Multi-Family, Mixed Use and
Mixed Income Housing
Development
What is a Mixed-Use Project?
Mixed-use development is an example of flexible
zoning which allows various types of land uses,
including office, commercial, residential, and in
some cases, light industrial or manufacturing, to be
combined within a single development or district.
A major purpose of mixed-use zoning is to allow a
balanced mix of office, commercial, and residential
uses in close proximity to increase convenience to
residents and reduce the number of shopping
and/or commuting trips needed.
Mixed-use developments can range in size from
single buildings with apartments located over retail
uses, to large-scale projects that include office and
commercial space along with hotels, convention
centers, theaters, and housing.
Mixed Residential and Retail
Development
Madison Crossing, in
Seattle WA, features
24 residential units,
a 15,000-square-
foot ground-floor
grocery and a
parking garage on
the second level.
Benefits of Mixed Use Projects
Mixed-use projects can offer cost savings to developers
in the form of shared parking arrangements and shared
costs for building operation, maintenance, and security.
Commercial uses can help subsidize affordable or low-
income housing, which may be necessary because of
high urban land prices and development costs.
Mixed-use projects can create new housing opportunities
in areas that may have previously allowed only
commercial, office, or light industrial uses.
Benefits of Mixed Use Projects
Mixed-use projects offers one way to accommodate
the higher housing densities. Higher density housing
in commercial zones may be more politically
acceptable than increasing densities in established
single-family zones.
Mixed-use projects can be utilized to better integrate
land uses by locating residential developments near
downtown commercial (shopping) areas.
With residents working or shopping close to home,
traffic congestion is reduced.
Allowing mixed uses can help to revitalize distressed
neighborhoods by creating a sense of community and
safety.
Fundamental Challenges of
Mixed-Use Projects
Higher costs
Large financing gaps
Unproven market demand
Difficulty in implementation
Higher Costs in Mixed Use
Projects
Mixed-use projects often have higher
costs per square foot than other
projects because of costs associated
with parking structures, firewalls
between ground-floor commercial and
upper-floor residential units, elevators,
and advanced fire suppression systems.
Large Financing Gaps in Mixed
Use Projects
Mixed-use projects, particularly those that incorporate
some element of affordable housing, often face both
“cost gaps” and “affordability gaps” associated with both
the housing and the commercial uses.
Cost gaps = the difference between the cost of
development and what the market is willing to finance.
Affordability gaps = the difference between market rates
and what the project’s target market can afford to pay.
The majority of mixed-use projects, both nationally and
locally, require significant public subsidies.
The challenge of filling these gaps is compounded by the
fact that there are relatively few subsidy sources for
commercial real estate development and that many
common housing subsidy tools are not well suited for
projects that consist of multiple uses.
Unproven Market Demand in
Mixed Use Project
There are relatively few mixed-use projects in
the most communities.
Most housing in the most communities is
located in distinctly residential areas.
Therefore, many funders and lenders remain
unconvinced of the demand for housing on
busy commercial streets and transit routes.
Difficulty in Implementation in
Mixed Use Projects
Projects with multiple uses are inherently more
complex and less efficient to design, finance and
manage.
Because housing and commercial uses are
fundamentally different, they require different design
features, different financing tools (with different
underwriting standards) and different management
skills.
In some cases, the demands of housing and
commercial uses conflict in ways that make it difficult
to market the product.
Bringing all of the divergent components together so
that they complement each other is the key to having
a successful mixed-use project.
Characteristics of Successful
Mixed-Use Projects
Specific goals for both the housing and commercial components of the project,
informed by careful market analysis that verifies the needs and assumptions underlying those
goals.
Development teams with solid experience in mixed-use design, commercial leasing, housing
& commercial financing, and property management.
Sites located within existing commercial districts with good visibility & access to transit
and roads.
Architectural designs that accommodate specific needs for commercial uses into the project on
the front end, while incorporating unique elements that attractively integrate the projects
into their communities.
Careful selection of a strong and unique mix of commercial tenants.
Sufficient parking that will adequately serve the needs of commercial and housing tenants.
Partnerships with municipalities on site assembly and the financing of infrastructure
improvements.
The use of phasing for large, multi-block projects when resources are not sufficient to
undertake all activities at one time.
Creative financing opportunities for short, medium and long term investors that allow the
commercial portion of the project to establish its customer base.
Realistic pro formas that include funds for tenant improvements, rents that are in line with the
market, a healthy vacancy rate for the commercial, and tested assumptions for operating
expenses.
Legal structures that separate the different uses when necessary to obtain financing.
Incorporation of civic uses, public or green spaces such as libraries, banks, community
centers, urban parks, and creative landscaping.
Non-Residential Uses and Risk
in a Mixed Use Development
The least risky non-residential use to develop is community
program space, which even though do not produce rent or
revitalize commercial corridors, they can provide tremendous
benefits to a supportive or affordable housing project.
Developing space for a childcare center or as office space for the
sponsoring agency or another non-profit group can be a reliable
way to generate income from the commercial space, without taking
on too much financial risk.
Developing space for a for-profit office tenant in an affordable or
supportive housing development can be difficult to market,
depending on the nearby availability of comparable spaces for rent.
The highest level of risk comes with trying to develop retail or
restaurant space since location is a major determining factor in the
success of a retail or food service establishment.
BEST MANAGEMENT PRACTICES
FOR MIXED INCOME HOUSING
The following is checklist of considerations in
deciding if a mixed-income development is
needed or desirable.
