Partners


Vol. 17, No. 1, 2007

FEATURES

Innovative Approaches Help Solve N.O.'s Housing Woes

Achieving the American Dream: Are We There Yet?

Courting the Creative Class: New Strategies for Urban Revival

GO Zone Tax Credits and Incentives

The Subprime Mortgage Market

Case Making: Building a Pathway to Implementation

Spotlight on the District—Florida

Staff

 
Innovative Approaches Help Solve N.O.'s Housing Woes

modular housing The Low Income Housing Tax Credit (LIHTC) Program, created by Congress to generate equity capital for affordable rental housing, has been around for a generation now. Modular construction methods have been in use far longer.

But the concept of using tax credits to finance modular multifamily housing development is novel. A New Orleans partnership faced with critical housing needs has made the leap.

What did it take? Their goal was clear: to produce high quality affordable housing in a short period of time. Ultimately, the partnership launched what's become New Orleans' first modular multifamily development using federal housing tax credits.

The new development, Louisiana Freedmen Homes, consists of 29 three-bedroom, two-bath apartments situated on three acres in the Uptown neighborhood between Audubon and Broadway Streets just south of Earhart Boulevard. All of the units are reserved for low- and moderate-income families.

New Orleans' slow recovery
New Orleans continues to struggle with replacing affordable housing destroyed by Hurricanes Katrina and Rita. Acute housing needs motivated the partners to consider nontraditional construction methods that involved lower costs for both labor and materials. Modular construction costs less per square foot because mass production results in economies of scale.

Modular construction is also a practical solution for some of the particular problems slowing construction in New Orleans, including labor shortages and theft of scarce building materials. It requires far fewer on-site labor hours compared with traditional site-built construction. A shorter construction period also reduces the risk of site theft, and modular units can be locked and secured as soon as they're put into place.

Although some local examples of single-family modular infill housing exist to demonstrate the feasibility of this approach, the partners nevertheless took a risk since many people remain skeptical about modular construction.

The evolution of modular construction
Thanks to advances in quality and design, modular construction has been gaining acceptance as a viable option for affordable housing in many communities. In fact, improvements in the past decade have been so great that many modular homes may be considered better quality housing than some traditional, site-built construction.

Confusion still exists regarding modular housing in comparison with "HUD Code" manufactured housing. While it may appear to be the same, HUD Code homes are built according to federal HUD codes applicable in all 50 states; modular homes, on the other hand, are built using the same codes as any other local construction. HUD Code homes can only be single-family residences, but modular structures can house single families or multiple families.

Modular homes must comply with the same state or local codes used by builders of traditional structures. For instance, the same windspeed standards apply to modular construction. The manufacturer of the units being developed in New Orleans, like builders of traditional, site-built homes, must build to withstand a maximum windspeed of 130 mph.

modular housing
The photo shows the different phases of the Louisiana Freedmen Homes and how the development comes together quickly—from building the foundations to placing the modules and constructing the front porches after the units are in place.

The homes
Louisiana Freedmen Homes consists of 15 buildings—14 two-story duplexes and a single-family residence. Each unit contains approximately 1,250 square feet. Duplex units have four modules stacked two by two, with one unit on each floor. Site-built front porches in a New Orleans style and high-pitched rooflines that reflect the dominant architecture in the area create an authentic, local look.

Quality options chosen by the developer and builder, such as 9-foot ceilings, ceiling fans, venetian blinds, wood crown molding and window sills, parquet flooring, ceramic tile and high-grade carpeting, add to the appeal of the units. Other features include central heat and air, a washer and dryer, and high-quality kitchen appliances, cabinetry, countertops and sinks.

Structural upgrades have also been added: 220v electrical wiring is specified as opposed to the standard 110v permitted under local codes, as well as thermal windows and doors. These and other energy-saving design elements will provide excellent payback to residents over time.

