Co-Living Not Just for Students Anymore

With the growing popularity of shared workspaces (think We-Work) it probably shouldn’t surprise anyone that shared living spaces are beginning to catch on. Of course, the student housing sector has been using this model for years, but in the market rate apartment world it hasn’t been seen until very recently. One issue is that local ordinances often prevent them, but as the affordable housing issue becomes more prevalent in virtually every city and town across the country, both housing providers and municipal leaders are looking for creative solutions and co-living looks like a good option. The Wall Street Journal recently ran an article that had some interesting data about this new housing approach:

This product, which is less than 10 years old and found primarily in large U.S. cities, represents only a tiny niche in the multibillion-dollar apartment industry. But developers are now preparing to build some of the largest new co-living properties in North America, a sign that the appeal of this type of housing could be broadening…

San Francisco-based co-living startup Starcity last week agreed to purchase a development site in downtown San Jose where it plans to build a 750-unit co-living building…

Rents at the company’s properties range from about $1,600 to $3,100 a month—not cheap but less than the average studio apartment rents in the Bay Area. Half of the rents at the new San Francisco property will be even further below market, affordable to people making as little as $35,000 a year, under new state legislation that streamlines the permitting process for projects with an affordable component.

“To tackle our affordability crisis we need both private sector solutions and public sector solutions,” said San Jose Mayor Sam Liccardo, referring to his city’s new co-living project.

 

Affordable Housing’s Headwinds

You can add financing to the litany of challenges being faced by affordable housing developers. From the Wall Street Journal:

Rising interest rates are undermining efforts to build more affordable housing, creating larger funding gaps for an industry already grappling with cuts in government subsidies and rising construction costs.

This year’s climb in borrowing costs—coupled with expectations that they will keep rising—has driven down the amount of debt used to fund affordable housing deals, said Michael Novogradac, managing partner of Novogradac & Co., an accounting firm that specializes in affordable housing…

The permanent debt rate—a measure of the long-term debt projects pay to lenders—was 4.18% for a Bridge project completed in the Mission District of San Francisco in 2016. This year, a proposed development less than a mile away, with the same developer and a similar amount of debt, closed at a rate of 5.06%. The fed-funds rate rose about 1% in the interim…

Affordable housing, which constitutes about a quarter of all new apartment construction in the U.S., is already facing a number of difficulties, including a decline in government subsidies and rising construction costs.

Wynnefield Looking to Add Affordable Units in High Point

Wynnefield Properties has applied for a rezoning in High Point with plans to construct a 96-unit affordable community off of Wendover Ave. From the Triad Business Journal:

The High Point Enterprise reports that High Point-based Wynnefield wants the city to rezone and annex 8.7 acres on the north side of Wendover Avenue, near Tarrant Road, for 96 apartments that it is classifying as affordable housing, meaning rents are below market rates and available to those earning less than 60 percent of the area’s median income.

Avondale Trace, as it would be named, would join Wynnefield’s other local developments, including the $10.2 million, 84-unit Kirwood Crossing, and the Addington Ridge and Admiral Pointe projects off Samet Drive. The Enterprise reports that it has another project, Hartley Ridge, under construction off Hartley Drive. 

Wynnefield, led by President Craig Stone, intends to finance the project through N.C. Housing Finance Agency tax credits and acity loan, as it has with the other developments. 

Fannie Mae Offers Incentives Tied to Well Being of Tenants

Fannie Mae is offering incentives for borrowers that are tied to providing services that improve the health and well being of residents. From an article in Multifamily Executive:

The incentive, in the form of a lower borrowing rate, is called Enhanced Resident Services and aims to foster services that address the needs of renters and support health and wellness programs, day care, food access, youth and education programming, and job training, according to Fannie Mae. The new offering became available to borrowers on Jan. 15.

