Constraints and Creativity Shape Affordland, California ... · 10/6/2015 Constraints and Creativity Shape Affordable Housing for Seniors in Oakland, California - Urban Land Magazine

10/6/2015 Constraints and Creativity Shape Affordable Housing for Seniors in Oakland, California - Urban Land Magazine

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Urban Land > Planning & Design > Constraints and Creativity Shape Affordable Housing for Seniors in Oakland, California

View from the corner of 2nd Avenue and East 15th Street in Oakland, California. (Bruce Damonte/David Baker Architects)

In the first two weeks after Lakeside Senior Apartments in Oakland opened its application process for residency last year, more than

2,400 applications poured in. Constructed to house very-low-income and formerly homeless seniors, the building had just 91 units to

offer.

Constraints and Creativity Shape Affordable Housing forSeniors in Oakland, CaliforniaBy David Baker and Daniel Simons

October 2, 2015 Text Size: A AA



Rental rates across the Bay Area have shot up in recent years, as many people who are priced out of San Francisco seek to live acrossthe bay. Lakeside Senior Apartments, which opened in June and is now fully occupied, faced a series of development challenges mademore pressing by the increased need for housing.

“We expected there to be considerable interest in the property, but we did not anticipate such a large demand,” says Aubra Levine,associate director of housing development for Satellite Affordable Housing Associates (SAHA) of Berkeley, California, which developedthe project. “Real estate prices are soaring, forcing more and more people into the rental market, reducing the supply and increasing thecost of existing units. Seniors, many of whom are on fixed budgets, have a particularly difficult time competing for these units.”

Bring Beauty: Art for Seniorsfrom David Baker Architects

02:09

Land Constraints

The first hurdle was assembling the land. The site is in a prime location one block from the recently revived Lake Merritt waterfront,within walking distance of multiple public transit lines, parks, playgrounds, restaurants, and shops. The original parcel was an OaklandHousing Authority (OHA) parking lot in use—or rather, underused—by the adjacent Rose of Sharon apartments for seniors. Thedevelopment team proposed incorporating Rose of Sharon’s surface parking into the new housing’s secure, below-grade parking,accommodating 35 replacement spaces and 22 new spaces for Lakeside Senior Apartments. The surface parking lot included a disusedtrolley right-of-way that created an awkward “panhandle” jutting from one side of the site. The housing authority acquired the twoirregular parcels on either side of the right-of-way, which were occupied by blighted buildings, ultimately creating a rational 0.66-acre(0.27 ha) site.

While the need for more affordable housing in Oakland is great, there are advantages to taking time with the process. “Land is such aprecious resource that when a developable parcel is obtained, it is easy to allow the euphoria of having that valuable resource securedcatapult you immediately into the next stages of development,” says Deni Adaniya, senior development program manager for the OHA.“In the case of the Lakeside site, although the first parcel secured was the largest, and developable on its own, the development teamtook advantage of opportunities that arose to buy adjacent land, compelling everyone involved in the project to slow down and take morecalculated risks. Ultimately, by allowing the project to develop at a slightly slower pace, the team was able to secure adjacent parcels ata reasonable price, which created a better development parcel that supported more affordable housing.”



A view of Lake Merritt from the rooftop community room. (Bruce Damonte/David Baker Architects)

Financing Constraints

The financing required some flexible maneuvering, given a difficult funding landscape. As with most affordable housing, Lakeside’sfinance plan involved multiple sources and a lengthy period of time. Satellite Affordable Housing Associates, then known as SatelliteHousing (before merging with Affordable Housing Associates in 2013), began working on Lakeside in 2008, with an initial fundingrequest to the city of Oakland. The building would provide 91 permanent affordable housing units to very-low-income seniors andformerly homeless seniors, aged 55 years or older, under the Low-Income Housing Tax Credit Program. There would also be a two-bedroom manager’s unit. Thirty-two of the units would be set aside for formerly homeless seniors with special needs. To qualify to live atLakeside, residents must have a household annual income no higher than 50 percent of the area median income.

