Housing development costs:
Land (acquisition, cleanup, infrastructure)
Hard costs (construction)
Soft costs (construction loan interest, fees, insurance, profits).
Total development costs (avg.) $300,000 per dwelling unit.
What makes housing (un)affordable?
Total development costs (avg.) $275,000 per dwelling unit.
To finance this cost over a 30year term, a developer would pay about $14,400 per year. So debt service on one new dwelling unit is about $1,200 per month.
Maintenance and operation (heat, utilities, insurance, cleaning, etc.) is abour $400 per month.
So the total cost to build and maintain one unit is about $1,600 per month.
That’s how much rent the average of all households in a building would need to pay for the development to break even.
What makes housing (un)affordable?
Who can afford to pay $1600 per month?
If “affordable” rent is 30% of a household’s total income, then a family earning about $65,000 per year (a “moderateincome” family) could afford to rent the unit:
30% of $65,000 per year / 12 months = $1625 /month.
Who makes $65,000 per year?
One income: an experienced nurse, bus driver, police officer. Two incomes: a public school teacher + a cabinetmaker.
One wage earner: School principal, attorney, stockbroker Two wage earners: Subway conductor + school nurse $ 4,431 $ 2,127 $ 85.22 $ 40.90 $ 177,250 $ 85,080 120% 250% Middle Income One wage earner: Veteran police officer, nurse, bus driver Two wage earners: Teacher + cabinet maker $ 2,127 $ 1,418 $ 40.90 $ 27.27 $ 85,080 $ 56,720 80 120% Moderate Income One wage earner: Rookie teacher, mail carrier, skilled manufacturing worker Two wage earners: Taxi driver + retail clerk $ 1,418 $ 1,064 $ 27.27 $ 20.45 $ 56,720 $ 42,540 60 80% Low Income (2)NEW YORK CITY MEDIAN HOUSEHOLD INCOME = $40,000One wage earner: Caseworker, cabinet maker, EMT Two wage earners: Prep cook + F/T child care worker. $ 1,064 $ 886 $ 20.45 $ 17.04 $ 42,540 35,450 50 60% Low Income (1) One wage earner: Child care worker, taxi driver, baker Two wage earners: Retail clerk + home health aide. $ 886 $ 532 $ 17.04 $ 10.23 $ 35,450 $ 21,270 30 50% Very Low Income One wage earner: Home health aide, retail worker, manicurist Two wage earners: Day laborer + P/T child care worker Senior citizen on Social Security, family on public assistance $ 532 $ $10.23 $ $ 21,270 $ 0 30% Extremely Low IncomeHousehold To From To From To From Sample Affordable Rent Hourly Wage Household Income % of AMI
You’re the developer!
You have: Enough land for about 800 units.
Brownfield tax credits to cover the costs of remediation and new infrastructure.
Some mix of subsidies totaling about $50,000 per dwelling unit, for about 400 units.
Low-Income Tax Credits
NYC HPD programs (New HOP,
NYS Housing Trust Fund and other DHCR programs (you’ve gathered up a total of about $20,000,000, so you must be pretty good at this!).
You want to build units that are affordable to a broad range of local people.
How can you mix:
households with different incomes.
+ subsidies from different sources.
Your total development costs:
800 units @ $270,000 per unit = $220,000,000
Total subsidy dollars = $20,000,000
Total debt service for 800 units =
Average per unit: $1200 / month
M & O per unit: $400 / month
Average “breakeven” rent = $1600 / month
If “breakeven” is $1600 per month, then:
You could house 800 families who can each pay $1600 per month in rent.
having one family who can pay $2000 per month.
makes it possible to house one family who can pay $1200 per month.
having two families who can pay $2000 per month each.
makes it possible for one family to pay $800 per month.
You can use $100,000 of subsidy to lower one family’s rent from $1600 to $800.
You can use $50,000 of subsidy to lower one family’s rent from $1600 to $1200.