The Mindful Marketplace with Joel Skene

Collaborative Approaches to Building Workforce Housing - Part 2

• Joel Skene / Sibley Simon

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Can a new way of thinking solve the housing crisis? Tune in to hear from Sibley Simon of New Way Homes who left the corporate world to tackle housing challenges in Santa Cruz, California. Sibley shares how traditional high-return and publicly funded models fall short and how his nonprofit leverages impact investment funds to build sustainable, community-focused affordable housing. From using nonprofit-owned properties to reducing parking requirements, discover the innovative strategies that make New Way Homes a game-changer in the sector.

We also explore how individuals can get involved through platforms like EquityVest and create their community investment funds with guidance from firms like Cutting Edge Counsel. Sibley discusses the triple bottom line approach—social, environmental, and financial sustainability—and the growing interest in these community investments. Learn about the potential of church-owned properties, the positive changes in housing regulations, and how blending for-profit and nonprofit models can lead to environmentally responsible, workforce housing. Don't miss out on this insightful conversation about fostering community growth and collaboration through innovative housing solutions.

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Joel:

What if investing in each other could change the world? I'm Joel Skeen with bizradious and this is the Mindful Marketplace. Welcome back to part two of this excellent conversation I'm getting to have with Sibley Simon of New Way Homes out in California, in Santa Cruz. Is that right?

Sibley:

Yeah, that's right.

Joel:

Yeah, yeah. So if you didn't get a chance to listen to part one of this episode, go back and do that. Sibley and I really talked about why he left kind of corporate world and moved into the world of trying to really solve some serious housing issues and we shed some light on what those issues are. But what I'm really excited to get to talk with him today about is this new model that New Way Homes is using to both construct and create affordable housing for people, but also to give local residents a way to invest into their local communities.

Joel:

We've talked a lot on this show about how there are so many people out there who are looking for alternative ways to invest their money. That isn't just Wall Street, whether that's because they are kind of sick of the boom and bust or whether it's because maybe they don't really want to support Wall Street for one reason or another. There's a lot of people looking for ways to invest their money in their local communities their money in their local communities, and I thought what New Way Homes is doing was just a really brilliant way to allow people to do that and to do some good with their money while earning a return on investment. So, sibley, tell us a little. What's the story of New Way Homes? How did this happen?

Sibley:

Yeah, so I talked a little bit last episode that had been helping with challenges on homelessness. But seeing that our housing problem was much broader than that, pl, plenty of people who have important jobs in our communities not being able to afford to live here anymore and in the greater Bay Area, you know, etc. And so I really dug into you know what's the problem on housing and, more importantly, what can we do about it, and saw that, oh, almost all the housing we're developing it's in one of two models. It's either this very high return, one big project at a time where institutional investment money comes in and, once you know again, 18% IRR and one tower, you know, and that only works in like condo towers or big subdivisions with big homes. You know where you can do that and so, okay, higher end of the market in a lot of places being taken care of that way.

Sibley:

And then the public sector putting some money into a smaller amount of housing, publicly funded affordable housing, which is great for low and very low income affordable housing. The main problem with that is there's not enough of it remotely to solve the issue. So you have lottery winners you know literal lotteries to see a thousand families that are eligible, which one family gets this apartment at an affordable rate. So again, that's great, but if those are the only two things we're doing, you know we're not going to solve the problem. It's really clear. And so realize that, oh, you can create apartment buildings that are rental housing, where the rent does not have to go up much year over year. You can create those and return capital to investors and bring the risk down, was my argument starting out, partly because you're not going for the very top of the market, which rents do go up and down with the economy. But if you're below that, at a more affordable rent, you're going to have a real line out the door but a lot more flexibility because you're privately funded. So that was the concept. Let's get into that.

Sibley:

And so I formed New Way Homes as a nonprofit to run an impact investment fund specifically for this purpose. And we also have a company called Workbench that we've grown bootstrapped through this and we even get hired by other developers where we have a design team and a construction team, development team, et cetera. So trying to integrate a lot of functions so that we can really have a whole project that makes sense, because we're thinking pretty differently. We're not under all the many, many requirements of publicly funded projects, but we're not going for the top of the market, you know. And so how do we do this? And we can figure out, oh, locations where you don't need to build a big parking garage, where people there are folks who are happy to live with much fewer cars maybe not zero cars, but much fewer cars. That saves a lot of money, makes the housing more affordable, but all kinds of things get unlocked that you can do differently to make the housing really great quality and more community oriented, but also more affordable If all that gets unlocked.