The OHA partnered with SAHA and the Oakland Housing Initiative, a nonprofit organization that OHA established to assist with theproduction of affordable housing in Oakland, to develop the project. “The OHA is one of 39 public housing authorities in the nationdesignated as a Moving to Work [MTW] agency, a HUD [U.S. Housing and Urban Development] demonstration program that provideshousing authorities the opportunity to design and test innovative local strategies,” says Adaniya. “The goal is to use federal dollars moreefficiently, help residents secure employment and become self-sufficient, and increase housing choices for low-income families. As anMTW agency, OHA is able to use HUD funding to expand affordable housing within Oakland. For Lakeside, OHA used the MTWprogram to provide 91 project-based Section 8 vouchers as well as permanent financing for site acquisition, predevelopment, andconstruction activities.”

The project was originally conceptualized as a 4 percent tax credit project together with the California Department of Housing andCommunity Development’s Multifamily Housing Program (MHP) supportive housing and HUD 202 funds. “However, before the projectcould apply for HUD 202 funds, the program was defunded and no longer available for this purpose,” Levine says. “The revisedfinancing plan included 9 percent tax credit equity through Wells Fargo Bank and funds from the MHP supportive housing program, theFederal Home Loan Bank Affordable Housing Program, the Oakland Housing Authority, and a private debt through the CaliforniaCommunity Reinvestment Corporation. The OHA’s 91 project-based vouchers provide invaluable rental assistance to our tenants andalso enabled the project to leverage debt to support development.”



City Slicker Farms volunteers work with residents to keep the rooftop garden thriving. (City Slicker Farms)

Design Constraints

The dense plan—138 units per acre (341 units per ha)—arranges the 92 units in two volumes that step down toward the lake, creating a

transition between the existing surrounding high rises and low-scale residences. In response to neighborhood concern, particular care

was taken with the profile of the building to protect the light and views enjoyed by people in the adjacent buildings. “Carving” away units

from the rectilinear form resulted in a more articulated shape, and the mass of the midsize building is further broken down into

accessible volumes with bays and color blocking. The design team used HardieBoard, a durable and economical material, in a creative

application to create a subtle yet interesting textural addition to the colorful facades.

Between the two volumes, the west-facing main courtyard opens toward the street and is warmed by the afternoon sun. Edged with a

glass wall, this private courtyard is visible to passersby, creating a balance between security and transparency and connecting the

building to the life of the larger neighborhood.

In addition to providing this visual connection, the new building activates the street edge with two lobbies as well as stoop units that

connect directly to the surrounding sidewalks.

At the upper residential levels, bridges span the central courtyard, linking the two residential volumes. Placing community spaces on the

top floor, which overlooks nearby Lake Merritt and the city beyond, reserved the spectacular views for the greatest number of users.

Although residents live independently, the building was designed with seniors in mind. For example, the lobby is ample and the corridors

are extra wide and lined with handrails, to help mobility-impaired residents navigate. Laundry rooms are on each floor with seating

areas, and the bridges that cross the courtyard feature sunny lounges that provide places for residents to rest, gather, and socialize

outside of their units.

In partnership with Creativity Explored, a local nonprofit gallery and studio that supports developmentally disabled artists, the design

team planned a colorful art program that would also help residents orient themselves in the building. Art selected in color-themed sets,

such as indigo or berry, would provide distinct identities to each floor, assisting with wayfinding.

When the art budget was cut, the design team launched a campaign through the crowdfunding site Indiegogo to raise the money. The

program includes selected artworks by local artists, many of whom are senior citizens themselves. All funds raised go toward purchasing

licenses to works from Creativity Explored, which are then digitally printed at a large scale for installation in the lobby and elevator

landings on each floor. Using digital prints rather than original artworks allows for scaling up the pieces to fit the expansive walls, and it

also means that should a work be damaged at any point, it can easily be replaced with an identical print.

