Meeting_Body
EXECUTIVE MANAGEMENT COMMITTEE
JULY 16, 2026
Subject
SUBJECT: METRO WORKFORCE HOUSING
Action
ACTION: APPROVE RECOMMENDATION
Heading
RECOMMENDATION
Title
CONSIDER:
A. AUTHORIZING the Chief Executive Officer (CEO), or designee, to negotiate and enter into a loan agreement and other related documents (“Loan Documents”) with Treehouse Leimert or affiliated entity, a joint venture between Leimert PropCo LLC (Treehouse) and The Apex Collaborative LLC (collectively, “Developer”), to provide up to $25,000,000 in development financing in support of the construction of The Nathaniel, a 97-unit workforce housing development located at 4421-4437 Crenshaw Boulevard, Los Angeles, CA 90043 (the “Project”);
B. AUTHORIZING the CEO, or designee, to negotiate and execute a recorded regulatory agreement establishing a Metro employee housing preference for 100% of the Project units, to be acknowledged by the senior lender; and
C. FIND that the Project is categorically exempt from CEQA pursuant to State CEQA Guidelines Section 15332 (Class 32 - Infill Development) pursuant to the findings in Attachment A.
Issue
ISSUE
In May 2025, Metro received an unsolicited proposal from Treehouse to provide a construction loan in support of The Nathaniel, a 97-unit workforce housing development located 500 feet (a 3-4-minute walk) from Metro’s Leimert Park K Line Station. Treehouse proposed that in exchange for Metro’s investment, 100% of the units at the Project would be subject to a recorded Metro employee housing preference, the first such preference secured by Metro at any housing development. At its January 2026 meeting, the Board approved an Exclusive Negotiation Agreement (ENA) with Treehouse. To advance the Project, staff recommends that the Board authorize the CEO to execute a loan agreement and related documents consistent with the negotiated terms described in this report and authorize a recorded regulatory agreement to secure the employee housing preference.
Background
BACKGROUND
The high cost of housing across Los Angeles County has made it increasingly difficult for Metro's own workforce to live near the system they operate, maintain, and build. As of April 2026, the median home price in Los Angeles County stood at $845,410 (California Association of Realtors, April 2026). Rental costs have followed a similar trajectory: median gross rent in Los Angeles County reached $2,058 in 2024, and Los Angeles County has the highest rate of rent cost burden in the Southern California region (U.S. Census Bureau, American Community Survey 2024 1-Year Estimates, as reported by the Southern California Association of Governments (SCAG), October 2025). Regionwide, 45.8% of Los Angeles County households were cost-burdened in 2024 - spending 30% or more of household income on housing - a rate exceeding both the statewide (39.1%) and national (32.0%) averages (SCAG, 2025).
Many of Metro's frontline employees, like much of the region's essential workforce, fall within the income bands that make finding affordable housing difficult across Los Angeles, and would qualify for income-restricted units. The 2026 LAHD 80% AMI ("lower income") threshold for the City of Los Angeles is approximately $93,280 for a one-person household, $106,640 for a two-person household, and $119,920 for a three-person household. Based solely on individual Metro salary data, approximately 2,000 of Metro's frontline workforce would likely fall within these income bands.
Given Metro's role as one of the region's largest employers and its unique position as a landholder through the joint development program, the Board has identified workforce housing as a strategic tool to address this affordability gap directly for Metro's own employees, ensuring that the people who keep the transit system running are not priced out of the communities they serve. The ability to access workforce housing could also serve as a recruitment tool to attract future employees. Specifically, employer-provided housing is increasingly recognized as a powerful, strategic benefit for attracting and retaining talent, especially in competitive labor markets and high-cost areas.
