Napa - Sonoma wine vineyards
Sonoma vineyards. Photo by Trent Erwin on Unsplash.

By Louis Martin

Known for its more than 400 wineries, Sonoma County often conjures images of the California dream. The area, along with neighboring Napa County, is informally referred to as wine country and often seen as a playground for the affluent. The reality on the ground is quite different.

Sonoma County’s affordable housing supply historically lagged demand, and its high-cost housing market priced out many families and people who work in the area. The median home price nears $700,000 and according to the U.S. Census, some 35,000 residents live below the poverty level.

The housing challenge became a crisis in October 2017, when wildfires in Sonoma County and the surrounding areas resulted in devastating property destruction. Twenty-two fires that covered 95,000 acres destroyed 10,000 structures, including about 6,000 homes with an estimated $65 billion total property loss. The city of Santa Rosa alone lost approximately 3,000 housing units.

The fire exacerbated the housing deficit, particularly so for low-income households that were already priced out of the market and the thousands of households that were looking for rental units after they lost their homes—many of whom did not have insurance and could not afford to rebuild.

Around the county, affordable housing projects were already underway in various stages, but the fires magnified the urgency for displaced families. Burbank Housing Development Corporation (BHDC), a major nonprofit affordable housing developer for the region, had just such a project in mind.

BHDC organized in 1980 to develop, own and operate housing for low-income residents in Northern California. BHDC had already constructed or rehabilitated more than 3,800 housing units in Sonoma and Napa counties, including multifamily rental, contractor built, mutual self-help, farmworker rental, special needs, senior rental and transitional housing. BHDC began partnering with RCAC in 1995 for financing. In the 20 years since, RCAC helped finance 15 BHDC projects.

“The funding sources for multifamily had effectively been extinguished, so we pivoted to see if we could create a homeownership product on that site that we could convince local officials and gain support to move forward on,” said Efren Carrillo, vice president of residential development at BHDC.

Efren Carrillo, vice president of residential development at BHDC, said that financing has always been a game of creativity, resourcefulness and relationships. In this case, BHDC had a solution more than 10 years in the making: a large piece of land that BHDC acquired in 2008. The 3.7 acre site in Santa Rosa was originally intended to construct 96 multifamily affordable housing units. At the time, the project was one of BHDC’s biggest wins. But anyone who knows history can predict what happened next: the Great Recession.

The recession caused a sudden funder contraction, particularly in California. The planned funding for the project, now christened Lantana Homes, disappeared. The decision to dissolve California’s redevelopment agencies, which had operated since the end of World War II, was the final blow. Lantana Homes was in limbo for the next several years.

In 2017 BHDC brought on new CEO Larry Florin, who asked the team to reimagine Lantana Homes. Carrillo credits Florin’s fresh eyes as a turning point for the mothballed project.

“The funding sources for multifamily had effectively been extinguished, so we pivoted to see if we could create a homeownership product on that site that we could convince local officials and gain support to move forward on,” Carrillo said.

BHDC replaced the original Lantana Homes’ plan for 96 apartment units with a new vision for a 48-lot subdivision. The homes would all be three-bedroom and two or two-and-a-half baths. BHDC would sell a minimum of 25 homes to low-income households and the remaining 23 units to households below 120 percent of the area’s annual median income. Each home’s target sale price was $495,000.

BHDC went to work navigating the complex labyrinth to submit site maps for approval and acquire permits and contracts. Carrillo recounts dealing with the U.S. Army Corp of Engineers, local water board and the California Department of Fish and Wildlife to work through concerns about endangered species at the site. All the while, the wildfires and their aftermath were happening in real time, adding a sense of urgency to the work.

“We had a housing shortage already, and the wildfires really created a calling for us to pivot and try to do something on this land. And that something is to create this incredible homeownership dream for 48 new families,” Carillo said.

Running in tandem with all the site development challenges was another challenge: how to pay for it. The entire project cost estimates called for $23.7 million. After the new plans were drafted, BHDC reviewed its funding sources. The Santa Rosa Housing Authority provided $3.4 million to propel the project forward, and during the project’s 14-year course, it provided more than $7 million. But it was still significantly short of the $23.7 million total cost estimate.

In late 2019, RCAC helped with a $19.1 million loan, which funded a sizable portion of Lantana Homes’ construction costs. The loan was one of the largest in RCAC’s history. Morgan Stanley Investment Bank partnered with RCAC and contributed $17.5 million to the loan. Morgan Stanley had an initiative to assist with wildfire recovery efforts and had recently participated in another RCAC loan in Sonoma County. Carillo said the funding was the game changer they needed.

“Completing the complex puzzle of affordable housing wouldn’t be possible without partnerships on the funding side. RCAC is a vital piece of that puzzle to make these homes a reality,” Carillo said. “RCAC has always been seen as one of these mission-driven funding sources that can fill gaps to make a project work. In this case, it’s a $19 million loan. It’s more than a significant contribution. Without it, this vision is not a reality.”

The other side of the funding coin was supporting the homeowners themselves. BHDC began marketing Lantana Homes in early 2019 through several public meetings, which more than 700 families attended. BHDC quickly received 267 applicants before construction even began. Even at a comparably low price to the market, the down payments were out of reach for many applicants. But BHDC’s dedicated homeownership team helped connect the families with several assistance programs. The Santa Rosa Housing Authority and Sonoma County put a combined $4.6 million toward homeownership assistance loans that homeowners did not need to repay unless they sold their homes in the future. California’s CalHome Disaster Recovery Loan program further bolstered the funding, providing $100,000 loans to homeowners that qualified. The power of what Carrillo refers to as financial stacking was evident in the bottom line: Most Lantana Home residents will move in with only a 4 percent down payment and a mortgage under $300,000.

“It’s incredibly rewarding to see everything come to completion. It’s exciting that 48 households can buy units,” said Megan Basinger, the interim city of Santa Rosa housing and community services director.

Megan Basinger, the interim city of Santa Rosa housing and community services director, was often at the center of this storm. Since 2017, Basinger was the liaison between the city and BHDC. She was instrumental in helping BHDC pivot from the original multifamily housing plan. Lately, she has been working with BHDC to help the individual homebuyers complete the process and close on their new homes. Basinger looks back on the project and reflects on the slow but steady progress.

“It’s incredibly rewarding to see everything come to completion. It’s exciting that 48 households can buy units,” Basinger said. “They’re able to have long-term stability in terms of their housing. It’s everything that we in affordable housing constantly work for.”

Carrillo shares this enthusiasm, but also points out a sobering statistic, “The most recent figures I’ve seen, at least for Sonoma County, is that 16,000 or 17,000 additional affordable units are needed. That’s just to respond to the existing demand. When you look at projected demand, then we’re looking at 30,000 new units.”

In pure numbers, it would take 625 more Lantana Homes projects to meet that demand. But Carrillo said it’s about more than the math, “While the demand and the need may be in the thousands, the fact of the matter is that you’ve got a few dozen families now whose lives will be changed forever. Homeownership does that. It creates opportunities for income mobility and higher education that other investments don’t.”

Basinger shares his sentiments by saying, “The need will always be there, and will continue to grow. But I think we can’t let the numbers get us down from the accomplishment here. We’re able to move 48 households into units that they own. That’s fantastic.”

Lantana Homes will celebrate its official opening in late August.