Get in on the Ground Floor With Mixed-Use Affordable Housing Projects

November 27, 2017

It used to be common to set affordable housing projects away from shops and services, creating unbreakable cycles of separation that led to urban blight and despair.

But today’s developers are adding retail tenants and more to mixed-use affordable housing projects to build stronger, more valuable communities.

Over the past decade, examples have popped up across the country, from a handful of first-floor shops to grocery stores that span the ground floor.

For example, the Chicago Housing Authority (CHA) is working with a private developer on a proposed seven-story project that will include a 30,000-square-foot Target store, according to Curbed Chicago. It includes 111 rental apartments; 60 percent would be reserved for CHA residents, and the rest will be rented at market rate. The site, which is currently now partly a parking lot, is next to another CHA building for seniors.

Building affordable housing on top of space devoted to retail, restaurants and service tenants is a growing trend, especially in urban neighborhoods where developers need to maximize density and improve profitability. It also plays a critical role in supporting diverse, livable communities.

Here’s how it works, and how affordable-housing developers can start planning to take part.

Benefits From the Ground Up

Mixed-use components deliver multiple benefits to affordable housing properties.

The commercial space provides an added income stream. Commercial tenants may stay put longer and yield a more dependable source of revenue. That brings added financial stability and diversity, which is often viewed favorably by both lenders and investors.

Commercial space is especially valuable when leased to tenants that provide services or amenities to the resident base, such as a fitness center, coffee shop or dry cleaner. Those services attract tenants and speed lease-up. The residential units provide a captive audience of customers or employees.

The addition of retail or office space in an affordable housing project also paves the way for city and neighborhood approvals.

In fact, some cities are now including commercial-use requirements in requests for proposals (RFPs) to stimulate area revitalization and job creation.

A good example of that is found in South Los Angeles, where Meta Housing Corp. developed an 80-unit project that included a 15,000-square-foot Fresh & Easy market. It was the first new grocery store in the high-crime, low-income neighborhood in decades.

Meta was not experienced at developing mixed-use affordable communities. But to grant city support and additional funding, The Community Redevelopment Agency of Los Angeles required Meta bring in the store, part of its efforts to revitalize the area.

In Florida, developer Riverwest Miami is proposing a project in Little Havana that will feature more than 700 units of affordable senior and workforce housing, 950 parking spaces and approximately 81,000 square feet of retail space, including grocery and home-goods stores, according to the South Florida Business Journal.

“We want to service the workforce housing population so they can live there, shop there and do their groceries there,” an attorney for Riverwest told city’s Planning, Zoning and Appeals Board.

An Eye for Design

Mixed-use affordable housing projects can add value, but also complexity. No one wants to carve out space in a plan to accommodate office, retail or restaurant tenants only to have it sit there vacant.

Developers need to allocate the right amount of space to create a balanced mix of retail, restaurant and service businesses that complement the project and the surrounding neighborhood.

The New York City Department of Housing Preservation and Development, along with the Design Trust for Public Space, took some of the lessons learned to publish a guidebook, “Laying the Groundwork.” The guide provides best practices and step-by-step advice aimed at improving the design of ground-floor commercial space within mixed-use affordable housing projects.

Commercial space is vastly different from housing space. So, design and build it with commercial tenants in mind. Also think about requirements of different tenants. For example, do you want to attract a restaurant? They often demand more rigorous ventilation, plumbing and electrical infrastructure.

Consider the following while designing:

  • Will you have separate entrances?
  • How will traffic flow?
  • Will your commercial spaces have adequate mechanical and plumbing?
  • Will the commercial space need bike racks or additional parking?
  • Will the exterior lighting promote activity and security?

Know Your Neighborhood

Leasing and merchandising that retail space is another important step. Understand the demographics and demand that exist in the particular market or trade area; the neighborhood may not need another coffee shop or nail salon. Choose tenants that can add novelty.

And think about how possible mixed-use tenants will add value both to your project (monetary) and for the residents living there (lifestyle).

Adding a commercial component to a mixed-use affordable housing project shouldn’t be an afterthought. It requires careful planning and individual consideration for design, construction, leasing and merchandising to provide the benefits you want from it.

And what are these benefits for affordable-housing developers? You get a space that adds value, provides new opportunities to generate increased income, and contributes to the overall success of the project.

For more content on real estate, read: How Developers are Lowering Apartment Costs

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