Complex Arrangement : Home Builder Finds Success in Low-Income Market
Kaufman & Broad Home Corp. is best known as a builder of sprawling suburban developments brimming with red-tile-roofed homes. But the Los Angeles-based home builder appears to be achieving success in another lesser-known but fast-growing venture: low-income housing.
Since entering the market two years ago, the Los Angeles-based company has built more than 3,000 apartments for low- and moderate-income residents in California, Colorado and Utah. Soon, the company plans to build low-cost housing in Texas, Nevada, Arizona and other states, said Michael Costa, president of Kaufman & Broad Multi Housing Group Inc.
The company entered the field despite the stigma attached to low-income housing, which often meets with opposition from existing neighborhoods when new complexes are proposed. The presence of such a large, for-profit builder has also raised concerns among some of the smaller, nonprofit groups that have in recent years built most of the nation’s low-cost housing.
“There is definitely some resentment in the nonprofit community,” said Carol Galante, president of San Francisco-based Bridge Housing Corp., one of the nation’s largest nonprofit builders of affordable housing.
Yet, Kaufman & Broad has found the low-income housing market is one that satisfies its bottom-line demand for profit as well as a corporate commitment to increase affordable housing.
“Our goal,” Costa said, “was to go out and show the world that subsidized and low-income housing [could be built] with a nice design and good quality.”
Kaufman & Broad taps into the complex network of federal tax credits, government subsidies and incentives that help reduce costs and make the projects financially doable. Still, the profit on most government-subsidized projects is limited to no more than 15% of total building costs. In comparison, the company’s for-sale home building operation earns a gross profit margin of about 19%.
A recently completed complex in Lakewood is typical of Kaufman & Broad’s low-income housing strategy. The company teamed up with a nonprofit developer to build an 85-unit senior citizens apartment complex on a site leased from the city’s redevelopment agency for $1 a year. The $5.6-million project was financed in part with tax-exempt bonds that helped lower interest costs.
The swimming pool and clubhouse at Seasons II Apartments in Lakewood make it hard to identify the complex as low-income housing.
Jesus Sanchez can be reached at Jesus.Sanchez@latimes.com
