Building a World Where Everyone Can Afford a Home

Like the woman it was named for, Florence Mills Apartments makes a striking impression. On the corner of Central and Jefferson in south Los Angeles, this modern-looking affordable housing complex rises four stories above the ground. Brightly-colored murals depicting Florence Mills, a jazz singer and Black rights activist, shine from two of the building's walls. 

Built by affordable and permanent supportive housing developer Hollywood Community Housing Corporation (HCHC), this building provides high-quality housing for residents whose wages don't match the rapidly rising housing costs of the city they call home. It also honors the legacy of a cultural icon and advocate for equal rights in a neighborhood where most residents are Black. 

This building represents a possible future for housing in Los Angeles. But it does not represent the current reality – a reality where 42 percent of the metro area’s residents pay more than 30 percent of their income on housing and where more than 66,000 experienced homelessness last year. What would it take to make affordable housing like Florence Mills Apartments the norm rather than the exception? 

This city's housing crisis is complicated and tenacious. We don't claim to know how to resolve it. However, we have tried a couple things that seem to be working. Partnering with nonprofit developers to help them scale and accelerate development. Providing capital and resources to help them manage larger development pipelines and simplify overly complex capital stacks. And making the capital more flexible so they can apply it as and where it's needed most.  

Los Angeles is certainly not the only place in the United States facing a housing crisis. But compared to the other communities that struggle with this issue, two things set Los Angeles apart: visibility and scale. In Skid Row, a downtown neighborhood covering 50 city blocks, thousands of people live in tents on sidewalks. Tent communities like these are just the most apparent sign of the crisis; for every person living on the street, many more bounce between the homes of family and friends, live in their cars, or wonder whether their next paycheck will cover another month of rent. 

The roots of this explosion in homelessness are decades old – and its impacts aren't felt equally. When housing boomed after World War II, redlining deliberately excluded people of color from owning homes and devalued the homes of those who did. When the city’s population exploded in the 1990s, housing development failed to keep up. In 1998 and 1999, the city’s population increased by 65,000 people. Over the same period, less than 2,000 units of housing were built – an extreme example of a nationwide housing shortage that disproportionately affected people of color. Those families, who had been shut out of buying homes a generation before, had far less accumulated wealth – meaning that their descendants were the first to feel the squeeze when the supply-demand mismatch led housing costs to rise.  

From 2009 to 2019, the median household income went up by 36 percent. Over the same period, the average rent went up by 65 percent. Sarah Letts, executive director of HCHC, puts it plainly: “Capitalism means that employers are going to pay people as little as they can get away with. At the same time, property owners are going to charge rents as high as they can charge.” And it's clear that racist housing policy has left an impact decades later: in a city where nine percent of the population is Black, Black people comprise 38 percent of people experiencing homelessness. 

Experts agree that more housing – especially affordable housing – must be developed in order to solve this crisis. However, several factors make building new housing in the Los Angeles area particularly difficult.  

The prices of land, labor, and materials have risen steadily in California over the last two decades. Zoning laws prioritize the development of single-family homes and limit where more cost-effective multi-family buildings can be built. “Soft costs” like permits, professional fees, and interest on loans also drive up the cost of construction.  

Affordable housing developers face additional challenges. Many of their projects require multiple sources of financing – meaning that developers must spend more on internal costs like staff time and holding the costs of property. And laws like the oft-cited CEQA – intended to inform decision makers and the public about potential environmental impacts of new development – are often leveraged by residents to block “undesirable” affordable housing projects from being built, tying further funding up in expensive legal battles.  

The end result? Today in Los Angeles, it costs about $500,000 to build a single unit of affordable housing. That's well above the average cost of a market-rate home in other parts of the country. 

The crisis is complex, and there’s no silver bullet that will solve it. However, experts largely agree on one thing: if there were more housing – especially affordable housing targeted directly at the families most likely to be squeezed out – the crisis wouldn’t be this bad. That’s why NFF has launched an effort to support affordable housing developers like HCHC with free consulting services and flexible, unsecured loans that they can apply to any aspect of their business.  

For the past several years, NFF has worked with 12 affordable and permanent supportive housing developers in the Los Angeles area. We initially offered consulting services designed to accomplish three primary goals: understand supportive housing developers’ financial dynamics and challenges; support data-informed decision-making and scaling considerations; and strengthen the ability of leaders to tell their financial stories and acquire the funding necessary to get housing built.

Overall, developers like HCHC found these engagements helpful. “Now...I can get a quick handle on my cash position. Now I’m not flying blind,” says Letts. “It’s also helping us with business decisions like ‘should we acquire that site and add it to our pipeline.'"   

While these engagements put developers in a better position to navigate a frustrating funding landscape, consulting alone wouldn’t help them address the root cause of their constrained pipelines: a lack of flexible capital. Despite measures like Proposition HHH, a voter initiative to raise property taxes to fund the development of supportive housing, these nonprofits still don't have enough money to build supportive housing at the scale they would like. "There is four to five times more demand from affordable housing developers for capital than there is supply,” says Letts. 

Furthermore, what funding is available is often tied to only the construction phase of a project's development – or to a specific project. This means that developers struggle to access the funds they need to finance those "soft costs” – permits, surveys, and the like – that often arise in the pre-development stage before construction begins. “And then the frivolous lawsuits,” Letts adds. “Of the four projects in our pre-development pipeline, two are dealing with lawsuits from people who don’t want affordable housing in their community.” 

The nonprofit developers we were working with needed funding that they could apply to any project – or to investments in the organization that would support a larger development pipeline. They needed capital that said, “we trust you to do your job.” So in 2019, we launched the Accelerating Permanent Supportive Housing Fund: $10 million in loan capital to 12 affordable housing developers across the city. This fund gives developers the flexible financing they need to construct, convert, and preserve affordable and permanent supportive housing. 

This funding is only just going out the door, so it will be years before we can analyze the full extent of its impact. But early signs, anecdotal as they may be, are positive. “We're using our loan for two main projects that are on different timelines,” says Becky Dennison, executive director of Venice Community Housing. "Without this loan, we wouldn’t be able to take on another site until at least one of these projects initiated construction. This financing gives us the flexibility we need to expand our pipeline when opportunities arise.” 

Florence Mills Apartments officially welcomed residents to its 74 units in May. Thanks to the efforts of HCHC, 200 people now have affordable, high-quality housing. But for every person that can move into a unit like this, thousands more struggle to maintain the housing they have – or lack housing at all. 

Unsecured loans to developers like HCHC and VCH will help them build critically important affordable and permanent supportive housing. But it won't solve the housing crisis – not at the rate we're doing it. We estimate that our clients will leverage this funding to construct or convert several hundred units – a fraction of the 700,000 that Los Angeles needs.  

What we do hope is that this approach can demonstrate how to get units built. When we trust our clients to do their jobs, they move hundreds of people into housing. If developers like these could access even more capital that they could use anywhere, they could build thousands more homes.  

Homes for people like Walter, a resident of another HCHC property. “For three years, I was living in this little tiny spot, in the back of what would have been the store,” he says. “When I walked in to see that I had a place with a kitchen – and not just a kitchen, a beautiful brand-new kitchen, air conditioning, a view... I mean, what can you say?”  

NFF's Affordable and Permanent Supportive Housing Fund is supported by grant funding from the California Community Foundation, CIT Bank, UniHealth Foundation, and the Weingart Foundation. Want to join this effort? Learn more about how we can invest in communities together.

Want to learn more about our engagements with LA's affordable and permanent supportive housing developers? Take a deeper dive.