Salisbury Square Residential Project

Transcription

1 Market Feasibility Analysis for the: Salisbury Square Residential Project in: Randolph, Vermont Prepared for: Randolph Area Community Development Corp. Prepared by: Douglas J. Kennedy Norwich, Vermont September 23, 2006 v. 1.5b LV #4606

2 Table of Contents Introduction and Scope of Project 3 Project Site and Community Context 6 Location 6 Project Site, Profile and Context - 8 Market Analysis 13 Market Area 13 Area Economy - 16 Target Markets 19 Background Demographics 20 Population-Households Trends and Characteristics 20 Household Income Levels 25 Housing Market Trends and Comparables 27 Housing Supply and Characteristics 27 Comparable Housing Demand 30 Ownership 31 Rental 33 Market Rents 35 Affordable Ownership Housing Overview 36 Market Potential 37 Potential Market Pools Market Area Households 37 Market Capture and Absorption Rates 44 Summary 47 Market Analysis: Salisbury Square; Randolph, Vermont; September 2006 Page 2

3 Introduction and Scope of Project The following report details research and analysis completed to assess the background market and market-based feasibility of a planned new mixed-use development project in Randolph, Vermont. The market analysis tested the market feasibility of the Salisbury Square project that will potentially provide: 1) New for-sale units oriented toward moderate income households and, as a secondary option; 2) New rental apartments oriented toward lower/moderate income households. The project may also include commercial and office space; However, the planned residential use is the focus of this report. The project will draw upon the market in the greater Randolph area. The project will include the following residential elements: Townhouse Units mix of two and three bedroom units. Intended for sale at targeted pricing of $175, Condominium/Apartment Units multi-unit building. Intended for sale with targeted price in the $125,000 range. Secondary use option for these units would be rental apartments. 1 As assessed in this report, the project will potentially involve financing programs to assist with homeownership: 1. The for-sale units will be made available to households with incomes ranging from 60 to 100 percent or 100 to 120 percent of the Orange County median. Households at the lower end of this income spectrum will receive favorable financing and are likely to be subject to equity sharing restrictions upon resale. 2. Efforts would be made to keep rental apartments should this option be chosen within an affordable range for households with incomes of up to 100 percent of the Orange County median. Several factors were given consideration in the assessment of the market-based feasibility of the project. Overall, the analysis was oriented toward answering several principal questions: Given the demographics and economic situation in the market area, is there sufficient support for the elements of the project and, if so, at what rate can the residential units be expected to absorbed or rented? What is the level of demand for the elements of the project? What competition does the project face? 1 Also possible that one or two studio apartments could be included in the mix. Market Analysis: Salisbury Square; Randolph, Vermont; September 2006 Page 3

4 Is the proposed Salisbury Square site in Randolph appropriate for a project of this type? The report was prepared in response to a request from the Randolph Area Community Development Corp. (RACDC) to assess a proposed residential development. We spoke several times with a representative of RACDC to ensure that we had a thorough understanding of the project concept. 2 Elements of the project are summarized below: Salisbury Square - Site is situated between School and Salisbury Streets, Randolph, Vermont new construction of townhouse and condominium/apartment units. The project may also include some commercial office and other space. - Developer Randolph Area Community Development Corp. - Location the project is located on a site lying between School and Salisbury Streets in Randolph. The site is immediately adjacent to Randolph s downtown area. - The site has access to public water and sewer. - The project will involve: New construction of 19 for-sale townhouse units and 10 condominium/apartment units. - Residential Market Orientation 1) Moderate income households who meet criteria for Vermont s first time home buyer programs; 2) Moderate income households who can purchase reasonably priced units and/or; 3) households that can afford rental units priced at market levels. - The project will be available to persons in any age group. The project in total will likely include 24+ units, including both townhouses and condominiums/apartments. In the event that the design, rental rates, or other aspects of the project differ in significant respects from the program(s) described above, the findings contained in this report should be revised. The report covers the following major areas with respect to housing market conditions and project viability: Definition of a geographic market for the project, as well as the household types that represent the target market(s) for the project. An assessment of the local and regional context in which the project will be developed, and a summary of local and regional growth and economic conditions. A quantitative analysis of source market demographics and potential buyer pools. 2 Interviews and other contacts with Jeremy Ingpen and Amy Diller of RACDC., who provided us with background data regarding the project. In addition, we relied on project sketch plans developed by the office of T.J. Boyle and Associates. Market Analysis: Salisbury Square; Randolph, Vermont; September 2006 Page 4

5 A review of existing, comparable housing market activity and assessment of competitive offerings. Projections regarding prospective project market absorption and recommendations. Significant market findings and relevant quantitative data are contained in tables, charts and figures contained in the text of the report. The analysis and this report are based on an extensive review of available data from Federal, state, regional and local sources. In addition, a number of individuals with knowledge of local/regional housing and commercial real estate markets have been interviewed to provide additional background material for the analysis. This report, including all background data, findings and recommendations, is based on market conditions as assessed by the analyst at the time of report preparation. In the event that there are any significant changes in a number of factors, including; macro-economic conditions, local/regional economic conditions, interest rates, local/regional competition, changes in the project program, or other factors affecting the market, it is likely that the findings contained in the report will change. No guarantees are offered that the estimates, projections and findings in this report will be met. However, the findings contained in the report do reflect the judgment of the analyst, following the review of housing and commercial real estate market conditions. Market Analysis: Salisbury Square; Randolph, Vermont; September 2006 Page 5