“We believe the strength of an affordable rental housing property is directly linked to the health and stability of the people and families who live there,” said Bob Simpson, vice president of affordable and green financing at Fannie Mae, in a statement. “Affordable borrowers have recognized the value of providing enhanced resident services at their properties for years but have been constrained by the inability to ensure a long-term source of financial support. By participating in our Healthy Housing Rewards program, borrowers will save between $15,000 and $75,000 per year. The amounts saved can be used to offset resident-services costs at [the borrowers’] property for the life of the loan, thus ensuring that the low-income residents who live there have access to health care, education, and other community services.”

Fannie will implement Enhanced Resident Services with the assistance of Stewards for Affordable Housing for the Future (SAHF), a nonprofit, multistate group of affordable housing providers that offers initial and ongoing compliance certifications for both the borrower and the multifamily affordable housing property providing the special services. To qualify, at least 60% of the units in the properties seeking the pricing incentive must serve residents earning 60% or less of the area median income.

 

Partnership Purchases, Will Renovate Affordable Housing Property in Kernersville

The Triad Business Journal is reporting that Village East LP, a new partnership that purchased an 88-unit affordable housing community in Kernersville, is planning to spend $5 million on renovations and is also constructing a community building. The project is expected to be complete by spring, 2018. From the Journal’s article:

Village East Apartments, an 88-unit, affordable housing community in Kernersville, has been sold for $2.85 million in a transaction that will lead to as much as $5 million in renovations, according to Bob Houghton, vice-president of Weaver Investment Co. of Greensboro.

KMW Builders of Greensboro is handling the renovations, which Houghton estimated who total between $4.5 million and $5 million. In addition to exterior and interior renovations, KMW will construction a community building…

Houghton said seller Kernersville Housing LP and buyer Village East LP have some of the same members…

Houghton said the new ownership group has gained approval from the N.C. Housing Finance Agency to sell tax credits to investors.

A Conversation About Affordability With the Smartest Guy in Housing: Episode 6 of Not a Complex Podcast

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This episode of Not a Complex podcast features an interview with Ken Szymanski, the executive director of the Greater Charlotte Apartment Association, and who until last year served the same role simultaneously for the Apartment Association of North Carolina. We were lucky to get an interview with him because he’s forgotten more about housing than anyone else actually knows. He shares his viewpoint on the current state of housing in the U.S., in particular the issue of affordability.

Another highlight of this episode is the return of PTAA’s very own Carrie Langley and Rachel Garavito to talk about upcoming events at PTAA.

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Show Notes:

PTAA Upcoming Events Page

Greater Charlotte Apartment Association

Apartment Association of North Carolina

Thoughts On Affordable Housing From Industry Forecast Breakfast

On January 26 the Greater Charlotte Apartment Association hosted its annual multifamily industry forecast breakfast. During the panel discussion the topic of affordable housing came up and here are a couple of takeaways captured by a reporter for the Charlotte Business Journal:

  • Inclusionary zoning measures don’t result in an abundance of affordable housing. Although there’s a clear housing-affordability problem in Charlotte — the average monthly rental rate is above $1,000 — putting in extra zoning or land-use regulations doesn’t result in more affordable housing. In fact, Olsen said, it often leads to fewer overall affordable units than if fewer regulations were in place. “Construction is very important to maintaining affordability,” Olsen said. “The places that build market-rate stuff faster, their naturally affordable (apartment communities are) younger and larger. That’s an important point when we think about policy — it’s hard to communicate to people that it’s actually good that we’re building higher-end apartments. It will eventually help all segments; it just takes a little bit of time.” She added that instead of inclusionary zoning, housing vouchers are a better option to address affordability.
  • Charlotte is seeing less naturally occurring affordable housing than other U.S. markets. Naturally occurring affordable housing is in older, outdated communities (a one- or two-star property, out of five) with non-subsidized, market-rate units that, because of newer development (four- or five-star properties) in the market, automatically have lower rents, according to Amon. Charlotte’s apartment inventory has only 14% naturally occurring affordable housing, while nearly half are four- or five-star properties, which represent the highest echelon of rent and amenities. Many older properties across the city have been torn down to make way for new — and often high-end — apartment development, which eats away at naturally occurring affordable housing. It’s creating a “drastic dichotomy” between older properties that are more affordable and luxury apartments. “As we keep building high-end properties, the difference between high-end and naturally occurring is just going to increase,” Amon said.
  • Why are we not building affordable housing? Porter focused his presentation on common questions the industry is asking. As Olsen and Amon addressed in their presentations, affordability continues to be a problem not just in Charlotte but nationally. He echoed Olsen’s comments that less building and more restriction will ultimately result in fewer affordable units. “If we want to produce housing at 60% (Area Median Income) or less, we’re going to need to subsidize,” Porter said. “A more restrictive environment for housing production always makes housing less affordable. When we want more roads and asphalt, we have to deal with stormwater and trees — all the things we talk about making livability better in the city costs more.” He called on those in the industry to help city leaders in coming up with ways to make housing more affordable and to consider opportunities in terms of rehabbing properties, value-add deals and development that can be done on existing zoned land.

