Safehold Inc.'s Ground Lease Revolution: A Lifeline for Affordable Housing in a Costly Market

The U.S. affordable housing crisis is reaching a boiling point. With rising interest rates and construction costs, developers face a stark choice: build fewer units or slash tenant amenities. Enter Safehold Inc. (SFE), a real estate investment trust (REIT) pioneering a novel solution. Its ground lease model is not just a financial tool—it's a lifeline for developers struggling to bridge the capital gap. For investors, this is a rare opportunity to back a scalable, proven strategy that addresses a national crisis while delivering steady returns.

How Safehold's Ground Lease Model Works—and Why It's a Game-Changer

Safehold's approach is simple yet transformative. Instead of developers buying land outright, Safehold purchases the land and leases it to them for 99 years at a fixed rate. This bifurcates land value from the building, unlocking lower-cost capital and eliminating risks like land price volatility or refinancing hurdles. The result? Developers can focus on constructing units instead of scrambling for cash.

Take The Benjamin, a 364-unit Boston-area project. By partnering with Safehold, developer The Michaels Organization secured financing at 4.25%—far below traditional mortgage rates, while avoiding the 30-45% equity stake typically tied to land costs. This freed up capital to build full-sized units with modern amenities, not cramped spaces stripped of essentials.

Closing the Capital Gap in an Era of Rising Costs

The math is undeniable. Traditional lenders have tightened underwriting as cap rates rise, forcing developers to cut corners or abandon projects. Safehold's model sidesteps these constraints:
- Lower Cost of Capital: Fixed ground rents at 4.25% vs. floating-rate debt (often 6-8%) reduce interest burdens.
- No Refinancing Risk: 99-year leases eliminate the need to renegotiate terms, a critical advantage for affordable housing reliant on long-term subsidies.
- Enhanced Returns: Developers see higher IRRs (Internal Rate of Return) by reallocating savings to construction rather than land speculation.

In Northern California, Safehold's deals with The Pacific Companies preserved 781 affordable units in San Jose and Concord. Without the ground lease, rising land prices would have forced developers to reduce unit counts or downgrade quality—a lose-lose for tenants and communities.

A Strategic Bet on a Scaling Trend

Safehold isn't just a niche player. With a $6.5 billion portfolio and over 145 assets across top 30 metro areas, it's already proving its model's scalability. Key stats:
- Portfolio Growth: 42 transactions in 2025 alone, with 20% targeting affordable housing.
- Market Validation: Ground-leased assets trade at cap rates matching fee-simple equivalents, showing investor confidence in the structure.

Why Investors Should Act Now

This isn't just about doing good—it's about doing well. Safehold's strategy aligns with two unstoppable trends:
1. Policy Momentum: Governments are pushing for affordable housing incentives, which Safehold's structure can leverage.
2. Demographic Demand: Urbanization and a growing population are fueling housing shortages, especially in high-cost markets like Boston and San Francisco.

With SFE's stock trading at a 15% discount to its 5-year average P/FFO (Price-to-Funds From Operations) ratio, now is the time to buy. The company's 99-year leases lock in cash flows, making it a defensive play in volatile markets.

Final Call: Invest in a Solution That Builds Value—and Homes

Safehold's ground lease model isn't just a financing trick—it's a blueprint for solving America's housing crisis. By backing SFE, investors gain exposure to a REIT with a proven track record, a scalable strategy, and a mission aligned with national priorities. In a market where affordable housing units are scarce and demand is soaring, this is one investment that delivers both impact and returns. Don't miss the ground-floor opportunity—literally and figuratively.