The Private Sector Solution to Affordable Housing in LA - an Interview with Aaron Mensch

“Everyone thinks affordable housing means government subsidies and $800,000 per unit costs. That’s insane. Totally unsustainable.” Aaron Mensch is challenging the status quo for affordable housing development in Los Angeles. “In the private sector, we can build these units for a third of the cost.”

From Crisis to Opportunity: Building a Real Estate Foundation

That’s a bold claim from someone who’s seen every side of LA’s real estate market. Back in 2009, as the housing crisis ravaged neighborhoods, Mensch started as a buyer’s agent for an REO broker, and watched the carnage up close. Where others saw devastation, he saw opportunity. Within months, he jumped from sales to investment, partnering on his first flip in the San Fernando Valley.

“Before I knew it, I stopped doing sales and went full time into flipping homes. We were doing five homes at a time,” Mensch recalls. The numbers corroborate the story: 50-60 homes with his first partner, another 100 on his own. Under Yellowstone Investments LLC, the tally would eventually surpass 150 projects.

Then in 2012, a broker approached him with a different proposition: raw land. “I’ve never built ground-up before,” Mensch says, but he partnered with an experienced developer to learn the ropes. That first step into ground-up construction soon led to building entire communities. When he sold a fully entitled lot to a public homebuilder, Mensch discovered his sweet spot – the complex world of entitlements and development.

Reimagining Affordable Housing Through Private Investment

By 2020, watching construction prices and interest rates climb while LA’s housing crisis deepened, Mensch saw the writing on the wall. State laws were shifting to favor affordable housing developments. He began acquiring lots specifically for 100% affordable housing projects, but with a twist – instead of relying on traditional government funding, he’d make it work with private capital.

“Historically, affordable housing in the United States is built with low income housing tax credits – essentially, the government subsidizes the development,” Mensch explains. “But new state laws have been designed to give developers real incentives: increased density, less parking requirements, and more height. These deals are starting to pencil for private developers to actually help solve the affordable housing issue.”

His approach is working. Mensch has already sold off over 350 units worth of entitled sites and has another 400+ under entitlement. But he’s not just focused on rentals – he’s also working on for-sale affordable townhomes, targeting the crucial “missing middle” of the market.

Challenging Misconceptions, Maintaining Pragmatism

Mensch is quick to refute common misconceptions about affordable housing: that it lowers property values, increases crime rates, or is poorly constructed. “It’s not public housing,” he emphasizes. “A one-bedroom is still $2,200 a month, in some areas. This is about creating entry-level product to alleviate pressure on the rental market.”

Even as he embraces California’s progressive housing policies, Mensch maintains a developer’s pragmatism. While new laws allow building with zero parking, he’s skeptical. “Just because you can legally entitle it; doesn’t necessarily make it a good product,” he notes. “LA still has a car culture. The goal is to find good sites that are parked adequately while preserving neighborhoods.”

A Vision for 2025 and Beyond

Looking ahead in 2025, Mensch is focused on expanding his model of privately-funded affordable housing development throughout California. His company, R2H Development (Right 2 Housing), encompasses his belief that housing is a fundamental right, not a luxury. But unlike many housing developers, he’s proving that market-based solutions can work alongside policy reform to address the crisis.

“I think the only way to solve the housing crisis is to get the private sector involved,” he says. For a native Angeleno who’s watched his city’s housing crisis deepen year after year, it’s more than just business – it’s about proving there’s a better way forward.