As the need for affordable housing continues to loom over Los Angeles, affordable developments are planting roots in some of L.A. County’s traditionally more affluent neighborhoods and cities. West Hollywood, Pasadena and Marina del Rey are among those seeing new affordable housing developments – areas with 8%, 18% and 62% higher median household incomes than the county overall, respectively, according to Data USA.
Whether it’s a shift in public perception, increased empathy, efforts to meet state and local demands – or some combination – these projects are entering the local pipeline.
Welton Jordan, chief real estate development officer at EAH Housing, has observed the growing trend in his 12 years at the San Rafael-based nonprofit developer which focuses on affordable housing in California and Hawaii.
“We’re definitely seeing a lot more people noticing and wanting to talk about (affordable housing) and understanding the importance of everybody needing somewhere to live,” Jordan said. “As society is starting to get older… I think some of these issues are coming more to the forefront than maybe they had in the past.”
Nevertheless, some communities are more accepting than others, Jordan said.
Currently, EAH is in the construction phase for two affordable housing developments in West Hollywood: Lexington Gardens at 1201 N. Detroit St. which will have 47 studio apartments reserved for people making between 30% and 60% of the county’s area median income (AMI); and Marigold West at 1041-1049 N. Martel Ave. which will have 50 units of studio, one-, and two-bedroom apartments reserved for seniors and individuals with special needs also earning the same AMI. Additionally, half of Marigold’s units will go to those with permanent supportive housing vouchers.
Through West Hollywood’s Affordable Housing Trust Fund, the city partners with nonprofits like EAH on projects.
“From a regional perspective, everybody understands the need for affordable housing everywhere. There are certain municipalities that I would say take it a little bit more seriously and… West Hollywood is one of those,” Jordan said. “They thrive to be an inclusive community. They understand the need for affordable housing, and they’re willing to put their resources towards it and support it.”
In addition to municipal support, Welton said neither project received backlash or pushback from the West Hollywood community as a whole.
County partnerships
On top of the desire to foster inclusivity, certain projects come from a place of compliance. In 2022, the L.A. County Board of Supervisors signed off on revisions to Marina del Rey’s affordable housing policy after the county’s Department of Beaches and Harbors analyzed and compared the area’s policy and implementation to neighboring jurisdictions.
The updated affordable housing policy increased the percentage of units that must be affordable in new developments in the Marina from 15% to 30%. The revisions also addressed rehabilitation standards and simplified the wait list and referral process for tenants seeking affordable housing.
Consistent with this policy change, the board launched the Marina del Rey for All initiative which encourages the use of county-owned land for affordable housing developments, among other things.
“MdR for All aims to ensure that (Marina del Rey) evolves in ways that better reflect the values of equity, access and inclusion for all L.A. County residents – not just those with the means to live or recreate here,” Duane Johnson, a communications consultant with the Department of Beaches and Harbors, said.
In line with this initiative, the county announced a 100% affordable housing project at 4206 Admiralty Way in Marina del Rey which will be built on a 90,000-square-foot parking lot owned by the county. The project has not yet broken ground.
The county board enlisted San Francisco-based nonprofit Mercy Housing as the developer after reviewing its proposal for a 120 unit, seven-story complex reserved for those earning between 20% and 80% AMI. A quarter of those units will be designated for people with disabilities. The complex, which will be Marina del Rey’s first 100% affordable development, will also include 2,250 square feet of retail space and 9,000 square feet of community garden and outdoor spaces.
The timeline of the project is yet to be determined, though Johnson said the county and Mercy will be “refining the project scope, engaging with the community and completing due diligence” over the next year to year-and-a-half. The cost of the project is also unclear at this stage.
“A project of this scale and ambition will require a significant investment – likely supported by a combination of state and federal housing credits, local affordable housing funds and philanthropic sources,” Johnson said.
Looking northeast to Pasadena, another affordable project is in early stages at a former Kaiser Permanente site, previously used for outpatient and administrative services, that has been vacant for more than a decade. In 2023, the county determined that north Pasadena needed more affordable housing and mental health and outpatient services.
