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Hacking a Funding Crisis for Affordable Housing

Updated: Jun 4

How Marin County California Collaborated to Bridge the Housing Divide




Today, a lucky 275,000 people call Marin County, California home. With Sonoma to the North, the Pacific to the West, and San Francisco to the South, Marin County itself boasts charming houseboat communities in Sausalito, hippie enclaves in Bolinas, the majestic Muir woods, and some of the oldest organic farms in the country. In 2018, Marin ranked as the healthiest county in the state of California - a title it’s claimed eight times based on length of life, quality of life, health behaviors, physical environment, and more. One might understand why Marin Country is an attractive place for people to live, work, play, and raise families.


However, like many desirable regions in our country and around the world, Marin County’s benefits are not accessible or equally distributed to everyone. One of the biggest challenges? Affordable Housing. In 2016, the median household income was $100,000/year, while the median home price rose to $1.1 million. Marin County’s affordable housing issue isn’t new, a fact that I know personally and well.


In the mid-2000s, I was the Program Officer of Affordable Housing at Marin Community Foundation, responsible for creating a plan to develop more homes for low-income individuals and families. At the time, the average price of a two-bedroom home in Marin County was $1,000,000, while developers were gobbling up remaining parcels of land to develop, further driving housing and land prices in an already tight market. The challenge seemed insurmountable. Despite working at one of the country’s largest community foundations, I knew MCF’s grant budget alone could not solve the problem. After much thought and consideration, I called on my peers in the local funding community.


Convening a Funders Collaborative to Map the Problem


To get started, I called everyone I knew that funded affordable housing, including unlikely sources such as tax credit investors, health and human services, and private foundations. We gathered core funders in philanthropy and the government sector - notably the housing authority (with their section 8 vouchers), a small private foundation, and other government funding sources such as CDBG. We reviewed our mapping exercise and got to work.


First, we looked at the collaborative’s available funding and any restrictions or priorities. Some funders had geographic priorities, and others had demographic priorities like homeless populations, seniors, families, or special needs populations. Second, we mapped out what restrictions might be placed on funds. These included the development phase (acquisition, construction, permanent), grant amount per unit, or investment criteria such as debt service or loan to value ratios. Finally, we mapped out the sources and uses of funding as they were currently being allocated. As the mapping progressed, a critical insight quickly emerged: financing for pre-development was clearly missing from Marin County’s affordable housing funding landscape.


Why was pre-development funding missing? There were two likely reasons. The first, to be clear, is that it’s the least sexy type of funding. Predevelopment costs include legal documents, architectural drawings, environmental studies, etc. The second is that the pre-development funding phase is also one of the riskiest to conduct based on the fact that some developments simply never get off the ground. Given these two factors, the group agreed that grant funding was likely the best option to fill the gap.


Bridging the Gap and Building a Collaborative Capital Stack


The funders collaborative mapping exercise served a critically important purpose: to illuminate how the Marin County affordable housing ecosystem worked and didn’t work. With a gap identified, the next steps were clear. At Marin Community Foundation, I doubled down on pre-development funding in addition to managing a loan fund that provided low-interest loans to nonprofits, including nonprofit affordable housing developers.


The next step was to work more closely with developers, critical stakeholders to an affordable housing ecosystem. One of the most significant risks for developers is knowing there is funding available for a project from A to Z - this not only includes pre-development funding, but funding for property acquisition, construction, and long-term financing (i.e., a mortgage). My goal was to reduce the funding risk for the developer as much as possible and to figure out the capital stack needed to advance projects successfully.


Back with the local funders collaborative, we lined up our sources of funding and realized that we had all phases covered. Pre-development funding would be supported with grants. The Loan Fund could handle the acquisition of the land. Local representatives from national banks were at the table willing to make a construction loan. Tax credit investors were at the table sharing their best thinking about financial modeling. And our local housing authority also had a few section 8 vouchers to throw at a project as well.


After a few meetings together, people were excited to contribute their unique skills and determine how best to collaborate on a project. Some people knew the government programs inside and out (CDBG/HOME), others were financial modeling whizzes, while some knew the history and local context. By sharing our talents and resources, we were ready to work together as a whole greater than our individual parts.


Listening and Empowering Affordable Housing Developers


Now that we understood the funding, we wanted to determine how we could support affordable housing developers with resources, knowledge, and political will. To do this, we invited a few developers to meet with our new funders collaborative to hear about various projects. The goal of these meetings was twofold. First, we wanted to show them that the funders were all aligned so that their financial restrictions and concerns would diminish. Second, we wanted to save funders and developers time meeting with everyone separately. From “our” funder point of view, we knew that developers would often tell various “iterations” of stories depending on the funder. By having the developer share their story en-masse, we all got the same story. And vice versa.


Undoubtedly, developers were hesitant at first, fearing a shark tank environment. However, when they saw the collaborative approach, the dynamic shifted. The meetings gave us an opportunity to hear each other’s questions and concerns, to build relationships, trust, and respect. Together, our funder collaborative and developers learned and problem solved in the same room. The government funders had a chance to learn banker’s restrictions and how they thought about the financial risks. Foundations and local funders had a chance to share the local context and compare various developments in process. The banks and tax credit investors also shaped the projects and funding to ensure that when the project hit their desk, it would meet investment criteria (there was no point of funding a project that wouldn’t meet these criteria since they were the last funder). Investors also appreciated this process as it helped with they could project in their investment pipeline.


Folks felt comfortable sharing their concerns and hearing solutions from various aspects. Will there be enough section 8? What if the banks won’t take us out? What about the environmental concerns, who are working on that? All of these questions could be answered by folks at the table. Step by step, the funders collaborative and developers mapped the development projects - crossing t’s and dotting i’s. What emerged through the process was not just an affordable housing development plan, but a true sense of community with shared values and purpose.


In the end, multiple Marin County affordable housing development projects went through this process - what ultimately was a collective impact approach with minor differences. While collective impact often has a strong emphasis on grants, our work required grants, section 8 government funding, bank financing, and low-income housing tax credits (consequently, requiring a facilitator experienced in housing finance).


Looking back I’m proud of the work that we developed together. In the future, I would take more time to evaluate the process – what did we learn, did it result in stronger outcomes, was it quicker, what were the unintended consequences? These are all lessons to apply to future projects.

A Replicable Model Across Issue Areas and Sectors

This collaborative approach to funding worked for us to move capital in Marin County, and it doesn’t have to stop there. It can be applied to every sector as a collaborative, collective impact approach. Interested in starting a funders collaborative? Here are key requirements and takeaways:


- Willingness of funders and banks to participate

- Strong facilitation with sector knowledge

- Developers willing to participate

- A process that takes three months to create

- Focused agendas – banks and investors are not used to nonprofit meetings

- Aligned values to create housing – may need to bend on priorities (demographics)

- Monthly meeting – 1.5 hours maximum


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