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San Francisco mayor, lawmakers cut deal to unleash 8K new homes

San Francisco Mayor London Breed speaks to the media following a tour of City Garden in the SoMa neighborhood in San Francisco on April 14, 2023. | Justin Katigbak for The Standard

San Francisco Mayor London Breed and Board of Supervisors President Aaron Peskin are introducing legislation Tuesday to cut affordability requirements for new housing construction as the city stares down a state mandate to allow for more homes. 

Called the Housing Fee Reform Plan, the legislation consists of two bills: One would reduce the affordable housing quota for approved projects as well as new projects for the next three years; the other would change how project impact fees are assessed.  

“We are fundamentally changing how we approve and build housing in San Francisco,” Breed said in a statement to The Standard. “By reforming our fees and setting them based on data, we can make sure we are delivering new housing, jobs and the economic benefits we all want for our City.”

Michael Shvo, CEO of Shvo, center, breaks ground of the renovation project of the Transamerica tower with Mayor London Breed, Sen. Scott Wiener, former Mayor Willie Brown and Supervisor Aaron Peskin. | Camille Cohen/The Standard

If passed, the two bills promise to ease the way toward fulfilling San Francisco’s state-mandated Housing Element that requires the city to make room for 82,000 new homes over eight years. They’re also an element of Breed’s “Housing for All” initiative, a series of policy proposals meant to accelerate the pace of housing development.

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The city’s Inclusionary Housing Ordinance requires developers to set aside units in their projects as subsidized affordable housing to offer at below-market rates. Alternatively, developers can “fee out” by paying fees that fund 100% affordable projects. 

But alongside sky-high land values and construction costs, the city’s multitude of fees are often cited by developers as barriers to getting housing built.

The bills’ sponsors estimate that the fee and quota reductions have the potential to facilitate the completion of close to 8,000 units of housing in already approved projects. Over 2,500 of those units are in projects located Downtown, giving a boost to Breed’s plans for revitalizing the district with housing

Aaron Peskin presides over a Board of Supervisors meeting.
Supervisor Aaron Peskin listens to public comment at a board meeting at the Supervisor's Chamber at San Francisco City Hall on May 16, 2023. | Justin Katigbak for The Standard. | Source: Justin Katigbak/The Standard.

Under the plan, the inclusionary housing percentage—the number of subsidized below-market-rate units required to be incorporated into new housing projects—will be lowered to between 12% and 16%. This will provide “special relief” to projects already approved but where work has been stopped due to rising building and financing costs, according to Breed’s office. 

The inclusionary housing legislation will also reduce other impact fees by 33% for the next three years, essentially suspending increases to those fees made over the last five years. 

The impact fee reform bill will establish a flat rate for fees, which will now be assessed upon project approval rather than the start of construction, as fee increases between those milestones were a pain point for developers. Fees can also be deferred until projects break ground.  

The bills are based on recommendations from the Affordable Housing Technical Advisory Committee, a group of housing industry representatives and advocates convened by the Controller’s Office. The group voted on the recommendations in April

The work of the technical advisory committee and the legislation represents a significant accord between housing stakeholder groups often at loggerheads on how to make living in the city more affordable—either by relying on subsidized affordable projects, or by increasing the overall supply of housing. 

“Our Inclusionary Housing laws have always been about maximizing the highest amount of affordable units that the private market will bear,” said Peskin in a statement. “This temporary reduction in affordable housing obligations is intended to kickstart housing development at this critical time in San Francisco’s economic recovery."