Young For-Profit Housing Developer

by Frederick
(Houston, TX)

Visitor Question: Can a for-profit housing developer build and manage both market rate housing and low-income government subsidized housing?

Editors' Reply: Absolutely! There's nothing to prevent a housing developer from addressing many price points in housing. Certainly low-income housing is something of a specialty in many instances, simply because following all the rules for government subsidies is a bit challenging.

And many for-profit developers hate the thought of low-income housing and/or what it would mean in terms of supposed bureaucratic red tape.

But you can cross over from one to the other, much as you might change from your newest development being twice as expensive as the last one.

After you understand the low-income or middle-income housing rules, programs, regulations, and culture, would-be nonprofit housing developers
will be acquainted with the players, know where to go for answers, and not necessarily find it more difficult than developing for profit.

In fact, we would encourage you to think about developing mixed-income housing. This requires some extra attention to architecture and detail, but it's really rewarding if your motivation for the low-income housing is altruism. Lower incomes benefit not only by the government subsidy but also by becoming acquainted with middle-income folks.

This is important because middle-income role models are useful in encouraging and motivating lower-income individuals. In addition, those market rate owners or tenants are likely to have more contacts with people who hire and thus be able to provide valuable job leads to the lower income residents.

Mixed-income housing can come about easier than you think, by virtue of making a development of similar sized buildings in compatible architectural styles, but make some of them single-family residences, some two-family, and maybe even some three-family.

The two-family and three-family don't have to be comprised of equally sized units. For example, a "two-family" in this context can mean a popular housing unit size in your market, plus a mother-in-law apartment or other accessory dwelling unit. Similarly, the three-family building could consist of one fairly ample size unit with two apartment-size units within the building.

In short, there's just nothing to prevent a portfolio of both market-rate and subsidized housing, and you'll be doing nothing but good for society if you try the mixed-income route. In some markets, the government subsidy is actually higher than the real market, although in other cities, the reverse is true. You will have to discover the right mix for your own profitability as a housing developer.

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