Secret Is Out in Prospect Lefferts Gardens

In recent years, the neighborhood had increasingly attracted more young people seeking affordable condos and apartments as well as the older homes.


WASHINGTON – The U.S. Department of Housing and Urban Development (HUD) announced today that it is charging the owner of a 24-unit apartment building in Holyoke, Massachusetts, with housing discrimination for denying units to families that have children. HUD’s charge alleges that Nilma Fichera, who owns and manages New York-based N.A.G. Realty, LLC, violated the Fair Housing Act when she refused to show or rent apartments to families with children because she could not certify that the building was free of lead-based paint.

Supply Shortfall Persists for Apartments

Little new apartment construction and surging demand has created a shortfall of 2.5 million units, the largest the nation has seen in more than a half-century, according to research from Nareit, a trade group for real-estate investment trusts.

As we’ve reported, apartment landlords are seeing vacancy rates decline as more Americans rent by choice or necessity. In the fourth quarter, apartment vacancy fell to the lowest rate since late 2001, with the national rate dropping to 5.2% from 6.6% a year earlier, according to Reis Inc. The vacancy rate had risen as high as 8% in 2009.

Pent-up demand could pull that rate even lower. According to Nareit, the normal rate of household formation is about 1.2% annually. But, with the sour economy in the last four years, the rate plunged to about 0.5%, as people delayed moving out and opted to live with roommates and parents longer.

This has created an unmet demand of about 2 million households, “about three times what it has been in previous business cycles,” says Calvin Schnure, vice president of research and industry information at Nareit. He expects many of these people to eventually turn to the rental market.

This comes as construction of new apartments slowed dramatically after the financial crisis. Building of multifamily units fell to a 20-year low during the recession and the units under construction remain at nearly 60% below the long-term average. Apartment construction is slowly picking up, though it will be a year or two before many projects are finished.

As the economy heals and hiring picks up, many of these households will seek their own place and that’s expected to be rentals, Mr. Schnure says. Once those doubling up “have an income that they can make their own rent payment, they’re going to rent on their own,” he said.

Keep in mind that Nareit’s members include publicly held apartment owners. The seemingly red-hot sector could weaken if the housing market recovers and more people buy homes.

Another risk is overdevelopment, which could create competition that forces landlords to cut rents. There’s also the chance of the economy weakening further, keeping all that pent-up demand, well, pent up.

Mr. Schnure remains bullish. “The fun is just about to begin,” he says. “It’s going to take some time for these households to move up. It’s a question of when it’s going to be realized. Even if you take a fairly conservative assumption,” it could be several years.

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Zell’s Archstone Purchase Blocked, Officially

Bloomberg News
Sam Zell, chairman of Equity Residential

Equity Residential’s purchase of a stake in competitor Archstone has been blocked by the estate of Lehman Brothers Holdings Inc., as Lehman has exercised an option to match the company’s $1.33 billion bid, Equity Residential said in a securities filing today.

But this latest step in the complex fight over apartment-company Archstone doesn’t put Equity Residential out of the picture. The Chicago company, whose chairman is investor Sam Zell, has another bite at the apple: It has an option to buy another 26.5% stake for at least the same price. It has 30 days to make a deal, at which point Lehman would, once again, have the right to match that offer.

Lehman’s purchase – which is half of the position in Archstone owned by Bank of America Corp. and Barclays PLC – ups its stake in Archstone to 73.5%. The failed investment bank’s advisers are expecting Equity Residential to put in an offer for the final 26.5% stake, and are preparing to block that too, according to people familiar with the matter.

Of course, it’s unclear what price Equity Residential would bid, and in theory it could be high enough that Lehman wouldn’t match it. Equity Residential is entitled to a breakup fee of up to $80 million if Lehman blocks its second purchase.

Restored Victorian House

This six-bedroom mid-19th-century London property has been returned to its original use as a single house after being divided into apartments.