In our market feasibility work throughout the western U.S., we frequently collaborate with apartment developers and for-sale new homebuilders. They aim to introduce attainably priced workforce housing to the market catering to what's known as “the missing middle.” These households don't qualify for subsidized low-income affordable housing units but find today’s high new single family detached home prices unaffordable. Here are three quite different approaches, all successful in addressing this critical housing need.
Product 1
Urban Townhome (UTH) -5-4-3-2-1 by Urban Pacific -Shopoff
Urban Pacific Group has pioneered what they call their Urban Townhome Workforce Housing program, which they describe as 5-4-3-2-1 row townhomes. The side-by-side 3-story townhomes are designed for multi-generational living, creating a welcoming environment where grandparents, adult children and grandchildren can live together under the same roof. The idea is that mom and/or dad are working full-time, while grandma and grandpa contribute full or part-time earnings to the household income (possibly fixed income) or might contribute by watching the little ones.
5-4-3-2-1 describes the homes: 5-bedrooms, 4-bathrooms, 3-stories, 2-car direct-access garages and all family members living under 1-roof. Most of the homes are in the 1,700 to 1,800 square foot range. The product is designed for urban infill locations where multifamily rental units are mostly only studios and one and two-bedroom units, with little suitable housing for families. Several UTH properties have been built in the greater Los Angeles area, generally with from 5 to 15 units, and densities of 25 to 30 du/acre. The units have extremely low turnover.
Product 2
Build-to-Rent SFD with ADUs by Ravello Holdings, Inc.
While build-to-rent (BTR) single family detached (SFD) homes are nothing new, the twist here is that every lot was built with two homes, a main house and an Accessory Dwelling Unit (ADU). The units are rented separately. Four homes are plotted in an area of about 120’ x 110’ (2 main homes and 2 ADUs), yielding a density of about 8 du/ac.
Located in the high desert community of Lancaster, California, Vello Valley offers 172 homes – 86 SFD and 86 ADUs. The ADUs are 977 square feet, 2-bedrooms, 2-baths, with private enclosed yard space. The main homes are 1,246 to 1,437 square feet offering 3-bedrooms and 2 or 2-and-a-half baths. The ADUs lease just as well as the main homes due to greater affordability. The ADUs rent for $2,800 to $2,900/mo compared to about $3,200 to $3,900/mo for the larger homes.
The ADU is a nice alternative for households who are price conscious, but don’t necessarily want to live in a dense multi-family rental community. The community includes a central recreation center with a clubhouse, swimming pool, tot lot, fitness room and on-site leasing office. The community leased up at a pace of about 10 to 12 units/month when brand new back in 2021.
Product 3
"Endcap" 3-Story Row Townhomes by Various Builders
This is a concept that started coming to market in earnest several years ago and many new homebuilders now swear by it. This is a 3-story side-by-side row townhome program, but instead of having one unit at the end of each building, there are two end units, which we refer to as endcaps.
To plot efficiently, the endcaps are typically much smaller than the other units. This creates a double-win for a prospective buyer; the units are lower in price than the larger offerings in the same community, and they are desirable corner / end units with lots of natural light. Providing endcap units is also a win for the homebuilder, as the smaller footprint of the endcaps typically allows for an increase in the number of units plotted per acre (typically 20+ du/ac).
The example shown is Boulevard Park (Warmington Residential) in Escondido, CA. The endcaps (Plans 1 & 2) are 1,102 and 1,191 square feet, offer 2-bedrooms and 2-and-a-half baths and are priced in the $660Ks. The other plans range from 1,468 to 1,818 square feet with prices from about $725K to $825K. The community has been averaging a strong pace of five home sales per month.
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