Experts say state needs more residential properties with three bedrooms or more. Some recent apartment communities fill the need Chris Tolles Few cities faced a housing shortage like Orange Cove. The Fresno County city's affordable-housing supply fell so short of demand that two or three families often lived in two-bedroom units. To meet the area's affordable-housing demand, Michael Costa, president of Long Beach-based Simpson Housing Solutions, along with the nonprofit DECRO and the city of Orange Cove, built Valle Verde Apartments, a 73-unit apartment community that offered three- and four-bedroom units at below-market rates. "This community promises a better future for working families in Orange Cove," Costa said. "Many of them are farmworkers, and all of them work hard and deserve the opportunity to live in decent, safe, quality homes." Throughout the state and specifically in denser, urban areas such as Los Angeles, demand for larger affordable units continues to go unmet, according to Raphael Bostic, director of the Casden Real Estate Economic Forecast at USC. "Large families don't have a lot of choices in terms of units that meet their needs," Bostic said. "It's an area of opportunity and potential for developers and property investors." According to first-quarter 2004 data from RealFacts, residential units with three bedrooms make up a small percentage of the overall housing stock. In Los Angeles County, for example, units with three bedrooms make up just 5.9 percent of the unit mix. In San Francisco, three-bedroom units total 5 percent of the mix, and in Orange County, 4.5 percent. The reason for the disparity is obvious. Though larger units garner the highest rents, they also take up the most space, so their average rent per square foot falls at the low end of the spectrum. In Los Angeles County, the only layout that earns less per square foot than three-bedroom townhouses - $1.37 per square foot - are two-bedroom, one-bathroom units, according to RealFacts. A similar trend is seen in markets throughout the state. The shortage of larger apartments is beginning to change, according to Bostic. Some developers, he said, have acknowledged the opportunity, but the units will not reach the market for some time. "We're still facing the same shortfall, and the demographics haven't shifted," Bostic said. Moreover, according to Robert Norris Jr., executive vice president of Century Housing, apartment communities that feature larger units often are in decrepit condition. Norris said most three-, four- and five-bedroom units in South Los Angeles and East Los Angeles are "at least 45 to 60 years old." The lack of large, high-quality units will force families to look elsewhere for housing, Norris said, a decision that can lower an area's quality of life. For example, service industry workers may be forced to live and work elsewhere because of the lack of available housing. Finding Solutions So how should the problem be fixed? Many municipalities throughout the state look to inclusive housing requirements to increase the affordable-housing stock, but that may not be the answer for the shortage of large, affordable units. "It's really complicated," Bostic said. Citing the inclusive zoning proposal before the Los Angeles City Council, which promotes affordable-housing development, Bostic said the ordinance needs a clause that specifically mandates the inclusion of larger affordable units. "Otherwise, the units will be the smallest ones," he said. By all accounts, much of the responsibility for affordable units of all sizes falls on multifamily-housing developers. In too many cities with inclusive zoning ordinances - 107 state communities have such ordinances, according to a study by the Reason Foundation - developers can wiggle out of requirements and get their project done, Norris said. "There are what I call reluctant entrepreneurs," he said. Some cities, Norris said, allow developers to pay a fee to avoid building an affordable unit. He said many developers would be glad to pay $500,000 rather than build an affordable unit. "It can't just be a money solution," Norris said. "It has to involve some level of construction. At the end of the day, there still has to be a requirement that a unit has to come into production." The easiest place to get any affordable-housing units built is in an area that is underdeveloped, according to Costa. He said that, in those areas, cities have forced developers of master-planned communities to set aside land for affordable housing. Though the value of the land diminishes with affordable-housing zoning, Costa said, the land price remains in scale. Developers can find ways to make their developments profitable with affordable housing. Back at Valle Verde Apartments, for which Fannie Mae provided a $10.4 million equity investment under its American Dream Commitment, monthly rents for the 1,030-square-foot to 1,200-square-foot apartments will range from $378 to $712. The units will feature built-in appliances, central heat and air conditioning and patios or balconies. The community will include a pool and spa, laundry facilities, barbecues and a playground, as well as a 2,400-square-foot community room with a computer center. The quality of the project defies the perception that affordable housing equates to slums, a notion Norris says limits economic vitality. He said his four children, each with a college degree, cannot afford to live in the community in which they grew up. "That's a heck of a thing," Norris said. "There's a skills drain in Southern California." - E-mail Chris_Tolles@DailyJournal.com ********** © 2004 Daily Journal Corporation. All rights reserved.