Thus, Pasadena in partnership with the county purchased the 2.4-acre Kaiser site at 434-470 N. Lake Ave. for $12 million with a plan to convert the property into a facility that will provide health services and housing with a minimum requirement of 25% affordable units.
Currently, Pasadena is evaluating 12 development proposals. If the city selects one of these proposals, it is required to accept the bid that creates the greatest amount of affordable housing, said David Klug, the city’s economic development director.
“If we have more than one proposal with the same number of affordable units, priority is given to the developer that proposes the deepest average level of affordability,” Klug added.
Recipe for success
In order for an affordable project to be well received in a more affluent community, there are a few important considerations, according to Deborah La Franchi, chief executive of affordable housing-centric investment firm SDS Capital.
“Developers must make sure they’re picking the right sites, not just a site that may work technically, but one that fits within the fabric of that community and what that community might be looking for,” La Franchi said.
For a multifamily complex, La Franchi said this means choosing an area in a commercial corridor and close to public transportation, rather than in existing single family residential neighborhoods.
Another part of receiving community approval is “the quality of what’s being built,” La Franchi said. “If you’re going into a higher income community, it’s about paying attention to the details and the external aesthetics.”
This helps debunk common misconceptions that an affordable development will devalue a community. In fact, a study from University of California, Irvine found that affordable developments do not decrease property value, but in some cases, they have actually correlated with increased home values.
Additionally, La Franchi said developers should include a variety of amenities and services for tenants such as common areas, after-school programs and support services.
“When you build projects that not only look and fit the fabric of the community … but you’ve also really created a home and a community within the building for those residents, the larger community sees this as a value add (rather than) a drain on the community,” she said.
Successful developers will also strive to be “the most nimble and most cost effective,” finding financing avenues that allow for building more with less, La Franchi said. In Southern California, this isn’t always an easy feat.
Financing challenges
EAH utilized a number of financing partners to realize its West Hollywood projects, which are set to open at the end of the year. This includes the city of West Hollywood, L.A. County Development Authority and low-income housing tax credits.
Additionally, the Lexington project – whose financing total was $40 million – partnered with the state’s Local Housing Trust Fund program, the state’s Department of Developmental Services, County of Los Angeles Housing for Health and US Bank. More than half of this financing was obtained through low-income housing tax credits, which Jordan called “the final layer of the cake” when it comes to affordable housing.
Sitting at $46 million, the Marigold project also used Wells Fargo as a resource.
Having been involved in Los Angeles’ affordable housing scene for more than two decades, La Franchi said “it has become more difficult, not less difficult, to piece these deals together,” adding that typical deals require five to 12 funding sources and take five to seven years.
Welton echoed this sentiment.
“It’s very difficult to encapsulate how much work it takes just to get a shovel in the ground,” he said.
On top of the financial burden developers face through closing costs with several funders, the time it takes to finalize every negotiation can limit opportunities.
This is because not all sellers are willing to spare the time needed for affordable developers to get their acquisition financing in order. Welton said this means EAH can only work with “patient sellers” as the process to obtain the necessary funding typically takes about eight months.
“These are ‘needle in a haystack’ opportunities that you come across after a lot of digging,” Welton said. “To find two in the city of West Hollywood was a unique experience where at the same time they were on the market, both sellers were willing to wait.”
With the Lexington project ending up at about $850,000 per unit and Marigold at nearly $920,000 per unit, Welton acknowledged the high cost.
While some developers can lower these costs through private sector partnerships, limiting regulatory and labor costs that come with public funding, nonprofit developers can’t typically offer the attractive returns private investors often seek by nature of being a nonprofit organization.
Nevertheless, Welton argued the cost is worthwhile in the end adding that EAH holds its properties in perpetuity with leases as long as 99 years.
“These developments are going to be here longer than all of us, and they’re going to remain affordable,” Welton said.
Increased interest and reception to affordable developments in more affluent areas is a positive shift in the housing landscape, Welton said, though it remains important to continue prioritizing low- and moderate-income communities as well.
“Affordable housing is more than just a roof over someone’s head,” Welton said. “It’s a foundation for a thriving, diverse community. Overall, it makes a more well rounded society to have affordable housing everywhere.”
