Los Angeles is seeing an unexpected housing boom — not from the high-end apartment towers that once defined its skyline, but from a surge of affordable housing developments transforming the market.
Near Los Angeles International Airport, Six Peak Capital — once known for its coliving ventures — has broken ground on Ramsgate, a 116-unit affordable community. In South Los Angeles, SoLa Impact recently opened a 79-unit project at just under $275,000 per unit, a fraction of the city’s million-dollar construction average. And in the San Fernando Valley, developer Passo is finishing its first affordable complex months ahead of schedule and under budget.
Across greater Los Angeles, similar projects are breaking ground at a pace not seen in years, largely thanks to Executive Directive 1, or ED1 — a policy introduced by Mayor Karen Bass in late 2022 that allows 100% affordable housing projects to bypass lengthy public hearings and City Council votes. The result has been a development pipeline that’s both faster and more financially viable, reshaping the city’s multi-family landscape.
From Bureaucracy to Breakthrough
ED1 has become one of the most powerful tools in Los Angeles’ housing policy. The directive has cut approval timelines from nine months to just a few weeks, and the results are striking: as of August, developers had proposed more than 35,000 ED1-backed units and secured approvals for 29,000 — more than the total number of affordable units proposed in 2020, 2021, and 2022 combined.
“The capital is available, the sites are actionable, and the financial community is watching,” said Passo Principal Simon Aftalion, whose firm has eight ED1 projects in progress and plans to develop nearly 3,000 units through the program.
For developers, the directive has turned what was once an administrative obstacle into an investment opportunity. “Market-rate housing has been essentially canceled at this point,” said Chris Aiello, managing partner of Six Peak. “Virtually no land makes sense from an investment perspective to build market-rate.”
In a market where soaring land and construction costs have sidelined traditional projects, ED1 has created a financial bridge — one that’s drawing strong interest from both equity investors and lenders.
The New Economics of Affordable Development
Affordable housing construction is suddenly penciling again. Debt broker Zack Streit, founder of Priority Capital Advisory, helped secure a $31.3 million construction loan for Six Peak’s Ramsgate project and said lender appetite for ED1 deals is intensifying.
“You’re talking about projects where sponsors can hit close to a 7% return on cost — that was previously impossible,” Streit told CoStar News.
The improved returns stem from a mix of local and state-level incentives: waived parking mandates, higher density allowances, and California’s property tax exemptions for affordable housing. In many cases, these benefits can add up to 100 basis points to a deal’s yield. Aiello noted that Six Peak’s partnership with a nonprofit — which qualifies the project for a welfare tax exemption — was a key factor in making the numbers work.
For lenders, these projects are increasingly seen as a distinct asset class: less speculative than market-rate multi-family, but with faster execution and fewer entitlement risks.
Challenges and Course Corrections
ED1’s rollout hasn’t been without turbulence. Early confusion over the directive’s implementation led to inconsistent approvals and some opportunistic behavior in the market. Certain developers entitled sites under ED1 and flipped them for profit rather than building, which pushed up land prices and locked up buildable parcels.
One of the first ED1 projects approved — a 75-unit site on South Normandie Avenue — was fully entitled in January 2023 and is now listed for sale. “People saturated the market at the beginning,” said land-use consultant Jordan Beroukhim. “Then interest rates rose, and small developers with six- or seven-unit plexes had to unload property.”
Even with the surge in activity, Los Angeles remains behind on its long-term housing goals: 456,000 new homes by 2029, including about 184,000 affordable units. But as the directive matures, developers say clarity has improved. “At first, ED1 was difficult to navigate,” said Kevin Kawaoka of NAI Global. “Clarity has arrived, but there was a lot of frustration in the beginning.”
Firms like Passo have taken a more deliberate approach — focusing on veteran housing near the West L.A. VA campus and building larger, higher-quality units that meet actual tenant needs. “A lot of people jumped at ED1 because it seemed like a good opportunity, but they didn’t have the math right,” said Daniel Glimcher, principal at Passo. “We spent time working with nonprofit partners to make sure our projects were sustainable.”
Momentum Beyond Los Angeles
The success of ED1 is attracting national attention. In San Diego, Mayor Todd Gloria issued a similar order in 2023 requiring all-affordable projects to be reviewed within 30 days — leading to the city’s highest permitting volume since 2005. Seattle, Boston, and Chicago have launched comparable executive initiatives to cut red tape and accelerate housing production.
“ED1 is a promising model that we would love to see applied in high-opportunity communities across the country,” said Sonja Trauss, executive director of YIMBY Law, which has defended several ED1 projects from legal challenges.
Back in Los Angeles, city leaders are moving to make the directive permanent through the Affordable Housing Streamlining Ordinance. If passed, it would codify ED1 into city law, replacing the temporary executive order. But the proposal isn’t without controversy — new provisions requiring union labor on buildings over 85 feet have raised concerns about cost increases and feasibility. “Adding union labor requirements will only serve to exacerbate Los Angeles’ housing affordability crisis,” Aftalion warned.
Investor Takeaway
Despite its growing pains, ED1 has transformed how Los Angeles approaches multi-family development — turning affordable housing into a viable, financeable product type at a time when most market-rate projects are on hold. The directive has shortened timelines, reduced entitlement risk, and brought capital back into a market that many developers had written off.
For investors, the takeaway is clear: ED1-backed projects represent a new, fast-moving niche within Los Angeles multi-family — one with real returns, institutional attention, and potential first-mover advantages.
As the city moves to make ED1 permanent, those who understand its mechanics — and act early — may be best positioned to benefit from the next phase of multi-family growth in Los Angeles.
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