Ventura County

VENTURA COUNTY

Dawn Dyer

Economic Gloom Continues to Cast Shadow on Ventura County

Lead, Follow or Get Out of the Way!

2009 Multi-Family Report

Decision Delayed on Ventura Rental inspection Program

Market Survey of
Ventura County

Investment Opportunities for
Apartment Owners

High Barriers to Entry

Countywide Vacancy Rate

Investment Objectives — Is Cash-on-Cash Really the Key?

At the most recent Apartment Investor Academy Meeting (Maximizing Your Building's Potential, May 2010), we explored ways to enhance the value of an apartment building once you own it. But I am frequently asked how best to assess the relative value of one building versus another when buying a multi‑family property. Should you base an investment decision solely upon cash-on-cash return, or try to buy distressed assets at steep discounts off the asking prices? There are many factors to consider.

I am a firm believer that you make money in real estate by buying right. While managing your property efficiently and retaining quality tenants are important aspects of enhancing the value of a multi-family property you own, the first step is making prudent decisions regarding a property you choose to buy. That doesn't mean simply finding the lowest price per unit, or the highest cap rate, or routinely submitting "low‑ball" offers.

The first step is to clearly define your investment parameters, goals, and priorities; and to understand the relationship between risk and reward. There is no standardized investment strategy that everyone should adhere to, since buyers have different resources, expertise, and comfort zones. It is important to consider the following factors: your age, or investment horizon, the degree of risk you can tolerate, the level of involvement you want to have in managing your properties, and your expectations for cash flow and appreciation.

Properties that generate the highest cap rates usually involve greater risk to your cash‑flow stream, and require a more pro-active role in maintaining and managing them. You can expect higher tenant turnover and collection problems, and generally lower rent and value appreciation over time for "C" - quality assets in marginal markets. Those who are seeking greater income stability and upside potential should focus on well-positioned properties, located in areas with strong market economics and demographics, and limited competition.

The best investments don't linger on the market for long, and are generally not being offered at "fire sale" prices. While it is vital that you fully assess the current rents and operating expenses (in relationship to market trends), your offer should be based on market realities, not simply targeting a perceived "discount" off the asking price.

Stringent Stormwater Rules May Sink Ventura County's Economy

Property owners and business leaders have a unique second chance to block the implementation of strict new stormwater regulations that could prove to be disastrous to the economic climate of Ventura County.

On July 8, 2010, the Los Angeles Regional Water Quality Control Board (LARWQCB) will hold a new hearing on the Ventura County MS4 (Municipal Separate Storm Sewer System) Permit, which was originally approved in May 2009. The intent of that permit is to fundamentally change how and where land can be developed in Ventura County by requiring the use of "low-impact development" (LID) standards, which many experts believe to be unworkable.

All projects would be required to capture, treat, retain and infiltrate stormwater on site, with virtually no runoff or discharge into the existing storm sewer system allowed!

While MS4 permits have been required since the early 90s, the May 2009 renewal permit for Ventura County contains the most stringent stormwater regulations in the United States. It includes stormwater retention requirements for new development (and redevelopment) that many analysts believe to be technically and economically infeasible.

Currently, developers are required to use bio swales and other methods of storm water filtration to improve water quality before it is discharged into the storm sewer system. However, the new permit requires the capture and retention of virtually all storm water on-site. The cost implications to new development could be staggering.

Local business and governmental leaders alike expressed concerns about the unintended consequences of this MS4 permit at a recent conference called "The Perfect Storm: AB 32, SB 375 & MS4 ‑ A Tsunami of New Legislation that will Impact Ventura County's Future." For a recap of conference highlights, and informative links about these new laws, visit www.vchome.org.

While most everyone can agree on the value of reducing greenhouse gases, and we all want clean air and water, these momentous new regulations are being imposed at a time of great economic and political uncertainty. With a countywide unemployment rate at over 11%, there is growing sentiment that this is not the time to adopt new rules that will discourage companies from expanding in, or relocating to, Ventura County.

Fortunately, we have been given a second chance. The Building Industry Association appealed the adopted permit to the State Water Resources Control Board in June 2009. In March of this year, just days before the scheduled release of the Draft Technical Guidance Manual, the state board remanded Ventura County's MS4 permit back to LARWQCB for a new hearing to be held July 8, 2010.

It is unclear at this time if the permit will simply be re-issued with the same onerous land development restrictions, or if LARWQCB will respond to the comments and concerns that have been raised by revising the LID standards to a more moderate policy. The results of this important hearing could change the face of Ventura County, and impact the local economy for years to come.

For more information on this important topic, and to stay updated on details of the upcoming hearing, visit www.socalwatercoaliton.com.

Dyer Sheehan Group, Inc. provides clients with Creative Solutions to Complex Problems. Professional real estate services include: brokerage, market research, project management, work outs, code compliance, and expert witness testimony. To arrange a confidential appointment, contact Dawn Dyer at 805-653-8100 or Dawn @dyerSheehan. corn. Copyright© 2010 Dyer Sheehan Group, Inc.

Economic Gloom Continues to Cast Shadow on
Ventura County Rental Market

Rents in Ventura County continued to fall during the first half of 2009 as property owners and managers competed for tenants who are trying to stretch their housing dollars. For the first time in over a decade, countywide rents have consistently fallen over the past year. Based upon Dyer Sheehan Group's survey of 20,549 market‑rate apartments, the July 2009 overall county average rent was $1,382, a decline of 3.6% from January 2009 and of nearly 7% from the previous July, when the overall average was $1,423.

