As S.F.’s market rate housing developers sit idle, nonprofits are swooping in to create affordable homes

A fenced off, 1-acre parcel at Cesar Chavez and Valencia streets, once a parking lot for the Mission District’s flagship Sears Roebuck & Co. department store, is now set to become one of San Francisco’s biggest new affordable housing developments.

Sequoia Living, which develops and owns senior complexes for both low-income and more affluent seniors, paid $13.5 million to acquire the parking lot behind 3435 Cesar Chavez St., which was redeveloped as live/work lofts after Sears closed its store in 1975.

Sequoia plans to develop 130 units of senior housing on the northern half of the site and partner with nonprofits to build another 130 units of affordable homes on the southern portion, according to David Latina, who heads up development for the company.

Latina said that Sequoia had spent years looking at both the old Sears lot as well as Salvation Army’s property across the street on the northwest corner of Valencia and Cesar Chavez. For most of that time, however, both properties were being coveted by for-profit builders who could pay more than an affordable group.

The old Sears lot was under contract to at least two market rate developers before the deals went south during the pandemic, which provided an opening for Sequoia.

“When the gas came off the pedal in the condo market I called our broker and said, ‘Let’s talk to them and see if we can make something happen,’” Latina said. “Everything is on hold, except affordable housing, which is great for us.”

Supervisor Hillary Ronen said the location — across the street from California Pacific Medical Center’s Mission-Bernal campus, near plentiful shopping, restaurants and public transportation — was ideal for seniors.

“This is among the most welcome types of housing we could build in the district,” Ronen said.

San Francisco is home to 164,000 adults aged 62 and older, about 23% of the population. A 2022 Aging and Disability Affordable Housing Needs Assessment Report found that over 29,000 senior renter households experience a rent burden, and about 16,000 of those households experience a severe rent burden. The 2022 Point-in-Time Count of unhoused people found an estimated 620 adults over 60 and 1,600 people with disabilities experiencing homelessness on any given night in San Francisco.

Two senior housing projects have opened in the Mission District in the past decade — one with 44 units at 3001 24th St. and another with 94 units at 1294 Shotwell.

“Those two don’t even begin to meet the need,” Ronen said. “Affordable senior housing is something we don’t have nearly enough of — especially given the number of seniors is exploding.”

Commercial real estate broker Gary Cohen, who represented Sequoia, has made something of a specialty of finding sites for affordable developers. He said that he expects to see a flurry of offerings from market rate developers who can no longer obtain financing to construct what they had hoped to build — but that so far it’s been slow.

“The question is whether sellers have come to terms with the pricing discount that would make it make sense for a nonprofit,” he said. “People have to adjust their expectations — and I don’t know that we are quite there yet.”

Sequoia was in a unique position to buy the land because it has a foundation that was able to put up the cash without going to the city for financing. The foundation is made up of contributions from residents of the group’s market rate communities, which are popular and tend to attract affluent families. It’s common for those residents to leave a portion of their estates to Sequoia’s low-income communities. Sequoia has market rate communities on Cathedral Hill as well as in Portola Valley, Walnut Creek and Greenbrae in Marin County.

“It is like Peter helping to pay Paul,” Latina said. “They feel good about their money going to an organization that not only takes care of them but takes care of others that can’t afford a market rate senior living community.”

The Mission District units will target seniors with income less than 50% of area median income — about $48,500 a year — and Sequoia is hoping to procure vouchers that will make it affordable to even lower-earning seniors. It will take about a year to obtain the low-income housing tax credits needed to fund the project, Latina said.

Mission Housing Executive Director Sam Moss said his nonprofit had looked at the site in the past but that Sequoia’s acquisition of the site — and plan to put units for low-income seniors there — was the perfect outcome.

“Sequoia is going to do great stuff there,” he said. “Affordable housing inherently has the potential to be counter-cyclical, but it depends on the money being there.”

Scott Falcone, an affordable housing consultant who advised Sequoia, said he has clients looking at potential acquisitions in the Outer Sunset as well as Union Square. The Union Square property is an existing hotel that would be redeveloped as apartments.

“These properties are not exactly flying off the shelf,” he said. “We are the only ones who can make it work. The price is coming down and it is likely to come down further.”

Ronen said she was particularly pleased that the Mayor’s Office of Housing and Community Development didn’t have to bankroll the land acquisition, which is what typically happens.

“It’s like Christmas come early,” she said.

J.K. Dineen is a San Francisco Chronicle staff writer. Email: jdineen@sfchronicle.com

Twitter: @sfjkdineen