The Financial Innovation Building California's Future Affordable Homes

NEW YORK, NY – July 14, 2026 – Safehold Inc. (NYSE: SAFE), a firm that has systematically redefined a centuries-old real estate practice, recently announced the closing of two ground leases that will pave the way for 570 new affordable housing units in California. The deals, located in Simi Valley and San Ysidro, represent more than just another transaction; they are a powerful demonstration of how financial innovation is becoming a critical tool in tackling one of the nation's most intractable social and economic challenges.

While the delivery of 570 homes is a welcome development, the true story lies in the underlying strategy. By partnering with leading affordable housing developer The Pacific Companies and securing tax credit equity from giants like U.S. Bank and Wells Fargo, Safehold is proving the strategic value of its modern ground lease model. This isn't just about building homes; it's about re-engineering the financial foundation of real estate development to make previously unviable projects possible, particularly in a state where the need is most acute.

A Crisis of Capital, A Solution in Structure

California's affordable housing crisis is a well-documented catastrophe of numbers. Only 22% of households can afford a median-priced home, and the state faces a staggering deficit of nearly one million rental homes for its lowest-income residents. Compounding the issue, a recent report identified nearly 40,000 affordable units statewide that are approved but stalled, stuck in a financial purgatory due to funding gaps.

This is the environment where Safehold's model moves from a niche financial product to a strategic imperative. The modern ground lease fundamentally alters a project's capital structure. Instead of purchasing the land—a massive upfront cost, especially in California—a developer like The Pacific Companies leases the land from Safehold for a long term, typically 99 years. This single change dramatically lowers the initial capital required to get a project off the ground.

By separating the ownership of the land from the ownership of the building, the ground lease acts as a highly efficient and patient layer of capital. It replaces more expensive equity or debt that would have been used for land acquisition, allowing developers to stretch their funding further. As Steve Wylder, Safehold's Head of Investments, noted, the company's strategy is clear: "We're positioning our capital as a tool to fill capital structure gaps and move projects forward."

This approach is particularly potent for projects utilizing the Low-Income Housing Tax Credit (LIHTC), the primary mechanism for financing affordable rental housing in the U.S. LIHTC projects involve a complex tapestry of funding sources, and the ground lease simplifies the equation, making the entire capital stack more efficient and resilient.

The Ecosystem of Innovation: Developers and Lenders Embrace a New Model

The growing adoption of the ground lease model is not happening in a vacuum. It is being driven by a powerful ecosystem of forward-thinking developers, financial institutions, and investors who recognize its potential to de-risk projects and accelerate development. The fact that The Pacific Companies, one of the most active affordable housing developers in the country, is a "repeat Safehold customer" is a powerful endorsement.

For developers, the benefits are clear. Reduced upfront equity requirements mean they can deploy their capital across more projects, increasing their overall capacity to build. The structure also mitigates land-price risk, a significant variable in volatile markets. This allows them to focus on their core competency: designing and constructing high-quality housing.

Equally significant is the participation of major financial institutions like U.S. Bank and Wells Fargo, which are providing the tax credit equity for these developments. Their involvement signals a growing confidence within the traditional financial sector that the modern ground lease creates a more secure and predictable investment. By stabilizing a project's financial foundation, the ground lease makes it a more attractive proposition for the tax credit investors who are essential to any LIHTC deal's success.

"We're excited to see the growing adoption of the ground lease structure amongst developers and their debt and equity sources," Wylder added, highlighting the expanding acceptance of this innovative approach. This collaborative framework—pairing Safehold's specialized capital with a developer's expertise and a bank's tax equity investment—creates a replicable and scalable model for progress.

From Financial Blueprint to Community Bedrock

The strategic importance of these deals becomes tangible when viewed through the lens of local need. In San Diego County, home to the San Ysidro project, nearly 130,000 low-income renter households lack access to an affordable home. Renters there need to earn nearly three times the local minimum wage to afford the average apartment. In Ventura County, where the Simi Valley project is located, local leaders are actively pursuing pro-housing policies to overcome similar affordability pressures.

Against this backdrop, the 570 units are not a mere drop in the bucket; they are a vital lifeline for hundreds of families, seniors, and essential workers. The financial structure enabling their construction has profound long-term implications for community stability. LIHTC projects come with mandatory affordability periods, often lasting 30 years or more. The ground lease complements this by establishing a predictable, long-term land cost, shielding the project from the market volatility that could otherwise threaten its ability to remain affordable.

This long-term cost certainty is a cornerstone of sustainable affordable housing, ensuring that these communities remain accessible for generations. By providing stable homes, these developments anchor residents in their communities, allowing them to build better financial futures and contribute to the local economy.

The Strategic Shift in Real Estate Capital

Since its creation of the modern ground lease industry in 2017, Safehold has been at the forefront of a quiet revolution in real estate finance. The company's success in the affordable housing sector is a testament to the model's versatility and power. What began as a tool for owners of high-quality commercial properties to unlock value is now proving to be an essential instrument for achieving critical social goals.

In a market defined by high interest rates, soaring construction costs, and persistent funding gaps, the ability to introduce a more efficient form of capital is a significant competitive advantage. Safehold has effectively created a new asset class for investors seeking safe, growing income while simultaneously providing a unique solution for developers struggling to make projects viable.

As Safehold continues to deepen its partnerships and expand its footprint in California—having now closed more than 25 ground leases on LIHTC developments across the state—it is writing a new playbook for public-private partnership. The company's focused strategy demonstrates that innovative financial engineering, when applied with purpose, can be a powerful force for both shareholder value and societal good, building a more resilient and equitable future one project at a time.