The cost of housing is spiking in cities across America, but when it comes to the “affordability crisis,” the Bay Area is ground zero. In Silicon Valley, sky-high rents and home prices might be a headache for young engineers and software developers, but the situation is untenable for those with lower incomes. Highly paid techies are one thing, but the maintenance workers and service personnel also need somewhere to live.
It’s still uncertain if grants like Facebook’s $20 million commitment last year, or the Chan Zuckerberg Initiative’s movement on the issue, will yield lasting results. But while it's long been clear that traditional grant dollars alone cannot solve the housing crunch or the related homelessness crisis, philanthropy is finding new ways to move the needle here through partnerships and coalitions that aim to unlock the kind of resources that really can make a dent. We often report on housing innovations happening around the country, such as in Los Angeles.
The latest effort to catch our eye is the TECH Fund, an innovative affordable housing initiative from Housing Trust Silicon Valley. Taking its inspiration from similar work by the Sobrato Family Foundation several years ago, the TECH Fund zeroes in on a single leverage point: early-stage capital for affordable housing projects.
Raising startup capital may be a key part of rebuilding the affordable housing ecosystem in Santa Clara County, which includes some of the priciest communities in Silicon Valley. That’s the position of Kevin Zwick, Housing Trust Silicon Valley’s CEO. According to Zwick, “The market, if allowed to function, will produce housing for middle- and upper-income families. But housing for low-income people isn’t getting built.”
Following last November's passage of Measure A, a $950 million county bond measure, a deep well of local funds has been freed up for affordable housing. But building housing requires lots of upfront cash, especially in Silicon Valley. “In order to access and leverage this new local funding,” Zwick says, “we need a short-term pool of funds, around $200 million, to allow affordable housing developers to compete.”
That’s a significant sum, but it’s less than what it would take to guarantee affordability across projects' entire life cycles. The TECH Fund (Tech + Equity + Community + Housing) raises capital from philanthropy and business, promising a return on the investment over five or 10 years. The goal is to raise $50 million this year. That money can then revolve through the loan fund three times, furnishing $150 million in early-stage capital over the next decade.
So far, the TECH Fund has attracted two big funders: the Cisco Foundation with $2.5 million and the Sobrato Family Foundation with $5 million. As other funders join in, Cisco is considering upping the ante to $10 million, and another $5 million may be on the way from the Packard Foundation.
According to Zwick, “This isn't the money that makes a project affordable for 50 years. This is perfect for meeting the need to start up a project; it’s patient capital for affordable housing developers.” In concert with funding from the ballot measure, those developers can compete over the short term with their market-rate peers, buying up land and confronting regulatory hurdles prior to construction.
Through its support for the TECH Fund, the Sobrato Family Foundation is returning to familiar ground. From 2001 through 2012, Sobrato partnered with the Opportunity Fund to commit over $18 million in loans to 50 affordable housing projects. In 2013, Opportunity Fund’s focus shifted to microlending, causing Sobrato to shift its giving to general operating support for organizations tackling homelessness, housing support and affordability.
The Sobratos are no strangers to real estate, and according to Sobrato Family Foundation CEO Rick Williams, it’s key for private funders (corporations included) to pitch in. “What’s so exciting about the TECH Fund is it gives private funders a concrete role to play that's consistent with both their business models and their values. It allows private funders to invest capital that can be recycled multiple times and fill a need that the public sector cannot.”
As the area’s only CDFI (community development financial institution) solely focused on housing, Housing Trust Silicon Valley exemplifies an exciting trend toward impact investing and public-private partnerships among affordable housing advocates. By joining forces with private capital and public funding, philanthropy can unlock avenues that might have been out of the question before.
The TECH Fund isn't the only partnership effort taking on a seemingly insurmountable challenge in the Bay Area. The San Francisco Housing Accelerator Fund is another, and it brings in the City of San Francisco.
While projects like the TECH Fund and the San Francisco Housing Accelerator Fund are meant to directly stimulate construction, Zwick also emphasized the need for advocacy and research, which can lead to victories in city halls, state capitols, and the voting booth. He pointed to corporate engagement as one pillar of fundraising through the TECH Fund. In addition to Cisco, one of the fund’s backers, companies like Applied Materials and Google have pushed their home cities to build more housing.
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