Given the current housing market in Havasu, Partnership for Economic Development CEO James Gray said a workforce housing development has to be creative in finding ways to keep down the cost.
“We are at a time where, to lower the cost of living we have to do things differently,” Gray said. “The hope to bring a median price from $420,000 to $405,000 doesn’t really help people. So we have to create different alternatives for people.”
Gray said one approach to lowering housing costs is to increase density by going vertical with a development such as an apartment complex.
“That takes the cost of the land and reduces it (per unit,)” Gray said. “It takes the infrastructure and reduces it, and it puts the scale where instead of one unit we are putting 200 units together. So it lowers the overall price. That is a model that has been used many times before.”
While the price per unit of a large structure like an apartment complex may be lower, Gray said they are still expensive to build because multi-level buildings require an elevator, and come with increased code and safety requirements.
Chad Nelson with A Team Real Estate said he has been trying to bring a new apartment complex to Havasu for the last several years but has not had any luck – especially during the pandemic.
“I have brought investors in here, and those investors have purchased other things, but they are not willing to build the apartment complexes because they look at our labor force and it scares them,” Nelson said.
Nelson said in his experience, the lack of large apartment complexes in Havasu makes it difficult to put together a sound business plan. He said the current large apartment buildings were all built long enough ago that information about how expensive they were to build, or how quickly they were filled with tenants is too dated to rely upon for current projections.
“There is no proof of what a new complex could pull, and without proof you can’t finish the equation,” Nelson said. “In order for somebody to loan you $10 million you have to have a solid equation – and that is where it stops every time.”
Limit land costs and manufactured homes
Another potential way to limit residential development costs, according to Gray, is to limit the cost of land associated with the housing. He said some affordable housing developments sell the structure, but lease the land that it sits on. Gray said such developments can include lots of amenities like security, gyms, pools and more, while still remaining affordable for workers in the community.
Nelson said he believes manufactured homes could end up being the most realistic solution to the current problem. He said such developments could be done quickly and fairly cheaply, and it wouldn’t require local contractors who are already booked solid with jobs because of the shortage of available local labor.
“When the manufactured home gets here you are literally hooking it up to the stem wall, or putting it up on jacks and connecting the plumbing,” Nelson said. “It is a quick process.”
Nelson said the main problem for Havasu is there isn’t any available land that is zoned for manufactured homes. Nelson said he has had several conversations with city officials to pitch the possibility of changing the zoning of some of the land north of Lowes along State Route 95 to allow for that particular use.
Mixed use developments
Gray said more affordable housing can also be created through a mixed use of single family and multi-family development.
“A developer will create a large tract and portion off maybe 25% of the development with something that is a little bit more dense and a little more cost friendly,” Gray said. “If it is placed in a larger tract of land they have shared infrastructure costs.”
The best approach?
There are several potential approaches that could work in Lake Havasu City, in theory, but Gray said it has to work out on paper as well before any projects will move forward. And that is the hard part.
“There is no really easy answer. Even with free land, some of these things don’t pencil out,” Gray said.
For his part, Gray said given Havasu’s current workforce housing availability he would be happy with any approach that is ready to move forward. He said ideally multiple different approaches will come to the market in and around Lake Havasu City in the coming years that will provide a variety of options.
“We are at the critical top of the mountain of creating attainable spaces for the workforce, that I’m in green light mode on all of them until we are to the other side, because it is really limiting the capacity for our businesses to move forward if we don’t have options,” he said. “Development of this nature takes time, so it is hard for me to be too picky.”
Lake Havasu Realtors Association President Richard Gomez said given surging home prices and a long term rental market with almost no availability, no matter what type of workforce housing gets built he is confident that it would be occupied quickly.
“We have a need. However you want to do it, we are going to fill them up,” Gomez said. “You build it and we will fill them – that is the truth.”