281 | A New Model of Creating Affordable Housing with Sibley Simon
Our guest this week on the pod is Sibley Simon. Sibley is the Founder and Executive Director of New Way Homes, a non-profit social enterprise that creates new affordable and below-market-rate housing while providing investors a fair return.
And a special thanks to members of the Awarepreneurs Community for sponsoring this episode!
Resources mentioned in this episode include:
Affordable housing, innovation and partnering with impact investors - an interview with Sibley Simon
NOTE: While it’s not perfect, we offer this transcription by Otter.ai for those who are hearing impaired or who don’t find listening to a podcast enjoyable or possible.
SPEAKERS
Sibley Simon, Paul Zelizer
Paul Zelizer 00:01
Hi, this is Paul Zelizer, and welcome to the Awarepreneurs podcast. On this show, we dive deep into wisdom from some of the world's leading social entrepreneurs. Our goal is to help increase your positive impact your profitability, and your quality of life. Before we get into today's topic, I have one request. If you could hit subscribe and do a review on your favorite podcast app that helps more people learn how to have positive impact through values based business. Thank you so much. Today, I'm thrilled to introduce you to Sibley Simon. And our topic is A New Model of Creating Affordable Housing. Sibley is the founder and executive director of New Way Homes, a nonprofit social enterprise that creates new affordable and below market rate housing, while providing investors with a fair return. Sibley, welcome to the show. Thanks, Paul. I'm excited to be here. I got a call from a friend of a friend who lives in California currently has a job works lives with an elderly parent who needs some care. And basically said, Paul, I can't afford California, get me out of here. I think I'm coming Albuquerque, can I talk to you? That's why we're here. So you, you have and your team have been thinking about this for a long time. And you don't want people to have to be what I've heard called economic refugees. And yet right now in the US and other expensive cities, it's really hard for, you know, hard working people with decent jobs to sometimes stay where they are. Is that fair to say that that's the kind of things that you and your team think about?
Sibley Simon 01:39
Absolutely. It's the very recent year when the last couple of years was the first year and many decades, maybe ever on record where the California population actually shrank. And that's, there's so many stories like you're hearing. But in addition to that, so that's part of it, we should not have economic refugees. Another part is a lot of people not leaving, but are really suffering a lot more than they should, you know, California has per capita homeless population is the largest in the country. And but it's much more widespread than that. And by some measures were the wealthiest state and by some measures were the poorest state. When you factor in housing costs, we have the highest poverty rate of any state in the United States. And that's crazy when there's the amount of wealth and incredible thriving economy that we have in California by other metrics. So yeah, some people leave some people stay and suffer, and neither is really okay. So before we get into how this all works, and what you're all doing about it, just give us a little bit of the backstory simply like why are you so passionate about this? And how did you get into doing this work? Sure, I have always in my life, getting excited about projects and entrepreneurial activities, and I come from families of small farmers, and they're very entrepreneurial. And that's all great. But I ended up after college, starting some tech companies it was.com boom in the 90s. So anyone could start a company if they didn't know what they were doing. So I was one of those folks, but ended up learning a ton and having some success and some failure, learning more from the failures, but through the successes ending up one thing after another owning a house in California owning home in the woods without debt, which is pretty remarkable, a privileged position to be in. And as I was at a juncture with all of that work, and ready to take some time off frankly, feeling a little burnt out by the pace of tech startup work for about 14 years. And one to have a kid with my wife who's a nonprofit executive, I wanted to take some time off, but I also knew that I wanted to put some professional energy into things I could care more about ethically, always been interested in that I had been on the boards of nonprofits, but you know, I've just been doing inventive things with software that people hadn't necessarily done before, but they weren't. They were kind of value neutral weren't making the world a better place. And so I just started volunteering more in my own community of Santa Cruz, California. And certainly homelessness is a big topic here. But I got into it from helping lead the renovation of a semi abandoned historical cemetery that saw a lot of use by folks who are homeless, and they're ended up getting a partnership with a local homeless shelter, that where individuals who are homeless came out and volunteered at the cemetery and when get some lunch. And we just did what we could. And that was just the first time in my life, I had had conversations on a weekly basis with people who were experiencing homelessness, and realizing that didn't define who they were, and that their path were as varied as everyone else's paths in the world. And, you know, you can find examples of stereotypes in that population, but many, many examples that defy the stereotypes. And really seeing a lot of people move through that on to success. And so then my next step was I just went over to that homeless services campus and said, What's going on here, met the executive director, fascinating organization and an incredible work. But I learned, oh, we needed to do in our region, what New York had started doing, Los Angeles has started doing, which is way better at helping people all the way out of homelessness, who had been in homelessness for a long time, not a little short spell, but were trapped in homelessness, doing the comprehensive services needed to get them permanently out of homelessness. And I joined an effort, really a couple other nonprofit leaders, and then myself started an effort to do implement those best practices in our county, made a ton of progress helped a lot of folks out of homelessness. But we were very metrics driven, like a lot of entrepreneurial businesses. How many