Across the country, the need for good quality, affordable housing is growing. As communities respond with large-scale developments—often supported by federal Low Income Housing Tax Credits (LIHTCs)—what happens on the ground floor of these projects matters deeply.
Yet these spaces often sit vacant or cycle through short-term, speculative uses that add little value to residents or neighbors. Meanwhile, community-based nonprofits can struggle to find stable, affordable space in the neighborhoods they serve.
An alternative approach is gaining momentum: prioritizing community-rooted nonprofit organizations as ground-floor tenants in affordable housing projects. This arrangement roots affordable housing developments in the neighborhoods they serve and creates more vibrant, sustainable, and equitable places.
Community Vision’s Experience
At Community Vision, a nonprofit CDFI serving California, we’ve worked for nearly 40 years to advance economic and racial equity through social purpose real estate advising and lending. Over the past five years, our consulting team has partnered with 13 nonprofits across 11 LIHTC-financed affordable housing projects in San Francisco, Oakland, Emeryville, Berkeley, and San Jose. We worked with six different developers, giving us a view to a range of approaches to working with nonprofit tenants.
In total, our nonprofit clients have secured over 50,000 square feet of ground floor commercial space in affordable housing developments for programmatic use. The average space is just under 4,000 square feet, and the average base rent is roughly $1.25 per square foot. Lease lengths range from 10 to 55 years, with the average term being just under 28 years. Many organizations strive for long leases because they provide security and stability. Three of the nonprofit tenants had an opportunity to purchase their unit, although none have done so yet.
We’ve learned that when developers and nonprofits collaborate early and intentionally, the benefits extend far beyond the building.
Benefits for Developers: Stability, Value, and Alignment
Ground-floor commercial space can be a headache for affordable housing developers. Traditional retail is risky, slow to lease, and often misaligned with community needs. Nonprofits, on the other hand, can be mission-aligned partners that enhance a project and its neighborhood impact, offering developers a variety of additional benefits:
- More stable tenancy. Nonprofits can be more durable than small businesses, especially during economic downturns. Many continued full operations and rental payments during COVID and benefited from public and philanthropic support. Demand for their programs remains high, and their financial models are typically more diversified.
- Improved community engagement. Partnering with respected local organizations helps developers gain community buy-in—particularly useful when working outside of their home geographies. These tenants can play a visible role in entitlement processes, such as co-hosting meetings or publicly supporting the project.
- Better access to capital. Mission-driven use of commercial space can unlock public or philanthropic funding, both for the ground-floor build-out and, sometimes, for the broader project. Nonprofits may also raise funds directly for their portion of the development.
- Alignment with mission and public policy goals. For nonprofit and public developers, prioritizing nonprofit tenants is a natural extension of their mission. It also aligns with growing local policy interest in using ground-floor space for community-centered purposes.
Benefits for Nonprofits: Stability, Visibility, and Belonging
Nonprofit organizations—especially those led by and serving communities of color—face shrinking access to good quality affordable spaces in good locations. This model offers a solution with multiple benefits:
- Long-term security. In regions where commercial rent is a major barrier, long-term leases create unprecedented stability. Nonprofits are protected from displacement and can make long-term investments in programming and infrastructure. Some agreements even include paths to ownership.
- Below-market rents. Ground-floor spaces in these projects are typically offered at well below market rate. These savings allow organizations to reallocate resources to programming and staffing.
- Increased visibility and access. Being on the ground floor of a residential building makes the nonprofit highly visible and accessible. This boosts outreach, which in turn boosts participation and community engagement. Residents upstairs and neighbors nearby can easily access programs and services. This often increases foot traffic, referrals, program participation, and even fundraising opportunities.
- Opportunities for co-location and collaboration. When multiple nonprofits co-locate in the same building or commercial corridor, opportunities for collaboration expand. Organizations can share resources, coordinate programming, and build stronger service networks. This “nonprofit center” model supports ecosystem-wide resilience.
