The crisis has been decades in the making, but now, it appears, developers are doing something about the lack of affordable housing around the United States.
The disparity between wages and the prices of shelter has been an “emerging trend” for the past three years, said the Urban Land Institute in its 2021 Emerging Trends Report.
“Despite broad recognition of housing affordability, especially for lower- and moderate-income households, as a serious matter that the real estate industry must address, the problem manages to get ever worse,” the report noted.
A record-breaking number of families cannot afford decent housing, reports the National Low Income Housing Coalition (NLIHC), with 6.8 million more affordable units needed for extremely low-income families. Seven in 10 of all extremely low-income families pay more than half of their incomes on rent.
The problem is not just limited to large, expensive cities, the NLIHC adds. The organization reports that here is no state or county in the U.S. where a renter working full-time at minimum wage can afford a two-bedroom apartment.
COVID-19 exacerbated the situation. After a decline in 2020 during the worst of the pandemic, rent prices spiked 17.8% nationally over 2021, reports apartmentlist.com in its January 2022 National Rent Report. Young professionals began moving out, increasing demand.
“In fact, the national median rent ($1,309) is now $119 greater than where we project it would have been if rent growth since the start of the pandemic had been in line with the average growth rates we saw in 2018 and 2019,” the report noted. December 2021 did bring some relief, the report notes, but the market remains tight.
New York City topped the list with a 32.8% year-over-year increase in the median price of an apartment. Interestingly, however, smaller but fast-growing cities (all in warm climates) were right behind, including Tampa (up 32.6%); St. Petersburg, Florida and Scottsdale, Arizona (both up 31%), Irvine, California (30.6%); Orlando (30.3%); Mesa, Arizona (29.6%); Phoenix (29.0%); North Las Vegas (28.8%) and Glendale, Arizona (28.5%).
The problem is not just limited to those with low incomes. Others are being priced out of housing; rents overall are rising largely because young homebuyers are either priced out of growing markets or because they can’t amass the down payment to qualify for a mortgage close to where they work, the ULI report continued. Instead, they rent, driving up rates even in secondary and tertiary markets where many people fled in search of affordability and/or more space during the COVID-19 pandemic.
The result is a bad situation made even worse for those in need. In 2019, only 62 affordable units were available for every 100 very low-income, renter households, the report said. Only 40 affordable units were available for every 100 extremely low-income, renter households, said the U.S. Department of Housing and Urban Development in its July 2021 Worst Case Housing Needs Report to the U.S. Congress.
“Very low-income renters — households with incomes at or below 50% of area median income — who do not receive government housing assistance and who pay more than one-half of their incomes toward rent, live in severely inadequate conditions, or both,” the report said.
More affordable housing is the key. And seeing opportunity, private investors and landlords around the U.S. are creating programs and projects to begin to meet the challenge.
Choice Lease
Lowering rents and making home ownership affordable are the goals behind Choice Lease, a $1 billion program from Blackstone’s Home Partners of America. In an effort to address the affordable housing crisis and mortgage access, challenges are often faced by low-to-moderate-income families and historically under-represented communities. A private sector program not reliant on any government subsidies, Choice Lease offers qualified applicants below market rents and paths to homeownership that were unavailable before.
Choice Lease builds upon Home Partners’ existing platform — which allows families to identify a home, then Choice Purchases purchases it so it can lease it to the family with long-term, fixed rate rental and purchase options — by expanding it to low-to-moderate-income residents. The program is intended for households with income of less than 80% of area median income (AMI) and affords them the same flexibility and benefits as its original Lease Purchase program while offering rental rates that are approximately 10% below prevailing market rates.
Choice Lease also will offer residents the right to purchase the home in the future at a price that would be expected to be below market value, as the annual purchase option price increases are significantly lower than market home price appreciation. Home Partners intends to deploy at least $1 billion to acquire homes for eligible individuals and families over the next two years.
