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When It Comes to Affordable Housing, for a Lucky Few, the Price Is Right

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When It Comes to Affordable Housing, for a Lucky Few, the Price Is Right

Marc Spaulding, a dancer, landed one of 88 subsidized residences in the otherwise market-rate One Santa Fe complex. The developer had set aside the Arts District units as affordable housing for people with a background in the arts. More than 700 people applied for the residences, and occupants were chosen by a lottery process.

DOWNTOWN LOS ANGELES - Performing on stage comes naturally for Marc Spaulding, a 36-year-old dancer who has taken jobs around the world. Finding an affordable place to live in Los Angeles, on the other hand? Not so much.

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“As an artist, the working situation is very up and down. That can be a challenge, living in a major city like L.A.,” Spaulding said. “On top of that, when you do find something in your budget, you have to worry about whether it’s really a decent place to live.”

After four years in the city, Spaulding finally found a gem. In October, he moved into one of 88 units in the Arts District’s mammoth One Santa Fe project that are set aside as affordable housing. (UPDATE: A previous version of this story suggested the units were set aside for artists. Any eligible household was able to apply.)

Spaulding pays $767 for his space. The market rate for a similar unit is about $2,000-$2,300.

“I got something state of the art. It’s beautiful,” Spaulding remarked.

Not that it was easy. Spaulding was one of more than 700 people to apply for One Santa Fe’s subsidized apartments. The building owners chose the occupants by a lottery process. 

The odds were long, but at least they were better than at The Emerson. At an April meeting of the city-county panel overseeing the $850 million Grand Avenue development, a representative of developer Related Cos. said that 8,000 people applied for the 55 units set aside as low-income housing in The Emerson. Those units are completely filled, the Related official said (again, a lottery was held for those who qualified). The rest of the luxury building was 40% occupied at the time of the April meeting.

The situation underscores the severe affordable housing shortage in the city. Mayor Eric Garcetti has called for 100,000 housing units to be built in Los Angeles by 2021. According to the Southern California Association of Non-Profit Housing, an estimated 500,000 subsidized units are needed to meet demand in the county. 

“Widespread development is a great thing. But the free market is about maximizing profit. So people are going to build big units and sell or lease them for as much as they can,” said Alan Greenlee, executive director of SCANPH. “There is a segment of the community that can pay that. But there are mostly those who can’t. That’s why we need more out-of-market approaches to this.” 

Few and Far Between

In years past, it was far more common to see affordable housing included in Downtown Los Angeles projects. Buildings such as the Sakura, Glo, Hikari, Gas Company Lofts and Met Lofts all have low-income residences in otherwise market-rate buildings. In most cases, the only difference is the look of some finishes or appliances.

Just finding these units, however, can be tricky for a potential resident. There is no consistently updated, centralized database of subsidized units in market-rate complexes, and developers often don’t widely advertise their availability. The other options to find affordable housing in L.A. are Section 8 vouchers, which allow residents to subsidize any apartment under a certain rent limit, or applying to live in city-owned housing. However, the popularity of Section 8 and its lengthy waitlist means the outlet is effectively closed, and there are only about 8,000 city-owned units in L.A.

For now, the best chance for affordable housing growth lies with private sector development, but it is harder to come by. Doug Bystry, the CEO of Clearinghouse CDFI, which often finances affordable housing development (and helped finance the retail portion of One Santa Fe), noted that a gap has arisen since the demise of the Community Redevelopment Agency in 2012. In the past, the agency often gave key early money to developers in exchange for including some low-income residences.

Without the agency’s influence in local development, many companies will continue to stick to market-rate projects, Bystry noted. 

“What the CRA dissolution has done is it’s taken away a big incentive for developers to even consider affordable housing,” Bystry said. “I’m not sure we’ve had more developers come to us for money after the loss of the CRA, but some developers who worked with the CRA and did affordable housing in the past, they’re now thinking they’re just not going to do it.”

It still happens, though it often takes wrangling or a directive from elected leaders. Related was required to include a 20% affordable housing component in The Emerson and in upcoming residences as part of the deal to build its Frank Gehry-designed mega-project The Grand on publicly owned land. 

A few companies, such as Equity Residential, have leveraged the city’s affordable housing incentive ordinance to plan subsidized units in exchange for reduced parking requirements or additional density. The company’s Beacon Tower at Fourth and Hill streets will have 428 apartments, with 25% of them subsidized to some degree. The development is tentatively scheduled to open in 2018. 

“Including 20% workforce and 5% very low income housing made more sense for us than any of the other combos that had maybe less than that,” said Dustin Smith, Equity Residential’s head of Southern California development.

Other projects in the pipeline with subsidized units include Forest City’s Blossom Plaza in Chinatown (53 affordable units) and the county’s La Plaza Cultura Village near Olvera Street, which would have 20% of its 345 apartments subsidized. The former project was shepherded by past Councilman Ed Reyes and the latter was propelled by ex-County Supervisor Gloria Molina, both strong advocates for low-income housing.

More units could come in the future with tweaks to the affordable housing ordinance or the “transfer of floor area ratio” system, in which developers pay the city money, used for public improvement projects, and in exchange get to build a taller or denser project on their site than normally allowed. 

Still, the big-picture issue of supply and demand remains the biggest hurdle when it comes to spurring the creation of affordable units. Many developers remain hesitant to finance properties using programs that require subsidized units, such as the federal low-income housing tax credit, believing it hurts the bottom line too much, said Bystry.

That said, some see long-term potential. If Los Angeles continues to build new housing while maintaining, rather than demolishing, its older stock, rents could ultimately begin to level out, said Chuck Cowley, a development partner in One Santa Fe. 

“The way you have price diversity is by having a variety of product in a variety of ages,” he said. “The least expensive car you can buy is a used car.” 

In the meantime, Cowley is glad the One Santa Fe team could keep some “creative culture” in the neighborhood by offering subsidized units to some working artists like Spaulding.

eddie@downtownnews.com

© Los Angeles Downtown News 2015