4 min read
In an era in which skyrocketing housing prices and limited supply have become the norm, the real estate market has become an unsettling landscape for many. Developers are aware of the need for affordable housing, yet many struggle to connect this need to tangible outcomes that are both affordable for tenants and profitable for themselves. Land, labor, and construction costs, zoning challenges, and NIMBYism (Not In My Backyard mentalities) delay the process, forcing developers to seek creative workarounds.
While many challenges are outside developers’ control, exploring alternative solutions to reduce costs and generate community support can help make affordable housing a reality.
A lack of land in desirable areas can steer developers away from the notion of building affordable housing. One way to combat land challenges is to consider repurposing existing properties into affordable housing.
Developers refer to this process as “adaptive reuse.” Rather than demolishing vacant structures, developers give them a new life, even if their new use case differs from their original purpose. By using the “bones” of a structure, developers can rehab the property instead of building from scratch, helping to save on construction costs, land purchases, and other expenses. This may also shorten project timelines since much of the structure is already available.
One additional benefit of adaptive reuse is the preservation of historic structures. A city’s architectural heritage can be woven into the modern landscape, adding character and a sense of identity to the neighborhood.
(Read the story of how Walker & Dunlop structured a $40.4M capital solution for one hotel-to-multifamily conversion.)
Green leases (also called sustainable leases) are specialized leases to promote sustainability and energy efficiency in buildings. These leases go beyond traditional lease terms and include provisions for landlords and tenants to adopt environmentally responsible practices.
These leases incentivize landlords and tenants to adopt sustainable behaviors, which may help developers procure grants and funding to reduce their financial investments. For example, developers may commit to reducing energy consumption by installing energy-efficient appliances, improving insulation, and using renewable energy sources where possible. This helps decrease greenhouse gas emissions while reducing utility costs for residents, making affordable housing even more affordable.
For developers facing resistance and NIMBYism from citizens and governments, ensuring thoughtful design of affordable housing projects can help to draw more support.
One way to do this is to prioritize communal spaces over individual units. For example, shared fitness centers, rooftop lounges, and outdoor areas provide residents with high-end amenities at a fraction of the cost. This allows for a more affordable price point while still delivering on the promise of comfortable living.
Another strategy is to partner with local businesses and service providers. By teaming up with local spas, gourmet restaurants, and upscale retail stores, developers can offer exclusive discounts or perks to residents. One example is Chicago’s Harvest Commons, which transformed the Union Park Hotel into affordable housing. A nearby micro farm supplies fresh fruits and vegetables for the complex’s cafe. By forging these partnerships, developers can provide added value without inflating prices.
Ultimately, it comes down to understanding what today's tenants actually want. Developers must consider how they can enhance the everyday lives of their residents through thoughtfully designed spaces and curated experiences. At the same time, they must consider how those designed spaces will be perceived by community neighbors.
(Read more about how Walker & Dunlop is working to preserve and improve affordable communities in our most recent ASI Impact report.)
Technology has revolutionized the way people live and interact with their homes. Innovations such as keyless door locks, remote temperature control, and virtual doorman systems enhance convenience, security, and efficiency for residents and owners.
Touchless features mitigate the spread of germs, from adjusting temperatures to turning lights on and off. Smart elevator systems allow residents to call elevators directly to their floor without stopping at other levels. This saves time while reducing congestion during peak hours.
Tech-forward affordable housing helps to attract and retain tenants, leading to a more profitable project for the owner or sponsor. Like affordable luxury, these features can also help developers get around negative mindsets or pushback from communities to allow new buildings to move forward.
While affordability is crucial for low-income individuals and families, developers and owners recognize the importance of going beyond simply supplying shelter. The growing trend of community-focused amenities in affordable housing reflects a shift toward prioritizing the well-being and social connectivity of residents. Developers and owners recognize the importance of creating spaces and implementing programs that foster a sense of belonging among residents.
Amenities like community gardens, playgrounds, fitness centers, and common rooms promote a greater sense of well-being while bringing residents together. These help to combat social isolation and promote inclusivity among residents.
By incorporating shared spaces such as community gardens, playgrounds, common rooms, and fitness centers into their projects, developers and owners can cultivate an environment that promotes interaction and improves the overall quality of life for residents.
The need for affordable housing continues to grow, and interest in rising to the challenge should grow alongside it. Embracing these trends and innovations can lead to successful affordable multifamily housing projects that are both profitable and necessary.
Walker & Dunlop is a leader in change. From finding properties and funding your vision to supporting deals with data-driven appraisals, our team remains ready and willing to help with affordable housing solutions.
Ready to be part of the innovative solution to the affordable housing crisis? With our expertise in commercial real estate, community starts here, with us and with our clients. Explore our affordable housing solutions today.