Lincoln Avenue Capital, based in Santa Monica, in partnership with Pacific Housing Inc., which is based in Sacramento, has signed an agreement with National City to covert an existing market-rate apartment complex into affordable housing with a cap on rents.
“This kind of property would be a prime target for a market rate developer to come in and do a value add strategy, buy the property and do a fluff and buff, then raise the rents up quite a bit,” said Avinoam Baral, Lincoln Avenue Capital senior analyst.
Calling National City “a fast changing part of San Diego County, Baral said that the area “is certainly experiencing rent growth and various gentrifying property changes.”
“This property has always been market rate property, kind of serving folks that are low income,” Baral said.
Under the agreement with National City, the complex – Southern Highlands at 2525 Highland Ave. – will remain affordable.
The 151 apartments in the complex will be rent restricted for 55 years and earmarked for tenants earning no more than 80% of the Area Median Income (AMI), and rents will be set at 60% of AMI levels.
For one person, 60% of the AMI is $54,660 and $62,460 for a two-person household.
Under the terms of the agreement, monthly rents at Southern Highlands are $1,366 for studio apartments and $1,464 for one-bedroom apartments, Baral said.
Any future rent increases will be linked to changes in the AMI.
“Expanding our impact in California is especially significant, as lower and middle-income Californians continue to face rents that put their housing security at risk,” said Eli Bronfman, managing partner of Lincoln Avenue Capital.
According to Apartment List, a rental listing agency, monthly rents in San Diego were 19% higher in August 2022 compared to August 2021.
Lincoln Avenue, which specializes in affordable housing projects, bought the National City property in 2020 for $22.1 million with the intention of converting it to affordable housing but changes in affordable housing financing delayed the conversion, Baral said.
“Since then, we’ve been trying to think of creative ways where we could still preserve the property as affordable housing,” Baral said.
Under the arrangement with National City, the company will pay lower property taxes in exchange for keeping Southern Highlands an affordable housing project, Baral said.
He said that the company plans to spend about $750,000 on renovations.
Lincoln Avenue Capital owns two other affordable housing projects in San Diego County, Pine View Apartment in Vista and Seabreeze Apartments in San Diego.
Lincoln Avenue Capital
CEO: Jeremy Bronfman
Headquarters: Santa Monica
Business: Affordable housing investment
Social impact: Provides a variety of services to tenants from nutrition initiatives to home ownership programs and onsite childcare. Works with more than 60 government and nonprofit partners to connect tenants to local organizations that provide healthcare, food, tutoring, and rental assistance.
Notable: Lincoln Avenue Capital serves residents in 22 states with 109 properties with a total of more than 20,000 apartments.