A conversation with the Tenderloin Neighborhood Development Corporation on May 28, 2014

Participants

Note: These notes give an overview of the major points made by Donald Falk.

Summary

Good Ventures spoke to TNDC as part of a limited investigation into housing affordability in San Francisco. SPUR Executive Director Gabe Metcalf and Association of Bay Area Governments Deputy Executive Director Bradford Paul recommended TNDC to Good Ventures. Conversation topics included TNDC’s activities and goals, strategies for increasing the supply of affordable housing, opportunities for philanthropy and technology companies to get involved, and other organizations and funders working on this issue. Good Ventures subsequently made grants to TNDC and SPUR.

Overview of TNDC

TNDC was founded in 1981 in response to the housing crisis of the late 1970s in San Francisco and the Tenderloin’s being the only low-income neighborhood without a neighborhood-based nonprofit developer. It seeks to address housing affordability and displacement in the city by buying property, owning it in perpetuity and renting it at below market rates to low-income households. TNDC also offers a range of social services relating to children and youth, adult social services, food security and community organizing, including forming tenant associations in its buildings, managing community gardens, and working to bring a grocery store to the Tenderloin.

TNDC currently owns 2,500 units across 30 properties in the Tenderloin, SOMA and other San Francisco neighborhoods. It will own over 3,500 units by 2018. Over the last decade, TNDC has roughly doubled the number of units it owns.

TNDC, which was started with funding from Franciscan Charities and continues to hold some Franciscan values, focuses almost exclusively on the City’s lowest-income households. People earning less than $1,000 per month occupy 80% of TNDC’s units; 25% are occupied by households that were previously homeless, and about 100 units are occupied by people with HIV/AIDS. TNDC’s tenants also include working-class families.

There is evidence that housing has a significant positive impact on many other aspects of life, including health, education, and child development. TNDC encourages other organizations to think about affordable housing as a platform for other kinds of social progress. It hosted a symposium last fall on the broader benefits of affordable housing. 

70% of TNDC's revenues are from program income, such as rent payments.

Addressing housing affordability in San Francisco

Affordable housing development is greatly underfunded at both the state and national levels. However, housing affordability is getting more attention than ever before, creating an opportunity for change. Mr. Falk supports Mayor Edwin Lee’s target of developing 30,000 new units (at least 10,000 of which would be affordable) in San Francisco by 2020.

Important strategies for increasing the supply of affordable housing include:

  1. Increasing purchases of sites for affordable housing in the next few years. The city is not on pace to reach Mayor Edwin Lee’s target of 10,000 new affordable units by 2020. New sites should be bought as soon as possible, because property prices are likely to continue rising.
  2. Creating a steady stream of funding for affordable housing development. San Francisco should be systematically producing twice as much housing as it currently is. Past efforts to fund affordable housing have often been done as one-off projects, which can drive up contractors’ prices and do not allow for development of strong management systems. Public funding for affordable housing comprises "gap financing,” i.e. paying the difference between a project’s cost and the source of financing it can generate through conventional and other public sources. In San Francisco, about $250,000 per affordable unit is required in gap funding. California Propositions 1C and 42 and the California State Housing Trust Fund also provide gap financing. Raising money for gap financing now will allow developers to start construction in about three years. It takes about five years to develop new housing.

Another approach is to incentivize or mandate affordable housing development. Supervisor Jane Kim has proposed a measure that would establish a goal that at least 30% of the units in the City be below market rate, and requiring that new developments that do not meet the threshold would have to complete an additional step in the approval process. It is unclear whether such a mandate would discourage development, or lead to more support for public funding for gap financing, which could lead to more development in the long-term.

Opportunities for philanthropy

Philanthropy can play an important role in affordable housing development by funding:

Few foundations are focused on affordable housing. Those that are involved in this area tend to be affiliated with banks and are focused on financial services. Major funders in this space include the Union Bank Foundation, the Bank of America Charitable Foundation, and the Wells Fargo Foundation. The Evelyn & Walter Haas, Jr. Fund, which was a major funder in the past, developed a strategic plan that deprioritized affordable housing and is no longer working in this area.

There would be positive symbolic value if the technology industry were to take the lead in improving housing affordability, particularly in the neighborhoods most impacted by the tech boom, e.g. the Tenderloin and South of Market. Mayor Edwin Lee initiated a dialogue with companies in tech and other industries about creating a “catalyst fund” of roughly $100-200M of debt and equity to fund housing development, some of which could be for affordable housing.

Other organizations working on housing affordability

There are many effective organizations in this community, including:

Other people to talk to