SAN DIEGO—With developers paying so much attention to high-end market-rate apartments and 60% AMI affordable housing, middle-income supply has dwindled and is now in great demand, Wakeland Housing's VP/COO Rebecca Louie tells attendees at RealShare San Diego here on Nov. 15. Speakers on the panel “Multifamily Market: Discussing Trends and Planning for the Future” discussed the affordable-housing issue at length, as well as other challenges this sector faces.

Jim Neil, EVP and partner with Kidder Mathews, said, “We do a good job of providing housing at the top end and at the bottom end, but we're not so good at the middle.” He asked the panelists what they see in the 80% AMI space.

Louie said there's a huge gap in this space, causing tenants in lower-end housing to stay longer and crowding out the 60% AMI cohort. “Middle development is seen as a need.”

Ian Gill, managing partner with Silvergate Development, said, “Our sweet spot is the 80% to 150% AMI.” He added that having some below-rate financing available can make the difference between being able to provide this housing and not. Also, parking is an issue that is affecting the ability to provide housing: as parking space becomes repurposed, this space can make a dent in the number of units that can be produced. “Decreasing parking ratios decreases the cost of construction and hugely impacts affordability.”

Mike McNerney, EVP of Lowe, said, from a financial perspective, the developer is challenged. More people using Uber and autonomous vehicles will lead to less parking being needed, but construction costs are rising, too.

Neil shifted the discussion to policy issues and regulations, asking the panelists their thoughts on whether bonus density was a good idea. Louie said, “I'm all for people utilizing the bonus-density program and setting aside units so they can get reduced parking.” She said those looking to do this should contact an affordable developer to maximize the tax credits. “San Diego needs any and all affordable-housing units however they can get them.”

Gill said processes are getting dragged out because of regulations, so it's worth putting in affordable housing for the certainty of the project. “We can't afford to lose so much time due to neighborhood opposition.”

McNerney said community opposition is still a challenge with affordable housing since this type of development scares a lot of communities. He pointed out that there's a perception that all of these homeless people are being bussed in to the area, but all of San Diego's growth is internal and due to births. “We need to educate people on the lack of affordability and how affordable housing works. Our kids can't afford to live here. It will take a lot of things to help us build workforce housing.”

Gill agreed that the public at large needs to be educated about the benefits of densification. “Multifamily development improves neighborhoods. It pays for infrastructure and makes areas safer. We can't afford to be blindly resistant to it.”

The discussion shifted to San Diego's homeless problem, which Louie said has “exploded,” adding that there's a push for permanent supportive housing. “Anything that can give us predictability in our funding is helpful.”

Gill said the RDA dissolution was a huge loss for affordable housing in San Diego and that San Diego's RDA generated enough funds to allow for an increase Downtown from the current 45,000 residents to the 90,000 expected. McNerney said it will take a lot of effort from different sources—federal, state and local, as well as private capital—to solve the affordable-housing and homeless problem.

Neil moved on to discussing rising construction costs and what might drive them down. Gill said 40% of housing costs are associated with regulations, and there has been a 300% increase in regulation costs since the 1990s.

McNerney said the extension of the trolley line will help in developing density, a cost reducer, because good transportation systems enable density.

Louie said there's a huge gap in this space, causing tenants in lower-end housing to stay longer and crowding out the 60% AMI cohort. “Middle development is seen as a need.”

McNerney said the extension of the trolley line will help in developing density, a cost reducer, because good transportation systems enable density.

Instant Insights /

Mid-Level Affordable Development Now Seen as a Need

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