Planning Commission - Regular Meeting

Okay, good afternoon and welcome to the San Francisco Planning Commission hearing for Thursday, May 28th, 2026. When we reach the item you're interested in speaking to, we ask that you line up on the screen side of the room or to your right. Each speaker will be allowed up to three minutes. And when you have 30 seconds remaining, you will hear a chime indicating that your time is almost up. When your allotted time is reached, there is a second chime and I will announce that your time is up and take the next person queued to speak. There is a very convenient timer on the podium where you can see how much time you have left and watch your time tick down. Please speak clearly and slowly and if you care to, state your name for the record. I ask that we silence any mobile devices that may sound off during these proceedings. And finally, I will remind members of the public that the Commission does not tolerate any disruption or outbursts of any kind. At this time, I'd like to take roll. Commission President Campbell? Here. Commission Vice President Moore? Here. Commissioner Braun? Here. Commissioner McGarry? And Commissioner Soe? Present. And Commissioner Williams?

Here.

Thank you, Commissioners. First on your agenda is consideration of items proposed for continuance at the time of issuance. And to date, there are no items proposed for continuance. We can move on to your consent calendar. All matters listed here under constituted consent calendar are considered to be routine by the Planning Commission and may be acted upon by a single roll call vote. will be no separate discussion of these items unless a member of the commission the public or staff so requests in which event the matter shall be removed from the consent calendar and considered as a separate item at this or a future hearing item one case number twenty twenty six hyphen zero zero one zero two four cua fifteen sixty nine slope boulevard conditional use authorization and item two case number twenty twenty six hyphen zero zero two nine nine eight cua at twenty two forty three mission street conditional use authorization members of the public this is your opportunity to request that either of these two consent calendar items be pulled off and Heard under the regular calendar today or at a future hearing date you need to come forward seeing none Public comment is closed and your consent calendar is now before you commissioners Vice president more move to approve second Thank You commissioners on that motion to approve items on consent Commissioner McGarry Commissioner So? Aye. Commissioner Williams? Aye. Commissioner Braun? Aye. Commissioner Moore?

Aye.

And Commissioner President Campbell?

Aye.

So moved, commissioners. That motion passes unanimously 6 to 0. Placing us under commission matters for item 3, the land acknowledgment.

The Commission acknowledges that we are on the unceded ancestral homeland of the Ramaytush Ohlone who are the original inhabitants of the San Francisco Peninsula. As the indigenous stewards of this land and in accordance with their traditions, the Ramaytush Ohlone have never ceded, lost, nor forgotten their responsibilities as the caretakers of this place, as well as for all peoples who reside in their traditional territory. As guests, we recognize that we benefit from living and working on their traditional homeland. We wish to pay our respects by acknowledging the ancestors, elders, and relatives of the Ramatish Ohlone community and by affirming their sovereign rights as First Peoples.

Thank you. Item four, Commission comments and questions. OK, seeing no requests to speak from members of the Commission, we can move on to Department matters. Item five, Director's Announcements.

Commissioners, I don't think either Kate or I have much to report. Is it on? Yes.

I think neither Kate or I have much to report.

Very good. And item six, review of past events at the Board of Supervisors, Board of Appeals, and Historic Preservation Commission. No reports either.

So.

General public comment. At this time, members of the public may address the Commission on items of interest to the public that are within the subject matter jurisdiction of the Commission except agenda items. With respect to agenda items, your opportunity to address the Commission will be afforded when the item is reached in the meeting. When the number of speakers exceed the 15-minute limit, general public comment may be moved to the end of the agenda.

Thanks for the time. There should have been an item to report from the Board of Appeals last night, but it was canceled because they figured out at the last minute that AB 114 applied, and they shouldn't have taken the appeal. And this was a project that had a CUA. It was tantamount to demolition. It was approved. Only two of you who are sitting up there now were here when that was approved. It said 248 Valley. If I can have the overhead, please, very quickly. OK, so this is from the appellant's brief. And this is looking towards the rear of the lot from Valley. And note that little thing there. OK, this is the rear. And here is the house as it was, 248 Valley. And this was the wall that was supposed to be preserved. 15% total vertical element was supposed to be retained. 40% of this wall was to be retained. 60% was to be gone. As you can see, it was flat-lotted. So what was the problem? Well, first of all, the neighbor was terribly harassed by what he told me. And the CUA condition 16 was never implemented. There was no community liaison until the other night. Just so you can see the demo calcs, you see I'm not crazy.

