Tag: ed1

Kian Investment Lands $24M Loan For 136-Unit Affordable Complex in Koreatown

Kian Investment has scored $24.4 million in financing to build a 136-unit affordable housing complex in Koreatown.

The entity controlled by West Los Angeles-based Keren Management and led by Saman Kerendian landed the loan to build the seven-story building at 926-938 South Kingsley Drive, the Commercial Observer reported.

The developer will bulldoze two California bungalows built in 1912 at the northeast corner of Kingsley and San Marino Street.

Kian obtained the $24.4 million, 30-month loan from Culver City-based nonprofit Century Housing, which comes with optional extensions and an interest rate equal to the secured overnight financing rate plus 2.41 percent.

As of June 4, SOFR was 5.33 percent, meaning the loan currently has a rate of 7.74 percent.

This month, Kerendian plans to break ground this month on the 72,800-square-foot building, which will have 136 studio and one-bedroom apartments for households earning 80 percent of area median income.

Initial plans filed in 2021 called for a 110,000-square-foot building with 89 apartments, according to What Now Los Angeles.

Kian employed Mayor Karen Bass’s Executive Directive 1, which fast-tracks the approval and permitting for 100-percent affordable housing projects to speed up affordable housing development.

Brokers Jonathan Lee, Shahin Yazdi, William Hyatt and Tommy Adelson of the Structured Finance Group at Colliers Mortgage arranged the financing.

“Since ED 1 is a relatively new initiative, many lenders have not yet fully evaluated the product to offer competitive terms,” Lee said in a statement. “Throughout this process, several banks considered ED 1 to be ‘too early,’ or offered terms in the 50-60 percent [loan-to-cost] range.

“Ultimately, we found a lender who understood the program and provided competitive terms and leverage.”

— Dana Bartholomew

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TRD Staff

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June 6, 2024
LA Developers Weigh Parking in Making Decisions to Build Under ED1

While Executive Directive 1, Los Angeles Mayor Karen Bass’ attempt to expedite affordable housing approvals, has generated interest from developers, there has been at least one major point of contention: parking.

Or, rather, the lack of it when it comes to proposed ED1 projects: the vast majority of the ED1 plans don’t offer on-site parking. Land use research firm ATC Research found that 73 percent of ED1 projects, totaling about 9,100 proposed units, have no on-site parking.

Mayor Karen Bass introduced ED1 in December 2022 to exempting affordable housing developments from lengthy environmental reviews and cutting the approval process to under 60 days.

With these projects, developers don’t have to build parking, bringing costs down.

“Developers are finding that in order, given the restrictions on rent, and construction costs today are really high, that the only way they can make a pencil is not to have parking,” said Chris Tourtellotte, who runs development for LaTerra Development.

But the question is: will developers be able to lease an apartment complex in Los Angeles without parking?

“What happens when you have no parking? It’s harder to rent the units,” said Moses Kagan, who runs Adaptive Realty and currently manages about 130 buildings in L.A., some of which have no parking. “As soon as your tenants start to earn more money, they move out, so you get more turnover. Over time, it’s harder to push your rents up, because you’re sort of constantly dealing with people turning over.”

L.A. is synonymous with parking — just watch any movie about L.A. and you’ll notice a lot of driving.

For some, not building parking is the only way for the projects to pencil. And the issue of parking is emerging as a key factor in whether developers take advantage of ED1.

For developers that are jumping on the ED1 bandwagon right now while the program is still in its early stages, getting rid of parking is no brainer given high construction costs.

“The reason why a lot of these projects have no parking is because of the nature of private developers that are doing these projects, because they’re taking the biggest risk,” says According to Ben Lee, an agent at Marcus & Millichap, who has sold a number of sites entitled under ED1.

Lee notes that these smaller developers, who he calls “cowboy” investors, that are using ED1 are taking on more risk because costs are high and the program is new, — no projects have been built, yet. More risk-averse builders and institutional investors are still evaluating how these ED1 projects pan out.

At the end of the day, it’s about finding the cheapest land, and the cheapest way to build.

“The reason why these developers are doing it in South LA without parkings because the dirt is the cheapest there,” he said.

“Developers are finding that in order, given the restrictions on rent, and construction costs today are really high, that the only way they can make a pencil is not to have parking,” says Chris Tourtellotte, who runs development for LaTerra Development.

For most, parking is just a part of the overall calculations and assumptions the builders are making.

Some developers are using the ED1 program as a way to expedite projects that previously looked to score incentives under the city’s Transit Oriented Communities, or TOC, program.

The city introduced Transit Oriented Communities (TOC) Affordable Housing Incentive Program in 2017 as a way to incentivize affordable housing, with the incentives correlated with proximity to public transport. The program offers density bonuses, height increases and fewer parking requirements for residential projects that have a certain number of affordable units.