Despite this slide in rents, the countywide vacancy rate has remained relatively stable at 5.35% as of July 2009, down from 5.83% in January, and up only slightly from 4.68% in July 2008.

While the weak economy has resulted in an overall softening of the rental market, some local communities have been hit much harder than others. Moorpark has the weakest market in recent history, with a July vacancy rate of 7.72%, and overall rents down nearly 9% over the past year. Santa Paula, on the other hand, saw a slight up tick in rents over last July (up 1.2%), with the lowest vacancy rate in the county at 3.11%.

Many property owners and managers said that tenants are moving around more, trying to find the best housing value, and looking to take advantage of "move-in specials" and "free rent" deals. Other local residents are moving back home with parents, combining households to share expenses, or leaving the area due to job losses or divorce.

While some long‑time renters are also taking advantage of the downturn in the housing market to buy a home at a steep discount, this trend is mitigated by those who have lost their homes to foreclosure and are now renting. Several of the properties DSG has surveyed have had higher than normal turnover rates, especially on one-bedroom units and luxury‑level apartments. It has also become an increasing challenge to screen tenants as more applicants have credit problems or are trying to move too many people into units.

Despite this recent softening in the multifamily market, apartments continue to outperform most other types of real estate. Home values have plummeted during the past three years while retail, office, and industrial vacancy rates and values have also taken a beating. If the worst of this recession is truly behind us, we should see the apartment market stabilize over the next two survey periods, January and July 2010.

The overall value of the Dyer Sheehan Group, Inc. survey is enhanced by the number of properties included. Please contact Emily@DyerSheehan.com if you are interested in participating in future surveys.

Dyer Sheehan Group, Inc., offers experienced and professional real estate consulting and brokerage services, including: sales; market research; project management; permit processing for development projects; repositioning of properties; and zoning/code compliance resolution.

Lead, Follow, or Get Out of the Way!

was reflecting today on the provocative theme of the 8th Annual Ventura County Housing Conference, "Housing Leadership in a Changing World," held the morning of September 30, 2009, in Camarillo. The Keynote Speaker for the Conference was noted author and columnist Terry Paulson, a recognized expert on change management. In addition to setting the tone for the conference, Terry participated in one of the four Breakout Sessions, Stand Up and Lead: For Elected Public Officials Only!, which was hosted by Ventura County Supervisor Kathy Long.

Other speakers included noted Economist Dr. Bill Watkins, who provided a Real Estate & Economic Forecast, and Chris Westlake from the California Department of Housing and Community Development. Additional Breakout Sessions include Leading the Way: The Future of New Housing Developments; Today's Housing Market — Who's Buying, Who's Lending, Who's Building?; and AB 32/SB 375/MS 4... Not a Secret Code. New Laws Changing the Housing Industry.

I was asked to moderate the AB 32/SB 375/ MS 4 Breakout Session, and to provide an introduction to these new laws during the Opening Session. While preparing an overview of the key elements, timeline, and potential impacts of these significant pieces of legislation, I found myself reflecting on the "Leadership" theme for the day. AB 32 — the California Global Warming Solutions Act of 2006 — was intended to reduce statewide greenhouse gas emissions bringing sweeping changes in the way we work, live, and do business in California. SB 375 (dubbed the anti-sprawl bill), links local land use with AB 32 implementation by seeking to reduce vehicle miles traveled through promoting "sustainable communities."

But, for Ventura County, the' most immediate and significant new legislation is the recently-adopted MS 4 (municipal separate storm sewer systems) permit, which imposes new precedent-setting storm water standards. While MS 4 permits have been required since the early 1990s, the Building Industry Association (BIA) warns that the May 7, 2009, renewal permit for Ventura County represents the most stringent storm water regulations in the United States, and includes storm water retention requirements for new development that BIA analysts believe to be technically and economically infeasible.

While almost everyone can agree on the value of reducing greenhouse gases, and we all want clean air and water, these momentous new regulations are being imposed at a time of great economic and political uncertainty. In addition to providing an overview of the new laws, and discussing potential impacts to housing, I encouraged the panel of experts to explore the genesis and adoption of the legislation in the context of Leadership.

Today's leaders in both government and the private sector are faced with an increasingly complex collection of issues, regulations, and constraints. They are frequently confronted with competing priorities, which can require difficult decisions, or a delicate balancing act Our local elected officials face the added complications of unfunded mandates, budget shortfalls with limited options for increased revenues, and vocal involvement by individual residents and well-organized coalitions.

We elect our leaders to lead...to take the time to become well-informed about the issues at hand ...and to make responsible decisions based on the best interests of the overall community or district they represent.

We need to cultivate leaders with the courage to look beyond the next election, and to make the tough decisions now. If we choose our leaders wisely, based on the highest standards of competence and integrity, then we should generally be able to "follow their lead" by subsequently supporting their sound decisions. If they violate that trust, we have the means to remove them from office!

Unfortunately, vocal minorities of virulent voters often fill City Council chambers in opposition to what might be in the long-term best interests of the overall community. Or, if they don't like the decisions their representatives make, a well-funded special interest group can co-opt the legislative process by going directly to the public with a referendum, promoted by sound-bite-size "facts" and lots of emotional flair. In the face of such pressure, our decision‑makers often opt for expediency, or simply choose the path of least resistance, even when making choices with profound and far-reaching consequences. Often, the sources of many of the next round of problems, are the "solutions" chosen in this type of volatile civic environment. A perfect example of this is the ongoing budgetary crisis at our state level.

