Affordable Housing

Affordable housing is an extraordinarily complex and sensitive issue.  Due to my many years of being on the front lines of the issue I know to tread lightly.  It has not been solved in the North Lake Tahoe area and seems to be an increasing problem in many places in the country, including Reno.  There are a lot of good ideas and plenty of good people working on the issue, but I don’t know if we’re any closer to a solution.  It’s a hot button campaign issue for politicians but solutions to housing problems are easy to promise and very hard to deliver.

Sawmill Heights at Northstar

The development group I work with provided several land parcels for affordable housing as part of entitlements for projects.  Land was conveyed to regional affordable housing builders who move around the country with this set of expertise.  They know how to build the right product for the market, and they know how to use tax credits to finance their construction.

There are many incentives set up by governments to promote the issue, but my observation is it takes quite a bit of institutional knowledge to know how to use the tools and how to unlock the value.  I think there must be a high barrier to entry in terms of expertise needed and financial risk taken in order to operate profitably in this realm.   Also, I’m sure the different sets of rules put in place by every locale you work in allow for the application of general principles but require addressing specific details in each.

Emma Garrard/Sierra Sun The view from an upstairs unit at Gray’s Crossing. Workforce Housing of Truckee Tahoe is currently taking applications for the affordable housing.

Sometimes affordable housing gets built and doesn’t get used fully, either because it can’t compete in the market when it comes to cheap pricing,  or it’s simply the wrong product and is not attractive.

NIMBYs are a major problem with affordable.  Everyone says they want it, but only if it’s not in their neighborhood.

Environmental opposition groups won’t for allow for exceptions to their attacks to help get things done.  They run by hard and fast rules which don’t allow for compromise.  Their mission is to fight everything.

There’s a theory the prevalence of Airbnb and VRBO allow owners to rent for less total nights and achieve greater financial returns versus locking up their properties in old-fashioned ski or summer leases.  I’m not sure if they’re even still a thing but I remember from my younger days when a group of folks would rent a beach or ski place for the season.  It could be locals, living and working there, or it could be young people who would pool their resources to lock up a place to share.  I don’t hear those terms any more.  It seems so easy to rent what you need when you need on your phone that there’s no reason to make a big commitment.

It seems logical the result is there are less places available for long-term rent and there may in fact be less stable seasonal visitation and more peaks and valleys as allowed by easy short-term availability.

The Zuckerberg purchase of $60 million of real estate only highlights the competition for Tahoe housing.  It’s great to see that the world’s wealthiest value Tahoe so highly when the world is their oyster, but it also reminds us that in order for Tahoe to be a great place we need ski resort operations, restaurants, yoga instructors, and housekeepers, not to mention police, forest rangers, teachers, firefighters and the trash man. 

photo credit to http://www.time.com

I don’t have any answers for this issue, but I am always deeply skeptical when I hear someone say they do.  It’s going to involve broad representation in this problem-solving effort, and it must include developers.

If you enjoy my blog, please follow me.  Also, please connect with me on Twitter of LinkedIn.  Thanks.

The Great Recession

The Great Recession happened right in the middle of my career.  I worked for a real estate development company on a large-scale project that was about 7 or 8 years into a 25-year master plan.  And it was high-end, second home resort development in California.  It really could not have been worse.

We started on several golf and ski resort communities in 2000.  We were taking a model that had worked in the high-end mountain resorts of Colorado especially well during the convergence of the late 90s tech bubble and empty nest baby boomers arriving at the peak of their vacation home purchasing potential.

photo credit to http://www.beavercreek.com

We adopted the model to California resorts with high hopes that the market was ripe for some new development.  The plan included two brand new golf course communities, a high-end luxury hotel with a residential component, and an 1,800-unit master planned community at the base of and on the ski resort, and a club to bring it all together.  Entitlements and planning took a couple of years but when the first real estate was offered it was obvious the plan was right.  In 2002 we began delivering finished lots and townhomes, and by 2005 we were delivering a multi-story mixed-use base ski village that was the nicest in the state. 

photo credit to http://www.thetahoeweekly.com

At both the golf course communities and the ski village we had oversold lotteries to allow potential buyers the opportunity to select lots or units based on architectural renderings and site plans.  We had people threatening to sue because they showed up at a fancy hosted party and were unable to get their chance to plunk down a hefty deposit for a lot that hadn’t even been built.  That was the peak and we all now know that money was just too easy to come by and that was the real source of the hyper-competitive market for any and all real estate. 

We were writing the term sheets for construction loans and delivering to the banks, knowing if they didn’t take our proposed terms another bank would.  We created three different Community Facilities Districts with local utility and community services providers based on appraisals showing sales in the billions of dollars over the next 20 years.  Based on the way real estate was selling at the time, the assumptions were correct.  We had taken out every loan available, including the biggest loan the company had ever closed on to build the 5-star luxury hotel.  The loan was so big it took a consortium of four major international banks to deliver the funding.

photo credit to http://www.rgj.com

None of this was easy.  There was so much effort put in by smart and hard-working people.  We had folks that had relocated from around the country, experts in construction, sales and marketing, land planning, architecture and design, and finance.  The machine was humming, and the future was bright.

It was all too good to be true.

If you find my blog interesting, please follow. And please connect with me on Twitter or LinkedIn. Thank you.