The housing crisis in Los Angeles is growing more severe as more and more people migrate to the city, and city officials are searching for ways to increase the housing supply. The latest is a new construction linkage fee that would increase commercial development by $5 per square foot to help fund affordable projects. The linkage fee is highly controversial, and the development community insists that this is not the path to more housing. Among them, Andrew Starrels, a partner with Holland & Knight LLP, sat down for an exclusive interview to talk about alternative solutions to the housing crisis and why he doesn't think that the linkage fee is a viable solution.

GlobeSt.com: How severe is the housing crisis in Los Angeles?

Starrels: If you compare land prices and in-migration over the past 10 years with the number of new housing units added, the figures are staggering – L.A. adds about one new housing unit for every four new residents. Among poorer residents, the numbers are even worse: looking only at those residents classified by HUD standards as “very low income,” L.A. would need to add over 380,000 residential units to meet the demand among those residents, and the shortage among all categories of affordable housing eligibility is over 1 million units. The proposed linkage fee will by most estimates fund only about 600 new units annually.

GlobeSt.com: What are other solutions to L.A.'s housing issues?

Starrels: Most in the development community believe that the affordability problem cannot be solved without markedly increasing the housing supply. The problem is really one of scale, and the issue is one of supply rather than price. Most publicly sponsored affordable housing projects, including those that rely on tax credits for affordable housing, are relatively small in scale. Los Angeles' shortage of affordable housing is too large to be solved by building projects 60 units at a time, even if the Affordable Housing Trust Fund provides funding. The solution is to make large-scale residential developments more attractive rather than discouraging them. So-called “mixed-income” projects are the best source of this. In these projects, a developer builds a traditional apartment community and sets aside some of its units for low or moderate-income residents. So, where a tax-credit investment might supply less than 60 affordable units, a mixed-income project might contain 1,000 units, with 200 of them dedicated as affordable.

GlobeSt.com: What are the challenges of these developments?

Starrels: The challenge is that “80/20” projects historically incentivized developers with low-rate financing that may not be sufficiently attractive in current interest rate markets. A better way of promoting large-scale development of mixed-income housing would be to provide different and more meaningful incentives. We should embrace density along transit corridors and in infill locations or other areas with shortages of affordable housing, and in exchange for increased density, the regulatory framework should require developments to include affordable components. In exchange for more density faster approvals, developers would contribute significant amounts of affordable housing.

GlobeSt.com: How can the city encourage these projects?

Starrels: The permitting and approval framework should be streamlined for developments that contain meaningful amounts of affordable housing, even if they are in mixed-income projects, and commercial projects that make contributions to the Affordable Housing Trust Fund should be allowed to “buy-in” to permit streamlining incentives. Finally, the need for density, transit-oriented development and infill housing requires a long-overdue reexamination of CEQA in order to provide certainty to developers willing to contribute significantly to the affordable housing supply. If permit streamlining and CEQA allowances can be utilized to facilitate the construction of sports stadia and arenas, similar incentives can be implemented for the construction of significant amounts of housing in critically needed areas.

GlobeSt.com: How severe is the housing crisis in Los Angeles?

GlobeSt.com: What are other solutions to L.A.'s housing issues?

GlobeSt.com: What are the challenges of these developments?

GlobeSt.com: How can the city encourage these projects?

Instant Insights /

Mixed-Income, The Best Path to Affordable Housing

Related Stories

Recommended For You