Orange County Church Sells Land for Affordable Housing

A church in Orange County sold part of its property to a developer with plans for affordable housing.

Olson Urban Housing purchased the 1.9-acre parking lot at Messiah Lutheran Church at 4861 Liverpool Street in Yorba Linda for $8.1 million, L.A. Business First reported. Olson Urban Housing, a subsidiary of Olson Company, plans to build a community of 40 affordable townhomes at the site known as Solana Walk.

The developer will build the project under the Congregational Overlay Zone, a local legal designation that allows religious organizations to build affordable housing on parts of their property. The townhomes will rise three stories in one- to four-bedroom floor plans with attached garages. Eight of the 40 residences will be designated for sale to moderate-income households through a lottery system; those units will remain income-restricted for 45 years.

While Olson Urban Housing opted for a land purchase, other affordable housing developers in Southern California have used church partnerships to bypass formal acquisitions. For example, Westchester-based Logos Faith Development forms partnerships with churches where the church puts its land into a single-purpose joint venture entity that gives the developer site control, saving money on acquisition costs and utilizing certain tax breaks.

“We maximize the tax upside [after acquisition] by then being able to secure the welfare tax exemption, which is extremely important, and being able to minimize negative tax consequences that occur when you transfer title into a new joint venture entity [because the church is a nonprofit],” Logos founder Martin Porter told The Real Deal. “Between grants, low interest loans, forgivable loans, impact investors that may require a different return, and then your typical investor and your typical lender… it’s a really distinct capital stack.”

Another project in Culver City from Community Corporation of Santa Monica recently broke ground on a church land project in partnership with the Culver-Palms United Methodist Church. The 95-unit development will rise six stories and consist entirely of affordable housing. Partnering with churches instead of paying to acquire land is the “hidden gem that makes a huge difference to developers,” CCSM’s executive director Tara Barauskas told TRD. “We’ve been working on this Culver-Palms project for six years, and we didn’t have to buy the land and pay six years worth of property taxes, insurance, land loan payments, interest and all those things. So it’s a huge benefit.”

Rents in Yorba Linda have grown 1.4 percent over the past three years with a local multifamily occupancy rate of 96 percent, per CBRE data cited by L.A. Business First. At least 80 religious institutions are considering church land housing projects, with more than a dozen already in the works, HousingWire reported.

— Chris Malone Méndez