6 Project Site and Community Context A review of the project site and host community follows: Location Randolph is a central Vermont community and serves as Orange County s principal commercial and service center. Randolph s regional location is show in the graphic below. Randolph - Regional Location Randolph is located in southwestern Orange County. Orange County is located in eastcentral Vermont and shares a border with New Hampshire (along the Connecticut River) to the east. Major travel routes in the town include: Interstate-89 (Randolph is served by Exit 4) Vermont Routes: 14 and 12 for north-south travel and Route 66 for east-west travel. Highway access is good. However, topography restricts direct travel to the west. Market Analysis: Salisbury Square; Randolph, Vermont; September 2006 Page 6

7 Randolph s estimated 2005 population was 5,054 persons, a 6.1 percent increase over the 1990 level - Orange County grew by 12.0 percent during the same period. As noted, Randolph is Orange County s principal commercial/service center. However, the community s influence is primarily in the western portion of the county along the I-89, VT 12, VT 14 and VT 110 north-south corridors. The presence of I-89 gives the community strong links to the north and south and substantially increases the range in which Randolph residents can seek employment. Similarly, the highway s presence increases the geographic area from which Randolph businesses can seek employees. The community s range of businesses and services can serve the great majority of residents day to day needs. However, many travel to the Upper Valley (VT/NH) or the Barre/Montpelier area for major shopping needs. Downtown Randolph Randolph s educational system includes the Randolph Elementary School, located at 40 Ayers Brook Road and the Randolph Union High School, located at 15 Forest Street. The high school also hosts the Randolph Career and Technical Center. Market Analysis: Salisbury Square; Randolph, Vermont; September 2006 Page 7

8 Randolph Elementary School and Randolph Union High School Project Site, Profile, and Context As noted, the project site lies between School Street, Salisbury Street and the railroad tracks just several blocks removed from Randolph s downtown commercial core. The site has an east-west orientation and can be accessed from either School or Salisbury Streets. The site location with respect to the downtown area is shown in the graphic below. (Space Left Blank Intentionally) Market Analysis: Salisbury Square; Randolph, Vermont; September 2006 Page 8

9 Salisbury Square: Site Location The site was previously used for industrial purposes and is regarded as a brownfield. With the exception of several abandoned agricultural and industrial buildings, the site is principally open. Significantly, a steep bank runs from east to west through the site, effectively bifurcating the site for development purposes. As such, development occurring on the School Street side of the site (north side) can take on a different character from that occurring on the Salisbury Street/Railroad side of the site (south side.) The site is shown in several views below: Market Analysis: Salisbury Square; Randolph, Vermont; September 2006 Page 9

10 Site View from end of Salisbury Street Looking Northwest Site View looking westerly along Southern Boundary Railroad to Left Market Analysis: Salisbury Square; Randolph, Vermont; September 2006 Page 10

11 Site View looking southerly from School Street We note the following regarding the Salisbury Square site: The site offers easy walking access to downtown Randolph s full range of services. The site is located immediately adjacent to a town recreation area, offering open space and recreational potential. Town Recreation Area Across School Street The site(s) can take advantage of existing village infrastructure. The site is adjacent to, and can be linked with existing residential neighborhoods. Market Analysis: Salisbury Square; Randolph, Vermont; September 2006 Page 11

12 The most recent project site plan is shown in the graphic below. 3 Salisbury Square: Current Site Plan 3 Sources: RACDC and T.J. Boyle and Associates, plan dated 6/30/06. Note that this is a working plan and that further changes are likely. Market Analysis: Salisbury Square; Randolph, Vermont; September 2006 Page 12

13 Market Analysis Market Area Moves by households are motivated by issues like: 1) Convenience in commuting to a job; 2) Preferences for certain communities revolving around service and transportation factors, and; 3) Search for high quality housing with affordable pricing. For older households, important issues include: 1) Security; 2) Living near family and friends and; 3) Convenient walking access to services. A number of factors were considered in making a determination of the market area for Salisbury Square, including; the regional transportation system and commuter patterns; location of local and regional competition, and; existing commuting and social patterns in the area. The table below shows commuting patterns to Randolph from other area towns. 4 Commute to Randolph Commuters to Randolph from: Number of Commuters % of Total Cumulative % Randolph town Orange Co. VT 1,269 46% 46% Braintree town Orange Co. VT % 56% Brookfield town Orange Co. VT 169 6% 63% Bethel town Windsor Co. VT 132 5% 67% Northfield town Washington Co. VT 83 3% 70% Tunbridge town Orange Co. VT 66 2% 73% Barre town Washington Co. VT 63 2% 75% Royalton town Windsor Co. VT 60 2% 77% Barre city Washington Co. VT 50 2% 79% Chelsea town Orange Co. VT 39 1% 81% Others % 100% Total 2, percent of commuters to Randolph originate from an area within roughly 15 miles of the downtown. This is shown in the following graphic. 4 Source: US Bureau of the Census and Vermont Center for Rural Studies Year 2000 data. Market Analysis: Salisbury Square; Randolph, Vermont; September 2006 Page 13

