Inclusionary Affordable Housing Program

From 1992 until 2002,Planning Commission policy required affordable units for certain projects of 10 units or more that received Department approval. The City adopted an Inclusionary Housing Ordinance in 2002 that set requirements on market rate development to include affordable units at 10% of the total. In 2007, the on-site requirement was increased to 15%, supported by a Nexus Study that demonstrated the necessity of affordable housing to mitigate the impacts of market rate housing.

Inclusionary requirements are one of several funding sources for the City's Inclusionary Affordable Housing program. Prior to 2011, the San Francisco Redevelopment Authority had been the City's largest provider of affordable housing funds. In 2011, Governor Jerry Brown and the State Legislature dissolved Redevelopment Agencies throughout the State. In 2012, in response to this loss and the slowing of housing development during the Great Recession, the voters amended the San Francisco Charter to create the Affordable Housing Trust Fund, which included a provision to lower the on‐site inclusionary requirement to 12%. As a Charter amendment, the Inclusionary rate could only be revised again by the voters.

In March 2016, the Board of Supervisors unanimously adopted a resolution declaring that it shall be City policy to maximize the economically feasible percentage of inclusionary affordable housing in market rate housing development. In June 2016, as housing prices rose drastically, San Francisco voters approved a Charter Amendment (Proposition C), which restored the City's ability to adjust affordable housing requirements for new development by ordinance. The passage of Proposition C then triggered the provisions of an ordinance, adopted by the Board of Supervisors in May 2016, which amended the Planning and Administrative Codes to 1) increase the Inclusionary Affordable Housing requirements, pending further action by the Board of Supervisors; 2) provide lower inclusionary rates for projects in the pipeline at the time (“grandfathered rates”), 3) require an Economic Feasibility Study by the Office of the Controller; and 4) establish an Inclusionary Housing Technical Advisory Committee (“TAC”) to advise the Controller. The City also updated the nexus analysis in 2016.

The Planning Commission considered the findings of the Controller's Economic Feasibility Study that was required by Proposition C to advise the Board of Supervisors of the maximum economically feasible Inclusionary requirements on February 23, 2017, and held an informational hearing on proposed amendments to the Inclusionary Affordable Housing Program on March 16, 2017. The Planning Commission considered two ordinances on April 27, 2017, and adopted specific recommendations on amendments to the Inclusionary Program. Following that Commission hearing, the sponsors of the two ordinances collaborated to draft the revised ordinance (Board File No. 161351v4), the “Consensus” ordinance, which was presented to the Planning Commission on June 7, 2017, and was ultimately passed by the Board of Supervisors and the Mayor in August 2017.

The 2017 ordinance was the most significant change to the City's Program since it was adopted. Not only did it increase the required on-site rates to 18% for rental projects and 20% for condominium projects, but it also introduced a variety of new controls and requirements. These included a requirement that project sponsors provide units at moderate- and middle-income “tiers” in addition to low-income units, an annual increase to the on-site inclusionary rates until the rates reached 24% for rental and 26% for condominium projects. Additional changes included a lower rate for small projects of 10-24 units, higher rates for specific geographic areas, and minimum unit sizes. The 2017 ordinance was also coupled with a new Citywide dwelling unit mix requirement.

In 2021, Supervisor Ronen introduced an ordinance (Board File No. 210868) to clarify Program requirements related to project tenure and establish tracking procedures and post-entitlement milestones for projects with affordable units.

The triennial economic feasibility study was not completed in 2020 due to the COVID-19 emergency. The Controller reconvened the TAC in October 2022 to prepare a new feasibility study. Economic conditions had changed following the pandemic, and the study found that various residential prototypes were generally infeasible to construct, even if there were no inclusionary requirements. The TAC recommended reducing inclusionary requirements and exploring other ways to improve housing feasibility. On September 5, 2023, the Board of Supervisors adopted legislation to temporarily reduce the Inclusionary Affordable Housing requirements for certain residential projects to improve the feasibility of residential development. The on-site requirements were temporarily lowered to 12% for pipeline projects approved before November 1, 2023 and to 15% for projects approved after that date. The 2023 ordinance (Board File No. 230769 /Ordinance No. 187-23) also provided a temporary 33% reduction of Article 4 development impact fees. The temporary reductions were set to expire on November 1, 2026.

From December 2025 through April 2026, the Controller reconvened the TAC, as required by Section 415.10, to conduct the City's triennial review of the economic feasibility of the Inclusionary Housing Program. The review included a feasibility study that analyzed condominium and apartment development prototypes using current market conditions, including construction costs, land values, financing, rents, and sales prices. On April 30, 2026, the Controller submitted the Triennial Review of Economic Feasibility memorandum to the Board of Supervisors, which included the TAC's recommendations to reduce the on-site requirement to 5%, contingent on establishing an alternative affordable housing funding source, exempting projects with fewer than 25 units, consolidating affordability requirements, applying a single set of standards to rental and ownership projects, and reducing non-inclusionary development impact fees in proportion to the reduced on-site requirement.