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New Ordinance NoticePublisher's Note: This section has been AMENDED by new legislation (Ord. 187-23
, approved 9/14/2023, effective 10/15/2023, oper. 11/21/2026). The text of the amendment will be incorporated under the new section number when the amending legislation is effective.
New Ordinance NoticePublisher's Note: This section has been AMENDED by new legislation (Ord. 201-23
, approved 10/12/2023, effective 11/12/2023, oper. 11/21/2026). The text of the amendment will be incorporated under the new section number when the amending legislation is effective.
If the project sponsor elects pursuant to Section 415.5(g) to provide off-site units to satisfy the requirements of Sections 415.1 et seq., the project sponsor shall notify the Planning Department and MOHCD of its intent prior to approval of the project by the Planning Commission or Department. The Planning Department and MOHCD shall provide an evaluation of the project’s compliance with this Section 415.7 prior to approval by the Planning Commission or Planning Department. The development project shall meet the following requirements:
(a) Number of Units: The number of units constructed off-site shall be as follows:
(1) For any housing development that is located in an area or Special Use District with a specific affordable housing requirement, or in any other Planning Code provision, such as Section 419, the higher off-site housing requirement shall apply.
(2) For housing development projects consisting of 10 units or more but less than 25 units, the number of Affordable Units constructed off-site shall be 20%, so that a project applicant shall construct .20 times the total number of units produced in the Principal Project. If the total number of units is not a whole number, the project applicant shall round up to the nearest whole number for any portion of .5 or above. In no case shall the total number of Affordable Units required exceed the number required as determined by the application of the applicable off-site requirement rate to the total project units. Owned Units shall be affordable to households earning up to 100% of Area Median Income, with an affordable sales price set at 80% of Area Median Income or less. Rental Units shall be affordable to households earning up to 65% of Area Median Income, with an affordable rent set at 55% of Area Median Income or less.
(3) For any Ownership Housing Project consisting of 25 or more units, the number of Affordable Units constructed off-site shall be 33% of all units constructed on the project site, with a minimum of 18% of the units affordable to low-income households, 8% of the units affordable to moderate-income households, and 7% of the units affordable to middle income households. In no case shall the total number of Affordable Units required exceed the number required as determined by the application of the applicable off-site requirement rate to the total project units. Owned Units for low-income households shall have an affordable purchase price set at 80% of Area Median Income or less, with households earning up to 100% of Area Median Income eligible to apply for low-income units. Owned Units for moderate-income households shall have an affordable purchase price set at 105% of Area Median Income or less, with households earning from 95% to 120% of Area Median Income eligible to apply for moderate-income units. Owned Units for middle-income households shall have an affordable purchase price set at 130% of Area Median Income or less, with households earning from 120% to 150% of Area Median Income eligible to apply for middle-income units. For any Affordable Units with purchase prices set at 100% of Area Median Income or above, the units shall have a minimum occupancy of two persons. This unit requirement shall be outlined within the Mayor’s Office of Housing Preferences and Lottery Procedures Manual no later than February 26, 2018. MOHCD may reduce Area Median Income pricing and the minimum income required for eligibility in each rental category.
(4) For any Rental Housing Project consisting of 25 or more Rental Units, the number of affordable units constructed off-site shall generally be 30% of all units constructed on the project site, with a minimum of 18% of the units affordable to low-income households, 6% of the units affordable to moderate-income households, and 6% of the units affordable to middle-income households. In no case shall the total number of affordable units required exceed the number required as determined by the application of the applicable off-site requirement rate to the total project units. Rental Units for low-income households shall have an affordable rent set at 55% of Area Median Income or less, with households earning up to 65% of Area Median Income eligible to apply for low-income units. Rental Units for moderate-income households shall have an affordable rent set at 80% of Area Median Income or less, with households earning from 65% to 90% of Area Median Income eligible to apply for moderate-income units. Rental Units for middle-income households shall have an affordable rent set at 110% of Area Median Income or less, with households earning from 90% to 130% of Area Median Income eligible to apply for middle-income units. For any affordable units with rental rates set at 100% of Area Median Income or above, the units shall have a minimum occupancy of two persons. This unit requirement shall be outlined within the Mayor’s Office of Housing Preferences and Lottery Procedures Manual no later than 6 months following the effective date of the Ordinance contained in Board of Supervisors File No. 161351. MOHCD may reduce Area Median Income pricing and the minimum income required for eligibility in each rental category. MOHCD shall set forth in the Procedures Manual the administration of rental units within this range.
(5) In the event that a Rental Housing project converts to an Ownership Housing project, the Project Sponsor shall either (A) reimburse the City the proportional amount of the Inclusionary Affordable Housing Fee, which would be equivalent to the then-current Inclusionary Affordable Housing Fee requirement for Ownership Housing Projects, or (B) provide additional on-site or off-site Affordable Units equivalent to the then-current inclusionary requirements for Ownership Housing Projects, apportioned among the required number of units at various income levels in compliance with the requirements in effect at the time of conversion.
(6) The applicable amount of the percentage required for the off-site housing units shall be determined based upon the date that the project sponsor has submitted a complete Environmental Evaluation application. Any development project that constructs off-site affordable housing units as set forth in this Section 415.6 shall diligently pursue completion of such units. In the event the project sponsor does not procure a building permit or site permit for construction of the principal project or the off-site affordable housing project within 30 months of the project’s approval, the development project shall comply with the inclusionary affordable housing requirements applicable thereafter at the time when the project sponsor procures a building permit. Such deadline shall be extended in the event of any litigation seeking to invalidate the City’s approval of the principal project or off-site affordable housing project for the duration of the litigation.
