This story was originally published in Affordable Housing Finance.
After being on the drawing board for more than a decade, an affordable housing community has broken ground in San Jose, Calif.
The long-awaited development will bring 64 affordable homes to seniors who have been chronically homeless, with some units reserved for seniors requiring in-home supportive services.
Leigh Avenue Senior Apartments became stalled during the recession and the dissolution of the state’s redevelopment agencies several years ago. Despite the setbacks, officials at First Community Housing stuck with the development, working to keep the project alive during shifting real estate cycles and changing financial conditions.
The project illustrates just how difficult it can be to develop affordable housing. It’s also an example of how Housing Trust Silicon Valley is deploying its innovative TECH (Tech + Equity + Community + Housing) Fund, an investment vehicle created to enable philanthropists and greater Bay Area employers take part in the affordable housing solution.
The approximately $50 million Leigh Avenue development is utilizing multiple funding sources, including a $2 million predevelopment loan from the Housing Trust.
“Predevelopment sources are not super abundant, and it comes at a risky stage of the development process,” says Sophie Rubin, director of communications at First Community Housing.
The Housing Trust initially provided a $3.75 million acquisition loan followed by the predevelopment loan, which included money from TECH Fund, according to officials.
The TECH Fund is also part of a $15.9 million acquisition and predevelopment loan that the Housing Trust has made to First Community Housing for McEvoy Apartments, a transit-oriented community that is proposed to bring more than 300 units in two phases to San Jose.
The fund began in 2017 with an initial investment from the Cisco Foundation, with the goal of helping affordable housing developers compete for sites that may otherwise go to market-rate housing or other developers. The funds have been used to buy land next to transit in downtown San Jose and close to jobs in Mountain View as well as preserve existing properties in Redwood City.
Built initially to create 10,000 affordable housing units in 10 years, the TECH Fund has helped start about 1,500 homes across 15 developments across Silicon Valley, with more than half for families, a third for the homeless and/or permanent supportive housing, and one in five for seniors.
The Housing Trust recently announced new investments of $5 million each from LinkedIn and Pure Storage and $10 million from Cisco, bringing the fund total to $52 million. Other investors have included the Grove Foundation, David and Lucile Packard Foundation, and Sobrato Family Foundation.
The organizations are recognizing they have employees across the economic spectrum, whether its drivers, people working in food service, or software developers, says Julie Mahowald, CFO and interim CEO of the Housing Trust.
“In order to grow, they need all those people, and they need them to show up and be ready to work,” she says. “If they are slogging through traffic for two hours because they cannot afford to live nearby then that’s going to harm the company in the long term. They need all their workers to be their best selves. It impacts productivity if people can’t get to work or don’t have a safe, stable home.”
The San Jose metro area has a shortage of approximately 58,600 rental homes affordable and available to households at or below 50% of the area median income (AMI), according to The Gap: A Shortage of Affordable Homes report by the National Low Income Housing Coalition. In other words, only 31 affordable and available rental homes exist for every 100 extremely low-income renter households and 40 exist for every 100 renter household earning at or below 50% of the AMI.
The money raised by the TECH Fund will be revolved over the course of a 10-year investment period, at the end of which investors receive a modest return on their investments in addition to the original investment being repaid and, most important, having created 10,000 affordable housing opportunities during that time.
The TECH Fund can be deployed across the Housing Trust’s multifamily program, the bulk of which involves predevelopment and acquisition activities.
The fund is a strong example of how a growing number of companies are investing in affordable housing.
Microsoft recently pledged $500 million to help address the housing crisis in the Puget Sound region, and Kaiser Permanente recently invested in an affordable housing community near its Oakland, Calif., headquarters and has announced a $100 million loan initiative with Enterprise Community Partners to create and preserve housing for low-income residents throughout the health-system’s service area.
This story was originally published in Affordable Housing Finance.
