With housing affordability continuing to be an issue in Reno’s hot real estate market, the city of Reno is considering an idea first floated during the recession — turning abandoned properties into affordable housing. More specifically, the Reno City Council is looking into acquiring tax-delinquent properties and rehabilitating them so they can be used as affordable or workforce housing. The program will only apply to properties that are delinquent on property taxes, not foreclosures for which the owner failed to pay the mortgage lender. Homes that might look abandoned but are not tax delinquent will not be part of the proposed program. The city also can’t just scoop up a house if the tax payment is 30 days overdue. Reno can only acquire the property once Washoe County exhausts all efforts to collect payment and the house would otherwise go into auction. The mayor and council members last month tasked the community development department with preparing a draft for the program. The draft ordinance should be ready for council review and possible approval in the next few months, said Cylus Scarbrough, a management analyst for the department. Under the program, the city will not be responsible for paying any delinquent taxes on the property, essentially getting it for free. State law, however, requires the city to rehabilitate the property, though it does not define what standards should be met for the rehabilitation. Property improvements should not be an issue, with the city able to tap into several sources such as community development block grants, Scarbrough said. “Funding is wide open,” he said.
Nevada law already allows the city to acquire properties for a public good such as street or drainage development. In such cases, however, the city typically retains ownership of the property in question. Turning property into affordable housing is different because ownership will be conveyed or transferred to a non-public entity. Under the city’s new plan, acquired homes could potentially be donated to a land trust or even new homeowners or households who satisfy income requirements. In Reno, the qualifying annual income is $62,000 for a family of four or $50,000 for a two-person household, Scarbrough said. For such an arrangement to be legal, the city must pass an ordinance that details how the program works, how it will run and who will operate it. The city is considering whether to run the program itself or delegate it to an agency with expertise in affordable housing matters such as the Reno Housing Authority. The RHA oversees about 150 houses acquired through the Neighborhood Stabilization Program and are being rented out at affordable rates. That program, created through the Obama administration’s American Recovery and Reinvestment Act of 2009, allowed the RHA to acquire houses in high-foreclosure neighborhoods during the recession. The city of Reno has also donated properties to the RHA in the past, which the organization is renting out. “We would be more than happy to work with the city,” said RHA spokesman Brent Boynton. “We’re always looking for any opportunity to increase our stock of affordable housing because it’s a major need for our community.”
Boeing loses order to Airbus in latest fallout from Max grounding
Saudi Arabia’s flyadeal is terminating a prior order for Boeing’s 737 Max jet and switching to European rival Airbus, in the latest blow to the Chicago-based manufacturer as it seeks to return the beleaguered fleet to flight after two fatal crashes. The budget airline, which in December said it would purchase 50 Max jets, will instead purchase 50 Airbus A320neo narrow-body jets, a direct rival to Boeing’s update to the popular 737 airliner. Deliveries for the nearly $6 billion deal will begin in 2021, flyadeal said in a statement, and will eventually lead to Airbus A320 being the exclusive jet for the carrier. A Boeing spokesperson said the firm is focused on “safely returning the 737 Max to service and resuming deliveries.” “We wish the flyadeal team well as it builds out its operations,” they said in an emailed statement. While orders for Boeing’s Max jet have been stagnant since the fleet was grounded earlier this year following the Ethiopian Airlines crash, the company notched a key order from British Airways parent International Consolidated Airlines Group SA in June. Boeing previously cut monthly production rates for the Max airliner as it works with the Federal Aviation Administration and global regulators to obtain approval for a software update that would allow the fleet to begin flying again. The Department of Justice, which was reportedly probing the approval process for the Max, is now said to be investigating the certification for the 787 Dreamliner, according to the Wall Street Journal.
Morgan Stanley downgrades global stocks: Weak growth to trump easier monetary policy
Morgan Stanley downgraded its global stocks on fears that slowing GDP growth around the world will offset central banks support. Chief cross-asset strategist Andrew Sheets told clients in a note that despite Wall Street’s confidence in a more accommodating Federal Reserve, investors haven’t fully appreciated the odds of weaker economic growth in the months to come. “Over recent weeks, you’ve heard us discussing why we think investors should fade the optimism from recent G20,” Sheets wrote in the July 7 note. “Why we think bad data should be feared rather than cheered because it will bring more central bank easing. Why we think the market is too optimistic on 2019 earnings and is underestimating the pressure from inventories, labour costs and trade uncertainty.” “The time has come to put our money where our mouth is,” he said. “The positives of easier policy will be offset by the negatives of weaker growth.” The strategist noted that over the next 12 months, there is now just 1% average upside to Morgan Stanley’s price targets for the S&P 500, MSCI Europe, MSCI EM and Topix Japan. The S&P 500 clinched all-time and closing highs on July 3 on the back of investor hopes that the Fed will ease interest rates at its two-day policy meeting at the end of the month. The Morgan Stanley strategist argued that investors still haven’t learned that when easier policy meets weaker growth, the latter tends to matter more for stock market returns. That, in turn, suggests that stocks could be set for poor returns given global trade worries, softening PMI data and diminished inflation expectations. Putting it all together, Sheets said that second-quarter earnings could prove painful for investors, who remains overly confident in current 2019 projections. “The market is underpricing the risk that companies lower full-year guidance. Just think about how much has changed since 1Q reporting in mid-April,” he wrote. “A US-China trade deal that was widely expected to be resolved led instead to a new round of tariffs. Global PMIs have continued to fall. And Morgan Stanley’s Business Conditions Index, a survey of how our equity analysts feel about their companies, suffered its largest one-month decline ever in June. ” To that end, Morgan Stanley is underweight both equities and credit, equal-weight government bonds and overweight cash. Sheets wrote that the brokerage’s favorite asset class remains emerging market fixed income.