Mayor Breed & President Peskin's Housing Stimulus and Fee Reform Plan Approved by Board of Supervisors

Plan will advance, accelerate, and build more housing by reducing inclusionary housing requirements for development projects and reforming impact fees based on data
July 25, 2023

San Francisco, CA—Today, the Board of Supervisors approved the Housing Stimulus and Fee Reform Plan introduced by Mayor London N. Breed and President of the Board of Supervisors Aaron Peskin to unlock the housing pipeline and accelerate the planning, approval, and construction of existing and new projects citywide. The Plan will reduce inclusionary housing requirements on new and already approved development projects and reform and defer development impact fees in order to spur housing development and economic activity and create predictability about City costs for development projects.   

The Housing Stimulus and Fee Reform Plan bases San Francisco’s policies on data and sets fees at levels to support new housing. As previously structured, San Francisco’s current fee structure has contributed to a decline in new project proposals and the stalling of thousands of already approved homes in the pipeline by compounding already escalating costs. The approved legislation encourages new housing proposals and helps unlock pipeline projects so they can quickly begin construction, resulting in desperately needed new housing, an increase in construction jobs, and growth of the City’s tax base.   

This legislation is a key piece of Mayor Breed’s Housing For All Plan, which is the City’s effort to allow for 82,000 new homes to be built over the next 8 years, and meets obligations set out in the City’s Housing Element, which was unanimously approved by the Board of Supervisors in January and certified by the State. Additionally, the legislation is informed by the City’s Inclusionary Housing Technical Advisory Committee (TAC) process, wherein the City Controller secures an independent consultant to conduct a feasibility study which the TAC uses to make recommendations to the Mayor and Board of Supervisors on what inclusionary rates will generate the most affordable housing that is economically feasible. The legislation goes beyond the TAC recommendations to not only focus on unsticking pipeline projects but creating incentives to spur new housing development proposals.   

"Changing the way we approve and build housing in San Francisco is essential if we are going to address our shortage of homes,” said Mayor London Breed. “Today’s approval by the Board to update and reform our City fees will help us expedite the creation of housing, which is critically needed as we work to meet our housing goals and support our economy. This is an important step in the larger strategy we need to remove barriers to housing and fund affordable housing so we can get more homes built across our entire city.”   

“Everyone agrees that our Inclusionary Housing program is an essential tool in our affordable housing toolkit but has to be dynamic and continually adjusted for economic feasibility,” said Board President Aaron Peskin, who co-authored the 2017 Inclusionary Housing laws along with then-Supervisor London Breed. “This economic moment in our recovery calls for tailored incentives and adjustments to our inclusionary rates and fee programs. Working with our non-profit and private developer stakeholders, we’ve come up with a time-limited and time-certain stimulus program that will move the dial on our housing pipeline at this critical time.”  

Setting Inclusionary Housing Requirements Based on Data   

San Francisco’s previous inclusionary housing requirements, which are what certain housing projects must set aside for affordable housing, were among the highest in the country and have not been reevaluated since 2017. An analysis conducted by the Controller showed that the current inclusionary housing levels set in 2017 make the current construction of new housing infeasible, and the TAC has proposed reductions accordingly to spur new housing development.   

The Inclusionary Housing legislation reduces inclusionary requirements for both Pipeline Projects — those that are already approved by the City — and new housing projects. The previous citywide rates range from 22% for on-site affordable units to 33% for units built off-site or paying an in-lieu fee. The new reduced levels will be:    

  • Pipeline Project requirements will be reduced to 12% for on-site and 16% for off-site or paying an in-lieu fee.    
  • New Projects approved in the next three years will be reduced to 15% on-site and 21% for off-site or paying an in-lieu fee.    

In addition, the proposal reduces all other development impact fees by 33% for the next three years.     

This approved legislation has the potential to unlock almost 8,000 already approved but unbuilt units in the pipeline across the City. In our Downtown areas alone, there are over 2,500 units in this pipeline that when built, will accelerate the mixed-use vision set forth in the Mayor's Downtown Roadmap.    

There are over 10,000 units in proposed projects that are not yet approved that will be able to take advantage of the reduced inclusionary package, which will enable them to move more quickly from approval into construction.    

This legislation was born out of the Affordable Housing Technical Advisory Committee (TAC), a group of development and affordable housing experts appointed by the Mayor and Board of Supervisors that advises the City on the Inclusionary Housing Program. The TAC is convened by the Controller, who provides the technical analysis for the committee and this legislation.     

Stabilizing and Reforming Impact Fees     

San Francisco charges a number of impact fees on new construction projects to cover partial or total costs of public infrastructure such as open space, transportation, and arts as designated in the annual impact fee register published by the Planning Department. The structure of how these fees has been calculated is unpredictable and causes severe cost escalations through the life of a project. By simplifying and standardizing these fees, San Francisco can create stability for projects to move forward without disruption and certainty for developers seeking financing.    

The Impact Fee Reform legislation changes the way development impact fees are escalated so they are no longer tied to a complicated construction cost estimate and instead are simply raised by 2% annually. The approved legislation allows development projects to lock in the type and rate of impact fees they will need to pay at the time they are approved by the City – instead of continuing to increase the fee rates each year until a project is able to break ground. It also reinstates the fee deferral program so projects don’t have to pay development impact fees until after construction.