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Governor Bevin recently announced the Red Tape Reduction Initiative, which will cut through the red tape of excessive and complex regulatory burdens that are a hardship for many business owners and will reduce the amount of government bureaucracy affecting Kentucky businesses, thus making the Commonwealth more employee-friendly.

The governor’s office projects that more than 4,500 business regulations will be evaluated as part of the initiative, and Bevin has directed cabinet secretaries to comb through all the business regulations on the books to weed out outdated or inefficient requirements.

Bevin has also called on state employees, businesses and individuals across the state to assist his administration by identifying what they consider burdensome regulations. A website, www.RedTapeReduction.com, has been created to collect feedback and ideas directly from the public and the state’s business communities.

The initiative has the support of many business organizations throughout the state, including the Kentucky Association of REALTORS (KAR).

KAR wants to encourage members from across the state to provide assistance to this intitiative as burdensome and unnecessary regulations can hinder economic development and decrease home sales across a region. If you have experience dealing with a regulation that proved to be burdensome, share it in the comments below or, better yet, visit the Red Tape Reduction website and report it using the online submission form (red button in the top right corner).

Red Tape Reduction website
Press release about the initiative
Report a Reg feature

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The Changing Global Economy, Debt Capital Market Retrenchment, and Demographic Shifts Lead the New List of The CRE 2016-17 Top Ten Issues Affecting Real Estate

The CRE 2016-17 Top Ten issues Affecting Real Estate

1. The Changing Global Economy

The IMF has revised GDP growth downward for much of the globe in 2016-17, as economic uncertainties continue and intensify. Currency issues, declining exports, and soft energy prices add to volatility (as reflected in the stock markets in early 2016 and Moody’s recent downgrade of Saudi Arabia). Political issues and conflict undermine stability as well

Implications: There is potential for global economic deceleration. Weakened exports could lead to slower/smaller port and infrastructure investment, in particular, and broader softening of investment in real estate and other asset classes. The U.S. remains attractive to global capital and inflows are still strong, although they may be under pressure at their origin (China, Middle East, and Europe). A surge in Chinese buying of both residential and commercial real estate last year took their five-year investment total to more than $110bn, according to a study from the Asia Society and Rosen Consulting Group.

2. Debt Capital Market Retrenchment

Debt markets for commercial real estate are slowing sharply. Regulators are telling bank lenders to curtail CRE lending (that’s 50% of the debt market), and the CMBS markets are slowing down, with no legislative fixes to retention rules that are due to go into effect in the summer of 2016. Many insurance companies that traditionally invest in real estate are approaching their real estate allocation limits.

Implications: The search for permanent CRE debt capital will become more intense and competition for capital will become an issue in 2016 and 2017. The lending environment is likely to become more restrictive. This could present opportunities for some other, less regulated, lenders to enter the market.

3. Demographic Shifts

Millennials (generally considered to be people ages 18-35) have overtaken the Baby Boomers (people of ages 51-69) in sheer numbers, but both groups remain substantial real estate consumers. While the Boomers are retiring at a rate of approximately 10,000 per day, America’s population of persons aged 90-and-older has almost tripled since 1980, and is expected to increase to more than 7.6 million over the next 40 years, according to the U.S. Census Bureau. Older households and younger households are competing for housing in many of the same places. In terms of income, younger (Millennial) households are falling behind with many sons and daughters living at home with parents.

Implications: Multi-family development is still strong, with evolving amenities. There are opportunities in housing options for both groups. In the retail sector, more “experiential” shopping/dining/entertainment destinations will emerge, but buying power is lower due to income stagnation. Although Baby Boomers continue to prefer to age in place, there will be opportunities in services including medical, assisted living and memory care facilities. Look for a rise in renting over home ownership.

4. Densification/Urbanization

Transportation options, walkability, extensive work/live/play options continue to draw people of all ages into the urban core and to close-in “urbanized” areas. The move to higher density areas continues, as job growth and dynamic urban centers attract new residents and businesses.

