Foundations Are Making an Epic Push to Tackle Housing Affordability in the Bay Area

The high cost of housing in the Bay Area has become an indelible characteristic of one of the country’s most vibrant and diverse regions.

In October, the median purchase price for an existing, single-family home in the Bay Area was $1.1 million, nearly 20% higher than just a year prior, and far out of reach for most of the region’s residents. Prior to the pandemic, the median cost of a rental, the housing option for half of the region’s households, had reached a whopping $3,700/month.

While recent headlines suggest a mass exodus of “software engineers, CEOs and venture capitalists” fleeing the Bay for a more affordable place to live and work, low- and medium-income residents most affected by rising costs and exclusionary housing policies have far fewer choices.

The Partnership for the Bay’s Future, an initiative that launched in 2019 to grapple with the high cost of housing in the region, expresses the core problem this way: Two full-time, minimum wage workers who make a total of around $65,000 per year can only afford to live in 5% of the Bay Area’s neighborhoods. Carrying this forward to 2040, they say, would mean another 1.3 million Bay Area residents would face some form of housing instability.

The partnership is perhaps the most ambitious housing initiative ever undertaken by philanthropy. It has come together with support from an assortment of funders, including two community foundations (San Francisco Foundation and the Silicon Valley Community Foundation), several national stalwarts of housing (the Ford Foundation, Local Initiatives Support Corporation (LISC)), three large corporations (Facebook, Genentech, Kaiser Permanente), the most prominent LLC funder in the country (Chan Zuckerberg Initiative), and three foundations not ordinarily connected to housing (William and Flora Hewlett Foundation, the David and Lucile Packard Foundation, the Stupski Foundation).

A daunting challenge

One significant reason for the Bay Area’s housing predicament is that housing development has simply not kept up with demand. From 2011-2015, the region added only about one housing unit for every eight jobs created.

But lackluster housing growth is not the only concern. Decades of zoning policies, mortgage lending practices and neighborhood covenants have explicitly or implicitly excluded Black people and other people of color, creating segregated neighborhoods and cities, and systematically denying opportunity to many of the region’s residents.

To tackle these issues, the partnership raised $500 million to “protect, preserve and produce” affordable housing in five counties: San Francisco, San Mateo, Santa Clara, Alameda and Contra Costa. The partnership’s goal is to “protect” 175,000 households over the next five years and preserve and produce another 8,000 affordable homes within the next decade.

“Protection,” in the partnership’s parlance, refers to “renters and displaced families who need stable housing and relief from rising and unsustainable rents,” while “preservation” focuses on keeping existing affordable homes in the community; “production” zeroes in on building new homes, guided by principles of “racial equity, belonging and affordability.”

“By coming together as funders, policymakers, advocates and service providers, we can change the story about housing in the Bay Area from one of exclusion to one of community, connection, and transformation,” says Khanh Russo, who directs the partnership. “The partnerships is really about working together across sectors to make sure everyone, whether Black, brown, Asian, or white, has a stable, affordable place that they can call home.”

What makes the partnership unique is not just the amount it’s raised, nor the diverse nature of funding partners, but its two-pronged approach, which focuses on both housing policy and investment. Russo says the partnership spent a year talking with community partners to identify critical gaps that could accelerate equitable and affordable housing for all.

The partnership is targeting local and state-level policy changes that protect renters and promote and accelerate affordable housing, working closely with the public agencies to enact needed reform. At the same time, it’s investing in affordable housing development and preservation, providing flexible funding that allows the partnership to unlock more funding for affordable housing.

Connecting the dots

The San Francisco Foundation provides the “backbone” support for the partnership, including the staffing, grantmaking and fundraising. In coordination with key partners, the foundation also guides the overall strategy, including managing the partnership’s policy and community engagement efforts. This includes overseeing the grantmaking program to advance racial equity and affordable housing policy in local governments and convening corporate, advocacy, research, development and service provider leaders to collaborate on developing and implementing affordable housing strategies at the regional and state levels. (SFF is also leading several other related housing efforts: Hope SF, Keep Oakland Housed and Bay Area Community Impact).

