Market-based, mission-driven developer dramatically lowers costs of building affordable housing

D Street Salal

Justus built D Street Salal apartments without public money and at half the cost of government-funded development. (Relay Resources)

Portland homeless advocate and builder has a model that he wants Seattle to adopt

By George Howland Jr

From 1992-2007, Rob Justus worked to get homeless people off the streets of Portland and into housing. “I left when we were struggling more and more with finding places for people to live,” recalls Justus. He didn’t, however, walk away from the problem. Instead, he developed his own model for building affordable housing that he says cut costs from Portland City Hall Housing Bureau’s (like Seattle’s Office of Housing) estimate of $200,000 a unit to $100,000 a door. He is already working with people in Bellingham and Vancouver, Washington to replicate the model. Now he wants to crack the region’s big provider of low-income housing: Seattle.

Non-profit developers of low-income housing in Seattle and Portland have strong concerns about Justus’ approach. Martha McLennan, Executive Director of Northwest Housing Alternatives, doesn’t believe Justus’ projects will hold up over time. “Does it make sense to build things we are not going to be happy with in 30 to 40 years?”

Says Justus, “We build to a 50-year standard.”

In 2009, Justus started his company, Home First Developer Partners (Home First). He knew he wanted to provide housing for people who make 30 percent—60 percent of Portland’s median income or $15,400—$31,000 for individuals. He calculated the rents that people in that income range could pay: $385—$770 for an individual and worked backwards from there.

Since developing his formula, Justus has built 233 units of affordable housing at an average construction cost of $90,000 each. Home First has an additional 311 units either under construction or permitted. “If someone is willing to have a modest return, they can do this all day long,” says Justus.

Satisfied customer: one-third the construction cost

Relay Resources, a non-profit that serves disabled people, has built 165 units with Home First and has broken ground on 154 more. Relay’s CEO and President Alysa Rose says, “We like his model. They were able to produce a unit of affordable housing for about one-third of the cost of the rest of the industry.”

Relay’s D Street Salal 78 apartments, built by Justus, feature amenities like a playground, a community gathering space, a basketball court, wi-fi, dual flush toilets, energy star appliances, on-site parking and granite countertops. And the current rent? It ranges: 400 square feet studios, $495 a month; 574 square feet one bedrooms, $719; and 747 square feet two bedrooms, $859. “Their model contains costs. They know how to make it work,” says Rose.

All of this has been done without any government money.

Justus has found a variety of ways to build less expensively.

First, he didn’t build in downtown Portland, where land and construction costs are high. Instead he has built in neighborhoods like East Portland, a poorer part of town.

Northwest Housing Alternatives’ McLennan believes building in poor neighborhoods is a mistake. “That was what we did 40 years ago,” she notes. Now, the emphasis in affordable housing circles is on creating mixed-income neighborhoods and building downtown near social services.

Second, Justus doesn’t hire a fancy architect. “Our designs are pretty basic,” he says.

McLennan argues that investing in good design will help affordable housing be attractive for decades. She refers, again, to how people today view 40-year-old public housing. “We cringe at those simple boxes,” she says.

Relay’s Rose is satisfied with the design of Justus’ projects. “I like the quality of the design and the living spaces,” she says.

No office, no employees, small profit margin

Third, Justus builds smaller buildings because they’re cheaper to build. His developments don’t rise above four stories, which allows him to use all wood-frame construction. The taller buildings often favored by non-profit affordable developers require more concrete construction, which entails higher costs.

Fourth, he avoided government funding that drives up costs with its complicated financing and bureaucratic requirements. Justus works with churches and non-profit organizations (not non-profit housing developers) like Neighborhood House, a social services agency. The church or organization uses their equity (land, grants or donations) to borrow money from the bank to build and pays the mortgage with the rents it receives from the low-income tenants. Justus makes sure the development pencils out.

Mclennan points out that if no one builds low-income housing using public money, government appropriations will go unused. Given the nature of the housing crisis, she says, “You can’t just turn [public money] away.”

The U.S. housing market has plenty of room, however, for both mission-driven, market-based, low-income housing and government-funded affordable housing.

Fifth, Justus and his partner don’t have an office or employees. They work out of their homes or in coffee shops.

Sixth, Justus doesn’t make a lot money on his projects. “There is no big margin of profit,” he says. “That’s why we are different from the for-profit developers.”

Seventh, Home First doesn’t contract with companies that pay prevailing wages, a government standard based on survey and collective bargaining agreements that is required for publicly funded projects. Justus subcontracts with small businesses and general contractors that have lower labor costs. “We hire a lot of businesses owned by people of color,” he says.

Mclennan has a couple of objections to this. “I do want to pay a fair wage. I don’t want to hire guys off the back of a truck for $12.00 an hour,” she says. In addition, Mclennan believes that Justus’ hiring practices will result in shoddy construction technique, which will lead to construction defects. “His product is relatively new,” she says. “We haven’t gotten to the point where we would see construction defects. It will take seven to ten years.”

Justus says Mclennan doesn’t know the cost of his labor. He adds that she hasn’t even toured his projects. He says his framers make $29 an hour and almost always his plumbers and electricians are union workers. He uses the same general contractors and small businesses that many regular for-profit housing developers do. “We have complete confidence in who is building our buildings,” he says.

Relay’s Rose doesn’t believe construction defects are an issue. “I see the materials. I see the quality of the construction. I welcome anybody to tour our projects,” she adds.

Justus hopes Seattleites will take up his approach. “There is no doubt that this could be replicated in Seattle,” he says. He invites interested parties to contact him through the Home First website. “If anyone wants to come to Portland and kick the tires—feel free!”he says.

Questions, tips, comments: georgehowlandjr@gmail.com

Award winning journalist George Howland Jr has been hired by Seattle Displacement Coalition to write for Outside City Hall about city politics, housing, homelessness and land use. He is not a member of Seattle Displacement Coalition and no part of his writing serves as a statement of the Coalition’s views. He works under his own editorial direction. The Coalition plays no role in choosing his specific subjects or editing his copy. He even refuses to drink beer with the Coalition’s John Fox.

.

Advertisements

About George Howland Jr

For many years, George Howland Jr has been a Seattle-based journalist.
This entry was posted in Affordable Housing, City Hall, George Howland articles, Homelessness. Bookmark the permalink.