Despite calling it "a great project," a state agency has denied a funding request that would have helped finance the construction of a new 187-unit affordable housing tower aimed at LGBTQ seniors in San Francisco. The applicant, Mercy Housing California, is welcome to resubmit its request in the next round of funding via the state program.
As the Bay Area Reporter first reported in the spring, the affordable housing developer had applied in March with the Affordable Housing and Sustainable Communities Program overseen by the California Strategic Growth Council and the state's Department of Housing and Community Development. The program was accepting applications for $675 million in funds to be allocated toward various projects across the state aimed at reducing greenhouse gas emissions, such as affordable housing for disadvantaged communities and low-income communities.
Mercy housing and San Francisco city officials had submitted a request of $38,919,460 for the LGBTQ-focused senior housing to be built at 1939 Market Street. If selected for the AHSC funding, Mercy planned to then apply for tax credits through the California Debt Limit Allocation Committee and the California Tax Credit Allocation Committee with an eye toward breaking ground next summer on the building along the upper Market Street corridor in the LGBTQ Castro district.
But the California Strategic Growth Council in mid-August opted not to award the funds to Mercy. In response to an inquiry this month from the B.A.R., the council's Deputy Director of Community Investments and Planning Amar Cid noted that the 1939 Market Street project had received a score of 77 after being reviewed by the program staff, which placed the project below the funding line for this round, the eighth for the program.
"Round 8 of the AHSC program had many transformative, impactful community projects. In fact, like every round to date, the total project requests exceeded the available funding. This year, we were oversubscribed by more than 2X the available funding," stated Cid. "It was a highly competitive round of the program."
A scoring matrix is used to prepare a "compliant recommendation" document for all applications that meet minimum qualifications to get to the scoring round, explained Cid, to ensure applications meet certain requirements. The statutory requirement of the program includes meeting 50% of the awarded funds "within and benefiting disadvantaged communities (DAC)," Cid noted, as defined by the California Climate Investments/Greenhouse Gas Reduction Fund.
The council then votes on approving and awarding funds to the projects based on the recommendations list presented to it. The decision isn't solely based on a project's score, as 11 projects that received lower scores than Mercy's did were selected to be funded. One issue for Mercy is its site doesn't fall within a designated low-income or disadvantaged community in the city per a map used by the program.
"Why some projects may have been awarded with a lower score than the 1939 Project has to do with other projects perhaps meeting specific DAC and/or program priorities," explained Cid.
AHSC officials met with Mercy housing staff this month to discuss with them how their project's final score was determined and ways to improve its score in future rounds of funding from the state program.
"The team met with the 1939 Market Street project team in mid-September to discuss ways to increase their score if they choose to apply in a future round," stated Cid. "Overall, 1939 Market Street is a great project, and our team hopes they consider applying in a future round."
Will try next year
Mercy had also sought state financing last year for the project, which has an estimated construction cost of $117,673,842, but was not selected for the highly competitive program. It told the B.A.R. this week it plans to resubmit its application for funding from the state program next year.
"While we just missed out on the AHSC funding this year, we will apply again in early 2025, and we are hopeful that we can secure a funding award next year," responded Mercy's real estate development team in its San Francisco office in a statement to the B.A.R. "Unfortunately, this does push the schedule back one year. However, we are continuing to move the project forward and are committed to getting 187 units of LGBTQ+ friendly housing built as soon as we can."
The affordable housing developer is working with Openhouse, a nonprofit provider of LGBTQ senior services in San Francisco, on the development of their third building of below-market-rate apartments meant to house predominantly LGBTQ seniors. The agencies had earlier partnered on the 119-units of LGBTQ-welcoming affordable senior housing split between the buildings at 55 and 95 Laguna Street.
The campus also includes Openhouse's offices at 65 Laguna and a community center it built out at 75 Laguna. It is a short walk from the location of the new 15-story residential building that will include a ground floor commercial space.
The city acquired the triangular 7,840 square foot lot bordered by Market Street and Duboce Avenue in 2020 for $12 million from the Sheet Metal Workers Local 104. The union plans to vacate the property nearer to when construction of the senior housing will commence.
San Francisco planning officials last year had approved the permits for the new tower. It will have 106 rent-restricted studios and 79 rent-restricted one-bedrooms for seniors. A one-bed unit plus a two-bedroom unit will be set aside for on-site managers.
Because Mercy has been unable to secure state funding, it already had pushed back by at least two years the expected opening of the building to sometime in 2028. But that timeframe was contingent on the state awarding funds to the project this summer.
The initial hope was to have construction begin in 2023, allowing tenants to move into their new homes in 2026, as the B.A.R. had reported three years ago. (https://www.ebar.com/story.php?ch=news&sc=news&id=310609) Now, that timeline has been pushed back to 2029 at the earliest.
The Mayor's Office of Housing and Community Development, after selecting Mercy and Openhouse to oversee the project, had awarded $4 million for predevelopment costs such as design work. The project is estimated to have a total price tag of $159,669,745 once all costs and the developer's fee is added in.
Last fall, the mayoral office allocated a per unit amount of $280,000 to Mercy in gap funding for the project's construction costs. The $52,360,000 allocation is contingent, however, on it receiving state financing.
When the new building does open to tenants, 40 units will be set aside for formerly homeless seniors subsidized by the city's Local Operating Subsidy Program. Another 75 units are to serve extremely low-income seniors via the city's Senior Operating Subsidy. Nine units will be set aside for the city's Plus Housing program for homeless seniors who make 50% of the area median income, with the remaining 70 units for seniors with incomes at 50% to 60% AMI.
As with the previous two buildings overseen by Mercy and Openhouse, a lottery will be held to select the residents who qualify for the units not specified for the city programs. Both straight and LGBTQ seniors will be able to enter it as long as they meet the income restrictions, though the aim is to see a majority of units go toward LGBTQ seniors.
Mercy will oversee construction of the housing units and provide property management for the building. Openhouse will provide services and programming to the tenants, and it could end up utilizing the space set aside for commercial purposes.
Two other affordable housing projects in the city did get awarded funding last month from the state growth council. An 85-unit development at 160 Freelon in South of Market will receive $41.2 million. It will largely serve families, with over 50% of units being two or three-bedrooms, 22 units set aside for formerly homeless households, and five units for HIV-positive households.
The revitalization of 89 units at Sunnydale Block 7 was awarded $29.7 million. The project at the city's largest public housing community will also create the first-ever accessible connection for residents to nearby McLaren Park.
In announcing the funds for the two projects in late August, Mayor London Breed's office made no mention that the LGBTQ-focused senior housing project had been rejected. Her office has yet to respond to the B.A.R.'s request for comment about the delay in seeing it be built.
Gay District 8 Supervisor Rafael Mandelman, who represents the Castro and has championed the senior housing project at City Hall, told the B.A.R. that the funding denial "is disappointing, but we are not giving up."
He added that he has been "a little concerned" that any public funding the project is granted doesn't hamstring the ability to see most of the housing units go to LGBTQ older adults. Doing so is already complicated by anti-discrimination laws that prevent the city from only marketing the development to queer seniors.
"I think one of the things I want to make sure is we are finding funding sources and designing this project in a way it is useable and used by queer seniors," said Mandelman. "I think one of the issues with the other Openhouse projects was making sure there were actually queer people in the buildings. They ended up being, what, about half queer."
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