Tab C MSHDA Guidelines for Market Studies

Tab C

MSHDA Guidelines for

Market Studies

Processes for Ordering and Writing Market Studies

Updated June 1, 2024

Page 1 
 
Table of Contents 
Contents 
Table of Contents ............................................................................................................................................... 1 
I.
  Market Study Procurement and Submission Process ......................................................................... 2 
A.  The 9% Competitive Tax Credit Rounds. ............................................................................................. 2 
B.  Submissions to the 4% Competitive Direct Lending Tax Credit Rounds. ................................................ 3 
II.
  Market Study Types ............................................................................................................................. 4 
A.  Full 9% Tax Credit Market Study .......................................................................................................... 4 
B.  Full 4% Tax Credit Market Study .......................................................................................................... 4 
C. Reduced Scope Market Study. ............................................................................................................. 4 
D. Update Letter. ...................................................................................................................................... 5 
III.
  Market Study Requirements: Full Market Studies (9% and 4%) ......................................................... 5 
A.  Table of Contents ................................................................................................................................. 5 
B.  Executive Summary. ............................................................................................................................ 6 
C. Scope of Work for the Market Study. ................................................................................................... 6 
D. Market Study Effective Date. ................................................................................................................ 7 
E.  Project Description. .............................................................................................................................. 7 
F.  Site Factors/Location. ......................................................................................................................... 10 
G. Market Area Definition ........................................................................................................................ 11 
H. Employment and Economy. ................................................................................................................ 12 
I.  Demographic Characteristics .............................................................................................................. 13 
J.  Competitive Environment ................................................................................................................... 14 
K.  Demand Analysis ............................................................................................................................... 19 
L.  Absorption Estimates ......................................................................................................................... 20 
N. Analysis and Conclusions ................................................................................................................... 20 
O. Other Requirements ........................................................................................................................... 21 
IV.
  Market Study Requirements: Reduced Scope  Studies ..................................................................... 21 
V.
  Update Letters ................................................................................................................................... 22 
VI.
  Resubmissions ................................................................................................................................... 23 
Attachment 1. Approved Market Analyst List ............................................................................................ 24 
Attachment 2. Amenities, Services, and Finishes ...................................................................................... 25 
Attachment 3. Scattered-Site Criteria. ....................................................................................................... 27 
Attachment 4. Unduplicated Demand for Authority Market Studies .......................................................... 28 
 

Page 2

Introduction

The MSHDA Guidelines for Market Studies present MSHDA’s requirements for market studies submitted

when applying for tax credits under the Low-Income Housing Tax Credit (LIHTC) program. The purpose

of market studies is to help MSHDA staff determine whether a market exists for a given low- or moderate-

income rental housing proposal. These guidelines for analysis are loosely based on the National Council

of Housing Market Analyst Model Content Standards and differ from those standards in sometimes

substantial ways. The MSHDA Guidelines also provide information about the processes of procuring and

submitting market studies to the Authority when seeking tax credits. Please note that all market studies

submitted to MSHDA should be searchable in Adobe Acrobat.

Market Study Procurement and Submission Process

The process for procuring and submitting market studies differs depending on the program a sponsor is

applying to. Specifically, sponsors can procure their own market studies for 9% applications and Pass-

Though Bond Program applications, but not for Direct Lending 4% or combination 4%/9% applications.

When procuring a market study for 9% and Pass-Through applications, sponsors may hire a market study

firm without MSHDA involvement from a list of approved firms. When procuring one for any project that

involves a loan from the Authority, the study must be ordered through MSHDA. (Studies ordered through

MSHDA can also be submitted for 9% tax credits, but a 9% study can never be submitted for 4% credits.)

The text below describes the two systems.

A. The 9% Competitive Tax Credit Rounds.

The process below applies only to the 9% competitive LIHTC and Pass-Through Bond Program

applications

• Market Analyst Selection. Applicants select a market analyst from an approved list of firms

(found in Attachment 1 of this document) to procure a MSHDA-compliant market study. The

sponsor contacts the firm directly and works with them to procure the market study without

involvement from the Authority.

• Market Study Payment. Tax credit applicants pay their chosen market study firm directly for the

market study. The price and other terms related to the procurement of the study are to be

decided between the applicant and the market study firm.

• Market Study Threshold Requirements. To be accepted for threshold, studies must do the

following:

o Comply with the MSHDA Guidelines for Market Studies set forth in this document for

all market studies.

o The project proposal in the market study must be the same as the one proposed in the 9%

LIHTC application; the market study’s rents, amenities, site, and other elements that

impact a property’s market potential must be identical to those in the application.

o Submit the study in electronic format by 5:00 on the date on which the 9% LIHTC

application is due. No market studies will be accepted after 5:00 p.m. on the application

due date. Market studies submitted after 5:00 p.m. on the due date, or delivered in hard

copy, will not meet the 9% LIHTC threshold requirements, and will not be processed.

(Please ensure that the electronic version of the study is searchable in Adobe Acrobat.)

• Preliminary Site Assessment. At least 60 days in advance of the 9% tax credit application

due date, project sponsors will indicate to MSHDA where their proposal is located by

sending their site information to MSHDA-MarketStudie[email protected]. We are asking

applicants to send the following information:

• The address of the site or, if the site does not have an address, the closest crossroads or

an address of a nearby site that can be used to identify the site’s location.

Page 3

• An aerial site map showing the site. Site maps can consist of an aerial photo from Google

maps or similar source if the location and boundaries of the site are clearly marked.

• An illustration of the site layout (done by hand or other means) that includes placement of

the structures, parking lot, and other major features, (if known).

• An indication of whether the project will be age-restricted, open-occupancy, or Permanent

Supportive Housing (if known), and

• An estimate of the number of units.

MSHDA staff will use this information to conduct a preliminary site evaluation, and 9% tax credit

applicants are strongly encouraged to share these evaluations with their market study analysts.

Any negative site attributes noted in the evaluation should be explicitly addressed within the

market study’s “Site Factors/Location” section and should be addressed in the study’s

conclusions about the suitability of the proposed site.

• Other Submission details:

o Market studies must be submitted in electronic form to the following email address: MSHDA-

MarketStudies@michigan.gov. Only one study per email should be submitted.

o The filename for each study should communicate the name of the project, the community in

which it is located, and the tax credit round for which the application is being made. For

example, if an application for River Pines Apartments in Townsville, Michigan was submitted

in a 9% tax credit round in February of 2021, a possible name for the study could be: “River

Pines Apartments—Townsville—9%Feb2021.pdf.”

B. Submissions to the 4% Competitive Direct Lending Tax Credit Rounds.

Market studies submitted for 4% tax credits/Direct Lending or for proposals with a combination of 4% and

9% tax credits must be ordered through MSHDA using the Market Study Initiation Request form,

available here: https://www.michigan.gov/mshda/developers/housing-market-research. MSHDA will then

hire the market study firm and provide oversight to the study. If a sponsor would like to submit a market

study that can be used interchangeably in either type of tax credit program, they should request a study

through MSHDA; this has the advantage that if 9% tax credits are not awarded, the same study could

then be submitted for 4% credits/Direct Lending instead.

• Market Study Threshold Requirements. To be accepted for threshold, studies must do

the following:

o Comply with the MSHDA Guidelines for Market Studies set forth in this document for

all market studies.

o The project proposal in the market study must be the same as the one proposed in the 4%

Direct Lending application; the market study’s rents, amenities, site, and other

elements that impact a property’s market potential must be identical to those in the

application. Market studies that differ from the proposed project must be revised at the

sponsor’s cost.

o Submit the study in electronic format by 5:00 on the date on which the 4% Direct

Lending application is due. No market studies will be accepted after 5:00 p.m. on the

application due date. Market studies submitted after 5:00 p.m. on the due date, or

delivered in hard copy, will not meet the 4% Direct Lending threshold requirements, and

will not be processed. (Please make sure that the electronic version of the study is

searchable in Adobe Acrobat.)

o The filename for each study should communicate the name of the project, the community

in which it is located, and the NOFA round for which the application is being made (if

applicable). For example, if an application for River Pines Apartments in Townsville,

Michigan was submitted in NOFA round 18 in June of 2024, a possible name for the

study could be: “River Pines Apartments—Townsville—NOFA18_June2024.pdf.”

Page 4

• Preliminary Site Assessment. Within the Notice of Intent to Apply application, project

sponsors will indicate to MSHDA where their proposal is located. The NOIA application

package should include the following:

• The address of the site or, if the site does not have an address, an address of a nearby

site that can be used to identify the site’s location.

