For a developer and builder in Los Angeles, where the car culture is practically a religion, Scott Laurie’s words sound like heresy.
“We are trying to get people out of their cars,” says the president and COO of The Olson Co. “And we’ve found that there are more people looking to be out of their cars than in the past.”
Not only has Olson discovered that there are home buyers who are sick of driving everywhere, it has also uncovered a hidden desire among Southern California residents to walk to their destinations. So strong and salable is this desire that Olson has added the word “Walk” to its community names.
Olson’s wish to cater to commute-weary buyers forms the basis for the three must-haves the company looks for in new developments: a healthy job market nearby, quick commuting to those jobs (via both mass transit and highway), and walkability within the community and its surrounding area.
Focusing on those three requirements has helped the company create a narrow niche market that allowed it to turn a profit in 2010 and 2011, despite the housing market’s implosion.
Olson targets sites between the outer suburbs and the city of Los Angeles. Often they are in downtrodden areas of exurban cities abandoned in the flight to farther-flung suburbs. The company builds affordable homes, usually for first-time buyers. And its partners are often cities eager to work with Olson to foster gentrification and eradicate blight.
A good example of the company’s niche-based success is Heritage Walk in Fullerton, Calif., an affordable community of 34 homes Olson built in partnership with the city, which wanted to clean up a rough part of an otherwise desirable town and provide affordable homes for its residents and workers.
The site in Fullerton fits Olson’s model because it’s near a metro stop and the interstates, next to an elementary school and a park, and not far from a library and City Hall, so transportation and walkability needs are met. And the local job market is good.
Heritage Walk was restricted to buyers who lived and/or worked in the city and who met lower-income criteria. It sold out within a year. Olson wrote sales contracts on 70 homes in the community, more than twice as many homes as it closed there. But more than half were disqualified because they made too much money, proving that there is a market in the community for buyers with higher incomes. Because the city donated the land, the houses could be sold at discounted prices, starting in the high $200,000s for the detached two-story homes.
Heritage Walk’s success has helped clean up an unsightly part of town with a high crime rate and made the area acceptable to full-price buyers, Laurie says. “We believe we are starting to improve the area.”
Olson is in the process of securing a nearby parcel to build a market-rate community of 60 townhomes that will sell closer to the local market price for homes, between $400,000 and $600,000.
“People don’t understand that building affordable homes can be profitable,” says Laurie. But it’s not easy. Olson has been working in this niche for 22 years to develop the skills and relationships it requires to partner with local government to develop and sell homes on less-than-desirable infill parcels.
“They are remnant pieces for a reason,” he says. “You have to have the vision. You have to know how to deal with warts and hairs. That’s what we do best.” And you have to have good relationships with city governments.
“We do all of our own entitlement and development,” says Laurie. “That’s a key differentiator for us. We have a team of eight people and that is their sole focus. They previously worked for cities so they know how to process and get the entitlements completed. For someone who doesn’t come from that background it is extremely challenging.”
Learn more about markets featured in this article: Los Angeles, CA.