200 6th Street Rendering

With a 99-year ground lease from the City of San Francisco for which Mercy Housing will pay a total of $99 as proposed, the projected cost of building the affordable housing development to rise on the southwest corner of Sixth and Howard is $47,333,630, which includes $4,600,000 in consideration for the land.

With $1,110,264 allocated to the cost of constructing the restaurant/retail space on the ground floor of the building which will replace the old Hugo Hotel, the estimated cost of developing the residential units on the eight floors above will be $46,223,366, or roughly $592 per square foot.

And with a total of 67 residential units in the development, including one unit for a manager, that’s an average cost of $689,901 for each of the apartments which will rent for between $291 and $1,214 per month to households with very low incomes of less than 50 percent of the area median and possibly as low as 12 percent.

Responding to a note from the California Tax Credit Allocation Committee staff about the eyebrow-raising cost per unit for the development, Mercy notes that the high cost per unit is “attributed to soil conditions, City Planning requirements, and unit size.”

The permit to demolish the Hugo Hotel to make way for the project to commence  should soon be approved and the development is expected to finished and ready for occupancy by the middle of 2016.

59 thoughts on “Cost To Build Affordable Housing On Sixth Street: $690K Per Unit”
    1. $47M could either:
      1 – give wino/junkies who hitchhiked to SF $700K condos for almost nothing, or,
      2 – keep 100,000 children from dying of preventable disease or starvation in the 3rd world for one year.

      I think I know where I’d prefer MY tax dollars to be spent

      1. Mercy Housing is a private non-profit that BUILDS HOUSING for disadvantaged families, seniors, veterans et al. It’s not YOUR tax dollars they’re using. They don’t save starving children in 3rd World countries. They don’t cure diseases. They BUILD HOUSING. For families, not wino/ junkies who hitchhiked to SF.

        Check their buildings at 10th & Mission, Channel & 4th and their collaboration at 299 Fremont. In this case they get a “free” land lease from the city and, in turn, from them the city gets 67 new homes and some retail in an emerging area.

        And no, I don’t work for them, and I don’t have a financial stake in this project. I just appreciate what they do for people and for the neighborhoods they build in.

        1. I agree that affordable housing is important and appreciate that Mercy Housing is able to build it. I do question, given that this location appears to extra expensive to develop, that may be they could build more and better housing else where.

          If the city is providing a “free” land lease, then it is a cost to the city not to sell it to a market rate developer and use the profit to build affordable housing elsewhere.

          I agree completely with you Have Mercy, that EcceMorons suggestion is absurd, especially their portrayal of the future tenants. It shows a lack of awareness to the real problem of housing in SF.

          1. Uh, yes, Mercy Housing DOES use taxpayer handouts. On page 12 of Mercy Housing’s consolidated financial statements, it says that:

            “MHI and its affiliates receive significant funding from federal, state, and local government subsidies in various forms, including low-income housing tax credits, low-interest rate loans, grants, and rent subsidies for qualifying very low, low and moderate-income tenants.”

        2. So, to quote MarketSt below – you’re fine with a charity that prefers to spend $700,000 to provide ONE apartment for ONE disadvantaged family, rather than spending that same money on saving the lives of 100,000 women and children who will otherwise die of untreated disease or starvation in truly poor countries.

          You call it “mercy”. I call it insanely misguided – and consequently give my annual charitable donations to Doctors Without Borders – and would encourage all other well-meaning folks to do the same.

      2. Yes, lets keep 100,000 children alive, so they can have 500,000 children and so on…. The sooner we reach 20 Billion, the sooner this whole debacle can be over…

  1. this is so stupid. i’m sure the cost per unit would have gone down if they made this taller. it’s so expensive to start construction here. they should have put it in a cheaper part of town.

    1. Do you mean the Malabar chestnut (Pachira aquatica)? I think that’s a great idea if they will do well outside in our climate.

  2. That actually sounds about right for construction costs. I deal with this regularly and that’s the norm in San Francisco. All the fees and permits and time really add up.

  3. How much is allocated for the cultural memory of the Hugo Hotel?
    I can’t tell whether my question is funny or sad or boring. Probably boring.

