Risk Reduction

There is little risk of loss of demand for housing. Long-term housing demand in the Hayward area is strong. A 2010 study for Hayward projects 8,620 more households over the next 20 years (Table IV-1, AECOM, Mission Blvd. Market Analysis and Economic Development Strategy, May 24, 2010, for the City of Hayward). Fourteen years later, in 2024, the supply of housing still has not met demand. There are numerous building projects up and down Mission Boulevard, however, the need is still not met. A project like College Heights, with 732 units can help meet this need in the most affordable, greenest way possible.

The biggest risk factor is the absorption rate, how fast units will sell at a given price. Too high a price has sales too slow to achieve a target return, and too low a price has the same result, and there is no certain way to determine an optimum price. Several things can be done to reduce risk. The City of Hayward economic development reports more than enough demand for housing from projected population growth.

Market Research

We propose that professional market research be based on a proposal by InterQ, an innovative San Francisco market research firm (https://interq-research.com/). The market research will use travel diaries, interviews, and focus groups composed of the specific markets. Travel diaries allow assessment of the practicality of a household meeting their travel time budgets in College Heights. For example, CSUEB people can be recruited by email, with arrangements made to meet on campus. The groups can discuss the concept in general, and then comment on floor plans and facades based on a few design choices using style sheets. Group comments on what has the most market appeal will eventually be offered to buyers. Focus groups will comment on the viability of the plan. The research will find ways to improve marketability and to educate people about the project.

Reservations

After project entitlement, buyers can put money down to reserve specific units. The developer would obtain a Subdivision Public Report Application Guide (SPRAG) Preliminary Public Report from the state Department of Real Estate. The report allows reservations which allows buyers to make a deposit to guarantee being able to buy a unit. The City could cooperate on expedited entitlement and getting a Preliminary Public Report. Reservations will indicate a strong intent to buy. A target for reservations can be stipulated before significant investment in site improvements begins. Falling short on reservations will alleviate the developer’s obligation to build the project. Reservations require some expense, but the expense is small compared to the total project, and provides high certainty of buyer commitment.

Phasing

Phasing involves delaying of expenses to get closer to revenues and is routine for construction of units, which are the most expensive part of the whole project. A block of houses would be built and sold before the next block starts, with sale revenues helping finance the next phase. Site development costs are the first large expense and occur early in the project, with advantage for phasing. It is important to get the first area ready for building as directly as possible to start revenues. Major site cut and fill probably has to be done all at once, but some walkway, utilities, Foothill Trail, and landscaping can be coordinated with building phases.

A Fallback Plan.

If sales fall seriously behind and indicate failure of the project after about two to three years of sales, a pre-approved fall back plan could be implemented, probably involving fewer units and more pavement to get parking close to units. It might still involve losses, but less than otherwise.

On the other hand, there is the possibility that the project could sell out faster than units can be built. There are other projects along the Mission Boulevard corridor that were sold out well before all the units were constructed. Demand for housing in Hayward is strong.