New York City has some of the most expensive real estate in the country. It is nearly impossible for a large segment of the population to afford even modest apartments. The need for low-income housing solutions is great; the CEO of one of the city’s largest affordable housing developers estimates that the city needs at least 800,000 affordable units.
New York has a goal of creating 300,000 affordable units by 2026. But even with this goal, the task of constructing affordable developments can be difficult with existing regulations, the high costs of construction and the stigma surrounding affordable housing. What should real estate developers consider before pursuing an opportunity?
Items to evaluate before purchase
Developing low-income housing is not simple. Before purchasing a lot or a building to transform, developers should closely evaluate the following:
- Zoning regulations in the area
- Tax implications of a purchase
- Whether the city will maintain ownership of the land
- Which groups will need to approve the construction plan
- Proper funding sources for the project
- Relative costs of construction in that section of the city
New projects are subject to local, state and federal regulations. All three need to be carefully considered prior to construction to ensure compliance. Failing to meet regulations can result in costly project pitfalls or ultimate project failure.
Leaving little margin for error
When you design and create low-income housing, you must keep your costs as low as possible to make the plan a viable option. Economic efficiency is exceedingly important, as is avoiding costly disagreements with constructors, suppliers and other invested parties.
Developers should ensure that they have thorough contracts in place prior to entering into a business relationship. It may be prudent to have a real estate attorney review and revise contracts before signing to avoid preventable complications, and to give the project the best chances of success.