• An aerial site map showing the site. Site maps can consist of an aerial photo from Google

maps or similar source, as long as the location and boundaries of the site are clearly

marked.

• An illustration of the site layout (done by hand or other means) that includes placement of

the structures, parking lot, and other major features, (if known).

• An indication of whether the project will be age-restricted, open-occupancy, or Permanent

Supportive Housing (if known), and

• An estimate of the number of units.

MSHDA staff will use this information to conduct a preliminary site evaluation. The preliminary site

evaluation will be included with the Market Study Initiation Request sent to the market study analyst. Any

negative site attributes noted in the evaluation should be explicitly addressed within the market study’s

“Site Factors/Location” section and should be addressed in the study’s conclusions about the suitability

of the proposed site.

II.

Market Study Types

MSHDA accepts four different types of market analysis, the requirements for which are found in this

document. Full studies can be of two types: a full 9% tax credit study or a full 4% tax credit study. The

9% tax credit study can be submitted only in the competitive 9% tax credit rounds or for the Pass-

Through Bond Program. The 4% tax credit study applies a stricter standard for the analysis and can be

submitted for any type of tax credit or for the Pass-Through Bond Program. As a reminder, full 4%

studies must be ordered through MSHDA, while full 9% and Pass-Through Bond Program

studies may be ordered directly from the market study firm. (See Market Study Process

Procurement and Submission section above.) Below is a general description of each type of study.

A. Full 9% Tax Credit Market Study

A complete market study of the type submitted with most 9% tax credit applications. Applicants for the

Pass-Through Bond Program can also submit this type of proposal. The criteria for a full 9% study

are explained under the Market Study Requirements: Full Market Studies section.

B. Full 4% Tax Credit Market Study

These are market studies required when funding is sought under MSHDA’s Direct Lending Programs or

under the 9% tax credit program when 4% credits are also requested. This is a robust market analysis,

and there are additional criteria beyond the criteria for 9% studies. The criteria for a full 4% study are

explained under the Market Study Requirements: Full Market Studies section.

C. Reduced Scope Market Study.

If a market study is submitted for the preservation of a deeply subsidized project, a reduced-scope study

may be accepted. The proposal must have subsidies on at least 95% of its units and meet other

qualifications specified in the guidelines. See “Section IV. Reduced Scope Studies” for the full set of

requirements.

Beyond the above circumstances, occasionally OMR may need to order a follow-up to an earlier market

study that is more in-depth than an update letter but does not require a new full market study. OMR staff

Page 5

will work with our approved vendors to determine an appropriate scope of work and price for such studies;

the sponsor will be responsible for the cost. These studies can only be ordered at OMR staff’s discretion

and can only follow a previously submitted full study.

D. Update Letter.

The Authority will accept updates for market studies submitted for both 9% LIHTC and the Authority’s

Direct Lending programs. An Update Letter is an abbreviated study that updates the information in a

previously approved full market study and is submitted between 6 and 12 months of the original study.

Please be aware that updates are for proposals that are fundamentally unchanged from their last

application. See “Section V. Update Letters” for the full set of requirements.

III.

Market Study Requirements: Full Market Studies (9% and 4%)

Below are the market study guidelines for the content of the full market studies. Each full market study

submitted to the Authority should contain the following information, in the order presented. MSHDA

reserves the right to return for correction any market study that does not follow the order of these Guidelines,

or that does not provide the requisite analysis. Some of the criteria will differ somewhat between the

full 9% study and the full 4% study; these are called out in each section that contains such differences.

Analysts must include the MSHDA Market Study Key Data Spreadsheet following the Table of Contents.

The MSHDA Market Study Key Data Spreadsheet summarizes key information from the study and can

be found in the Housing Market Research section of the MSHDA webpage:

https://www.michigan.gov/mshda/0,4641,7-141-5587_106252---,00.html. This document is meant to

provide an at-a-glance look at the study; the length of this document should not exceed one page.

A. Table of Contents

The table of contents should include a listing of all sections outlined in this document with electronic links

and page numbers for ease of navigation during the market study review process. Additional detail may

be included in the table of contents; the below is the minimum that must be included.

• Executive Summary

• Market Study Scope of Work

• Market Study Effective Date

• Project Description

▪ Project Structure

▪ General Information

▪ Amenities

▪ Rehabilitation Efforts (if applicable)

• Site Factors/Location

▪ Site Conditions

▪ Site Marketability

▪ Negative Site Factors

▪ Evidence of Investment/Community Revitalization

▪ Concerns noted in OMR’s Preliminary Site Review

▪ Site Factors/Location Conclusion

• Market Area Definition

• Employment and Economy

• Demographic Characteristics

• Competitive Environment

▪ Rental Market Information

▪ List of Projects within PMA not included in Survey Data

▪ Vacancy Rates

▪ Most Comparable Properties

▪ Recent Development and Pipeline Activity

Page 6

▪ Scattered Sites Data (if relevant)

▪ Comparison and Analysis

▪ Standard Amenities

▪ Impact on Existing Housing Markets

▪ Absorption Rates

▪ Effective Rents

▪ Upgrades

▪ For-Sale Homes

• Achievable Market and LIHTC Rents

▪ Derivation of Rents

▪ Analysis of Rent Advantage

• Demand Analysis

• Absorption Rate and Period

• Conclusion

▪ Strengths and Weaknesses

▪ Identified Risks

• Statement of Recommendation

Include a list of tables, charts, graphs, maps, and plans included with page numbers and internal links to

their locations within the study.

B. Executive Summary.

Each market study should include a concise summary of the data, analysis, and conclusions, including

the following:

• A concise description of the site and the immediately surrounding area/surrounding land uses;

• A brief summary of the project including the proposed target population to be served;

• Brief summary of economic conditions;

• Brief description of and support for the defined primary market area.

• Summary of key demographic data;

• Summary of competitive market conditions;

• Summary of the demand analysis which states the analyst's conclusion about the sufficiency of

theoretical market demand based on the analysis;

• A summary of market related strengths and weaknesses that will affect the property’s

marketability, performance, and lease-up. Mitigating factors of negative attributes should be

identified, if any;

• Precise statement of key conclusions reached by the analyst. This statement should provide a

definitive evaluation of the proposed development and its prospect for success as proposed and

should reconcile any conflicting data indicators among the various sections of the report.

• Clear, explicit, and bolded recommendation for whether the project should move forward as

proposed, should move forward only with the analyst’s specific suggested modifications, or

should not proceed at all.

• Absorption estimate for the subject property. If the report recommends any changes to the

proposal, it should be clear if this absorption estimate is for the property as proposed or

assuming the analyst’s recommended changes are followed.

C. Scope of Work for the Market Study.

Please identify the following:

• The type of report (Full 4% Market Analysis, Full 9% Market Analysis, Reduced Scope Study, or

Update Letter). For a Reduced-Scope Study or Update letter, please explain how the proposal

qualifies based on the criteria in this document.

• Client name and the name of project developer. If the client is MSHDA, as for a Full 4% Market

Page 7

Study, be sure to also include the name of the project sponsor.

• Intended use and users of the report.

• Identify steps taken in completion of the report. If any significant steps were not taken, identify

and explain.

• Date of field work and site visit.

• Person conducting field work.

• Primary analyst reaching conclusions of report.

D. Market Study Effective Date.

Market studies are most useful when they are based on the most recent data possible. Our ability to

assess the marketability of a project depends on timely information gathered by market analysts. As

such, market studies must have effective dates within the following time limits to be accepted:

• Initial submission of full 4% or 9% market studies, reduced scope studies, and update

letters. These studies must be dated no more than 6 weeks prior to the submission deadline for

the funding round unless they are resubmissions from a previous round.

• Resubmission of full 4% or 9% market studies. These studies must be dated no more than 10

months prior to the submission deadline for the funding round and must have been previously

reviewed by MSHDA. (NOTE: See the section on “Resubmissions” in this document for the

complete list of requirements related to the re-submission market studies.)

E. Project Description.

The market study should include a project narrative to show the analyst’s understanding of the project.

Please note that for projects with combination 4%/9% tax credits - if a proposal includes multiple

buildings that have distinct operations, amenities, and other elements that cause the buildings to have

different market dynamics, the buildings should be treated separately. For example, a proposal with

two buildings with different income targeting, rents, and amenities will need separate pro formas,

demand calculations, absorption estimates, competitive market analyses and

conclusions/recommendations. The separate analyses should be presented in one market study.

