As school districts around California scramble to tackle a teacher shortage in the face of rising housing costs, the West Contra Costa school district hopes a new program that offers home down payment assistance will help its efforts to recruit and retain teachers.
“This is just one of the innovative opportunities we have worked on to assist our teachers to stay in our communities and continue to help our students thrive,” said district Superintendent Matthew Duffy. “West County, and particularly Richmond, is one of the few places in the Bay Area where home buying is still relatively affordable.”
Through the new program, a San Francisco-based for-profit startup company called Landed will pay half of the down payment up to $120,000 per household in exchange for 25 percent of the gain or loss in value when the home is sold. At that time, buyers would also repay the down payment
The goal of the program is to help teachers who earn an average $67,000 in salary to afford to purchase a home.
While the program in West Contra Costa is primarily aimed at attracting and keeping teachers, it is open to any district employee — including teachers, administrators, clerical staff and maintenance workers — who commits to remaining employed in the district at least two years and who can contribute at least 10 percent of the down payment.
“We know that Landed is just one of many solutions needed to address the housing crisis in the Bay Area, and we are excited to bring this program to the East Bay and West Contra Costa Unified to help keep educators working and living in the communities they serve,” said Landed spokeswoman Nikki Lowy. Since the district announced the program last Wednesday, several dozen employees have expressed interest in it, but no one has applied yet.
Demetrio Gonzalez, president of the district’s teachers’ union, said he lives with three roommates in Point Richmond in a rented home because they can’t afford to buy. He said he may apply for the program, but stressed that the union’s number one priority is teacher raises.
“If we were getting paid well, then we wouldn’t have to worry about how to afford a down payment,” he said. “But I think this program is great. It can be another support, I believe.”
Landed, founded in 2015, participated in the Y Combinator startup training and also received funds from the Draper Richards Kaplan Foundation and financial backing or other support from other angel and venture capital investors, banking executives, former directors of federal housing authorities, affordable housing policy experts, union organizers, philanthropists and Stanford economists.
Since then, it has established partnerships with about 50 districts throughout California, including many in the Bay Area, Los Angeles, Orange County and San Diego areas. It spent its first year establishing partnerships with investors and districts, then awarded its first three down payments in the fall of 2016 to educators from the Mountain View-Los Altos Union High School District, Los Altos School District and Nueva Independent School in San Mateo County.
So far, it has helped 48 school or district employees buy homes valued collectively at more than $26 million. The buyers include teachers, principals and nurses in the following districts: Sequoia Union High, Ravenswood City, Redwood City, San Mateo Union High, Redondo Beach, Oakland, Evergreen, Eastside Union High, Oak Grove, South San Francisco, Campbell Union and Milpitas.
West Contra Costa Unified, a district of nearly 30,000 students, is based in Richmond and serves East Bay communities in the western portion of Contra Costa County.
The district has hired more than 400 teachers over the past four years, but loses about 15 percent a year, resulting in an ongoing teacher turnover problem. To help stabilize the workforce, the school board recently approved a 5 percent teacher raise and is considering budget cuts and a possible parcel tax to help fund future raises to bring teachers’ salaries more in line with those in neighboring Bay Area districts.
“Now with Landed,” Duffy said, “we can help make the home-buying process a little easier for our employees and encourage them to stay in our district.”
About 100 district employees turned out for a housing fair Monday at DeJean Middle School in Richmond for the district’s official unveiling of its cooperation with Landed. The event included representatives from organizations that provide housing or financial planning assistance including Sparkpoint Contra Costa and the California Housing Finance Agency.
Mitzi Perez, a first-year Digital Arts teacher at Kennedy High in Richmond, said she is currently renting from her parents in Richmond, but wants to buy a home with her fiancé. “I want to live in an affordable home in the place where I grew up,” said the 23-year-old, adding that she attended DeJean Middle School.
