STEP-BY-STEP
How affordable housing gets built in the City
Follow the process from acquisition and permitting to construction and lease-up.
Mayor's Office of Housing and Community DevelopmentMOHCD supports nonprofit developers with planning approvals and funding applications for affordable housing.
Site acquisition
To qualify for federal and state funding, a parcel must be owned by either the City or a nonprofit affordable housing developer. Sites can be acquired in several ways:
Land Dedication: City law requires private developers to fulfill certain affordable housing commitments. A private developer may dedicate land to the City to meet those requirements. MOHCD manages interim uses.
Public Lands: Some sites are already owned by a public agency. These sites are usually empty lots or vacant buildings.
- The Real Estate Division notifies MOHCD when a City‑owned site becomes available.
- State‑owned sites are listed on the California Department of Housing and Community Development (HCD) website.
Development Agreements: A development agreement is a contract between a developer and the City. These agreements are common for large projects that take many years to build. They often include public benefits like new parks or street and utility upgrades.
The Mayor and the Board of Supervisors must approve all development agreements. In the agreement, the developer must commit to providing affordable housing by either:
- Setting aside specific units within the project as affordable (inclusionary), or
- Designating one or more parcels within the project for a 100% affordable housing development
For sites that will be 100% affordable housing, the main developer must work with a nonprofit affordable housing developer. This partnership is needed to qualify for federal and state funding.
Developer Acquisition: A nonprofit developer may also purchase a site directly, usually under a City NOFA to fund new projects. Deed restrictions ensure the site will be used to build affordable housing.
Notice of funding availability and developer selection
MOHCD issues public notices when funding is available. There are three main types of notices:
- Notice of Funding Availability (NOFA)
- Request for Information (RFI)
- Request for Proposals (RFP)
Each notice details the development opportunity and how the funding can be spent. Common uses are site acquisition, preservation, and predevelopment.
Developers respond to posted notices with their project proposal. The proposal details their experience, financing plan, and vision for the project.
An independent panel reviews proposals for basic eligibility. The panel then ranks eligible proposals based on the public scoring criteria. If there is not enough money for every project, MOHCD funds the highest-ranked projects first.
The selected developer(s) enter into a loan or grant agreement with the City. This agreement explains the responsibilities of the developer as per MOHCD's Underwriting Guidelines. All loans are subject to approval by:
- Citywide Affordable Housing Loan Committee
- Mayor
- City Attorney's Office
- Board of Supervisors (if more than $10M)
Design and planning
The developer assembles a project team and creates detailed designs for the project. This includes the building layout, architecture, and site improvements.
The developer submits the designs with a Project Application to San Francisco Planning. They also apply for a site permit from the Department of Building Inspection.
Certain 100% affordable projects have streamlined reviews and permit approvals per state law.
Apply for financing
Most affordable housing projects need more than one source of money. City funding is often the first step. It can help a project apply for and receive money from lenders and state and federal programs. Limited City funds leverage other funding sources that cover all project costs.
The most common sources of funds are:
- Federal tax credits and private activity bonds
- State construction loans or grants
- Low-interest, long-term loans from private financial institutions
If a project does not get federal or state money, the nonprofit developer may change the design or plan. These changes can help the project compete better in future applications. But if the plans change, the developer must go back a step and submit the new plans and permits for approval.
Sometimes there is still a gap in funds needed for a project. MOHCD may issue loans to cover these gaps. These loans have to get approval from the Citywide Affordable Housing Loan Committee. If the loan is for more than $10 million, it also needs approval from the Board of Supervisors and the Mayor.
Notice to proceed
Projects have strict requirements for labor, wage compliance, and local hiring during construction. Requirements are set by local, state and federal law and by each funding source. A notice to proceed is approval from the City that the project will meet these standards. The project team has to meet with City agencies and all contractors before a notice is issued.
Construction
During construction, the project team has to submit draw requests for funds. The project must meet certain milestones to get future draw requests approved. The project team also has to verify wage compliance on a regular basis.
Marketing, loan closing and "TCO"
A key milestone is when a project gets its Temporary Certificate of Occupancy (TCO). This means all critical work is complete and tenants can start moving in. It also sets a time limit for the developer to finish the full scope of work.
This is when property managers can begin marketing and outreach to potential applicants. Developers publicize information like when applications are due or when lotteries will happen. This encourages prospective tenants to make sure income and contact information is up-to-date.
Lease-up and closeout
Units are generally leased up through the DAHLIA San Francisco Housing Portal. Applicants submit preliminary income and household information through DAHLIA for a specific project. Applicants are then ranked by lottery preference. The developer must follow lottery order for leasing up all available units.
Some units are referral only. These units are not leased through DAHLIA. Instead, tenants are referred from certain programs or agencies. Examples include units set aside for people exiting homelessness and project-based voucher units.
After lease-up, the developer goes through the closeout process. MOHCD verifies funds were properly spent and affordability restrictions are in place. The developer submits final audits, cost certifications, evidence of insurance, and other documents.
Occupancy, monitoring and asset management
Every year, the developer has to submit reports with tenants' household incomes. MOHCD reviews and verifies these reports and their compliance with affordability restrictions. Developers who fail to comply face penalties including fines and legal action. MOHCD also works with developers to renew affordability restrictions as they expire.
If a tenant vacates a unit, the developer has to re-lease the unit through DAHLIA. If there is a waitlist, those applicants are offered the unit first. If there is no waitlist, the property manager will re-open applications.
MOHCD also conducts regular inspections of some affordable housing projects. These checks make sure homes are safe, well maintained, and meet housing quality standards.