Support for Seniors

Support services play an important role in the success of affordable housing for seniors, and they drove the design of Lakeside Senior

Apartments. The developer, SAHA, also provides property management and support services at the building, so the design team was

able to work closely with SAHA’s staff to support their goals and fine-tune the building to meet the needs of residents more precisely. In



this instance, a substantial amount of common space is distributed through the building. At the ground floor, the large community roomopens wide to the courtyard, creating a flexible indoor/outdoor space for events. Additional ground-floor space includes centralmanagement and service offices, a computer room, a library, and classroom-style rooms. The fifth-floor lake-view community suiteincludes outdoor garden plots, a community room and event kitchen, outdoor decks, and a wellness studio. This variety and separationof spaces allows for more events to occur simultaneously, contributing to engagement within the community.

Maximizing the synergies between the program and the architecture is particularly essential for buildings with senior residents. “Theearly months, just after opening a new building, are often challenging as residents are getting acclimated to their new home and forsome, particularly our formerly homeless residents, a new way of life,” says Levine. “Without the proper support, these challenges canlead to feelings of isolation and worse. Residents at Lakeside Senior Apartments are helping to plant the community garden, creatingartwork for the lobby, and participating in group exercise classes. Through these physical acts of investing in their new homes, they aregetting to know one another and helping to grow, strengthen, and beautify the Lakeside Senior Apartments community.”

Lakeside Senior Apartments had its grand opening in July, yet the need for more housing for seniors in Oakland is great. When rapidgentrification occurs, seniors often are priced out and have to leave communities where they have long-established ties to friends, familymembers, organizations, and institutions. To enable them to stay and thrive requires compassion, commitment, and creativity—creativecollaboration, creative financing, creative use of land, and creative design—to integrate the new community into the urban fabric.

David Baker and Daniel Simons are principals of San Francisco–based David Baker Architects, which designed Lakeside SeniorApartments.

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Despite Looming Clouds, Bright Forecast for U.S. Real EstateBy Beth Mattson-TeigOctober 2, 2015 Text Size: A AA



The latest ULI Real Estate Consensus Forecast calls for relatively smooth sailing ahead as it relates to both continued economic growthand a favorable outlook for commercial real estate investment. Yet, the forecast is not as bullish as it was six months ago, and there are

headwinds looming that are expected to temper growth heading into 2017.

The forecast, produced by the ULI Center for Capital Markets and Real Estate, predicts a healthy pace of economic expansion. Gross

domestic product (GDP) growth for this year is expected to be on par with the 2.4 percent that was recorded in 2014, while

strengthening to 2.8 percent in 2016 and 2.7 percent in 2017. It is notable that the forecast growth for 2016 and 2017 is at the highest

levels in eight years, comparable with the 2.7 percent GDP growth that occurred in 2006.

Related: More on the ULI Real Estate Consensus Forecast

“The U.S. economy is in a surprisingly good place, probably better than it feels to a lot of people. We’re just starting to shake out the

doldrums and feel like we are going ahead. But at the same time, we are wondering how long this upcycle will last,” says Margaret

Harbaugh, vice president at Morgan Stanley Real Estate Investing. Harbaugh was one of three industry panelists who participated in the

webinar discussing the survey results.

Given the lessons learned in the last downturn, it is not surprising that industry panelists do have one eye out for red flags that might

indicate a potential bubble forming on the horizon. “We are always looking for the turning signals,” says Steven Laposa, a webinar

panelist and principal, Global Real Estate Knowledge Center, at Alvarez & Marsal in Denver. “What are the signals that we didn’t see in

2005, 2006, 2007 that may or may not be forming now?” he adds.



Overall, the outlook for the commercial real estate (CRE) sector remains bullish. The forecast included survey responses from 48economists and analysts at 36 leading real estate organizations. All real estate indicators are forecast to be better than their 20-yearaverages in 2015, with the exception of four indicators expected to be worse—equity real estate investment trust (REIT) returns, retailavailability rates, retail rental rate change, and single-family housing starts.