The Project Description should include:

1. Project Structure. Analysts should supply a project description that includes:

• The proposed income targeting, unit mix including bedrooms and bathrooms, estimated utility

costs, target tenancy (age-restrictions, Permanent Supportive Housing, etc.) and proposed

net rents and gross rents. Include maximum and minimum allowable incomes by AMI level;

• Identify project-based rental subsidies to be offered and the units to which the subsidy applies;

• Unit size in net square feet (the living area of a unit, exclusive of common areas);

• The utilities to be paid by tenants and energy sources (gas, electric, etc.) for tenant paid hot

water, heat and cooking, as well as the utility allowances for tenant paid utilities and the type

of heat provided;

• Age restriction (55+, 62+, 65+) for the community. Analysts should discuss the appropriateness

of the age restriction in light of local market conditions and the location, design, layout, and

service-provision at the property.

• For projects with a combination of 4% and 9% tax credits, the pro forma must include all

units—both those financed with 4% and 9% tax credits—and analysts should identify which

financing stream (4% or 9%) applies to each unit type.

Page 8

• The number of buildings, number of stories, and building design type (walk-up, single-story,

mid- rise, high-rise, elevator-serviced, etc.);

• Unit features and finishes (if available).

2. Amenities.

• List and describe the analyst’s understanding of the proposed in-unit and common amenities.

Pull cords or other personal emergency response system (PERS) should be offered in all

senior properties, and analysts should call out the fact that they have been omitted if a sponsor

has not proposed them. Please also see the “Standard Amenities” requirements under Section

H. Competitive Environment for a discussion of amenities that should be included. A list of

amenities that should be identified if present is available within the Market Study Initiation

Request form on MSHDA’s Market Research website:

https://www.michigan.gov/mshda/developers/housing-market-research.

• In addition to the amenities listed in appendix [2?], be sure to identify any premium finishes or

features, such as stainless-steel appliances, hardwood floors, or kitchen islands.

3. Project Design

The market analyst should review site and architectural plans and give a rough opinion of their

effects on the marketability of the project. Confirm whether all bedrooms have windows; note

that OMR will not approve projects that include bedrooms without windows. Include the status or

date of architectural plans, name of the architect, and a copy of the site plan, floor plans, and

elevations. If the plans are not completed at the time of the analysis, the market analyst should

so state.

If unit square footages within each bedroom type differ by more than 10%, a list showing individual

square footages for each unit must be provided either in the proforma or in a separate table. Provide

analysis of whether varying unit sizes will have significant differences in market appeal and if different

rents should be charged based on unit sizes. When unit sizes vary by less than 10%, an average

square footage may be used for the analysis.

Additionally, 4% Direct Lending projects are subject to MSHDA’s Standards of Design, available on

MSHDA’s website here: https://www.michigan.gov/mshda/developers/architects-and-contractors.

Sponsors are required to request waivers for any variance(s) from these standards in the Notice of

Intent to Apply application; the sponsor should provide these waiver requests to the analyst as well.

Provide analysis of whether each requested waiver, if any are received, would positively, neutrally, or

negatively affect the marketability of the subject; this can be in tabular form. If no waiver requests are

received from the sponsor, this should be stated in the market study.

Though OMR recognizes that market study analysts should not be expected to check the entire project

against MSHDA’s Standards of Design, we do ask the analyst note if any of the following standards are

not met regardless of whether the sponsor requested waivers:

• Dishwashers and garbage disposals shall be required.

• The minimum square feet for a one-bedroom unit shall be 600 square feet.

• All units shall provide a patio or balcony.

• Dwelling units shall not be in basement spaces or where the finish floor of the habitable area is

entirely below grade.

• Efficiency units are not an acceptable dwelling unit for MSHDA funding.

• Buildings having two or more stories shall be equipped with at least one elevator. Buildings with

100 or more units or of three or more stories shall be equipped with at least two elevators.

• Window blinds shall be provided at all window and door wall openings.

Page 9

• All dwelling units shall have individual mechanically ventilated HVAC units. Through-wall or

window-mounted air conditioning is not acceptable in new construction.

4. Additional Requirements for Rehabilitation of Occupied Properties:

The rehabilitation of occupied units should not result in any displacement of current tenants. Provide the

following information regarding potential displacement due to changes in subsidy status, rents, and income

targeting, along with analysis of whether displacement should be expected and any changes necessary to

avoid displacement.

• Identify any existing assisted housing program at the property such as Section 8, Section 202,

Section 811, BMIR, Section 236, etc.

• Document the length of time that subsidies will remain available at the project, or the availability of

additional rental subsidy at the proposal (i.e., additional Rental Assistance units for RHS 515

projects), such as a copy of the applicable portion of the HAP contract, or a letter from the Rural

Housing Service showing that the RA units at the subject will remain after rehab effort.

• Compare the current rent structure to the proposed rent structure.

• Comment on the effect of any changes on the project’s marketability and potential tenant

displacement.

• Make note of any rents expected to increase by 5% or more

Include a rent roll showing tenant incomes for all affordable units at the subject, the household size

occupying the unit, the unit’s number of bedrooms. Make sure tenant names or other personally

identifying information are not included in the market study. The analyst may need to redact

personally identifiable data from documents received from the sponsor. An analysis of this information

should be provided that indicates how many of the current tenants would be overburdened by the proposed

rents and estimates the number of households that could be displaced.

In addition to avoiding displacement due to the economic factors noted above, the rehabilitation of the

building(s) should not result in any permanent displacement of the tenants currently in the units.

• Describe the methodology for the rehabilitation, including the phasing of rehab activities,

impact of the rehabilitation work and on current tenants, and information on needed

relocation of tenants (if necessary);

The rehabilitation of occupied units should result in increased market appeal. Provide the following

information, along with analysis of the impact on marketability.

• Describe the scope of work, and include an estimate of total construction costs, cost per unit,

and a breakdown of hard and soft costs, if available.

• Call out changes in amenity provision, including the additions or subtractions to current

amenity package, and the analyst’s opinion of the effects on marketability deriving from

these changes.

Provide occupancy history over the last three years, as well as the current occupancy rate. If the

current occupancy rate is below 90%, explain the low occupancy rate. In cases where the sponsor

has been holding units vacant in anticipation of rehab efforts, note the date that the sponsor began to

hold units vacant, and the number of units held vacant for this purpose. This should be consistent

with the historical occupancy data provided. Additionally, for occupied rehab projects with current

occupancy rates below 90%, provide analysis of whether the proposed project as conceived is likely

to improve the marketability of the subject to the point that reaching and maintaining stabilized

occupancy is likely given competent management of the property.

Page 10

F. Site Factors/Location.

The Authority has criteria for site analysis that can be found in Tab CC of the MSHDA Combined

Application for Rental Housing Programs (www.michigan.gov/MSHDA). Analysts should look at these

criteria when determining how well the site will aid or hinder marketability. Please note that MSHDA has a

higher level of expectation for sites for Full 4% Direct Lending Market Studies than for Full 9% Market

Studies. Additional requirements for 4% Direct Lending studies are listed at the end of this section.

MSHDA OMR provides preliminary site reviews for 9% projects submitted ahead of the 60-day notice

deadline and for all 4% Direct Lending projects. Any concerns noted in these reviews should be

addressed within the market study. Site-related concerns that were noted in the preliminary site review

and are not sufficiently addressed in the study may result in OMR recommending lower rents or against

proceeding with the subject proposal.

Provide a description of the site characteristics including its size, shape, general topography, and

vegetative cover, and adverse conditions. Identify land uses directly surrounding the subject site. In

addition, provide the following:

• Photographs of the site and neighborhood (defined as an area within two blocks of the proposal),

and a map clearly identifying the location of the project. Analyze and map the property’s location

vis-à-vis the following:

o Closest transportation linkages;

o Community anchors such as a central business district, neighborhood commercial

zones, places of worship, schools, and community centers, among others;

o Medical services;

o Public transportation;

o Municipal services such as libraries, police, and fire service

o Commercial services such as banks, grocery stores, pharmacies, and others;

• In situations where it is not feasible to show all the categories on a map, the categories may

be addressed in the narrative.

A description of the site’s impact on the marketability of the proposal, including at least the following

items:

• Curb appeal of the site (or the project itself if it is a rehab proposal);

• An analysis of the linkages between the project and local amenities noted in the PMA map

described previously;

• An analysis of the surrounding neighborhood, including the analyst’s perception of its residential

character, non-residential land uses (if any), the quality of the housing stock, its level of upkeep,

and its effects on the market performance of the proposal.