“A developer who has bought a piece of land and has a sunk costs into the TOC entitlement strategy that doesn’t pencil anymore is using ED1,” Lee said.

Developers are not necessarily flocking to ED1 because it removes parking requirements, but is an alternative route to getting a project approved.

Some developers don’t see parking as an issue long-term.

“There’s such a lack of affordable housing in the city of L.A., that people would still be glad to find an affordable unit with rent restrictions, and then either get rid of their car and take the bus or Uber or taxi or ride their bicycle, or park their car on the street,” Tourtellotte said.

“With fully autonomous self-driving vehicles and robo taxis, less and less people will own cars, because cars won’t really be in park.”

Daria Solovieva

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May 3, 2024
Opinion: Why is L.A. still letting single-family homeowners block solutions to the housing crisis?

Last month YIMBY Law, a nonprofit, pro-housing advocacy group, sued the City of Los Angeles on behalf of a private developer seeking to construct a 360-unit apartment building in Canoga Park. These apartments would be only for renters who meet the federal definition of low to moderate incomes in L.A. The project was submitted under Mayor Karen Bass’ Executive Directive 1, meant to dramatically speed up the approval and permitting process for 100% affordable housing projects. But recently the city revoked the eligibility of the Canoga Park building for this program following complaints from single-family homeowners.

This about-face is part of a trend. Last year, the mayor’s office amended ED1 to shield single-family zones from streamlined development — after eight such applications, including the Canoga Park proposal, were already submitted. Those proposals were then denied eligibility for ED1. Some of the projects have filed appeals; one denial has been overturned, but the City Council rejected an appeal for the Canoga project.

Without ED1, these projects face a discretionary approval process that may involve lengthy environmental review and other delays likely to prevent them from happening. This turn of events may cost the city more than 1,100 affordable apartments.

Bass announced ED1 as moving “City Hall away from its traditional approach that is focused on process and replacing it with a new approach focused on solutions, results and speed.” The mayor’s stated intention received a remarkable boost via the state law AB 2334, passed in 2022, allowing developer incentives for 100% affordable projects including substantial increases in height limits and allowable density (the number of housing units on a given-sized parcel of land) in “very low vehicle travel areas,” where limited residential development has kept down traffic. The idea is that these areas can more easily accommodate any extra traffic stemming from increased housing density.

The potential cost savings from ED1 and AB 2334 encouraged private developers to produce long-term, income-restricted units — crucially, without relying on public financing. If the more than 1,100 apartments now held up from ED1 streamlining were built through the standard publicly subsidized pathway, at a typical cost of around $600,000 per unit, they could require up to $660,000,000 in public funding. Privately funded alternatives are a boon to local, regional and state governments that have sought for years to spur the production of so-called “missing middle” housing that is affordable to working-class and middle-income households.

Yet now this progress is in question, just as the power of these complementary city and state reforms has begun to emerge. The lawsuit concerning the Canoga Park building may result in one or more of the halted projects being built eventually, and the state has suggested that the city erred in revoking their ED1 eligibility. But even if these projects get approved, since ED1 now excludes the single-family neighborhoods that make up approximately three-quarters of residential land in L.A., they would mark an end rather than a beginning to similar development.

Some residents of these neighborhoods say that’s only fair. According to Councilmember Bob Blumenfield, for homeowners affected by new apartments, “their property value is going to get cut in half, they’re going to have a big shadow over their place.”

As it happens, I can speak personally to these concerns. I am the owner and resident of a unit in a small rowhouse condo development on the Westside located directly across the street from an ongoing project converting a single-family home into a multi-unit apartment building.

My neighbors and my family are losing a good deal of sunlight throughout the day from the new building. Our street has been a cacophonous, messy construction site for so long it’s hard to remember what it was like before.

But I know that this is what solving the housing crisis looks like: A single parcel that previously housed one family is being transformed into apartments for perhaps 15 to 25 people, with units reserved for low-income households. Like those in the contested ED1 projects, these affordable units won’t require public funding.

There is simply no way to solve our housing crisis without throwing shade in some single-family residential areas. We might have to increase traffic in some neighborhoods, too, though providing more housing in jobs-rich West L.A. could ultimately reduce traffic by allowing people to live closer to where they work. As for property values, multiple studies have shown that low-income housing does not substantially reduce them, including in high-cost neighborhoods, and often increases them.

Some constituencies will always oppose development. Local policymakers who are serious about solving our dual crises of housing affordability and homelessness have to take a hard look at how much political capital they are willing to spend to create effective policies in the face of such objections.

If we can’t build fully affordable projects that don’t drain government coffers even on the edges of land zoned for single-family residences, then Angelenos should prepare for a permanent housing crisis.

