One criticism of San Francisco’s new housing plan is that it doesn’t guarantee money to build subsidized housing for lower-income residents.
The Family Zoning Plan, as it’s known, is meant to make larger apartment buildings, the kind ideal for affordable homes, legal to build in several low-rise neighborhoods. It’s not meant to fund them.
But funding those buildings is indeed a problem, and there’s no starker example than a project at ground zero of one of the city’s biggest political battles: The Great Highway.
More specifically, it’s at 1234 Great Highway. It’s a plum westside location, and not just because it’s steps away from the ocean.
It’s also a rare large site, an old Motel 6 a full block long. It’s what affordable developers need so that high construction costs make financial sense — at least in theory.
Even better, under a state law (different from the city’s new housing plan) the 1234 Great Highway developers applied for fast-track approval last year.
Their plans call for two eight-story buildings with 199 homes and a care center for low-income seniors. Half the units would be earmarked for formerly homeless residents.
As rents around the city go through the roof, they hoped to break ground this year. But now they won’t. Neighbors who have complained for years about losing their views rejoiced, and at least one headline implied that they’d won a battle.
Across town, neighbors managed to delay low-income senior homes for months. But the main developer says 1234 Great Highway doesn’t have a NIMBY problem. It says the problem is 2,500 miles away in Washington, DC.
HUD headache
Affordable housing isn’t affordable to build. With land, labor, and materials at a premium in SF, cost estimates range from $750,000 to $1 million per unit.
No single source can cover that kind of bill, so affordable developers patch together grants and loans from city, state, federal, and private sources, often with time constraints.
Securing public money can be critical in persuading private lenders to fill in the gaps. Losing one major funding source can endanger a project. “Projects die because they can’t close their funding,” says Jon White, chief real estate officer for Fremont-based developer Abode.
The federal Department of Housing and Urban Development was once a reliable financing partner. Like other agencies, it’s now subject to Trump administration attempts to kill grants and purge spending, often based on reasons such as “DEI” — diversity, equity, and inclusion.
Edmund Campos, spokesperson for lead developer Tenderloin Neighborhood Development Corporation, says “changes at HUD have created uncertainty” that have led TNDC to “pause the project.”
There wasn’t a particular HUD grant that fell through. Instead, TNDC planned to use the federal Restore-Rebuild initiative, a complicated tool to help cities build subsidized housing.
HUD pays the rent for some of the lowest-income Americans via Section 8 vouchers, but the buildings themselves are mostly privately owned.
(HUD responded to requests for comment by emailing links to a voucher database and did not answer follow-up questions.)
Restore-Rebuild (previously called Faircloth-To-RAD) lets cities develop new public housing and convert it into private affordable homes, with HUD committing to subsidize rents for low-income renters for 20 years. With that guarantee, developers and lenders say it’s easier to borrow money and finance some of these projects.
Leaning on those guaranteed rents was a big part of the 1234 Great Highway plan, but project manager Jacob Goldstein says there’s now a “general sense of uncertainty” around HUD and its dealings.
TNDC also lost out on a big grant closer to home. Financial documents drawn up last year show a $180 million price tag. Among the funding sources, City Hall would cover $34 million, mainly to buy the motel property, about $8 million would come from bonds, and $36 million from a state grant.
One big problem: TNDC didn’t get the state grant.
Only 30 of 164 applicants qualified for the state grant. Last year, 74 of 168 won awards.
“Without that initial HCD award, the project cannot yet advance to the next financing stages,” says Campos, using the initials of the state’s Department of Housing and Community Development.
TNDC has won grants through this program before, such as $20 million in 2022 for senior housing on Geary Boulevard.
HCD spokesperson Alicia Murillo says competition was intense, with 164 projects seeking a combined total of $2.8 billion. There was only $382 million in the funding pool. Only 30 of the 164 applicants qualified. The previous year, 74 out of 168 applicants won awards.
Murillo declined to comment on the qualifications of 1234 Great Highway but said the process tends to favor affordable developments that score at least 100 on a key bond-qualification metric. The Great Highway project is 100 percent affordable and had a score of 120, the highest possible, according to the Citywide Affordable Housing Loan Committee, which called the project “very competitive.”
‘Not a reliable partner’
Under Secretary Scott Turner, a former Texas congressman, HUD has undergone staff cuts and tried to claw back or shift funds appointed by Congress, such as permanent supportive housing for previously homeless residents under the Continuum of Care (CoC) program.
“Congress already authorized HUD — with strong bipartisan support — to run a two-year CoC Program,” but HUD has refused to spend the money, according to a letter from the US Conference of Mayors in December.
San Francisco and many others have brought a lawsuit and courts have blocked HUD’s moves for now, but the administration’s dismissiveness of contractual norms has repercussions. (HUD did not return requests for comment on this story.)
“They’re not a reliable partner. That’s a big deal,” says one SF-based affordable housing developer who asked not to be named. “If everyone is worried about funding cuts and housing vouchers,” lenders won’t feel confident about pouring millions into affordable housing, the developer says.
“It took us years to convince lenders to underwrite these kinds of projects,” says Abode’s Jon White. “That trust is lost” in the current environment, he adds, and Abode is now looking to rework projects around federal programs they once took for granted. “Lenders have good reason to worry, they read the news. Will HUD even exist in two and a half years when a project is ready to break ground?”
To many in the business, Washington feels like a black box; policy goes in one end and unpredictability comes out the other. “I’ve heard both ends,” says California YIMBY spokesperson Matthew Lewis. “Some folks say funds are coming through, others are getting cancelled or indefinitely delayed. Elon/DOGE and Trump permanently broke [or] disabled many systems, but not all of them, so your mileage may vary.”
Campos says TNDC will apply for new grants in 2027 and revive plans if the money comes through.
If and when that happens, city and state laws should prevent angry neighbors from pulling local levers of delay. But the supervisor race for the district remains keenly attuned to local housing complaints. Incumbent Alan Wong, appointed by Mayor Daniel Lurie in December, is fighting to keep his seat in a special June election. (The winner must run again for a full term in November.)
His four opponents are bashing him for his vote to approve the Family Zoning Plan. One, who runs a merchant association, told The Frisc in 2024 that a proposed eight-story affordable development at the other end of the Great Highway was “too tall.”
At a candidate debate Wednesday night, neighborhood affordability was a key question. Wong said one way to bring down prices was to build housing for all income levels. When the moderator asked if he’ll fight for 1234 Great Highway, Wong said he was “still developing his policy perspective.”
He also mentioned neighbors who didn’t like that half the building would be reserved for formerly homeless people.
Reached by phone the next day, Wong confirmed that he hadn’t yet decided about supporting the project and repeated that he’s heard from “some residents about their concern about how it’s a mix between seniors and people that are transitioning off homelessness.” (The developers have said the residents will all be seniors, half of them formerly homeless.)
The developer says the project can’t move ahead without new grants. And by then, either Alan Wong or a rival will be serving the first year of a new four-year term, with no election to face for a long time.