State infusion of $29 million for affordable Mission homes
San Francisco’s cash-strapped affordable housing development industry is about to get a little help: $29 million from the state’s cap-andtrade emissions reduction program.
Staff at the Strategic Growth Council, which administers money collected through the state’s cap-and-trade program — a pollution credit marketplace where companies buy the right to pollute — is recommending that a 157-unit development at 1950 Mission St. receives $15 million, while an 82-unit project at 490 S. Van Ness Ave. gets $14 million.
The council still needs to approve the grants but has historically gone along with staff recommendations.
Kate Hartley, director of the Mayor’s Office of Housing and Community Development, said the two grants are a pleasant surprise. “We knew we had a good chance for one, but were really pleased to get two awards,” she said.
The likely infusion of cash comes as rising construction costs and changes in federal tax laws are hampering the city’s ability to create below-market-rate housing.
Building affordable housing in San Francisco now costs an average of $750,000 per unit, 17 percent more than the average of $627,000 just two years ago. From 2014 to 2017, the typical affordable housing project had a funding gap — the amount not covered by bonds, state money or tax credits — of about $235,000 per unit. That number is now $342,000 per unit.
In addition, the tax bill Congress approved last year is reducing the amount of money affordable housing developers can make by selling Low-Income Housing Tax Credits — an $8.3 billion program that is the biggest source of affordable-housing construction financing.
Reducing the corporate tax rate from 35 to 21 percent has resulted in fewer corporations competing for the credits, which reduces the amount that affordable developers can sell them for.
“We are really battling against increasing construction costs combined with the loss of tax credit equity,” Hartley said. “Getting these funds gives us a little bit of relief.”
The cap-and-trade program awarded $121.9 million in the 2014-15 round of funding and $300 million for the 2015-16 cycle. For the 2017-18 period, staff is recommending that about $257 million in grants go to 19 projects. The final decision will be announced June 28.
Both of the San Francisco projects that may receive grants are in the Mission, a rapidly gentrifying neighborhood that has been the city’s top priority in building affordable housing. While the neighborhood has not produced a new affordable development in a decade, the current pipeline includes seven Mission District projects totaling about 800 units.
The first of these, a 94-unit senior development at 1296 Shotwell St., started construction in May. On Wednesday the developers of that project — the Chinatown Community Development Center and the Mission Economic Development Agency — celebrated the groundbreaking with a ceremony at the site.
Luis Granados, executive director of the Mission Economic Development Agency, said that while his agency has traditionally focused on pursuits such as job training and business development, it got into the development business in response to the flight of the Mission’s working-class Latinos. The Mission has lost 8,000 Latinos since 2000, according to an agency report.
“Client after client were asking us about their housing opportunities. They were telling us they were afraid of being evicted,” Granados said. “We knew we had to transform from a service organization into an organization that provides services and creates housing. Market-rate housing continues to spring up block after block in this neighborhood, while 8,000 Latinos were being displaced.”
While the agency is involved in five of the seven affordable Mission developments, Granados said, “We need an additional 10 projects like this one in the Mission.
“We have a strong sense of urgency, and we have the ability to make it happen,” he said. “Being on a fixed low income should not mean you are displaced from the neighborhood you helped build over many decades.”
Sam Moss, executive director of Mission Housing, which is building 1950 Mission St. with Bridge Housing, said the city could leverage the capand-trade money to raise about $90 million from lenders.
“It allows the city to start planning for future affordable housing with $29 million more dollars,” Moss said. “The sad fact is that for many reasons, most of them political, the Mission didn’t get one unit of affordable housing for a decade. We are making up for lost time.”
Clients “were telling us they were afraid of being evicted.”
Luis Granados, Mission Economic Development Agency