Silicon Valley's Affordability Problem
Development is hot, but we've got a ways to go when it goes to injecting the Valley with more affordable units, according to all-star panelists at Bisnow's Future of South Bay event yesterday at the San Jose Hilton. (Either that or turn all the multifamily buildings into pay-by-the-hour motels.)
San Jose planning director Harry Freitas has worked on almost every major development project San Jose has seen in the past 25 years (including the expansions of the San Jose airport and convention center next door to the hotel). Now he's making big changes to improve the biz climate, and San Jose's got expedited services to put developers through the entitlements process faster than any other neighboring city. One perk is the reduced North San Jose traffic impact fee. (He welcomes calls about project ideas or problems: 535-7900.)
Santa Clara Mayor Jamie Matthews, who's helped bring unemployment down to a single digit since taking office in 2010, reminds the audience that traffic is a sign of economic vitality. He's working to find housing for Santa Clara's large senior population (in June, the 48-unit Camino del Rey senior apartments debuted). More affordable units across the board are a must; not everyone makes six figures, and service sector jobs are coming to town. The reason Alex Byer invested $28M in redoing the Santa Clara Town Centre (where Target just opened) is because of the city's plan for more housing nearby via conversion of motel sites. (PS: His purple doesn't mean he's a Ravens convert; he's supporting Domestic Violence Awareness Month.)
City of San Jose director Leslye Corsiglia acts as a multipurpose lender, financing for development of new affordable rentals. She understands the significant need for more senior housing and is working on bringing a couple hundred units to town. In San Jose alone, there needs to be 2,400 new affordable units built each year just to meet the need for new growth. She admits the market crash made it difficult to finance new development, and some units in the pipeline are seven years old. She's now trying to do anything possible to find resources and money to continue the work they're doing.
Housing Trust Silicon Valley CEO Kevin Zwick acts as a nonprofit community lender to hash out local affordable housing issues. Last year, he got banks and Cisco on board to get projects off the ground via acquisition, construction, and predevelopment loans. He's helping a developer finance some for-sale condos in Santa Clara. Around the Bay Area, there are cities that have studied issues and have put together thoughtful policies and new funding sources. They are ahead of the game, and it's about supporting the rest of the cities to find resources for affordable housing.
NorthMarq SVP Dennis Williams says in the last 18 months, his S.F. office has arranged financing for 2,500 units in South Bay (all market rate with some component of affordable). You can finance just about anything right now in Silicon Valley, he says, and he works in such arenas as life insurance, construction, and equity financing. On one hand, all lenders want to do business here. On the other hand, we have national underwriting standards that can cause challenges—despite low cap rates in the 4s. Before the panel, he showed us his printed out Nationals ticket for last night. (He must have been good luck.)
SummerHill Homes SVP Katia Kamangar says her company builds 100 to 250 homes a year, including townhomes to $3M luxury mansions. On the multifamily side, SummerHill has over 1,000 units under construction in areas like Walnut Creek and Sunnyvale, with 1,300 more in the pipeline. She looks for opportunities in the Bay Area near transit, especially for multifamily. One deal she's working on now in Santa Clara is the assemblage of 26 acres of land near the Caltrain station, which will offer a variety of housing types and price points for sale and rent. She tries to focus on infill because in market cycles, that tends to weather the best. She's seeing some NIMBY-ism as cities transform and some equate new apartment projects to more traffic.
Polaris Pacific director Lindsay Lessman works on projects ranging from 17 units to 656 units. She, too, sees most growth occurring around major transit hubs, and says downtown San Jose is particularly hot. Communities like San Mateo's Bay Meadows of the world are doing great, she adds.
Allen Matkins partner Lee Gotshall-Maxon, who moderated, has worked on 7,500 ground-up units in the Southwest over the past 20 years. This is the hottest residential market he's seen in his career.