The Competition for Affordable Housing Property

By John LaRaia, H.G. Fenton Company, BIA Board Member
A few weeks ago, my former colleague, Bob Cummings, eloquently described the current economic climate in which “residential use for a parcel is often times not the highest and best use for that land.” This is especially true in the geographic areas that are being promoted and envisioned as the prime areas for new housing to be built such as Downtown and Uptown.
This is clearly evidenced in the data provided and compellingly presented by Victor Krebs from Colliers International most recently. His data analyzed all the land sales that occurred in Downtown and Uptown since January 2018 to July 2019 to how many of those sales were for future development sites. His conclusions found:
  1. 125 properties were sold during that timeframe and in a geographic area that is in the “wheelhouse” for future urban redevelopment and mixed-use housing near transit
  2. The vast majority (82%) of those sales were sold to investors, not developers, which means they are likely not to be redeveloped for additional housing for an extended period
  3. The remaining (18%) of those sales were sold as potential development sites

When only 18% of sales are going to developers today, we can expect this percentage to decrease when new policies are adopted that increase the cost or reduce the expected revenue of providing new housing.

We can expect that 18% to drop to 15%, 12%, 10% or less over time.

Once a potential redevelopment site is purchased by an investor, who then leases that site for 10-20 years to a user such as a restaurateur, we’ve lost the opportunity to build the housing we all know is so desperately needed for a significant period of time.

An alternative is continuing to promote the Grantville model, which has produced or will produce 4,000 units in the next few years, of which 25% are affordable.

This occurred primarily for three reasons:

  1. The Community Plan was updated which provided for by-right residential development
  2. Many of the existing uses for the acquired development land were underused and underdeveloped, allowing residential developers to successfully compete for the land
  3. Much of the affordable housing is being provided on government-owned land that is being transferred through an RFP process. When owned by a government entity, there is an argument that affordable housing should be provided on site

So the question becomes – how do policy makers find more ways to create “Grantville” opportunities rather than creating policies that make it harder for residential developers to compete for sites?