What Are Some of the Basics of Construction of Multi-family Housing?
The collapse of the multi-family condominium in Surfside, Florida in June has raised issues of construction safety which do not typically get public attention.
To address some of the basic issues of the development of multi-family housing, I interviewed Caroline Vary, partner and managing director of asset management with Jonathan Rose Companies, a mission-based nationwide for-profit owner of 15,000 units of multi-family housing, 90% of which are deemed affordable including 50% for senior citizens.
JV: Describe the types of multi-family housing Jonathan Rose is involved in.
CV: Much of the ground-up development has been financed with the use of low-income tax credits and many of our new acquisitions have rental contracts through the federal Section 8 Housing Program administered by HUD. These projects are often mixed-use, including in addition to housing, uses such as health-care facilities, schools,and office space for non-profit businesses. All are in support of our Community of Opportunity Program. Our buildings are built or renovated to high green standards consistent with our mission to provide cost-effective and energy-efficient multi family housing.
JV: Please tell about your professional background
CV: I studied architecture at the Rhode Island Institute of Design. What I learned was that while I enjoyed architectural design, I liked being part of the building process. I worked for Sciame Construction for five years and then joined Taconic Investment Partners where I gained a larger exposure to the real estate industry. I joined Jonathan Rose Companies in 2007, initially to manage development projects. I am now responsible for our Asset Management practice. We provide quality affordable housing for a large number of people who otherwise might not have that opportunity.
I am also a licensed real estate broker in New York State and Connecticut.
JV: Please identify the Various Building Codes that have been established to protect a building’s occupants.
CV: The International Building Code that applies to all buildings regardless of their use was adopted by New York State on July 3, 2002. Prior to its adoption New York had its own Building Code separate from the International Code. It applies anywhere in New York where local codes are less restrictive.
The New York Multiple Dwelling Law applies to residential buildings of three or more units in New York City and Buffalo based on their populations of 350,000 residents or more.
The New York State Multiple Residence Law applies to all residential units outside of New York City and Buffalo.
The New York City Housing Maintenance Code applies to all residential units in New York City.
JV: Who are the major players in the development of multi-family housing?
CV: I would say it starts with the developer and their conception of what it is appropriate to build; whether it be commercial, residential, or perhaps, mixed-use based upon what local zoning laws allow. Hopefully they factor in what is best for the community as well. The developer would then put together a group of professionals such as zoning lawyers, general contractors who would hire the sub-contractors, environmental specialists, architects, engineers, landscape architects, and a property manager for the maintenance of the property. The municipal planning departments would have to approve the plans to make sure that they are consistent with the overall master plan for the community.
JV: Is it ever the case that the builder has to deviate from the original architectural drawings?
CV: Yes, that often is the case. If it’s a modest change as opposed to substantial, the proposed change may not require building department approval.
JV: Explain the difference between a temporary and a final certificate of occupancy.
CV: The temporary (TCO) allows tenants to move into the apartments because substantial completion has been achieved. The work remaining to be done is minor and will not affect health and safety. After the remaining minor work has been completed, the buildings department will issue a final certificate of occupancy. (C of O). If the owner wishes to transfer ownership of the property, a condition of the contract will be receipt of the final approval by the buildings department in order to protect the purchaser.
JV: Am I correct that the period of time between the issuance of a TCO and a final CO can be substantial, so a purpose of the TCO is to allow the tenants to take occupancy and the developer to gain some income to meet their development and operating costs?
CV: Absolutely! The time in between the two is unpredictable and could be very lengthy.
JV: Talk about preventive and corrective maintenance, service contracts, the funding of reserves, and insurance.
CV: It’s typical for owners to establish an annual operating budget but it is important that it fits into an overall plan. It’s important to look out five to ten years and identify future replacement and capital improvement items that will evolve as the building ages. That necessitates the setting aside of reserves which will be available when the work has to be done. It’s important to allow for inflation over an extended period of time. Those issues should be addressed annually to make sure that the reserves are being adequately funded.
Closely connected to this is the need for on-going preventative maintenance in order to avoid costly corrective maintenance. Service contracts with professionals’ knowledge about the systems is one way to meet that goal.
It is very important that warranties be tracked in anticipation of their expiration, and insurance coverage must be monitored and updated annually.
JV: What would you suggest is the best preparation for your position with Jonathan Rose?
CV: I would say, literally, learning this business from the ground up. There are so many facets to real estate development that the more experience you have in all of them, the better you will be able to do your job.