While there can certainly be valid reasons for voters to distrust their elected officials, I sincerely question whether the current trend of "governance by initiative" is working. If we could alter the climate of distrust, by empowering our leaders to LEAD... to make the tough decisions based on thoughtful, informed, and nonpartisan assessments of the issues at hand, as well as honest evaluations of the long-term impacts of any proposed solutions... then I believe we would be able to "get out of the way" and let the democratic process work.

Dyer Sheehan Group, Inc. provides brokerage and consulting services to apartment owners and the development community. Contact Dawn Dyer at 805‑653‑8100 or dawn@dyersheehan.com. J

A Room with a View is Nice … But is it a "Right"?

Sunshine on my shoulders makes me happy, but is it the government's job to regulate how many rays I can catch? View protection and solar access are issues that many communities are grappling with throughout the Golden State. In Ventura, policymakers and voters will soon be asked to decide if a homeowner's right to a view trumps the basic property rights of his neighbor.

An initiative has been placed on the City of Ventura's November 2009 ballot, which, if approved, would impose a "...moratorium of up to two years prohibiting the approval of new structures in all non-exempt areas of the city which exceed 26', until a comprehensive amendment to the General Plan establishing a view protection overlay zone is presented to the voters for approval or has been approved by necessary governmental agencies..."

This initiative has been proposed by a group calling themselves VCORD (Ventura Citizens for Responsible Development). The initiative would establish a View Resources Board (VRB), most of whom will be appointed by the VCORD Board of Directors. This VRB would be accountable for drafting a View Protection Ordinance to amend the City's General Plan, which would then be submitted to the Ventura City Council for adoption.

In the interim, the city would be prohibited from granting discretionary approvals for any development subject to the measure (including building additions, renovations or appurtenances), exceeding 26' in height, for up to two years. That can include a lot of buildings.

VCORD contends that the protection of views from existing homes, and the preservation of solar access on these same private lots, is critical to the well‑being of Ventura. But how do we balance these priorities with other, even more critical priorities like the economic vitality of the community, and providing housing that is affordable to all residents? And what about all of the other priority measures and land‑use policies that have already been adopted? Isn't this what we elect our civic leaders for?

In August 2005, the Ventura City Council approved a new General Plan, which acts as a "blueprint" for growth over the next two decades. The preparation of the General Plan was completed over many years involving hundreds of hours of broad-based community input, considering existing land-use policy decisions, including the SOAR (Save Open Space and Agricultural Resources), and the Hillside Voter Participation Act, both of which limit development in Ventura.

The city adopted a General Plan that prioritizes development of infill sites, with a focus on intensification and re‑use of vacant or underdeveloped properties. In order to implement these goals, city staff has been working to adopt new zoning and forms based on development codes, allowing for the most efficient use of land to meet the city's future business, civic, and housing needs. In the face of so many competing priorities, how can a city limit growth on its green fields, hillsides, historic sites, and coastline; while simultaneously limiting new development in its core areas to one-story buildings?

In response to VCORD, and to the 2005 General Plan action item to "require preservation of public view sheds and solar access," the Ventura City Council initiated it's own View Protection & Solar Access Task Force in July 2008. The Task Force presented its report and recommendations to council on April 20. (Available at www.cityofventura.net.)

Unfortunately, the Task Force overstepped it bounds by proposing policies that would help protect PRIVATE views and solar access from vegetation as well as buildings. The council accepted the report, and directed its staff to have the Planning Commission and Design Review Committee (PCDRC) review the report, and make policy recommendations at a hearing to be held on June 15. While the Ventura City Council has not yet taken a formal position on the VCORD proposal or the Task Force recommendations, Mayor Christy Weir did ask the PCDRC to focus on policies that affect "public viewsheds," leaving the additional Task Force recommendations dealing with protection of "private views" for a later date. I urge the council to step back even further and address the issue raised by Councilmember Neal Andrews, "is a view a 'Right' to be protected by government?" If so, how do we protect one private property owner's rights to a view, without trampling on the neighboring property owner's rights to build?

2009 Ventura County Multi-Family Report

Economic Woes and Unsold Homes Cast A Shadow on Rental Market

ompared with other types of real estate, multifamily housing has remained relatively resilient throughout 2008. Nevertheless, continued weakening of the national, state and local economies, combined with the ongoing crisis in the mortgage and financial markets, and rising local unemployment rates, have taken their toll. The Ventura County apartment market has softened slightly in some areas, and much more significantly in others.

Many properties throughout the county have either reduced asking rents, or are offering hefty incentives to lease up vacant units. Others have held rent prices steady to retain existing tenants. As a result, for the first time in over a decade, the average countywide monthly rent has fallen during the past year, reversing virtually all of the rental appreciation that we have seen since January 2007.

Rents did not decrease as much in some cities; but other sub‑markets and unit types were more severely impacted. A handful of buildings reduced rents by as much as $200-$400 per month in 2008, while most simply refrained from rent increases, or dropped rents slightly. Ojai was the only community in the county where rents went up for all unit types since January 2008. In contrast, in Moorpark average rents for a 3-bedroom apartment fell 7.4% over the last 12 months.

A number of factors are cited for the recent decline in occupancy levels. Apartments are now competing for renters with the large and growing "shadow market" of unsold homes and condos, which are being offered at very competitive rents.

