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The Real Deal Los Angeles

Is LA’s big plan for more affordable housing development just a mirage?

Despite generous incentives to private developers, only a fraction of the units are set aside for low-income residents
By Dennis Lynch | March 12, 2018 12:59PM

(Credit: Wikimedia Commons, Pixabay)

UPDATED, 4:44 p.m., March 13: Six months after Los Angeles began a major effort to boost affordable housing by offering incentives to private developers, the proposals have poured in.

So far, developers have submitted to the city 42 apartment plans with units set aside for low-income residents. But scratch the surface on those designs and what appears is both the program’s potential for success and its recipe for failure.

Known as Transit Oriented Communities, the program was rolled out in September, after voters approved the ballot initiative in November 2016.

In order to promote dense, affordable housing with access to mass transit, L.A. will offer developers of residential projects access to a package of incentives. Those can be utilized if the developer sets aside a minimum of between 8 and 25 percent of the units as affordable and builds within a half mile or less of a major transit stop.

The 42 projects now under review have a total of 1,578 housing units.

Seventeen of those have a confirmed number of affordable units set aside. They amount to 981 total units, with 245 set aside as affordable.

That means a quarter of those projects are reserved for affordable. But subtract the three projects whose 158 units are all affordable, and the overall average drops to 10.6 percent.

 

L.A.’s deepening housing crisis, it appears, will not be solved anytime soon.

Still, developers, industry pros and city officials see a reason for optimism. They say the transit-oriented program was never meant as a panacea. Rather, it is part of a long-range plan to increase affordability by engaging private developers who otherwise would have stayed away. Taken on those terms, they say, the effort will slowly make L.A. a more welcoming place for middle- and low-income residents, and help reshape it into a transit-friendly metropolis.

So far, rapidly-growing Koreatown and Hollywood have seen the highest number of applications for developments seeking afforable housing incentives.

That’s likely because of the abundance of Metro train and bus lines that run through each neighborhood, and the ever-present demand for housing. West L.A., the Wilshire corridor, and parts of South L.A. are also ripe for that kind of new construction.

On a once vacant city-owned lot in South L.A., a nonprofit housing organization for the homeless plans to develop a 50-unit residence — all affordable — with significant transit-oriented incentives.

North Hollywood-based LA Family Housing will save time and money with those incentives, said CEO Stephanie Klasky-Gamer. The proposal for LAFH’s Residences on Main, she said, also adds more units than ordinary zoning would have permitted.

Among the extra incentives the 100 percent affordable project qualifies for are reduced open space and stepback requirements.

Two other nonprofit developers: PATH (People Assisting the Homeless) and LINC Housing (Living IN Communities) are proposing apartments whose units are all affordable.

Projects in which more than 20 percent of the units are deemed affordable are moved to the top of the review pile at the Department of City Planning. That means developers may only have to wait a matter of weeks to move on their projects, instead of months.

So far seven transit-oriented projects have made it through the city process, totaling 288 units and 117 of them affordable. All but eight of those are between LINC and PATH’s completely affordable projects.

While Transit-Oriented Communities appears to be spurring development, the proposals do not include the mixed-income projects that city officials had hoped. Most developers are using the incentives package to either build the fewest number of affordable units required in exchange for more market-rate units, or are using it to build large, entirely affordable projects.

Most of the affordable housing submissions have been from private developers seeking 10 to 20 percent affordable units for market rate projects they may have built anyway.

There is no limit on the size of the development that can qualify for affordable and transit-oriented incentives.

The largest proposal so far is a 193-unit development on James M Wood Boulevard in Koreatown. The property, an LLC tied to the law firm Kim Joo & Associates, wants to set aside 20 of those units as affordable, about 10 percent of the total.

Like the majority of projects filed, that project qualifies for a Tier 3 bonus, the lowest level. Still, that would let the developer build 70 percent more units than the zoning would have allowed, and about 50 percent higher floor-to-area ratio. That means by including fewer than two dozen affordable apartments in the project, the developer is likely to receive a substantial revenue boost from the added number of market rate units.

The smallest project filed, meanwhile, is a 12-unit rental in East Hollywood. The developer there, Chicago-based UrbanWorks, will include two units as affordable, according to company founder Amirali Shakoorian. He planned to build the property anyway, but applied for the bonuses after hearing about the program, and its potential benefits, he said. The small number of affordable units set aside qualifies UrbanWorks for the bare minimum incentives.

Without those promised incentives, private developers say they could not build apartments with affordable units. For an individual on the extreme low-end income scale — earning $19,000 a year — the rent on an affordable unit studio apartment generally cannot exceed $340 per month. Even on the higher end, a family of three earning no more than $65,000 per year would pay a maximum of $875 per month.

Those numbers, owners contend, make it economically impossible to recoup the money on a development project and make a profit, let alone maintain the building and make upgrades.

Pacific Union broker Morgan McMullin, agreed, saying that developers have expressed enthusiasm about the the program, but acknowledged it may not be cost effective for the smaller developers.

That group, he said, has “done very well on a price-per-square-foot basis. They will just build fewer, larger units,” so they don’t need the affordable incentives.

McMullin believes Transit-Oriented Communities’ major appeal for developers is the ability to build near Metro lines like Expo, which runs between increasingly tech-heavy Santa Monica and Downtown. But that would cater to the upwardly-mobile commuter not the low-income earner.

“Maybe 30 percent of your tenants work in one direction or the other,” he said. so [the tenants] see this as a chance not to go completely car-free, but to have some flexibility,” he said. “In terms of changing the culture of L.A., I think that remains to be seen.”

Correction: An earlier version of this story misstated the percentage of affordable housing units developers have included in their overall project plans.