Head of Investments Steve Wylder recently sat down with Bisnow’s Studio B to discuss the adoption of ground leases in the affordable housing sector and recent expansion to Texas.
To keep up with housing demand and bridge its affordability gap, the U.S. needs an estimated 7.2M affordable housing units. But financing these projects remains difficult.
Affordable developments often face costly — and lengthy — regulatory hurdles, steep land and construction costs, and rigid lending requirements. Safehold, the creator and pioneer of the modern ground lease, is making strides in its mission to solve this gap, said Steve Wylder, Safehold executive vice president and head of investments.
“There’s significant unmet demand, particularly in higher-cost markets where [housing] is greatly undersupplied,” Wylder said. “With elevated development costs and interest rates, the affordable housing market requires some creativity to get new developments out of the ground.”
With a traditional ground lease, a developer leases unimproved land from the owner and then builds out and maintains the property.
A big drawback is the potential for steep, and unpredictable, rent increases. This creates great uncertainty among developers, lenders and tenants alike.
Safehold, however, has modernized this structure to bring more transparency to a developer’s capital stack, Wylder said. And for those looking for a creative and efficient way to bridge capital structure gaps in the affordable housing sector, it’s a timely solution, he said.
Safehold’s ground lease has been designed as a 99-year lease term with fixed 2% annual increases — with proceeds at a premium to the underlying land cost and a cost of capital well below conventional debt. This injection of low-cost ground lease capital can greatly improve deal feasibility, helping to bridge gaps and drive a lower-blended cost of capital, Wylder said.
“By folding in our ground lease capital, developers can typically drive a 10% to 20% increase in permanent period proceeds at a lower cost of capital,” Wylder said. “That’s a critical gap to fill on many of these projects and also allows for governments to stretch the impact of their subsidies and other capital sources. It’s an innovative new tool that can be very useful in helping to get affordable projects out of the ground.”
Over the past nine years, the firm has funded more than $7B of ground lease capital, accounting for approximately 160 deals. While it works across a range of asset classes, including office and multifamily, the affordable housing sector has been a focal point of its work in recent years. It has completed more than 20 low-income housing tax credit, or LIHTC, deals in California and, most recently, in Texas.
In March, Safehold closed on a 348-unit LIHTC development in Austin slated for delivery in 2028. The project will be developed by NRP Group, one of the nation’s largest affordable housing developers, Wylder said.
“We’re really pleased to close our first transaction in Texas,” he said. “It’s an important market for us, and we intend to continue building our presence there. We’re in the process of expanding into additional states, and we expect our ground lease structure to become much more commonplace throughout the U.S.”
Now that the firm has completed numerous LIHTC transactions, Wylder said feedback from its clients has been positive. However, Safehold continues to look for new ways to adjust its ground lease construct as well as the economics behind it to address the needs and concerns of the investor community.
“We’ve molded our ground lease structure based on input that we’re receiving from investors and lenders,” he said. “With a great deal of experience in the market-rate world, we’ve continued to implement changes around the margins that will help this structure to be more widely adopted within the affordable ecosystem.”
Since Safehold’s affordable ground lease structure is a new tool, the firm is spreading awareness in the industry, particularly among tax credit investors, construction lenders and permanent lenders.
“It’s great to see that our efforts are making a difference, and the investment community is developing a comfort level and an understanding of the structure,” Wylder said.
For its commitment to easing the housing affordability crisis throughout the U.S., Safehold was nominated as a finalist for the 2026 Ivory Prize, which recognizes innovative solutions to improve housing affordability. This is an exciting nomination for the Safehold team, Wylder said.
