McKinsey & Company Looks At The Future Of Affordable Housing In The City

The McKinsey Global Institute (MGI) recently released a ground-breaking report, “Affordable Housing in Los Angeles: Delivering More—and doing it faster.” The 67-page report with several years of research behind it examines the future of affordable housing in Los Angeles. This was a collaboration between MGI, the Los Angeles Business Council Institute, the Los Angeles Coalition for the Economy & Jobs and the United Way of Greater Los Angeles. 

“The main takeaway from the report is the current housing situation is an opportunity to reimagine Los Angeles with what we do and how we deliver affordable housing,” explains Johnathon Woetzel, co-author of the report and director, McKinsey Global Institute and lead of McKinsey’s Cities Special Initiative.

Think innovation combined with multi-stakeholder cooperation to significantly change housing dynamics in and around Los Angeles. One approach is integrating housing around transit along the Metro system that continues to expand throughout Greater Los Angeles. Currently, the Metro serves 96 stations. According to the report legislative proposals have been introduced including Measure JJJ in Los Angeles to “increase density near transit.” This would according to Woetzel, “benefit both high and low income” individuals and families. “We can be both innovative and imaginative in our approach to building that housing,” Woetzel adds.

The reimagine piece links back to co-living and communal housing with the potential to add significant affordable housing units into the mix. “We are stretching innovation opportunities here since most of Los Angeles is low-rise,” Woetzel points out. Turning single-family homes into duplexes, building a housing unit in a backyard, sub-dividing two houses and turning them into a bungalow court are all on the table. Neighborhoods would essentially be redefining themselves. Woetzel points to 10,000 permit applications before the City of Los Angeles for co-living conversions. 

Using prefab housing as an affordable option makes sense on several levels. The idea behind this way to add housing units is considerably lower construction costs and faster building times: “Let’s change the mindset of how we build and scale it then see the savings that support rents that are lower and more people can afford without subsidies.” Woetzel believes this can be a solid start to solve a piece of Los Angeles’ affordable housing challenge. He points to the number of 3,000 prefab units needed to get a factory up and running. “I don’t doubt that there are 3,000 households that can use prefab housing.”

Woetzel is encouraged that big changes are on the horizon for Los Angeles. “There are a lot of people trying to change the approach and we feel that there is a positive trajectory taking place. Ballot initiatives have passed and the City of Los Angeles and the L.A. City Council are on board. The permitting process is being fast-tracked,” Woetzel confirms. Any developer can confirm that obtaining permits takes time, money and projects can derail during the process. Changing the pattern and process of development is a public/private solution. “There is more than enough for everyone to take a piece,” Woetzel said.

Typically, in urban development often lower-income groups face displacement. “It’s very important that we don’t leave the most vulnerable people behind in the process. “Doing that is less about economics and more about management,” said Woetzel who is passionate about how successful this can be for today and the future.  

Woetzel sees momentum building. “Los Angeles is the city of dreams and capturing the opportunities requires innovation and we are the home of turning innovation into reality.”

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