Innovation Ecosystem

When new affordable housing rises from the ashes

The latest innovative approach by ONE Neighborhood Builders featured pre-fab modular affordable housing on a site that was once ravaged by fire

Photo by Steve Ide/ONE Neighborhood Builders

A crane lowers a modular unit into place at the Bowdoin Street site. The eight modular units of affordable housing are expected to be ready for occupancy in May.

Image courtesy of OME Neighborhood Builders

Milton Baxter, director of Real Estate and general counsel at ONE Neighborhood Builders.

By Richard Asinof
Posted 3/14/22
The modular affordable home development on Bowdoin Street provides another example of the innovative approaches being taken by ONE Neighborhood Builders.
What are the opportunities for more modular construction in Rhode Island? Could such an industry be located here as a manufacturing business? Can the new money being invested by the state be directed at filling the gaps in pre-development needs? Given that there is at least a two-year to three-year lead time for the completion of new affordable housing projects, what kinds of interim steps can be found to alleviate the demand for housing?
The lawsuit brought by the R.I. Attorney General against landlords for failure to protect residents from lead poisoning is a reminder that much more can be done to enforce the existing laws regarding the safety of tenants. It is often up to the municipal inspectors to take action against negligent landlords and to enforce the building codes.

PROVIDENCE – Four years ago, on a cold January night, an apartment building at 110 Bowdoin St. caught fire. A tenant, 49-year-old woman, who lived on the second floor, died, and was pulled from the rubble. The tragic story made headlines.

Five days earlier, Providence firefighters had been called to inspect the property, and they  had found the building littered with space heaters and a nest of extension cords, according to a news report by WPRI. The building was to have been condemned, after the inspectors found it had no heat or running water, once again, according to a news report by WPRI.

In the wake of the tragic fire that swept through the three properties on Bowdoin Street in Olneyville, Jennifer Hawkins, the executive director of ONE Neighborhood Builders, wrote a story for ConvergenceRI about the need to reframe the conversation:

“Last weekend a devastating fire engulfed three properties along Bowdoin Street in the Olneyville neighborhood of Providence, leaving one person dead and displacing nearly two-dozen residents,” Hawkins wrote.

In the aftermath, Hawkins continued, she said she thought about something that Tiffany Manuel, vice president of knowledge, impact and strategy at Enterprise Community Partners, had said during a recent conference, concerning the intersection of race, diversity, inclusion and affordable housing development.

Hawkins wrote: “Manuel offered a casual but hard-hitting aside, which I am paraphrasing: “How many times have you heard that the response to a lack of decent, affordable housing is a U-Haul?” [See link below to ConvergenceRI story, “Why not just move? It is often not a choice.”]

The common thread was addressing the critical need for comprehensive neighborhood development.

Modular housing
In just one week’s time, beginning on Monday, Feb. 28, and ending on Friday, March 4, eight pre-fab homes were placed on the site of the Bowdoin Street, a remarkable feat accomplished under the innovative leadership of Hawkins and her team at ONE Neighborhood Builders, including Milton Baxter, director of Real Estate and General Counsel for the community nonprofit agency.

The story of the project comes at time when much more political energy is focused on the dire need for affordable housing in Rhode Island. It is another example of the leadership and vision that ONE Neighborhood Builders has demonstrated in supporting a comprehensive approach to neighborhood revitalization. [See link below to ConvergenceRI story, “Investing in neighborhoods and residents.”]

ConvergenceRI spoke with Baxter last week, seeking to better understand the dynamics at play with such a project. As Baxter explained it: “It can take a solid 24 months, and that is optimistic, more likely 36 months, a three-year process from initial concept to putting the key in the door and turning it and allowing the family to move in.”

To make that happen, it requires the access to flexible sources of capital in a real estate market that is already highly competitive. “As an affordable housing developer, we are in the same market as traditional housing developers,” Baxter said. “And, as we all know, they are not making any more land. So, there is a finite amount of land that is available.”

Access to sources of predevelopment to pre-development funds – for engineering, architectural studies and environmental remediation of a site – become a critical component, Baxter said. Putting the pre-fab units together in one week may seem like a remarkable feat, but the hard work was all the preparation work to make the Bowdoin possible.

Here is the ConvergenceRI interview with Milton Baxter, the general counsel and director of Real Estate at One Neighborhood Builders, during a time when renewed political attention is being focused on the creation of more affordable housing in Rhode Island.

ConvergenceRI: Has there been a sea change in the way that the state is looking at affordable housing?
BAXTER: As evidenced by the coverage that has gone on around the [need for] affordable housing in the state, you can say, “yes,” to that.

I do not know if that has yet been translated in the [increase in the] production level of affordable housing, but there is certainly a focus on it, at an unprecedented level. It is hoped that it will translate into the actual production of new units and the preservation of existing affordable housing.

ConvergenceRI: In terms of increasing the production level of affordable housing, what needs to happen to push the envelope?
BAXTER: There are forces in play. The availability of funding is clearly a big piece of that. And, I think that increasing the number of [funding] sources that are becoming available in connection of affordable housing will certainly allow projects that might not have been feasible previously to become feasible, because funding sources are able to fill gaps in the development costs that exist.

I think folks need to realize that there is no magic wand around the production of affordable housing. There is a natural life cycle of production development of any kind of housing or real estate.

It is driven by a whole host of factors: What is currently existing on the site? What the zoning and planning requirements are? Are there environmental hazards that need to be remediated at the site?

With affordable housing, many times, the timing of the development is dictated by when the funding schedules are available. So, when funding rounds are released by the applicable agencies, [it depends on] what the response time is, and what their award time is?

