Workforce Housing In Londonderry 1

Workforce Housing In LondonderryFinancial Feasibility Analysis

Londonderry ZBA Presentation

February 20, 2013

Russell Thibeault Applied Economic Research

Workforce Housing In Londonderry 2

Scope of Analysis

• Evaluate financial feasibility of town’s workforce housing provisions:– 75% of units workforce housing, affordable to renters with

incomes at 60% or less of area median and paying no more than 30% of their income on rent, including utilities.

Two scenarios– 15 buildings, 16 units each, 75% workforce housing. Cost=

$37.3 million– 10 buildings 24 units each, 50% for workforce housing.

Cost=$33 million.

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What Can Market Units Rent For?

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What Are Comparables Renting For?

Complex Fairways Hampshire Green Legacy Park Royal Crest EstatesLocatyion Forest Ridge Road, Derry Route 3, Bedford Bradley St, Manchester 1 Newcastle Drive, NashuaAverage Unit Size 1,000 1,200 850 1,250 Average Monthly Rent 1,150$ 1,600$ 1,175$ 1,300$

Average = 1,300/month without utilities.

New 2 Bedroom in Amoskeag Millyard will have monthly rent of $1,400 per month Without utilities.

Conclusion: New 2 Bedroom Units in Londonderry Can Rent for $1,375 per month without utilities

5

What is Allowable Workforce Housing Rent In Londonderry?

$1360 per month with utilities, $1,100 per month per month without utilities

Workforce Housing In Londonderry

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What Income is Available To Support Investment?

75% Workforce 50% Workforce

Gross Rental Income 3,265,000$ 3,457,100$

Operating Expenses (property taxes, maintenance, insurance, etc.) (1,275,800)$ (1,275,800)$

Net Income Available To Support Costs 1,989,200$ 2,181,300$

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How Much Investment Can Be Supported?

75% Workforce 50% WorkforceCost To Build 37,300,000$ 33,000,000$ Rate Of Return Required 6.50% 6.50%Income Required 2,424,500$ 2,145,000$ Estimated Net Income 1,989,200$ 2,181,300$ Surplus or (Deficit) (435,300)$ 36,300$

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Is The Return Adequate To Justify The Investment?

75% Workforce 50% WorkforceNet Income Available To Support Costs 1,989,200$ 2,181,300$ Cost To Build 37,300,000 33,000,000Rate of Return 5.33% 6.61%

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Conclusions

• It would cost more to build the proposal with 75% workforce housing than with 50% workforce housing;

• The 75% workforce housing scenario would generate less income than the 50% workforce housing scenario;

• The 75% workforce housing scenario is not feasible;

• The 50% workforce housing scenario is feasible.