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Getting the Facts
How are new homes and apartments made affordable places to live?


Creating new affordable housing

New Construction. New construction of affordable apartments uses the same process as construction of market-rate housing. (Learn more about the development process)

The major difference with affordable housing is that the developer seeks subsidies in order to have a very, very small mortgage to be paid from future rent. The operation of affordable apartments is usually supported by rental income, unless the targeted residents have extremely low incomes. In such cases, developers also seek operating subsidies, usually Section 8 assistance tied to the units.

Affordable housing developments usually require several sources of financing. Sources can include a deferred payment loan from local government, a low-income housing tax credit investment, a conventional mortgage, and foundation funding. Another set of layered finance could include tax-exempt bonds combined with tax credits and a grant or deferred payment loan from local government.

Rehabilitation. Existing apartment buildings can be made permanently affordable by a process of purchase and rehabilitation. The developer, usually a nonprofit, purchases an older building that is either vacant or occupied by low- and very-low income tenants. The developer must check with the Los Angeles Housing Department to determine whether the property is under the jurisdiction of the Rent Stabilization Ordinance (RSO). If so, there are rules on rehabilitation, tenant relocation and related topics that must be followed by all property owners. More details can be found at www.lacity.org/lahd.

Rehabilitation is often nearly as expensive as new construction because it usually involves replacing the plumbing, electrical and other systems. In addition any environmental hazards such as lead-based paint and asbestos must be eliminated. Sometimes developers also reconfigure the building, combining smaller units into three and four-bedroom apartments. The financing for rehabilitation is basically the same as for new construction. Permanent affordability is usually guaranteed through loan documents or deed restrictions that require rents to be affordable to households at certain income levels for up to 55 years.


Making existing housing affordable

Housing can be made affordable by assisting individual tenants with their rent payments, by subsidizing the cost of constructing or rehabilitating buildings in which some or all of the units have low rents, or by stabilizing rents.

Tenant Assistance

Rental Assistance. The federal Section 8 program provides low-income households with direct assistance to help them pay their rent.

Rent Stabilization. The Los Angeles Housing Department oversees the City's Rent Stabilization Program, which helps protect tenants of older apartment buildings from excessive rent increases.

Home Buyer Assistance

There are various local, state and federal programs that provide financial assistance for low- and moderate-income households to buy a home.

 
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