folks can we turn their lives around and help them help themselves, you know, each month and we track that metric, and we tried to take down barriers and get more efficient and accomplish more. And then when great, we could get up to about 12 people a month in our county, get completely out of long term homelessness, and then try to help them succeed from there. And then we just absolutely hit a ceiling. And it was not about being able to pay the rent for more people. Initially, as they're getting on their feet, it was not about the services, it was about how many housing units were available. And when we did work so hard to get a landlord to rent to someone who had been on the streets or in a vehicle. We were out competing a bunch of other people who need housing and didn't feel great. And then the people who were doing this incredible social services work professionally, as California and coastal California and Santa Cruz as one of the epicenters just have housing costs. You know, they're full time employee doing incredible important work in our community, and frankly, saving lives and they could not afford housing here anymore. And so we were felt like we're employing people into homelessness, which is a terrible feeling. And so it really just felt like, as I got to see the breadth of this, and schools as I started to have a daughter that was taken care of, and we kept losing childcare, because people were the economic refugees, as you put it, and moving out of town, the schools can't hire teachers here, they're always a shortage of teachers because of the housing costs relative to pay. And I just feel like our communities falling apart, there are fewer and fewer families. And we just get this bipolar, you know, folks who are wealthy and then folks who are really struggling. And we just have to solve it. And as I started understand, the other thing it's doing is making people have longer and longer commutes. So they can live somewhere where it's a little less expensive and commute a super long ways, then it's a climate change problem. And we can't meet our climate change goals without solving the commuting problem. And just on and on seeing the effects of this. I was like, This is what I've got to work on one way or another. And so I started just, you know, how can we find some permanent supportive housing for folks who are trying to help out of homelessness, but quickly got to the point of seeing, like, we just need more of a variety kinds of infill housing, near where people can work, and the other things they want to do in their life. And we need more of it for everybody who's struggling to afford housing, which is the vast majority of folks in California, and not to harp on California. That's just what I know really well, the metrics are worse than anywhere else in the country. But other places are not far behind in some cases. So it's a problem and solution that pertains, you know, around the United States.
Paul Zelizer 09:23
So I love that you went from looking at things in a short term way. So let's just like find ways to get people off the streets, to like seeing that there were some ceilings and those ceilings were preventing long term permanent change and the folks that you're working with in their lives, and it's almost like one of those I forget what movie it was, but it was like, it's the number of units dummy, right? At a certain point, you're just like, we need more affordable units. And anything else that we might try to put attention to if we don't sort of solve that problem, then we're just going to be putting band aids on tufts. situations and you're like, Alright, I'm gonna go right there. So somewhere along the way, you decided to create new way homes what when was that?
Sibley Simon 10:10
It was over Thanksgiving eight years ago now. And it as Majan, a lot of your guests and listeners could appreciate how this goes, is the thing that tipped me over the edge to really saying this is what I'm going to try to do full time was looking at spreadsheets, and realizing that having the realization that like, oh, we actually can build housing, housing is very expensive to build, of course, a big project, we can build the housing and return the money to investors that it takes to build it and give some return, at least. And have it be rental housing, that is various levels of affordable housing for different folks, we can actually do a lot of that, even here in California, where it's pretty expensive to do, we just don't do it. Because there's always something more profitable you could do, whether it's more profitable to invest in with the money or more profitable to do with that land, or, you know, are building high end condos for sale. You know, and if we're not building enough total housing in California, which we definitely haven't been, you know, the industry, of course, cherry picks off the most profitable activity, which is, you know, in the most desirable cities building large scale condo towers, for the highest prices, they can and or building single family homes, that sprawl that are that are typically quite large as well, that's most of the housing gets built. We can In addition, build a lot of other housing. It's just if we didn't have enough, big enough, big enough industry that wasn't happening. And so when I realized, because I felt like doing one project is great, we could save some lives or, or help teachers live where they work, or whatever it is, that's great. We build 10 units of housing, that's great. I can feel proud of that. But it's not solving the big problem. And I was excited to figure out how can we move the needle and the bigger picture, and I realized, and so if you have to raise millions of dollars of philanthropy, to build one building, that's 10 units of housing, again, that's great. But that's not very replicable to just raise that money over and over again. And so the oh, if we can get people to invest at a modest return and return that money, then there's hope of doing it over and over again and scaling it a bit more. So when I saw that the numbers kind of add up for that. It just wasn't being done. Sure, there's always things you're missing. When you have the ideas and you've done initial investigation, every business, I feel like you make a plan. And then you spend a year finding all the reasons that that plan can't work the way you initially envisioned it, but you solve all those problems, and then you can go forward. So I had a year of that afterwards. But when I saw that the numbers seem to add up. That was when I was like, I'm, this is what we're going to work on.
