ARES Urbanexus Update #167
The American Real Estate Society (ARES) distributes this monthly selection of real estate and metropolitan development news and information curated by H. Pike Oliver.
Environment
A bumblebee and housing in California
As California grapples with a deepening housing underproduction crisis, developers might face an unexpected challenge: Crotch’s bumblebee. As more insects become eligible for protection, it could be just the beginning of a new era of endangered species protection, and the methodology for understanding listing and protection might be very different for insects. The bumblebee has an extensive range within California. It has also been observed in southwest Nevada. Bumblebees are most active between March and September, with queens most active in the spring.
If the bumblebee were to be listed, it could pose significant challenges to developers all across the state. They would have to adhere to new regulations, including undergoing extensive survey processes and implementing unclear conservation practices, potentially delaying previously established timelines.
You can learn more here.
Housing
Rent setting algorithm sparks anti-trust litigation
In August 2024, the U.S. Department of Justice (DOJ) and several state attorneys general sued RealPage Inc., claiming the pricing algorithm used in its software violates federal antitrust laws.
Experts say resolving the litigation, whether through settlement or a trial, is likely to take some time. However, the claims laid out in the DOJ's allegations prompt more significant questions about the role of technology in everyday real estate practices such as lease negotiations.
At the heart of the DOJ's claims is that apartment owners share information not publicly available with RealPage's software, which inputs that information into an algorithm to suggest lease rates to other software users — and industry competitors. That, according to Attorney General Merrick Garland, "enables landlords to share confidential, competitively sensitive information and align their rents," which the DOJ alleges violates the Sherman Antitrust Act.
You'll be able to learn more here.
Top-rated rental properties in US metro areas
The ORA® Power Rankings, developed by J Turner Research, is a monthly, independent ranking of apartment properties and management companies based on their Online Reputation Assessment (ORA) scores. The ORA score is a statistical model that consolidates and assesses online ratings from various review sites and Internet Listing Services (ILSs), resulting in a single score on a 0-100 scale.
These rankings recognize the online reputation of the highest-performing communities and management companies. The September 2024 ORA Power Ranking spotlights the nation's 25 most populous metropolitan statistical areas (MSAs) and recognizes the top 10 properties in each based on their ORA scores. The average ORA score of each MSA is also highlighted. Learn more and view an interactive version of the map here.
Residential zoning in California
Researchers from UC Berkeley’s Othering & Belonging Institute crunched the numbers and found nearly 96% of all the land zoned for residential use in California is reserved for single-family homes. To dramatically increase housing stocks and decrease housing costs, state regulators are requiring cities to plan for more affordable housing construction, which often requires rezoning.
The state mandate resulted in a plan for 250,000 more housing units in the City of Los Angeles. An article by L.A. Times housing reporter Liam Dillon highlighted the fact that L.A. planning officials proposed to meet the state requirement by making high-density neighborhoods even denser while leaving low-density, single-family-home communities virtually off-limits
After years of study, the city planning commissioners had to decide: Where should all those new homes go? After hours of public comment and debate, commissioners opted for the status quo.
Why too few homes get built in the USA
The housing crunch that has existed for years in high-cost big cities has moved into the rest of the country. New York Times housing reporter Conor Doughterly explains that the culprit is building too little housing, which began two decades ago. In the three years leading up to the Great Recession of the late 2000s, homebuilders started about two million homes a year. That number plunged during the crisis and never fully rebounded. Since 2010, builders have started about 1.1 million new homes a year on average — far below the 1.6 million needed to keep up with population growth. America is millions of homes behind, and it gets worse each year.
Learn more here.
Regional and metropolitan trends
House price changes across the USA
House prices changed unevenly across U.S. metro areas from the second quarter of 2023 to the second quarter of 2024. House price appreciation ranged from -4.6% to +20.7%. In the second quarter of 2024, 14 metro areas, highlighted in red on the map above, had negative house price appreciation, while the remaining 370 metro areas experienced positive price appreciation.