With the highest local unemployment rate in years, residents, who have either lost their jobs or who are uneasy about the future of their current positions, are moving out of the county. Others, whose jobs are not portable or who have other reasons to stay here, have cut personal expenses by combining households with friends or family. This trend has led to increased vacancy rates and softer rents for 1-bedroom units in many cities.

Demand has also softened for larger apartments in the high-rent communities due to people buying homes. Troop deployment also has impacted properties in Oxnard and Camarillo. Several properties reported longer times to rent vacant units, and greater difficulty in finding prospective tenants who can meet qualifying income and credit standards.

In some cases, units are empty for 6‑8 weeks between tenants, as compared to recent years when most were rented within days of becoming available. For the first time in our survey history, we are also getting reports of tenants skipping out on back rent, moving out "secretly" during the night.

Despite the current downturn in the local rental market, multi-family investment properties have maintained their value, and cash flow, better than virtually every other asset type. While the countywide vacancy rate is the highest it has been in at least 1 5 years, it is still much lower than that of retail, office or industrial properties.

The fact that there has been a minimal amount of new apartment inventory built or planned for future development, has helped to insulate multi-family properties from the type of overbuilding that occurred in some other market sectors and geographic areas. Apartments are still the most affordable type of housing. Even with the current economic problems we are facing, rents should remain relatively flat in 2009 while the countywide vacancy rate is not expected to exceed 7-8%.

All information provided herein is from sources deemed to be reliable, but no guarantee or warranty is stated or implied.

Decision Delayed on Ventura Rental Inspection Program

he Ventura City Council Chamber was packed to capacity on December 8 for the public hearing on proposed alternatives to a Rental Housing Inspection Program. The idea of adopting a program to more pro‑actively identify and address substandard rental housing conditions within the city first surfaced last year during city budget talks.

However, City Manager Rick Cole emphasized at the Dec. 8 hearing that the city is "not trying to generate extra money for its General Fund" through adoption of a rental inspection and registration program. He said that the city is trying to do a better job of ensuring public health and safety, when it would otherwise have to lay‑off inspection personnel, due to the current budget reduction mode.

Cole stressed that if the City Council agrees that the city should do more than it currently is to ensure public safety, there will be costs involved. The key question? Who should pay?

The cost could be absorbed by all city taxpayers through General Fund expenditures. The city could charge owners of 1‑3 rental units like they currently charge landlords of four or more units. Violators could be charged higher fees beginning with their first citations. Or, the city could maintain the status quo and take no further action on this issue.

Prior to hearing testimony by nearly 40 public speakers, city staff presented its report to the council, and offered alternatives for preserving rental housing. The intent of the staff report was to substantiate and define the substandard housing problem in Ventura, and to document a variety of stakeholder perspectives on this issue, including input from landlords, tenants, the social service task force, the business community, educators, law enforcement, and code enforcement personnel.

Chief Building Inspector Andrew Stuffier showed 60 photos of substandard housing violations that were identified within the past two years. The hearing was intended to solicit public input, and to allow the council to discuss potential future policy direction. No formal ordinance or resolution is proposed for adoption at this time.

The staff report included five alternative approaches that the council could direct staff to pursue.

1) Take no action regarding unregulated rentals.

2) Extend the current annual exterior inspection, interior self‑certification and Business License Tax regulations governing four or more units to the currently unregulated stock of 1-3 unit rentals.

3) Establish a Rental Preservation Program for 1-3 unit rentals requiring annual exterior inspections.

4) Establish a Rental Preservation Program for 1-3 unit rentals requiring triennial interior and exterior inspections.

5) Transfer additional inspectors to code enforcement to step up enforcement of health and safety violations in substandard rentals, recovering costs of enforcement through currently authorized fines.

City Attorney Ariel Calonne clarified that alternatives one and five do not require the city to adopt any new ordinances, but that options two and three equate to a new Business License Tax, which would require voter approval prior to adoption.

Upon completing the staff report, the council heard a wide spectrum of opinions, concerns, and suggestions during the public hearing, which continued for nearly 2.5 hours, even though testimony was limited by the Mayor to two minutes per speaker. Many local landlords expressed concerns over the hearing, which they felt was inadequately noticed, excluded many stakeholders who wanted to participate, and was too brief for sufficient public input.

Some tenants related horror stories of renting substandard homes, and the lack of cooperation on the part of landlords to address code violations. Others expressed concerns that additional city regulations would result in rents going up, and would invade their privacy.

But, by far, the most prevalent sentiment expressed by landlords is that the city should aggressively enforce serious life and safety code violations using existing tools and resources, without burdening conscientious landlords with additional costs or administrative requirements. Several housing advocates expressed concerns regarding the potential loss of affordable housing units from an already tight rental market. During tough economic times, they reason, "substandard housing is better than being homeless."

At 10:30 PM, the City Council voted to adjourn the meeting, prior to beginning its discussion or considering what recommendations it might make to staff. Most council members stated a preference to close the public hearing, and to continue the council discussion at a future meeting, when they would be refreshed, and have plenty of time for a thoughtful consideration of the issues and public input received to date. The next proposed hearing is January 12, 2009, at 6:00 PM. Videos of Ventura City Council hearings, as well as agendas, staff reports, and minutes, are available on the city's website at www.cityofventura.net.

Ventura County Apartment Market Survey Released

e are pleased to announce the publication of our July 2008 Ventura County Multi-Family Housing Rental Survey. Since 1997, we have worked in conjunction with the University of California, Santa Barbara — Economic Forecast Project in order to study and understand the vibrant multi‑family housing markets in Ventura, Santa Barbara, and San Luis Obispo Counties.

