No Parking Developers swap parking spots for affordability.
At moda, a condo project under construction in downtown Seattle, 83 of the 251 units do not include parking spaces. But that didn't deter buyers: The project sold out in less than a week. Residents of moda do get something in lieu of a parking spot—a lower-priced unit, thanks to reduced construction costs. “We still have a huge waiting list,” says Iolanthe Chan-McCarthy, president of Urban Pacific Real Estate, the marketing firm for moda, which was developed by HMI-2312, an affiliate of HMI Real Estate. “People feel they don't need a car. They can walk everywhere.”
Taking a cue from projects like moda, developers are seeing that parking is not critical to a property's success, given the right project and location. The concept, popular for years in East Coast locales such as Boston and New York, is now gaining traction in West Coast cities where more developers are offering limited parking or unbundled parking (where a parking spot is not included in the price of a condo or apartment rent). And for good reason: Developers can save big bucks (a parking space can cost as much as $60,000 to build) and pass on those savings to residents.
“We have a problem of expensive housing and free parking; the priorities are all the wrong way around,” says Donald Shoup, a professor of urban planning at the University of California at Los Angeles and author of The High Cost of Free Parking. “I think [unbundled parking is] a very healthy trend, and it's sensible for apartment developers and owners because they are offering tenants new options.”
Reduced parking often has the most impact for residents of affordable projects. “In an urban area, the quickest way to get people a 15 percent bump in disposable income is for them to take public transit instead of owning a vehicle,” says David Baker, a partner at the San Francisco-based architecture firm, David Baker + Partners. And minimal or even no parking can make room for more critical offerings. At Curran House, a David Baker-designed affordable complex in San Francisco's Tenderloin area, parking spots are replaced with additional units and the offices of the nonprofit developer.
Unbundled parking works best in cities with strong transportation systems, like Portland, Ore., which actually has no minimum parking requirements in most areas to encourage public transit. “The real challenge will be: Can we successfully bring this approach to places like Los Angeles, which is much more of a car culture?” asks Tom Cody, principal of Portland-based Gerding Edlen Development, which is building projects with unbundled parking throughout the West Coast.
The change must come from the residents, adds Baker. “People just assume they need food, water, air, and parking,” he says. “They don't even question the need. You've got to start by questioning the need.” —Rachel Z. Azoff
Affordable Surge Housing scores on ballots.
Democrats weren't the only big winners last November. Affordable housing, an issue with which Democrats are often sympathetic, also came up big at the polls.
In California, voters approved the $2.85 billion Proposition 1C affordable housing measure that will authorize funds to finance housing programs, capital for infill development, brownfield cleanup, and housing-related parks. In New Mexico, voters approved Amendment No. 4, which will allow the state to use funds to buy land and pay for the cost of building or restoring affordable housing. Finally, Rhode Island voters decided to issue general obligation bonds, refunding bonds, and temporary notes for affordable housing.
Many cities also saw their housing bonds pass. In Austin, Texas, voters approved Proposition 5, a $55 million affordable housing bond for both rental housing and homeownership. Voters in Dallas supported two affordable housing measures, Propositions 7 and 8. Proposition 7 provides $1.5 million to purchase derelict property for the city's land bank, while Proposition 8 provides $41 million for economic development and housing.
That's not to say that all housing bills passed. Measures in Los Angeles and Louisiana that required two-thirds votes failed. Still, housing advocates were optimistic about the election results. “[Voters] look at housing costs in California going up,” says Tim O'Connell, senior director for programs and policy for Century Housing in Culver City, Calif. “In some areas of California, we've had a 25 percent increase in house prices. Rents weren't going up as fast, but now we're seeing them catch up. People realize their income hasn't gone up, but their expenses have gone up.”
Kelo Backlash Voters boost property rights in many states.
When the U.S. Supreme Court ruled on the side of New London, Conn., in a landmark 2005 eminent domain case, pundits predicted a wave of state legislation that would curtail the openings for property seizure created by the decision. Now that the 2006 elections are over, these pundits look pretty smart.
