In the ever-changing real estate landscape, the demand for affordable housing remains a formidable force. With innovative developments and a commitment to equitable practices, the industry is working to bridge the gap between demand and supply in a subsector that is undergoing significant changes.
It’s a simple fact. Potential tenants aren’t prioritizing the same things as in years past, and according to The Habitat Company Vice President of Community Development David Mevis, various factors, like the ongoing evolution of work dynamics, has ushered in a new era of housing demands.
To start, the incorporation of “work from home” flexibility into housing units and common areas is a prominent trend. With remote work becoming the norm, renters now expect the convenience of remote-work capabilities—a shift in preference that has prompted developers to integrate advanced technology, such as keyless entry systems, throughout buildings, which not only enhances the resident experience, but also improves operational efficiency.
And the increasing emphasis on holistic well-being cannot be ignored, for example, the focus on wellness amenities that cater to both physical and mental health. Outdoor spaces designed for social engagement and fitness activities, including yoga classes, have become highly demanded. Simultaneously, the industry’s commitment to sustainability and green building practices has grown stronger. Equitable Transit Oriented Developments (ETOD) have gained traction, with a focus on creating inclusive projects that cater to diverse socio-economic groups.
However, with these trends comes unique challenges. Mevis said that developers are tasked with managing an expanding set of policy objectives aimed at addressing various social challenges though affordable housing. Despite these objectives, though, resources are diminishing, exposing developers to significant risks and financial exposure. Bureaucratic hurdles at various levels of review and approval further compound the complexities of the development process.
When assessing the state of affordable housing demand and occupancy rates, Mevis emphasized the rising need for subsidized housing.
“Subsidized rents have increased materially,” Mevis said, “driven by inflation adjusted rent limits. In consideration of the demand for affordable housing units, those units earmarked for individuals and families at 60% AMI should be 100% occupied. However, the lack of efficiency in the workflow process primarily for subsidized housing is a contributing factor for lower occupancy rates.”
Habitat is one company actively contributing to the transformation of the region’s affordable housing landscape, with three projects in specific poised to make a significant impact: 43 Green, OC Living and LeClaire Courts.
43 Green, which is located adjacent to the 43rd Street Green Line CTA station in Bronzeville, is the first equitable transit-oriented development (ETOD) on Chicago’s South Side. Habitat welcomed its first residents in June to the recently completed Phase I residential building, which includes 99 units, 50 of which are affordable. In addition, construction has started on the 80-unit Phase II residential building.
OC Living, the residential phase of the $200 million Ogden Commons mixed-use development in Chicago’s North Lawndale neighborhood, broke ground this past spring and will welcome its first residents in early 2024. All told, the multi-phase project will bring 350 mixed-income housing units to the area, more than half of which are affordable.
The first phase, three-story commercial building was completed in 2021 and is now open and home to Sinai Health’s One Lawndale Community Care and Surgery Center, bringing critical outpatient services to the area, as well as Wintrust Bank and Momentum Coffee.
LeClaire Courts is in the early stages of redevelopment on the site of the former LeClaire Courts public housing complex. Last month, CHA gave the green to the residential development, which will include over 350 affordable and market-rate apartment units.
Impressive developments, but they haven’t been easy, considering how financing options and capital availability for affordable projects have evolved during the past year. COVID-19 resources have largely dried up, while construction and other development costs have inflated dramatically. Not to mention, borrowing power has been reduced due to interest rate hikes, resulting in the need to rescale to smaller development sizes with fewer units getting built. Many projects have stalled out and fewer new projects are moving forward, as affordable housing is becoming as expensive to develop—or more so—than market rate housing. Mevis said growing regulations, policy objectives and program requirements that accompany affordable housing funding sources, however well-intentioned, work against the goal of simply producing more units of affordable housing quickly and efficiently to tackle the shortage.
In short, affordable housing is more complex and costly than ever—and that’s not expected to reverse any time soon. At the same time, Mevis said there’s a necessary push to expand diversity and equitability in development, ownership and management of affordable housing.
“Without significant financial support of, and technical assistance to, the targeted developers, these goals will be difficult to meet,” Mevis said. “Housing agencies must embrace flexibility, creativity and open-mindedness in the laboratory of ideas, structures and solutions to deliver on this objective.