We currently track more than 20,400 apartment units in Ventura County, and compile the data into detailed statistical summaries and graphs that show current rents (both in dollars and dollars per sq. ft.) and vacancy rates, as well as average unit sizes and property ages for the major market areas in the county.

These market areas include Camarillo, Fillmore, Moorpark, Ojai Valley, Oxnard/Port Hueneme, Santa Paula, Simi Valley, Thousand Oaks, Westlake Village, and the City of Ventura. The full survey provides current and historical data (with graphs) for each of these market areas, as well as a combined countywide summary (shown here), so that trends may be easily identified and understood.

The survey showed that of 185 Ventura County apartment properties, the overall average countywide monthly rent reached a new record high of $1,483 in July 2008, up 2.1% from July 2007, despite the reduction in countywide median home sales prices during the same period.

chart

Rents were the highest in Thousand Oaks, with an overall average of $1,626, although this new rate does represent a reduction of nearly 3% from the historical high rent level of $1,676 in July of 2007.

Moorpark logged in with the second highest overall rents, at $1,606, up slightly from the previous July, but down 0.9% from the January 2008 peak of $1,620. The most affordable rents in the county were found in Fillmore, with an average overall rental rate of $976, up 6.7% from the previous July.

Even with this rise in rents, the overall county vacancy rate fell slightly in July to 4.68%, down from 5.09% in January 2007. While the January 2008 vacancy rate was the highest the study has recorded in Ventura County in several years, a countywide vacancy rate of 5% is still considered to represent a very strong rental market.

Access to accurate market information is of great value to real estate owners, managers, and brokers, as well as to governmental agencies, lenders, and other professionals providing services to the real estate industry. The DSG Ventura County rental date is updated twice a year, in January and July, with a narrative analysis of the data included in the January report. For further information, or to order your personal copy of the study, please contact Dyer Sheehan Group, Inc., at 805‑6538100 or dawn@dyersheehan.com.

What are Housing Choice Vouchers?

ection 8 — the Housing Choice Voucher Program, is the primary program by which the federal government provides housing subsidies to low-income families, elderly, and disabled persons. Housing Choice Vouchers are administered locally by non‑profit public housing agencies (PHAs), which receive federal funds from the U.S. Department of Housing and Urban Development (HUD). The goal of the program is to help renters afford decent, safe, and sanitary housing in the private market.

Program participants must find their own place to rent from a private landlord or property manager. Generally, the Voucher holder will pay 30-40% of their household income toward rent, and the PHA or local Housing Authority will pay the balance of the fair market rent directly to the property owner.

The participation of willing landlords is a key element of the program, which makes it possible for families to afford quality housing, especially in high cost-of-living areas like Ventura County.

How Does the Housing Choice Voucher Program Work?

Eligibility for a housing voucher is determined by the local housing authority based on income and family size, and is limited to U.S. citizens. Persons with felony convictions are not eligible. HUD income limits change annually, and are based on a percentage of the countywide median income levels for various family sizes. Extremely-low-income households earn up to 30% of area median income, very-low-income represents 50% of area median, and low-income households can earn up to 80% of it.

Potential voucher recipients must complete an application process, in which the local housing authority will collect and verify information on family income, assets, family composition, and employment. This information is used to determine program eligibility, the amount of housing assistance, and the unit size the applicant can rent. Family income and composition are re‑examined annually to ensure continued eligibility.

Once a voucher has been issued, the applicant may then go out into the market to locate housing. The allowable unit size is based on household composition, and all units must meet acceptable health and safety standards to qualify for the program. When the family finds the housing unit, they negotiate the lease terms directly with the owner or property manager. The unit must be inspected by the PHA to ensure that it meets the program's housing quality standards, and to determine that the rent requested is "reasonable" based on local market conditions.

The owner enters into a lease agreement with the tenant, and a housing assistance payment contract with the local PHA. It runs for the same term as the lease. The tenant pays monthly rent to the landlord that equates to at least 30% (but no more than 40%) of monthly adjusted gross income for rent and utilities. The balance of the agreed-upon market rent is paid directly to the landlord by the housing authority, providing the owner with predictable cash flow.

The Economics of Section 8 in Ventura County

There are a number of advantages to property owners for participation. The tenant must make their share of the rent payments on time, maintain the unit in good condition, and abide by all other terms of the lease. The housing authority does a thorough background check on all voucher applicants. The tenant also must get pre‑approval from the housing authority for any new household members, which protects the landlord from overcrowding.

Because there is a multi-year waiting list to obtain vouchers, program participants will not easily jeopardize eligibility by breaking the terms of their leases. Since tenants pay rent based on their income, if they experience a job loss or drop in pay, the housing authority can increase the subsidy to maintain the landlord's income stream.

While the property must pass an annual inspection to ensure that it meets HUD's Housing Quality Standards, these guidelines are based on basic safety and sanitation standards that most landlords strive to maintain anyway. The annual inspection requirement can actually protect the asset by ensuring that, at least once a year, any essential unit repairs or maintenance issues are identified and addressed.

Because Ventura County is considered a high cost-of-living area, and has a relatively high median income, the HUD local fair market rents are very competitive. Voucher payments may vary, but the current standards for Ventura County allow for a maximum of $1,422 per month for a 2-bedroom unit, and $2,038 for 3‑bedrooms. And the demand for Section 8 units is huge. Vacant units can be advertised for free through lists maintained by the local housing authorities.

