On my E30 318i it was the heater matrix.
Basically strip all dah trim and it slides out into the footwell. Mines is a right hand drive, being here in the UK, and the matrix was about £100. I did have a leaking heater solenoid too. Fixed that and shortly afterwards the matrix leaked.
Easy way to tell, assuming you have coloured coolant (ours is tinted red) is to drop towels or something onto the carpet.
Unmodded (and never will be) E30 318i