(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