Vestcor planning infill project in Brooklyn

[vicupstate]

My comments were more related to purchase rather than rental. That said, someone making $50k is spending about 1/3 of their take home pay on rent if it is 1,000 a month which is where most or all of the DT units start at, if I understand correctly. 

[thelakelander]

"The cap at Vestcor's proposed Brooklyn project is $69k. I believe the Lofts at Jefferson Station also include a percentage of workforce housing units. You can also earn $50k and stay at the Carling and 11 East.  The only two projects where the cap is well below $50k is Lofts at LaVilla and Lofts at Monroe."

Are they asking for your tax returns with each application?  How are they verifying your income?

I don't know the details but I'm sure they verify income some way. There are quite a few complexes like this all over town, including the Southside.

Also, $300 per square foot to build multi family? Does that include the cost of the real estate? It must.  A very experienced local builder I spoke with recently said he can build a nice single family home for $80 per square foot. HIS COSTS.  How can multi family be so much more expensive, don't economies of scale kick in at some point?

A frame single family home would not need elevators, parking garages, parking lots, etc. These are examples of items that would increase square footage costs.

[Gators312]

"The cap at Vestcor's proposed Brooklyn project is $69k. I believe the Lofts at Jefferson Station also include a percentage of workforce housing units. You can also earn $50k and stay at the Carling and 11 East.  The only two projects where the cap is well below $50k is Lofts at LaVilla and Lofts at Monroe."

Are they asking for your tax returns with each application?  How are they verifying your income?

LIHTC aka Tax Credit properties do move-in and annual income certifications similar to the HUD Programs such as Section 8 or the Housing Choice Voucher program.  Tenants must provide specific documentation to prove eligibility.   The income cap depends on the number of eligible household members in a unit.    Here are the income limits for Florida: http://www.floridahousing.org/docs/default-source/developers-and-property-managers/compliance/limits/2018-ship-income-rent-limits-3-30-18-eff-4-1-18.pdf?sfvrsn=71f1347b_2

The State agencies that are responsible for allocating the credits are also responsible for oversight of the programs.  Annual audits are done at the properties to ensure compliance.  If owners are found with tenants out of compliance they lose the tax credits on the entire building that is out of compliance and don't get to recoup them.   Tax credit deals can be very complex with Syndicators and Underwriters in addition to owners with skin in the game and all counting on a specific amount of credits. 

Here's some dry reading if you want to know more about LIHTC details.  https://www.irs.gov/pub/irs-utl/IRC_42.pdf

[fieldafm]

Vestcor doesn't really need a pat on the back for doing these developments.  The Federal Tax credits make these projects well worth the efforts.  Additionally, it seems that Vestcor is winning most of the competitive 9% credits (any developer can get 4% LIHTC for building affordable units) from the Florida Housing Finance Corp for our area.  Some believe that the FHFC process is rigged, and Vestcor's recent wins will fuel that chatter.  Regardless they are good projects for our city.

True, Vestcor is a company that is driven to enter into profitable transactions... and their decision to dive into the affordable housing market has been a profitable one.  My perspective really centers around the fact that Vestcor is the only developer of note that is building new affordable/workforce housing in Jacksonville's urban core. This is a welcome and necessary addition to the core, so I'm very glad they are investing here instead of any number of Florida cities.

I have a slightly different view on FHFC. I think Jacksonville has gotten the short end of the stick for many years.... its nice that we (and in particular the urban core neighborhoods) are finally getting our fair share.  I think Vestcor recognizes that, and this is the impetus to their new starts in LaVilla and (soon) Brooklyn.

I'm frankly disappointed that Jacksonville has largely missed out on the urban multifamily boom that has swept the country.... for a second time in recent memory (first with condos from 2001-2008 and now with apartments from 2010-present). I'm very glad to see Vestcor's investment in the core. It's also disheartening that there haven't been more market-rate units that have come online in the core since 2010.  Most of the projects being proposed now are pie-in-the-sky and have likely missed the market.

Major cities like NY and DC have Inclusionary Zoning programs, which are zoning laws that require any new development or major rehab to set aside a % of units for affordable tenants.  These affordable housing programs help augment Federal efforts without cost to taxpayers.  This doesn't solve the dearth of affordable housing in those cities, but it is a good piece to solving the entire puzzle.