Sibley:

If you start with investment sources that are not trying to maximize profit, they're trying to get a solid, steady return, but not maximize profit, right. So we try to flip the script and say we're trying to maximize affordability and a great long-term project that's environmentally sustainable and great for the community and return our promised return to investors, not maximize the return to investors. So by flipping that, it just opens up your thinking to all kinds of creative things you can do to make it more affordable, more environmentally sustainable, think more long-term. So we created this New Way Homes Fund and in particular, we have over $10 million fund now and growing. That's for pre-development and that's normally what's seen as the most the riskiest stage, which is starting out with the projects and getting the planning permits and then the building permit.

Sibley:

And I just want to mention before I stop here, that the one other thing that I didn't think of when starting this but started it raised some money from people I knew who were pretty philanthropic but wanted to do an impact investment, seeded this, got it going and then had a terrible time getting any sites because the sites themselves are super expensive and hard to come by and you know how do you make this work.

Sibley:

And then what has happened is that it turns out like even just in California, there's hundreds of thousands of properties owned by nonprofits and the biggest category of that is churches, and so many of these nonprofits and churches are mission aligned. They see the housing crisis and they're like we're not trying to maximize profit, but we might want some income stream, but we could put our land, our site, our building into helping create this kind of mission-driven, more affordable housing. And so we've gone around making lots of partnerships. So if we have impact investment that gets a reasonable return and we have a site owner willing to invest the land. We don't have to buy up front. Now we're really on a path to help make the housing more affordable.

Joel:

Yeah, and when you mentioned return on investment for the people who are investing into these housing projects, you mentioned the difference between making a profit and maximizing a profit. But I also think, if I'm thinking about things like we've talked about the triple bottom line here planet, people, profit. I think there's also a quadruple. Now there's a fourth one, I'm forgetting what other P there is but one of the ways that I've always thought about this is that people who invest locally and invest in ways that are geared towards impact are getting not just a financial rate of return, but they're also getting a social rate of return. Have you seen that in these projects? What does that social return look like for? I guess, both on the people who get the housing but also for the people who make the investment.

Sibley:

A hundred percent of our investors are really motivated to help solve this housing crisis to help people, families you know young folks, seniors, you know all these veterans you know you can go on and on who are really struggling because of the cost of housing. You know a hundred% part of the motivation, so partly they just feel great. When we then build a building and people occupy it who you know, clearly we have, you know, videos, people who moved in and we didn't ask to have made a video. You know just how thrilled they are to have this housing, with the family showing it to their kids. We have folks who have come out of prison who are really motivated to get a job. It's very hard to get housing with the applications, you know, if you're coming out of prison, but the folks who then go on and you know, do really well, you know it's interesting. So A just feel good hearing those stories. But also, more specifically, we've had some businesses or nonprofit employers, you know, like our health care system, you know, et cetera invest and we, what we offer to those folks is a marketing preference, so they're investing in the New Way Homes Fund. When we have vacancies we'll go to them and say hey, before we market this even more widely, do you want to see if any of your staff want to apply for this apartment and if they fit the bill, you know, we'll rent to them. And so that's a very, because all these employers are saying, oh my gosh, you know, and I just had a hospital. Somebody from a hospital yesterday said we really want to meet and talk about, you know, housing for staff or folks coming to us for training, you know, et cetera. So you know that that's a. You know.

Sibley:

You could still say that's financial because it's motivated to help their business work. But the, the business doesn't get involved in being a landlord or anything. They just want something to offer to employees, you know, to help be there. But just folks who have, you know, plenty of, are not really wealthy, they're not in that 1%, but they have their retirement set and they're like oh, how can I invest some of this? Because my kids cannot afford to live in this community where they grew up? How can I make an investment that provides a steady return, that helps solve that problem, even if they're not going to live in your building maybe they will, maybe they won't but just like, help solve this problem so we can have a community? And so everybody here feels that of like personal stories. Even if they're set with their housing. They have plenty of personal stories about people who haven't been able to live in this community, and so they want to help solve that.

Joel:

And the way you're describing it to it almost like when, when we invest into our communities, it seems like it's it's about investing more with a long term mindset. Right, like if you do community investing or you do local investing, like you said, like you know, ok, maybe you, you, you hit the lottery on a really great, fast growing company that's local to you. That's cool and you can get a fast rate of return. But a lot of times what I'm seeing is it's not that the rate of return is actually always all that bad, it's just more that it's more takes more of a long-term mindset. Can you speak any at all to the long-term mindset around how you think about investing at New Way?