  4. $700K for something that will rent out for between $291 and $1,214. What a colossal waste of time and money to make a pauper live like a prince. Perhaps that’s why they call the people who qualify for these units, “winning the lottery”. For the price of one unit here, a dozen units could be built in any number of cities around the country. Why we should be made to pay for even a dime of this is beyond me.

    1. Hand a man a fish he eats for a day

      Teach a man how to fish he eats for life.

      Keep soaking the taxpayers. The American way!

    2. Seriously, you can’t even rent a unit in East Oakland or Hayward for $1200 a month. $291? It’s so extremely low it’s only going to encourage welfare. The rents should at least be comparable to the area averages to keep the inhabitants working.

  5. Gawd… All that just to shore up the progressive voting base in the city to keep progressive politicians and their benefactors employed.

  6. This is another wonderful development by the best below market developer on the planet. How shameful of all of you to decry its cost. The people who will live there deserve decent housing in decent neighborhoods. The cost of construction is what it is, get over your bigotry against poor people and be glad so many people will benefit from it. It will be great for the neighborhood, everyone building it, and everyone living in it. Mercy Housing is building it, so how much is it actually costing any of you? The value of the land? The cost per unit for the land value is $16,571. You besmirch the city “paying” that amount per unit so that people can live a decent life? Shame on all of you!

    1. So you’re fine with children starving to death in the world while our charitable dollars go to keeping people who can’t afford it living in San Francisco. Not a matter of life or death. Just a silly token measure for a few lucky lottery winners who don’t appreciate it anyways.

    2. Oh, I feel SO shamed that I think spending $$ to help the most desperately helpless women and children on Earth is a better idea than lining the pockets of the “non-profit” corporations who guilt gullible SF voters into building $700,000 condos for a few folks who wandered into town.

      But now I see the light! We’re not doing enough. We should be buying each of these people mansions in Monaco – anything less is…well…just INHUMAN.

      I suspect that Have Mercy has an economic (or political) interest in this deal, as no one could have their priorities so heartlessly scrooed up if they were simply wanting to do the greatest good for the greatest number. Have Mercy seems to have some skin in this particular game.

  7. Have Mercy: “how much is it actually costing any of you? The value of the land?” Your right! Everything is free. No funds for this project come from taxes.

  8. I think it’s great. Let’s keep the city diverse. This is an investment in poor people. I read recently that the lack of segregation in SF has led to an unusually high upward mobility rate for disadvantaged people. That is, the kids of poor folks have a much better chance of making it into the top 20% economically here then elsewhere. And that outcome is associated with economically diverse neighborhoods.
    Not that any of the free market types actually care about outcomes. Ideologies and resentments are where they find their thrills.

    1. @Minka, I agree it’s all good intentions, but is it reasonable and efficient policy?

      Since resources are limited, I relate to the sentiment that charitable spending should be directed to the most needy.

      It would be much more efficient to subsidize low-income people to the extent that they’re able to find the most affordable shelter, meaning Vallejo/Richmond/Hayward would be more realistic. I don’t see why they need to be put-up in a prime location. [Yes 6th street isn’t a paradise, but keep in mind that Mission Bay South will have another Mercy housing complex + a non-Mercy low-income complex (block 6) + a halfway house (block 3)].

      Finally, I don’t see why SF should spend considerable tax revenues to award lottery subsidies (rent subsidies equivalent to 200K over 10 years) when there are clearly shortcoming in infrastructure. Ideally, our social net should be established and funded by the federal government, and SF can focus on maintaining herself. Frankly, I’d be surprised if US taxpayers wish their tax money to be spent on subsidizing low-income people living in $1000 sq/ft real estate, but let’s let them choose.

  9. all these comments are interesting – but i wonder – are any of you activists? or are you “opinionated couch intellectuals”?

  10. Why is it that the burden of housing poor people (and homeless, people with serious mental health issues, etc.) falls only on urban-dwelling taxpayers? It’s not just SF. Take a look at the huge homeless camps in San Jose’s creeks, for instance. Isn’t this really a FEDERAL problem? Couldn’t we move all of this mental health treatment/housing into lower cost areas? Is there a reason that the most premium plots of real estate in the country have to be used to warehouse people who don’t really need to be in the city?