“I am a product of the district. I wanted to stay homegrown and to go to one of our most under-served schools. I wanted to make sure that I’d be there for students, but it’s nice to know that there’s something that could help me as well.” She said she needs money for a down payment and signed up to receive more information from most of the organizations at the event, including Landed.
Diana Ortega, a 3rd grade teacher at Downer Elementary in San Pablo who has worked in the district 18 years, said she commutes 20-50 minutes each day from her rented home in Crockett. Ortega said she’s unsure whether she’d pursue Landed’s program.”They basically front you the money, but you would have to agree to share the capital gains,” she said of the down payment program. “I’m thinking, ‘Wow, is it worth it?’ My gut says, ‘no,’ but I may be desperate enough.” Her only other option is to borrow against her pension plan.
The Landed program received a major boost when the Chan Zuckerberg Initiative invested $5 million in it last year to help educators in three school districts near Facebook’s headquarters in Menlo Park to buy homes. Subsequently, Landed established the U.S. Educator Housing Fund in partnership with large foundations, such as the Santa Cruz Community Foundation and a Denver foundation, with the goal of providing down payment assistance to educators in other expensive cities nationwide. The housing fund is a limited liability company that includes money that is managed by Landed, Lowy said.
“Part of the appeal to foundations is we have a dedicated fund going directly to helping educators,” she said. “And any profits from appreciation when homes are sold goes directly back to the fund, which has allowed us to create an evergreen fund.”
Although the Zuckerberg Chan Initiative has invested in the fund, Mark Zuckerberg and Priscilla Chan have no role in the fund or the company Lowry said, adding that the Initiative is the couple’s foundation.
School district employees can use the program to purchase homes anywhere and are not limited to the school district where they work, Lowy said.
“We definitely want educators to be able to use this as a tool to buy something closer to where they work, but we also recognize that everyone’s personal situation is different,” she said. “It has to be their primary residence.”
Buyers must agree to work with a designated realtor who shares its commission with Landed, but sellers choose their own realtors, she added.
Homeowners must repay the initial down payment, along with 25 percent of the profit or loss in value, after a maximum of 30 years, she said. If they don’t sell their homes, buyers could refinance to pay back the money or use other funds they may have available. If Landed provides less than 10 percent of the down payment, the percentage of the profit or loss is lower.
Detailed information about how the program works is available on the Landed website. In one scenario on the site, the housing fund would pay $80,000 toward a $160,000 down payment on an $800,000 home.
After several years, if the home went up $100,000 in value to $900,000, the housing fund would get back 25 percent of the appreciation ($25,000) plus its initial down payment ($80,000) for a total of $105,000. If the house lost $100,000 in value, the housing fund would lose 25 percent of the depreciation ($25,000), which would be subtracted from the initial down payment of $80,000, for a total of $55,000 paid back to the fund.
Districts are not required to contribute monetarily to the program, but are expected to promote it to their employees, Lowy added. She said California teachers whose districts have not partnered with Landed may be eligible for individual assistance if they live in the Bay Area, or Los Angeles, Orange or San Diego counties.
There is currently no maximum amount of down payment assistance available to individuals, since the fund includes more than $10 million dollars, she said.
“We’re able to serve anyone on a first-come, first-served basis,” Lowy said. “If we’re wildly successful, we will recruit more money to the fund.”
In the future, Landed hopes to expand its resources to include financial coaching that could help educators lower their debt, she said. Some educators may not have a 10 percent down payment saved yet and may need to pay down debts, including student loans, before they are ready to buy a home.
“A big focus of ours over the next year is building up that support for other educators,” she said. “Down payment support might not be the thing they need.”
Landed launched a partnership in Denver last week and hopes to expand to other areas of the Pacific Northwest and the East Coast by the end of the year, Lowy said, noting that a Denver funder is paying for the Colorado expansion, but that money from the current housing fund could be used initially and they could solicit new investors if necessary.
“We’d like to get the conversations started,” she said. “Those are natural places for us to go next.”