Mixed Income Calculator
Mixed Income Housing CalculatorWorkshop ExercisesProject #1: Park PointePark Pointe is a proposed 90 unit apartment building on a 1 acre site in an inner ring city (“Urban” zone). The project is located at a key intersection with a relatively strong rental market. The proposed project is 6 stories tall with wood frame residential on top of a concrete parking structure. The developer is seeking TIF support to make the project financially feasible. The site is in a TIF redevelopment district. The city provided TIF to a similar project nearby recently. Based on a careful analysis by an independent consultant it was determined that the other project would need to offer the developer a 6.25% Yield on Cost. In order to make that level of YOC possible, the city agreed to provide $600 per unit per year in TIF for a period of 15 years.After the last project, the City Council expressed concern and asked that City staff evaluate the possibility of requiring affordable housing in exchange for future TIF commitments. One of the members of the City Council met with the developer recently and reports that they are open to including affordable housing units in the project if the city can find a way to make that financially feasible. The Council member has asked that you evaluate the project and propose some options that would achieve 20% affordable housing. Project Details: Unit MixUnitsSizeRent1 bedroom60800$1,4652 bedroom301300$2,100TOTAL90 Total Units967 Average Unit Size$1,677Average RentKey CostsLand Cost: $1,425,000 Hard Costs: $152,000 per unitParking Spaces: 117Operating Costs: 35% of Gross Rental IncomeYour Tasks:Select an appropriate template in the calculator and adjust the inputs to match this project as closely as possible. Adjust the unit mix, unit sizes and rents Adjust the land priceAdjust the site areaAdjust the construction cost (Note that the quoted cost includes parking)Is the project feasible without TIF?If you were to provide $600 per unit in TIF, could the project support affordable housing units? How many units, at what affordability level?Suggest a strategy for achieving 6.25% Yield on Cost while also requiring that 20% of the units be affordable to households earning 60% of Area Median Income.Project #2: The ConfluenceThe Confluence is a proposed upscale ‘lifestyle’ apartment community. The 2 acre site is within a few blocks of a proposed light rail station in an Urban Center location. The project as currently conceived is 5 stories with structured parking.The proposed site is surplus public land. The city has proposed to sell the land to the highest bidder at the maximum market price. However because of concerns about rising housing prices and gentrification in this area, policymakers have asked staff to consider whether requiring affordable housing in the new development would be practical (either with a market rate sale or a below market price for the land).Current zoning allows only a 5-story building. It is not clear whether the market is strong enough to support a higher density project, but you have been asked to consider increasing the allowable density as a way of providing affordable housing without discounting the land price. The developer estimates that if they were to build a 6-story building they could accommodate 125 units on the site. Project Details:Unit MixUnitsSizeRentStudio12500$1,1001 bedroom75700$1,3502 bedroom131150$2,000TOTAL100Total Units735Average Unit Size$1,405Average RentKey CostsLand Cost: $37,500/unitHard Costs: $11,638,523 (including parking)Soft Costs: $1,745,778Parking Spaces: 125Operating Costs: 30% of Gross Rental IncomeExpected Yield on Cost: 6.0%Your Tasks:Select an appropriate template in the calculator and adjust the inputs to match this project as closely as possible. Is the project feasible without increasing the density or lowering the land price?Evaluate the feasibility of requiring affordable units in the project as currently proposed? How much would the land price need to be reduced to make 20% affordable housing at 60% of AMI feasible? Evaluate the impact of increasing the allowable density to 125 units. How much affordable housing could the project accommodate at this higher density?Follow Up Tasks:Imagine a similar project on privately owned land. If you increased the zoning to allow 6 stories, how much would you expect the land price to change? Evaluate the impact of requiring affordable housing along with the upzoning. How much affordable housing could you require in exchange for increasing density by this much?Exercise AnswersProject #1: Park PointeTeams of 2-4 peopleHandout project profile - Applicant wants TIF in some modest amount. City wants affordable units.Each team should pick a prototype to start from and make adjustments to match the project application materials. ?Task 1: Model the project as requested with no TIF (20 minutes)?AnswerStart with the Urban - High-density woodframe rentalAdjust # of UnitsAdjust unit mix - number, size, rentsBack out the cost of parking construction= (Construction cost per unit * number of units) - ($25,000 * number of spaces)Look up the total built square footage in the calculator output or calculate it= (Average unit size * number of units)/(1-common area %)Calculate the hard cost per foot excluding parking= Total construction cost excluding parking/total built square footageShould get to the point where the Yield on Cost is about 6.06%?Discuss: How closely do you think the numbers here match what is in the developer’s proforma?Task 2: Add TIFCalculate the annual amount of TIF necessary for the project yield on Cost to exceed 6.25%?Answer:At $600 (15 years) the project should have a YOC of ~6.35?Discuss: Why does this project need TIF? What would have to change for the project to work on its own?How does the availability of TIF impact land values? ??Task 3: Propose a strategy for achieving 20% affordable units at 80% of AMIIncrease TIFAdditional densityReducing parking requirementDiffering affordability periods?Cash Grant?Discuss:If you wanted to add more TIF, how much would it take to make 20% affordable housing work?What happens if you change the income level of the affordable units? Project #2: The ConfluenceSite is zoned for 4 stories - developer wants upzoning to allow 6 stories. City wants affordable housing in exchange. How much is the upzoning worth? ?Tasks:Select an appropriate template in the calculator and adjust the inputs to match this project as closely as possible. Is the project feasible without increasing the density or lowering the land price?AnswerStart with Urban Center – Higher Density Woodframe RentalAdjust unit mix, sizes and rentsAdjust site acreageAdjust Land price (Divide by two for per acre cost)Adjust construction cost to $102 per footAdjust the operating cost to 30%YOC should be ~ 6.12%DiscussWhy is the necessary YOC lower for this project than the last example? How much does the operating expense % impact the result?Evaluate the feasibility of requiring affordable units in the project as currently proposed? How much would the land price need to be reduced to make 20% affordable housing at 60% of AMI feasible? Answer: It costs about $1 million to provide 20% affordable, so land price must drop by $1 million ($500K per acre) = $1,375,000 per acreDiscussWhy is the YOC lower for this project than the last example?Evaluate the impact of increasing the allowable density to 125 units. How much affordable housing could the project accommodate at this higher density?Answer: Maybe as much as 25%. If we increase the density and hold land value constant the project will be much more profitable. But at a higher density we might need a higher YOC to compensate for increased risk. DiscussWhat values should change for a higher density project?How should we address the additional risk related to marketing a bigger project?Follow Up Tasks:Imagine a similar project on privately owned land. If you increased the zoning to allow 6 stories, how much would you expect the land price to change? Answer: Maybe as much as $700,000 (to ~$2.5 million).DiscussHow fast do land prices really change to reflect changes in zoning?Evaluate the impact of requiring affordable housing along with the upzoning. How much affordable housing could you require in exchange for increasing density by this much?Answer: At 20% (at 60% AMI) we could pay $3.75 million for land and still achieve 6.09% YOC. DiscussWhat is the right standard for determining how much you can safely impact land prices? Is it harder to push prices down than to just limit the rate of growth? ................
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