But if this sounds like the wrong direction for the city, Bass and the City Council should fully commit to protecting and expanding innovative policy such as the original ED1, without categorical exclusions for single-family neighborhoods, and AB 2334. Mechanisms that convince private developers to produce long-term affordable housing offer what is as close to a free lunch on this crisis as L.A. is ever likely to get.

Jason Ward is an economist at Rand Corp. and the co-director of the Rand Center on Housing and Homelessness.

Jason Ward

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February 1, 2024
Opinion: Who gets to live in L.A? A bold plan to create affordable housing has a serious flaw

Last December, Mayor Karen Bass moved to speed up the production of affordable housing in Los Angeles by issuing Executive Directive 1. This measure streamlines the approval of new multi-unit residences by exempting them from the usual slate of hearings, appeals and environmental reviews. The city Planning Commission voted this month to continue ED1, bringing the directive one step closer to becoming permanent.

On its face, this is the sort of bold housing policy Los Angeles needs. The city is not building nearly enough units to meet demand. In fact, an LAist analysis found that from 2010 to 2019, the city lost eight times more homes that were affordable for low-income residents than it gained.

This has partly been due to developers being deterred by lengthy, expensive and risky approval processes for new construction. On its face, ED1 is helping to chip away at that problem: The Department of City Planning reported that, as of the end of October, it had approved more than 50 new developments under the directive and had 55 other applications pending, projecting the addition of 12,383 new affordable homes.

But absent from this success story is the way this directive is reshaping the character and makeup of Los Angeles’ working-class neighborhoods and displacing longtime residents. In her effort to permanently streamline the construction of affordable housing, Mayor Bass is asking the city to weigh in on a bigger question: Who gets to live in Los Angeles?

According to our analysis of city data, in ED1’s first 10 months, more than a third of new developments filed under the directive have been in South Los Angeles, an area with one of the highest concentrations of Angelenos living in poverty. We also found that one-third of those South L.A. developments require the demolition of existing affordable housing, eliminating at least 62 rent-stabilized units in the area and displacing hundreds of residents, many of whom cannot afford to move elsewhere in their neighborhood or the city. Under the streamlined process, tenants have mere months to find new homes. We’ve talked to many such residents who fear they will become homeless.

It’s also worth noting where ED1 developments aren’t happening. In June 2023, Mayor Bass revised the directive to exclude parcels zoned for single-family homes — which initially made up more than half of approved projects, according to an analysis by Abundant Housing.

This change came after the city planning department heard “feedback” from residents it surveyed as well as members of the City Council concerned about apartment buildings “plunked down in the middle of single family neighborhoods.” This exemption prevents the city from streamlining the construction of affordable housing in these “higher-resource areas” with the least density. It also makes multifamily residential zones more of a target for developers.

If L.A.’s wealthy neighborhoods are preserved at the expense of low-income ones, we will all feel the consequences: rising rents as the number of rent-stabilized units continues to shrink; an increase in homelessness, especially for seniors and renters on fixed incomes who have no other housing options available; less diversity in Los Angeles as residents in the affected neighborhoods, which are predominantly Black and brown, scatter outside the city to afford rent; and more traffic as families have to relocate farther from their schools and jobs.

Los Angeles urgently needs more affordable housing, and streamlining the development process is a necessary step. But city leaders need to be mindful of what may be destroyed if the approach is not equitable. Before making ED1 permanent, the city should exempt rent-stabilized units from the streamlining process so that a more thorough assessment can take place and tenants have more time to consider their options. The city should further ensure that developers — even those pursuing 100% affordable housing projects, some of which may technically be exempt — comply with the obligations for relocation, right of return and right to remain under California’s Housing Crisis Act of 2019.

Displaced tenants also should receive more robust relocation services, including help securing comparable replacement housing in the same area. Under the current process, the city provides a list of potential housing providers and tenants are burdened with the search for affordable units.

Finally, single-family homes should not be exempt from streamlining. Such an exemption reflects the sort of NIMBY position that got us into this affordable housing crisis in the first place. It will only reinforce the inequity that has shaped housing policy in Los Angeles as affluent neighborhoods remain relatively sheltered from change while low-income neighborhoods are dismantled for the sake of growth.

Los Angeles’ leaders must consider the unintended consequences ED1 could have. Our city has to balance the need to build affordable housing with the need to keep our most vulnerable residents and communities housed and intact. Not doing so risks undermining the efficacy of this directive, which aims to ensure more Angelenos have access to affordable housing, not fewer.

Maria Patiño Gutierrez is the director of policy and advocacy, equitable development and land use at Strategic Actions for a Just Economy in Los Angeles.

Maria Patiño Gutierrez

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November 27, 2023