Nonprofits, Hit by Pandemic, Face Underlying Real Estate Pressures in LA Region

By Elizabeth Mattiuzzi and Eileen Hodge

Nonprofit organizations provide critical services for low-income communities, communities of color, and the LGBTQ community, particularly in times of crisis. These services help support food security, housing stability, workforce development, health, and the arts for individuals and families. Nonprofits have faced a variety of challenges during the pandemic, from adjusting operations in order to keep their employees safe, to finding ways to reach clients who are stuck at home, to shutting down completely. Many nonprofits have lost revenue or had to cancel fundraising events, creating financial uncertainty for their organizations even as many have ramped up services to meet the increased need (pdf, 495 kb) in their communities during the pandemic.

Our new report, “Holding Space: Underlying Real Estate Conditions for Nonprofits in the Los Angeles Region,” (pdf, 1.8 mb) explores the baseline conditions for Los Angeles region nonprofits regarding their operating space going into the pandemic. The LA metro area, the largest population and employment center in the western United States, saw its unemployment rate jump 15 percentage points to 19.1 percent from January to May 2020, giving it the fourth highest unemployment rate in the country.

The report, based on a survey and interviews, finds that many nonprofits in the Los Angeles region faced displacement pressures going into the pandemic due to the high cost of renting or purchasing operating space. These pressures are likely to continue or increase as the economy and the real estate market regain steam and many nonprofits continue to face pandemic-related revenue gaps. A large majority of the organizations surveyed serve low-income communities and communities of color.

Experiences and Expectations Surrounding Real Estate Costs and Relocation

  • Most nonprofits that responded to the survey had an increase in their operating space costs in the previous five years—25% experienced an increase in operating space costs that they would characterize as “significant”, and 35% experienced what they consider a “moderate” increase.
  • Of nonprofits surveyed that rent, 68% had an increase in operating space costs in the previous five years.
  • Of the nonprofits surveyed that experienced a rent increase in the previous five years, 43% relocated during that time.
  • Out of all respondents that had relocated in the previous five years, 35% cited the high cost of real estate as a reason for moving and 29% had moved more than once.

Perceptions of Displacement Risk

  • 65% of nonprofits surveyed were concerned about potential displacement of their organization from the community/communities that they serve due to rising costs.
  • 88% of nonprofits surveyed were concerned about clients and constituents being displaced from their neighborhood due to rising costs.
  • 39% of respondents anticipated that their nonprofit may have to reduce the programs or services that they provide, and 28% anticipated a potential reduction in staff.
  • 33% of nonprofits surveyed anticipated a possible reduction in operating space quality, and 24% anticipated that they may have to reduce their office space.

The Impact on Arts Organizations

Many of the respondents represented arts organizations. Nationally, employment in the arts, entertainment, and recreation industry (which includes workers at both for- and non-profit entities) fell by 53 percent between February and May 2020, the largest percentage decrease of any industry. The road to reopening for many performance-based artists and arts nonprofits, with their focus on in-person gatherings, may be slower than for other sectors of the economy.

The report also spotlights inventive ways LA nonprofits and their partners have managed the challenges of staying in place over time. For example, some nonprofits have found creative arrangements for sharing space with other organizations, and a few have leases with nominal rent from public sector landlords. However, an intentional, cross-sector effort is likely necessary to prevent a long-term increase in the displacement of nonprofits from the communities that they serve in a post-pandemic environment.

In the short term, while the pandemic has led some nonprofits to close, many have been able to access federal Paycheck Protection Program loans. The Federal Reserve is making loans available to nonprofits with at least ten employees through the Nonprofit Organization New Loan Facility, and nonprofits can apply for funding through the Federal Emergency Management Agency’s Public Assistance program.

To learn more, read Holding Space: Underlying Real Estate Conditions for Nonprofits in the Los Angeles Region (pdf 1.8 mb).

Related

How are Nonprofits that Serve the Western U.S. Weathering the COVID-19 Crisis?

Coronavirus Compounds Challenges for Low-Income Communities and Communities of Color

Transforming Community Development Through Arts and Culture Community Development Innovation Review (Volume 14, Issue 2)

The views expressed are not necessarily those of the Federal Reserve Bank of San Francisco or of the Federal Reserve System.