DM Development Opts for Affordable Housing in San Francisco

DM Development is trading market-rate condos for affordable apartments at a development in Potrero Hill.

The San Francisco-based developer started construction on a 425-unit affordable housing project at 300 De Haro Street after abandoning plans for a market-rate version amid soaring costs and frozen financing, the San Francisco Chronicle reported.

The effort is DM Development’s first affordable housing project. To make it happen, DM founder Mark MacDonald spent a year and a half trying to secure funding via low-income housing tax credits and tax-exempt bond financing from the California Debt Limit Allocation Committee and the California Tax Credit Allocation Committee.

“We had heard about the complexity of LIHTC, but we didn’t have a full appreciation until we went through it,” MacDonald told the outlet.

The development will include 425 studio and junior one-bedroom units. It will welcome residents earning between 30 and 70 percent of the area median income, or between $32,750 and $76,350 annually for one person. At 11 stories, it will rise taller than surrounding buildings, annoying some neighbors.

The units will be compact, spanning 300 to 400 square feet, and save space by providing Murphy beds that convert from a sofa and dining table to a queen-size bed. Residents will have access to community lounges, a fitness center, a 7,000-square-foot landscaped backyard and a shared kitchen that opens onto a rooftop deck. It will also have about 6,000 square feet of ground-floor retail space along 16th and De Haro streets.

DM kept costs down by designing efficient floor plans and harnessing the developer’s relationships with subcontractors. As a result, it will cost less than $500,000 per unit to build — about 40 percent cheaper than similar projects.

With market-rate apartment construction becoming less financially feasible in San Francisco, DM is turning its focus to affordable housing for the time being. It’s even open to changing its plans for other market-rate sites under its control to take advantage of LIHTC benefits.

“We are not giving up on market-rate, but for the near term this is our strategy,” he said. “This is not just a one-time thing we are doing because of market conditions. It just so happens that the market-rate stuff is on hold, so we saw this as an opportunity to start this business.”

The complex is slated to open in 2027.

— Chris Malone Méndez