7.5.13.1 Net Demand Analysis

A. The market study must include an estimate of future demand for the specified forecast period, typically 36 months. The estimate of demand must be based on a calculation of incremental demand (i.e. demand for additional new units) and must address the following factors:

1. Renter household growth during the forecast period.

2. Recent trends in tenure broken down by homeownership and rental that may increase/decrease the demand for rental units (e.g., households shifting from renter to owner tenure.)

3. Replacement of existing rental units lost from the inventory due to demolition, conversion, shifting of owner units into the rental market, and by other means.

4. The effect of any current excess vacant supply, based on an estimate of the balanced market vacancy rate, which is typically assumed at five percent.

5. Reconciliation of the number of units in the proposed project with the demand estimate for the PMA, taking into consideration current housing market conditions, available vacancy, and forecast additions to the supply (planned and under construction).

6. The impact of demand on occupancy levels. Analysts must comment on the potential impact of the net demand conclusion on future occupancy levels in the market by the end of the forecast period, especially if net demand indicates supply and demand are concluded to be out of balance.