SF Panel Recommends Lowering Affordable Housing Requirement

San Francisco should cut developers’ taxes and fees, project costs and the number of required affordable homes.

Those were among the nearly dozen recommendations of a city panel to encourage home construction across the city, the San Francisco Business Times reported.

The Inclusionary Housing Technical Advisory Committee meets every three years to guide inclusionary zoning requirements — or how much affordable housing should be included in multifamily projects of more than 10 units.

The panel, which refrained from endorsing any particular strategy, will forward its 11 recommendations to the Board of Supervisors. Mayor London Breed has launched legislation to encourage faster home construction.

Its recommendations, according to the Business Times, include:

Issuing city-sponsored subsidies, grants or tax-exempt bond financing, including subsidies that would be equivalent to a reduction or a temporary abatement in property taxes for a certain period of time;
Lowering on-site inclusionary percentages and reviewing the level of affordability required;
Altering inclusionary requirements to better align with state density bonus law;
Phasing in inclusionary housing units over a set period of time based on pre-established performance benchmarks;
Issuing bonds to fund the inclusion of affordable units within market-rate projects;
Reducing city-imposed impact fees;
Deferring or spreading out timing for payment of city-imposed fees;
Reducing or eliminating city-imposed fees for state density bonus units;
Reducing or eliminating city-imposed transfer tax;
Revising city-specific building code requirements to reduce project costs; and
Evaluating and promoting alternative production types, like modular units or mass timber, to achieve cost savings.

Interest rate hikes and three years of soaring construction costs have made the development of market-rate apartment and condominium buildings of nearly all sizes unfeasible for developers, the Controller’s Office told the inclusionary committee last month.

San Francisco must find room for 82,000 homes – including 46,000 affordable units – over the next eight years to reach its state-mandated housing goal.

Last month, the committee discussed lowering the city’s affordable housing requirements from current rates of between 15 percent and 23.5 percent to as low as 12 percent, according to the Business Times. The Controller’s Office put the current rate between between 21.5 percent and 23.5 percent.

But even that may not be enough to encourage growth, with apartment projects in the city too costly to pencil out for developers, according to the city’s chief economist.

Some committee members suggested the city should lower its inclusionary requirements even further. Others said the committee’s goal should be to find ways to bolster housing production without chipping away at affordable housing requirements, balancing feasibility with affordability.

— Dana Bartholomew