Bank of NC Investing $5 Million to Build Affordable Housing in High Point

Bank of North Carolina is investing $5 million in an effort to build affordable housing in High Point. From a story in Triad Business Journal:

Seeking to have a direct impact on the city that’s home to its headquarters, Bank of North Carolina will build affordable housing in struggling High Point neighborhoods and sell the new homes using a new mortgage product crafted for a population of potential homeowners now being underserved…

The bank’s effort will be in partnership with the city of High Point, which has had a downpayment assistance program in place for several years, and also has an inventory of vacant lots and reclaimed properties in lower-income neighborhoods that could provide land for the housing effort…

What Bank of North Carolina is proposing is to begin building three-bedroom, two-bathroom houses priced in the $70,000 to $80,000 range…

The idea would be to sell the homes at cost or near cost, with the new homeowners using a mortgage product Bank of North Carolina rolled out several months ago focused on those potential homeowners that lenders typically don’t target.

FHA Initiative Intended to Boost Development of Affordable Housing

From Housing Wire (via NAA Industry Insider):

The Federal Housing Administration announced a new plan to reduce multifamily insurance rates in order to encourage capital financing of affordable and energy-efficient apartments…

The rate reductions will take effect on April 1, 2016, and will directly impact FHA’s Multifamily Housing Programs and properties housing low- and moderate-income families and/or developments installing energy-efficient systems or building within federal energy guidelines.

As a result, the FHA said it expects the multifamily insurance rate reductions to cause the rehabilitation of an additional 12,000 units of affordable housing per year nationally…

The FHA also announced that it is reducing upfront premiums to support its affordable housing and energy efficiency goals. Upfront insurance rates will be set at 25 basis points for Broadly Affordable and Energy-Efficient properties and 35 basis points for Mixed-Income properties. 

Report on “Overincome” Families in Public Housing

A nationwide audit by HUD’s Office of the Inspector General revealed that 25,000 overincome families are living in public housing and Fox 8 took a look at it from a local angle:

Local entities with overincome residents in the report included: Greensboro (17 families listed overincome), High Point (6), North Wilkesboro (12), Winston-Salem (3), Madison (3), Mt. Airy (3), Asheboro (2), Troy (2), Mt. Gilead (1), East Spencer (1), New Randleman (1), and Burlington (1).

Many were barely over the income threshold. Those on the higher end included a Greensboro family making $73,097, a High Point family making $66,744, a Madison family making $70,923 a year, and a Wilkesboro family making $65,286 a year.

That summary reflects the OIG data in 2015 and may not represent current situations in individual housing authorities…

Referring to the highest examples on the Greensboro list, Akers Brown explained, “That report would have been a point in time. Because our families are so transient, that is not the case today. So you could have somebody overincome today and they’re not overincome tomorrow because they lost their job or one of their children lost their job, a variety of different reasons. So we do not have anybody that has that income level today.”

As of Wednesday, GHA now has eight overincome families in their portfolio, she said, and six of them have been over the threshold for less than a year.

“Some are overincome by as little as $34. So there’s a wide range of overincome families that are served. When you’re talking about eight families total, that’s not a lot a lot of families when you look at the number we serve.”

Akers Brown emphasized GHA serves more than 12,000 people in the greater Greensboro area.

You can read the full report from HUD’s OIG here.