20240408 4.B UCLA Report HomeKey SR
HOMELESSNESS SUBCOMMITTEE
STAFF REPORT
TO: THE HONORABLE HOMELESSNESS SUBCOMMITTEE
FROM: BEN KIM, CITY MANAGER
DATE: APRIL 8, 2024
SUBJECT: DISCUSSION ON UCLA REPORT ON THE HOMEKEY PROGRAM
DISCUSSION
At the request of Mayor Ly, attached is UCLA’s report for discussion - Lessons From
California’s Homekey Program, Adding Affordable Housing by Buying Market-Rate Apartment
Buildings.
A summary of the report’s findings is found on page 4 of the report as follows:
Summary of Findings
While best known for helping local governments purchase and convert underused motels
into supportive housing, California’s Homekey program has also been used by the Housing
Authority of the City of Los Angeles to acquire nine new market-rate buildings to lease at
affordable rents to low-income tenants.
When compared to a random sample of 24 similar subsidized ground-up developments
(projects that receive subsidies before starting construction), the cost of market-rate
Homekey acquisitions was 20% less per unit ($556,100 vs. $446,800).
Potential benefits from the acquisition and conversion of new market-rate housing include:
faster delivery of affordable units, reduced risk of overspending on exceptionally costly
projects, and permanent public ownership and affordability of acquired properties.
The lower cost of Homekey projects cannot be explained by differences in size, location, or
design, nor by capitalizing future social service expenses into development costs. Instead,
the lower cost of Homekey projects can likely be attributed to simpler financing mechanisms
and fewer non-essential project requirements such as local hire and community spaces.
While these requirements can provide important benefits, they often come at the expense of
building fewer affordable homes.
Homelessness Subcommittee
April 8, 2024
Page 2 of 2
Acquisition of new market-rate housing is not a substitute for increasing overall housing
production in expensive cities and regions, nor for building housing that meets the needs of
specific marginalized communities.
Homekey illustrates how subsidies can be used to lower the price of a housing unit at any
point in its lifecycle, regardless of who builds it or to whom the builder intends to rent or
sell. Compared to purpose-built affordable housing, the rent paid by tenants of market-rate
housing is higher, but the cost to build and acquire it is often lower — and cost ultimately
determines how much housing can be purchased with limited subsidies.
State and federal policies and funding programs are not currently structured to encourage
acquisition of new market-rate housing. With this in mind, public officials should explore
reforms that can better level the playing field between acquisition and subsidized
development.
STAFF RECOMMENDATION
It is recommended that the Homelessness Subcommittee discuss and provide direction.
PUBLIC NOTICE PROCESS
This item has been noticed through the regular agenda notification process.
Attachment A – UCLA Report: Lessons from California’s Homekey Program: Adding
Affordable Housing by Buying Market-Rate Apartment Buildings