Why is this important?
Protracted timelines and high costs for developing permanent supportive housing (PSH) for the homeless, and affordable housing more generally, have been the subject of intense scrutiny in both policy circles and media in recent years. These issues are especially pressing in San Francisco, where homelessness and housing unaffordability have spiraled to crisis levels in a jurisdiction known for long housing approval timelines and escalating development costs.
Who was behind this effort?
Our report focuses on Tahanan, a 145-unit PSH development at 833 Bryant Street in the SoMa (South of Market) Pilipinas Filipino Cultural Heritage District, which opened earlier this year. Tahanan is the first development financed by the Housing Accelerator Fund-managed Homes for the Homeless Fund (HHF), in partnership with Tipping Point Community’s $100 million Chronic Homelessness Initiative (CHI). HAF and Tipping Point’s purpose through this effort is to pilot new approaches to developing PSH faster and at lower cost.
What was different about Tahanan’s finance and development model?
Tahanan’s finance and development model differed meaningfully from the traditional approach to creating PSH in San Francisco in several respects: 1) Private HAF funds paid for acquisition, predevelopment, and construction, and were only repaid with public funding once the project was complete; 2) The City and County of San Francisco (CCSF) is providing annual property lease payments to cover debt service for the 30-year tax-exempt loan, in lieu of its traditional up-front capital loan; and 3) Senate Bill 35 (SB35) entitlement streamlining and off-site modular construction (contracting with Factory_OS), which are available to other developments, were for the first time combined with the other key features of Tahanan’s finance and development model.
What did we find?
Tahanan’s total residential development costs were approximately $377,000 per unit, 41 percent less than a comparison group consisting of 25 new-construction PSH developments in San Francisco. Differences in costs were concentrated in the structure itself, rather than in “soft” costs. In addition, Tahanan’s timeline from entitlement approval date to the placed-in-service date was 41 percent shorter than comparable PSH developments, and each development milestone period analyzed was much shorter (e.g., construction start date to the estimated construction completion date).
What is the story behind these results?
Tahanan’s implementers approached financing, design, and site selection with a laser-like focus on reducing cost and time—an unusual approach for PSH and affordable housing more broadly in San Francisco for a variety of reasons typically out of developers’ control. This approach, and each component of the finance and development model, influenced time and cost savings in several key respects, including: 1) opting for small 260 square-foot PSH units and efficient floor plans, minimal retail space, and few design bells and whistles; 2) HAF’s high risk tolerance allowing Tahanan to advance without waiting for CCSF and State funding procedures to be completed; 3) CCSF’s willingness to shift its role from providing an up-front capital subsidy to instead providing property lease payments after the project was complete, enabling Tahanan to avoid several local requirements imposed on other PSH and affordable housing, but not market rate developments; 4) and streamlined entitlements via SB35 and off-site modular construction both contributing to substantial reductions in the project timeline.
Why is this significant?
Much of Tahanan’s time and cost savings resulted from project implementers’ freedom to prioritize the cost- and time-saving goals over other policy goals, thanks to SB35 streamlining and use of private HAF funds during predevelopment and construction, which limited CCSF’s input on the project during this period. This finding raises the question of whether—considering the severity of the homelessness and housing affordability crises—local requirements and review processes that are imposed on PSH and other affordable housing but not on projects that do not receive local funding, even if well-meaning, should be eliminated or bypassed to minimize impacts to timelines and costs. Were local governments to take this politically challenging step, they could fundamentally shift how PSH and other affordable housing gets built, ensuring more efficient use of scarce public dollars available to support these developments while addressing growing public concern over the cost and time to develop this housing.