Based in Eatonton, Ga., Horton Industries manufactures about 100 modular units per week through its subsidiaries, Horton Homes Inc. and Dynasty Homes Inc. The company makes most of its sales in the Southeast. Horton employees do the actual lifting and placement of its units, and they guarantee to repair or replace any damage resulting from transportation or to fix any problems that stem from factory errors.

The partners at work
As with most affordable housing developments, the modular project began with a 501(c)(3) nonprofit organization, Louisiana Freedmen Homes LLC. Represented by dozens of local churches, the nonprofit owned the raw land and will have ongoing ownership and management of the property.

A developer and general contractor who have had experience with modular development are important to the success of a modular project. The developer is key in establishing the building plans, and the general contractor must have specialty skills to construct the infrastructure before the modular units can be placed. Developer James E. "Jamie" Neville, president of Neville Development LLC, works with general contractor Keith LeDuff of Keith LeDuff General Contractor.

The bank representative is Yvette Cola, vice president and commercial real estate relationship manager at Regions Bank, which is doing the construction and permanent financing for the project. As part of the financing package, Louisiana Freedmen Homes sold low-income housing tax credits to Regions Bank and obtained layered financing that included Louisiana Housing Finance Agency's HOME funds, Gulf Opportunity Zone (GO Zone) credits, energy credits, leveraged private investment and funding from other sources.

Bringing it all together
This dynamic partnership brought together an innovative product and a new financing approach to meet New Orleans' pressing need for affordable housing. The city and Orleans Parish understood the project and were willing to grant permits. Jamie Neville noted that the greatest challenge was convincing all the participants to move at a pace that seemed very rapid compared with traditional site-building.

While there is much to applaud about the successful construction and financing of the modular multifamily development, the real celebration is about the 29 families who now have safe, decent, affordable housing. Louisiana Freedmen Homes stands as a model for future development in the Gulf Coast region and elsewhere. In fact, Jamie Neville and Keith LeDuff already anticipate developing additional modular subdivisions.

This article was written by Wayne Smith, community affairs director at the Atlanta Fed.

For more information about Horton's modular division, refer to www.hortonhomes.com/hortonmodularmain.htm. To see floor plans and renderings, refer to New Orleans Modular Homes' website at www.nolamod.com. Specific duplex plans used in Louisiana Freedmen Homes are "The Orleans" and "The Victoria."

More on Modular Housing

modular housingThe Internet provides innumerable resources for those seeking more information about factory construction. Such information covers the entire spectrum of consumer interests, from lower income single family and multifamily homes to multimillion-dollar modular mansions. Some luxury homes have over 8,000 square feet, totally dispelling old notions about the product. But large or small, the thought process is basically the same when undertaking modular construction.

Determine the home site and dwelling plans.
The land and its zoning will initially dictate what can and can't be done when exploring options regarding the type of home that can be built.

Find the best builder for the job.
Consumers cannot generally buy modular units factory direct, which helps ensure proper placement of modules on site. But modular factories can often assist in finding local developers and builders with experience in these products. Be sure to check references and inspect past projects. Seek competitive bids to ensure getting the best deal, which is not always the least expensive proposal.

Work out the budget.
The budget will help determine the size of the home, its features and whether an architect is needed. The developer or builder generally manages the total project cost estimate, which will include on-site construction components such as the foundation, sewer/septic infrastructure, other utility connections, driveway and walkways, and porch or deck additions. Consider various financing options in advance. Don't forget the cost of homeowner's insurance.

Decide on a manufacturer.
While a manufacturer can assist in finding a builder, an experienced local builder can also assist in finding the most appropriate manufacturer to meet the buyer's needs. For example, request for special accommodations could narrow the options to those companies able to make certain customizations. Another consideration is the extent to which customizations might contribute to delays.

Follow the process.
As with building a traditional house, staying on top of the process every step of the way will help ensure that things go smoothly.

And the catch-all rule of thumb? As with entering any form of homeownership, the more the consumer knows the better!