How This Workforce Housing Developer is Saving on Construction Costs

Unlike some developers in the market, Ernesto Lopes, president & CEO of AHS Residential, doesn’t want to build high-end, luxury apartments. Instead, he aims to help solve the housing crisis by building attractive communities at a moderate price point for working-class families and individuals.

Even before the pandemic, that wasn’t easy. But, now, with soaring construction and labor costs, it is a daunting task. Still, Lopes says it is possible. In fact, he thinks it is possible to build attainable housing on a large scale. He plans to start 1,000 units by the end of this year. By 2024, he wants to hit 5,000 annually.

Lopes’ plan starts with controlling construction costs. “Construction is key,” he says. “It’s where most of the money is going. If you can control and be very efficient on the construction, then that is a big part of the problem you’re solving.”

Since AHS is vertically integrated, it doesn’t take developer fees, which saves money. In addition, Lopes says this integration means that entitlement risks, construction risks and lease-up risks are minimized.

“We understand these risks very well, and I think we can control them,” Lopes says. “So, we don’t see as much of a risk as other investors are seeing it. That allows us to control the cost, be more efficient in what we do, and generate the same kind of returns that other developers are doing. Then we still charge a reasonable rent.”

AHS also builds an “extremely standardized” product, according to Lopes. “We only have one type of two-bedroom apartment, one type of one-bedroom apartment and one type of three-bedroom apartment,” Lopes says. “And they’re the same, whether you’re in Miami, Atlanta or Dallas. We do change the exterior textural features.”

Modular construction is one way the company saves costs and achieves standardization. “We’re more efficient in the design of buildings because they’re modular,” Lopes says. “They’re already 90% designed. So we can have a set of drawings in 30 days for any kind of building we’re doing. And because we always build the same units, we’re very efficient in doing that.

On the construction site, AHS relies on production managers. “Our production managers are only focused 100% on production,” Lopes says. “They don’t do contract administration.”

AHS does everything on concrete, and it uses aluminum forms that allow it to build faster than competitors, according to Lopes.

“By repetition, we build it more efficiently,” Lopes says. “That’s a big part of the equation as well. Those are the main factors that make us a little different. It allows us to solve a major problem [affordability] that this country is having.”

AHS only develops. It doesn’t buy and renovate. “We’re a greenfield company and I think that we bring a lot of value by building it cheaper,” Lopes says. “Our cost of acquisition is less than it would be for a value-add developer buying an older product. We still think our base will be cheaper.”