THE BIG SPLASH

States Paying You for Building Tiny Homes

Tiny homes have surged in popularity for their affordability and eco-friendly nature, leading some states to offer financial incentives for building them.

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• Typically ranging from 150 to 1,200 square feet, tiny homes cost around $30,000 to $60,000, with variables like location and amenities affecting the price. Here are three states offering unique programs.

• California: The ADU Grant program provides up to $40,000 for pre-development and closing costs associated with constructing an accessory dwelling unit (ADU). Although the $50 million allocated has been fully reserved, the program's information remains available for reference.

• New York: The Plus One ADU Program offers grants of up to $125,000 to local governments and non-profit organizations that create safe, quality ADUs. These grants target low- to moderate-income residents and are part of an $85 million fund spread over five years.

• Vermont: The Vermont Housing Improvement Program-ADU initiative grants up to $50,000 to single-family property owners to build ADUs. Applicants need to meet specific criteria, including matching at least 20% of the grant funds and completing the project within 18 months.

• These programs aim to facilitate affordable housing options and foster community-specific solutions. While some, like California, have already allocated their funds, the focus on tiny homes underscores their growing appeal as a practical alternative in today's real estate landscape.

A SCOOP OF BILLIONAIRE

Spanish billionaire Amancio Ortega's real estate investment firm, Pontegadea, has secured a significant deal in Chicago, acquiring a 492-unit tower for over $231 million.

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• The 44-story tower is located at 727 W. Madison St. and was purchased this month, making it the highest-value apartment property sale in the city for 2023.

• The tower was sold by Skokie-based developer F&F Realty and a real estate affiliate of Ares Management. Completed in 2019, the tower has a vacancy rate of 6.7%, with asking rents of $3,386 per unit and $4.31 per square foot.

• Amancio Ortega, the founder of Zara and the largest shareholder in Zara's parent company, Inditex, has been expanding his real estate holdings globally. Pontegadea's acquisition adds to Ortega's substantial real estate investments, which include prominent properties in Chicago and other cities.

• The purchase comes in a relatively slow year for major deals in Chicago, with a total investment of around $2.2 billion in Chicago-area multifamily property sales so far, compared to last year's $5.6 billion.

• Ortega's deal underlines his continuing interest in real estate, especially in major urban centers like Chicago.

A SCOOP OF RENT CONTROL

As rents and eviction rates rise across the US, cities and states are increasingly considering rent control policies to address housing affordability and prevent homelessness.

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• Advocates argue that skyrocketing rents in booming housing markets are pushing the poorest residents to the brink and contributing to the homelessness crisis. Several states are debating or implementing rent control measures.

• In California, a 2024 vote will decide whether to allow statewide rent control, while in Seattle, the City Council recently rejected rent control measures after concerns were raised about their impact on landlords.

• In New York, landlord groups have petitioned the US Supreme Court to overturn the city's rent stabilization law, which limits rent increases for over a million units.

• Rent control policies limit the annual increase in rent, aiming to keep housing costs manageable.

• Advocates stress that rent control helps keep people housed and prevents displacement, which is a key contributor to homelessness.

• However, opponents, including some property owners and developers, argue that rent control can discourage new apartment construction and adversely affect landlords' finances. Despite debates, experts emphasize the importance of finding a balance that protects both tenants' housing security and property owners' interests.

A SCOOP OF HOUSING INVENTORY

Housing inventory is on the rise, reaching its highest point of the year. This increase is influenced by climbing mortgage rates, making potential homebuyers more cautious due to reduced affordability.

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• This trend is causing a drop in home purchase offers, a slight rise in unsold inventory, and more price reductions for listed homes. The housing market is experiencing a shift from the surprisingly robust sales seen in the first half of the year.

• With mortgage rates reaching their highest levels in two decades, the number of homebuyers entering the market is decreasing.

• Rising mortgage rates are contributing to the growth of housing inventory. However, this year's market behavior is distinct from the previous year. Unlike the dramatic increase in rates and inventory in the same period last year, the current rise in rates is accompanied by a more gradual growth in inventory.

• The relationship between mortgage rates and inventory, known as the Altos Rule, indicates that higher rates lead to increased housing inventory.

• Price reductions are also on the rise, indicating that sellers are facing a reduced number of potential buyers. This slowdown in buyer demand is weakening home price appreciation.

• Despite median home prices remaining relatively stable, the data suggests that the market is responding to the changing mortgage rate environment. As mortgage rates continue to influence buyer behavior, the real estate landscape is expected to show further fluctuations in the coming months.

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