There they are.

See, failed all three except the vertical, which was 88%.

OK, what the permit holder wanted, and what I totally agree with, was the confusion over the permits. And this has come up before, and I'm worried it'll come up again. So what's the problem? Form 3 was given by DBI. Form 3, application for building permit additions, alterations, or repairs. The permit holder had no clue that there was supposed to be a second unit, and that was his beef. There should have been a demolition permit. It was tantamount to demolition. Actually, the thing was flat lot, as you can see. Here is a permit, a demolition permit for another project in Noe Valley on 24th Street that was approved as a full flat lot. You can see it's form six, application for demolition permit. Here is the building permit that went along with it. Form 2, application for building permit. Clear cut. Same thing. No difference. 10 amounts of demolition is a demolition. That's just the way it is. I'm very concerned about this going forward. This happened before. I don't think this should happen in the future under the tenant protection ordinance. There's a project now. I'll talk about it later during the affordability thing. But... I don't understand why, especially now that planning department is doing the intake, that you're not making sure, the planners are not making sure at the intake that a demolition permit and a building permit is issued when something exceeds the demo calcs. or it's flat-lotted. It's the same thing. And these projects, these are both owned by two LLCs. The entitlement was sold. And as I said at the CUA, I'm going to stop in a second, at the CUA hearing, and there was no communication with the neighbor.

Thank you, Ms. Shudish. That is your time.

You all know what I'm talking about.

We've heard it before. Oh, yeah, you have. Ten years.

Now 11.

Last call for general public comment. You need to come forward. Seeing none, general public comment is closed. And we can move on to the regular calendar for item 7, case number 2026-003786, PCA, the Inclusionary Affordable Housing Program and Development Impact Fees. This is an informational presentation.

Thank you, John.

Good afternoon, President Campbell and members of the Commission, Ada Tan, Department staff. We are here to provide information on proposed updates to the Inclusionary Affordable Housing Program and development impact fee reductions. I am joined by our colleagues Sheila Nicolopoulos with the Mayor's Office of Housing Community Development, Ted Egan with the Comptroller's Office, and Jacob Bintliff with the Office of Economic and Workforce Development. The city's inclusionary program under Planning Code Section 415 requires market rate housing projects with 10 or more units to comply with the program requirements, which can be satisfied by providing below market rate units on-site, payment of an in lieu fee, units provided off-site, or through land dedication if the code permits. The inclusionary program was formalized in 2002, and the rates have changed over time. Previously, changes to the rates required a charter amendment. In 2016, voters approved Proposition C, which allowed the city to adjust the requirements by ordinance. The Inclusionary Housing Technical Advisory Committee, TAC, was also established. The TAC met in 2017, 2023, and again earlier this year. Temporary inclusionary rates have been in place since 2023 and are set to expire on November 1st, 2026. On May 19th, Mayor Lurie and Supervisor Melgar introduced legislation to amend the inclusionary requirements and to reduce development impact fees under board file number 260538. The intent of today's presentation is to provide an overview of the changes proposed under the ordinance. This chart shows the overall housing production trends since 2006. There has been a significant decline in overall production since the pandemic. When looking at market rate units only, which are shown in orange on this chart, annual production has declined from more than 3,000 units in 2020 to only 924 market rate units in 2025, which is a 70% decrease. I'd now like to invite Sheila up to speak. There she is. Right on time.

