Soaring prices for land, materials, labor make it harder for affordable housing to be affordable
The Triangle's sizzling real estate market is starting to burn developers of affordable housing.Posted — Updated
From soaring land prices and labor shortages to inflated prices for materials and rising interest rates, the cost to build housing at below-market rates is steadily climbing.
"It’s kind of this perfect storm of – we’re in a very hot market, [and] we’re competing for a limited resource both physically and financially," Yolanda Winstead, president of nonprofit developer DHIC Inc., said Tuesday.
"Obviously, we’re in a market that’s very attractive with lots of people moving into the Triangle area, so there’s a lot of demand from market-rate and affordable developers for land and sites," Winstead said. "The construction costs have been a big factor, and many developers that are working in our space are faced with the same issue we have."
DHIC has five projects underway in Raleigh, Durham, Apex and Holly Springs that will add a total of 627 apartments to the area's affordable housing inventory.
But Apex alone needs 2,000 affordable units, according to the town's new Affordable Housing Plan.
"We can’t build it fast enough," Winstead said.
Construction on one of the projects, Broadstone Walk, on South Hughes Street in Apex, is slated to start early next year. The complex will provide 164 one-, two- and three-bedroom apartments for households making 40 to 60 percent of the area's median income – roughly $38,000 to $57,000 for a family of four – when it's finished in 2024.
"You’re talking about occupations like retail workers and other service industry jobs – grocery clerks, firefighters, day care workers," Winstead said.
Christopher Valenzuela, Apex's housing program manager, said the development will be the largest affordable housing project ever in the town.
But DHIC faces a $1.5 million shortfall on the $35 million project.
"Because of the rate increase, we can afford less of a permanent mortgage, which means we need to raise other dollars in order to be able to keep the rents where we want to," Winstead said.
The developer has asked Apex and Wake County for additional funding to make up the deficit. Apex's Town Council was expected to vote Tuesday night on putting an extra $1 million toward the project.
Apex this year launched an Affordable Housing Fund, where the town sets aside about $1 million a year to support more units, Valenzuela said.
"These are things other local jurisdictions can consider adopting – either an affordable housing bond or local fund – to help offset some of those rising costs," he said.
"We know we can’t do it all on our own. It takes a team. It takes an effort," he added. "It’s going to take, typically, multiple funding sources and partnering and ensuring we have those commitments in place to help be able to pencil out a project."
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