On Monday June 19, the Land Use Committee of the Board of Supervisors introduced a revised version of the compromise Inclusionary Affordable Housing legislation that Supervisors Breed, Kim, Peskin, Safai, and Tang introduced in May. We expect the legislation to be heard again, likely for the final time, at the Land Use Committee on July 10th. Any additional clarifications and/or potential amendments should be addressed prior to or at the July 10th hearing, before the Committee forwards the legislation on to the full Board of Supervisors for a vote, possibly as early as July 11.
After Prop. C passed in June 2016, the Board of Supervisors adopted trailing legislation (Ord. 76-16) updating the affordable housing requirements, which resulted in the current Citywide affordable housing scheme—with a 25% on-site requirement or a 33% fee/off-site requirement for projects with 25+ units, and a lower 12% on-site or 20% fee/off-site requirements for projects with 10-24 units. Prop. C also called for the City Controller’s Office to prepare an analysis to determine the maximum feasible inclusionary housing requirements. The Controller presented its preliminary findings in the fall of 2016 and final recommendations in February 2017.
Over the last few months the Planning Commission and Board of Supervisors have heard two competing versions of updated affordable housing legislation—the Peskin-Kim proposal and the Safai-Breed-Tang proposal. Last month, compromise legislation was introduced by the five Supervisors, and that version of the legislation was further amended at the Land Use Committee meeting on June 19. The Compromise legislation is pending under BOS File no. 161351 (and is available here: https://sfgov.legistar.com/View.ashx?M= F&ID=5243 881&GUID=CFA3750B-25F3-4C15-9C57-20E691DE66A2).
Under the current version of the legislation, projects that have submitted an Environmental Evaluation Application (“EE Application”) before January 1, 2013 are subject to the old 12% on-site/20% fee and off-site rates. For projects that submit an EE Application between January 1, 2013 and January 12, 2016, the existing grandfathered rates apply, set forth in Planning Code Section 415.3(b).
Notably, the amended legislation adds a requirement that a project sponsor obtain a building or site permit within 30 months of project approval. Projects that fail to procure a permit within that timeframe would be subject to the inclusionary affordable housing requirements applicable at the time such permit is obtained.
Affordable Housing In Lieu Fee:
As currently proposed, for 10-24 unit projects, a 20% in-lieu fee requirement applies. Projects with 25 or more units that wish to pay the fee are subject to an amount equivalent to 33% if ownership units or 30% if rental units. Each year, by January 1, the City (via the Mayor’s Office of Housing and Community Development (MOHCD)) would be required “to adjust the fee based on the cost of constructing housing.”
The affordable housing fee would also be imposed on any additional units or square footage authorized pursuant to the State Density Bonus Law (excluding projects that filed a complete EE Application by January 1, 2016).
Affordable On-Site Unit Option:
10-24 unit projects would continue to be subject to a 12% on-site requirement, with sales prices at 80% AMI or less. Rental units would need to be offered at a rent set at 55% AMI or less. Starting on January 1, 2018, the City (via MOHCD) would increase the on-site requirements by 0.5% each year, until the requirement maxes out at 15%.
Projects with 25 units or more would be subject to the following requirements:
- On-Site Ownership Units: 20%, of which:
- 10% to be affordable to low income households (price set at 80% AMI or less);
- 5% to be affordable to moderate income households (price set at 105% AMI or less);
- 5% to be affordable to middle-income households (price set at 130% AMI or less); and
- Ownership units to be offered at 130% AMI or above may not be studio units.
- On-Site Rental Units: 18%, of which:
- 10% to be affordable to low income households (rent set at 55% AMI or less);
- 4% to be affordable to moderate income households (rent set at 80% AMI or less);
- 4% to be affordable to middle income households (rent set at 110% AMI or less); and
- Rental units to be offered at 110% AMI or above may not be studio units.
Regardless of these rates, the maximum affordable rent or sales price may not be higher than 20% below the median rental or sales price for the neighborhood in which the project is located, defined in accordance with the American Community Survey Neighborhood Profile Boundaries Map.
