New Orleans adds affordable housing
David Abbenante, HRI president of property management, talks to Karin Nicks, the first resident at River Garden II. New construction since Katrina is bringing more than 2,000 affordable housing units to the city. (Photo by Frank Aymami)
New construction since Hurricane Katrina will bring 2,000 units on line. Most of the projects are designated as mixed-income housing, which combines affordable and market rate units.
Despite reports that the metropolitan area has lost 3,000 jobs since last April, apartment developers and managers are confident they will fill most of their vacancies. Once that inventory is absorbed, the current decline in rental rates and occupancy will be reversed, said Larry Schedler, president of a multifamily property transaction firm in Metairie, La.
“If we can continually create jobs in this market, then we can fuel apartment absorption and development,” Schedler said.
Roughly 700 affordable units and 1,150 market rate units will be added to the area’s apartment inventory, according to the 13th annual Greater New Orleans Multi-Family Report, a joint product of Schedler’s company, Madderra & Cazalot and The Multi-Family Advisory Group.
Mark Madderra, co-owner of mortgage banking firm Madderra & Cazalot, said the flurry of mixed-income developments are the result of post-Katrina tax credits, community development block grants and other financial incentives.
Of the eight recent mixed-income projects listed in the report, six are in downtown New Orleans, one is in eastern New Orleans and one is in Slidell, La.
“They are logical places for our disaster resources to go, to put these resources back where disasters took place, replacing what was lost with something better,” Madderra said.
Developers are obtaining money to build affordable rental housing through the federal Low Income Housing Tax Credit program, which targets families with income less than 60 percent of the area’s median salary.
The low-income tax credits allowed developers to build market-rate apartments within the same complex. At the latest phase of HRI Properties’ River Garden, market rates are $895 for a one-bedroom unit and $1,240 for two bedrooms.
“They are being leased up as they are built,” said David Abbenante, HRI’s president of residential property management. “We have a lot of leasing momentum. ...The renter has more and better choices in the market right now because of these units. Affordable units are the hottest moving units in the market right now.”
Schedler said the New Orleans apartment market is starting to see the effects of increased supply and competition. According to the GNO Multi-Family report, metro occupancy rates averaged 87 percent, a 5 percent decline from the fall 2008 report. Monthly rental rates averaged $842, a $21 decrease from the fall.
“The findings of our report show a market that is in the process of absorbing additional inventory from both new construction as well as some remaining rehabilitations of Katrina damaged properties,” Schedler said. “Over the next six months, rental and occupancy rates will continue to reflect the absorption of this new inventory.”
Abbenante said the biggest effect the new units will have on the market is on the area’s aging units and those that have not been rehabbed in the past 10 to 15 years.
“I call them tired units,” he said. “They were built awhile ago, survived Katrina and have not received a facelift in awhile, and those units are a little soft in the market ... because higher-quality and brand new units for similar prices are coming on line.”
Brian Gibbs, developer of the 21-story apartment building under construction at 930 Poydras St., said the bigger challenge apartment managers face is whether people want to rent or buy in New Orleans regardless of the price. For that to happen, the city has to continue addressing quality of life issues.
“If that happens, then all of these developments will complement what the city has to offer, and the developments will take care of themselves,” Gibbs said. “Density in the market is a good thing. Whatever can bring people to this city, to live and work, is a good thing for our entire market.”
