Categoria: Development

Silicon Valley Bank’s Other Key Partners: Affordable Housing Developers

By Dana Hull and Sarah Holder | Bloomberg

Construction on The Kelsey Civic Center, a 112-unit affordable housing project across from San Francisco City Hall, was supposed to begin this week.

But the lender for the project’s $52 million construction loan was Silicon Valley Bank.

On Friday — the date the project’s financing was slated to close — regulators shut down the bank, known for its ties to the tech community but also a financing source for local developers. The Kelsey and its co-developer are now talking to other potential lenders and hoping that any delays can be minimized.

“SVB was an important player in the tech scene and the startup scene, but they were also a really important player in the affordable housing scene,” Micaela Connery, co-founder of The Kelsey, said by phone.

No state is under more pressure to build affordable housing than California, which is losing residents partly because of chronic housing shortages caused by sky-high rents and home prices. More than 1.2 million households lack access to an affordable rental home, according to the California Housing Partnership, and sprawling tent encampments of unsheltered residents are common in major cities.

READ MORE: Most cities still falling behind affordable housing mandate, state numbers show

The fallout of SVB comes as Gov. Gavin Newsom and California’s attorney general are ramping up enforcement of a new state law intended to increase the state’s critically low housing stock. The median single-family home price is about $750,000, more than twice the US median.

The aggressive push is pitting the state against local authorities that Newsom accuses of obstructing his plan to add 3.5 million new homes in California, including affordable units. Last week, Newsom and Attorney General Rob Bonta announced the state is suing Huntington Beach for failing to comply with the new multifamily zoning laws intended to create more housing.

READ MORE: Newsom sues Surf City for affordable-housing snub

On Sunday, Newsom praised the Biden administration for their actions to protect SVB depositors, which he said in a statement had “profoundly positive impacts” on several pillars of California’s economy, including “affordable housing projects that can continue construction.”

Developers of lower-cost housing say they’re confident other lenders will step into the void left by SVB. But underwriting takes time, and any delay often adds to a project’s overall price tag. Rising interest rates and inflation are already lifting construction costs.

Laura Foote, the executive director of YIMBY Housing, a nonprofit that advocates for housing growth in the region, said the sector was heartened by the federal government’s actions over the weekend.

Affordable-housing developers “are very stressed about the delays, but they’re not yet saying ‘oh my gosh, and now this building won’t get built,’” said Foote.

RELATED: Irvine eyes 4,536 new rentals: Why building homes isn’t always war

Silicon Valley Bank has invested and loaned more than $2 billion to fund affordable housing projects in the Bay Area between 2002 and 2021, where it says it’s helped build or rehabilitate about 10,000 affordable units. In its 2022 ESG report, the bank outlined a plan to invest more than $1 billion more in residential mortgages in low- and moderate-income areas in Massachusetts and California by 2026.

The Kelsey “will find a path forward,” said Connery. “The big loss is scheduled. Any delay is an opportunity cost.”

Irvine Eyes 4,536 New Rentals: Why Building Homes Isn’t Always War

In an age where conflict over homebuilding appears to be the norm, an intriguing deal in Irvine with land giant Irvine Co. could help the city meet its state-approved homebuilding goals.

The tentative “memorandum of understanding” would see Irvine getting 4,536 new apartments at six sites – 1,025 with affordable rents. Developer Irvine Co. will pay $65 million in fees for the construction that could be completed to meet the city’s 2029 home-production deadline.

It’s a road map for 2,157 rental homes at three sites previously announced by Irvine Co. plus another 2,379 units at three other locations.

Now, city council approval is required for this memorandum to move ahead. And Irvine politics is hard to handicap as the debate over the deal begins at Tuesday’s city council meeting. But it’s noteworthy that the deal was negotiated by a city committee that includes Mayor Farrah Kahn and Vice Mayor Tammy Kim.

Irvine’s seemingly cooperative process runs in sharp contrast to what’s going across Southern California.

At least nine cities in the region face housing proposals from developers trying to bypass the normal approval process because those cities don’t have state-approved state-approved housing goals. Or there’s La Habra, which is being sued by a homebuilder after it canceled a previously approved housing project. And there’s Huntington Beach, where state officials and the city are suing each other over the local government’s refusal to adopt some of California’s pro-housing development laws. Now you’d think homebuilding would be simple. But getting building plans approved anywhere in California requires cities and developers to navigate a maze of regulations. And some of those rules can force outcomes neither side really wants.

So, to get anywhere close to California’s lofty housing dreams, adult conversations between stakeholders with serious give-and-take become a necessary requirement.

Look, the somewhat symbiotic relationship Irvine and Irvine Co. is a half-century old. So it’s not what every municipality faces.

But Irvine Co. believed the homes could have been built without much city oversight or fees paid. Conversely, the city could have made that construction as challenging as possible. Let’s look inside the deal to get a glimpse of the tradeoffs involved.

So what does Irvine get? Homes: To meet state goals, the city needs 23,600 new units by 2029 with roughly 15,000 deemed affordable for households earning less than local median wages. Irvine Co.’s plan would provide a big step toward meeting those intense demands.