14 80 Percent Commuter-Shed: Randolph We also collected data regarding the commuting patterns of Randolph residents. The table below shows the destination communities for Randolph commuters. 5 5 Source: US Bureau of the Census and Vermont Center for Rural Studies Year 2000 data. Market Analysis: Salisbury Square; Randolph, Vermont; September 2006 Page 14

15 Commute from Randolph Commuters from Randolph to: Number of Commuters % of Total Cumulative % Randolph town Orange Co. VT 1,269 51% 51% Lebanon city Grafton Co. NH 114 5% 56% Royalton town Windsor Co. VT 98 4% 60% Braintree town Orange Co. VT 92 4% 63% Hartford town Windsor Co. VT 90 4% 67% Barre city Washington Co. VT 82 3% 70% Montpelier city Washington Co. VT 65 3% 73% Bradford town Orange Co. VT 63 3% 75% Bethel town Windsor Co. VT 51 2% 77% Barre town Washington Co. VT 48 2% 79% Northfield town Washington Co. VT 37 1% 81% Other Locations % 100% Total 2,487 The majority (51 Percent) of Randolph commuters work in their hometown. However, we note that over 10 percent commute to the Upper Valley (VT/NH) region. Because we are assessing the potential for ownership housing programs (or possible rental) within the project, we have attempted to be inclusive without overstating the likely influence of any single element. Clearly, Randolph residents would be attracted to a project in their home community. Further, we are anecdotally aware that a number of persons who work in Randolph now live in other towns because of lesser housing costs. Again, these households would be attracted to an affordable ownership or rental option in the town. Further, we are aware that a number of workers commute to Randolph from outside the 15 mile area particularly from the Upper Valley VT/NH and the Barre/Montpelier areas. For purposes of this analysis, the primary market area has been defined as a circle with a varying radius of approximately 15 miles, centered at the project site. Given the attractiveness of the study area as a place to live and the growing economy, it is also anticipated that 10 to 15 percent of the market for the project will be drawn from outside of the defined market area. Market Analysis: Salisbury Square; Randolph, Vermont; September 2006 Page 15

16 Area Economy The economy has a significant impact on the residential market, as both upward and downward economic trends affect housing availability and pricing. Because this project will have appeal to a range of prospective tenants in terms of age, a substantial portion of the potential tenants will be active in the job market. A strong economy will draw new people to a region, increasing the demand for housing and increases in pricing. The current employment situation in the region is a significant factor in the housing market. Employment trends and levels reflect economic conditions as a whole and are considered an accurate barometer of a changing economy. The following table compares labor force, employment, and unemployment rates for Orange County and Vermont. Figures are expressed as annual averages. Market Analysis: Salisbury Square; Randolph, Vermont; September 2006 Page 16

17 Labor Force and Employment Comparison: Orange County, Vermont ( ) Orange County Vermont Labor Force Employment Unemployment Rate Labor Force Employment Unemployment Rate ,350 13, % 304, , % ,050 14, % 318, , % ,550 15, % 333, , % ,900 15, % 335, , % ,400 15, % 353, , % ,550 16, % 355, , % 2006* 17,000 16, % 365, , % Change % 17.2% 16.9% 18.8% Note: All figures with exception of 2006 annual averages figures for June. Source: Vermont Dept. of Employment & Training Orange County has experienced strong growth, both in terms of the size of its labor force and in terms of employment gains. Labor force and employment growth have fallen only slightly below the rate of growth for the state as whole. However, unemployment rates in Orange County are quite low. Low unemployment rates typically result in a labor shortage and resultant pressure on the housing market. Similar data is shown for the Town of Randolph in the table below. Randolph serves as an employment center for much of western Orange County and also draws workers from northern Windsor County and southern Washington County. Market Analysis: Salisbury Square; Randolph, Vermont; September 2006 Page 17

18 Labor Force and Employment: Town of Randolph ( ) Labor Force Employment Unemployment Rate ,560 2, % ,610 2, % ,630 2, % ,730 2, % ,760 2, % 2006* 2,730 2, % Change % 14.0% Note: All figures are annual averages except figures for June. Source: Vermont Dept. of Employment & Training Although increases have not matched those for the county as a whole, it is apparent that the employment situation in Randolph has improved over the years. Unemployment rates in Randolph are particularly low. Randolph has attracted a number of employers both well established and new. Several of the community s major private employers are summarized in the table below. Market Analysis: Salisbury Square; Randolph, Vermont; September 2006 Page 18

