Preserving and Rehabilitation of Aging Properties

Little Tokyo’s history dates back to the early 1900s, when Japanese immigrants first established businesses along First Street. While new developments and taller buildings now overshadow some of the original façades, the district remains historic: approximately 40% of Little Tokyo’s housing stock predates the 1980s, and roughly half of those homes were built before the 1940s. These properties form the neighborhood’s backbone, anchoring its cultural character and serving as naturally occurring affordable housing. As demand increases, however, many of these buildings face pressure to convert to market-rate units or undergo redevelopment, threatening both local affordability and historic identity. Consequently, our housing plan aims to preserve and rehabilitate this legacy stock, extending its useful life, through a targeted set of strategies.

Creating a Revolving Line of Credit for Neighborhood Non-Profits

One challenge in preservation is the need to respond quickly when acquisition opportunities arise on the market. Assembling capital on short notice is difficult. Establishing a low-cost line of credit for rapid site control, followed by arranging long-term financing, allows neighborhood stewards to outcompete outside investors.

A successful model is the Urban Land Conservancy’s (ULC) Metro Denver Impact Fund (MDIF), a $75 million revolving loan fund supporting affordable housing, schools, and other community assets. The MDIF is capitalized through a partnership with FirstBank, which provides a $37.5 million, 10-year revolving line of credit, matched by $37.5 million in soft-debt investments from nonprofits, foundations, and public agencies. The fund offers low-cost, interest-only capital with a streamlined approval process, enabling ULC to move swiftly on preservation and development deals. In most cases, ULC retains long-term land ownership via a 99-year ground lease. As of 2023, the MDIF has financed about 40% of ULC’s portfolio, totaling $81 million.

The Little Tokyo Service Center (LTSC) is well-positioned to adopt this approach, as its reputation and service footprint across Los Angeles could attract broader capital from foundations and CDFIs. The organization could deploy a similar fund to acquire and rehabilitate aging buildings for affordability preservation and to secure infill sites during the predevelopment phase.

Raising a Joint-Equity Rehabilitation Fund

There are aging properties that may not be ready for full redevelopment but could benefit from renovations that extend their useful life. An emerging way to finance these improvements without adding owner debt is a joint-equity rehabilitation fund. Under this model, equity partners invest the capital needed to upgrade the building. Those improvements increase the property’s value and net operating income, extending the building’s lifespan and improving cash flow. In return, investors participate in appreciation and receive a share of the increased rental revenue.

In Little Tokyo, simply renovating naturally occurring affordable housing and raising rents to market is contentious, given the neighborhood’s need for affordability. We propose that neighborhood organizations and existing vehicles, such as the Little Tokyo Community Impact Fund, partner with the local government and philanthropic funders to create a blended fund. Grants and donations from partners such as the California Community Endowment and California Community Foundation would be used to leverage credit-enhanced revenue bonds (functioning as quasi-equity in the capital stack). In exchange for this support, owners would record covenants that convert a portion of the units to permanently affordable housing. This approach preserves and rehabilitates aging stock while creating lasting affordability with limited owner liability.

Beyond adding deed-restricted rentals, the same program could support Tenancy-in-Common or co-op conversions, offering attainable ownership where new-build condos are out of reach. Rather than continuing to rent, households could build equity in right-sized, older units that are often better priced for young families. These transitions could be financed through the joint-equity rehab fund and a revolving line of credit targeted to moderate-income buyers.

Promoting Family-Friendly Apartment Development

Little Tokyo has a distinctive demographic mix. On one side is an aging senior population deeply rooted in the neighborhood; on the other is a growing cohort of young professionals whose housing needs evolve quickly. Today’s unit mix and amenities often are not conducive to starting or raising a family, so many residents move on when their needs change. Our goal is to make Little Tokyo more family-friendly by adding larger units and in-building amenities that encourage couples and young families to stay and grow within the community.

Incentivizing Two and Three-Bedroom Units + Family-Friendly Amenities

Family-oriented units and amenities can be expensive to implement and maintain. They are riskier, as developers need to prove the young-family market, and larger units typically rent for less on a per-square-foot basis. To incentivize developers to include two- and three-bedroom units and family-oriented amenities, we recommend offering density and intensity bonuses, as well as funding opportunities for developer participation.

Under the Citywide Housing Incentives Program (CHIP), we propose introducing local criteria for the Little Tokyo neighborhood that allow developers to build more units on their site, increasing the allowed density and intensity, thus making the inclusion of family-sized units profitable. Additionally, we recommend introducing the opportunity for developers to include indoor amenities that count toward open-space requirements, such as on-site childcare, indoor playgrounds, or family-friendly fitness centers.

We also recommend exploring funding opportunities for developers who include family-oriented units and amenities. For example, we could create a NOFA under United to Los Angeles (ULA) that provides funding for the development of family-oriented properties. Moreover, we could introduce criteria in Prop A, a recent sales tax fund, to incentivize this type of development.

Building Mixed-Income Properties

As Little Tokyo evolves into a mixed-income community, it requires housing solutions that serve the entire economic spectrum. To sustain this diversity, we must incentivize a balanced housing mix that includes affordable, workforce, and market-rate units. This comprehensive approach preserves the neighborhood's social fabric, ensuring it remains accessible to a broad demographic, from seniors on fixed incomes and local service workers to caregivers and young professionals.

Leveraging Publicly-Owned Land to Subsidize Mixed-Income Properties

The neighborhood features several publicly owned vacant parcels that are ripe for residential development. We propose utilizing these assets to support developers of Low-Income Housing Tax Credit properties. By offering long-term ground leases at below-market rates, the city and county can significantly reduce development costs, helping these projects achieve financial feasibility. In exchange for this land subsidy, the City will enforce Land Use Restriction Agreements to guarantee that a portion of the units remain permanently affordable.

The purple area represents underutilized blocks and parcels.

Adaptive Reuse of Office Buildings

The post-pandemic shift to hybrid and remote work has left Little Tokyo with several underutilized and largely vacant office buildings. This trend presents a clear opportunity to convert these commercial properties into much-needed residential housing. The primary obstacle to these conversions is not a lack of interest, but the high cost, which often makes them financially infeasible.

Currently, the primary tool for encouraging these projects is the Citywide Adaptive Reuse Ordinance (ARO). This ordinance allows buildings older than 15 years to have by-right access to a suite of powerful incentives. These include exemptions from certain density limits and parking requirements, a streamlined planning review process, nonconforming protections for existing structures, and flexibility in minimum unit sizes. The ARO is designed to enhance a project's financial viability by eliminating key regulatory barriers that would otherwise incur prohibitive costs and delays.

Tax Abatements for Adaptive Reuse Projects in Little Tokyo

Despite available zoning relief, a structural financial gap remains for many conversion projects in Los Angeles. To make these complex renovations viable, we recommend implementing a targeted property tax abatement program for the Downtown area. This incentive would serve as a catalyst, transforming vacant commercial assets into productive residential communities.

Washington, D.C.’s "Housing in Downtown" program offers a compelling precedent, providing a 20-year tax abatement in exchange for a 15% affordability set-aside. We propose adapting this model for Los Angeles by amending the current ARO, which would involve implementing a 10- to 20-year abatement on the tax increment generated by the rehabilitation (the increase in value resulting from the renovation). Alternatively, the program could specifically abate the City’s portion of the property tax. In exchange for this fiscal relief, developers would be required to restrict 10–20% of the units as affordable housing for the duration of the abatement period.

Two potential office to residential conversions in our study area.