Last month, MGAC’s West Coast team joined Cox, Castle & Nicholson for our first virtual joint-session of the Adapting and Thriving Series titled “Confronting California’s Housing Crisis – In Search of a New and Resilient Model.” The session focused on regulatory, transactional, design, and construction challenges for housing projects.
The video clip above focuses on financing for housing projects in a post COVID-19 world. To see the full virtual session, click the link below.
What we are currently seeing in the market, sort of post-COVID is a little bit of reluctance from the capital markets to invest in some of these projects, even with three and a half million residential units short here in California. And part of the hesitancy, from what we have gleaned from our industry colleagues and friends out there, is where is the bottom? And it’s really a bit of an unknown in terms of we haven’t really seen construction costs lower. The supply chain is still strong from the standpoint of primary materials, building materials.
And so, there are a lot of investors that are just, sort of, waiting it out a little bit. And a lot of the conversations that we’re having are, even if you are starting to plan for and get a project entitled now, you’re three to four years off of occupation, and completion, or substantial completion of that development. And this housing crisis, as we have seen from the trends, is not necessarily going away. People aren’t fleeing from California. In fact, what I think we’re seeing is a little bit more need for more affordable housing than the standard status quo. So, I think there’s going to be an increase in that.
From the standpoint of affordability, or financial modeling, to include some of those components, we really haven’t seen much of a change. But what we’re seeing is more phased development.