March 12, 2024

Master Leasing: A New Approach to LA's Homelessness Crisis

Holland & Knight West Coast Real Estate & Land Use Blog
Melanie Chaewsky | Samara Harris
Breaking Ground: West Coast Real Estate and Land Use Blog

The City of Los Angeles City Council on Feb. 23, 2024, unanimously approved the Los Angeles Homeless Services Authority's (LAHSA) Master Leasing Program, the City's newest innovative effort in its ongoing battle against homelessness.

The City's program will mirror a program implemented by the County of Los Angeles in November 2023, in which the County and LAHSA secure long-term leases of all or portions of privately owned residential buildings and sublease individual units to unhoused residents. The County and LAHSA provide supportive services at these sites, including but not limited to "permanent housing, intensive case management, medical and mental health care, substance abuse treatment, employment services, benefits advocacy, and other services or service referrals necessary to obtain and maintain housing." Los Angeles Municipal Code Section 12.03.

Through the County's master leasing scheme, the County and LAHSA take on the role and responsibilities of "landlord," including tenant placement, rent collection, property management, maintenance, security and eviction. By having control over tenant approval, the County and LAHSA are able to help unhoused individuals overcome some of the barriers that traditionally prevent them from obtaining housing such as criminal records, employment status and credit scores. Since its commencement, the County's initiative has provided 105 units to unhoused residents, with an additional 530 units to follow.

The Master Leasing Program offers existing property owners the opportunity to provide units to unhoused residents without the burden of managing tenant challenges. The program may also appeal to developers who would normally avoid pursuing affordable housing by allowing them to lease the building to a reliable master tenant and then use the master leasing agreement to secure financing for the development.

Prior to the widespread implementation of the program, the City will launch a pilot Master Leasing Program in scattered sites throughout West Los Angeles and other areas in the Fifth District.

At the time of approval, the City Council instructed its city administrative officer (CAO) and chief legislative analyst (CLA) to prepare contract terms, program metrics, benchmarks and other necessary program elements to implement the program and report back in 60 days (i.e., May 20, 2024) on these items and findings related to the pilot program. The City Council also instructed the CAO to identify funding for the pilot and its potential citywide expansion and requested that the city attorney and CAO's Risk Management Team analyze any risks or liabilities in the funding agreement between the County and LAHSA and the lease agreement between LAHSA and the landlord. At the end of the 60-day period, the CLA and CAO will report on any "backstop" costs that the City may need to cover in order to pilot the program.

As of the date of this writing, the CLA and CAO have not reported to the City Council. Check back after the 60-day period for updates on benchmarks and funding.

For more information and questions on the Master Leasing Program, please contact the authors.

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