Housing Authority approves Sunnydale ground leases, project-based vouchers and streetlight power; HUD approval required

The Housing Authority of the City and County of San Francisco on Thursday approved a package of agreements to advance phase 1C of the Sunnydale HOPE SF redevelopment, authorizing ground leases for Blocks 7 and 9, project-based vouchers and a construction license to provide electrical power to new streetlights on West Access Road.

The items — described in staff materials as a series of ground leases, HUD use agreements, partial releases of prior HUD use covenants and ancillary lender documents — were presented by Claire Murphy, associate director of real estate development at Mercy Housing, a co-developer on the Sunnydale project. Murphy told commissioners the proposals would allow construction to start this summer on Building 7 (88 units, including 67 units set aside for Sunnydale legacy residents at 50% of San Francisco area median income) and Building 9 (94 units, including 71 legacy-resident set-aside units). Murphy said the blocks are “100% affordable” and reiterated the project’s commitment to one-for-one replacement of legacy units.

Why it matters: The approvals advance more than 180 affordable units in the Sunnydale redevelopment and clear a path for infrastructure work tied to the overall HOPE SF promise of replacing public housing units as sites are rebuilt. Staff and the developers said closings remain subject to final HUD approvals.

Commission members and staff emphasized the project is on the HOPE SF model of one-for-one unit replacement and that HUD must sign off on the recorded agreements before any transaction closes. Housing Authority CEO Tanya Letizhu noted the authority and partners are working with the mayor’s office of housing and community development on resident concerns raised earlier in public comment and confirmed the documents will be submitted to HUD for review. As Murphy said in the presentation, the work includes new community-serving space, recreation facilities and linear open space in addition to the housing units.

Votes and formal actions: The commission took roll-call votes on each item and approved them. The record shows unanimous ayes from the commissioners present. The actions approved include:

- Consent resolution approving project-based voucher (PBV) allocations for Sunnydale Block 7 (not to exceed 67 PBVs) and Block 9 (not to exceed 71 PBVs) and approval of an amendment to multiple legal services contracts to increase the collective cap by $1,200,000 to $2,700,000. (Vote: Commissioners Pikes—Aye; Kim—Aye; Lindo—Aye; President Torres—Aye.)

- Resolution approving execution of the Block 7 ground lease, HUD use agreements, partial releases and related lender documents to permit construction of 88 affordable rental units and one manager unit (subject to HUD approval). (Vote: Pikes—Aye; Kim—Aye; Lindo—Aye; Torres—Aye.)

- Resolution approving execution of the Block 9 ground lease, HUD use agreements, partial releases and related lender documents to permit construction of 94 affordable rental units and one manager unit (subject to HUD approval), and related easement and construction license agreements. (Vote: Pikes—Aye; Kim—Aye; Lindo—Aye; Torres—Aye.)

- Resolution authorizing a construction license agreement among the authority, SFHA Housing Corporation and Sunnydale Infrastructure LLC to provide use of authority property and electrical access for new streetlights on West Access Road. (Vote: Pikes—Aye; Kim—Aye; Lindo—Aye; Torres—Aye.)

Contract amendment: The consent agenda also included a separate resolution authorizing Amendment No. 1 to contract number 23-0001 (multiple law firms for legal services), increasing the collective contract amount by $1,200,000 to a total not to exceed $2,700,000; that consent package passed on roll call.

Context and next steps: Staff and Mercy Housing said HUD review and approvals remain required for several recorded documents (HUD use agreements and partial releases). Staff recommended approval at the meeting to maintain the project closing schedule and avoid backtracking the timeline. Claire Murphy said construction preparation, including infrastructure work that has already started, will allow groundbreaking on the buildings this summer if HUD and lender conditions are met.

During the discussion commissioners asked about income targeting and AMI levels; Mercy Housing cited 2024 AMI guidance and explained that a portion of the units are targeted to legacy Sunnydale households at 50% of the San Francisco AMI and the remainder at or below 80% AMI. CEO Letizhu and staff reiterated commitment to coordinating with the mayor’s office of housing and community development and property managers to respond to resident habitability and service concerns that surfaced in public comment.

Remaining caveats: Several documents are explicitly subject to HUD approval and the staff presentation and votes reflected that condition. The commission record and staff remarks repeatedly noted HUD sign-off is required before final closings and before PBV subsidy becomes effective.

Ending: The commission approved the Sunnydale package as presented and directed staff to continue coordination with HUD, developers and city partners to address outstanding resident concerns while advancing the project toward construction and lease-up.