The Financial Red Flags for 2550 Irving Street
Updated: Jul 12, 2021
The Tenderloin Neighborhood Development Corporation (TNDC) keeps saying 2550 Irving Street won’t “pencil out” for less than 7 stories. Why?
The architect just confirmed our suspicions in a meeting: the acquisition cost for this parcel is so high, they have to maximize the number of units to keep it just under $1M/unit. But even with the maximum units, the costs are ridiculous.
This month the Board of Supervisors will vote on the short-term $14M predevelopment loan – which gives TNDC the funding they need to buy 2550 Irving Street from the San Francisco Police Credit Union for $9.4M! That’s DOUBLE the assessed value, with NO market study to support the price, and nearly DOUBLE the average acquisition cost for Affordable Housing in San Francisco.
If you’re thinking, “Well, that’s a lot but it must have been the best proposal” – we’ll never know because it was the ONLY proposal. TNDC was the ONLY developer who submitted responses to the NOFA, and 2550 Irving Street is the only parcel they suggested for District 4.
It’s not just the acquisition cost. The total project cost is $94M for 98 units – that’s $959K/unit – 60% over the average for new SF Affordable Housing.
Then, the developer TNDC has to secure long-term financing – 27% of which comes from replacing the short term $14M loan with a long-term $25.6M loan from SF’s Mayor’s Office on Housing and Community Development (MOHCD). They’ll also seek $38.1M (40% of budget) from federal Low-Income Housing Tax Credits (LIHTC). The problem is NO smart investors will be interested in an overpriced, contaminated site needing remediation and ongoing monitoring. So when TNDC can’t get financing, the only winner is the SF Police Credit Union, laughing all the way to the bank.
This project is overpriced not just for land and construction, but almost $1M will be required to remediate the site’s known contamination per California Department of Toxic Substances Control (DTSC) – which only protects the new tenants on that parcel, and does nothing about the other plume that will keep flowing from the lot on the south side of the block UNDERNEATH 2550 Irving Street to continue harming current neighbors.
Plus, add the City’s unbudgeted infrastructure costs for upgrading water, sewage and MUNI.
Is there an alternative? Yes, it’s possible to house more families and faster!
As proposed, 98 families will have to wait 5 years for Affordable Housing. If we reduce the height and density of the development at 2550 Irving Street to 4 stories (instead of 7 stories as proposed by TNDC), prioritize those units for those who most need on-site services, and reallocate the remainder of the budget to rehabbing blighted Single Family Homes (SFHs) in the Sunset District into fourplexes with 3 flats and an ADU, then we can house MORE FAMILIES IN HALF THE TIME, before we even break ground at 2550 Irving. That not only reduces blight, it creates density with dignity.
If TNDC can’t get 2550 Irving to pencil out because of the acquisition cost, then don’t buy 2550 Irving. Reallocate the full $94M to rehabbing 12 SFHs/year into fourplexes to house 48 families in year 1; 96 families by year 2; and by year 4, before anyone will have moved into 2550 Irving, you’ll have housed 192 families. That’s TWICE as many families in less time.
Just because MOHCD is not currently set up to develop Affordable Housing this way, doesn’t mean they can’t. With the cost savings and increased benefits for Affordable Housing, it is well worth the time and effort.
To be clear: most neighbors support Affordable Housing in the Sunset. But not 7 stories and not for the money, when we could build more faster. We’re also concerned that the Board of Supervisors would be green-lighting a purchase that in all likelihood won’t get the needed long-term financing.
That’s why we’re opposed as proposed, and we’re asking Supervisor Mar to lead the Board of Supervisors in saying no to this ill-conceived budget.