• In cases of poor curb appeal, poor linkages, or poor quality of housing stock, discuss these

deficiencies and their likely effect on the marketability of the project.

• Provide analysis of public safety issues including information or statistics on crime in the vicinity

of the site and in the PMA relative to data for the overall area. Address any local perceptions of

crime or problems in the PMA.

• Describe and evaluate the visibility and accessibility of the site. Address the following:

o Ease of ingress and egress, including a discussion of traffic controls around the site,

difficult left-hand turns against prevailing traffic, excessive curb cuts surrounding the

entrance to the development, and unreasonable lines of sight at the entrance.

Excessive traffic congestion should be avoided, such as around major employment

parking lots, large shopping malls and multi-screen theaters;

o Self-advertising quality of the site, by virtue of its visibility from roadways;

o Adequate visual separation from adjacent land uses;

o Potential for adequate signage, lighting, and landscaping.

Page 11

• For 9% proposals that are located closer than 600 feet to an active railroad track,

specifically assess the impact on the feasibility of the proposal, including such things as the

impact on rent levels and estimated absorption period. It may be useful to review MSHDA’s site

criteria in Tab CC of the MSHDA Combined Application for Rental Housing Programs when

identifying negative site factors for this adjustment.

• For proposals that lack residential character, specifically assess the impact on the feasibility of

the proposal, including such things as the impact on rent levels and estimated absorption

period.

• State whether each of the items below is true or not for the proposal:

o Is it located farther than 600 feet from an active railroad track? (If the answer is “no”, please

note that this should be addressed in the calculation of achievable rent grids, per the

“ACHIEVABLE AND MARKET RENTS” section of this document.)

o Is it located farther than 300 feet from negative site factors such as garbage dumps,

truckyards, high-tension power lines, industrial land uses, drilling rigs, and other dis-

amenities? (It may be useful to review MSHDA’s site criteria in Tab CC of the MSHDA

Combined Application for Rental Housing Programs when identifying negative site

factors for this adjustment.) (If the answer is “no”, please note that this should be

addressed in the calculation of achievable rent grids, per the “ACHIEVABLE AND

MARKET RENTS” section of this document.)

o Is it near to existing residential uses, preferably single family, which are in good

condition and reinforce the feeling of "neighborhood” or, if not, is it the subject of a

realistic plan to improve any blighted homes or structures to a good condition?

(Central city walkable proposals may be still accepted if they lack residential

character.)

o 4% Direct Lending projects that answer “no” to any of the above questions may result

in OMR recommending against proceeding with the project.

• Where applicable, provide evidence of new private or public investment in the area near the

proposal. This could include community revitalization plans, other housing developments, new

commercial enterprises, or others.

• For scattered site, single family projects, the Authority has added site considerations that must

be met. Analysts should look at the scattered-site criteria in Attachment 2 of this document and

determine how well the proposal’s site meets them.

• Address any concerns noted in Marketing staff’s preliminary site review, as described under “I.

Market Study Procurement and Submission Process.”

• Provide a conclusion concerning the suitability of the proposed site for the proposed use. Include an

opinion on whether the site affects the subject’s marketability positively, negatively, or neutrally.

G. Market Area Definition

For the purposes of Authority market studies, the Primary Market Area is the local area from which the

subject will draw potential renters. It implies that households within the PMA would be willing to move to,

or shop for, housing located therein, and that rents, amenities and other aspects of housing are similar

among multifamily complexes in that area. Analysts may choose to seek Authority pre-approval of a PMA

before proceeding with subsequent analysis by submitting it to [email protected].

Page 12

Given this definition, the analyst must define the Primary Market Area (PMA) that pertains to the subject.

Identify PMA boundaries by census tracts, school districts, jurisdictions, street names, or other geography

forming the boundaries. Also, include a map that clearly shows the borders of the PMA, and its major

features (towns and cities included, major roadways, and the location of the subject).

Defend the composition and extent of the PMA. Note the number of households within the PMA. To the

extent possible, the PMA should be based on real- world data, such as the experience of other

complexes in the area. This is especially applicable if the proposal is for a new phase of a successful

project. It is important to note that PMA boundaries based on radii are not accepted by the

Authority. In addition, PMAs that cross state borders are allowed only if convincing evidence of cross-

border interaction (migration, commuting, shopping, experience of other projects in the market, etc.) is

presented in the study.

Include a list of all Census tracts within the PMA.

H. Employment and Economy.

Provide data and analysis on the employment and economy of the Primary Market Area to give an

understanding of the overall economic health of the community in which the proposal is located. List

sources for the data and methodology for the analysis and be sure to relate all findings to the market

performance of the subject property.

Employment and Unemployment: Provide the information described below for the for the Primary Market

Area or smallest geographic area available that includes the Primary Market Area and compare the data

to the larger geographic area, e.g. the city, county, labor market area, or MSA. List data sources and

describe the methodology for the analysis. The following should be provided:

• A description of employment by industry sector.

• A list of major employers in the PMA, the type of business and the number employed

and compare the data to the larger geographic area (i.e. MSA, County, etc.).

• The historical unemployment rate for the last ten years (or other appropriate period) for the

PMA and compare to the larger geographic area (i.e. MSA, County, etc.).

• Information that pertains to the number of jobs within the study geography:

o Total At-Place Employment for the same period. “At-Place Employment” measures the

number of jobs located within a specific geography and should not be confused with

the Employed Labor Force. Compare to the larger geographic area. Recent trends

(job loss/gain) in At-Place Employment should be identified and discussed.

o At-Place Employment by Sector and Employment Change by Sector. Identify the most

important employment sectors in the area, potentially including share of employment

and employment growth.

• A discussion of future trends for employment, as well as general economic conditions, in

the PMA in relation to the subject property.

• Discuss recent or planned major employment expansions or contractions, plant openings

or closings or other similar information including potential impact on demand for rental

housing.

Page 13

• Comment on how concentrated the local economy’s employment is on an industrial sector basis.

• If relevant, comment on the availability of affordable housing for employees of businesses

and industries that draw from the PMA.

• Provide a breakdown of typical wages by occupation. These are usually available on an MSA-

wide basis, but some sources might exist for smaller areas (the American Community Survey,

for example).

• Provide commuting patterns for workers such as how many workers in the PMA commute from

surrounding areas outside the PMA. Comment on what these patterns mean for the

marketability of the subject proposal.

• Provide a conclusion stating whether economic conditions will have a significant positive

or negative impact on the subject property.

I. Demographic Characteristics

Provide total population, age, and income target data for the Primary Market Area and the smallest

available comparison area, (which may include a county or MSA) using data from the most recent

decennial Census, American Community Survey information, and/or data provided by third-party

providers. It should include current year estimates and estimates projected to market entry (usually one to

two years after the current year).

Indicate the source for all data and provide an analysis of trends indicated by the data. This is especially

important if the trends noted in the Census figures do not match those coming from the third-party

sources (i.e., Claritas or ESRI). When they differ, the analyst must offer a plausible explanation for the

difference with proof; as a last resort, if one cannot be made, then straight-line estimates and projections

using data from the previous two decennial censuses (for example, 2010 and 2020). In addition, the

market analyst’s own estimates can be used, but these must be accompanied by a detailed description

of their derivation, and enough data to allow Authority staff to recreate them, if needed.

Detail on the following demographic topics is necessary:

POPULATION AND HOUSEHOLD COUNTS AND CHARACTERISTICS. Population and

household counts for the appropriate age classification should be provided for the year of the most

previous decennial Census, the current year, and projections for five-year growth or anticipated

placed in service date. Counts for elderly persons and households (65 and older) should be broken

out.

• Tenure by age of householder, including the number of renters and owners that are headed

by seniors (aged 65 and over) and non-seniors;

• Household size and type by tenure (both the average number of persons per household and

tenure group, and a breakdown of households by number of persons per household and

tenure group);

• Include population by age, including the number of non-elderly (0-64) and elderly (65 and

over). For congregate care and Affordable Assisted Living projects, ages used in the analysis

(for both population and household information) should be 75 and over. If sufficient evidence

is introduced, younger elderly populations might be accepted; this will depend greatly on the

product type proposed by the developer.

Page 14

INCOME BY TENURE. Provide a breakdown of households by income in $5,000-$10,000

increments by household size and by tenure. The data should be taken from the most

recent version of the American Community Survey and the year of market entry.

