2. CCSR-HRSR 09-04-2012 SPEC JOINT

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EXECUTIVE SUMMARY • The City of Elk River issued permits for the construction of 2,420 new residential units during the last decade. That equates to 242 units annually. However, 90% of development occurred from 2001 to 2006. New residential construction has declined significantly since. • Approximately 82% of Elk River homeowners have a mortgage. About 29%of homeowners with mortgages also have a second mortgage or home equity loan. Comparatively, about 68% of homeowners in the United States have a mortgage. Rental Housing Market Analysis • In order to assess the current market conditions for rental housing in Elk River, Maxfield Research Inc. conducted an inventory of subsidized (i.e. housing that is income-restricted to households earning at or below 30% of the Area Median Income), affordable (i.e. housing that is income-restricted between 30% and 80% of the Area Median Income) and market rate (i.e. housing that is not income-restricted) projects located in the City. • In total, Maxfield Research inventoried 594 general occupancy market rate rental units in the City of Elk River spread across 12 multifamily developments (18 units and larger). At the time of the survey, there 16 vacant units. Of which 7 vacancies were located in Granite Shores that is currently in its initial occupancy phase after converting from for-sale condominiums. Excluding Granite Shores, the market rate vacancy rate totals 1.7%. Typically, a healthy rental market maintains a vacancy rate of roughly 5%, which promotes competitive rates, ensures adequate consumer choice, and allows for unit turnover. • Elk River has a total of 54 subsidized units within two buildings and 244 affordable units across five developments. The buildings feature a variety of unit types that cater to a wide- spectrum of household types. There were six units vacant at the time of the survey for a rate of 2.0%. A healthy income based rental market typically maintains roughly a 3.0% vacancy rate. • Low vacancy rates in all general occupancy rental products indicate pent-up demand for additional rental housing in Elk River. Senior Housing Market Analysis • There are eight senior housing facilities located in Elk River with a total of 353 units. Other than the vacant units at Guardian Angels which are in its initial lease-up phase for their new expansion, all units are occupied. This indicates a need for additional senior housing units. • Guardian Angels by the Lake are the only facility that offers senior housing with services. The development contains 60 assisted living units and 30 memory care units. A recent addition expanding the number of units at the development from 60 to 90 units should fulfill the demand for service enriched housing in Elk River over the decade. MAXFIELD RESEARCH INC. 7