Why developers are pivoting to this apartment type in Los Angeles

Mayor's plan to expedite affordable housing seen as potential US blueprint

A rendering of Six Peak Capital's planned 9033 Ramsgate multifamily development near Los Angeles International Airport, a 100% affordable development driven by the Mayor's Executive Directive One program. (Six Peak Capital)

By Brannon Boswell

CoStar News

October 27, 2025 | 3:40 P.M.

Near Los Angeles International airport, developer Six Peak Capital has broken ground on an apartment project with 116 affordable units, a sharp pivot for a firm that once specialized in market-rate coliving complexes.

Closer to downtown in South Los Angeles, a project by SoLa Impact with 79 affordable units opened at just under $275,000 per unit, far lower than the typical $1 million they cost in Los Angeles. And in suburban San Fernando Valley, developer Passo is preparing to open its first affordable housing complex months ahead of schedule and under budget.

Across greater Los Angeles, more housing projects with less expensive rents — built for those making less than 80% of the area median income of $106,000 — are breaking ground because of a streamlined process that advocates say could be a model for other cities around the country.

This surge in affordable housing construction comes as other types of housing projects remain stalled because of California's expensive and relatively slow construction process — that real estate developers say is caused partly by the state's regulations and limited land.

Construction of "market-rate housing has been essentially canceled at this point,” Chris Aiello, managing partner of Six Peak, told CoStar News. “Virtually no land makes sense from an investment perspective to build market rate.”

The developer said Executive Directive 1 was important in completing Passo's 15-unit Devonshire apartments in Granada Hills. (Passo)

Affordable housing, however, is easier than ever to build in Los Angeles, some developers say. That's largely because of a city directive called Executive Directive 1, commonly referred to as ED1, that passed in late 2022 under Mayor Karen Bass. It allows 100% affordable housing projects to bypass lengthy public hearings and skip City Council votes. The directive has trimmed approval timelines from nine months to just weeks, according to the mayor's office.

This year, as of August, developers had submitted proposals for more than 35,000 ED1-backed units and secured approvals for 29,000. That's more than the total number of affordable units proposed in 2020, 2021 and 2022 combined, and compares to 17,556 units total housing units approved in LA during the last fiscal year, according to the Department of City Planning.

“The capital is available, the sites are actionable and the financial community is watching,” Passo Principal Simon Aftalion told CoStar News. Passo has eight ED1 projects underway, and plans to eventually develop nearly 3,000 units in Los Angeles under the program.

A number of those involved say developers and public officials still face an uphill battle when it comes to apartment development, even with the help of ED1. Los Angeles is still behind on its goal to permit roughly 456,000 new homes by 2029, including about 184,000 affordable units, as required under the state’s housing element. High construction costs, complex approvals, and limited financing continue to slow multifamily production across the region.

National interest

Even so, the City Council is advancing an ordinance modeled on ED1’s framework to codify the directive.

“ED1 is a promising model that we would love to see applied in high-opportunity communities across the country,” said a statement from Sonja Trauss, executive director of YIMBY Law. The nonprofit group, with a name that's an acronym that stands for "Yes In My Back Yard," has defended several ED1 projects from legal challenges.

Bass enacted ED1 in late 2022, but confusion over its implementation has slowed the rollout, according to brokers. Since then, the program has undergone three major revisions, and it could undergo further changes as city officials move to make the measure permanent.

At first, ED1 "was difficult to navigate," Kevin Kawaoka, an executive vice president at brokerage NAI Global, told CoStar News. "Clarity has arrived, but there was a lot of frustration that ensued in the beginning.”

While ED1 is the most popular tool for affordable housing development right now, some say, it's not the only one. The City Housing Incentive Program offers additional incentives for affordable housing, especially near transit corridors, while the newly signed SB 79 streamlines approvals for certain redevelopment projects and expands eligibility for density bonuses.

Today, ED1 is the fastest path to approval for affordable housing in Los Angeles, according to some real estate developers. The city’s planning department continues to process ED1 applications on an expedited timeline, often within 60 days.

Critics say some developers have used the fast-track process to win approvals and then flip sites for a profit, pushing up land prices without adding new housing. Others relied on hard-to-lease micro-units to pack in density. That kind of speculation, experts warn, can lock up buildable parcels, drive out mission-driven builders, and undermine the directive’s goal of getting affordable units built quickly.

Some sites of proposed ED1 developments are now up for sale to potential builders that can take the project to completion. That includes one of the very first projects approved under ED1, a 75-unit complex at 1228-1238 S Normandie Ave that was fully entitled in January 2023.

“People saturated the market at the beginning,” Jordan Beroukhim, a land use consultant and former City Hall staffer who is president of consulting firm Beroukhim & Co., told CoStar News. “Then interest rates rose. Small developers that had planned six- or seven-unit plexes have to unload property."

The empty lot at 1228-1238 S Normandie Ave was originally planned to be a 75-unit all-affordable development backed by Executive Directive 1 but is now for sale. (CoStar)

Growing pains

While many ED1 proposals have stalled, others like the Ramsgate project in Westchester are financially sound, backed by low-income housing tax credits and lender interest, according to developer Six Peak.

Capital targeting affordable housing in Los Angeles has increased as market-rate opportunities dwindle, according to Aiello, who had several funds compete to finance the project that resulted in a $31.3 million construction loan. The project broke ground in October 2025 and is expected to deliver fully furnished studios, one-bedrooms, and two-bedrooms by late 2027.

Debt broker Zack Streit, founder and president of Priority Capital Advisory helped arrange the Ramsgate financing and said lender appetite for ED1 deals is intensifying as opportunities to finance market-rate construction dwindle across Los Angeles.

“You’re talking about projects where sponsors can hit close to a 7% return on cost — that was previously impossible,” Streit told CoStar News.

Waived parking mandates, increased density, and California’s property tax exemption for affordable housing can collectively add 100 basis points to a deal’s returns, he said.

Aiello said Six Peak is using California’s welfare tax exemption through a nonprofit partner — a financial lever he called “an important piece of the puzzle.”

ED1 is creating a distinct investment class in LA multifamily, Streit said. Lenders are beginning to treat ED1 projects differently than traditional multifamily when it comes to underwriting risk and yield expectations.