Los Angeles — A new fund has been launched in California to help create 500 homes for purchase by middle-income workers.
Managed by the nonprofit California Community Reinvestment Corp. (CCRC), the Workforce Housing Fund recently approved its first deal – a $4.8 million investment in the Fuller Lofts, a $37 million adaptive-reuse project that will create 102 units of for-sale housing, just minutes from downtown Los Angeles. At least 45 of the homes will be sold to families earning no more than 120% of the area median income (AMI). The developer is Livable Places, Inc., a nonprofit corporation formed in 2001 specifically to create workforce housing and to encourage the development of affordable housing through education and advocacy.
Designed by Pugh + Scarpa, Fuller Lofts will be located a short walk from the Lincoln Heights/Cypress Park Metro Gold Line station in downtown. Construction is expected to begin around March, with the first homes scheduled to be completed in April 2007, according to Ryan Lehman, executive director of Livable Places.
Early estimates call for the workforce housing to sell in the mid-$300,000 range, according to Lehman. The median home price in the Los Angeles area is more than $575,000.
He said workforce housing is necessary for a number of reasons, including helping keep the economy strong by allowing employers to attract employees who don’t want a long commute. At the same time, it helps reduce traffic congestion by having affordable homes closer to jobs.
“As a start-up organization, it was important to have an investor such as CCRC that has a fund that is targeting this type of development,” Lehman said.
CCRC’s Workforce Housing Fund will provide risk capital to builders of affordable housing throughout the state. The fund provides equity financing for up to 25% of the housing project costs. Several of CCRC’s member banks, including Bank of the West, Wells Fargo, Union Bank of California, Bank of America, Washington Mutual, City National Bank and Montecito Bank & Trust, have invested in the fund. Many of the fund investors will also provide construction and mortgage financing to the housing projects.
Impact Community Capital, a consortium of major insurance companies, is another key investor. CCRC also invested $4 million of its own capital into the Workforce Housing Fund, which will target families earning between 80% and 120% of AMI.
Overall, the fund is about $30 million, according to CCRC President Mary Kaiser. The nonprofit is talking with a few developers about possible deals and is actively soliciting more, she said.
The equity fund will often provide the first money into a deal. This is important because it will help developers to go out and qualify for construction financing, according to Kaiser.
Why workforce housing?
The Workforce Housing Fund was created to help fill a void in the market. There are few programs that encourage developers to build housing for moderate-income workers, Kaiser said.
For example. the popular low-income housing tax credit program, which is the nation’s biggest tool for building affordable housing targets a lower income population.
Some workforce housing funds have emerged in recent years, such as the Genesis Workforce Housing Fund, a collaboration between Genesis LA Economic Growth Corp. and Phoenix Realty Group, which serves the Los Angeles region.
CCRC’s new fund, however, will help meet a large and important need across the state. Founded in 1989, CCRC has the infrastructure in place to manage the fund. According to Kaiser, it is rare that a real estate private equity fund is managed by a nonprofit.
She said the fund will be positioned to create as many affordable homes as possible. As a result, returns may not be as high as a mainstream equity fund. Investors, however, will still see good yields, said Kaiser, noting that they support the fund’s mission and like CCRC’s track record.
CCRC leaders worked on establishing the fund during the past year. Since that time, the idea of workforce housing has continued to grow.
Atlanta Mayor Shirley Franklin announced that her city would launch a trust fund to encourage the construction of affordable workforce housing.