even though the properties are now more likely to be located in riskier, smaller apartment markets. In 2010, slightly more than one-third (38 percent) of all multifamily sales valued at more than $15 million involved buildings in secondary or tertiary markets. “In 2019, that’s likely to be 60 percent,” says Sebree. “Investors are pushing farther and farther away from the urban core looking for yield… The New York investor looks in Pittsburgh and then outside of that.” In addition, in several primary markets, including New York City and California, new rent control laws have complicated the math for apartment investors. However, lenders have kept their standards high for how much leverage they will allow on multifamily deals, say Sebree. “A typical loan requires a 30 percent to 40 percent down payment in many parts of the country,” he says. So even an improbably steep fall in prices would not leave many loans underwater. Author Bendix Anderson, NREI Online billions Vo V olume of apar a tment sales First three quarter rs $150 125 100 75 50 25 0 2008 20 010 2012 2014 2016 2 2018 SOU URCE: REAL CAPITAL ANALYTICS NOVEMBER DECEMBER 2019 | MULTIHOUSING PRO 23 Unlocking big data 24 MULTIHOUSING PRO | NOVEMBER DECEMBER 2019 WWW.MHPMAG.COM The coupling of big data with artificial intelligence (AI) and the internet of things (IoT) has power to disrupt the traditional way of basing real estate decisions on experience, past performance and intuition. The machine learning component of AI enables multifamily owners and operators to more accurately and quickly pinpoint future risks and opportunities and gain insight into the trends driving performance in markets and at individual properties. “It’s an evolution. Collected data is beginning to drive artificial intelligence engines. Whereas before, software would capture data for retrospective analysis—things that had happened in the past—the aggregation of massive amounts of data are being used to predict what will be, or should be,” said Jeff Adler, VP of Yardi Systems’ Matrix Products. “The purpose of using AI is to speed up the analysis timeframe, reduce the repetitive mundane tasks required to make decisions and tease out relationships that would be hard to see when humans are looking at the data. That’s where big data takes a step beyond what traditional analysts have always done, what I have always done, and that is the future of predictive analytics,” he said. An example is Yardi’s RENT Café, where AI engines deployed across the platform filter and distribute interactions with prospective apartment renters that come into the software via phone, text or email. Based on how they are read by AI, interactions are either automated or go into a text library or to a chat box—the latter, a WWW.MHPMAG.COM function of AI that provides real-time, detailed answers to apartment prospects’ questions, instead of scripted responses. Other examples of data useful in optimizing the resident acquisition process include turn list data and marketing budget data. Another area in which data is organized, put through an AI engine and converted to recommended outcomes is real estate investment analysis. Yet another is predictive maintenance, where data generated by smart appliances installed in the building can alert management to impending malfunctions and even generate service requests to repair or replace the failing part. “This is an emerging area and today we are focused on wrapping our arms around data that we have inside the various Yardi products and services. Big data is a five- to seven-year journey and the pieces will be deployed in different practical solutions over time,” said Adler. Leading the charge The process of utilizing advanced analytics across a portfolio entails collecting enough data to build accurate algorithms and manually scrubbing the data before it can be used. The datasets of any one owner of an individual property tend not to be large enough to draw generalizable outcomes, so any particular owner has a hard time amassing the amount of information sufficient to make predictive analysis work, said Adler. For that reason, established software providers who have the ability to amass huge NOVEMBER DECEMBER 2019 | MULTIHOUSING PRO 25 swaths of data from a multitude of sources are leading the analytics charge in the multifamily space. The ideas behind data mining for predictive analytics were introduced to the apartment industry in 2001 with the revenue management systems that use algorithms to set rents for individual units, making previous methods of setting rents a thing of the past. These systems may be standard today, but they took almost a decade after introduction to catch on. Similarly, big data has been slow to take hold in the industry where owners still rely on instinct, experience and human touch to glean a course of action from retrospective data. And, with a number of start-up tech firms entering the market with AI products, many operators are still on the sidelines waiting to see which of them fall by the wayside and which remain standing. “I think the future of AI and analytics primarily will be driven by the software platforms that have access to huge amounts of data. There’s a bunch of little companies that are trying to do the analytics, but they do not have the underlying plumbing, and I think most of those solutions will eventually go out of business,” said Adler. Meanwhile, many industry professionals still compile market survey and comparison data the old way. “We still have our onsite team members complete their own market surveys and regularly shop comps in person and over the phone in similar methods to what has always been done,” said Diane Norbury, senior VP of multifamily operations at Pillar Properties. “While data providers have become 26 MULTIHOUSING PRO | NOVEMBER DECEMBER 2019 WWW.MHPMAG.COM increasingly more valuable in terms of their breadth, scope and frequency of compiling data in a more useful way, there is, in my opinion, no replacement for the daily touch points that our teams have as ‘boots on the ground.’ This allows them to remain in touch with what is happening in the marketplace in a way that can’t be fully captured by third-party sources. “That said, data providers allow us to validate what we hear and see or dig into areas that previously were difficult for us to reach, providing a much more complete picture. From there, users quickly ask more educated questions and have the tools to develop more valuable strategies for their own operations,” she added However slow big data is to catch on in multifamily, it’s power is too great for industry professionals to ignore. “AI is not going away. It is going to be something that is very important,” said Adler. Norbury concurs, saying, “As data scientists continue to find ways to cull this data, scrape it and present it in meaningful ways, it will naturally develop into more reliable and valuable sources for our industry – especially as more users begin to rely upon it for daily decision-making.” Ownership issues But surrounding big data are ethical and privacy issues that also cannot be ignored. Data anonymization is the use of one or more techniques that make it more difficult to identify a particular individual or property in stored data. Most privacy protections rely on informed consent for the disclosure and use of individuals’ private data, but because big data is a resource that can be used over and over again and often in ways not originally conceived of at the time the data was collected, erosion of anonymity can occur. Regulations like the General Data Protection Regulation, a 2016 law on data protection and privacy for all individual citizens of the European Union and European Economic Area, and a recent data privacy law passed in California that is expected to be the first of many in the U.S., set up strict conditions for gaining consent from individuals and place the burden on the data provider to prove that an individual agreed to a certain action. “It’s very important to us that anything that is individually identifiable remains the property and ownership of our clients and that is a very important core value of ours as we draw on aggregated and anonymized data to create solutions that add value to all of our clients. “Based upon our relationship with clients WWW.MHPMAG.COM and a choice we made, we have created an agreement by which we have the ability to aggregate and anonymize information to create benchmarks and actionable predictions for our clients, but not expose the data individually,” Adler said. He explains there are substantial costs associated with data cleansing, providing appropriate security for the data and eliminating the inconsistencies that can happen when humans enter data. Data is cleaned monthly at Yardi by an autonomous team of experts who report to no Yardi product line and are the only humans with eyes on the underlying information. “These are significant efforts by very skilled people who have to know a tremendous amount of information and knowledge about how all of the systems function together,” said Adler. The data is extracted from clients’ data bases and placed into a centralized database to be normalized and cleansed and to ensure a consistent timeframe. Once assembled, a set of security routines must be run if the information is requested for extraction. Only then can the data be reported out on at a competitive property level or market or submarket or segmentation, but even then, the data must meet certain criteria. A built-in anonymization and aggregation routine requires at least five properties from two or more owners on the return set. “The way it works in Matrix is you identify a comp set of 15, 20 or 30 properties and then you call out for the data to be returned. As long as there are five or more properties, you will return the results. I won’t and can’t know which five, six, seven or eight of the 15 or 20 came back. That’s the anonymization,” said Adler. Making it better Adler said “AI is really a misnomer for a set of technologies, like neural networks and language processing, that interact with each other to create better predictive and proscriptive analysis by applying large sets of data to a problem and running iterations sufficiently frequently to be able to create output and a feedback loop where the machine learns from each of them—with the idea that the more transaction data, the better the machine is able to make predictions over time. “We’ve taken baby steps—the first was ‘Wouldn’t it be great if we could predict in advance if a property had enough demand to meet financial goals?’ And we said, “What do you need to make that kind of decision?’ You need to know what renewal rates are by NOVEMBER DECEMBER 2019 | MULTIHOUSING PRO 27 floorplan, what the notices to vacate are and what they are likely to be, how much demand is coming or expected to come and put those things together and see if there is a gap. There is a set of algorithms that need to run to get to the point where I can say, ‘I think you have a gap.’ If you run that algorithm enough and back test it, you can say with some confidence there is a prediction of a gap. Now, what do you do with that? There are only three levers one can pull—change the price, change your advertisement activity, or change your resident qualification standards. In the absence of machine learning, and this is what I did as COO of a company, we made those decisions based upon the best information we had at the time and our gut understanding of the relationship between each one of those three levers. “So, finally we ask, ‘Wouldn’t it be great if a machine could make some of those decisions? Could they make decisions more quickly and better than a human being?’ The first thing we did to derive answers was to exclude the resident quality standards, which were a bit more complex than we could handle and decide if we should increase price or modify advertising. Invariably, what tends to be the case is that as long as you are in a large urban market where there is a lot of demand and your property is a very small percentage of the total stock of housing in that market, it is less expensive to modify your advertising to get more leads to achieve your desired objective. So, we now have that chugging along 28 MULTIHOUSING PRO | NOVEMBER DECEMBER 2019 inside of one of our services. “We are very early on a five- to seven-year AI journey We are not trying to reinvent the wheel. We are harnessing some of the relationships in our aggregate dataset to make everyday problem solving a little better for our clients,” said Adler. Benchmarking boost Pillar Properties is an early adopter of Yardi’s Elevate-branded, AI-enabled intelligence services designed for C-suite and other operational execs. Norbury gives testament to the predictive analytic and benchmarking prowess of AI-enabled software. “Having benchmark data now allows outliers or concerns to make themselves more readily apparent, so decision making and changes in strategy can be done quickly, with less damage to operational performance when righting a course,” “Also, it can highlight issues relating to specific areas of a business for more accurate adjustments, rather than applying a shotgun approach and perhaps missing the overall mark. We’ve found that by using benchmarking data, we can quickly assess if a troubled asset has issues with pricing, marketing, expense management or perhaps team members—whereas before it wasn’t always that evident. It has also made our onsite teams much more educated and independent to make successful decisions,” said Norbury. Benchmarking data also helped Pillar Properties pinpoint the reasons for lagging performance in certain buildings. “For exam- ple, we found that one of our communities wasn’t reaching our rent growth goals and was having difficulty with occupancy as well, despite a strong competing sub-market that had high occupancy and rent growth. From the data, we found that historically this asset always outperformed its competitors in rents and rent growth and significantly slowed now that it was aging and there was new product online. We were no longer able to push rents, as we were already at the top of the submarket,” said Norbury. After a sensitivity analysis extrapolated from the data showed that significantly dropping rents at the property would result in the occupancy level needed to meet or beat cash flow goals and still remain competitive, Pillar Properties changed focus from rent growth to occupancy and recalibrated its budgets. “We’ve also been able to use benchmarking data to see when our competitors will have expirations and availability in certain floor plans and get ahead of strategizing our own vacancy and marketing plans—we never had tools like this before, and that’s extremely powerful. “The multifamily and real estate industries are finally catching up with the rest of the world in successfully aggregating and digesting information in a valuable way that can improve efficiencies, operations and overall success. The more participation, the more refined the tools will become for everyone,” said Norbury. Author Wendy Broffman WWW.MHPMAG.COM Pillars 2020: Stepping it up 30 MULTIHOUSING PRO | NOVEMBER DECEMBER 2019 WWW.MHPMAG.COM The three towers that house 1,131-units at Waterline Square in New York City, a finalist in Pillars’ best high-rise and best mixed-use categories, are connected by the 10,000-sq. ft. Waterline Club that features an array of amenities, including a skate park, tennis court, rock-climbing wall. WWW.MHPMAG.COM NOVEMBER DECEMBER 2019 | MULTIHOUSING PRO 31 The national obsession with counting steps in the pursuit of physical fitness has spawned a plethora of pedometers in the marketplace and a trend toward pedestrian-oriented neighborhoods in the multifamily world. More than half of the finalists in the developer awards category of this year’s National Association of Homebuilders’ (NAHB) Pillars of the Industry competition were classified as walkable on their application forms. But some are much more pedestrianfriendly than others, according to Walk Score, a website that rates the walkability of almost everywhere the United States, with points awarded from one to 100, based on proximity to amenities, population and intersection density and road metrics like block length. 32 MULTIHOUSING PRO | NOVEMBER DECEMBER 2019 A number of the finalist communities in the competition that honors superior achievement in multifamily development boast walk scores between 90 and 100, earning them the title of Walker’s Paradise, communities where residents do not need a car to accomplish daily errands. Vici Apartments The 97-unit Vici Apartments in the Little Italy neighborhood of San Diego, Calif., a finalist in Pillars’ best mixed-use and best midrise categories, boasts a nearly perfect walk score of 98, with pedestrian access to numerous dining and retail venues. Developed by San Diego’s H.G. Fenton Company and built on a bit more than half an acre by general contractor Ledcor Group of Irvine, Calif., the seven-story rental com- munity that was designed by Orange, Calif.based AO Architects, includes 17,720 sq. ft. of retail and restaurants and a food hall on the first and second floors. The 11,000 sq. ft. H.G. Fenton-developed Piazza della Famiglia, a central gathering place located between Vici Apartments and the seven-story H.G. Fenton-developed Amo Apartments, features a public courtyard with a fountain and retail and the Little Italy Mercato Farmers’ Market every Saturday. For those who prefer to dine al fresco at home, Vici features a rooftop kitchen with a pizza oven, beer on tap, a hibachi grill and a BBQ. The apartment community that includes studio, one- and two-bedroom apartments that range from 554 sq. ft. to 1,136 sq. ft. is a four-minute walk from County Center/Little MHPMAG.COM A wavy-roof amenity building that references the nearby ocean is adjacent to a 5,000 sq. ft. swimming pool at the 516-unit The Residences at Pacific City, a finalist in Pillars’ best low-rise category. The community is made up of six buildings arranged in a semi-circle facing the ocean. Italy, a commuter stop near San Diego’s government buildings, a ten-minute walk to the Sante Fe Depot, 15 minutes to the Civic Center and an 18-minute stroll to Seaport Village, a shopping and dining complex adjacent to San Diego Bay. Apartment interiors, designed by San Diego-based Robin Wilson Interior Design, include Bosch stainless steel appliances, fullsize washers and dryers, quartz countertops, wood-style flooring, and private terraces with operable glass wall systems. 465 North Park Residents of the 444-unit 465 North Park in Chicago, Ill., a finalist in Pillars’ Best HighRise category, are a three-minute walk from the local Target discount store and right across the street from a Whole Foods Market. MHPMAG.COM The 48-story skyscraper that was codeveloped by Chicago-based Jupiter Realty Company and MetLife Investment Management’s Chicago branch, with a curving elliptical design by Chicago architect Pappageorge Haymes Partners, encompasses a stepped tower atop a five-story podium and warrants a walk score of 96 and a transit score of 100, earning it the title of both walker’s and rider’s paradise. The developer also is in process of redeveloping a 1.6-acre, 30-year-old public park just to the west of the apartment community that is close to numerous entertainment and dining venues and public transportation opportunities, including water taxi stops and Divvy stations for the city’s bike sharing program. The market-rate apartment community that was built by Chicago-based Power Construction Company LLC includes units ranging from 523 sq. ft. studios to 2,137 sq. ft. penthouses and townhomes that range from 1,287 sq. ft. to 1,921 sq. ft. with interior design by Chicago-based Solomon Cordwell Buenz. Multiple retail spaces are located on the ground floor with apartments on the second through fifth floors and seventh through 48th floors, penthouses on the top two floors and two-story townhomes on floors four and five. To help 465 North Park stand out in the Windy City’s crowded skyline, the tower is capped by a glowing crown that changes colors in accordance with holidays and special events and conceals the first tuned sloshing damper, which mitigates wind-induced motion, to be installed in a residential highrise building in Chicago. The apartment community that recently earned LEED Gold certification features an acre of amenity space spread over different levels that include a swimming pool, a demonstration kitchen and dining room, a business center and a clubroom with billiards and fireplaces. Anaha Solomon Cordwell Buenz also designed the 318-unit Anaha condo community in Honolulu, Hi, in partnership with Honolulubased Benjamin Woo Architects. Developed by the Dallas, Texas-based Howard Hughes Corporation the finalist in Pillars’ best condominium category is yet another walker’s paradise with a walkability score of 94. The 40-story community that was built by Hawaii’s Albert C. Kobayashi, Inc., is the second of two Howard Hughes luxury towers to rise in the master-planned Ward Village, which was awarded LEED Platinum certification for exhibiting the highest standards of sustainable neighborhood design, promoting pedestrian orientation, bike friendliness and easy access to public transit. The glass-clad Anaha, which means “reflection of light” in Hawaiian, is a fiveminute walk from the Ala Moana Shopping Center that is home to more than 290 restaurants and shops amidst a backdrop of lush tropical landscaping and koi ponds. The 857,000 sq. ft. tower features a variety of retail and dining venues at the podium level, including one of local chef Peter Merriman’s signature restaurants that provide fresh, local and seasonal cuisine, and Hawaii’s flagship Whole Foods Market is right across the street. The studio, one-, two-, and three-bedroom condos rise above 17,000 sq. ft. of retail space at the ground level. A recreation deck on the seventh floor includes an ocean view pool, dog park, tennis court and sand volleyball court. The unit interiors, designed by international design firm Woods Bagot, feature hardwood flooring in living rooms and kitchens and wool carpet in the bedrooms, freestanding tubs in master bathrooms, wine refrigerators and polished-quartz composite countertops. F1RST Residences It’s a very short walk for residents of the 326unit F1RST Residences to Nationals Park ball field that is located adjacent to the mixed-use community that includes 30,000 sq. ft. of retail space. The apartment community that boasts a walk score of 93 also is a quarter-mile from the Anacostia Riverwalk Trail in the lively new Capitol Riverfront neighborhood of Washington, D.C., a mile from Capitol Hill and a three-minute walk from the Navy Yard Metro Station. The finalist in Pillars’ best mixed-use category was developed by Grosvenor Americas, which has offices in Canada, Washington, D.C., and San Francisco, in partnership with Washington, D.C.-based McCaffery Interests, Inc., with design by Hickok Cole Architects and interior design by Hickok Cole Lifestyle, also of Washington, D.C. The community that was built by Bethesda, Md.-based Clark Construction includes a 170-key, extended-stay Residence Inn by Marriott and fitness studios, fastcasual eateries and a full-service restaurant NOVEMBER DECEMBER 2019 | MULTIHOUSING PRO 33 The 97-unit, seven-story Vici Apartments in San Diego, Calif., a finalist in Pillars’ best mixed-use and best midrise communities categories includes 17,720 sq. ft. of retail and dining venues on the first and second floors. 