Good afternoon. I'm Sheila Nikolopoulos, Director of Policy and Legislative Affairs with the Mayor's Office of Housing and Community Development. So on this slide, it highlights our development trends over the years. And out of MOHCD's total affordable housing portfolio, oh, thank you, Jacob. Of 35,000 units, a total of 4,600, or 13%, represent inclusionary housing units, whether from the planning code section 415 requirement, bond finance inclusionary, or individually negotiated development agreements or other projects. The orange, yellow, and red bars on this chart are those various categories of inclusionary. When looking only at the inclusionary units required under section 415 of the planning code, these units represent 9% of the total affordable housing portfolio. So inclusionary has been meaningful, but a relatively small portion of our overall affordable housing production. And since the pandemic, inclusionary units have made up an even smaller share of the overall portfolio. Since 2020, just 6% of total affordable units came from inclusionary program, almost half the rate that we saw during the 2010s, when there was more robust overall housing development. And inclusionary provided roughly 13% of all affordable. Excuse me.

Ma'am, would you be so kind to speak a little slower? Oh, certainly. Thank you. I was speed walking over here, so I'm still in that mode. There are lots of people who hear the recorded version, and they can't hear. Yes. Thank you.

On this next slide, we see the inclusionary fee revenue. We've seen a similar trend in the amount of fee revenue that MoCD receives from an inclusionary program. As you can see here, the annual fee revenue has declined sharply when compared to the years immediately prior to the pandemic, dropping from $31 million in fiscal years 2017-18 through 19-20 to a post-pandemic average of $2.1 million per year, a 94% decrease. I will be here to answer questions as well as some other staff from OCD, and I'm going to pass over to the Comptroller's Office now.

Thank you, Sheila, and good afternoon, commissioners. My name is Ted Egan with the Comptroller's Office. As Ada mentioned, since 2016, the Comptroller's Office has had the responsibility of convening the TAC and making recommendations related to inclusionary requirements in the city. And we've recently completed the 2026 iteration of this triennial responsibility. Ada also mentioned that based on our 2023 study, the city subsequently made temporary reductions to the requirement for so-called pipeline projects, which were projects that had been in the works prior to 2023, interim projects, which were introduced after that period but before current present, And these temporary reductions are due to expire on November 1st of this year, at which point so-called current requirements, where essentially the pre-2023 requirements, will apply. And I call this out mainly because I'm going to share with you results that use these words, pipeline, interim, and current, and I want you to understand what they're referring to. Other than that, I'm just going to briefly describe the process we went through and some of our findings. As we've done with two previous reviews, we contracted with Century Urban, a local land use economics firm, and they were assisted by TBD Consultants, a cost estimation firm, to help get the most current and relevant market and construction cost information. The TAC, which Ada referred to, is an eight-member body, four of whom are appointed by the mayor and four of whom are appointed by the Board of Supervisors. The TAC convened in December of last year per a code requirement and also had three meetings this year. On the final TAC meeting on April 8, the TAC unanimously endorsed a set of recommendations that I will briefly review at the end of my slides. The consultants, Century Urban with TBD, were responsible for producing the feasibility analysis, and they used a very similar methodology to what they used three years ago in the 2023 study, looking at five construction prototypes, a low-rise larger project, mid-rise, 135-foot high-rise, 240-foot five-foot high-rise, and a small 13-unit low-rise project. They looked at both condominiums and apartments in terms of producing a feasibility model and considered both the base case and projects that would have used the state density bonus. Financial feasibility of each of these prototypes models was evaluated under Current conditions, as I just defined it, pipeline conditions, interim conditions for on-site, also a case