Developers are excited about the potential for SB196—a new affordable housing bill passed by the state that exempts land trusts from paying property taxes on affordable housing projects. The new bill is expected to drive affordable housing development throughout the state, and builders are seeing an increase in interest in affordable housing projects.
"There is a rising sentiment among experts that this bill, along with the $1.75 billion the state is investing in new housing, will spur an increase in affordable housing and requests for this housing," Richard Lara, president and CEO of RAAM Construction, tells GlobeSt.com. "When legislators create bills like SB-196, affordable housing developers are more incentivized to start projects and finish them expediently, which benefits lower-income residents and families as well as the communities in which these developments are located."
While the bill will definitely help affordable project pencil, construction costs remain the biggest challenge to affordable housing development. "The challenge will be finding ways to build affordable communities in a way that guarantees their quality while meeting the timelines set up by this bill," says Lara. "That's why it's important for affordable housing developers to partner with construction specialists and general contractors who are adept at this type of development and know how to get the job done well and efficiently while remaining on budget."
RAAM Construction regularly works on affordable housing projects, and Lara says that it understands the unique nuances of the sector. It has several project currently in the pipeline, but the new supply still does not meet the current demand. "Given the state's new commitment to building affordable housing, the outlook on this sector is bright," says Lara. "While there is considerable pent-up demand for this product type and there has been an increasing need for it for years, we are finally on the path to begin to meet that need thanks to a renewed focus on the sector from legislators and other groups."
Lara forecasts a long runway in this segment of the market, particularly as the cycle matures. "Barring any Black Swan events that could reset the plan to develop more affordable housing, the likelihood of increased new project starts in California is strong," says Lara. "With a robust national economy, Opportunity Zone projects taking off, and the special attention affordable housing is receiving at the highest levels, we are anticipating a ramping up of affordable development projects over the next year."
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