| News - Friday, July 31, 2009
Upfront: Marin Community Foundation puckers up
Can affordable housing advocates make lemonade out of bitterly sour housing market?
by Peter Seidman
"While this is here, we're trying to do something good in a rather abysmal reality."
That's how Philip Kilbridge, executive director of Habitat for Humanity Greater San Francisco, describes a new affordable housing program his organization is participating in with the Marin Community Foundation (MCF) to "make [affordable housing] lemonade out of lemons" in Marin's depressed housing market.
The foundation has pledged $10 million to go toward a five-year plan to increase the amount of affordable housing in Marin for low-income families, seniors and others. A key part of the plan involves a partnership with Habitat and North Bay Family Homes, a Novato-based nonprofit organization.
The two affordable-housing partners will use foundation money to leverage the purchase and rehabilitation of foreclosed homes in the county. "One immediate and innovative component of the new initiative will be to turn the availability of foreclosed homes into a double-win," says MCF President Thomas Peters, "benefiting both families and neighborhoods."
In 2006, the foundation announced a change in its policy regarding the amount of money it gives to sustaining grants and grants that initiate programs. Previously, it allocated 70 percent of the Buck Trust grants to help cover operating and maintenance costs—sustaining costs—to Marin nonprofits. The remaining grants went toward new one-time, or initiating grants. The goal was to go through a two-year transition period after which the foundation would grant 50 percent of its annual disbursements to sustaining grants and 50 percent to initiating grants. The total amount of money did not decline; the only change was in the targeted use of the grant money.
The foundation restructured its grant-giving policy to promote four specific areas: uncertain economic security and challenges to upward mobility for Marin's poor; the county's effect on global warming; the education gap between students in families with low incomes versus those in families with upper-level incomes; and the continuing need for more affordable housing.
Peters says, "A number of affordable housing advocates, really skilled partners—EAH, Eden Housing, North Bay, Habitat and others—were key to our forming this initiative" to buy foreclosures and rehabilitate them. "We are delighted that we can be of help to these folks, but they are the ones who are the experts." Affordable-housing financing, adds Peters, "is like a 20-ingredient" pizza, and the initiative is designed to be one of the ingredients.
Marin Community Foundation plans to allocate about $2 million each year to the program. In the first year, about half of the money will go toward buying and refurbishing foreclosed homes, then selling them to low-income families. One million dollars doesn't go far in the real estate world, even in a depressed market. But it's a lever, says Peters, and nonprofits can use it to tap into state and federal tax credits, help buy several homes at once and use it in other ways to multiply its value. "We're looking at using that $1 million in the first year to not only act as seed money but also to teach us all about how to be even smarter and more impactful as we go on into this five-year plan." He goes on to say, "It's a like the starter dough in sourdough."
In addition to the partnership plan to purchase and rehabilitate foreclosures, the foundation will put money from the housing initiative to work in West Marin to improve housing for farm- and dairy-workers. "The issue out in West Marin," says Peters, "is not so much getting the housing; it exists. There are structures there, but they need emergency intervention." Several ranches and dairies have "stepped forward and are looking to participate with us and the county of Marin."
Peters reserves special praise for Supervisor Steve Kinsey, who has pushed for improved housing for the workers in West Marin. "This one really belongs to Supervisors Kinsey," says Peters. "He started talking to us easily two years ago about this." Rehabilitating housing for farmworkers "really is about safety and equity. It's about the safety of the structures themselves, to make them fit and proper homes. But it's also about equity. These are families in almost all instances, and they're making a substantial contribution to this community and certainly to our economy." The program aims to produce "humane and appropriate housing for these families, just like most of the rest of us enjoy in this community."
The five-year plan also focuses on coordinating with cities and towns in the county to help them meet their zoning and other planning requirements that mandate and support affordable housing. A fourth component aims to prevent families in Marin from slipping into homelessness. Targeted toward helping families in precarious situations, for instance, a $75,000 grant to the Marin Housing Authority helps provide emergency funding for medical expenses, car repair and other financial necessities.
Recent real estate news hints at a bottom in the market, but mixed signals show that the foundation's plan to help organizations like Habitat buy and refurbish foreclosures fills a serious need, especially in Marin. Foreclosures dropped 18 percent in Marin in the second quarter this year. But that news is tempered with an increasing number of notices of default throughout the Bay Area. These notices are sent to people who are delinquent in paying their home loans. And there's an expectation that the foreclosure rate may increase in the third quarter, if the state fails to extend a moratorium.