in which we're using the on-site rates assuming the density bonus was taken, and an interim case in which the in lieu fee was paid instead of on-site requirements. And finally, a hypothetical 100% market rate project that had no inclusionary requirements. Of course, there is no such case in real life, but this was a hypothetical case. The consultants used current market data and current construction information for project revenues and costs and calculated, as is typical in this type of work, a residual land value, which is essentially what could the project afford to pay for land given its expected revenues and costs. And the real threshold feasibility question is, does this residual land value per unit, which a project can support, how does that line up with the actual cost of land, which is currently, according to the consultants, in the range of $60,000 to $70,000 per unit? Projects that have an RLV below that number are not considered financially feasible. In terms of our results, these are the findings for the apartment cases. And I would just make an immediate note that parentheses here means a negative number, and we're looking at the residual land value for each case. So the immediate thing you see here is for all of the flavors of inclusionary requirements, cases one through five or rows one through five, the residual land value is negative, which means these projects would currently be financially infeasible even if land was free. you would not produce this project. And in fact, for the apartments, even under a hypothetical 100% market rate project that has no inclusionary requirements, the residual land value is negative for each case. Again, meaning even if land was free, you would not produce 100% market rate project for these undercurrent conditions. For condominiums, the results are very similar. The residual land value is negative for all of the current interim pipeline requirements. It is negative in every case but one for the hypothetical 100% market rate project. The only case where it's positive is the mid-rise condominium case B. where the residual land value is $60,000. That is at the low range of what a project might afford to pay and be feasible. So what this is saying is only that project is even borderline feasible and only with zero inclusionary housing requirements. Everything else has a negative land value, residual land value, even with zero inclusionary requirements. And so on this basis, the controller recommended to the TAC or suggested to the TAC that the maximum inclusionary requirement that projects could support is zero, and that projects or requirements that significantly exceeded zero risked reducing market rate housing feasibility without corresponding growth in affordable housing, inclusionary housing production. This is just a comparison of the residual land values for each of the cases I just shared for the hypothetical 100% market rate project under the current study, and then how that has changed since our 2023 study, which used identical prototypes. And you can see all of them are zero, except for that one case at 60,000. And all of them have been significantly negatively impacted since the 2023 study. This is largely due to the fact that condominium prices have declined in the city since 2023. Construction prices have risen. And while rents have grown in the city for the past year or year and a half, that has not been enough to make the math work for market rate apartment production. I will now just briefly summarize some of the key, I won't read all of these, but I will summarize some of the key recommendations that the TAC decided upon. And I would remind you these were unanimously decided by the eight members of the TAC. There was an agreement that the on-site requirements should be set at 5% going forward if there is a consensus measure that establishes an unaffordable housing source to be placed on the November 26 ballot. If there is no consensus measure, the requirements should be set at 10%. Secondly, the TAC recommended that on-site requirements should be identical for apartment and condominium projects. That was also the case in the temporary reductions. The recommendation five, the TAC recommended eliminating requirements for small projects between 10 and 24 units. And also lastly, number eight, the TAC recommended reducing non-inclusionary development impact fees by 67%. So that summarizes our process, our findings, and the recommendations of the TAC. I will be here if you have further questions at the end. Thank you.

