Real Estate Definitions
A |
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| Absorption Period | The period necessary for newly constructed or substantially renovated properties to achieve a stabilized level of occupancy (95% or 97% for subsidized rental). The absorption period begins when the first certificate of occupancy is issued and ends when the last unit that has signed a lease enables the property to reach the stabilized level of occupancy. |
| Absorption Rate | The average number of units rented each month during the absorption period. |
| Active Adult (Independent Living without services available) | Active Adult properties are similar to a general occupancy apartment building, in that they offer virtually no services but have age-restrictions (typically 55 or 62 or older). Organized activities and occasionally a transportation program are usually all that are available at these properties. Because of the lack of services, active adult properties typically do not command the rent premiums of more service-enriched senior housing. |
| Adjusted Gross Income (AGI) | Income from taxable sources (including wages, interest, capital gains, income from retirement accounts, etc.) adjusted to account for specific deductions (i.e. contributions to retirement accounts, unreimbursed business and medical expenses, alimony, etc.). |
| Affordable Housing | Housing that is income-restricted to households earning at or below 80% AMI, though individual properties can have income-restrictions set at 30%, 50%, 60% or 80% AMI. Rent is not based on income but is a contract amount that is affordable to households within the specific income restriction segment. It is essentially housing affordable to low, very low or extremely low income tenants. |
| Amenity | Tangible or intangible benefits offered to a tenant in the form of common area amenities or in-unit amenities. Typical in-unit amenities include dishwashers, washer/dryers, walk-in showers, closets and upgraded kitchen finishes. Typical common area amenities include detached or attached garage parking, community room, fitness center and an outdoor patio or grill/picnic area. |
| Area Median Income (AMI) | AMI is the midpoint in the income distribution within a specific geographic area. By definition, 50% of households earn less than the median income and 50% earn more. The U.S. Department of Housing and Urban Development (HUD) calculates AMI annually and adjustments are made for family size. |
| Assisted Living | Assisted Living properties come in a variety of forms, but the target market for most is generally the same: very frail seniors, typically age 80 or older (but can be much younger, depending on their individual health situation), who are in need of extensive support services and personal care assistance. Absent an assisted living option, these seniors would otherwise need to move to a nursing facility. At a minimum, assisted living properties include two meals per day and weekly housekeeping in the monthly fee, with the availability of a third meal and personal care (either included in the monthly fee or for an additional cost). Assisted living properties also have either staff on duty 24 hours per day or at least 24-hour emergency response. |
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| Building Permit | A building permit issued for a new housing unit or units is considered a “housing start, which has been authorized to be built by the local governing authority. Most jurisdictions require building permits for new construction, major renovations as well as other building improvements. Building permits ensure that all the work meets applicable building and safety rules and is typically required to be completed by a licensed professional. Once the building is complete and meets the inspector’s satisfaction, the jurisdiction will issue a “CO” or “Certificate of Occupancy.” Building permits are a key barometer for the health of the housing market and are often a leading indicator in the rest of the economy as housing starts have a major impact on consumer spending. |
C |
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| Capture Rate | The percentage of age-, size-, and income-qualified renter households in a given area or “Market Area” that the property must capture to fill the units. 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 designated area. |
| Comparable Property | A property that is representative of the housing choices in the designated area or “Market Area” that is similar in construction, size, amenities, location and/or age to the property it is being compared to. |
| Concession | Discount or incentives given to a prospective tenant to induce signature of a lease. Concessions typically are in the form of reduced rent or free rent for a specific lease term, or free amenities, which are normally charged separately, such as parking. |
| Contract Rent | The actual monthly rent payable by the tenant, including any rent subsidy paid on behalf of the tenant, to the owner, inclusive of all terms of the lease. |
D |
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| Demand | The total number of households that would potentially move into new or renovated housing units. These households must be of appropriate age, income, tenure and size for a specific proposed development. Components vary and can include, but are not limited to, turnover, people living in substandard conditions, rent over-burdened households, income-qualified households and age of householder. Demand is specific to the individual project. |
| Density | Number of units in a given area. Density is typically measured in dwelling units (DU) per acre – the larger the number of units permitted per acre the higher the density; the fewer units permitted results in lower density. Density is often presented in a gross and net format:
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| Detached Housing | A freestanding dwelling unit, most often a single-family home, situated on its own lot. |
E |
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| Effective Rents | Contract rent less applicable concessions. |
| Elderly or Senior Housing | Housing where all the units in the property are restricted for occupancy by persons age 62 years or better, or at least 80% of the units in each building are restricted for occupancy by households where at least one household member is 55 years of age or better and the housing is designed with amenities, facilities and services to meet the needs of senior citizens. |
| Extremely Low-Income | Person or household with incomes below 30% of Area Median Income, adjusted for respective household size. |
F |
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| Fair Market Rent | Estimates established by HUD based on the 40th percentile of gross rents for typical, non-substandard rental units occupied by recent movers in a local housing market. The amount of rental income a given property would command if it were open for leasing at any given moment and/or the amount derived based on local market conditions that is needed to pay the gross monthly rent at a typical, non-substandard rental unit. The survey excludes public housing units, substandard units, rental units built in the last two years and seasonal rentals. This figure is used as a basis for determining the payment standard amount used to calculate the maximum monthly subsidy for families residing in financially assisted housing. |
| Floor Area Ratio (FAR) | Ratio of the floor area of a building to area of the lot on which the building is located. |
| Foreclosure | A legal process in which a lender or financial institution attempts to recover the balance of a loan from a borrower who has stopped making payments to the lender by using the sale of the house as collateral restitution for the loan. |
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| Generations | A generation is a group of people born in the same period and raised in the same geographic area. Generations exhibit comparable characteristics because they experienced similar trends at roughly the same life stage and through similar channels. In America, there are six living generations.