Implications: There is a growing trend toward the development of high density mixed-use centers such as The Domain in Austin and the West Loop in Chicago that offer luxury living spaces, retail, work and entertainment spaces, parks, and gathering spaces. The emergence of “innovation centers” and “education centers,” which represent dynamic economies and cultural environments continues. There is pressure on suburbs to become more “urban.”

5. The Political Environment

The political environment has become acrimonious at all levels – global, national, state, local – and affects investment decisions (including business and household location decisions) with issues ranging from the perceived ability of governments to function to taxation to social issues. Social media makes it very easy to track the political and economic climate of any locale – and debate any political issue publicly.

Implications: The political and tax environment of every locale is now visible and information is immediate, creating heightened awareness that can influence where people choose to live, where businesses locate or expand and where tourists visit and spend. Locales that demonstrate political stability and investment in infrastructure, transit, schools, etc., may attract residents, visitors and businesses; those communities that project a negative environment will likely lose economic vitality over time.

6. Housing Affordability and Credit Constraints

New issues are beginning to emerge in the housing market, as affordability and credit constraints are challenging both the rental and home ownership markets. Stringent credit requirements prevent many households from entering the home ownership market, increasing demand for rental property. Limited available for-sale inventory and income stagnation are affecting affordability. Multifamily development continues but rents are outstripping incomes in many communities. With declining affordability, questions arise about where newly formed households will live, where the workforce will reside and whether affordable services will be available for aging Baby Boomers.

Implications: There will be continued strong demand for rental housing, but with a likely slowdown in rent growth. Micro apartments are helping to provide affordable alternatives for Millennials. Single family owner markets have room to improve, and builders are beginning to target “starter homes.” Competition for land in some areas is a supply constraint.

7. The Disappearing Middle Class

The wealth and income gap continues, with a number of measures showing stagnant or declining wages and wealth. A recent Pew Research study shows that the median income for middle-class households fell by nearly five percent between 2000 and 2014. Their median wealth (assets minus debt) declined by 28 percent after the housing market crisis and the subsequent recession. Costs have risen dramatically for many large-dollar items that affect middle class families, including college tuition and out-of-pocket costs under employer healthcare plans. Confidence in a comfortable retirement is wobbly, with concerns over rising costs and declining benefits in corporate retirement plans. To cover increasing costs and eroding asset wealth, an increasing percentage of households has moved from one-income to two-incomes. In 1960, 72 percent of two-parent families with children under 18 had a single earner (typically the father). That figure fell to 37 percent by 2010, while the number of two-earner families rose to 60 percent. At the same time, the Millennial generation is falling behind in assets and income (and many young people are coping with student loan debt).

Implications: Middle-market retailers (ie.g., Sears, Macy’s) have weakened and closed some retail outlets. The purchasing power divide drives new opportunities to serve diverse markets (i.e., Wal-Mart and Dollar General at the low end of the spectrum and luxury retailers such as Neiman Marcus and Tiffany at the other end). Stagnant or declining purchasing power affects where people can live as their housing choices diminish. There are opportunities in high-density multi-family and affordable housing. Luxury development continues to do well (malls, office, hotels, retail). But there is less opportunity in the middle. There will be a shift from home ownership to renting over time. A lack of home and business ownership–and such investment in communities–can easily lead to or contribute to growing social unrest.

8. Energy

Whenever a key commodity encounters instability, it can threaten global economic security. Energy markets are currently unstable. This year’s crash in oil prices has threatened the global economy–capital markets have responded–Saudi Arabian debt has been downgraded by Moody’s and, in some markets (such as Houston and North Dakota) lenders are restricting commercial real estate debt.

Implications: There has been a drastic change in U.S. oil production–rig counts in the U.S. are at their lowest level in 50 years. This affects regional employment and economies. Investors are reassessing plans. Alternative energy may become more attractive over time. High energy demand in China could change dynamics, but energy remains a highly volatile market.

