Yes, it may be true that the construction costs are the same, but the specifications may not be.  Private developers, not subsidized, are no doubt more cost conscious than non-profits and look at alternative materials and specs. for fit-up.  Non-profit developers serving a lower income population may find it necessary to install more durable and higher quality materials notwithstanding their efforts to house responsible tenants.  I don't know whether that population can afford rental deposits either, unless a 3rd party is paying for them, and also must have minimum replacement reserves on day one of tenanting a new project.  As a result, it can be expected that their overall development costs may be higher. And some non-profit have multiple missions and are heavily staffed, and that may also result in some shifting of some development costs built into the projects to other purposes.  Also Developer fees may be different, and the definition of a developer fee, what's included and what's not,  can vary as well.

A responsible analysis would not be a survey, but an auditing of actual development costs from beginning to end, and comparing specifications would be necessary to truly understand the differences.  I am sure that a privately developed unit costs less to build than a publicly subsidized unit, but once it gets on the market, there are fees to be paid to agents and representatives to get them paid.  It's not just about the costs, but the market rents, and I am not sure what we know what the fair market rent happens to be for a unit that's not in the market.  In short, I am not sure I would offer two cents for this survey, and the results may not tell us anything.

Joel Schwartz

On Wed, Sep 25, 2019 at 4:38 PM Scott Jaunich <SJaunich@drm.com> wrote:

100% Agreed.  But I fear we are preaching to the choir!

 

R. Prescott Jaunich, Esq.
Downs Rachlin Martin PLLC
199 Main Street
P.O. Box 190
Burlington, Vermont 05402-0190
(802) 846-8606 (direct)
(802) 862-7512 (fax)
sjaunich@drm.com

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From: vtdevelopment@simplelists.com <vtdevelopment@simplelists.com> On Behalf Of Kemener Whalen
Sent: Wednesday, September 25, 2019 4:31 PM
To: Johnny G. Illick <JGIllick@rearchcompany.com>
Cc: David White <dwhite@whiteandburke.com>; Michael Kirick <michael@kirick.com>; Seth Leonard <SLeonard@vhfa.org>; vtdevelopment <vtdevelopment@simplelists.com>
Subject: [EXT] Re: [VT Dev] Vermont Affordable Rental Housing Cost Study: last call for data!

 

100% agreed with Mr. Illick..  What the state and municipalities fail to recognize (or accept perhaps) is that developers are not paying the permitting/impact fees, they are a conduit of the fees to the public.  While anecdotal I think this little story is representative:

 

I went to selectboard meeting in a town in chittenden county.  The public works director in the town was discussing water upgrades needed associated with potential zoning changes.  The discussion focused on pressure and cost.  When asked the public works person stated that given the current infrastructure if heights were increased there would not be sufficient water pressure to serve the increased heights.  The public works person indicated that the cost to get sufficient pressure would be substantial for the municipality.  The selectboard response "make the developer pay for it".

 

This little anecdote highlights the fundamental lack of recognition that the consumer is ultimately who is footing that bill.  Developers don't pay for anything, rather developers "float" the cost until it can be recouped from the consumer.  Developers are a conduit for the cost of permitting/entitlement to the consumer.  Developers are a pass through to the consumer.  Until the state/municipalities recognize that fundamental fact, there will be little headway in making housing more affordable (for consumers/citizens) in Vermont.

 

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Kemener Whalen

Chief Financial Officer

BlackRock Construction

p:

802.861.1123  m: 802.863.8313

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On Wed, Sep 25, 2019 at 4:04 PM Johnny G. Illick <JGIllick@rearchcompany.com> wrote:

All,

   ReArch Company does work for both housing authorities and for our own development projects and I can tell you that construction costs are the exact same. I agree with Kemener in that it is the current market conditions that are driving construction costs up but the costs are the same for everyone. 

 

I also think everyone is missing the point as the real issue is the extremely high impact and permitting fees. When you factor in the cost of all of the permitting, entitlement, ACT 250, wetland studies, etc., etc., etc., it drives up the project cost. The developer merely passes those costs on to the renter in the form of higher rent when most people think it’s the greedy developer trying to line their pockets. We as a state have to scale our impact fees back dramatically if we want affordable anything. Lowering fees will in fact affect us short term, but we need to be thinking more long term as it will pay huge dividends down the road by increasing our tax base, have a real supply of workforce housing, help attract and retain the thousands of people leaving our state, etc., etc., etc. The only way to develop affordable housing is with huge subsidies and even that is getting hard.

 

Until we can change the attitudes at the State and City levels, nothing is going to change and we will continue to struggle building affordable/workforce housing.

 

Current Impact fees in Vermont = “Unaffordable Housing” Not the cost of construction.

