The Oceanaire apartment complex in downtown will become an affordable housing project for middle-income earners for at least the next 15 years under a new pilot program approved by the Long Beach City Council Tuesday night.

Rents in the building will be locked into an agreement that will keep rents lower for households making between 80% and 120% of area median income for potentially as long as 30 years. It’s expected that full conversion of the 216 units in the building will take four years.

Under the agreement, 87 units (80% of the median income), 43 units (100%) and 86 units (120%) will be receive varying degrees of rental reductions.

A two-bedroom apartment for a household earning $72,080 would cost $2,366, while the same apartment would cost a household making $108,120 annually about $3,550 per month. The market rate for a two-bedroom unit in the Oceanaire is about $3,529 per month, according to the presentation given to council Tuesday.

A slide from a city presentation showing income limits and proposed rents for the new pilot program at the Oceanaire apartments in downtown.

To accomplish this the city will enter into an agreement with the California Statewide Communities Development Authority to issue bonds for the purchase of the Oceanaire from its current operator, Waterford Property Group.

The acquisition by the development authority is expected to cost about $144 million in real estate and ongoing maintenance, administration and management fees.

Greystar Real Estate Partners would be brought in as the property manager and the city would receive the public benefit of having more affordable units added to its inventory, but it will come at a cost.

Because the project will exempt the building from property taxes, it’s expected to cost the city, the county and schools in Long Beach about $1.5 million in year one. The city alone is expected to lose about $8 million in tax revenue over the course of the pilot program. All tax collecting bodies are anticipated to lose about $43 million.

“This is currently the only option for providing moderate income housing units,” said Patrick Ure, a manager in the city’s development services department, who laid out the risks of the project for the council.

The city can force a sale of the property after year 15, but a financial analysis carried out for the site suggests that it would be better for the property to be sold after 30 years. Still, a city staff memo noted that “there are likely situations where the city and other taxing bodies do not recover foregone property tax or make a profit” when that sale happens.

The city’s subsidizing of the project by foregoing property taxes normally collected will mean that services elsewhere in the city will need to be reduced.

The Oceanaire opened in 2019 as the city’s newest luxury apartment complex, and a spokesperson told the Post in early 2020 that it expected to be near 90% capacity by the summer. However, as of January, only about 71% of the units were occupied, according to a city report.

Jason Ruiz covers City Hall and politics for the Long Beach Post. Reach him at [email protected] or @JasonRuiz_LB on Twitter.