(7) If the principal project or the off-site project has resulted in demolition, conversion, or removal of affordable housing units that are sub- ject to a recorded covenant, ordinance, or law that restricts rents to levels affordable to persons and families of moderate-, low- or very low-income, or housing that is subject to any form of rent or price control through a public entity’s valid exercise of its police power and determined to be affordable housing, the Commission or the Department shall require that the project sponsor replace the num- ber of affordable units removed with units of a comparable number of bedrooms and sales prices or rents, in addition to compliance with the inclusionary requirements set forth in this Section.
(b) Timing of Construction: The project sponsor shall ensure that the off-site units are constructed, completed, ready for occupancy, and marketed no later than the market rate units in the principal project. In no case shall the Principal Project receive its first certificate of occupancy until the off-site project has received its first certificate of occupancy.
(c) Location of off-site housing:
(1) Except as specified in subsection (ii) below, the off-site units shall be located within one mile of the principal project;
(2) Projects within the Central SoMa SUD must be located within the area bounded by Market Street, the Embarcadero, King Street, Division Street, and South Van Ness Avenue.
(d) Type of Housing: Nothing in this Section shall limit a project sponsor from meeting the requirements of this Section through the construction of units in a limited equity or land trust form of ownership if such units otherwise meet all of the requirements for off-site housing. In general, affordable units constructed or otherwise provided under this Section shall be comparable in number of bedrooms, exterior appearance and overall quality of construction to market rate units in the principal project. The total square footage of the off-site affordable units constructed or otherwise provided under this Section shall be no less than the calculation of the total square footage of the on-site market-rate units in the principal project multiplied by the relevant on-site percentage requirement for the project specified in this Section. The Notice of Special Restrictions or conditions of approval shall include a specific number of units at specified unit sizes – including number of bedrooms and minimum square footage – for affordable units. The interior features in affordable units should generally be the same as those of the market rate units in the principal project but need not be the same make, model, or type of such item as long as they are of new and good quality and are consistent with then-current standards for new housing and so long as they are consistent with the “Quality Standards for Off-Site Affordable Housing Units” found in the Procedures Manual. Where applicable, parking shall be offered to the affordable units subject to the terms and conditions of the Department’s policy on unbundled parking for affordable housing units as specified in the Procedures Manual and amended from time to time. If the residential units in the principal project are live/work units which do not contain bedrooms or are other types of units which do not contain bedrooms separated from the living space, the off-site units shall be comparable in size according to the following equivalency calculation between live/work and units with bedrooms:
Number of Bedrooms (or, for live/work units square foot equivalency) | Number of Persons in Household |
0 (Less than 600 square feet) | 1 |
1 (601 to 850 square feet) | 2 |
2 (851 to 1,100 square feet) | 3 |
3 (1,101 to 1,300 square feet) | 4 |
4 (More than 1,300 square feet) | 5 |
(e) Marketing the Units: The Project Sponsor shall submit a proposed marketing plan to MOHCD to begin marketing the Affordable Units at least six months prior to the beginning of marketing for any unit in the Principal Project. MOHCD shall approve the marketing plan for the Affordable Units prior to the Project Sponsor marketing any unit in the Principal Project. Failure to comply shall be deemed a violation of the Planning Code subject to enforcement and penalties as set forth in Section 415.9. MOHCD shall be responsible for overseeing and monitoring the marketing of Affordable Units under this Section 415.7. In general, the marketing requirements and procedures shall be contained in the Procedures Manual as amended from time to time and shall apply to the Affordable Units in the project. MOHCD may develop occupancy standards for units of different bedroom sizes in the Procedures Manual in order to promote an efficient allocation of Affordable Units. MOHCD may require in the Procedures Manual that prospective purchasers complete homebuyer education training or fulfill other requirements. MOHCD shall develop a list of minimum qualifications for marketing firms that market Affordable Units under Section 415.1 et seq., referred to in the Procedures Manual as Below Market Rate (BMR units). No project sponsor marketing units under the Program shall be able to market BMR units except through a firm meeting all of the minimum qualifications. The Notice of Special Restrictions or conditions of approval shall specify that the marketing requirements and procedures contained in the Procedures Manual as amended from time to time, shall apply to the Affordable Units in the project.
(1) Lottery: At the initial offering of affordable units in a housing project and when Affordable Units become available for resale or re-lease in any housing project subject to this Program after the initial offering, MOHCD must require the use of a public lottery approved by MOHCD to select purchasers or tenants.
(2) Preferences: MOHCD shall create a lottery system that gives preference according to the provisions of Administrative Code Chapter 47. MOHCD shall propose policies and procedures for implementing these preferences to the Planning Commission for inclusion in the Procedures Manual. Otherwise, it is the policy of the City to treat all households equally in allocating affordable units under this Program.
(f) Individual affordable units constructed as part of a larger off-site project under this Section 415.7 shall not receive development subsidies from any Federal, State or local program established for the purpose of providing affordable housing, and shall not be counted to satisfy any affordable housing requirement for the off-site development. Other units in the same off-site project may receive such subsidies. In addition, subsidies may be used, only with the express written permission by MOHCD, to deepen the affordability of an affordable unit beyond the level of affordability required by this Program.