    1. Agreed. Regardless of the extent to which one feels that their tax money should be used to support homeless/very low income (I support such programs), it’s insane for locales to bear a major burden when it’s clearly a federal issue.

  11. Does anyone know a website which details the source of funding for the various affordable housing projects? I believe some of the funding to date has come from california-level initiatives, but this source has dried up and now the SF BOS are thinking of issuing bonds?

  12. Why does it surprise you that “progressive” leftist policies benefit the deciders more than the “people” ?
    This is true of every such dictat in San Francisco and has been often observed on socketsite.

  13. It is time for liberals to choose: a million rules and permits or outcomes – enough housing, especially affordable. You can’t make it impossible to build in a city and expect the housing stock to keep up. How about this? PRE ZONE lots for affordable housing. Make the permitting free and slash the time it takes. Pre zone micro housing. Talk to developers and figure out how the government can make it easier. We (liberals) are driving everyone crazy with rules and regulations and fees and endless waits for inspections and permits. It took us 8 months to get our solar panels approved and the awesome installers LOST money thanks to the city. And it was do impossible to navigate we gave up on a grey water system – this is a draught and the permits were just too hard. Liberals have to choose – their beloved rules or outcomes.

  14. Mercy Housing is a non-profit, they are working hard to build and manage the housing for a very small number of selected poor people. With the very low rent collected, is it enough to pay for the maintenance and management personnel?

    Of the 690k per unit cost, most of the money goes to the construction union workers and the builder’s profit. Btw, is Mercy Housing the builder? If so, there will be no builder profit, only wages to union workers and profit to contractors, plus fees to the city building department.

    It is amazing that we need to spend 690k to house a low income family. Maybe we can give each family $600 per month and give them a ticket to Texas or Detroit?

    In my opinion, we should only support the people who can not work. Anyone who is healthy and can work productively should work hard. We can provide temporary housing to people in need, not a permanently almost free housing.

    I am wondering how Texas is handling their poor people. Or is it possible that Texas has very few low income people because Texas people are more hard working than California people?

    1. As a “non-profit” housing developer, Mercy, is permitted to charge a 8% “developer fee”.

      FYI, your typical “for-profit” developer factors in about a 4% “developer fee”. Mercy, or rather its executives are doing quite well for themselves in this transaction — it not all “altruism”.

      The approximately $600/sf construction cost is incredible. Evidently due to a rather expensive design (that happens when you go above 6 stories as this project does) as you have to build with concrete and/or steel rather than wood. Also it looks from the exterior renderings that some pretty fine finish materials are being uses and the architecture has a lot of “ins-and-outs”. Lastly, an all-union job is going to cost a premium as well. Nevertheless, this should have been a project that was more in the $400/sf to $450/sf range including all hard (construction, land, etc.) and soft costs (i.e., agency fees, design fees, etc.). At $600/sf it seems things have gotten a bit out of hand. It seems like it might have been wiser to build only 6 stories (44 units) rather than the substantially more expensive 9 stories (67 units).

  15. Simply put, affordable housing should be both affordable to rent, but should be built in the most cost efficient way possible, so that the money benefits the maximum number of people. Which may mean building these units in san Bruno or Daly City or hunters point, but not on land that results in units that cost $647K each. Truly a major waste of money. I can’t afford to live in Beverly Hills but I don’t expect the city or charities to build me a free apt. either.

  16. I can’t believe how ignorant you people are here about the realities of building affordable housing. First, it’s more expensive because they have to meet more stringent code standards than most private developers (e.g. need handicap accessibility in all units) have to use union labor, meet green building standards, and have to build for durability and low maintenance.

    As to the financing, most affordable housing developments are not financed through direct cash transfers from city or state general funds. Most are cobbled together from a variety of funding sources: transferable federal tax credits from private companies, the in-lieu of fees from for-profit developments, and a variety of federal, state, and local public and private sources. While it’s fair to ask if this is the MOST efficient use of limited resources, that is really a meta question. The more appropriate question is “how much more does this cost to build than market-rate housing?” I don’t know the answer to that.