Why Housing Matters
• Attracts top talent: In industries facing labor shortages (e.g., construction, energy, healthcare), offering housing can be a decisive factor. Surveys show that 33% of employees would prioritize housing support over a pay raise, and 25% would consider switching jobs for better housing (Source: livinsoft.com <https://www.bing.com/ck/a?!&&p=1df8c9753f0bf5cf8d6c5364e891c79df2d88536b949d8473447dc60f7a86e6eJmltdHM9MTc4MzQ2ODgwMA&ptn=3&ver=2&hsh=4&fclid=0a8f3712-a93b-6f6d-0312-2192a83e6e88&u=a1aHR0cHM6Ly9saXZpbnNvZnQuY29tL3RoZS1yaXNpbmctZGVtYW5kLWZvci1zdGFmZi1ob3VzaW5nLWJlbmVmaXRzLw&ntb=1>);
• Builds loyalty and retention: Stable, employer-provided housing signals investment in employees’ well-being, fostering long-term commitment. Companies report lower turnover rates when housing is offered, as workers feel valued and secure;
• Improves productivity: Reducing commute stress, housing search burdens, and relocation hassles allows employees to focus on their work; and
• Enhances work-life balance: Proximity to the workplace, affordable rent, and quality amenities help employees manage time and finances more effectively.
Prior Board Actions
At its April 2023 meeting, the Board approved an amendment by Director Solis to Item 8, the board action that adopted strategies to accelerate progress toward Metro's previously established 10,000-unit housing goal, of which at least 5,000 will be income-restricted. The amendment directed staff to report back on opportunities to designate new housing units for Metro workforce housing through the Metro joint development program or other appropriate mechanisms.
As staff advance Metro's transit-oriented communities’ goals, including the target of developing 10,000 housing units, projects developed on Metro property are generally structured with a mix of subsidies, including grants from local and state governments and tax credits, to ensure units are reserved for low- and very-low-income households. Because of this deal structure, Metro is not able to reserve units for its own workforce: tax credit and other forms of commonly-used public financing requirements prohibit employer-restricted occupancy (with limited exceptions, i.e. for public school teachers).
As a result, despite ongoing interest in advancing this policy objective, Metro has to date been unable to incorporate workforce housing units into any of its joint development projects. The Project is therefore proposed as an opportunity to test the concept and evaluate the benefits of a workforce housing preference: if this approach proves successful and generates strong interest from Metro employees, staff could pursue similar workforce housing preferences at future developments.
The Nathaniel Metro Workforce Housing Project
Treehouse was founded by Prophet Walker, who has developed or managed the construction of more than 800 housing units and over $350 million in multifamily, retail, industrial, and mixed-use assets. The Apex Collaborative is led by Tyler Monroe and Brian D'Andrea, who collectively have over four decades of experience developing over 5,500 housing units.
In May 2025, Treehouse submitted an unsolicited proposal to Metro under the agency’s Unsolicited Proposals Policy, proposing a 100-unit development at 4427 Crenshaw Boulevard, near the Leimert Park K Line Station, with 80 units proposed to be restricted to households earning 30-80% of AMI and reserved primarily for Metro employees in exchange for $25 million of loan financing. Through subsequent negotiations between Metro and the Developer, the unit count was refined to 97 units dedicated for Metro employees, as reflected throughout this report.
The Joint Development Unsolicited Proposals focus solely on projects on Metro-owned property. Because the Project is not on Metro property, it is proceeding through the Unsolicited Proposals process in the Office of Strategic Innovation, and because the request is in excess of $10 million, it qualifies as a “landmark” proposal requiring Board
Consultation at key milestones post Phase One.
As a result, at its July 2025 meeting, the Board received and filed the Landmark Unsolicited Proposal submitted by Treehouse for the Project and authorized the CEO to proceed with a Phase Two evaluation of the Landmark Unsolicited Proposal to develop Metro Workforce Housing adjacent to the Leimert Park K Line Station.
In January 2026, following completion of the Phase Two evaluation, the Board authorized the CEO to enter into an ENA with Treehouse. The Phase Two evaluation identified five key issues for negotiation - developer fees, treatment of sunk costs, Metro's preferred financing structure, the form of Metro's investment, and proposed unit rents relative to market as issues to resolve during the ENA period.