19 Major Private Employers: Randolph Year Annual Company Employees Product/Service Established Sales Randolph Gifford Medical Center 284 Health Services 1903 $10-50Million Dubois & King 92 Engineering Services 1962 $5-10Million Metal Stamping, Tool & New England Precision 55 Die 1988 $10-50Million Randolph National Bank 55 Commercial Banking 1875 Applied Research Associates 53 Geotechnical & Environmental Equipment Source: Vermont Business Magazine. The community has a strong base in services and manufacturing. We note that Vermont Technical College and the Randolph School System are also major local employers. Overall, it is clear that the economy in the area of the project has grown and that it remains strong. This has the effect of increasing demand for housing and pushing housing prices up. Housing pricing typically increases in periods of economic growth. While the current economy (at this time of this writing) appears to have softened, we do not expect housing pricing to decline. Perhaps most significantly, the economy is drawing young workers to the area. We note that recent reports indicate that the regional housing market is cooling, with increases in for-sale inventories and potential price stabilization. Data presented in a later section of this report is consistent with this assessment. However, it is important to note that, to date, there has been no major correction in the housing market. Target Markets Given the range of affordable housing potential proposed in the project, there is no single target market group. Rather, a number of household types and ages may be interested in affordable rental or ownership housing. Primary Target Market - Ownership Units Market Analysis: Salisbury Square; Randolph, Vermont; September 2006 Page 19

20 Ownership units will be primarily attractive to younger and middle aged households attempting to break into the housing market. This could include couples, two persons living together and families with children. Although the potential for an older household to express interest in this housing product is a possibility, we have focused on younger and middle aged households for purposes of this analysis. Secondary Target Market -Rental Units Potential appeal to a broad range of household types, including new, young households (singles, couples, singles with children, couples with children, etc.) to older households particularly single persons. Background Demographics Given the project profile, prospective occupants in ownership or rental units will need to meet distinct age/income profiles. As such, it is essential to complete a thorough demographic analysis in order to determine if there is are sufficient, qualified market pools to provide tenant and buyer prospects. The analysis focuses on households with characteristics that will make them eligible for tenancy or ownership in the project at various income levels, as well as households propensity to move. Given the parameters of the project, the primary focus must be on lower to moderate income households who are seeking a housing change. Additional background demographic data has been provided in order to provide an overall sense of change in the market area and to assess the relative strengths of the target markets. The broader demographics of the region will affect the project s market acceptance, for at least two major reasons: 1) Overall market strength increases housing demand, both easing acceptance of new projects and making it easier for households to move; 2) Demographic shifts result in changes in housing needs. Critical background demographic indicators are summarized below. Population/Household Trends and Characteristics The table below shows historic and current population values for the market area, Randolph Town and Orange County. We have also included data for the Region the area within 25 miles of the project site. Market Analysis: Salisbury Square; Randolph, Vermont; September 2006 Page 20

21 Population Trends and Projections: Market Area, Randolph Town and Orange County ( ) Projected '10 Change Market Area 23,125 23,860 24, % Change 3.2% 1.5% Randolph Town 4,764 4,853 5,054 % Change 1.9% 4.1% Orange County 26,149 28,226 29,287 % Change 7.4% 3.6% Region* 117, , , % Change 1.2% 0.8% Sources: U.S. Bureau of the Census, ESRI Business Information Solutions, Vermont Dept. of Health The market area, town and county have all experienced moderate population growth in recent years. Expectations are for some continued growth but not at a high level. Overall, it is projected that the market area s population will increase by 367 persons during the next five years. The following table shows the current and projected market area population broken down by age group. Market Analysis: Salisbury Square; Randolph, Vermont; September 2006 Page 21

22 Population by Age Bracket: Market Area (2005 Projected 2010) Total Persons Age Group % Change ,056 3, % ,531 3, % ,577 2, % ,388 3, % ,104 4, % ,054 3, % ,622 1, % ,121 1, % % Total Population 23,860 24, % Source: Median Age ESRI Business Information Solutions Market area population change will show significant variation by age group. Based on the projections, all of the population increase in the market area will occur in the 55 to 74 years and 85 or more years groups. Growth in the 55 to 74 years bracket is a clear reflection of the aging of the baby boom cohort, a major force in the majority of US markets. Household change is a direct indicator of housing need. The following table shows current and projected market area households and average household size for each year. Data is also shown for the region the area within 25 miles of the project site.. Market Analysis: Salisbury Square; Randolph, Vermont; September 2006 Page 22

23 Household Change and Average Size: Market Area and Region ( ) Projected 2010 Change Market Area 2005-'10 Households 9,279 9,764 10, % Change 5.2% 2.7% Average HH Size Region Households 46,147 47,451 48, % Change 2.8% 1.9% Average HH Size Sources: U.S. Bureau of the Census, ESRI Business Information Solutions The number of households in the market area is expected to increase by 262 between 2005 and This represents a market for new housing, particularly if it is oriented toward the appropriate market group. Average household size continues to decrease in this market, resulting in a 2005 to 2010 household growth rate (2.7 percent) that exceeds the overall population growth rate. Continued decreases in average household size are a reflection of aging in the market. Current and projected market area age data has been presented in terms of breakdown by age of head of household, an indicator that is specific to the housing market. This is shown in the table below. Market Analysis: Salisbury Square; Randolph, Vermont; September 2006 Page 23