Sibley:

Yeah, we definitely think longer term. So we've had a lot of foundations invest in New Way Home Fund who want to invest at a 3% return. But that's the practice in the foundation world. But for individuals, businesses we've done some offerings at 4.25% return that are 10-year notes and send an interest check every year, a couple of things like that. And then we're also getting vehicles set up for equity investment in the project. So then someone's a part owner of the projects themselves and they have to think even longer term.

Sibley:

You know it might be 15 years, you know, to get liquidity but a little higher return you know might get, you know, six plus percent return on that, you know, year after year after year. So you know that's kind of. You know those are modest returns but can be a solid part of someone's overall portfolio because these are real buildings that are really there. You know they're not something that could just disappear overnight. You know and and so and. But the other thing is we think very long term. You know we're not trying to build these buildings and sell them. We're trying to build them, manage them, keep them more affordable over time, have partners like nonprofits, churches, community organizations, and we're helping their balance sheet and they're doing things for the community. A lot of the churches we work with who are motivated for this. They're not just some church up the hill that people go to on Sunday. They're like doing food banking, they're like just helping folks who don't have a place to sleep. They're just, you know so much, providing places for COVID shots, like you know, just all this stuff in the community. We've been so impressed so you know it helps fund some of that stuff. So we think long term.

Sibley:

Also, the triple bottom line I want to mention, you know, the environmental sustainability is so important. We go above and beyond in that we're always trying to find the latest things we can do. And it does affect the other bottom lines in that if we're thinking long term, we can look at something and be like, oh, if we do this extra water conservation measure or take the extra step to be net zero energy, that it might take 15 years for that to pay off financially. But we're looking at the 30 year mortgage and the operating costs over that whole time and we can borrow a little more because of that lower operating costs, right. So you know we can think of doing things that can pay off over the very long term and we really are trying to figure out how do we, you know, lower carbon footprint, make these buildings extremely sustainable?

Joel:

So let's say I'm saving a couple hundred dollars a month for my retirement and I'm okay with using half of that to do an impact investment where I might not get the highest rate of return possible, but it means something to my community and it's giving and it's taking care of something that I really care about. I guess how does that work? I know normally most people need an advisor. They need a lot of these things in order to make any Wall Street investments. Is this done through crowdfunding? How would someone, how would an ordinary person just saving for retirement, make an investment into affordable housing through New Way?

Sibley:

Yeah, you hit it on the head. If someone qualifies as an accredited investor, which typically the most common way is, someone has a million dollars of assets that are not their primary residence, so it's quite a bit. But sometimes people get into retirement, you know, have that, for example, then they can. There's all kinds of investments they can make that are open to accredited investors. We always have that going on. But what we've wanted to democratize this to a greater extent, and so we've participated in those crowdfunding investment vehicles that are now legal, and so we have one up right now, you can see, on newwayhomesorg. You go to it, it'll take you to the page specifically for that. It's on a platform called EquityVest that only does mission related.

Sibley:

You know, investments impact investments, but you can see it on our newwayhomesorg website and that is one where, yes, someone can invest. Start said I think it's $250 in minimum investment, but you know, got to go look and see all the terms there. But, um, but you can see a video about what we're doing and and a lot of easy to read things about how it works, and so one can just do it through the website then. So the federal government has put rules in place, um, and all kinds of things we have to follow so that this isn't something that's going to go. You know, scam thousands of people. So now there's rules and compliance so that we can offer these kinds of impact investments to, you know, in a retail way, to anyone who wants to participate.

Joel:

You know, it kind of reminds me. There is a group that I was talking with, with Kevin Jones and Michael Schumann, and he they were in, I want to say in Louisville Kentucky. They were in I want to say in Louisville Kentucky and they actually you were able to use the fund that they had to match crowdfunded community donations for startup businesses, and so there's just it's just the crowdfunding stuff seems like if you're out there and you're wondering, like how do I invest outside of Wall Street and locally, I would say, take a look at some of those platforms for crowdfunding, whether it's WeFunder, what was the one that you mentioned?

Sibley:

EquityVest. It's a newer one that is more focused on that. There's billions of stuff on WeFunder, right, but you can find some impact investments on there too.

Joel:

Yeah, exactly, and the other thing that I wanted to ask you too let's say that someone out there listening isn't just interested in maybe making a personal investment into an impact, into an impact project, but maybe they're interested in actually trying to start some kind of fund or actually create something like this in their own community. You mentioned the you know, housing with Airbnb issues. Here in my hometown of Asheville, North Carolina, we have more Airbnb saturation than any other city in the country, and it's like by double the second highest, and so that's that that workforce housing is one of the biggest issues that my my community faces. So I'm Curious like what would you, what would your kind of guidance or advice be to someone who wants to possibly try to create something like this in their own communities?