    And HowtoHelpPoor: are you magically going to create the well-paying jobs that allow those who want to “work hard” make enough money to live and work here? Many of the folks in low-income housing do work hard – probably harder than you, except it takes 2 minimum wage-jobs to barely make enough to pay rent. I don’t even want to get into the cluelessness about our economy and contempt for those struggling that your comment conveys.

  17. The city is 7 miles wide. The “working poor” don’t need a $700K unit, no matter what it costs or who builds it. They can commute 7-10 miles from S. San Francisco or San Bruno. Subsidize their bart or bus pass. It’s a lot cheaper.

    1. i agree. part of our issue is we are 7×7. if we could just incorporate daly city, south san francisco and San Bruno, people could still live in SF to which many feel entitled for some reason. SF is like Manhattan, not like NYC. We should be helping the poor in areas that are less expensive. I do believe in the model where 10-15% of all units in new buildings are BMR, but not in pure BMR buildings as it doesnt make financial sense and you are also not integrating different class levels.

      1. There is still tons of underutilized open space in south eastern parts of SF. We don’t even need to incorporate to expand.

  18. @katdip, there are thousands of cities and SF is not unique. Hard working low income people can live in Richmond, Concord, Tracy or wherever they like.

    Most of the cities do not build housing for working poor. The working poor just move to a place where they can afford.

    The problem is in SF’s politicians. If you want to give away a free house, there will be shortage of takers. Even in Texas, there will be many and many people want/need/wish for a free house, IF their city is run by SF politicians.

    So I think that the source for all these absurdity is exactly the people who think like @katdip

  19. Wow, just wow. Can you for one minute put yourselff in the shoes of these people you so quickly condemn to far flung suburbs? Imagine a janitor/security guard who makes $12 per hour, who has to commute 1.5-2 hours each way from Tracy. Not only are they still not making much money, but now they have to have enough money for a super reliable car because if they don’t work they don’t get paid, and they have to pay for gas, insurance, etc. If they are trying to support a family, they probably have to work two jobs, making this even more insane, not to mention finding reliable safe child care. People can and do make these choices all the time – all I expect of our society is to provide some opportunities for them to have a less insane life. We need them to work here – who do you think delivers most of the unseen services in this City?

    And no one is “giving away a free house.” Depending on the income limits, most tenants have to pay 1/3 of their income in rent, which is the same formula most banks use for lending money for a mortgage. And of course because they are poor, the percentage of their income they spend on food, child care, health care etc. is far higher than what us more privileged people pay. So maybe you need to get over your welfare queen stereotypes and actually get a clue what’s going on in the real world before you so blithely condemn them.

    1. we have bart and there is a ferry from vallejo. Bart reaches many more affordable area, and it is much cheaper to subsidize their transportation than to pay $700K for a free condo

  20. katdip, you’re trying to make a very complex issue very simple. We all agree that workers are needed, and that they must live somewhere. Plainly it is not inhumane to expect that some workers will have to travel some distance to work in an expensive location. For example, janitors and security guards work in Pac Heights too. Does that mean that we MUST build subsidized housing for them in Pac Heights? At a million dollars per unit given the higher land costs there?

    Of course not. So we’re just debating how far away is reasonable or humane or whatever. You think Tracy is too far. Is Oakland too far to house those janitors and security guards? I don’t think so, and if we can build there for $300,000 per unit rather than $700,000, that makes sense. How about Concord? or Antioch? We have staff members in our office who travel that far because they want a bigger house, and that’s where they can afford one. Might it make sense to build more subsidized housing in these outer, cheaper areas rather than smack dab in an extremely expensive city? May not even need to provide any subsidies there as housing may be cheap enough without them, or you could at least get far more for our subsidy $$. Maybe 250 units for that $46 million. A better solution, perhaps?

