Local Nonprofit Launches a Crowdfunding Raise
Everyone Can Invest to Solve the Affordable Housing Crisis
By Jeanne Howard
If the subject is affordable housing in Santa Cruz County, the news is not usually good and not usually new. Now, there is a new strategy in town for creating more affordable housing, according to New Way Homes, a local nonprofit.
New Way Homes (NWH) was founded in 2015, and has been jumping through hoops for the past four years to bring its first two projects through the design and planning approval phase. One has begun construction, and one will begin this fall.
There are several innovative tactics to the “new way.” One is to work in partnership with other nonprofits that own land where housing can be developed. These are often churches, but also include organizations such as Housing Matters in Santa Cruz, where the cost savings on land can be significant. To finance the projects through the first phase, which is conception through permitting, NWH funds its work by a growing area of raising capital called “impact investment,” where a community, or anyone anywhere, invests to solve a social problem. Investments, small and large, are made by folks who would like to create more affordable housing in their communities, as well as by other investors who can now provide capital for community projects—thanks to changing federal regulations.
The method NWH uses to raise money has been given a boost by the federal government. The regulations for crowdfunding were changed a few years ago so that anyone can invest in organizations, and receive a return on their investment. It used to be that only individuals with significant resources (“accredited investors” with a high minimum of assets) could invest. Now, small amounts can be invested by anyone.
Governments at all levels subsidize the building of affordable housing, but support from the public coffers is shrinking. “California needs millions of units of housing that we don’t have, and only creates 100,000 units per year,” says Sibley Simon, a former tech entrepreneur and the founder of NWH, “so, we’re falling further behind.” NWH’s projects receive no government subsidies for construction.
NWH recently launched a crowdfunding “raise” on Wefunder.com. Securities and Exchange Commission rules limit the details that can be published, but the full lowdown can be found on the Wefunder page, including a list of current and future projects. More than 300 housing units are planned, with 19 under construction now.
“Our goal is to build thousands of units in the greater Bay Area in the next decade, and help seed a new part of the housing industry that is not limited by the amount of public subsidy, and focuses on increased affordability,” says Simon.
Once the homes are built, a traditional mortgage takes over and pays back the investors. (See the amount on the Wefunder profile.)
Costs are lowered in several ways, but include environmentally sustainable building, taking advantage of new state laws that allow for increased housing density in certain locations, and new laws that require less parking for developments near public transportation. In most cases, the nonprofits will own 100 percent of the housing, will take on the mortgage, and be able to pay it from rental income.
Housing geeks — they are now as cool as tech nerds, if you didn’t know — get into the nuance of terminology such as permanent supportive housing, mixed-income housing, and affordable housing, which have differences when it comes to development. NWH is working on a range of housing types that includes all of these, and the goal is to create only housing in these categories. Occasionally a project may require that market-rate units are included to finance the lower-priced housing, but 95 percent of the units in NWH’s projects are below-market-rate homes of one kind or another. (Cities often require developments to include 10-20 percent affordable housing and assume the rest are market rate.)
In Santa Cruz County, construction will begin this month on seven units of “permanent supportive housing” at 801 River Street, Santa Cruz. It will be owned by the nonprofit Housing Matters. This long-vacant historic Victorian home will serve chronically homeless individuals with high medical needs to be met by support services across the street at the Housing Matters campus. In addition, NWH has two projects in planning: 120 units of new housing on that same campus and 30-plus units on a site in Santa Cruz called Peace Village. Families will be welcome at Peace Village, and children will have well-designed, new construction and a built-in community.
Full disclosure: Jeanne Howard founded the nonprofit fundraising campaign Santa Cruz Gives, and supports nonprofits in achieving their missions. She is currently helping New Way Homes get the word out about their first crowdfunding launch.