In the past ten years as federal housing programs severely declined and cities and states grappled with housing shortages and a shrinking supply of affordable housing, non-profit developers and municipal agencies have emerged as the focus of much of the creative efforts undertaken to provide affordable housing for Southern California. The Planning Report recently met with the La Habra Neighborhood Housing Services and the City of Los Angeles Housing Authority to discuss their current efforts.
Neighborhood Housing Services traditionally establishes a partnership between local government, local lenders, and residents to revitalize neighborhoods, primarily through low-cost loans for home improvement. However, many NHS’ have moved beyond these goals to develop single-family houses.
At the NHS of La Habra, Orange County, this non-profit organization is pursuing numerous opportunities—buying and rehabilitating foreclosed property, rehabilitating fixer houses, and most recently, developing on new land. These new homes are subsequently sold to families who do not exceed the median income ($844,000 for a family of four in Orange County) and are first time buyers.
The NHS will purchase lots of approximately 4,000 square feet for $30,000-$35,000. Throughout the building process, NHS may receive help from government agencies. For instance, the City will often provide some fast tracking for the project in issues of planning or zoning. If NHS is planning to acquire and rehabilitate a foreclosed property, the HUD office may pull the house out of the bidding process.
The single family houses developed by NHS are approximately 1,400 square feet and will sell for $130,000. Keep in mind that the median resale value of a house in Orange County is $256,000. The median resale value of a house in La Habra is $220,000. Therefore, the NHS has to try to maintain a balance between providing affordable housing without lowering real estate prices in the neighborhood. The answer is “creative financing,” says Glenn Hayes, NHS' director, for people who do not qualify for loans.
After building the houses, NHS will provide a below market interest rate and a 10% down-payment. In 12 years the NHS has only experienced one default.
The Housing Authority of the City of Los Angeles is another agency searching for creative means to maintain its existing housing stock for low-income renters. For instance, consider Normont Terrace, a 400 unit housing project at Pacific Coast Highway and Vermont Avenue. In order to demolish this aging housing and simply replace the 400 units, the cost approaches $30 million.
Five months ago. an unpopular decision to sell another public housing project, Jordan Down, to a private developer was canceled. However, the Housing Authority, under the leadership or new Executive Director Gary Squier, released a Request for Proposal for developers regarding Normont Terrace.
The Housing Authority is offering the project's land for lease to be developed at its permissible land use. Many Housing Authority projects are old and these developments have relatively low density. The project might make sense financially to developers who can double or triple the density. At Normont Terrace, the project covers 10 units per acre. The zoning, however, allows for 30 units per acre. A developer can therefore demolish the current project and build 1,200 units of which 400 would be returned to the Housing Authority as owner for very low-income renters.
The Housing Authority has since selected two finalists for the exclusive right to negotiate for the project: Peter S. Cook & Associates, and D&S Development Corp. In the future, the Housing Authority may continue to offer profit-sharing opportunities with developers to strategically maximize its assets.
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