The first affordable housing development from a new nonprofit-private sector partnership is testing whether Bay Area developers can achieve what the industry has struggled to do for decades: build housing faster and for less money. At 1633 Valencia St., on the edge of the Mission District and Bernal Heights, the numbers suggest they can.
The 145-unit project for formerly homeless seniors was completed in just 19 months at a cost of roughly $525,000 per apartment — about half the per-unit price tag often associated with new affordable housing developments in San Francisco. By the time city leaders joined developers for a ribbon-cutting ceremony Tuesday in front of the red-brick and blue-tiled facade, the building was already 95% leased.
As traditional government funding for affordable housing grows scarcer and construction costs remain stubbornly high, the inaugural project from the Bay Area Housing Innovation Fund, backed by private developers and companies such as Apple, offers a glimpse of what it takes to speed up and cut costs for income-restricted housing projects. Occupants of 1633 Valencia make less than 50% of the area median income and pay 30% of their income in rent.
The question now is whether those results can be repeated. Several similarly funded developments are moving through the pipeline, setting up new test cases for whether the San Francisco project’s combination of flexible private financing and construction innovation, including the use of prefabricated components, can be replicated at a scale large enough to meaningfully expand the region’s affordable housing supply.
Apple helped launch the Housing Innovation Fund in 2024, contributing to an initial $50 million investment along with partners such as the Sobrato Organization, a Silicon Valley developer, and the San Francisco Housing Accelerator Fund, a nonprofit that provides flexible capital to projects using innovative construction and financing approaches. Late last year, the Housing Accelerator Fund committed another $50 million to the Housing Innovation Fund.
The nonprofit Mercy Housing California developed 1633 Valencia, with the Housing Accelerator Fund acting as a financing and development partner.
To date, the Housing Innovation Fund has stretched about $40 million across three projects in the Bay Area. In addition to 1633 Valencia and a 100% affordable, 195-unit transit-oriented development in San Jose, which broke ground last week, it has backed a 121-unit project in Santa Cruz that is slated to finish construction in August. Projects that qualify under the fund’s cost and time goals exceed its current capacity, said accelerator fund CEO Rebecca Foster. She expects its portfolio will grow to more than eight projects representing more than 1,000 new homes over the next year, with the average per-unit construction cost landing at about $625,000.
For Foster, 1633 Valencia is “proof that we can and must fundamentally change how affordable housing gets financed and delivered.”
With rents in high-cost markets such as San Francisco experiencing double-digit increases over the past year, Foster said that the region and its corporate stakeholders have arrived at an inflection point and that housing financing tools such as the Innovation Fund stand to help the region grow more sustainably.
“With rent starting to skyrocket again,” Foster said, “it’s a really important moment for our base of amazing corporations that have benefited from this hotbed of innovation and the unique, diverse, vibrant community that we have here in San Francisco to really roll up their sleeves and say, ‘OK, how am I part of the solution to these affordability challenges?’”
Mayor Daniel Lurie, in a statement Tuesday, applauded the project team for transforming a plot of land that “used to sit largely unused” into a site where “people can age with dignity, build connections with their neighbors, and find the stability they need to thrive.”
At 1633 Valencia, the strategy for addressing the complexities of affordable housing construction was to bring in David Baker Architects and contractor Cahill at the same time as one team, using a construction method known as design-build. That allows construction to begin on portions of the project sooner and helps to control costs.
Mercy Housing, Cahill and David Baker Architects had joined forces previously at a nearby permanent supportive housing project known as Tahanan, which they delivered in under three years at a cost of roughly $400,000 per unit. By reusing building plans that had already been designed, engineered, permitted and constructed, the team was able to lower costs and risk. With the use of prefabricated components and up-front financing from the Innovation Fund, the team was able to meet the goals it set for the Valencia Street project.
“We are constantly looking for ways to build smarter, faster and with greater impact for residents,” said Tiffany Bohee, president of Mercy Housing, adding that the development “reflects what’s possible when trusted partners come together with a shared commitment to innovation and equity.”
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