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Mayor Lee & Supervisor Farrell Introduce Legislation to Amend Inclusionary Housing Ordinance to Build More Affordable Housing Faster

Speeding Production of Needed Affordable Housing Helps Meet & Exceed Mayor’s Goal of 10,000 Permanently Affordable Units by 2020 to Address Housing Crisis

Mayor Edwin M. Lee with Supervisor Mark Farrell introduced legislation at the Board of Supervisors to make changes to the City’s Inclusionary Housing Ordinance to speed up production of affordable housing in San Francisco for low and middle income families. The legislation, part of the Mayor’s Blueprint to 10,000 announced last week that sets forth a blueprint to provide more than 10,000 permanently affordable homes to families and residents by 2020, will help the City better meet the needs of low and middle income families who need housing.  

“Making sure San Francisco remains affordable starts with housing,” said Mayor Lee. “With this clear blueprint of making more than 10,000 affordable homes available to low and middle income families and residents, we will increase production of affordable housing and increase affordability for our City’s families. The proposed amendments to the Inclusionary Housing Ordinance resulted from recommendations from my Housing Working Group last year and will incentivize and speed up the production of affordable homes in our City’s growing neighborhoods.”

“This package of reforms and updates to our City’s inclusionary housing program offer real solutions to address our housing shortage and crisis,” said Supervisor Farrell. “We need to implement policies that provide the right incentives and opportunities to build more housing – especially affordable housing – as quickly as we can, and this package will certainly help that vision materialize.”

The package of amendments included in the draft Inclusionary Housing Ordinance update include:

•    Creation of a “Dial.” The draft Ordinance adds an option to allow a Project Sponsor to increase the targeted pricing and Area Median Income (AMI) level of on- or off-site units in exchange for providing more units.  For rental units, sponsors will be able to dial up from 55 percent AMI to 70 percent or 90 percent AMI, in exchange for a higher percentage of units.  For ownership units, sponsors may choose to dial up from 90 percent to 120 percent AMI, in exchange for more units. (Sections 415.6(e)(4) and Section 415.7(f)(4).
•    Addition of a “Small Sites” Alternative. Currently, the Inclusionary Housing requirement may be satisfied through the provision of units on- or off-site (and in some zoning districts, land may be dedicated) instead of paying the Inclusionary Housing Fee. The draft Ordinance adds an alternative in which developers of small projects have the option to direct their fee toward the acquisition of rental buildings at risk of conversion to market in the neighborhood of the principal project. (Section 415.7(A)).
•    Procedures for Implementing the Offsite alternative. The draft Ordinance includes a set of amendments that aim to strengthen the Offsite alternative. Changes include:
o    Geography.  The area in which an off-site project may be located in relation to the principal project has been expanded.  Off-site projects may be located within one and ¼ mile of the market rate project, or within the same Planning Department-defined neighborhood. (Section 415.7(c)).
o    Timing. The offsite building may be completed one year after the principal project is completed, rather than at the same time or before the market rate project receives its First Certificate of Occupancy. If the offsite project is constructed by a nonprofit housing developer, that timeline may be further extended to two years (with the option of an additional one year extension) after the completion of the market rate development. (Section 415.7(b)).
o    Square Footage. Offsite projects constructed by a nonprofit housing developer may satisfy the offsite requirement based on square footage, rather than based on the total unit count of the principal project.  (Section 415.7(a)(2)).
o    Pricing for Offsite Ownership Units. Currently, ownership units provided onsite are priced to be affordable to households that earn 90 percent of AMI, while ownership units provided offsite units are priced lower, at a price affordable to households earning 70 percent of AMI. The amendment would standardize the pricing of ownership units as affordable to households earning 90 percent AMI in all cases.
•    Additional amendments to the requirements of the Offsite Alternative include removing the increased requirement for offsite projects that use non-competitive Low Income Housing Tax Credits or bond financing.  Included in the package of amendments to Article 4 of the Planning Code are non-substantive changes intended to clarify requirements, definitions, and streamline procedures.  

The package of amendments is the result of work done under the umbrella of the Mayor’s Housing Working Group, convened by Mayor Lee in 2014. The goal of the group was to implement changes to help bring additional affordable units online quickly, and the focus of the Legislative Subcommittee was to create and to strengthen alternatives to paying the Inclusionary Housing Fee. The Legislative Subcommittee was comprised of stakeholders who included market rate and affordable housing developers, advocates, property managers, and city staff. Specific components were developed with the benefit of economic analysis and modeling conducted by Seifel Consulting, SPUR’s Housing Board, and Council of Community Housing Organizations (CCHO) staff. The result of the work is a set of amendments to Article 4 of the Planning Code that add alternatives to paying the Inclusionary Housing Fee, streamline procedures related to the Off-Site alternative, and make a number of other clarifying and procedural changes.  

The Mayor’s Blueprint to 10,000 requires the introduction of five critical pieces of affordable housing legislation throughout the month of September including rehabilitating public housing, preserving affordable housing, stabilizing neighborhoods by keeping people in their homes, and keeping neighbors living in their communities, building more affordable units within market rate developments and accelerating and incentivizing the production of more permanently affordable units.  

These policies and programs will work in concert with the $310 million affordable housing bond that does not raise property taxes proposed for approval by voters in November to ensure delivery of at least 10,780 units by 2020, if not more. Mayor Lee is committed to using every tool, including leveraging local, State, and Federal resources, to build more housing. Mayor Lee’s planned $2.7 billion investment from the Housing Trust Fund, tax increment and fees over the next 20 years, make up the Mayor’s long-term plan to fight the affordability crisis and shift the balance of housing in the City so that San Francisco remains affordable for low and middle income families over the long term.