'Workforce housing' and why local businesses want it

Imagine if half of all your employees suddenly couldn't afford to live conveniently near your workplace? Many of them would leave rather than spend two hours of their daily lives in traffic or transit. Of course you'd replace them, but you wouldn't be attracting the same level of talent, then naturally, your customers would gradually realize the same.

Thus local businesses today are advocating for more 'workforce housing' - housing that is attainable to working families earning between 60%-120% of the median income for the area, and typically unsubsidized, as defined by real estate industry representative Urban Land Institute.

The following survey results of local businesses (this one in New Orleans) reflects a growing national concern, a result of a peaking perception that more square footage is better.

- 71% said the lack of workforce housing negatively impacted their business;
- 65% considered the need serious;
- 42% felt developer incentives would increase the supply;
- 33% proposed public-private partnerships as the answer.

Myriad solutions are provided for such a pervasive issue, but the most logical lies with the fact that the average area of living space per occupant in the U.S. was 290 s.f. in 1950 and is 939 s.f. today. So maybe the answer isn't how do we build affordable 1200 s.f. homes, but how do we make 'not so big' cool again.

Image source: The equivalent of workforce housing in Munchen, Germany, by rondelro

Micro-housing affordable to buyers, profitable to developers

There is not a desirable city that exists that doesn't have a lack of attainably-priced housing, and it's been covered pretty extensively. Smaller homes have been one of the most logical answers, and developers are starting to agree to the point investors have termed the smallest end of these offerings...

Microhousing is defined as very small one-two bedroom units, 300 to 500 square feet, with an emphasis on shared amenities like fitness facilities, party rooms with kitchens, libraries, laundry rooms, and car-sharing. While they are more expensive to build per square foot, they also sell at a higher dollar value per square foot, with the key benefit to first-time home buyers being a much lower price point to own rather than rent.

Pictured is downtown San Francisco's Book Concern Building, a five-story microhousing redevelopment of a 1906 historic landmark, with its 60 units starting at 275 square feet. When dealing with building codes that limit numbers of stories and not height, mezzanines often do not count as a story.

"Affordable housing doesn't have to be ugly"

That's 'ugly' in terms of design and craftsmanship, not so much style, which I'm sure many of you may be partial to.

When nonprofit developer Mercy Housing completed its 96-unit SRO (single-room occupancy) building for very low income residents in the Near North neighborhood of Chicago, president Richard Banks reiterated the group's vision that the building would be "a statement that affordable housing doesn't have to be ugly or look like a warehouse."

Essentially, if very low income (subsidized) housing can have this quality of design and craftsmanship (completely separate from style, which is wholly subjective), then market-rate housing for those that don't need government assistance should have no excuses whatsoever of expecting any less.

The Schiff Residences opened in 2007 and not only are they affordable, but proudly display functional as well as beautiful green design features, including
- solar panels and rooftop wind turbine that generate about 15% of the building's power;
- gray water system that filters water from sinks and showers to flush toilets;
- 10,000-gallon storage tank that collects rainwater for use on the landscaping;
- All energy-saving features save 22% on utility costs.

Check out some fun animated diagrams of its green design elements here.

Reader Q&A: Beta communities and economic integration

"Have you explored how beta communities would incorporate affordable housing and/or economic integration aspects, or is that not at all a focus?"

The CoolTown beta community program starts with identifying the most progressive, creative, entrepreneurial, triple bottom line individuals in the neighborhood. That typically means housing that is affordable is extremely important to their well being since their jobs aren't focused on maximizing their income, or are just starting to grow their businesses with intent to achieve that point. There are multiple strategies for developing attainably-priced homes without relying on government subsidies, and that's our focus.

As far as economic integration, that is largely an issue when developing in economically-challenged neighborhoods. In Anacostia, Washington DC, which is still trying to establish an economic base, our beta community program there is intent on not only identifying the emerging leaders that have a strong connection to the local community, but also have a vision of what the next generation of the neighborhood could be - based on the economic success of its existing population and culture rather than gentrifying it with 'outsiders'. For instance, in Anacostia that means a health-oriented African-American-owned green building restaurant vs a Ruby Tuesdays, and that's just what we're doing.

