San Mateo’s Hillsdale Garden will be below-market rate housing

Hillsdale Garden currently offers market-rate housing, however, concerns ranging from crime to overcrowding and inadequate management practices have plagued the complex for years. 

Converting residential developments from market-rate to affordable housing has become more commonplace over the years, said Yusef Freeman, partner at The Vistria Group, especially as more macroeconomic factors, such as high interest rates and inflation, affect housing production costs and stiffen lending conditions. 

“Right now, the principle tool for building new affordable units is through tax-exempt bonds and tax credits,” he said. “And because of [macroeconomic conditions] and also the finite amount of those resources and subsidies needed to go with the tax credits and bonds, this tool of using conventional investment partnerships to create new affordable housing is an important tool for communities to leverage throughout the country.”

Such a project is the group’s first of its kind in the Bay Area, although it recently finalized a similar agreement in San Diego County earlier this year, which comprised 151 affordable units. 

“Part of our thesis is investing in areas that have affordable housing challenges but also located in areas with strong schools, good jobs and places of opportunity,” Freeman said, adding that financing derives primarily from equity at The Vistria Group and their partners, as well as a Freddie Mac loan. San Mateo city staff confirmed they do not plan to provide financial assistance.

The units at Hillsdale Garden will target households earning up to 80% of the area’s median household income, which equates to about $125,000 for a two-person household in San Mateo. Freeman said the effort will be able to also support city workers, including police, firefighters and teachers. Current tenants will be able to stay in the complex. According to a press release, Pacific Housing will also offer resident services, such as after-school programs and skill-building classes. 

The effort could also help the city achieve its Regional Housing Needs Allocation, which is a state-mandated number of housing units every jurisdiction must plan for each eight-year cycle. Between 2023 and 2031, San Mateo must plan for 7,015 new housing units, 40% of which must be for low-income households, typically the most difficult to build. 

San Mateo County Supervisor Noelia Corzo said in the press release that the conversion to below-market-rate housing “will reduce displacement, improve existing housing conditions, and provide a range of social services for the residents of Hillsdale Gardens.”