9. The Sharing/Virtual Economy

As the effects of the recession only slowly fade, we are seeing the emergence of a “shadow economy” or “sharing economy.” New enterprises spring from economic uncertainties, such as Airbnb, Uber and bicycle sharing companies (e.g., Divvy). These have become alternatives to traditional lodging and transportation offerings – often operating outside of traditional regulations. They offer alternatives for employment as well. Crowdfunding has become an addition to traditional sources of capital for new enterprises and investment, including real estate.

Implications: Efforts to regulate some of these operators have seen mixed results, and the enterprises will likely continue to change the economic landscape while challenging the viability of some of their more traditional counterparts. New competitors and shifting demand will likely push weaker players out of the market (consider the falling prices of taxi medallions). Shared office spaces are rapidly becoming more widespread; “virtual” offices offer office amenities (receptionists, mailboxes, short term desk space) to small businesses. As is often the case in periods of dynamic change, many will become more widely accepted elements in the general economy.

10. The Rise of “Experiential” Retail

Traditional retail is reacting to change by adapting, with major retailers shuttering stores and downsizing their footprints, moving more to online options. As retailers retrench and rethink their retail models, large online retailers thrive. Amazon has replaced Wal-Mart as the biggest retailer in terms of dollars. This creates not only challenges but also opportunities.

Implications: “Destination” retail development is emerging. Malls are being reimagined as “experiential”– providing service options, “showroom” spaces (e.g., Tesla) while many actual purchases are being made online. Malls are redefining the concept of ‘anchor’ stores, with high-end food courts replacing department stores. “Mixed-use experiences”—such as a hotel/restaurant/sports (bowling) combination in addition to traditional stores—are growing. Watch for new retail ideas to attract consumers, including offering more local and regional shops and fewer large chains, in an effort to create more unique shopping experiences.As we begin to see signs that we have reached the peak of one of the hottest retail investment markets in history, many owners are re-evaluating their portfolios to decide which properties they want to keep versus which to sell. Core properties located within major MSAs and/or high demographic areas have always been desirable, however, over the course of the real estate cycle, investors have moved to secondary or tertiary markets in search of significantly better yields, choosing credit tenancy over location.

On the Watch List:

The Counselors of Real Estate organization noted that close runners-up in development of The CRE Top Ten Issues Affecting Real Estate 2016-17 list included 21st Century Manufacturing & Industrial, Infrastructure, and “Unknown Unknowns” (such as terrorism and trade agreements) which are factors that could affect commercial and residential markets.

The External Affairs Committee welcomes feedback on these issues as well as identification of issues you think are critical to real estate and/or of interest to Counselors and the broader industry. Contact us at info@cre.org.

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Using a drone to capture listing photos and videos or inspect properties is about to become significantly easier now that the federal government has finalized its long-awaited regulations over the commercial use of unmanned aerial systems.

The final rule issued Tuesday by the Federal Aviation Administration paves the way for people who obtain a remote pilot certificate to operate drones that weigh less than 55 pounds, as long as the aircraft remains within visual line-of-sight. Earning the certificate will involve passing a test of aeronautical knowledge at an FAA-approved testing center — but it will not require applicants to have formal flight training.

The FAA has, until now, required people wishing to operate drones commercially to obtain a so-called Section 333 waiver, and the agency has limited those waivers to people with a pilot’s license. That constraint has stood in the way of real estate professionals and others wishing to use drones in their businesses, despite the growing availability and decreasing cost of lightweight, remote-controlled aircraft equipped with cameras.

The new FAA regulations, which take effect in August, follow requests from industry groups, including the National Association of REALTORS®, for regulators to develop a framework that would allow people without specialized training to use drones for purposes other than a hobby. NAR sent multiple letters to the FAA during the rulemaking process and testified before Congress in support of the use of drones in the real estate industry.

“We’ve worked hard to strike a responsible balance that protects the safety and privacy of individuals, while also ensuring real estate professionals can put drones to good use,” NAR President Tom Salomone said in a statement. “That effort just took another big step forward. The rules will help more real estate professionals take flight, making the efficiency and innovation that drones have to offer available to a much broader base of operators.”