Image: Duke's City restaurant in Washington DC, named after Duke Ellington

Key to attainable housing? Combining multiple elements

Nowadays, one affordable housing strategy isn't enough to make a difference. You need several all at once, and the Urban Land Institute illustrates just that in their article, Housing the Masses. Here are some of the programs that need to be combined:

Inclusionary zoning - This is esssentially an affordable housing requirement as a % of total units, often 15%-20%. San Diego, Tallahassee, Palm Beach, and Key West, Florida, have recently passed such ordinances. L.A. requires 20% of housing in downtown projects to be affordable, and in the Washington DC any government assistance is coupled with an inclusionary housing requirement.

Parking reductions - The costs from parking requirements alone can kill a project before it ever gets started. L.A. reduced the parking requirement for projects within 1000 feet of a transit center to 1.25 spaces per unit from 2.25, and the city of Miami allows developers to provide residential parking off-site.

Inexpensive quality building materials - As JetBlue proves, you can be hight style at low cost, like the concrete and exposed-brick-wall exteriors at Santee Court (pictured) in downtown Los Angeles’s Fashion District, and Chinese granite countertops instead of Italian stone.

Smaller homes - There are several dozen entries on this in the Housing & Lofts section. The bottom line is households are shrinking, and so should homes.

Financing options Trusted developer-construction partnerships create cost efficiencies. Triple-bottom-line-oriented investors will accept lower-than-normal profit margins of 9-10% rather than the normal 15-20%. Low-interest financing via government programs, low-income tax credits, historic tax credits and new market tax credits all significantly lower housing costs.

Land trusts - See previous entry. Nonprofits and cities purchase land reserved for workforce housing.

Image source: crawwler

Land trusts preserving attainable housing as well as wilderness

Land trusts, like the Trust for Public Land, are widely known for purchasing and permanently conserving parks and natural lands. Now a new form of land trust, such as one created by the California Community Foundation in 2003, are preserving land for housing affordability. Partnered with private sector developers that specialize in workforce housing**, building costs are lowered by 30 to 50 percent. In exchange for being able to buy a home below market value, the owner agrees to sell the home for the amount invested plus only a maximum percentage of the property’s appreciation value.

Following this model, the City of Winter Park established a land trust in 2005, buying up land, deeding it to the trust, then negotiating with local contractors to build homes at below-market prices. In this arrangement, the building is owned by the buyer and can be sold or inherited, but the land remains in the trust on a 99-year land lease. In Florida alone, 17 land trusts are operational or incorporating, while 13 are being considered.



Universities, hospitals, and school districts in California and Hawaii are increasingly using the land trust model to build housing for their constituency at 30 to 40 percent below market value, allowing them to more effectively recruit and retain top employees.

**Workforce housing is often referred to as non-government-subsidized affordable housing.

Images: Two proposals by UniDev proposals, a land trust-based developer in Maryland.

'Mortgage Helpers' to the rescue: Condos with built-in rental suites

Does this sound familiar? "I (or we) would love to buy a condo, but they're too expensive where I want to live and I don't want to go the housemate route to help pay the mortgage." Or how about this, "I'd really like to live in this neighborhood for at least a couple of years and would love to rent out a contemporary not-so-big efficiency to be able to afford it, but they simply don't exist."

Well, both those prayers are about to be answered with what is being referred to as Mortgage Helpers, coined by architect/developer Michael Geller, president of Univercity, a university-owned corporation developing a sustainable new community adjacent to the campus in the Vancouver BC region. It's essentially a for-sale condo with a built-in self-contained rental suite that the condo owners can rent out as an entirely separate unit to help pay the mortgage, OR absorb back into the condo as a third bedroom as the need arises or the income allows. A flex condo if you will.

Michael was inspired by the need for more affordable housing for students who might want to live within the community, but this kind of housing attainability applies to anyone interested. Here are some of his key factors for success:

"1. A separate door to the corridor, or the outside;
2. Pre-wiring and possible venting for the small kitchen area, which can be located in a closet;
3. Very nominal parking requirements for the 'secondary suite'. If a normal parking requirement is applied, it won't work. We agreed to 1 space for every 4 units;
4. Some common laundry facilities in the buildings, since these units, unlike most others we build around here, do not have 'in-suite' facilities."