34 MULTIHOUSING PRO | NOVEMBER DECEMBER 2019 WWW.MHPMAG.COM WWW.MHPMAG.COM NOVEMBER DECEMBER 2019 | MULTIHOUSING PRO 35 in the ground-floor retail space. Eighteen dining venues that offer an international selection of cuisine are within a six- to eight-minute stroll and a Harris Teeter grocery store is an 11-minute walk from the apartment community that features rooftop dog park and stadium seating with unencumbered views of Nationals Park. The studio, one- and two-bedroom apartments that range in size from 477 sq. ft. to 1,497 sq. ft. feature floor-to-ceiling windows with views of the riverfront and D.C. monuments and include engineered wood flooring, kitchen islands, stainless steel appliances, in-unit Bosch washers and dryers, porcelain tile in the bathrooms and subway tile backsplashes in the kitchens. Laurel Cherry Creek Located in pedestrian-friendly Cherry Creek North, a 16-block outdoor shopping and dining district in Denver, Colo., the 72-unit Laurel Cherry Creek, a finalist in Pillars’ best The 444-unit 465 North Park in Chicago, Ill., that is a finalist in Pillars’ best high-rise category includes a public park that currently is being redeveloped and features a tuned sloshing damper to mitigate wind-induced motion at the community. condominium category, is within walking distance of more than 600 businesses, including boutiques, spas and salons and galleries and eateries that range from sidewalk cafes to fine dining. The upscale Cherry Creek Mall is located just two blocks away with more than a million sq. ft. of high-end retail and the University of Colorado Urgent Care is 1.5 blocks from the condominium community. Developed by Denver-based PaulsCorp, LLC, designed by Denver architecture firm Johnson Nathan Strohe and built by Colorado-based Haselden Construction with interior design by Denver-based Kimberly Timmons Interiors, the 12-story high-rise community that soars above ground-floor restaurant and retail space, enjoys views of the Denver skyline, Pike’s Peak and the Rocky Mountains. The community that boasts a walk score of 93 is within a five- to seven-minute walk from the Filmore Plaza, The Shops at North Creek and a nearby strip center. The one-, two- and three-bedroom condos and penthouses that range from 934 sq. ft. to more than 4,700 sq. ft. are equipped with gourmet kitchens and free-standing soaking tubs and feature private balconies or terraces with glass railings, eight-foot walnut entry doors, gas fireplaces, wide-plank engineered flooring in all the living areas, wool loop carpet in the bedrooms and multi-panel sliding glass or folding glass doors. Community amenities include a rooftop entertainment deck with a stainless-steel lined saltwater pool and a pool deck that is shaded by a walnut pergola, a summer kitchen with a pizza oven, and a lobby that is adorned by rich walnut woods and brass accents, Carrera marble flooring and a glittering chandelier. Waterline Square A team of three world-renowned architects designed the 2.2-million sq. ft. tri-tower mixed-use Waterline Square that is a finalist in both the best high-rise and best mixed-use categories of the Pillars competition. The 1,131-unit New York City condominium and rental community that encircles a 2.6-acre park designed by Mathews was developed by GID Development Group, which has nine regional offices across the country, and built by New York City-based AECOM Tishman on one of the last remaining Hudson River waterfront sites in Manhattan. Big Apple-based Hill West Architects col- 36 MULTIHOUSING PRO | NOVEMBER DECEMBER 2019 WWW.MHPMAG.COM laborated with the three architects, who designed the individual towers that make up the community that merits a “very walkable” score of 88, according to Walk Score. The 37-story One Waterline Square, which houses 56 condominiums above 216 rental units and is distinguished by an undulating glass and metal façade was designed by Richard Meier & Partners, a Pritzker Prizewinning firm with offices in New York City and Los Angeles, Calif., and features interiors designed by New York City-based Champalimaud Design. Two Waterline Square, designed by New York City-based Kohn Pedersen Fox Associates is the largest of the trio, home to 645 condos and apartments. The 397-foottall tower that tops out at 38 stories is the tallest of the three towers and features interior design by Yabu Pushelberg, which maintains offices in New York City and Toronto. Designed by Rafael Viñoly Architects, the 34-story Three Waterline Square is the smallest of the three buildings, housing 47 condos and 167 rentals. Unit interiors were designed by New York City-based Groves & Co. with marble and wood accents that reflect a contemporary theme. Two and Three Waterline Square include WWW.MHPMAG.COM culinary venues by world-renowned Cipriani and New York City-based Empellón, respectively, and the towers share an amenity program at the Waterline Club that connects all three buildings. Designed by New York Citybased Rockwell Group, the 100,000 sq. ft. space features an impressive array of amenities that include an indoor half-pipe skate park and a regulation-size tennis court, a rock-climbing wall, golf simulator, full-court basketball, and a saltwater lap pool. Modera Midtown The 435-unit, 29-story Modera Midtown, a finalist in Pillars’ best high-rise category, is located in Atlanta, Ga.’s art and technology district. The walkable, transit-oriented community is just steps away from a Whole Foods Market, one block from a MARTA rail station and within walking distance of numerous restaurants and shops. Developed and built by Boca Raton, Fla.based Mill Creek Residential Trust and designed by Bethesda, Md.-based SK+I Architecture, the mixed-use community with a walkability score of 88, includes more than 12,000 sq. ft. of retail and chef-driven restaurant space on the street-facing sides of the ground floor. The 435-unit, 29-story Modera Midtown in Atlanta, Ga., a finalist in Pillars’ best high-rise category, is both walkable and transit oriented and includes more than 12,000 sq. ft. of retail and restaurant space on the ground floor. Located in Atlanta’s second largest business district, that is home to Fox Theatre, High Museum of Art, Opera Nightclub, Whiskey Park and Atlantic Station, the community that includes studio, one-, two- and three-bedroom and penthouse floor plans that range from 564 sq. ft. to 1,458 sq. ft. features a sky lounge, three rooftop terraces, two of which include pools, and an 1/8-mile running track that is elevated 100 feet above street level and wraps the building. The units’ interiors, designed by Carlyn and Company of Great Falls, Va., include under-cabinet and toe-kick lighting, stainless steel appliances and gas cooktops, inhome washers and dryers, and Murphy beds in select studios. The Residences at Pacific City The 516-unit The Residences at Pacific City that is a finalist in Pillars’ best low-rise category is nestled amidst a thriving retail and dining scene, steps away from the sand and NOVEMBER DECEMBER 2019 | MULTIHOUSING PRO 37 The 326-unit F1RST Residences, a finalist in Pillars’ best mixed-use category, is located just a mile from Washington, D.C.’s Capitol Hill and includes a rooftop dog park and stadium seating with unencumbered views of the adjacent baseball park. surf in Huntington Beach, Calif. Developed by Highlands Ranch, Colo.based UDR, Inc., with architectural design by Irvine, Calif.-based MVE+Partners and built by Bernards, also based in Irvine, the community that rates a walkability score of 78 is made up of six residential buildings that encircle three amenity buildings and an adjacent pool deck and is fronted by a twoacre public park. All six of the buildings have courtyards that are connected thematically by a sundial concept that allows for activity levels to flow from one courtyard to the next, throughout the day. This transition is aided by their physical connection points, glass-railed overhead walkways, as well as a boardwalk that runs through the property, providing connection points to the public realm and linking residents to the beach. A curvy-roofed amenity building, intended to convey the feel of an ocean wave, sits next to a 5,000-sq.-ft. pool with an island in the center that is outfitted with a 17-foot diagonal screen for movies and sporting events that lowers into a vault when not in use. The apartments that are arranged in a semi-circle that faces the ocean and Huntington Beach Pier include one-, twoand three-bedroom units that range from 657 sq. ft. to 1,761 sq. ft. with interiors designed by Oakland, Calif.-based Mister Important Design that feature oversized windows, glass sliders, balconies, private patios and rooftop decks. Apartment amenities include hardwood floors, quartz countertops and stainless steel appliances. Winners will be announced on Jan. 21, 2020, during the NAHB International Builders’ Show in Las Vegas. Author Peggy Shaw The 72-unit Laurel Cherry Creek, a finalist in Pillars’ best condominium category, features ground-floor retail and restaurants and views of the Denver skyline, Pike’s Peak and the Rocky Mountains and a stainless-steel lined saltwater pool on the roof. 38 MULTIHOUSING PRO | NOVEMBER DECEMBER 2019 WWW.MHPMAG.COM Surgery #10 0,0 0 0: Seven-month-old Aissata came to t the Africa Mercy seeking help for her cleft lip. Left untreated, the condi ition would have meant serious health and nutritional problems. (Mercy y Ships) H elp is o n th e way than k YO U, U apartm en e t i n d ustry AN D AI M C R U IS E I NC EN NTIVES Mercy Ships opera ates a floating, state-of-the-ar rt hospital staff fed with volunt teer doctors and caregivers to o patients across the globe. Consider this Fund d for community-building or in your personal charity p y. AIM A Cruise Incentives is, , again, ag , matching dollar-for-dollar all donations to Mercy Ships through the end of the year—up to $20,0 $ 0 0. Let’s make campaign 2019 another big suc ccess. For more information on the program: mercyships.org To donate under the AIM match program: mercyships.org/AIM C ELEBRATI NG OVER 100,000 1 L I FE S AV I NG S U R G E R I ES SI NC E 1978 I N D U ST RY C H A L L E N G E BY MULTIHOUSING T PRO MAG GAZINE IS A PROUD P MEDIA SPONSOR OF THIS LIFE-CHANGING INIATIVE T Developing expertise Multifamily professionals who are interested in keeping up with the latest trends in the industry are undoubtedly familiar with NAA’s Apartmentalize and NMHC’s OPTECH shows. However, they may not be aware of another event that is worthy of their attention, particularly if they work in the development side of the industry. That event is NAHB’s International Builders’ Show (IBS). From Jan. 21-23, the 2020 IBS will bring together more than 1,400 top manufacturers and suppliers from around the globe in 600,000 net square feet of exhibit space at the Las Vegas Convention Center. As the largest annual, light-construction trade show in the world, the show highlights the latest and most in-demand products and services, and brings together nearly 70,000 show attendees from across the residential construction industry. In addition to showcasing great new products, the show will feature a new project management track, and will also reveal cutting-edge information and trends in more than 150 education sessions throughout the week. Education Track for Multifamily Pros Many of the IBS education and information sessions are targeted specifically at the mul40 MULTIHOUSING PRO | NOVEMBER DECEMBER 2019 tifamily market segment, including numerous education sessions available directly through the Multifamily Central—the hub for all things multifamily during IBS. Popular sessions include: Controlling Multifamily Construction Costs—Completing a project on time and on budget is critical to a successful multifamily development. Presenter Tom Tomaszewski of The Annex Group will share his insight on how to control construction costs while constructing multifamily projects, including information on the latest building technologies and tools. Multifamily Modular vs. Site-Built: One Design Plan for Comparing Both Options— Modular has been popular topic as a potential solution for quicker development of multifamily properties. But how you know when it’s right for you to tackle your first multifamily project? Learn how to develop a single bid set of plans so you can get pricing and schedules for both site-built and modular from presenter Troy Tiddens of Neudesignarch. This year also brings new multifamily sessions, such as: Gen Z: End of the Alphabet and Beginning of an Era—During the next decade, Gen Z will grow from 8 million to At 2019 IBS, panelists take part in one of the more than 130 educational sessions offered that year. For 2020, in addition to a multifamily track, tracks are available on design and community planning, project management, business management, industry trends and emerging issues and others. Photo credit: Nick Hagen Photography over 55 million in the workplace, apartments and homes. This represents a huge opportunity and a challenge. Discover what Gen Z wants in their home, what they are willing to pay for and their approach to money and spending to help connect and engage with this growing demographic. Tips on Entering the LIHTC/Affordable Housing Sector—Affordable housing projects can be a great investment for multifamily