Good afternoon, commissioners. Jacob Bentliff with the Office of Economic and Workforce Development here on behalf of the mayor's office. So as you just heard, the item before you is the product of a robust and thoughtful discussion based on data that has been underway since last year and concluded at the end of April. The ordinance before you represents one part of those recommendations, as you just heard, which are to respond to the findings of the controller's feasibility analysis by making significant reductions to the city's inclusionary housing and development impact fee requirements. As Ted mentioned, this was also coupled with a recommendation to establish a recurring, predictable local source of funding for affordable housing. While that item is not before you today, I want to make clear that the city is moving ahead full steam ahead on that item as well. So specifically, last week, Supervisor Melgar introduced a ballot measure to expand and renew the city's existing affordable housing trust fund with the mayor's full support and the co-sponsorship of a majority of the Board of Supervisors. Let me provide a couple of details on that measure because you won't hear about it in as much depth in the presentation. The Affordable Housing Trust Fund currently provides about $50 million a year for affordable housing production and preservation and is set to expire in 2043. The proposed November ballot measure would increase the fund to an annual amount of $125 million per year using a formula based on the growth in the city's overall tax base. Specifically, each year we would put 20% of the property tax revenue that results in the growth of the city's overall assessed value into the fund until it reaches the $125 million target. We project that to take about 10 years, after which the fund will grow at the same pace as the city's overall general fund, up to 3% per year, until 2058, when it would sunset. Over this 30-year period, we project the city's annual baseline funding for affordable housing will roughly triple from the current $50 million per year to about $160 million per year, which will add up to an additional $3 billion for affordable housing over the next 30 years. Critically, during those early years when the fund is gradually increasing, the city would be able to issue revenue bonds against this new revenue stream so that we'll be able to fund affordable housing production in the near term while we're waiting for that funding increase to phase in. This will start with a $70 million bond to be issued next year specifically for affordable housing preservation. That's the Housing Trust Fund. At the same time, the mayor, along with supervisors Melgar, Dorsey, Cheryl, and Sautter, also introduced the ordinances before you today to advance three key goals that I hope you'll keep in mind as we move forward through the discussion. First and foremost, to meet our overall housing goals from the housing element, both by making new market rate housing development more feasible and through the expanded dedicated source to advance our affordable housing goals. Secondly, to incentivize the development through the family zoning plan that you all worked so hard on last year, and also our local zoning in general. The ordinance would do this in a couple of ways. First, by exempting small projects of less than 25 units from inclusionary requirements, we would make it easier to build the kind of mid-scale infill housing the family zoning plan largely envisioned throughout the city's well-resourced neighborhoods. Secondly, by setting our local inclusionary rates to be lower than the minimum amounts required under state law for the state density bonus and the various state ministerial approval programs, we'll be providing a strong incentive to use our local zoning and family zoning program. Projects would certainly still be able and welcome to use the state density bonus or ministerial programs, but to qualify for those programs, they would have to provide significantly more on-site affordable housing as set forth in state law. Finally, the ordinance is intended to significantly simplify and streamline the planning code to provide greater transparency and predictability on how inclusionary and impact fee requirements are applied, because it really shouldn't take a 10-page matrix to know what requirements your project is going to be subject to, even though it's a very good matrix. Overall, we believe this legislative package accomplishes exactly what the TAC recommended, shifting our strategy from relying on fees and inclusionary requirements imposed on new housing development that, as you saw, has significantly declined under current economic conditions to a broader-based funding source that grows in tandem with the city's overall economic growth. We recognize this is a dense and complicated item, but I hope you will agree it's one very much worth our time and discussion today. In closing, I'd like to sincerely thank your excellent planning department staff, Ada Tan, Carly Grobe, Kate Connor, Andrew Perry, our colleagues in OCD, Sheila Nicolopoulos, and Chaska Berger, as well as many others, and our deputy city attorney, Audrey Pearson, for all their work on this, and of course, our legislative partners, especially Supervisor Melgar and Jen Lowe and her staff. So with that, I'll turn it back to Ada. And of course, we'll be here for questions. Thank you.

