Converting Hotels into Affordable Workforce Housing: Maxwell Drever provides some thoughts
The seven million affordable workforce housing apartments needed to meet total demand should be one of the biggest concerns for citizens of our country says Maxwell Drever. There are concerns that difficult financial times will be coming shortly. Many people from low to moderate-income groups who work for all sorts of public and private sector entities are at risk if the economy craters. Non-profit organizations have come forward with proactive propositions urging people who can do something about it to focus on the basic need for traditional workforce housing.
While there are some innovations, most are well-known and mildly effective bureaucratic solutions. That said, prominent impact investor Maxwell Drever has a different approach. He says, “COVID-19 forced the closure of thousands of “broken” hotels nationwide. Although this was not yet well known, the owners of these properties owned buildings that still had value. Because developers like myself had begun buying these broken properties and converting them into resort-like affordable workforce housing”.
The Maxwell Drever Approach
Maxwell continues. “Conversions of broken hotels into affordable workforce housing creates clean and comfortable apartments, starting at $500 per month for those with full-time jobs earning $15 to $30 per hour. Because most of these former hotels had pools, our designers found creative ways to the types of pools you would normally find in high-end resorts. There are so many amenities that we have squeezed in to make these places beautiful” We did some digging and learned some of the key features to the approach Maxwell is taking.
Does the conversion make sense?
Building an affordable workforce housing project requires in-depth research and strategies. Real estate developers who jump right in unrepaired will pay the price during construction. They should also keep in mind that not all hotels qualify. For instance, motels generally do not have enough rooms or facilities to accommodate enough people to make conversion financially viable. On the other hand, elite hotels have ample space to provide the numbers needed to make the conversion work. Moreover, smaller hotels generally provide limited services when compared to full-service hotels.
Debt Financing and Funding Sources
Debt financing has become an attractive option because banks and other financing entities are beginning to understand “the math.” From what we can tell, room acquisitions costs run on average $50,000 per room, with financing costs averaging 5.1% We see debt financing secured at around 5% as the most effective way to ensure that an affordable workforce housing project succeeds.
Finally, we recommend to first-time conversion folks to be careful. Before deciding to take a development such as this type on themselves. By our calculations, the number of ways things can go wrong is too numerous to list.
While many people use the two terms interchangeably, workforce housing and affordable housing are very different. Workforce housing is available and affordable for the local moderate and medium-income groups. While affordable housing refers to housing families can afford with some assistance and subsidies.
The workforce housing group can include several people with different wages as per the average local wage rate. The group of workers/families who qualify for affordable is smaller than the workforce housing group.
It is because workforce housing may include some affordable units. And some market-rate units (that are still affordable because of local wage).
Understanding these fundamental differences can make it easier for professionals to make the right decision for their housing needs.