Mixing It Up
Stephanie Castro occupies one of the 33 units reserved for low-income renters in Santee Court. All across Downtown, buildings are mixing market-rate and low-income units. Photo by Gary Leonard.

Stephanie Castro spends most mornings creeping in traffic past Downtown's skyline on her drive from Long Beach, where she sleeps on her aunt's couch, to class in Koreatown. The Downtown high-rises taunt her again on her drive to work in Highland Park.

When the fashion design student and part-time assistant decided to make life simpler by moving Downtown, she found nothing she could afford.

"It's really difficult when you're just one person and you're a student and you work part-time," said Castro, 19.

When friends leaked word of the low-rent units in their Fashion District building, Santee Court, she joined the waiting list. "That was a year and a half ago," Castro said.

Last week, the wait ended, when Castro signed a lease for a studio apartment, one of 33 units reserved for low-income tenants in the building. It rents for $606 - half of what wealthier tenants pay for a comparable unit.

It's part of a little-noticed but growing trend Downtown. Developments that receive public funding, such as tax credits, are required to reserve at least 20% of the building for low-income renters.

And it looks like the wave of the future.

About two dozen Downtown buildings, including Hikari in Little Tokyo, Met Lofts in South Park and Glo in City West, offer an affordable housing component. There are now more than 650 low-income units throughout Downtown market-rate projects, including nine developments opened since 1999. A handful of dense, high-profile additions are on the way, including the Grand Avenue project, Northwest Gateway in City West and the proposed L.A. Central towers in South Park.

The arrangement places low-budget renters down the hall from luxury loft dwellers - in some cases in nearly identical units - rather than miles away in less pricey neighborhoods.

Many city officials hail it as a key to "smart growth," and housing advocates say it is especially needed in Downtown, where the average income has risen sharply, according to recent studies.

"It's a bankrupt policy not to ensure that communities are mixed and that there is a place for low-income and working people," said Larry Gross, executive director of the Coalition for Economic Survival.

However, some find the trend risky and aren't convinced the idea will, or should, work in Downtown. Even some developers who have built mixed-income projects were unwilling to discuss them for this article, uneasy about their projects gaining the stigma they say affordable housing still carries. Bringing attention to the low-income neighbors, some said, can scare off the market-rate residents.

"A lot of prospective tenants call to inquire if we have the program and, if so, if we've had any problems," said Angela Llanes, senior leasing associate for the Gas Company Lofts, which opened in 2004 at 810 S. Flower St. and set aside 53 of its 251 apartments for low-income residents.

"They're afraid that it is going to bring in a homeless population with drugs and crime," she added. "We tell them that we've never had any problems."

'Healthier' Development

The trend stands in contrast to other more common scenarios: completely separate market-rate and affordable housing complexes, or situations where a developer pays into a fund to have the required 20% affordable housing ratio built offsite.

In the case of mixed-income projects, developers sprinkle low-rent rooms throughout their otherwise market-rate buildings. Neighbors are hard-pressed to tell who pays what.

"I can't stick all the affordable units in one wing of the first floor," said Kevin Ratner, senior vice president of development for Forest City Residential West. His company built both the Met and Met Lofts with bond financing, which requires 20% affordable units.

In Met Lofts at 1050 S. Flower St., 52 of the 264 apartments are tagged as "affordable." They rent for about $570 while comparable market-rate units go for as much as $1,700. The only difference is the design flourishes, some as small as the type of light fixtures.

The income a developer loses on lower rents is canceled out by the lower cost of financing, Ratner said, but something beside the bottom line must drive the decision.

"I personally believe that mixed-income communities are a healthier way of [doing] development as opposed to ghetto-ization," Ratner said. "Understanding how it benefits the developer is not something that all developers are willing to spend the time to understand."

City planners agree there's a benefit. By encouraging developers to build more projects for all income levels, they argue, more residents can live close to work, easing traffic gridlock. Every building completed helps stem the affordable housing crisis.

Backers of the concept say the case for mixed-income projects is particularly strong in Downtown Los Angeles.

A demographic study released this year by the Downtown Center Business Improvement District and conducted by the Los Angeles Economic Development Corporation showed a continued rise in the affluence of incoming Downtown residents. According to the report, the median income for Downtown households in 2006 was $99,600 - almost double the average median income for the city. (The AMI for a family of four is about $54,500.) Of those households, about 17% made between $100,000 and $124,999 and more than 14% claimed an income over $200,000.

"When the projects get built and they don't have affordable housing in them, what we get is the demographic you saw in that report: young, single, affluent," said Nancy Sidhu, a senior economist for LAEDC. "The residents who have moved in first are, in income terms, the cream of the crop. And what we are not seeing is an influx of people with modest income."

Some observers see that pattern as unhealthy for Downtown and the city as a whole.

"You are looking at the definition of gentrification," Gross said about the data, warning that Downtown could become a place, "where only the rich and wealthy can afford to live."

Not everyone sees cause for concern.

Carol Schatz, president and CEO of the Central City Association and the DCBID, argues that Downtown has long housed its fair share of low-income units and that public money could produce more affordable housing if location were not part of the equation. Schatz said the massive Grand Avenue project is an example of how mixed-income efforts can prove inefficient.

