The Californer - USC Sol Price School of Public Policy and the Urban Institute Release Affordable Housing Study

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LOS ANGELES - Californer -- Four years after Los Angeles voters approved Measure JJJ, which mandated a program that incentivizes affordable housing developments near major transit stations, building permits are rising in qualified neighborhoods. According to a study by the Urban Institute and the USC Sol Price School of Public Policy, new research reveals that the program offers more long-term profit potential than market-rate apartments in many neighborhoods.

The program, now known as the Transit-Oriented Communities (TOC) Affordable Housing Incentive Program, encourages affordable housing within a half-mile of major transit stops by allowing additional density in exchange for affordable units. As a result, qualifying developments can build more units to replace or exceed revenue lost by reducing rent.

The study, "Los Angeles' Housing Crisis and Local Planning Responses: An Evaluation of Inclusionary Zoning and the Transit-Oriented Communities Plan as Policy Solutions in Los Angeles," finds the program has increased the approval rate of building permits in TOC areas compared to the preceding Density Bonus Program. It projects that TOC-eligible projects will be more profitable than market-rate developments. The John Randolph Haynes and Dora Haynes Foundation funded the study.

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"The TOC program successfully balances financial incentives that attract private construction of affordable units without giving developers a windfall," said lead author Linna Zhu, a research associate with the Urban Institute. "While alone it won't solve the housing crisis in Los Angeles, our study indicates that it is part of the solution and a roadmap for policymakers in cities facing housing crises."

To be considered affordable, a household must spend no more than 30 percent of income on housing. By that standard, Los Angeles has a shortage of 566,000 affordable units. Yet, Los Angeles County permitted only one unit per 3.2 new jobs in 2019, which is 44 percent below the national average of one per every 1.8 jobs.

As a result, the study contends that Los Angeles' affordability crisis is primarily a supply problem. While the study concludes that no single program will close the affordability gap in L.A., the examination of the TOC program shows early signs of success.

To measure effectiveness, a team of five economists created data models and financial simulations, including a series of proforma analyses that forecasted 13 years of cash flow on 20 hypothetical developments. The economists assessed affordable and market-rate developments in TOC zones to determine the best investment.

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In addition to Zhu and Green, the USC Sol Price School of Public Policy's research team included Jorge De la Roca, assistant professor, Marlon Boarnet, professor, and Evgeny Burinskiy, a Ph.D. candidate.

The full study is available at https://www.huduser.gov/portal/periodicals/cityscpe/vol23num1/ch5.pdf.

For more information, visit www.usc.edu/lusk.