Paul Zelizer 13:09
So somewhere 2014 2015, you have this idea, you start crunching numbers. And there's two very specific things that you did survey that I really, really like, number one, you saw that threshold, you saw that tendency not in any way, there was bad intent, but you were seeing that the problem wasn't being solved. And I love your description of, you know, hey, we put this massive amount of intention trying to like write grants, or get philanthropy or get donations, and best case scenario, maybe there's like a 10 unit, you know, complex that goes up. And in the meantime, while you're raising the money, and while you're, you know, building this thing, which would take years way more people than 10 with the numbers of homeless weeks a year like this is not sustainable. So So I love that big picture. And I just want to invite our listeners to notice that the second thing civilly is you really leaned in and you mentioned one that I want to ask you about your there's two main things when you're thinking there's lots of things but but two big costs for housing one is the land, where are you going to put this housing, then number two, is the money to build the actual construction, whether that's running in the utilities, or putting in the foundation, or building the walls, putting a roof on etc. And in both of these areas, you've done something very innovative. So whichever you want to start with either as a land or getting the money to build, but tell us about those two innovations.
Sibley Simon 14:42
I will and I'm gonna add a third barrier that people don't think about as immediately but has been paramount here, which is that getting the legal permission to build what you want to build on that land. And I can't take credit for innovating there. But the state law legislature of California has been solving that problem. And we've made sure we're experts in how to use new state laws to get that legal permission. That is a big one big reason that supply has not been meeting demand here in many other places for decades. So to get to your point, the the first idea I had, as I mentioned was that, oh, impact investment could be the key to this. Because we've been building housing in two ways. You know, Wall Street type investment, seeking a high return doing the highest end part of the market, great, that's taken care of, then we've been putting public dollars into publicly funded affordable housing, that's great, too, and we need to do more of it. And I really support that. But it's not nearly enough to meet all the need, especially up when you get to folks who have pretty good jobs and still can't afford housing. But even at the lower income level is just not enough. So. So those two things are happening, fine. But I realized that yeah, getting the money, we need to actually build the buildings, and I want to build infilled apartment buildings. And now in doing that, then you can borrow a construction loan. And then you can once you're done and rent out apartments, you can refinance to a 30 year mortgage, that's all great. But just like when an individual buys a house, you have to have a down payment, and you can get and you can borrow for the rest and pay it off over time. Building a building works the same way. You got to have a downpayment. And then you can borrow the rest and end up paying that out of rents over 30 years. So how do you get that downpayment, which still could be millions of dollars for a building? Well, that's where it felt like impact investment would be the possibility here, the third way of creating housing at scale. And so it was able to start with folks I knew who were philanthropically supported, work on homelessness, and then go to foundations and foundations as well, who were looking to do more use of their endowment as impact investments, get the money back at a modest return, but put it toward investing in something that was solving a problem in the communities. So went to those types of sources and raised some money. Great, and, and felt like, Okay, we got a model, we've got some people who have put some dollars that are particularly philanthropically minded. So they've been willing to take the risk for a modest potential return, and believe that we can do this. So then we have some money, we can move projects forward. So that was great. And so that was that innovation was thinking, Okay, we're gonna give a modest return and when and to be concrete, found, it turns out, I learned over time, a lot of foundations like, if they're going to do an impact investment, which usually means loaning money to a nonprofit, and then getting paid back over time, they often like to loan that money at 3% return. That's the most common thing out there. For individuals and businesses and other folks who might make an impact investment to help solve this problem. We have different structures most commonly we've been raising money for and a quarter percent. And then sometimes we can do a higher return than that into specific projects. So that's what I mean, when I'm saying more modest return instead of 15%, or 20%. Return that high risk, high return real estate investment world might seek. So that was that solution. So we actually figured that out first, but it takes years of work. To get to the point you can even build a building, you got to like you said, find the land the site, and then you got to get legal permission. Well, so then I spared i had to set all that up, raised the money, the legal structures, form a nonprofit, all this stuff, and then spent literally a couple of years pulling out our hair, just trying to find a site that we can build. You know, if a site's for sale, it's going to go to, you know, higher end development that can pay a higher amount probably, or a lot of folks in California, they have to pay so little property tax on, you know, places you could build an apartment building that they just keep it as a long term investment and not very motivated to sell it now. So there's a lot of issues and a lot of zoning issues that prevent a lot of places from being developed. So what I ended up doing, and by then it was a weed with a growing team is finding sites in two ways, but the biggest way is partnering with nonprofits that