All right. So the following slides summarize the key changes proposed under the ordinance, beginning with the rates. Many of these are consistent with the TAC recommendations that Ted mentioned earlier. The applicability threshold would increase from projects with 10 or more units to projects with 25 or more units. The current interim onsite rate is 15%, and the pipeline rate is 12%. The TAC recommended reducing the onsite rate to 5%. IF THE ORDINANCE IS NOT ADOPTED, THE RATES FOR LARGE PROJECTS WOULD INCREASE TO 18% FOR RENTAL AND 20% FOR OWNERSHIP. THE TAC ALSO RECOMMENDED REMOVING THE HIGHEST TIER, MIDDLE INCOME AND SHIFTING TO A 70-30 SPLIT BETWEEN LOW AND MODERATE INCOME. BASED ON DATA FROM 2020 TO 2025, THE MAYOR'S OFFICE OF HOUSING COMMUNITY DEVELOPMENT RECOMMENDS AN 80-20 SPLIT INSTEAD. THIS WOULD REQUIRE RENTAL PROJECTS TO PROVIDE 4% OF UNITS AT 50% AMI AND 1% AT 80% AMI. OWNERSHIP PROJECTS WOULD PROVIDE 4% OF UNITS AT 80% AMI AND 1% AT 100% AMI. WHILE THE TAC RECOMMENDED SETTING THE MODERATE INCOME OWNERSHIP TIER AT 105%, MOST CD RECOMMENDS 100% AMI TO BETTER ALIGN WITH DEMONSTRATED APPLICANT NEEDS. So as Jacob mentioned earlier, on-site inclusionary housing affects a project's eligibility for state density bonus. Projects can use their inclusionary units to qualify for additional density incentives and concessions, with larger bonuses tied to higher affordable housing levels. BECAUSE RENTAL PROJECTS ARE REQUIRED TO SERVE LOWER AMI HOUSEHOLDS, THEY TYPICALLY QUALIFY FOR GREATER BONUSES. REDUCING THE ON-SITE REQUIREMENT FROM 15% TO 5% WOULD LOWER THE AUTOMATIC DENSITY FOR RENTAL PROJECTS FROM A 50% BONUS TO 20%, AND OWNERSHIP PROJECTS WOULD NO LONGER AUTOMATICALLY QUALIFY. A LOWER INCLUSIONARY RATE COULD ALSO ENCOURAGE THE GREATER USE OF PROGRAMS LIKE HOUSING CHOICE SF, MAKING LOCAL INCENTIVES MORE ATTRACTIVE. On-site inclusionary units may also be used to qualify for state streamlining programs. SB 423 requires at least 10% of affordable housing, while AB 2011 requires between 13% to 30% on-site, depending on the tenure and the elected option. Currently, inclusionary projects provide enough affordable housing to meet these eligibility criteria. If the rate is 5%, projects will be required to provide additional affordable housing to qualify for streamlining. The current affordable housing fee rate is 20.5% for projects with 25 or more units. The TAC recommended setting the affordable housing fee rate to 10%. The off-site rate would also be 10%. Additionally, the ordinance proposes proportional reductions to home SF requirements to align with citywide on-site rates. Existing rates for home SF programs range from 20% to 30%, while the proposed rates would range from 7% to 10%, depending on the project tier. For projects located in the districts shown on this map, the current on-site rate ranges from 15 to 17.6%, with fee and off-site rates between 20 to 27%. If the proposed ordinance is adopted, projects in these areas would be subject to the citywide on-site rate of 5%, with fee and off-site rates set to 15%. The code currently only allows projects within specific areas to elect the land dedication option. The ordinance would expand the option citywide. Projects in the specific areas would be able to dedicate land with enough capacity for affordable housing equal to 15% of units on the principal site. Most projects citywide, including those in the Housing Choice SF area and well-resourced neighborhoods, would need to dedicate land equal to 10% of units on the principal site. The proposal increases the minimum site capacity to 70 units. All dedicated sites must be approved by MOCD and their agency will retain discretion to accept smaller sites. Dedicated sites must be located within one mile of the principal project, although projects located in the specific areas shown on the previous map or within a well-resourced neighborhood could dedicate land anywhere within those areas. The same location standards would apply to projects providing off-site units. The ordinance establishes requirements for how projects can take advantage of the new rates, request extensions to the performance period, or modify the method of inclusionary compliance and project tenure. The commission will need to delegate authority to the planning director or the designee to allow for administrative approval of such requests. Currently, projects may request a reduction in all impact fees except for the affordable housing fee by 33%. As Ted mentioned earlier, the TAC recommended increasing that reduction to 67%. All projects that submit a complete development application, along with pipeline projects that have been finally approved but have not been issued a first construction document, are eligible to request this reduction. The areas shown on this map are required to pay additional affordable housing fees on top of the inclusionary fee. This ordinance will eliminate the additional housing fees for these areas. 85% of assessed impact fees can be deferred to first certificate of occupancy. And for projects that propose 20% or less increase in gross floor area, those projects will keep their original fee types and the rates will be locked in at final approval. Modifications of over 20% or entitlement extensions will be fully reassessed using the fee types and rates in effect at the time of the request. Pipeline projects can receive an adjustment on unpaid balances, but no refunds will be issued for fees that have already been paid. As we mentioned earlier, the TAC meets every three years to evaluate feasibility related to inclusionary. This slide provides an overview of the vesting requirements. Projects have a three-year period to vest their approval. If a project requests an extension, the department will apply new standards related to inclusionary and impact fees, and new objective standards would be triggered. The ordinance also proposes simplification and code cleanup, including removal of language that is no longer applicable, updated definitions, and clarifications on specific topics to reflect department protocol and implementation. As of this morning, the department has received 16 letters of support for the proposed ordinance. As for the legislative timeline, the code changes related to fees will be presented to the Building Inspection Commission on June 17th. We will be before this commission again on June 18th for the Planning Code Amendment adoption vote and delegation authority. The Land Use and Transportation Committee hearing is expected to follow, and the goal is to bring this before the board for their consideration prior to the August recess. This concludes staff presentation, and we are available to answer any questions. Thank you.

