June 28, 2019
By Melissa Baer
At Connect Apartments in Los Angeles recently, experts in affordable housing sat down with moderator Debra Carlton, senior vice president, public affairs at the California Apartment Association, for a candid conversation on todays issues, trends, and what keeps them up at night.
With financing being one of the biggest challenges among developers, the panel kicked off with a discussion of the strategies being used to build affordable housing.
According to Aaron Wooler, managing director at Hunt Real Estate Capital, California’s requirements of demand on developers in populated cities is only going to become more stringent. He explained that Hunt Real Estate Capital addresses financing for creative developments through various structuring of deals, many which include tax exemptions.
“Regarding finances, as a developer, we take a two-prong approach to cut costs,” Liane Takano, director, Southern California operations at Related California Affordable said. “One way is to take advantage of construction technologies that lead to efficiencies, and the other way is to look to build via different avenues by monitoring different populations—millennials being an example. This enables us to create efficient, smaller units.”
Building on the topic, Carlton brought up the Governor of California’s budget this year, which provided half a billion dollars in financing for affordable housing, and then approved another $4 billion in bonds. Carlton asked the panelists, “Is this going to be enough?”
Nicholas Dunlap, senior vice president, property management at Avanath Capital answered the question by explaining there are different ways to address financial issues. “Using a voucher system and taking advantage of public/private partnerships with developers makes sense, and allows us to provide practical measures.”
When asked what messages should be sent to lawmakers about the challenges that are faced when trying to complete a development, Takano said, “It’s one thing to have financing, but it’s another to actually be approved to do the projects. We need the development process streamlined and the red tape cut down.”
Working with the city and state can be challenging, Dunlap said. “The economy will suffer if there is no housing for our workers.” With that, Dunlap explained there are soft funding programs within the city and state that can be utilized. “We’re working on a nine-year project that will be viable due to this soft funding because it really filled in the gaps.”
Staying on the topic of legislature, Prop 2.0 came up as a polarizing issue. “Our market rate side is paying attention to Prop 2.0, but at the same time it’s not as uncomfortable because of our structure,” Takano said, referring to a California statewide rent control measure targeted for 2020 that has been predicted to drive rental units from the market, decrease apartment values, and possibly diminish annual tax revenues by tens of millions of dollars or more.
Dunlap said this [Prop 2.0] is unfortunate because the legislature will actually force people who might not have increased rents to raise them 10.5% just because they can. “They [the legislature] seem to have taken a backwards approach to these challenges.”
Regarding inclusionary housing that requires developers to build affordable housing and sell it below market rate, there seems to be partnerships on the rise between market rates and not-for-profits providing affordable housing.
“We bring nonprofits together to secure the real estate tax exemption on our affordable properties,” Wooler said. “However, a lot of these developers aren’t aware of this program and how it works in California.”
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Tags: Apartments & Multifamily