(g) Notwithstanding the provisions of Section 415.7(f) above, a project may use California Debt Limit Allocation Committee (CDLAC) tax-exempt bond financing and 4% credits under the Tax Credit Allocation Committee (TCAC) to help fund its obligations under this ordinance as long as the project provides at least 60% of the off-site affordable units as affordable at 55% of area median income and the balance of the off-site affordable units using these funds at affordability rates that comply with the requirements of TCAC, CDLAC, and this Section 415. The income table to be used for such projects when the units are priced at 55% of area median income is the income table used by MOHCD for the Inclusionary Housing Program, not that used by TCAC or CDLAC. Except as provided in this subsection (g), all units provided under this Section 415.7 must meet all of the requirements of the Inclusionary Affordable Housing Program and the Procedures Manual for off-site housing.
(Added as Sec. 315.6 by Ord. 37-02, File No. 001262, App. 4/5/2002; amended by Ord. 76-03, File No. 020592, App. 5/2/2003; Ord. 213-06, File No. 051668, App. 8/2/2006; Ord. 219-06, File No. 051685, App. 8/10/2006; Ord. 101-07, File No. 060529, App. 5/4/2007; Ord. 198-07, File No. 070444, App. 8/10/2007; Ord. 232-08, File No. 080521, App. 10/30/2008; Ord. 63-09, File No. 081249, App. 4/23/2009; redesignated and amended by Ord. 108-10, File No. 091275, App. 5/25/2010; amended by Ord. 312-10, File No. 100046, App. 12/23/2010; Ord. 62-13
, File No. 121162, App. 4/10/2013, Eff. 5/10/2013; Ord. 277-13, File No. 130968, App. 12/18/2013, Eff. 1/17/2014; Ord. 204-15
, File No. 150622, App. 12/3/2015, Eff. 1/2/2016; Ord. 76-16
, File No. 160255, App. 5/13/2016, Eff. 6/12/2016; Ord. 158-17, File No. 161351, App. 7/27/2017, Eff. 8/26/2017; Ord. 26-18, File No. 171193, App. 2/23/2018, Eff. 3/26/2018; Ord. 202-18, File No. 180557, App. 8/10/2018, Eff. 9/10/2018; Ord. 296-18, File No. 180184, App. 12/12/2018, Eff. 1/12/2019; Ord. 210-21, File No. 210868, App. 11/19/2021, Eff. 12/20/2021)
AMENDMENT HISTORY
Undesignated introductory paragraph and divisions (a)(1), (b), (d), and (f) amended; division (g) added; Ord. 62-13
, Eff. 5/10/2013. Undesignated introductory paragraph and division (e)(2) amended; references to "MOHCD" corrected throughout; Ord. 277-13, Eff. 1/17/2014. Division (e)(2) amended; Ord. 204-15
, Eff. 1/2/2016. Undesignated introductory paragraph amended; former division (a)(1)(A) redesignated as (a)(1) and amended; former divisions (a)(1)(B) and (C) deleted; new divisions (a)(2)-(4) added; divisions (b), (c), and (d) amended; Ord. 76-16
, Eff. 6/12/2016. Undesignated introductory paragraph and divisions (a)(1)-(3) amended; former division (a)(4) deleted; new divisions (a)(4)-(7) added; divisions (e), (f), and (g) amended; Ord. 158-17, Eff. 8/26/2017. Undesignated introductory paragraph and division (d) amended; Ord. 26-18, Eff. 3/26/2018. Undesignated introductory paragraph and division (g)1 amended; Ord. 202-18
, Eff. 9/10/2018. Division (c) redesignated as divisions (c) and (c)(1); division (c)(1) amended; division (c)(2) added; Ord. 296-18
, Eff. 1/12/2019. Undesignated introductory paragraph and divisions (a)(2), (a)(3), (a)(5), and (e)-(e)(1) amended; Ord. 210-21
, Eff. 12/20/2021.
CODIFICATION NOTE
A project sponsor of a principal project comprised of 24 or fewer residential units may elect under Section 415.5(g) to meet its Inclusionary Affordable Housing requirement by designating its payment of the Affordable Housing Fee due under Section 415.5 for a Small Sites program that MOHCD shall establish for this purpose. Affordable Housing Fees designated for this program shall not be considered part of the designated funds specified by Section 415.5(f). MOHCD shall expend the program funds from a principal project on a Small Sites Project that meets the requirements set forth in Section 415.5(f)(2)(B) and that is within the same neighborhood as the principal project. The neighborhood of the principal project shall be determined by the Planning Department’s Neighborhood Groups Map. If MOHCD is unable to identify and apply the fee to a qualifying Small Sites Project within the same neighborhood as the principal project within two years of the payment of the fee, such fee shall be released into the Affordable Housing Fund to fund other qualifying Small Sites Projects in San Francisco.
(Added by Ord. 7-17, File No. 161157, App. 1/20/2017, Eff. 2/19/2017)
(a) For any units permitted under the Program:
(2) Units shall not remain vacant for a period exceeding 60 days without the written consent of MOHCD.
