A 29-acre site in St. Charles — one of the last remaining open properties in town for residential development — is becoming a flashpoint for housing affordability in the city.
With a new proposal on the table, some city officials are requesting affordable units while the project’s developers argue it would hurt their private equity-backed bottom line…
The developers said they are trying to support retail along the Randall Road corridor by “attracting residents with disposable income.” City officials responded by saying there are people who work for the city who can’t afford to live there.
During the March 16 meeting, the developers said offering affordable units, such as a $1,070-per-month studio, would “provide a revenue gap.”
The basics of the story are not unusual for suburban residential development projects. A developer sees an opportunity. Upscale residential units can bring a good profit and upscale suburban communities tend to like residential properties that enhance their status and character. The city responds to the proposal with a few requests, including requesting some affordable housing units for several groups in the community the suburb would like to retain or attract. A period of negotiation or dialogue commences.
What is different here is that the developer has clearly stated that substituting affordable housing units will lead to a revenue problem. Why? Because there are expectations from the private equity supporting the development. The article does not discuss the details (and they may not be publicly available) but it sounds like it can be put another way: not enough money will be made on this development if affordable housing is included.
Profit-making is not unexpected. The clash between private equity money and affordable housing is less often in the public view. What amount or percentage does private equity expect to make on residential development? Can it make room for any affordable housing or is it completely about profit maximization?
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