In most cases, elderly households must be removed from these totals when analyzing family

projects, and non-elderly households must be removed for senior proposals. The only exception for

this rule concerns markets where the subject, by virtue of market or unit size (for example, markets

with a lack of senior housing, or proposals that feature one- and two-bedroom unit mixes), might

attract senior renters. Proof of this contention is necessary.

BUILDING PERMITS. A 5-year history of building permits, if available, by housing type,

and comments on building trends in relation to household trends will be included in the

study.

ANALYSIS. Provide an analysis of the demographic trends indicated by the data described

above being sure to relate the findings to the market performance of the subject property.

Clearly identify any specific trends that that positively or negatively affect rental housing

demand.

J. Competitive Environment

A market study should include a comprehensive description and analysis of the rental market serving the

primary market area. The scope of the survey/analysis should be sufficient in breadth to evaluate where

the subject property fits within the overall rental market. If available and relevant, an overview of the

regional rental market including number of units planned/under construction and recent trends in rents

and vacancies should be provided.

As the tenant-paid rents at communities with project based rental assistance (Section 8, Public Housing,

USDA) are based on income, they are not generally an accurate representation of market conditions. As

such, the contract rents and vacancies at these communities should be presented independently of

properties without these subsidies. Unless stated otherwise, the following requirements pertain to both

Full 9% and Full 4% studies, with additional requirements for 4% Direct Lending studies listed separately.

RENTAL MARKET INFORMATION

This purpose of this section is to understand the competitive environment in the market area and assess

the proposal’s competitiveness when compared to competing multifamily rentals.

A. Please conduct a market survey and provide an overview of the primary market area’s housing

stock including the information below. Provide this information for all surveyed properties (rather

than solely for the most competitive properties) unless indicated otherwise. The proposed rents,

amenities, and features of the subject property should be shown in comparison to existing

communities in tabular form. Specifically, the information provided should include:

a. Name and street address, population served (senior/general occupancy/special needs), year

built, property contact information, etc.), and rent structure. For the most comparable

properties, also provide the age, condition and street appeal and the type of design (i.e.

townhome, walk-up, duplex, etc.).

b. Unit mix including number of bedrooms and bathrooms, square footage, and rents.

c. Provide the current occupancy. If available, add the historical occupancy and absorption

history (if recent/available) for the most comparable properties.

d. Number of households and date of any waiting lists.

e. Current concessions being offered.

Page 15

f. Unit features and amenities such as ceiling fans, patios/balconies, washer/dryer

connections, parking, etc. Specify how many units have individual patio/balconies.

g. Include additional details such as high-end finishes, hardwood/carpet flooring, high-

efficiency appliances, etc., for at least the most comparable properties.

h. Community amenities such as on-site management, recreation, laundry, elevators, and

parking (including number of parking spaces and elevators, if possible). Include the cost

of any fees charged for laundry, parking, or any other amenity.

i. For the most comparable senior properties with services, give the types of services

included in the rent or available for an additional fee. Provide the costs of any for-fee

services.

j. Type of utilities (state whether paid by tenant or owner and energy sources for hot water,

heat and cooking);

k. The market vacancy rate for the PMA rental housing stock by population served (i.e.

market rate, Low Income Housing Tax Credit, and Project-Based Rental Assistance.)

l. Include a map identifying the location of each property in relation to the subject, identifying

its funding type or subsidy source (9% LIHTC, Conventional, Section 8, Section 236,

Section 515, Authority financing, or other).

B. Projects not included in the survey of the rental market. Provide a list of projects within the

PMA that were not included in the survey along with an explanation why each project was left out.

For Tax Credit projects left out due to unresponsiveness, note the number of attempted contacts.

C. Vacancy Rates. Present the vacancy rates for the surveyed rental stock. As appropriate,

vacancies should be broken up by property classifications and target market, which may include

market rate, LIHTC, deeply subsidized (rent based on tenant income), senior, special needs, etc.

As available, vacancy data should be provided by bedroom type (unit size). Provide this data in

tabular format.

Vacancy trends should be provided and discussed if available/relevant.

• Significant seasonal variations in vacancy rates should be discussed if applicable.

• Any vacancy or absorption problems should be identified and discussed, particularly among

the most comparable rental communities.

• Identify any significant variances in vacancy rates that exist among price point, location,

bedroom size, product type, target market, etc.

D. Most Comparable Properties. Identify the most comparable properties to the subject property

and provide a narrative evaluation of the subject property in relation to these communities. Market

studies should identify the most comparable affordable communities and market rate comparables

used for a comparison of rents. The study should explain how these communities were selected as

the most comparable and why other projects were excluded. Photographs must be provided of the

properties deemed most comparable to the subject, as well as a map of these properties that

includes the location of the subject property.

E. Recent Development Activity and Pipeline. Discuss recent development activity in the market

area including recently constructed rental communities and those planned or under construction in

the market area. The market study must include separate estimates of the numbers of rental units

currently under construction and the numbers of units in the planning and development stages that

are likely to enter the housing market during the specified forecast period. These estimates should

include all rental developments known, not solely those determined by the analyst to be comparable

and competitive. The location of each pipeline community relative to the subject site should be

presented. The report should contain estimates of:

a. The number of projects currently under construction, expected completion date,

Page 16

the total number of units, unit mix breakdown by bedroom and income target, and

structure type.

b. The number of projects in planning stages likely to be developed, including but not

limited to those with building permits or firm financial commitments, including

details on the number of units by bedroom size, rents, locations, and stage of

development.

c. Identify any projects that will specifically compete with the subject property.

d. Include an explanation of why any non-competitive projects in the pipeline are not competitive.

Keep in mind that in most Michigan markets, 60%- and 80%-AMI units will be competitive with at

least a portion of the market-rate rental market, especially when there is a lack of new housing

units in the market area.

e. Include a list of LIHTC pipeline projects with allocations in or near the market area

that are not yet placed in service, giving as much detail as possible on estimated

placed-in-service dates, unit mix, and income levels. The Authority may be able to

provide a list of properties that were recently approved for funding by the MSHDA

upon request. If there are no comparable projects in the pipeline, the analyst must

state this fact.

F. Scattered Sites. In markets with limited multi-family rental communities or lower-density

subject properties, provide an analysis of available scattered site rentals including pricing and

other available/pertinent data.

G. Comparison and Analysis. Compare and analyze the subject property to the surveyed rental

communities in terms of amenities, tenant paid utilities, unit sizes, location, parking,

concessions, rents, and other relevant considerations. This analysis may be refined to include

only the most comparable communities.

H. Standard Amenities. MSHDA considers any amenity which is offered by more than 60% of

comparable properties to be a standard amenity for that market. Provide a list of standard

amenities within the market, including the percentage of comparable properties offering each

standard amenity. Identify any amenities absent from the subject’s amenity offerings that are

provided by at least 60% of either of the following: 1) the most comparable properties, 2) the

newest comparable properties (properties constructed within the primary market area in the past

ten years), or 3) all surveyed properties. For any such amenity, discuss the amenity’s prevalence

among competing properties and the potential impact on the subject’s market feasibility given that it

lacks this offering. Also, include a statement to the effect that MSHDA considers standard

amenities to be a necessity in all proposals and may condition the addition of any missing standard

amenity or require a rent reduction due to its absence. Please note that MSHDA may make an

exception for rehabilitation projects that do not offer certain amenities due to the building’s existing

structure and layout.

I. Impact on Existing Housing. Discuss the impact of the subject development on existing housing

in the market area, in terms of conventional multifamily projects and affordable projects (including

RHS, HUD and others where applicable). Further, discuss the impact on Authority-financed

properties, including those that are active in the Authority’s pipeline or that have been

constructed, but not have not yet reached stabilized occupancy.

J. Absorption Rates. Absorption experience of recently completed rental developments as

available, including units per month estimates for each project, with particular emphasis on

comparable and competitive projects that have entered the market within the past 24 months.

Page 17

K. Effective Rents. Current effective rents should be provided for each of the most comparable

rental communities by bedroom size when available. Effective rents should account for any

current incentives and should be adjusted to reflect a consistent utility policy.

L. Upgrades. Any options/upgrades available to renters should be identified with the

associated costs.

M. For-Sale Homes. If the subject property has three- or four-bedroom units that account for at

least 20% of its total units, discuss the availability of non-rental housing options, including

purchase or sale of homes.

