Common Terminology in Market AnalysesSource: NCAHMA and www.housingonline.com |
| Absorption Period The period of time necessary for a newly constructed or renovated property to achieve the stabilized level of occupancy. The absorption period begins when the first certificate of occupancy is issued and ends when the last unit to reach the stabilized level of occupancy has a signed lease. Assumes a typical pre-marketing period, prior to the issuance of the certificate of occupancy, of about three to six months. The month that leasing is assumed to begin should accompany all absorption estimates. |
| Absorption Rate The average number of units rented each month during the absorption period. |
| Acceptable Rent Burden The rent-to-income ratio used to qualify tenants for both income-restricted and non-income restricted units. The acceptable rent burden varies depending on the requirements of funding sources, government funding sources, target markets, and local conditions. |
| Achievable Rents See Market Rent, Achievable Restricted Rent. |
| Affordable Housing Housing affordable to low or very low-income tenants. |
| Amenity Tangible or intangible benefits offered to a tenant. Typical amenities include on-site recreational facilities, planned programs, services and activities. |
| Annual Demand The total estimated demand present in the market in any one year for the type of units proposed. |
| Assisted Housing Housing where federal, state or other programs subsidize the monthly costs to the tenants. |
| Bias A proclivity or preference, particularly one that inhibits or entirely prevents an impartial judgment. |
| Capture Rate The percentage of age, size, and income qualified renter households in the primary market area that the property must capture to fill the units. Funding agencies may require restrictions to the qualified households used in the calculation including age, income, living in substandard housing, mover-ship and other comparable factors. The Capture Rate is calculated by dividing the total number of units at the property by the total number of age, size and income qualified renter households in the primary market area. See also: penetration rate. |
| Comparable Property A property that is representative of the rental housing choices of the subject's primary market area and that is similar in construction, size, amenities, location, and/or age. Comparable and competitive properties are generally used to derive market rent and to evaluate the subject's position in the market. |
| Competitive Property A property that is comparable to the subject and that competes at nearly the same rent levels and tenant profile, such as age, family or income. |
| Concession Discount given to a prospective tenant to induce the tenant to sign a lease. Concessions typically are in the form of reduced rent or free rent for a specific lease term, or for free amenities, which are normally charged separately (i.e. washer/dryer, parking). |
| Demand The total number of households in a defined market area that would potentially move into the proposed new or renovated housing units. These households must be of the appropriate age, income, tenure and size for a specific proposed development. Components of demand vary and can include household growth; turnover, those living in substandard conditions, rent over-burdened households, and demolished housing units. Demand is project specific. |
| Effective Rents Contract rent less concessions. |
| Household Trends Changes in the number of households for a particular area over a specific period of time, which is a function of new household formations (e.g. at marriage or separation), changes in average household size, and net migration. |
| Income Band The range of incomes of households that can afford to pay a specific rent but do not have below any applicable program-specific maximum income limits. The minimum household income typically is based on a defined acceptable rent burden percentage and the maximum typically is pre-defined by specific program requirements or by general market parameters. |
| Infrastructure Services and facilities including roads, highways, water, sewerage, emergency services, parks and recreation, etc. Infrastructure includes both public and private facilities. |
| Market Advantage The difference, expressed as a percentage, between the estimated market rent for an apartment property without income restrictions and the lesser of (a) the owner's proposed rents or (b) the maximum rents permitted by the financing program for the same apartment property. (market rent – proposed rent) / proposed rent * 100 |
| Market Analysis A study of real estate market conditions for a specific type of property. |
| Market Area See Primary Market Area. |
| Market Demand The total number of households in a defined market area that would potentially move into any new or renovated housing units. Market demand is not project specific and refers to the universe of tenure appropriate households, independent of income. The components of market demand are similar to those used in determining project-specific demand. A common example of market demand used by HUD's MAP program, which is based on three years of renter household growth, loss of existing units due to demolition, and market conditions. |
| Market Rent The rent that an apartment, without rent or income restrictions or rent subsidies, would command in the primary market area considering its location, features and amenities. Market rent should be adjusted for concessions and owner paid utilities included in the rent. See the NCAHMA publication Calculating Market Rent. |
| Market Study A comprehensive study of a specific proposal including a review of the housing market in a defined market area. Project specific market studies are often used by developers, syndicators, and government entities to determine the appropriateness of a proposed development, whereas market specific market studies are used to determine what housing needs, if any, exist within a specific geography. The minimal content of a market study is shown in the NCAHMA publication Model Content for Market Studies for Rental Housing. |