24 Current and Projected Household Age Distribution: Market Area ( ) HH Age Group HHs % of Total HHs % of Total Change % % (25) , % 1, % (26) , % 1, % (208) , % 2, % (48) , % 2, % , % 1, % , % 1, % 40 Source: Totals 9,770 10, ESRI Business Information Solutions As noted, there is solid household growth in the market area a projected increase of 256 households over the next five years. Not surprisingly, particularly strong growth is expected in the 55 to 64 years bracket, consistent with the aging of the baby boom. Overall, households with heads aged 55 years or more will account for the majority of growth in the market area. Although there will be no net increase in the number of younger households housing needs will remain. The following table shows market area and Region households by size (number of persons in household.) Market Analysis: Salisbury Square; Randolph, Vermont; September 2006 Page 24

25 Households by Household Size; Market Area and Region (2000) HH Size (Persons) Market Area Number % of of HHs Total Region - 25 Mile Radius Number % of of HHs Total 1 2, % 12, % 2 3, % 16, % 3 1, % 7, % 4 1, % 6, % % 2, % % % % % Totals 9,279 46,147 Sources: US Bureau of the Census, ESRI Over 63 percent of the households in the market area are composed of only one or two persons, an indication that the majority of rental demand is likely to be for smaller units. Household Income Levels Household income level is significant for this project. Since eligible buyers (or tenants) have been targeted within certain income guidelines, the presence (or absence) of income-eligible households is a primary indicator of the project s marketability. Household income distributions have been analyzed for the market area and region. Data is included for income brackets that have potential for residence in the project. The tables below show household age by income distributions for the market area and region for The income distributions are shown for all households. 6 6 Sources: US Bureau of the Census, ESRI. Market Analysis: Salisbury Square; Randolph, Vermont; September 2006 Page 25

26 Household Income by Age Distribution: Market Area (2005) Number of Households $25 - $34,999 $35 - $49,999 $50 - $74,999 $75 - $99,999 # of HHs % of Total # of HHs % of Total # of HHs % of Total # of HHs % of Total Age of HH Head % 83 5% 45 2% 4 0% % % % 63 6% % % % % % % % % % % % % % % 188 9% 78 8% % 104 6% 72 3% 85 8% Source: Totals 1,266 1,783 2,130 1,035 ESRI Business Information Solutions Household Income by Age Distribution: Region (2005) Number of Households $25 - $34,999 $35 - $49,999 $50 - $74,999 $75 - $99,999 # of HHs % of Total # of HHs % of Total # of HHs % of Total # of HHs % of Total Age of HH Head % 392 5% 225 2% 46 1% % 1,309 16% 1,618 16% 357 7% % 1,802 22% 2,470 24% 1,234 23% % 1,764 22% 3,082 30% 1,866 35% ,007 18% 1,396 17% 1,629 16% 1,127 21% % % 796 8% 372 7% % 562 7% 493 5% 365 7% Source: Totals 5,662 8,092 10,313 5,367 ESRI Business Information Solutions Market Analysis: Salisbury Square; Randolph, Vermont; September 2006 Page 26

27 Housing Market Trends and Comparables We have provided a profile of housing stock, market dynamics and competitive housing in the study area below. The range of housing opportunities in Randolph is reasonable, as the town serves as an urbanized center and provides both low and relatively high density living situations. Overall, the Randolph area market is principally oriented toward ownership housing there are a broad variety of offerings in the region. Relevant housing market data is presented below: Housing Supply and Market Characteristics The table below shows Census 2000 data for Randolph and Orange County. The table shows total housing units, occupied housing units, owner-occupied units, renter-occupied units and renter-occupied units as a percentage of total occupied units. Housing Stock Data: Occupied Housing Randolph Town and Orange County (2000) Orange County (2000) Randolph Town (2000) Total Housing Units 13,386 1,905 Occupied Housing Units 10,936 1,769 - Owner-Occupied Units 8,559 1,245 - Renter-Occupied Units 2, Occupied Units as % of Total Units 82% 93% Renter Occupied as % of All Occupied 21.7% 29.6% Sources: U.S. Bureau of the Census ESRI Business Information Solutions Randolph households show a higher propensity to rent than do other households in Orange County. This is a reflection of the town s more urbanized housing stock and the natural concentration of renter households within the community. Overall however, it is apparent that the county is primarily oriented toward ownership housing. Market Analysis: Salisbury Square; Randolph, Vermont; September 2006 Page 27

28 The table below accounts for vacant housing stock by type for 2000, based on U.S. Bureau of the Census data. Housing Vacancy: Randolph, Orange County (2000) Orange County Number of Vacant Units Randolph Town Number of Vacant Units For Rent For Sale Only Rented or Sold; Not Occupied 70 2 For Seasonal, Recreational or Occasional Use 1, Other Vacant Totals 2, County-wide, seasonal (vacation) housing is a significant factor in the housing stock. However, this is not the case in Randolph where the number of seasonal units is relatively small. The small number of vacant rental units is notable the 2000 data implies a rental vacancy rate of only 3.5 percent; It is apparent that housing demand pressures have increased since Similarly, the data indicates that only 1.7 percent of housing units intended for owner-occupancy were vacant in Again, housing demand pressure has increased since The following tables show the year 2000 number of renter and owner households by household size for Randolph and Orange County. 7 7 All data for year Market Analysis: Salisbury Square; Randolph, Vermont; September 2006 Page 28

