On land in Portland, Oregon that once housed an auto repair shop and parking lot, a new apartment building will soon be built with a new approach to affordability. Instead of using federal grants to make some apartments affordable, the owners of the building agreed to just make less money than usual and put the extra money back into the project to bring down the cost of rent. .
âAll you have to do to create affordable housing is charge less rent,â says Kevin Cavenaugh, founder of Guerrilla Development, the real estate company behind the 58,000 square foot building called the Atomic Orchard Experiment. âIt’s really not complicated. If you build something as aggressively, starkly, and beautifully as possible, you can’t forget the beautiful part, but if you build it for less, your mortgage is less. And just because you can rent it for X doesn’t mean you have to rent it for X.
By avoiding the grants that developers typically use for affordable housing, Cavenaugh says he can avoid bureaucratic hurdles that slow projects down, which also increases spending. By working with investors who wish to support social impact, the project can provide affordable units without outside subsidies. Investors typically receive an 8% dividend on properties like this; in this case, they agreed to 4%. They’ll still make money, but the roughly $ 200,000 will go back into the building, internally subsidizing 12 of the 49 units, then converting more units into affordable housing each year as more money rolls in (although there is no guarantee that the building won’t increase rents in the future or be sold to someone who thinks differently). âCapitalism doesn’t have to be complicated,â he says. “It would just be adorable if it was a little less greedy, wouldn’t it?”
Each of the one-bedroom apartments has the same simple design: a small loft with a spiral staircase that leads to a mezzanine with a bedroom and a bathroom. A solid glass garage door on the front of each unit provides light and can roll up for fresh air. The building does not have parking spaces because the city of Portland, unlike many cities, does not need one (this also keeps costs down). Market-priced apartments can be rented for around $ 1,700 per month, increasing each year with the market. Affordable apartments can be rented for $ 950 or $ 1,000 per month.
Cavenaugh wanted to find new solutions for affordable housing after meeting a homeless man sleeping outside his office, and reflecting on Portland’s challenge with homelessness, which continues to grow. âEveryone wants to do something,â he says. âAnd I am a real estate developer, graduated in architecture. If I can’t fix this, or try to do it, shame on me if I don’t even try. In 2020, his company funded and constructed a single occupancy building (SRO) – a type of building that was much more common in cities – and partnered with a homeless nonprofit to help new formerly homeless residents to move in. Another similar building is under construction now.
As accommodation in Portland becomes more expensive, many more are struggling to find accommodation. With the most recent project, the company plans to target residents with low-income jobs who do essential work in the city. âI contacted my lawyer and said, ‘Hey, am I allowed to discriminate by profession? Can I only hire social workers who are on the front line of the homelessness crisis? This type of discrimination is legal, he found. The approach will be one way to help some people afford to stay in a city that they might otherwise have to leave.
The project, which will begin next February, could be replicated elsewhere. âDevelopers use the phrase ‘it’s not pencil’,â says Cavenaugh, which means they claim it’s just not financially possible to build affordable housing in expensive cities like San Francisco. âIt’s not a true statement,â he said. âWhat they should be saying is that affordable housing in the Bay Area is not quite for them. They could do it. It’s in the dark, they can make money. They could just make more money doing other things.