already own land, and so they have a mission aligned reason to want to develop housing and the number one category we've ended up working with churches Because churches own tons of sites that are infill, close to downtown's and often have huge parking lots or just blank area on their property they're not using or sometimes a whole wing of the church that's not used anymore. There's a lot of churches that used to be bigger and now are smaller membership and, or that do things differently than they used to and and have extra site extra building. And so that is an order, they're really feeling their own membership being economic refugees. So they, we found that a lot of churches are very interested in saying they don't have money to develop a property, but they have the property and they don't want to lose that asset. They don't want to just sell it. They want to put it to work for solving a problem in the community doing a lot of good, and some churches saying go and partner with publicly funded affordable housing developers and do that kind of project. But for a lot of reasons not gonna go into it's not always the best fit. And there's many more of these sites not being done that way. And other types of nonprofits to social services, nonprofits, we're starting to talk to schools. So there's all these properties where a great location, good zoning, and where if we don't have to pay for the land upfront, even if we're giving a return to that nonprofit owner, over time, they're gonna get cash flow, they're gonna get a good financial return on their investment, as well as the mission return. If we don't have to pay up front and carry the cost of all that land and raised all that money just to hold the land for years before we can build a building, then that's another big step toward making the housing more affordable. So is getting low return and modest return on capital and then not having to buy land up front years, before you build a building, were two huge keys to unlocking a model where we could make housing more affordable. And then the third thing that, like I said, I mean, the huge problem has been zoning and land use control at local governments, where any neighborhood could stop anything from being built near it. And that's really changed in California dramatically in the time I've been working toward this. Now, there are many, many opportunities where state law says the city of look, the city already planned for housing in this location. So if you propose that housing that fits that plan, and you make some of it deed restricted as long, long term or permanently affordable housing for lower income, then the city can't say no anymore. And that's been a huge step forward in California, that's allowing a lot to happen. And really, the development industry and the financial structures haven't caught up to that, that development can be so much lower risk now. But we're taking full advantage of that. So when we start a project, we know it's gonna get approved, for sure. And then we can be focusing on the finances and the design, and then operational plan and who the housing can best serve and making the best project that we can. We still really respect the neighborhood and meet with the neighborhood, but we don't, it's not all a political game anymore to get one project approved. So those are the big changes that are allowing us to have success, building housing that wasn't really being done before.
Paul Zelizer 23:33
Beautiful. So listeners notice, simply had a and now your team civilly, you knew the impact you wanted to have, but you had a lot to learn. And when you hit these barriers that were really stopping other people, you brought out the innovation card, and both in all three, but especially the land and the money to build, and then leveraging a general trend that was you know, making it more legally viable to build affordable housing projects. Matter of fact, I heard you say, you can't stop it, if its own correctly, you can't do not in my backyard anymore under certain same circumstances, which really puts a hold on many affordable housing. Those came together to create a new way homes. And there's a lot of innovation there. So congratulations. Thank you. So let's do this. In a moment, I want to come back and hear what new a homes look like. Now, there's been hundreds and hundreds of units, some of the things you're working on where you're going. But before we do that, just want to take a quick break and hear a word from our sponsor. Do you have a business that's about making the world a better place and you want it to grow both in terms of your impact, helping more people and your income so you could live a good quality life? If you do, I'd like to talk to you about some research for a second. When scientists look at what actually contributes to humans reaching their goals The single biggest predictor, whether it's a wellness goal, or it's a business school is what they call social support. In other words, a group of people who are on a similar journey, who can help you with specific strategies that work on that journey at the time and point of development that you're on, as well as emotional support for the ups and downs of that journey. Being a social entrepreneur has highs and lows, right? If you like that kind of support aware printers has a community called the AWARE printers community, over 270 really generous and really skillful social entrepreneurs. And that's what we do with each other. We share concrete strategies, as well as emotional support for the ups and downs of the journey. If you'd like to find out more, you can take a look at where printers.com forward slash community. And thank you to everybody in the world printers community who helped sponsor this podcast. So welcome back, everybody. In Sibley, in the second part of the show, we like to joke about putting on our social entrepreneur glasses. So we got that big picture. Now. It sounds like when I was doing my research, it sounds like there have been hundreds of units built over the past eight years, and really over the past five years, because it took you a couple of years to kind of figure out some of these challenges. Where are you at now in terms of how many units has new way home?
