Over the past year, Apple has faced criticism over its apparent refusal to take a stand against the Bay Area’s crippling housing crisis. But all the while, the iPhone maker held a closely-guarded secret: Behind closed doors, Apple was, in fact, talking about housing — first internally and then with the governor’s office and local organizations.
Those conversations paid off Monday when Apple promised to commit $2.5 billion in investments, donations and real estate to build housing and help people afford homes across California. Apple’s commitment dwarfed the earlier $1 billion pledges from Google and Facebook, and Apple was applauded by everyone from the mayor of San Jose to the governor of California to local housing nonprofits.
But in a climate where it’s estimated the state needs as many as 3.5 million new homes and building costs are among the highest in the nation, how much can $2.5 billion do? For now, details of the plan are scarce, and much of the fund’s success depends on how Apple and state officials decide to disperse it.
“There are really good signs,” Amie Fishman, executive director of the Non-Profit Housing Association of Northern California, said of Apple’s pledge. “But there’s still much more to be determined.”
Apple’s pledge includes $2 billion for state-level efforts to build affordable housing and provide mortgage and down-payment assistance to first-time homebuyers, as well as $300 million in San Jose real estate, $150 million to fund Bay Area affordable housing and $50 million to fight local homelessness. The majority of Apple’s money will be spent statewide rather than locally.
“Apple’s announcement is really important because there is a significant need for funding for affordable and middle-income housing throughout California. And I think Apple’s contribution will certainly help,” said David Garcia, policy director for UC Berkeley’s Terner Center for Housing Innovation. “That being said, there is an even greater need to engage on policy at the local, regional and state-wide level. Otherwise, the investments are not going to be as effective as possible.”
Housing projects continue to get held up by restrictive local zoning rules and other policy obstacles, Garcia said. As an example, he cited an ongoing fight in Apple’s hometown of Cupertino to build 2,400 apartments and large amounts of retail and office space on the site of the defunct Vallco Shopping Center. The City Council has not been supportive of the plan, which now is facing a challenge in court by a local community group. Apple has yet to use its political clout to weigh in on the project.
The company is using $1 billion to create an open line of credit to help the state invest in affordable housing projects. Apple and state officials will decide together on a case-by-case basis which projects to fund with that money and what the terms of those loans will be, Apple said Thursday. The tech company plans to meet quarterly with the governor’s office to analyze the success of the fund.
Apple has not said how much housing it hopes that $1 billion will help build, but Alex Sanchez, executive vice president of ROEM Development Corporation, estimates it could produce about 6,000 units. It costs about $500,000 to build one unit of housing in the Bay Area, Sanchez said. But Apple likely wouldn’t front that entire cost. A typical affordable project secures about a third of its financing through commercial debt, a third through federal and state low-income housing tax credits, and a third through other sources — such as Apple’s new fund, Sanchez said.
Another $1 billion of Apple’s money will go into the California Housing Finance Agency, or CalHFA, the state agency that provides first-time homebuyers with mortgage and down-payment assistance.
The Apple pledge also includes $150 million in grants and forgivable loans to fund Bay Area affordable housing in partnership with Housing Trust Silicon Valley and other local organizations. That money will focus on long-term financing to get housing projects built all the way to completion, said Housing Trust CEO Kevin Zwick. That’s crucial because while many programs — including the Housing Trust’s successful Tech Fund — focus on land acquisition and other early-stage funding, there’s not as much money available for projects in their later stages, he said.
“That’s going to create thousands of units that otherwise wouldn’t get built because there’s just not enough local subdivides to go around,” Zwick said.
Notably, Apple’s $2.5 billion pledge does not include money specifically for housing in Cupertino, a city criticized as frequently as Apple for failing to do enough to ease the housing crisis.
But the fund does include housing planned specifically for San Jose. Apple plans to turn half of the 84 acres it owns off North First Street — real estate worth $300 million — into housing. The company said it is prepared to donate the land, rather than sell it for a profit — a particularly valuable offer in a region where exorbitant land prices jack up the cost of construction.
Still, that North San Jose land is zoned for office and industrial uses, presenting a potential hurdle. But Apple intends to work with the city to change that designation.
“City staff is planning to look for ways that we can take full advantage of Apple’s proposals so we can continue to serve both current and future residents of the city,” Kim Walesh, deputy city manager and director of economic development, wrote in an emailed statement.
Apple’s fund also includes a $50 million donation to San Jose-based Destination: Home. That will allow the nonprofit, which works to end homelessness in Silicon Valley, to help fund an estimated 2,400 new units of housing for extremely low-income and homeless individuals. The organization also will dramatically expand the reach of its homelessness prevention program, which will go from serving 900 families a year to serving 1,500.
“Apple being willing to invest in this work that we’re doing means that we’re going to be able to help accelerate more production,” Destination: Home CEO Jennifer Loving said, “and prevent more people from becoming homeless.”