“We are grateful that our partners at Blackstone have provided the support needed to implement this initiative, which addresses disparities in homeownership among historically under-represented communities as well as low- and moderate-income consumers,” said Bill Young, co-founder and CEO of Home Partners of America. “We have a unique opportunity to drive change that will help these groups access quality homes while providing a clear and transparent path to homeownership.”
475 Bay St. Staten Island, New York
New York and many other cities require new housing developments to reserve a portion as affordable housing. BFC Partners’ $151 million 475 Bay St. in Staten Island will be 100% affordable, the Brooklyn, New York-based developer announced at its January closing.
A 250,173 square-foot development will be the first development site in the newly rezoned stretch of Bay Street to break ground and will bring 269 residential units with one super’s unit and 9,000 square feet of pedestrian-friendly retail to the neighborhood.
“The closing at 475 Bay St. is an exciting milestone in the revitalization of Staten Island’s North Shore. As the first project to break ground on this newly rezoned piece of Bay Street, this development will pave the way for necessary development in the neighborhood,” said Joseph Ferrara, principal of BFC Partners. “BFC Partners is committed to the borough, and this latest project demonstrates our continued investment in the North Shore of Staten Island.”
The developer will set aside 131 units for tenants whose household income is at or below 80% of AMI, which is $85,920 for a family of three, and 138 units will be set aside for tenants whose household income is at or below 30% of AMI for formerly homeless seniors, which is $25,080 for an older adult living alone.
The New York State Housing Finance Agency (HFA) is issuing a first mortgage loan of $99,865,000, funded from a series of tax-exempt Affordable Housing Revenue Bonds. 475 Bay St. will also receive an annual subsidy for frail and older adult residents from the New York State Empire State Supportive Housing Initiative. Subsidized supportive services will be provided by Selfhelp Community Services Inc.
The building’s amenities include a rooftop recreation area, indoor fitness area, children’s play space, a multifunctional lounge and views of the NYC skyline, harbor and Verrazano Bridge. 475 Bay St. will also have an older adult screening room and an older adult outdoor recreation deck, with older adult services also provided by Selfhelp.
“For decades, Selfhelp has been providing older adults and other vulnerable New Yorkers with affordable housing and services to age with independence and dignity in the neighborhoods they call home. We look forward to bringing SHASAM, Selfhelp Active Services for Aging Model, to 475 Bay St. to provide low-income older adults with the on-site services they need to remain healthy at home,” said Stuart Kaplan, CEO of Selfhelp Community Services.
Working on behalf of Harmony Housing, a national non-profit specializing in affordable and workforce housing, Greystone Affordable Development and Urban Trends Real Estate Inc. are developing Eastway Crossings, an affordable Low-Income Housing Tax Credit (LIHTC) community located in East Charlotte, North Carolina.
Greystone Affordable Development’s first new construction project in the Charlotte market and the first collaboration between Urban Trends and Harmony Housing, Eastway Crossings will serve senior residents, aged 55 years and older, with household incomes at or below 60% AMI. Forty of the units will be reserved for veterans through a Veterans Affairs Supportive Housing (VASH) project-based voucher contract. The common areas are strategically designed to include space for services: conference room, private one-on-one meeting room, exercise room and areas which can be used for health and wellness activities. Additionally, on-site staff will coordinate activities with local service providers as well as shuttle services for residents.
“The overall programming for the building was drafted based on feedback and engagement with our local partners. Greystone and Urban Trends were intentional about initiating those conversations at the onset,” said Kenya Pleasant, director of development, Greystone Affordable Development.
To fund the $28.9 million development of Eastway Crossings, the partnership was awarded 4% Housing Credits from the North Carolina Housing Finance Agency, purchased by Key Community Development Corporation (KCDC) which generated $12 million in capital contributions. Other critical funding sources included $2 million from the City of Charlotte Housing Trust Fund (HTF), $1.5 million from Mecklenburg County and $13.4 million in Fannie Mae MBS as Tax-Exempt Bond collateral (M.TEB).