Among some of the notable CRE findings, CRE transaction volume remains robust, with continued price appreciation and positivereturns. Commercial property transaction volume is expected to increase for another two years and then level off at $500 billion by 2017.

Rising treasury rates will increase borrowing costs for real estate investors. However, survey respondents do not expect it tosubstantially affect real estate capitalization rates for institutional-quality investments (NCREIF cap rates). In fact, cap rates areexpected to decline slightly to 5.2 percent in 2015 and then rise to 5.3 percent in 2016 and 5.7 percent in 2017.

The forecast anticipates rising cap rates and rising asset values, which means that income growth also will need to be high to achievethat. Though possible, it may be a challenge to get the necessary net operating income (NOI) growth to support higher values, notesAndy McCulloch, webinar panelist and managing director, real estate research and analytics at Green Street Advisors. “If we weresetting the betting line on asset value appreciation over the next couple of years, we would probably put it at zero, with NOI growthroughly offsetting a little bit of a backup in cap rates,” says McCulloch. Rather, he expects cap rates to rise with healthy, yet modest NOIgrowth given the improvements in fundamentals that have already occurred in the maturing stage of the market recovery.

The survey results predict that vacancy rates will continue to decrease modestly for office and retail over all three forecast years.Industrial availability rates and hotel occupancy rates are forecast to improve modestly in 2015 and essentially plateau in 2016 and2017. Apartment vacancy rates also are expected to decline in 2015 before rising slightly in 2016 and 2017. Commercial property rentsin all four sectors, as well as hotel revenue per available room (RevPAR), are all expected to rise over the next three years.



Some of the favored property sectors in the near term among panelists include apartments, office, and manufactured housing.“Apartment has been defying expectations for two or three years now,” says Harbaugh. The demographics for apartments continue toremain compelling, with demand from millennials and baby boomers. There is more new construction, but that supply is gettingabsorbed due in part to new household formation.

Compared with six months ago, the forecast vacancy rates for apartments in 2015, 2016, and 2017 are lower, and the forecast rentalrate changes are all higher. Apartments are expected to show consistent rental rate growth above the 20-year average of 2.7 percent,while rents are expected to rise by 4.6 percent in 2015, and then moderate to 3.5 percent in 2016 and 3.0 percent in 2017.

On the contrarian side, Laposa points to some of the potential risks of oversupply in the apartment sector in certain markets. “I have hada private equity firm already talk to me about how to develop an investment strategy as a vulture fund for apartments to be implementedin the next two years,” he says.

Certainly, some potential risks could rock the boat for both economic growth and performance within the commercial real estate sector.One threat is a shakeout in the technology sector, which has been a big driver for economic expansion. Second are geopolitical threatsranging from slower growth in China and Europe, as well as the looming presidential election in the United States.

Those factors may have influenced survey respondents, who are predicting slightly lower real estate returns in 2016 and 2017. Overall,returns based on the NCREIF Property Index have remained fairly steady the last three years between 10.5 percent and 11.8 percent.The ULI Forecast anticipates that returns will remain in this range in 2015 at 11.7 percent, and then trend lower—dipping below the long-term average returns—with returns of 9.0 percent in 2016 and 7.0 percent in 2017.

Despite the positive economic forecast, there are some worrisome signs with very low yields in both the corporate bond market and theREIT market, notes McCulloch. It has been pretty “rough sledding” in the REIT market, with major property sectors trading on averagetoday at a 15 percent discount to net asset value (NAV), he says. “Why that’s important is if you look back over time, the REIT markethas been a very good predictor of private market values,” he says. “So, the signals that we see for real estate values are getting morebearish.”

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Constraints and Creativity Shape Affordland, California ... · 10/6/2015 Constraints and Creativity Shape Affordable Housing for Seniors in Oakland, California - Urban Land Magazine