Sibley Simon remembers having an epiphany after his daughter’s second daycare closed because workers lost their housing. Simon, an angel funder with a tech background, says he decided that his next entrepreneurial venture would focus on the impacts of the housing crisis, a cause he had already championed as treasurer of the Homeless Services Center (HSC) and a philanthropist.
Simon believes Santa Cruz has only two options from which to choose.
“We either could gradually become a wealthy, exclusive community, where a lot of our economy can’t keep existing here,” he says. “Or we can build denser downtowns and expand downtown a bit. Those are our two options. There’s no no-change option. And in my view, the first one is a much more disruptive change than the second one.”
Simon is developing a new housing investment model, one he believes could be scaled to other communities throughout California.
The fund, New Way Homes, aims to bring affordable housing to the Monterey Bay at a time when the rising cost of housing is pricing residents out of the area. The new model would bridge the gap between government-funded affordable housing and the homes built by “market rate” developers—who typically build for-sale homes at the higher end of the price spectrum, because that’s where the profits are.
Some investors have begun to see the New Way Homes vision as providing a different kind of place for them to watch their money grow, albeit a little more slowly. Investments from employers could help their employees continue to live and work locally, as most Santa Cruz residents are renters.
Dignity Health invested $200,000 and Santa Cruz County Bank has invested $50,000 in the New Way Homes fund. Foundations, Simon says, look to give away about 5 percent of their assets every year. “More and more are doing impact investments at a 3 percent return level,” says Simon, whose much-anticipated low-income complex at the HSC has hit unexpected delays because of land ownership issues and other technical details.
Social impact investments from the private sector are gaining ground elsewhere, too. Cisco announced in late March a $50 million grant to a San Jose organization called Destination: Home. Affordable housing loans have been coming in locally from the Monterey Bay Housing Trust, a partnership between Monterey Bay Economic Partnership and Housing Trust Silicon Valley. Additionally, a $250 million bond is expected to be on the November ballot to support affordable housing.
Simon says that the area grows very gradually in both good economic times and in bad—partly because Highway 17 serves as a bottleneck, separating it from the major economic job center of Silicon Valley. And housing construction, he explains, hasn’t kept up with the gradual growth.
In order to maximize the social impact of these investments, Simon, who is still in the pre-development planning stage with his funding venture, hopes to focus on infill, construct a large number of smaller units—instead of building fewer big units—and put them in vacant or underutilized properties within the county’s downtown areas.
These units would be what some housing experts call “affordable by design.” They’ll be less expensive to build compared to standard housing complexes, and they’ll get built according to environmentally sustainable standards in walkable locations, requiring fewer parking spots as a result. The investments will cover pre-construction costs, which Simon says are the most difficult aspect to fund. He’s also pushing for the county and city to enact stronger bonus density ordinances so nonprofit developers can qualify for density bonuses under state law. The law lets developers seek exemption from certain zoning requirements if necessary, potentially allowing more units per acre, if they house enough low-income or senior residents.
The city of Santa Cruz recommended a bonus density update as part of its 100-or-so housing recommendations in December. The county’s Housing Advisory Commission will discuss a potential ordinance change for the unincorporated area on May 2 in supervisor chambers.
Simon isn’t the only one getting serious about housing construction downtown. Developer Owen Lawlor recently submitted his much-discussed plans to build several levels of housing on two major downtown lots south of Cathcart Street, including at the Taco Bell lot.
Simon says the housing market has become extremely constrained and competitive. The result, he says, is a rental application process that often becomes “an auction,” if a landlord wants it to be. “100 people for one unit,” Simon says. “What that means is rent’s going up real fast for just a lack of a little more supply.”
Units built for his projects, he says, will be rented at or below the median rent, which is currently around $2,000 for a two-bedroom unit.
New Way Homes will offer investors minimum annual interest payments of around 3 percent, but Simon would like to get them to a 6 percent return over 10 years while developers complete their projects. Speculative real estate businesses, in contrast, seek three times that return, but Simon says many investors may not be interested in what those developers are doing.
Simon says that ever since he and his wife, Nina Simon, who runs the Museum of Art and History, moved to Santa Cruz 11 years ago, he has tried to be an active part of the community. After volunteering to restore Evergreen Cemetery, he found himself focusing on the issue of homelessness and helped start the 180/180 initiative—now called 180/2020—which has set its sights on ending chronic homelessness. Simon is still in the planning stage for housing units at HSC for the chronically homeless—one of New Way Homes’ projects.
That project, which would provide wraparound services to residents, is in the thick of challenges, partly because the complicated site has been built up, little by little, over the decades. Some of the land is owned by the city, some of it by HSC. Simon had hoped to submit plans by the end of last year, but there are also challenges with parking and a big storm drain for the Harvey West neighborhood that goes under the campus.
District Two County Supervisor Zach Friend says he’s seen a change in the approach by many in the community as they’ve come around to Simon’s point of view. Friend has heard more people say that it isn’t right when someone has to earn $70,000 a year to afford a decent apartment in Santa Cruz County. Parents and grandparents are seeing their kids move away once they become adults because they can’t afford to live here anymore, he says.
“I think there’s a sense in the community that if we don’t do something, the character in the community will shift as it becomes a place for second homes, for vacation homes—in essence, for the rich to be able to recreate—as opposed to our community to create and live,” Friend says, “and contribute to the community at large.”