Silicon Valley Bank’s collapse could have grim implications for Bay Area affordable housing projects.
While the bank was known for funding tech startups, it also invested more than $2 billion in affordable housing in its community over the past two decades, Bloomberg News reported Thursday (March 15).
And while the Federal Deposit Insurance Corp. (FDIC) has pledged to safeguard depositors, developers who work in the affordable housing space are in a more precarious spot.
“If it takes two months to replace your construction lender, that will cost millions of dollars in interest, but you will also potentially blow by federal deadlines,” Matt Schwartz, president and CEO of the California Housing Partnership, told Bloomberg.
“We need clarity from the federal government agencies that are restructuring Silicon Valley Bank that affordable housing commitments will be fulfilled immediately.”
SVB was shut down by regulators last week following a run on its deposits. Its standing as a long-time lender to startups has rocked the financial world and caused a number of companies to struggle. Or in one recent case, explore bankruptcy.
That’s what’s happening with bulk eCommerce grocery and retailer Boxed, PYMNTS reported Thursday. The company said in a recent Securities and Exchange Commission (SEC) filing that it is looking into “the potential filing of a petition for relief under the United States Bankruptcy Code,” as well as “soliciting proposals for the sale of all or substantially all of its assets.”
The company was already facing challenges, announcing earlier this year it was considering a sale and other ways to raise capital. And for a while, its prospects seemed to improve as the company secured $20 million in new financing.
Then came the fall of SVB, in which Boxed “held the majority of its cash deposits and other liquid instruments,” the company said in its SEC filing.
As for the housing world, U.S. homebuilders are apparently a bit wary of what’s happening in the banking sector, even as they remain confident in their industry, PYMNTS reported.
“Even as builders continue to deal with stubbornly high construction costs and material supply chain disruptions, they continue to report strong pent-up demand as buyers are waiting for interest rates to drop and turning more to the new home market due to a shortage of existing inventory,” National Association of Homebuilders Chairman Alicia Huey said Wednesday when the group released its latest housing market index.
“But given recent instability concerns in the banking system and volatility in interest rates, builders are highly uncertain about the near- and medium-term outlook.”