developers, as long as you’re aware of the many federal and state rules you must comply with in developing and managing such properties. Presenter Sean Kelly of Leon Weiner & Associates addresses both the opportunities and obstacles for entering the world of affordable housing and using the Low-Income Housing Tax Credit (LIHTC). Developing a Mixed-Income Apartment Community: A Case Study—Mixedincome apartment communities can add layers of complexities through financing, WWW.MHPMAG.COM investors, syndicators and more. Learn firsthand from presenter Chris Parker at GIV Development about the tips and best practices he utilized to help create Project One, a 112-unit, net-zero project with 70 percent affordable units in Salt Lake City. The show boasts myriad general building sessions devoted to trending topics for home builders as well, including: Best in Show: The Latest Trends in Housing from the Consumer Electronics Show—Technology is a key design area of interest for Gen Z and millennials, and the Consumer Electronics Show (CES) offers a unique perspective into upcoming trends. Panelists will share the latest trends fresh off the 2020 CES floor and how they will impact the home building industry. Protect Your Assets: 10 Best Practices to Manage Risk & Reduce Liability in 2020— Save time and money by incorporating these best practices for risk management into your business operations. Attendees will learn to identify key contract provisions to help reduce liability and alternatives for dispute resolution, as well as updates from recent court cases to understand the latest issues leading to disputes. Separate registration is also available for in-depth education prior to the show through master workshops which will be held Monday, Jan. 20. Hot Spots at IBS In addition to informative educational seminars, IBS also offers a host of other opportunities to learn and network with industry professionals. A full registration also includes access to: Education on the show floor through construction demos at the High-Performance Building Zone, as well as an insider-look at the products and techniques discussed in the zone through the Builder Performance Lab Opportunities to make new business connections, including IBS Centrals dedicated to topics such as multifamily housing, as well as 55+ housing, custom building, design, remodeling and sales Networking opportunities included dedicated receptions and mixers in the Multifamily Central in addition to events such as the IBS Young Pro Party and IBS House Party. Recognizing the Best The Multifamily Pillars of the Industry Awards luncheon on Tuesday, Jan. 21, at 122 p.m. will also honor the best in the multifamily housing industry, including top developments, affordable housing projects, firms, marketing efforts and industry professionals. Tickets to this event are available through buildershow.com. As part of the seventh annual Design and Construction Week®, IBS attendees will also have exhibit floor access to the National Kitchen & Bath Association’s Kitchen & Bath Industry Show. This co-location offers attendees the opportunity to explore a combined total of 2,000 exhibitors covering more than 1 million square feet of exhibit space at the Las Vegas Convention Center. Design and Construction Week will kick off Tuesday, Jan. 21, with keynote Earvin “Magic” Johnson. “It’s our goal for the NAHB International Builders’ Show to be the event of the year for our members and industry professionals,” said NAHB Chairman Greg Ugalde, a home builder and developer from Torrington, Conn. “Nowhere else will you find top-level education sessions, a variety of networking opportunities, special events and an exhibit hall full of innovative products all in one place. This is truly an event you can’t miss.” To register or to obtain more information, visit buildershow.com. Attendees at 2019 IBS in Las Vegas, Nevada view some of the more than 1400 exhibits of the latest products for the light construction industry. Photo credit: Nick Hagen Photography WWW.MHPMAG.COM NOVEMBER DECEMBER 2019 | MULTIHOUSING PRO 41 As economists forecast for 2020, some are already thinking past next recession “Economists generally expect [the United States] will experience a downturn... over the course of 2020 or early 2021,” says Sam Chandan, a trained economist, an associate dean of New York University’s Schack Institute of Real Estate, and a host of the Real Estate Hour on SiriusXM Radio. Chandan presented his “2020 Economic Forecast” at a ULI New York event in November. But Chandan expects a recession, when it comes, to be relatively brief. “Any recession in modern economic history has been relatively short-lived compared to the period of growth to follow,” he said. Given the length of the current economic 42 MULTIHOUSING PRO | NOVEMBER DECEMBER 2019 expansion, Chandan is among those who are already focused on where opportunities to invest in real estate might appear after it is over. Data and in-depth analysis will help investors make the best decisions. And collaboration and cooperation will help lawmakers and local officials create the best policies to encourage growth. Chandan himself is not predicting a recession in the near term. “No economist wants to go on record as saying that the downturn will be in 2020,” he says. “If it isn’t... then they will be remembered for that.” Instead, Chandan is taking a close look at forecasts made by other economists. In October 2019, nearly 50 economists surveyed by the Wall Street Journal revised their estimates of how much the U.S. economy is likely to grow in 2020 to 1.6 percent. That is not a recession, though it is down from their average forecast of 2.0 percent growth the year before, according to the Journal’s Economic Forecasting Survey. That is exactly what economists would do if they believed that a recession was likely: Forecast growth that did not stop but instead slowed significantly below the capacity of the economy. “They are hedging their reputational bets, saying: ‘You know what? I think the downturn is going to be in 2020. I just WWW.MHPMAG.COM growing consistently for 125 months—since the end of the Great Recession in 2009. “This is the longest expansion in modern U.S. economic history,” says Chandan. “In theory, the expansion could continue.” However, clues like the inverted yield curve and forecasting survey point to a slowdown. Investors look for opportunities If the U.S. economy does fall into recession in 2020, it is unlikely to shrink for more than a few months before beginning to grow again for several years, judging from the recent past, says Chandan. Real estate investments are also likely to be less damaged by the next downturn than in past cycles. “Real estate doesn’t appear to be the sector where we are taking risks that won’t pay off,” says Chandan. “By and large, we have been fairly reserved in our development activity, in our investment activity.” That said, Chandan does worry about some loans made to apartment properties. “Commercial real estate has been much more reserved in the expansion of its debt with the exception of multifamily,” he says. Lenders had $1.4 billion in loans outstanding to apartment properties. That’s twice the volume of apartment loans outstanding just before the financial crisis, he says. In the rush to make those loans, some lenders may have lent too much. The average apartment borrower carried $13.95 of debt for every $1 of net operating income in the second quarter of 2019, up from an average of less than $10 of debt in 2010, according to Chandan. “Not all of that debt is going to have been structured in a way that is going to survive maturing in a downturn,” says Chandan. Real estate investors who have not overextended themselves are likely to survive a recession without much damage. “Those who are positioned defensively... are positioned to succeed when growth does return to the market,” says Chandan. These investors will also have new tools to find opportunities in a recovery. That includes extremely granular data that is less fragmented that in the past—and a new generation of analysts and associates who can mine that data so that investors can make better decisions, says Chandan. That will help companies navigate the changing demand for real estate. “The way in which we want to use space is changing on a more fundamental level than we have seen in economic history,” says Chandan. “Obvious examples include the way we don’t want to go on record as saying so,’” says Chandan. Bond investors also are sending a clear signal that a recession might be coming, Chandan says. For several months now, investors have been willing to buy long-term government bonds at a lower yield they get from short-term government bonds. These bond investors are effectively betting that Federal Reserve officials will soon be forced to announce more interest rate cuts to support a faltering economy. Economists and investors have wondered for years how much longer the United States can expand. As of November, it had been WWW.MHPMAG.COM choose to shop.” Investors will also need strong data to navigate slower economic growth over the long term. The United States used to grow at a rate of roughly 3 percent a year, or even more than 4 percent during expansions. During the last decade, however, the usual rate of growth has hung closer to 2 percent. “Over the last 10 or 20 years, the rate at which our economy grows has slowed,” says Chandan. The United States has chronically failed to invest enough money on infrastructure in the United States. “That ultimately exerts significant drags on how productive we can be as individual economic agents,” he says. The growing inefficiency of the labor market has also made it tougher for people to get back to work, becoming a drag on the economy. “The necessary skills that make you relevant have never changed more rapidly,” says Chandan. “We have more jobs open and available today than we have ever had. The difficulty firms report is they cannot find the people with the right skills to fill those positions.” Chandan also sees a mismatch in the housing markets: “The bulk of development that we have seen has been that class A, urban, high-rise building that is well amenitized and is in the top decile of the askingrent distribution, if not even higher.” That creates a glut of housing for upperincome people, and an expensive shortage for everyone else. “There have been eight years in a row where the median American renter has seen his or her rent increase faster than his or her income,” he says. “If teachers, firemen, policemen, and other people who serve community do not have the opportunity to reside within the communities that they serve, then the long-term economic outcomes that we see for the city are impaired.” The solutions to these problems will require cooperation and collaboration, he says. For example, the cities best positioned to grow have the ability to invest in regional transportation infrastructure that helps people get from where they live to job opportunities— and paves the way for dense, new, relatively affordable transit-oriented developments that relieve stress on the housing markets. In localities where stakeholders fail to cooperate, and housing costs continue to rise, the pressure will also rise on lawmakers to pass rigid, new rent-control laws. “No one is winning with some of the outcomes that we are seeing and how we are going about trying to solve the housing affordability crisis,” says Chandan. Author Bendix Anderson for Urban Land Institute NOVEMBER DECEMBER 2019 | MULTIHOUSING PRO 43 How marketers can overcome short-termism Marketing is all about strategy—or is it? To find out, the August 2019 CMO Survey asked U.S. marketing leaders: “How much time do you spend managing the present versus preparing for the future of marketing in your company?” Overall, 341 leaders responded by reporting they spend 68.5 percent of their time “managing the present” and only 31.5 percent of their time “preparing for the future.” This finding holds across company size, sector, and industry. This finding may surprise you given the business and marketing chatter about developing a digital business and navigating technological change to a better future. Visit any marketing blog and you will find practitioners discussing using advanced technologies such as artificial intelligence, machine learning, personalization, and analytics to win future business by improving the customer experience and creating new products and services. So what accounts for this seeming disconnect? 