Although the new regulations eliminate the requirement that drone operators hold a pilot’s license, they contain a host of restrictions intended to protect people on the ground. Beyond requiring the operator or another visual observer to be able to see their drone while it is in operation, the regulations prohibit flying inside buildings or flying over people who are not connected with the flight. In addition, drone flights will be permitted only during daylight or twilight hours, drones must not fly faster than 100 miles per hour, and operators must be at least 16 years old.

The regulations will permit drone operators to obtain waivers from the FAA for some of the restrictions if they are able to demonstrate that their proposed flight will still be able to operate safely.

Meanwhile, NAR is calling for the FAA to develop less-restrictive rules for drones under four pounds. NAR also believes the FAA should come up with guidelines that would permit drone flights to go beyond visual line-of-sight, which is particularly important for aerial photography of large buildings or expansive tracts of land.

“We’re entering a new stage of drone use in real estate, and no doubt there will be additional questions and challenges ahead,” Salomone said. “NAR will continue educating its members on issues important to the safe, responsible use of drones so they can grow their business and better serve their clients.”

—By Sam Silverstein, REALTOR® Magazine

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FRANKFORT, Ky. (June 16, 2016) — Kentucky’s seasonally adjusted preliminary unemployment rate for May 2016 dropped to 5.1 percent from a revised 5.4 percent in April 2016, according to the Office of Employment and Training (OET), an agency of the Kentucky Education and Workforce Development Cabinet.

The preliminary May 2016 jobless rate was 0.2 percentage points lower than the 5.3 percent rate recorded for the state in May 2015.

The U.S. seasonally adjusted jobless rate for May 2016 was 4.7 percent, according to the U.S. Department of Labor.

Labor force statistics, including the unemployment rate, are based on estimates from the Current Population Survey of households. It is designed to measure trends rather than to count the actual number of people working. It includes jobs in agriculture and those classified as self-employed.

In May 2016, Kentucky’s civilian labor force was 1,980,221, a decrease of 2,448 individuals compared to the previous month. Employment was up by 2,603, and the number of unemployed decreased by 5,051.

In a separate federal survey of business establishments that excludes jobs in agriculture and people who are self-employed, Kentucky’s seasonally adjusted nonfarm employment increased by 600 jobs in May 2016 from the month before and rose by 23,100 positions since May 2015.

“Job creation in May was weak, with little change in nonfarm employment. The U.S. economy had a similar story: a drop in unemployment rate and low job growth,” said economist Manoj Shanker of the OET. “We are pretty close to full employment, and hiring has slowed down considerably as businesses evaluate market demand.”

Nonfarm data is provided by the Bureau of Labor Statistics’ Current Employment Statistics program. According to this survey, five of Kentucky’s 11 major nonfarm North American Industry Classification System (NAICS) job sectors registered gains in employment, while six declined from the previous month.

The leisure and hospitality sector posted a robust gain of 1,900 jobs in May 2016 from a month ago. Since May last year, the sector has added 3,600 jobs. This sector includes arts, entertainment, recreation, accommodation, and food services.

“Employment in hotels and restaurants ratcheted up sharply in May in response to the steadily improving employment situation,” said Shanker.
Kentucky’s manufacturing sector gained 1,000 jobs in May 2016 compared to the previous month. Since May 2015, employment in manufacturing has increased by 2,800. Durable goods account for two-thirds of the manufacturing sector and grew by 3 percent from a year ago with the addition of 4,600 jobs, whereas non-durable goods lost 1,800 jobs over the year.

“Manufacturing employment, especially the durable goods sector, has been improving steadily since 2010. It was one of the first sectors to recover after the Great Recession, and continues to grow,” said Shanker.

The financial activities sector expanded by 600 jobs in May 2016 from a month ago. The sector has added 3,000 jobs since last May.