 

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From: vtdevelopment@simplelists.com <vtdevelopment@simplelists.com> On Behalf Of Kemener Whalen
Sent: Wednesday, September 25, 2019 2:16 PM
To: David White <dwhite@whiteandburke.com>
Cc: Michael Kirick <michael@kirick.com>; Seth Leonard <SLeonard@vhfa.org>; vtdevelopment <vtdevelopment@simplelists.com>
Subject: Re: [VT Dev] Vermont Affordable Rental Housing Cost Study: last call for data!

 

The cost of construction is rising for everyone.  The construction labor shortage is a contributing factor.  Material cost increases are a contributing factor.  The current tariff environment is a contributing factor.  These are issues that apply across all construction.  Steel tariffs are applied to all materials, not materials intended for "affordable vs market rate".  There are likely increased legal costs for "affordable housing groups", as generally their projects are reliant on tax credits, grants, etc - which will result in increased billable hours from lawyers/CPAs and may include fees associated with securing the funding.  However, the (land use) regulatory environment doesn't selectively apply fees for affordable vs market rate (and affordable generally offers some additional benefit - increased density, etc).  If the costs are being perceived as higher by the affordable housing groups, perhaps its a reflection of the increasing cost of construction coupled with a very expensive and time consuming permitting process, without recognition that for-profit developers are experiencing the same cost related burdens.  Perhaps the development community (for profit and non-profit) should work together to advance a unified message of regulatory cost and the impact on the cost of housing overall.  Vermont may indeed need more affordable housing (regulated), but more importantly it needs housing that is affordable (market rate).

 

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Kemener Whalen

Chief Financial Officer

BlackRock Construction

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802.861.1123  m: 802.863.8313

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a:

68 Randall St. South Burlington, VT 05403

w:

BlackRockUS.com  e: Kem@BlackRockUS.com

 

 

On Wed, Sep 25, 2019 at 1:45 PM David White <dwhite@whiteandburke.com> wrote:

Michael,

 

There have been some suggestions over the years that non-profit affordable housing organizations have been paying more than for-profit developers for their projects. Although I am not involved in this study, my understanding is that one of its objectives is to evaluate that issue. If affordable housing developers have been paying more than necessary, what can be done to bring their costs into line and thus reduce the amount of public subsidy? Let’s use public funds more wisely.

 

I hope that helps.

 

David

 

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From: vtdevelopment@simplelists.com <vtdevelopment@simplelists.com> On Behalf Of Michael Kirick
Sent: Wednesday, September 25, 2019 12:31 PM
To: Seth Leonard <SLeonard@vhfa.org>
Cc: vtdevelopment <vtdevelopment@simplelists.com>
Subject: Re: [VT Dev] Vermont Affordable Rental Housing Cost Study: last call for data!

 

Excuse me for being an idiot, but by definition, if "affordable" construction costs more, then doesn't that make it less affordable? Help me here on what the question is. What is being defined as affordable vs market?

 

Michael

From: "Seth Leonard" <SLeonard@vhfa.org>
To: "vtdevelopment" <vtdevelopment@simplelists.com>
Sent: Wednesday, September 25, 2019 9:48:21 AM
Subject: [VT Dev]  Vermont Affordable Rental Housing Cost Study: last call for data!

 

Good Morning,

 

Earlier this year, VHFA, VHCB and DHCD initiated a study of affordable rental housing development cost factors in Vermont. We are trying to answer a couple questions: is affordable rental housing more expensive to build than market-rate rentals, and if so, why and what can be done about it? Also, can we better understand the relation between public policy goals and their impact on the cost of development.

 

To make this study as valuable to our development community as possible, we need information on the cost of producing market rate rentals. The more data we have around market rate development, the more meaningful the study will be. We hope you will consider providing project-level development cost data for inclusion in a comparative statistical analysis. Even if you only have information for a small component of the development costs (such as engineering, architectural, or construction), this is helpful. As described in the Use of Data Agreement in the documents linked below, all data you provide will be aggregated and anonymized to ensure confidentiality.

 

We have put out several requests for data over the past few months, and are hoping to have all participants submit their information this week if possible (please contact me if a slightly longer timeline would be helpful).

 

Participation is very easy and will not take much time out of your day:

 

Thanks for participating in this important effort. We will be sharing the results at the White + Burke developers’ conference in November, will blog about, and can share it in other ways when it’s done late this fall.

 

Thank you very much!

 

Seth Leonard | Managing Director of Community Development

164 St. Paul St, Burlington, VT  05401  |  802.652.3403

Vermont Housing Finance Agency

vhfa  Affordable homes for a sustainable Vermont.

 

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Barre Area Development, Inc.
P.O. Box 265, 14 N. Main Street
Barre, VT 05641