Reinvestment Fund financing is helping Community Asset Preservation Corporation (CAPC) bring new construction, affordable homeownership to appreciating markets in Florida and New Jersey.
CAPC, a nonprofit developer, is building homes in low- and moderate-income census tracts across the Orlando (Orange, Seminole and Osceola Counties), Tampa (Hillsborough and Pinellas Counties), and Palm Beach County markets in Florida, as well as in the Essex County market in New Jersey. The units will still be largely affordable to buyers ranging between 80% and 120% of the area median income.
Florida is in the midst of significant population and economic growth–it is currently the third most populous state in the country, with the fourth largest economy. Not surprisingly, the growth has increased the demand for housing, putting pressure on prices and accelerating the loss of affordable housing.
Several recent studies have revealed a severe housing shortage in Florida. According to the National Low-Income Housing Coalition, 79% of Florida’s extremely low-income renter households face severe cost burdens, spending more than half their income on rent. Costs have also increased for homeownership. As compared to 2000, when two-thirds of the state home sales were affordable (defined as $210,000 in current dollars), the majority of homes sales in Florida are now unaffordable. According to the National Low-Income Housing Coalition, the Orlando metro area is now the most unaffordable in the nation, and relatively speaking, is less affordable than famously expensive cities like San Francisco and Seattle.
Investors in Florida’s single-family market have further constricted affordable homeownership opportunities. According to a study by the University of Florida’s Shimberg Center for Housing Studies, in recent years, investors have accounted for approximately 40% of the single-family home sales in the state, including in CAPC’s target markets. This consists primarily of portfolio investors like REITs and other private equity vehicles, who purchase single family assets for rent rather than sale. As the existing single-family inventory has shrunk in recent years, investors have also moved toward build-for-rent, consuming new construction as well. In addition to institutional investors, smaller scale “flippers” also represent a significant portion of the single-family market in CAPC’s target areas. Nationally the rate of sales of single-family homes to flipper investors was 7.7%. This compares to 16.23% in Tampa and 15.1% in Orlando, both of which cities are among the top 10 highest in the country.
Despite the active trade in single family housing taking place in the relevant Florida markets, there remains a significant amount of developable infill lots in already built neighborhoods with established infrastructure. CAPC plans to target its development to these infill lots and also build on local government initiatives to support affordable housing development in Orlando and Tampa.
In New Jersey, CAPC’s development efforts are largely centered in Newark, where CAPC is located, and in smaller nearby cities of similar demographic and neighborhood character, such as Irvington and East Orange. With a population of 282,000, a median income of $37,600, and a poverty rate of 28%, Newark is markedly less prosperous than Essex County overall. The homeownership rate in Newark is particularly low at only 21.9%, and Newark has lost 3,300 homeowners in 5 years. Small owner-occupied properties (2 – 4 units) are very common in urban areas in the Essex County market and 45% of Newark residents live in small apartment buildings of 2 to 4 units. CAPC plans to develop similar properties with units that will be affordable to families at under 120% are median income.
Since 2009, CAPC has completed over 800 newly constructed or rehabilitated housing units in New Jersey and Florida, at a total development cost of $170 million. Reinvestment Fund is providing enterprise-level capital to CAPC, with a multi-year, revolving line of credit facility of up to $8 million. CAPC will not only create quality affordable units, but also be able to do so at scale based on efficient acquisition, construction and sales management and without reliance on public subsidy. Over the course of 5 years, CAPC projects using the facility to develop more than 220 units, with as many as 40 units in development at any one time. The Florida units will also be built with steel frame and poured concrete construction techniques that are both energy efficient and more resilient to hurricanes and other hazards.