The city of Los Angeles, like many cities across the US, is in dire need of much more affordable housing to alleviate and prevent homelessness. Despite the promise of alternative methods of creating low-income housing, like social housing and community land trusts, policymakers in Los Angeles have instead opted to try to eliminate some of the bureaucratic hurdles that private developers argue are a key inhibitor to an abundance of affordable housing. Los Angeles’ Executive Directive 1 (ED1), a cornerstone of Mayor Karen Bass’s strategy to reduce homelessness, is a 2022 initiative to drastically reduce the time it takes affordable-housing developments to be approved by planners. As of 2024, over 18,000 units have been approved under this directive.
Newly constructed affordable housing in the US is primarily built by for‑profit and nonprofit organizations who use public subsidies to charge below-market rents to tenants. Most developers using ED1, the recently released data shows, are for‑profit firms from the market-rate real-estate industry forgoing difficult-to-obtain public subsidies and instead building housing that will be affordable only to moderate-income earners (Los Angeles City Planning 2024). In Los Angeles, where the median income is $80,366 per year, moderate-income earners bring home anywhere from $70,000 to $117,000 per year, depending on family size. Low-income renters, and particularly the lowest-income renters who are most at risk of experiencing homelessness, are much less likely to see their housing opportunities expand because of this policy (Kushel and Moore 2023). As activists and organizers point out, ED1 may also be a force of displacement as developers buy up aging multifamily properties, which are often rent-controlled, to build new “affordable” ones.
“Streamlining” initiatives like ED1 can speed up the development process, bringing rental housing online more quickly. But without combining such initiatives with substantial public funding, private developers will not create housing for the lowest-income renters who are most at risk of becoming homeless. The limits of ED1 should serve as evidence for policymakers and leadership that it’s time to look beyond market solutions for our housing affordability crisis, which generates profits for property owners while doing little for low-income renters.
Towards market-based solutions for affordable housing
After the state-run housing projects built between the 1940s and 1960s that served low-income households were widely criticized for their role in poverty concentration, policymakers in the US took two primary routes to house the poor: first, housing vouchers that tenants could use to rent homes on the private market; and, second, tax incentives to urge private market developers to build low-income housing. While these policies offer benefits to residents’ wellbeing, they only serve an estimated 1 in 4 total households that require housing assistance (Ports et al. 2018; Wood et al. 2010; Gartland 2022).
The market is a limited solution to affordable-housing problems. Vouchers often go unused, as “lucky” voucher recipients are unable to find a landlord willing to accept them. Developers building affordable housing are unsurprisingly unwilling to rent units at costs lower than what they need to operate and maintain their buildings. And for‑profit developers, who are often less mission-oriented than their nonprofit counterparts, are more likely to convert affordable units to market-rate prices after time-limited affordability requirements end (Mazzella 2021).
Yet leadership in LA has looked primarily to the market to improve the stock of affordable housing and reduce homelessness. After being elected in 2022, Los Angeles mayor Karen Bass began releasing a series of executive directives, mostly targeted towards affordable-housing production. One less-discussed directive, for example, is a program that asks LA’s wealthy to provide philanthropic grants to build housing. Executive Directive 1, which has received the most attention and is the focus of this essay, aims to expedite permits and clearances for housing projects with “affordable units.”
The profitability of affordable housing under ED1
The purpose of ED1 is to expedite the planning approvals process for housing development projects that are 100% affordable so that affordable housing is available to renters sooner. This offers some savings to developers by reducing the time they need to hold onto the property and pay staff. Developers are attempting to forgo public subsidies entirely by combining the cost savings from a shorter planning approval period with other cost-saving measures such as density bonuses, smaller units, building in areas with lower property values (for example, South LA), and eliminating parking. As the ED1 applications show, for‑profit market-rate and luxury developers are flocking to this new opportunity in droves. In at least one case, a market-rate developer scrapped plans for a luxury building and instead submitted plans for an ED1 project on the same lot (Sharp 2024).
It’s important to note that the meaning of “affordable” in the case of ED1 housing units varies widely. Projects are eligible for ED1 if units are rented at a cost affordable to tenants with income levels at 80% to 120% of area median income or lower. In Los Angeles, these levels of affordability mean that these units can be rented by renters making up to about $100,000 per year, depending on family size. Unsurprisingly, most applications to ED1 are for projects with units renting at the highest cost possible to maintain eligibility. Traditional affordable developers building housing for lower-income residents are also utilizing and supporting ED1, though their pursuit of competitive public subsidies slows down their ability to take advantage of this policy.
Though “affordable housing” seems inherently resistant to investment schemes, the entrance of for‑profit firms into the affordable-housing market suggests that housing with restricted rents is being made into a profitable investment strategy. The post-pandemic real-estate market may have encouraged investors to consider the profitability of affordable housing, as rising interest rates in 2022 decreased demand for single-family housing and luxury condos. Moreover, new private-equity-backed developers in Los Angeles are focusing solely on affordable housing and staying on as landlords. One of these landlords, SoLa Impact, has been cited for multiple code violations and sued 24 times over habitability issues, according to the Inner City Law Center (2025).
Organizers in LA also point out that ED1 leads to the displacement of tenants, which drastically weakens its potential to serve the city’s needs. When ED1 first emerged, it allowed affordable projects to be proposed in areas of Los Angeles with single-family zoning. Such a policy would be transformative for the city, in which 72% of residential land is currently zoned for single-family homes (Wagner 2024). The policy was unfortunately quickly amended to exclude proposals in single-family zones. Worries about what this means for renters currently living in multifamily buildings protected under LA’s Rent Stabilization Ordinance have come to fruition: low-income tenants across LA are reporting that they are being asked to move out to make way for new affordable development (Zahniser and Pineda 2023). While the city has made some beneficial changes to protect vulnerable residents, such as creating a Priority Occupancy Process to give displaced renters priority placement in other subsidized housing, interest groups argue that they haven’t gone far enough and that low-income residents are still in danger of being displaced (United Neighbors in Defense Against Displacement Coalition 2024).
The limits of market-based solutions for affordable housing
While ED1 can expand housing opportunities for median-income earners and potentially increase supply of low-income housing as median-income earners move, the city’s most pressing housing needs will continue to go unmet without attention being directed towards the organizations and systems that deliver resources to our most economically marginalized residents. Yet mission-oriented developers who want to build housing for the most economically disadvantaged tenants face immense challenges in doing so, owing to limited funding. Providing housing to the most disadvantaged residents requires a higher level of risk than profit-motivated developers are willing to take on, which points to the limits of market solutions for resolving our current housing-unaffordability crisis.
Market interventions, which often provide precarious and temporary forms of affordable housing, will continue to generate profits for property owners while offering only meager improvements to housing opportunities for low-income renters. There are other options for leadership and policymakers who are willing to move beyond the current paradigm of market-oriented solutions. Social housing, for example, has proved to be a successful model for providing low-income housing detached from the speculative housing market. Los Angeles even has its own model to look towards for inspiration: the Los Angeles Eco‑Village, which houses about 40 residents in community-controlled apartment buildings.
This debate is particularly pressing as the Trump administration attempts to slash federal funding, endangering US Department of Housing and Urban Development programs such as Section 8, which provides vouchers for renters to use on the private market. While homelessness in Los Angeles continues to grow, those lucky voucher holders who can find a landlord willing to rent to them may lose their rental assistance entirely. Responding to the unaffordability crisis in Los Angeles can’t be done through market interventions alone, despite the protestations of leadership. Ensuring housing for all—especially Los Angeles’ most vulnerable residents—requires moving away from market solutions and towards sustained public funding and community control.
Bibliography
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