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How to Choose a Development Partner

Introduction

As a continuation to our Getting Started Guide – a set of Learn Center articles supporting organizations new to housing development – this article is meant to help disability-forward minded individuals and organizations navigate the housing development process and make their ideal housing community a reality. Building housing is no small feat, and if this is your first, second (or even third) endeavor, you should benefit from the support of a seasoned development partner experienced in the type of project you’re hoping to execute. This guide is a starting point to help you think about what type of housing development partners would best meet the needs of the community you aim to create. Partnering with a developer is a multi-year endeavor, so you will want to take the time and consideration to ensure that you are choosing the right partner for the job. 

First, let’s define what a development partner would do for a housing project. They will be an organization or individual who has experience in transforming a piece of land into livable housing. Developers understand the entire process of building housing from getting local approvals, to financing, to construction, to renting or selling the units. They also help identify potential areas of risk for all partners involved, like lengthy entitlement process or construction cost escalation. The developer should also have relationships with consultant teams like architects, structural engineers, and construction managers who will help design and build the end product. 

Once your organization has committed the resources (money and/or time) to build housing, work through the steps below to find a strong, effective, efficient development partnership that can deliver on much needed disability-forward housing. 

Articulating Your Value

Prior to finding the partner that will be best suited for your project,  it is important for you to understand what you bring to the table. You and/or your organization have a lot of value, and you must be able to articulate that value in order to build an equitable, trusting partnership with a housing developer. Think about the role that you and/or your organization is going to play within the development of housing. 

Your value can be calculated by your target population experience, expertise and local community connections. That value can include things such as:

  • Organizing community to support a new housing project: Projects in some areas initially can face neighborhood opposition because some people in the neighborhood/community do not know what change will bring to their beloved neighborhood. This apprehension is understandable. Connecting authentically with communities, especially if you are from that community, can help a housing project mitigate risk. As an organization or individual, your ability to listen, respond, and engage communities to enable the creation of disability-forward housing is valuable. 
  • Supporting capital for the project: Housing is expensive to build. You may be able to bring valuable access to capital to a project, or connections that can help you secure financing for a project. If you are in this privileged position, finding a development partner may be easier, but that gives you even more reason to find the right partner that will help you execute against the vision of your organization. You will also want to articulate upfront the limit of the contribution you or your organization is willing to make to the project. 
  • Providing services to the future community: If your organization currently provides services to people with disabilities or any marginalized communities, you come with a wealth of experience of how to ensure future residents thrive in their new community. This mitigates a lot of operational risk related to the future housing project. You also can provide strong design input understanding what type of spaces, amenities, and services are important to the community you aim to serve in the future project. 
  • Providing land for the project: You may own a piece of land and are looking to develop it to provide disability-forward housing. Prior to forming a partnership you will want to use a third party consultant to value the land through an appraisal, so you and your partner can be aligned on the financial contribution of the land you bring. 

Deciding on the Best Type of Development Partner for you

Once you understand what you will bring to the project, you must find a partner that has the skills that complement your value. Although it’s not exhaustive, here are the types of developer partners that exist in most markets and some considerations when it comes to partnership: 

  • Larger, Established Developers: These types of developers have an established way of working and likely have their own design and operating standards. The upside to working with larger organizations is that they tend to have institutional sway and well-formed connections which can be advantageous during the development experience. They may be less likely to be flexible or want to target riskier projects or housing populations they haven’t worked with before. If you find a large developer you think you’d like to work with, you will want to understand if they have more experience in developing affordable, mixed income, or market rate housing and ensure their experience aligns with your desires. 
  • Smaller Regional Developers: These can be for-profit or nonprofit entities, and will likely have deeper community connections and are less rigid in their operations than a larger developer might be. They may have greater capacity and willingness to hear and internalize your vision for your project. Local nonprofit developers are often seen as an asset to the community which can help in raising funding for affordable projects. 
  • Vertically Integrated Developers: These are organizations or companies that provide resident services or property management within their projects after they are developed. This structure is common and can be advantageous for organizations that provide housing to people who require some level of support in conjunction with housing (like permanent supportive housers serving people experiencing homelessness). These types of development partners can help be beneficial for groups that want to minimize operational risk in properties they own and/or invested in. A potential downside to these developers is that some may have siloed expertise – they work on developing housing for specific populations, like nonprofits that develop permanent supportive housing, or mid-size private developers building senior housing, but there are also several smaller nonprofits and private companies dedicated to creating multifamily projects of different sizes for more general populations.
  • New and experienced individual developers: Some have very small nimble teams that can partner well with a newer type of venture. If you work with a smaller developer you will want to make sure that at least one of the partners is “bankable” meaning that a financial institution (like a bank or other investor) can feel comfortable making a loan or investment with the team knowing that one has a large enough balance sheet to support the project if something goes wrong during construction or operations. 