The Proposed Project
In 2021, the Developer filed an entitlement application with the City of Los Angeles for a mixed-use project at 4421-4437 S. Crenshaw Blvd. As originally proposed, the Project, with density bonus, was a 93-foot-tall mixed-use building with 89,694 square-feet of Floor Area, including 100 dwelling units, 1 accessory dwelling unit, and 10,439 square feet of commercial space at the ground floor and roof level. In June 3, 2022, the City determined that the developer’s then-proposed development qualified for a Class 32 CEQA exemption and approved the Project, including the density bonus (Case Nos. DIR-2021-7732-TOC-DRB-SPPHCA / ENV-2021-7733-CE).
Since the City’s determination, the proposed development has changed in the following ways: the number of residential units has been reduced from 100 to 97, the number of studio units has been reduced, the number of 1- and 2-bedroom units has been increased, there are no longer any 3- or 4-bedroom units, the commercial space and the vehicle parking have been eliminated, and the building height and number of stories have both been reduced. Developer intends to re-entitle the Project with the City to reflect these changes.
Leimert Park Location
The Project presents an advantageous location for the proposed workforce housing pilot due to its proximity to the Leimert Park Station, and its position within Metro's rail network. The proposed development is located near three rail divisions and one bus division: Division 16 (K Line), Divisions 14 and 21 (E Line), and Bus Division 5. A total of approximately 1,143 Metro employees are assigned to or support these divisions, including bus drivers, other frontline staff, and custodial, facilities maintenance, and mechanical/way maintenance personnel.
Beyond this concentration of frontline staff, the station's position in the rail network also provides broader connectivity benefits. The K Line's northern terminus at Expo/Crenshaw Station provides an existing transfer to the E Line and, by extension, one-transfer access to Downtown Los Angeles and the broader east-west rail corridor. Proximity to the station would also give resident employees a realistic option to live car-free, and the resulting transportation cost savings would further contribute to household financial stability.
Because the loan for the Project is structured as a long-term agreement, the long-term evolution of Metro's rail network is directly relevant to the value of this location for resident employees. This locational benefit would increase when the K Line Northern Extension ("KNE") advances in the future. KNE is currently in the environmental review phase and, when approved and funded, would extend the K Line underground from Expo/Crenshaw to the D Line at Wilshire Boulevard and the B Line at Hollywood/Highland Station. Should KNE be completed as proposed, residents of a workforce housing development at Leimert Park Station would gain efficient access to three of Metro's six rail lines, a level of system connectivity not currently available at most other Metro station sites.
The neighborhood surrounding Leimert Park has undergone significant demographic change over the past two decades. Rent burden, defined by the U.S. Department of Housing and Urban Development as spending more than 30% of household income on rent and utilities, has been a persistent and worsening condition in the neighborhoods surrounding the Project site. 64% of residents in Leimert Park, View Park-Windsor Hills, Baldwin Hills/Crenshaw, and West Adams neighborhoods are considered rent burdened by this measure. With over 90% of occupied housing in the immediate area renter-occupied, most residents are directly exposed to this cost pressure.
A workforce housing development anchored by an income-restricted, employee-preference structure would provide a countervailing source of housing stability for Metro employees in an area at the center of the Metro system that is experiencing significant cost escalation
Discussion
DISCUSSION
Over the past six months, Metro has vetted and further negotiated the proposed deal terms, which are described further below.
Proposed Terms
The total development cost for the Project is currently estimated at approximately $55.8 million. Metro’s contribution would represent approximately 45% of total development cost. Metro’s construction financing would be disbursed over a 3 year period. Metro would receive priority repayment of its loan principal and accrued interest at a disposition event, ahead of Treehouse’s return of capital. Key proposed terms include:
• Loan amount: up to $25,000,000, subordinate to senior construction and permanent financing.
• Interest Rate: 3% simple interest, accruing during construction
• Term: 55 years from issuance of the certificate of occupancy, matched to the term of the regulatory agreement. Outstanding balance and accrued interest due and payable at maturity.
• Revenue Sharing: Split of residual receipts, refinancing proceeds, and disposition proceeds: 60% to Metro / 40% to Treehouse.
• Developer Fee: $2,500,000 (approximately 4.6% of total development cost, aligned with industry practice)
• Sunk Costs: Approximately $12,049,000 in predevelopment and land-carry costs incurred to date, the Developer has agreed that costs not reimbursable from Project financing sources will be covered by Sponsor capital or other non-Metro sources, rather than from Metro’s loan proceeds.
