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June 2020

Harvard student, multifamily experts offer strategies for building more for less

June 5, 2020

There is no simple - or single - solution for making housing more affordable, but a new report offers ideas from multifamily experts for reducing design and construction costs.

Titled "More for Less? An Inquiry into Design and Construction Strategies for Addressing Multifamily Housing Costs," the 47-page report was published by Harvard's Joint Center for Housing Studies (JCHS), NeighborWorks and The Brookings Institution. Author Hannah Hoyt, a master's in architecture candidate at Harvard Graduate School of Design, noted it is essential to expand the supply of lower-cost rental housing as the nation recovers from the pandemic.

In a blog on the topic of affordable housing and America's inequitable housing system, Hoyt partnered with Jenny Schuetz, a fellow at the Metropolitan Policy Program at the Brookings Institute. They cited research indicating the poorest 20% of U.S. households spend more than half their monthly income on rent. Nearly half of renter households spend more than 30% of their income on housing costs, which the co-authors noted meets the Department of Housing and Urban Development's definition of "cost-burdened."

Writing in a Brookings blog, Schuetz stated, "For far too long, policymakers at all levels of government have failed to provide decent-quality, stable, and affordable housing to millions of Americans. In COVID-19, we're only starting to see the devastating consequences of that failure."

Sharing knowledge and employing new collaborative strategies by design, development, and construction teams can also help increase the efficiency and predictability of multifamily construction, according to findings by Hoyt and Schuetz.

The strategies Hoyt outlined in her "More for Less?" report are organized by land costs, soft costs, and hard costs and were developed from interviews with developers, architects, contractors, and policy makers. These experts shared strategies and some experimental ideas for addressing cost increase and anticipating cost challenges.

Hoyt said her report is intended to "provide a starting point for project teams as they build high-quality, cost-efficient multifamily housing."

While the document focuses on the design and construction decisions that are within the day-to-day control of the project team, it also recognized policy or financing changes that could impact project costs. Various cost savings could be reinvested in their buildings or passed on to tenants, Hoyt suggested.

Local governments can also help make housing more affordable, according to Hoyt. Among ways she and the multifamily experts identified are by updating zoning laws to allow more housing and by reforming public RFP process, an important element of subsidized housing projects.

When writing about hard costs, Hoyt divided the proposed strategies into four categories: site preparation and substructure; shell and structure; interiors; and services.

Soft costs, which can account for 20-to-30 percent of total project costs, included architecture and engineering services, impact fees, required studies, exactions, permits and financing costs. Hoyt found the predictability and magnitude of these costs vary significantly from city to city. She also acknowledged affordable housing projects often have higher costs due to the complexity of financing.

Hoyt found wide variation in land costs, which typically account for 10% to 20% of total project costs for multifamily development. Developers who are efficient and creative could achieve cost savings. For affordable housing, developers may be able to buy discounted land from a public agency or nonprofit organization.

"All sites have constraints or challenges; finding out what these issues are up front-rather than being caught off guard later-is key to evaluating sites," Hoyt stated.

"Developers have very limited ability to change the price of land in their local market," she wrote, citing Washington, DC and San Francisco as areas where prices can eclipse $10 million per acre. That contrasts with Cleveland and Detroit, where prices are around $100,000 per acre.

To reduce land costs, Hoyt outlined three strategies:

Strategy 1: Invest time up front evaluating site capacity and potential obstacles

Strategy 2: Develop on oddly shaped lots or scattered sites

Strategy 3: Renovate, convert, or co-locate housing with existing buildings

The blog on flexible zoning and streamlined procedures was the second in a four-part series on how innovations in design and construction can bring down the cost of building multifamily housing. Hoyt said the goal is to lay out what developers, architects, and contractors can do to improve affordability independent of larger changes in land use policy or housing finance.