The analyst defines the problem the market study addresses, specifically:

• The project's initial lease-up period and date of estimated sustained occupancy (95% occupied at underwritten rents and expenses) in the target market.
• The effect of the new project on the existing market.

The problem definition states sufficient potential demand exists for the development as proposed. Potential demand is the pool of households that are income qualified (household income does not exceed applicable program limits) and can afford proposed rents (no more than 35% of household income for family developments and 40% for elderly, including utility allowances).

Properties targeting special populations such as frail elderly should segregate portions of the data to reasonably include only those households. Clearly document all assumptions.

The target market area (TMA) is defined as the area in which similar properties compete with the subject property for tenants. The analyst will describe and justify the basis for defining the boundaries of the TMA. Use of geographic boundaries such as roads, rivers, and residential districts are encouraged. Identify all methods used to determine TMA, including: interviews with city officials, property managers or other real estate professionals, driving tour, school district boundaries etc. Radial boundaries are discouraged and should be used only when better information is not available. Secondary market areas may be delineated as a subset of the entire market, though the study must include the basis for considering the secondary market.

The study must include a map that clearly identifies the boundaries of the TMA.

The study must include a detailed description of the development site, improvements, amenities, unit types, and unit amenities. The description is based upon the analyst's physical review of the development site. The analyst may include supplemental information provided by the developer.

Site analysis considers issues such as: views, accessibility, visibility from transportation routes, topography, contiguous uses, and nuisances. Site analysis should consider population preference issues (e.g., senior vs. family).

Location analysis considers issues such as: linkages and proximity to services (public and private transportation, neighborhood issues, fire/police protection, schools, shopping, employment, recreation, medical services, and applicable special-needs services), general comparability to nearby rental stock, and other related miscellaneous issues. Include a map and/or chart identifying relative locations or such factors.

Building description: Includes number of buildings, stories, units, building construction type, number and type of parking spaces, and amenities or services included in rent. The analyst should also identify cost per unit, total cost for acquisition and construction, number of units per acre, and present site zoning and any applicable restrictions. This information may be provided by the developer to validate that the development proposal is in agreement with the market study.

Development amenities: Include common areas, parking, garages, storage, laundry, elevator, green space, and recreational areas or equipment.

Unit amenities: Include appliances, floor coverings, air conditioning, window treatments, cable television, and owner-paid utilities.

The development's unit mix is presented in table format with the following headings:

• Units
• Unit Type
• % of CMI
• Net Rent
• Utility Allowance
• Gross Rent
• Maximum Rent per Income Group
• Square Footage

Include a table with rehabilitation developments indicating current rents and occupancy information, and provide an expected retention factor.

The purpose of this section is to identify the number of potential households within the TMA that should be considered as renters for the proposed development. Assumptions made outside of the issues identified below should be logical and defensible. For example, if households currently residing in single family housing are considered as potential renters (for senior developments only), the study should provide relevant data defending such a position.

The demographic summary should identify the following:

• Population. Total population by age cohorts broken down in ranges of five years or less. These figures should be provided as of the last census information, present estimates, and projected figures 5 years in the future.
• Households. The total number of households by age.
• Income. Household income by age of householder broken into income cohorts of no more than $5,000. Households with income over $50,000 can be grouped into a single cohort.
• Tenure. Tenure by persons in unit (households with six or more persons can be grouped into a single category.)
• Ratio of renters to owners. By household and unit type.

The analyst indicates the source of demographic data - most recent census, current, and five years into the future.

Other considerations include seniors moving near children's residences, distances people are likely to move in either rural or urban markets, and other cultural or demographic preferences.

Note: This section is not required for elderly developments. The market study shall provide an overview of the TMA's economic base. At a minimum, the study must provide the following:

Number of persons employed in the TMA. Present a trend of at least 10 years in lieu of the unemployment rate as of the last census.

Projected future employment. The analyst should interview employers in small markets, or employers in areas expecting significant employment expansion.

List of major area employers. Include industry type, number of employees, distance from subject, and expectations for employment changes in the next year. Major employers need not be in the TMA if those employers draw from the TMA.

Average wage rate ranges.

The market study should analyze supply, both current and potential, of competing developments within the TMA. This should include the following:

Existing and planned multifamily comparable developments. The study must show the development's units in chart format with the following headings, and include the subject in the chart:

• Project Name
• # of Units
• Unit Type
• % of CMI
• Net Rent
• Utility Allowance
• Gross Rent
• Square Footage
• Rent per Sq. Foot
• Age
• Utilities Included
• Amenities Offered
• Parking
• Subsidies/Vouchers
• Vacancy Rate

The study should identify concessions offered and current waiting lists, along with the management agent name and phone number, and development photographs. WHEDA establishes no minimum or maximum number of rental comparables. Rather, the analyst should use proper judgement to present a number appropriate to demonstrate a representative sample of the TMA.