Sibley:

Yeah, I mean, if someone is going to create an impact investment vehicle for funding multiple mission driven housing projects, just contact us. We'll send you everything we've ever done. You know we see ourselves as wanting to have impact in the world and part of that is tell people what we've learned, right, so we can't spend a ton of time, you know, helping someone set it up somewhere, but we certainly give you everything we've learned. So, but yes, absolutely, I mean first things, you know, identify some sources. Hopefully you can find some individuals, businesses, foundations. You know who will make some initial investments to help you get started.

Sibley:

But you know there is quite a bit of compliance and legal stuff to set up. But that's where again, talk to people who've done it we have great legal help from gosh. They just changed their name. They've been Cutting Edge Council, so you can still find them under that name, but they just changed their name, which is escaping me. But Cutting Edge Council is a legal firm in Oakland but they're national experts in working all over all kinds of states specifically helping people on impact investment. You know that's what they do Really cool for just the legal side. But absolutely, you know, it's something I really recommend because there's huge interest out there. A lot of people don't even know how to take action in investing in their own community. But if you can just go around and talk to people in your own community about doing it, you will find a lot of interest. You just have to do a bunch of that setup to do it right.

Joel:

Yeah, we've been talking a lot about these diversified community investment funds that I think that Cutting Edge and NC3 worked on to put together, where you can actually invest your money directly into local businesses and real estate at the same time, and it makes the process a lot, lot easier. If you're out there listening and you're interested in that. Twice a month on YouTube, I do another show on my YouTube channel called community capital live with, uh, michael Schumann and Kevin Doyle Jones. Um, and so if you are interested in that in the, in the fun side of things, start tuning into that, because that's a that's a really great resource and we're building out a database through impact alpha and the main street journal on that. Um, so, yeah, I, uh, I, what are? Yeah, what are you excited about right now or, I guess, when you're thinking about kind of the future, of what this is going to do for your community? What does it mean really to have these investors coming directly from your community?

Sibley:

Yeah, it's incredible because, again, this long-term approach it allows us to take. Yeah, it's incredible because, again, this long-term approach it allows us to take and we have more and more site owners coming to us because they see us having some success and like, oh, what you did with this nonprofit over there, what you did with this church over there, oh, can you do that with us. Or even just families that have owned a business property for a long time that has sort of an old one-story commercial building on it for a long time, that has sort of an old one-story commercial building on it that at the end of this life, oh, could we build this, a new storefront with housing that's really needed on top of it. So just being able to do this has brought more and more people from the community out to help, seeing that like, oh, we can all work together here to build the housing that's needed. The other thing I'm really excited about and absolutely love is that in all kinds of places across our country and I literally mean that, um, rural, urban, blue states, red states, et cetera the uh legal regime that has and regulation that has helped, um, in some cases unknowingly, you know, in some places knowingly, california invented single family homes, only zoning to have, you know, lock in segregation.

Sibley:

But that created the housing crisis or these crises. Is is going in the right direction. It is changing and state legislators, you know, across the country, are doing things. You know I'm working out west, I'm paying attention to like, oh, montana is doing a lot of changes, california is doing a lot of changes, every single state. And that is so cool because you work on a cause it could be climate change, whatever and sometimes you're like, oh, government can't get anything done on this. And here there's a lot of bipartisan support for the details get challenging and everything but by and large, so like, let's make change. So private sector, public sector, blended sector, you know, can come together and just like, build the infill, environmentally responsible workforce housing that we really need. So that is really fun and participating in that policy change is really fun too, to try to get it right sorry the audio.

Joel:

the audio cut out. Can you hear me? Yeah, I can hear you, fine. Okay, all right, I'll have to edit this, but that's okay.

Joel:

Well, sibley, I think it's an incredible project. I think it's really worth people taking a look at, to get to learn more about how you guys are doing as an example, as I said, because this is the kind of thing you know when we talk about big changes that need to happen in our economy, in our world, like you said, a lot of times, we look from top down or we look from you know kind of old structures of you know nonprofit do good work is over on one side with one pocket and you know making money is on the other side. But your ability to combine the innovativeness and the flexibility of a for-profit business with the mission and the goal and really just the impact of a nonprofit, I think is such a cool thing and really, really admirable. So check out New Way Homes and follow what they're doing and to stay in touch with them. I am Joel Skeen. This is Biz Radio US. Make sure to subscribe on YouTube, spotify, itunes, stitcher, wherever you get your podcasts. And until next time, remember we are each other.