As inventory shortages and high costs are making Long Beach, CA nearly as unaffordable nearby Los Angeles, $4.34 million acquisition and predevelopment loan from LISC is helping the construction of a new affordable housing community to move forward and provide a range of apartments for families earning 30% to 60% AMI.
Investing in multifamily housing can offer a range of benefits for developers, from lower maintenance fees to steady income streams. These properties also tend to appreciate in value and protect against inflation, acting as a safety net during difficult economic times.
But in Los Angeles County, where there’s already a shortage of 499,430 affordable homes, development of multifamily housing is on the decline. In 2023, multifamily permits dropped by nearly 20 percent in the area.
Century Affordable Development, Inc (CADI), an organization focused on affordable housing in Southern California, is helping address the housing crisis in the transit-rich coastal city of Long Beach, where nearly all residents are impacted by high costs and lack of affordable housing.
An affiliate of the mission-driven CDFI Century Housing Corporation (which has a portfolio of over 1,600 units), CADI’s latest 153-unit multifamily housing development will accommodate low-income families. The organization closed a $4.34 million acquisition and predevelopment loan with LISC in 2022 to support the construction of 1401 Long Beach Blvd. and is moving forward to create the project offering a range of apartments for families earning 30% AMI to 60% AMI.
By providing homes for large families, with half of the units being either two-bedroom or three-bedroom units, the new development is tackling the city’s urgent need for multi-family housing, explained Oscar Alvarado, CADI vice president. The development is also set to include sustainable LEED-certified features: Energy Star-certified equipment and water-efficient fixtures, and a solar array roof to generate electricity.
“These features are important because they will contribute to lower utility bills for residents and will support our commitment to environmental responsibility in the communities where we work,” Alvarado said.
Additional amenities, currently in the works, include a parking garage, two courtyards-- one of which will feature a playground--and a multipurpose center with a community kitchen, lounge, fitness center, service coordinator and case manager offices, and large bike storage room.
After the original developer behind 1401 Long Beach Blvd. was forced to close its doors, LISC stepped in to help get the project stabilized and on a path toward completion.
“We knew that CADI had the financial strength, the development strength, and the capacity to make this project a reality,” Alexandra Dawson, LISC director of lending and investments said. As the market has shifted, due to a combination of eviction moratoriums, price increases, interest increases, limited cash flow while properties take longer to develop, and other roadblocks, it’s become more difficult for developers to stay afloat. When the project’s original developer and other well-established partners shuttered, it put into perspective for many permanent supporting housing owners and operators how crucial it is to ensure portfolios are stabilized, Dawson explained.
During the period leading up to the purchase of 1401 Long Beach Blvd., interest rates were high, limiting CADI’s options to continue development. However, as part of the transaction, CADI assumed the LISC acquisition loan that the seller had, which had a favorable interest rate due to the loan originating 18 months earlier.
“This transaction may not have been possible with a new loan with a high-interest rate,” Alvarado said. “Without the LISC loan assignment and assumption, the acquisition of this site would not have been financially feasible.”
Developing an affordable housing project is a multi-year process, from acquisition to construction and syndication closing, due to the time it takes to secure construction, permanent financing, and entitlements, he added. With the current competitive landscape for affordable housing financing, which means fewer funds are available, the predevelopment period can be prolonged and in turn lengthen the time it takes to pay the acquisition interest.
“As developers wait during what could be a three- to five-year window before the project closes construction, having acquisition financing in the interim period helps them better plan for their pipeline,” Dawson said.
Since the acquisition, CADI has made substantial progress. The organization secured $5M in funding from the City of Long Beach through the Long Beach Community Investment Company (LBCIC) and applied for the Affordable Housing and Sustainable Communities Program, to receive funding allocated for projects that implement land-use, housing, transportation, and agricultural land preservation practices to reduce greenhouse gas emissions.
Supporting multifamily housing projects will help Long Beach withstand the affordability crisis that markets across Southern California are facing, LISC’s Dawson explained. Located in a formerly redlined neighborhood, 1401 Long Beach Blvd. will also help prevent long-term residents from getting pushed out.