BECKHAM Bending the Curve

Transcription

1 BECKHAM Bending the Curve

2 Bending the Cost Curve like Beckham: Trends in Housing and Construction Costs

3 Speakers Andrew Jakabovics, Enterprise Community Partners Sharon Dworkin Bell, National Association of Home Builders (NAHB) Bob Saffin, Miller Valentine Group Moderated by: Bill Martin, Barrington Homes

4 Bending the Cost Curve Solutions to Expand the Supply of Affordable Rental Housing Andrew Jakabovics Enterprise Community AIA Session Code: 4nov-COST

5 Required This presentation is protected by U.S. and international copyright laws. Reproduction, distribution, display and use of the presentation without written permission of the speaker is prohibited.

6 Required This program is registered with the AIA/CES for continuing professional education. As such, it does not include content that may be deemed or construed to constitute approval, of any method, product, service, enterprise sponsorship or endorsement by AIA New York State. The statements expressed by speakers, panelists, and other participants reflect their own views and not necessarily reflect the views or positions of the AIA or AIANYS, local components, or those of their respective officers, directors, members, employees or any other organization associated with them and involved in the planning and production of this program. Questions related to specific products and services may only be addressed at the conclusion of this presentation.

7 Learning Objectives: Participants will be able to understand specific elements of the development process and how they impact cost. Participants will be able to identify how various aspects of the development process relate to each other with respect to cost. Participants will be able to list stakeholders who can help address cost issues. Participants will be able to identify opportunities to address costs within their own control and find partners to work with across the table.

8 Bending the Cost Curve Initiative Overview Collaboration w/uli Terwilliger Center and Enterprise Roundtables and interviews with nearly 200 key stakeholders in: Chicago, Denver, Houston, Los Angeles, Minneapolis/St. Paul, New York City, Pittsburgh, San Francisco, Seattle Publications Nov. 2013: Bending the Cost Curve Discussion Brief Jan. 2014: Bending the Cost Curve Full Report Additional activities Minnesota Challenge

9 Finance and Underwriting: Complexity = Time = $ Development types limited by capital availability Deal structure can increase costs The impact of layered finance Multiple goals per investor x multiple investors per deal Additional paperwork, fees, due diligence expenses Compliance requirements Longer timelines More holding costs Reduced competition

10 Program and Investor Requirements Processes, rules and incentives can create additional costs Subsidy allocation process Programs/investor requirements Requirements/incentives to meet other policy goals Cost control measures do not always work as intended

11 State & Local Regulations and Fees Framework can influence building type, design and construction costs Examples: Parking minimums Density, height and unit size requirements Bans on project types Building codes and rehabilitation standards Role of public sector in site selection process Qualified contractor rules Procurement preferences Wage rate regulations

12 Process-related Cost Drivers Interrelated nature of cost drivers adds to challenges Path dependency can escalate costs at later date Intersection of program rules and financing sources

13 Best Practices for Bending the Cost Curve Promote cost-effectiveness through consolidation, coordination and simplification Remove barriers to reducing construction costs and delays Facilitate a more efficient deal assembly and development timeline Improve and align incentives Improve the flexibility of existing sources of financing and create new financial products to better meet needs. Support the development and dissemination of information and best practices

14 Stay Connected Andrew Jakabovics Sr. Director, Policy Development & Research Enterprise Community Partners

15 2014 Ohio Housing Conference Sharon Dworkin Bell Senior Vice President, Multifamily and 50+ Housing

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17 Average Share of Builders Reporting Shortages - History m SF starts in k SF starts Jan-Jul Direct Labor Subcontractors Source: NAHB, BEC Survey.

18 Share of Builders Reporting Labor/Subcontractor Shortages* (Percent of Respondents) Carpenters-rough Framing crews Carpenters-finished Bricklayers/Masons Plumbers Painters Roofers Electricians HVAC Weatherization workers Excavators Building maintenance manager 63% 68% 60% 68% 58% 63% 49% 52% 38% 42% 38% 46% 37% 44% 35% 42% 29% 33% 29% 31% 28% 37% 25% 28% Direct Labor Subcontractors * Some or serious shortage. Source: NAHB, BEC Survey, June 2014

19 Average Change in Labor Costs (For same house, Previous 6 Months) Mar-13 Jun % 2.9% 2.8% 1.4% Direct Labor Subcontractor Source: NAHB, BEC Survey.

