HBA’s non-profit builds a new Albuquerque community
|Rick E. Davis, left, runs the HBA-sponsored non-profit building firm that led the development of Tres Placitas. Green builder Jerry Wade of Artistic Homes delivered a highly energy-efficient product.
Homes with front porches and landscaped yards line the streets of Tres Placitas Community. Residents stroll down walkways six feet wide, and enjoy biking, jogging and walking on a trail system that winds around the neighborhood. Six acres of placitas (little plazas) and parks offer adults and kids a place for recreation and leisure. The Village Plaza, with a 36-foot pavilion, is home to community events and family gatherings.
And although 40 percent of the homes here are built for residents who need special mortgage assistance, 100 percent are designed with the same standards of quality.
This is just part of the vision that is making affordable housing a success story on an infill site in northwest Albuquerque, N. M. Created through several partnerships, the mixed income Tres Placitas Community was designed in 1999 to serve predominantly first-time home buyers. While financial assistance is certainly a plus for some, the community provides all residents with housing that is attractive, affordable, energy efficient and neighborhood friendly.
"It’s a story of partnerships," says Rick E. Davis, president and executive officer of the Family Housing Development Corporation (FHDC). "This is not a government give-away program. That’s what makes this so special - the way it was acquired, the way everything came together so everyone benefits from it. It’s a story of how non-traditional partners can come together to produce something that wasn’t there before."
Founded as a non-profit developer in 1989 by the Home Builders Association of Central New Mexico, FHDC’s mission from the start was to promote ways to make housing more available to first-time buyers.
Tres Placitas is part of a nationwide affordable housing effort initiated in 1998 by the NAHB and Fannie Mae Corp. It links local HBAs, builders, non-profits, governments and banks with Fannie Mae’s local Partnership offices, allowing them to tap into funding programs offered by Fannie Mae and the Fannie Mae Foundation.
Fannie Mae, through its American Communities Fund, and Charter Bank together equally contributed a total of $5 million in debt financing for the development of Tres Placitas.
Like the other 10 professionals who sit on FHDC’s board of directors, Davis volunteered his expertise and time to create an innovative development organization that would change the face of affordable housing in Albuquerque. The group’s first cooperative project with the City of Albuquerque was the Trails West mixed income community, built between 1994 and 1996 on 16 acres purchased from the city. Upon its completion, they turned right around and expanded their efforts with Tres Placitas, a 251-home community on 40 acres near Trails West on the city’s northwest side. As of July 13, 2000, Phase I of Tres Placitas had closed on sales of 90 homes. Of 50 additional homes under construction in Phase II at that time, 40 were presales.
"I’ve always had an appreciation for the benefits of homeownership for a family," says Davis, who has served as FHDC president since 1990 and was recently named its executive officer. As owner of R. E. Davis Construction, he’d become concerned as he saw the recession and inflation of the 1980s pushing his co-workers out of the housing market.
"When I got involved, it was impossible for a plumber, electrician or framer to own his own home. Even beyond that, teachers and policeman were finding it increasingly difficult to buy that first home. So housing affordability was a big issue, and something that I wanted to address and help with where I could."
Davis doesn’t know exactly how many people in Albuquerque’s population of 500,000 (city proper) can’t afford to buy housing. He’s seen estimates as high as 15,000, but believes the number is closer to 5,000 households.
"Certainly the economy for the last 10 years in Albuquerque and the rest of the nation has enjoyed prosperous times. We’ve seen growth in wages and a reduction in mortgage rates - both help to increase the accessibility of housing. But we still have a group of families and individuals that would like to own homes but can’t because the cost of housing is high."
"We relate things back to income. What we find is people below 85% mean income often have difficulty getting into their first house. If that drops below 80%, they need some sort of help to get that first house."
Claudia Kedda, Director of Housing Programs for NAHB, says that projects like Tres Placitas are serving a growing market for affordable housing across the country. She noted that currently the NAHB/Fannie Mae Affordable Housing Partnerships program has more than 50 builders or HBAs in the U.S. working on specific projects.
"Known as ‘emerging’ or ‘underserved’ markets, they include single women and female-headed households, minorities, first-time home buyers and immigrants," according to Kedda. "These are the segments of the home buying market that have the lowest homeownership rates and the potential for purchasing affordable homes.
"However, building affordable housing can be more challenging than market-rate housing. There is a need for more complex financing, and we are working with new, first-time home buyers and gaining community support for moderate-cost housing. Still, many of the builders we work with feel it’s a good way to make a contribution to their community."
In the case of Tres Placitas, none of the partners has shied away from the challenges. As for the complex financing involved, it was generated by the partners’ desire to enhance the community, and it operated under what Davis calls "a fair deal" philosophy.
FHDC, for example, paid cash for the 42 acres of land for Tres Placitas at a reduced rate from the City of Albuquerque: $222,000 for the land and $256,000 for the assessment.
"That’s a pretty low price but the city is getting back about $1.1 million in soft second mortgages," Davis notes. "It’s a fair deal. It’s not a great deal, but it’s a fair deal." (FHDC makes soft second mortgages or zero payment loans to home buyers who qualify. When the homeowner sells or refinances the house, the soft second mortgages will be paid to the city.)
