Enrique Landa, managing partner at Associate Capital, is optimistic about the launch of a new 105-unit apartment building in the Potrero Power Station area, aimed specifically at teachers, nurses, and tradespeople who are essential to San Francisco’s community.
As housing development in the city faces significant challenges, very few projects are moving forward without public subsidies for low-income housing or no rent caps for market-rate properties.
Many potential residents struggle to find housing that fits within the critical ‘missing middle’ category.
“People just assume it doesn’t exist,” said Landa. “And if it does, they assume they don’t qualify.”
In San Francisco, middle-income housing is designed for households earning between 50% and 110% of the area’s median income, which in the city falls within low six-figure salaries.
As a result, many residents frequently find themselves spending more than half of their income on housing costs.
Faced with the daunting environment for real estate development, Landa and his team undertook an extensive marketing initiative recently to reshape public perceptions of housing options for middle-class individuals in San Francisco and encourage leasing in the newly constructed building.
Rather than relying solely on traditional marketing methods, Associate Capital initiated direct outreach to local employers, emphasizing the question: “Need housing and make less than $185K?”
In a bold move, Landa even rented a spotlight to project an image of a house on the building’s rooftop deck ahead of the ribbon-cutting ceremony, a tactic that, while somewhat whimsical, has yielded results; each unit now boasts approximately eight applicants.
In contrast, new market-rate units typically see just one or two applicants per unit, whereas low-income affordable units often attract over 50 applications.
To determine residents for the Sophie Maxwell building, named after former District 10 county supervisor Sophie Maxwell, a random lottery will be held later this month.
The building is the first new structure in the expansive redevelopment of the former Potrero Power Station, which is expected to transform into a mixed-use community over the coming decades.
After acquiring its portions from NRG Energy in 2016, Associate Capital faced hurdles in getting the project approved by city planners, with the COVID-19 pandemic subsequently disrupting construction plans and dampening investor enthusiasm for new apartment buildings, offices, and hotels.
Landa expressed the frustration of watching valuable opportunities slip away: “We worked our entire lives to get this project entitled. Then entire asset classes just — poof — disappeared.”
To address the inactivity threatening their project, Landa’s team explored unconventional funding methods when financing for construction was limited.
In 2022, they discovered a bond-recycling program from the California Housing Finance Agency, which allowed developers to reissue tax-exempt bonds from previous projects to generate cash for new affordable housing initiatives.
To comply with the program’s requirements, Associate Capital invested 18 months collaborating with five banks and three law firms to ensure that the Sophie Maxwell building would meet necessary affordability and timing mandates.
In 2024, an Enhanced Infrastructure Financing District (EIFD) was established under the leadership of then-Mayor London Breed and the Board of Supervisors, enabling the firm to capture additional property tax revenue from the development for infrastructure improvements such as roads, utilities, and public amenities.
These financial incentives ultimately reduced the company’s borrowing costs for the project.
Landa emphasized the importance of maximizing design efficiencies to keep the project profitable, noting that the standard cost for constructing a new housing unit in San Francisco hovers around $1 million.
At Sophie Maxwell, the team managed to cut this cost down to $670,000.
“The affordable housing economy doesn’t necessarily reward developers for spending less,” Landa pointed out. “Our team went back to first principles on everything and treated it as an exercise.”
In addition to the thoughtfully designed living spaces, the building features several amenities including a 3,000-square-foot rooftop deck with sweeping views of the city skyline and a co-working area that contributes a market-rate feel to the project.
The lobby showcases two large art installations that pay tribute to Maxwell’s distinctive necklace designs, a nod to her efforts in decommissioning the gas-powered plant in 2011, which set the stage for its redevelopment.
While the surrounding area reflects the remnants of San Francisco’s industrial history, it remains a developing project with ongoing work to realize its potential.
“We don’t have to preserve this history,” Landa stated. “How lucky are we that we get to?”
Currently, the Power Station site is still disconnected from nearby vibrant communities such as Dogpatch and Mission Bay, which have flourished into mixed-use neighborhoods over the past decade.
Just up the road, Brookfield’s Pier 70 redevelopment incorporates local businesses like Standard Deviant brewery, Breadbelly Bakery, and Bay Padel Club, yet it still embodies the concept of a neighborhood rather than a fully realized community.
The completion of the Sophie Maxwell building is anticipated to kick-start momentum for further developments, as Associate Capital plans to transition into constructing a 300-unit market-rate apartment complex and a waterfront park next to an old power plant with a prominent 300-foot smokestack.
Additionally, UCSF is working on its own cancer treatment center next door, adding to the area’s renewal.
By successfully completing this workforce housing project in such a challenging market, Landa hopes to reignite investor interest in similar housing initiatives.
Despite feeling like a novel concept today, Landa points out that it wasn’t long ago when companies such as Metropolitan Life Insurance Co. developed extensive middle-income homes in locations like Parkchester in New York and Parkmerced in San Francisco.
“Our country used to do stuff like this,” Landa reminisced. “Now, it’s about educating capital as to what is possible, because the demand is clearly there.”
image source from：sfstandard
