CREJ

Page 36 — Multifamily Properties Quarterly — February 2021 www.crej.com Affordable Housing A s developers we have an important role to play in creating new, innovative and equitable solutions to the housing crisis facing cities across the country. While “developer” has become a loaded term in today’s vernacular, I take pride in my role as a community builder who devel- ops the structures and streetscapes where we live, eat, work and play. That said, we can and must do bet- ter. The pace of development in “desti- nation cities” like Denver has meant that change feels quick and severe. The housing crisis, however, is not the result of over development, but rather a shortage of development – a simple supply and demand issue. A complex set of factors resulted in nearly three jobs created for each housing unit built in Denver. The chart shows the trends in the city’s housing units (rental and for sale), relative to population, job growth and median home values from 2010- 2018. You can see that as population and job growth significantly out- paced the delivery of housing, home prices increased at a rapid rate. It would be too simplistic to simply say “we must build more homes.” How and where we build them is equally important. Traditionally, Denver has subsi- dized low-income housing through federal and state tax credits and city loans or grants. However, that model is tremendously expensive and has tended to concentrate affordable housing in already lower-income communities. Using this model to address Denver’s need for 30,000 affordable units would require bil- lions in state, local and federal subsi- dies. Recent research by the Equal- ity of Opportunity Project questions whether those bil- lions would be well spent. The project concludes that neighborhood factors like poverty rates, educational attainment and employment rates are important contributors to intergenerational economic mobility. The study shows that concentrated poverty creates a vicious cycle that negatively impacts the economic prospects of youths of color. The study’s policy implication is that for our communities to become more equitable and sustainable, they need to be more economically diverse. No longer can we continue to concentrate affordable housing in already poor areas. We do not just need more housing; we need to pro- vide diverse housing options in more diverse locations by combining mar- ket-driven solutions with traditional affordable housing. As a master plan developer, we are uniquely positioned to pioneer the more equitable development that is being demanded by progressive municipalities and consumers. With larger planned communities, we can build inclusive housing that can accommodate different family sizes, incomes and cultures while pooling resources to provide additional com- munity benefits like grocery stores, public art, parks and services that contribute to public health. Of course, there is no silver bullet. We need to use multiple strategies to address decades of underdevel- opment of both people and places. We have explored numerous new policies that we hope to implement as part of a new model of inclusive development. These policies will focus on a community-led process that first develops people and then creates places and infrastructure that support community goals. Public policies like a neighbor- hood preference policy can reverse some of the displacement caused by development. Already instituted in Portland, Oregon; San Francisco; and Austin, Texas, NPPs identify indi- viduals and families who have been displaced from a neighborhood and places them at the front of line for affordable housing that would allow them to return to their community. At our Blue Vista community in Longmont, we developed a master plan that combined market-rate homes with 25% (twice the city’s requirements) affordable for-sale homes owned by Elevation Commu- nity Land Trust. Using a community Master plan developers’ crucial role in affordability Kenneth Ho Principal, Westside Investment Partners, kho@ westsideinv.com I thought you said this would be easy.” After our third rejection from the Colorado Housing and Finance Authority for our first low-income housing tax credit project, we began to question the viability of continuing to pursue affordable housing at the Yale Sta- tion light-rail stop. The site in ques- tion was a former gas station that we had owned for 40 years; the 2008 financial crash caused us to recon- sider our plan to build for-sale con- dos. Fortuitously, our development partner George Thorn approached us with a consortium of affordable housing advocates and developers including Susan Powers and the Urban Land Conservancy, who over- came our skepticism about develop- ing affordable housing and, in 2009, we had made our first application to CHFA. Thankfully CHFA was holding three rounds for 9% LIHTC annually so we did not have to wait long to make our fourth (and finally suc- cessful) application. The prize for our first allocation of LIHTC was historically low tax-credit pricing and a capital stack nine entities deep to “fill the gap.” This acro- nym soup of governmental entities included federal, state and local agencies in addition to the equity partner and lenders. Herding the cats to the closing table proved so difficult that we had to begin con- struction before all the documents were signed. Easy indeed. Construction on The Apartments at Yale Station was completed in 2012 and by then we already had made an application on another LIHTC project; this one at the Uni- versity Station light-rail stop. Development of affordable hous- ing near transit would become a theme for us going forward. We had made enough “tuition payments” during our first project that simply letting that skill set atrophy made no sense. We also had become con- vinced of the merits of the program. The Apartments at Yale Station is directly across the street from our corporate office building and we got to see firsthand how positively impactful the housing was to the residents. Our history of market-rate rental and for-sale developments caused us to carry a luxury sensibility to affordable projects. That mentality came with a learning curve (budget overruns being the obvious one), but the design architects we hired ensured that the affordable proj- ects we built were indistinguishable from the market-rate projects down the street. In many cases, the mod- est (by our market-rate standards) accommodations we had built were the nicest homes our residents ever lived in. We found they took pride in their community and ensured it was well kept and maintained. Our generational approach to real estate development also has paid dividends in affordable housing. We design and build all our property with the assumption that Koel- bel and Co. will own the property decades hence. As a result, we make decisions to minimize operational expenses and maximize durability. We have learned many lessons the hard way: Do not skimp on wash- ers and dryers; initial expenses on more efficient HVAC systems will pay dividends once operational; test all garbage disposals during punch walk; and spring for solid-surface counter tops if the budget allows. As we came to understand the nuances of the financing structure, we ventured ever further down the rabbit hole of deal complexity. With Andy Alison, our partner on three deals in Boulder, we built affordable housing for market-rate developers looking to lessen their cash-in-lieu burden. Utilizing 4% LIHTC, we were able to meet their schedule and deliver the units before the mar- ket-rate projects leased up. At the 9th and Colorado redevelopment in Denver, we utilized 4% LIHTC Work worth the rewards: Affordable development Carl Koelbel Chief operating officer, Koelbel and Co., ckoelbel@ koelbelco.com “ Denver Metro Census & Department of Labor data from 2010 to 2018 shows net population growth (blue) of 399,144 (14%), net job growth (yellow) of 352,669, cumu- lative home value increase (green) of $177,874 (68%), and net housing (for-sale and rental combined) unit increases (orange) of 124,906 over the same time period. Please see Ho, Page 40 Please see Koelbel, Page 40 Ash Street Apartments, located in Denver at 1170 Ash St., was financed with 4% low- income housing tax credits as well as state LIHTC. It is 100% affordable, with a mix of residents making 50% and 60% of the area median income.