Cash: There’s as much as $65 million paid to the city – a $14,500 per-unit fee – and the freedom to use that money as local policymakers see fit.

Financial flexibility is important to the city because a traditional affordable-housing deal would mean developer fees could be spent only on park construction. And the city, home to the ever-evolving Great Park project, already has plenty of recreational spaces.

Control: The state is trying to limit housing supervision by all cities because that oversight often throttles residential development. But Irvine Co. agreed that all plans for these units will go through typical city approvals.

“It’s a deal everyone could feel good about,” said city manager Oliver Chi as it “respects the principles of the original master plan.”

What does the company get? Rentals: This is not charity work. Obviously, Irvine Co’s apartment portfolio of roughly 65,000 units statewide will grow.

Location: The memorandum allows the developer to turn vacant or unproductive land into non-traditional sites for income-generating housing, primarily in the city’s jobs hub around Irvine Spectrum.

Corporate tenants: Do not forget about the company’s huge portfolio of office and industrial properties across the city, especially in the Spectrum neighborhood.

Orange County employers are desperate for talent and places to house those workers. Housing near workplaces is especially valued. These rentals are close to Irvine Co.-owned retail sites, too.

So, view the $65 million in fees as an Irvine Co. investment that benefits many parts of its business.

“Few cities have the ability to master plan new communities next to Fortune 500 companies, innovative tech startups, and world-class hospitals,” said a statement from Irvine Co. senior vice president Jeff Davis. “This framework agreement reflects that unique opportunity to meet the needs of Irvine’s workforce, businesses, and residents.”

And what will residents get? Rent relief: The plan calls for 337 units with rents for tenants earning annual household incomes of about $50,000; 160 units would be reserved for those earning up to $80,000; and 528 for those making up to $100,000.

Extended relief: Rent limits on 1,025 rentals, adjusted for inflation, would last for 75 years vs. the typical 30-year arrangement.

Added savings: It’s not part of the memorandum but Irvine Co. says roughly half of the remaining units built would be smaller than the landlord’s usual specs. That will mean the company, known for its high-end and high-priced apartment complexes, will offer rents well below what it typically charges.

Common living: These apartments also might not fit your possibly tarnished view of affordable housing.

Full-price units and residences for lower-income folks will be mixed within the complexes. And the housing will be fashioned with a Mediterranean look much like the company’s stylish Los Olivos complex across the 405 from the Irvine Spectrum shopping center.

What’s the bottom line? Housing development should be pretty simple.

But when the state’s economic needs clash with local political desires and the industry’s profit demands you often get a combustible brew.

In this Irvine deal, the city needs housing, especially affordable rentals. And Irvine Co., by far the city’s biggest apartment developer and owner, has properties to spare – empty stores and land once planned for uses that are out of favor.

A reasonable match provided the foundation for a deal.

Jonathan Lansner is the business columnist for the Southern California News Group. He can be reached at

Developers Propose 576 Homes In Orange, Some At The Mall, Others By Hospital

The city of Orange became Southern California’s fifth municipality facing housing proposals that could bypass local zoning restrictions because it lacks a state-approved housing plan.

Two preliminary applications landed at City Hall in January seeking to build 576 new townhomes and apartments under the so-called “builder’s remedy.”

The 1990 state provision requires local governments without approved housing plans, or “housing elements,” to approve projects that conflict with local zoning and the general plan, so long as 20% of the homes are for low-income households or all of the homes are for moderate-income households.

“They should call this a builder’s free-for-all instead of a builder’s remedy,” newly elected Orange Mayor Dan Slater said in a text. “This is but one of many knucklehead decisions that our Sacramento representatives have foisted on cities to interfere in long-standing local planning processes.” 

One application seeks to build 297 townhomes plus 75 low-income “accessory dwelling units” along the back side of the partly vacant, 50-year-old Village at Orange shopping mall on North Tustin Street. The 14-acre project would take over much of the rear parking lot, a vacant JCPenney building and part of the mall.

The other seeks to build 204 apartments — including 41 low-income units — in six-story buildings on 8 acres along Santiago Creek behind the Chapman Global Medical Center.

An attorney for Stonefield Development, backer of the Santiago Creek apartments, said his client still wants to pursue its original plan to build 158 senior apartments in five, three-story buildings. The new application was filed as “a fallback” plan to lock in their right to develop the property if the senior housing gets denied.

Some residents raised objections to the proposals, saying the new homes are too tall, too massive and too close to existing single-family neighborhoods.

But they’re at a loss about what the city can do to stop them since Orange still doesn’t have a plan for where to put the 3,936 homes the state mandated it build by 2030.

“What I really object to is the state taking away the ability of the city council to regulate zoning and the general plan,” said Orange resident Shirley Grindle, a local government watchdog who opposes the developments. “I went down to City Hall. Everybody is opposed to this. I wish the city would get together and sue the state agencies behind (this provision).”