Benefits for Communities: Activation, Access, and Cultural Continuity
For the residents of the affordable housing project and the surrounding community—nonprofit ground-floor use brings both tangible and symbolic benefits:
- Neighborhood activation. Too often, ground-floor commercial space in affordable housing remains dark and underused. Nonprofits can activate these spaces with consistent programs, services, and events. Whether it’s a child care center, health clinic, job training site, or arts space, these uses bring life and energy to the street.
- Culturally representative programs. Nonprofits rooted in the neighborhood often provide culturally responsive, linguistically appropriate services tailored to community needs. This includes everything from legal aid and food access to mental health care and youth mentorship as well as arts and culture groups making visible their unique people, culture, and history.
- Placekeeping and community identity. By anchoring long-standing or emerging local organizations in new buildings, this approach helps prevent cultural displacement. It keeps trusted institutions in the neighborhood and ensures that new development reflects—not erases—local identity.
What Makes It Work?
This approach requires a departure from conventional leasing practices. Based on our experience, here’s what helps it succeed:
For Developers:
- Start with a clear vision. A ground-floor strategy grounded in community engagement sets the foundation for successful partnerships. Clearly state why nonprofits are key to the project’s success.
- Treat it as a partnership. Think beyond the landlord-tenant model. These are long-term relationships that benefit from joint planning and mutual accountability. Establishing trust and communicating clearly are essential.
- Offer long-term leases and, where possible, ownership options. This supports nonprofit sustainability and increases investment in the space.
- Provide support for tenant improvements. Consider managing the build-out yourself or delivering space ready to use to avoid the nonprofit becoming an “accidental developer.”
- Engage early. Nonprofits need time to fundraise, design, and prepare for occupancy. Bringing them in during early stages is key to the success of this arrangement.
For Nonprofits:
- Get real-estate ready. Align internally on goals, capacity, funding, and financing. Develop a clear understanding of your needs, assets, and limitations.
- Model full costs. Consider all occupancy costs—not just rent—and build a revenue strategy to match.
- Build a development team. Bring in advisers early: legal, financial, design, and project management expertise are essential.
- Prepare for the long haul. From planning to opening can take as long as five years, sometimes longer. Ensure you have staff capacity and plan for succession.
For Local Government:
- Incentivize nonprofit use. Offer tenant improvement grants, zoning flexibility, or soft debt options to support activation of nonprofit ground-floor spaces.
- Adjust zoning. Expand definitions of “active use” to include community-serving nonprofits, not just restaurants and retail.
- Champion the model. Promote policies and investments that prioritize community ownership and equitable development.
- Fund readiness and capital needs (this recommendation also applies to philanthropy). Support for capacity building, predevelopment, and tenant improvements is essential to participation by nonprofits.
While this approach comes with complexities, it also brings powerful rewards. With intention, trust, and the right support, underutilized commercial space can be transformed into vibrant, mission-driven places where people gather, learn, heal, and thrive. Prioritizing nonprofit organizations as tenants on the ground floor of affordable housing does more than just fill space. It’s a holistic approach that stabilizes nonprofits, strengthens housing developments, and supports thriving, connected communities.
This article summarizes key insights from our broader research and experience. Read the full paper here.
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Great to see this!
A few random thoughts:
– It’s important for Affordable Housing Developers to discuss these spaces with potential limited partners, for LIHTC (tax credit) deals, to make sure these spaces are eligible for tax credits. Sometimes they won’t commit to do so until perm conversion, but that’s still a good outcome.
– Tenants should be made familiar with any competitive bidding or prevailing wage requirements for warm shell or tenant improvement work to avoid complaints later on.
– It’s still unclear how well New Market Tax Credits are working out for these spaces, but it would be great to see best practice and space size eligibility observations.
– Affordable housing developers should remember to check with City/County agencies like libraries and public health to see if they can serve as tenants (and ideally bring capital to buy out the space as a condo).
– While non-profit tenants are great, there may be ways to support first time entrepreneurs gain access to low cost spaces by subleasing that keeps the storefront lively. So perhaps the independent coffee shop that operate morning hours and is used for a after school program in afternoons and early evenings.