(4) The income levels specified in the Notice of Special Restrictions and/or conditions of approval for the project shall be the required income percentages for the life of the project. Notwithstanding the foregoing sentence, if approved by MOHCD and as provided in the Procedures Manual, an exception to the required income percentage may be made in the following cases:
(A) a rental unit that converts to an Owned Unit with Qualifying Income up to a maximum of 150% of AMI and a sales price established pursuant to Section 415.8(b)(5);
(B) where there is an existing tenant who has undergone re-certification as defined in the Procedures Manual, the existing tenant’s household income may increase up to a maximum of 200% of AMI;
(C) new Owned Units where the project sponsor has used good faith efforts to secure a contract with a qualified buyer but is unable to secure such a contract in a timely manner from the initiation of marketing;
(D) resale Owned Units where the owner has used good faith efforts to secure a contract with a qualified buyer but is unable to secure a buyer contract at a maximum resale price specified by MOHCD in a timely manner;
(E) the Qualifying Income level for new or resale Owned Units may be set at 20% above the income level stated in the Notice of Special Restrictions or conditions of approval; or
(F) resale Owned Units where the owner has requested an adjustment to the maximum income limit stated in the existing Notice of Special Restrictions or other document establishing affordability requirements for the unit and/or has requested an increase to the Qualifying Income level, pursuant to subsection (b)(9).
(5) The Commission or the Department shall require all housing projects subject to Section 415.1 et seq. to record a Notice of Special Restrictions in the official records of the City and County of San Francisco. The Notice of Special Restrictions must incorporate the affordability restrictions. All projects described in Section 415.3(a) must incorporate all of the requirements of this Section 415.8
into the Notice for Special Restrictions, including any provisions required to be in the conditions of approval for housing projects described in Section 415.3(a). These Section 415.3(a) projects which are housing projects that go through the conditional use or planned unit development process shall have conditions of approval. The conditions of approval shall specify that project applicants shall adhere to the marketing, monitoring, and enforcement procedures outlined in the Procedures Manual, as amended from time to time, in effect at the time of project approval. The Commission shall file the Procedures Manual in the case file for each project requiring inclusionary housing pursuant to this Program. The Procedures Manual will be referenced in the Notice of Special Restrictions for each project.
(b) For any units permitted to be Owned Units under the Program, the MOHCD shall:
(1) Establish and implement a process for reselling an affordable unit in the Procedures Manual.
(2) Provide that owners may not change title on the unit without review and approval by MOHCD and according to guidelines published in the Procedures Manual, as amended from time to time.
(3) Provide that owners must comply with refinancing procedures and limitations as published in the Procedures Manual, as amended from time to time.
(4) Provide that, in order to retain all units restricted as affordable under this Program within the City’s affordable housing stock, the specific procedures for passing an affordable unit through inheritance are contained in the Procedures Manual. All transfers through inheritance must be reviewed and approved by MOHCD and, in all cases, the heir must acknowledge and agree to the provisions of the Program. The following households may inherit the ability to occupy a unit restricted under this Program: (i) a spouse or registered domestic partner, regardless of income; or (ii) a child of the owner if the child is a qualifying household for the unit. If the heir qualifies under one of these categories, the heir must occupy the unit or the heir must market and sell the unit at the restricted price through a public lottery process and retain the proceeds from the sale. If the heir does not qualify to occupy the unit, the heir must market and sell the unit at the restricted price to a qualified buyer through a public lottery process. The heir would retain the proceeds of such sale.
(5) Require that affordable Rental Units permitted by the Commission to be converted to Owned Units satisfy the requirements of the Procedures Manual, as amended from time to time, including that the units shall be sold at restricted sales prices to households meeting the income qualifications specified in the Notice of Special Restrictions or conditions of approval, with a right of first refusal for the occupant(s) of such units at the time of conversion. If the current tenant qualifies for and purchases the unit, the unit shall be sold at a sales price corresponding to the affordability level required for the unit as a Rental Unit as specified in the Notice of Special Restrictions or conditions of approval, with a maximum allowable Qualifying Income level up to 150% of AMI. If the unit is sold to a buyer who is not a current tenant, the sales price shall correspond to the affordability level required for the unit as an Owned Unit as specified in the Notice of Special Restrictions or conditions of approval. Upon conversion to ownership, the units are subject to the resale and other restrictions of this Program for the life of the project, as defined in the Notice of Special Restrictions or conditions of approval for the Project.
(6) For Owned Units approved pursuant to Sections 415.6 or 415.7, the Notice of Special Restrictions or conditions of approval will include provisions restricting resale prices and purchaser income levels according to the formula specified in the Procedures Manual, as amended from time to time. All amenities and parking spaces that were purchased with the initial sale of the Owned Unit must be sold with the Owned Unit upon resale and shall be included in the resale price. In the event subordination of the Affordability Conditions contained in a recorded Notice of Special Restrictions may be necessary to ensure the project applicant’s receipt of adequate construction and/or permanent financing for the project, or to enable first-time home buyers to qualify for mortgages, the project applicant may follow the procedures for subordination of affordability restrictions as described in the Principal Project’s conditions of approval or in the Procedures Manual. A release following foreclosure or other transfer in lieu of foreclosure may be authorized if required as a condition to financing pursuant to the procedures set forth in the Procedures Manual.
(7) Purchasers of Affordable Units shall secure the obligations contained in the Notice of Special Restrictions or conditions of approval by executing and delivering to the City a promissory note secured by a deed of trust encumbering the applicable affordable unit as described in the Procedures Manual or by an alternative means if so provided for in the Procedures Manual, as amended from time to time.
