MULTIFAMILY FOCUS
HOUSING AFFORDABILITY
tend to be great for homeowners, but pretty tough for homebuyers, especial- ly first-time homebuyers. As housing becomes less affordable in Nashville and elsewhere in the country, it gets tougher for people who are just out of college and people earning the median income in the area (usually nurses, teachers, firefighters, etc.) to buy a home. The solution, in my opinion, is to build more condominium developments as quickly as possible, and it’s clear from our local government’s actions I’m not alone in this belief. In Nashville, there are now a lot of government-sponsored incentives for real estate investors wanting to build multi- family housing, both condos and apart- ments. Since condominiums are a great first step into homeownership for a lot of people who otherwise could not afford to buy, they are particularly attractive to policy-makers concerned about housing affordability. A developer with a solid plan for keeping their units affordable may be able to negotiate a public-private partnership with the government to ob- tain land for building (that’s a tough thing to do these days), get grants to provide capital, earn tax abatements and credits, or qualify for low-interest loans. These programs are in place in a number of markets already, if you know to look for them or apply for them. With every one of these strategies that a develop- er uses successfully, they are increasingly able to build housing that is affordable to the first-time homebuyer and middle-class homebuyer because they do not have to sell those units for as much to still make a profit. At the end of the day, building affordable housing in hot markets provides a huge economic benefit to the communi- ty, and it’s one that a lot of local and state governments are willing to pay for.
um developments today, but when I first started the Solo East project, there was not so much interest. I had an idea to create the Solo brand so we could eventually have a Solo North, South, andWest in addition to Solo East. But Solo East was the first. It’s in a hot area of Nashville now, but things were not so hot when I got started. In fact, my development was located on the very fringe of the neighborhood, and I had to hope I was right about the neighborhood turning a corner. I had to hope that building the right kind of rooftops (residences) would bring in the economic growth the area needed in order to be an attractive place to live. One of the ways that you can spot this kind of “rooftop potential” in a neighbor- hood is if you see that bars, restaurants, or desirable retail are going up (or being planned) in the area. Then, if you really want to get ahead of the game, you must be the one with the vision to really get things off the ground. For example, with the Solo East Development, we broke ground shortly before a developer with a similar concept but a much more expensive end product. His priority was not necessarily housing affordability, but that was okay because the two developments were good for the neighborhood values. We had already sold out at a good but affordable price point, and rising property values provided incoming businesses with some confidence. The important thing to understand about the Solo East development (and others in the brand) is they are founded on the importance of housing affordability. We buy land and, as part of our game plan now, obtain as many advantages for development as possible so we can pre-sell and sell our condos with built-in equity for the owners. Then, we offer our potential buyers access to all the information we can about financing those properties. For example: • Condo buyers can get loans for up to 97 percent of the purchase price. • There are a lot of programs out there to help first-time buyers.
• If you buy an affordable condo at pre- sale, you will likely have equity when you move in. • Interest rates are not likely to remain as low as they are at present. • The same programs that are designed to help a developer, like me, keep prices affordable may have partner programs designed to help buyers access that affordable housing. THE “TRAIN” IS LEAVING THE STATION One of the things I believe makes the development of affordable housing options, including multifamily op- tions for ownership like condominium developments, so important is that for many people in this country, the opportunity to own a home is getting ready to expire. This is not just bad for people wanting to own property. It’s also potentially bad for the economy. As rents continue to rise, more households spend more of their monthly paycheck on housing and have less disposable income to spend in the local economy. Over time, you end up with a large spending population that cannot spend because all their income is going toward housing, and they’re not even getting appreciation or equity out of the deal. It’s an important responsibility for those who have the ability to create affordable housing that is also profitable to do so. It does not just help those in the community; it also builds up the local economy and supports our own families in the process. •
The Solo East condominiums were designed with affordability in mind, but they also have high- end amenities that make ownership attractive to young professionals.
Howa Condo Community EnabledMe to CreateWealth for Myself and 121 Homeowners A DEVELOPER LOOKS BACK ON A SUCCESSFUL EXPERIMENT IN HOUSING AFFORDABILITY.
by Bruce McNeilage
T
sold them those units in the full confidence that I was doing the right thing not just for those families, but also for my own. Condominiums represent a unique oppor- tunity in multifamily real estate because they add substantially to the inventory of affordable housing in a community while still generating healthy, substantial profits. WHY CONDO COMMUNITIES PAY OFF IN HOT MARKETS It’s no secret that the Nashville, Tennes- see, real estate market is hot. Hot markets
first stage of homeownership, but that the project would also be a great source of returns for myself and my investors. That was the beginning of the Solo proj- ects, the first of which is Nashville’s Solo East. When the 121 owners in Solo East moved in, they moved in with equity, the long-term security of homeownership, and a fixed monthly rate on their mortgages. They also had knowledge that more than likely they would personally benefit from rising home values in the Nashville area when they were ready to sell and move into a bigger, possibly single-family, home. I
hanks to the housing crash in the mid-2000s, a lot of banks and
lenders simply stop listening when they hear a developer say the words “condo” or “condominium.” That trend is changing today, but it was still very firmly in place in 2010, when I got the idea to start investing in condo developments. At that time, it was extremely difficult to get a bank to lend on such a project. However, I kept at it, because I believed (rightly, as it turned out) that condominium communities would not only be a great way to bring a new generation of homeowners into the
Bruce McNeilage is the managingmember and a co-founder of Kinloch Partners. He is a passionate advocate for housing affordability and homeownership, and
invests heavily in Nashville, Tennessee, as well as throughout the southeast. Learn more about his projects, including single-family built-to-rent com- munities and the Solo East and North condominium projects at www.Kinlochpartners.net.
ROOFTOPS FOR RETAIL: GETTING IN AHEAD OF THE GAME There is a lot of buzz about condomini-
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