Donner Lofts addresses two big challenges faced by the city of San Jose, Calif.—the need for workforce housing near downtown jobs and permanent housing for people who have been homeless.

Part of the city’s vision to revitalize its downtown area, the 102-unit development serves residents earning from 20% to 50% of the area median income, including several health-care aides and airport workers. Twenty units target formerly homeless individuals who receive extensive on-site services.

Developer MidPen Housing has other properties that serve the formerly homeless, but Donner Lofts is its first to target high utilizers of services, says Jan Lindenthal, vice president, real estate development.

The project is notable for taking part in Santa Clara County’s Project Welcome Home, a unique Pay for Success program, which drives resources toward social programs that prove effective. It ties payment for social services to the achievement of measurable outcomes.

Located a block from City Hall, the new development is built on the site of the historic Donner-Houghton Estate—the former home of Eliza Donner, a surviving member of the Donner Party and a city landmark. The site had been vacant since a fire destroyed the estate in 2007.

After another developer tried unsuccessfully to develop the land, MidPen acquired the site in 2011. The nonprofit then land banked the property, allowing its team and city officials to work on a creative and feasible plan to build affordable housing on the site.

In one move, the team reduced the former developer’s plans for 157 studio apartments to have fewer but larger studios and one-bedroom apartments. “We wanted to create apartments for working people that they’re not going to grow out of immediately,” says Lindenthal.

The $30.8 million development is financed largely with low-income housing tax credit equity from Bank of America Merrill Lynch.

An urban infill project, Donner Lofts also received transit-oriented development funding from the state. It is located two blocks from a light-rail station and 10 different bus lines, giving residents easy access to jobs, schools, and other resources.

“It’s in a neighborhood that’s been trying to reclaim itself,” Lindenthal says. “The neighborhood embraced our project. They saw it as a way to improve the whole neighborhood.”