Director of Community Real Estate Karoleen Feng
Associate Director of Community Real Estate Johnny Oliver
MEDA established its Community Real Estate team in 2014. The goal? To deploy all-the-more innovative ways to stem displacement in San Francisco’s Mission District. Such turn-the-curve thinking was needed when since the year 2000 the neighborhood had seen 8,000 Latinos displaced — over 25 percent of this community. This was against the backdrop of no affordable housing having been built in the Mission for a decade.
So in 2015 MEDA leveraged its over four decades of trust built with the community and the City to establish a pilot program. Through countless meetings across the Mission and at City Hall offices, the San Francisco Small Sites Program was creatively shaped to finance the strategy of nonprofits, such as MEDA, buying four- to 25-unit buildings with tenants vulnerable to eviction.
The big idea and what it solved
The targeted Small Sites Program stems displacement by taking private-market housing out of the hands of speculators. The income/rent mix is an average of 80 percent of Area Median Income (AMI), ensuring that two outcomes concurrently occur: Low-income residents can stay in place, plus the building is financially feasible sans rent subsidies.
Additionally, the buildings are transformed into quality housing, with deferred maintenance issues addressed after years of neglect by landlords. Details of the big idea were shared in the December 2016 blog entitled, “MEDA Helps Reshape San Francisco Small Sites Program to Stem Mission District Displacement, Block by Block.” (Read.)
The four main things we learned in our first years
The Small Sites Program reaped quick results, translating to MEDA having now purchased 20 buildings comprising 128 homes and 16 commercial spaces — with all units kept affordable.
What MEDA has learned and applied in its first three years is:
- Tenant organizing. Trust was needed to be gained with prospective MEDA tenants, as fears and questions swirled in their heads. Who was this community-based organization offering to buy the building? Will my household’s rent really remain affordable in a neighborhood with escalating prices and six-figure earners willing to pay much-higher rent? If I get relocated from my unit so that planned rehabilitation takes place, will I really be allowed back into my home? Such concerns were responded to via continuous, straightforward communication. Tenants are MEDA’s strongest allies in Small Sites Program purchases, both in the initial purchase as champions to other tenants, and as future ambassadors for the program. MEDA has developed responses to frequently asked questions, while remembering to be sensitive in the response to each tenant or building type. There is continued strengthening of engagement while acquiring the building and, ultimately, as our nonprofit becomes new owners of these buildings.
- Technical/building stock issues. The Mission features some of the oldest housing stock in San Francisco. When MEDA assesses the building for prospective purchase, a 20-year capital-needs assessment is prepared to ensure that the long-term maintenance of the physical structure is accounted for in our plans; this cost is then included in our financing for the building. With most units and commercial spaces occupied, MEDA sensitively prepares for tenants’ unique situations during their relocations.
- Acquisition nimbleness. To be successful with each acquisition, MEDA juggles realities and expectations of the seller, lenders, tenants and physical building in a contracted time frame (MEDA’s shortest purchase contract has been 45 days, with an average of 75 days.) Prior to getting into contract, MEDA uses that time to engage tenants and understand the building stock needs. MEDA has now become adept at understanding the needs of owners so that our organization remains market competitive, while also sharing with these sellers how MEDA’s purchase of their building would be different from an investor/speculator. Strong relationships have been forged with multiple lenders, traditional banks and community-development finance institutions that are committed to financing alternatives to slow down displacement in a high-cost neighborhood such as the Mission.
- Talent cultivation. As MEDA launched this unproven work, the nonprofit realized that the Small Sites Program was like building a road as you drove down it. There is a relatively small talent pool showcasing the professional skills and cultural relevance to acquire and rehabilitate the buildings in a neighborhood rapidly losing Latino families. So MEDA invested in — and groomed — talent in the last three years. This translated to what started as a small team growing to an indefatigable staff of 13, largely drawing from Latinos who themselves understood the challenges of staying in their own homes.
Scaling a big idea
MEDA took two years to purchase its first 10 buildings (from 2015 to 2016), with the next 12 bought at an accelerated pace of just one year (in 2017). As MEDA pushes forth in 2018, the aim is to keep up this pace of acquisitions and rehabilitations.
MEDA defined a business plan for the success of the Small Sites Program strategy when it was launched in 2015. This plan was revised in late 2016 as MEDA looked to accelerate acquisitions. The business plan ensured that MEDA was not incrementally responding, but instead was carefully managing growth. Specifically, the nonprofit planned for the investment of MEDA’s financial resources and staffing for the expansion of this program — critical for gaining the support of board and funders in the first three years.
Now looking to scale the Small Sites Program, financing alternatives have become a must for MEDA’s strategy, as a means to complement City monies. That’s why MEDA turned to the San Francisco Housing Accelerator Fund (SFHAF), with five properties now jointly purchased; and even a Neighbor-to-Neighbor (N2N) fund that enabled MEDA to purchase two sites, community members providing bridge loans until City monies become available one year later.
Additional revenue streams are also being investigated, including the novel approach of having MEDA’s Community Development Financial Institution (CDFI), Adelante Fund, loan monies to the Community Real Estate team.
Such visionary approaches are imperative to meet MEDA’s anticipated pace of one Small Sites Program purchase each month, with the Mission’s housing remaining in balance block by block, building by building and family by family.
As rapidly as MEDA is responding to the crisis in its own neighborhood, the organization recognizes that similar crises exist in many other communities of color across the San Francisco Bay Area. That is why what has been learned to date is being formalized into models that can be shared, as we look to partner with peer organizations to develop their capacity to stem displacement in their own community.