California, for the first time ever, experienced a population decline. Maybe that's why the state has been trying to get more affordable housing in place. Senate Bills 9 and 10, likely to pass, will do away with zoning for single-family homes, allowing multifamily to occupy those spaces.
Starting now and lasting for the next two years, a partnership between Standard Communities and Faring (called Standard-Faring Essential Housing) will create $2 billion worth of middle-income housing, also called "workforce housing," throughout California. This will be achieved mostly through acquisitions to convert existing properties, but ground-up development will be part of the plan, too.
Already, over 650 units of middle-income housing at three separate properties have been created. Targeted areas for these workforce housing units include Orange County, Los Angeles County, and the Bay Area.
This whole project is made possible through a Joint Powers Authority (JPA) ownership, a special arrangement where government agencies work together to build facilities or deliver services. In this case, the partnership is a public-private one.
JPA partnerships allow acquisitions to be funded with tax-exempt bonds. The owner of the properties, under this Standard-Faring venture, will be the California Statewide Communities Development Authority (CSCDA), an agency created in 1988 to finance community-based public benefit projects. Standard-Faring Essential Housing will be the project administrator and in charge of operations.
The first conversion project
The Renaissance at City Center in Carson, California, is the first of these projects. The building was built in 2013 as a luxury mixed-use facility. Standard-Faring acquired the building and converted it into middle-income housing. It remains a mixed-use facility with 12,000 square feet of retail and has 150 living units that range in size from 576 square feet to 1,336 square feet.
Rents range from $2,225 for the smallest one-bedroom, one-bathroom units to units that start at $3,595 a month for three-bedroom, two-bathroom units. (Rents might still seem high, but this is Los Angeles we're talking about.) The good news for residents is annual rent increases are capped at 4% (which could be the reason for the relatively high starting rent).
Two more projects
The second project completed was Union South Bay Apartments, also in Carson and consisting of 357 units with 28,000 square feet of retail. The next acquisition happened in Glendale, California: The Link Apartments, with 143 units and over 13,000 square feet of ground-floor retail.
Who the housing is for
One income group in California has been out of luck regarding housing: the middle class. Middle-income earners don't earn enough to afford rent in the priciest parts of California, but they earn too much to qualify for affordable housing. This includes people like teachers, first responders, and hospital staff who would like to live in the areas in which they serve.
The income requirements for this new venture will serve this middle-income group. Applicants for workforce housing need to earn between 80% and 120% of the area median income (AMI). This differs from affordable housing requirements that are open only to people who earn no more than 80% of the AMI and typically only 60% of AMI.
The Millionacres bottom line
Investors should look for more projects like this one that combine government agencies with private business. The joint effort allows the focus to be on middle-income workers who have fallen through the cracks in California -- the ones who didn't give up and leave the state.