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For-profit providers should consider ‘Good Will’ in their operations

Potential for-profit providers of affordable housing have the opportunity to provide a market-driven supply of housing, either rentals or for purchase. Among the many practical and quantifiable measures that come with any business venture, these providers should also consider the ethical and societal measures that cannot be calculated into dollars and cents for the bottom line.

Each provider must determine where along the qualitative continuum they wish to operate, between providing absolute “bare bones” improvements and equipment (appliances, insulation, quality of materials, energy use minimization, etc.) and installing the highest quality features (such large capacity and minimal energy use appliances, granite countertops, etc.) that may jeopardize the profitable survival of the operation.

The accounting concept of ‘good will’ applies here, as it does with many other industries. As it is not a measurable and controllable cost, many comptrollers and accountants will not include this factor into their recommendation to operational managers. Providers of affordable housing who choose the ‘bare bones’ operational model (minimal financial and time investment for maximum cash or investment yield) seem to also eliminate ‘good will.'

On the other hand, for-profit providers of affordable housing who do try to put the best product on the market that their particular operation can afford and remain profitable apply ‘good will’ into the cost analysis for each site, whether as an actual dollar value or simply as an intent.

Even if the bottom line yield (net profit) of the project is less than if lesser cost and quality improvements were installed, the long-term value to the home involved, the neighborhood, and the positive impression gained with the local officials will enhance the value of the provider.

Putting the highest quality product on the market, at the most reasonable price in the marketplace, yet make a profit sufficient to pay costs, invest in future sites, and still have a net profit for the personal needs of that provider requires a non-financial decision with each project.

The reputation of the provider to try and provide these quality projects will be shared between potential home buyers, real estate professionals, and local officials. This will lead to a larger field or potential buyers or renters, shorter market times as buyers’ agents recognize the benefits to their clients, and shorter administrative review periods. Any of these outcomes improves the economic future of the provider, and that will enhance the bottom line.

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