Affordable housing is replacing market-rate as the preferred multifamily development type in Los Angeles as 100 percent affordable projects become more attractive thanks to Executive Directive 1.
Developers Six Peak Capital and SoLa Impact, for example, are among those doubling down on fully affordable developments, CoStar reported.
New York-based Six Peak Capital started construction on an apartment project near Los Angeles International Airport with 116 affordable units recently. The company was previously known for building market-rate co-living complexes.
SoLa Impact just opened a project with 79 affordable units in South Los Angeles. They cost less than $275,000 per unit to build — quite a discount from the typical $1 million cost per unit to build in Los Angeles.
Further north in the San Fernando Valley, meanwhile, developer Passo is gearing up to open its first affordable housing complex, bringing it to life months ahead of schedule and under the planned budget.
ED1, enacted by Mayor Karen Bass in late 2022, allows developers of 100 percent affordable housing projects to avoid the lengthy public hearings process and skip City Council votes. As a result, approval timelines for such projects have been cut down to a few weeks in most cases. The directive has trimmed approval timelines from nine months to just weeks, according to the mayor’s office.
Developers had submitted proposals for 35,000 ED1-backed units and secured approvals for about 29,000 as of August. That eclipses the number of affordable housing submissions from 2020 to 2022 as well as the 17,556 units total housing units approved in L.A. during the last fiscal year.
“Market-rate housing [construction] has been essentially canceled at this point,” Chris Aiello, founding partner at Six Peak, told CoStar. “Virtually no land makes sense from an investment perspective to build market rate.”
ED1 has inspired similar ordinances across the country, including in Southern California. In early 2023, San Diego Mayor Todd Gloria signed an executive order requiring all 100 percent affordable housing projects to be reviewed and processed within 30 days. Last year, the city saw its highest number of housing permits since 2005.
Still, L.A. is behind on its housing goals, namely the permitting of 456,643 new housing units by 2029, including 184,721 set aside for affordable housing.
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