Last November, voters in nine states passed measures that would hinder local governments' ability to use eminent domain to seize property for private development. Arizona, Florida, Georgia, Michigan, Nevada, New Hampshire, North Dakota, Oregon, and South Carolina limited eminent domain, while California, Idaho, and Washington rejected constraints. So far, 34 states have taken steps to restrict eminent domain after the Supreme Court's ruling, according to Larry Morandi, director of state policy research for the National Conference of State Legislatures.
“This is an issue that had strong bipartisan support,” Morandi says. “If you're a property owner, you want to make sure your place isn't being condemned so that a mall can go up.”
Details of the new measures vary. For example, in Florida and Georgia, elected city councils have to approve eminent domain takings so the councils will be held accountable. New Mexico and New Hampshire passed short legislation that bans seizing property and transferring it to a private entity. “The measures were all over the board,” Morandi says. “Some of those were very short and will need to be figured out by state courts to determine how restrictive they are.”
Although John McIlwain, senior resident fellow for the ULI/J. Ronald Terwilliger chair for housing at the Urban Land Institute, thinks eminent domain is a good last resort, he worries some of this legislation may be going too far. “Anyone who uses an airport or train station or government parks is using eminent domain,” McIlwain says. “These are things we have taken for granted, but wouldn't have had otherwise.” —L.S.
Condo Fallout 2007 may bring broken deals.
As the condo market has gone from white-hot to ice-cold, opportunists are preparing for failed projects.
“I think there are a lot of lenders that are about ready to pull product,” says Jack McCabe, CEO of McCabe Research and Consulting in Deerfield Beach, Fla. “The consensus is that with rates lower and all of these concessions that are prevalent right now, a lot of the snowbirds will take advantage in the first quarter. There could be a flurry of action in the first three months. But, in second half of 2007, we'll see tons of properties go to lenders.”
That kind of failure could create lots of opportunities for developers and managers. “The hedge fund and investors looking for strategic allegiances with different experts and developers will get lined up and active in 2007,” McCabe says. “There will be opportunities for developers to pick up projects in mid-stream and mid-construction and finish them out. There will be opportunities for others to come in and take over troubled projects and sell them out.”
Among those planning to capitalize on those opportunities is Norman Radow, president of The Radco Cos. With the condo market foundering, he's working with mezzanine lenders and equity investors to turn around faltering condos. Right now, he's in Chicago, Atlanta, and Boston—but Florida is on his radar. “Everyone had gone into the condo business,” Radow says. “Even products that are in good markets and the right location may need a change [in this market]. If you have a developer who can't change, that's what we come in to do.” —L.S.
Project of the Month Overlook at West Hill Ithaca, N.Y.
The 128-unit, two-story Overlook is the first New York apartment development in the affordable housing sector to incorporate energy-efficient components into the construction process. These green building features include high-efficiency furnaces and boilers, tankless water heaters, occupancy sensors, and timer-controlled lighting.
The project's green design promotes affordability through reduced fuel usage that will deliver long-term cost savings for its residents. At least that's the goal of the Overlook's development team: Queens, N.Y.-based The Domain Cos., Long Island, N.Y.-based The Arker Cos., and Ithaca Neighborhood Housing Services.
According to Chris Papamichael, principal of The Domain Cos., roughly half of the units will be set aside for residents earning no more than 60 percent of HUD's area median income; 35 percent are reserved for residents at 50 percent of AMI; and 15 percent will be occupied by renters at 30 percent AMI or less. The remaining 15 percent of the units will be given to formerly homeless families.
Papamichael says the developers wanted to offer a first-rate, energy-efficient rental property for hardworking families—an unusual priority in the affordable housing arena. Papamichael points out that the project sports a very traditional style that is in keeping with the apartment's surrounding neighborhoods. “We wanted to implement green standards whenever feasible,” he says.
The development also features a clubhouse with a fitness center, classrooms, and meeting areas. A nearby museum will offer monthly displays in the community center at Overlook, which Papamichael says is the first of many green projects for the company.
