How startups and developers are helping teachers find affordable housing

A common refrain in the conversation about the U.S. affordable housing crisis is that home prices and rents have risen considerably faster than wages. This is perhaps most true for the nation’s teachers.

According to the National Education Association, teacher salaries from the 2018-19 school year are down 4.5 percent compared to salaries from the 2009-10 school year, when adjusting for inflating. Over that same time period, the Case-Shiller National Home Price Index has risen by 43.1 percent.

This means many teachers have been forced to leave their school communities—particularly in high-cost metro areas like San Francisco and New York City—or to leave the profession altogether. Teacher strikes have swept the nation as educators demand pay commensurate with their cost of living.

While the strikes have led to better pay in a few cases, the issue has also attracted attention from a number of private entities, who’ve found ways to help teachers either purchase a home or rent an affordable apartment. Among these private groups are developers, nonprofits, and tech startups.

“We really feel that every community needs [teacher housing] to put teachers back at the center of the community,” said Ron Beit, CEO of the developer RBH Group.

Beit and RBH Group have opened two workforce housing developments targeting teachers called “Teachers Villages.” One is fully operational and leased in Newark, New Jersey, and the other opened on May 1 in Hartford, Connecticut. The company hopes to break ground on a Teachers Village in Chicago by the end of the year, and has acquired a site to build one in Miami.

The Newark location features 204 residential units—70 percent of which are occupied by teachers—on five blocks in the city’s downtown district, in addition to 65,000 square feet of retail.

The $150 million development included investments from Goldman Sachs and Prudential Financial, but the next Teachers Villages will get a funding boost from opportunity zones. A provision of the 2017 tax law overhaul, opportunity zones allow investors to realize tax benefits if they invest in “distressed” census tracts designated by state governors.

RBH Group launched an Opportunity Zone fund—the financial mechanism investors use to funnel money into Opportunity Zones—specifically for investments in Teachers Villages. Beit says Opportunity Zones are a natural fit for funding Teachers Villages, particularly because the sites RBH is eyeing for developments are already designated Opportunity Zones.

RBH was already rolling out the Teachers Village concept in census tracts deemed distressed, said Beit. “Then all the sudden this Opportunity Zones legislation passed and we just happened to have a whole bunch of Opportunity Zones in the pipeline, not only in Newark but beyond,” Beit added. “We’ve been developing in these areas for well over a decade at this point.”

Photo: RBH Group

While Teachers Villages are targeting renters, tech startup Landed helps teachers achieve homeownership by assisting with down payments, often one of the biggest hurdles to homeownership, particularly in high-cost areas.

For a typical 20 percent down payment on a mortgage from a traditional lender, if a teacher puts in at least half of that amount, Landed will fund the rest. In exchange for the assistance upfront, Landed assumes 25 percent of any gain—or loss—on the house at the time it’s sold or refinanced.

So if a homeowner who received assistance from Landed sells their house for a gain of $100,000, Landed would get $25,000 of that difference, plus the amount it contributed to the down payment. The numbers would be reversed if there was a loss of $100,000. You’d still have to pay back Landed its contribution to the down payment, but Landed would eat $25,000 of the loss.

Landed has helped more than 200 teachers find homes, mostly in the San Francisco Bay Area, but it has also facilitated home purchases in Los Angeles, San Diego, Seattle, and Denver, with more markets on the way. The company has plans to expand to other professions facing similar problems, too, like nursing and law enforcement.

Landed cofounder Alex Lofton says the company has recouped its investment on about 10 houses on which the homeowner refinanced their mortgage. Lofton said he got the idea of Landed as a business school student at Stanford, which has a program to assist professors with down payments in pricey Palo Alto.

“Think about this as a version of ‘the bank of mom and dad,’” Lofton said. “The way that people would do this without us is they would ask their mom and dad for down payment support,” he explained. “The reality is that’s just not an option for a lot families of color, underrepresented minorities, immigrant families. Trying to even that out a bit with other tools is something we’re really excited about.”

NEAR, a nonprofit dedicated to revitalizing Indianapolis’s Near East neighborhood, believes helping teachers reach their homeownership goals could be the key in retaining educators. NEAR has developed 122 residential properties in Near East—mostly single-family houses—and the nonprofit is now focused on completing 22 single-family houses as part of what it calls an “Educators Village.”

Financed with New Markets Tax Credits and through the federal HOME program, NEAR has built 15 of the 22 single-family houses and sold those to teachers at cost for anywhere between $170,000 and $190,000. The remaining seven are currently under construction.

NEAR executive director John Franklin Hay said his hope was to sell half of the 22 to teachers, but so far the organization has sold all of them to teachers after outreach through local schools. The group has also worked with the Indianapolis Neighborhood Housing Partnership to provide down payment assistance.

As much as assisting individual teachers can help, the issue at hand is the pay gap between teachers and the rest of the workforce. A recent HeyTutor analysis looked at median pay for teachers with a bachelor’s degree in each state and compared it to median pay for workers with similar education levels in professions outside of education. What it found was a substantial disparity in every U.S. state.

According to industry watchers like Matthew Chingos, VP of education data and policy at the Urban Institute, a more effective way to help teachers find better housing would be to simply pay them more.