Silicon Valley is in the throes of a housing crisis that is having a devastating effect on low and middle-income families. There are not nearly enough affordable homes in the region. Many people must spend much of their income on housing, or they are forced to move away.
Philanthropy is looking for creative ways to help address the crisis. One novel approach is to use financial markets to provide funding to develop affordable housing.
The Housing Trust Silicon Valley’s TECH Fund has announced that it has now raised $12.5 million, thanks to a $5 million investment from The David and Lucile Packard Foundation. The fund is a new initiative that will provide startup capital to build 10,000 affordable homes in the Bay Area over the next 10 years. The Packard Foundation joins Cisco Foundation and the Sobrato Family Foundation as the early investors in the TECH Fund, which provides institutional investors with the opportunity to use their funds to tackle the affordable housing crisis.
“The Packard Foundation is deeply committed to making our local communities strong and vibrant,” said Carol Larson, President and CEO of the David and Lucile Packard Foundation. “The lack of accessible, affordable housing in Silicon Valley is a threat to the social fabric and economic stability of these communities. This is a pivotal moment for action. Investing in the TECH Fund is an important pathway towards housing crisis solutions.”
The Packard Foundation is the first purchaser of the Community Impact Note that the Housing Trust created as an investment vehicle for the TECH Fund.
The investment by the Packard Foundation brings the total committed to the TECH Fund, which stands for Tech + Equity + Community + Housing, to $12.5 million. The goal is to create a $50 million fund that can be used for low-interest loans to affordable housing developers. Investors can choose between a five-year note at 1.5% interest or a 10-year note at 2% interest. All investments will be repaid in full at the end of maturity, and investments in the TECH Fund are backed by the Housing Trust’s AA- Standard & Poor’s rating.
“We are thrilled that the Packard Foundation is joining in our efforts to bring new players to affordable housing finance,” said Kevin Zwick, CEO of the Housing Trust. “The housing crisis in our region affects everyone’s quality of life and this is an opportunity to invest in a solution that will make a meaningful difference.”
Cisco Foundation was the first investor in the TECH Fund in April with a $2.5 million commitment and a promise to consider matching up to $10 million from other investors. The Sobrato Family Foundation announced approval of a $5 million investment in May.
Since 2000, Housing Trust Silicon Valley has invested $131 million in multifamily lending, homeownership assistance, and programs to reduce homelessness that has created nearly 15,000 housing opportunities. It is the first nonprofit Community Development Financial Institution (CDFI) in the nation to receive a Standard & Poor’s rating of AA-.