Is Mass Timber in Affordable Housing projects now a Viable Solution?

Is Mass Timber in Affordable Housing projects now a Viable Solution?

Foreword by Ian Thompson, Editor

Welcome to our latest video, titled “Is Mass Timber in Affordable Housing projects now a Viable Solution?”. In this discussion, Ricky McLean and Renee Funston delve into the innovative use of mass timber in affordable housing construction, a hot topic given the pressing need for more affordable housing all around the world.

Outside of Western Europe and Scandinavia, the use of mass timber, also known as massive timber, in construction projects is relatively new. It is starting to gain traction in multi-residential and commercial buildings, yet remains almost a myth in single-family residential builds. However, this does not imply that the technology is not ready, and cost-savings can be made. Instead, it suggests that the industry isn’t prepared or aware of this much-needed change.

So, does it make financial sense to utilize mass timber in affordable housing projects? The answer, as is often the case, hinges on the design and understanding how to use mass timber to its strengths while maximizing building efficiency. It’s not just about comparing the cost of materials. One must also consider the broader picture, including labour savings, reduced construction time, and overarching benefits such as sustainability, reduced site disruption, and waste. If the answer is a resounding ‘yes’, then what steps need to be taken to encourage designers and builders to adopt these superior building systems?

Renee Funston, a Development Manager with the Capital Area Development Agency, shares her firsthand experience with a mass timber affordable housing project, providing unique insights and addressing some of the key questions surrounding this issue.

Throughout this video, Ricky and Renee explore whether building with mass timber can solve some of the challenges in the affordable housing sector. They discuss the potential cost implications, dispel the misconception that affordable housing must be built using the cheapest materials, and examine the feasibility of using mass timber throughout the build.

So does it make financial sense to use mass timber in affordable housing projects?

Renee shares the specific benefits that mass timber can bring to an affordable housing project, including environmental advantages, construction ease, and timeline efficiencies. They also discuss the broader implications for developers, architects, and contractors navigating the complexities of using advanced building systems and current regulatory compliance in the USA.

This video is a must-watch for anyone interested in affordable housing developments, innovative and more efficient construction methods, and the evolving role of mass timber in meeting housing needs. I hope it provides valuable insights and sparks further discussion on affordable housing solutions, and why I feel designers and builders need to adopt better practices, products and building systems today, for the benefit of all.

Video Transcript

Is Mass Timber in Affordable Housing projects now a Viable Solution?

Welcome back to another Timber Talk Tuesday. I’m Ricky McLean with Woodworks. Have you heard about the use of mass timber in affordable housing construction? It’s no secret right now that the U.S. is in the midst of a desperate need for more housing in general, especially affordable housing. Can a new and innovative material like mass timber be used to solve some of these challenges? What happens if the mass timber comes at a cost premium? Does affordable housing have to be built using the cheapest materials possible? Is there room for a new material like Mass Timber? If you’re interested in some or perhaps all of these topics, I recommend you stick around for today’s video. I think it’s going to be a good one.

Now, to help address a lot of these questions, I thought, what better way to do so than by talking to somebody who’s actually done one of these projects – a mass timber affordable housing project here in the states. So, I recently had a conversation with Renee Funston. Renee is a Development Manager with the Capital Area Development Agency, which is in Sacramento, California. As of the time of this recording, they’re just wrapping up construction on a five-story project called Sunrisa in Sacramento.

Sunrisa is a regulated affordable housing project. It’s providing 58 affordable housing units in the 40 to 60 percent AMI income range. It’s receiving financing from four percent tax credits, tax-exempt bonds, a state HCD loan, and a Capital Area Development Agency loan. It’s utilizing CLT floors and roofs on top of panelized light wood frame walls for a five-story from grade Mass Timber affordable housing project.

One of the first questions that I asked Renee in our conversation is to briefly explain some of the general challenges that affordable housing projects encounter. Not tied specifically to the use of mass timber, but just what are some of the constraints that they face on a day-to-day basis when doing affordable housing development?

Cost is always the key issue. There’s a lot more demand for affordable housing, as we know, that by far outpaces the availability of public financing. Especially in California, we have a huge housing crisis issue.

One of the central affordable housing tools has historically been the four percent tax credits, which historically have been non-competitive and were awarded through an over-the-counter application. However, with the Cerny and Disaster Relief Tax Relief Act of 2020, the set the tax credit four percent floor to actually four percent.

The four percent name was actually just representing the designation type. You have four percent tax credits and nine percent tax credits. The IRS formula for calculating the value of these four percent tax credits actually floated below four percent. So when Congress established the four percent floor, this actually flooded the market with tax credits, which lowered the value of those credits to developers and investors.

Pairing more demand for affordable housing financing, plus a lower value for these tax credits, plus indicators becoming more selective in choosing those projects to fund, it created greater financing gaps. So there’s a lot more projects that are seeking four percent tax credits and every point on the application counts.

The funding criteria changes every year based on political priorities, such as designating more units for people transitioning from homelessness. Then, of course, funding criteria across different programs also don’t align, so developers are constantly trying to rework your project to complete your funding stack. And all the while you’re performing these programs gymnastics, we also have the same issues as market rate developers – rising construction costs, supply chain issues, and labor shortages.

Next, I asked Renee what happens specifically when you try to bring in new materials such as mass timber, something that’s new to them as the development agency, something that was also new to most of the design and construction team. How does a new and innovative material that could potentially provide some benefits, create additional challenges or hurdles specifically on an affordable housing project?