Sibley Simon 26:26
Built? Yeah, so I want to slow you down a little bit there. Because everybody's always surprised. Like, oh, you know, for a lot of years, I couldn't say there was any built. And so it was a lot of like still feeling like, oh, we still gotta prove it. So we are still young in this because you know, the average affordable housing project generally out in the world takes seven years, at least in California to get done. And we're trying to go faster than that. But it's taken a long time to get up to speed. So we've just completed we completed our very first project a year ago. And that's in Oakland. It's with a historically black church. And it's renovating a whole wing of that church that was empty former classrooms, and to 12 units of housing, we were able to, we're just completing the permanent financing now. So we're coming to the final final step of the whole cycle, the church is completely owning in this housing, sometimes we share ownership, this one, we were able to get to where they could completely own it. And there they have a multi year contract with the county, they're operating it as reentry housing. So individuals coming out of prison, who are ready for a program where they're getting employment and other services they need. And like I said, it's been operating for a year now. And they're already having great success of folks moving out into having their own housing, permanent housing and jobs, etc. So we're super proud of that, up to 20 adults at any given time, and really is a success. So so that project is done. We have a second project, we're there, these first two projects, in theory could go a little faster, because they were renovating vacant buildings. That was that one and the second one's in Santa Cruz is permanent supportive housing back to what I started initially, it's just seven units, because this long vacant Victorian house is historic house. So the historic building, that's a whole consideration. We had to completely completely renovate it and turn it into seven units. And that's extremely close to done. 98% done. So folks, we'll be moving into that housing pretty soon. And so those are just our first two projects. So yes, we have hundreds of units that have made a lot of progress. We have 121 unit project that we did the entitlement and, and led through design that's going to start construction, that's all permanent supportive housing, again, back to my initial vision, that's these, that's the bigger project we were able to start it's taken about seven years, that is really going to radically change the amount of permanent supportive housing with a high degree of services in the Santa Cruz area 121 units with a health clinic space in the building that's going to break ground early next year. So that's a big step for us. And then we have multiple other projects that are in the permitting stage. So you got to get your planning permits and then do the full engineering and get the building permit. So we have we do have hundreds more units in that phase from all affordable project that's in Salinas, California. Another great man stinkum project in Santa Cruz with the church, and we're having working with several more churches in Oakland, as well as on projects really meant in various ways to reduce displacement, especially out of the black community in Oakland that's felt a ton of economic displacement in recent years.
Paul Zelizer 30:22
So simply this middle way, the third way you called it between like, nonprofit a gift, you know, a, or a zero interest loan, and more traditional, you know, investors, I was talking to somebody who worked in an investment in a VC basically. And he said, Look, I don't want to be really blunt about it. But to be blunt about it, if a project doesn't get us 10x return in the first five years, I can't get paid to talk to you like I need to move on. Right? That's a pretty wide, widely divergent pathway is right? Either give them money or a zero interest loan, and 10x return in five years like and what you're doing in the middle there, I'm seeing more in that like middle area, right, talk to us a little bit in that like three or four and a quarter or 5% return? Like, how does that conversation go with investors? And tell us about like, what would be motivating somebody to meet you in that third way?
Sibley Simon 31:27
Sure, there's a number of things to unpack there, but I'll highlight a couple of them. First of all, Yeah, everybody's motivations in their life are different and where they're at right now. And it's an interesting, I have such varied conversations about that with individuals we talked to, we have a couple 100 individual investors now, and many of them are just are at the point where it's like, you know, I understand the financial picture of my life, I'm relatively comfortable, or I have what I need, I need to keep earning money, or I'm retired and, and have an okay picture with retirement, you know, people at all ages of life, but they're like, you know, I'm earning some money, I invest some money over here, but I really would like my investments to be doing good in the world, and I'm fine having a portion of my investments be fixed income, you know, get an annual interest payment at four and a quarter percent, okay, you know, I'm fine having a portion of my investments be that but what I really want is some of my investments, doing something really good. And they might find some satisfaction in having investing in stocks and bonds, but having it being socially screened, you know, so they're not investing in companies that they think are doing bad things, or that they are investing in more environmentally friendly companies more actively, but also just something in their own community around where they live and be and that's so tangible is building housing. And so we find folks saying, Yeah, either I just want to do a little bit to help you out, you know, to help this new way homes grow and, and help some folks or we see some people be like, really want a substantial portion of my investments to be investments like this, and here's one portion of that, you know, invest in new homes. So it's really folks who are impacted, motivated, and also see even businesses who, of course, businesses, traditional business, they're where their bottom line focused. But more and more businesses around here, part of their bottom line focus is they can't get employees who can afford to live here. And so they're like, Well, I'm Anna, they don't want to be in the business of owning housing to rent to their own employees. And so they're like, Well, what can we do, and one of the things we're saying is, oh, if you're a business and you invest in our fund, we'll give you some preferences, you know, to some of your employees, not, not a discount, but we'll come to you and we have a vacancy. And if you have somebody who's to fit, you know, we'll rent to them for you know, a couple units or whatever. So finding ways to fit into businesses, bottom line, motivation has been one angle. So that's the attitudes we get, and and foundations who are, you know, sometimes under pressure, but also desire to have less of just straight wall street investments, when they're actually their whole purpose is to do good in the world. They're looking for investments on that. But a whole second thing I'll say is, well, you gave the range there from philanthropy to you know, VC investment, the other end of the scale, but what you are not mentioning in that is the other side of the return equation, which is risk. And part of the reason VC say that is because, you know, 80% of their companies are going to completely fail and they lose all the money, right? So to get a good return, they gotta hit the big winners. That's a risk return profile. My big dream, which is not where we're at today, but my big big dream is we get this system and