Next housing crisis victims? Nonprofits

Organizations that help at-risk residents also feeling real estate sting

When the struggle to make ends meet becomes too much, Bay Area families often turn to local nonprofits for help. But these days, those same pressures — high rents, soaring property values and an exorbitant cost of living — are threatening the very organizations set up to help the region’s most at-risk residents.

As residential rents and housing prices skyrocket in rapidly gentrifying Bay Area cities, so do commercial rents — and the nonprofit organizations that help locals with everything from housing and food to immigration paperwork increasingly are being displaced from the neighborhoods they serve. Some are renting co-working desks or finding donated spaces. But that’s not a solution for every nonprofit, and experts say vulnerable communities are at risk of losing key services these philanthropic organizations provide.

“Property is being snatched up pretty rapidly, and so it’s just difficult,” said Maritza Maldonado, founder and executive director of the recently displaced Amigos de Guadalupe in San Jose’s Mayfair neighborhood. “It’s difficult as a nonprofit to try to stay in the place that we’re at but also to serve the needy in this community.”

Nearly three-quarters of local nonprofits are concerned the real estate market will hurt their long-term financial stability, according to a survey published in November by the Northern California Grantmakers’ Nonprofit Displacement Project, which was presented earlier this month at a Red-

wood City meeting of Silicon Valley’s philanthropic leaders. One third of the 180 Santa Clara and San Mateo County nonprofits surveyed said they have relocated in the past five years.

Average asking prices for commercial rental spaces in downtown San Jose rose 12 percent over the past year, according to data from real estate firm JLL. In downtown San Francisco, they rose 10 percent, and in downtown Oakland they rose almost 9 percent.

Those prices are too much for the nonprofit Peninsula Museum of Art, which must vacate its Burlingame home by the end of the year after the property

owner activated an early termination clause in the lease. Owner Mario Muzzi said he plans to turn the outdated building into a mixed-use retail, office and residential development.

That means the museum — and its exhibits, classes and studio space — has to relocate.

“The search is on!” museum executive director Ruth Waters wrote in an email.

Amigos de Guadalupe, which helps residents of East San Jose’s Mayfair neighborhood find housing, access health care and secure their immigration status, lost its home in the Our Lady of Guadalupe Church two years ago after the church got new leadership. The organization began hunting for a new headquarters but soon

found it couldn’t afford the neighborhood’s market-rate rent. Moving to a cheaper area wasn’t an option because, like many nonprofits, Amigos must operate in the community it serves.

Amigos found a smaller space, but its rent went from a yearly stipend of about $5,000 at the church to a monthly payment of $3,300. The organization, which serves about 3,500 people a year, scored a lucky break when Santa Clara County stepped in to help cover some of the rent. But the cramped space doesn’t allow room for all the classes Amigos offers, so it now holds some at a local school.

It’s a story real estate adviser Benjamin Osgood of Dunhill Partners West hears again and again. He works with nonprofits all over the Bay Area who have

expiring leases and massive looming rent increases. Osgood helps his clients find new offices, downsize so they can save money by renting less space, or negotiate lower rents with their existing landlords.

“Every single additional dollar that goes into a landlord’s pocket is one less dollar that could be put toward accomplishing their mission,” Osgood said.

Nonprofits make up about half of Osgood’s clients — the rest are tech companies. When he helps match a tenant with a building, he’s typically compensated via a commission paid by the landlord. But if he’s working with nonprofits, he says he usually slashes his rates.

To help solve the problem of nonprofit displacement, Northern California

Grantmakers is working on buying buildings in the Bay Area to house nonprofits.

Last year, the Northern California Community Loan Fund launched Spaces for Good, a free online platform that acts like an Airbnb for nonprofits that need office, event or work spaces. The platform has about 125 listings in the Bay Area.

And All Good Work, which began matching social impact organizations with donated co-working space in New York City in 2016, expanded to Silicon Valley at the end of last year. It hopes to place 20 Bay Area nonprofits in work spaces by the end of the month.

SOMOS Mayfair, an education and community organizing nonprofit in San Jose’s Mayfair neighborhood, scored a desk at a downtown San Jose coworking space through All Good Work in December. The nonprofit, which also rents space at its primary offices on King Road, pays $50 a month for its new co-working space — far less than the typical $475 a month for a desk in the building.

“We’ve had an increased need for space, our team is growing and at the same time the cost of our rent is increasing,” said executive director Camille LlanesFontanilla, who estimates SOMOS’ rents are increasing about 4 percent a year. “As an organization that is only funded by philanthropy, that makes it very difficult for us.”