Kentucky’s trade, transportation, and utilities sector grew by 200 jobs in May 2016 from a month ago. This is the largest sector in Kentucky with nearly 400,000 jobs accounting for one-fifth of all nonfarm employment. Since May 2015, this sector has expanded substantially with a gain of 11,300 jobs. Retail trade lost 2,200 jobs over the previous month, but expanded by 7,100 jobs over the year while transportation and warehousing gained 2,400 jobs from a month ago and 4,400 positions over the year.

Employment in the other services sector, which includes repairs and maintenance, personal care services, and religious organizations, rose by 200 positions in May 2016 from a month ago. This sector has decreased by 1,200 jobs from a year ago.

The government sector, which includes public education, public administration agencies and state-owned hospitals, declined by 100 jobs in May 2016 and by 3,800 positions compared to last May.

The construction sector fell by 100 jobs in May 2016 from a month ago. Since May 2015, construction jobs have been down by 700 positions.

The educational and health services sector dropped by 200 positions in May 2016, but there was a robust gain of 8,500 jobs from a year ago.

Employment in the mining and logging sector decreased by 300 jobs in May 2016 from a month ago. The industry has declined by 2,800 positions from a year ago.

The information sector lost 600 jobs in May 2016. This segment has declined by 1,300 positions from a year ago. The industries in this sector include traditional publishing as well as software publishing; motion pictures and broadcasting; and telecommunications.

The state’s professional and business services fell by 2,000 positions in May 2016 from a month ago. Year-over-year, there was a gain of 3,700 jobs. This category includes establishments engaged in services that support the day-to-day activities of other organizations, including temporary employment services and payroll processing.

Civilian labor force statistics include nonmilitary workers and unemployed Kentuckians who are actively seeking work. They do not include unemployed Kentuckians who have not looked for employment within the past four weeks.

Kentucky’s statewide unemployment rate and employment levels are seasonally adjusted. Employment statistics undergo sharp fluctuations due to seasonal events, such as weather changes, harvests, holidays and school openings and closings. Seasonal adjustments eliminate these influences and make it easier to observe statistical trends. However, because of the small sample size, county unemployment rates are not seasonally adjusted.

Learn more about the Office of Employment and Training at http://www.kylmi.ky.gov/.

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FRANKFORT, Ky. (April 21, 2016) – Unemployment rates rose in 65 Kentucky counties between March 2015 and March 2016, fell in 37 counties, and remained the same in 18, according to the Kentucky Office of Employment and Training, an agency of the Kentucky Education and Workforce Development Cabinet.

Woodford County recorded the lowest jobless rate in the Commonwealth at 3.6 percent. It was followed by Oldham County, 4 percent; Fayette County, 4.1 percent; Shelby County, 4.2 percent; Scott County, 4.3 percent; Spencer County 4.4 percent; Anderson, Boone and Campbell counties, 4.5 percent each; and Franklin, Jessamine and Madison counties, 4.6 percent each.

Magoffin County recorded the state’s highest unemployment rate at 20.1 percent. It was followed by Leslie County, 13.9 percent; Harlan County, 13.3 percent; Letcher County, 12.7 percent; Floyd and Wolfe counties, 12.6 percent each; Knott County, 12.3 percent; Pike County, 12.1 percent; Owsley County, 12 percent; and Martin County, 11.7 percent.

In contrast to the monthly national and state data, unemployment statistics for counties are not seasonally adjusted. The comparable, unadjusted state unemployment rate for the state was 5.8 percent for March 2016, and 5.1 percent for the nation.

Unemployment statistics are based on estimates and are compiled to measure trends rather than actually to count people working. Civilian labor force statistics include non-military workers and unemployed Kentuckians who are actively seeking work. They do not include unemployed Kentuckians who have not looked for employment within the past four weeks. The statistics in this news release are not seasonally adjusted because of the small sample size for each county. The data should only be compared to the same month in previous years.

Learn more about Kentucky labor market information at www.kylmi.ky.gov.

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