Guidebook to Successful Affordable Housing:
Never set out on a journey without mapping the terrain
• Macroeconomics and finance
• Long-term interest rates (yield curve)
• Currency rates relative to ‘stable’ currencies
• Inflationary expectations
• Political stability
• Banking and capital markets
• Domestic capital markets: breadth and depth/ secondary market liquidity
• Experience with and receptivity to long-tenor fixed-income securities
• Private-sector development
• Locally produced versus imported materials and components
• Experience with large-scale residential development
• Specialized experience with professional multifamily rental
• PPP environment
• Established law or practice/ jurisprudence
• Experience with PPPs in other industries (e.g. traditional infrastructure)
• Judicial reliability when government is a sovereign counterparty
• Intra-governmental national-provincial-municipal dynamics
Define the goal in both demand-side and supply-side outcomes
A home is a shield around a family, and it should be sized to match the family it’s protecting
• Envision a target population
• Composition > Ages
• Income level > Income sourcing > Income reliability
• Level of formality (income, housing, current tenure, registration)
• Depth of demand: How many with our effective market radius?
• Distinguish three consumption levels
• Need: What a middle-income-plus household of this type would have
• Effective demand: What our target population can regularly afford to pay
monthly
• Financeable demand: What they can borrow to buy
• Down payment household can tap &
• What a third-party evaluator will underwrite into a loan
• Right-size the housing typology
• Density (units per 100 m² of land area)
• Bungalow, walkup, high-rise
• Envision the city ten years from now
• How much urbanization/ verticalization/formalization is there in the informal?
Housing PPP’s are a journey into an unknown future
Things always happen that no one could have foreseen
• Cost of materials rises
• Promised commitments prove unenforceable
• Expected demand does not materialize
• People who sign up for off-plan purchases don’t actually close
• Change their minds later
• Can’t pass credit underwriting
• Need to be given their money back
• The ‘wrong households’ move in
• Latent defects appear 6-12-24 months downstream
• Who owns the unknown risks?
• Because somebody always does, whether they know it or not
• Best strategy: form a true public-private team
• “If you want to go fast, go alone; if you want to go far, go together”
• A DevCo with GovSub and BidCo
• With the right team of expert contractors
Always have a viable offtake strategy:
A sprint and a marathon are entirely different kinds of running
• Offtake = Payment in full, in cash, for the development phase
• ‘Rolling over the development debt’ is not an offtake, it’s a buck-pass
• Ideal offtake is bulk offtake
• Sell all the homes/ flats at one mass closing
• One building, one subphase, one phase
• A partially sold property is like a partially cleared fence
• Off takers can include:
• Homeownership
• Direct (freehold or leasehold)
• Via homeowners’ association (HOA), or condominium
• Indirect via intermediary steward (demand aggregator)
• Housing co-operative
• Employer-assisted or employer co-owned
• ‘Intentional’ landlords (professional, socially motivated)
• University, hospital, or other entity needing dormitory-style accommodations
• Mission-oriented landlord (e.g. faith-based group)
• Government (via an entity dedicated to being a mission landlord)
• What about ‘rent to own’?
Always have a viable offtake strategy:
A sprint and a marathon are entirely different kinds of running
• Offtake = Payment in full, in cash, for the development phase
• ‘Rolling over the development debt’ is not an offtake, it’s a buck-pass
• Ideal offtake is bulk offtake
• Sell all the homes/ flats at one mass closing
• One building, one subphase, one phase
• A partially sold property is like a partially cleared fence
• Off takers can include:
• Homeownership
• Direct (freehold or leasehold)
• Via homeowners’ association (HOA), or condominium
• Indirect via intermediary steward (demand aggregator)
• Housing co-operative
• Employer-assisted or employer co-owned
• ‘Intentional’ landlords (professional, socially motivated)
• University, hospital, or other entity needing dormitory-style accommodations
• Mission-oriented landlord (e.g. faith-based group)
• Government (via an entity dedicated to being a mission landlord)
• What about ‘rent to own’?