Head of Investments Steve Wylder sat down with Affordable Housing Finance to discuss the adoption of Safehold’s ground lease capital in the Affordable Housing sector.
As high interest rates and rising costs continue to squeeze affordable housing projects, a once-niche financial structure is gaining new prominence in the sector: the ground lease.
Used historically for commercial projects or institutional owners, ground leases are being adapted and modernized to help close financing gaps in affordable housing deals, including those relying on low-income housing tax credits (LIHTC).
The leader in the space is Safehold, a publicly traded real estate investment trust that’s funded more than $7 billion of ground lease capital across the United States. Safehold expanded into the affordable housing market three years ago, and, in 2025, it launched a dedicated affordable housing platform.
So far, Safehold has closed over 20 affordable housing ground lease deals, delivering more than 3,200 affordable units and is growing its services to better support the unique needs of affordable housing developers and get more projects on the ground, says Steve Wylder, Safehold’s Head of Investments.
“We’ve modernized the form of ground lease, proven the concept in the context of market-rate multifamily transactions and other asset classes like hospitality and office,” Wylder says. “[We’re bringing] that track record and technology to the affordable sector.”
Why ground leases, and why now?
High interest rates and rising construction costs have opened wide gaps in deals that would have been viable just a few years ago. Developers relying on subsidies, soft loans, and competitive gap funding face programs that are time-consuming to secure and highly competitive regulated.
“It’s an environment that requires some creativity in order to fill those gaps and move projects forward,” Wylder says. “We are positioning our capital, our structure, as a tool to do exactly that.”
In a typical ground-up 4% LIHTC transaction, Safehold’s 99-year ground lease is designed to increase overall project proceeds while keeping borrowing costs down, Wylder says. Safehold does this by paying more for the land than a standard land purchase would yield, while charging a lease rate that’s lower than what a conventional construction or permanent loan would cost.
Because ground rent is treated as an above-the-line expense rather than debt, the property’s income is more appealing to a permanent lender. The structure is designed to be compatible with tax credit equity and permanent debt.
After resizing the permanent loan based on net operating income after ground rent, the combination of ground lease proceeds and debt typically leaves developers with 10% to 20% more total capital than they’d have in a traditional deal.
“That’s a gap filler,” Wylder notes.
From California to Texas and beyond
Safehold’s early affordable housing activity has been mostly concentrated in California, one of the nation’s most active and high-need markets. But the firm is now expanding its footprint. It recently closed its first LIHTC transaction in Texas with The NRP Group, one of the country’s busiest affordable housing developers. The project in Austin will include 348 units when it opens in 2028.
“It effectively establishes a precedent [and] helps to open up a new market for us,” Wylder says. “We’re looking to expand in Texas now that we have a workable structure, and we’re actively expanding in other states as well.”
Now, Safehold is looking ahead to new markets and opportunities, but with an eye toward continuous improvement. If ground leases are going to become a go-to option for affordable housing developers, they must work for a complex cast of stakeholders, including developers, tax credit equity investors, lenders, and bond issuers, he adds.
Evolving with the industry
Given how new ground leases are in the affordable sector and the unique dynamics of each market, the lease structure is shifting based on feedback from investors, whose buy-in is essential for deals to close, Wylder notes.
“This is a long-term endeavor for us, and we’re committed to growing our presence in the affordable housing space,” he says. “We’re listening and doing our best to address [issues] and evolve the lease construct, the economic construct, to fit inside this affordable ecosystem.”
The goal, he adds, is an iterative process aimed at addressing the unique needs of the market and increasing acceptance of the structure over time. As the market continues to grapple with financing gaps, Wylder expects ground leases to become an increasingly common part of the conversation for developers searching for ways to close capital stacks without adding new layers of public subsidy.
“There’s significant unmet need for affordable product,” he says. “We can be a really good resource to the affordable industry as it tries to meet that demand and deliver much-needed affordable housing.”
