Serenity at Larkspur, a luxury apartment complex in Marin County, offers high-end amenities like pools, a tennis court, and a wine tasting room, with views of the San Francisco Bay. Rent for a one-bedroom unit is $3,004 per month, aligning with the market rate. However, the complex was purchased in 2019 by Catalyst Housing, which received tax breaks to transform it into “affordable housing.” Catalyst agreed to cap rents at levels affordable for middle-income earners (80%-120% of the area’s median income) and received financing through tax-exempt bonds issued by the California Community Housing Agency (CalCHA).

The deal eliminated $2.4 million annually in property taxes but has not significantly lowered rents. In some cases, rents are higher than comparable market-rate properties. Despite claims of affordability, a Bay Area News Group analysis revealed only modest discounts for lower-income units and above-market rates for higher-income tiers. Tenants often rely on subsidies or one-time credits to afford rent.

The financing structure benefits Catalyst and bond investors more than tenants. Catalyst has collected millions in fees and subordinate bonds, which yield high returns over decades. Meanwhile, cities forfeit property taxes, and some properties, including Serenity, struggle financially due to insufficient rental income and high debt.

To address financial challenges, CalCHA is exploring refinancing options, which could raise rents further or temporarily lease units to higher-income tenants. Catalyst may waive fees temporarily but stands to gain even more in the long term if the refinancing succeeds. Tenants, however, report that the promised affordability often feels out of reach, and financial instability threatens the sustainability of these projects.