show other people how to do it so other people can do it. So it's a whole industry. where the risk is shown to be low enough, that of four to six that we can give a four to 6% return. And that's seen as risk adjusted market rate return, so that people will do it and part to feel good because it needs to happen. And we need to improve the world this way. But that they won't feel it's concessionary. Because there's a lot of, there's a lot of investments out there. And if you invest in Treasury bonds, and a lot of times you might get a 0% return or a 1% return, right. But that's incredibly safe. It's the safest investment in the world. So if we can have to put a more finer point on it, we're building apartment buildings, if we can retain some of the equity ownership and those apartment buildings, when we share it with a nonprofit or whatever, we retain some of that ownership that's on our balance sheet, we look like a safer and safer investment. We are a safer and safer investments, we get a track record, we show how this works. We're a track record of paying investors annual paying fixed interest payments, the end, we have that great balance sheet, we can show that like oh, this is a pretty safe thing that's like a bond, you can invest in it, get 4% 5% return, that's pretty safe. There's billions and billions of dollars out there that want relatively safe, there's always risks, but relatively safe four to 5% returns, tons of that. So that's the way for us to grow and still be an impact investment. Because we weren't, we're not going to loosen up our mission. But be something closer to a market rate return. If we can, instead of increasing the return bring down the risk. And then that's how this kind of thing can scale and whether we scale it or we just show other people how to do it. I'm fine either way. But I'm convinced we need housing development. That is modest return, we I just I just think our society is not going to succeed. Unless we go back to achieving that it can't be a high it can't be the all housing is either fully charitable, or a very high return investment. We're not going to make it that way.
Paul Zelizer 37:10
Thanks for breaking that down press Sibley and those numbers that you're sharing, I'll put a link to an episode with Marty Stagg Meyer, who's in the Atlanta area, in doing, you know, bringing housing to marginalized communities, and really affordable rates, different models. But what was fascinating is those same numbers, she's talking three to 5%. And that's when things really become viable, in a totally different, still expensive downtown Atlanta environment. So I'll put a link to that episode. But it looks like that there's more data coming in from the larger social impact space, that that's a really viable way of presenting a case to impact investors and what you were saying simply about reducing the risk. And we don't always have to reduce I mean, increase returns. Another variable we can do as social entrepreneurs, is, like you said, so well, is reduced the risk profile, and people say, Oh, tell me more about that is if the alternative is for Treasury at 0.5% or 1%. And you can give them 4%. They're gonna say, Tell me more. So thanks for breaking that down for us. So right now you are raising some money. Tell us about the projects you're raising, you're you're looking for investors who want to raise their hand right now.
Sibley Simon 38:39
Yeah, that's right. We have a few projects in which I mentioned a little bit, but for I'll just show, I'll highlight one, for example, that we're looking to start construction on next year. But we have to put together capital first. And so this is a church, pretty well known, historically black church called center of hope in East Oakland. It's on this big street called MacArthur Boulevard. It's actually only a few blocks away from our first project in Oakland that we completed. And we have a couple other sites we're working on in that neighborhood as well. And so partly, this has helped us think at a neighborhood level in some cases, like this case, where it's like, how can we help redevelop this neighborhood that has not had a lot of investment? And we've talked to predominantly black homeowners associations in that area, and they're like, you know, they were really hungry for this good quality development, and some commercial use along the commercial street. They feel like they've seen that decay over 50 years. But, but we don't want to trigger development that makes that lights up gentrification, right where then the high end development comes in, totally changes who lives there, and that that brings up the rent Since people who currently live in the neighborhood and people, more people are displaced. So that's been very interesting starting to think at a neighborhood level, I won't go more into that. But I, I know, that's a topic people think about with housing development. So I mentioned it. But this project is kind of a next Cornerstone project there. This church not only has its church and some offices, they actually already have some publicly funded transitional housing for women in a building down the street, and then they've got this building that is a pretty good strong building that used to be a charter school, but it's been vacant for around a decade now. And then a house as well, right next to it. And so we're taking those two buildings, and we're going to renovate them into 28 units, and of housing ranging from studios to three bedroom units. And then we plan to have all those be lower income, affordable housing in some form, some might be folks with vouchers like what's called Section Eight vouchers, so they're very low income, but have a way to pay more rent through that voucher, but can't find anywhere to that will accept the voucher. So that subsidy that's out there not being used to, we could rent a few units to a program, or we could just have folks that are not, you know, super low income, but or have a job, you know, family that has income, reliable income, but just can't find housing they can afford at you know, they're there, say 80% of the area median income, we could rent to some families at that income level. And we can make the project work successfully that way. So this is renovating these vacant buildings into 28 units, and really finding the ways to maximize those helping affordability in the neighborhood there and doing it without public funding. And the key there is we've heard from a number of the minority lead churches in particular, or other organizations, where the publicly funded projects are great. But if we did this as that, then it's a whole regional lottery as to who gets in 1000 families apply for every unit, because the insane need there is. And again, good affordable housing. But because it's 1000 to one, and it's literally dropped out of a hat, essentially, then it's nobody the church knows gets in, right, and they're not looking to discriminate. It's not just for church members, it's you know, not for any demographic qualifications as to who gets in, but they really care about their neighborhood and about people who live there being displaced. And we're trying to help that the most. And so we've got a model to try to help address that. And then more in the neighborhood after that. So we need to about a million and a half dollars to be that downpayment toward construction. Now we have great lenders we can work with. For the rest of the construction costs, it could be, say a $9 million total project budget, including construction, and some other costs at that phase. And so, you know, we have some funding sources we're talking to, but we're planning over the first half of this next year to raise the rest of the money for that. And we're really interested in in helping you know, and talking to anybody who's interested at any dollar level in making an investment.