What is the market?
Who is being served in a development?
What is the tenure type?
What is the scale?
What is the greater community context?
What are the financial considerations?
Is a mix of incomes necessary for approval
What defines success?
Income Levels for Mixed Income
Projects The Conventional Wisdom
Many affordable housing experts believe that
a mix including up to 20% extremely low
income (ELI) elderly households is almost
always feasible.
There is general consensus that a mix
including non-working ELI family households
is more risky.
Many experts believe that up to 20% non-
working family ELI households is feasible with
good management, and that higher
percentages may or may not be feasible.
Income Levels for Mixed Income
Projects Different Mixes
According to conventional wisdom, sponsors should
consider the following factors when planning a
development with these mixes:
“30 to 60” mix. Some households below 30% area median
income (AMI), with the remaining households meeting LIHTC
requirements. In this mix, the conventional wisdom rule of
thumb is the most frequently cited advice.
“30 to 80” mix. Some households below 30% AMI, with at
least a significant number of the remaining households being
typical market renters. There is some evidence that the presence
of a middle band, say from 40% to 60% AMI, is very helpful and
perhaps essential in achieving community stability and viability.
“30 to 120” mix. Some households below 30% AMI, with at
least a significant number of the remaining households having
incomes at or near the highest levels typical for renter
households in the local market. Here, the evidence is stronger
that a middle band is needed.
House Charlotte
2002 Median Family Income for tha Metropolitan Statistical Area:
Charlotte - Gastonia - Rock Hill
FAMILY SIZE
% OF
INCOME 1 2 3 4 5 6 7 8
20% $8,950 $10,250 $11,500 $12,800 $13,800 $14,850 $15,850 $16,900
30% $13,500 $15,400 $17,350 $19,250 $20,800 $22,350 $23,850 $25,400
40% $17,950 $20,500 $23,100 $25,650 $27,700 $29,750 $31,800 $33,850
50% $22,450 $25,650 $28,850 $32,050 $34,600 $37,200 $39,750 $42,300
60% $26,900 $30,750 $34,600 $38,450 $41,550 $44,600 $47,700 $50,750
70% $31,400 $35,900 $40,350 $44,850 $48,450 $52,050 $55,600 $59,200
80% $35,900 $41,050 $46,150 $51,300 $55,400 $59,500 $63,600 $67,700
90% $40,400 $46,150 $51,950 $57,700 $62,300 $66,950 $71,550 $76,150
100% $44,850 $51,300 $57,700 $64,100 $69,250 $74,350 $79,500 $84,600
110% $49,350 $56,400 $63,450 $70,500 $76,150 $81,800 $87,400 $93,050
Note: To update to current year, please change HUD's estimate of Median Income for 100% Family of 4
Appendix 1 - Definition of Affordability For Base Year 2002
1 Affordability Matrix - ( Based on a Family of 4)
% of Median Annual Maximun Max. Max. Sales
Income Income Monthly Rent Price Price
50% $32,050 $801 $88,755 $93,192
60% $38,450 $961 $110,560 $116,088
80% $51,300 $1,283 $154,341 $162,058
100% $64,100 $1,603 $197,952 $207,849
120% $76,900 $1,923 $241,562 $253,641
Assumptions: Insurance and taxes are $150,.00
8 % interest Rate for 30 years
II. Affordability Matrix - ( Based on a Family of 3)
% of Median Annual Maximun Max. Max. Sales
Income Income Monthly Rent Price Price
50% $28,850 $721 $77,852 $81,745
60% $34,600 $865 $97,443 $102,315
80% $46,150 $1,154 $136,795 $143,634
100% $57,700 $1,443 $176,146 $184,954
120% $69,250 $1,731 $215,498 $226,273
Assumptions: Insurance and taxes are $150,.00
8 % interest Rate for 30 years
III. Affordability Matrix - ( Based on a Family of 2)
% of Median Annual Maximun Max. Max. Sales
Income Income Monthly Rent Price Price
50% $25,650 $641 $66,949 $70,297
60% $30,800 $770 $84,496 $88,721
80% $41,050 $1,026 $119,418 $125,389
100% $51,300 $1,283 $154,341 $162,058
120% $61,550 $1,539 $189,264 $198,727
Assumptions: Insurance and taxes are $150,.00
8 % interest Rate for 30 years
IV. Affordability Matrix - ( Based on a Family of 1)
% of Median Annual Maximun Max. Max. Sales
Income Income Monthly Rent Price Price
50% $22,450 $561 $56,047 $58,849
60% $26,900 $673 $71,208 $74,769
80% $35,900 $898 $101,872 $106,966
100% $44,850 $1,121 $132,365 $138,984
120% $53,800 $1,345 $162,859 $171,002
Assumptions: Insurance and taxes are $150,.00
8 % interest Rate for 30 years
Information on Housing
Affordability in Your Area
Go to the web site of the
National Low Income Housing
Coalition
[Link]
Go to your specific state and
your specific county or MSA
This site will yield detailed
information on the “fair market
rent” for different size
apartments
It will also yield detailed
information about the proportion
of your area’s population that
can afford fair market rents
(30% of AMI)
Housing Affordability in Charlotte
NC
What impact will
these limitations
make on affordable
housing projects in
Charlotte?
What would you have
to do to develop or
rehabilitate an
apartment to be
affordable in this
market?
Specific Affordability Data for
Charlotte