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| Gross Rent | The monthly housing cost to a tenant which equals the Contract Rent provided for in the lease, plus the estimated cost of all utilities paid by the tenant. |
H |
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| Household | All persons who occupy a housing unit, including occupants of a single-family, one person living alone, two or more families living together or any other group of related or unrelated persons who share living arrangements. |
| Household Trends | Changes in the number of households for any particular areas over a measurable period, which is a function of new household formations, changes in average household size and net migration. |
| Housing Choice Voucher Program (HCV) | The federal government's primary program for assisting low-income families, the elderly and the disabled to afford decent, safe and sanitary housing in the private market. A family that is issued a housing voucher is responsible for finding a suitable housing unit of the family's choice where the owner agrees to rent under the program. Housing choice vouchers are administered locally by public housing agencies, state housing agencies, non-profit organizations, and Tribally-Designated Housing Entities (TDHEs). They receive federal funds from the United States Department of Housing and Urban Development (HUD) to administer the program. A housing subsidy is paid to the landlord directly by the administering authority on behalf of the participating family. The family then pays the difference between the actual rent charged by the landlord and the amount subsidized by the program. |
| Housing Unit | House, apartment, mobile home or group of rooms used as separate living quarters by a single household. |
| HUD Project-Based Section 8 | A federal government program that provides rental housing for very low-income families, the elderly, and the disabled in privately owned and managed rental units. The owner reserves some or all the units in a building in return for a Federal government guarantee to make up the difference between the tenant's contribution and the rent. A tenant who leaves a subsidized project will lose access to the project-based subsidy. |
| HUD Section 202 Program | Federal program that provides direct capital assistance and operating or rental assistance to finance housing designed for occupancy by senior households (62+) who have incomes not exceeding 50% of Area Median Income. |
| HUD Section 811 Program | Federal program that provides direct capital assistance and operating or rental assistance to finance housing designed for occupancy of persons with qualified disabilities who have incomes not exceeding 50% of Area Median Income. |
| HUD Section 236 Program | Federal program that provides interest reduction payments for loans which finance housing targeted to households with income not exceeding 80% Area Median Income who pay rent equal to the greater or market rate or 30% of their adjusted income. |
I |
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| Income Limits | The maximum income limit by household size and expressed as a percentage of the Area Median Income, for the purpose of establishing an upper limit for eligibility for a specific housing program within a specific geographic area. |
| Independent Living | Independent Living properties offer support services such as meals and/or housekeeping, either on an optional basis or a limited amount included in the rent. These properties typically dedicate a larger share of the overall building area to common areas, in part, because the units may be smaller in size than in active adult housing and in part, to encourage socialization among residents. Independent living properties attract a slightly older target market than adult housing, typically seniors ages 75 or older. Rents are also above those of active adult buildings, even excluding the services. |
| Inflow/Outflow | The Inflow/Outflow Analysis of commuting patterns generates results showing the count and characteristics of worker flows into, out of and within a defined geographic area. |
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| Low-Income | Person or household with a gross household income at or less than 80% of Area Median Income, adjusted for household size. |
| Low-Income Housing Tax Credit | A program targeted to generate equity for investment in affordable rental housing authorized pursuant to Section 42 of the Internal Revenue Code. The program requires that a certain percentage of units built be restricted for occupancy to households earning 60% or less of Area Median Income and rents on these units be restricted accordingly. The developer is awarded housing tax credits, which credits are then sold in the investment market to qualified investors. |
M |
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| Market Analysis | The study of real estate market conditions for a specific type of property, geographic area or proposed (re)development. |
| Market Rent | The rent that an apartment, without rent or income restrictions or rent subsidies, would command in a given area or “Market Area” considering its location, features and amenities. |
| Market Study | A comprehensive analysis of a specific development proposal including a review of the housing market in a defined market or geography. Project specific market studies are often used by developers, property managers or government entities to determine the appropriateness of a proposed development, whereas market specific market studies are used to determine what housing needs, if any, existing in a specific geography. |
| Market Rate Rental Housing | Housing that does not have any income restrictions. Some properties will have income guidelines, which are minimum annual incomes required in order to reside at the property. |
| Memory Care | Memory Care properties, designed specifically for people diagnosed or afflicted with Alzheimer’s disease or other dementias. Properties usually consist of suite-style or studio units or one-bedroom apartment-style units and substantial communal area for activities and programming. In addition, staff typically undergoes specialized training in the care of this population. Because of the greater amount of individualized personal care required by residents, staffing ratios are much higher than traditional assisted living and therefore, the cost of care is also higher. Because the illness may afflict people at a broad range of ages, individuals with a non-afflicted spouse may face a decision to relocate their loved one to a specialized facility, which involves the caregiver’s concern of incurring the high cost of health care at a specialized facility while continuing to maintain their home. |
