A Revisit of Capture Rates A Practical Exploration and Demonstration of the Various Capture Methodologies Being Used Across the Industry Rob Vogt, VWB Research, Columbus, OH Julia Lavigne, Ribbon Demographics & Housing Analysis, New Castle, CO Mary Pitts, Novogradac & Co., Washington, DC Mary-Ellen Shay, ME Shay & Co., Sacramento, CA Bob Rogers, John Wall and Associates, Anderson, SC with contributions from Scott Allen, GAR Appraisal, Amherst, NY

CAPTURE RATE – The percentage of age, size, and income qualified renter households in the Primary Market Area that the subject property must capture to achieve a stabilized level of occupancy. CAPTURE CAPTURERATE RATECALCULATION CALCULATIONEXAMPLE: EXAMPLE: •• 50 50PROPOSED PROPOSEDSUBJECT SUBJECTUNITS UNITS •• WILL WILLSERVE SERVEHOUSEHOLDS HOUSEHOLDSWITH WITHINCOMES INCOMESBETWEEN BETWEEN$10,000 $10,000AND AND $25,000 $25,000 50 50(SUBJECT (SUBJECTUNITS) UNITS) /1,000 /1,000(DIVIDED (DIVIDEDBY BYELIGIBLE ELIGIBLEHOUSEHOLDS) HOUSEHOLDS) ==5.0% 5.0%(EQUALS (EQUALSCAPTURE CAPTURERATE) RATE) The The50 50subject subjectunits unitsmust mustcapture capture55ofofevery every100 100eligible eligiblehouseholds. households.

Interpreting Capture Rates 5% Capture Rate (need to get 1 in every 20 eligible households)

33% Capture Rate (need to get 1 in every 3 eligible households)

Income-qualified households

The Capture Rate Spectrum N. N.&&S.S.CAROLINA CAROLINAAND AND GEORGIA GEORGIA(30%) (30%) TEXAS TEXAS(URBAN=20%) (URBAN=20%)

CALIFORNIA CALIFORNIA (30%-50%) (30%-50%)

ARIZONA ARIZONA(10%-20%) (10%-20%) OHIO OHIO(7%-10%) (7%-10%) ILLINOIS ILLINOIS(5%-7%) (5%-7%)

TEXAS TEXAS(RURAL (RURAL100%) 100%)

PENNSYLVANIA PENNSYLVANIA(4%-6%) (4%-6%)

Understanding the methodology utilized in study and the acceptable thresholds for that methodology allows reviewer to better evaluate the capture rate of the subject project.

How Project Components Impact Capture Rates Diverse mix of bedroom types enables projects to attract large base of prospective tenants. Offering lower rents will lower the minimum income requirement & increase the window of affordability. Replacing some LIHTC units at project with market-rate units lowers LIHTC capture and enables project to serve a broader market. Offering specific set asides on some units for special needs or having a subsidy can expand the potential support base.

14%

Capture Rate

12%

Rural Markets

Danger Zone

10% 8% 6%

Urban Markets

Best Opportunity

4% 2% 0% 0%

10%

20%

30%

Penetration Rate

40%

50%

CASE STUDY UNIT TYPE

UNITS

% of AMHI

NET RENT

GROSS RENT

2BR/2 BTH

4

30%

$318

$360

2BR/2 BTH

4

40%

$398

$440

2BR/2 BTH

23

50%

$498

$540

2BR/2 BTH

14

60%

$568

$610

3BR/2 BTH

3

30%

$362

$410

3BR/2 BTH

3

40%

$422

$470

3BR/2 BTH

12

50%

$532

$580

3BR/2 BTH

6

60%

$602

$650

2BR/ 2 BTH

1

MGR UNIT

-

-

Date of opening: 2nd QTR.2011

AREA DEMOGRAPHICS 85,266 pop.(2008) 8.3% population growth ’08-’13 35,466 hslds. (2008) 53.8%/46.2% owner/renter share Median household income $60,445 (2008)

Area Competition Three existing family Tax Credits Opened 2004, 2007, 2008 Two stabilized, one in lease-up All three offer 2- and 3-bedroom units One also has one-bedroom units

NY-Demand by Bedroom Type Two-Bedroom

Three-Bedroom

Total Number of HH in the Market - 2008 (All HH)

35,486

35,486

% of Renters

46.20%

46.20%

% of Owners

53.80%

53.80%

Number of Renters based on HH size/Unit type(1)

11,185

5,209

Less Senior HH aged 62+: See narrative for details

-1795

-307

= 9,390

= 4,902

$360/$610

$410/$650

$9000-$24,400

$10,250-$26,000

$0-$24,400

$0-$26,000

Renter Mobility Contribution

Net Renter HH Estimated Rents for Target Market Gross Rent(2) Income Qual. Range: (3)-Specific Range based on rents Income Range to account for elimination:

NY-Demand by Bedroom Type Two-Bedroom

Three-Bedroom

Total Income Qualified HH (From 2008 HISTA)(4)

