SVB’S other key partner: affordable housing developers
Bank was to invest $1B in residential mortgages
Construction on The Kelsey Civic Center, a 112unit affordable housing project across from San Francisco City Hall, was supposed to begin last 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.
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 U.S. 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. Recently, 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.
Last Sunday, Newsom praised Joe Biden’s administration for its actions to protect SVB depositors, which he said in a statement had “profoundly positive impacts” on several pillars of Cali
fornia’s economy, including “affordable housing projects that can continue construction.”
Developers of lowercost 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 already are 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,’ ” Foote said.
Silicon Valley Bank has invested and loaned more than $2 billion to fund affordable housing projects in the Bay Area from 2002 to 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,” Connery said. “The big loss is scheduled. Any delay is an opportunity cost.”