SITO's 4-Point Strategy
1. Retain and repair existing housing
Presently, the dominant approach to creating affordable housing is new construction and gut rehab. These approaches provide new or like-new rental units but come at a steep cost to the public and take years to complete. In an Oct 23, 2022 article NY Times columnist Ezra Klein reported on Los Angeles’ effort to address homelessness through apartment construction. 3,357 units had been created at a cost of $596,486 per unit! Similarly, in an April 17, 2022 article, the St Louis Post Dispatch reported on the city’s plans to use $34M to rehab the 147-unit Hillvale apartment complex which works out to $231,000 per unit. A faster and more cost-effective approach is to identify distressed but sound multi-family apartment buildings that can be quickly and cost-effectively renovated into dignified rental units using Selective Rehab. SITO’s decades of experience enables us to select buildings and neighborhoods for which the selective rehab method is well suited.
2. Use Selective Rehab
Instead of doing gut rehab which entails ripping out everything except the brick and studs and starting over, with Selective Rehab we carefully assess the property to determine what work needs to be done. Each apartment is unique but typically we replace windows, doors, and add insulation to secure the apartment and make it energy efficient. The kitchens and bathrooms normally need replacement or significant repair. Then we repair or clean up ceilings, walls, and floors and check and repair or replace all the mechanical systems to insure they are operating well. An important aspect of the process is removing overgrowth from the property and generally improving the exterior and grounds so the building is not only a benefit to the tenants but also to the neighborhood. This results in clean, safe, well-functioning apartments with comfortable amenities and improved energy efficiency which the tenants and neighbors can be proud of. Most importantly, this work can be done for $40,000 to $80,000 per unit (acquisition and rehab) and completed in four to six months. Substantially faster and at a lower cost than gut rehab or new construction.
3. Utilize a novel financing approach, which makes selective rehab possible
Historically, substantial and reliable financing for selective rehab of affordable housing has been difficult to secure. The prime impediment is that banks will only loan a non-profit up to 75% of the value of the completed building. SITO’s novel approach is to use donations and 10-year interest-free loans to fill the gap. After 10 years, accrued equity in the building is sufficient to enable SITO to repay the interest-free loans after refinancing back to 75% of value. This funding approach allows SITO to charge affordable rents. The rental income is used to pay the mortgage and all property management and maintenance costs while requiring no ongoing subsidies.
4. Promote the use and funding of Selective Rehab by additional non-profits
Sanctuary In the Ordinary cannot on its own selectively rehab all the viable properties in St Louis. Therefore, we also act as a proponent of the strategy and encourage other non-profits to learn from SITO’s success. We believe having many non-profits using this approach can be a powerful agent of change for St Louis. Non-profits value more than the bottom line and thus can temper rent increases more than private owners and can take a long-term, broad perspective with a goal of keeping surrounding areas clean, green, and safe. (See ACH Petition for SITO’s latest efforts to promote Selective Rehab to this city and other nonprofits)