For Michael Miller, getting a project off the ground is often an act of formal negotiation.
When building affordable housing like the 200-plus units he’s planning at Harbor Gateway and Stevenson Ranch, the president of Bold Communities said he’ll typically be forced to seek funding from three to five different local and state agencies.
This time, you’ll go to just one: the newly established LA County Affordable Housing Solutions Agency.
The agency, known as LACAHSA, bills itself as a one-stop source for financing affordable housing through the provision of construction loans, permanent loans, rental grants and other types of financing products. The bet is that by doing so developers can build low-income homes faster and cheaper in an area with devastating affordability and homelessness.
There is some evidence that this is the case. According to the Turner Center at UC Berkeley, each additional source of public funding an affordable developer uses, on average, delays the project by 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 that means more units,” said LACAHSA interim CEO Ryan Johnson.
On Wednesday, the agency approved just over $100 million for ten projects, including two from Bold Communities.
The Turner Center said going to multiple agencies to get the necessary funding adds cost because developers must endure higher legal, labor and compliance costs to handle additional applications and contracts.
Each process, of course, takes time, with developers paying additional holding costs on pre-development loans, all the while inflation drives up the cost of materials and wages.
Miller estimates that by using LACAHSA alone, he can reduce overall costs by about 5% to 10%.
LACAHSA, established by state law in 2022, gets its funding from the Measure A half-cent sales tax approved by voters to fight homelessness and build affordable housing.
Until now, the agency had only provided money for homeless prevention efforts such as direct rental subsidies to employers.
The first round of affordable housing construction and preservation funds, approved Wednesday, will pay for 554 below-market units. Most will be new homes, while a small portion will be conversions of existing market-rate housing units into affordable units and extension of deed restrictions on some existing market-rate units.
LACAHSA pointed to data showing that in the best-performing quarter of new construction projects that have recently applied for funding, total development costs have been below the average cost of building affordable units in the region. Savings increased to approximately 12% when project proposals relied primarily or entirely on LACAHSA funding, rather than mixing federal funding with one or two LACAHSA products.
Turner Center executive director Ben Metcalf said it’s not clear how much those savings may reflect the cost-effectiveness of the projects that recently came to apply for funding from LACAHSA. But he expects at least some savings to result from the creation of LACAHSA.
Not only does the agency offer a number of financial products, but LACAHSA said it evaluates project proposals for their cost-effectiveness efforts and considers that a key factor when deciding to approve funding.
Metcalf, who previously served as director of the California Department of Housing and Community Development, said such a focus on awarding dollars based on the cost of development is not common among federal agencies.
In part, he said, that was because “increasing affordable housing costs have only become a visible problem in the last few years.”
By 2022, the Times reported the cost of building one unit of affordable housing in California would typically cost more than $1 million. Voters also expressed growing frustration with the lack of progress in reducing homelessness and housing costs.
LACAHSA is not the only effort to streamline the funding process, with Gov. Gavin Newsom proposing to streamline federal funding as part of this year’s budget.
Meanwhile, LACAHSA plans to approve another round of affordable housing funds in May.
To apply for that grant and the dollars approved Wednesday, LACAHSA said it needs developers to be able to begin operations 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 chairman of the LACAHSA board, said the high interest indicates that it is actually a lack of “funding and operational support” that is holding back affordable housing in LA County, rather than a lack of “land or community.”
“LACAHSA is designed to meet this time,” he said in a statement.
Projects being planned by Bold Communities in Harbor Gateway and Stevenson Ranch are conversions of long-stay hotels to low-income senior housing.
Now that the funding has been secured, Miller said he expects the buildings to be filled with new residents by the end of next year.
“I think these are, frankly, going to go head-to-head,” the nonprofit executive said.
