Most builders state with unshakeable certainty that in order to protect their margins when building affordable or workforce houses, municipalities must allow them to maximize their land by approving higher densities. Perry Bigelow of Bigelow Homes in Aurora, Ill.--which has been building a traditional neighborhood development called HomeTown Aurora since 1998, with 1,288 homes on 173 acres--says he'd much rather get density bonuses and smaller lot allowances from planning boards, than beg for impact fee waivers.
One builder, though, recently asked a town to reduce the approved density on a project, so it could build an entirely different, and less expensive, home. About halfway through a 200-unit project in White Lake Township, Mich., Ivanhoe-Huntley Homes realized that the buyer market had suddenly gone soft for 1,400- to 1,680-square-foot homes in attached duplexes starting at $230,000.
The builder had already completed 102 units when, says co-CEO Steven Perlman, his company thought that a more affordable product might sell better. So it went back to the township's housing authority with a proposal that called for reducing the project's density so it could build 75 single-family detached homes ranging from 1,500 to 2,300 square feet that would sell in the mid $100s to low $200s. The company also met with the community's HOA to explain its plan and encountered no opposition.
The township's planners, says Perlman, favored the lower density but didn't think they could buck the zoning laws on their own. So Ivanhoe-Huntley filed a "friendly lawsuit" against the township and received a consent judgment in its favor. The township and the builder hammered out the details, "but we got mostly what we wanted," says Perlman.
Lessons learned: Perlman says this experience taught his company that it needs to leave enough room in its plans to react quicker to market conditions. As for the duplex part of this project, when BUILDER interviewed Perlman in late March, he said 24 units were left and projected one sale per week.
Going with the Flow
A New Jersey builder plans to use profits from the sale of modular homes to fund affordable projects.
[text] The Affordable Homes Group, a nonprofit builder based in Mount Holly, N.J., started out constructing homeless shelters in the 1980s. Over the ensuing years, Affordable has ventured into rental units, renovating and rebuilding properties under a HUD-supported mortgage program, and, more recently, green building that Affordable's president, Kent Pipes, is convinced can provide a revenue stream that supports his company's affordable efforts.
Earlier this year, Affordable built a market-rate, energy-efficient home, with a selling price of $299,500, as an "experiment," says Pipes, and at the same time renovated two attached buildings to green building standards, which will be affordably priced. Those two projects, which Affordable completed without government subsidies, convinced Pipes that he could build affordable green houses and make money. His plan is to manufacture energy-efficient modular homes out of a plant located in Hattisburg or Jackson, Miss., which would ship modules to contractors throughout the Gulf states.
In mid-April, Pipes told BUILDER that he would soon meet with investors for "seed money" for this endeavor. Pipes says he plans to build a model modular home in June in Mount Holly, which would be about 1,400 square feet, with fiber-cement siding and foamed-in structural roof panels. Pipes envisions his affordable home, assembled on an owner's lot, would sell for between $100,000 and $140,000. (He says he can charge a bit more because HUD and Fannie Mae offer mortgages that take into account energy efficiency in their payment schedules.)
Closer to its home base, Affordable has been working with Pleasant Valley Modular Homes, a modular manufacturer based in Pine Grove, Pa., to supply Affordable with product it would sell at market-rate prices. Some of the profits from the modular sales would be funneled into affordable projects, such as the 200-year-old house in Medford, N.J., that Affordable has been renovating with state and local subsidies into a shared five-person rental property for seniors.
- John Caulfield