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D.C. Council Passes Emergency Bill to Tackle $100M Unpaid Rent Crisis

The DC Council passed a new emergency bill reforming ERAP to address the growing unpaid rent crisis and its impact on affordable housing.

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Good morning. The D.C. Council passed an emergency measure tightening rental assistance rules as affordable housing providers struggle with $100M in unpaid rent. Plus, Adam Neumann is launching a new coworking project called Workflow.

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Rent Crisis

DC Council Pushes Emergency Rental Assistance Program Reforms

The D.C. Council has passed an emergency measure to reverse pandemic-era policies on rental assistance to address the growing crisis of unpaid rent and delayed evictions.

What happened: The bill ends pandemic-era policies that allowed tenants to self-attest eligibility for the Emergency Rental Assistance Program (ERAP). It also limits tenants to one ERAP-related eviction stay per case, giving courts more discretion to prevent abuse. Evictions for nonpayment, which once took 3-5 months, now stretch beyond a year, leading to mounting financial losses for landlords.

Fast-track relief: To prevent foreclosures, Bowser is diverting $80M from the Housing Production Trust Fund, typically reserved for new construction, to provide bridge loans. This is intended to help subsidized affordable housing properties avoid foreclosure and the loss of affordability covenants.

Zoom in: Roughly 13.9% of D.C. residents live in city-supported affordable housing, says CoStar, but providers are struggling with unpaid rent that has jumped from $11M in 2020 to $100M today. If unresolved, foreclosures could wipe out affordable housing, jeopardizing years of progress fueled by $1.5B in city investment over the last decade.

What they are saying: Tenant advocates argue the bill adds administrative burdens and may delay ERAP processing, making it harder for vulnerable tenants to avoid eviction. Legal groups warn it could displace tenants who are on the path to repaying their rent.

➥ THE TAKEAWAY

Big picture: With over $100M in unpaid rent and foreclosures looming, this emergency bill is just a stopgap. Housing providers and officials agree that without long-term solutions, a wave of defaults could destabilize D.C.'s affordable housing market, undermining years of progress and threatening the city's most vulnerable residents.

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✍️ Editor’s Picks

  • WeWork competitor: Just months after his attempt to reacquire WeWork fell through, Adam Neumann is launching a new coworking project called Workflow.

  • Resilient community banks: US community banks, with assets up to $2.2B, are surprisingly resilient despite their CRE exposure, with a 0.95% ROA and 9.60% ROE, outperforming expectations.

  • Manhattan metrics: Manhattan condo and co-op sales dipped 3% to 2.8K last quarter, but contract signings actually rose 19% in September.

  • Construction slowdown: US construction spending dipped 0.1% in August, driven by a sharp decline in single-family homebuilding, though lower borrowing costs may boost activity.

  • Bond boom: US investment-grade bonds posted a 5.8% return in Q3, marking their best quarter in 2024 and approaching their longest winning streak since 2019.

🏘️ MULTIFAMILY

  • Energy efficiency: Multifamily developers are faced with higher costs as HUD and USDA mandate stricter energy codes, potentially impacting housing affordability and availability.

  • Costco commotion: In South LA, the nation’s first mixed-use complex with a ground-floor Costco (COST) features 800 apartments, including 184 units for low-income households.

  • Redemption arc: Tides Equities aims to redeem itself after past mistakes, hoping to secure broader industry trust for future investments and financing.

  • Affordable oasis: CRP Affordable Housing bought a gas station site for $10M and is seeking $100M in public financing for a 100-unit affordable complex.

  • Proptech puzzles: Amid Rezi's closure, a new lawsuit claims it caused Leagem Partners to default on a $49M loan by mishandling rents.

🏭 Industrial

  • Sunbelt expansion: Northwood Investors bought a 1.8 MSF industrial portfolio in several Sunbelt states, with average lease terms of 7 years and rents that are 40% below market.

  • Big-box makeover: The Sterling Organization plans to transform a former Fry’s Electronics in Fremont into a manufacturing and tech research hub.

  • Growth spree: Triten Real Estate Partners acquired Central Texas Logistics Center, a 485.9 KSF industrial portfolio in San Marcos, marking its entry into Austin.

🏬 RETAIL

  • Neighborhood revival: Small neighborhood retail is enjoying a resurgence in cities due to zoning reforms, shifting consumer habits, and local incentives.

  • Shopping center splurge: Paramount Realty acquired New Jersey's busiest shopping center, Hamilton Marketplace, for $100M, the largest such deal since 2017.

  • Retail royalty: Kimco Realty Corp. (KIM) bought Waterford Lakes Town Center in Orlando for $322M, with high lease rates and strong retail demand.

🏢 OFFICE

  • Boston market: Boston's office leasing hit a 2-year high in 3Q24 with 3.4 MSF in signings, signaling a potential sector recovery.

  • Discount deals: Union Bank Plaza, a 40-story LA office tower, was sold for $80M at a discount, for around $114 PSF.

  • Deal's demise: The GSA terminated a proposed deal for the new SEC HQ in NoMa after Douglas Development and Midtown Equities were unable to secure financing for the 1.2 MSF complex.

🏨 HOSPITALITY

  • Holding ground: The US hotel sector is showing surprising resilience amid a broad consumer slowdown, with RevPAR at top metros up 42.8%, while the bottom was down 9.6%.

A MESSAGE FROM REAP CAPITAL

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📈 CHART OF THE DAY

US manufacturing activity continued to shrink in September for the sixth consecutive month, with the Institute for Supply Management’s index staying at 47.2, indicating ongoing contraction

Weak orders, declining employment, and subdued demand due to cautious business investment amid federal monetary policy and election uncertainty contributed to the contraction, despite a slight improvement in the rates of decline for orders and output.


FACT OF THE DAY

Hong Kong’s Central-Mid-Levels Escalator system is the longest outdoor covered escalator in the world, stretching over half a mile. It's not just a transportation marvel—it has significantly boosted the value of nearby commercial real estate, turning the area into a vibrant hub of shops, restaurants, and offices!


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