Affordable housing developers are always looking for inventive, new ways to make more homes for extremely low to moderate income individuals and families available. Succeeding relies not only on getting creative when searching for the right housing stock, but also on finding a willing funding partner to push the limits of traditional financing to get the deal done. Fortunately for Oakland, such a developer and funder team recently partnered to accomplish a fairly unusual deal – the simultaneous purchase of three local buildings that became permanent affordable apartments in January 2020. And they are all located in desirable neighborhoods surrounding Lake Merritt.
The East Bay Asian Local Development Corporation (EBALDC) is a local neighborhood Community Development Corporation (CDC) that is passionate about creating healthy, vibrant, and safe neighborhoods for diverse populations in the Bay Area. In their mission to create strong communities, EBALDC is always searching for ways to protect rental homes.
“We typically focus on buildings with at least 20 units, so this was a bit different for us,” says Andy Madeira, Chief Executive Officer at EBALDC. “Two of the buildings were also in neighborhoods we’d never worked in before, but together, these buildings presented a real opportunity for us to make a dent in the affordable housing market. We had to try.”
Purchasing multiple small buildings, however, translates into higher per unit acquisition and operating costs. And purchasing buildings in more affluent or gentrifying neighborhoods meant greater competition for the purchases. This deal was going to be challenging but creating affordable housing units in more affluent neighborhoods also presented a different kind of opportunity.
“We are committed to helping everyone find safe, affordable housing as well as ample opportunities to live a fulfilling life,” says Madeira. “It’s exciting to provide affordable housing in communities where our tenants will have access to great amenities like well-funded schools, health care providers, employers, parks, and dining and shopping corridors.”
To make all this happen, EBALDC had to act fast. They turned to the Local Initiatives Support Corporation (LISC), who manages funds for the Bay’s Future Fund (BFF), the investment arm of the Partnership for the Bay’s Future. LISC agreed that the BFF would put close to $1.2 million into the project.
“Supporting EBALDC in this project was really important to us,” says Cindy Wu, Executive Director of LISC in the Bay Area. “EBALDC is much more than just an affordable housing developer, they are a strong neighborhood-based CDC and community anchor that cares and invests in low wage communities. We know they will be great stewards of this project and that through this, they will help demonstrate the viability of creative, community-based solutions.”
EBALDC needed over $13 million to support the purchase. Getting nearly $1.2 million from the BFF at only 1% brought down the average total cost of the capital substantially, allowing EBALDC to cap rents at the affordable rates while still paying down their debt. In addition, because of the secured funding and partnership, EBALDC was able to proceed with critical and immediate repairs such as broken windows and remediation of extensive mold.
“Another great benefit of working with the Bay’s Future Fund was the efficiency with which we were able to make the deal,” says Madiera. “While other sources of capital involve a time consuming, multi-step bridge loan process, working with the BFF allowed us to move with the speed of the market in one transaction and provide a competitive offer.”
In January of 2020, EBALDC purchased the properties.
646 Foothill Boulevard is a three-story building in the rapidly gentrifying East Lake neighborhood. Sitting on a large lot, the property boasts 3 one-bedroom and 12 two-bedroom units, along with great outdoor space in a community of single-family homes.
3465 Richmond Boulevard, in the Adams Point Neighborhood, is surrounded by redwoods and consists of 12 two-bedroom units and a two-bedroom penthouse.
The third property, at 430 Vernon Street, also in Adams Point, contains 12 two-bedroom units and includes tenant access to laundry, parking, and a beautiful, grassy garden adjacent to the property.
Together, the buildings contain 40 homes, which EBALDC plans to restrict to tenants earning 60% of the Area Median Income or less. “Many of those living in the housing we support live paycheck to paycheck. If anything goes wrong, they can’t make their rent. COVID is the perfect case in point,” says Madiera. “During the pandemic, EBALDC has been working to connect our residents with not only rental assistance, but food, healthcare, and other necessities. We believe our job is to make sure that people stay housed even when things go wrong in their lives.”
Wu is excited by the even broader impact this deal stands to make. “While each project we fund is exciting, we also believe that through the example we are setting with the Partnership for the Bay’s Future’s investments, we model what is possible in affordable housing,” she says. “Encouraging other funders to replicate this work is the one crucial way to make the outsized impact necessary to tackle the affordable housing issue in the Bay Area.”