There are a whole host of things that go into the development cycle, and it can take a solid 24 months, and that is optimistic, more likely 36 months, a three-year process from initial concept to putting the key in the door and turning it and allowing the family to move in. That being said, you have to start some place, right?

To get back to your original question, the availability of funding is certainly a key. What we find in affordable housing is that, unlike traditional development, we are not able to secure a bunch of equity, because the property, by its nature, with its rent being restricted, does not allow the sizing of the amount of debt and a return on equity that a traditional development would experience.

There is only so much debt that can be sustained, and then balance of that debt has to be filled with equity or with funding sources.

Inherently, there are going to be gaps; funding gaps are going to occur. Those funding gaps are, unfortunately, growing, because of the cost of construction and the cost of development keep going up.

One of the hindrances around further affordable housing development has been matching the ability to develop to funding sources – there being some amount of funding that wasn’t available, that created a gap in funding that often made the project not feasible.

It is the hope that with these additional funds that are being made available, it will close that gap and it will make projects that were once not feasible now feasible – and able to proceed.

ConvergenceRI: In talking about the new development that is using pre-fab construction units, how does that change the ground game? Does it shorten the time span, of the 24 months to 36 months, between when the development is first planned and turning the key in the door?
BAXTER: It certainly shortens the construction time span, because the vagaries of construction of a stick-built project, let ‘s call it a construction onsite project, the traditional model where you drive by and see construction going on, those are impacted by a whole bunch of factors which include weather, and when tradesmen can be on site.

When you are building projects in a factory, a lot of those variables are reduced, You are not looking at weather, you are also able to build, as I understand it, [round the clock]: a lot of these modular homes manufacturers run three shifts. Your construction is not limited to daylight hours.

And then, you have the ability to control the quality of the construction that is going on, because it is a more controlled environment, with more precision around the construction, which reduces waste in materials. Overall, it seems to be a much more efficient process.

Once the constructed units are brought to the site, it is fairly quick to assemble. As you might know, on Bowdoin Street, we started on Monday morning at 7:30 a.m. and by 3 p.m. on Friday, we had all eight units fully set in place.

Clearly, there are requirements for external site work, and we have to do plumbing and electrical connections. But, to have eight apartments, essentially built within a week’s period of time… Once they were on site, the units were installed pretty quickly.

Instead of making it such a linear process, you can make it a parallel process – which could allow for the start of construction in the factory to occur sooner than you might be ready to do it on site, simultaneously to the foundation being [poured]. Then, you are ahead of the game.

And, once we see where we land in terms of when we finish this project, we will have a better ability to quantify what that savings of time is, and what the overall savings of dollars is. I do think that it will serve to reduce construction time and development time in general. And, those savings of time will also result in savings of costs.

ConvergenceRI: Where did you buy the pre-fab units from?
BAXTER: We contracted with a local modular home developer, named Coastal Modular and they sourced those from a factory in Pennsylvania,

ConvergenceRI: Is there any opportunity to build such a factory here in Rhode Island?
BAXTER: I think that is a function of the market. To the extent modular becomes less of a novelty and more of a standard way of producing housing – including single family housing and multi-family housing or hotels or other types of housing that lend itself to modular construction, then, I think it will generate entrepreneurial solutions.

The more that modular becomes a method of construction that is relied on by developers, then we will some resourceful builders say, we can build those here just as good as they can in Pennsylvania – and reduce the shipping costs and have more local control over projects.

ConvergenceRI: Were you familiar with what happened at the Bowdoin Street site before?
BAXTER: It was before my time, but the project demonstrates how you can move from devastation to hope. It is a source of organizational pride in the redevelopment of the property. To be part of the solution that generated homes for eight families is a source of organizational price and aligns with the mission that we have:

ConvergenceRI: Were there any difficulties in lining up finances for the project?
BAXTER: That is a really good question. In terms of sourcing the actual sources of funds, it was pretty typical, identifying the amount of money that you needed, going to the various sources to request it.

The acquisition of funding sources was pretty traditional. But what was different was the condition that we had to maneuver around was the way that traditional construction projects, how the funding is dispersed [measured by stages of completion] as you go through time.

For example, if you are 25 percent done with construction, someone from the bank or the funding source takes a look and says, you are 25 percent done, and you can requisition up to 25 percent, and that process repeats itself each month, until the project is completed.

In modular construction, one day, someone shows up with 16 modules and, in our case, builds eight units, almost completely within a week, which was not a traditional method of construction.

ConvergenceRI: Were the lenders able to accommodate your needs?
BAXTER: Yes, we were able to work with our various funding sources. One of the things we learned is that the construction bridge loan for a non-traditional source that is comfortable with the cash flow that occurs during modular construction is a key partner to have.

ConvergenceRI: Are there other similar projects in the works that ONE Neighborhood Builders is considering, using similar modular construction?
BAXTER: We are looking at a single family lot that is located in the Elmwood section of Providence about deploying a modular construction there.

In terms of multi-family, we don’t have any plans that are are currently far enough along on the drawing boards to say that they are plans. We are always looking for opportunities to find in-fill sites or sites that maybe currently have a derelict building or buildings on them, that we can demolish and install new housing, and to the extent that an affordable modular [development] works for those sites, then we certainly will do it.

ConvergenceRI: What questions haven’t I asked, should I have asked, that you would like to talk about?
BAXTER: Another great question. I think it is important to know that affordable housing is not something that ONE Neighborhood does alone, it is in concert with a bunch of other folks, different funding sources. In this case, the city of Providence played a very key role. They orchestrated the placement of the land into receivership, which allowed us to purchase it out of receivership.

I think the other part is the receptiveness in the community for affordable safe housing, located in the community where people want to live and are currently living. The community partners that we have to assist us in our day-to-day operations are very important to our efforts.

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