Little bit of an apples to oranges comparison, I think.  Places like NYC, San Francisco and DC have thick books of Code that quite simply restrict growth... so much so that there are self-created scarcity issues in markets like that. Frankly, inclusionary zoning is a Band-Aid to much larger supply problems. With the barriers these places have in place... the chickens are finally coming home to roost- and from a macro level that's sad as there are real class segregation and generational wealth transfer issues at play. Fortunately, we have abundant land and nothing really restricting density on that scale (for instance, a neighborhood like Georgetown restricts Floor Area Ratios so much that you can only build a certain type of product... and you can't yield many units from that product)... therefore we don't have the much broader affordability and supply issues that say the Petworth neighborhood (which is one of the better ones in terms of the type of housing stock found) in DC grapples with.

Mike - why are these new starts struggling to lease up?  Bad proforma from the developers?  If the rent is "too damn high" for anyone to afford why would they build it? 

That's a good question, and something to really start paying attention to (the smart ones should have paid attention two years ago). In general, multifamily has gotten into bubble territory. This is a nice chart that shows multifamily construction skyrocketing to pre-recession levels... while single family construction has clearly lagged behind. You don't need to be an economist to look at that and see a problematic trend.



This is not true for every metro, but in cities like Seattle... its a supply/demand issue. There have been more multifamily units built in the last 7 years than in the previous 50 years combined (specifically talking about Seattle).  And those are mostly all market-rate rentals in expensive neighbourhoods.  Construction, permitting and acquisition costs as they are... these units need rental rates geared towards households earning well above the metro's median income range. At a certain point, there is an oversupply in that portion of the marketplace. I'll probably have an article up on Moderncities.com breaking down supply/demand by MSA next week. It's pretty interesting (at least to nerds like me).

Institutional money and equity partners have been funnelling money into this segment of the housing market steadily since 2010 (particularly where population growth has been high in places like Houston, Seattle, Denver, San Diego, etc). Can't fault developers for wanting to go for the easy money.  We are seeing so many deals with miniscule cap rates nowadays... that obviously should sound alarm bells. When the returns dry up (and they are beginning to do so), the money will flow elsewhere... chasing healthy returns (personally, I think the middle of the market is woefully under-represented now.. and whoever starts to eat up market share their is going to make some nice cash for themselves).

[vicupstate]

^^ Excellent commentary. I can attest that the phenomenon you describe is not just limited to our biggest cities either.  So do you think the middle market is profitable just not as profitable as high-end, and therefore will get more product soon? I fear the high-end will dry up soon with nothing filling the void.

[Captain Zissou]

Well stated, Mike!

[MusicMan]

In the very near future I hope to pitch to a well established developer a proposal for a 150 unit apartment complex on a gorgeous parcel a few blocks from Murray Hill/Edgewood Ave business district.

This will be market rate rentals with some luxuries (pool, tennis...) and the first of it's kind serving Murray Hill (that I am aware of). The location is also close to King Street entertainment district...  (so in reality it also serves Riverside-Avondale)...

Any thoughts out there about demand for this, or am I just dreaming....??

[pierre]

In the very near future I hope to pitch to a well established developer a proposal for a 150 unit apartment complex on a gorgeous parcel a few blocks from Murray Hill/Edgewood Ave business district.

This will be market rate rentals with some luxuries (pool, tennis...) and the first of it's kind serving Murray Hill (that I am aware of). The location is also close to King Street entertainment district...  (so in reality it also serves Riverside-Avondale)...

Any thoughts out there about demand for this, or am I just dreaming....??

I think there would be. I live in Murray Hill and anytime I walk by the sprawling Bank of America property, I envision something like that on it.

[MusicMan]

Is it for sale? That's not where I am looking but I would check it out if offered up.

[Live_Oak]

It might be in the near future.

I'm a bank of America customer and live nearby. A couple weeks ago I got a letter from BOA stating that they'll be closing the Edgewood branch in June 2019.

[pierre]

It might be in the near future.

I'm a bank of America customer and live nearby. A couple weeks ago I got a letter from BOA stating that they'll be closing the Edgewood branch in June 2019.

I have spoken with people in the neighborhood saying the same thing. I assume that is an old Barnett Bank space. It's a waste of real estate in it's current use. There is rarely anybody there. And I don't think the drive thru is functioning, except for the ATM.

[Steve]

Off topic, but I do think there's a real estate strategy around former bank buildings. I can see a lot of vacancies in the next decade. They're generally in prime locations too.

[JaxAvondale]

Agreed! This is very similar to the Centerstate Bank issue on King Street.