Those who oversee the development of Treasure Island are already eyeing the proposed November affordable housing bond to help close a funding gap blamed on rising construction costs.
Treasure Island officials revealed this week that they are short $170 million for five planned affordable housing projects on the man-made island, which is undergoing a massive redevelopment.
They are pursuing a number of options to try and close the gap, among them seeking some share of the planned $500 million affordable housing bond Mayor London Breed is working to place on the November ballot.
The update on the projects came during Tuesday’s Treasure Island Development Authority’s Infrastructure and Transportation Committee hearing.
“I am really concerned,” said committee member V. Fei Tsen. “The only reason why we are doing the development on Treasure Island and allowing the market rate housing to be built is so that we can build more affordable housing.”
She added that with construction costs rising 15 to 20 percent annually the funding gap is “going to grow considerably.”
Natalie Bonnewit, an affordable housing development consultant for the Treasure Island Development Authority, told the committee that there is a “a significant programmatic funding gap to fund the affordable housing.”
The gap is blamed on rising construction costs. Bonnewit said that back in 2011 when the development agreement was approved the construction cost was about $220 per square foot and that has more than doubled to $470 per square feet. Construction for a unit of housing, she said, is “is generally averaging about $750,000.”
“Costs are going crazy,” Bonnewit told the committee. “Even though Treasure Island has resources it’s still not enough.”
The projects draw funding from various sources.
Of these first five affordable housing projects that are part of the redevelopment, the first one slated to begin construction early next year appears fully funded but is awaiting final approval of state funding. With that approval, the project will move forward as planned.
The Swords to Plowshares and Chinatown Community Development Corporation project will include 105 units for the homeless and low-income veterans.
Helping the project become a reality is the fact that it will use modular construction to reduce costs and was awarded a $10 million grant in November by the state’s Veterans Housing and Homelessness Prevention.
But there is an estimated funding gap of $40 million for 135 units by developer Catholic Charities and Mercy Housing. Officials are hoping to secure funding to start construction in the second quarter of 2021.
A 112-unit development by Community Housing Partnership for formerly homeless families has an estimated funding gap of $27 million. Construction is slated for 2023.
The fourth slated development of 160 units has a funding gap of $64 million and an 85 unit project a gap of $39 million.
These projects are required to house existing residents on the island who were living there before the development agreement was finalized and are the agency’s “replacement unit obligation,” totaling nearly 600 units.
Agency officials also said there are two island parcels where up to 200 affordable housing units could get built, but this project has a gap of $81 million.
Treasure Island Director Robert Beck said that “anything that we can do bring more resources, new resources to the table we have to pursue with full commitment.”
He noted that the funding gap doesn’t assume revenue that could be collected from the project, such as tax increment financing and market rate development fees.
But it wasn’t made clear at the hearing how much project revenues could draw down the funding gap or when.
Committee member Sharon Lai called the funding gaps “concerning.”
She said while the first project appears in good standing “the rest of the projects are pretty uncertain at this point.” She called for follow up conversations and a more exact calculation on how project revenues might help draw down the gaps.
Committee member Linda Richardson emphasized the importance of backing the planned November bond.
“We can go and start begging for Treasure Island to have something in there,” Richardson said.