MAI appraiser

What’s Red, Blue and Gray All Over?

The population of the United States is rapidly growing older. According to the US Census Bureau, the number of older Americans is projected to more than double from 2010 to 2050. And by 2030, Americans 65 and older are estimated to represent over 20% of the total population. Technological advances and modern medicines are contributing to a greater number of seniors each year.

Question: Is the country prepared to meet the housing needs of this growing demographic?

Middle-income seniors risk falling through cracks on housingAccording to the US Census Bureau, as of July 2022, there were approximately 144 million housing units in the US and of those housing units almost two thirds are owner occupied. Seniors living in lower income households cannot find the means to adequately update their homes to meet their needs as they age.  Aging in place is becoming more of a challenge for this demographic group due to high home maintenance cost, interest rates, and a reduced income as seniors rely on social security and/or part-time work.

Several state governments are paying attention and trying to make it easier to age in place. The Institute for Taxation and Economic Policy (ITEP) provides a list of states that offer lowered property tax options, renter’s aid and reverse mortgages through HUD’s Home Equity Conversion Mortgage (HECM) program.  For example, Iowa’s legislature recently passed bill SF 619 for the Elderly and Disabled Homeowners.  The bill allows income qualified seniors to exempt $3,250 of taxable value of their primary residence for the 2023 tax year and $6,500 for the 2024 tax year. Similarly, Connecticut’s state law offers an income-based property tax credit up to $1,000 for single homeowners.

Without more awareness and action to proactively push funding through legislation for affordable senior housing, the “I’ll think about that someday when I get a little older” will be tomorrow and our nation may not be ready.

FRG Wins 5-Year Contract with HUD

Feasibility Research Group (FRG) selected to perform rent comparability and post-rehabilitation studies (RCS) for the Midwest Region.

University Heights, OH (August 12, 2019) — FEASIBILITY RESEARCH GROUP (FRG), a real estate services firm based in Northeast Ohio, has been selected to provide rent comparability studies (RCS) for multifamily housing properties in the Midwest Region.  The Midwest Region includes the following states: Illinois, Indiana, Michigan, Minnesota, Ohio and Wisconsin.

The US Department of Housing and Urban Development requires the completion of rent comparability studies in compliance with the latest version of Chapter 9 of the Section 8 Renewal Policy Guide.

“We are excited to work with the US Department of Housing and Urban Development” said Gregory Williams, MAI and FRG‘s Owner and Managing Director. “We are looking forward to helping to provide safe and affordable housing to communities throughout the Midwest.”

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Eminent Domain: What Options Do Property Owners Have?

As a MAI designated appraiser who completes right-of-way, acquisition and disposition appraisals, I have encountered a variety of situations where property owners are unaware of the complex process involved in a full or partial taking of private property. During this process, the appraiser can in fact assist the property owner in making sure they achieve the best possible outcome when selling their property to a government agency.

For example, once a state agency has determined that property is needed for public use, the property owner does not have an option to simply refuse the sale of their property. However, the government is required to ensure they compensate the owner fairly and cannot place any undue burdens or hardships on the property owners during this process. Thus, when the state claims private property through eminent domain, the property owner can have an impact on getting the best deal possible.

Here are some ways that property owners can make sure they are justly compensated, in the case of a state claim to their property:

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FRG Continues Expansion Into Mid-Atlantic Region

Feasibility Research Group (FRG) has been selected to provide Appraisal Services for the District of Columbia Housing Authority.

University Heights, OH (April 3, 2019) — FEASIBILITY RESEARCH GROUP (FRG), a real estate appraisal and consulting firm based in Northeast Ohio, has been selected for Appraisal Services with the District of Columbia Housing Authority.

The District of Columbia Housing Authority requires professional appraisal services to support its Office of Capital Programs.  The programs that FRG will support include the appraisal of mixed income, mix use development, public housing apartments.

“FRG looks forward to supporting the District of Columbia Housing Authority with their appraisal needs” said Gregory Williams, MAI and FRG‘s Owner and Managing Director. “FRG’s appraisals will support DCHA’s initiative to provide livable housing to support healthy and sustainable communities.”

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FRG Expands into Maryland

Feasibility Research Group (FRG) awarded multi-year contract to provide appraisal services for the Maryland Department of Housing and Community Development.

University Heights, OH (March 11, 2019) — FEASIBILITY RESEARCH GROUP (FRG), a real estate appraisal and consulting firm based in Northeast Ohio, has been selected for Appraisal Services with the Maryland Department of Housing and Community Development.