He adds, "This is a clever way of providing a more affordable housing option, and greater housing flexibility". I personally think the plan works best in a three-bedroom apartment, especially one where the bedrooms are on either side of the living room, but this plan seems to work as well. The 240 s.f. units are renting between $600 and $750 in our market area!

See article for more info.

What would you call them? Comment below!

Homes by Ikea?

By 2010, 50% of all new homes will be built by just 10 national homebuilders, up from 36% today, say industry analysts (that's a lot of influence). Why? As reported a few entries ago, most of our investment capital is held in large, corporate entities that only invest in other large corporate entities. Accepting this trend, there are two paths to steering this capital toward the readers of this site seeking urban, affordable, creative, unique, social, pedestrian-oriented places to live/work/hang out in: Invest in a real estate mutual fund model, or replace one of those 10 national homebuilders with companies who think like Ikea...

Yes, Ikea's getting into the homebuilding industry, starting in the UK and Scandinavian countries, with a company called Boklok. It doesn't look like they have much corporate competition as far as their target market and values are concerned:

Their customers:
- "Small households
- Working people with average household earnings of around $25K-$50K per annum
- People who cannot access social housing
- First time buyers
- People who are currently priced out of the owner-occupied market or market rented sector in their chosen location"

Their design principles:
- "Inner courtyards and green space with fruit trees and seating
- Flexible open-plan layout
- High ceilings and large windows, giving the apartments a light, airy and contemporary feel"

The first prototypes are suburban and way too cookie cutter, but clearly have the potential for downtown urban development (the U.S. is one of the only countries that still depends on stick-frame construction), and certainly, it shows that their target market and product offering may be worth investing in on a very large, and yes, corporate scale.

Is your city a burden to creatives?

If it doesn't have walkable urban neighborhoods, it could very well be. Based on a recent study, A Heavy Load: The Combined Housing and Transportation Burdens of Working Families by the Center for Housing Policy, in many ways for creatives, living in an auto-oriented small town is less affordable than subsisting in Manhattan.

The study covered low- to moderate-income (ie including artists, musicians, entrepreneurs just starting out) working families (married with and without children, single parents with children) across 28 major metropolitan areas nationwide. It found that combined transportation and housing costs were extremely constant, averaging 57% of annual income (with a low of 54% in Pittsburgh to a high of 63% in San Francisco.) However, among all household types of every income, those combined costs are only 48%, with just about all of the difference coming from transportation costs (see study table below).

What does this help conclude? Creatives, the key to job growth in your city, will find ways to make housing affordable, attainable (ie smaller units, shared housing). However, in order to support the creatives in your city that are incubating potential fast-growth companies and cultural destinations, if you don't have urban neighborhoods where owning a car is an option rather than a requirement, that's an unnecessary financial burden that lessens the mystery of why so many creatives aspire to move to Manhattan, as profiled just previously.

Saving on housing costs (part 2) - no more 6% fees?

Continuing yesterday's entry... The Last Stand of the 6-Percenters - that's the NY Times story that's got home buyers excited and realtors needing to rethink their business model. The current system awards 3% to the seller's agent, and 3% to the buyer's agent. Louisville is pioneering a better model with its beta community.

"Traditional agents spend very little time brokering a deal. Most of their time is consumed looking for new clients, which is of no benefit to consumers,“ states a Berkeley professor who studies real estate commissions. Referring to the current realtor-controlled system, "It’s a thousand tiny shackles on innovation,” says the chief executive of Redfin, an online realty service that offers 2/3 of the buyer agent's fee (3%) back to the buyer, and replaces seller agents (3%) with a flat fee of $2000 to list in the MLS. In the book, Freakonomics, realtors are even compared to... well, let's just say cults - more here. The Times article further states that realtors don't even make that much given the amount of work and sacrifice (weekends) they put in.

Thus, enter the beta community model: No buyers agents. No listing agents. No fees. You get to participate in the development of your home and the building it's in. The developer provides those savings to you, oftentimes as a 10% pre-sales discount. Marketing costs for developers are instead directed over to establishing the beta community, which also reduces risk and inventory - or as Dell likes to call it, having negative inventory and negative working capital.

Image: This is the phase (design and planning) where resident-driven attainable home buying should begin.