Chan Zuckerberg-Backed Fund Targets Bay Area Housing Crisis
(Bloomberg) -- The philanthropy started by Facebook Inc.’s Mark Zuckerberg and his wife Priscilla Chan is backing a fresh effort to address the housing shortage in the San Francisco Bay area, where an explosion of tech wealth has deepened inequality and contributed to an affordability crisis.
The Partnership for the Bay’s Future -- which the Chan Zuckerberg Initiative is starting in conjunction with the San Francisco Foundation, the Ford Foundation and other groups -- will seek to preserve and create affordable housing through a new $500 million investment fund. It’s also targeting a $40 million fund aimed at government policy changes, according to a statement Thursday. Facebook and Genentech are among the companies making contributions.
The initiative, while largely driven by philanthropies, is the latest example of how tech companies and their executives are seeking to alleviate a crisis that they’re often blamed for exacerbating. Just last week, Microsoft Corp. announced its own $500 million plan to support affordable housing and homeless services in the Seattle area, a region that’s also seen skyrocketing housing costs along with swift growth in its tech industry.
The Bay Area, however, has become a national symbol for a housing market that’s accessible only to those at the top of the income ladder. The median house price in San Francisco is now $1.6 million. And homes are even more expensive in Silicon Valley, where Facebook, Apple Inc. and Google parent Alphabet Inc. are based. Teachers, nurses, firefighters and other essential public servants often struggle to find places to live, and even some highly paid tech company workers are getting priced out.
“This is a problem that impacts the greater community,” Chan, who started her philanthropic investment company with Zuckerberg in 2015, said in an interview with Bloomberg Television. Tech companies and their leaders “want to be a part of building the Seattle or the Bay area into this place that people from all different backgrounds can come and be successful.”
The Bay Area’s crisis stems from explosive economic growth paired with little new construction. The region has added 722,000 jobs since 2010, but only created 106,000 new units of housing, according to a report from the Committee to House the Bay Area, a group promoting a regional plan to address the crisis. It backers have advocated for producing 35,000 new homes annually and preserving and protecting tens of thousands more.
The Partnership for the Bay’s Future will seek to further those efforts, which, along with other policy changes, could add or protect 175,000 homes in the region. In a sign of how steep the challenge facing the area is, though, the group estimates that its $500 million investment vehicle, which is expected to be one of the largest housing funds in the country, may add or preserve only around 8,000 homes over the next five to 10 years.
It’ll do so through a combination of products that aim to plug gaps in financing that have bedeviled affordable-housing developers and operators. One such offering will be revolving lines of credit to help community development organizations buy land in a competitive and fast-moving property market. Another will seek to give loans to build supportive housing for people experiencing homelessness.
While the new effort is commendable, if the investment fund only produces 8,000 new units, “that’s a drop in the bucket,” said Issi Romem, the chief economist for real estate data provider Trulia. The more important outcome might be changes to land-use policy that would make it easier to add the needed density, he said.
The seeds of the partnership began roughly two years ago, when representatives from the Chan Zuckerberg Initiative, the San Francisco Foundation, the Ford Foundation and some corporations began discussing what a solution to the region’s housing crisis might look like. They asked public officials, community groups and religious organizations for input, and eventually pulled in the Local Initiatives Support Corp., or LISC, a national housing organization that will run the $500 million investment fund.
“When we first started these kinds of conversations, there was a sense that these kinds of issues were somebody else’s problem,” said Fred Blackwell, chief executive officer of the San Francisco Foundation. “And what’s happening is that folks in the corporate sector, and tech sector more specifically, are starting to see this as a business problem. It’s creating a situation where it’s hard to recruit good workers.”
The wide range of players involved means that, unlike Microsoft’s announcement last week, money for the effort will be coming in from different quarters, and only about half of it is currently raised. To kick things off, the Chan Zuckerberg Initiative is seeding the investment fund with $40 million and the policy fund with $10 million. Facebook, for its part, is putting $1 million toward the policy fund. Genentech, located in South San Francisco, will add $10 million, split between the two vehicles.
Maurice Jones, the president and CEO of LISC, said the number of different partners is a strength of the initiative. He also applauded the fact that the group will focus on policy as well as financial contributions.
“The bottom line is you really need both efforts if you’re going to maximize any investment,” he said.
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