(8) Procedures for Units Unable to Resell. The Board of Supervisors finds that certain requirements of this Program and the Procedures Manual may create hardship for owners of Affordable Units restricted under this Program. However, the Board also recognizes that the requirements of this Program are important to preserve the long-term affordability of units restricted under the Program. In order to allow some relief for owners of Affordable Units during a time of economic downturn, but to provide the maximum protection for the long-term affordability of the units, the Board directs MOHCD to analyze the following issues and, if it deems appropriate, to propose amendments to the Procedures Manual to address the issues:
(A) Waiver of Resale Requirements and Maximum Qualifying Income Level for New Buyers of Resale BMR Units. The Board recognizes that the risk to low- and moderate-income homeowners during times of economic downturn can increase the risk of default and foreclosure of units restricted under this Program. The Board directs MOHCD to study ways to reduce such risks in the below market rate unit context and, if it deems appropriate, to make recommendations to the Planning Commission to amend the Procedures Manual to allow MOHCD discretion, in certain limited circumstances, to waive requirements for owners of Affordable Units who have used good faith efforts to secure a contract with a qualified buyer but are unable to resell their unit in a timely manner. Such amendments to the Procedures Manual may include, but are not limited to, authorizing MOHCD to make one or more allowances for owners of Affordable Units unable to resell, such as: (i) a one-time waiver of the first-time homebuyer rule for the purchasing household; (ii) a one-time waiver of qualifying household size requirements for the purchasing household; (iii) a one-time waiver of owner occupancy rules to allow a temporary rental; (iv) a one-time modification of the asset test for the new buyer household; and (v) allowing MOHCD discretion to increase the Qualifying Income level for the unit by up to 20% above the maximum income limit currently allowed by the Use Restrictions for the unit but at no time higher than 150% of AMI. MOHCD and the Commission shall set forth criteria for granting such allowances such as establishing a minimum time that the units must have been advertised by MOHCD without selling; establishing criteria related to unusual economic or personal circumstances of the owner; providing a maximum percentage for the increase above the maximum income limit currently allowed; providing that the increase may only be granted on a one-time basis; and requiring the owner to clearly establish that the BMR unit is being resold at the maximum resale price specified in the Procedures Manual, as amended from time to time.
(B) Waiver of Maximum Qualifying Income Level for New Buyers of Initial Sale BMR Units. The Board of Supervisors recognizes that the current Program provides that the income of a new buyer of a below market rate household cannot exceed the maximum income stated in the Planning Approval or Notice of Special Restrictions for the BMR Unit. Due to less desirable developments or geographic areas, a project sponsor is sometimes unable to find a buyer for a BMR Unit within the maximum income stated in the Planning Approval or Notice of Special Restrictions for the unit. This situation makes it difficult, if not impossible, for certain current owners of below market rate units to resell their units. In order to minimize this situation, the Board of Supervisors directs MOHCD to study ways to address this issue and, if it deems appropriate, to make recommendations to the Planning Commission to amend the Procedures Manual to allow MOHCD to assist project sponsors who have used good faith efforts as determined by MOHCD to secure a contract with a qualified buyer but who are unable to secure such a contract in a timely manner from the initiation of marketing. Such amendments may include allowing MOHCD discretion to increase the Qualifying Income level for the unit by up to 20% above the maximum income limit currently allowed by the Use Restrictions for the unit but at no time higher than 150% of AMI. MOHCD and the Planning Commission shall establish limits to this or a similar proposal such as: providing a maximum percentage for the increase above the maximum income limit currently allowed; requiring that a certain period without securing a buyer would pass before such an allowance would be made; and providing that the increase may only be granted on a one-time basis.
(9) Adjustment of Pricing and Income Limits for Owned Units Purchased at a Price Above the Affordable Price Determined at the Time of Resale.
(A) Findings and Purposes. The Board of Supervisors finds that the requirements of this Program and the Procedures Manual may create financial hardship for certain Owners of Affordable Units who could suffer a financial loss if said Owners sold their units at a price in compliance with the existing Notice of Special Restrictions or other affordability restrictions for the unit. However, the Board also recognizes that the requirements of this Program are important to preserve the long-term affordability of units restricted under the Program. To provide flexibility while protecting the long-term affordability of the Affordable Units and viability of the Program, this subsection (b)(9) provides options to allow some relief for Owners of Affordable Units that are re-selling at a time when the Affordable Price would be lower than the price at which they originally purchased their Affordable Unit.
(B) Authorization to Reset Pricing and Income Limits. The Board authorizes MOHCD to adjust the Affordable Price at the time of resale and to establish the corresponding maximum income limit or income range for eligible Owned Units, as further specified and limited in this subsection (b)(9). This authorization and adjustment procedure shall be available only once per eligible Owned Unit and shall result in an Affordable Price that is based on a permanent increase to the restrictions on Affordable Price and maximum income limit for the Owned Unit. For the resale and any subsequent resale of the Owned Unit, the Maximum Purchase Price shall be determined by MOHCD based on the new, increased maximum percentage of AMI established pursuant to this subsection (b)(9).
(C) Eligibility. An Owned Unit is eligible for an increase in the Affordable Price and corresponding maximum income limit or income range for the Owned Unit if: 1) the Owner purchased the unit at a price above the Affordable Price at the time of resale, which Affordable Price shall be determined by MOHCD based on the existing Notice of Special Restrictions or other document establishing affordability requirements for the unit at the time MOHCD processes the Owner’s resale request; and 2) the Owner submits a resale request for the unit to MOHCD within three years from the effective date of the ordinance in Board File No. 240802, enacting this subsection (b)(9). The Owner is not required to attempt to sell the unit prior to the adjustment described in this subsection (b)(9) to qualify for said adjustment.
