Published on: March 1, 2018


Sounding an alarm that usually comes from housing advocacy groups, a multifamily developer is warning of an impending crisis in the rental housing market – the result of a mismatch between supply and demand. His message: Although the luxury market is overbuilt, or close to it, and the need for affordable housing acute, developers continue to add supply at the high end, because affordable rents can’t cover rising construction costs.
“The two-by-four doesn’t care whether it’s in a luxury building or in an affordable building. It costs the same,”

Toby Bozzuto, president of the Bozzuto Group, a multifamily developer, told CNBC. “The differential of course, is the rent… The rents have to be high to support the cost.”

Apartment completions increased by nearly 50 percent last year, but nearly 80 percent of those units were in luxury buildings, according to statistics compiled by RealPage, an apartment management software and data company.

Harvard’s Joint Center for Housing Studies estimates that nearly half of all renter households are paying more than 30 percent of their income for housing; 25 percent are paying more than 50 percent. The mismatch between what renters need and what builders can produce is distorting the market – overbuilding is holding rent increases down at the high end, while competition for scarce units is forcing rents up at the low end.

“It’s a tale of two cities,” Bozzuto said, with middle-and low-income tenants paying proportionally more of their income than luxury renters –”so much so that I believe there’s an acute crisis headed our way.”


Since the Great Recession plunged Fannie Mae and Freddie Mac into a sea of mortgage losses requiring a massive government bail-out to keep them afloat, the secondary market giants have been steadily working their way back to profitability and out of receivership. But the tax reform proposal enacted by Congress last year threatens to undo much of the progress they have made. Both reported fourth quarter losses ($6.4 billion for Fannie and $3.3 billion for Freddie), resulting from tax code changes that have made once valuable tax credits worthless. The losses will reduce the GSEs’ cash cushion below statutory requirements, requiring them to seek capital infusions from the Treasury – $3.7 billion for Fannie and $300 million for Freddie.

Timothy Mayopoulos, Fannie’s president and CEO, described the quarterly loss as a “one-time accounting charge,” that does not reflect the company’s underlying strength. “Our 2017 results demonstrate that the fundamentals of our business are strong,” he said in a press statement.

Freddie Mac officials delivered a similar message, emphasizing the company’s strong pre-tax earnings. “2017 was a landmark year in Freddie Mac’s transformation,” CEO Donald Layton, said, citing “several very significant milestones,” ─ among them, a 6 percent increase in mortgage guarantees, boosting them to the highest level in a decade.” Both Fannie and Freddie expect that the tax reform impacts will be positive for them after this year.


Decrying what they describe as an “attack” on housing benefits for low-income families, affordable housing advocates are urging Congress to reject the Trump Administrations proposed budget for next year. Citing the need to tame budget deficits, the Administration has proposed steep cuts in a variety of government agencies, including a nearly 18 percent reduction in funding for the Department of Housing and Urban Development (HUD).

The Community Development Block Grant program and the National Housing Trust Fund would be among the casualties if the agency’s budget is reduced to less than $40 billion.

The agreement that ended the last government shutdown, restored about $1 billion of the loss, but would still leave the agency with nearly $9 billion less than its 2017 allocation, according to an analysis by the National Low-Income Housing Coalition.

“The proposal includes severe funding cuts, as well as harmful rent increases and arbitrary work requirements that would leave even more low-income people without a stable home, undermining their ability to live with dignity and climb the economic ladder to achieve financial security,” the coalition said in a press statement.

“This budget is bad policy and bad politics, David Dworkin, president and CEO of the National Housing Conference agreed. “It undermines years of public-private investments in housing and community development that have had broad bipartisan support, like the CDFI Fund and block grant funding for neighborhood redevelopment,” he told Affordable Housing Finance. “It even cuts the Capital Magnet Fund and National Housing Trust Fund, which aren’t even paid for by taxpayers.”


Consumers are feeling increasingly upbeat about their finances – and that could be cause for concern. Buoyed by rising personal incomes and a strengthening job market, consumers are spending more, saving less, and borrowing more heavily to finance their expenditures.

Consumer spending increased a seasonally adjusted 0.4 percent in December compared with November, matching the personal income gain for the month, while the saving rate fell to 2.5 percent, its lowest level in nearly 13 years, according to a Commerce Department report.

Debt ratios as a percentage of income have begun to move higher recently, after declining steadily since the financial crisis. “Debt may be filling the gap for many households when incomes have not kept pace with rising living expenses,” analysts John McElravey and Ryan Brinkoetter wrote in a note to clients. “A reversal may be ahead, they warned, “if income growth does not catch up to consumer expectations.”


Like consumers (see above), business executives are confident about the economy, but are becoming increasingly concerned about the widening gap between the jobs they need to fill and the skills of workers available to fill them.

More than two-thirds of the business leaders responding to JPMorgan Chase’s annual business outlook survey were upbeat about the global economy – a 39 percent improvement over the past year, and the highest level in the eight years the survey has been conducted. Sixty-eight percent said they expect either significant or moderate benefits from the tax reform package Congress enacted last year and 21 percent expect minor gains.

