As the tech center of the world for decades, Silicon Valley is synonymous with innovation. And innovation is what is needed to address our deepening housing crisis. Not just innovation in technology, but innovation in thinking, in approaching the problem from a different mindset. We’ve begun to see some Silicon Valley companies and community organizations use innovative approaches in the financing of affordable housing.
The TECH Fund – Tech + Equity + Community + Housing – is a financing vehicle in which Silicon Valley companies are investing in our communities that lack nimble and early affordable housing funds to purchase land and jumpstart developments. Housing Trust Silicon Valley launched the TECH Fund in March 2017, to provide quick funds for land acquisition and financing for the pre-development of affordable housing. At the time, there were no investment funds that could attract liquid assets from Silicon Valley companies. The TECH Fund was the first to meaningfully tap into this liquidity for its capital and has been a model for organizations and regions to follow.
It takes corporate treasuries thinking differently about investing. Traditionally, they have parked cash in the short-term for a reasonable rate of return. The TECH Fund has a very modest long-term return of 1.5% for a five-year investment and 2.0% for a ten-year investment. Treasuries can get higher returns in money markets or short-term bonds, so they need to think differently about investments with an affordable housing mission. This adjustment allows them to become invested company partners in affordable housing solutions, creating a win-win for the company and the community.
Cisco Systems was the first investor in the fund and LinkedIn, Sobrato Family Foundation, Pure Storage, The David & Lucile Packard Foundation, NetApp, and others have followed. Recently, Google announced a $1 billion pledge to build affordable homes in the Bay Area. The TECH Fund will receive $50 million, and $200 million will go to additional financing solutions including an investment fund to incentivize developers to build affordable housing units and to focus on homelessness. The majority of the balance goes to rezone Google-owned land for housing, thus enabling the development of new homes at all income levels.
Google’s investment makes the total that the TECH Fund has raised for the creation and preservation of affordable homes to $112 million. To date, the fund has financed 2,256 homes, with an ultimate goal of 10,000. And the money Google invested is already being put to work. On August 28, it was announced that a portion of the funds helped PATH Ventures acquire 1020 N. 4th St. in the Hyde Park neighborhood of San Jose. The development will include 93 homes for formerly homeless seniors.
What does this mean for the community? It means affordable homes in safe neighborhoods for families, the elderly, people with disabilities, and other vulnerable populations. There are many other community benefits that come with this investment. People can live closer to their jobs, saving millions of long commute miles and greenhouse gas emissions per year. Children have better educational outcomes when they live stable homes and neighborhoods. Renters can afford to live and work locally, saving millions of dollars per year.
In the May/June issue of the Housing Trust’s newsletter is an interview with Ralph, a formerly homeless army veteran who was able to move into Second Street Studios – a recently opened San Jose complex with pre-development funding provided by the Housing Trust. Ralph’s security deposit – as well as the deposits of 126 additional residents – was provided by Housing Trust’s Finally Home program, which benefits directly from the Silicon Valley Leadership Group Foundation’s Applied Materials Silicon Valley Turkey Trot.
“I am able to sleep,” Ralph said when asked about the difference in his life now that he has a place to live. “I don’t have to worry about where I am going to find my meal for the next day. I have a place to store food and a place to cook – it is so different living in a place with a fridge and a stove. And I don’t have to worry about being ripped off, or stabbed, or whatever, out on the streets because you don’t know what happens out there. I don’t know who to thank first for all of this!”
A company’s investment in the Housing Trust’s TECH Fund is a reward for us all.
-Kathleen Wortham, Senior Associate, Housing and Health Policy, Silicon Valley Leadership Group | September 5, 2019