"So not only do tax payers receive back the initial subsidy - no gift was made by the community - through the efforts of FHDC, Fannie Mae, Charter Bank and Jerry Wade, we’ve created this at no cost to the tax payer. Every deal is different, every community is different - part of our bigger story here is there’s opportunity through creation of non-traditional partnerships to address housing needs in a community. The city is converting an asset - using a piece of land - and they are benefitting the community."
FHDC used funds from the $5 million loan from Fannie Mae and Charter Bank to buy the land from the city, then develop it with roads and utilities, says Davis. FHDC then sold the lots for $27,500 each to Jerry Wade, owner of Artistic Homes, the company building all 251 homes in Tres Placitas.
"The soft second subsidy money comes from the difference between costs and sales price to Jerry. As each house sells, Fannie Mae and Charter Bank are repaid out of closing proceeds," says Davis.
How do you build 251 homes on 42 acres, include six acres for green spaces and parks, and maintain affordability, density, quality and aesthetics all at the same time?
"We got the city to agree to reduce the width of the street from 28 feet to 26. That was a major accomplishment - it not only helped cut down on costs but also enhanced the neighborhood," notes Davis.
"Because of the density of the project, we also felt landscaping was very important. We master-planned landscaping for the entire subdivision, including open spaces of four private parks within the subdivision in addition to a two-acre park that we gave to the city. As you push densities up, you need to have places for kids to play, and open spaces for people to enjoy and congregate."
"It’s quite a challenge to design a house that will fit on that size lot - 45 2 70," says builder Jerry Wade. "A single-story home averages about 1150 square feet with a two-car garage; some two-stories are nearly 1800. But these are not cut back anywhere. FHDC had us put 25-year roofs on - others we build are 20 years. Quality is not cut back at all. If anything, some of the city’s specs were higher.
"We also put front porches on all the units and try to make sure the venting, air conditioners and piping are at the back of the house for aesthetics."
Wade says that another major goal was to build a more energy-efficient house, use recycled building materials such as finger-joint lumber (short pieces from the mill) and recycle project waste.
All homes in Tres Placitas have to comply with higher standards of energy savings, water conservation, waste reduction & construction recycling, which is a major reason why FHDC chose Artistic Homes to build houses in Tres Placitas. The company is a member of HBA of Central New Mexico’s Green Builder program, the third established in the nation.
Davis emphasizes that selection was competitive. "We asked what rate they’d be willing to pay for the lots and how many they’d buy a month, and through that competitive process, Jerry Wade was selected as the best choice."
One rewarding result of these efforts is community acceptance from neighborhoods surrounding Tres Placitas. Davis said Trails West, Artistic Homes’ first affordable community, paved the way with similar standards that squelched community protest as residents became apprehensive about affordable housing moving next door.
"Our goal in Trails West was to sell to buyers at 65-80 percent of mean income, and we pointed out to the neighborhoods that protested that we’re talking about policemen, bank tellers and teachers buying homes - people supporting themselves to get a first mortgage."
"I believe that Tres Placitas is a huge benefit to the city," says Cynthia Statt, Affordable Housing Coordinator for Albuquerque Development Services of the City of Albuquerque. "We’re trying to bring mixed income areas together, stabilize neighborhoods and diversify areas. That is our ultimate goal, so when you come to Albuquerque, you don’t know where the affordable housing is. I think Tres Placitas will go a long way towards doing that."
While Wade encourages other for-profit builders to take on affordable housing projects, he does so with caution. Tres Placitas homes range in price from $97,500 up to $115,400, so volume is key to profit.
"There’s a market for it. But one of the drawbacks is that the profit margin is low - you have to build a lot of homes to make up for it, you need to build over 300 a year." (In addition to the homes in Tres Placitas, Wade is building 450 affordable homes on the open market).
Although this market might seem risky to some prospective builders, lenders and home buyers - the average income of soft second mortgage recipients is $23,241; and the average price of a house is over four times that at $101,262. Davis and Lori Weber, FHDC’s project administrator, say FHDC and Albuquerque lenders are diligent in providing affordable financing and educating buyers about the process. For that reason, they don’t worry much about default.
"Talking with local lenders, particularly Charter Bank, what we’re finding is that default rates are not any greater than conventional mortgages," says Davis. "The bottom line is that people who are buying these homes can qualify for a first mortgage. This is significant because once qualified, history has shown that their rate of default is no greater. If you can imagine what it’s like for a single mom or dad to raise two kids and keep their credit intact, that indicates pretty high discipline."
The goal is to assist families at 80% or less of the median income, which for a family of four in Albuquerque was $46,125 in 1999 and is $48,300 in 2000, according to Weber.
"Thirty-six families in Tres Placitas have received soft seconds," she noted. "The average family size is 2.5 people and the average age is 29.8 years. The average income of $23,241 is reaching people at 61% of median income, which is really pretty incredible."
"After it’s all said and done" says Davis, "talking to the families and meeting them is really a rewarding experience. We’ve all had these experiences. I think of one of our first buyers was the young lady with two little kids who didn’t think there’d ever be a way she could own a home. She’s still making payments, and they’re still enjoying their home."