ACHIEVABLE MARKET AND LIHTC RENTS. Provide estimated achievable market rents and

LIHTC rents for each unit type derived from comparable properties in the market area. Discuss their

ramifications for the marketability of the subject. The following are specific requirements of this section of

the guidelines:

A. Derivation of the Rents/Rent Comparability Grids.

Analysts should use a rent comparability grid to estimate the achievable and market rents. Analysts are

required to submit to MSHDA the rent comparability grids for each market study in spreadsheet

form that includes the formulas for all calculations and the weights applied to the adjusted rents

of each property used to derive the Estimated Market Rents. The purpose of this requirement is for

MSHDA to be able to understand the methodology for deriving market rents and to be able to revise the

spreadsheet with different adjustment amounts or add/delete comparables in order to see the impact on

the Estimated Market Rent.

The choice of which comparable properties to use to estimate achievable rents can greatly affect the

resulting achievable rents. Generally, using comparable projects requiring fewer adjustments results in a

more credible analysis. The analyst must provide an explanation of why the included properties were

chosen. Properties outside of the PMA, properties with low occupancy rates, luxury developments, and

others with significant differences from the subject project should only be used in rare cases where other

comps are not available.

When compiling rent comparability grids, please keep the following requirements in mind:

• Analysts should add the following adjustments to their rent comp grids when applicable:

o A rent adjustment for any property that is sited less than 600 feet from an active railroad

track. For Full 9% Market Studies, explain, using information from existing comparables or

other justifications, why the market study supports the proposal (if it does), given that it is

located so close to an active railroad track. (For proposals for 4% tax credits, see

Additional Requirements for 4% Direct Lending Studies, below.)

o A rent adjustment for proximity to any other type of site-related dis-amenity, such as high-

power tension lines, truck yards, drilling rigs, propane tanks, or other negative site factors. It

may be useful to review MSHDA’s site criteria in Tab CC of the MSHDA Combined

Application for Rental Housing Programs when identifying negative site factors for this

adjustment.

o An adjustment for sites that are not near existing residential land uses, preferably single

family, which are in good condition and reinforce the feeling of "neighborhood”. However,

walkable proposals in core downtown areas may be still accepted if lacking residential

character.

• For each estimated rent, a ratio of the adjusted rent to the last rent must be provided. MSHDA’s

preferred range for this ratio is 90% to 110%; properties that yield adjustments outside of this

range are considered not to be comparable to the subject property. In cases where this ratio

Page 18

cannot be achieved due to a lack of comparables, the analysts should call this out, discuss the

limits to the analysis of such a lack of true comparables, and take these limits into

consideration in their analysis/recommendations.

• If any weighting of the adjusted rents other than a straight averaging is used to determine

the achievable market rents, the analyst must provide the weights and explain how they

were assigned.

• The following are prohibited in rent comparability grids submitted to MSHDA:

o Positive adjustments due to high occupancy rates at comparable properties (properties

with low occupancy rates rarely should be used to determine achievable market rents)

o Positive adjustments for perceived pent-up demand in the market,

o Positive adjustments for cases where the analyst thinks comparable

properties are not maximizing their rent potential.

• Senior properties that offer services (assisted living facilities, congregate care facilities,

continuum of care retirement communities, etc.) should not be used as comparable properties

for independent senior apartments. If, due to a lack of comparable properties, senior properties

that offer services are used as comparable properties for independent senior apartments, the

costs of the services at the comparable properties must be accounted for in the grid. Beyond

the actual cost of the services, properties that offer services often charge a rent premium due to

the availability of these services; this should also be accounted for in the grid.

• Continuum of Care Retirement Communities (CCRC’s) or other senior housing complexes

housed in a campus-like setting that offer multiple levels of care are not comparable to

independent living or congregate-care senior properties. However, if there are no other senior

comparables available, and if performance data about the independent-living portion of a

CCRC can be isolated from the other levels of care on the campus, it may be used as a

comparable; in these cases an adjustment should be made in the grids in recognition of the

fact that senior renters will pay more for CCRC housing based alone on the benefit of being

able to age in place at a multi- level of care campus.

• Luxury or high-end apartments (those offering luxury finishes, premium amenities, etc.),

should not be used as comparables for affordable housing proposals offering a more modest

product.

The rent grids should result in an estimated achievable market rent and an estimated achievable

LIHTC rent for each unit type. Provide an explanation of how the estimated achievable rents

were calculated from the individual adjusted comps used (i.e. straight average, specific weights,

average weighted to median, etc.).

B. Analysis of Rent Advantage. Quantify and discuss the market advantage of the proposed rents and

the resulting impact on market feasibility. Include a table that shows the proposed rents, estimated

achievable market rents, and the ratio of the proposed rents to estimated market rents. Discuss the

feasibility of the rents, stating whether the proposed achievable and market rents (if applicable) are

reasonable and achievable given the competitive market and the specifics of the proposal. And, if not,

recommend alternate rents. When conducting this analysis, keep in mind the following MSHDA

preferences:

• For Full 9% Market Studies:

o For 60% of AMI units: Proposed rents should offer at least the industry-standard

10 percent discount from the estimated market rents

o For 80% of AMI units: State the analyst’s preferred percentage discount for 80% rents

(generally between 5% and 10%) and explain the reasoning for the chosen discount

level.

Page 19

• For Full 4% Market Studies:

o All 60% of AMI units should offer at least a 10% discount from the estimated market

rents and all 80% AMI units should offer a discount of at least 5% from market rents.

SENIOR REQUIREMENTS

• Age restricted properties should be analyzed separately from general occupancy

communities when evaluating rents, occupancy, services, etc.

• Senior properties that offer services (assisted living facilities, congregate care facilities,

continuum of care retirement communities, etc.) should be analyzed separately from

independent senior communities.

• Examine features and amenities that are specifically designed to address seniors. Pull cords or

other personal emergency response system (PERS) must be offered in all senior properties,

and analysts should explicitly note their absence if a sponsor has not proposed them.

ADDITIONAL LIHTC/AFFORDABLE REQUIREMENTS

Provide a list of all affordable housing communities including LIHTC communities and deeply subsidized

communities (Section 8, Public Housing, USDA). Any LIHTC communities not included in the analysis

should be identified with an explanation of its exclusion.

• To accurately understand rent structure, rents of the subject property and existing

LIHTC communities should be broken out by AMI level.

• Vacancy among existing LIHTC communities should be provided by AMI if available.

Furthermore, vacancies for units with and without project-based subsidies should be

included.

• Proposed rents should be evaluated for each proposed income level, rather than an average

by bedroom type.

Analysts should comment if specific units (bedroom/AMI) will lease significantly faster or slower

than the remainder of the project.

LOCAL PERSPECTIVE.

The market study should include a summary of the perspective on the rental market, need for the

proposed housing and unmet housing need in the market. The local perspective should consider:

• Interviews with local planners, housing and community development officials and market

participants to estimate proposed additions to the supply of housing that would compete with

the subject, evaluate the local perception of need for additional housing and obtain information

on any redevelopment plans that cover the site’s location;

• Interviews with local Public Housing Authority (PHA) officials to seek comment on need for

housing and possible impact of the proposed development on their housing inventory and

waiting lists for assisted housing. Include a statement on the number and availability of Housing

Choice Vouchers and the number and types of households on the waiting lists for Housing

Choice Vouchers.

K. Demand Analysis

For the purposes of these analyses, it is assumed that market-rate households will pay up to 30% of their

incomes toward gross rent, and that lower-income households will pay up to 40% of their incomes toward

gross rent. For market-rate units, the upper income limit for the demand analysis should be 100% of AMI

for the estimated average household size of prospective market-rate tenants or other methodology

explained and justified by the market analyst. If evidence from the market exists, it is possible that higher

income levels or income-to-rent ratios may be used for senior projects; however, evidence supporting this

contention must be presented in the study.

Page 20

It is further assumed that for family proposals there will be 1.5 persons per bedroom; senior projects will

rely on an assumption of two person households. Demand estimates for proposals that contain a

significant proportion of larger rental units (with at least 20 percent of the units offering three or four

bedrooms) will need to take into account the relatively small number of large households that would

choose such unit sizes; the analyst must account for this in the analysis.

Analysts should use the Excel spreadsheet (the “Demand Estimation Sheet with Movership Rates”)

provided on the OMR’s website (https://www.michigan.gov/mshda/developers/housing-market-

research) for the calculation of demand estimates for each income limit at the subject property. These

demand estimates should be constructed so as to eliminate double counting stemming from

overlapping income qualification limits. (Information on the Authority’s preferred methodology on

creating non-duplicated demand estimates is included in Attachment 3 to these guidelines.) Be sure to

use income-specific renter propensities for demand estimation, to recognize the fact that more low-

income households rent. This information is available from the US Census (factfinder.census.gov), on

table HCT11 for family projects, and on the HUDUser website (www.huduser.org) for senior proposals.

