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INtroduction TO HOTEL AND APARTMENT CONVERSIONS
Hotel To Apartment Conversions Fix The Affordable Housing Crisis And They Generate A High Returns
My name is Jason Trindade and I am the CEO of Proximity Capital, a private equity firm committed to bringing more affordable housing to lower income populations, specifically the state of Louisiana. I am going to walk you through an introduction to hotel and apartment conversions and explain why they work work better than any other solutions in locations like Baton Rouge, Louisiana. With the right strategy in place, developers and operators can generate substantial return on investment and bring affordable housing solutions to the market at the same time. This is investing with purpose as you make money and you have a positive impact on the world around you.
is there a need for a new strategy?
According to the National Low Income Housing Coalition, there is a shortage of $7.2 million affordable homes that are available to extremely low income renter households. In Louisiana, there is a shortage of 113,468 rental homes that are affordable and available to extremely low income households (ELI). If the problem exists, we must find a solution. We can make a difference.
CURRENT HOUSING SOLUTIONS
Single Family Homes
While support for home ownership has been declining, HUD helps make homes affordable with loan programs, grants, and bonds that are available to homes buyers and developers. They limit the amount of money that home buyers needs to put down, they offer tax credits to home builders, and the issue municipal bonds with below market interest rates to developers.
Multifamily
HUD also helps make apartments and rental homes more affordable with loan programs, grants, and bonds that are available to developers. Additionally, they offer many rental assistance programs that can be used to reduce or cover housing expenses for lower income tenants. They have assistance for emergency housing, long term housing, and tenants facing eviction.
Allocation of affordable housing resources
A Shift From Home Ownership To Rental Assistance
This chart is taken from a HUD presentation done in 2024 and the data shows that over the last 13 years, the government has shifted their focus from home ownership to rental assistance programs. We have seen appropriations for Key HUD Programs shift dramatically with a decline of 41% for Home Investment Partnership Programs and an increase of 4% for community development funds, 20% for tenant based rental assistance, and 26% for project based rental assistance. There has also been a significant decline in funds for public housing, housing for disabilities, and housing for the elderly.
BATON ROUGE HAS ONE OF THE HIGHEST POPULATIONS of RENTERS
51% Of Baton Rouge Residents Are Tenants
This chart is taken from a HUD presentation done in 2024 and the data shows that over the last 13 years, the government has shifted their focus from home ownership to rental assistance programs. We have seen appropriations for Key HUD Programs shift dramatically with a decline of 41% for Home Investment Partnership Programs and an increase of 4% for community development funds, 20% for tenant based rental assistance, and 26% for project based rental assistance. There has also been a significant decline in funds for public housing, housing for disabilities, and housing for the elderly.
Rent Rates Are The Higher Than 95% Of Other Markets in Louisiana
Fair Market Rent prices in Baton Rouge are very high compared to the national average. This FMR area is more expensive than 90% of other FMR areas. Fair Market Rent increased an astounding 27.06% from 2023 to 2024. This means the amount the government is willing to pay increased by 27.06% in one year which has created a huge opportunity.
THE HOUSING SHORTAGE AND HOTELS IN Louisiana
Apartment Occupancy is 96% vs 55% For Hotels
Apartment Occupancy is 96% vs 55% For Hotels
Apartment Occupancy is 96% vs 55% For Hotels
With apartment occupancy 41% higher than apartments, they can generate more income than a hotel which makes it the highest and best use for the owner of the property.
Hotels Have Vacant Studios
Apartment Occupancy is 96% vs 55% For Hotels
Apartment Occupancy is 96% vs 55% For Hotels
The average occupancy of economy hotels in the Baton Rouge is 55% and many of these vacant units sit empty for years.
Operating Expenses Are Lower
Apartment Occupancy is 96% vs 55% For Hotels
Apartment Rents Are Similar To Extended Stay Hotel Rents
The average expense to income ratio for an apartment in Louisiana is 37% vs the 60% average expense ratio for economy hotels. The apartment cost 23% less to operate.
Apartment Rents Are Similar To Extended Stay Hotel Rents
Apartment Rents Are Similar To Extended Stay Hotel Rents
Apartment Rents Are Similar To Extended Stay Hotel Rents
HUD has set the Fair Market Rent for a studio at $1,107/Mo in Baton Rouge. Fair Market Rent prices in Baton Rouge are very high compared to the national average and the FMR area is more expensive than 90% of other FMR areas.
Hotels and Apartments Have The Same Zoning
Apartment Rents Are Similar To Extended Stay Hotel Rents
Government Assistance Is Available For Apartments
In the state of Louisiana, the general commercial zoning for a Inns is also approved for residential communities with no need for a special use permit or special consideration.
Government Assistance Is Available For Apartments
Apartment Rents Are Similar To Extended Stay Hotel Rents
Government Assistance Is Available For Apartments
The majority of housing funds are allocated towards apartments which means you can get lower rate debt, tax credits, and the government will cover the majority of your tenants rent.