Naturally Occurring Affordable Housing NAAHL Annual Conference December 1, 2016 page 1
Slicing And Dicing Rental Housing U.S. Rental Housing Inventory By Units Rent Subsidized 3.3 Million 8% Market Rate & Market/Affordable 16.0 Million 37% 1-4 Units 23.5 Million 55% Sources: U.S. Census Bureau; CoStar Portfolio Strategy As of August 2016 page 2
Slicing And Dicing Rental Housing U.S. Rental Housing Inventory By Units 1 & 2 Star 5.6 Million 13% Sources: U.S. Census Bureau; CoStar Portfolio Strategy As of August 2016 page 3
One- And Two-Star Rating Criteria CoStar Building Rating System (BRS) page 4
Three-Star Rating Criteria CoStar Building Rating System (BRS) page 5
Four-Star Rating Criteria CoStar Building Rating System (BRS) page 6
Five-Star Rating Criteria CoStar Building Rating System (BRS) page 7
CoStar Building Rating System EXTERIOR INTERIOR 1 Star 2 Star 3 Star 4 Star 5 Star page 8
Affordability Issues More Significant At Top End Of Market Rent As A % Of 100% Area Median Income By Star Rating 28% Rent As A % Of Income 26% 26.4% 24% 22% 23.4% 20% 18% 16% 14% 12% 10% 17.8% 15.3% 2013 2014 2015 2016 19.6% 16.5% 1 & 2 Star 3 Star 4 & 5 Star Source: CoStar Group As of 16Q2 page 9
1 & 2 Star Represents A Major Portion Of The Market Number Of Units By Star Rating 22.3% 3,393,118 36.2% 5,501,144 41.5% 6,310,441 1 & 2 Star 3 Star 4 & 5 Star Source: CoStar Group As of August 2016 page 10
The Vast Majority Of Multifamily Properties Are 1 & 2 Star Number Of Properties By Star Rating 4.7% 15,827 19.8% 66,684 75.4% 253,467 1 & 2 Star 3 Star 4 & 5 Star Source: CoStar Group As of August 2016 page 11
1 & 2 Star Properties Can Be Found Almost Anywhere 1 & 2 Star Units By Metro Sources: ESRI; CoStar Portfolio Strategy As of 16Q2 page 12
Los Angeles New York Chicago San Diego San Francisco East Bay Miami Orange County Seattle Minneapolis Boston Inland Empire Philadelphia San Jose Portland OR Fort Lauderdale Northern NJ Washington, DC Cincinnati Denver Los Angeles And New York Dominate 1 & 2 Star Properties By Metro 50 45 Number Of Properties (000s) 18.4% 40 35 30 11.6% 25 20 15 10 4.3% 3.7% 2.9% 2.6% 2.0% 2.0% 1.9% 1.7% 5 1.4% 1.4% 1.4% 1.3% 1.3% 1.2% 1.1% 1.0% 1.0% 1.0% 0 Source: CoStar Group As of August 2016 page 13
Almost Half Of 1 & 2 Star Inventory In 50+ Unit Buildings Number Of Units By Building Size And Star Rating 4.0 Number Of Units (Millions) 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 5-9 Units 10-19 Units 20-49 Units 50-99 Units 100-199 Units 200+ Units 1 & 2 Star 3 Star 4 & 5 Star Source: CoStar Group As of August 2016 page 14
Most Units Built More Than 35 Years Ago 1 & 2 Units By Building Age 1.6 Number Of Units (Millions) 1.4 1.2 1.0 0.8 0.6 0.4 0.2 0.0 1900-09 1910-19 1920-29 1930-39 1940-49 1950-59 1960-69 1970-79 1980-89 1990-99 2000- Source: CoStar Group As of August 2016 page 15
Vacancies Show The Effect Of Construction Average Vacancy By Star Rating 9% Vacancy Rate 8% 7% 6% 5% 4% 3% 2% 1% 0% 2013 2014 2015 2016 1 & 2 Star 3 Star 4 & 5 Star Source: CoStar Group As of 16Q2 page 16
Strong Long-Term Rent Growth In 1 & 2 Star Segment Average Rent Growth By Star Rating 8% Rent Growth 7% 6% 5% 5.0% 5.6% 6.4% 4% 3% 2% 1% 0% 1 & 2 Star 3 Star 4 & 5 Star Average Annual Rent Growth Since 2013 Y/Y Rent Growth Source: CoStar Group As of 16Q2 page 17
San Francisco San Jose East Bay New York Honolulu Long Island Orange County Boston Los Angeles San Diego Washington, DC Northern NJ Miami Seattle Fort Lauderdale Stamford Denver Inland Empire Portland OR Hartford Austin Baltimore Palm Beach Philadelphia Sacramento Chicago Minneapolis Nashville Raleigh Norfolk Orlando Pittsburgh Salt Lake City New Orleans Tampa Dallas - FW Houston Atlanta Richmond Detroit Milwaukee Charlotte San Antonio Phoenix Jacksonville Kansas City Cleveland Saint Louis Las Vegas Indianapolis Columbus OH Cincinnati Oklahoma City Memphis Core Coastal Metros Are The Priciest 1 & 2 Star Average Asking Rent By Metro $3,000 Average Asking Rent $2,500 $2,000 $1,500 $1,000 $500 $0 South East Midwest West Source: CoStar Group As of 16Q2 page 18
But On A Comparative Basis May Be Relatively Cheap 1 & 2 Star Apartment Rents As A Percent Of Market Rent Sources: ESRI; CoStar Portfolio Strategy As of 16Q2 page 19
Ethan Vaisman, Senior Consultant evaisman@costar.com These CoStar Portfolio Strategy materials contain financial and other information from a variety of public and proprietary sources. CoStar Group, Inc. and its affiliates (collectively, CoStar ) have assumed and relied upon, without independent verification, the accuracy and completeness of such third party information in preparing these materials. The modeling, calculations, forecasts, projections, evaluations, analyses, simulations, or other forward-looking information prepared by CoStar and presented herein (the Materials ) are based on various assumptions concerning future events and circumstances, which are speculative, uncertain and subject to change without notice. You should not rely upon the Materials as predictions of future results or events, as actual results and events may differ materially. All Materials speak only as of the date referenced with respect to such data and may have materially changed since such date. CoStar has no obligation to update any of the Materials included in this document. You should not construe any of the data provided herein as investment, tax, accounting or legal advice. CoStar does not represent, warrant or guaranty the accuracy or completeness of the information provided herein and shall not be held responsible for any errors in such information. Any user of the information provided herein accepts the information AS IS without any warranties whatsoever. To the maximum extent permitted by law, CoStar disclaims any and all liability in the event any information provided herein proves to be inaccurate, incomplete or unreliable. 2016 CoStar Realty Information, Inc. No reproduction or distribution without permission. page 20