Clouding that generally favorable picture, nearly half of the respondents said it is increasingly difficult to find employees with the “unique” skills that match the positions they need to fill as older, more experienced workers retire. An equal number said they are finding the pool of job applicants at any skill level is sparse. Respondents said technical and trade positions are the most difficult to fill.

wo thirds of the executives said they are implementing new strategies to attract younger workers. More than 30 percent are offering flexible hours,13 percent are offering improved benefits and 9 percent are offering training or the opportunity to work from home. The smallest percentage (7 percent) are increasing wages.


Nearly 80 percent of prospective buyers can afford only half the homes available for sale in their markets, the National Association of Home Builders reports. Despite that lopsided equation, most say they hope to buy a home within a year.

A Zillow analysis finds that the housing market has regained all of the $9 trillion in value lost during the recession, but the gains have not been shared equally by all housing markets.

Housing industry executives anticipate that driverless car technology will affect land values and housing demand. They’re just not sure exactly how, where, or when.

Mortgage rates have reached their highest level in four years, as inflation fears have triggered sharp increases in the Treasury yields, to which mortgage rates are linked. “It hasn’t gotten to where people are starting to back out of deals yet.,” one mortgage industry executive told Bloomberg News. “But as we get closer to 5 percent, that’s when they will start thinking about it.”

The Mortgage Bankers Association has taken strong exception to a study by the Center for Investigative Reporting concluding that discrimination against minorities is rampant in mortgage lending.



Easements confer obligations as well as benefits on their beneficiaries – a detail that property owners sometimes overlook. Two recent decisions illustrate the point: One addresses the obligation to share use of an easement; the other focuses on the obligation to share its maintenance costs.

Tackling the first issue (sharing the easement’s use), a Texas Appeals court ruled that holders of a nonexclusive easement in a condominium association could not restrict access to which other residents of the community were entitled. In this case (First Colony Community Services Association, Inc. v. Valentz), the community association granted an owner (Valentz) a nonexclusive easement allowing him to install “landscaping and other appurtenances” across a strip of common area property. The easement language stated that it was “subject to all existing easements and other limitations,” and that its use had to consistent with the requirements of First Colony’s declaration – including the provision giving owners “”an easement of enjoyment” in the common area.

Valentz installed the landscaping features the easement permitted, including a wrought-iron fence bordering the easement area. But when he installed a locked gate barring entry by others, the association objected, insisting that Valentz remove the lock and leave the gate open. He refused both requirements, agreeing only to open the gate on request by owners seeking assets. Finding that arrangement unacceptable, the association sued.

The trial court sided with Valentz, granting his request for summary judgment; the appeals court went the other way, agreeing with the association that installing a locked gate converted what was supposed to a nonexclusive easement into an exclusive one.

“The non-exclusive nature of the easement requires the [Valentz]to permit use and enjoyment of Reserve E by other owners in the Association,” the court said. The easement was also granted “subject to all valid and subsisting easements,” including the “easement of enjoyment in the association’s common areas” specified in the declaration. “Because the easement is unequivocally ‘nonexclusive’ and the Declaration provides that all First Colony owners have an easement of enjoyment in and to [the easement area],” the court concluded, “the use of a locked gate…to exclude the Association’s members violates the express nonexclusive grant.

In our second easement case (Tanglewood Property Owners’ Association, Inc. v. Isenhour), the North Carolina courts were asked to determine whether lot owners who were not members of a homeowner association were, nonetheless, required to pay a share of the cost of maintaining easements from which the owners benefited.
The defendants – Frank and Linda Register – -owned two lots in Tanglewood West. A voluntary homeowner association, which they chose not to join, owned the subdivision common areas. For about 20 years, the association paid maintenance costs for the common area and easement areas to which non-members had access.

But in 2013, the association decided that non-member lot owners should pay a proportionate share of those maintenance costs, totaling about $128 per year for the Registers. When they refused to pay, the association sued.

A trial court ruled that the plat plan granted the Registers only an easement by necessity to use easement area roads to access their property, and they should be required to pay only a share of the reasonable costs necessary to maintain the roads. The association appealed, arguing that easement holders are required to maintain an easement, regardless of the extent to which they use it.

The Appeals Court agreed. “Although the Defendants may not currently use some of the easement areas, as easements appurtenant, [their]’ rights to these areas will run with the land and add value to Defendants’ property. Thus, Defendants are conferred a benefit, even if they do not currently use all of the easement areas.” Because they benefit from the easements, even if they don’t use them, the court concluded, the Registers have a duty to maintain them.


“When it comes to where people can live, work and go to school, the idea that more than a third of people of color buying a home still don’t believe that their money is as good as anyone else’s is a massive problem.” ─ Nela Richardson, Redfin Chief Economist.

Marcus, Errico, Emmer & Brooks specializes in condo law, representing clients in Massachusetts, Rhode Island and New Hampshire.