Our Davidson’s Landing workforce housing development in Kansas City was awarded FIRST PLACE in the Multi-family Category of the Excellence in Building Awards at last night’s kick-off of the annual Structural Insulated Panel Association (SIPA) Meeting and Expo in Scottsdale, Arizona.
Davidson’s Landing is the first of a new breed of energy-efficient apartments serving the hard-to-reach middle-income workforce housing market. Because we utilized SIPs, we were able to successfully monetize the energy benefits to make the numbers work for this project.
Many thanks to my development partners (Robert Hughes and Jason Young) and my design partners (John Urban, Michael Lash, Philip Agee, Chris Mathis, Erik Henson, and Chris Bloom) for their help in making this project a success.
Introducing Davidson’s Landing Apartment Homes – our newest workforce housing development located in Kansas City.
After three years of challenges – the COVID pandemic, supply chain disruptions, record inflation, interest rate hikes, capital market dislocations, investor skittishness, etc – we have successfully completed the construction and lease up (ahead of schedule and under budget) of this 115-unit workforce housing development.
I am glad to see that factory-built housing is making inroads into the affordable housing space.
From the piece:
“Though residential high-density construction units remain the most prevalent type of modular building, Vaughan Buckley, CEO at Volumetric Building Companies, a Philadelphia-based modular builder, noted a recent shift away from market-rate multifamily projects to affordable housing developments.
Affordable housing projects jumped from around 10% of VBC’s pipeline to about a 50% share over the past year, according to the company.”
Unfortunately, most affordable and workforce housing developers use “first cost” as a metric for evaluating the feasibility of a project. They focus on construction cost reductions in an effort to close sources/uses gaps for their deals. Lower construction cost normally means less energy efficiency.
My development team discovered that by spending a little more on carefully-selected components, we can increase energy efficiency and attract private capital to close our sources/uses gaps. By focusing on “sources” rather than “uses” of funds, we are able to make our projects pencil out, keeping them affordable AND energy-efficient.
From the piece:
“Local developers say efforts to combat climate change are valuable, but the new rules are costly, threatening their ability to help resolve the region’s housing shortage.”
The backbone of my company’s workforce housing development initiative is energy efficiency. In 2014, we constructed a two-phase project to explore the benefits of building with structural insulated panels as opposed to traditional stick-built framing.
We discovered that by spending as little as $5,000/unit more on carefully-selected components, we could attract up to $30,000/unit of additional capital to finance our projects. With construction costs of $150,000/unit, this $25,000 net benefit goes a long way towards keeping our projects affordable.
What to do with $25,000/unit? We decided to target the hard-to-reach workforce housing market. We engineered a family of 3-story garden apartment buildings and have several workforce housing projects underway at this time.
What we discovered is totally counterintuitive. We actually closed a $25,000/unit funding gap by spending MORE on construction, not less. Unfortunately, most developers, contractors, architects, and engineers have not yet come to understand the economics behind this. But they will one day – I am certain of that.
From the piece:
“The local branch of Habitat for Humanity is constructing Wapiti Commons, a 20-unit development slated for completion next summer. The project boasts units that are not only affordable, they’re also net-zero, meaning the development will produce as much energy with its solar panels as its efficient appliances consume, making utility bills cheaper. This is no custom-built one-off, but part of Habitat’s plan to show that sustainability can be standard, not just a luxury add-on. Habitat sees Wapiti and its sister site, Basalt Vista, as templates of what’s to come.”
A recent study conducted by the Washington Policy Center found that as much as 24 percent of housing price increases may be attributed to the government policy. Indeed, the study found that state and local laws, permitting, building restrictions and regulations add on average $144,000 to the cost to construct a new, median priced home.
Reminds me of the old saying “No society in the history of the world taxed and/or regulated itself into prosperity.”
Affordable housing is often relegated to marginal development sites, frequently with environmental issues, adding to the cost and time associated with development. Indeed, the developer and the future residents of these projects will ultimately pay for remediation, which is no way of incentivizing much-needed development.
From the piece:
“During a Feb. 7 Citizen Advisory Committee South St. Petersburg Community Redevelopment Area (CRA) meeting, City Architect Raul Quintana informed the committee members the soil contamination was discovered through sampling, and they are now working with the DEP (Department of Environmental Protection) on the removal process. Soil contamination is commonly found at industrial sites.
A dry-cleaning business and metalworks building once operated at the location.”
Rising construction & operating costs – along with rising interest rates – were partially offset by significant rent increases for market rate properties in 2022. Many of these deals were salvaged by increased market rents last year.
Not so for affordable multifamily.
Costs and interest rates rose for affordable multifamily, too. But rents – which are tied to household income – increased only modestly in 2022. Because of this, many of these restricted rent deals don’t pencil out.
From the piece:
“The 2023 housing market’s ‘headwinds’ are the same for all homebuilders — high construction costs compounded with high interest rates that have lowered borrowing amounts. But those challenges are especially sharp for affordable housing developers.”
SIPs and modular both have their place in the market. Indeed, at some point modular manufacturers will begin to use R28 SIPs instead of traditional R13 exterior wall construction.
