Potrero Yard, the 109-year-old Muni maintenance facility in the Mission District, is woefully out of date and seismically unsound.
Plans to overhaul the yard, more than doubling the number of buses it can serve to 250, won key approvals this month. But an ambitious blueprint to add up to 465 affordable homes on the site, rising as much as 13 stories above the neighborhood, now requires an extra step.
The city’s cash-strapped transit agency says it will pay some of the developer’s costs, up to $100 million, then hope to recoup the money through a complicated buyback plan.
Earlier this year, The Frisc reported that the project’s 465 homes could shrink to about 100 homes – a Plan B if funding didn’t come through. Now the only way to keep the project moving, homes or no homes, is through an unusual twist: the San Francisco Municipal Transportation Agency is going to pay all infrastructure costs upfront instead of splitting them with the developer.
Update, 10/3/25: SFMTA has cut the project back to 100 homes, blaming financial woes, according to the Chronicle.
The money would not come from SFMTA’s operational budget, where service cuts could kick in next year. Instead it would come mostly from the capital budget, which covers large projects like the recently completed L Taraval revamp.
With the extra $60 to $100 million, SFMTA has now earmarked up to $560 million for the project. Without that extra kick, the bus yard itself couldn’t break ground next year.
At a December 3 hearing, SFMTA chief strategy officer Jonathan Rewers told the agency’s board: “We’re fronting that.” The housing developer “essentially needs to buy back that airspace [to] repay those expenses.”
When first conceived some six years ago, the city hoped all the construction, bus yard and houses together, could proceed simultaneously and share the cost of common infrastructure: HVAC, basement, elevators, and especially the reinforced bus yard roof – in architectural lingo, the podium.
A consortium of local and national developers are responsible for wrangling funds. The first homes are supposed to break ground in 2027, with the bulk expected to follow in 2029.
But the developers don’t have the infrastructure money right now. Raising funds for affordable housing is complicated. It requires leapfrogging between different grants and subsidies and combining time-sensitive revenue sources before they expire.
“There are a number of competitive funding sources that [the developer] is pursuing,” SFMTA spokesperson Michael Roccaforte tells The Frisc.
The developers declined to comment for this article, referring all questions to SFMTA.
‘Time equals money’
Meanwhile, costs keep rising. At that December 3 hearing, SFMTA board member Steve Heminger noted that agency staff estimated in 2022 that everything – bus yard, homes, and all – would cost about $1 billion. But a top SFMTA official said at the same hearing that the price tag is now $2 billion, thanks to interest rates.
Sounding pained, Rewers told Heminger that the old budget was calculated during a period of “near zero” interest on federal loans. The rate is now up to about 5 percent — a difference of potentially hundreds of millions of dollars, said Rewers. He added that “we hope the Fed continues to lower interest rates,” a process that began earlier this year. “Where we are at today is high risk, but we’re trying to wait out rates coming down.”
SFMTA has done a remarkable job moving the project to this point given the ambitious scale and the logistical and financial complications of the pandemic. But since the project began in 2018, the agency and developer also held more than 150 public outreach meetings, which extended the process. In housing construction, already a complicated endeavor, “time equals money,” Rewers told the board.
There’s no requirement for SFMTA to get into the housing game, and it’s unlikely to generate funds for the agency. “Affordable housing addresses a critical city need but it is not necessarily a revenue-generating opportunity,” Roccaforte tells The Frisc.
They’re doing it anyway. The impetus comes from an expectation early in the Breed administration for every department to help solve the housing crisis, according to SFMTA and Planning staff who were involved when the Potrero Yard project was first conceived. This was the transit agency’s chance.
The City Hall directive came years before SF adopted its current housing goal to make way for more than 10,000 new homes per year through 2031. More than half of them must be affordable.
The prospect of 46,000 new affordable homes locked in by 2031 seems dim. In the past decade, the city has averaged fewer than 1,000 a year. In 2023, SF added only 971 affordable homes to its housing stock, none in the “extremely low-income” category.
Under the current proposal, about half the 465 units would be priced for low-income households making between 30 and 80 percent of the city’s area median income (AMI), which is $150,000 for a four-person household. Most of the rest would be pegged as “missing middle” homes for those making between 80 and 120 percent AMI.
Last month’s election offered gloomy prospects for expanded affordable housing funds. If the Potrero Yard project can’t corral the money for 465 units, the backup plan will feature a tower on the side with about 100 units. Instead of housing on the bus yard roof, there will be a paratransit facility.
SFMTA public affairs manager Bonnie Jean Von Krogh says the agency is doing all it can to avoid Plan B. “We have done a number of things to accommodate a very different market than when we started in 2018,” says Von Krogh.
Muni is in the midst of a self-described financial crisis. Von Krogh tells The Frisc most funds earmarked for the development are capital investments that can’t be spent on service. But she acknowledges a small part of the funds could come from grants that can be spent on either operations or capital. She declined to estimate how much.
The Board of Supervisors had to sign off on the financing agreement, $100 million extra from SFMTA and all, and approved it last week without debate or public complaint. At least that part was easy.
Correction, 12/24/24: A previous version of this story misspelled Bonnie Jean Von Krogh’s last name.