• Units: 97 units, comprised of 9 studios, 65 one-bedroom units and 23 two-bedroom units.
• Affordability Restrictions: 100% of units restricted at 80% AMI. Underwriting reflects rents at the lesser of the 80% AMI rent or a minimum 10% discount to market as established by market study (current average discounts: ~10.6% for 1BR units and ~10.1% for 2BR units). The regulatory agreement will include a "hold harmless" mechanism to preserve debt-sizing assumptions in the event future AMI adjustments or market shifts would otherwise reduce rents below underwritten levels. Up to 20% of units may be made available to households at up to 120% AMI (moderate income) if additional philanthropic capital can be raised to offset the impact of the forfeiture of the welfare property-tax exemption on the senior loan.
• Employee Eligibility: Actual eligibility for the Project's units would depend on household size and total household income, including any income earned by other adult household members, and would be determined during the formal application process.
• Administration of Metro Employee Lease-Up Preference: Waitlist maintained by the property manager at the property level, with Metro access and regular reporting. Metro shall confirm employment status/eligibility; the property manager handles income qualification and background screening. When a unit becomes available, Metro would have a defined identification window (up to 30 days) to refer income-qualified employees before the unit may be offered to the general public, consistent with the recorded regulatory agreement, which would be acknowledged by the senior lender.
• Monitoring and Audits: Metro would establish an ongoing monitoring program for the Project, including annual documentation and periodic audit of compliance with the employee housing preference and affordability restrictions.
• General Plan/Zoning Consistency: The project, as re-entitled, must be consistent with the City’s existing applicable general plan designation, general plan policies, zoning designation and zoning regulations.
• Regulatory Compliance Measures: The project, as re-entitled, must comply with all applicable City of Los Angeles Regulatory Compliance Measures, including without limitation RC-AQ-1 (Demolition, Grading and Construction Activities), RC-GEO-1 (Seismic); and RC-N0-1 (Demolition, Grading, and Construction Activities).
Considerations
Staff identified the following considerations during negotiation of the proposed terms:
• Subordination risk. Consistent with traditional real estate finance structures, the Project's institutional senior lender will likely require that Metro's loan, and the recorded employee housing preference restricting a portion of units to Metro's workforce, be subordinated to the senior lien. This is standard practice for a construction/permanent loan stack and reflects the senior lender's priority claim on the property in exchange for the Project's debt financing.
To mitigate the risk this subordination poses to Metro's programmatic interest, staff will condition Metro's loan on the senior lender's written acknowledgment of Metro's workforce housing preference, ensuring the preference program is recognized as an operating requirement of the Project throughout the life of the loan. As a result, the risk of impairment to Metro's preference program would only materialize in the event of a default or foreclosure by the Developer - an outcome in which the senior lender could, in enforcing its rights, extinguish subordinate interests, including Metro's loan and the recorded preference.
To protect Metro's interest in this scenario, staff will seek to include, as part of the final loan agreement, a right for Metro to step into the property management role in the event of default or foreclosure. This would allow Metro to assume operational control of the Project, including preservation of the workforce housing preference, rather than relying solely on the senior lender to maintain that programming after taking possession. In addition to the step-in right, staff will explore negotiating a right of first refusal or right of first offer in favor of Metro, allowing Metro the opportunity to acquire the Project, or the senior lender's interest in the Project, in the event of a proposed sale, a Developer default, or foreclosure. Unlike the step-in right, which would allow Metro to assume operational control while preserving its workforce housing preference, a purchase right would provide Metro a path to permanent ownership of the asset, offering a stronger long-term safeguard for the Project's affordability and workforce housing programming.