Meanwhile, house prices in the second quarter of 2024 are much higher than before the pandemic. Nationally, house prices rose 49.7% between the first quarter of 2020 and the second quarter of 2024. More than half of the metro areas saw house prices rise by more than the national price growth rate of 49.7%. Among all the metro areas, house price appreciation ranged from 13.8% to 81.0%. House prices in the South and the West have grown faster than in the Midwest and Northeast. Within the top 20 metro areas that had the highest house price appreciation, 11 metro areas are in the South Atlantic Division and six in the East South Central Division, while none were in the Midwest.
You may learn more here if you’d like.
Retail
Chapter 11 bankruptcy filings by retailers
A spate of retail bankruptcies has opened up vacancies in retail centers across America. Columbus, Ohio-based Big Lots Inc. became the latest major retailer to file for Chapter 11 bankruptcy protection earlier this month. It plans to close more than 300 stores as part of its restructuring. Other retailers like rue21 Inc., Express Inc., and The Body Shop International Ltd. announced plans earlier this year to close hundreds of stores. Discount retailer 99 Cents Only Stores LLC said this spring it would close all of its 371 stores. LL Flooring Holdings Inc. and Conn's Inc. also have filed for bankruptcy this year, as did Red Lobster, with the Orlando, Florida-based chain closing more than 100 restaurants as part of its recently concluded Chapter 11 proceedings. Most of those sites were freestanding out parcels of shopping centers.
In some markets and centers, retailer store closures have been backfilled quickly and at a higher lease rate than what the previous occupant was paying. However, in other places, the type of store that's closing—and its location—can make it difficult to re-fill vacated spaces. Executives at publicly traded retail real estate investment trusts have largely cited the interest in acquiring retail leases at bankruptcy auctions as a positive sign amid the closures.
Learn more here.
Transportation
Motorization of the United States
Even with an urbanization rate of more than 80 percent, the United States is still seen as a country that has to rely on transportation via passenger vehicles due to the varying quality of its public transit and long-distance train and bus network. However, the idea that U.S. residents own more than one car is, on average, untrue.
Statista calculations based on data from the U.S. Census Bureau and the U.S. Department of Transportation show that only nine U.S. states have a motorization rate, meaning the number of motor vehicles per capita, at or above 1.0. Since the data doesn't disaggregate the pool of motor vehicles by private and commercial use, a higher density of, for example, agricultural businesses or companies relying on larger vehicle fleets might skew the results. Another factor to consider is that not every motor vehicle is classified as a car. This caveat notwithstanding, no state comes close to Montana, with an average of two motor vehicles per capita.
On the low end of the spectrum are some of the country's smallest states like Delaware, the District of Columbia and New Jersey, which are easier to get around in if you don't own a car. One of the exceptions from this rule with a motorization rate of 0.46 is New York, which ranks 30th out of 50 states and the District of Columbia in terms of land size. However, it exhibits a high urbanization rate and, for example, a well-connected public transit system in New York City. The state's capital is home to around 43 percent of all residents of New York state, according to the most recent U.S. Census from 2020.
US driving and congestion is higher than ever
After a reprieve from car traffic in 2020, vehicle miles traveled have now surpassed pre-pandemic levels in almost every metro area.
Lockdowns and the widespread adoption of remote work in the early days of the pandemic offered a rare glimpse of streets without the usual noise and air pollution from traffic. Four years later, though, both traffic and congestion exceed pre-pandemic levels across most of the US, according to a report from the transportation analytics firm StreetLight Data. The total miles traveled by all vehicles, or VMT, jumped 12% between May 2019 and May 2024, reaching record levels. You may learn more here.
Regional and metropolitan trends
Areas with the worst traffic
The ConsumerAffairs Research Team analyzed three key traffic measures for 49 major U.S. metros to determine which cities have the heaviest congestion, most extended travel times, and most fatal crashes. They combined these factors to calculate an overall traffic score for each area and rank them. See the top 9 (worst) traffic areas in the chart below.
You can learn more here.
