Detroit Market Studies

Client

Michigan Multifamily Asset Managers (MMAM)

Skills

Appraisal, Market Study – Affordable Housing

Project Description

Clarendon was awarded a contract with Michigan Multifamily Asset Managers (MMAM) to provide Reviews of HUD Section 8 Rent Comparability Studies (RCS) for the State of Michigan.

Section 8 laws and administrative procedures require HUD to obtain and review Rent Comparability Studies (RCS) when initially renewing most Section 8 contracts and when processing some rent increase using the Annual Adjustment Factors. The market rents resulting from these studies determine the rents owners can receive and, hence greatly influence whether an owner will renew and continue providing assisted housing or opt-out of the Section 8 contract and convert to unassisted, market rent housing. The market rents set in these studies also drive HUD’s outlays for Section 8 project-based subsidy.

Market Overview

Economic conditions in the Detroit Metro area improved significantly during the past 6 years, however, it has not completely recovered from job losses, from 2000 to 2010. The professional and business services sectors have led job growth, followed by education and health services. Services, the largest sector in the metro, has benefited from several recent relocations and expansions adding an average 14,600 jobs annually since 2011.

The three largest employers in the metro are Ford Motor Company; FCA US, LLC (Fiat Chrysler Automobiles) and General Motors. Manufacturing, particularly associated with automobiles, has historically been critical to the economy. Since 2014, sales of automobiles and light trucks have had the highest rates recorded since 2006, which has contributed to investment and hiring.

Jobs are drawing new residents to the area and underpinning the demand for housing. The rental housing market is considered balanced, with vacancy rates down considerably from the highs mid-decade. Rent growth trends are leading to new construction in more neighborhoods throughout the metro. In addition, vacant apartment buildings, especially in the city of Detroit, are being restored and some older office buildings are being re-positioned as rentals.