LA Project Serving as First Mixed-Use Development To Anchor Costco
AB 2011 is quietly shifting part of California's housing production toward privately capitalized, mixed-income multifamily, but only for developers who can absorb higher construction costs without public subsidies.
Thrive Living recently became the first project under AB 2011 when it began building 5035 Coliseum, an 800-unit apartment property above a Costco Wholesale store in South Los Angeles, expected to open in 2027.
It's in a large, underutilized property with decades-old industrial buildings in a densely populated area.
"Being the first had its challenges, but ultimately, we worked with leaders in city government to navigate the details and make this project happen," Ben Shaoul, founder of Thrive Living, told GlobeSt.com.
"As a result, we are building the first mixed-use development in the nation to have Costco as the anchor retail tenant."
The Housing Authority of the City of Los Angeles is a partner in this project in the Baldwin Village area.
AB 2011 allows a streamlined ministerial approval process for affordable multifamily projects in certain commercial zones.
Doug Ressler, business manager at Yardi Matrix, told GlobeSt.com that the new law is creating a bifurcated market, with well-capitalized private developers moving faster than increasingly constrained, subsidy-dependent affordable developers.
Two development eligibility paths are being pursued: 100% affordable housing – typically Low-Income Housing Tax Credit (LIHTC)-oriented and mixed-income "commercial corridor" projects (minimum 15% low-income units for rentals).
A key consideration is that the developmental costs models' tradeoffs include using prevailing wages, which raises hard costs (frequently by 10% to 25%); tax credit equity to offset those costs and CEQA exemption and by-right approval, which removes 18 months to 36 months of entitlement risk.
"Private capital can price these tradeoffs; subsidy capital often cannot," Ressler said.
For the "thrive" model, speed helps lock in construction pricing sooner, reduces interest carry risk and provides a competitive edge for underutilized retail and office parcels.
Thrive's 5035 Coliseum project (named for its street address) will include 184 apartments, or 23% of the total units, that are dedicated to low-income households. There will be a mix of offerings at 30%, 50% and 80% of the area median income (AMI) levels, with the exact unit allocation still to be finalized.
Plans call for the remaining 616 units to be non-subsidized affordable and workforce housing, serving households at AMI levels between 120% and 150%.
Shaoul said there will be other opportunities for AB 2011-based development.
"The city and state have developed many incentives over the years to spur the development of new affordable and workforce housing opportunities," he said.
"AB 2011 is one of many laws and programs in that toolbox. We will continue to evaluate sites that meet the criteria for AB 2011 as we implement our mission to build communities for better living and bring thousands of new residential units to the Los Angeles marketplace."
Source: GlobeSt/ALM