At our last workshop on April 10, City Open convened at the UIC Great Cities Institute to learn about what it takes to source revenue to fund community-driven projects, by looking at real estate development budget and project costs. The workshop was led by Navi Sandhu, Assistant Vice-President of Fifield Companies, where she leads acquisitions, finance and development.
Season Theme: Funding Community-Driven Projects
Workshop Method: Real Estate Development Budget & Project Costs
Navi Sandhu began the workshop by going through the economics of a real estate project, using a case study: an old apartment building in East Garfield Park, with six rental units. Participants were tasked to assume the role of a real estate developer, and guess the anticipated costs for acquiring and renovating the apartment units, as well as how funds would be sourced to cover project costs.
Navi was fully transparent with the costs and processes that a real estate developer has to manage when trying to cover costs and still provide affordable housing for future tenants, especially those living in non-affluent neighborhoods like East Garfield Park. Even if the cost to purchase land or a building might be cheaper, the hard costs for renovating a unit is the same wherever the neighborhood. In order to provide more affordable housing options, the Chicago Housing Authority (CHA) might purchase individual apartments within privately-owned buildings, paying the owner themselves, and subsidizing the rent with Housing Choice Vouchers (section 8).
One of the more unexpected liabilities included the daily operation and management costs of a stabilized property, including rent and utilities, while the building is being renovated.
For the second part of the workshop, participants worked in groups, and, using proposals from the previous workshop focused on design strategies for Accessory Dwelling Units, estimate any possible project costs and sources of funding for these specific case studies.
Group 1: ADU-type structures for True North Detroit community, led by Navi Sandhu
One of the main concerns for this project were about community interest and support, as well as land remedial to create a clean slate for the new building to be constructed. One of the participants suggested the controversial and unusual way of sourcing funding, by suing the previous owner for misconduct in land-use, to cover land remedial costs. However, this would result in the additional cost of hiring a lawsuit attorney.
Other possible sources of funding for this maker space include the Illinois Facilities Fund (IFF), which provides loans, architecture services and consulting to assess real estate feasibility for projects that benefit the community, and the McCormick Foundation, which could cover living costs/stipends for artist residencies.
Group 2: ADU Gallery Space + Art Studio
Due to the site’s proximity to the Alliance Francais, the group proposed the hard costs of construction to be paid for by affluent French community members. However, another goal for the proposal was to have greater community engagement, through informal means, as well as a general survey of interest.
Group 3: Student Spaces for UIC, led by Steve Vance
To cover the prospective costs of technologically advanced equipment and fiber optics for students, the group chose to take advantage of its connection and proximity to UIC, suggesting sources such as private donors, alumni and the state capital budget for state-owned universities to provide funding for the project. Another suggestion was for UIC to partner with public initiative organizations, to be held accountable for their commitment to workforce development, as part of their corporate social responsibility.
After the presentations, the conversation turned to the possibility of using crowd-funding sources for community-driven architectural projects, like Fundrise. Using this method could prove community support, which could provide financial insurance, and work to approve the continuation of a project. Crowd-funding could also provide an alternative to getting support from banks or family donations, who usually need assurance that projects would be successful, and might cause gentrification in the area. However, there are doubts as to who holds liability, as well as the distribution of shareholders.
Further discussion then led to questions about who holds power to evaluate and make decisions when analyzing the data on the income of tenants, as well as the value of developments. Also, when sourcing goods and solving problems, should real estate developers turn to internal or external sources?
VALERIE WONG is an Architecture student at the School of the Art Institute of Chicago expecting her Bachelor of Fine Arts in Spring 2019. She is always curious about the multi-faceted nature of the urban realm, and is exploring a tentative future in urban design and architecture theory.