At the Urban Land Institute’s 2022 Emerging Trends in Real Estate Conference, presenters discussed recent trends in the real estate industry, impactful projects in Louisiana, and challenges and opportunities in affordable housing in New Orleans.
Trends in the Real Estate Industry
Andy Warren, Director of Real Estate Research at PwC highlighted the following interesting trends in the real estate industry right now:
Outlooks are better for 2022 than they were before the pandemic, and people are more optimistic now than they have been since around 2011-2012. National transaction volume is now higher than pre-pandemic levels, causing buyers and investors to branch out into different property types and different markets.
There is an extremely large amount of capital available, which sometimes leads to investors taking on more risk, which can foreshadow a crash, but other factors such as reduced availability of materials and labor, is slowing things down, mitigating this risk.
Areas of concern include rising material, labor, housing and land costs, rising interest rates, inflation and the possibility of variants causing the pandemic to continue. In addition, population growth is slowing but housing affordability is still decreasing, particularly in popular cities where people are moving. Climate change remains a concern, but government and industry are taking it more seriously, attempting to develop standards to mitigate this risk.
Top markets include the usual suspects: Nashville, Raleigh-Durham, Austin, Tampa and Dallas. New Orleans is rated #67 but has potential for growth due to remote work and a growing tech sector. Mountain towns are also increasing in popularity due to remote work options.
Industries that survey respondents felt had favorable outlooks for growth include industrial/distribution, housing (single family and workforce apartments) and neighborhood shopping centers.
Survey respondents indicated that their desire for flexibility arising out of the pandemic has increased, creating more demand for remote work, location independence and more technology to asset with this. This may lead to a reduced need for office space, but it will more likely change how space is used, such as demand for more amenities to encourage people to come in. People who have exited cities have returned but still want flexibility.
Real Estate Projects in New Orleans and Louisiana
Peter Gardener of Gardner Development, Stephen Ortego of SO Studios Architecture and Thomas Richards of The Richards Collection discussed their current projects in Louisiana. Gardener described the redevelopment of a 1969 Holiday Inn in New Orleans East designed by William Bond, which was vacant for years after Katrina, eventually foreclosed on by the City due to blight and then was notoriously graffitied in 2017. The property will be developed as multifamily housing. Gardener was able to get the property listed on the National Register of Historic Places and create a cultural products district which allowed him to utilize tax credits, and he will also seek a tax freeze as part of financing for the property.
Stephen Ortego discussed his development with a group of architects of a property on Vermilion River in Lafayette which includes the former Trappey’s canning plant from the 1930s. The property will become a large development of several buildings including 650-750 dwelling units, plus office, retail and food and beverage. Ortego also created a cultural district for the neighborhood and had the property recognized on the National Registry of Historic Places. Ortego stated that they were inspired by the Pearl District in San Antonio, and as the project has grown, the City of Lafayette has become much more involved, leading to development of parks and a pedestrian bridge in the area.
Thomas Richards described the revamp of Clearview Mall into Clearview City Center, including development of the former Sears site into a mix of medical office, residential (approximately 270 Class A units), retail and eventually a limited-service hotel, all working around certain existing popular operators such as Target. Richards intends to use vertical development to preserve green space on the ground for an energetic street scape that encourages walking.
Challenges and Opportunities in Affordable Housing in New Orleans
A panel of speakers discussed challenges and opportunities related to affordable housing in New Orleans:
Ryan Herringshaw of Providence Community Housing discussed Our Lady of Lourdes, a historic adaptive reuse of a school on Napoleon Avenue as senior housing, which will be 100% affordable for 45 years. Herringshaw detailed the capital stack that made the project possible, including a 4% LIHTC (Low Income Housing Tax Credit), a PILOT (Payment in Lieu of Taxes), HUD financing, other federal funds and historic tax credits. It was important to the organization to provide community space and services, including common area amenities such as a business center and a $275,000 tenant service reserve.
Michael Merideth of VPG Enterprise discussed his involvement in the affordable housing component of the River District development, which includes 450 units of affordable and workforce housing. The capital stack similarly includes 4% LIHTC, TIF (Tax Increment Financing) and CDBG funds, all of which he stated are essential to making affordable housing developments viable financially. The residential component of the development will be 40% affordable, 10% workforce and 50% market, which he believes provides longevity to the project.
Andreanecia Morris of Housing NOLA described the continuing challenges around affordable housing in New Orleans despite an influx of development after Katrina. She noted that in 2014, median income was approximately $37,000 and median rent was approximately $900. As of 2020, income only increased to a median of $38,000, with rent rising to $993. A family should pay no more than 30% of income for total housing costs, including utilities. She noted that the highest percentage of Louisiana residents at threat of eviction are Black. As of 2022, we need around $37 Billion for 45,000 new affordable units and other costs. She listed a combination of potential solutions such as creating incentives for affordable housing, removing zoning barriers (such as density limits), and ending source of income discrimination/supporting HANO in finding landlords for voucher programs.
Property Technology Industry in New Orleans
Several New Orleans entrepreneurs discussed the Prop Tech (Property Technology) industry:
Kerri Davis of Fortress Technology Solutions described its proprietary property management software, which simplifies the process for managers and tenants by limiting all services to one application and requiring less time to achieve variety of actions.
Marco Nelson of RentCheck discussed its system for documenting the state of rental units before and after renting for purposes of security deposits. Their software allows the tenant to perform a self-guided video walk through which eliminates the need for a manager or staff person to do this work. He noted that the pandemic forced increased use of this technology since people were not able to interact personally.
John Weirich of Levelset discussed its system for streamlining construction payments and its plans for vertically integrating construction payment services. He noted that technology allows you to do more with less people, which is important in the current job market climate.
Creative Ways of Financing Affordable Housing
Kathy Laborde, the keynote speaker and CEO of Gulf Coast Housing Partnership, which has already developed 4,000 units in the Southeast, discussed creative ways of financing affordable housing. She noted that one of the most important aspects of any project is organizing a combination of sources of debt and equity to cover development costs, such as federal dollars, tax credits, private equity and private or public debt. For example, their HC3 project on a former Brown’s Dairy lot on Oretha Castle Haley Boulevard will provide affordable housing with integrated onsite healthcare for Medicaid users. Aetna is providing equity along other sources such as New Markets Tax Credits, bonds, LIHTC, and other federal, state and local funding. The estimated completion date is middle of 2023.