(Note: The construction phase is typically not the domain of the municipality, but it is important for those involved in planning for housing to have a good understanding of the entire development process).
In the construction phase, zoning issues have been resolved, a contractor is hired, construction financing closes, and a permit is issued. Construction work can begin. Property marketing will likely get under way during construction. State- and federally-supported affordable housing will have marketing requirements, including an affirmative fair housing marketing plan. This plan must be followed at the initial lease-up/sales period and during the project’s operations. This guide provides an overview of the following parts of the construction and initial occupancy process:
- Selecting a general contractor
- Construction oversight
- Marketing and lease-up
- Management plan
- Marketing and outreach plan/affirmative fair housing marketing plan
Selecting a general contractor
The developer will create a construction contract and put it out to bid, then work directly with the selected contractor for construction services. The general contractor subcontracts the major areas of building construction, site work (utility line installation, grading, storm water management, etc.), framing and finish work, mechanical (heating, ventilation, and air conditioning), electrical, plumbing, and landscaping.
It is the developer's responsibility to monitor construction and necessary inspections and to ensure that work is being done on time, within budget, and according to the project plans and specifications. It is also the developer's obligation to ensure that any and all public hiring and reporting requirements are met during the construction period. The funding bank(s) will also provide some oversight and, at the project’s expense, hire a construction inspector who will inspect the property, at a minimum once a month, to ensure that the construction invoice reflects the amount of work completed.
Marketing units, outreach plan, and lease-up
The developer is responsible for resident selection, including the drafting of the resident selection plan, marketing, administering the initial lottery process and determining whether potential residents are qualified. If they choose to hire a third party agent to perform these services, it is the developer's responsibility to ensure that any contracted marketing and/or management agents are in compliance with all requirements.
The use of public funds, including local funds, requires the development of a marketing and outreach plan. Developers must create an affirmative fair housing marketing plan (AFHMP) to ensure fair and open access to affordable housing and to promote compliance with state and federal laws. The plan covers all outreach, marketing, and tenant selection activities for initial and continued occupancy. The plan must also include a provision that the vacant affordable and/or accessible units must be registered with CHAPA's MassAccess website.
More information on AFHM plans, including rules regarding tenant selection, can be found in DHCD's official guidelines as well as the links in the Fair Housing guide. The guidelines are updated periodically and should be reviewed to ensure that marketing and tenant selection plans include the appropriate requirements.
Approximately six months prior to construction completion, or as determined in the affirmative fair housing marketing plan, the developer and property manager should begin to advertise and screen lottery applicants. This will allow units to be leased quickly when construction is complete. This is of particular concern if the project involves tax credits, which require that units be leased within a specific timeframe (generally 90 to 120 days after issuance of the certificates of occupancy, depending on the size of the project).
Once the project is completed, the local building department will issue certificates of occupancy. At this point, the development can be occupied and the developer can start to move forward in closing the permanent financing of the project, which will pay back the construction loan and often pre-development and acquisition lenders.
The management plan includes a clear definition of both the property manager's and the owner's responsibilities for the daily operation of the project, such as lease-up, rent collection, maintenance, emergency maintenance, contracting, supportive and other site services, and required financial reporting. The plan should also include forecasts for income, operating expenses, and capital improvements so the development can project the fiscal performance for the coming years.