Employing relaxed density requirements under Senate Bill 9, a new Hyde Park development seeks to be a model for innovative strategies to combat the city’s housing crisis.
Developed by the real estate arm of the Historic South-Central nonprofit, Coalition for Responsible Community Development (CRCD), the project will take a traditional single-family lot – which currently has one house built on it – and add two additional homes to the property. Construction began last month.
The existing two-bedroom home is 850 square feet, and the new development will add one 1,252-square-foot three-bedroom house and one 643-square-foot two-bedroom home.
Under SB 9, which went into effect in 2022, single family residential lots can be divided into separate parcels for the creation of up to four housing units.
The homes at 6552 Fourth Ave. are part of a larger, multi-regional initiative, started by the JPMorgan Chase Foundation and the Center for Community Investment, called Connecting Capital and Community. Along with Los Angeles, other cities involved in the initiative include Miami, Chicago, Washington D.C. and Seattle.
“The idea was to address the inequities that persist in the housing ecosystem,” said Omar Carrillo Tinajero, executive director of the Center for Community Investment. “We were interested specifically in partnering with cities across the country that were focused on finding innovative solutions to some of the trickiest, harder to address issues in the affordable housing landscape.”
In L.A. specifically, Tinajero said the goal was to increase homeownership opportunities in South L.A.
That’s where SB 9 came in. Looking at homeownership “as a way to stabilize communities or build wealth” while understanding issues of land availability in parts of the city, Tinajero said “the L.A. team saw this bill as an opportunity.”
Alejandro Martinez, president of CRCD Partners, the real estate division of CRCD, said he and his team had been interested in opportunities to work on an SB 9 development for the same reasons the Center for Community Investment was.
Thus, a partnership was born along with other local firms including Self-Help Federal Credit Union and Genesis LA, a downtown-based community development financial institution.
‘Non-conventional deals’
The development budget currently stands at $1.9 million – $650,000 of which was used to make the site acquisition. Genesis LA served as the primary funder putting in some of the organization’s own capital combined with seed funding from JPMorgan Chase and another philanthropic source.
“There’s different credit enhancements and risk tolerant capital layered in to make these sorts of non-conventional deals work,” said
Tom de Simone, chief executive and president of Genesis LA.
Part of the strategy for this project was finding a site that would allow for multiple points of entry for the various homes to create as much of a traditional homeowner experience as possible.
“Finding a property that was on a corner gave us the ability to design a product where everyone had access to the street from their front door,” Martinez said.
At the time of purchase, there had been moderate rehab on the existing house, which had been vacant. They’ve since done some additional improvements and moved in a tenant to serve as a caretaker for the property throughout the construction process.
By the nature of the project, the homes will have less outdoor space than your typical home site. With that in mind, CRCD decided to add rooftop access on one of the homes to create an opportunity for a private outdoor space.
The team is aiming to make the homes available to those making up to 120% of L.A. County’s area median income, though specifics may vary by the home and are subject to change based on final cost.
“I wouldn’t feel comfortable committing to any price at this time, just because in development, the riskiest time is when you’re in construction,” Martinez said, citing interest rates and material costs as variables.
Rather than a traditional 30-year mortgage, the development team decided on a tenancy-in-common ownership model.
“(Self-Help Federal Credit Union) is in the process of developing a tenancy-in-common product that is a little bit more flexible and can reach lower and moderate-income households as compared to the more conventional products that are out there,” de Simone said.
‘Targeting South Central’
At the time the project was going through the permitting process, de Simone recalled the city’s Planning Department saying this was one of the first SB 9 projects to take place in South L.A., an area where homeownership has seen a decline.
An August report from USC’s Neighborhood Data for Social Change found that 68% of South L.A. neighborhoods have high rates of residents transitioning from homeownership back to renting. The report also found that homeownership among Black households decreased more than any other racial group in the county – a trend not reflected at the state or national level.
In a panel discussion of these findings, Michael Lens, author of “Where the Hood At? Fifty Years of Change in Black Neighborhoods,” said Los Angeles should explore land trusts and community forms of ownership to mitigate the racial homeownership divide which is precisely what this development is doing.
“One of our goals is to increase the home ownership opportunities for African American and Latino households,” Martinez said. “So, for the foreseeable future, we will be targeting South Central.”
In a broader sense, Tinajero stressed the importance of creating a spectrum of housing to address the crisis in L.A. and other parts of the country.
“(Building homeownership opportunities) is not unrelated to the crisis,” he said. “With limited homeownership opportunities, people get CRCD trapped in rental housing even if their incomes rise or their financial situation changes. The problem continues to be compounded if we’re only paying attention to one small piece of that very wide spectrum.”
De Simone echoed this sentiment, noting the impact of seemingly small projects when they are done at scale. He recalls the surge of ADUs in recent years and how that has gone on to change the way people view single-family lots and create opportunities for passive income.
“It just goes to show new approaches, and a variety of different scales and interventions, can emerge that can become meaningful contributors to the broader ecosystem,” de Simone said. “Many people are fixated on sort of a singular fix to the housing system… (but) we really need an all-end approach rather than some silver bullet.”