The Partnership for the Bay’s initiative Future Family Bay, administered by LISC, serves as the chief investment arm for the partnership’s development and preservation work, offering different financial products to mission-aligned developers and nonprofits. Interest rates on low-cost loans range from 4 to 5% for as much as $7.5 million each, as determined by area median income.

Different funds have been created for different housing-related needs. For example, one fund focuses on providing revolving lines of credit meant for small- to mid-sized development corporations. Another provides mixed-income “mezzanine” loans to support housing that blends market rate and affordable rental units to support the so-called “missing middle,” individuals who earn too much to qualify for government support but too little to afford market-rate units.

There are also very low-rate loans for supportive housing, intended mostly for persons experiencing homelessness. These include preservation loans, which focus on keeping low-income housing and HUD-funded affordable homes in the community, and affordability stabilization loans, which are provided to mission-aligned affordable housing developers to purchase properties before they are snatched up by speculative investors; low-interest loans for nonprofits and community-based groups fund affordable housing to serve their clients.

In 2019, the partnership awarded its first round of grants to local government entities and community organizations working to advance policy solutions to protect renters and preserve existing affordable housing. Grantees submitted coordinated applications between the local government and the community organization proposing a joint project they would work on together. The policies they are working on are an innovative collection of approaches to the region’s housing problems that center on racial equity and communities of color, including new systems to provide renters and communities with the right to purchase affordable homes before they are sold to outside investors, ensure county-wide protections for renters, and establish new approaches to building community wealth.

Key partners

As part of the Challenge Grant award, each grantee jurisdiction was matched with a mid-career fellow who is helping to provide needed capacity and expertise to accelerate solutions. The fellows also work with the grantee community organizations to ensure community involvement in the policy process.

“The fellows are an opportunity for us to really partner with cities to ensure they have the resources they need to draft policy, reach out to partners, and look at housing development issues through a racial equity lens,” Russo says. These resources are really critical, especially for local elected officials who might see the need for more affordable housing in the communities they represent but might be publicly unwilling to come forward due to NIMBYism, or who might waver in face of criticism. In addition, the fellows program is creating a sort of brain trust of all of these cities, who are experimenting and trying new tools, which allows the partnership to quickly identify what strategies are working and help to lift those up.

One recent policy win from the grantee cohort is San Jose’s new Anti-displacement Strategy.

“All Californians deserve a place they can call home, where they feel a sense of belonging in their community, and where they can build a better future for themselves and their families regardless of their race or zip code. The Partnership for the Bay’s Future enables Bay Area communities to help residents live in homes they can afford through its focus on local policy change and investment in building and preserving affordable homes, says San Francisco Foundation CEO Fred Blackwell.

With the financial stress wrought by the COVID pandemic pushing more households to the brink of homelessness, the need for complementary efforts that preserve, protect and produce affordable housing, like the partnership’s, are more important than ever. And, as more policy wins emerge from that work, we also hope to see more funders taking direct policy actions – like fellowships and funding for racial-equity-focused organizations and grassroots housing advocates.

Collaborative Effort Saves Affordable Housing in Redwood City

Given the dual perks of beautiful, historic homes and close proximity to Silicon Valley, it’s not surprising that housing prices have risen quickly, and gentrification has raged through the port town of Redwood City over the past ten years. Though the census bureau estimates that at least 50 percent of the households in the southernmost end of the city earn an income of less than 60 percent of the Area Median Income (AMI), the median rent in Redwood City is now more than twice the national median.

Such rocketing rates make it impossible for low-to-middle-income workers to settle down in their own community, and spells near certain displacement for those already here. Fortunately there are efforts at play to protect affordable housing and stop displacement in Redwood City, and those proving most successful are coordinated efforts like the one that saved 3592 Rolison Road.