44 MULTIHOUSING PRO | NOVEMBER DECEMBER 2019 Looking at other evidence in The CMO Survey and business press, we’ve identified four drivers causing marketers to focus on the present at the expense of the future: Pressure for short-term earnings: Marketing’s role is often viewed as a lever for driving short-term sales instead of the longterm growth engine it has been demonstrated to be. Quarterly earnings pressure from the stock market triggers the need to focus marketing campaigns on achieving immediate customer wins or extending product lines rather than building new capabilities or creating a breakthrough subscription or platform-style businesses. Too few strategic roles: Marketers are often assigned tactical roles, such as managing social media or promotions. We see this in the August 2019 CMO Survey results showing that marketing leads market entry in only 37 percent of companies, revenue growth in only 36 percent, and market selec- tion in only 20.6 percent. If marketers are not given a seat at the leader’s table, they will not have the credibility to inspire or lead strategic change. Role ambiguity: Additionally, in the February 2019 CMO Survey, only one in three marketing leaders reported that they felt their role was “very clear.” If they feel their roles are too ambiguous, we believe it is likely that marketers may focus on immediate priorities rather than long-term strategies in order to make quick wins and protect what they can control. Marketer compensation structure: In the February 2019 survey, marketers reported that 18.9 percent of their compensation is a performance bonus, on average, with an additional 8.2 percent in company equity. This imbalance can lead to a focus on shortterm success in financial metrics to achieve performance bonuses, rather than focusing on long-term strategic objectives associated WWW.MHPMAG.COM with building equity in the firm. So, what should you do if your marketing organization is caught up in the chaotic whirlwind of the present and you don’t have the time or resources to prepare for the future? Here are a few actionable takeaways we’ve found in teaching, research, and work with companies that we think can help marketing leaders refocus on the future. Adopt a future focus Allocate time every week to think longterm: Strategic planning should not be something that happens once a year. It should be a part of a marketing teams’ daily and weekly thinking. The long-term view means thinking about brand building and customer relationships—both long-term plays—even as shortterm decisions are being made. You can encourage your leaders and teams to think about the future by asking how short-term decisions contribute to corporate and marWWW.MHPMAG.COM keting strategies. If they don’t, they should be tabled or cancelled outright. Invest in marketing capabilities: Organizational-level knowledge and skills embedded in key processes are engines that drive success. Capabilities allow firms to repeat successes, work more productively, eliminate errors, and institutionalize practices. They also make it difficult for peers to imitate, thus widening the competitive gap over time. Marketers report they approach capability-building mostly by hiring new employees with those skills or training existing employees (59.8 percent), but also rely on learning from agencies (14.5 percent) and consultancies (12.2 percent) to equip them with new capabilities and embed them into their culture. Figure out what capabilities are key to your business and build them. Work to create a culture of continuous learning, where employees can obtain new skills on a regular basis. Drive decisions from data: Marketers report using marketing analytics to make decisions only 39.3 percent of the time. This is too low. Embedding analytics into decision architectures can promote a stronger datadriven approach that is not overly reactive to short-term events and weans marketers away from “gut instincts” that are increasingly out-of-place in our data-driven culture. Focus on growth: Marketers report in the February 2019 CMO Survey that “driving growth” is their top challenge. We think it may also be their ticket to maintaining a focus on the future. A growth mindset by definition puts the emphasis on new markets, new products and services, and new partners. Marketers should be encouraged by senior leadership to take calculated risks that align with corporate growth and have these behaviors reinforced in annual goal setting and performance incentives. Deepen cross-functional ties: When marketing partners with R&D, digital, technology, operations, and finance, its sights are set on critical firm-level outcomes. Marketing can, in turn, keep a strategic focus on serving the customer. The value of such ties is why companies are increasingly setting up cross-functional teams to address critical transformation imperatives such as improving the customer experience. Remember that the Amazon Prime success story was not foretold. The program was very controversial within the company when it launched in 2005. It has since become a huge platform for growth. Fund marketing for the long-term: Building growth takes sustained investment. Marketers have reported that their budget is about 9.8 percent of firm revenues and has hovered between 6 percent and 11 percent since 2011 in The CMO Survey. Marketing budget as a percent of firm budget matched its highest level in survey history at 12 percent this year. As companies grow globally, enter new markets, and digitize products and services, they will likely need to invest in marketing to drive new capabilities. This means higher marketing budgets are likely here to stay, although they may temporarily retrench during recessions. Demonstrate the impact of marketing: When asked whether they have been able to demonstrate the impact of marketing spending over the long run, only 41.6 percent said they have been able to prove the impact quantitatively, 39.7 percent said they have a good qualitative sense of the impact but cannot measure it quantitatively, and 18.7 percent have not been able to show the impact yet. Some 10.8 percent of marketers rated providing the ROI of marketing activities as their number-one challenge. The more marketers can demonstrate their impact, the more likely they are to receive additional resources to promote strategic planning. The ability to use data analytics to demonstrate ROI will become a strategic priority in the industry and will separate super-star marketers from the rest. Don’t compete on price—build value: According to the most recent CMO Survey, marketing leaders now believe that customers are less focused on low prices than they are on getting excellent service and superior product quality. A buoyant economy can create such a shift as customers worry less about debt and more about quality. Follow these trends to build more value into offerings—don’t commoditize or compete on price. This strategy sets the stage for long-term growth with options to innovate, deepen customer relationships, and partner to access new sources of value and new markets. It’s human nature to focus on easy tasks that keep business humming, but over time this short-term mindset delivers diminishing results. Marketing can lead into the future with the right support and right focus. Author Christine Moorman is the T. Austin Finch, Sr. Professor of Business Administration at Duke University’s Fuqua School of Business and the editor-inchief of the Journal of Marketing and director of The CMO Survey. Lauren Kirby is a second-year MBA student from Duke University’s Fuqua School of Business with concentrations in marketing and strategy. NOVEMBER DECEMBER 2019 | MULTIHOUSING PRO 45 Why business leaders need to understand their algorithms One of the biggest sources of anxiety about AI is not that it will turn against us, but that we simply cannot understand how it works. The solution to rogue systems that discriminate against women in credit applications or that make racist recommendations in criminal sentencing, or that reduce the number of black patients identified as needing extra medical care, might seem to be “explainable AI.” But sometimes, what’s just as important as knowing “why” an algorithm made a decision, is being able to ask “what” it was being optimized for in the first place? Machine-learning algorithms are often called a black box because they resemble a closed system that takes an input and produces an output, without any explanation as to why. Knowing “why” is important for many industries, particularly those with fiduciary obligations like consumer finance, or in healthcare and education, where vulnerable lives are involved, or in military or government applications, where you need to be able to justify your decisions to the electorate. Unfortunately, when it comes to deeplearning platforms, explainability is problem46 MULTIHOUSING PRO | NOVEMBER DECEMBER 2019 atic. In many cases, the appeal of machine learning lies in its ability to find patterns that defy logic or intuition. If you could map a relationship simply enough between inputs and outputs to explain it, you probably wouldn’t need machine learning in that context at all. Unlike a hand-coded system, you can’t just look inside a neural network and see how it works. A neural network is composed of thousands of simulated neurons, arranged in interconnected layers that each receive input and output signals that are then fed into the next layer, and so on until a final output is reached. Even if you can interpret how a model is technically working in terms that an AI scientist could comprehend, explaining that to a “civilian decisionmaker” is another problem altogether. Deep Patient, for example, is a deep-learning platform at Mount Sinai Hospital in New York. It was trained using electronic health records from 700,000 individuals, and became adept at predicting disease, discovering patterns hidden in the hospital data that provided early warnings for patients at risk of developing a wide variety of ailments, including liver cancer, without human guidance. Then, much to everyone’s surprise, Deep Patient also demonstrated an ability to predict the onset of certain psychiatric disorders like schizophrenia, which are notoriously difficult even for doctors to predict. The challenge for medical professionals in such a scenario is to balance acknowledging the efficacy and value of the system with knowing how much to trust it, given that they don’t fully understand it or how it works. Some organizations and industries are investing in the capability to audit and explain machine learning systems. The Defense Advanced Research Projects Agency (DARPA) is currently funding a program called Explainable AI, whose goal is to interpret the deep learning that powers drones and intelligence-mining operations. Capital One, which has had its own serious issues with data breaches, created a research team dedicated to finding ways to make deep learning more explainable, as U.S. regulations require this type of company to explain decisions such as why they denied WWW.MHPMAG.COM a credit card to a prospective customer. Algorithmic regulation is likely to become more sophisticated over the next few years, as the public starts to become more openly concerned about the impact of AI on their lives. For example, under the General Data Protection Regulation (GDPR), which came into effect in 2018, the European Union requires companies to be able to explain a decision made by one of its algorithms. Arguably in the near future, you won’t be able to design any kind of AI without both a team of top scientists, and also an equally capable team of privacy engineers and lawyers. The rationale behind algorithmic regulation is accountability. Making AI more explainable is not just about reassuring leaders that they can trust algorithmic decisions; it is also about providing recourse for people to challenge AI-based decisions. In fact, the issue of algorithmic transparency applies not only to machine learning, but also to any algorithm whose inner workings are kept hidden. Algorithms that either