Contact your local housing authority to learn more, or to list your units for rent to voucher holders.

All information provided herein is from sources deemed to be reliable, but no guarantee or warranty is stated or implied.

Changing Demographics and Lifestyle Trends Create Opportunities for Apartment Investors in Ventura County

he "typical" renter household is evolving, as a more diverse cross‑section of the population seek the flexibility and benefits of apartment living. Recent trends indicate that economics are only one of the reasons people choose to rent. Apartment living has become a lifestyle choice for many who could otherwise afford to buy a home.

Changes in demographics and household composition have also increased the demand for rental housing, while production of new apartment units remains well below projected demand. The lack of competition from new rental projects represents up‑side potential for Ventura County apartment owners, as the need for quality housing options continues to climb.

Data from the National Multi Housing Council, and other industry groups, indicates a trend beginning in the 1990's, toward "Lifestyle Renters." Statistics indicate that a growing percentage of renters are older, more affluent, and better educated, with renters earning $50,000 or more representing one of the fastest growing segments.

By 2001, a striking 41% of the renters included in the Fannie Mae National Housing Survey said they rent "as a matter of choice" and not out of necessity; up significantly from 28% in 1999. Studies like these indicate that housing preferences are changing, and that home‑-ownership is no longer the "American Dream" for all of our citizens.

Evolving lifestyles and priorities, changing demographics, and public policy initiatives have dovetailed with changes in the apartment industry to increase and diversify apartment demand. As life gets more hectic, with increasing demands on our time and resources, many people find the ease of apartment living to be a welcome relief from spending "free time" mowing lawns, fixing leaky faucets, and dealing with the ongoing demands of homeownership.

Faced with increasing fuel costs and longer commute times from job centers to suburban neighborhoods, living in an apartment near work, or along a transit corridor, is an appealing option.

As people become more actively involved in community, political, environmental, and other extra‑curricular activities, apartments offer simplicity in lifestyle that frees time to pursue one's passions. Empty-nesters are discovering the joys of living in urban infill settings within walking distance to dining, entertainment, and recreational options; as well as the comfort and security of a "lock and leave" scenario that provides the freedom to travel.

Changing demographics also are a key factor in the growth in apartment demand. The composition of the "typical" household has changed dramatically in recent decades. Experts say that many women are putting off childbirth to pursue careers, or choosing to have fewer children. The National Center on Health Statistics indicates that the percentage of women ages 40‑44 who have only one child has nearly doubled since 1980.

Data also indicates that a growing number of Americans are now living alone, or with partners to whom they are not married, or sharing living expenses with a non‑related person. U.S. Census Bureau data indicates that as a proportion of all households, married-couples with children declined from 40% in 1970 to 26% in 1990. In Ventura County the UCSB Economic Forecast Project reports that nearly 49% of the total number of Households in 2007, consisted of only one or two persons. Apartment living is a great option for young professionals, single adults, gay or lesbian couples, or empty nesters who don't need a large family home.

Throughout the West, immigrants and their offspring will account for a significant portion of the population growth in the coming years. In Ventura County, more than 80% of the gain in migration and natural increase through 2012 will be from persons of Hispanic origin. Because immigrants tend to be younger, and just starting out in building a financial base, they are predominately renters for at least the first few years in this country.

The other demographic segment that will grow substantially over the coming decades is people over the age of 50. In fact, the fastest growing cohort will be people over the age of 65. The California Economic Forecast projects that over the next 20 years, their numbers double and their share of the total population increases from 11% to 18%. Over the next 25 years, 78 million baby-boomers will retire to the South and West, according to a study by the Milken Institute. The fabulous climate, high quality of life, and proximity to the greater Los Angeles region will likely attract many of these "snow birds" to Ventura County.

National leaders in the apartment industry have recognized these trends and have begun to respond to the changing renter profile, by creating a whole new generation of multi-family housing, which offers more onsite amenities, higher quality finishes, and a host of services. Some of these new luxury communities offer apartments with granite countertops, high-speed internet access, and custom-painted accent walls. On-site amenities include state of the art recreational facilities, office and media centers, as well as concierge services, dry-cleaning pick-up, and a host of other hotel-type goodies. But, what can an owner of a 40-year‑old apartment complex do to position their property for the future?

The first important step is to realistically assess your market dynamics. Is your property located in an area likely to attract "lifestyle" renters? Buildings located near the beach, thriving downtowns, or cultural and business hubs, or adjacent to transit options or major employment centers, offer great opportunity for upside potential. By investing in significant cosmetic upgrades, a well-located C+ property can be repositioned to compete at slightly lower rent levels with newer institutional "A' quality complexes in your area.

However, don't forget the curb-appeal. You will not get the opportunity to show off your beautifully renovated interiors if prospective renters are turned off by the view from the street. If, however, your property is a "bread and butter" building in a modest neighborhood, you may choose to concentrate your resources on completing any needed repairs or maintenance that will ensure the safety and comfort of residents, without over-improving for the market.

In these locations, you can still add value by investing in improvements or amenities that make sense for your target market, such as: secure bicycle or surfboard storage, installing exterior lighting and/or fencing for added security, or converting the underutilized "recreation" room into an after-school study hall or day-care center. The bottom line is, the apartment market in Ventura County is not likely to be "over‑built" at any time in the foreseeable future. Owners can benefit by investing in the future of their buildings.

