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Making More Room for Families

Housing: Nonprofit developers are building the larger apartments sought by low-income tenants, but not enough to meet the demand.

April 16, 2002|JESUS SANCHEZ | TIMES STAFF WRITER

Apartment hunters scouring the city can find options ranging from palatial penthouses to spartan singles. But those searching for a simple three-bedroom unit will probably end up empty-handed.

The scarcity of larger units is problematic in big urban centers such as Los Angeles, where large numbers of low-income and immigrant families squeeze into small one-bedroom and studio units, housing specialists said.

Nonprofit housing developers have taken on the job of building large family-style apartments but in numbers that fall far short of demand.

"[Renters] will take anything they can get," said Alice Salinas, housing director for Esperanza Community Housing Corp., a nonprofit developer that owns about 100 three- and four-bedroom apartments south of downtown Los Angeles. "We build [larger units] because there is a great need."

Despite strong demand in urban areas, the three-bedroom apartment remains one of the rarest forms of real estate. Only about 7% of the nation's nearly 16 million apartments have three or more bedrooms, according to the National Multi Housing Council.

Private builders steer away from three-bedroom apartments, which are viewed as more risky and less profitable than smaller units, investors and developers said. At least 75% of apartment dwellers are singles or couples, with few demanding anything larger than a two-bedroom unit.

However, the statistics do not reveal the large number of renters who need but cannot afford or find a three-bedroom unit and consequently settle for smaller units, housing specialists said.

Couples with growing incomes and families tend to leave apartments for single-family houses and condominiums, said David Cardwell, vice president of finance and technology at the housing council.

"If my income is not suppressed and I have a large family, I'm going to rent a house."

Private Developers Prefer Smaller Units

The economics of three-bedroom apartments don't make sense for many private developers. In most cases, a landlord can't charge much more for a three-bedroom apartment than a two-bedroom unit despite the additional cost and space requirements. If a landlord can command $1,500 for a three- bedroom unit, he can easily get $1,700 or more combined by renting out a two-bedroom and one-bedroom unit in the same building, according to apartment industry specialists.

"You can't get the rent per square foot [in a three-bedroom apartment] that you can for the smaller units," said Dean Zander, an apartment investment broker at Hendricks & Partners.

In dense urban areas, high land costs drive developers to squeeze more and smaller apartments into a project, said Fred Tuomi, vice president of Equity Residential Properties Trust, one of the nation's largest owners of apartment buildings. Less than 5% of the 21,440 apartments Equity Residential owns in California are three-bedroom units.

"Our bread-and-butter floor plan is the two-bedroom and two-bath unit because it's easier to rent," Tuomi said. "If you are building apartment communities in downtown Los Angeles or Hollywood, you are going to see very few three-bedrooms."

But the economics and rules of thumb that guide private developers often are at odds with realities facing the large number of low-income and immigrant families crowded into urban areas.

The majority of new and renovated apartments that have sprung up across Los Angeles feature units that are too expensive and small for large low-income families. Instead of moving to a three-bedroom house, many residents are forced to remain in crowded apartments because soaring real estate values have put homeownership out of reach, advocates of affordable housing said.

"It's not going to happen for a lot of people because of the economic leap people have to make to afford a home in the Los Angeles area," said Louis Bernardi, executive director of Los Angeles Housing Partnership, a nonprofit housing developer.

High prices and a housing shortage have resulted in overcrowding in about 30% of Los Angeles' housing stock, according to a March 2000 report on the city's housing conditions. Overcrowding is generally defined as an apartment unit or house with more than one occupant for every room.

With private developers unable to build large apartments profitably, nonprofits such as Bernardi's are building the majority of the three-bedroom apartments, industry observers said. In many cases, government housing subsidies and tax-credit programs encourage the development of large three- and four-bedroom apartments. Most limit the number of residents in each apartment to about two people for each bedroom.

"The only way to develop three- and four-bedroom units is with subsidies," said Alice Salinas, housing director for Esperanza Community Housing Corp., which owns about 100 such apartment units in the crowded neighborhood north of USC. "Without them, families will not get homes."

Fewer Large Rentals Expected in Future

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