appear to be biased or are obscure in the way they work have WWW.MHPMAG.COM already been challenged in the courts. For example, in 2014, the Houston Federation of Teachers brought a lawsuit against the Houston school district, arguing that the district’s use of a secret algorithm to determine how teachers were evaluated, fired, and given bonuses was unfair. The system was developed by a private company, which classified its algorithm as a trade secret and refused to share it with teachers. Without knowing how they were being scored, teachers said, they were denied the right to challenge their terminations or evaluations. A circuit court found that the unexplainable software violated the teachers’ 14th Amendment right to due process, and the case was ultimately settled in 2016, with use of the algorithm being discontinued. In the next few years, the number of such challenges is likely to rise. However, for leaders, the most important question to ask the teams designing and building automated solutions may be not why they reached a particular decision, but rather what are they being optimized for? Optimums are important. There’s a classic thought experiment proposed by Swedish philosopher Nick Bostrom called the Paperclip Maximizer. It describes how an AI could end up destroying the world after being given the goal to manufacture paperclips as efficiently as possible, “with the consequence that it starts transforming first all of earth and then increasing portions of space into paperclip manufacturing facilities.” The AI in Bostrom’s paper is not intrinsically evil. It was simply, in his view, given the wrong goal and no constraints. Wrong goals or optimums can cause a lot of unintended harm. For example, an AI program that set school schedules and bus schedules in Boston was scrapped after an outcry from working parents and others who objected that it did not take into account their schedules, and that it seemed to be focused on efficiency at the expense of education. But was it the program’s fault? It was, after all, coded to look for ways to save money. However, unlike the complexities of building and interpreting an AI model—debating and deciding on what a system is optimized for is absolutely within the capability set of business leaders and boards, and so it should be. AI is a tool that reflects our priorities, as organizations and governments. It might seem cold to discuss human fatalities in automotive or workplace accidents in terms of statistics, but if we decide that an algorithmic system should be designed to minimize accidents as a whole, we have to also judge any resulting harm in the context of the system it replaces. But in doing so, we will also have to be ready to be judged ourselves, and ready to justify our decisions and design principles. Leaders will be challenged by shareholders, customers, and regulators on what they optimize for. There will be lawsuits that require you to reveal the human decisions behind the design of your AI systems, what ethical and social concerns you took into account, the origins and methods by which you procured your training data, and how well you monitored the results of those systems for traces of bias or discrimination. Document your decisions carefully and make sure you understand, or at the very least trust, the algorithmic processes at the heart of your business. Simply arguing that your AI platform was a black box that no one understood is unlikely to be a successful legal defense in the 21st century. It will be about as convincing as “the algorithm made me do it.” Author Mike Walsh is the author of The Algorithmic Leader: How to Be Smart When Machines Are Smarter Than You. Walsh is the CEO of Tomorrow, a global consultancy on designing companies for the 21st century. NOVEMBER DECEMBER 2019 | MULTIHOUSING PRO 47 Milling around The Lofts at Sterling Mill located in Franklinton, N.C. opened in November. The 124 year old structure, formerly known as Sterling Cotton Mill, was built in 1895 by Samuel C. Vann. It was placed on the Historic Register of National Places in 1996. The property is the latest by S.L. Nusbaum Realty Co., headquartered in Norfolk, Va. The design of the 96 apartments retained much of the original structure and features. Community amenities include a business center, playground, outdoor grilling area, and a state-of-the-art fitness center. In attendance at the grand opening were family members of Samuel Cannady Vann, founder of Sterling Cotton Mill, including Josephine Dickson and her husband, Warren Dickson and Sara “Sallie” Whitmore. According to Miles Leon, president of S.L. Nusbaum Realty Co., “It was a special treat to meet members of the Vann family. We toured the building and they shared both memories and artifacts that they treasure to this day.” Leon continued, “This apartment community represents a unique blending of the past, the present and the future. Having some of Vann’s ancestors with us today, was very meaningful.” The apartment homes were leased within months of opening and a waitlist has begun, according to Leon. Another unique aspect of The Lofts at Sterling Mill is the offering of below-market rents for residents with annual incomes up to 60 percent or less of the Raleigh-Durham MSA’s median income. Leon expressed he finds “great satisfaction in providing housing that is both of very high quality and very affordable.” Rents for one bedroom units run $749 per month, two bedroom units are $929 and a three bedroom is $1,034. Leon concluded by adding his “thanks to the many stakeholders who made The Lofts at Sterling Mill a reality.” 1. (clockwise) exterior of Sterling Cotton Mill, also known as the Franklinton Cotton Mill, includes historic Industrial Italianate style design elements. The mill was built by Samuel C. Vann, whose son Aldridge built the Aldridge H. Vann House. The mill closed in 1991. 2. The Lofts lobby 3. The Lofts work-out facility includes many original finishes 4. A corridor at The Lofts at Sterling MIll. 48 MULTIHOUSING PRO | NOVEMBER DECEMBER 2019 WWW.MHPMAG.COM WWW.MHPMAG.COM NOVEMBER DECEMBER 2019 | MULTIHOUSING PRO 49 Is Airbnb’s overhaul a turning point? Airbnb Co-Founder and CEO Brian Chesky made a surprising announcement in November. It shouldn’t have taken two major incidents of fraud and violence to convince one of the world’s leading travel brands to upgrade their approach to safety and security. Airbnb, the popular online marketplace for lodging and home-sharing, is no fledgling startup short on resources. It’s a corporate behemoth that’s worth an estimated $31 billion, operating in 100,000 cities, and hosting over 2 million people every night. The company has had eleven years to develop methods to prevent scams, protect their users, and improve the experience of hosts and guests. Yet despite all of this, it has fallen short in major ways. That’s because, like many platform businesses, Airbnb has seen its role as primarily connecting people to each other and charging a fee—not taking ownership of the quality of the full experience that it enables. While the company has been incredibly successful at getting strangers to interact with each other, its growth has been fueled by a hands-off approach where it has avoided blame when things go wrong. It’s largely left it to users and journalists to uncover major problems and work out the details. Whether it’s complying with local tax laws or figuring out when to get the cops involved, Airbnb has shirked responsibility for the hard questions. But that may no longer be the case. On November 6, Airbnb Co-Founder and CEO Brian Chesky announced plans to dramatically improve the way the company treats users and enforces the rules. In an email to employees, he laid out a series of productive and sensible steps to restore and increase 50 MULTIHOUSING PRO | NOVEMBER DECEMBER 2019 trust in the platform and community. Most notably, he promised to verify the accuracy of all seven million listings in the marketplace. This was followed by a The New York Times interview where he stated that as an industry “we have to take more responsibility for the stuff on our platform,” and that his shift in thinking may have been “too gradual.” It was a remarkable admission—and it may signal a turning point in how we view the economics of Silicon Valley’s favorite business model. Over the last decade, platforms have transformed finance, media, gaming, and many other industries. Whereas traditional businesses would own everything and deliver services and products directly, platforms work by creating an ecosystem where different parties can connect with each other and exchange goods, services, and information. This leads to a fundamentally different orientation. Transportation platform Uber owns no vehicles of its own. It makes its money by connecting drivers and riders to each other, while e-commerce platform Alibaba owns no warehouses or inventory of its own. It connects shoppers and sellers. Platform owners focus on setting the rules and maintaining the infrastructure. In exchange, they typically take a piece of every transaction. As a result, companies have been able to achieve massive scale rapidly, making them enormously disruptive. While the business model isn’t new, advances in technology have made it much easier to match, curate, and analyze different participants and their needs, leading to an explosion in popularity. The problem has been that in the pursuit of profits, platforms are notorious for cutting corners with moderation and quality control. Issues don’t get addressed until after harm has been caused. They often pass the costs of cleaning up their messes on to individuals, government, and society. Whether it’s Facebook collecting ad revenue while its users are being manipulated, Amazon selling banned and unsafe products without checking, or YouTube recommending violent videos to children, the issue is the same: a gatekeeper is falling behind, ignoring the downsides, and not doing their job properly. Airbnb’s announcement is striking because it’s so rare for a platform company to offer to absorb the costs of their own externalities. Instead of deflecting, it is holding itself accountable. If it follows through with its commitments, it will raise the bar for what’s expected of a platform operator. Other companies will be forced to re-evaluate what they can get away with today, and the whole industry may move to a more mature stage of development. Platform companies often break new ground, and it would be unfair to expect them to solve every problem at the outset. But we should absolutely demand they learn as they grow and take more responsibility for their impacts. Their success doesn’t have to be at our expense. Investing in trust requires a good-faith effort to prevent problems before they occur. Author Tarun Wadhwa is an entrepreneur, academic, and writer who is working at the intersection of technological advancement, innovation, global growth, security, and public policy. WWW.MHPMAG.COM Reach New Heights with NAHB Multifamily Multifamily developers and builders face local and national business challenges every day. NAHB Multifamily is in your corner to provide you with the edge you need to overcome those challenges and build a successful business. As a member of NAHB and the Multifamily Council, you'll be first to receive updates on all facets of the multifamily sector, along with opportunities to connect and share best practices with other business leaders. Most importantly, you'll have a platform that allows your voice to be heard. With direct access to industry and government leaders who drive multifamily policy, you'll help shape and influence the decisions that impact your business. Learn more and join at nahb.org/whymultifamily OK Boomer is just the first salvo of a larger generational showdown The inscription (above) is reminiscent of another that, according to Newsweek, was unearthed in the Sumerian city of Ur (located in modern-day Iraq and founded in 3800 B.C.), which says, “If the unheard-of actions of today’s youth are allowed to continue, then we are doomed.” Whether these tablets actually exist is unclear. (Snopes, where are you when we need you?) What matters is that variations of these quotes have been circulating for at least a century, and there’s a reason for that. OK Boomer and generational discord Few will disagree that there is a tendency for generations to caricaturize one another. The young tend to see the old as fuddy-duds and scolds, while the old tend to view the young as disrespectful, lazy, and rebellious. Nowhere is this more evident than in the current OK Boomer movement. If you’re not familiar, OK Boomer is an internet meme and catchphrase that went viral in 2019. It’s used by Gen Z and millennials to mock baby boomers grousing about their work ethic and attitudes. To be fair, young people have something to grump about. (I say this as a Gen Xer who has no skin in the game.) They’ve been accused of being emotionally fragile, sexless, lazy, ingrates who are going to die faster than everyone else (so there!) 