Dyer Sheehan Group, Inc., provides a wide range of professional consulting and brokerage services to property owners and investors. Dyer can be reached at 805‑653‑8100 or dawn@dyersheehan.com. All information provided herein is from sources deemed to be reliable, but no guarantee or warranty is stated or implied.

High Barriers to Entry and the Economics of Land-Use Favor Ventura County Apartment Owners

By: Dawn Dyer, Dyer Sheehan Group

yriad factors have limited development of new multi-family housing units in Ventura County, and have done so for decades, despite continuous population growth and changes in economic factors and demographic trends that have fueled the demand for apartments.

While the high quality of life in Ventura County makes it a desirable place to live, income levels have not kept pace with home price appreciation, so many local residents can't afford to buy homes, creating additional renters.

Local land use policies, public sentiment, and economics have limited development for years in Ventura County. And yet, the majority of population growth in the region since 1990 has been from Natural Increase (net births over deaths), as opposed to Net Migration. This trend is expected to continue, putting further demand pressure on the local housing market.

Ventura County has been a pioneer of growth controls and restrictive land use policies for many years. As a result, the risk factor and cost of producing new housing has escalated, which has made it increasingly difficult for new apartment projects to "pencil out." The Guidelines for Orderly Development (GFOD) were originally adopted in 1969 by the Ventura Local Area Formation Commission (LAFCO), Ventura County, and each of the cities in the county. The GFOD are statements of local policies which provide that urban development should occur, whenever and wherever practical, within incorporated cities.

Urban development is defined as the need for a new community sewer system or the expansion of an existing community sewer system, the creation of residential lots less than two acres in area, or the establishment of commercial or industrial uses that are not related to agriculture or the production of mineral resources.

Ventura County development is further restricted by numerous additional land-use policies and voter‑approved initiatives, including: Greenbelt Agreements; Save Our Agricultural [and Open Space] Resources (SOAR) and City Urban Restriction Boundary (CURB) initiatives; Hillside View Shed Preservation ordinances; and the California Coastal Act, among others. New growth restriction ordinances are currently being promoted as ballot measures in several cities, such as the traffic initiatives in Oxnard and Thousand Oaks, and a height-limit ordinance in Ventura.

Even on those parcels of land that can still be developed in Ventura County, it has become more difficult to build apartments. In fact, the Construction Industry Research Board (CIRB) reports that during the 15-year period from 1993-2007, an average of 2,182 new single-family housing units were permitted per year, compared to an average of only 703 multi‑family housing (including apartments and condos) permits.

Property that is zoned for higher density residential development can generally be built out with either condominiums or apartments. But, condo prices have far outpaced "per door" apartment unit prices, creating less financial incentive to build rental housing. Neighborhood opposition to new apartment developments has further limited the supply of new rental units.

The rising prices of land, permits, development‑impact fees, insurance premiums, and construction labor and materials, have dramatically increased the cost of housing production in recent years.

While rents have also been appreciating steadily, it is still difficult to build new midmarket-rate apartments that generate sufficient economic returns to merit the risk and time value of the money required to brave the development process in Ventura County. While there have been some apartment communities built in recent years, many of these were either a required component of large master-planned communities (like River Park in Oxnard), large "luxury" communities, or "affordable" units built with the assistance of government subsidies and special financing.

The economics of land use in Ventura County will continue to limit development. The current slowdown in the financial and housing markets will further limit the production of new housing stock for a period of time, but the need for additional residential units will continue.

At the same time that Ventura County residents and policy makers have limited housing production, the population has continued to increase, adding an average of 9,350 new residents per year from 1993-2007 (Source: CA Dept of Finance), 67% of which came from Natural Increase. The allure of the Pacific Ocean, pastoral vistas and open spaces, diverse recreational and cultural amenities, and adjacency to the Los Angeles County metropolis will continue to attract new residents from outside of the area as well. However, while Ventura County's economy is quite diverse, providing residents with a relatively high median household income, home prices have risen beyond the reach of many residents.

The California Association of Realtors (CAR) reports a First-Time Buyer Housing Affordability Index of just 30% in the 4th quarter of 2007. CAR estimates that a first time home buyer would need to have a Minimum Qualifying Income of $106,200, to qualify to purchase a home at the median price of $530,800. But the Median Family Income in Ventura County for 2007 was only $79,500, leaving many residents seeking rental housing.

Additional demand for apartments is also being created by changes in population trends including household compositions, and lifestyle choices. We will further explore these issues, as well as how to position your investments, to take advantage of these opportunities in the next issue.

All information provided herein is from sources deemed to be reliable, but no guarantee or warranty is stated or implied.

Countywide Vacancy Rate Up 35% in Past Year

2008 Ventura County Multi-Housing Forecast — Part 2

By: Dawn Dyer, Dyer Sheehan Group

hy, one might ask, if vacancy rates are up, as reported last month, and the for-sale housing market is in the doldrums, have Ventura County rents continued to rise? While rent appreciation slowed down during the last six months of 2007, the overall average countywide rent rate reached a new record high of $1,470 in January 2008, up 4.25% from the previous year.

The Dyer Sheehan Group Multi-Family Rental Housing Survey, including nearly 20,000 apartment units in 189 properties, is the most comprehensive study available in Ventura County, and includes a variety of properties ranging from triplexes to large institutional‑quality complexes containing several hundred units each.

As with vacancy rates, there were substantial variations in rental‑rate data for the nine market areas throughout the county.

