Among the biggest, and most contested, changes are the decrease in the required the Loan-to-Cost (LTC) from 90 percent to 83.3 percent, for the FHA 221(d)(4) program for market-rate new construction. The Debt Service Coverage ratio (DSC) has also been increased, to 1.20 percent from 1.11 percent.

The new requirements make it incumbent on developers to raise more equity‑as much as an additional 10 percent more in cash, according to calculations by Johnson Capital.

Developers are not pleased with the increased requirements. HUD has said it will revisit the guidelines around January 2012 to see if market conditions still warrant the new rules. Will change come before then, however? Word is that although the rules have been passed, the National Association of Home Builders continues its discussions with HUD…

As far as I can figure, the phone started ringing in earnest about sixty days ago. At first, the work was coming in as sort of a steady trickle . . . drip, drip, drip: a combination of both completely new developments and others previously left for dead. The drips have combined and become a relatively steady flow, so much that we’ve been able to bring back some of our people who were temporarily sidelined during the economic maelstrom.

Thankfully, I’m not an analyst or a prognosticator, but if I had to make an assessment of what is motivating new life for so many multifamily and mixed-use projects, I’d say it’s some combination of more money being generally available, and the impetus to get some vertical construction underway while pricing is still at depressed levels. If a meaningful quotient of the projects we’re now looking at—especially the resurrected ones—actually break ground and get rolling, this will put pressure on the pricing, and the window will gradually creak closed. So this current environment is going to work out well for the first teams to make the leap.

Another factor may be the subtle recovery of apartment fundamentals. In what must definitely be a characteristic of “the new normal,” improvement in this case is defined as a leveling off or cessation of the decline in rents and occupancies. This encouragement, however modest, may be enough to ignite a latent intention to build already brought near the flash point by the “available money/construction sale” scenario described above. Whichever it is, I’ll take it.

Finally, it is encouraging to witness the amount of “possibility thinking” I see going on right now. We have re-visited many projects, which have that “designed at the peak of a bubble” flavor—just a little too much with inflated optimism—that are now seeking an obtainable paradigm. Some are attempting to push the constricting envelope of building and fire codes to get just a little more into package that works with a less dense construction type. In other words, I’m seeing a new enthusiasm, albeit need-driven, to imagine a better mousetrap.

What a joy to be in the last half of 2010, a year I’m sure we’ll all be glad to have behind us. Meanwhile, time to pop another Red Bull and get back to the drawing board.

(Daniel Gehman is principal at Thomas Cox Architects. He can be reached at DanielG@tca-arch.com)

It seems to be the tendency of 21^st Century Big Money to have a ideological opposition to “Big Government.” But in this case, homeowners and renters are lucky because industry is coming out in favor of government support, as in government support for the mortgage finance system. Free Marketers are not so pro-Free Market when the government support also helps them.

It is a fundamental fact of human society that certain things cannot be handled by the Free Market. And you need laws and enforcement to hold back thievery, cheating, etc. That’s why you have governments.

Why do we have to make such a basic explanation of human civilization all over again?

Sorry, maybe because of my background, I have not been ideologically brainwashed by the 21^st Century Free Marketers into holding a rabid attitude against governments. I have nothing against “government.”

And the accompanying news was that the yield on the benchmark 10-year Treasury bills had fallen back further, to 2.69 percent. Recently, the yield has been in the 2.90 percent range, and we thought that was low (albeit higher than the low-2 percent levels reached during the depths of the financial crisis in late-2008/early-2009).

Just as I was getting ready to submit a blog today on this subject, I found the news had caught the eye of at least another blogger. A piece was ran late this morning with the title, “The Meaning of 2.71.”

How about it, multifamily? With Fannie and Freddie spreads around 200 basis points for the highest leverage deals, all-in interest rates can be in the 4-5 percent range depending on the transaction, said one lender I spoke to. Low rates like these can generate a lot of cash and additional wealth creation. They can enable more deals to work and/or enable sellers to sell for higher prices?

I was in Manhattan about two weeks ago, and it pretty much took a full 24 hours for me to understand I wasn’t in the city of angels anymore. Initially, I waited like a good soldier at each intersection for the light to flash the “all systems go” white walking guy. And the blocks are really small, have I mentioned that?

Pretty soon I began to notice that people were breezing by me as if it were nothing at all to cross the street regardless of what the pedestrian light said. “Wow,” I thought, “these folks are really brazen.” Really, at the end of the day, the stop lights for pedestrians were suggestions, at best.

Fortunately for me, on my first evening in New York, I had dinner with some locals. I explained my dilemma with the cross walks, and, probably without meaning to, they gave me that “Oh, you poor naïf” look. The succinct explanation offered to me: “Daniel, this is New York. Pedestrians rule. You look both ways, and if there are no cars, you cross. No big deal.”