29 Renter Household Distribution by Size of Household: Randolph and Orange County (2000) Orange County (2000) Randolph Town (2000) HH Size (Persons) Number of HHs % of Total Number of HHs % of Total % % % % % 62 12% % 56 11% % 27 5% % 7 1% % 4 1% Totals 2, Owner Household Distribution by Size of Household: Randolph and Orange County (2000) HH Size (Persons) Orange County (2000) Number % of of HHs Total Randolph Town (2000) Number % of of HHs Total 1 1,690 20% % 2 3,327 39% % 3 1,389 16% % 4 1,401 16% % % 70 6% % 25 2% % 17 1% Totals 8,559 1,245 The majority of Randolph and Orange County s renter households are composed of small households either one or two persons, an indication that market demand is primarily for smaller units (70 percent in Randolph; 66 percent in Orange County). While the majority of the market demand is generated among smaller households, it is important to note that there are larger households in the rental market. Households in ownership housing are typically Market Analysis: Salisbury Square; Randolph, Vermont; September 2006 Page 29

30 somewhat larger, 38 percent of Randolph s owner households composed of three, four or five persons and 38 percent of Orange County s owner households composed of three, four or five persons. The table below shows residential building permits issued in Randolph and Orange County since 1996, broken down by type, including single family and multi-family units. 8 Building Permits Issued: Randolph Town and Orange County ( ) Totals % of Total Randolph Single Family % Multi-Family % Totals Orange County Single Family % Multi-Family % Totals The data make it clear that the rate of residential development in Randolph has accelerated in recent years. During the past five years ( ) Randolph averaged 18 to 19 new residential units on an annual basis and accounted for over 20 percent of all residential development in Orange County. Further, the data make it clear that the great majority of recent housing development has been in single family development. Comparable Housing Demand A review of comparable housing demand in the area is useful for several reasons: As an assessment of current demand and occupancy levels. To assess general market conditions in the ownership market and rental housing availability for lower and moderate income households and; 8 Building permit data source: HUD User State of the Cities Data Systems. Building permit data not available for Randolph. Market Analysis: Salisbury Square; Randolph, Vermont; September 2006 Page 30

31 As an aid in determining the potential market area for the project (See Market Area above). The primary focus of the review was on establishing that there is demand for existing affordable housing options in the area particularly those that provide housing for lower and moderate income households. Ownership Housing Market Trends We have collected data regarding residential sales to provide background regarding the ownership market. The table below summarizes R1 property sales for 2000 through 2005 in Randolph and Orange County. R1 properties are year-round residential properties on less than six acres and are generally regarded as the most representative of the year-round residential market. The table shows total transactions, total dollar volume, average transaction and median transaction amounts. 9 R1 Sales Trends 2000 to 2005; Randolph and Orange County Randolph Town Transactions Volume ($Millions) $4.58 $4.42 $5.24 $5.03 $7.59 $8.82 Orange County Average $106,416 $93,966 $119,011 $114,292 $126,520 $187,647 Median $95,000 $89,900 $110,000 $116,000 $128,000 $145,000 Transactions Volume ($Millions) $26.61 $20.79 $28.79 $27.95 $32.85 $39.85 Average $109,497 $101,925 $116,107 $122,034 $131,941 $150,955 Median $92,000 $90,000 $104,500 $113,000 $125,000 $139,450 9 Source: Vermont Department of Taxes Division of Property Valuation and Review. Transactions recorded in the R1 category include some sales to seasonal home buyers. Market Analysis: Salisbury Square; Randolph, Vermont; September 2006 Page 31

32 The number of R1 transactions in the town or county has not changed dramatically during the years shown in the table. During the most recent years, Randolph averaged about 50 transactions and accounted for roughly 20 percent of all of Orange County s transactions. While the number of transactions did not increase significantly, significant increases in average transaction amounts have resulted in substantially higher sales volumes. In Randolph, the average R1 transaction increased in value by 76 percent between 2000 and There was a 48 percent increase between 2004 and 2005 alone. We also assessed recent price trends over time by looking at the average of 40 trailing transactions for the 2003 through 2006 period. This is shown in the graphic below. Trailing 40 R1 Transactions: Randolph; ( ) $180,000 Trailing Average - 40 Sales $170,000 $160,000 $150,000 $140,000 $130,000 $120, The graphic shows clear price increases over the period from 2003 to The most recent data (2006) is consistent with the recent slowdown in the real estate market as widely reported in the media. Finally, we assessed price bracketing in the market by breaking down R1 transactions by price group both for the 2003/2004 and 2005 through current period. This is shown in the graphic below. Market Analysis: Salisbury Square; Randolph, Vermont; September 2006 Page 32