The project's first phase was completed in June 2006 at a cost of $10 million, with 64 affordable units ranging in size from 700 square feet to 1,100 square feet. The Overlook is situated on a 25-acre site with a density of five units per acre. —Abby Garcia Telleria
PARKING SPOT Here's a sampling of parking rules in West Coast cities.
DOWNTOWN LOS ANGELES:
2.25 parking spaces per unit
PORTLAND, ORE. (CENTRAL CITY DISTRICT):
No minimums and a maximum of 1.3 stalls per unit to 1.7 stalls per unit
BELLEVUE, WASH.:
No minimums and a maximum of 2 parking spaces per unit (some areas have a minimum of 1 per unit)
New Adventure RREEF, the real estate and infrastructure investment management arm of Deutsche Bank, has ventured into the Far East with a mid-market, mass residential project in Zhuhai, China. RREEF will partner with one Macanese investor and two Chinese co-investors to develop a $225 million residential project in the northwestern district of New Xiangzhou. It will offer affordable apartments primarily to local middle-class residents. —L.S.
Slowing Market Don't think the multifamily sales market is slowing down? Check out a recent Mortgage Bankers Association report that says there was a 15 percent decrease in loans for multifamily properties from the third quarter of 2005 to the third quarter of 2006. Multifamily also saw a decrease in originations of 1 percent over the second quarter of 2006. —L.S.
Priced Out Apartments aren't getting any cheaper. In 2006, the cost of affordable rental housing continued to outpace the wages of those who need it. The national two-bedroom housing wage climbed to $16.31, up from $15.78 in ‘05, according to The National Low Income Housing Coalition's annual “Out of Reach” report. This is the hourly wage a full-time worker must earn in order to afford a two-bedroom unit at a community's fair market rent. —R.Z.A.
The Miami condo market may finally be collapsing, according to a recent South Florida Business Journal story. The paper reports that many condo buyers are looking for loopholes to get out of their contracts. If they can't find one, they may just walk away from thousands of dollars in deposits. This could send the market into a freefall. With 6,000 residential units built in the last year and more than 22,000 coming on line this year, the market is already saturated. —L.S.
Southern Living More help is on the way for hurricane-devastated Biloxi, Miss. The Biloxi Housing Authority plans to rebuild or develop more than 1,500 homes and apartments with financial assistance from Enterprise Community Partners, Fannie Mae, and others. Fannie Mae is reviewing an $18 million line of credit, joining Enterprise's $500,000 line. The two groups also are giving a combined grant of $325,000. The authority lost about 70 percent of its housing units as a result of Katrina. —R.Z.A.
Overseas Adventure The Urban Land Institute is headed to the Middle East. The Washington, D.C.-based global research and education institute is creating a ULI Centre for Real Estate Education in Abu Dhabi in the United Arab Emirates. The center's goal is to advance the professional knowledge and skills of those working in land use and development. ULI also plans to establish a ULI District Council in Abu Dhabi. —R.Z.A.
Executive Feedback Q & A How is the immigration debate and its possible outcome affecting your operations?
A: “Requesting apartment managers to verify the legal status of potential residents is an intrusive violation of the privacy rights of all Americans and represents an ineffectual response, an unimaginative, knee-jerk ‘Band-Aid' approach to a failed national immigration policy. It also is sad because it is a forgetful renunciation of our proud heritage. We are a nation of immigrants, each new wave adding to the strength and character of our great land.” —Nathan S. Collier, founder and principal, Collier Enterprises/Paradigm Properties
A: “[Illegal immigrants'] false documentation could be provided. False documentation seems to be an issue that should be handled at the national government level, not at the site level. If [municipalities] initiate anti-immigration measures, we might consider passing the additional occupancy permitting costs onto the applicant.” —Laurie Lyons, CEO, BH
A: “Fair Housing requires treating everybody equally. As firms increase scrutiny of immigrants, they must increase scrutiny of all applicants.” —Terry Feinberg, president, Arizona Multihousing Association