Firm digs into affordable housing plan

Santa Clara apartment complex purchase is a pilot for group's initiative

SANTA CLARA >> The Sobrato Organization aims to use its real estate expertise to help tackle one of Silicon Valley's most daunting challenges: the region's affordable housing woes.

The Sobrato firm is one of Silicon Valley's most iconic real estate companies, and the Sobrato Family Foundation handles its philanthropic affairs. In May, the foundation paid $26.1 million for Santa Clara's 68-unit Vista Pointe Apartments, located at 3455 Homestead Road.

Now, the apartment building purchase has become the foundation of a pilot project to determine whether the Sobrato firm can craft a fresh solution to the housing dilemma in Silicon Valley, according to John M. Sobrato, chairman of the company.

“We call it the Housing Security Initiative,” Sobrato said. “The key to economic mobility is stable affordable housing for people at low- and moderate-income levels. That is the key to building self-sufficiency and moving up the economic ladder.”

The Bay Area's cost of living has surged in recent years, fueled by runaway inflation. The jump in consumer prices has outstripped wage increases for many of the region's residents, and the increased costs have extended to brutally high housing prices.

“Rents have far outpaced the growth in median income,” Sobrato said. “As families spend more on rent, they have less money left over for necessities such as food and transportation.”

Executives with the Sobrato firm hope to use the three primary branches of the organization — real estate, capital investments and the charity-focused family foundation — in a coordinated fashion to tackle affordable housing issues.

“Affordable housing seems to be a natural area where we could use the entirety of the organization to achieve an impact,” Sobrato said.

The company's approach to addressing the affordable housing woes in Silicon Valley is a combination of constructing more

housing, preserving existing affordable housing and advocating for more to be developed.

“We need all types of housing in Silicon Valley, because if there's not enough of that, including market-rate housing, then that shortage puts pressure on affordable housing,” Sobrato said. “We can help with housing production, including building affordable homes.”

The Sobrato Organization also tries to assist in cases when an affordable housing development receives government approval, but lacks financing for construction.

“There are many projects that get close to the finish line where they get the funding from the city, the county, the state, but sometimes they don't have quite enough capital to construct and finish the project,” Sobrato said. “We want to be sure the developer has enough capital to complete the housing.”

The new project in Santa Clara, meanwhile, falls into the preservation category.

“We think we can make the biggest difference through preservation,” Sobrato said. “For us, the Vista Pointe Apartments in Santa Clara is really our pilot project to see if preservation can work as a concept.”

Typically, older apartment complexes such as Vista Pointe, which was built in 1969, undergo major upgrades following a sale — primarily to justify a hefty increase in rents.

“The upgrades mean higher rents, and then these kinds of projects at moderate rents are gone forever,” Sobrato said.

But the Sobrato Organization will undertake only essential improvements at Vista Pointe.

“We will address maintenance issues,” Sobrato said. “We will replace the roofs. The carports need some wood and roof maintenance. There is some deferred maintenance that is needed. The objective is to keep the price as affordable as possible.”

Sobrato said the strategy will keep current tenants in the Vista Pointe complex from being priced out of their homes.

“People can rest assured that none of the low-income families at Vista Pointe are going to be displaced,” he said.