Key Takeaways from “Making Multifamily Developments Work in Challenging Times: Capital, Legislation, and Construction Insights”

Last month at the 2024 PCBC, I had the privilege of moderating a panel with Daniel Bertao , Vice President of Development at Ryan Companies, Shonda Herold from Affirmed Housing, Rob Warnaca, DBIA , President of GenCap Construction, and Seth Dorros , Vice President of Land Acquisitions at JPI.

Below are my top takeaways from the panel:

Capital Challenges and Creative Financing:

Both Seth and Daniel mentioned looking beyond traditional institutional financing, exploring high-net-worth syndications, family offices, and public-private partnerships. Creative financial structures, such as co-GP arrangements and joint ventures with land sellers, were highlighted as necessary strategies to make projects viable in the current market.

Collaboration with Market Rate and Affordable Developers:

Shonda Herold from Affirmed Housing highlighted opportunities for collaboration between market rate and affordable housing developers. By partnering on projects, developers can meet inclusionary housing requirements and creatively finance developments using affordable housing mechanisms.

Innovative and Efficient Design Approaches:

Design efficiency and maximizing yield are critical concepts. Daniel described a a growing trend, by which traditional forms are being upsized and densified to maximize returns. Three-story gardens are now 4 and 5 story tuck-unders. Wraps can be up to 8-story podium wraps and Podium densities may exceed 200 DUA. Efforts are being made to develop attainable housing by simplifying and standardizing designs, which involves reducing the number of unit types and using more standardize design elements. The focus has shifted to construction efficiency (not just reduced unit size).

Impact of Legislation and Policy:

Legislation such as SB 330 and density bonus laws which provide access to waivers and incentives in California were discussed as crucial tools for making multifamily projects feasible. Seth noted that waivers are more useful on some projects than the Density Bonus itself. He also acknowledged ongoing issues with CEQA abuse, which can delay projects despite favorable legislation. The Complete Communities program in San Diego was cited as an exemplary model for incentivizing housing development.

Construction Costs and Labor Supply:

The panel highlighted the stabilization of construction costs, with prices leveling off after significant increases in previous years. However, labor shortages remain a concern. Rob Warnaca from Gencap Construction pointed out the industry's ongoing struggle with recruiting younger workers and the aging workforce, which continues to drive up labor costs. The importance of improving pre-construction processes and developing design standards to enhance efficiency and reduce costs was also emphasized.