Trying to build anything innovative requires additional extreme care and attention from the entire design and construction team because parties are unfamiliar with the new construction method.

For example, with Sunrisa, we were part of the 2019 California building code, which allowed CLT for gravity loading bearing use but not for lateral. So that is for horizontal but not vertical application. To permit this novel design, the team had to work through the alternative means and methods review (AMMR) process. This caused additional schedule delays because of extended reviews by all parties, including introducing the system and explaining the differences to just traditional framing.

It was our architect and GC’s first project using CLT. Similarly, the team had a recurrently introduce and explain the product and process to the subcontractors and vendors.

Additionally, being affordable housing, we’re subject to section 11b in the California building code, which specifies building requirements for public housing which is extremely prescriptive in defining precise dimensions. So all of these things really put you in a tight box.

A lot of developers try to reduce costs, expedite the process, reduce headaches, and ultimately build more housing units right now. Going with mass timber in a novel construction method like CLT creates just a lot more layers of complication in this field that’s already fraught with oversight, regulation, and compliance requirements.

Of course, it’s not all challenges and hurdles when it comes to mass timber and affordable housing. Mass timber can leverage some benefits and provide some real tangible benefits. That’s what I asked Renee about next. What are the specific tangible benefits that using mass timber in an affordable housing project can provide?

One of the major benefits, if we want to just look at construction ease and timeline, is that CLT is essentially a prefabricated material. When there’s a lot of parent attention to the upfront preparation process, we reduce the actual framing time. This is really beneficial for our projects which were framing during the winter time.

With Sunrisa, we used the CLT for the horizontal components and then we used prefabricated walls in conjunction. Our contractor had done a lot of upfront research, working with the different subcontractors, getting all the pieces directly lined up. They also got really familiar with the framing system itself and they used a crane. They were able to place a floor of CLT panels in one day, which is a huge time savings compared to four or five days per floor with conventional TGI. This is significantly faster than concrete which requires formwork, shoring, and reinforcement with steel.

This also saved us cost as far as our general conditions for the contractor and helped us in meeting some completion deadlines. This mix of using the prefabrication CLT and the walls resulted in precise and high-quality lumber. Then of course, there are the environmental benefits of easing insulation, reducing time cleaning and straightening up the walls, and reducing on-site waste.

I think there’s a perception too with some people that an affordable housing project has to be built using the cheapest materials possible, the cheapest means possible. Oftentimes, use of mass timber could create a cost premium. Now a lot of projects have been able to overcome that cost premium through leveraging the other benefits that mass timber can provide. But strictly looking at the cost of the materials, if an affordable housing project uses mass timber and it does create a cost premium on the material side of things, does that create a no-go situation? Does that immediately strike out the possibility of mass timber in affordable housing? This was the question that I asked Renee next.

Certainly, I mean if you’re going to go with any innovative construction method period, you need to build in some buffers in your pro forma, expecting that there will be cost overruns. A lot of these things are going to be really unique to the client and the design and construction team, and their motivations for doing the project.

A lot of affordable housing doesn’t have to be just the bottom line profit driven. For example, with Sunrisa, we’re a really unique client. We are a Joint Powers Authority between the city and the state. We have a very specific charge with creating housing that’s accessible to a wide range of income levels within the central city, and to maintain the vitality and urban character of a 24-hour community around the state capitol. We still get tax increment financing which we reinvest in the neighborhood.

While certainly there were cost overruns with Sunrisa that were unanticipated, there were still ways for us to work things around, from just being able to pull from other buckets of financing. And then also, in California, there was just, and I mean across the country with this particular period in time and dealing with post-pandemic, there was also additional bond cap. So that made it really a lot more beneficial to finishing this project and making things pencil in the end.

As I also said, we were done through the governor’s executive order for affordable housing development and that gave us our actual land for just one dollar a year. So that also helps save on the cost for using CLT.

When you pair these unique characteristics and then just the benefits of how stunning CLT looks, from having the added height, how warm it looks and feels, and opening up a space, for us, livability, longevity of the actual living unit, and the benefits overall that it’s going to bring to the neighborhood, those are our most deciding factors.

Then of course the environmental benefits. It was a no-brainer for us that we wanted to use CLT. Plus, we had a really dedicated, as I said, architects and contractor, and everyone was, as together, a joint dedicated team felt a sense of camaraderie to building this product that would be beautiful and into the future.

There you have it, folks. I hope that you enjoyed that conversation with Renee. I hope that it clarified some of the questions that often surround the use of mass timber in affordable housing, and perhaps just affordable housing questions in general. I do think this is a topic where there tends to be some misunderstanding, misperception, commonly misunderstood topics, and so hopefully today’s video clarifies some of that.

I do also want to mention that Renee is going to be on a panel discussion talking about mass timber in affordable housing projects, the realities, the benefits, the challenges, at the 2023 International Mass Timber Conference in Portland, Oregon, at the end of March in 2023. So, if you’re attending and want to hear more from Renee, hear more about this project, I suggest that you attend that panel discussion, as well as hear from some other really leading architects and developers in the space of mass timber affordable housing, and helping solve a lot of the challenges that we face as a country in terms of housing solutions.

Well, that’s it for today’s video. I thank you so much for making it to the end, and until next time, we’ll see you later.