• Ekin Gunaysu

The Bay Area Needs More Social Entrepreneurs

Updated: Jun 26

Since 1980s, a growing number of individuals have been increasingly using entrepreneurship as a strategy to tackle the societal problems in the world. Combining business techniques to ensure efficiency with a passion to fulfill community needs, social entrepreneurship provides a model that can support long-term development and change. Focusing on the housing crisis, this is the 1st article of the blog series that gives insights on how social entrepreneurs can invest their resources to address some of the pressing social issues in the Bay Area, California.

California has become the epicenter of millennial wealth in the US, accommodating 44% of the millennial millionaires living in the country.[1][2] The State has the highest percentage of business owners (23%) and the highest percentage of real estate investors. Seven of top 10 ZIP codes where these millionaires live are in Silicon Valley, suggesting a strong tech connection that is associated with wealth creation. Despite its booming economy, thriving job center and world-class universities, about two-thirds of the Bay Area residents say that the quality of life here has gotten worse in the last five years due to high housing prices, traffic jams, rising cost of living and homelessness.[3] In fact, 44% of the people say that they are likely to move out of the Bay Area in the next few years. Clearly, the Bay Area has major social problems that are making it increasingly difficult for middle-income individuals to live and work with stagnant wages and increasing rents.

It seems quite paradoxical that issues as such, that are directly associated with people’s quality of life, have so far not being addressed adequately in a region known for its abundance of venture capital and vibrant entrepreneurial spirit. Unfortunately, in a profit and consumption driven economy, values that are important for human life, such as having access to affordable housing, sustainable transportation or living in a clean environment, can be overlooked or traded off easily for concerns or needs that appear to be more urgent for businesses. At the same time, the American culture tends to rely more heavily on the civil society and the private sector rather than the government action to find solutions to their pressing problems. In this regard, social entrepreneurs and social ventures can play a pivotal role in addressing the large-scale problems that typically require major resources, capacity, perseverance and leadership to be solved.

Social ventures or social enterprises are often interested in impact investing, based on the idea that markets can deliver solutions to the world’s toughest problems and foster long-term change. Impact investment is a growing industry operating at the intersection of money and meaning. In the Bay Area, though, it is also closely associated with leveraging technology to promote societal well-being. Kapor Capital, Omidyar Network, Better Ventures, Khosla Impact and Social Venture Circle are among the most well-known social enterprises in the Bay Area that are committed to using technology to address critical issues of our time. Every year, Social Capital Markets (SOCAP) organizes a 5-day conference in San Francisco bringing together social entrepreneurs, investors, foundation and nonprofit leaders, as well as government and policy leaders from all over the world.[4]

Keeping in mind that the two of the top four concerns of Californians are related to housing, social ventures can play an important role in making affordable housing accessible to more people. It has been argued that the profitability of the affordable housing may be underestimated by the investors, as it has an attractive risk-return profile and is better positioned to perform through a recession than class-A apartments.[5] Initiatives undertaken by other states or countries to solve housing crisis can serve as good examples. For instance, in New York, LISC, a non-profit community development financial institution, created the Community Development Trust, the first real estate investment trust that invests in affordable housing around the country and leads foreclosure interventions to help people keep their homes.[6] In addition, the organization’s Bring Them HOMES program helps create housing for homeless and at-risk veterans.

In Atlanta, PadSplit encourages private investors to create affordable residences by making it more profitable. The company’s business model allows property owners to turn existing housing into shared living spaces for multiple residents.[7] Through a resident management platform, the company facilitates everything from lead generation to payment processing.

Another solution that has become popular in countries such as the UK, Germany and Japan, is having modular buildings which are less costly, built faster, and have lower carbon footprint.[8] Although modular construction seems to be an efficient and environmentally friendly way of coping with housing crisis , it cannot change anything on its own, unless the power dynamics in the housing system and the inequality in land ownership is altered significantly.

Earlier in March, the residents of San Francisco voted for a ballot measure that would restrict the development of new office space until the city starts building enough affordable housing.[9] Doubtless, initiatives undertaken by the private sector should be compounded by progressive government policies to make progress towards a lasting solution to the problem. Nevertheless, investing in affordable housing seems to be one of the best forms of combining money and meaning, not only because the Bay Area’s ability to attract a talented workforce and sustain its vibrant economy will be dependent on its ability to come up with creative solutions to its housing crisis, but also because affordable housing is the key to creating healthy communities and it has an impact on all aspects of people’s lives .

[1] Millennial millionaires are defined as people between 23 to 37 of age with a net worth of more than $1 million. [2] A Look at Wealth 2019: Millenial Millionaires.. (n.d.). Coldwell Banker Global Luxury. Retrieved on June 1, 2020, from https://blog.coldwellbankerluxury.com/wp-content/uploads/2019/10/CBGL-Millennial-Report_SEP19_FINAL-4a.1-1-1.pdf [3] Hansen, Louis. (2019, March 24). Is the Bay Area pushing people to the breaking point? The Mercury News. https://www.mercurynews.com/2019/03/24/is-bay-area-pushing-people-to-the-breaking-point/ [4] About SOCAP. Social Capital Markets. Retrieved on June 1, 2020, from https://socialcapitalmarkets.net/about-socap/ [5] Borland, Maree Kelsi. (2020, February 5). Investors Are Overlooking the Yields in Affordable Housing. Globest. https://www.globest.com/2020/02/05/investors-are-overlooking-the-yields-in-affordable-housing/# [6] Affordable Housing. (n.d.). LISC. Retrieved on June 1, 2020, from https://www.lisc.org/about-us/ [7] Field, Anne. (2020, March 25). How Social Entrepreneurs Are Stepping Up To Meet The Crisis: A Roundup. Forbes. https://www.forbes.com/sites/annefield/2020/03/25/how-social-entrepreneurs-are-stepping-up-a-roundup/#20d259d81364 [8] Cassidy, Anne. (2019, August 6). Can modular homes solve the UK's housing crisis? The Guardian. https://www.theguardian.com/music/2019/aug/06/flatpacked-homes-can-modular-buildings-solve-the-uks-housing-crisis [9] Britschgi, Christian. (2020, March 6). San Francisco Has Added a Lot of Jobs but Not Enough Housing. City Voters Approved a Ballot Initiative That Cuts Back on the Jobs. Reason. https://reason.com/2020/03/06/san-francisco-has-added-a-lot-of-jobs-but-not-enough-housing-city-voters-approved-a-ballot-initiative-that-cuts-back-on-the-jobs/

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