Budget and Finance Committee - 2026-01-07
Meeting Intelligence Preview
Meeting Summary
The Budget and Finance Committee approved multiple housing and behavioral health projects, including a $15.3M operating subsidy for 32 supportive housing units for transitional age youth at 78 Haight Street, $44.3M in city loans for a 94-unit senior affordable housing project at 967 Mission Street, and $27.6M in state Proposition 1 funding for behavioral health facility improvements at 887 Potrero Avenue (50 new locked mental health beds) and 333 7th Street (16-bed dual diagnosis treatment program). The committee also approved rent reductions for 25 food and beverage tenants at SFO airport valued at $1.84M.
Key Decisions (14)
SFO Food and Beverage Rent Reduction Program
Approved lease amendments to lower minimum annual guarantees for 18 of 69 food and beverage leases, lower percentage rent for 7 pre-security leases, and alter MAG adjustment methodology for most F&B leases. Relief valued at approximately $1,840,000 with $276,000 general fund impact.
DOE Heat Pump Water Heater Prize - Phase 1
Retroactively authorized Environment Department to accept $400,000 prize from US Department of Energy to develop pilot program upgrading up to 200 homes with electric heat pump water heaters. Prize received 12/12/2023.
DOE Heat Pump Water Heater Prize - Phase 2
Retroactively authorized Environment Department to accept $400,000 prize from US Department of Energy to implement pilot upgrading 20 homes. Prize received 03/17/2025.
HSA Grant from Anthem Blue Cross - HHIP
Authorized Human Services Agency to accept $268,000 grant from Blue Cross of California Partnership Plan for Housing and Homelessness Incentive Program, period 04/01/2026 through 03/31/2030, funding senior eligibility worker position.
HSA Grant from SF Health Plan - HHIP
Authorized Human Services Agency to accept approximately $1,072,000 grant from San Francisco Health Plan for Housing and Homelessness Incentive Program, period 04/01/2026 through 03/31/2030, funding program specialist position.
78 Haight Street Operating Subsidy
Approved $15.3M grant agreement with RSU Associates LP for 20-year operating subsidies for 32 supportive housing units for formerly homeless transitional age youth at 78 Haight Street/120 Octavia Street. Includes $10.5M from Local Operating Subsidy Program (general fund) and $4.7M from No Place Like Home state funds.
967 Mission Tax-Exempt Bond Issuance
Authorized issuance of tax-exempt bonds not exceeding $41,750,000 ($21.75M + $20M notes) to finance construction of 94-unit senior affordable housing project at 967 Mission Street.
967 Mission Ground Lease and City Loan
Approved 75-year ground lease at $15,000 annual base rent and $44.3M city loan (57-year minimum term) to 967 Mission LP (John Stewart Company/Bayview Hunters Point Multipurpose Senior Services) for 94-unit senior affordable housing. City funding of $465,000 per unit, nearly double typical amount due to loss of state funding.
967 Mission Senior Operating Subsidy
Approved $10.5M grant agreement for 15-year operating subsidies for 40 units at 967 Mission - 20 units at 15% AMI and 20 units at 25% AMI for seniors.
ZSFG Foundation Grant - ZPCQI Round 3
Authorized Department of Public Health to accept $6,755,486 grant from SF General Hospital Foundation for period 01/01/2026 through 06/30/2029 to support Kaizen Promotion Office, EPIC optimization, and lean methodology staff training.
DPH Disease Intervention Specialist Grant
Retroactively authorized DPH to accept approximately $1,100,000 from California Department of Health for HIV, STI, hepatitis C, and mpox disease investigation workforce development, period 07/01/2025 through 06/30/2026. Award letter received 10/28/2025 after predetermined start date.
A&A Health Services Board and Care Contract Extension
Approved 3-year extension of contract with A&A Health Services Inc for rehabilitative board and care residential services, increasing amount by $22.7M for total not-to-exceed of $32.6M through 06/30/2029. Covers 71 beds: 46 at Victoria's House (San Francisco) and up to 25 at San Pablo facility.
887 Potrero Behavioral Health Center - Prop 1 Bond BCHIP Grant
Retroactively authorized DPH to accept $21.3M from California DHCS Proposition 1 Bond BCHIP funding for capital improvements at 887 Potrero Avenue Behavioral Health Center to add 50 new locked sub-acute mental health beds for conservatorship patients. Grant period 05/06/2025 through 06/30/2030.
333 7th Street Dual Diagnosis Treatment Facility - Prop 1 Bond BCHIP Grant
Retroactively authorized DPH to accept $6.3M from California DHCS Proposition 1 Bond BCHIP funding for capital improvements at 333 7th Street for 16-bed residential dual diagnosis treatment program (social rehab facility). Former Joe Ruffin Place site acquired October 2024. Opening expected November/December 2026.
Development Activity (4)
78 Haight Street / 120 Octavia Street
64-unit affordable housing development on former central freeway parcel. 32 units for transitional age youth experiencing/at risk of homelessness with Larkin Street Services support, 31 studios for adult households, 1 three-bedroom childcare unit. Construction completed September 2025, 60 of 64 units leased.
967 Mission Senior Housing
94-unit senior affordable housing: 24 units for formerly homeless seniors with LOSP subsidies, 5 units for HIV+ households at 30% AMI, 40 units with SOS subsidies (20 at 15% AMI, 20 at 25% AMI), 25 units at 50% AMI unsubsidized. Total development budget $79M with $44.3M city funding ($465,000/unit). Construction February 2026 to December 2027, full occupancy April 2028.
887 Potrero Behavioral Health Center Conversion
Capital improvements to add 50 new locked sub-acute mental health beds for conservatorship patients on 2nd floor. Includes renovated staff/patient spaces on 2nd and 3rd floors, replacement of elevators, HVAC, fire alarms. Related projects: 624 Laguna Street for relocated BHC clients, additional Laguna Street property for 40 net new assisted living beds.
333 7th Street Dual Diagnosis Treatment Program
16-bed residential dual diagnosis treatment program (social rehab facility) with 24/7 staffing. Former Joe Ruffin Place operated by Baker Places for 20+ years before closing 2021. Capital improvements include new roof, mechanical upgrades, new elevator for full ADA accessibility. City acquired property October 2024.
Market Signals (6)
Housing Demand
State funding for affordable housing in 'low-resource areas' has become increasingly difficult to obtain, forcing cities to backfill with local funds - 967 Mission lost state MHP and ASEC funding due to being in a low-income area.
Housing Demand
Tax credit equity pricing has declined significantly - 967 Mission received only 86 cents on the dollar (compared to historical norms), and 2970 16th Street came in at 80%, increasing city subsidy requirements.
Sentiment
Nonprofit affordable housing operators face financial stress - TNDC announced plans to sell some buildings, raising questions about long-term financial capacity of nonprofit housing portfolio.
Housing Demand
City per-unit affordable housing costs reaching record levels - 967 Mission requires $465,000 per unit in city funding, nearly double the typical $250,000-$300,000 range.
Commercial Demand
SFO airport food and beverage tenants struggling financially - 18 of 69 leases have minimum annual guarantees at 15% of gross revenues versus 10% average, requiring rent relief program.
Sentiment
Geographic equity concerns persist in SOMA/District 6 regarding concentration of behavioral health and homeless services facilities, though treatment facilities are exempt from new restrictions.