AFTER YEARS OF HEATED negotiations between tenants, city officials and a private equity landlord, a large apartment complex in San Rafael’s Canal District is on course to become long-term affordable housing through a regional program designed to prevent displacement in high-cost markets.
The Bay Area Housing Finance Authority has finalized a partnership with the owner of The Meridian, a 99-unit apartment complex at 400 Canal St. The deal uses BAHFA’s Welfare Tax Exemption Preservation Program to convert at least 60 units into affordable housing, with plans to convert the remaining units soon.
It is the first application of the regional program to occur in the Canal District, which is home to roughly 16,000 residents, most of them low-income Latino renters, and has long been under pressure from rising rents.
San Francisco-based Tesseract Capital Group acquired the property in 2022. Although the site sits within a designated opportunity zone — a program that offers federal tax incentives to boost investment in low-income areas — Tesseract did not acquire the property under the opportunity zone program, according to Derek Flores, the company’s president of development and construction.
Shortly after the sale, tenants say they received buyout offers and eviction notices tied to renovations. Some residents later returned to higher rents and utility fees, prompting the formation of a tenants’ union known as the 400 Canal Tenants’ Union.
For more than three years, tenants and housing advocates pushed for stronger protections than those offered under a proposed affordable housing conversion through the California Municipal Finance Authority, a joint powers authority of member local government agencies, nonprofits and businesses. That deal collapsed in 2025 after tenants objected to rent levels tied to 80% of area median income and the lack of firm limits on rent increases and eviction protections.
“We identified the BAHFA program to be the one affordable housing program that would benefit us because it preserves our rights as tenants and ensures protections for the low-income families and workers in the community,” said Marina Palma, 400 Canal Tenants’ Union leader.
Palma has worked with several regional and county tenants’ right organizations to negotiate the deal between the owner and renters.
Under the program, Marin County will exempt the property from standard property taxes assessed and collected by the county, though special assessments will continue to be paid. Removing property taxes from the operating budget allows rents to be reduced and capped, according to an announcement from the Metropolitan Transportation Commission, which houses the program.
Occupancy will be restricted to households earning at or below 80% of area median income, which includes many families earning far less. According to the Marin Housing Authority, 80% of the county’s area median income for a two-person household is $139,250. Tesseract says 86% of units currently rent below that average.
The property consists of larger family-sized units with two and three bedrooms, which are increasingly rare in the Bay Area.
According to Daniel Saver, who administers the BAHFA program, terms include ensuring a discount to market rents. Even rents that are 80% of AMI in some neighborhoods are still essentially market rate, he said.
“Ours requires a 10% discount from market rate,” Saver said. “Whatever the market is, it would need to be below 80% of AMI. But then we would require there to be a 10% discount on that.”
Additionally, rents may not increase by more than 4% each year.
“The BAHFA program has given us a platform to work hand-in-hand with our residents, the tenants’ union, the Canal community, and the city of San Rafael to achieve a common goal,” said Flores.
Savings from the tax exemption will also fund about $3.8 million in building improvements over the next 20 years, including elevator modernization, roof replacement, electrical upgrades, and walkway repairs.
“Marin County is the third most expensive rental market in the Bay Area and the state, making it especially critical to preserve existing affordable housing and increase supply,” said San Rafael Mayor Kate Colin. “This project will help ensure that homes in a large multifamily property remain affordable or accessible to a range of income levels in the long term, thereby safeguarding housing stability for current and future residents who might otherwise face displacement due to market‐rate pressures.”