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

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RENTAL MARKET ANALYSIS Introduction Maxfield Research Inc. identified and surveyed larger rental properties of 18 or more units in the Elk River. In addition, interviews were conducted with real estate agents, developers, rental housing management firms, and others in the community familiar with Elk River's rental housing stock. For purposes of our analysis, we have classified rental projects into two groups, general occupancy and senior (age restricted). All senior projects are included in the Senior Rental Analysis section of this report. The general occupancy rental projects are divided into three groups, market rate (those without income restrictions), affordable, (those receiving tax credits in order to keep rents affordable), and subsidized (those with income restrictions based on 30% allocation of income to housing). General-Occupancy Rental Projects Our research of Elk River's general occupancy rental market included a survey of 19 apartment properties (18 units and larger) in July 2012. These projects represent a combined total of 892 units, including 594 market rate units and 298 affordable/subsidized units. At the time of our survey, 16 market rate units and six affordable/subsidized units were vacant, resulting in an overall vacancy rates of 2.7% for market rate units and 2.0%for affordable/subsidized. We were unable to gather complete information on the following properties of Elk Park Estates, Elk Ridge Estates, and Tara Hills Estates. The overall market rate vacancy rate of 2.7% is lower than the industry standard of 5%vacancy for a stabilized rental market, which promotes competitive rates, ensures adequate choice, and allows for unit turnover. Nearly half of the 16 vacant units in Elk River are located at Granite Shores (7 vacant units) which is in the process of converting from condominiums to rental units. Granite Shores has been leasing for roughly three months and is in its initial lease-up phase. Subtracting this property recalculates the market rate vacancy rate down further to 1.7%, well below the market equilibrium. The pent-up market indicates a possible need of additional rental housing for all major sectors of the rental market: low-income, moderate-income, and market rate. Table RMA-1 summarizes information on general occupancy projects surveyed. The following are key points from our survey of these developments. Market Rate • Granite Shores, converted to rental in 2012, is the newest market rate general occupancy building built in nearly 20 years. Granite Shores contains a total of 67 units and was originally built as a for-sale condominium in 2006, but struggled to sell units and went into MAXFIELD RESEARCH INC. 43