Many Bay Area communities have faced intense gentrification pressures over the last few years, leading to untold numbers of evictions of tenants and small businesses.
According to research conducted by SVCF grantee California Reinvestment Coalition (CRC) and the Anti-Eviction Mapping Project, the displacement crisis most affects residents of color and low-income residents who can no longer afford to live in the communities they have been a part of, often for generations. This has destabilized families, disrupted local institutions, weakened the fabric of neighborhoods, contributed to homelessness, and re-segregated communities, according to CRC’s June 2018 report, “Disrupting Displacement Financing in Oakland and Beyond.”
The report identified banks and other financial institutions as culprits that enable ongoing displacement of low-income residents by knowingly financing serial evictors who buy properties, raise rents and evict tenants as part of their business models. This practice by banks runs counter to their obligation to help meet low- and middle-income community credit needs under the federal Community Reinvestment Act.
“Banks are required to help meet local community credit needs and should work to help build household and community wealth, yet displacement financing by banks exacerbates community and household financial strains,“ said Kevin Stein, deputy director of the California Reinvestment Coalition.
In addition, tax incentives for investing in low-income neighborhoods, such as the new federal “Opportunity Zones” program, have the potential to worsen displacement, resulting in mass-produced homelessness and imposing huge costs on families, communities and municipalities, according to CRC’s report on displacement.
The federal Opportunity Zone tax incentive, enacted in December 2017 as part of the Tax Cuts and Jobs Act (P.L. 115-97), is designed to spur economic development and job creation in underserved communities across the United States by providing significant tax benefits to investors. However, as written, the legislation carries no requirements for demonstrating that these tax preferences are generating enduring community benefits.
To help address these disturbing trends, CRC and its allies developed the Anti-Displacement Code of Conduct, which calls on financial institutions and institutional investors to end financing practices that lead to the foreseeable displacement of residents. The code of conduct instead encourages these institutions to promote lending and investment that fosters tenant, homeowner, small business, and community stability.
Key components of the code include agreements to:
- Refrain from financing serial evictors and problematic commercial developers
- Ensure borrower landlords comply with state and local tenant protection laws
- Underwrite multi-family home loans to current rents and local rent control laws, and not to levels that require or assume higher rents beyond what tenants can afford
- Finance the production and preservation of affordable rental housing
- Help small businesses remain in the community through loan products that aid in the purchase of buildings, and philanthropic support to help negotiate leases
- Finance local government efforts and initiatives to fight displacement, preserve affordable housing, support small businesses, and respond to homelessness
In 2018, Silicon Valley Community Foundation made a $60,000 grant to the California Reinvestment Coalition to help CRC support anti-displacement efforts in Silicon Valley by mobilizing their network of members and allies, fostering collaboration and helping ensure that newly designated Opportunity Zones in Silicon Valley and the greater Bay Area actually benefit communities as intended.
When investments staff at SVCF learned of the code of conduct in 2018, they immediately recognized an opportunity for additional impact. They reasoned that by working through banks where SVCF maintains cash deposits as part of its investment portfolio, SVCF could influence financial institutions to support the code of conduct. Staff reached out to Community Bank of the Bay, where SVCF deposits earn market rates of return while supporting job creation in Bay Area communities through the bank’s lending to local small businesses and projects that support environmental sustainability.
“When Silicon Valley Community Foundation approached us about endorsing the Anti-Displacement Code of Conduct, we reviewed it thoroughly,” said Bill Keller, CEO of Community Bank of the Bay. “For the most part, our philosophy and activities were in line with the Code, but we also thought, we want to be the best bank for the communities we serve, and aligning our practices more closely with the Code of Conduct was a great way to achieve that objective.”
“This is a classic win-win-win,” said Bert Feuss, SVCF’s Senior Vice President, Investments. “We are excited to leverage our investment relationships in furtherance of the code of conduct and in partnership with CRC and Community Bank of the Bay.“
CRC, SVCF and Community Bank of the Bay are collaborating to address Bay Area gentrification and displacement by seeking more signatories to the code of conduct. The three organizations share a common mission to strengthen communities, build economic opportunity and drive more local investment conversations toward equity.
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