The Southern California Development Forum (SCDF), an organization that provides networking opportunities for those in the real estate community, hosted a panel discussion on November 9th, 2021, about the successes and pitfalls in new housing developments from the perspective of Los Angeles’ leading developers.
Bradley Cox, senior managing director for Trammell Crow Company (TCC), a commercial real estate development and investment company, served as the moderator for panelists from Hines, Mercy Housing and Watt Investment Partners.
Addressing Southern California’s Housing Crisis
There is a broad consensus that new housing is a key part of addressing rising rental rates and home prices. With the economy on the rebound from a pandemic-fueled setback, apartment vacancies remain low and new construction housing is no match for the demand.
Jennifer McElyea, a senior managing partner for Watt Investment Partners, proposes that more inclusionary housing will be required in the future, and learning the ins and outs of affordable housing processes will give you a competitive advantage.
“Tax credit rules and funding sources change every year,” said McElyea. “When you pivot from something that’s predominantly market rate to predominantly affordable, your capital plan and return on investment changes.”
Construction Processes in Building Modular Housing
Ed Holder and his team are supporting Mercy Housing’s commitment to modular housing with several projects including two in San Francisco.
“Both are supportive housing sites that were funded by the city,” said Holder. “We really learned a lot from the builders, teams, and partners that allowed us to transmit new knowledge from San Francisco to the city of Los Angeles. It’s not fully implemented yet, but at least at a director level, people can resemble a trend.”
Holder continues on to express that in progressing housing initiatives, it’s really about changing the system, then laying down the groundwork and providing a pipeline for future developers to follow in repetition.
Moving Affordable Housing Projects Through the City of Los Angeles
There aren’t many avenues for the allocation of private capital in the production of affordable housing, thus making it a very difficult and tedious process to complete.
“The challenge is getting your income high enough to make the numbers and getting your return on the investment for private capital,” said McElyea.
Watt Investment Partners has been buying properties in the San Fernando Valley and other parts of Los Angeles and using them as candidates for affordable housing. McElyea believes there still needs to be new builds, but there’s also an abundance of opportunity to convert existing market stock at very low costs.
“We need predictability at a state level,” states Holder. “If we could get reoccurring state sourcing with certainty, we can start planning development projects with certainty.”
Holder believes having reliable state sources significantly expedites the process of affordable housing development to help people get off of the streets.
In summary, entitlement processes, tax rules, state regulations, and funding sources are consistent obstacles faced by developers. In order for industry-leaders to continue to combat Southern California’s housing crisis, innovative processes and strategic capital plans will have to evolve with the continuous changes of California’s rules and regulations.
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