(D) Maximum Allowable Adjustment. For the resale of an Owned Unit eligible for an adjustment under this subsection (b)(9), MOHCD may establish an adjusted Affordable Price up to the original purchase price paid by the current Owner. MOHCD may increase the maximum income limit or income range for the unit to reflect the adjusted Affordable Price, up to a maximum of 130% AMI. In addition, once per eligible Owned Unit, MOHCD may increase the maximum Qualifying Income level for the unit by up to 20% above the maximum income limit or income range in the new Notice of Special Restrictions or other document establishing affordability requirements for the unit, provided that the increased maximum Qualifying Income level does not exceed 150% of AMI. The ultimate resale price may be lower or higher than the adjusted Affordable Price. Nothing in this subsection (b)(9) ensures or entitles an Owner to a resale price equal to the adjusted Affordable Price when reselling their Owned Unit.
(E) Procedures.
(i) MOHCD shall propose policies and procedures for implementing price and AMI level adjustments consistent with this subsection (b)(9) to the Planning Commission for inclusion in the Procedures Manual.
(ii) MOHCD may establish an adjusted Affordable Price and increase the maximum AMI level consistent with this subsection (b)(9) for the purposes of processing the resale, including marketing the Affordable Unit. If approved pursuant to subsections (b)(9)(E)(iii) through (vi), the increased maximum AMI level shall be established for all other purposes by the recording of a new Notice of Special Restrictions upon closing the resale of the Owned Unit that reflects the increased AMI level. As a condition of MOHCD’s approval of the adjustments under this subsection (b)(9), the Owner shall execute and authorize the recordation of the new Notice of Special Restrictions in senior lien priority upon closing the resale of the Owned Unit.
(iii) For units in principal projects that required Planning Commission approval, the Planning Commission, in consultation with MOHCD, may modify any original conditions of approval for the principal project related to the maximum price or income levels consistent with this subsection (b)(9), including, but not limited to, modification to the required terms of a Notice of Special Restrictions recorded or to be recorded against the project or the Owned Unit. If the Planning Commission has delegated its authority to the Planning Department to review and approve requests for pricing and AMI level adjustments, such adjustments shall be reviewed and considered for approval by the Director of the Planning Department, and the Planning Commission shall not hold a public hearing for discretionary review.
(iv) For units in principal projects that required Planning Department approval but not Planning Commission approval, the Planning Department, in consultation with MOHCD, may modify any original conditions of approval for the principal project related to the maximum price or income levels including but not limited to modification to the required terms of a Notice of Special Restrictions recorded or to be recorded against the project or the Owned Unit.
(v) For units in principal projects that did not require Planning Commission or Planning Department approval, the Planning Department, in consultation with MOHCD, may modify the required terms of a Notice of Special Restrictions recorded or to be recorded against the project or the Owned Unit.
(vi) Any other City approval required prior to modifying the terms of a Notice of Special Restrictions, such as amending a development agreement, shall be obtained.
(F) Reporting. MOHCD shall provide a report to the Inclusionary Housing Technical Advisory Committee, Planning Commission, and Board of Supervisors or a committee thereof after 10 adjustments are approved under this subsection (b)(9), and after every tenth adjustment approved thereafter. In addition, MOHCD shall provide a report to the Inclusionary Housing Technical Advisory Committee, Planning Commission, and Board of Supervisors or a committee thereof within twelve months from the effective date of the ordinance in Board File No. 240802 enacting this subsection (b)(9), and every twelve months thereafter. The Board of Supervisors or a committee thereof shall hold a public hearing on the first annual report; accordingly, that report must be accompanied by a draft resolution for the Board to accept the report. Each report provided pursuant to this subsection (F) shall include at least the following information for each approved adjustment:
(i) The location of the Affordable Unit;
(ii) The date the adjustment was approved; and
(iii) Pricing and AMI level information before and after the adjustment.
(G) Expiration of this Subsection and Related Subsection. This subsection (b)(9), and the related subsection (a)(4)(F), shall expire by operation of law four years from the effective date of the ordinance in Board File No. 240802 enacting those two subsections. Upon expiration of those subsections, the City Attorney is authorized to cause their removal from the Planning Code, which removal may include as appropriate nonsubstantive modifications in subsection lettering, numbering, punctuation, and language.
(c) For any units permitted to be Rental Units under the Program, MOHCD shall establish:
(1) restrictions on lease changes and propose such restrictions to the Commission for inclusion in the Procedures Manual.
(2) additional eligibility criteria for sub-leasing and propose such restrictions to the Commission for inclusion in the Procedures Manual.
(3) criteria for continued eligibility for occupied rental units and propose such restrictions to the Commission for inclusion in the Procedures Manual.
(4) criteria for homeownership status and propose such restrictions to the Commission for inclusion in the Procedures Manual.
(5) criteria for granting affordable rental households the right of first refusal in purchasing an Affordable Unit that is converted from a Rental Unit to an Owned Unit and propose such restric- tions to the Commission for inclusion in the Procedures Manual.
(6) that at no time shall an annual increase exceed the actual allowable increase for that year. In cases where the rent has decreased, the tenant’s rent must be decreased. In cases where the annual adjustments have not been applied year to year, the Project Owner may not take advantage of any increases that were not applied until the Unit is vacant and re-rented.