| Migration | The movement of households and/or people into or out of an area. |
| Mixed-Income Property | An apartment property contained either both income-restricted and unrestricted units or units restricted at two or more income limits. |
| Mobility | The ease at which people move from one location to another. |
| Moderate Income | Person or household with gross household income between 60% and 120% of the Area Median Income, adjusted for household size with some definitions presenting a range of between 80% and 120% of AMI. |
| Multifamily | Properties and structures that contain multiple separate housing units for residential inhabitants within one building or more than one building. Typically, a multifamily building has at least three or more units. |
N |
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| Naturally Occurring Affordable Housing | Although affordable housing is typically associated with an income-restricted property, there are other housing units in communities that indirectly provide affordable housing. Housing units that were not developed or designated with income guidelines (i.e. assisted) yet are more affordable than other units in a community are considered “naturally-occurring” or “unsubsidized affordable” units. This rental supply is available through the private market, versus assisted housing programs through various governmental agencies. Property values on these units tend to be lower based on a combination of factors, such as the age of structure/housing stock, location, condition, size, functionally obsolete, school district, etc. |
| Net Income | Income earned after payroll withholdings such as state and federal income taxes, social security, as well as retirement savings and health insurance. |
| Net Worth | The difference between assets and liabilities, or the total value of assets after debt is subtracted. |
P |
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| Pent-up Demand | A market in which there is a scarcity of supply and as such, vacancy rates are very low or non-existent. Pent-up demand refers to for-sale and rental housing. |
| Population | All people living in a geographic area. |
| Population Density | The population of an area divided by the number of square miles of land area. |
| Population Trends | Changes in population levels for a particular geographic area over a specific period – a function of the level of births, deaths and in/out migration. |
| 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 (“an assisted unit”). |
R |
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| Redevelopment | The redesign, rehabilitation or expansion of existing properties. |
| Rent Burden | Gross rent divided by adjusted monthly household income. |
| Restricted Rent | The rent charged under the restriction of a specific housing program or subsidy. |
S |
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| Saturation | The point at which property supply (or unit supply) outpaces demand to support additional market rate, affordable/subsidized, rental, for-sale or senior housing units. Saturation usually refers to a particular housing product type in a specific local market or may refer an oversupply of housing in a larger regional area. |
| Senior Housing | The term “senior housing” refers to any housing development that is restricted to people age 55 or older. Today, senior housing includes an entire spectrum of housing alternatives. Maxfield Research Inc. classifies senior housing into four categories based on the level of support services. The four categories are Active Adult, Independent Living, Assisted Living and Memory Care. |
| Short Sale | A sale of real estate in which the net proceeds from selling the property do not cover the sellers’ mortgage obligations. The difference is forgiven by the lender or other arrangements are made with the lender to settle the remainder of the debt. |
| Single-Family Home | A dwelling unit, either attached or detached, designed for use by one household and with direct street access. It does not share heating facilities or other essential electrical, mechanical or building facilities with another dwelling. |
| Stabilized Level of Occupancy | The underwritten or actual number of occupied units that a property is expected to maintain after the initial lease-up period. |
| Subsidized Housing | Housing that is income-restricted to households earning at or below 50% AMI. Rent is generally based on income, with the household contributing 30% of their adjusted gross income toward rent. |
| 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/market rate rent and the amount paid by the tenant toward rent. |
| Substandard Conditions | Housing conditions that are conventionally considered unacceptable and can be defined in terms of lacking plumbing facilities, one or more major mechanical or electrical system malfunctions, or overcrowded conditions. |
T |
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| Target Population | The market segment or segments of the given population a development would appeal or cater to. |
| Tenant | One who rents real property from another individual or rental company. |
| Tenant-Paid Utilities | The cost of utilities, excluding cable, telephone, or internet required for the habitation of a dwelling unit, which are paid by said tenant. |
| Tenure | The distinction between owner-occupied and renter-occupied housing units. |
| Turnover | A measure of movement of residents into and out of a housing unit or into and out of a geographic location. |
| Turnover Period | An estimate of the number of housing units in a geographic location as a percentage of the total housing units that will likely change occupants in any one year. |
U |
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| Unrestricted Units | Units not subject to any income or rent restrictions. |
V |
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| Vacancy Period | The amount of time a housing unit (most often an apartment) remains vacant and is available on the market for sale or for rent. |
W |
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| Workforce Housing | Generally refers to housing where a household’s income is restricted to a maximum of between 50% and 120% AMI and also rent levels are set to an affordability level that equates to the above income levels. |
Z |
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| Zoning | Classification and regulation of land use by local governments according to use categories (zones); often also includes density designations and limitations. |
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