San Juan, Puerto Rico: Mixed-Income Housing Transforms the Commonwealth's Affordable Housing
Bayshore Villas embodies Puerto Rico’s new vision for affordable housing. Replacing an outdated public housing development in San Juan’s Puerta de Tierra neighborhood, the 174-unit complex is the commonwealth’s second mixed-income housing development. Consensus on the new vision emerged through an engagement process led by developer McCormack Baron Salazar and architect Álvarez-Díaz & Villalón for Bayshore Villas and its earlier sister development. Public housing residents needed reassurance that government promises to produce replacement affordable housing would materialize. Meanwhile, some government officials and investors had to be persuaded that a mixed-income structure would strengthen the development’s financial feasibility. The development team soon recognized the importance of forming close working relationships with local stakeholders to generate mutual trust and elicit ideas to increase resident satisfaction with the new housing. After an extensive planning and development process, Bayshore Villas opened in 2018 and was awarded a Jack Kemp Excellence in Affordable and Workforce Housing Award 3 years later.
Mixing Incomes in Public Housing Redevelopment
Bayshore Villas consists of 13 buildings containing 59 units of public housing, 33 units supported by project-based vouchers, 43 units funded through low-income housing tax credits (LIHTCs), and 39 units with market-rate rents. Residents of the subsidized units earn less than 60 percent of the area median income, with certain funding programs requiring lower thresholds. The one- to three-bedroom apartments range from 600 to 1,400 square feet. Onsite amenities include a community room, fitness center, business center, and playgrounds. A grocery store will occupy the ground floor of one of the buildings and serves as a community amenity. The resilient structures are designed to withstand hurricane-strength winds, flying debris, and intense shifts in air pressure. Underground chambers can hold 70,000 gallons of stormwater. Because of these features, Bayshore Villas withstood Hurricanes Irma and Maria with minimal damage in 2017, when construction was nearing completion.
Bayshore Villas occupies the site of a former public housing development, Puerta de Tierra, built in 1950. Located on a mega block that segregated the northern and southern parts of the neighborhood, the inward-facing buildings were isolated from the surrounding community. According to Antonio Garate, vice president and director of development for McCormack Baron Salazar’s Puerto Rico operations, “Bayshore Villas divided the site into smaller blocks at a more human scale and reconnected the existing streets and pedestrian accesses; now the buildings face the street in a development that united people of different walks of life and, as a result, transformed the community."
Addressing Stakeholder Concerns
In the late 2000s, when the Puerto Rico Public Housing Administration (PRPHA) began its redevelopment efforts, the commonwealth recognized the need for a new economic model that could supplement dwindling government assistance. Officials decided on mixed-income developments as a financially feasible way to replace public housing complexes by developing 3 properties to provide more than 750 units, approximately 85 percent of which will be affordable. In 2013, McCormack Baron Salazar was selected as the developer because of its expertise in mixed-income projects. Álvarez-Díaz & Villalón, a San Juan architecture firm familiar with the local culture and experienced in public input processes, led the engagement program for the combined development and each of the three properties.
Throughout this process, the development team heard the concerns of stakeholders who were unfamiliar with mixed-income rental housing. Public housing residents were skeptical that tenants of market-rate apartments would want to live in a building that included public housing units, but they were reassured by the units’ design that made the different types of apartments indistinguishable. Government officials came to see the development’s financial feasibility is enhanced when rents from market-rate units augment the lower rents from affordable units. And potential investors, who had little data on possible rental rates because of the predominance of informal rental agreements in Puerto Rico, were convinced by the performance of McCormack Baron Salazar’s catalogue of similar projects that the mixed-income properties could be marketable. After the first project, Renaissance Square, was completed, the engagement process became progressively easier for the next projects, Bayshore Villas and Emerald Vista.
Financing for Bayshore Villas
Development costs for Bayshore Villas totaled approximately $47 million (table 1). At more than $27 million, LIHTC equity was the largest funding source. The remaining funding came from PRPHA. PRPHA used nearly $150,000 of its HUD funds to relocate public housing residents.
Table 1: Bayshore Villas Financing
|Low-income housing tax credit equity||$27,600,000|
|Puerto Rico Public Housing Administration, HUD funds||15,900,000|
|Puerto Rico Public Housing Administration, other funds||3,500,000|
Future of Mixed-Income Housing in Puerto Rico
McCormack Baron Salazar’s third mixed-income development is under construction in the city of Caguas, and the first phase of Emerald Vista opened in December 2021. The multifamily development will eventually provide 438 units, including a wing for seniors. Like Bayshore Villas, Emerald Vista includes public housing, units supported by Section 8 vouchers, apartments funded only through LIHTCs, and market-rate units. Emerald Vista also broke new ground as the first Puerto Rico multifamily housing development to secure HUD Community Development Block Grant Disaster Recovery funding, a response to the 2017 hurricanes. When the final phase of Emerald Vista opens, the commonwealth, McCormack Baron Salazar, and Álvarez-Díaz & Villalón will have fulfilled their promise to build more than 600 affordable apartments. According to Alejandro Salgado Colon, the executive director of PRPHA, public housing residents are happy with their new homes. Government officials also expressed satisfaction with the three developments. McCormack Baron Salazar is planning other mixed-income developments in the commonwealth.