Addressing the affordable housing crisis in Los Angeles—and beyond

October 2021

Addressing the affordable housing crisis in Los Angeles—and beyond

Barriers exist on the road to more affordable housing, but with fresh insight and a trusted financial relationship, project leaders can overcome them to unlock opportunity for the many individuals struggling to find quality housing today.

Leaders from across the real estate ecosystem are working to ramp up affordable housing stock. But there’s no easy fix to this crisis. Investors, developers and lenders alike face a range of challenges—and opportunities, too—in the historic undertaking to improve equity in residential multifamily real estate.

Today’s low-income renters encounter a shortage of available and affordable housing in all 50 states and in every major metropolitan area. In the Los Angeles area, for instance, extremely low-income households outnumber affordable, available housing stock by roughly 5 to 11. Amid this deepening crisis, policy makers and private sector players alike have been actively exploring ways to fill the gap.

Matthew Haas, SVP, Relationship Manager at KeyBank, joined a Bisnow panel on the role developers and investors can play in addressing the affordable housing crisis in Los Angeles. Moderated by Elisa Paster, Partner, Glaser Weil, the Fall 2021 roundtable also featured Ekta Naik, VP Development, SoLa Impact, and Michael Massie, Chief Housing Development Officer, Jamboree Housing.

Following are key insights panelists discussed, including challenges and opportunities that apply not only in California, but anywhere affordable housing problems persist.

1. Adaptive reuse is on the rise.

The lasting impacts of COVID-19 on office, hospitality and retail real estate are inspiring more focus on adaptive reuse. But innovative reuse was already making waves well before the pandemic.

Developers were already seeing hotel conversion, for example, as a potential shortcut to delivering more affordable housing units, faster. Project HomeKey2 , California’s program to convert motels and hotels into housing for people experiencing homelessness or at risk of homelessness, has only added to the momentum behind this type of reuse.

Though it may be more sustainable to repurpose an old building than to build an all-new one, there are indeed structural and engineering challenges to converting, say, a school or office building, into code-compliant housing. But, as Haas says, “It’s been done – one just needs to figure out can you do it.”

2. Expectations are high for future modular construction. Now? That’s a different story.

Major advances in technology and strategy have transformed modular factory-built construction, potentially paving the way to drive more affordable housing capacity in the long term. In the near term, however, panelists agree more education, capacity and experience is needed before modular solutions can fulfill their potential in this sector.

That’s because some risk exists for lenders, developers and investors alike in proceeding with modular in a system built around traditional, onsite development processes. A primary issue is that a sizable chunk of modular development happens offsite, in a separately owned and managed warehouse, which can create timeline issues, if, for instance, there’s a shortage on a materials order coming to the warehouse. Lenders are wary about financing modular construction that has fewer proven comparables than traditional construction, and without a greater volume of projects, the cost- and time-saving benefits are yet to be realized. Moreover, factory locations are critical to delivery production times as well.

Haas believes land use, entitlement and permitting policies and processes could help, and envisions Community Development Financial Institutions (CDFIs) stepping in to help serve as a bridge between banks, which need some security in any transaction, and developers. He also says there may be more potential for trusted, established state and local partners who are willing to get creative financially.

For example, KeyBank financed an affordable modular development in Los Angeles, in part because the general contractor had earned the lenders’ confidence in the past, and was willing to put down a higher deposit advancement on the factory component of the modular steel units.

3. Local Partnership is increasingly vital in affordable housing financing.

Cities and states across the country have different land use and building codes and regulations for affordable housing—and they’re changing quickly as more parties work to bring more units online. But wherever you go, local code makes a dramatic impact on project costs, whether it’s solar requirements or the higher costs of having to build up infrastructure where none exists. And in turn, those complex code and design considerations have a direct impact on what funds are available.

While banks don’t get involved in design per se, they must be involved in any value engineering conversations, says Haas. It’s crucial to establish and maintain as clear a sense of project costs as soon as possible throughout. That means ensuring general contractors are able to price things out accurately, including among their sub-bids. It also means knowing and communicating with your bank about what you’re trying to achieve, especially when potential tax credits and point scorings are involved in conjunction with other soft sources.

4. It’s important to define what we mean by affordability.

Affordability must go all ways; that is, low-income renters need affordable housing options, but developers must be able to afford to deliver them, too. This requires looking more holistically at the financing piece of the puzzle.

As Haas says, “What is your capital stack during the construction period, compared with what you are considering on the perm side?” Ultimately, project leaders must consider what are the other sources of financing available to help make project in balance and move forward in a reasonable manner. Additionally, any opportunities to build more efficiently – especially in the face of rising labor and material costs – will help bring units online and income-producing more quickly. A boon for both developers and ready-and-waiting residents.

Affordable housing opportunity is within reach, with KeyBank

Barriers exist on the road to more affordable housing, but with fresh insight and a trusted financial relationship, project leaders can overcome them to unlock opportunity not just for business participants, but for the many individuals struggling to find quality housing today.

KeyBank Community Development Lending and Investment is one of the nation’s leading investors in affordable housing. Clients rely on KeyBank’s integrated national platform and deep experience putting together innovative and complex financing solutions in relationship with for-profit, nonprofit and government agencies. For more information, reach out to KeyBank senior relationship manager Matt Haas covering CA, NV, NM and AZ, or visit


National Low Income Housing Coalition, Gap Report.

This document is designed to provide general information only and is not comprehensive nor is it legal, accounting, or tax advice. Consult your tax advisor regarding applicability of tax related information to your unique tax circumstances. KeyBank does not make any warranties regarding the results obtained from the use of this information. Credit products are subject to credit approval, terms, conditions, and availability and subject to collateral and/or change. is a federally registered service mark of KeyCorp. ©2021 KeyCorp. All rights reserved. KeyBank is Member FDIC.

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