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Real Estate & Housing

When Does Building Teacher Housing Make Sense?

Nikki Lowy | 1 Jun 2017

“We need many arrows in the quiver to solve teacher housing” - Superintendent Jeff Harding, Mountain View Los Altos HSD

“Housing is the single biggest thing that keeps me up at night,” a San Francisco independent school head said at a recent housing roundtable hosted by Landed. The roundtable assembled school leaders to discuss housing solutions for their teachers and staff. As the group murmured in agreement, the conversation turned to the pragmatic: as school leaders, what can we do about it?

Retaining great educators is essential to any school’s long-term sustainability. And in expensive areas like the San Francisco Bay Area, where housing is frequently cited as the number one reason why teachers leave, housing has increasingly become a focal point of retention and recruitment strategies. We’ll explore what this looks like in California.

Teacher Housing: What options do schools have?

Different populations of educators have different housing needs – there’s no one-size-fits-all solution. For many early career employees, rental housing often makes the most sense. Schools can support employees who rent by providing monthly payment support in the form of a rental subsidy or, in some cases, by purchasing or building permanently affordable housing (more on this later). Alternatively, there is a second group of educators who are ready to put roots in their community and build wealth through homeownership. While some communities may offer programs that broadly support homebuyers (via a city-run loan program or a community land trust, for example), schools can proactively support their own employees by providing down payment assistance (through a partner like Landed).

At Landed, we believe that both rental and ownership solutions can go hand-in-hand. We spoke with Leah Denman, Project Manager for Dutra Cerro Graden, who works with California school districts to evaluate the most strategic use of their real estate assets. Denman reiterated that because school districts and religious institutions are among the biggest landowners in the State, finding ways to help districts maximize underutilized land can be a great tool to add new and much-needed rental inventory to the market.

New opportunities: the wonky stuff

California legislators agree. In the last year, a number of policy initiatives have been proposed and passed that enable California school districts to build and earmark housing for educators:

  1. SB 1413 *(Sept. 2016):* Allows school districts to build teacher-only affordable housing on district property
  2. AB 1157 *(proposed):* Streamlines the approvals process to encourage school districts to turn surplus property into district employee housing
  3. AB 45 *(proposed):* Provides $100 million in State grants to school districts (in partnership with qualified developers) to build teacher rental housing

Due to the novelty nature of this legislation, there are currently a limited number of built projects to point to. However, a few districts are paving the way, including San Mateo Community College District (SMCCD), now on it’s third teacher housing project. According to the SMCCD, “the District is able to build first class, market rate housing and offer below-market rents because 1) it owns the land (land costs do not need to be included in the cost of ownership or operations); 2) it financed the project with a tax-exempt issue; 3) the property is property-tax exempt; and 4) the District does not have a profit motive.” Denman further lauded the district for its robust community engagement strategy and good management practices, including setting up a separate housing authority to manage the projects.

While these bills provide promising opportunities for districts, building housing does not come without risk. Building housing can be expensive, time-intensive, and politically challenging. As Denman points out, “schools are in the business of education.” If schools opt to go down the path of building housing, they’ll need, “strong political willpower and board leaders who are committed for the long haul.”

A typical ground-up development project takes 3+ years to complete.

(courtesy of Dutra Cerro Graden)

To build or not to build?

As schools grapple with the question of whether or not to build, Denman suggests starting with the data. Each school boasts a unique set of demographics, land attributes, financing options and community stakeholders that will factor into this decision. She suggests schools consider the following decision-making process to determine whether building housing is right for their community:

  1. SURVEY: Understand your staff’s current housing status, commuting patterns and housing goals and clarify objectives.
  2. STUDY: Hire an external consultant to conduct a feasibility assessment to answer such questions as: what are my land acquisition options? How many units can I support? How much will this cost? What scale and scope is acceptable to my community? Do I have any major site constraints?
  3. DECIDE & STRATEGIZE: Work with your team to determine the best design, scope and financing strategy for your district and community. For example, some districts with larger sites may be able to offset the cost of building by selling a portion of the land to a market-rate developer. Now’s the time for a go or no-go decision.
  4. ENGAGE: Select your developer (through a request for proposal [RFP] or direct relationship), engage your stakeholders and begin the environmental review process.
  5. BUILD: Work with your developer team to understand key milestones and the impact on your community.

Development is hard. It carries enormous financial risk, can take years to reach occupancy and requires strong leadership to navigate a complex approvals and community engagement process. However, when pursued in parallel with a homeownership assistance strategy and with the right experts and partners to support the process, development can be an effective tool for schools seeking to secure permanently affordable housing for essential employees.

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Real Estate & Housing

About the Author

Nikki Lowy

Nikki leads Partner Success at Landed. She's a 3rd generation San Franciscan, proud Golden Bear & Penn Quaker, urbanist, cyclist, and urban cyclist.

Looking for Landed's down payment program? Due to a temporary unavailability of DPP investment funds, all Landed metro areas are being put on a DPP waitlist effective September 8, 2022. You can read all the details (including FAQs) here if you would like to know more.