The use of other data sources (such as the HISTA dataset) is also acceptable.

Analysts should compare the findings of the analysis to MSHDA’s preferred demand ratio thresholds,

shown in the table below. Please note that senior housing with services, such as under the MSDHA

Congregate Care model, may be feasible despite having capture rates above 50% in some markets.

MSHDA may accept capture rates of up to 75% to 100% for certain proposals, depending on their

specifics.

Type of Rate

Open-

Occupancy

Senior

Penetration Rate

Capture Rate

50%

Saturation Rate

20%

10%

L. Absorption Estimates

Estimate the absorption rate for the subject property and the corresponding lease-up period. The

absorption period should be based on stabilized occupancy rather than 100 percent occupancy. If the

absorption period is based on the inclusion of pre-leased units, provide an explanation for that

assumption. Explain what data was used to estimate the absorption rate. Cite absorption rates at

comparable projects in the market area completed within the past 24 months if possible. If such data is not

available or no comparable projects have been completed in the market area recently, indicate what the

absorption rate is based on. Please note that the Authority has observed that lease-up times for senior

housing with services are significantly longer than those for other types of housing.

N. Analysis and Conclusions

The analysis and conclusions section of the market study should summarize salient points from each

section of the market study used by the analyst to reach the conclusion.

Compare the proposed development to comparable rental communities including:

• Unit distribution

• Community Amenities

• Included utilities

• Unit features and finishes

• Unit square footage

• Location

Also, please address/provide the following:

Page 21

• Identify any significant competitive advantages or disadvantages of the proposed development.

• Discuss the proposed price position relative to the existing rental market. Comment on the

appropriateness of the proposed rents in light of the site location and product to be constructed.

• Identify risks, unusual conditions and mitigating circumstances that may affect the subject’s ability

to perform as expected. Provide an overview of potential risks related to the following project and

market characteristics and conditions. If no mitigations are recommended for these risks, provide

your reasoning:

o Unit configuration, targeting, and unit types, such as unit size, layout, and intended

demographic target.

o Amenities, such as the proposed amenity suites’ impact on market appeal, operating costs,

and project viability.

o Project site and surroundings, including risks local to the site, risks from surrounding land

uses and neighborhood conditions, and risks due to availability of amenities within

reasonable distances.

o The rental market, including risks due to aggressive rents, performance of the existing

rental market, market demand, and other projects in the pipeline.

o Displacement, including any potential causes of displacement such as rent increases, rehab

methodology, changes to income targeting, transition from market-rate to income limited

units, and any others.

• For occupied rehab projects with current occupancy rates below 90%, provide a statement of

whether the proposed project as conceived is likely to improve the marketability of the subject to

the point that reaching and maintaining stabilized occupancy is likely given competent

management of the property. This should be supported throughout the market study.

• Demand, including reconciling any conflicting data on future demand such as expected population

or household shrinkage in the PMA paired with demand estimates within preferred thresholds.

• Discuss any impact (short/long term) the subject property will have on the overall rental market

and comparable rental communities.

• The final conclusion of the report should reconcile any conflicting data in the report. For example,

experience of comparable properties may indicate less/more demand than indicated in the

demand section of the report.

• Include a clear, explicit, and bolded recommendation for whether the project should move forward

as proposed, should move forward only with the analyst’s specific suggested modifications, or

should not proceed at all.

O. Other Requirements

• Date report was prepared, date of site visit and name and telephone number of the

analyst preparing study;

• Certification of no identity of interest between the analyst and the entity for whom the report

is prepared;

• Certification that recommendations and conclusions are based solely on professional

opinion and best efforts;

• Statement of qualifications, including a resume;

• List of sources for data in the market study;

IV.

Market Study Requirements: Reduced Scope Studies

If the proposal is for the preservation of a deeply subsidized project with rent subsidies that cover at least

95% of its units, is at least 90% occupied, features rent increases of less than 5% on any units without

project-based rental assistance, AND has (or will have in place by the estimated date that the renovation is

concluded) a signed HAP contract with five or more years remaining after the renovation, the sponsor can

submit a reduced scope study. Please explain how the proposal qualifies based on the criteria below. If

the requirements below are not met, then the sponsor of the proposal must submit a full market study.

Page 22

The necessary components from the III. Market Study Requirements section of this document include:

• A. Executive Summary (for information relevant to reduced-scope studies);

• B. Project Description, including vacancy and turnover rates at the subject over the last

three years;

• C. Site Factors/Location (Sufficient analysis to identify significant issues that could

impact marketability. No site visit required.)

• D. Market Area Definition;

• H. Competitive Environment

• F. Analysis and Conclusions

Beyond the above circumstances, occasionally OMR may need to order a follow-up to an earlier market

study that is more in-depth than an update letter but does not require a new full market study. OMR staff

will work with our approved vendors to determine an appropriate scope of work and price for such studies;

the sponsor will be responsible for the cost. These studies can only be ordered at OMR staff’s discretion

and can only follow a previously submitted full study.

Update Letters

The Authority accepts updates for market studies submitted for both Full 9% and Full 4% Market Studies.

For an Update letter, the project must meet the conditions below and the market study must demonstrate

how the proposal qualifies under the criteria. Any questions about whether or not a study qualifies for an

Update letter should be submitted to MSHDA-MarketStudies@michigan.gov. The qualification criteria

include:

• The project that is described in the study has not undergone any major changes since the

study was completed and submitted.

o Major changes include rent increases of more than 10%, including more targeted units

at higher Area Median Income bands (more 60% or 80% AMI units, more market-rate

units,

etc.), removal of more than three amenities, removal of any one Standard Amenity from

the proposal (see RENTAL MARKET INFORMATION, Section G for more information),

changing a family-targeted proposal to senior (or vice versa), changing the availability of

deep subsidies, or other changes.

o Changes to the proposal that clearly aid in its reaching stabilized occupancy

sooner (lower rents, fewer units, increased number of units with project-based

subsidy, for example) usually qualify for an update.

• The study to be updated must be dated within six months to one year of the application due

date in which the proposal will compete.

• Studies more than a year old cannot be updated; new studies are needed in that case.

• After one update, a new (full) study is needed; an update cannot be updated.

• For any proposal that is submitted for 4% credits or a combination of 4% and 9% credits,

the study being updated must have been assigned by the Authority.

• For market studies submitted in support of an application for 9% tax credits or under the Pass-

Through Bond program, the original study may have been hired directly by the project sponsor

from the list of approved firms. (See Attachment 1.)

If all of these conditions are met, then an update can be ordered. The update will take the form of a letter,

comparing the original proposal to the updated proposal and updating all information necessary to assess

whether the more recent proposal is still feasible in the market. Include a statement of whether any

material changes have occurred in the market since the completion of the original study, and whether the

recommendation given previously is still supportable.

Page 23

VI.

Resubmissions

Market studies that were submitted and reviewed for the immediately preceding 9% tax credit round can

be resubmitted for the following 9% tax credit round as long as:

• With the exception noted below, the proposal’s rents, amenities, site, and other elements that

impact a property’s market potential have not changed from the initial submission, and

• The market study is dated no more than ten months prior to the submission deadline.

• For example, a market study dated September 1, 2022 that was submitted for the October,

2022 tax credit round can be re-submitted in the April, 2023 tax credit round, as long as the

proposal submitted in April 2023 is the same as the one submitted in October, 2022. Please

note that in no case may a market study be resubmitted for more than one round.

Please also note that market studies can sometimes be resubmitted even if the proposal has changed if

any changes will clearly reduce the project’s exposure to the market, such as by increasing the

proportion of units providing project-based subsidies, reducing the number of market-rate units and/or

units targeted to households earning 60% or above of AMI, adding amenities, or offering fewer units

overall for the project. Sponsors are encouraged to submit any questions about whether or not a

study may be resubmitted to MSHDA-MarketStudies@michigan.gov.

