One of the most high-profile apartment developments underway in Los Angeles — 800 affordable homes on top of a new Costco — is being financed entirely without the help of public tax credits.
The developer behind the project, Thrive Living, thinks the many strings attached to public subsidies slow completion of units and ultimately make it harder for projects to be profitable, according to Ben Shaoul, founder of the firm that's a unit of Los Angeles-based Magnum Real Estate Group. Instead, the group uses new permitting laws and private financing sources to open the project to residents by 2027.
“Time is money,” Shaoul said at an April housing conference in Los Angeles. “By shaving years off project timelines, we’re accessing a robust capital marketplace without needing tax credits.”
Thrive Living is joined by developers throughout the country easing their reliance on tax credits and public subsidies to lean on private capital and other incentives to more quickly build affordable homes for cash-strapped renters.
The shift comes as the cost of building affordable housing in Los Angeles regularly tops $1 million per unit, nearly double the cost in states like Georgia, Texas and Arizona, according to a report from the U.S. government. That cost threatens to derail projects as the region faces an acute housing shortage, according to industry professionals. Construction delays alone add about $20,000 per unit and months to project schedules, according to California housing officials.
U.S. renters and investors alike have been prioritizing affordable housing in recent years as house prices have ballooned more than 50% since the pandemic, according to the S&P CoreLogic Case-Shiller Home Price Indices.
To be clear, traditional tax-credit deals and government-backed financing remain central to the affordable housing ecosystem. But developers say that relying exclusively on slow, competitive funding rounds is no longer viable — and that embracing private-market solutions could make or break California’s ability to meet its goal of adding 2.5 million housing units by the end of 2030.
Diverse investment sources
For national developer Related, the solution is a combination of public tax credits and private investment from sources like pension funds and banks.
"That has been a key strategy for us," Related California Chairman and Chief Executive Bill Witte said in a statement.
The firm's current projects include transforming a former public housing site in San Francisco into a mixed-use neighborhood called Sunnydale Hope and the development of Alder 9, a 159-unit community for low-income seniors and families in Portland, Oregon. "We are always looking for creative ways to leverage capital to help finance affordable and workforce housing," Witte said.
At Thrive Living, Shaoul said, his team uses Assembly Bill 2011 — a California law that fast-tracks the approval process for certain residential projects in commercial zones — and other incentives to streamline entitlements, allowing lenders to underwrite loans quickly and investors to avoid the uncertainty of lengthy discretionary reviews.
In addition to adding 800 affordable units above a Costco on the site of a former hospital at 5035 Coliseum St. in Baldwin Park Village, the firm is working on the planned redevelopment of a downtown Los Angeles food processing facility into a 376-unit mixed-use apartment complex for low-income and middle-income households at 1457 N. Main St., without tax credits.
“We rinse and repeat the same unit designs across projects,” Shaoul said. “It’s about standardization, predictability, and moving fast.”
Tapping capital markets
Nonprofit developers are embracing similar tactics. Alexa Washburn, chief development officer at National CORE, said her organization, one of the country's largest affordable housing development firms, issued a $100 million social bond — pooling money from private investors and companies with a philanthropic arm — to pre-finance land acquisition and infrastructure, allowing it to bypass the delays of traditional public funding cycles.
“By tapping into the capital markets, we speed up everything, and we reduce dependency on unpredictable public funding,” Washburn said during the Mayoral Housing, Transportation and Jobs Summit hosted by the LA Business Council last week.
Mercy Housing California, another nonprofit, is building hundreds of modular affordable units to reduce construction timelines. President Tiffany Bohee said one project in the Bay Area completed units for $380,000 apiece — a fraction of typical costs — by combining up-front private investment with back-end layering of tax credits.
“If your goal is cost efficiency and speed, it can be done,” Bohee said. “You have to rethink the entire development process.”
State officials are taking notice. Gustavo Velasquez, director of California’s Department of Housing and Community Development, said the state is consolidating funding programs to reduce the bureaucratic layering that can add four months and $20,000 per unit for every new funding source a project requires.
“We know what works,” Velasquez said at the housing conference. “It’s deregulation, streamlining and reducing the bureaucratic hurdles that slow down production.”
National trend
Investors increasingly see multifamily properties as a good bet as housing prices climb and vacancies shrink. In November, Los Angeles-based apartment investor Standard Communities bought a $1 billion portfolio of 60 affordable apartment complexes across four states. The company is seeking more deals, according to a spokesman.
“Due to volatility in capital markets and rising interest rates, new housing starts have significantly declined in recent years. This poses a long-term threat to new unit development while inadequate housing supply [worsens] the ongoing housing crisis,” a Standard Communities spokesperson told CoStar News. “There is no better time to invest in affordable housing."
And while Standard used a mix of property tax abatements and other incentives to fund the deal, institutional dollars are increasingly available to help make projects work economically.
Salt Lake City-based asset management firm Catalyst Opportunity Funds last month closed on a $140 million fund to help finance affordable and workforce housing developments across the country with capital from institutional investors JPMorganChase, UnitedHealth Group, American Express and KeyBank as well as foundations, family offices and other "mission-aligned" capital partners.
The fund has contributed to Metropolitan Village, a 198-unit apartment community at 733 Woodland Court in Winston-Salem, North Carolina; and The Moraine, a 160-unit development at 1402 Tacoma Ave. S. near Seattle that won a 2025 CoStar Impact Award.
Meanwhile, Los Angeles-based SDS Capital Group's debt fund has raised $1 billion for financing new affordable housing developments across the country through 2026.
SDS Impact Debt Managing Director Jason Riffe said the new fund will help affordable housing development firms avoid "the traditional and time-consuming process of applying for grants and other public funding that can take years to obtain."