This 1960s, single-story, 10-unit building is home to 13 professionals. Each tenant has a studio apartment with a small outdoor patio and a parking spot, and the building is only a short walk to a great market, bakery, coffee house, and brewery.

In 2018, however, the homes of residents at 3592 Rolison Road were suddenly at risk. After years of living under an owner who only slightly increased their rent over time, the building was up for sale and likely to be purchased and turned into market rate housing. They were terrified.

“When things get sold around here, they are instantly torn down,” says Tom Hem, a digital pre-press technician at a local printing company, who has lived at 3592 Rolison for almost 12 years. “And, whenever they build something new, it’s high end. That’s what developers do. They don’t put in affordable housing, they put in stuff a choice few people can afford. Unless someone steps in to keep the property affordable.”

HIP Housing, a non-profit affordable housing developer in the Bay Area, learned the building was being sold and stepped in to try and acquire it. Getting access to the funding needed, however, was going to take time, and time was not something that the red-hot San Mateo County housing market could accommodate.

That is when a second partner joined the effort to save this small, but crucial, building. The Sand Hill Foundation, a private foundation based in Palo Alto, offered to purchase and hold the building while HIP Housing built the financing needed to buy it themselves.

Sand Hill provided HIP with site control, but HIP, though grateful for the temporary reprieve, still had to find resources to purchase it outright, and quickly.

Redwood City has a program that balances housing stock by compelling market-rate developers to pay a fee to the city every time they develop a project. These fees are then redistributed to critical affordable housing projects. In an unusual move, Premia Capital, a local commercial real estate agency which admired HIP’s work, reached out to Redwood City to ask that their $2.49 million worth of fees go directly to any projects HIP was trying to fund. 3592 Rolison Road fit the bill.

“This was especially innovative,” says Kate Comfort, executive director of HIP Housing. “When it comes to protecting and preserving affordable housing, you have to act quickly. Redwood City’s great use of their Affordable Housing Ordinance and Impact Fee program and Premia’s proactive approach allowed us to get this funding when we actually needed it, and save this property. ”

 With fees from Premia in hand, the project only needed a loan of $1 million to meet the rest of the purchase price. Comfort approached a local community development financial institution, Capital Impact Partners, to see if they could help. Among other sources of funding that Capital Impact distributes, they originate loans for the Bay’s Future Fund (BFF), one of the largest housing funds in the nation. As the investing arm of the Partnership for the Bay’s Future, BFF is focused entirely on preserving, protecting, and producing affordable housing in the Bay Area. Andrew King, senior loan officer at Capital Impact, knew 3592 Rolison Road was a perfect project for BFF.

“It was an exciting, worthwhile project that even had everyone’s attention at city hall, and we knew that, with the Bay’s Future Fund, we could get HIP the rates and loan terms they needed,” said King. “We were so impressed by the project that we added an additional $100,000 to the loan– for a total $1.3 million– so HIP could also do some repairs.”

In the end, between the amount Redwood City put towards the purchase price and the Bay’s Future Fund’s long-term, low-interest loan, HIP’s mortgage payments on the property would be low enough to guarantee that rent for existing tenants will not change; and rent will be restricted to occupancy by people earning 60% of the Area Media Income (AMI) or below for the next 55 years.

Comfort is most impressed by the way it all came together. “To have private, public, and nonprofit partners all working together is exciting. We even got a local property management company to pitch in and help with some necessary, immediate renovations pro bono. This is atypical in the development world and just goes to show that, when various sectors are working together, you can get so much more done. It’s a thrilling feeling.”

Cindy Wu, Executive Director of Bay Area LISC, who manages the Bay’s Future Fund, agrees, “This is the story of partnership—of a group of diverse organizations coming together to make sure we don’t lose existing affordable housing— to maintain the livability of a piece of a neighborhood for the families that live there.”