Page 24

Attachment 1. Approved Market Analyst List

Baker Tilly:

David Haviland

Senior Manager

Baker Tilly US, LLP

4807 Innovate Lane

Madison WI 53718

Phone: 608-240-2358

Fax: 608-249-8532

david.haviland@bakertilly.com

Market Analyst Professionals

Chris Vance

222 South 9th Street, Suite 1600

Minneapolis, MN 55402

PH: 248-515-0496

cavance@mindspring.com

Shaw Research & Consulting, LLC

Steven R. Shaw

P.O. Box 38

Bad Axe, MI 48413

Phone: (989) 415-3554

Fax: (989) 803-5904

steveshaw@shaw-research.com

Real Property Research Group,

Inc.

Tad Scepaniak

Managing Principal

(v) 770-517-2666 x 6201

(f) 877-243-5057

(M) 678-662-0576

tad@rprg.net

Kinetic Valuation Group

Jay Wortman

President/Partner

3901 S 147th Street, Suite 144

Omaha, NE 68144

[email protected]m

(d) 402.202.0771

(f) 402.939.0222

Newmark

Joe Sievert

Vice President

2410 North Forest Road

Amherst, NY 14068

Phone: 716-810-1223

Mobile: 716-628-6667

Joe.Sievert@nmrk.com

Novogradac & Company LLP

K. David Adamescu

Manager

4449 Easton Way, 2nd Floor

Columbus, OH 43219

614.934.1139

david.adamescu@novoco.com

Vogt Strategic Insights (VSI)

Andrew W. Mazak

Partner

1310 Dublin Road

Columbus, OH 43215

Ph: (614) 224-4300

Email: andrewm@VSInsights.com

Page 25

Attachment 2. Amenities, Services, and

Finishes

Market studies must clearly indicate whether the proposed project will include or not include the amenities,

services, and finishes listed below. Additionally, the market study should indicate which of these amenities,

services, and finishes are present at any comparable properties used to estimate achievable market and/or LIHTC

rents. (Please note that the rent grids used to estimate achievable market and LIHTC rents are not required to

include all of these amenities.) Analysts should make reasonable efforts to determine whether other surveyed

projects include these amenities.

Appliances

• Self-Cleaning Oven/Range

• Frost-Free Refrigerator

• Dishwasher

• Microwave

• Garbage Disposal

• In-Unit Laundry Hookups

• In-Unit Washer/Dryer

• Air Conditioning (include type)

Flooring Types

• Differentiate between the following types:

o Carpet

o Ceramic Tile

o LVT

o Composite

o Hardwood

o Finished Concrete

o Other (specify)

• List type for each area within the units:

o Bedroom(s)

o Kitchen

o Bathroom(s)

o Living Areas

Security Amenities

• Gated Entry

• Security Fence

• Security Cameras

• Intrusion Alarms

• Intercom

• Controlled Building Entry

Unit Amenities

• Mini-Blinds

• Individual Patio/Balcony

• Basement

• Walk-In Closet

• Assigned Exterior Storage

• Coat Closet

• Ceiling Fan(s)

• Fireplace

Community Outdoor Spaces

• Playground/Tot Lot

• Bike Racks/Storage

• Picnic Area/Grill(s)

• Rooftop Terrace/Community Balcony

• Courtyard

• Walking Trails

• Gazebo/Pavilion

• Community Garden

• Dog Park

• Fire Pit

• Sports Court/Field (specify type)

• Swimming Pool

• Notable Views (specify type)

Community Indoor Spaces/Amenities

• Business/Computer Center

• Café/Coffee Bar

• Clubhouse

• Community Room

• Exercise Room/Fitness Center

• Community Kitchen

• Laundry Room

• Media Room/Theater

• Convenience Shop

• Dog Wash Facility

• Elevator (include the number of elevators)

Parking

Include the number of spaces and any fees.

• Surface Lot

• Carport

• Detached Private Garage

• Attached Private Garage

• Attached Structure/Garage

• Electric Vehicle Charging Station(s) (specify

type)

Page 26

Services

• On-Site Management

• 24-Hour On-Site Management

• Organized Activities

• Healthcare

• Housekeeping

• Transportation (specify type)

• Meals

Senior Amenities

• Emergency Call System (specify type)

• Beauty/Barber Shop

• Activity Director

• Library

Upgraded Finishes

• Stainless Steel Appliances

• Premium Countertops (specify type)

• Premium Cabinetry (specify type)

• Premium Fixtures (specify type)

• High/vaulted Ceilings

Page 27

Attachment 3. Scattered-Site Criteria.

For scattered site, single family projects, the Authority has added site considerations that must be met in

addition to those above. The market study should clearly state whether the subject meets these requirements.

They are:

A. No less than 20% of total units must be located on a single block (defined as both sides of a street;

i.e., the north and south sides of May Street between First and Second Avenues);

B. Blocks must be adjoining, as shown in the diagram below;

C. There cannot be more than four existing housing units between proposed units all of which must

be of good quality (good-quality units are either new, or display a minimum need for rehabilitation

of major structural systems such as roofing, porches, or windows);

D. There cannot be any blighted structures (defined as one that exhibits objectively determinable

signs of deterioration sufficient to constitute a threat to human health, safety, and public welfare)

between any two proposed units regardless of the distance between them.

Page 28

Attachment 4. Unduplicated Demand for Authority Market Studies

Unduplicated demand estimates segment the market for a project into separate AMI bands. This is a

basic approach, done so that comparisons between competing proposals can be judged more

completely, and that any double- (or triple-, or quadruple-) counting between AMI bands is removed from

the analysis.

The steps used to do this are simple. First, the analyst determines the amount of overlap present

between AMI levels (usually, this exists between the upper limit of one income band and the lower limit of

the next-affluent band). Second, the analyst divides that overlap in half. Finally, the analyst allocates each

half to the AMI bands in question. The graphics below will hopefully illustrate how this is done:

Take a hypothetical proposal, with the following income targeting, rents, and household income

distribution:

The overall income band for LIHTC units in this case stretches from $10,320 to $21,000. As you can see,

the example displays a great deal of overlap; in fact, those households that earn between

$13,320 and $14,770 qualify for all of the units at once. These income bands are graphically displayed

below:

If demand by AMI band is computed and added together, the resulting figure will overestimate the total

LIHTC demand by a large factor due to the large amount of overlap. To rid the analysis of this effect, the

first step is to compute the amount of overlap between the bands—in effect, taking the upper limit of the

lower income band, and subtracting from it the lower limit of the next-lowest band. This is shown below:

Page 29

In this example, $14,770 - $11,220 = $3,550, and so on. The next step involves allocating 50% of this

overlap to both income bands. The calculations are in the table below:

So, the overlap between the 35% and 40% bands is $3,350. One half of that is $1,775. Taking that

amount from the old 35% upper limit leaves $12,995. This is the new upper limit for the 35% units. The

new lower limit for the 40% units is set at one dollar more than this, or $12,996. This is done for all of the

overlaps in the example. A chart showing the new income limits is below:

Using these new limits will give you the following demand estimates, using the usual statewide movership

rates for Michigan:

These estimates result in the following demand calculation:

Page 30

Number of Qualifying Households in Each Band

We are assuming for the purposes of this analysis that household growth did not occur in this market, and

the demand is made entirely of current households.

Speaking of assumptions, these numbers represent the unduplicated demand for the project based on a

number of them, namely the accuracy of HUD’s income limits, the current household count, the current

household income distribution, movership differences between tenure types, and the homogeneity of

households throughout the income bands themselves in terms of desired monthly rent payments.

Keeping these things in mind, here are a few guidelines concerning how to use these estimates to

determine market depth for a project:

• First, the concept of excess demand is important, since it will likely exist in most studies. In our

example, an excess demand of 74 units exists for 35% units, 50 at the 40% level, 45 at the

45% AMI level and 126 at 50% AMI. Obviously, this example shows a project that has plenty

of theoretical market to cover its units. In other situations, individual income bands can show a

capture rate closer to 100%. In these cases, some of the excess at the next-lower income

band can carry over, since households can qualify at more than one income level. Carrying a

lower band’s excess demand through more than one adjacent band presents more risk.

• Second, it is possible to use these statistics to guide recommendations about income

targeting. If demand indicators (capture, penetration and saturation rates) are strong in some

levels, more room in the market might exist. If indicators are tight, then a reduction in units is

probably warranted.

• The more conservative approach to assigning income limits in a demand analysis is to add

more of the overlap to lower bands, rather than enlarging the top bands to lower their capture

rates. The Authority’s experience with lease-up has shown that in most projects it is the

60%- and 80%-AMI units that tend to stay on the market longer, so showing large amounts of

theoretical demand for them can be misleading in terms of absorption and, as a result,

financial underwriting.