Anita Nelson, the executive director and CEO of SRO Housing in Los Angeles, says her company offers both kinds of housing. The community bathroom option is the least expensive, with rents running as low as $203 a month. The group charges more, depending on income, for efficiencies with “kitchenettes” that run 350 square feet to 450 square feet.
INANCIAL HURDLES Money probably heads the list of any developer’s concerns. But building units for residents without a lot of income means spending even more time—and creative efforts—on the age-old question: Who’s going to pay for all this?
Generally, SRO developers can’t have any debt on the construction. Financing typically depends on a mix of government grants, partnerships with social service organizations, profit from commercial components, and a lot of fundraising.
“Money is difficult to pull together,” Alvidrez says. “You always have at least five to six funding sources, and it takes a lot of time and energy to create the full spectrum of financing to develop these units.”
Extras like commercial space on the bottom floor or mixed-use housing are keys to keeping SROs financially viable, say developers. So, too, they say, is building in urban cores, which allows for higher densities.
“The 24-hour desk clerk costs the same whether it is 200 units or 100 units,” Falk says. “It is cheaper in many ways to have more units. Anything under 100 is too small. Even 100 units are hard to make pencil out.”
As it stands now, developers get by with minimal profits or by balancing their portfolios with other projects. For example, Carlisle partnered with Miami-based Carrfour Supportive Housing to develop The Royalton, a 1920s Miami hotel, which will create 100 apartments. Carlisle’s Boggio says the project ended up being pro bono work for his company.
“Any profit margin is highly questionable,” Boggio adds. “We are really hoping that we can get the nonprofit (owner) down to a number where we are not operating at a loss, which some nonprofits are doing.”
Carrfour’s president, Stephanie Berman, says the partnership with Carlisle was the only way to get enough money. “It helps in getting financing to split the load of funding applications,” she says. “The applications are extremely time-consuming and taxing on our staff.”
Most SRO developers laugh at the mention of profit margins, especially because rental subsidies and government funding—key components in meeting the needs of the homeless—are scarce.