The vacant JCPenney building would be the center of a plan to build 297 townhomes and 75 low-income “accessory dwelling units” on the back parking lot of The Village at Orange shopping mall. Because Orange failed to adopt a state-approved housing plan, the city can do little to stop the development even though it violates local zoning rules. (Photo by Mark Rightmire, Orange County Register/SCNG) Missed deadline Orange isn’t alone in missing state planning deadlines.

The city of 140,000 is one of 109 municipalities in the six-county Southern California region without a state-approved housing element, which was due in October 2021.

The builder’s remedy submissions come after developers ran into opposition to previous proposals at the two sites.

The Santiago Creek proposal wasn’t meant to pressure the city into approving the developer’s previous senior housing plan, even though it features 46 more units in much taller buildings, said Allan Abshez, Stonefield’s attorney.

Grindle, however, objects to both plans, saying the buildings would “just loom over the backyards of those homes” on the opposite side of Santiago Creek.

A vacant lot located at the intersection of Yorba Street and Chapman Avenue, just east of Santiago Creek, behind the Providence St. Joseph Heritage Medical Group building and the Chapman Global Medical Center in Orange on Tuesday, February 7, 2023. It is a proposed location for future housing in Orange. (Photo by Mark Rightmire, Orange County Register/SCNG)

A building and back parking lot of the The Village at Orange shopping mall in Orange, east of Canal Street in Orange, on Tuesday, February 7, 2023. It is a proposed location for future housing in Orange. (Photo by Mark Rightmire, Orange County Register/SCNG)

A building and back parking lot of the The Village at Orange shopping mall in Orange, east of Canal Street in Orange, on Tuesday, February 7, 2023. It is a proposed location for future housing in Orange. (Photo by Mark Rightmire, Orange County Register/SCNG)

The view from La Habra’s Westridge Golf Club, which could become a future site for 530 new homes under Lennar’s new housing plan, filed with the city on Jan. 17. The plan includes 110 low-income apartments, in addition to 238 houses and 138 townhomes. (Photo by Jeff Collins, the Orange County Register/SCNG)

The vacant JC Penney building would be the center of a plan to build 297 townhomes and 75 low-income “accessory dwelling units” on the back parking lot of The Village at Orange shopping mall. Because Orange failed to adopt a state-approved housing plan, the city can do little to stop the development even though it violates local zoning rules. (Photo by Mark Rightmire, Orange County Register/SCNG)

Golfers line up their putts at La Habra’s Westridge Golf Club. Lennar Homes is seeking to build 530 new homes on the site despite city objections. Because La Habra has yet to adopt a housing plan, state law may require city approval even though the proposal conflicts with the city’s general plan. (Photo by Jeff Collins, the Orange County Register/SCNG)

An 8-acre site along Santiago Creek designated as open space could be transformed into six-story apartment buildings with 204 units under a fallback plan a developer filed last month. The “builder’s remedy” will be used to build the apartments if the city doesn’t approve the developer’s smaller senior housing proposal, an attorney said. (Photo by Mark Rightmire, Orange County Register/SCNG)

Another resident complained that the Village at Orange proposal, which abuts “your typical Leave It to Beaver neighborhood,” would violate zoning and height limits. The mall is zoned commercial with two-story height limits, said Doug Hamilton, a local real estate broker.

“We didn’t like (the plan) because most of the homes they were planning are three stories,” Hamilton said. “They want to tear down (30% of the) walkable mall. … Retail taxes is what pay for city services. It’s not good for the city, it’s not good for the community and actually not good for the longevity of the mall.”

Malls throughout the nation have been converting space into housing as online shopping takes a greater share of retail spending. A former owner gave the aging Village at Orange mall a facelift to boost foot traffic, then promptly sold the 855,728-square-foot center in 2016. In addition to the former JCPenney, the Sears building and the former Todai restaurant near the main entrance have long been dormant.

20 other applications Although the builder’s remedy is now 32 years old, the first such applications surfaced last summer.

In addition to Orange, developers filed 20 other builder’s remedy applications in Santa Monica, Redondo Beach, Beverly Hills and La Habra, according to government records and press reports. All told, the proposals in all five cities call for 8,240 new homes, nearly 1,700 of them affordable to low-income households.

The passage of Senate Bill 330 in 2019 “transformed (the builder’s remedy) into a nuclear option for developers to deploy in municipalities with persistent barriers to housing production,” Rand Corp. economist Jason Ward said in a commentary published last fall in the Santa Monica Daily Press.

The city of Orange is scheduled to vote on a revised housing element on Friday, Feb. 10, and state housing officials indicated last month they probably will approve the new version. But state approval won’t invalidate the two builder’s remedy applications since they were filed while the city still was out of compliance.

The state rejected the city’s earlier plan, submitted last February, citing technical reasons, including discrepancies and a desire for more analysis of homelessness, segregation and the location of affordable housing sites.

Hamilton conceded the city may share some of the blame by not adopting an approved housing element sooner.

“If they were caught flat-footed, they should have known more about (the builder’s remedy),” he said.

“I’m not aware of what was done prior to my election,” added Slater, who took office in December after defeating incumbent Mayor Mark Murphy.  “But … we have been pushing to get our updated housing element approved since before we were even sworn in.”