“It’s been a pleasure partnering with Greystone on this vitally important affordable housing project,” said Chris Ogunrinde, president and CEO, Urban Trends Real Estate Inc. “We know that the work we do is only a drop in the bucket in addressing the nation’s affordable housing crisis, but it will make a big impact here in East Charlotte.”
Construction is underway on Stony Oaks Apartments, a four-story medium-high-density community that will provide 142 units of affordable housing to Santa Rosa, California. As the design-build contractor, R.D. Olson Construction is managing a single contract with the owner, Meta Housing. The project will be completed in April 2023.
Stony Oaks Apartments will include 56 one-bedroom, 48 two-bedroom and 38 three-bedroom apartments reserved for families and individuals earning between 30% to 60% of AMI. Resident amenity spaces will include a large multi-purpose community room, a fitness center, a media center, laundry and on-site management offices. Surface parking will include 185 stalls with 47 secured bicycle stalls.
“Santa Rosa hasn’t been able to fully rebuild since the city lost nearly 3,000 homes in the Tubbs Fire of 2017, so an affordable multifamily community that can house more than 400 residents will be a welcome addition to the city,” said Bill Wilhelm, president of R.D. Olson Construction.
An outdoor oak grove canopy will serve as a focal point and complement programmed amenities, including two outdoor play areas for toddlers and older children, amphitheater seating, courtyards, barbecues, quiet workspaces and outdoor fitness opportunities.
“Future residents of Stony Oaks Apartments will have a quality, affordable place to call home with comfortable amenities, natural surroundings and convenient access to downtown,” said Aaron Mandel, executive vice president for Meta Housing.
R.D. Olson Construction is partnering with architect Dahlin Group, B.K.F. Engineers, REYFF Electrical, HVAC Talent Air and Ampam Parks Mechanical on the project.
Smith-Beretania Apartments, Honolulu
To preserve affordable housing in Hawaii, Community Preservation Partners (CPP) has acquired the Smith-Beretania Apartments in Honolulu, a 22-floor high-rise affordable housing complex that houses 164 one- and two-bedroom units, all of which receive a subsidy under a Section-8 housing assistance payment (HAP) contract. CPP partnered with local lenders, BlackSand Capital, a Hawaii real estate private equity firm, and Bank of Hawaii to finance the property acquisition, in addition to working with Hawaii affordable housing specialist Ahe Group.
Under CPP ownership, future renovations to the Smith-Beretania Apartments will be financed through the low-income housing tax credit program, which will preserve its affordable housing designation for future decades.
“At CPP, we believe that working with local community partners is essential in bringing about affordable housing projects that make the residents and community proud,” said Anand Kannan, president at CPP. “By working closely with BlackSand Capital, Bank of Hawaii and Ahe Group, we were able to execute the deal efficiently and preserve affordable housing for more than 300 residents in a high-cost market. We are looking forward to providing a modern renovation, enhancing social services and building a sense of community for the residents that will last for years to come.”
There is an urgent need for preserving Hawaii’s affordable housing inventory, especially given the median asking rent on Oahu has risen to $2,100, up from $1,700 within the last year, with Honolulu specifically seeing a 3.9% rise in rent, CPP said. Many families spend more than 30% of their household incomes on housing, and with the increasing cost of food and energy, some 10% to 14% of Oahu households are late on rent each month, according to U.S. census surveys as reported by the University of Hawaii Economic Research Organization.
CPP will work with Hawaii-based business partners to invest nearly $10 million to rehabilitate the complex, with renovations to include exterior paint, unit turns, energy efficiency improvements, accessibility upgrades and site amenity updates. In addition to the 164 units of affordable housing, the half-acre lot offers a community room, onsite management, laundry facilities, controlled access entry and dedicated parking in the adjacent parking structure. Additionally, the site provides access to a public park with a playground, basketball court, pet park and open green space.