Once you think about a partner type that would work well with your organization, ask other similar developments in your region for recommendations and conduct interviews to see if they would complement your own organization. Share the vision of the project, the value that you bring, and what is needed from them. Do your due diligence to talk to organizations/people that they have worked with in the past to ensure styles are aligned. Once you’ve narrowed down your ideal partner, before finalizing, discuss the following with your potential partner. 

Evaluating Partnership Structure

Depending on the strengths of each partner, you can approach partnership in several different ways.

Fee based development

A fee-based developer will work with you to develop the project but has no ownership stake or interest in it. If you go down this route, you would pay the developer a fee to take on all aspects of fully developing the project, but you would ultimately own and lease the project and be responsible for it in terms of risk and taking on loans, entering into contracts with architects and other professionals, etc. You would also have broad decision making capacity and would be able to determine which other project partners you’d like to bring on board, and ensure your vision is executed against. Fee developers can vary in the way they charge for their development services, but most charge a fee based on a percentage of total project costs. Fee-based developers are typically a good choice for someone with a vision that is more or less fleshed out, but who lacks experience in the development process.

Joint ventures and co-ownership

In a joint venture or co-ownership structure, your development partner will have an ownership stake in the project, along with you, and will benefit economically from the project for the agreed upon partnership term. Under this construct, the cash flow and developer fee will be negotiated and split between the partners, and so are the guarantees, risk, and decision making processes. Partnership can involve more than one partner – you can work with both a nonprofit and private developer, or simply choose one of those options to bring your project to life. Joint venture partnerships are typically beneficial when each partner has something that the other lacks, whether it’s target population expertise or experience in developing and financing affordable housing properties versus market rate properties. Joint ventures are a good choice for a smaller organization that wants to build organizational capacity in housing development or operations but may not have a large balance sheet or the affordable housing experience needed to be competitive for public financing. 

Aligning on Roles and Decision Making

There’s a psychological theory that when small groups form, they go through four phases: form, storm, norm, perform. First, a new group starts working together (forms); then they get into disagreements (storm); then they establish clear delineation of roles (norm); and finally they are positioned to do great things together (perform).  The earlier that you determine the working norms between you and your partner, the less likely you are to “storm” creating a more productive team environment. 

Some best practices around role determination and decision making include: 

  • Identify the partner that will lead on different aspects of the process; for instance, while one partner may lead securing entitlements, the other partner may be the public spokesperson and lead community engagement.  
  • Identify the key decisions that would require concurrence from all members of the partnership; these may include future rents/prices, key design decisions or resident amenities.  
  • Outline these roles and decision making pathways early in the development process in a Development Management Agreement or a Joint Venture Agreement (contracts that you and your partner will discuss and sign)
  • Take the time to identify the most important aspects of the project for each partner. The roles and decision making processes should be aligned with the passion and priorities of each partner according to what they care about the most; for example, if one partner’s mission is to create opportunities for people with disabilities, they should lead the resident services and community partnerships aspects of the housing development 

Conclusion

When choosing a development partner, it’s important to research and interview the partner, to make sure they are an appropriate fit for your envisioned housing community. You will rely on your development partner for many things like financial feasibility, navigating relationships with government agencies and officials, complying with legal requirements and helping manage other partners like design and construction teams to build the project. You’ll work very closely with your development partner for years (and maybe decades) so take the time and be intentional about choosing someone who is open-minded and enthusiastic about the priorities of your disability-forward vision.