A New Path Forward

Cities are the beating hearts of human civilization. Cities are incubators for economic growth, technological innovation, artistic revolution, scientific discovery, and social progress. Cities are where two-thirds of humanity live, love, dream, work, play, dance, raise families, and, ultimately, die. In many respects, a map of the world’s major cities is a more accurate representation of the structure and flow of historical power than a globe divided into nation-states.

Why are cities so vibrant? What powers this urban dynamism?

Density.

If you live in a small town, civic life is limited. Say you want to open a restaurant. For that restaurant to stay afloat, your menu needs to appeal to virtually every resident, so the only restaurants that survive are generic. But now, say you move to a city and open a restaurant. Because so many more people live nearby, your establishment only needs to attract a tiny percentage of them to succeed, so you can focus on making the food only you can make, refining what makes you special. Even better, your city is a laboratory for thousands of similar experiments running in parallel. Most will fail, but those that succeed pioneer fresh niches, unlocking new possibilities for everyone.

Urban flourishing isn’t limited to gastronomy. The same principle of abundance applies to ideas, vocations, relationships, beliefs, lifestyles, and every other realm of human endeavor. That’s why people have been flocking to cities for generations. With their constant flux of diversity and opportunity, cities are the most likely place to create a better life for you and your loved ones.

Density also generates profound positive side effects. It curtails suburban sprawl. It decreases per capita carbon emissions. It reduces pressure on biodiversity and outlying wildlands. It means walkable neighborhoods, shorter commutes, and deeply interconnected communities.

The San Francisco Bay Area is a global hub that exemplifies many of the benefits of urban living. It boasts world-class trails, beaches, parks, open spaces, and wetlands. It birthed Google, the Black Panthers, fortune cookies, the Grateful Dead, Pixar, E40, the iPhone, Zendaya, and Dune. It is a hotbed of activism, invention, scientific research, cultural experimentation, entrepreneurship, and environmental advocacy. No wonder it attracts folks from every corner of planet Earth.

Homes are the building blocks of the Bay Area. Home is where we care for ourselves, our parents, and our children. Home is where we make the time and space to become who we want to be. Home is where we cultivate community. Home is where great breakthroughs begin. Home is where an entrepreneur chases their big idea on nights and weekends, an architect creates their career-defining design, a writer pens their first screenplay or novel, or a musician invents a new sound.

Look closely and you’ll find that many of the Bay Area’s greatest creations came to life in home offices, garages, kitchens, and backyards. HP, Apple, and Google all started in suburban garages in Silicon Valley. The Grateful Dead practiced in a parent’s home in Menlo Park. George Lucas’s childhood in Modesto inspired his first commercial success, American Graffiti, and he then changed Hollywood forever by making Star Wars, Indiana Jones, and Pixar—all from a ranch in Marin.

Success starts at home, but the Bay Area has a problem: there aren’t enough homes for the many people who want to live here.

For more than a century, Bay Area municipalities have been passing laws to limit new development. Residents loved their neighborhoods and didn’t want them to change too fast. But over time, these regulatory obstacles snowballed until it became virtually impossible to add significant new housing inventory in a thriving metropolitan area with a growing population—freezing a living city in amber.

More and more people wanted to move to the Bay Area, but there weren’t new homes to house them. You can probably guess what happened next. People didn’t stop wanting to live here, so housing prices skyrocketed, displacing residents who didn’t want to move but couldn’t afford to stay, fueling suburban sprawl, extending commutes, and leaving thousands of people unsheltered on the streets. Meanwhile, existing homeowners who had championed development restrictions profited as their real estate values went through the roof—they could pay lip service to the housing crisis while enjoying unprecedented paper gains.

Now, home ownership is out of reach for almost everyone in the Bay Area. The median home costs $1.5 million, a price less than 5% of households can afford, and requires a minimum income of $290,000. Demand continues to outpace supply, and sprawl is accelerating, consuming critical farmland and threatening wilderness areas. Residents face daily commutes of up to two hours each way. Teachers, firefighters, cooks, journalists, scientists, nurses, artists, shopkeepers, and public servants can’t afford to live in the communities they serve. Small businesses are giving way to Prime delivery trucks. Ghost kitchens are replacing family-run restaurants. Headlines decry the dire situation, but nothing seems to improve. Young people struggle to imagine how to make a life for themselves in a place they’ve fallen in love with.

It doesn’t have to be this way.

New legislation in California has opened the doors to change. SB 1069—passed January 2020—gives each single-family residence the right to build two additional dwelling units (ADUs) and allows funds to own houses and add ADUs without owner occupancy. SB 9—passed September 2021—enables homeowners to divide their property into two lots and allows two homes to be built on each of those lots, with the effect of legalizing fourplexes in areas that previously only allowed one home. Because state laws supersede local restrictions, SB 1069 and SB 9 mean that the Bay Area finally has a chance to break out of its vicious cycle.

We founded New Avenue to help solve the housing crisis by pioneering a new way for middle-class families to become homeowners in great neighborhoods. To advance that effort, we helped make SB 1069 and SB 9 happen, and now that they’re on the books, we are working to make good on their promise.

How? We provide everything you need to turn expensive single-family houses into inclusive complexes of two, three, or more homes. Each complex has a shared courtyard, private spaces, separate homes, and a financing model that welcomes extended families, renters, and unrelated co-owners. This approach transforms one unattainable property into multiple accessible properties perfect for first-time homebuyers, making it possible for more people to fulfill their dreams of living by the Bay.

We’ve already built hundreds of sustainable ADUs around the Bay Area, but in order to offer a real solution to the housing crisis, our model needs to scale. For reference, 27,216 Bay Area homes that meet our criteria were sold in 2021. That’s a lot of potential. To unlock it, we’ve vertically integrated finance, design, and construction, and built a proprietary software platform to manage process, payments, and vendors. Scaling housing requires scalable economics, and with a 20%+ IRR, our projects generate excellent returns for investors in our funds.

Ultimately, what New Avenue does is simple: we take one expensive home and turn it into a complex of two or more homes on the same lot. But don’t mistake simple for easy. Our approach and operations are informed by more than a decade of work building ADUs in the communities we seek to serve. The positive impact of that work speaks for itself, and we’re just getting started. We want to go from doing hundreds of projects to thousands and then tens of thousands.

Success means updating the American Dream. Success means millions of families moving into their first home, net reductions in carbon emissions, reversing sprawl, supporting walkable neighborhoods, cultivating the benefits of density and diversity, and shifting the regional real estate market to make homeownership accessible to the middle class once again. Success means forging inclusive communities, improving quality of life, empowering at least 70% of households to afford a home, nurturing social connectedness, and building a better future together. Success means freeing the Bay Area from amber so it can evolve to serve the evolving needs of those proud to call it home.

And that’s just the beginning. Los Angeles faces a housing crisis too, as do cities throughout California and the nation. But reviving urban dynamism isn’t just about addressing a crisis, it’s about laying the foundation for what comes next. We call ourselves New Avenue because that’s precisely what we’re striving to build: a new path forward.