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Tool 7: Selecting Option (Build, Buy, Leverage, or Supplement) to Deliver Affordable Housing

This tool allows you to assess the different options for delivering affordable housing, both qualitatively (Table 1) and quantitatively (Tables 2 - 5). It also outlines the mechanisms through which each option can be encouraged (e.g., capital grants, land banks, density bonusing).

Qualitative Assessment

 

Who

Why

When

How

1. Build

All

Lack of affordable supply

During downturns in the housing market (leverage off upturns)

Capital grants, density bonusing, land banks

2. Buy

All

Excess supply suitable for conversion to affordable units

During downturns in the housing market

Housing trusts

3. Supplement

Government

More flexible option for addressing affordability

All times, especially in flexible supply markets

Cash transfers, vouchers to tenants, portable housing allowances

4. Leverage

Municipal
government

Zoning and permitting powers provide leverage to encourage developers to include affordable units in their developments

When planned residential developments or re-developments lend themselves to the inclusion of affordable units

Inclusionary zoning, density bonusing

Quantitative Calculation—Build, Buy, or Supplement

Please note that the blue cells below are calculation cells and thus, do not require entered information.

Steps:

The first task is to determine the number and size of each unit type you plan to deliver:

  1. In row A, in each column, enter the type of unit you intend to produce.
  2. In row B, in each column, enter the required number of units of each type.
  3. In row C, in each column, enter the average size (in terms of square feet) of each unit type.

This provides the basis for calculating the cost of the three options—build, buy, or supplement.

Build
A) Type of Unit
B) Units Per Site
C) Average size (square feet)

Option 1: Build


Using the information from the table above, you can now weigh the various options for delivering affordable housing units:
4.  In row D, in each column, enter the type of unit (A).
5.  In row E, in each column, enter the land costs associated with each unit.
6.  In row F, in each column, enter the construction costs associated with each unit.
7.  In row G, in each column, enter the soft costs associated with each unit (e.g., marketing, architect fees).
8.  In row H, in each column, enter the taxes associated with each unit.
9.  For row I, in each column, click "calculate" to determine the total cost per unit.
10.For row J, in each column, click "calculate" to determine the total cost to build all units.
 
Build (con't)
D) Type of unit (A)
E) Land costs
F) Construction costs**
G) Soft Costs*
H) Taxes
I) Total Per Unit (E+F+G+H)
J) Total cost to build all units (I x B)

Option 2: Buy

11. In row K, in each column, enter the type of unit (A).
12. In row L, in each column, enter the current square footage cost per unit for buying (dollars per square foot).
13. For row M, in each column, click "calculate" to determine the implied cost per unit.
14. For row N, in each column, click "calculate" to determine the total cost to buy all units.
 

Buy
K) Unit Type (A)
L) Current square footage cost for buying units ($/sq. ft)
M) Implied cost per unit (L x C)
N) Total cost of buying all units (M x B)
 

Option 3: Supplement

15. In row O, in each column, enter the type of unit (A).
16. In row P, in each column, enter the number of households you plan to assist (B).
17. In row Q, in each column, enter the average income of the households you plan to assist.
18. For row R, click the "calculate" button to determine how much the average household could spend on shelter without exceeding the 30 per cent shelter-to-income ratio.
19. In row S, in each column, enter the average monthly rent of each unit type in your community (you can retrieve this information from local housing agencies).
20. For row T, click the "calculate" button to determine the average annual rent of each unit type in your community.
21. For row U, click the "calculate" button to determine the average annual affordability gap.
22. For row V, click the "calculate" button to determine the total costs to government to close the affordability gap for all households.
 

Supplement
O) Unit Type
P) Number of houseolds you plan to assist (1 household = 1 housing unit; See B)
Q) Average income of households
R) 30% of average income of households that will occupy the units (0.3 x Q)
S) Average monthly rent for affordable unit
T) Average annual rent for affordable unit (S x 12)
U) Average annual affordability gap (T - R)
V) Total cost to government to close affordability gap for all households (U x P)

23. Compare the total cost to build (J), the total costs to buy (K), and the total cost to supplement (V). Select appropriate option.

* architectural, marketing, and project coordination expenses
** based on $150 square foot for two bedroom and studios and $100 per square foot
*** based on 50/50 build/buy (except for SRO custom built) 25 year amortization of zero down mortgage at 5 per cent.

               

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