Thank you. With that, we should open up public comment. Members of the public, this is your opportunity to address the commission on this proposal.

When I read this, I thought about the financial feasibility study done for the rezoning. And as I recall, what stood out to me about that was that there was no financial feasibility under the rezoning except on the 25 by 100 lots. And 25 by 100 lots are most of the lots in the neighborhoods of our city. And to follow up on my general public comment, could I have the overhead, please? This is a project that's under review currently in Noe Valley, well, Fair Oaks. You can see it's actually three units, even though it's like flats. And I want you to note those little notices there. Those are the public notices that were put on the building. That was there. And that just struck me as something that needed to be said. I mean, everyone knows it. But when you see it like that on the notice in front of the building that's going to have the work done, it says, we need affordable housing and money. And the thing that's odd about this particular project, it's been around for a while, is that it's going to be an alteration. horizontal and vertical expansion. It has demo calcs, here they are, that exceed the thresholds. So it's going to do six units. Then it's applying under SB 330. It's locked in. And it's also going to have one state density bonus. So I know we've talked about here the whole problem with SB 423 and the fact it's two to 10 units. And nobody's going to do affordable. Well, now it's even going to be more so. I mean, I guess maybe you have to, based on everyone's financial feasibility analysis. But there's going to be no affordable housing built. It's not going to happen. It's a pipe dream, a pipeline pipe dream. And I think this project is a good example of that. Another story I'll give you, since I'm telling stories, is on my block there is an A-rated building that's been basically empty for several years since the pandemic. There was a proposal to do a two-story horizontal expansion and put in an ADU. Huge, huge. Now, because of the Housing Choice Program, they're going to just use the Housing Choice Program, or they're going to try to use the Housing Choice Program, for two units. That, to me, is crazy and totally flies in the face of what the rezoning was supposed to be about. But it can happen because of the way it's done. You're going to get a lot of fancy, like the one on Valley Street, fancy high-end housing Who's going to live there? I don't know. Two units, large housing, multimillion dollars, all made by LLCs, like the one on Valley, which was from an LLC, bought the entitlement from out of town, from Sandy, Utah. That's what's going to happen. Thank you.

Hello, commissioners. First, thank you for all the work that you did on the family zoning plan last year. My name is Jugal Patel. I'm a resident of District 8. And I'm here in support of the proposed amendments to the inclusionary housing program and development impact fees. Over the last 15 years, I have lived every facet of housing insecurity in this city, from sleeping on its streets to shelters, rehabs, transitional housing, relying on housing subsidies, and now supporting myself in a rent-controlled apartment. I was lucky to find a rent-controlled room I could afford through my community. Not everyone is so fortunate. As I worked my way up from the streets, the line to support myself in this city kept moving further and further away. I tried to apply for affordable housing, but with so few units and so much need, I gave up after a while. Now I make too much for an affordable unit, and I still can't afford to live outside of rent control. I could not get an affordable unit when I qualified for one. Now that I don't, I can't afford a market rate unit. Nothing about this system is working as it should. I'm a champion for affordable housing. I understand how essential it is for our most vulnerable neighbors to build a stable life. But when affordable housing is tied to market rate development and no market rate housing is getting built, no affordable housing gets built either. The controller and the TAC have told us what we already know. Today's requirements are blocking the very homes they're meant to fund. San Francisco needs to pull every lever to get home building moving again. lowering inclusionary rates, reducing impact fees, and pairing those changes with a stronger housing trust fund. I urge the commission to support these amendments as they consider them and help build housing at every level from deeply affordable to market rate. I'm here for an abundant San Francisco. Build more homes for a San Francisco everyone can afford. Thank you.

