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Affordable housing developers use 99-year ground leases to fill LIHTC gaps
Safehold-backed deals for two 2028 delivery projects include fixed 2% annual rent increases and rely on 4% Low-Income Housing Tax Credits instead of buying land outright.
Affordable housing developers are increasingly turning to 99-year ground leases to address financing gaps in 4% Low-Income Housing Tax Credit projects, according to HousingWire.
Safehold-backed deals underway in high-cost markets include a 99-year lease in Santa Cruz County for The Pacific Companies, covering a 256-unit project targeting 2028 delivery. A similar Safehold lease was also recently closed by The NRP Group for a 336-unit development in northeast Austin, also targeting 2028 completion.
The leases help developers avoid purchasing land while using institutional capital positioned as “gap filler” for LIHTC projects, as high construction costs and elevated interest rates keep funding gaps persistent. In the described Santa Cruz and Austin deals, the rent structure includes a fixed 2% annual increase.
HousingWire also notes that California housing reforms and approvals have moved faster, including changes intended to streamline permitting and shorten environmental reviews, but land affordability has remained a challenge in coastal markets like Santa Cruz. The article contrasts that limited impact with the continuing role of ground leases to bridge site and financing constraints in both California and Texas.