The Maryland Department of Housing and Community Development requires professional appraisal services to support its Business Lending Division.  The programs that FRG will support include the appraisal of mixed-use commercial properties.

“We are excited to work with the state of Maryland’s Department of Housing and Community Development” said Gregory Williams, MAI and FRG‘s Owner and Managing Director. “Our commercial appraisal reports will be key in helping the Business Lending Division make sound lending decisions.”

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Small Business

Shortly after becoming a MAI designated appraiser, I founded FRG. The firm was built on a client base of strong regional financial institutions who needed quality commercial real estate appraisals for their loans and portfolio management. For a good three or four years that client base grew as banks provided loans to small businesses that were seeking to expand their own business. However, there has been a shift over the last twenty-four months, and I have noticed a flattening and decline of financial institution business lending.

I can’t say with 100% certainty the reason for the decline, as there is no one single reason for this shift. However, over the last couple of years I have observed some bank lending trends:

Shifting Geographic Focus to High Growth Markets
Several banks that previously held a strong presence in the Midwest have shifted their focus to higher growth areas on the east coast. One such bank is First National Bank of Pennsylvania; in 2015 and 2016 they stated that the Cleveland and Pittsburgh MSAs were focus areas for growth. However, as we moved into 2017 and 2018, their focus shifted to the mid-Atlantic and Southeast. First National Bank confirmed this shift in their 2017 Annual Report, stating that Raleigh, Charlotte, Winston-Salem, Greensboro, High Point, NC and Washington, DC joined Pittsburgh, Baltimore and Cleveland as the bank’s largest commercial regions .

Prioritizing Mid-Cap Companies over Small Businesses
Banks have been shifting their lending to mid-cap companies instead of lending to small businesses. A reason for this shift could be because it is more difficult to package loans under $1M into bonds that can be sold to a third party.

Bank Consolidation and Banks Getting Larger
In the past two years, there has been a great deal of bank consolidation. For example:

• The largest bank headquartered in Michigan, Chemical Financial Corporation acquired Talmer Bank, a less than 100 branch bank also headquartered in Michigan and recently announced a merger with Minnesota-based TCF Financial Corp resulting in the bank becoming one of the 50 largest banks in the country.
• The second largest originator of SBA loans for the state, Columbus, Ohio-based Huntington National Bank acquired First Merit Bank of Akron, Ohio

The Federal Reserve Bank’s Small Business Lending Survey reported that in the third quarter of 2018, there was 1.4% growth in large institution loans for commercial & industrial small business, while mid-sized and small banks decreased their loan activity by 4.2% and 1.5%, respectively. Smaller banks are more likely than large banks to lend to small businesses. Therefore, the consolidation of the banking industry, and the rising average size of lenders, might account for some of the shift away from providing small business credit. According to the Federal Reserve’s Small Business Lending Survey, small banks offer lower interest rates on fixed rate terms loans than large banks, meaning small businesses may be able to secure more favorable loan terms from a smaller bank as well.

These shifts in lending make it hard for a small business seeking funds to expand, buy equipment or secure a building to accomplish their goals. So where can these small businesses turn? Many businesses look to the federal and local government to secure loans when financing is unavailable or too expensive elsewhere.

One example of this is the SBA 7(a) loan program, which is the SBA’s flagship loan program.  Proceeds from 7(a) loans may be used to start a business or assist with operations, acquisition or expansion of an existing business. These loans can offer more “flexibility, longer terms and potentially lower down payments compared to other financing options.”[i]  The average 7(a) loan is ~$420,000. In 2015/2016 there was a peak in both the number of 7(a) loans and the dollar amount loaned to businesses nationwide and since 2016, the number of approved loans has declined across the US.

 

In the last six years in the Midwest, SBA loans have increased. However, these states diverge from the national trends with increasing dollars loaned since 2015. Ohio holds the lead in total dollars loaned, reaching over $930 million in loans approved for the FY2018.

 

Added barrier for small business success: 2019 Government Shutdown

For small business across the United States and particularly those located in the Midwest, SBA loans are critical to support business operations and growth. Unfortunately, the recent government shutdown resulted in many businesses unexpectedly losing out on funds or not being able to obtain the finances they need. For small businesses to succeed, they need to be able to plan for growth. This means being able to reliably pay for and invest in that growth. As a fellow small business owner, I understand how important access to capital can be – and as I have observed the shifts mentioned above in financing options for small businesses, it is more important than ever that political differences be put aside and we keep the government open to ensure needed funds can get into the hands of business owners.