A Unique 800-Unit Affordable Housing Complex In LA Will Be Built On Top Of A Costco

Warehouse Superstore Costco is known as a place for getting good deals. In LA, that now also includes housing. A Los Angeles developer, Thrive Living, is planning a unique approach to building affordable housing – putting it on top of a Costco. 

According to the Wall Street Journal, construction on the 800-unit development will start in early 2025 in the Baldwin Village section of South LA, with the bulk item retailer taking up the ground floor. To qualify for tax breaks, the development will have a rooftop pool and fitness center and will also contain 184 apartments for low-income residents.

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A Membership Model Is The Key To Costco’s Success

By partnering with a successful retail chain – which, according to The Motley Fool, derives 73% of its profits from members’ dues – Thrive’s rental income from its brand-name tenant will mean it will not need to rely heavily on government subsidies. In California, using government subsidies has been a contentious issue for developers because of the additional costs they engender through delays, bureaucracy and red tape (as CRE Daily explained when using the example of developer SDS Capital Group, who halved their costs by using private funding). If the Thrive/Costco project succeeds, it could pave the way for similar projects. 

“I want to build thousands and thousands of apartments every year, not hundreds,” Thrive’s founder, Ben Shaoul, who also runs Magnum Real Estate Group in New York, told the Wall Street Journal. 

A Win/Win

Mixed development projects are nothing new, especially in urban areas where space is limited. They’re a win/win: the retailer rents space from the developer and has a built-in customer base of residents above its store. They also make sense in cities where parking is an issue, with customers able to take an elevator rather than a highway to shop. 

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A Lack Of Competition

While many retailers such as Whole Foods and Target are content to rent space, Costco – predominantly in suburban locations with ample parking – has preferred to own rather than lease its premises. It’s not as if Costco can’t afford to buy in LA. According to the retail website Expanded Ramblings, Costco’s total revenue in 2024 was $249 billion (with $6.29 billion in profit), spread over 128 million members. However, the Baldwin Village location, a lower-income section of Baldwin Hills – often dubbed the Black Beverly Hills where median house prices are around $1 million, according to Redfin – makes sense for Costco because of the lack of competition.

“Costco would advantage the people in the neighborhood because we only have a Ralphs right here,” resident Karen Johnson told NBC Los Angeles. “There are a lot of large families living out here that can’t afford large housing, so when they go to buy small stuff, they have to spend more money, but when they go to Costco, they can buy bulk and they can save some money. Plus, there are jobs for the community.”

A New Way Of Doing Things

Los Angeles Mayor Karen Bass, a former Baldwin Village resident, endorsed the collaboration, taking advantage of state law AB 2011, designed to streamline approvals for apartments and mixed-use projects, including low-income housing.

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“We are breaking with the old ways of doing things and moving Los Angeles forward,” Bass said in a statement. “Unprecedented action driven by urgent collaboration in both the public and private sector is what is expected and that’s what we are delivering today.”

LA, like much of California, is experiencing a housing crisis. It is desperately looking for innovative ways to bring affordable housing to the city. Developers like Thrive see this as a golden opportunity.

“Mayor Bass has declared a housing emergency in Los Angeles and we’re answering the call,” Jordan Brill of Thrive Living told NBC LA. “Our company is focused on addressing the severe housing affordability crisis in Los Angeles while also attracting retailers willing to make long-term commitments and deliver community-serving products and services that enrich the living experience for our residents and neighbors.”

The Advantage Of Modular Construction

Thrive founder Shaoul estimates the Baldwin Village project should cost around $425 million to build. He started the project using a combination of company money and bank loans, which he used to buy the land. Costco’s strong credit rating is considered a big advantage when building the retail section of the development; the residential section would be funded separately. Construction is meant to conclude in 2027, thanks to off-site modular housing, which will streamline construction compared to on-site building.

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