• Financial Subsidy. Many of the affordable housing developments Metro pursues through its Joint Development program require significant subsidy from both Metro, commonly in the form of discounted or donated ground lease value, and other public funding sources, including state housing programs and federal low-income housing tax credit equity, in order to achieve financial feasibility. Metro has helped offset this gap by discounting the value of the land contributed to each Joint Development project. These projects typically do not generate a return for Metro until they are refinanced or sold. On a per-unit basis, this Project development proposes a higher than average per-unit financial contribution from Metro in comparison to traditional Joint Development projects. Based on an underwriting analysis prepared by Keyser Marston Associates, the Project’s $28.0 million total public subsidy contribution (a $25,000,000 Metro loan and an approximately $3,000,000 state appropriation) equates to approximately $288,660 per unit subsidy ($257,731 of Metro per-unit contribution), compared to standard tax-credit financed affordable housing projects, which frequently require significantly more public subsidy per unit. While Metro’s average per-unit financial contribution of approximately $50,744 per unit (primarily in the form of discounted ground rent) for general affordable housing projects is less than the proposed contribution to this Project, due to their tax-credit financing structure, those projects are unable to facilitate dedicated workforce housing for Metro employees. In addition, based on the Project’s pro-forma and negotiated partnership structure, 55 years into the project, Metro’s earnings would have a net present value of $7.2M.
Determination_Of_Safety_Impact
DETERMINATION OF SAFETY IMPACT
Approval of this item would have a positive impact on the safety of Metro's workforce. By providing housing options within walking distance of the workplace, the Project would reduce employees' reliance on vehicle commutes, thereby potentially mitigating their exposure to traffic-related accidents and other commute-related safety risks.
Financial_Impact
FINANCIAL IMPACT
Adoption of the recommended actions would commit up to $25,000,000 in Metro funds toward the Project. No funds would be expended during the current fiscal year; disbursements would begin in FY2028 (starting July 2027), and the initial payment will be included in next year's proposed budget. Because this is a multi-year funding commitment, the Chief People Officer will budget over the remaining term. Future payments will be funded through the respective departmental cost centers based on anticipated services, and Cost Center Managers will be responsible for budgeting funds in future fiscal years.
Impact to Budget
The source of funds for this action will be the General Fund, likely joint development lease and advertising revenues. These fund sources are eligible to fund bus and rail operations.
Equity_Platform
EQUITY PLATFORM
The Project advances Metro’s Equity Platform by potentially delivering income-restricted workforce housing in a high need, transit-rich area to support economic stability for lower-income Metro employees earning not more than 80% of AMI.
The project also aligns with Metro’s place-based equity approach by directing investment into a community with documented environmental and health vulnerabilities, including an average CalEnviroScreen score of 76 and widespread designation as disadvantaged under state and regional indices. Consistent with Metro’s Equity Platform principles of meaningful outcomes and community benefit, the proposed workforce housing model seeks to reduce displacement risk, shorten commutes for qualified lower wage workers, and reinforce the long-term benefits of transit investment for historically marginalized communities. Key areas for consideration during the next phase include developing a process necessary to ensure equitable access to workforce housing for eligible employees, ensuring alignment with Metro’s commitments to racial equity, accessibility, and inclusive economic opportunity.
Vehicle_Miles_Traveled_Outcome
VEHICLE MILES TRAVELED OUTCOME
Vehicles Miles Traveled (VMT) and VMT per capita in Los Angeles County are lower than national averages, the lowest in the SCAG region, and on the lower end of VMT per capita statewide, with these declining VMT trends due in part to Metro’s significant investment in rail and bus transit.* Metro’s Board-adopted VMT reduction targets align with California’s statewide climate goals, including achieving carbon neutrality by 2045. To ensure continued progress, all Board items are assessed for their potential impact on VMT.
As part of these ongoing efforts, this item is expected to contribute to further reductions in VMT. This item supports Metro’s systemwide strategy to reduce VMT by supporting a housing development in a high need, transit-rich area near the Leimert Park K Line Station encouraging transit ridership, ridesharing, and active transportation. Metro’s Board-adopted VMT reduction targets were designed to build on the success of existing investments, and this item aligns with those objectives.
*Based on population estimates from the United States Census and VMT estimates from Caltrans’ Highway Performance Monitoring System (HPMS) data between 2001-2019.
