How Building Affordable Housing Changes Lives

Shelter for the “missing middle”

By Michael Costa

At Highridge Costa, we have a simple motto which binds everything and everyone together in our organization: changing lives. That’s because our sole mission is equally simple. We develop, own and manage well-planned, attractive, affordable housing solutions which keep our teachers, nurses, retail workers, firefighters and police officers living in the same communities in which they work.

In some of these cases, we’ve worked with market-rate developers to help them meet inclusionary zoning requirements so they can focus on what they do best, which is to develop market-rate, for-sale housing. Once the affordable communities are completed and leased up, we call on our own asset management department to ensure these communities remain just as attractive as the days they opened to residents.

In general, we’ve found that the greatest demand for affordable housing units are in markets with available jobs, but with a higher cost of living such as California and/or Hawaii, and increasingly in states such as Texas, Colorado and Nevada. With a headquarters in Southern California, our preferred target markets for new developments are west of the Rocky Mountains, with the aim of building 10 to 12 new communities per year. 

We’ve been developing affordable housing for nearly 30 years, and have had the opportunity to complete over 30,000 units throughout the country. As a result, we’ve certainly encountered nearly every obstacle you can imagine as a builder. Whether it’s initial pushback from the local community, sourcing materials and labor, or lack of funding in an extremely competitive environment for affordable housing financing, this is when our experience and creativity become critical.

For example, when we noticed increasing competition for limited financing through traditional state and local agencies, we turned to unique financing programs such as 501(c)3 bonds and essential-purpose bonds to finance communities for “missing middle” families.

We’ve been developing affordable housing for nearly 30 years, and have had the opportunity to complete over 30,000 units throughout the country.

The “missing middle” group, composed of those who earn too much to qualify for most traditional affordable housing units but are unable to afford the rapidly rising cost of market-rate housing, are often those crucial workers who so clearly demonstrated their importance during the COVID-19 pandemic.  The income range for this missing middle group generally ranges from 80% to 120% of the Area Median Income (AMI) for the geographic region in which the community is located.

There are also some other key advantages when building through joint ventures with our non-profit partners, including exemptions on property taxes. In turn, these exemptions allow us to build even more units when allowed by local zoning laws. In other cases, we lower our overall building costs by obtaining the land at lower cost from cities in need of affordable housing, or enter into a long-term ground lease arrangement with various land owners. The key to each deal is our flexibility and creativity.

Besides targeting the missing middle, we also have a long history building affordable housing targeted towards low-income senior households. Having started in the multifamily business right out of college, I was fortunate to lead a program created by CalMark Multi-Housing, Inc. designed to house low-income seniors. This gave me a great opportunity to understand the challenges of developing affordable housing, especially the unique financing programs needed for success.

More recently, we’ve been expanding to include permanent supportive housing (PSH) in urban areas such as downtown Los Angeles. The idea here is to provide safe shelter to military veterans and others experiencing homelessness, and allow them to stay and rebuild their lives over time. We currently have our first homeless community completed, two more under construction, and a fourth to start by year end.

However, no matter the challenges we face, at the end of the day we’re still doing what we’ve done for nearly three decades: We’re changing lives, and I wouldn’t have it any other way.

Michael Costa is the CEO of Highridge Costa, an award-winning developer of affordable housing.