"It was a huge subsidy per unit so a lucky few people will win the lottery and get to live in that building," Schatz said. "But for the amount of the subsidy that requires, how many more low-income units could we have built in another location, perhaps to the south of Downtown, or to the north or to the east?"

City officials instead look to Grand Avenue as a template. When it reaches its final phase, 532 affordable rental units - some of them intended for "extremely low-income" people - will mingle with the nearly 2,000 luxury condominiums and hotel rooms.

That inclusion, the result of intense negotiations by the Community Redevelopment Agency and City Council, is generally regarded as the most drastic to date.

Meet the Neighbors

Though the Grand Avenue project, scheduled to break ground at the end of the year, promises to put the spotlight on the concept of poor tenants renting alongside those who can afford seven-figure penthouses, there are already numerous indications that co-habitation works.

At developments like the Gas Company Lofts, which boasts 53 low-rent and 198 market-rate units, it equates to a dramatic spread in incomes on the same floor.

"For the same market-rate unit that would be $2,400, you could qualify for paying only $575 a month," said Llanes. "It can be a phenomenal deal for families."

Some residents of the building weren't even aware of the situation until informed by a reporter.

Asked about his low-income neighbors, John Florance, 45, said he hadn't known.

"I think it's a great idea. Downtown is kind of becoming for the uber-rich," said Florance, who has lived there for a year and a half and pays $1,700 for 850 square feet.

Those taking advantage of the affordable housing said the issue rarely comes up in conversation with neighbors.

"I've never heard any discussion here about the discrepancy between incomes," said Paul Barkigia, a low-income resident of the Met Lofts. Barkigia, 59, a retired librarian, pays $627 for a fully equipped apartment. He said he'd be in "big trouble" without the affordable program.

In mixed-income buildings, prospective tenants must show they qualify as "low-income" and be certified through the CRA. Most also undergo the same background check as other residents. Multiple management companies interviewed said there is no need for stricter standards for low-income tenants.

Ratner admitted that some market-rate buyers at Forest City properties have left because of the affordable component. Still, he said the biggest drawback to the program is not the people, but the paperwork.

"It is very management intensive. There's a lot of work that goes into managing a building that has an affordable component to it," Ratner said, estimating that it accounts for 20% more time and energy by management.

At Santee Court, leasing manager Andrew Ruiz puts a lot of energy into just keeping tabs on those who apply for rooms.

"We turn over maybe five of them a year and I probably have 60 or 70 people who request those five units," he said.

Recently, when a unit finally opened up after 18 months, Ruiz called Stephanie Castro to tell her the good news.

He said filling up the market-rate units, though satisfying, is nothing compared to making a phone call to someone like Castro.

The Chicago Experiment

What Happened When Mixed-Income Housing Replaced the Projects

Imagine if the L.A. Housing Authority, working with developers, demolished every single low-income housing project in Downtown Los Angeles to replace them with mid-rise lofts for both high-income young professionals and Skid Row residents alike. That's essentially what Chicago has done.

Nearly a decade ago, Chicago officials elected to abolish the de facto segregation of rich and poor that subsidized housing projects had created in its metro area. One particularly infamous complex, Cabrini-Green, housed more than 2,000 of the city's poorest residents. Massive low-rent tenements like it had, over decades, become entrenched havens for crime and legacies of poverty.

"We had created these islands of poverty and decrepit housing, isolated from the whole city," said Bryan Zices, communications director for the Chicago Housing Authority.

Meanwhile, nearby downtown Chicago was witnessing an upswing of redevelopment and gentrification.

Starting in the late '90s, the CHA moved to mix the two populations in new urban developments by using the increasing value of the downtown area to draw market-rate buyers. The city leased land to for-profit developers to begin bulldozing the decrepit public housing and replacing it with massive mixed-income complexes.

Most of the developments, including the replacement for Cabrini-Green, hold one-third high-end condominium units, one-third workforce housing (60%-80% of the Area Median Income) and one-third very low-income housing (30%-50% AMI). Low-income residents moved into units with the same specs that well-off residents could purchase for market-rate prices.

At the time, real estate observers and some developers questioned whether market-rate buyers would pay to live next door to families recently lifted from some of the grittiest projects in the city.

By most accounts, the effort has been a success.

"There was some trepidation about it for sure in the beginning," said Joseph Williams, whose Granite Development took on one of the first projects, Oakwood Shores, which opened in 2004. "But there has been a tremendous amount of assimilation from all of our residents to being in a mixed-income community."

Another developer echoed Williams. The Holsten Real Estate Group was charged with replacing part of Cabrini-Green with 261 mixed-income units that wealthy professionals would buy for $350 a square foot. The new complex, North Town Village, is half market-rate condos and 30% public housing for poor families that once lived in the projects. The rest are affordable apartments with moderate rents.

"It's been up and running about six years and it's successful," said developer Peter Holsten. His company is currently constructing a second mixed-income project, an 800-unit mega-development.

According to Zices, all of the affordable apartments created by the program are occupied and the market-rate sales hover around 90%, making it a successful model.

"The market-rate buyer is comfortable living in such a mixed-income community," he said. "We don't have any problems with it here. It's a strategy that keeps Chicago a vibrant, robust city that can steal the Olympics away from L.A."

Contact Evan George at evan@downtownnews.com.

page 1, 9/17/2007

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