33 R1 Transactions by Price Bracket: Randolph; ( , 2005-Current) 35% Percentage of Total Sales 30% 25% 20% 15% 10% 5% 0% 9.2% 3.6% 20.0% 13.1% 30.0% 33.3% 20.8% 25.0% <$50,000 $50-99,999 $ ,999 $ ,999 $ ,999 $ ,999 $300,000+ Price Bracket 13.8% 11.9% Current 2.3% 7.1% 3.8% 6.0% The graphic makes it clear that the number of higher value transactions has increased in the 2005-Current period. In the 2003/2004 period, transactions of $250,000 or more accounted for 6.2 percent of the total; this had increased to 13.1 percent of the total in the Current period. However, we note that the core of the market remains in the $100,000 to $199,999 range. Finally, a review of area listings indicates that there are properties in the $100,000 to $200,000 range. 10 While a number of these properties clearly need work and/or are relatively small, the Randolph area market remains one with some affordable ownership opportunities. However, our research did not uncover any new units in this price bracket. Rental Housing Overview There are a number of rental housing projects with an orientation toward lower/moderate income renters in the Randolph area. A summary of existing subsidized and partially subsidized projects in study area follows: Source: NNEREN-MLS. 11 Sources: Interviews and data from RACDC, Interview with Rob Caron, Interviews with additional area contacts Ellen Baker, Steve Reid. Market Analysis: Salisbury Square; Randolph, Vermont; September 2006 Page 33

34 Branchwood Apartments, Pearl Street, Randolph this is a 12 unit project, including one, two and three bedroom units. There is no rental assistance (deep subsidies) but rents are held at an affordable level using the LIHTC, HOME program and VHCB funding. As of a recent report, all units were fully occupied and waiting periods for persons on the wait list ranged from six to nine months. Sass Apartments, Hedding Drive, Randolph this is a 16 unit project, including one and two bedroom units. There is no rental assistance (deep subsidies) but rents are held at an affordable level using the LIHTC. As of a recent report, all units were fully occupied and waiting periods for persons on the wait list ranged from six to nine months. Prospect-Forest Homes, Forest and Church Streets, Randolph a total of nine units, including two, three and four bedroom units. These are deeply subsidized units, with project-based Section 8 subsidies. As of a recent report, the units were fully occupied and there were waiting lists for each of the unit sizes. Forest and Church Street Units Randolph Circle, Village Circle, Randolph this is a 20 unit project, including two, three and four bedroom units. These are deeply subsidized units, with project-based Section 8 subsidies. As of a recent report, the units were fully occupied and there were waiting lists for each of the unit sizes. Randolph House and Red Lion Inn, Downtown Randolph both of these projects are oriented toward the senior market and, as of a recent report, were fully occupied with waiting lists. Both projects are deeply subsidized. Market Analysis: Salisbury Square; Randolph, Vermont; September 2006 Page 34

35 Market Rents There appears to be solid demand for rentals in the study area vacancies are low and good quality, affordable units are hard to find. Just as significantly, housing development oriented toward first time buyers is rare. Market pricing can vary as rentals occur in a variety of unit types, ranging from efficiencies to single family. Generally, contacts indicate that the quality of housing in the market is reasonable. However, they further indicate that it is difficult to secure a high quality rental because of the high level of demand. Projects that have differentiated themselves in terms of quality, real amenities (garage, in-unit washer/dryer, etc), or location command higher rents; a so-called quality premium. Rents in the region have increased at a strong rate in recent years. An annual survey of rental rates in the region by a major housing organization indicates that median rents increased at an annual rate of 5.8 percent between 1998 and This is well ahead of the pace of inflation. According to another recent study, rents in the Upper Valley Region have been increasing at an annual rate of 10 percent in recent years. 13 We reviewed a number of publications and databases to determine current market rental pricing in the Randolph area. 14 Our findings indicate the following: Studio gross monthly rentals (including heat and other utilities) appear to average $570. (We note that there are few of these units in the market.) One Bedroom Units gross monthly rentals (including heat and other utilities) appear to average $700. Two/Three Bedroom Units gross monthly rentals (including heat and other utilities) appear to average $870. Rental units are attractive when they are competitive with the prevailing market rent, particularly if the unit is in good to excellent condition. It is expected that if a decision to include rental apartments is made that project rents will be comparable to prevailing market rents. However, the units would be competitive because they are new and because they are managed by RACDC which has a solid reputation in the market. 12 Based on data from Residential Rental Cost Survey produced annually by the New Hampshire Housing Finance Authority. Data for Grafton County, NH where trends are similar to those in Orange County, Vermont. 13 Source: Upper Valley Housing Needs Analysis. 14 Sources include print and online versions of: The Herald, The Valley News March through July of Market Analysis: Salisbury Square; Randolph, Vermont; September 2006 Page 35

36 Affordable Ownership Housing Overview The shortage of affordable ownership housing has been well documented in the regional media. While a number of committees and organizations are working toward affordable housing development, it is apparent that the production of these units is not occurring at the pace required to satisfy demand. The May 2005 Presentation to the Vermont Affordable Housing Coalition Vermont Housing Needs Assessment, found that: 15 Orange County has not produced an adequate number of new owner or rental marketable units between 2000 and 2005 to meet the growing housing demand. Orange has added just 2 percent new owner units and 2.4 percent renter units, compared with the state rates of over 4 percent in each category. 15 Source: The Vermont Housing Council & Consolidated Plan Advisory Group. Market Analysis: Salisbury Square; Randolph, Vermont; September 2006 Page 36