The next day, I watched for a while, and it was absolutely true. Emboldened by this revelation, I pretty soon tried my first crossing against the flashing hand. Wow—on the 30-ft. wide, one-way streets, it was not a big deal at all. In fact, it was kind of exhilarating—I felt freed to pursue my own goals, as long as I wasn’t threatened by a speeding vehicle.

This works, of course, because so many of the streets in Manhattan are really narrow. Seriously, by comparison, even the typical street in downtown LA is like a thruway—the distance to cross is so great, and the cars are moving so fast, do you really want to take your life in your hands? I have been trained, it is clear, that the car is king, and I need to take my rightful place in the divine order of things.

And so it is. It’s LA; cars rule, peds drool. Will it always be thus? I don’t know. One Thursday a month, in the evening, the emerging gallery district along Spring street comes alive with tens of thousands (I suppose) hipsters out to sample the fare from the food trucks and cruise the galleries. Temporarily the pattern is reversed, and downtown adopts a New York state of mind. It’s a glorious thing.

Maybe as downtown LA continues to emerge, we should have a lot more one-way streets, and generally narrow half of them by making the sidewalks wider and more inviting. In NYC, the heavy traffic is grouped to bigger streets about 10 blocks apart, as far as I can tell. Maybe we need a little more of that.

(Daniel Gehman is principal at Thomas Cox Architects. He can be reached at DanielG@tca-arch.com)

The latest National Multi Housing Council (NMHC) Quarterly Survey of Market Conditions released in May showed “widespread improvement” in the apartment sector. The apartment sales volume index even increased to a record, of 72 from 56.

In the midst of the newfound optimism, we have news this week that the national economic recovery is slowing. Some experts even say the consumer spending slowdown will last through 2011.

Will this economic reversal continue into future months, and take a bite out of recent improvements in commercial real estate industry conditions, or at least, sentiments?

In the three years my system has been operating, this is pretty much how it has performed. Then an interesting phenomenon occurred. This spring, my wife, who operates a home-based business, was away for several months. In the first 30 days, my energy consumption matched, almost to the kilowatt-hour, the amount produced, resulting in a zero power bill. This happened again in the next month. In the third month, that meter must really have been spinning backwards, because I posted a credit! This became quite a motivator—sport almost—and I tried to double down on my conservation efforts to see how long I could stay in the black.

This week in Los Angeles, the City Council agreed to consider a feed-in tariff program for the Department of Water and Power. If approved, it could foment a large move into “distributed infrastructure,” which is very much a harbinger of the future. Roofs of buildings, large and small, could be retrofitted with solar arrays that generate many more watts than the facilities need, with the overage being sold back to DWP. In the cases of large warehouses with low power demand, this could add a nice little punch to the bottom line. It will help stimulate “green” business and manufacturing, too, and will inevitably push us closer to a massive paradigm shift.\

Expect the utilities to squeal. After all, this will cut into their revenue stream. However, the potential of credit back for the PV systems will make the cost of their installation defensible for many more people, even some single family homeowners.

Like me. If DWP goes for this, our other California energy providers will follow. I have already reduced my electric bill dramatically; I would love to eliminate it completely, and have it instead become a modest revenue stream for me. (It probably won’t hurt re-sale value, either.) There’s 4.5 years left to accomplish this goal. Let’s get cracking!

(Daniel Gehman is principal at Thomas Cox Architects. He can be reached at DanielG@tca-arch.com)

The new set of laws supposedly provides for: increased regulation of the financial industries–tightening oversight of the derivatives market–and consumer protections in the use of financial products. It is purported to put into place procedures to help avoid future tax-payer-funded bank bailouts. And it increases capital requirements for banks.

Read some comments about the bills here. And our sister publication Commercial Property Executives earlier discussed (“Upward Climb,” p. 30) the bill’s possible effects on the commercial real estate market specifically. In particular, lenders were required in the House bill to have more “skin in the game” in CMBS, which could mean more careful lending.

In its recent white paper, NAI Global points to a projection that by mid-2013, the U.S. will see the same number of jobs as at the beginning of September 2008.

That does not appear exactly to be good news, when you think that every year new people also enter the labor force. (The U.S. population continues to grow every year and is projected to reach almost half a billion in 30 years’ time.)

Can the trend of weak job creation be sufficiently reversed given the continued loss of jobs due to outsourcing and factory relocations overseas?

The unemployment rate would still be an “anemic” 7 percent by mid-2013, says NAI Chief Economist Peter Linneman. Hence the title of NAI’s white paper, “A Robust Rebound to Mediocrity?”

Colliers held its first annual Global Leadership Summit in Manhattan recently.

The three-day meeting, which  brought together clients and Colliers brokers from all over the world, concluded with a talk by best-selling author Malcolm Gladwell at the Jazz at Lincoln Center theater.

Collier’s recent Global Leadership Summit consisted of high-level strategy sessions and client meetings. Douglas Frye, global CEO of Colliers International, said, when introducing Gladwell, that the investment sales industry would need a different approach in the next three years.