(To read more on the multifamily market, click here.)
DENVER-It costs developers an estimated $5.34 million, or $85,000 per unit, to develop a typical 60-unit, two-bedroom affordable housing community in Colorado, according to a recently released Colorado Blue Ribbon Panel on Housing report. Kathi Williams, executive director of the Colorado Division of Housing, and co-chair of the report, is calling the public-private report, 13 months in the making, the most exhaustive report ever compiled in the state.
The report states that a typical affordable housing community requires a developer to receive cash flow of $562,000, which means the developer needs $950 per month in rent to operate and pay the debt.
"Private builders, financial institutions, Realtors, insurance firms and other private entities dominate the housing market in Colorado," the report notes. "Under most circumstances, private financing and construction of housing is quite proficient at producing quality housing affordable to a significant portion for the population."
However, affordable housing developers face basic economic challenges, the report says. "The problem in producing housing for lower-income populations arises from the high-cost of producing housing, which constricts the supply of housing available to the lower-end of the income spectrum," states the report. "These costs may be due to the cost of materials, the cost of land, the cost of infrastructure, the length of time necessary to navigate the approval process, minimum fire and safety standards, or other factors."
Public dollars, the report says, can be made available to developers of affordable housing to reduce the cost of land acquisition or other pre-development costs. The report also says that a "one-stop shop" is needed to provide easy access to developers to streamline the development and grant application process. It recommends that the Colorado Division of Housing staff and fund the one-stop shop.
The report also suggest that groups such as the Colorado Division of Housing, Colorado Housing and Finance Authority, and HUD, which work closely with developers, create common application procedures to streamline developers' ability to get financing. "Such procedures would allow developers to apply to several housing agencies by filling out a single application," the report notes.
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