(Added as Sec. 315.7 by Ord. 37-02, File No. 001262, App. 4/5/2002; amended by Ord. 101-07, File No. 060529, App. 5/4/2007; Ord. 198-07, File No. 070444, App. 8/10/2007; redesignated and amended by Ord. 108-10, File No. 091275, App. 5/25/2010; amended by Ord. 312-10, File No. 100046, App. 12/23/2010; Ord. 62-13
, File No. 121162, App. 4/10/2013, Eff. 5/10/2013; Ord. 210-21, File No. 210868, App. 11/19/2021, Eff. 12/20/2021; Ord. 258-24, File No. 240802, App. 11/14/2024, Eff. 12/15/2024)
AMENDMENT HISTORY
Division (a)(4) amended and divisions (a)(4)(A) through (E) added; division (b)(5) amended; division (b)(8) amended and divided into divisions (b)(8) and (b)(8)(A)1
; divisions (b)(8)(B) and (c)(6) added; Ord. 62-13
, Eff. 5/10/2013. Divisions (a)(1)- (a)(4)(A), (a)(4)(C)-(E), (b)-(b)(8)(B), (c), and (c)(5) amended; Ord. 210-21
, Eff. 12/20/2021. Divisions (a)(1), (a)(4)-(a)(4)(B), (a)(4)(D)-(E), (a)(5), (b)(1)-(6), (b)(8)-(b)(8)(B) amended; divisions (a)(4)(F) and (b)(9)-(b)(9)(G) added; Ord. 258-24
, Eff. 12/15/2024.
(a) A first construction document or first Certificate of Occupancy, whichever applies, shall not be issued by the Director of DBI to any unit in the Principal Project until all of the affordable housing requirements of Sections 415.1 et seq. are satisfied.
(b) If, after issuance of the first Certificate of Occupancy, the Commission or Department determines that a project sponsor has failed to comply with any requirement in Section 415.1 et seq. or any reporting requirements detailed in the Procedures Manual, or has violated the Notice of Special Restrictions, the Commission, Department, or DBI may, until the violation is cured, (1) revoke the Certificate of Occupancy for the Principal Project or required Affordable Units, (2) impose a penalty on the project pursuant to Section 176(c) of this Code, and/or (3) the Zoning Administrator or MOHCD may enforce the provisions of Section 415.1 et seq. through any means provided for in Section 176 of this Code.
(c) The Department shall notify MOHCD of any housing project subject to the requirements of Section 415.1 et seq., including the name of the project sponsor and the number and location of the Affordable Units, within 30 days of the Department’s approval of a building or site permit for the project. MOHCD shall provide all project sponsors with information concerning the City’s first time homebuyer assistance programs and any other related programs MOHCD shall deem relevant to the Inclusionary Affordable Housing Program.
(d) The Department shall, as part of the annual Housing Inventory, report to the Board of Supervisors on the results of Section 415.1 et seq. including, but not limited to, a report on the following items:
(1) The number of, location of, and project applicant for, housing projects which came before the Commission for a Conditional Use Authorization or Planned Unit Development, and the number of, location of, and project applicant for, housing projects which were subject to the requirements of Section 415.1 et seq.;
(2) The number of, location of, and project sponsor for, housing projects which applied for a waiver, adjustment, or reduction from the requirements of Section 415.1 et seq. pursuant to Section 406 of this Article, and the number of, location of, and project sponsor for, housing projects which were granted such a waiver, adjustment, or reduction and, if a reduction, to what percentage; and
(3) The number of, location of, and project sponsor for, every housing project to which Section 415.1 et seq. applied and the number of market rate units and the number of affordable on- and off-site units provided, including the location of all of the affordable units.
(e) A study is authorized to be undertaken under the direction of MOHCD approximately every five years to update the requirements of Section 415.1 et seq. MOHCD shall make recommendations to the Board of Supervisors and the Commission regarding any legislative changes. MOHCD shall specifically evaluate the different inclusionary housing requirements for developments of over 120 feet approximately five years from the enactment of the requirement or as deemed appropriate by MOHCD. MOHCD shall coordinate this report with the five-year evaluation by the Director of Planning required by Section 410 of this Article.
(f) Annual or Bi-annual Monitoring.
(1) MOHCD shall monitor and require occupancy certification for Owned Units and Rental Units on an annual or bi-annual basis, as outlined in the Procedures Manual.
(2) MOHCD may require the owner of a Rental Unit, the owner’s designated representative, or the tenant in an affordable unit to verify the income levels of the tenant on an annual or bi-annual basis, as outlined in the Procedures Manual.
(Added as Sec. 315.8 by Ord. 37-02, File No. 001262, App. 4/5/2002; amended by Ord. 219-06, File No. 051685, App. 8/10/2006; Ord. 101-07, File No. 060529, App. 5/4/2007; Ord. 198-07, File No. 070444, App. 8/10/2007; redesignated and amended by Ord. 108-10, File No. 091275, App. 5/25/2010; amended by Ord. 312-10, File No. 100046, App. 12/23/2010; Ord. 62-13
, File No. 121162, App. 4/10/2013, Eff. 5/10/2013; Ord. 210-21, File No. 210868, App. 11/19/2021, Eff. 12/20/2021; Ord. 155-22, File No. 220262, App. 7/21/2022, Eff. 8/21/2022)
AMENDMENT HISTORY
(a) Findings.
San Francisco continues to experience a housing crisis that requires a broad spectrum of land use and financing tools to address. The 2022 Housing Element Update of the City’s General Plan calls for 40% of all new housing production to be affordable for lower income
households below 80% of area median income and 17% of new housing affordable to be built for moderate/middle income households up to 120% of area median income. San Francisco’s inclusionary housing program, which requires housing developers to provide affordable units as part of their projects, is a critical component of the City’s programs to expand affordable housing options. The Inclusionary Housing program is one of the City’s tools for increasing affordable housing dedicated to lower income San Franciscans without using public subsidies, and in particular it is a useful tool for creating any affordable housing to meet the growing need of moderate/middle income households.
