For Michael Miller, getting a project off the ground is usually a bureaucratic juggle.
The president of Bold Communities said that when he plans to build affordable housing such as more than 200 units at Harbor Gateway and Stevenson Ranch, he would typically be forced to find funding through three to five different local and state agencies.
This time, he’s going to just one: the newly established LA County Affordable Housing Solutions Agency.
The agency, known as LACAHSA, bills itself as a one-stop shop for affordable housing financing, offering construction loans, permanent loans, rental subsidies and other types of funding products. The bet is that doing so will allow developers to build low-income housing faster and cheaper in a county with a tough affordability and homelessness crisis.
There is some evidence of this being the case. According to UC Berkeley’s Turner Center, each additional public funding source that an affordable developer uses delays a project by an average of four months and increases the total cost by $20,460 per unit – more than $2 million for a 100-unit community.
“We want to build housing cheaper and faster, because it means more units,” said Ryan Johnson, LACAHSA’s interim chief executive.
On Wednesday, the agency approved more than $100 million for ten projects, including two projects by Bold Communities.
Turning to multiple agencies for needed funding increases costs as developers endure higher legal, staffing and compliance costs to manage additional applications and contracts, the Turner Center said.
Of course, each process takes time, during which developers pay additional holding costs on pre-development loans, while inflation pushes up the cost of materials and wages.
Miller estimates that just by going through LACAHSA, he can cut total costs by about 5% to 10%.
LACAHSA, established through state legislation in 2022, receives funding from a half-cent sales tax, a recently voter-approved measure to fight homelessness and create affordable housing.
Until now, the agency had only provided funding for homelessness prevention efforts such as direct rental subsidies to tenants.
It’s the first batch of funds to create and preserve affordable housing, approved Wednesday, that will pay for 554 below-market units. The vast majority will be brand-new homes, while a smaller portion will be converting existing market-rate residential units into affordable units and expanding deed-restrictions on some existing below-market units.
LACAHSA data shows that in the top-performing quarter of new construction projects that recently applied for its financing, total development costs were lower than the typical cost of building affordable units in the county. When project proposals relied primarily or entirely on LACAHSA funding rather than mixing state funding with just one or two LACAHSA products, savings increased to approximately 12%.
Ben Metcalfe, managing director of the Turner Center, said it’s unclear to what extent those savings may reflect that affordable projects have just happened to apply for funding from LACAHSA. But he hopes at least some of the savings can be attributed to LACAHSA’s structure.
Not only does the agency offer a plethora of financial products, but LACAHSA said it ranks project proposals based on their efforts to reduce costs and considers this an important factor when deciding whether to approve funding.
Metcalf, who previously served as director of the California Department of Housing and Community Development, said this kind of focus on awarding dollars based on estimated development costs is not the norm among public agencies.
In part, he theorized that this was because “the rising cost of affordable housing has really only become an issue of visible concern in the last few years.”
In 2022, the Times reported that the cost of building just one unit of affordable housing in California routinely exceeds $1 million. Voters have also expressed growing frustration over the lack of progress in reducing homelessness and overall housing costs.
LACAHSA is not the only attempt at a complex funding process that Gov. Gavin Newsom has proposed Streamline state funding As part of this year’s budget.
Meanwhile, LACAHSA plans to approve another round of affordable housing funding in May.
To apply for that funding and the dollars approved Wednesday, LACAHSA said developers need to be able to break ground within 12 months. Developers submitted 127 applications seeking a total of $1.5 billion to build 11,625 units.
Long Beach Mayor Rex Richardson, who serves as chair of the LACAHSA board, argued that the high interest shows that it is actually a lack of “funding and operational support” that is preventing the creation of more affordable housing in L.A. County rather than a lack of “sites or community will.”
“LACAHSA was created to meet this moment,” he said in a statement.
Projects planned by Bold Communities at Harbor Gateway and Stevenson Ranch are to convert extended-stay hotels into low-income senior housing.
Now that funding has been secured, Miller said he hopes to have the buildings filled with new residents by the end of next year.
“I think these will be pretty straight forward, honestly,” the nonprofit executive said.