Implementation_of_Strategic_Plan_Goals
IMPLEMENTATION OF STRATEGIC PLAN GOALS
The proposal addresses numerous Vision 2028 goals, including:
• Goal 3.2 (Transit Oriented Communities): The Project will enable Metro to “implement effective solutions” to address “quality of life issues, such as equity, economic opportunity, gentrification, displacement, affordable housing.”
• Goal 3.3 (Genuine Engagement): The Proposer has indicated that there has been robust community engagement in the advancement of the Project, which has built upon numerous other outreach efforts in the surrounding community.
• Goal 4.1 (Community Development): The Project will enable Metro to “implement effective solutions” to address “quality of life issues, such as equity, economic opportunity, gentrification, displacement, affordable housing” to support the goals of the Vision 2028 Plan.
• Goal 5.2 (Good Public Policy and Fiscal Stewardship): The Project carefully leverages Metro funding to provide an essential benefit to Metro employees.
• Goal 5.5 (External Partnerships): The project expands Metro’s capacity to work with ‘nontraditional business partners’ to develop a new workforce housing product.
• Goal 5.7 (Workforce/Affordable Housing): The project will create income-restricted homes with a preference for Metro employees to “build and nurture a diverse, inspired, and high performing workforce”.
Alternatives_Considered
ALTERNATIVES CONSIDERED
The Board could choose not to approve moving forward with this workforce housing development and instead direct staff to decline to advance the Landmark Unsolicited Proposal to implementation. Staff do not recommend this alternative, as it would forgo a unique workforce housing opportunity aligned with Metro's workforce housing goals at a scale and location that aligns with Metro's needs.
The Board could alternatively direct staff to pursue one or more Request For Information (RFI)-identified projects in lieu of the Project. In parallel to the ENA negotiations, Metro issued a RFI in December 2025 to the broader housing development community to gauge interest in alternative approaches to an employee housing set-aside program. Metro received 11 responses identifying 19 discrete projects, collectively containing approximately 2,438 units, of which approximately 1,785 units could potentially be made available to income-qualifying Metro employees. Of these, only nine projects match the Project's scale (more than 95 units), and only six are located adjacent to a Metro rail station rather than a bus-only site. Only two projects meet both thresholds: a 295-unit project at 2300 S. Hill Street adjacent to the Grand/LATTC Station (A Line), and a 271-unit project at 225 S. Grand Avenue adjacent to the Grand Ave Arts/Bunker Hill Station (A Line), both proposed for acquisition by the Housing Authority of the City of Los Angeles. Neither offers the same level of connectivity to Metro's operations and maintenance facilities as the Project. In addition, other responses proposed a master lease structure rather than fee ownership or a long-term ground lease with equity participation. Under a master lease, Metro would secure unit set-asides for employees but would hold no ownership interest in the property and would have no ability to recoup or share in any appreciation of its investment over time. This structure does not align with Metro's objective of building potential long-term equity through its workforce housing investments. Staff do not recommend pursuing an RFI-identified project as a substitute at this time, as none combines the Project's specific transit connectivity profile and ownership structure with its scale. Should this opportunity prove successful, staff notes that pursuing RFI-identified projects and other options remain available to Metro as a complementary, non-exclusive path to expand workforce housing beyond this Project.
Next_Steps
NEXT STEPS
The Project has cleared CEQA review via categorical exemption. Should the Loan Agreement be authorized, staff will finalize and execute the loan documents and the recorded regulatory agreement establishing the Metro employee housing preference. The Developer will not require any additional source of public subsidy and will proceed to secure a construction loan from a conventional lender. The Developer anticipates completing any remaining ministerial reviews and finalizing design within 12 months of Metro's approval, with a groundbreaking targeted for Summer/Fall 2027 and construction expected to take approximately two to two-and-half years.
Attachment
ATTACHMENTS
Attachment A - CEQA Findings
Attachment B - Frequently Asked Questions
Prepared_by
Prepared by: Marcel Porras, Deputy Chief Innovation Officer, Deputy Chief Innovation Officer, (213) 922-4605
Reviewed_By
Reviewed by: Seleta Reynolds, Chief Innovation Officer (213) 418-3034
Dawn Jackson-Perkins, Chief People Officer (213) 418-3166
Nicole Englund, Chief of Staff (213) 922-7950
