Cincinnati Metropolitan Housing Authority

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THE RENT REASONABLENESS ESTIMATOR

• Cincinnati Metropolitan Housing Authority
• CMHA
• Cincinnati, Ohio

September 17, 2008
QUADEL CONSULTING CORPORATION
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NOVOGRADAC COMPANY LLP

• Background
• Novogradac Company LLP (Novogradac), founded in
  1989, is a nationally certified public accounting
  firm that specializes in housing and community
  and economic development with an emphasis on
  affordable housing.

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NOVOGRADAC COMPANY LLP

• Background
• Novogradac was once again designated a Best of
  the Best firm by INSIDE Public Accounting
  (formerly Bowmans Accounting Report). The report
  analyzed 327 firms, and only the top 25 achieve
  the Best of the Best status, which signifies
  exceptional corporate management and firm
  operations. This is the fourth consecutive year
  that Novogradac has been recognized by IPA.

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NOVOGRADAC COMPANY LLP

• Background
• Novogradac has expertise in
• Economic market research, including
  infrastructure investments, satisfaction surveys,
  and specialty studies.
• Investment analysis and due diligence support,
  including portfolio analysis, loan work-outs,
  bankruptcy support, mergers and acquisitions, and
  model development.

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NOVOGRADAC COMPANY LLP

• Background
• Novogradac has expertise in
• Valuation and market research, including complex
  property types, mixed use properties and
  alternative use scenarios.
• Financial advising, including developing
  leveraged financial structures, providing
  financial analysis, possible alternatives, and an
  opinion for the financial viability of proposed
  projects, etc.

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NOVOGRADAC COMPANY LLP

• Background
• Novogradac has expertise in
• Federal government consulting including military
  housing privatization, Enhanced Use Leasing, HUD
  and OSD policies and procedures, lodging
  facilities, etc.
• Housing and development support for affordable to
  luxury housing for rent and for sale.

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NOVOGRADAC COMPANY LLP

• Background
• During the past ten years, Novogradac has
  consulted on over 4,000 projects nationally. The
  Market Research Group does approximately 700
  market studies per year and since 2003, over
  2,000 market studies have been completed
  nationwide.
• We have prepared HUD Consolidated Plans and
  portions of Comprehensive Plans
• Novogradac completes market wide assessments on a
  periodic basis on markets throughout the U.S.

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THE RENT REASONABLENESS TOOLKIT

• The Rent Reasonableness Toolkit meets HUD's
  requirements for contract rent determinations and
  provides clear documentation for tenant files.
• The Toolkit ensures that a fair rent is paid for
  units selected for participation in the voucher
  program.

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What is Rent Reasonableness?
THE RENT REASONABLENESS TOOLKIT

• HUD requires that local housing authority
  payments for voucher-occupied units be in line
  with market rents.
• Rent reasonableness ensures that the rent that
  CMHA will pay for a unit occupied by a voucher
  holder is supported by market rents for similar
  unit types in similar neighborhoods.
• Establishing market-based payments for units
  occupied by voucher holders ensures that the
  rental market remains in balance.

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THE RENT REASONABLENESS TOOLKIT

• The CMHA Rent Reasonableness System

• Uses representative local rental market data
• Equitably compares one unit to another
• Accommodates the differences in areas and
  neighborhoods
• Has an objective system to explain to owners how
  the approved rent was determined
• Ensures that the process is not arbitrary
• Ensures that CMHA is getting fair value

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RENT REASONABLENESS METHODOLOGY OVERVIEW

• The rent reasonableness model combines two
  well-established analytical tools used in the
  real estate profession
• Direct comparability of units.
• Statistical regression analysis.
• This combination creates reliable determinations
  of rent based upon actual comparable data from
  the rental market.

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RENT REASONABLENESS METHODOLOGY OVERVIEW

• Unlike rent reasonableness systems that use only
  three or four comparable units, the Toolkit uses
  data from the entire rental market to determine a
  units rent.
• The statistical model adjusts each rent according
  to statistically significant market variables.
• The rent for a given unit is the SAME no matter
  what comparable properties are used.

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RENT REASONABLENESS MODEL

• The implementation of the Rental Valuation
  Toolkit consists of the following broad steps

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DATA COLLECTION

• Newspaper/Classified Research
• Cincinnati Enquirer, CityBeat
• Internet Research
• www.rent.com, www.apartmentguide.com,
  www.craigslist.org
• Neighborhood Survey
• Physical driving survey of Cincinnati and
  Hamilton County neighborhoods
• Community Partner interviews
• Data collected in 53 Cincinnati neighborhoods, 62
  County villages and municipalities, and 12
  Townships

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UNIT FEATURES Data Collected

• Building Type
• Unit/Street Condition
• Asking Rent
• Number of Bedrooms

• Number of Baths
• Square Footage
• Utility Structure
• Concession

• Patio/yard
• Central air conditioning
• Refrigerator
• Oven/range
• Dishwasher
• Garbage disposal
• Washer/dryer
• Washer/dryer hookup
• Built-in microwave

• Swimming pool
• Garage and/or covered parking
• Off-street parking
• Blinds
• Carpeting/hardwoods
• Exterior storage
• Central/shared laundry
• Landlord-paid alarm

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DEMOGRAPHIC INDICATORS

• There are locational features that affect market
  rents and do not relate to the physical
  characteristics of a property.
• We considered the following demographic
  indicators in our analysis

• Median income
• Median home value
• Renter prevalence
• Change in home value
• Prevalence of vacant housing units
• Crime prevalence (personal and property)

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REGRESSION ANALYSIS

• The regression analysis analyzes all
  characteristics collected for each data point and
  determines which are statistically significant.
• Significant features include the number of
  bedrooms, building type, median income, median
  home value, property/street condition, and
  several amenities.
• Outliers are eliminated
• Values are assigned to each feature to determine
  appropriate adjustments.

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RENT REASONABLENESS CONCLUSION
Questions?
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