Recessions usually mean bad tidings for everyone.
Jobs are lost, savings are depleted, and the poor get poorer. Generally the most vulnerable people feel the pinch the worst, struggling to make ends meet while shivering under the shadow of a bleak economic outlook. That’s why with major market indicators once again pointing to the strong likelihood of a harsh financial winter ahead, it’s important to take a moment to consider a longer view about what opportunities to help people might exist when the markets start to crash.
One potential area of exploration is the acquisition of real estate for affordable housing development. This isn’t exactly a new idea and many communities are smartly calling for this type of action right now.
In general, a recession typically causes real estate values to decrease because there is a lower demand for homes or investment properties. At the same time, new market rate residential developments tend to become much harder to finance and build, as it’s difficult to forecast increasing rent or demand over time due to uncertain economic currents. As a result, land and existing multifamily housing both become commodities that can actually be obtained for much more reasonable prices.
The problem is that when you are in the bowels of a bear market, very few entities have the money to take down the properties. And the people who are in a buying mood at that time are more often than not deep-pocketed, out-of-town investors who aren’t at all concerned about the affordability of our community or the vulnerability of the people living here.
That’s where both local government and philanthropy can really step in. Not having to focus on profits, these organizations can step in and think about the future needs of the residents they exist to serve first, taking advantage of a dropping real estate market to bank land for new affordable housing developments and acquire existing depressed and dilapidated rental stock to both rehabilitate and preserve its affordability over time.
Despite the historically horrifically high cost-of-living in the Bay Area, our region might be better positioned than most to make this type of a response a reality.
We have government bodies like the city of San Jose, the county of Santa Clara, and the Housing Authority that have all committed wholeheartedly to take on the affordable housing crisis, with hundreds of millions of dollars dedicated over the past several years to build thousands of new homes. And while some sources like the 2016 affordable housing bond might be dwindling, there’s still a number of other reserves that we can dip into, especially when the impact has the potential to do so much good for so many at a fraction of what it is costing us now.
Similarly, here in the heart of Silicon Valley, a host of major private foundations and philanthropists exist who care most about seeing a strong social return for good on their investments. If government agencies are willing to lead the way in this effort, we’ve seen the blueprint for successful public-private partnerships that leverage the best parts of each sector to achieve transformational change.
All that being said, we do need to start planning now. Too often, these critical cycles are missed, as it is easy to get lost in the storm when things are at their worst. But if we can put together the money and political will to make this vision a reality, perhaps something might actually be looking up even when everything else is headed down.
San José Spotlight columnist Ray Bramson is the Chief Impact Officer at Destination: Home, a nonprofit that works to end homelessness in Silicon Valley. His columns appear every second Monday of the month. Contact Ray at [email protected] or follow @rbramson on Twitter.