1,027

1,099

Elimination of Existing/Planned Competitors

-100

-91

Net Demand

927

1,008

80.74%

71.10%

100%

100%

Net Demand

748

717

Total Demand By Unit Type

748

717

45

24

Capture for unit type

6.01%

3.35%

Ratio of total project (unit type compared to total)

65.22%

34.78%

Income qualified based on the specific band above Mobility Factor

Number of Units

Weighted Average Market Capture(pro-rated by type)

5.09%

North Carolina Overall Demand PERCENT OF MEDIAN HOUSEHOLD INCOME DEMAND COMPONENT NEW RENTER HOUSEHOLDS (INCOME-APPROPRIATE) + EXISTING HOUSEHOLDS (RENT OVERBURDENED) + EXISTING HOUSEHOLDS (SUBSTANDARD HOUSING) + EXISTING HOUSEHOLDS (ELDERLY HOMEOWNERS) = TOTAL DEMAND

30% AMHI 1,766–1,674 = 92

40% AMHI 2,886-2,740 = 146

50% AMHI 60% AMHI TOTAL 4,486-4,217 6,054-5,634 7,828-7,316 = 269 = 420 = 512 + 1,766X61.2% 2,886X50.4% 4,486X26.2% 6,054X18.9% 7,828X30.7% =1,081 = 1,455 = 1,175 = 1,144 = 2,403 + 1,766X7.6% 2,886X7.6% 4,486X7.6% 6,054X7.6% 7,828X7.6% = 134 = 219 = 341 = 460 = 595 + N/A

N/A

NEW DEMAND

N/A

N/A

2,024

3,510

68

128

= 1,307

1,820

SUPPLY (DIRECTLY COMPARABLE UNITS SINCE ‘08) =

N/A 1,785 -

0

0

60 =

1,307

1,820

1,725

1,956

3,382

PROPOSED UNITS

7

7

35

20

69

CAPTURE RATE

0.5%

0.4%

2.0%

1.0%

2.0%

NC Demand by Bedroom Type Based on the distribution of households by household size, our hypothetical survey of conventional apartments and the distribution of bedroom types in balanced markets, the estimated shares of demand by bedroom type for the Site PMA are distributed as follows: ESTIMATED DEMAND BY BEDROOM BEDROOM TYPE

PERCENT

ONE-BEDROOM

36.0%

TWO-BEDROOM

42.0%

THREE-BEDROOM

18.0%

FOUR+-BEDROOM

4.0%

TOTAL

100.0%

NC Demand by Bedroom Type Applying the demand by bedroom type shares to the incomequalified households yields demand and capture rates of the proposed units by bedroom type as follows:

BEDROOM SIZE (SHARE OF DEMAND

TOTAL DEMAND* SUPPLY**

NET DEMAND PROPPOSED BY SUBJECT CAPTURE RATE BEDROOM UNITS BY BEDROOM TYPE TYPE

TWO-BR:30% AMHI(42.0%)

549

0

549

1

0.7%

TWO-BR:40% AMHI(42.0%)

764

0

764

1

0.5%

TWO-BR:50% AMHI(42.0%)

750

2

748

23

3.1%

TWO-BR:60% AMHI(42.0%)

850

8

842

14

1.7%

THREE-BR:30% AMHI(18.0%)

235

0

235

3

1.3%

THREE-BR:40% AMHI(18.0%)

328

0

328

3

0.9%

THREE-BR:50% AMHI(18.0%)

321

5

316

12

3.8%

THREE-BR:60% AMHI(18.0%)

364

10

354

6

1.7%

*Includes overlap between the targeted income levels at the subject site **Directly comparable units built and/or funded in the project market over the projection period (since ’08)

Illinois Demand The Illinois demand methodology analyzes the number of income-eligible renter households at the time of market entry (2011) for each targeted income band.

Penetration Rate (capture rate) TARGET AMHI LEVEL 30% AMHI

40% AMHI

50% AMHI

60% AMHI

TOTAL

7

7

35

20

69

INCOME-ELIGIBLE RENTERS (2011)

/ 1,766

/ 2,886

/ 4,486

/ 6,054

/ 7,828

PENETRATION RATE

= 0.4%

= 0.2%

= 0.8%

= 0.3%

= 0.9%

PROPOSED UNITS

Illinois Demand The 241 existing non-subsidized Tax Credit units in the Site PMA must also be considered when evaluating the achievable penetration rate for the proposed subject LIHTC units.

Saturation Rate (penetration rate) MARKET SATURATION LIHTC UNITS (PROPOSED AND EXISTING)

310

INCOME-ELIGIBLE RENTERS (2011)

/ 7,828

OVERALL MARKET SATURATION RATE

= 4.0%

Capture Rate Summary California 10.3% North Carolina 2.0% Illinois 0.9% Texas 25.3% Virginia 1.1% Ohio 0.9% New York 5.09% NCAHMA 0.9%/1.8% (by hsld size)