Land zoned multifamily. The analyst must discuss the amount of land currently zoned for multifamily housing, including potential numbers of units within assumed time periods.

Impact of other housing options on development. In some markets, one-to-four unit dwellings may compete with multifamily developments. The analyst must estimate whether other housing options will significantly impact the project.

Community perceptions of the development. The analyst shall contact key community leaders who have insight regarding the proposed affordable housing development. These individuals include the mayor or municipal president, city manager, and community development or housing agency leader.

Competitive advantage. The analyst should identify the most comparable properties with the subject in the following chart:

	Property #1	Property #2	Property #3	Subject	Competitive Advantage
Unit Mix 1 bdrm 2 bdrm	16 40	51 18	28 38	33 31	Subject
Rental Rates 1 bdrm 2 bdrm	$625 $685	$390 $525	$565-665 $650-820	$215-485 $370-720	Property #2
Square Feet 1 bdrm 2 bdrm	750 1050	600 800	670 875	675 900	Property #1
Amenities	A/C Library Attached Garage	A/C	A/C	A/C Elevator	Property #1

Rental comparables must be plotted on a map of the area, with addresses, to facilitate site review by WHEDA staff.

• Impact on similar developments. The analyst must discuss the project's estimated impact on other section 42 properties and those properties funded with tax-exempt bonds.
• Impact on other affordable housing properties (Section 8, 515, 236, public housing, etc.). The analyst must estimate the number of Section 8 tenants expected at the project.
• Impact on market rate housing.

The analyst shall examine whether the proposed property will significantly reduce the tenancy of such established properties, and provide contributing factors for this reduction.

Based on information presented in earlier sections of the study, the analyst must calculate and discuss the following rates. For each calculation, identify the page in the report on which the source values are found.

Penetration rate. The (number of units in the subject) divided by (number of age and income qualified households in the TMA).

Saturation rate. The (number of units in the subject + comparable pipeline units + existing comparable units) divided by (number of age and income qualified households in the TMA).

Absorption rate. The number of months the project would take to reach sustaining occupancy (95% occupied at underwritten rents and expenses). The analyst should explain:

• estimate of new household growth,
• observed trends in absorption/turnover of comparable units,
• use of subsidies and concessions.

The absorption period will start as soon as the first units are released for occupancy.

The analyst should make calculations for each unit type, as well as the entire development. When calculating the above figures, assume no more than two persons per bedroom and two persons per household for elderly developments. Only households above age 65 should be considered for senior developments. The analyst must provide a statement on the viability of the development based on the demand analysis factors defined above.

Demand Analysis Example:

Assumptions:

Elderly Project, 12 units (all one-bedroom, 60% CMI), 200 households of 1.5 persons earning at most 60% of CMI and paying no more than 40% of their income for rent, 25 households added via growth into TMA, 12 households added via movership into TMA, 6 pipeline comparable units, 12 existing comparable units.

Calculations:

Penetration rate: 12 divided by 200 = 6%

Saturation rate: (12 + 6 + 12) divided by 200 = 15%

Absorption rate: Determined by history and observed factors to be 1.5 units per month: 12 divided by 1.5 = 8 months

The analyst must provide a Certification stating:

• There is no Identify of Interest with the sponsor of the study.
• The results, recommendations and conclusions stated in the study are based solely on professional opinion and best efforts.

Market Considerations for Residential Care Apartment Complexes (RCAC's)

The market study for an RCAC considers the special market targeted. The following information shall be discussed in the study relating to this type of development's special issues:

Market area selection

• How far will any elderly person move?
• Consider geographic, ethnic, religious, societal/cultural markers to determine area

Demographic information

• of the selected market area based on the typical profile of a resident (typical profile of RCAC resident is 83 yr. old female widow)
• No. of elderly (male & female) over 85 yrs. old
• No. of elderly (male & female) over 75 yrs. old
• Household incomes of both age groups
• Household assets of both age groups (if available)
• No. of persons/household (becomes closer to 1 with higher age)
• % of elderly requiring supportive services (increases with age

Turnover rate of RCAC's

• Can be up to 50% annually.
• Average stay in an RCAC is 26 months, but may be longer (48 months) if some form of public funding involved.

Absorption rate

See definition in preceding section.

Ties to community influencers

• CMO (Care Maintenance Organizations in Family Care pilot counties)
• County Human Resource (issuers of Medicaid Waivers)
• Hospitals
• Nursing Homes

Factors determining where to move

• reputation
• cost
• location

Competition

Examine not only other RCACs, but CBRF's (location, availability, costs, amenities, services available, reputation), and availability/use of Home health care in the area. Section 42 elderly may be a competitor, especially if Home health care is readily available.

Estimate current use of Medicaid Waivers for RCAC residents and how the proposed Family Care might affect the market.