A Recipe to Create Affordable Housing

Nonprofit developer MidPen Housing has been building affordable housing in the Bay Area for more than 50 years, but as the region’s housing crisis has reached new depths, the organization took a bold step to strengthen their mission to assist low-income residents. In 2020, MidPen adopted a new strategic plan that aims to set aside at least 40% of the new homes in their development pipeline for either permanent supportive housing or households earning extremely low incomes (ELI, below 30% of area median income). 

“Every year HUD increases the area median income (AMI) not because actual income is increasing, but to match drastically rising rents and, for the past few years, the AMI has been increasing by about 10% annually in Santa Clara County,” says MidPen Vice President of Business Development Felix AuYeung. “This means that low-income housing is not serving the population that it used to. We want to ensure we can continue to serve fixed-income families, people with disabilities, and households with other limitations.” 

AuYeung adds, “Homelessness in the state of California is severe. As affordable housing providers, there is no line behind us. There are very few other options for creating permanent housing support for these members of our community. We feel we have to take on more responsibility.” 

MidPen is putting its new plan into action with its latest development, which will serve formerly homeless residents and households earning extremely low incomes in the leafy suburb of Sunnyvale. And it’s very much needed. 

“We have to remember that there are unhoused individuals in every Bay Area community, so we can’t just have projects in the three big urban centers,” says Ray Bramson, COO of Destination: Home, an integral project partner. “Sunnyvale is an exciting place to build—bucolic and suburban and yet near the Caltrain and replete with amenities. It’s a place where you can spend the rest of your life and have access to all the little joys that make it a home.” 

But location is only one of the things that makes this project so refreshing. The most inspiring thing about 1171 Sonora Court–a seven-to-eight story building which will add at least 160 more homes to the community when it is completed in 2030–is how it came together. 

In January 2020, after the city of Sunnyvale supported MidPen’s purchase of a neighboring site on Sonora Court that will result in 176 affordable homes, MidPen was looking to develop another project of similar scale in the area, which has been gradually becoming  more residential. The owner of a manufacturing site kitty corner from the 2020 purchase placed their property, 1171 Sonora Court, on the market. MidPen promptly purchased the property and is now in the process of moving the project forward. 

“It was an extraordinary deal because it meant purchasing a piece of land that wouldn’t be developed for several years – something we could only do because of our strong relationship with the city, which encouraged us to apply for future City funding from anticipated impact fees,” says AuYeung. “At that point, all we needed was to find someone who would lend us the money for the acquisition, which meant finding someone willing to take this leap with us.” 

MidPen reached out to the Community Housing Fund (CHF) for support. CHF, a loan fund launched under the Partnership for the Bay’s Future in December 2020 with $150M seed funding from Facebook and additional funding from Destination: Home and Local Initiatives Support Corporation (LISC), is dedicated to producing housing for renters earning extremely low incomes. LISC manages the fund and serves as a lender, along with Corporation for Supportive Housing (CSH) and Capital Impact Partners. 

It was exactly the type of project the founders of the Community Housing Fund had in mind when developing this resource and lenders at CSH started underwriting it immediately. 

“CSH works to provide early, higher-risk capital to developers who provide housing for individuals and families who experience homelessness,” says Brigitt Jandreau, Chief Lending Officer for CSH. “We were thrilled to make this loan because the project is not only committed to racial equity and serving those with extremely low incomes, but the large number of units in the development means we can help provide much-needed housing and supportive services to help a significant population in this community really build strong futures and thrive.”  

Because of this partnership, every unit at 1171 Sonora Court will be affordable, with at least 20% of the homes designated as permanent supportive housing , another 20% of homes for those earning up to 30% AMI, and the remaining homes reserved for those making between 30% AMI and 70% AMI. The building will accommodate both individuals and families with a diverse unit mix from studios to three-bedroom apartments and will include several shared spaces such as a community room, resident lounge, community kitchen, learning center, laundry rooms, playground, central courtyard, case management rooms, and structured parking.

Residents will also be able to take advantage of a large array of services, including an academic program run by MidPen Resident Services that supports kids after school and in the summer, and a leadership program for youth. Adult programs include financial and vocational management. Onsite staff will also construct service plans for each resident experiencing chronic homelessness; then provide them with services covering issues ranging from housing retention to ongoing behavior modification, to integration activities in order to facilitate the resident getting involved in community engagement, community building, and educational workshops.

Cindy Wu, Executive Director of LISC Bay Area is thrilled to see 1171 Sonora Court be one of the earlier projects to close out of the CHF. “This project is confirming the hypothesis we had when we started—that we would be able to find development partners that would create deeply affordable properties with creativity if we had a fund that would allow them to act with flexibility and speed,” says Wu. “All the players were able to act fast enough to allow MidPen to acquire the land and move the project forward while securing this extraordinary ELI commitment up front. It will be a tremendous addition to the Santa Clara community.”