Affordable Housing Development & Management
Six Dimensions of Success
An affordable housing property is likely to be successful only if it is soundly structured in six different areas that we call 'dimensions' because they are effectively independent of one another:
1. Community
The property represents its own little community of people. That community must be healthy, creating a sense of well-being, comfort and 'quiet enjoyment' for rent-paying adults, children, and the elderly. If not -- if a property's community is unhealthy -- then people will not want to rent, the external community will not want to help, and the current residents will not respect the property.
2. Physical
The property must provide a safe, clean, habitable, defensible physical environment so that apartments, building common areas, and open space are all attractive and present a good visual appearance. It must be well cared for and it must look well cared for.
3. Compliance
Affordable properties must have mechanisms in place to ensure programmatic compliance, which means (a) there must be compliance rules, (b) they must be monitored by a capable compliance regulator, (c) the compliance regulator must be credible, and (d) failure to comply must inevitably trigger appropriate enforcement (let the punishment fit the crime).
4. Operations
The property's ongoing income sources must always exceed its ongoing recurring operating costs, including intermittent costs like capital expenditures. (Because these are hard to predict, most soundly run properties use a substantial annual replacement reserve deposit to smooth out the annual costs and cushion shocks.)
5. Downstream responsiveness
No one can predict the future well enough to design a twenty-year financing and operating scheme that can survive all potential vicissitudes; therefore the property's configuration must have enough built-in responsiveness to cope with the unpredictable. This means (a) the rules must have escape hatches or change procedures that can cope with on-the-fly redesign, and (b) the property must be owned and regulated by people capable of changing the plan when the plan is failing.
6. Financing
The property's financing must be in balance so that (i) it has enough sources of funds to cover all its projected development or acquisition uses of funds, and (ii) working capital on its balance sheet must be ample to cope with the normal ebb and flow of receivables and payables. A property should always be contracting for products and services from strength, and it cannot do this if the balance sheet is weak.
These are interdependent; most are consequences of government decisions.