Exploring the Possibilities of K‐12 Workforce Housing in California
Many school districts in California—and nationwide—are struggling to maintain a stable workforce amid a widespread teacher shortage. In California alone, more than 200 school districts reported that 75 percent of schools started the 2023 school year with a shortage of qualified teachers, according to a Learning Policy Institute study.
But in the San Francisco Bay Area’s well-documented housing affordability crisis, most teachers are priced out of living in the communities they serve. This creates a major barrier to attracting teachers, especially younger teachers and teachers of color. Teacher recruitment and retention challenges negatively affect student achievement, especially in schools serving low-income and predominantly Black, Indigenous, and People of Color (BIPOC) communities.
K-12 workforce housing offers a potential solution to these intersecting challenges. Many districts are interested in leveraging their own land to provide affordable housing for their teachers and staff. Providing housing could be especially effective in recruiting a younger and more diverse workforce.
However, building housing is a new venture for most school districts and not a core part of their educational mission. Many school administrators are overwhelmed by the process: they are trying to address the retention of teachers and staff, not trying to become housing developers. Certain key decisions need to be made up-front, such as the financing approach, which often drives other decisions. Many districts need more information about their options to decide if workforce housing is a fit for them and to plan a successful project.
Seeing this information gap, Multistudio has initiated a series of think tank discussions around navigating K-12 workforce housing in California. The first discussion centered around identifying barriers districts face in pursuing workforce housing projects. We convened a mix of regulatory and finance experts—along with school districts that are currently engaged in workforce housing development and districts that are evaluating projects—to share insights, lessons learned, and creative approaches.
According to Alex Torres of Brownstein Hyatt Farber Schreck, teacher workforce housing is a political “winner” in California that is largely welcomed in communities. As recent successful legislation to provide affordable housing for artists, California Assembly Bill 812 (AB 812) proves there is a model for legislation to provide teacher workforce housing.
Housing politics in California have changed significantly, and 2023 was a banner year for pro-housing production legislation. California House Speaker Robert Rivas recently reorganized the California Assembly leadership to be very pro-housing. In terms of upcoming legislation, Assembly Constitutional Amendment No.1 (ACA 1)is already on the 2024 ballot and, if passed, will authorize cities and districts to issue affordable housing bonds with 55% voter approval.
Because of the current legislative environment and need for workforce housing, Alex Torres urges California districts to:
According to Tony Mirenda, Executive Director at Kitchell, the barriers facing districts in the entitlements process include:
Partnerships are becoming more feasible amongst K-12 districts and/or with community colleges to share in the risk and reward of jointly developing housing. This is a trend that’s expected to become more prevalent.
According to Ross Robb, Principal with RLR Ventures, LLC, financing risk (i.e., leveraging core districts assets to support housing development) is considered by many school districts to be the most intimidating aspect of contemplating new workforce housing. However, tools can be deployed to create a new paradigm of affordability and desirability in the communities in which school districts reside.
In real estate development, there are five main levers of financial feasibility to pull:
Currently—especially in California—the first four levers are pushed all the way forward, resulting in higher costs, which causes rental rates to follow suit, making it extremely difficult for multifamily projects to pencil out. The cost of capital and the cost of land are two opportunities to target for cost reduction. The cost of capital can be reduced by employing combinations of low-income housing tax credits (LIHTC) and tax-exempt debt if the project qualifies. The cost of land can potentially be free or deferred, with a district entering into a ground lease where it gets paid if and when the project is successful.
Participants from RBC (Royal Bank of Canada) Capital Markets went over the main funding sources for affordable housing developments. Selecting a funding source may dictate whether a school district can restrict housing access to a specific population (i.e., teachers) or simply designate them as having leasing priority. For example, LIHTC properties must comply with the Fair Housing Act and cannot deny admission based on membership in a protected class.
Karen Sullivan, Executive Director of Facility and Capital Planning at SFUSD and Ali Gaylord, Director of Housing Development at MidPen Development, presented SFUSD’s first workforce housing project which is currently under construction. The project consists of 135 units targeting 40-120% AMI, located on a district-owned site in the Outer Sunset neighborhood of San Francisco. Together, SFUSD and MidPen Development were able to plan and deliver a successful project in the following ways:
Special thanks to Ross Robb of RLR Ventures, Tony Mirenda of Kitchell, Alex Torres of Brownstein Hyatt Farber Schreck, Katherine Jacobson, Karma Pemba, Michael Baird, and Sara Russell of RBC Capital Markets, Ali Gaylord of MidPen Housing, and Karen Sullivan of San Francisco Unified School District, as well as numerous Bay Area district representatives for their contributions. As ongoing discussions, these summits are intended to highlight opportunities for K-12 districts to capitalize on the potential to develop workforce housing.
