Modular housing is on the way for San Francisco's unhoused residents.
This August, if things go as planned, 145 new apartments for formerly homeless adults will open in San Francisco, one of the country's most expensive housing markets.
Tahanan Supportive Housing, located in San Francisco's South of Market (SoMA) neighborhood at 833 Bryant Street, will be opening only three years after initial acquisition of the site. The project not only had a compressed timeline, but also aggressive budget goals. The solution was found in an innovative combination of philanthropic funding, new regulatory streamlining, and modular construction.
While modular construction has long lurked at the edges of real estate development with the tantalizing promise of time- and cost-efficient housing solutions, Tahanan has made it clear that simply accelerating construction is not sufficient to achieve the ambitious goal of solving California's homelessness crisis. Drawn-out bureaucratic processes and rigid financing structures also need to change (or be circumvented) in order to realize the full advantage of modular construction's speed and efficiency.
According to a recent report from the Terner Center for Housing Innovation at the University of California, Berkeley, building affordable multifamily housing in San Francisco typically can take five to seven years or even longer from site acquisition to move-in, with total development costs (excluding land acquisition) ranging from $500,000 to $740,000 per unit. On the recommendation of a mayor working group, the City in 2017 launched a public/private partnership called the San Francisco Housing Accelerator Fund (HAF) to more efficiently develop affordable housing. HAF operates as an independent nonprofit organization committed to reducing project costs and speeding up the preservation and production of affordable homes in partnership with the public sector. Funds from the city, philanthropic organizations, and financial institutions are central to its efforts.
When one such local philanthropic anti-poverty organization, Tipping Point Community, reached out to HAF to create a new model for building housing for homeless families, the idea of Tahanan Supportive Housing emerged.
Tipping Point secured a $50 million commitment to back the effort, enabling HAF to purchase a parking lot from a private owner in October 2018, thus avoiding the often lengthy process of developing on a publicly owned site. An amendment to the city planning code, passed just after the site was purchased, rezoned the property to make 100 percent affordable housing an eligible use. The site is located near public transit options, grocery stores, and community parks that provide the infrastructure essential to the success of resilient affordable housing.
Tipping Point and HAF then turned to Mercy Housing California, an experienced local affordable housing developer that has been working in this area since the 1980s, and San Francisco-based firm David Baker Architects to design and build the housing.
In addition to the land acquisition, Tipping Point's funds made it possible to pay upfront costs to Factory OS, a manufacturer of modular housing based in Vallejo, California--something that would have been more challenging to do within a typical affordable housing finance schedule. Tipping Point's funds also covered other pre-development expenses. A mortgage, funded with tax-exempt private activity bonds, repaid some of the HAF money, the rest of which will be repaid using equity from low-income housing tax credits (LIHTCs).
Once Tahanan is completed, San Francisco will master lease the building from HAF for 30 years and subsidize operations; when the lease term is up, the city will have a right of first refusal to buy the property from HAF. The building will continue to be owned by the Mercy Housing-led partnership 833 Bryant L.P., in compliance with LIHTC regulations and as is necessary to qualify for a property tax exemption.