There is no denying that there is a terrible affordability crisis in Los Angeles, but the bulk of new housing develop in class-A luxury product. Much of that is because land prices force developers to build luxury product; however, there are also few funding options for affordable or middle-market deals. The agencies tend to dominate this space, but other capital sources are slow to roll out loan products for affordable and middle-market deals.

“There is really a different class of lender that handles affordable deals,” Bryan Shaffer, principal and director at George Smith Partners, tells GlobeSt.com. “Fannie Mae and Freddie Mac has specific programs for those deals, so they have always been competitive in that range.”

Shaffer says that lender demand for affordable deals is geographically specific. Some cities garner more lender attention for B- and C-class product. “It really depends on where it is located an what the market dynamics are,” he says. “We are still not sure what the outcome is going to be in a market like Houston after the hurricane. Before the hurricane, there was so much class-A product coming on the market that you actually saw lenders favoring B, C and affordable deals because there was an oversupply of A market product.”