Pack Of Wolves Housing Concept Generates Revenue For Residents

The housing affordability challenge has very, very deep roots. So, many developers across the country are working on the right design, the right construction method, or the right capital model to lower the cost to the resident.

But none may be as unique as Luna House.

Founded in 2019 by real estate entrepreneur Jose Romero, Luna House was created after he was inspired by a resident from another development in Arizona called Aviva. At Aviva, Romero had been able to raise rents by 20% in a single year, and the project remained 99% occupied. Because the residents loved living there, they started expressing concern that they were going to get priced out.

That started Romero thinking about how to maintain his fiduciary responsibility to investors, while maintaining a level of affordability for residents. 

“Thirty percent of the cost of housing is the capital,” Romero said. “The capital that we build, so much of the time goes empty. Residents are charged every day for space that they don’t consume. Most of housing is only occupied at night. So, I started to ask myself, how do you create flexible spaces that can be used for both residential and commercial purposes? That is the next evolution of housing.”

The Model

Romero created a patent-pending floorplan for the Luna House project that includes units, coworking spaces, hospitality and amenities, to develop a new formula for more affordable living.

First, residents have the option to offer up their place during popular times of the year as a hotel or as a short-term booking. If they do, Luna guarantees a certain amount for that agreement and that amount is deducted from the rent on a monthly basis. This gives the resident an avenue to make money on the space that they aren’t using all the time, instead of letting it go vacant.

Then, the project is designed with more than 30 amenities per floor, giving the residents access to spaces that are very unique. Plus, those spaces are available to nonresidents, at a fee. When the spaces are able to generate revenue, then that revenue is also distributed among the residents. The residents, or CoCondo owners, get credits to use the amenities as a benefit of ownership, and they can purchase credits if they run out.

For instance, someone might want to lease a space to conduct yoga classes. The yoga instructor pays to rent the space and that rent goes to the residents. Residents also can use credits to attend the yoga class or even use credits to lease the space for a work meeting or graduation party.

Romero’s model holds the promise of a 60% reduction in housing costs. Renting a one bedroom, one bath unit in downtown Miami would be about $2,200, but the renter earns no principal. Owning the same unit be a $2,600 payment per month, earning $400 in principal and also netting out at $2,200. But, with the Luna CoCondo model, the maximum payment would be $1,821. That amount would be decreased by about $424 from the home sharing revenue, and another $359 in coworking and amenity sharing revenue, making the payment $1,038. Plus, the owner would be able to credit $238 towards principal, making the net cost $800 per month.

Romero points out that the estimated $359 in revenue for amenity sharing is a very modest number based on only 5% occupancy of the amenity spaces.

“The more we lease these amenities to non-residents, the more we can reduce residents’ payments” Romero said.

So, Luna House takes a group of residents who can commit to a certain lifestyle and gives them the opportunity to make money together. The wolf pack mentality makes them successful.

While those are the discounts on the monthly rent, there is more to this model. The CoCondo buyers are buying in with a 30-year capitalized lease that has a guaranteed payout in year 30, which would get the resident to 90% of the value of homeownership.

Romero considers every resident a money partner, who gets lower fixed payments and a share of the amenity revenue.

It works for Luna because of the hospitality units, which is where Romero says he makes money.

Other Wealth Generation Models

Others across the country are developing innovative concepts that would create wealth for residents.

Shane Phillips, author of The Affordable City, recently published a proposal for a housing pension program. His idea is basically that the government takes responsibility and goes into debt to acquire housing. Then, renters pay off that debt, which allows them to build equity in the government’s property portfolio, and the government pays back that equity in the form of a rental pension benefit.

Another concept is the Savers Village, which was proposed by DS Real Estate Investors and Darryl Scipio to not only provide housing, but to also provide education for financial literacy and a way to save for a down payment.

The Savers Village program takes 10% of received monthly rental payments and uses it to open savings accounts for residents. Those funds are then invested into the stock market where they will accrue for three to five years until the tenant is ready to purchase a home. This proposed project is currently raising funds on a crowdfunding platform, and scheduled to be developed in 2022.

The Future Of Wealth Generating Housing

The Miami-based project is scheduled to break ground in late 2021 and Luna House will be the developer. Award winning designer Lawrence Lake is creating the interior design and the architect will be Corwil Architects. Luna House Miami will include 435 units, which breaks down into 310 units for residents and 125 that are dedicated to hospitality. Move in is planned for 2023.

Luna House Miami will be the first of more than 10 locations across the country. Once other Luna projects are developed, Romero plans to allow residents to transfer to units at other locations in support of a future remote work environment.

While the Luna House project offers high end, luxury finishes, the model could be applied to a more affordable design, opening the door to a much broader population.

This post first appeared on Forbes.com. To see the original, click here.