“There’s probably a hundred challenges,” says Cynthia Parker, the president and chief executive officer of BRIDGE Housing, a nonprofit housing developer based in San Francisco.
Material prices keep going up, with the costs of steel and glass not expected to come down any time soon. Labor expenses also keep rising. Even with the lowest interest rates in our lifetime, it still can be very difficult to make economic sense for starting a new construction project without some sort of guarantee that it will not be a bust. Developers say that perhaps the toughest impediment to new housing construction is local opposition, especially if the proposed construction site is in a safe neighborhood with good schools.
But dealing with prejudice against affordable housing dwellers and NIMBYism (Not In My Back Yard) is not a new struggle.
If the community or the city council doesn’t want the project, they can hinder it,” says Clifford Goldstein, who has been in Southern California’s commercial and multifamily real estate development business for more than 30 years. “If you delay a developer long enough, that can kill it.”
Goldstein complains that most legislators don’t take the time to understand the costs of construction, or the financial return requirements of lenders and investors. A developer can only operate within certain parameters in order to move forward.
“Time, meaning the time to obtain approvals — and the risk of not obtaining approvals – is perhaps one of the most important issues that causes the financial and investor community to require higher returns,” he says. “It is these higher return thresholds that often drive up the minimum rent that a developer seeks.”
Evan Gerberding, a spokeswoman for the California Department of Housing and Community Development, spells out the bane of developers: “Projects with more community opposition, with significant changes imposed by local design-review requirements or that received funding from a redevelopment agency, cost more on average.”
Stereotypes and negative perceptions of what an affordable-housing dweller looks like don’t help. Parker has heard them all. Potential neighbors fear that the low-income inhabitants will drive “junkers” and mar their pristine suburban landscape. The newcomers have too many children and, of course, the building will resemble a Soviet housing project.
Nothing could be further from the truth, Parker says.
“I can’t underscore [enough] the community acceptance piece of this,” she says, her voice streaked with frustration.
BRIDGE’s website proudly displays numerous awards from such prestigious bodies as the Urban Land Institute for the developer’s aesthetically pleasing LEED buildings (structures certified by the Leadership in Energy and Environmental Design). Besides, residents range from grandmothers living on fixed incomes to teachers and those who, through no fault of their own, have a physical or mental disability.
Parker’s BRIDGE group locates projects near transit corridors and currently has 5,000 units in the development pipeline, with 800 to 1,200 units being produced each year.
“That’s very busy but it’s not even a drop in the bucket,” says Parker.