Affordable Housing Market Entry

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Affordable Housing Market Entry

Real estate developers face increasing pressure to invest in the Bay Area affordable housing market. The greatest opportunity for investments is in the East Bay and Oakland areas. Consequently, a need to help low-income families has led large tech companies like Google to invest $50 million to build low-income homes around the area. Apple has also committed $2.5 billion in affordable housing investment funds to increase development and restoration opportunities. These are just a few of the large companies working in their communities through investments in the Housing Trust Silicon Valley’s TECH Fund to help families in need. The market is set for slower growth, as the changing economic environment from the corona virus causes speculation about development opportunities.

Lending Institutions

Real Estate Investors

  • Eden Housing oversees affordable housing development and property management activities.
  • Legacy Partners group owns, develops, and manages multi-family communities.
  • The Lara mar Group is a billion-dollar real estate investment company.
  • The Partners Group is a full-service development company in commercial and residential buildings.
  • ACRE Investment Company focuses on commercial and residential real estate opportunities.

East Bay and Oakland Real Estate Markets

  • Economists forecast a cooling period for housing prices, with lower inventory and strong buying competition.
  • Experts believe the average annual 30-year fixed mortgage rate of 3.8% will last through 2020.
  • Most of the Bay Area will see home prices will remain steady over the remaining months in 2020.
  • The Bay Association of Realtor's statistics shows there were 20% fewer homes sold in Oakland.
  • There is a slower construction pace for single-family homes because of the pandemic.
  • Affordable housing options like Accessory Dwelling Units add more value to low-income families.
  • The state of California is enacting restrictive rent and eviction control provisions to manage housing costs.

Opportunities

  • Real estate developers believe the Bay Area will get past the corona virus better than most of the country.
  • The Millennial age group is starting to search for first-time buyer homes.
  • Much of Oakland’s new construction is centered near convenient downtown areas.
  • The Bay Area lost 2,128 subsidized, rent-restricted apartments over 20 years.
  • Affordable housing provides low-income families with stability.

Threats

  • There is a high degree of competitiveness for credits among large developers that forces states to award tax credits to smaller developers.
  • States are currently seeing most marketing of rental housing projects are targeting eligible families for 100 percent of all units.
  • Large technology companies are making their mark on the affordable housing industry by donating billions to low-income housing.
  • Real estate experts around the Bay Area did not expect the pandemic economic freeze to cause stronger competition for housing.
  • Experts believe the housing market conditions will deteriorate over the coming months as the economy moves past the pandemic shutdown.
  • Market trends show banks will tighten lending standards during a wide economic slowdown.

Consulting Companies

Steps for Market Entry

  • The first step to entering a new market involves defining the potential market.
  • Before entering the market, conduct an internal assessment to understand how to leverage core competencies.
  • When entering a new market, developers must do market research to decide the best possible return on investment for the new market.
  • Investors must decide which market to enter based on strategic fit and the company's ability to serve the market.
  • It is critical to decide the level of investment required before entering a new market.
  • Investors must develop strategies for how they will enter a new market.
  • Companies must access market trends to be ready for unforeseeable challenges.

Research Strategy

The research was conducted to understand the Bay Area Market to invest in affordable housing development. We searched relevant sources including those relevant to the city, state, and federal funding programs. The search included articles regarding opportunities zones, as well as information highlighting big tech companies that are donating to help families in need. There is also information from key sources about funding companies offering grant initiatives to real estate investors. Several sources include information about the effects of the pandemic on the local economy and future growth in the market.
Sources
Sources

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  • "California opportunity zones offer huge opportunities for real estate investors. "
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  • "Google made headlines by pledging to contribute $1 billion to fix the region’s housing crisis."
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  • "Bay Area families weathered the financial crisis well. "
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  • "The California Tax Credit Allocation Committee administers two low-income housing tax credit programs."
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  • "The California Debt Limit Allocation Committee was created to set and allocate California’s annual debt ceiling, and administer the State’s tax-exempt bond program to issue the debt. "
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  • "San Francisco's Mayor’s Office of Housing and Community Development administers financing for the development, rehabilitation, and purchase of affordable housing."
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  • "Because of the high level of competition for credits, many states award tax credits to affordable housing project developers. "
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  • "Developers partner with a lender that reliably navigates financing, and is also a trusted leader in addressing affordable housing in the community."
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  • "The Low Income Investment Fund provides development, acquisition, construction, and term financing for affordable housing developers through its Revolving Loan Fund."
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  • "Community development organizations miss opportunities to purchase available property that could be used to create hundreds of affordable homes."
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  • "Local Initiatives Support Corporation offers lending based on product type: development, acquisition, construction, mini-permanent, permanent, bridge, and working capital loans. "
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  • "In the spirit of improving communities across the Bay Area, we have compiled the following list of other funding agencies with grant-making priorities. "
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  • "The Bay Area Transit-Oriented Affordable Housing Fund launched a $40 million initiative to promote affordable housing development across the Bay Area."
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  • "The review highlighted a list of top real estate development companies in San Francisco."
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  • "Based on market analysis, the Bay Area real estate market will have a very slight cooling in prices, continued low inventory, and ongoing buyer competition."
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  • "Real estate experts around the Bay Area did not expect the deep freeze brought on by the corona-virus pandemic."
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  • "The Bay Area did not see a single federal or state-subsidized affordable apartment converted to market-rate housing last year. "
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  • "Economists expect the housing market condition to deteriorate in the coming months. "
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  • "A wider economic slowdown leads banks to tighten lending standards as they did during the financial crisis last decade."
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  • "The company specializes in developing and implementing optimal real estate strategies by analyzing specific real estate investments, reviewing investment managers, assisting in negotiations, and ensuring investor and manager goals are aligned."
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  • "Our services include research, design strategy, process design, change management, space management, innovation, and analytics services."
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  • "We specialize in real estate market research to help executives forecast business by prioritizing investment opportunities and markets."
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  • "Expanding into a new market can be an effective way to leverage core business growth. "
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  • "A thorough market research is of extreme importance for companies to look at the best possible return on investment. "