ORANGE, Calif. — A Beverly Hills real estate investment company plans to convert a luxury apartment complex in Orange County into homes for the "missing middle" or middle-income earners.

In partnership with the California Municipal Finance Authority, BLDG Partners has acquired Allure Apartments, a 282-unit multifamily property in the city of Orange.  

What You Need To Know

  • In many ways, middle-income earners are in a housing limbo and are at the mercy of annual market rent rate increases

  • BLDG will convert the luxury apartment property into affordable apartment homes for residents that earn 80% to 120% of the area median income

  • In Orange County, for a family of four, the median income is $106,700

  • When it comes to affordable housing, middle-income earners such as teachers, police officers and others are often left out of the discussion

Under the terms of their agreement with the state's municipal finance authority, BLDG will convert the luxury apartment property into affordable apartment homes for residents that earn 80% to 120% of the area median income. In Orange County, for a family of four, the median income is $106,700, according to the California Department of Housing.

Rather than paying market rent, residents will pay up to 35% of their income a month, said Matthew Ellis, the principal of BLDG, to Spectrum News. Rent increases are capped at 4%, Ellis said. 

"We're interested in providing affordable, quality middle-income housing in California because it's the one segment of the population that has never been catered to," he said.

BLDG did not disclose the cost of the acquisition. According to the commercial real estate data site Reonomy, UBS owned the property before selling it to BLDG.

Middle-income earners always seem left out of the conversation in the affordable housing debate. They are working professionals such as nurses, police officers and teachers that earn a decent salary but not enough to qualify for affordable housing subsidies and might have too little income to afford a mortgage for a home.

In many ways, these middle-income earners are in a housing limbo and are at the mercy of annual market rent rate increases, especially in high-cost Orange County. 

While affordable housing dominates most news headlines, there has also been a push to create more workforce and middle-income housing for the "missing middle." 

Last year, Newport Beach-based Waterford closed a series of deals to convert luxury apartments to workforce housing. For example, Waterford in December purchased the 480-unit Westgate Apartments for $280 million in Pasadena and will convert it for residents who make between 60% and 120% of the area median income.

Ellis said BLDG has long championed developing, buying and managing multifamily properties for low-income and middle-income earners.  

"We're a mission-based owner and operator. We've always been playing in the affordable space and middle-market space," said Ellis.

Ellis said his company has been working on the Allure deal for about a year. 

He said it's important to provide housing for middle-income earners, who often get left out of the affordable housing conversation.

"If you look at the programs in financing affordable housing, those subsidies stop at 60% AMI," he said. "And then you have the developers who do market rate. There's really nothing that provides quality affordable housing for those that essentially make our cities what they are today. The firefighters, police officers, teachers, city staff, they can't afford to live in new market-rate housing because they don't make enough money. A lot of people are having parents or grandparents cosign with them and paying upwards of 50% of their income."

The current coronavirus pandemic, Ellis said, has made the housing situation worse for middle-income earners since prices for single-family homes and rent have gone up. 

Ellis said they plan to begin working with Allure tenants paying market rates and checking if their income level will qualify them for a rental decrease. 

For example, a one-bedroom, one-bathroom unit at the Allure currently goes for about $2,500 a month. If the tenant makes anywhere between 80% and 120% of the area median income, they'll see a reduction in their rents. 

"They could see a $600 decrease a month in their rent," said Ellis.

Ellis said they have other conversion projects lined up but did not disclose them at this time.  

"We're here to provide housing," he said. "It's consistent with our mandate to create affordable quality housing for folks who otherwise would be priced out in the cities they live and thrive."