Bay Area housing to get $1 billion investment from union pension fund as financing dries up – San Francisco Chronicle

A union pension fund is set to inject $1 billion into Bay Area housing construction, an initiative the group says will help finance more than 4,000 new residential units by 2025.

The AFL-CIO Housing Investment Trust, one of the nations largest pension investment programs focused on housing, said that the investment would result in 4,000 union construction jobs and 12,000 jobs altogether.

The Bay Area initiative will invest $500 million in a broad spectrum of housing types, including market-rate apartments, middle-income workforce housing and affordable units. The trust said the $500 million would allow it to leverage another $500 million from local unions, investors, low-income tax credit investors and other partners.

The investment comes as financing for housing has become more difficult to find. With dropping rents, spiking vacancies and uncertainty about what the regions housing market will look like in the wake of the pandemic, new housing projects are likely to be delayed, contractors and developers say.

While the coronavirus pandemic has led to significant declines in Bay Area rents one-bedrooms are down as much as 14% year over year, according to Zumper the $3,000 a month average price tag is still unaffordable for a broad segment of the population, the group said.

Too many people in the Bay Area are being laid off and too many still cannot afford decent housing, said Chang Suh, the HITs chief executive officer and co-chief portfolio manager.

The AFL-CIO announcement comes after a two-year stretch during which several major tech companies announced plans to invest in housing. Apple pledged $2.5 billion for affordable housing, while both Facebook and Google pledged $1 billion.

Suh said that the pandemic is leading to rising unemployment among local construction workers, service industry workers and public sector employees, who will struggle to afford rent or mortgage payments.

Since 1984, the trust has invested $396.1 million in 19 projects throughout the Bay Area. The investments helped create more than 3,200 housing units and 4,500 construction jobs.

The union pension fund backed some of the earliest developments coming out of the great recession, including investing $33 million into Potrero Launch, a 196-unit Dogpatch development, and $32 million into the Arc Light project at 178 Townsend St., both in San Francisco and developed by the Martin Building Group.

In addition to those two projects, the AFL-CIO trust invested $70 million into Rincon Green, Emerald Funds 308-unit apartment complex on Harrison Street in the South of Market.

Emerald Fund Chairman Oz Erickson said that project would not have been possible without the union pension funds investment, which provided two-thirds of the financing.

Their participation was essential, he said.

The pandemic-induced recession and plummeting rents in San Francisco, along with increased city fees and rules around affordable housing requirements will make it nearly impossible to finance housing construction, Erickson said.

I dont think there will be much built in the next two years, he said, adding that the $1 billion initiative will be very much appreciated as the market starts to rebound.

For developers looking to raise money for new projects, the capital markets remain stalled, said Todd David, executive director of the San Francisco Housing Action Coalition. The markets have been dislocated since March and the lending markets have not improved at all, he said.

Tim Paulson, secretary-treasurer of the San Francisco Building & Construction Trades Council, said that union pension funds have a history of coming through when other capital financing dries up.

Our pension funds like to invest in real jobs and real housing investment not just Wall Street dividends and bottom-line profits, said Paulson. Jobs and housing that is kind of the one-two punch of what we all care about right now.

Ted Chandler, managing director of the trust, said the investment in Bay Area housing would both produce competitive returns for our pension fund beneficiaries as well as help many thousands in this time of need.

The lesson here is that smart capital is the lifeblood of housing and community development, Suh said.

J.K. Dineen is a San Francisco Chronicle staff writer. Email: jdineen@sfchronicle.com Twitter: @sfjkdineen

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Bay Area housing to get $1 billion investment from union pension fund as financing dries up - San Francisco Chronicle