Paul Zelizer 43:31
And if somebody wanted to talk to you about that, how would they get ahold of you?
Sibley Simon 43:35
Really the best thing is on the new way homes website, it's easy to go to contact and fill that out. And that'll come to me having to say my email address is Sibley at New Way homes.org. But also just going to new way homes.org. Easy to find there. And we have both a 10 year note that for people who qualify as accredited investors, many most people who do don't know that they qualify. But that's a qualification that allows us to, to take a loan to this nonprofit new way homes from folks and give a annual interest payment of the four and a quarter percent as I mentioned with the principle due at the end that allows us to build the project, rent it out, eventually refinance it and pay everyone out. And so that's one way but also periodically, we've done crowdfunding campaigns where anyone it doesn't matter what their income or asset level is, can invest something in it and starting at $100 investment. And so folks want we're in the spring we'll do another one of those campaigns. So first want to be on the list to hear about that when it happens. Also, similarly contact us we'll make sure that they do so. Those are same It's the same note, same investment, I care democratically that anybody, you don't have to be wealthy, to make great investments, a lot of investments out there you do, you have to qualify with certain amount of assets in order to just get the investment. And I think on the impact side, as well as the return side, you know, more investment should be open to everybody who wants to participate.
Paul Zelizer 45:21
Right. So we'll put a link to the new way homes website, in the show notes. So simply, you know, it's been a, what an amazing eight years, and thank you for all this work you're been doing and how you've been innovating in a space that's been pretty stagnant. And I mean, good people really trying, but there's a lot of structural blocks. So thank you for all this innovation. When you look ahead, if you like project out, I don't know, go five years down the road, what does New Way homes look like? And where do you think you're going?
Sibley Simon 45:52
Yeah, well, we have a whole area haven't gotten into it. This so only mentioned really briefly, is? Yeah, kind of like you said, I mean, so much wasn't being done that every time I got to a new major function in the process, I felt like I didn't necessarily have folks that could go to who were doing it the way we needed it to be done. And things like the design process or getting cost estimates for construction, or, you know, things like that. So what we've ended up doing is start, I first started a little development company, to take very low profit and take below market rate fees, but just to do the development work and hire more folks in that area. And then I've ended up blending that with the design build company, so that we could have in our whole system, the ability to have a development team and have, you know, architects and designers on staff and have some construction supervision, so that we really could do things really efficiently and rework how everything's done, still in process still improving. Today, for sure. So what I want to get really good at is, you know, in five years, I want us to have, you know, a couple 1000 units under development at any given time, and to have a really efficient end to end process where we have our figuring out, a lot of things need to cost less, you know, they just the way the system has been bill and the requirements put on we need safe housing, no question, you know, it's got to be earthquake safe, it's got to be environmentally better and better than it has been in the past. We're trying to build a one of the apartment buildings we've developed, we're hoping is one of the very first passive house apartment buildings in California, meaning extremely low energy and great air quality, even when there's forest fires around. And so you know, things need to be improved on, but they also have to be more financially efficient. And so I'm, I hope that we're measurably building housing less expensively, and that's better quality. So actually improving on both of those, and go into a ton of detail on that, how we're how we're trying to do that, what we figured out what we haven't figured out, but you know, I just hope that we're innovating across that. And in service of the end of the day of making of both, you know, environmental goals, and especially of affordability goals, as well. And so we're showing improvements, and then sharing those, and just I want to share, share, share, because, you know, I mean folks all the time, and they don't in the housing, world housing development world, they got a little proprietary thing over here, and they don't want to share it, or they've figured some things out. But this is a huge problem. We need to be, you know, blasting out there. And every innovation we can, I think because there's maybe it's a privilege that we're in an industry where the need is unfathomable. California is missing 2 million homes for the number of people it has literally to mine. And so the majority of people under 30, adults under 30 live with their parents, you know, it's just we've done all these things are so much overcrowding, there's so much homelessness, we've done all these things to accommodate the fact that we just are millions of units short. So it's not competitive. It's not a zero sum game. If other people start doing what we're doing that's not going to outcompete us at all. And so I just want to share, share, share. And so I want our ideas to get out there and see, I want to see five more new way homes in California and five years.
