Six L.A. developers say they can homeless housing fast, cheap

By Doug SmithSenior Writer

Aug. 24, 2019 5 AM PT

Building housing for homeless people is slow and costly, and is getting slower and costlier every year. But six developers responding to a challenge from Mayor Eric Garcetti are getting a chance to show how they would do it faster and cheaper.

Pre-fab construction, simplified financing, shared housing and small-scale projects were the strategies spread through the proposals recommended Friday to share a $120-million grant funded through the city’s $1.2-billion homeless housing bond.

The proposals promise to produce 975 new units of supportive housing at an average cost of $352,000 per unit, according to a report the mayor and housing officials presented to the citizen committee tasked with oversight of the bond, Proposition HHH. The committee, which had called on the mayor last fall to conduct the innovation challenge, voted with little comment to send Garcetti’s recommended proposals on for City Council consideration.

Collectively, the proposals fell slightly short of the committee’s goal of building 1,000 units in two years or less.

While all six provide alternatives to the typical tax-credit model, only about half the funds would go to projects that are well outside of that conventional model, Ben Winter, the mayor’s housing policy specialist, told the committee. The other half would fund more mainstream projects that tweak the system.

Four of the projects would be completed in less than two years, not counting the eight months already spent preparing the bidding process and grading the proposals. The two others would take longer.

Cost estimates also varied widely. The two highest-rated proposals — both made by small developers — would provide 227 units for an average of

$250,000 per unit, less than half what other HHH projects have cost so far.

All HHH projects leverage the city money with other sources of local, state and federal funds in complex packages that stretch out the development time. Most of the innovation proposals had simpler financing plans, some of which target non-public sources.

FlyawayHomes, which submitted one recommended proposal, would provide shared housing in two-bedroom units made of shipping containers. The projects would be partly backed by private investment with a return on investment.

Daylight Community Development, meanwhile, said it would replace part of the HHH money it would receive with a bank loan after three years based on a commitment for rental subsidies from the Los Angeles County Department of Health Services.

But proposals by two large developers were more conventional. A collaboration between Abode Communities and Mercy Housing offered 360 units for an average $436,000. Bridge Housing proposed to build 140 units for $479,000. Both groups would rely partly on the tax-credit financing that has been the mainstay of the Proposition HHH bond program.

Alan Greenlee, executive director of the Southern California Assn. of Nonprofit Housing and a member of the panel that rated the 13 proposals that were submitted, conceded that some of the innovations might not appear dramatically innovative. The ratings were based on several factors, including creativity of each proposal and the likelihood of each one working in the real world.

“You’ve got to be a housing geek to say this is revolutionary,” Greenlee said. But if they work, he said, “it will have an impact on price and speed without affecting quality. They’re trying systems improvements, standardization, duplication.”

The Abode/Mercy team, for example, said it would build six projects quickly by dedicating $5 million to a short-term construction fund that would be paid off as modular units were delivered to each site, freeing funds for the next project.

All six recommended proposals were based on strategies rather than specific projects — a departure from the requirement that developers of HHH projects have control of a property before applying for funds. That model forces developers to tie up money in land that can sit idle for a year or more while they package financing.

Some of the development teams said they had specific properties in mind, and were negotiating or had just closed deals, but none had full control.

“It gives us a hunting license to find projects on the open market,” said John Perfitt, executive director of Restore Neighborhoods L.A., a boutique developer that earned the highest rating in the challenge.

But the flexibility of the development model is also a source of uncertainty.

“Some of these may not work,” Winter told The Times of the recommended proposals. “Some of them may be wildly successful.”

Each developer will have four months to secure land, then another year to complete its financing. If they don’t meet the deadline, the money will return to HHH, Winter said.

The projects:

Restore Neighborhoods LA would receive $10 million of HHH funds to build 95 one-bedroom supportive housing units that would be built on small lots not requiring zoning changes.

Daylight Community Development would receive $23.8 million to build 132 supportive units in shipping containers. A portion of the HHH funds would be repaid after three years with private financing.

Abode Communities and Mercy Housing would receive $40 million to build 360 supportive units in six modular projects. A $5 million revolving fund covering factory work and deposits will be repaid as the modules are delivered.

Brilliant Corners would receive $7 million to develop 53 supportive units on up to three existing sites, converting non-residential buildings to housing.

Flyaway Homes would use $19.5 million to supplement private debt and equity to build 195 units of supportive housing in shipping containers. Each two-bedroom unit would house two people.