20 Effects Labor Shortages Have Had on Your Business over the Past 6 Months (Percent of Respondents) Caused you to pay higher wages/subcontractor bids Caused you to raise home prices 54% 54% 65% 62% Created difficulty in completing projects on time 46% 60% Caused you to seek labor/subcontractors from wider geography 35% 36% Made some projects unprofitable Caused you to turn down some projects Slowed the rate you accept incoming orders Lost/cancelled sales 28% 24% 15% 18% 10% 13% 9% 9% Mar-13 Jun-14 Source: NAHB, BEC Survey.

21 Low to Very Low Supply of Lots (Percent of Respondents reporting market supply as low to very low) 53% 59% 59% 45% 43% 29% 30% 16% 7% Mar'97 Jun'03 Aug'05 Aug'06 Feb'09 Mar'10 Sep'12 Aug'13 May'14 Source: NAHB HMI Survey.

22 Shortages Translate Into Higher Prices (Percent of respondents reporting higher prices than one year ago) 69% August 2013 May % 55% 61% 45% 49% A Lots B Lots C Lots Source: NAHB HMI Survey.

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24 Share of Builders Reporting Building Material Shortages* (% of Respondents Who Purchase Materials) Trusses Clay brick Windows and Doors Gypsum wall board Cabinets Hardwood flooring Ready-mix concrete Roofing materials Steel Beams Millwork Oriented Strand Board (OSB) Insulation material Cement Steel (Lightweight for framing) Ceramic tiles Concrete brick and block Framing lumber Plywood Copper wiring HVAC equipment Structural Insulated Panels (SIP) Vinyl siding Plumbing fixtures & fittings * Either serious or some shortage. Source: NAHB, BEC Survey, July % 5% 6% 6% 6% 7% 8% 8% 9% 9% 9% 9% 9% 15% 15% 14% 14% 14% 13% 12% 11% 10% 10%

25 Fewer Builders Report Shortages of Key Materials in 2014 Plywood OSB Gypsum wall board 46% Framing lumber 37% 32% 34% 28% 26% 10% 2% 22% 18% 12% 7% 3% 4% 3% 9% 16% 6% 11% 20% 14% 21% 20% 5% 4% 3% 18% 8% '04 '05 '06 '11 '12 '13 '14 '04 '05 '06 '11 '12 '13 '14 '04 '05 '06 '11 '12 '13 '14 '04 '05 '06 '11 '12 '13 '14 Source: NAHB, BEC Survey, July 2014

26 New Methods of Construction Being Investigated Modular Pods Light Gauge Metal Automated Parking Systems

27 LIHTC costs are 10% higher than market-rate rental More sources of financing = more legal fees Mandates from allocating agency or community Expensive finishes More stringent energy efficiency measures Larger unit size Larger closet size Carports in snow-free climates Davis-Bacon Cost of adaptive reuse and new construction

28 Impact of Increased Costs Creates incentive to build larger projects in order to absorb costs Less production of new units Preservation preferred by allocators and developers Some projects not economically feasible so aren t built

29 Thank You.

30 2014 Ohio Housing Conference How Program and Investor Requirements Are Affecting Construction Costs Bob Saffin Senior Project Manager, Miller-Valentine Group

31 2014 Ohio Housing Conference Requirements That Have The Most Impact on Construction Costs Energy Efficiency Guidelines Accessibility Green Initiatives/Sustainability Historical Requirements Prevailing Wage Project Size and Type

32 2014 Ohio Housing Conference Energy Efficiency Guidelines Program and Investor Requirements Codes are Catching Up Potential Savings on Operational Expenses

33 2014 Ohio Housing Conference Accessibility Often Program Requirements Beyond Code Costs are increased with Adaptive Reuse

34 2014 Ohio Housing Conference Green Initiatives/Sustainability Both Investor and Program Requirements Cost Impact Can Vary by Location

35 2014 Ohio Housing Conference Historical Requirements Program Requirements Difficult to Determine Cost Impact Early

36 2014 Ohio Housing Conference Prevailing Wage Both Program and Investor Requirements Cost Impact Varies by Location Limits the Pool of Subcontractors Oversight and Liability

37 2014 Ohio Housing Conference Project Size and Type Program Driven Smaller Projects = Less Efficiencies Different Types = Different Costs

38 THANK YOU!