In Urban Land Magazine, there is an article talking about the relationship between capital and mixed-income housing. The article indicates that it’s hard to raise funds for mixed-income housing. Mixed-income has been seen as the most sustainable model for modern cities. However, they give an example of a new town center in Richfield, Minnesota, an 80/20 project: 80% market-rate units and 20% affordable units. The developer had several dilemmas that wouldn’t have been a problem if the development were 100% affordable or 100% market rate. When comes to mixed-use, things become complicated. Market investors didn’t want to participate in the project because of the lower return, and affordable housing investors didn’t feel qualified to underwrite the market-rate units. There is a huge divide between those two groups of investors. Even though the developer tried hard to help both parties understand the benefits of mixed-income housing, it still seemed too risky for most of the institutional investors.
Here is the big problem. Even though many developers want to be forward-thinking and build mixed-used, mixed-income housing, the keys are in the investors’ hands. “We think that maybe we as developers and architects shape what our world looks like. The truth is the capital markets shape what our world looks like. . . .” Said by Colleen Carey, a ULI trustee. The industry will never get truly innovation unless the capital market initiates it. However, most investors want the biggest return possible with the lowest risk.
Therefore, the article called for innovative funding methods to support mixed-income housing projects. This kind of project may get complicated with multisource financing —usually through a combination of loans, equity, and tax credits. But, that’s what the city needs, and what people want to live in. The incentives will allow sources of funding to be stronger in the future.
So how to solve the problem? From my perspective, mixed-income housing is necessary and it’s the future trend. With zoning and city’s comprehensive plans, more and more communities will target mixed-income housing as a solution to growth and affordability issues. It’s not only a good way to add more diversity to neighborhoods, but also will balance the population and amenities people have access to. However, there is often difficulty financing the projects because of the lack of a template. In the article, it says that mixed income is defined more by what it is not than what it is . Politicians should push for progress on mixed-income housing. Like what we have in Seattle, new affordable and workforce projects are coming online as Mayor Ed Murray has made a bold commitment to producing or preserving 50,000 new housing units—20,000 of them affordable—over the next decade. On other hand, looking for individual investors could be other way to solve the problem. As the Bellwether projects did, mixing in capital from private investors who are motivated by community development and want to get a stable return could be a solution.