Community Preservation Partners (CPP) may just be the hero for those contending with the Bay Area’s exorbitant housing prices and severely constrained urban housing supply.
CPP, a national investment firm dedicated to the preservation and rehabilitation of affordable housing communities throughout the U.S., recently spent $119 million in May 2016 to acquire and preserve two multifamily apartment complexes in Oakland: Mohr 1 Apartments and Oak Center Apartments. The Department of Housing and Urban Development (HUD) will also recapitalize the two apartments to ensure they remain affordable and inclusionary for those of moderate means for up to 55 years.
Mere months later in August 2016, CPP again invested $53 million to do the same for the Monte Vista Gardens housing community in San Jose.
These joint ventures, which CPP funded in part with similar investment companies Related Affordable and Jamboree Housing, will renovate and preserve a combined total of 347 units in the Bay Area’s most expensive cities. Further, residents won’t be displaced during the rehabilitation process.
Even more promising is the fact that these ventures are only the latest from CPP; the company has acquired at least 44 preservation projects throughout California.
Of course, CPP isn’t simply pumping millions into housing preservation for the warm feelings of altruism. CPP is the development branch of WNC & Associates, Inc., a privately held investment company with 19,500 investors (including corporations) and approximately $7.5 billion of value in its portfolio.
What’s the payoff for CPP and these investors? Massive tax breaks — particularly, the federal New Market Tax Credit (NMTC), which provides private investors with seven years of tax breaks for affordable housing investments in low-income communities.
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CPP claims the preservation of multifamily complexes like the above will prevent other, more overtly money-minded investors from scooping up manageably-priced apartments and hiking up rents to market rate or higher, displacing residents who rely on their current low rents to remain in the cities. Indeed, CPP’s projects serve a vital purpose for sustaining the Bay Area’s socio-economic variety — but preservation isn’t exactly a one-size-fits-all solution (nor CPP’s singular goal).
The housing supply and pricing crisis plaguing the Bay Area stems primarily from restrictive zoning determined by city and county officials. Preservation of existing units alone does nothing for those newly arrived Bay Area residents still searching for housing within their budgets in such a high-demand environment. Until zoning loosens to encourage greater urban density through new, more expansive construction, only a sparse few urban residents will be able to keep up with the heightening stakes to both live and work in the Bay Area. Without new additions to the housing inventory, low- and middle-income renters in the Bay Area will be stuck looking for housing which doesn’t exist. Ultimately, these residents of modest means will have to flee the area in search of lower rents elsewhere.
For now, CPP’s tax-motivated preservation projects are beneficial to residents now living in existing, low-income housing who otherwise are often displaced by less “charitable” investors. However, the static Band-Aid of preservation needs crucial assistance from rezoning and new construction to make a true difference in the Bay Area’s housing crisis.