It seems that this would be a good time for purchasing foreclosures and rehabilitating them into affordable housing. Not necessarily, says Megan Kirkeby, a policy analyst at the Nonprofit Housing Association of Northern California. "A lot of foreclosed homes are being bought up by speculators—and not for nonprofit reasons." Affordable housing organizations are finding themselves competing with those speculators. Lenders tend to lean toward applicants who provide the lowest risk and the fewest complications. As Peters says, funding in the affordable housing market can reach byzantine proportions. That makes MCF's backing even more important when an organization creates a funding package.
Habitat already has created a successful funding package—and a successful transformation of foreclosed properties in a program similar to the foundation's. Under the Neighborhood Revitalization Program, Habitat and the city of Menlo Park each put up $500,000 to jump-start a plan to buy five foreclosed properties in that city's Belle Haven neighborhood. Habitat bought the first home for $225,000, a price that illustrates what happened to the market on the Peninsula. Kilbridge says, "Faith institutions, corporations, family foundations and others have stepped up," including the Bank of America and Wells Fargo and "other financial institutions," to help with the finances in the Belle Haven program. That's leverage at work.
Belle Haven, not to be confused with ritzy sections of million-dollar homes in Menlo Park, has a high number of foreclosures. A few years ago, home prices in Belle Haven topped out at about $600,000. Now they sell for between $200,000 and $400,000.
That first Habitat project in Belle Haven is a three-bedroom, 910-square-foot home, says Kilbridge, "that was effectively a seven-bedroom, one bath." The garage had been converted to two rooms and two nonconforming rooms were added. The property sold about three years ago for $675,000. "Trust me when I say it was not a delight to look at, smell or otherwise experience." Three years later Habitat bought it "without any special deal" for $225,000. Habitat is using its typical model of having one site supervisor—a paid staff member—working with 15 to 20 volunteers. Using donated labor, the sweat equity of the family, plus donated or discounted materials to rehabilitate the home, when all the bills are paid Habitat will have spent about $42,000. And the donated labor will have come to about $150,000 worth of work.
The transformation of a foreclosed and derelict structure into a model home has met a welcome response in the neighborhood, especially because Habitat pays particular attention to the look and feel of the exterior, including landscaping.
Habitat homes remain affordable because when a family moves out, Habitat has the right of first refusal to buy the home for the original price, plus an adjustment for each year a family owned it. The adjustment is based on either 3 percent or the Consumer Price Index, whichever is less. When Habitat buys back a home and resells it, the new owners abide by the same mandates.
Habitat is now being asked by the community to look at other homes in the area. Kilbridge says his organization has purchased some of the homes it learned about through community tips. He sums up the Menlo Park experience this way: "It's a winning situation."
Whether that same welcome will meet Habitat in Marin remains to be seen. In the past, county residents have bristled when the organization proposed projects in Marin. But times change. And constructing a new Habitat home in a neighborhood is quite different from rehabilitating a derelict building that blights a neighborhood. Kilbridge says he and Habitat's director of real estate development came to Marin last week to look around in Novato, San Rafael and Fairfax to get a sense of what may be possible in the county.
"You know, what's fascinating is that Habitat's worldwide mission is to eradicate poverty housing. I think we have this perception that poverty housing means a shack with a corrugated metal roof and no plumbing. But there is incredible poverty housing in Marin County." Kilbridge says he saw a place in Fairfax that originally was a two-bedroom, one-bath home "that had been transformed into a six-bedroom, two-bath, two-kitchen home in horrific condition, with old and exposed wiring. It was clear that up until six months ago somebody lived there and called that home." He says that from the evidence he saw, maybe 15 or 20 people were living on the property. "That's the kind of [site] that could qualify for a Habitat rehabilitation project, properties on which we can do the most work so a family can succeed, and we don't have to pay an arm and a leg to acquire on the front end."
One financial tool Habitat cannot use in Marin is stimulus money from the federal Neighborhood Stabilization Program, which is authorized under the Housing and Economic Recovery Act of 2008. Although the county has received about $659,000 in federal stimulus funds for various housing programs, and the Marin Housing Authority has applied for additional funds, none of the funds are part of the Stabilization Program. The foreclosure rate in Marin, even though serious, is below the trigger for qualification. That makes the foundation's commitment even more important.
But, as Kirkeby points out, buying foreclosed homes and putting them back into the market as affordable units does not increase the overall housing supply, which ultimately affects affordability. "Foreclosure is not a housing-production program."
Contact the writer at peter@pseidman.com | 
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