MAKING AN IMPACT

Social entrepreneur Andi Israel is developing a new affordable housing model for Los Angeles homeless.

By National Business Post Staff

September 17, 2020

New housing units in Florence-Firestone, adjacent to Huntington Park and four miles south of downtown Los Angeles…could provide a path forward to help alleviate some of Los Angeles’s affordable housing and homelessness crisis. The Aster, scheduled to be completed by the end of 2021, will have 56 units along with a variety of on-site resources for its residents, including medical and employment services, helping residents make a transition towards self-sufficiency.

In LA county, which lacks more than 500,000 units of affordable housing, more than 60,000 people are experiencing homelessness each night, many of whom are sleeping on the street. The construction of The Aster is taking place with little fanfare. However, its promise lies in a new funding model that could prove to be a blueprint for future affordable housing projects.

“We just don’t have enough affordable housing in the Los Angeles market,” said Andi Israel, 32, the L.A. developer at the center of the project.

Lack of affordable housing in larger markets is in part due to the limited market of developers interested in these traditionally high-cost projects which can be administratively burdensome with limited profit margins. Private companies seek profit on investments, and traditional financing for affordable housing, which often relies on tax credits, doesn’t provide the same profitable returns.

So, Israel decided to create a new model, based on private financing models, in order to find another way.

“Social Impact Investors are investors who aren’t only looking to make a financial profit on their investment,” Israel explains. “They want to make a positive impact on the world, so they make investment choices that consider both social impact and financial return. Unlike traditional market-rate deals, The Aster is being built specifically to serve our most vulnerable unhoused neighbors, and its investors understand that this deal is not expected to yield traditional market-rate returns.”

As a “social entrepreneur,” Israel, through her development company RxLA, is creating a way for people and companies to make an impact investment. The building, which is being financed through conventional debt and private equity, will have a smaller return compared to commercial ventures, but she touts the project’s social impact, which will also appear on investor reports.

Celina Alvarez, an experienced housing advocate and the Executive Director of Housing Works – the social services provider that will be managing the on-site services at The Aster – explained that this new model might just work.

“Andi has cracked a code that, I believe, will now allow for much needed dialogue to take place,” Alvarez wrote in an email.

Located in an unincorporated part of Los Angeles County, The Aster will operate much like a normal apartment building. Tenants will have leases, but will only pay 30 percent of their incomes towards rent, some of which can come from Social Security benefits and/or earned income; the remainder will be subsidized by the LA County Department of Health Services. To find tenants, RxLA is working with the Los Angeles Homeless Services Authority, who will match perspective tenants to the apartments based on their needs.

Israel, who takes a “housing first” approach toward ending chronic homelessness, said the approach of bringing private funding to affordable housing development will help alleviate some of the financial pressures on local governments.

That’s where Housing Works comes in. By providing on-site intensive case management services, supportive housing reduces residents’ dependence on County services, such as emergency room visits, which significantly reduces local government spending.

“We look at the work we do through the lens of being present with a purpose, creating value in the lives of the people we serve, while working to reignite flames that were once very, very dim,” Alvarez said.

Israel began focusing on the homeless plight in Washington D.C. while attending George Washington University, working at a soup kitchen during her sophomore year. She would later recall two specific events that made quite an impact.

One day, during a poetry group, a guest experiencing homelessness shared his poem, “The Scarlet H,” in which he expressed that homelessness is much like wearing a scarlet letter and becomes the lens through which the rest of the world makes assumptions and judgements.

“[It] can so quickly become a barrier to seeing a human being beyond one particular circumstance, ” she wrote in an email. “[The poem speaks to] how damaging this can be to those living through it, how this perpetuates flawed narratives, and how this inhibits the path to addressing the underlying issues.”

The second event Israel recounts is when she helped an acquaintance, who was experiencing homelessness, access an affordable apartment.

Israel immediately came to know how difficult it was to navigate the application process and find a cost-effective place to live.

She graduated with a dual degree in sociology and human services, and later went on to attend New York University, receiving her master’s in urban planning.

Upon coming home to Los Angeles, Israel found work at Skid Row Housing Trust, a nonprofit developer dedicated to housing people who are homeless, where she developed four affordable housing projects over the following three years.

Soon thereafter, Israel returned back to school, to the University of Southern California Marshall School of Business for her master’s in social entrepreneurship.

Ever since her homecoming to LA and founding her own business, Israel is grateful for and has enjoyed the opportunity to work with her father, Eddie Israel, a long-time Los Angeles real estate developer.

“He is a very engaged adviser,” she said.

She recounts the story of how they took a hands-on approach towards finding a general contractor for The Aster, driving around the city, chatting up contractors in impromptu interviews, on one of LA’s hottest days. They eventually connected with Hy-Max Building Corp., a company whose work they liked.

She does say though, that when it came to the red tape of affordable housing, she showed him the way.

“I was a real neophyte when it came to affordable housing,” Eddie said. “She tutored me along.”

Eddie, came onto the Aster project with experience in conventional construction and financing. He helped her prepare a pitch deck for investors, and by the time she was ready to acquire the land, he was up to speed on the issues surrounding affordable housing.

“I really like this, and I plan on staying with her on this, for a really long time,” he said. “She’s so much better than I ever was.”

There’s one other affordable housing development on the same block where The Aster is going up. Attractive and well-maintained, this building has become just another part of the neighborhood.

As Israel excitedly explains, “When communities start to see that some of the preconceived ideas of affordable housing […] are not usually true, then I think people become much more open to the idea [about] integrating it,” she said. “I’ve been really lucky so far.”

Fortunately, there haven’t been any setbacks with the development of The Aster. Construction began on time. And with much of the country in shut down mode in the wake of the COVID-19 pandemic, workers broke ground on the property just before quarantine, and building was deemed an essential service.

Still, the virus has presented its own challenges to the team, but “we have to make it work, and so we are,” she said.

“The pandemic has really highlighted our growing homelessness crisis and affordable housing shortage, the severity of local rent burdens, the impending flood of evictions and potential new cases of homelessness…along with the drastic racial disparities among those most impacted.”

Israel is already looking ahead to the future. Her long-term goal is to refine and scale the funding models that are used to further the social impact of affordable housing in the future.

“[It’s] constantly evolving,” she said.

With a variety of innovators in the affordable housing space, no two funding models look exactly the same. But with early success, Andi Israel stands to be on the forefront of solving the ever-growing homeless situation in Los Angeles.