A 22-story housing development that could bring more than 300 new homes — about a third of them affordable — to the Lower Nob Hill neighborhood in San Francisco’s northeast might now be just months away from breaking ground, after it received a key assist from the Board of Supervisors earlier this week.
Getting the project to this point was no small feat for its developer.
“Every day, we moan about how this is the most difficult project we’ve ever done in 35 years in business,” said Patrick McNerney of the project planned for 1101 and 1123 Sutter St., which is sponsored by Martin Building Company, his development firm.
San Francisco home builders have been facing a punishing market environment ever since the economic shocks of the COVID-19 pandemic drove up the cost of construction materials. The stubbornly high interest rates that followed haven’t helped either.
To make the project pencil out, McNerney had to get creative, cobbling together obscure funding sources and leveraging state housing laws that allow for larger developments. Even then, a last-minute regulatory snafu might have proven fatal for the project if city supervisors had not intervened with a one-time legislative fix.
Supervisor Danny Sauter — who represents District 3, which includes the proposed development site — led the push to save the project.
“I cannot emphasize enough how rare — especially in this climate — an opportunity in a project like this is,” Sauter recently said of the development.
According to Sauter, the 303 new homes that the project aims to create would represent the single largest source of new housing that his district has seen in the past three decades.
The planned high-rise would also include space for retail as well as a child care center. In addition, it would re-purpose as a garage a historic three-story auto-repair building first constructed in 1920.
When McNerney’s firm first won permits for the development in 2022, he had originally planned to build a structure that would house just 221 apartments. But he was able to scale up his ambitions two years later, after California expanded its density-bonus laws, which allow builders to construct larger projects in exchange for providing more affordable units with their developments.
The project also won a competitive award from the California Housing Finance Agency. The award offers tax credits and tax-exempt bond financing for affordable-housing projects, the sort of housing that is set aside for low-income residents and offers below-market rents.
