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Friday, Mar 29, 2024

Affordable Housing Firm Expands As Number of Projects Increases

With a regional expansion underway and a nearly four-fold increase in the number of projects it is handling, Amcal Housing has gone on a recruitment spree. The Agoura Hills-based provider of affordable housing has hired five associates and promoted four of its staffers. The company expects to add another eight or 10 employees by September to handle the increased workload. “We have been growing significantly every year for the past five years,” said Percival Vaz, president and CEO at Amcal. “We had two or three projects on the table at any given time five years ago. Today we’re doing 10 projects well in excess of $100 million.” Amcal’s expansion comes at a time when the climate for affordable housing, which refers to rental and for-sale units that are sold or rented at below-market rates, becomes increasingly difficult. Land prices are soaring as are construction materials costs, making it difficult to construct homes and apartments that can sell and rent at these rates. What’s allowed Amcal to flourish is an expertise at securing tax credit funding available for its projects. Amcal funds its projects in large part by competing for a portion of the $75 million worth of tax credits available in California from federal programs. Competition for this funding is fierce and only about one of every four or five companies who apply are successful, according to Amcal officials. The company then sells the credits to large investors in exchange for equity funding to build its projects. Investors such as SunAmerica, John Hancock, Verizon Capital and others use the tax credits to offset their tax liability. Amcal leverages the funding to secure additional financing, typically from conventional loans to complete its projects. Challenging climate The company has been in operation for 27 years, using similar funding strategies. Still, the current climate has been challenging, Vaz said. “For 25 of those 27 years we always came in on budget,” Vaz said. “But a couple of years ago, when we had the big spikes in construction costs it hurt us. We had to restructure some of our programs and get additional funding from the city. The government has some programs to deal with these cost overruns.” For its future projects, Amcal is projecting costs conservatively. “But we’re still guessing,” said Vaz, “because no one can predict whether lumber will go up 20 percent or 80 percent. It’s particularly hard on affordable housing developers. Regular developers can make up for the cost increases, whereas an affordable housing company is restricted on rents and even on for-sale housing. And there’s no way to make it up.” Other affordable housing developers are facing similar problems. “It’s a lot more difficult to put product on the market now than it was four years go,” said Bill Jones, director of Enterprise Home Ownership Partners, an affordable home building venture that includes Enterprise Community Partners, the city of Los Angeles and HUD. Enterprise was formed during the recessionary 1990s to resell HUD repossessions as workforce housing. As late as 2000, the agency was selling homes for $169,000 to families that earned about 67 percent of the area median income. Today, there are no HUD repos and the lowest price home currently available through the program is $370,000. EHOP has taken advantage of a recently passed Los Angeles ordinance that allows the agency to subdivide lots originally zoned for apartment buildings. The ordinance allows the agency to construct enough for-sale townhomes on the parcel to make the high price of the land pencil out. Even so, Jones figures that the average homeowner eligible for one of the EHOP townhomes now must earn about 77 percent of the median income instead of the 67 percent required to qualify for one of the homes five or six years ago, “and that’ sonly because they increased the subsidies available,” Jones said. According to Neelura Bell, program director for the Los Angeles office of Local Initiative Support Corp., a group that helps fund non-profits who build affordable housing, so-called gap funding that government groups offer to compensate for rising costs is beginning to catch up with the recent increases in prices for land and building materials. But the problem of land availability remains, particularly as market-rate developers have become more aggressive in their acquisition activities. Non-profits developing affordable or low-income housing can’t compete with the prices these developers are able to pay. “Some groups that develop at a lower price point are having challenges getting access to the property,” said Bell. “That’s why those of us who are advocates are advocating for some inclusionary policy because market rate developers can move at a quicker clip.” Although Amcal has recently expanded its operations into the San Diego, Fresno, Sacramento, Bakersfield and Orange County areas, it is continuing to find projects in the L.A. area as well. Van Nuys development Several projects are in final stages and others are beginning in the Lincoln Heights area. The company is also in the planning stages for a development in Van Nuys. “We’re also looking at sites in North Hollywood and in Panorama City, but it’s too premature,” said Vaz. To help handle the current workload, Amcal has promoted Sean Hyatt to vice president of development and Perry Wright to vice president of construction. In addition, Luxmi Vaz has been promoted to vice president of accounting and administration and Jay Ross has been named senior development associate. Amcal has also hired Sid Paul to direct for-sale housing. Maurice Ramirez has been hired as director of development and finance. Mark Ruff has been appointed director of acquisitions for Los Angeles and Juan Arroyuo has joined as director of development for San Diego and Imperial counties and Mario Turner has joined as director of development for Orange County. Although the company’s strategy of building on smaller, infill lots, makes it somewhat easier to find suitable parcels, the process is still challenging. “We’re going to continue to be an active player in L.A.,” said Vaz. “Land prices have just skyrocketed and it’s becoming increasingly difficult to make these units pencil unless we go to high rise or higher density.”

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