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Kaiser Permanente’s Housing for Health Fund Provides Agile Investing

Photograph of two façades of a three-story multifamily residential building.
Photograph of the entrance to Kensington Gardens, with decorative and security ironwork.
Photograph of a kitchen, with cups, a sink, a microwave, and a toaster oven on a counter between upper and lower cabinets.


Home >Case Studies >Kaiser Permanente’s Housing for Health Fund Provides Agile Investing


Kaiser Permanente’s Housing for Health Fund Provides Agile Investing


In 2018, the impact investing arm of Kaiser Permanente, the large healthcare consortium, announced its commitment to invest up to $200 million to create stable housing and better health outcomes through its Thriving Communities Fund. One investment strategy of the Thriving Communities Fund is the Housing for Health Fund (HFHF), an equity investment fund created in partnership with Enterprise Community Partners to provide up to $85 million for local developers in Northern California, where Kaiser is headquartered. Early in 2019, Kaiser contributed $15 million to start HFHF and pledged to match up to $35 million of Enterprise’s fundraising to grow the fund to a total of $85 million. HFHF’s initial investment was $6 million to help the East Bay Asian Local Development Corporation (EBALDC) acquire and make safety improvements to Kensington Gardens, an apartment building in Oakland, California. EBALDC will keep residents’ rents stable while pursuing government subsidies to transform the market-rate affordable housing into an income-restricted building. In accordance with the public health focus of Kaiser and HFHF, EBALDC will work with Enterprise and community residents to create a health action plan to identify and address public health needs.

Keeping People in their Homes

Kensington Gardens is a 3-story, 41-unit walkup apartment building that was constructed in 1928 in the San Antonio neighborhood of East Oakland. The building contains 24 studios, 11 one-bedroom units, and 2 two-bedroom units as well as 2 junior one-bedroom apartments (studios with an additional small room that does not meet the minimum requirements for a bedroom) and 2 one-and-a-half-bedroom units (one-bedroom apartments with a similar small room). Since EBALDC purchased Kensington Gardens, residents have continued to live in the building at rents based on their prepurchase amount, which was below the neighborhood average. EBALDC caps rent increases at no more than 5 percent for households that are not rent burdened (those that spend less than 20% of their income on rent) and at no more than 1 percent for extremely rent-burdened households (those that spend more than 50% of their income on rent), with rent increases between 1 and 5 percent for households with intermediate rent burdens. Because EBALDC is stabilizing rents in this way, current residents can avoid being displaced from the San Antonio neighborhood, which is “on the cutting edge of displacement,” according to Joshua Simon, executive director of EBALDC. This strategy keeps Kensington Gardens residents in the neighborhood where their friends and family live. When current residents leave Kensington Gardens, EBALDC maintains the stabilized rents for the new tenants.

Financing to Create Long-Term Affordability

The initial $11.8 million financing for Kensington Gardens included approximately $10 million to acquire the property and $1 million for EBALDC’s planned seismic and roof renovations. The major sources of financing were $6 million from Kaiser’s HFHF and $5.4 million from a private loan (table 1).

Table 1: Initial Investment in Kensington Gardens

Housing for Health Fund$6,000,000
Conventional debt (First Republic Bank)5,460,000
EBALDC equity300,000

HFHF holds a majority equity position in all invested properties and pays investors (including Kaiser) a percentage of the rental revenue after expenses, including debt servicing. John Vu, vice president of strategy for national community health at Kaiser, explains that Kaiser’s goal as an impact investor is to generate social impacts while earning a 1 to 5 percent return to fund additional housing investments.

EBALDC bought Kensington Gardens with the intention of converting the building into an affordable housing project financed through a combination of low-income housing tax credit equity, bonds, and grants. EBALDC will structure that financial package to buy out HFHF’s equity and pay off the acquisition loan. EBALDC intends to complete this process within 10 years, at which point the project will be governed by resident income and other restrictions of the new funding sources.

Accessible Funding to Create an Affordable Healthy Community

One major reason for creating HFHF was to provide equity financing that affordable housing developers can quickly access. For-profit housing developers, especially those working in the San Francisco Bay Area’s expensive housing market, can obtain debt financing or simply make an all-cash purchase long before nonprofit developers can assemble financing from multiple government and philanthropic sources, each with their own requirements. HFHF provides capital quickly so that nonprofit developers such as EBALDC can bid for suitable properties as opportunities arise. In addition, according to Simon, private-sector lending institutions are willing to fund only a percentage of an affordable housing project, and equity investment is required to fill the gap that debt will not cover. Although government or philanthropic sources can provide this needed equity, HFHF’s readily available equity can promptly leverage private debt.

One of the reasons that Kaiser partnered with EBALDC for the first HFHF project was EBALDC’s Healthy Neighborhoods approach to housing. For Kensington Gardens, EBALDC has partnered with Health Resources in Action (HRiA) to prepare a plan to improve the health outcomes for area residents. In June 2019, HRiA agreed to analyze neighborhood and environmental data and conduct a survey and listening sessions to learn about residents’ health needs. HRiA and EBALDC will use this information to create a health action plan that will identify three healthy housing goals as well as strategies EBALDC will undertake to achieve them. HRiA will also create a monitoring process with Enterprise to track the success of the programs that have been implemented.

Expanding the Housing for Health Fund Model

Using these techniques, Kaiser and its local partners are able to seize opportunities to secure affordable housing in ways that they cannot achieve with other forms of financing, such as government subsidies. HFHF expects to close on six projects in Sacramento, Santa Rosa, Oakland, and other Northern California communities. Vu reports that Kaiser is looking for more investment opportunities, through HFHF and other impact investment strategies, with local developers that share its public health vision. In addition to HFHF, Kaiser has recently created a $100 million debt capital fund within the Thriving Communities Fund to finance affordable housing projects. According to Vu, that fund has closed on 20 properties that will produce more than 1,700 units of affordable housing.



The contents of this article are the views of the author(s) and do not necessarily reflect the views or policies of the U.S. Department of Housing and Urban Development or the U.S. Government.