The teamwork factor

When affordable homes are not affordable to build

Salim Chraibi, CEO Bluenest Development

The teamwork factor

When affordable homes are not affordable to build

By Salim Chraibi

The national housing crisis has been a hot topic all around the country, with more than 11 million Americans considered cost-burdened. In Florida, named the “epicenter” of the crisis by Housing and Urban Development Secretary Marcia Fudge, the future seems unpredictable.

What seems to make matters worse is that nobody talks about the increased costs, labor shortage, and barriers such as red tape private developers face when building reasonably priced homes. Simply put, it is not easy to build those. While the crisis continues to push low-middle-income families into units that won't leave them scraping by for other necessities, the obvious solution is to develop more properties as demand greatly outnumbers the supply. To achieve this goal, private and public institutions must join conversations to strengthen partnerships and implement solutions.

As recently as 2020, 25% of all Florida households were deemed stretched-thin, with 63% of low-income families struggling financially to keep a roof above their heads, according to the Florida Housing Coalition. Miami-Dade County has suffered the most, with 44.1% to 47%t of households considered cost-burdened, outnumbering all other areas of Florida. An excruciating example—the median household income in Miami is $44,581, while the average annual rent is $34,092. In the post-pandemic housing market, the essential workers in middle-low-income households struggle the most. The same workers who make up the backbone of our community are facing homelessness or eviction, which include workers in retail and dining, customer service, secretarial and janitorial positions, heavy laborers, educators and medical technicians. Many of these households are forced out of their homes to lower-cost units a greater distance from work, leading to rising transportation costs or out of housing altogether, essentially becoming homeless. There is a dire need for properties, but let us amplify developers' difficulties. The pandemic launched a supply chain shortage for nearly every industry, and the construction segment is no exception. Supply chain shortages started with lockdowns in the spring of 2020, forcing ports, factories and farms to shut their doors to combat the global health crisis. And, as the pandemic evolved and changed, businesses slowly reopened with short staffing and heavily increased health and safety protocols. Some facilities and ports were forced to shut down for good, and manufacturing plants in other parts of the world still face long-term consequences, leaving the production of goods at a long-time low. The demand for products and materials increased as the nation returned to work and play and primarily resumed pre-pandemic lives. For the housing market, an increase in demand coupled with a decrease in

production means the materials needed to build new affordable housing units are hard to come by. Further, because demand drives prices up, when the required materials are achievable, they come at a hefty price tag. According to the US Census Bureau report, construction spending in July 2022 totaled almost $1,8 billion. Only a year earlier, this cost was $1,6 billion. The National Mortgage Professional recently reported building material prices have increased 20.4% year over year and have risen 31.3% since January 2020—this includes the prices for lumber, concrete, drywall, flooring, siding, insulation and roofing. While developers can decide to budget these costs, market forces largely determine those. But the cost increases don't end here. Once developers have obtained all the materials needed for building a new unit, there are still more costs that must be factored into the overall cost of making a home. HomeAdvisor estimates that building materials make up to 50 percent of the total house cost. Another 40% goes to the labor force, with the remaining 10% assigned to cover design, financing, and project management fees. And these fees have risen as well, costing double what they were pre-pandemic. Lack of materials, nonetheless, is not the biggest enemy. The most pressing challenge facing the construction industry today is a shortage in the workforce. Building a home requires a team, including a construction manager, framers, electricians, plumbers, roofers, pavers, HVAC contractors,

The prospect of the South Florida real estate market is bright, with exciting new developments on the horizon, making it the perfect time to implement innovative strategies to solve its housing crisis.

and landscapers. Finding the professionals to join the team is becoming harder due to an aging workforce and a shortage of new skilled workers. If that was not enough roadblock, or better yet, house block, another significant factor driving up construction costs is the time it takes for a project to get through city permitting and development. In Miami, even architects charge more for a project because they know the city's issues in the permitting department. Current land regulation is part of another debate since zoning in Miami lacks the density needed to lessen the housing crisis. Rezoning some of the zones previously reserved for single-family units would allow for the development of twin houses, triplexes, and quad houses, alleviating the problem. Our company applies this method and has delivered more than 100 homes, many previously zoned for single units. Looking at previous strategies and other prosperous cities to grasp what has or has not worked is key to avoiding the same pitfalls. Many factors contribute to Miami's growth, popularity and appeal, all of which unite to make it a premiere worldwide destination. People will continue to move here. While some costs are unavoidable, materials and labor are included here, and developers need to budget smartly, public institutions need to make the process easier. Rezoning and decreasing the red tape to allow private developers to deliver properties faster should be the primary objective of any conversation regarding housing affordability. While the future seems unpredictable, decisions made now will dictate outcomes. The prospect of the South Florida real estate market is bright, with exciting new developments on the horizon, making it the perfect time to implement innovative strategies to solve its housing crisis. MH

Salim Chraibi is CEO at Bluenest Development, which specializes in affordable urban and suburban infill residential development, offering clients high quality at an affordable price.