- By Adam Shanks | Examiner staff writer |
- Jun 27, 2023 Updated 22 hrs ago (SFExaminer.com)

Mayor London Breed and city legislators believe they’ve found a way to help dislodge thousands of unbuilt, already-approved homes currently stuck in housing purgatory.
By easing the fees and affordable housing requirements The City imposes on housing developers, city leaders hope to kickstart long-stalled projects and spark new construction at a time San Francisco desperately needs it.
The twin pieces of legislation, introduced Tuesday by Breed and Board of Supervisors President Aaron Peskin, are built on the simple premise that The City inadvertently stymies new housing with myriad burdens.
“We are fundamentally changing how we approve and build housing in San Francisco,” Breed said in a statement. “When fees are set so high that everything freezes, it halts housing and hurts our entire city. 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.”
The first bill would significantly lower the percentage of housing units a developer must set aside as affordable for at least three years. The incentives apply to newly proposed projects and those that have already cleared regulatory hurdles and are waiting to be built.
Inclusionary housing rates have long been the subject of debate. Breed and Peskin’s legislation is predicated on the belief that housing projects aren’t moving forward in part due to the affordability requirements imposed on them.
The second piece of legislation would change how The City calculates a developer’s impact fees, which are intended to compensate The City for the consequences additional housing has on services like public transit.
Now, rather than a complex calculation based on various market factors, The City would simply increase the fees — paid by the square foot — by 2% annually.
If adopted, the changes would take effect on Nov. 1.
The legislation comes as The City strives to build 83,000 new homes by 2031, the target called for by the state-required Housing Element it adopted earlier this year.
Of the 8,000 units of approved-but-
unbuilt housing that could benefit from the legislation, 2,500 units are downtown, according to an analysis by The City’s Office of Economic and Workforce Development.
In addition to helping meet citywide housing goals, Breed hopes the legislation would help reinvigorate The City’s languishing downtown.
Although it won praise for meeting the state deadline to adopt a new Housing Element, The City — particularly the Board of Supervisors — is starting to receive criticism for failing to implement the reforms for which the plan calls.
Key to Breed’s proposal is that it is made jointly with Board of Supervisors President Aaron Peskin.
“Our Inclusionary Housing laws have always been about maximizing the highest amount of affordable units that the private market will bear,” Peskin said 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.”
Inclusionary Housing and Impact Fees
Adopted in 2002, the Inclusionary Housing Program aims to ensure a significant portion of new residential units in a development of at least 10 homes are priced “below market rate.”
The City currently requires a developer to set aside at least 22% of rental units as affordable (units for sale must meet slightly higher thresholds).
Alternatively, the developer can secure affordable units off-site at a different location within city limits — at an increased threshold of 33% of the total rent units — or pay a fee and avoid the requirement altogether.
The lowered inclusionary minimums would apply to new projects and those already sitting in the pipeline — a nod to the fact that interest rates and construction costs have increased substantially since many on-deck projects first won city approval.
The legislation proposed by Breed and Peskin would require an on-site minimum of 12%, or an off-site minimum of 16% of units, for in-the-pipeline projects. New projects would have to set aside at least 15.0% on-site units, or 20.5% in off-site units, for affordable housing. The opt-out fee would be slashed by one-third.
The legislation is based on the recommendations of the Affordable Housing Technical Advisory Committee a city-appointed advisory group that found existing inclusionary housing rates were discouraging potential developers from carrying projects across the finish line.
The TAC, convened by the city controller every three years, will revisit the inclusionary rates again in 2026.
The proposal includes a one-third reduction in impact fees paid by developers. Breed’s office notes that such fees have increased by 30% in the last five years.
In the second piece of legislation, city leaders also want to change how impact fees are calculated.
Development impact fees are updated annually and, under the current system, are based on a construction cost estimate the mayor’s office describes as overly complicated.
By setting the impact fee’s increase to 2%, Breed and Peskin hope to offer potential developers predictability. The legislation would also set the fee at the time when a project is approved by The City, not when construction begins, so developers are not punished for not immediately starting work.
