Health Commission endorses draft term sheet for Mercy Housing senior project at Laguna Honda campus

The San Francisco Health Commission voted to endorse a draft nonbinding term sheet that outlines the principal terms for a proposed senior housing development on the Laguna Honda Hospital campus and authorized the Mayor's Office of Housing and Community Development (MOHCD) and Mercy Housing California to pursue planning entitlements.

Why it matters: The project, proposed in two phases, is intended to add affordable senior housing and supportive services near Laguna Honda while reserving part of the development for referrals of Laguna Honda residents who can live in a community setting. The term sheet is a prerequisite for financing applications and planning entitlements; it does not itself bind the city to construction or implementation.

Key points of the term sheet: Anne Romero, senior project manager at MOHCD, told the commission the draft concept envisions two phases. Phase 1 would include approximately 131 one-bedroom units and an early childhood education center; Phase 2 would include roughly 90 studio units, one two-bedroom staff unit and an adult day health center. The target resident age is 62 and older, though MOHCD said it will explore whether an age 55+ threshold would unlock financing opportunities. The term sheet proposes typical affordable housing financing sources including the $50,000,000 Prop A bond allocation for Laguna Honda, low-income housing tax credits, state tax-exempt bonds and a proposed local senior operating subsidy that could cover up to 40% of units in each phase.

Ground-lease and ownership: MOHCD would serve as the ground lessor under a standard 75-year ground lease with base rent of $15,000 per year; Mercy Housing would form a limited partnership (required for tax-credit financing) to own improvements and serve as property manager and service-provider.

Commission and public concerns: Commissioners and public commenters raised questions and conditions the commission asked staff and partners to address as the project moves forward: final determination of age and financial eligibility; how many units (if any) would be set aside for referrals from Laguna Honda; accessibility and transportation for seniors living on the site; potential impacts of federal policy changes and tariffs on financing and construction costs; the relationship between a proposed child-care center on campus and the adult day health center; unit size and suitability for assistive devices; and neighborhood visibility and design impacts. Director Tsai and MOHCD staff said many of those issues will be refined during entitlement and financing stages and that monthly updates to the Laguna Honda Joint Conference Committee are requested in the resolution.

Vote and next steps: The commissionendorsed the draft term sheet and directed DPH staff to continue working with MOHCD and Mercy Housing to develop project details, and to allow Mercy Housing to submit entitlement applications to the Planning Department and Department of Public Works. The resolution makes clear endorsement is not a final approval of implementation and does not foreclose alternatives, mitigation measures or a decision not to proceed.

Public testimony: Neighbors and service providers broadly supported moving the project forward to entitlements so the city can pursue state funding cycles, while others warned the site(steep campus topography and limited nearby retail/transportation) and unit sizes may not best serve the frailest seniors. Stepping Stone Health urged inclusion of adult day health and integrated services; other commenters urged quicker movement through entitlements to access state capital funds.

Ending: MOHCD and Mercy Housing will proceed with entitlement submissions while DPH, the Laguna Honda JCC and the full Health Commission continue monthly briefings on project design, eligibility, and potential mitigations.