52 MULTIHOUSING PRO | NOVEMBER DECEMBER 2019 The extent to which any of these characterizations are true is open to debate, as is the extent to which baby boomers and Gen Xers actually believe these things. (One could argue that much of the discontent is driven by weak social science and media who fan outrage to gin up clicks.) What matters is that young people are getting a little tired of the caricatures, evidenced by the commercial success of OK Boomer merchandise. In turn, baby boomers appear to be irritated by the young upstarts who are clapping back. “OK, millennials,” Myrna Blyth, senior vice president and editorial director at AARP , told Axios. “But we’re the people that actually have the money.” The internet exploded over Blyth’s comment, of course, and the AARP quickly disavowed her words. While the (over)reaction to Blyth’s comment is much ado about nothing, it foreshadows a greater conflict ahead. OK Boomer is part of a larger showdown The baby boomers might “have the money,” as Blyth put it, but they’re also leaning on millennials and Gen Z to collect more of their paychecks. About 44 million Americans received Social Security benefits in 2018, and about 34 million of those were baby boomers, who According to Smithsonian Magazine, an Assyrian clay tablet from 2800 B.C. bears a gloomy inscription describing how the Assyrian youth were ruining civilization. “Our Earth is degenerate in these later days; there are signs that the world is speedily coming to an end; bribery and corruption are common; children no longer obey their parents,” the tablet supposedly reads. continue to retire at a clip of roughly 10,000 per day. That’s a lot of retirees to support. Before you begrudge boomers too much, consider a few things. First, boomers contributed lots of money to Social Security over the years themselves. Second, most of them are banking on that Social Security income, one of the proverbial “three legs” of the retirement stool, along with pensions/ employer-sponsored accounts and personal savings. Third, boomers haven’t done a great job building out the other two legs—45 percent say they have zero retirement savings!— so many of them really need those Social Security checks, even if they have less debt and more equity than any other generation. Nevertheless, Gen Z and millennials have some legit gripes. Baby boomers might have paid into Social Security, but millennials and Gen Z are being asked to pay a lot more—for a program that will likely offer them less return. Social Security will begin drawing down its assets to pay retirees their promised benWWW.MHPMAG.COM efits. Without program changes, the trust will be depleted within 15 years. In 1960, when the oldest boomers started paying Social Security, they paid 3 percent on income up to $4,800 ($41,000 in 2018 dollars). By 1970 they were paying 4.8 percent on the first $7,800 ($51,000 in 2018 dollars). By 1980, when the youngest boomers were hitting the workforce, they were paying 6.13 percent on the first $25,900 of income ($80,000 in 2018). Workers today, on the other hand, are paying 6.2 percent on income up to $132,900. That’s a far greater contribution (if you can call it that) by a long shot. The problem is it’s nowhere near enough. Next year, The New York Times reports, for the first time in nearly 40 years, Social Security will begin drawing down its assets to pay retirees their promised benefits. Without program changes, the trust will be depleted within 15 years. “Then, something that has been unimaginable for decades would be required under current law,” says the Times. “Benefit checks for retirees would be cut by about 20 percent across the board.” Does anyone think retirees will sit back and take a 20 percent shave on their retirement? Me neither. So what happens? It’s hard to say, but we should first recognize that this is no easy fix. Who’s going to budge? One of the problems with Social Security is that as the program has aged, fewer and fewer workers are supporting more and more retirees. In 1945, there were 42 workers per beneficiary. By 1960, there were just over five workers per beneficiary. From 1970 through the 2000s, there were between three and four workers for every retiree. Today, 2.8 workers cover each retiree’s benefits, according to the Social Security Administration. By 2030 there will be just 2.4 workers supporting each retiree. (In Europe, the worker-retiree ratio is even lower.) However you slice the data, it’s clear that to sustain its growing population Social Security will require much bigger, ahem, contributions. Okay, call them taxes, FICA. Whatever. The point is, the coming generations will be asked to pony up a lot more. How much? Well, the trustees of the Social Security program project the cash-flow deficit over the next 80 years to reach a staggering $44.2 trillion, says economist Veronique de Rugy. That’s trillion, with a t. To put that figure into perspective, total federal revenues in WWW.MHPMAG.COM 2019 amounted to $3.46 trillion. There are pathways to making Social Security solvent, of course. Most of them involve young people paying more in taxes and retiring later. To fund Social Security for a generation 12 times wealthier than they are. The irony of it all is almost too much. The “lazy” Millennials and “self-absorbed” Gen Zers will soon be asked to cough up trillions to cover the retirements of the boomers who mercilessly mock them, all to fund a program most millennials worry will not even exist by the time they reach retirement. One cannot help but wonder if, when called upon to pay these obligations, millennials and Gen Z will just cock their heads and reply, OK Boomer. Author Jonathan Miltimore, fee.org (1) The of workers supporting each future Social Security recipient is on the decline. (2) Lindsay Lohan meme. OK boomer dates back to 2015 on 4chan as an insult amongst users aimed at those who seemed out of touch. It took off this year on Chinese-based TikTok. The song by Peter Kuli & Jedwill, “OK BOOMER!”calls boomers racist, fascist Trump supporters with bad hair. The song became popular on TikTok sing-along videos this fall. Number of o workers supporting one So ocial Security retiree 45 40 35 30 25 20 15 10 5 0 1945 1950 1960 per OASDI beneficiar y 41.9 16.5 3.7 1970 3.2 1980 3.4 1990 3.4 2000 2.9 2010 2 2.8 20 019 2.4 2030 SOURCE: 2019 OASDI TRUSTE EES REPORT NOVEMBER DECEMBER 2019 | MULTIHOUSING PRO 53 Virtual tours and live videos give rental prospects intimate access Matt Weirich devised the concept of a video leasing platform after a painful apartment hunting experience when he graduated from Purdue University and moved more than two hours away to Chicago. Weirich says he made the drive six weekends in a row to tour more than 40 properties in person before settling on where to live and signing a lease. “How can we streamline this process?” he wondered. “I knew it was a pain point for me, as a consumer. What I saw online on the apartment websites was never what I actually wanted to see at the property itself,” says Weirich, co-founder and CEO of Realync, a multifamily video leasing and engagement platform that enables apartments to host their own custom live video tours and create personalized pre-recorded videos for prospective residents. “If I’d been able to see what I wanted to see and narrow that down to about 20 properties, I could have cut out half of my trips to Chicago and really honed in on where I wanted to live and what kind of property features mattered most to me,” he says. Tap into technology to help renters research online Prospects prefer to do most of their research online and don’t want to waste time visiting more than a few properties, so why not give renters what they want and assist them in the leasing process by providing helpful content in as many formats as possible? “We make so many buying decisions using 54 MULTIHOUSING PRO | NOVEMBER DECEMBER 2019 research tools online, and consumers are starting to appreciate the convenience of not having to come in to the office and fill out forms,” says Katrina Greene, Senior Regional Manager at Sheehan Property Management. As part of their lead follow-up process, Sheehan property managers email prospects personalized Realync videos to highlight property features like the fitness center and pool, and to do walk-throughs of individual units a prospect shows interest in. “Our tour numbers are starting to decrease, but leasing velocity has stayed the same,” Greene says. “We still have to put in the effort to get the lease, but we are doing it with the help from multiple software platforms.” Why add video tours to apartment websites? Video content is projected to account for more than 80 percent of all web traffic by next year, continuously increasing the value of video content marketing. “I think, from the sales team’s standpoint, video tours are hugely beneficial,” says Marcella Eppsteiner, Vice President of Marketing at Mission Rock Residential, which oversees more than 105 apartment communities across the U.S. “In today’s climate, it doesn’t even matter which market, it’s all about eCommerce for consumers—and that even includes finding a home,” Eppsteiner adds. “Especially the millennial generation, they’re more mobile and move from market to market, be it for a job or they just want a change in lifestyle and will move if they think it’s an enhancement.” While physically showing up at a property used to be the only way to sign a lease, much of that process has migrated to a digital platform. Prospects can pre-qualify and apply for a lease on many property websites after using online technologies to gather all of the details they need to make a decision. “Right now, we have online leasing happening, where people can and sometimes do lease sight-unseen—if they have access to all of the right information,” Weirich says. “Residents are on a spectrum. On one end is the prospect who is going to have to come back 20 times before they make a decision, and on the other end there’s the person who will sign a lease based on one photo posted on Craigslist. “Realync is helping onsite teams capture more of that spectrum that’s currently underserved, or at least the experience is below the level they’d like when it comes to doing research online and truly experiencing a property,” he says. Embedding video on website presents challenge When property managers send a prospect a Realync video, it’s a unique link that delivers data back to the property on how that prospective resident engaged with the video content. In that scenario, the property has already made contact with the lead and is following up with personalized videos based on what they know about that person’s buying needs and priorities. WWW.MHPMAG.COM CEO, VP , COO, CPM, ARM, ACoM, AMO, CAPS, CAMT, NALP (We love reading our readers’ letters) WE’VE GOT JUST ONE FOCUS: BUSINESS PROFITABILITY RESERVE YOUR AD SPACE NOW John Clemens • 925.984.2651 Videos simply embedded on a website, while incredibly powerful for driving traffic and engagement, don’t deliver to multifamily professionals the same in-depth analytics possible with other kinds of content. To overcome this digital challenge, Realync recently partnered with PERQ to integrate tour videos into the AI-driven website conversion software. In the first four months of initial testing on two property websites with PERQ, the videos ranked second for online lead-to-lease conversions and second for overall engagement on the sites. “Historically, when embedded videos were put on a website, we had no way of tracking anything about the person who watched them. We