| Marketability The manner in which the subject fits into the market; the relative desirability of a property (for sale or lease) in comparison with similar or competing properties in the area. |
| Market Vacancy Rate (Economic) Percentage of rent loss due to concessions, vacancies, and non-payment of rent on occupied units. |
| Market Vacancy Rate (Physical) Average number of apartment units in any market which are unoccupied divided by the total number of apartment units in the same market, excluding units in properties which are in the lease-up stage. |
| Migration The movement of households into or out of an area, especially a primary market area. |
| Mixed Income Property An apartment property containing (1) both income restricted and unrestricted units or (2) units restricted at two or more income limits (i.e. low income tax credit property with income limits of 30%, 50% and 60%). |
| Mobility The ease with which people move from one location to another. |
| Move-Up Demand An estimate of how many consumers are able and willing to relocate to more expensive or desirable units. Examples: tenants who move from class-C properties to class-B properties, or tenants who move from older tax credit properties to newer tax credit properties. |
| Multi-Family Structures that contain more than two housing units. |
| Neighborhood An area of a city or town with common demographic and economic features that distinguish it from adjoining areas. |
| Net Rent (also referred to as Contract Rent or Lease Rent) Gross rent less tenant paid utilities. |
| Penetration Rate The percentage of age and income qualified renter households in the primary market area that all existing and proposed properties, to be completed within six months of the subject, and which are competitively priced to the subject that must be captured to achieve the stabilized level of occupancy. Funding agencies may require restrictions to the qualified Households used in the calculation including age, income, living in substandard housing, mover ship and other comparable factors. units in all proposals / households in market * 100 See also: Capture Rate. |
| Pent-Up Demand A market in which there is a scarcity of supply and vacancy rates are very low. |
| Population Trends Changes in population levels for a particular area over a specific period of time—which is a function of the level of births, deaths, and net migration. |
| Primary Market Area A geographic area from which a property is expected to draw the majority of its residents. See the NCAHMA publication Determining Market Area. |
| Programmatic Rents See Restricted Rents. |
| Project Based Rent Assistance Rental assistance from any source that is allocated to the property or a specific number of units in the property and is available to each income eligible tenant of the property or an assisted unit. |
| Redevelopment The redesign or rehabilitation of existing properties. |
| Rent Burden Gross rent divided by adjusted monthly household income. |
| Rent Burdened Househo The rents that the project can attain taking into account both market conditions and rent in the primary market area and income restrictions. |
| Saturation The point at which there is no longer demand to support additional units. Saturation usually refers to a particular segment of a specific market. |
| Secondary Market Area The portion of a market area that supplies additional support to an apartment property beyond that provided by the Primary Market Area. |
| Special Needs Population Specific market niche that is typically not catered to in a conventional apartment property. Examples of special needs populations include: substance abusers, visually impaired person or persons with mobility limitations. |
| Stabilized Level of Occupancy The underwritten or actual number of occupied units that a property is expected to maintain after the initial rent-up period, expressed as a percentage of the total units. |
| Subsidy Monthly income received by a tenant or by an owner on behalf of a tenant to pay the difference between the apartment's contract rent and the amount paid by the tenant toward rent. |
| Substandard Conditions Housing conditions that are conventionally considered unacceptable which may be defined in terms of lacking plumbing facilities, one or more major systems not functioning properly, or overcrowded conditions. |
| Target Income Band The income band from which the subject property will draw tenants. |
| Target Population The market segment or segments a development will appeal or cater to. State agencies often use target population to refer to various income set asides, elderly v. family, etc. |
| Tenant Paid Utilities The cost of utilities (not including cable, telephone, or internet) necessary for the habitation of a dwelling unit, which are paid by the tenant. |
| Turnover An estimate of the number of housing units in a market area as a percentage of total housing units in the market area that will likely change occupants in any one year. See also: Vacancy Period. Housing units with new occupants / housing units * 100 |
| Turnover Period The percent of occupants in a given apartment complex that move in one year. |
| Unmet Housing Need New units required in the market area to accommodate household growth, homeless people, and households in substandard conditions. |
| Unrestricted Rents Rents that are not subject to restriction. |
| Unrestricted Units Units that are not subject to any income or rent restrictions. |
| Vacancy Period The amount of time that an apartment remains vacant and available for rent. |
| Vacancy Rate (Economic) Maximum potential revenue less actual rent revenue divided by maximum potential rent revenue. |
| Vacancy Rate (Physical) The number of total habitable units that are vacant divided by the total number of units in the property. |
