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Beyond Bricks and Mortar: Developers’ Role in Building Thriving Affordable Communities

Beyond Bricks and Mortar: Developers’ Role in Building Thriving Affordable Communities

Largely due to the subprime mortgage crisis in 2008, the typical American renter is no longer a college student or young professional. For the first time in America’s history, the average renter is now 40 years old.


The flood of working-class, middle-aged renters has led to historically low vacancy rates and rental costs that significantly outpace the rate of inflation. While new properties are being built, they’re largely marketed to high-income renters, often perceived by housing developers as low-risk, high-reward tenants.


Unfortunately, the scarcity of affordable housing has forced economically conscious tenants to compete against one another for fewer and fewer affordable properties, leading to substantially greater rent inflation at the low end of the spectrum.


How Developers Can Help Communities Thrive


Affordable housing is in high demand, and with the low income housing tax credit (LIHTC), developers and property managers can help address that need. Available pro rata over a 10-year period, the federal LIHTC program subsidizes up to 70 percent of the low-income unit costs in a project via a 9 percent or 4 percent tax credit.


And, contrary to popular belief, working-class housing can be quite low-risk. LIHTC properties have a vacancy rate of just 4.2 percent, compared to the overall rental market’s 10.6 percent. Since the program’s inception in 1986, foreclosures have occurred in less than 1 percent of LIHTC properties, beating all other classes of real estate.


It takes more than bricks and mortar, however, to create a housing community that will meet the needs of working-class individuals. Property developers wishing to build desirable, affordable communities must consider the challenges that residents may face.


1. Cater to community needs. Before drawing up building plans, reach out to social service organizations in the community. They’ll know what type of low-income housing is in the highest demand and what type of resident you can expect to move in. Consider which of these groups need affordable housing in your area:


  • Young families: Young working people — such as police officers, firefighters, bank tellers, and service workers — comprise every community. But down payments for houses are often far out of reach for younger buyers, and many market rents take up to 50 percent of incomes. Housing for these individuals should be near schools and parks and include play facilities for children.


  • Seniors: Because many seniors live on limited incomes, LIHTC properties offer safe, affordable housing options. A great way to appeal to seniors is to construct properties with shared spaces where seniors can host social events and exercise classes. Community gardens are also popular among seniors because they can provide a connection to nature, physical activity, and a supply of fresh, healthy food.

  • People with special needs: High rents have made many properties unavailable to adults with developmental or intellectual disabilities, and government programs that provide housing subsidies to this population — such as the Section 8 Housing Choice Voucher Program — are woefully underfunded. Housing for these residents should be near care providers, and property managers should partner with service providers and inclusive workplaces that are equipped to meet residents’ needs.


  • Veterans: Many veterans return home from serving our country only to find themselves homeless due to a lack of affordable housing. The number of homeless veterans has been reduced by more than 25,000 over the past five years, but about 50,000 veterans are still struggling to find affordable housing. Housing targeted toward veterans might be located near Department of Veterans Affairs facilities and community colleges.


2. Make space for common areas. Common areas are particularly important in working-class developments. Use innovative design to create attractive complexes with exercise rooms, on-site laundry, and open areas for communal events such as potlucks.

Community rooms can also be used to host “wrap-around” services such as tutoring classes, health and wellness events, and career development days. Invite social service agencies from the community to regularly host programs as an integral part of the development.


3. Consider tenants’ lifestyles. To maximize the benefits to residents and to make the property more marketable, consider what features will make the development desirable to economical tenants.


The Seattle Housing Authority, for instance, built its properties along bus routes, while Cape May Housing Authority outfitted its units with new energy-efficient appliances. In Decatur, Georgia, the housing authority employs a family and youth services adviser and a resident services supervisor to accommodate and support residents’ lifestyles.


4. Partner with a nonprofit housing organization. Resident turnover adds costs and creates headaches for residents and property managers. 

Studies show that social services are a strong guard against excessive turnover, so consider partnering with a nonprofit housing foundation to ensure residents will receive adequate social support and will want to stay. In my experience, about 1 in 5 LIHTC applications is successful, but partnering with a social service nonprofit tends to make applications more competitive to the state housing agency that allocates these credits.


By working with an organization that offers on-site social services — such as healthcare and wellness services for seniors, educational opportunities for children, and local employment assistance for veterans — property developers and managers can expect a 6 percent decrease in annual resident turnover.


The onus is not just on property developers and managers to create thriving communities, but they certainly have a role to play. By considering the daily challenges working-class people face, developers can build attractive, affordable, and successful communities that benefit everyone.


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