For Projects with at least 25 units, the on-site requirement will increase by 1% each year for two consecutive years, beginning on January 1, 2018. Starting January 1, 2020, the required on-site requirement will increase by 0.5% each year, until the requirement reaches 26% for ownership units and 24% for rental units.
The amended legislation further requires the Planning Department and Controller to do a study of areas where an Area Plan, Special Use District, or other re-zoning is being considered or has been adopted after January 1, 2015, in order to determine whether a higher on-site requirement is feasible on sites that have received a 20% or greater increase in developable residential gross floor area or a 35% or greater increase in residential density.
Affordable Off-Site Option:
10-24 unit projects would be subject to a 20% off-site requirement, with the sales prices at 80% AMI or less. Rental units would need to be offered at a rent set at 55% AMI or less.
Projects with 25 units or more would be subject to the following requirements:
- Off-Site Ownership Units: 33%, of which:
- 18% to be affordable to low income households (price set at 80% AMI or less);
- 8% to be affordable to moderate income households (price set at 105% AMI or less);
- 7% to be affordable to middle-income households (price set at 130% AMI or less); and
- Ownership units offered at 100% AMI or above may not be studio units.
- Off-Site Rental Units: 30%, of which:
- 18% to be affordable to low income households (rent set at 55% AMI or less);
- 6% to be affordable to moderate income households (rent set at 80% AMI or less);
- 6% to be affordable to middle income households (rent set at 110% AMI or less); and
- Rental units offered at 100% AMI or above may not be studio units.
If a project is located within the Eastern Neighborhoods-Mission Plan Area, the North of Market Residential Special Use District Subarea 1 or Subarea 2, or the SOMA NCT (Neighborhood Commercial Transit) District, then the project is subject to the following requirements:
- Fee or Off-Site: 30%
- On-Site Rental: 25% (with 15% affordable to low-income households, 5% affordable to moderate-income households and 5% affordable to middle-income households)
- On-Site Ownership: 27% (with 15% of the on-site affordable units affordable to low-income households, 6% affordable to moderate-income households, and 6% affordable to middle-income households)
Dwelling Unit Mix:
The amended legislation also proposes a new Planning Code Section 207.7 aimed at creating additional family-sized housing. The new provision would apply to projects proposing at least 10 new units, and would require that 25% of the units contain at least 2 bedrooms and 10% of the units contain at least 3 bedrooms. Additionally, no more than 30% of the units may be studios.
These dwelling unit mix requirements may be waived or modified with Conditional Use Authorization or pursuant to a Large Project Authorization. They would not apply in RTO, RCD, NCT, DTR, Eastern Neighborhoods Mixed Use Districts, or in an area or Special Use District with higher specific bedroom mix requirements. The requirements would also not apply to projects where 100% of the units are affordable units pursuant to Section 206.3, group housing units, BMR units pursuant to Section 406(b)(1), SRO units, units for seniors or people with disabilities, or student housing projects affiliated with an institution with an institutional master plan on file with the City. Section 207.7 would also not apply to any project that submitted a complete EE Application by January 12, 2016, or which has received project approval by June 15, 2017.
We expect the version of the legislation with the new Section 207.7 to be heard by the Planning Commission on July 6 and by the Land Use Committee on July 10, before being sent to the full Board of Supervisors for approval.
 The current version of the legislation amends the fee/off-site grandfathered requirement to provide that: “for projects proposing buildings over 120 feet in height . . . except for buildings up to 130 feet in height located both within a special use district and within a height and bulk district that allows a maximum building height of 130 feet, such development projects shall pay a fee or provide off-site housing in an amount equivalent to 30% [rather than 33%] of the number of units constructed on-site.”
The issues discussed in this update are not intended to be legal advice and no attorney-client relationship is established with the recipient. Readers should consult with legal counsel before relying on any of the information contained herein. Reuben, Junius & Rose, LLP is a full service real estate law firm. We specialize in land use, development and entitlement law. We also provide a wide range of transactional services, including leasing, acquisitions and sales, formation of limited liability companies and other entities, lending/workout assistance, subdivision and condominium work.