The regulatory risk associated with new housing development makes it very expensive to build in Los Angeles. A combination of strict local zoning laws and the environmental review process under CEQA increases the average length of project delays and overall cost of doing business.
Rather than simply throw more money at the problem, the Bay Area Metropolitan Transportation Commission (MTC) has formed a new $50 million revolving loan fund in partnership with the private and non-profit sectors. Its $10 million contribution will be in a “top loss” position and provide developers of affordable housing the opportunity to acquire land near transit stations while they navigate the approvals process at the local level.
This arrangement not only reduces borrowing costs for the developer, but effectively mitigates regulatory risk as well because the MTC’s participation in the fund implies public agency support for a given project just by virtue of granting the loan.
Plus, it leverages commitments by the private sector to stretch affordable housing dollars much further than they would otherwise go as direct grants or subsidies. MTC staff estimates its $10 million contribution to “a $40 million TOD Fund could be used to help finance the acquisition of at least 20 to 30 acres around the region, which, depending on the density of build-out, would support development of anywhere from 1,100 to 3,800 units of affordable housing.”
New York City has a similar partnership in place. With the region’s transit network poised to expand significantly under the 30/10 Initiative, it is time for the City of Los Angeles to step up the financial committment to its own New Generation Fund, too!