The City adopted an Inclusionary Housing ordinance in 2002 that set requirements on market rate development to include affordable units at 12% of the total for the first time. The inclusionary program has successfully resulted in more than 3,330 units of below-market, permanently affordable housing since its adoption. The City prepared a Nexus Study in 2007 in support of the program, which was updated in 2016. The reports demonstrated the necessary affordable housing in order to mitigate the impacts of market rate housing1 The City’s inclusionary housing requirements, which have been set at various levels since 2002 in response to changing economic conditions, are codified in Section 415 of the Planning Code.
The purpose of this Section 415.10 is to provide for the ongoing study of how to set inclusionary housing obligations in San Francisco at the maximum economically feasible amount in market rate housing development to create housing for low and moderate/middle income households, at the income levels set forth in Section 415.10(d), and with guidance from the City’s Nexus Study, which shall be periodically updated.
(b) Triennial Economic Feasibility Analysis. With the support of independent con- sultants as deemed appropriate by the Controller and with advice on setting qualifications and criteria for consultant selection from the Inclu- sionary Housing Technical Advisory Committee established in Administrative Code Chapter 5, Article XXIX, the Controller, in consultation with relevant City Departments and the Inclusionary Housing Technical Advisory Committee, shall conduct a feasibility study of the City’s inclusion- ary affordable housing obligations set forth in Planning Code Section 415 et seq., including but not limited to the affordable housing fee and On- site and Off-site Alternatives, and shall submit a report to the Board of Supervisors by July 31, 2016 and by October 31 for subsequent years. Thereafter, the Controller, in consultation with the Department and the Inclusionary Housing Technical Advisory Committee, shall repeat this process at least every 36 months, or more fre- quently as deemed necessary by the Controller in response to a significant shift in economic or market conditions.
(c) Elements of the Economic Feasibility Analysis. The economic feasibility analysis required by subsection (b) of this Section 415.10 shall include sensitivity analyses of key economic parameters that can vary significantly over time, such as, but not limited to: interest rates; capitalization rates; equity return rates; land prices; construction costs; project scale, available state and federal housing finance programs including Low Income Housing Tax Credits readily available for market rate housing; tax-exempt bond financing; Federal Housing Administration and U.S. Department of Housing and Urban Development mortgage insurance; available City or local housing finance programs, such as Enhanced Infrastructure District (EIFD) and tax increments; zoning changes that increase or decrease development potential; variable City exactions, including community benefit fees, capacity charges, community facilities districts; the value of state density bonus, concessions and incentives under California Government Code Section 65915 and any other state law that confers value to development and which project sponsors may attempt to avail themselves of and public-private partnership development agreements where applicable and other factors as deemed reasonably relevant.
(d) Report to Board of Supervisors. The Board of Supervisors may review the feasibility analyses, as well as the periodic updates to the City’s Nexus Study evaluating the necessary af- fordable housing in order to mitigate the impacts of market rate housing. The Board of Supervisors will review the feasibility analyses within three months of completion and may consider legislative amendments to the City’s Inclusionary Housing in-lieu fees, On-site or Off-site Alternatives, and in so doing will seek consultation from the Planning Commission, adjusting levels of inclusionary or affordable housing obligations and income levels up to maximums as defined in Section 415.2, based on the feasibility analyses, with the objective of maximizing affordable Inclusionary Housing in market rate housing production, and with guidance from the City’s Nexus Study. Any adjustment in income levels shall be adjusted commensurate with the percentage of units required so that the obligation for inclusionary housing is not reduced by any change in income levels. The Board of Supervisors may also utilize the Nexus Study in considering legislative amendments to the Inclusionary Housing requirements. Updates to the City’s Inclusionary Housing requirements shall address affordable housing fees, On-site affordable housing and Off-site affordable housing, as well as the provision of affordable housing available to low-income households at or below 55% of Area Median Income for Rental Units and up to 80% of Area Median Income for Owned Units, and moderate/middle-income households from 80% to 120% of Area Median Income.
(Added by Ord. 76-16
, File No. 160255, App. 5/13/2016, Eff. 6/12/2016; amended by Ord. 158-17, File No. 161351, App. 7/27/2017, Eff. 8/26/2017; Ord. 210-21, File No. 210868, App. 11/19/2021, Eff. 12/20/2021; Ord. 187-23, File No. 230769, App. 9/14/2023, Eff. 10/15/2023, Oper. 11/1/2023; Ord. 201-23, File No. 230855, App. 10/12/2023, Eff. 11/12/2023, Oper. 11/1/2023)
AMENDMENT HISTORY
If any subsection, sentence, clause, phrase, or word of Sections 415.1 et seq., or any application thereof to any person or circumstance, is held to be invalid or unconstitutional by a decision of a court of competent jurisdiction, such decision shall not affect the validity of the remaining portions or applications of the Section. The Board of Supervisors hereby declares that it would have passed Sections 415.1 et seq. and each and every subsection, sentence, clause, phrase, and word not declared invalid or unconstitutional without regard to whether any other portion of Sections 415.1 et seq. or application thereof would be subsequently declared invalid or unconstitutional.
(Added by Ord. 158-17, File No. 161351, App. 7/27/2017, Eff. 8/26/2017)
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