Paul Zelizer 49:36
So simply I can hang out and talk to you all day. You're doing such great work and you're busy and our listeners are really busy. So yes, there was one or two suggestions you wanted to leave our impact founders with things you've learned over the past eight years that you think might help somebody who's in that process of you know, hitting ceilings and getting into sticky problems and trying to solve that. Or there's something you want to share with us about the New Age journey that we haven't yet covered. What would that be? Well,
Sibley Simon 50:11
I love talking to people about social ventures. And one of the things, so I'll say just a couple of things. One of the things, I think one of the most common, I think mistakes that people in their initial concepts or ideas is, is having like multiple stages, where it's like, well, I want to build this kind of business, so that then I can do something really good with the profits or that so I can have a philanthropic side to it. And it is so hard to build businesses that are profitable. You know, that's just so much work to always take along. Yeah, not whatever 90% of the time takes longer and more work than you think it will. You know, I'm eight years into this. I've been through starting businesses before, but if you told me when I started with that initial spreadsheet at Thanksgiving, eight years ago, that in eight years, okay, we'd have our first project done, and wouldn't be a profitable company yet. I don't know if I would have started. I mean, I hope I would have. And I'd like to think long term, and I'm going to be now I'm enjoying it so much. I'm gonna love doing this for the next 10 years. But I just see a lot of people and like, it's so hard to get a restaurant profitable. And people I want to get a restaurant profitable. And then I'll, you know, do this, this this. So I think people have to come up with what the fundamental business itself, whether it's technically a nonprofit, or for profit, or a B Corp, or whatever it is, you know, it's got to do good by its very existence. So that's one thing with people's business plans, I feel like I run into a lot. And, you know, I don't I will never know, who told me this when I graduated from college. But as I was, you know, initially thinking I was gonna go into academia, and then during college realized, I liked so many different things, I really wanted to go out in the world and be entrepreneurial. And I was very even then I was very interested in what could improve the world, what are systems changes, what are big changes that can move the needle on big problems, and someone said to me, if you really want to help solve problems, and not get paid a lot to do it, you know, or you don't care about making a lot of money to do it, go out there and work in business first, and really learn some skills, and just in the regular, you know, in regular business world, because I didn't have any experience with that, and then decide to put those skills to work in whether it's nonprofit sector, or now impact, you know, investment, you know, or impact socially responsible venture world. And that may not be the right path for everyone. And you can learn a ton by starting a nonprofit. But I do think there are there is so much more that needs to be done in the world, in building new businesses that fundamentally are not just responsible corporate citizens, but fundamentally are helping solve the world's problems. And I think philanthropy needs to grow and improve too. But I think there's so much need for that with businesses, that business skills are so needed. And I think, you know, it's just incredibly helpful for people to work in related industries that are just for profit, and then take those skills and do a better job or a better business plan somewhere. And while I hadn't worked in housing, I'd worked in a lot of things that require finance and investment and investors. And that got me slowly started. So somebody gave me that advice. And it was almost 15 years to the day after, you know, that, that I decided to finally start a truly, you know, social venture. And there's no question I couldn't have done this without that level of business experience before. It's just been so complicated and hard, which is why it hadn't happened. It's very hard. So those are the two pieces of advice I feel qualified to give. And I hope they're helpful for somebody.
Paul Zelizer 54:16
Thank you so much for being on the show tonight.
Sibley Simon 54:18
Thank you very much. I love I love tracking your podcast. So I look forward to continuing to learn from your episodes and thanks a lot for having me.
Paul Zelizer 54:29
Just a reminder, folks, and today's episode is an example. We love it when people make suggestions of topics and guests. Big shout out to Drew Tilton, a former guest on the show who introduced me to civility and new way homes when I say we love it when listeners send in recommendations. I'm not kidding. We really do love it when people who know our culture and understand the kinds of stories we love to tell so if you have an idea, go to the AWARE printers website. Look at our contact page we have three simple guidelines. And if you're saying yeah, this story this guest really fits please send your ideas right on here. So for now, I just want to say thank you so much for listening. Please take good care and these intense times and thank you for all the positive impact that you're working for in our world.