First Privately Funded Workforce Housing Set to Break Ground
The two buildings of TL 361 located at 361 Turk and 145 Leavenworth streets will be San Francisco’s first privately owned and financed buildings that offer means-tested rent controls for workforce housing.
SAN FRANCISCO—The partnership of Forge Development Partners and Bridge Investment Group will break ground on the first newly constructed privately funded workforce housing development in the city. The groundbreaking ceremony will be held tomorrow from 3:00 to 5:00 p.m. at 145 Leavenworth.
A Freddie Mac Multifamily unfunded forward commitment, which includes a Preservation of Affordable Rents Covenant agreement, will provide permanent financing for the development called TL 361. The partners will deliver new housing stock affordable to the workforce in the urban core, with a minimum of 51% of units to be rented to those earning a maximum of 80% of the FHFA area median income.
The project is supported by construction financing from East West Bank and Washington Federal Bank. TL 361, located at 361 Turk St. and 145 Leavenworth St. in the Tenderloin, will transform two surface-level parking lots into a mixed-use residential community featuring two standalone buildings with a total of 240 micro-units above neighborhood-serving retail as well as a dedicated on-site social and community center. It’s been dubbed a combination of innovative product design and technology with unique investment financing and management.
“Forge is excited to launch TL 361 with a partner that shares our vision of bringing transformative solutions to the housing and living issues of the urban core,” said Richard Hannum, founder of Forge. “This first project will demonstrate the applicability of our model to provide high-tech, high-touch and highly desirable housing solutions in downtown settings that are accessible to the people who work in the urban core. Together, Forge and Bridge will deliver a managed user experience for working people that enhances their quality of life at a lower cost of living.”
Importantly, Hannum adds, “it is a ‘true solution,’ meaning it is replicable and scalable.”
These two buildings will be San Francisco’s first privately owned and financed buildings that offer means-tested rent controls for workforce housing, according to Dan Stanger, vice chairman of Bridge Investment Group and co-chief investment officer for the firm’s workforce and affordable housing strategy.
“The structured financing, which guarantees affordable workforce housing, coupled with innovative construction methodologies from Forge, makes this a particularly attractive model,” Stanger says. “We are very pleased that the double bottom line model we have developed to fund and build affordable workforce housing like TL 361 in the urban environment is both viable and profitable in this era of social responsibility, driving both competitive market returns and social and economic mobility.”
The $100 million development is a reaction to the elevated construction costs that have made it prohibitively expensive to build new affordable housing without relying on government subsidies, greatly reducing the supply available to the US workforce. This private sector partnership will use patented systems to keep construction costs down, allowing for more affordable rents at a time when more than one in two American rental households are cost-burdened by their housing. Innovative solutions to energy systems will combine to make the project extremely efficient and sustainable.
As required under the Mayor’s Office of Housing and the inclusionary housing ordinance, 12% of the 240 micro-units will be set aside for renters who earn roughly $32,000 per year. To reach the required 51% of affordable units, Forge and Bridge will privately impose rent restrictions on 39% of the units, making them affordable for renters with current income as low as $75,000 per year. The remaining 49% of units will be offered at market rate, starting at prices affordable for renters making approximately $82,000 per year, still below the area median income.
“Freddie Mac’s loan will help keep rents affordable for 240 residents in the highest-cost market in the United States,” says Lauren Garren, Freddie Mac vice president. “Workforce housing is in short supply across the country—a problem Bridge Investment Group and Forge Development Partners are taking head on with TL 361.”
TL 361 will consist of two eight-story standalone buildings. Of the 240 units, 146 units will be located at 361 Turk St. and 94 units will be located at 145 Leavenworth St. All units feature private baths and cooking facilities.
There will be seven stories of residential over ground-floor retail in each building along with a shared rooftop deck and double height common spaces on every floor. Green technologies will be employed with very low energy usage and high sustainability.
Forge Development is represented in its acquisition program as well as structuring its partnership agreements by Scott Bales, a 30-year veteran in the industry and current managing director of multifamily housing at JLL.
“Forge Development has the unique capacity to procure alliances within communities and create feasibility for its partners at a time when both of these elements have become increasingly rare and exceedingly valuable,” Bales tells GlobeSt.com. “I believe that Hannum and his partners have a successful formula that is both customizable and replicable, and will change the way many think about workforce housing.”
Guided by San Francisco Planning Code Section 415, the Inclusionary Housing Program (also known as Below-Market-Rate Program) aims to create housing affordable to low, moderate and or middle-income households in new buildings. When a housing developer proposes a residential project with 10 or more units, that developer must either reserve a percentage of units in the new building to be rented or sold at a below market rate, reserve a percentage of units in another building built by the same developer to be rented or sold at a below market rate, pay a fee, and in some cases dedicate land that will become affordable housing, or a combination of all the above.
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