37 Market Potential The market success of the project will hinge on several factors. Major points regarding the proposal are summarized below: The project has an excellent location: - The project site is in a central location in Randolph, with easy access to all downtown services. - The location is in Randolph, the area job center. - The project can be integrated into a stable residential neighborhood. The demographic analyses indicate that there are solid pools of income-qualified households in the targeted markets for the project (see below). These markets will experience growth, given the positive economy. The study area s solid economy and growth trends are significant. Affordable housing residents are likely to be persons drawn to the area by new jobs. The study area is subject to strong housing pressures. Selective additions to the affordable housing stock will meet with substantial demand. It is reasonable to assume that the potential market for affordable housing projects in the study area is larger than the market area analyses show. Randolph is regarded as an attractive place to live new housing options would almost certainly draw households in from outside the defined market area. For purposes of this analysis, we have assumed that an additional 10 to 15 percent of the market for the components of the project can be drawn from outside of the study area. These factors indicate that there is market potential for the project. Additional assessment is presented below, for each of the project s potential markets. Potential Market Pools Market Area Households The raw background demographic data can be analyzed to estimate the total available market pools for the for-sale or rental components of the project, in terms of numbers of households meeting relevant age and income criteria. Three market pool analyses have been completed: 1. Ownership units a) 19+ units in the townhouse structures. The units would have two or three bedrooms and will sell for approximately $175,000 and; b) 10+ condominium units in one and two bedroom configurations targeted selling price Market Analysis: Salisbury Square; Randolph, Vermont; September 2006 Page 37

38 of approximately $125,000 (these units could also be marketed for rental see below). Financial features are summarized below. The ownership market has been assessed in terms of households with incomes at 60 to100 percent of median income and 100 to 140 percent of median income. 2. Lower/Moderate income rental units to include 10+ units in an apartment building, with unit sizes ranging from Studio to two bedroom, this market pool could include younger or elderly households with household sizes ranging from one to four persons. Limited to households with incomes less than 100 percent of the Orange County median. Ability to afford project rents will determine base income eligibility for these units. 60, 80, 100 and 140 percent households income limits by household size for Orange County are shown in the table below. 16 Household Income Limits: Orange County, Vermont (2006) Household Size % of Median Limit $24,720 $28,260 $31,800 $35,340 $38,160 $40,980 80% of Median $32,960 $37,680 $42,400 $47,120 $50,880 $54, % of Median $41,200 $47,100 $53,000 $58,900 $63,600 $68, % of Median $57,680 $65,940 $74,200 $82,460 $89,040 $95,620 The market pool analyses has been completed in two major steps: 1. Calculate the size of the age/income eligible market pools the number of households that can take advantage of a particular housing program (ownership or rental) by virtue of their age and household income level. 2. Estimate the propensity to move within each market pool. Only a segment of each age/income qualified households will seek a change in housing at any given time. As such, it is helpful to assess the propensity to move within age/income categories in order to develop a realistic estimate of the size of the housing market. Households in various age and income groupings display markedly varied propensities to move within the course of a year. Most significantly, the propensity to move declines with increased 16 Source: HUD 2006 limits. Market Analysis: Salisbury Square; Randolph, Vermont; September 2006 Page 38

39 age and income. Thus, younger, lower income households are most likely to move, while older, high income households are least likely to move. As a measure of the volume of activity, the market pool estimates, as broken down by age and income, have been applied to propensity to move factors specific to each age/income group, based upon a variety of research studies. 17 The result of these calculations is an estimate of the number of market pool households likely to be seeking to move within the course of one year. Note that these figures include moves to all types of housing. The market pool estimates follow: Homeownership Program - 60 to 100 Percent Median (Lower/Moderate Income) Ownership units are typically made affordable using two basic approaches: 1. Financing reduced down-payments, low interest rates, etc. 2. Subsidized Price achieved through direct subsidy, land write-downs, etc. In combination, these tools can result in significant reductions in monthly housing costs, reducing the required income level for home ownership. Depending on the level of assistance, home purchasers may be subject to some restrictions, most often in the instance of resale. Typically, buyers would face a restriction on gain upon sale and only be able to take 25 percent of the appraised gain in property value from the initial sale value. This factor does limit the potential market for the project as some households do not find this limitation to be acceptable. Our analysis of home ownership market potentials focuses on households with heads aged less than 55 years, under the assumption that there are few first time buyers in age brackets above this level. Our analysis for the income strata was conducted in several major steps: 17 Sources include: Ernst and Young Real Estate Journal American Demographics American Housing Survey - U.S. Bureau of the Census Current Population Reports - U.S. Bureau of the Census Census U.S. Bureau of the Census Propensities to move values have been adjusted to account for lower than average propensities in this region. Market Analysis: Salisbury Square; Randolph, Vermont; September 2006 Page 39