In an effort to address the ongoing issue of high housing prices in the United States, particularly making it difficult for Americans, especially young people, to buy homes, a real estate developer in Los Angeles is testing out a new affordable housing blueprint. The plan involves constructing apartments above the well-known members-only retail store, Costco.
Thrive Living, a real estate developer in Los Angeles, is in the process of planning to build affordable apartments above Costco’s large stores to alleviate the shortage of affordable housing. The project kicked off at the beginning of 2025 in Baldwin Village, located in the southern part of Los Angeles, where a mixed-use building with 800 units is being built, with Costco occupying the first floor. The project includes amenities such as a rooftop swimming pool and fitness center, aiming to provide 184 apartments for low-income families.
This will be the first residential development project in the United States with an embedded Costco store, leveraging on Costco’s large base of loyal customers. Thrive’s founder, Ben Shaoul, mentioned that the rent paid by Costco Wholesale to Thrive will assist the developer in reducing the reliance on government subsidies for affordable housing. If successful, Shaoul expressed his hope to replicate this model in other locations to build more affordable housing. “I hope to build thousands of apartments every year, not just a few hundred,” he said.
The chosen location of Baldwin Village will allow Costco to enter the densely populated urban market and automatically gain a customer base for the apartments above. Many residents are likely to become Costco members for the convenience of shopping in the store.
Analyst Karen Short from Melius Research highlighted that, for example, if each unit has two tenants, it could potentially attract up to 1,600 Costco members. Large warehouse-style retailers typically located in suburban areas have begun to expand into urban areas in recent years through smaller-scale stores and new designs.
Retailers like Target and Whole Foods have incorporated apartment buildings into their establishments to attract urban residents. Costco, exploring various urban strategies for over two decades, now boasts several downtown stores. Costco prefers owning real estate rather than leasing, making the Los Angeles project an innovative approach for the company.
The store occupies 185,000 square feet, slightly larger than the company’s average store size, and Thrive plans to build two levels of underground parking. Shaoul mentioned that Costco initially contacted Thrive in the spring of 2022 to discuss leasing the location in Baldwin Village. Shaoul estimated the construction cost of the project to be around $425 million.
Shaoul’s goal is to secure a separate loan for the retail portion of the project, expecting favorable rates due to Costco’s high credit rating. Thrive is exploring the use of new market tax credits, a government tax incentive aimed at encouraging private investment in distressed local economies. Thrive is also betting that having Costco as a retail tenant can attract more investors.
The residential building will be financed separately through commercial banks or other sources. Government subsidies will not be used to fund the construction of the apartments, but once the property is open for rent, Thrive plans to collaborate with the Los Angeles Housing Authority to provide rental vouchers for at least 100 units for low-income tenants.
Construction of the development project is expected to be completed by 2027. To expedite the building of the apartments, Thrive plans to utilize off-site modular construction.
Private enterprises and elected officials across the United States have been seeking ways to address the affordable housing crisis. In 2024, the number of homeless individuals reached record levels as housing prices in the U.S. surged significantly. Freddie Mac estimates that the U.S. is lacking 3.7 million housing units.