Last month, leaders from various backgrounds in affordable housing—financiers, developers, architects, lawyers and designers—convened in Los Angeles for Bisnow’s Affordable Housing Summit to share insights and unique approaches to increasing affordable housing via efficiency gains and strategic financing. Below are a few quick takeaways.
1. Chase the money.
Traditional government subsidies and grants alone are often insufficient to meet either an individual project’s financing needs and/or an area’s growing demand for affordable housing. This results in developers turning to additional capital sources, such as public-private partnerships, low-income housing tax credits, impact investments, philanthropic contributions, and community development financing. This multifaceted approach allows for increased flexibility and creativity in financing affordable housing projects. Moreover, leveraging a variety of funding sources distributes the financial burden across stakeholders, reducing the strain on any single entity. One example, in Los Angeles, was using a combination of low-cost bonds and opportunity zone siting which enabled the development of 700 new units (split between 20% affordable and 80% accessible to the “missing middle”). The California Municipal Finance Authority and the California Housing Finance Agency issued bonds that intuitional investors with an appetite for tax-exempt instruments then acquired to complete the capital stack.
2. Integration of affordable units with market rate requires creative solutions.
Experts agreed that successfully integrating affordable housing units with market rate units is crucial for fostering inclusive and diverse communities. One development approach is providing mixed-income developments, where affordable housing units are seamlessly incorporated alongside market rate units within the same project. This integration promotes social cohesion and reduces potential project stigmatization. However, successfully integrating affordable units with market-rate units requires creative solutions and thoughtful design. Mixed-income development should be designed to reflect the long-term legacy of the community that it is to serve and managed in a manner that promotes authenticity and growth. One speaker suggested that this could be achieved by co-locating permanent supportive housing near existing boutique motels. Supportive housing, which “combines non-time-limited affordable housing assistance with wrap-around supportive services for people experiencing homelessness, as well as other people with disabilities,” is most successful when tenants have access to neighborhood amenities. By co-locating permanent supportive housing facilities with existing amenities—such as boutique motels—tenants can more easily integrate into their neighborhood, creating cohesion within the community.
3. “By-right” approval gets projects over the finish line.
Recent by-right development laws are facilitating the creation of more affordable housing. One speaker referred to laws that promote streamlined project approvals as the “Governor’s Toolshed”—making specific mention of their own success with leveraging the provisions of SB 35 and AB 2162. These laws (and others) allow developers to proceed with projects that comply with certain zoning and planning regulations through a streamlined approval process, reducing costly delays and uncertainty in the review process. This efficiency is particularly advantageous for affordable housing, as it enables developers to minimize costs associated with prolonged review periods. By removing these barriers, by-right development fosters implementation of creative solutions, such as mixed-income housing or density bonuses, which can enhance affordability.
4. Modular construction accelerates development timelines.
The high cost of land, construction and labor can significantly impact the affordability of housing projects, and difficulties with the procurement of materials often leads to delays. Modular constructions’ repeatable and scalable approach to project design is revolutionizing the pace of affordable housing development. By utilizing prefabricated building modules, project timelines can be cut by as much as 16 months when compared to the conventional approach to affordable housing development. Industrialized construction methods also lower the cost of new housing construction by 5% to 20% according to industry experts. Modular construction accounted for approximately 6% of new construction last year in North America.
5. Collaboration is key.
By forging partnerships and sharing responsibilities, collaboration facilitates the efficient allocation of resources, reduces duplication of efforts and encourages the adoption of best practices. When collaboration occurs between developers, designers, engineers community groups, nonprofits, and public agencies, it can help ensure projects adequately address the needs of the population the project is intended to serve and supports residents’ integration into the local community. Additionally, collaboration can help overcome common barriers to affordable housing production such as funding, adequate resources and resistance from surrounding residents and local governments. Ultimately, creating affordable housing lies in its potential to generate holistic, comprehensive housing solutions that benefit individuals, families and communities, while striving to alleviate the existing housing crisis and promoting social well-being for all.
This document is intended to provide you with general information regarding the Bisnow Affordable Housing Summit in Los Angeles. The contents of this document are not intended to provide specific legal advice. If you have any questions about the contents of this document or if you need legal advice as to an issue, please contact the attorneys listed or your regular Brownstein Hyatt Farber Schreck, LLP attorney. This communication may be considered advertising in some jurisdictions. The information in this article is accurate as of the publication date. Because the law in this area is changing rapidly, and insights are not automatically updated, continued accuracy cannot be guaranteed.