    The point is, a sensible solution would involve the entire region. SF is not an island, and providing subsidized housing is not a SF-only responsibility. Heck, what if one of the residents of this new SF subsidized building takes a job out in Concord and BARTs there? should we prohibit that? Of course not. It is not as simple as saying “SF needs low wage workers and thus we MUST provide subsidized housing for them in SF.” Nor is it as simple as saying “they can just move farther and father out until they can live in market rate housing.”

    imho, spending $46 million to construct a mere 67 units is an asinine misuse of scarce funds. We could help many times the number of people by building elsewhere. Doesn’t have to be in Tracy, but it also doesn’t have to be in SOMA.

  21. katdip, do you really think the way as you posted? I suppose you can use a little bit of common sense.

    Are you one of those politicians trying to get elected by using these kind of arguments? Many of the SF politicians argue like you do, but they only say those words for the purpose of election. In their mind, they do not think this way. They know it is BS, but they try to get more votes by using the BS.

  22. I think SF needs some smart and wise politicians. Most of the liberals or progressives are good at BS, but they create more and more problems while trying to “solve” a problem.

    To be honest, I would not be surprised that housing condition be much much better if SF had a Republican board of supervisors.

  23. Even when we vote a democrat, a progressive or even a liberal extreme, we need to elect a wise man or woman. A stupid elected officer will cause huge damage to everyone.

  24. This is the most absurd thing I’ve read in a while. Politicians should be ASHAMED.

    SRO’s don’t even come as cheap as this will – $500-900/mo for a dimly lit room! And yet on the back of taxpayers, poor working families will pay only $291/mo in some cases to live in brand new housing that’s probably far nicer than many of the market rate units (such as mine for well over $2K/br) around town? I work 60+ hours a week and I too struggle, along with everyone else, to live in this great city. I view it as a privilege and choice to be here, not a right. If I wanted to save some extra cash, I could move to Temescal or somewhere else and commute in via ACT/BART.

    If this gets built, politically people’s careers need to roll asap. This is the kind of story that gets picked up by the news all over the country and taken advantage of, rightly so, by conservatives – it’s laughably easy even for liberals to look at this farce and draw conclusions, let alone conservatives.

    How expensive would it be to build more affordable housing in Bayview or Visitacion Valley? Or Colma? Daly City? If SF feels the need to spend $700K/unit in the city, can’t it just work with adjacent towns and fund their subsidized housing for much less and bus/train people in?

    Absurd. I loathe and despise anyone who can’t see what’s wrong with this.

  25. Area median income (AMI) for 1 person in 2012 was considered $72,000.

    12% would be $8,640, which is roughly equivalent to what a solid beggar makes (aka homeless). 30% of this income in monthly rent would be $216/mo.

    30% would be $21,650, roughly minimum wage. 30% income in monthly rent is $541, which is what a lot of SRO’s cost per month.

    50% would be $36,050. 30% income in monthly rent would be $901/mo, still within SRO range.

    Teachers in SF are at 85% of the median, or roughly $60K/yr in salary, as individuals. I would guess many if not most are married and are part of households.

    At rents of $291-$1214/mo for studios to 3 BR apts, we can make a safe assumption this is literally housing for borderline if not fully homeless people through families helmed by single mothers collecting checks and working 1-2 minimum wage jobs.

    I’m FINE paying for subsidized housing and believe everyone should be housed somewhere, but it IS NOT A RIGHT TO BE HOUSED ON SOME OF THE MOST PRIME LAND IN THE MOST EXPENSIVE CITY IN AMERICA.

    I wish SF and all of its neighbors could legitimately and effectively work together to solve both housing issues and the area’s dismal public transit. Unfortunately, SF bears nearly full responsibility for both on the shoulders of people presumed to be “rich enough” to pay higher taxes and housing costs.

    Thought the previous Socketsite article on this project, from 2012, was also interesting: Redeveloping Sixth Street: Corner Of Sixth And Howard As Envisoned.

    1. Fair point, but keep in mind that 1/3 of mission bay south is affordable housing. Take a look at the mercy housing at 4th and channel. At least 4th/channel is slated for low income families. In contrast, block 6e is marked for very low income (with or without families), while block 3e will likely be a halfway house.

  26. Anyone notice how they put a sports car racing towards the pedestrians crossing the street? I hope their attention to detail in the actual construction is better than their renderings.

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