New San Francisco Housing Reform Laws

The San Francisco Board of Supervisors recently passed two key pieces of legislation in hopes of spurring increased housing production to address the long standing housing crisis. The City is under pressure from the State of California to plan for the creation of over 80,000 new housing units before 2031. 

Housing Fee Reform Plan 

The first issue is reducing the number of required affordable units in new construction to reflect economic reality. There were two bills passed that make up the “Housing Fee Reform Plan.” These bills are integral components of Mayor London Breed’s comprehensive “Housing For All” strategy, which she co-sponsored alongside Board President Aaron Peskin. City law requires the feasibility of this inclusionary percentage to be analyzed periodically. 

Given challenges in the funding market due to interest rate increases, decreasing rents in some neighborhoods and high construction costs, it is very difficult for mixed-income housing developments to pencil out for developers. This legislation encompasses several measures aimed at mitigating the effects of mandatory affordable housing units. It achieves this by decreasing the obligatory percentage for projects already in the “housing pipeline,” aiming to incentivize the commencement of stalled projects. The inclusion of sunset date on this new legislation is an attempt to get projects moving sooner rather than later. 

San Francisco possesses some of the highest inclusionary housing requirements in the nation. An evaluation carried out by the Controller revealed that the inclusionary housing standards established in 2017 have rendered the construction of new housing economically unviable. By utilizing data-driven insights to set these standards, the new regulation aims to eliminate a substantial obstacle to the creation of new housing in the City.

The legislation lowers the inclusionary mandates for both Pipeline Projects—those already sanctioned by the City—and forthcoming housing ventures. The citywide rates spanned from 22% for on-site affordable units to 33% for units constructed off-site or for those opting to pay an in-lieu fee. The newly suggested reduced thresholds are as follows:

• For Pipeline Projects, the requisites will be decreased to 12% for on-site units and 16% for off-site units or the in-lieu fee payment.
• New Projects sanctioned within the upcoming three years will witness a reduction to 15% for on-site units and 21% for off-site units or the in-lieu fee payment.

San Francisco’s Housing Fee Reform Plan is founded on data-driven policies and strategically sets fees to facilitate the development of new housing. However, the current fee structure is impeding the proposal of new projects and causing delays for thousands of approved homes in the pipeline due to rising costs. This legislation aims to rectify the situation by incentivizing new housing proposals and expediting pipeline projects, leading to the swift commencement of construction. As a result, the city will witness the much-needed growth of new housing, an upsurge in construction jobs, and an expansion of the City’s tax base.

Family Housing Opportunity Special Use District

The Family Housing Opportunity Special Use District simplifies the process of gaining approval and eases regulations for homeowners aiming to replace single-family homes with structures containing two, three, or four units. Qualifying projects will receive exemptions from certain height limitations, conditional-use permits, and the need for neighborhood notifications. Additionally, a distinct usage zone will be established on the west side of the City, enabling homeowners to more easily extend their residences with reduced obstacles, supporting the ideas of multigenerational living, downsizing, or creating rental units.

The new law also enables select projects to bypass the discretionary review process by the Planning Commission, a step that could otherwise extend the approval timeline by 12-18 months.

Interested in learning more about the new San Francisco housing reform laws? Feel free to reach out to us and we’re happy to answer any questions.