Promoting Integration at Mixed-Use, Mixed-Income Communities

May 3, 2018

Affordable Housing Development Featured Finance & Investment More Market Rate National News

Multifamily developers and investors at the 2018 ULI Spring Meeting discussed their solutions and strategies for making mixed-income/mixed-use developments more scalable, as well as the challenges they face along the way.

Integrating Mixed-Income and Mixed-Use panel at the 2018 ULI Fall Meeting

In today’s economy, you can predict life expectancy by zip code moreso than by genetic code, observed Salin Geevarghese, senior fellow at the Center for the Study of Social Policy, speaking on a panel at the 2018 ULI Spring Meeting in Detroit. With this in mind, developers from market-rate to affordable housing are identifying ways to create mixed-income and mixed-use developments that promote diversity, equity and integration.

“Our racial and income segregation and opportunity mismatch are fundamental starting points for our work to create equitable, inclusive, mixed-income communities that enable everyone to achieve,” Geevarghese added.

In California, which boasts one of the largest economies in the world, the state’s economic expansion has not been shared equitably, noted Benjamin Metcalf, director of the California Department of Housing and Community Development. Inability to afford quality housing has led to consistent out-migration from the state. From 2007 to 2016, California lost 1 million residents to domestic migration—or about 2.5 percent of its total population—according to American Community Survey data.

As a result, California has been using mapping software to see at the Census tract level where discretionary public funding should be placed to support new affordable and mixed-income construction. The state has also initiated a big push for accessory dwelling units (ADUs), which are second small dwellings on the same grounds, or attached to, a regular house.

“They’re a great way to add entry-level, attainable, reasonably priced (housing for low-income homeowners),” Metcalf said. Over the last couple of years, the strategy has taken off, growing from 80 issued ADUs in 2016 to almost 2,000 last year.

Policy in Practice

The Parks at Walter Reed, a $1 billion redevelopment of the Walter Reed Army Medical Center into a mixed-use, mixed-income development in Washington, D.C.

Two developers described how their firms are putting this goal of creating mixed-income communities into practice.

For real estate development and investment firm Urban Atlantic, the strategy is to develop communities that include 20 percent affordable housing and 80 percent market-rate units. Panelist Vicki Davis, president of Urban Atlantic, discussed the firm’s redevelopment of the former Walter Reed Army Medical Center in Washington, D.C. Dubbed The Parks at Walter Reed, the $1 billion mixed-use, 66-acre project is in collaboration with Hines and Triden Development Group.

The firm is committed to designating 20 percent of the 2,100 units as affordable, with one-third for those making 30 percent of AMI, one-third for those making 50 percent of AMI and one-third for 80 percent AMI. For the 30 percent AMI renters, which are largely formerly homeless individuals, Urban Atlantic will provide supportive services in their buildings.

She noted, however, that the benefits of developing these projects certainly come with their challenges, including the tensions of having people of varying incomes living together.

Despite this, Davis said that having great public partners, financing tools and a supportive regulatory environment are key to creating successful mixed-income communities.

Daryl Carter, founder, chairman & CEO of workforce and affordable housing investment firm Avanath Capital Management, agreed that these types of projects come with unique difficulties.

A few years ago, Avanath purchased and renovated the 528-unit Northpointe Apartments, one of the largest Section 8 developments in Long Beach, Calif. The community and the adjacent market-rate community were in high-crime neighborhoods, so the firm decided to buy both properties totaling nearly 1,000 units in order to improve the entire area.

Northpointe, one of the largest Section 8 developments in Long Beach, Calif., was purchased by Avanath Capital Management and renovated to a mixed-income community. Photo by Andy Yutsai Wang | W Architectural Photography

Because the city councilman didn’t want a concentration of affordable housing, Avanath renovated the properties to be mixed-income for those making 80 to 85 percent of AMI.

“Those communities today…show you can make an impact on the neighborhood. We make a lot of money by making our (communities) safe and secure and we put considerable money into it,” Carter said.

He noted, however, that many of the challenges surrounding developing these communities come down to race. “Our business model, we raise institutional capital…you hear all kinds of pushback,” he explained.

Davis agreed that buy-in from stakeholders is a challenge—although it’s getting easier—as well as financing, due to affordable and market-rate solutions not meshing well together.

As a result Avanath has been in the “myth-busting business,” proving to investors that its properties’ performance is strong and rents are paid on-time, and lowering the perception of risk about investing in communities of color.

He added that making a community safer is also about reducing turnover. “When people know their neighbors, it’s safer,” he proclaimed.

Davis agreed that diversity of people and activation of the spaces make for great communities, noting that there’s been a shift toward “placemaking” in the multifamily arena.

“Being near your work, being near your shopping, being in walkable communities, near parks, etc., makes a natural step for mixed-use and mixed-income communities,” Davis added. “I think it’s going to get easier over time because it starts to be baked in.”