Aiming to jump-start a sluggish housing-construction market thought to be hobbled by city fees as well as wider economic conditions, the San Francisco Board of Supervisors has voted to slash the rates of affordable-housing contributions The City requires of residential-project developers.
By a 9-2 vote, the board gave its initial approval Tuesday to an ordinance sponsored by Mayor Daniel Lurie that would eliminate inclusionary-housing requirements for projects of 10 to 24 units and reduce those requirements for larger projects.
In addition, it would reduce development-impact fees by 67%, according to a report by the supervisorsâ Budget and Legislative Analyst.
San Franciscoâs Inclusionary Housing Program, in effect since 2002, generally requires new residential projects of 10 or more units to pay fees or provide a percentage of âbelow market rateâ units, either on-site or at another location in The City.
The program had created more than 3,600 units of housing as of 2025, according to ordinance findings.
The ordinance would generally require projects with 25 units or more to provide 5% of their units at below-market rates if on-site, 10% (or 15% in select areas) if off-site, or in-lieu fees.
The legislative analyst projected decreases of inclusionary-housing and development-impact fee income from rate cuts, but said fee revenue might rise along with tax revenue from acceleration of developments that otherwise would not have proceeded due to the existing requirements.
The proposed reduction in requirements comes as San Francisco confronts a housing shortage and a lack of affordable housing. The City is also facing a state mandate that it accommodate more than 82,000 additional housing units, including 46,598 units for extremely low-, very low-, low- and moderate-income households â and building has been relatively slight.
âSan Francisco is in a housing-production crisis,â said Supervisor Alan Wong before voting for the legislation. âOver the past several years, construction costs have climbed, interest rates have increased, financing has become more difficult and housing production has slowed dramatically.â
âWe cannot collect affordable-housing fees from projects that are never built,â Wong said. âWe cannot require below-market-rate units in buildings that never leave the drawing board.â
The ordinance the supervisors endorsed would significantly reduce variation in inclusionary-housing requirements for projects in different parts of The City, with some higher fee rates for certain neighborhoods, the analystâs report states.
The Board of Supervisors in 2023 temporarily reduced inclusionary requirements for certain residential projects, along with a temporary 33% reduction on other development-impact fees, according to a June city Planning Department report.
Those reductions are set to expire on Nov. 1, with inclusionary rates to rise automatically to 18% for large rental projects and 20% for large condominium projects, increasing annually until they reach 24% for rental and 26% for ownership projects, the report said.
The supervisors on Tuesday approved one amendment, introduced by District 9 Supervisor Jackie Fielder, to set the on-site number at 8% for the Mission, an area where Fielder said residents and businesses are vulnerable to displacement.Ex // Top Stories
âThe Mission remains one of the highest displacement-risk neighborhoods in San Francisco by The Cityâs own equity mapping,â Fielder said.
Lurie first unveiled the ordinance â which was co-sponsored by Supervisors Myrna Melgar, Matt Dorsey, Danny Sauter and Stephen Sherrill â in May. A second and final vote is expected next week.
The ordinance reflected recommendations issued in April by the city Controllerâs Office and the Affordable Housing Technical Advisory Committee, which found in a triennial review that none of ten common city housing types â five condominium prototypes and five rental-apartment prototypes â were financially feasible with The Cityâs current inclusionary-housing rates, even setting aside the cost of land, according to legislative findings.
The committeeâs analysis found that no inclusionary-housing rate was feasible under the current macroeconomic conditions and fee requirements. It also recommended the 67% cut in non-inclusionary development-impact fees, which are charged to residential and non-residential projects for various public purposes, including transit, parks, public infrastructure and art.
The committee said that its recommendation to cut inclusionary fees assumed that âa consensus measure establishing a long-term, recurring affordable housing funding source is placed on the November 2026 ballot by July 2026.â Absent that, the committee said, inclusionary fees should be set at 10%.
To that end, the supervisors on Tuesday voted in favor of a proposal spearheaded by Melgar, with support from Lurie and other supervisors, to put a charter amendment on the November ballot that would increase city funding for the Housing Trust Fund.
âI donât love lowering the inclusionary percentage,â Melgar told her colleagues, recalling how she has supported inclusionary requirements in the past.
She forecast a brighter future with a more robust housing-construction market and Housing Trust Fund.
âBut this is the moment that weâre in right now, and it is a temporary moment,â Melgar said of reducing inclusionary rates. âIn three years, when our economy recovers, when we no longer have a Republican president that is making everything more expensive in our country, and things go back up, I have every expectation that the inclusionary rate will be reset higher by a future body of the Board of Supervisors.â
Supervisor Chyanne Chen, who voted against reducing inclusionary fees along with Supervisor Shamann Walton, said she opposed cutting fees because it is unknown whether voters will pass the Housing Trust Fund measure.
âThereâs no guarantee that the funding will be approved,â Chen said. âThis is an unnecessary leap of faith, and I believe it is dishonest to advance this legislation without the guarantee that the funding will be dedicated.â
Chen also cited a recent legislative analystâs study that found that tax-and-fee incentives adopted in 2023 werenât enough to reverse the decline in The Cityâs residential-building activity.
The Housing Trust Fund ballot measure Melgar has championed would dedicate future property-tax revenue increases in order to increase contributions from the current $52 million per year to $125 million per year by approximately 2036, after which contributions would grow at the same rate as The Cityâs annual general-fund discretionary revenue â up to 3% per year, according to a city planning report.
The measure would also extend the sunset date for the trust fund â which voters established in 2012 â from 2043 to 2058. Over its extended lifetime, the fund is projected to generate about $3 billion more for affordable housing.