Although Thousand Oaks still has the highest average monthly rents for a 2-bedroom apartment at $1,739, this only represents a 1.5% increase over 2bedroom rents during the past year; as opposed to the loftier increase of 8.8% from January 2006 to January 2007.

By comparison, 2-bedroom rents in Fillmore increased 5% during 2007, to a new high of $1,040 in January 2008; while average 2-bedroom rents in Ojai actually decreased by $2 per month, to $1,098.

The continued increase in rents for most market sectors is related to the ongoing shortage of housing in Ventura County, especially rental housing, which has traditionally been more affordable than home ownership.

Furthermore, there is also an increased demand for rental housing from people who have lost their homes due to foreclosure, or are "sitting on the sidelines" of the real estate market waiting for the bottom before they buy, or because they cannot qualify under the new tighter mortgage underwriting standards.

2008 Ventura County Multi-Housing Forecast — Part 1

By: Dawn Dyer, Dyer Sheehan Group

or the first time in nearly 10 years, the vacancy rate for Ventura County apartments exceeds 5%. At the same time, countywide average monthly rents have continued to increase. The January 2008 countywide vacancy rate of 5.09% is up significantly from 3.76% in January 2007, and 2.17% in 2006. And yet, it is important to note that a vacancy rate of 5% is traditionally considered to represent "market equilibrium," where there is a reasonable selection of options for potential renters, and sufficient occupancy levels to support project economics for property owners.

While it may be troublesome for property owners and managers who have become accustomed to maintaining full buildings and long waiting lists, this slight increase in the vacancy rate has some advantages to the overall housing situation in Ventura County.

The most obvious implication is that appreciation in rents has slowed, which helps maintain the affordability of rental housing for some county workers who might otherwise have soon been priced out of the local market. The increased competition for renters, and longer time periods between tenants, have given some local owners the incentive to complete upgrades and maintenance projects on their properties, which does not always happen when the market is as tight as it has been in recent years.

The January 2008 data also indicates greater variances in both vacancy rates and rents than in other recent reports. The City of Ventura had the highest vacancy rate, at 7.58%, while Ojai and Fillmore were well under the countywide trend, at 1.52% and 2.33% respectively. However, there was also considerably more deviation between conditions at individual properties within a given market area, than there was previously. In Ventura, several communities still reported very strong occupancy levels of 98% or higher while others were less than 80% occupied.

There are a number of reasons given for the higher than "normal" vacancy rates.

1) General economic conditions top the list. Even though rent increases have slowed down, cumulative rent appreciation has surpassed wage growth in recent years.

2) Layoffs at some of the larger employers in the county have affected some areas and properties more significantly than others, as have troop deployments for some communities.

3) Many managers reported a continued exodus of renters leaving Ventura County or California due to the high cost of living along the coast.

4) With the slowdown in the home sales market, there has been an increase in the number of single-family homes and condominiums being offered for rent by private parties who haven't been able to sell their homes.

5) At the higher‑end rental communities, the cool-down in the housing market and continued low mortgage interest rates, have created opportunities for people who are paying top-end rents to transition into homeownership.

In the City of Ventura, there were additional factors contributing to the increase in the vacancy rate. Nearly 1,000 apartment units changed ownership last year, with the sale of a handful of large complexes. A change of ownership frequently creates a dip in occupancy levels as new policies and prices are often implemented.

One of these properties also had affordability requirements for a portion of the apartments that were tied to bond financing, which expired in 2007. When the units converted to market rents, most of the previous tenants vacated, and the units have not all been released yet.

There was also a significant increase in the vacancy rate for some large buildings that provide mostly studio and one-bedroom units. The tight economy had a more severe impact on this tenant base, with many single‑income households and tenants in transition.

Stay tuned next month for a Ventura County Update on rental rates.

Ventura County Launches New "Donate, Reuse, Recycle"
Website: www.VCMAX.org

he County of Ventura is proud to sponsor the www.VCMAX.org "Donate, Reuse, Recycle" waste reduction website and invites all county residents and businesses to tour the VCMAX program's virtual reuse warehouse, place free "Wanted" or "Available" ads, and check out all of the great items available that are either free or reasonably priced!

For five years, VCMAX, the Ventura County Materials Exchange, was a catalog‑based reuse program modeled after the State's popular CALMAX Materials Exchange program. In 2006 to reduce expenses, the County ceased publication of quarterly VCMAX reuse catalogs and converted the program to www.VCMAX.org, an internet‑based program dedicated to reuse, recycling, waste diversion, and public education!

The new site is a "one stop" REUSE RESOURCE that gives people the tools they need to place free wanted and available ads, and link to information about free electronic waste collection events; free Household Hazardous Waste Collection events; thrift and consignment stores; appliance recycling businesses; countywide recycling centers; Habitat for Humanity's ReStore, a thrift store for building materials; FoodShare; and the Ventura County Regional Energy Alliance's website for SAVE ENERGY ‑ SAVE MONEY tips.

The VCMAX website helps you arrange for a "Spring Cleanup" any time of the year, and don't forget that tax donation slips are provided for donations to charities such as ReStore, FoodShare and thrift stores.

The www.VCMAX.org reuse website was designed to help reduce landfill disposal by encouraging residents and businesses to safely dispose of Household Hazardous Waste and Electronic Waste, reduce their energy consumption, and reuse or donate materials that others in the county can use. Call Pandee Leachman in the Integrated Waste Management Division at 805-658-4315 for more information. The VCMAX program is provided by the County of Ventura.