could tell how many views and unique visitors, but nothing beyond a macro view,” says Realync Director of Operations Jordan Easley. “Now, PERQ is able to carry that through to an actual conversion point and then tell us exactly who watched the video and other important details about that person.” PERQ’s technology identifies and tracks individual leads who engage with the videos and other interactive website experiences like a budget planning tool and neighborhood assessment. The in-depth prospect data gathered on the website helps property managers create more specific personalized videos to email prospects after they visit the website, increasing the effectiveness of the lead follow-up. Equip your strongest sale team members to leverage live videos Eppsteiner calls the virtual tours on Mission Rock’s property websites “a game changer” for the on-site leasing teams, because consultants can digitally provide the highest quality customer service; however, she advises it takes a top-notch leasing agent to maximize the marketing impact of the videos. “When you utilize and leverage a virtual tour in the sales process, you have to have a strong sales person who is incredibly dedicated to customer service,” Eppsteiner says. “They can walk the prospect through where their new home would be. From a prospect standpoint, virtual tours are equally important by aiding in their search. They can actually see the community, and then engage with a higher caliber sales team.” For leasing specialists worried AI technology and virtual tours will put them out of a job someday, Easley says only underperforming agents who don’t look at multifamily leasing as a long-term career path will be eliminated by the efficiencies that technologies grant overburdened leasing offices. “Instead of eight leasing agents at a property with a couple of underperformers, 56 MULTIHOUSING PRO | NOVEMBER DECEMBER 2019 maybe you have six and reinvest in those best six, equipping them with technologies to help them perform even better,” Easley says. “It delivers a better experience for leasing agents and prospects alike.” Easley points out multifamily property owners and regional managers win by saving money with increased efficiency and likely making more money by improving online lead conversion rates. Your best leasing agents win with bigger commissions split between fewer people and will be more satisfied with their job when given tech tools that improve their results. Give prospects intimate access without resorting to self-guided tours In the residential housing market, there’s a growing demand for self-guided tours, where homebuyers can access and see a property at any time without an agent present. “The real estate industry in general, starting with the single-family home industry, is moving very quickly to 24/7 open houses where the prospect tours the house by themselves,” says Bob Romine, owner of R.C. Romine & Associates, a marketing and advertising firm that primarily serves multifamily property clients. “Yes, there’s a lot of hesitation on it within the multifamily industry.” With the trend of self-guided tours making waves in the housing market, several multifamily leasing experts we spoke to say they fear renters may start demanding similar access to available apartments. “It’s certainly a buzzword phrase in multifamily lately,” Weirich says. “The hesitation is really two-fold. For one, there’s a security concern, particularly if the community isn’t tech-enabled and set up for self-guided tours. That’s a really big issue. Secondly, are we going to get rid of leasing consultants as we know them today? The answer is no. The leasing agent is still an important part of the process no matter what technology they use.” Live video tours hosted and personalized by a property’s own leasing staff may offer the perfect solution to the multifamily industry’s conundrum of self-guided touring that raises questions about security and safety of the other residents or lack of insight from the leasing team. Self-guided tours also eliminate the opportunity to build the relationship between the leasing agent and prospect that’s critical to instilling trust in a property they may call home. And, in reality, self-guided tours would likely be hosted in a model unit and not the actual apartment available to lease, Weirich points out. “Realync videos are unit-specific tours and connected to a leasing agent who can answer your questions, and instill trust and transparency into the process,” Weirich says. “We feel like we’re the marriage between streamlining the leasing process to be able to experience it from anywhere, but also enhancing it with a physical leasing agent still being involved.” Nurture out-of-market leads with virtual tours Renters moving from afar and seeking an apartment outside of their current market are the most obvious target for apartment tour videos, although they’re also helpful to prospects who live in town but want to eliminate several properties from their list of potential apartment communities before booking tours to see their top few choices in person. “We have a lot of student housing growing on the platform because of international students,” Weirich says. “It’s incredibly helpful, whether moving two hours away, or to another state or even another country.” Sheehan leasing consultants often utilize the videos to reach out-of-market prospects, sending separate customized videos of the amenities, neighborhood, specific units available, and sometimes even videos of the staff welcoming them to the community. “Virtual tours, or rather actual video footage of the unit, have allowed us to be more effective salespeople to prospects who are out of state or live outside of the U.S.,” Greene says. “They are able to make a confident buying decision without physically being here.” Author Kristy Esch, PERQ MHPMAG.COM W E D O N ’ T WA N T T O B E A WE DON’T WANT TO BE A We’ve scoured the utility management landscape. We sought to solve common problems, cover current issues and devise strategies for the future of utility management. But we aren’t enough. We need to increase our knowledge base. We need to create better strategies. We need to build a better advisory team to serve us all. Join the best and brightest owners and managers involved in utility management to create the ultimate Utility Management Advisory Team. Join today at umadvisory.org The Closer Making disparate impact deliver fairness HUD’s proposed revisions to our disparateimpact rule enhance our commitment to fairness for everyone. Everyone agrees that discrimination has no place in society. But everyone also agrees that a city should be able to require that landlords kill rats without facing a lawsuit. The current “disparate impact” rule under the Fair Housing Act (FHA) does not reflect this common sense. But the Supreme Court has ruled that it does not have to be this way, and the Department of Housing and Urban Development (HUD) is proposing a revised rule that both fights discrimination and stops courts from second-guessing reasonable requirements (such as rat removal). It is good for housing and for the people protected by the FHA. Long before becoming a pediatric neurosurgeon and later HUD secretary, I grew up in tenement housing where there were rats the size of cats. I did not know much about the world at the time, but one thing was selfevident: Nothing good comes from rats. But in Gallagher v. Magner (2010), a federal appeals court allowed a lawsuit to proceed in Saint Paul, Minn., where the city was sued for aggressively enforcing its housingcode policy on rat removal. Landlords argued that the city’s enforcement efforts had an illegal disparate impact because they would drive up rents, disproportionately affecting minorities. The city withdrew its appeal of this case, which had reached the Supreme Court, bowing to significant pressure from the Obama-era Department of Justice. Many Americans without law degrees may wonder how such a case could arise. The FHA prohibits discrimination in the sale, rent, or financing of housing-related activi58 MULTIHOUSING PRO | NOVEMBER DECEMBER 2019 ties based on protected classes such as race, sex, or religion. Traditionally, this has meant treating people from different groups differently, or “disparate treatment.” However, under “disparate impact,” businesses and towns can also be liable for policies and ordinances that are neutral on their face, neutral in intent, and neutrally applied but under which a protected minority group is disproportionately affected. Disparate-impact litigation is hotly contested. Proponents argue that expansive disparate-impact liability helps overcome the country’s history of racism. They emphasize its use for targeting hidden or unconscious biases or remedying past wrongs. Critics argue that the FHA did not expressly authorize disparate-impact liability, that virtually every policy causes some statistical imbalance, and that it is unfair to hold governments and businesses liable for otherwise legal and even necessary actions—such as killing rats—because it was discovered after the fact to have a disproportionate effect. The Supreme Court resolved some of this debate in 2015 under Texas Department of Housing and Community Affairs v. Inclusive Communities Project, Inc. There, it upheld the existence of disparate-impact liability under the FHA but outlined some prudential and constitutional limits. These limits, to quote the Supreme Court, help avoid setting “our Nation back in its quest to reduce the salience of race in our social and economic system.” The proposed new rule better reflects the Supreme Court’s ruling in Inclusive Communities Project and provides everyone with better guidance on what constitutes unintentional but unlawful discrimination. Under HUD’s proposed revisions, plaintiffs must demonstrate that the challenged practice is arbitrary, artificial, and unnecessary. Plaintiffs must also show a robust causal link between the challenged policy and the disparity that is not established by statistical imbalances alone. Defendants would also be able to assert as a complete defense that the actions they took were required by other state, local, or federal laws. It is only fair that a party should not be found to violate one law for following another. Our proposed rule revisions, if finalized, would make disparate-impact liability work better and more fairly. This will provide plaintiffs with a roadmap for pleading stronger cases (evidence shows only about 20 percent of claims are successful on appeal) while empowering defendants to assert effective defenses earlier in the process—saving them and their customers time and money. Ultimately, these changes will lead to more innovation and an increase of lower-cost housing and related services. I understand that people may have differing opinions about the proposal. We welcome and encourage comment letters on any issues raised by the proposed rule and will consider all of them seriously to make sure the disparate impact regulation is as effective as it can be. As numerous recent actions taken by HUD, such as our anti-discrimination lawsuits against Facebook and the city of Los Angeles and our investigation into San Francisco’s housing policies, demonstrate HUD remains vigilant in our mission of pursuing justice on behalf of Americans who are victims of housing discrimination. HUD’s proposed revisions to our disparate-impact rule enhance our commitment to fairness for everyone. Author Ben Carson is secretary of the Department of Housing and Urban Development. The Closer is a forum for provocative thought relating to the multifamily housing industry. The views herein do not necessarily reflect those of the magazine. Send submissions to mr@mhpmag.com MHPMAG.COM Get the most from your marketing. Get results. IMAGE A DV E R T I S I N G ST T RA R TE E GY BRAN N DING RESULTS I M AG E A D. C O M RealPage® Market Analytics WHAT’S DRIVING YOUR DEALS? “ We highly value RealPage Market Analytics because it provides details on rent rolls such as lease renewals and true revenues that simply aren’t available anywhere else. — Aimee LaMontagne Baumiller, Vice President, PNC Bank For more information, visit www.realpage.com/MarketAnalytics © 2019 RealPage, Inc. All trademarks are the property of their respective owners. “