Affordable Housing Incentives Drive Major Developer Commitments in Los Angeles
Kennedy Wilson and Jamison formed a joint venture to develop 4,000 affordable apartments in Los Angeles over five years, a project valued at roughly $1.7 billion. The partnership will include ground-up construction and conversions of existing buildings, including older office properties, for income-qualified renters. The first project is Sky Castle, a 512-unit conversion of a 400,000-square-foot downtown office complex expected to begin construction in August. Units will serve households earning 30% to 80% of area median income, with two-bedroom apartments renting for about $2,248 versus a market rate of $3,991.
Kennedy Wilson manages $36 billion in assets and owns about 45,000 apartments nationally, including 14,000 affordable units, while Jamison has developed 8,000 apartment units with 2,000 converted from obsolete offices. The venture plans to keep average per-unit costs around $425,000, well below typical new affordable housing in Los Angeles, by using low-income housing tax credits, tax-exempt bonds expanded under the One Big Beautiful Bill Act, and the low-cost basis of acquired office buildings. Government incentives including financing, zoning accommodations, and fast-track permitting have made income-restricted housing one of the few sectors where large projects remain financially viable despite high construction costs and weak commercial markets.
Los Angeles faces an estimated shortage of 500,000 affordable homes, with roughly half of city households spending more than 30% of income on shelter. The 2022 mansion tax on property sales above $5 million has generated about $1.2 billion for affordable housing but also contributed to a slowdown in large commercial transactions, according to a RAND Corp. report. Mayor Karen Bass said the city has received permits for 42,000 affordable housing units since she took office, with 6,000 under construction, though the 4,000-unit Kennedy Wilson-Jamison commitment represents a small fraction of overall need. Jamison has another 1,700 converted units under construction, while Kennedy Wilson has 25,000 U.S. units in development and provides lending for 30,000 additional units.
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