LA Company Seeks To Fill Public Funding Gaps With $1B Affordable Housing Platform

An affordable housing debt platform launched by a Westwood company last year could face greater demand following the Trump administration's cuts to federal agencies and entities critical to affordable housing and February’s cancellation of $60M in contracts with affordable housing developers. 

SDS Capital Group began deploying its $1B in available debt last fall and has already committed nearly half of it to finance 1,427 units, but company executives say the shake-up in the affordable housing ecosystem could draw more developers to their door.

Programs are being “thrown into a little bit of disarray” right now, SDS Capital Group CEO and founder Deborah La Franchi said.

With so much shaken up at the federal level for affordable housing and the programs it relies on, “Getting through those programs is probably going to take longer and have more uncertainty,” she said. 

SDS Capital's new debt platform is aimed at helping moderate-income and affordable housing projects get across the finish line. The platform, SDS Impact Debt, was launched to provide competitive debt financing for projects that include moderate-income and other affordable housing units. 

The debt platform could finance more than $1B of housing units within the next 18 months, according to SDS estimates.

The vehicle is in the process of closing six financings for 1,427 units of multifamily housing, equivalent to about $450M of that expected $1B. Fifty-four percent are affordable to families earning up to 80% of the area median income, and 80% are available to families making up to 120% of AMI — a threshold commonly used to denote moderate-income housing. 

Moderate-income housing is often harder to build because many government funds focus on lower- or lowest-income renters.

SDS says the mix of affordability levels is key when trying to get projects to pencil. La Franchi said ideally, this financing and the lower rates it provides could incentivize market-rate developers to consider including affordable units in their projects for the first time. 

Those first six projects are all in Los Angeles County, which has a nearly 500,000-unit shortfall for very low- and extremely low-income households, according to 2024 data from the California Housing Partnership. Moderate-income households face challenges, too, with about 30% of them paying 30% or more of their household income to rent. 

However, SDS can finance nationally and plans to do so. It is already looking at deals in Seattle, San Antonio and other areas of Texas, and Wilmington, North Carolina.

“We can really deploy in any state,” SDS Impact Debt Managing Director Jason Riffe said.

Most of the 1,427 units that are in the process of being financed will be in new development projects, while about 200 existing affordable units will be preserved because of this financing. 

Construction debt is usually costlier, Riffe said, which means there’s an opportunity for SDS.

“That is a product that we are able to come in under market and provide some competitive advantage,” Riffe said. 

Of those 1,427 units, the ones that are new construction work out to between $250K and $300K per door. Projects with public dollars typically cost double that or more, Riffe said. 

Affordable housing developers that rely on public funds are usually constrained by the requirements of that capital, Riffe said. 

“What we've seen across LA County is when you layer on so many of those constraints, your project just doesn't pencil. If it doesn't pencil, you can't build it, and people don't have housing,” Riffe said. 

The financing is in the form of a private-asset-secured bond. The product can be used for a single asset or a group of assets. Terms range from three to 40 years at rates 1.5% to 2.5% below other retail debt offerings, according to a release from SDS. 

“We're open to construction of anything in that range — zero to 120% [affordability] — and we're open to acquisition and rehab,” Riffe said. “We're open to bridge or permanent financing, to preservation of naturally occurring [affordable housing]. We're open to all those spaces because we think all those solutions are needed to solve the crisis.”