Bay Area Senior Housing Pipeline Shows Divide Between Market-Rate And Affordable Projects

Developers are slowly adding new senior housing across the Bay Area, but the region’s pipeline is splitting in two: Market‑rate projects in affluent enclaves are moving ahead, while affordable senior housing, even at shovel‑ready sites, is grinding to a halt under San Francisco’s deepening gap‑funding backlog.

“We have a bunch of sites secured and designed that are just waiting for that gap financing to become available in the city,” Tenderloin Neighborhood Development Corp. Vice President of Real Estate Chris Cummings said during Bisnow’s Bay Area Senior Housing Summit on May 21 at Hyatt Centric Fisherman's Wharf.

“We are not even looking at new opportunities to land-bank or build new until we get over that hump.” 

The backlog of gap funding for entitled affordable housing projects in San Francisco exceeds $1B, according to San Francisco Planning.

The freeze stands in stark contrast to conditions for market‑rate operators like Calson Management, which has four Bay Area projects under construction and is leaning on tools like commercial property assessed clean energy financing to overcome high interest rates and construction costs. 

Layered on top are strict building requirements for assisted living and memory care facilities — often forcing expensive concrete construction on tight infill sites — a combination that is pushing new supply toward wealthier neighborhoods and leaving demand for affordable senior housing unmet.

TNDC announced in January that its plan to build 199 affordable senior apartment homes on the site of a Motel 6 at 1234 Great Highway in the outer Sunset District was on an extended hiatus due to its inability to secure federal and gap funding. TNDC plans to reapply for funding in 2027 to begin construction in 2028.

Funding for affordable senior housing in the city and Bay Area typically comes from equity generated by tax credits sold to private investors, soft funding from the state of California or federal government in the form of subsidized loans or grants, and funds from local municipalities completing the gap in the capital stack, Cummings said.

Demand for senior housing often exceeds supply. TNDC’s recently completed 98-unit senior housing project at 383 Sixth Ave. in the Inner Richmond neighborhood, which included 20 apartments dedicated to seniors without housing and another 20 for senior veterans, was fully leased within three months, Cummings said.

Senior housing developers that don’t rely on state or federal funding often have an easier path to bringing their projects online. Calson, whose portfolio spans 642 senior housing units across eight properties in California, has four buildings under construction in the Bay Area, Managing Partner Jason Reyes said.

“Right now, we have about 400 beds available in the Bay Area, and they're quickly being absorbed,” he said.

Private equity is largely on the sidelines when it comes to senior housing projects, and elevated interest rates coupled with high construction costs can cast a long shadow over the feasibility of senior housing projects, Reyes added. Financing requires creativity, and Calson turned to C-PACE financing to get one of its projects underway.

C-PACE financing provides developers with low-cost nonrecourse private capital with up to 30-year amortization that can offset the need to include more expensive mezzanine debt in the capital stack. Funding is tied to energy efficiency, which is common in nearly all new building systems in California, Reyes said.

“You end up with a reasonable loan amount at a decent interest rate that you can put behind a senior lender,” he said. “The tricky part is that because they're going in second position, and because it's the state-backed funding, they actually attach it to your property taxes.

“A lot of banks tend to choke on that, but for the right lenders with regional relationships, utilizing C-PACE is really important.”

Senior housing also has unique building constraints that limit supply, W.E. O’Neil Vice President Mike Smith said. W.E. O’Neil is developing multiple senior housing projects in the Bay Area, including The Whitford of Dublin in the East Bay, a 148-unit assisted living and memory care facility, for Harbert Management Corp. 

W.E. O’Neil has completed more than 2,300 units for Belmont Village Senior Living, which has senior housing properties in Albany, San Ramon, Sunnyvale, San Jose and Los Gatos, plus another project that is in preconstruction in San Rafael.

Buildings designated as assisted living or memory care facilities have to be constructed from fire-resistant materials, which limits development options.

“Most sites are infill and smaller, and that means you're building in concrete, which is expensive on anything under 10 stories,” Smith said. “That's why market-rate senior [housing] is what's making sense right now.”

There are challenges for top-of-the-market projects, too. High-end independent living projects often take years to bring online and require equity partners with a longer investment horizon, Belmont Village Senior Living President Mercedes Kerr said.

“A lot of what we do is in very high-barrier-to-entry markets, and that gestation period can be years,” Kerr said. “You need patient capital and math that’s going to support the carrying cost of a project that might take a long, long time to bring to market.”