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Filling the ‘missing middle’ in LA’s housing market is focus of new government program. Will it pay off? Listen 8 min MORE The Oceanaire apartment complex in downtown Long Beach was originally a luxury building, with a studio costing $2450 in rent per month. Now thanks to a government program, the same studio could cost $1841/month for some tenants. Photo by Anna Scott/KCRW.
The Oceanaire apartment complex in downtown Long Beach, a short walk from waterfront, opened two years ago as a typical luxury project: sleek architecture, amenities like a 24-hour gym and jacuzzi, and rents starting around $2,450 a month for a studio.
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A new state program seeks to increase the stock of housing for the so-called “missing middle” by issuing bonds to investors who buy existing market-rate buildings that are then transformed into units that a four-person household making $90,000 to $135,120 annually can afford.
Lennar, the developer of the Oceanaire building Downtown, recently took advantage of this new bond program and sold the two-year-old luxury complex for $144 million to the California Statewide Communities Development Authority, which bought the building using bonds purchased by investors who are repaid through monthly rents, plus interest.
The city had to sign off on the sale, as it will have to forgo property taxes for up to 30 years, but will get to keep proceeds from the future sale of the building.
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The district encompasses six blocks of prime real estate Downtown, including many large stores such as Walmart, Fresh & Easy and Big 5 Sporting Goods that have sat vacant for months or years. The new development company wants to transform those spaces into mixed-use buildings with retail and residential units.
“Big-box retail stores are not the highest and best use for this site,” said John Drachman, co-founder of Waterford Property Company, one of the firms involved in the purchase. “It’s better suited for more density.”
Drachman noted the impact that the COVID-19 pandemic has had on retail, with more consumers shifting to online shopping.