No butts about it, smoking in apartments is illegal

The City Council of San Rafael, just 15 miles north of San Francisco has unanimously voted to ban smoking inside of any multi-family home, whether the tenant is a renter or owns the unit or building. According to Reuters¹, nine other municipalities in California have already taken the same measure, adding the 57,000 residents of San Rafael to the non-smoking roster.

The ban includes condos, duplexes, townhomes, apartments, or any other multi-unit housing, and goes as far as simultaneously making it illegal to smoke on downtown streets. Reuters reports it is the city’s hope that other cities across the country will follow their lead and do the same.

“We are happy to blaze a trail,” Mayor Gary Phillips said, pun likely intended. “We’re most happy to be in the forefront of the issue because we think it will greatly benefit our residents and those visiting San Rafael, and we think it will set the tone for other cities as well.”

According to the American Lung Association, California is the only state so far where smoking has been banned in homes. The move is praised by anti-smoking advocates, but smokers may be upset by the move. Privacy advocates are likely to continue speaking out against the in-home smoking bans, as what a person does in the privacy of their own home is just that – private.

“This is tyranny”

“This proposed smoking ban actually intends to punish people for what they do in their own homes,” Thomas Ruppenthal told the council. “I really feel this is tyranny.”

Some have taken to Twitter to ask what’s next? @Aaron643 asks, “In your own home…what’s next? Soda? Fatty foods?”

San Rafael’s ordinance is applicable to all multi-family homes, be they new or old, owned or rented, while other cities have installed anti-smoking bans inside homes with rules such as restricting the ban to new construction.

Look for other California cities to take similar measures, and for the movement to leak into other states.

¹Reuters’ report on San Rafael’s new law

Production on the rise

The Multifamily Production Index (MPI), released by the National Association of Home Builders (NAHB) today, improved for the eighth consecutive quarter with an index level of 54, marking the index’s highest reading since the second quarter of 2005.

The MPI measures builder and developer sentiment about current conditions in the apartment and condominium market on a scale of 0 to 100, rising from 51 in the first quarter to 54 in the second quarter.

According to the NAHB, “The MPI provides a composite measure of three key elements of the multifamily housing market: construction of low-rent units, market-rate rental units and “for-sale” units, or condominiums. The index and all of its components are scaled so that any number over 50 indicates that more respondents report conditions are improving than report conditions are getting worse.”

With this sentiment reading, multifamily has officially surpassed the optimism felt in the single-family new home market.

Recent increases in the MPI

In the second quarter of 2012, the MPI component tracking builder and developer perceptions of market-rate rental properties recorded a level of 63 and has been over 60 for four consecutive quarters—the longest sustained period of strength since the inception of the index in 2003. For-sale units had its highest reading since the fourth quarter of 2005, coming in at 41, while low-rent units recorded an all-time high of 61.

“The apartment and condo housing sector is continuing on a path of steady recovery as new construction has increased to try to keep up with current consumer demand,” said W. Dean Henry, CEO of Legacy Partners Residential, and chairman of NAHB’s Multifamily Leadership Board. “However, credit continues to be an issue for many developers around the country, making it difficult to keep pace with this demand.”

The improving Multifamily Vacancy Index

The Multifamily Vacancy Index (MVI), which measures the multifamily housing industry’s perception of vacancies, increased five points to 36, bringing it back approximately to the level it sustained throughout 2011. With the MVI, lower numbers indicate fewer vacancies. After peaking at 70 in the second quarter of 2009, the MVI declined consistently through 2010, then held steady at either 35 or 36 in every quarter of 2011.

“The strength of the MPI suggests that multifamily production is likely to increase somewhat going forward,” said NAHB Chief Economist, Dr. David Crowe. “Multifamily production has already recovered substantially from a historic low of about 110,000 starts a year in 2009 and 2010 to the current annual rate of a little over 200,000. However, prior to the downturn multifamily starts remained about 300,000 per year for 12 consecutive years, so there is room for further improvement before apartment and condo production return to normal, sustainable levels.”

The NAHB reports that “Historically, the MPI and MVI have performed well as leading indicators of U.S. Census figures for multifamily starts and vacancy rates, providing information on likely movement in the Census figures one to three quarters in advance.”

Rental market activity data

According to Freddie Mac’s U.S. Economic and Housing Market Outlook for June, the residential rental market is on fire, and is expected to continue heating up as homeownership continues to be postponed by many Americans.

“Further increases in rental demand are likely in the coming year as newly formed households postpone homeownership decisions until the economy strengthens and they have accumulated sufficient savings,” said Frank Nothaft, vice president and chief economist of Freddie Mac. “Overall apartment market trends may show further vacancy declines and rent gains, with property values improving as well.”

Freddie reports that from March 2011 to March 2012, the rental market saw a 4.0 percent increase in occupancy, with an additional 1.5 million households moving into rental units.

Vacancies down, rents up

Rental vacancy rates have dropped roughly two percentage points over the past two years, the report notes, and while nominal rents rose two to four percent during the year ending March 2012, average rent on an inflation-adjusted basis remained below where it had been for much of the decade prior to the Great Recession. Some cities have seen rents spike up to 30 percent recently, and it is nearly unanimous that rents will continue rising across the board.

The report says, “Multifamily property values are up on average about 25 percent during the past two years from their trough during the first quarter of 2010, according to the National Council of Real Estate Investment Fiduciaries index, but still about 14 percent below their peak prior to the Great Recession.”

Freddie notes that starts of buildings with at least five apartments have jumped 48 percent in the first five months of this year when compared to the same period a year ago. The National Association of Home Builders data released yesterday reveals volatility in the multifamily sector as completions fell 25 percent between April and May alone.

Regardless of inventory levels, starts, permits, or completions, Freddie is forecasting higher rents and lower vacancies as more families postpone homeownership.

Full report:
[ba-pdfviewer pdfurl=”https://theamericangenius.com/wp-content/uploads/2012/06/Jun_2012_public_outlook.pdf” width=”100%” height=”800px”]