It’s hard to build affordable housing product these days, but according to GlobeSt, one developer found a way to crack the code.

Urban Pacific Group has a workforce housing construction model that it claims is able to generate 25% internal rates of return over an 18-month to 24-month period.

“We started looking for a new workforce-housing model, and we identified a marketplace for rental townhomes with multiple bedrooms to serve multi-generational working families,” Scott Choppin, founder of Urban Pacific, told GlobeSt.

 “We found that if we build five-bedroom units, we could house a larger family and given the way that the rent structures work, we could be around $3,000 per month for a five-bedroom unit. When we finished the underwriting, we found that this model would produce market-superior yields to equity."

The new project model is referred to as an Urban Town Home, and Urban Pacific plans to create properties with 10 to 30 five-bedroom units.

The especially impressive aspect of Urban Pacific’s success with this product is that they have been doing it in some of the most expensive markets in California. North Long Beach, South L.A. Garden Grove and Fullerton are some of the submarkets the company has been building in within the extremely expensive markets of Orange County and Greater Los Angeles, which bodes well for its scalability nationally.

It is important to note that a key component of Urban Pacific's strategy to gets these projects to pencil is picking spots within its markets that have less competition than others. Urban Pacific calls these areas “blue-collar,” but one could just as easily read that as less desirable, a profile which many investors aren't willing to bet on.

So far, Urban Pacific has completed one UTH project and has two others under construction. These are smaller properties meant to offer proof of concept, and the first larger project will go up in Fullerton.

“Our early projects were demonstration projects because we wanted to prove the project worked,” Choppin said.

“We are now moving out of the demonstration phase, and our first larger project is in Fullerton. It is seven units, so still small in relative terms. Our new model is anywhere from 10 to 30 units.”

Urban Pacific has three additional sites in its crosshairs and is in the process of acquiring them.

Will the model hold water long-term? Perhaps. But in a market where it is such a struggle to get workforce housing projects to pencil, any and all potential solutions are welcome.