How Renters Foot the Bill While Investors Cash In Big Time!
Welcome to Serenity at Larkspur, where luxury meets stunning views atop the picturesque hills of Marin County! Here, residents bask in spectacular sights of the San Francisco Bay and majestic Mount Tamalpais. But it’s not just the scenery that dazzles—this upscale apartment complex boasts a plethora of amenities, including not one but two sparkling pools, a tennis court for the active lifestyle, and even a sophisticated wine tasting room. Just across the street, the high-end Marin Country Mart awaits with designer shops like Goop and Design Within Reach, catering to those with a taste for the finer things in life.
However, don’t let the glamour fool you—the cost of living here is anything but trivial. A one-bedroom unit will set you back a cool $3,004 a month—a hefty price tag that’s consistent with the current market rates.
But wait! Serenity at Larkspur was meant to be more than just another market-rate apartment complex. Back in 2019, it was acquired by Catalyst Housing, a developer that secured a tax break from the city of Larkspur with a promise to provide what they proudly termed as “affordable housing.” Their aim? To set rents at levels that low- and moderate-income renters could actually afford.
This ambitious deal was brokered with the help of an obscure government agency, created in partnership with Catalyst itself—meet the California Community Housing Agency (CalCHA). Through this innovative agency, tax-exempt municipal bonds were issued to finance a staggering $226.5 million purchase. In exchange for a sweet property tax exemption—which amounts to about $2.4 million annually—Catalyst agreed to transform these luxury apartments into what they call “essential housing,” capping rents to be affordable for those earning 80% to 120% of the area’s median income (around $109,680 to $164,520 for a single person).
Since the inception of this program, private developers like Catalyst have leveraged CalCHA’s bond-issuing prowess to snatch up 13 luxury properties across the Bay Area and even more in Southern California. Cities from Berkeley to Antioch eagerly jumped on board, collectively giving up a whopping $21 million in annual property taxes for what was touted as a noble cause.
But here’s the catch: the supposed rental discounts have been either minimal or completely absent. A thorough analysis revealed that nearly half of the CalCHA “essential housing” units in the Bay Area actually charge more per square foot than their market-rate counterparts. “This program does very little to make housing more affordable for middle-income households,” states a leading affordable housing advocate, “and in some cases, it’s costing them more in rent than comparable market-rate housing.”
While developers like Catalyst have reaped significant financial rewards from these arrangements—collecting a staggering $25 million in upfront fees and an estimated $48 million in fees for bankers and lawyers—critics are sounding the alarm. “This looks to me like a public to private sector wealth transfer,” said a municipal finance analyst. “Governments gave up property taxes for an important public purpose, but the bulk of the benefits seem to be flowing to the private sector.”
A New Housing Model
As California’s housing costs increasingly strain the pocketbooks of all but the wealthiest, there’s a growing concern among policymakers regarding the rising rents that middle-income households face—those who don’t qualify for traditional affordable housing subsidies.
Enter Jordan Moss, the visionary founder of Catalyst, who noted a pressing need for a solution. “There’s a whole host of people in California who earn too much to qualify for traditional affordable housing but not enough to afford homes in the communities they serve,” he explained.
In pursuing his vision, Moss steered away from conventional approaches that rely on competitive public subsidies and tax credits—methods he deemed “not scalable.” Instead, he tapped into a financing tool that has long been used by counties and school districts: municipal bonds. This innovative approach allowed jurisdictions to band together and create joint powers authorities, or JPAs, which could issue bonds on behalf of private entities or nonprofits for projects intended to serve a public good.
With CalCHA established, Moss and his team set out to issue bonds without needing to contribute their own capital upfront—something typically required in real estate acquisitions. This meant that CalCHA could fund not just the purchase price of the properties but also additional reserves and fees, leading to massive profits for Catalyst and its associates.
For the Serenity deal alone, Catalyst pocketed an impressive $2.2 million upfront fee along with annual administrative fees, while the associated legal and banking teams took home another bundle of cash. In total, tens of millions in fees were generated from these transactions, much of which is exempt from state and federal income taxes—a sweet deal for high earners in California.
But as these projects unfold, questions linger: what has the “essential housing” program really achieved? Catalyst claims that renters in these units enjoy an average discount of 23% compared to current market rents. Yet, independent analyses suggest that many units actually rent for higher prices than their market-rate counterparts, particularly at the upper income tier. Despite claims of affordability, many residents express frustration over the true costs of living in these so-called affordable units.
Affordable for Whom?
At Serenity and other Catalyst-managed properties, residents are often confused about the affordability of their living situations. Take Angelica Cardenas, a 38-year-old preschool director who moved into Creekwood, another luxury complex, noting that over half of her take-home pay goes to rent. “I don’t feel like it’s affordable,” she lamented, as she prepared to move back in with family, hoping to save for a down payment on a home.
Victor Khan, a 34-year-old IT professional, enjoys the amenities of his apartment but also finds himself questioning the financial relief he was promised. “Friends in San Francisco are paying the same rates I am,” he remarked.
Some residents at Serenity benefit from added discounts, courtesy of a nonprofit fund established by Moss himself, aimed at helping teachers with their moving costs. However, many only secured leases due to major concessions that temporarily reduced their rent below restricted rates. Edgar Leyva, for instance, received a substantial first-year credit, but worries about facing a rent hike when the promotional period ends. “There aren’t many options in Larkspur,” he said, frustrated by the prospect of his rent rising again.
As the financial landscape shifts, Serenity and other CalCHA properties face increasing challenges. Some projects are already in financial distress, jeopardizing their affordability as rent income struggles to match rising debt obligations. Interestingly, negotiations are underway to restructure Serenity’s debt, potentially leading to higher rents and the leasing of units to higher-income tenants.
In this complex web of financial schemes and housing promises, the question remains: who truly benefits from these so-called affordable housing initiatives? As Catalyst continues to wave the banner of affordable living, residents and analysts alike are left to wonder if real change is on the horizon—or if it’s merely another layer of marketing spin in a housing crisis that shows no signs of abating.
How We Did This Analysis:
Our analysis compared actual restricted rents for income-qualifying households to current market rents at similar properties. We reviewed publicly available appraisals and conducted a search for comparable units online to assess average rental rates.
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