Afternoon, Commissioners. Thank you for the hard work on the family zoning plan. My name is Nicholas Lowe. I'm a resident of District 2. I'm an adherent in support of the amendments, proposed amendments to the inclusionary program and the development impact fees. I moved to SF about 10 years ago to build a career and a life. So I've done the first part. That was hard, but it was done. The second part, though, to building a life is more difficult than anticipated. Look, now, I live by myself, which I'm in a very fortunate position to do so, having a job that pays well. But not everyone has that. And that shouldn't be something that everyone, that someone needs to have to have a life here, right? That shouldn't be exclusive to the high-wage earners in finance and tech. And every conversation with my friends in my community my age circles back to the same question. How much longer can we afford to live in a city? I want to stay, right? My community and I all want to stay. We want to plant the roots in this city, raise kids, and become an integral part of the community that we're a part of. But none of this is possible if we're all one to two rent increases away from leaving the city. And it won't be possible for even more people who come after me unless the city starts building more housing again. The controller and the tech have made the technical case in front of this commission today. And I'll make the human one. My generation would love to stay, but at this current rate of the abysmal housing building, we're not going to be able to. And like I said, staying in this city shouldn't be exclusive to the people who earn ultra-high wages, especially with the AI wave and the boom today. Lowering inclusionary rates to what is actually feasible, reducing impact fees, and pairing that with a stronger housing trust fund are the most direct ways to change that. So I urge this commission to consider and support these amendments, build the homes. Thank you.

Hello, commissioners. My name is Alex Zirbel. I live in District 5. I've lived in San Francisco for 12 years now. I'm really excited for this proposal, so I'm here in support because I think it addresses the key issue that's forcing my family, my friends and I, out of the city. Over the past five years, I've already seen two friends move out of the city to East Bay in order to start a family. The main reason they did that is for cheaper housing. I'm looking around at my current friend group, and none of them can see themselves staying in the city to raise a family. It's another about five couples. We like living in SF. We really want to stay. I especially really want to stay, but it just looks too expensive. And so it's very frustrating to feel that and then look around and see so little housing getting built and look at the data and see if that's true. So little housing is getting built. um i'm really happy that sf prioritizes subsidized housing but we i don't think we should be doing that by adding so many taxes and fees to new housing so i love that these changes go along with a stronger housing trust fund as well i would love to see us building a lot more housing in san francisco and i hope that if we do myself and my friends can stay here to raise our families

Hi, good afternoon. Thank you so much for the incredible hard work and leadership that you all bring to this. My name is Graham. I am a resident of Dubose Triangle neighborhood in District 8. I'm a local nonprofit worker, and I'm here in support today of the proposed amendments to the inclusionary affordable housing program and the revision to the impact fees. I am actually the fourth generation in my family to live in San Francisco and call the Bay Area home. And I am hoping that this city can afford me the same opportunities that I believe that they had. Unfortunately, that does feel less and less possible due to the extreme housing shortage that we have here in the city. I join many fellow members of the abundant San Francisco community, which is a grassroots network here in San Francisco of more than 300 San Francisco residents who are organized in favor of an abundant and affordable San Francisco. Together, we are here to ask this commission to place incentives for new home construction at the top of your priority list. Lowering inclusionary rates to what is actually feasible, reducing impact fees, and pairing that with a stronger housing trust fund is the best way to change that, in our humble opinion. I'm here for an abundant and affordable San Francisco. We hope that you can ensure that our city builds more homes for a city that everyone can afford.

Thank you so much.

Good afternoon, commissioners. My name is Graham Griffin. I'm a District 2 resident. I'm a youngish renter here in San Francisco, and I'm with Abundant San Francisco to provide public comment today. I'm here in support of these amendments, and I'm excited that this has been paired with an increase in funding for affordable housing. As some of you may have seen this week, it was reported that the average one bedroom apartment in San Francisco right now is renting for $4,000 a month. I'm very worried about where I'll be able to live when my lease is up next year. A one bedroom apartment for $4,000 a month, I think most of us can agree, is a completely untenable situation. I believe that we're here because we're not building enough. We're not building enough affordable housing. We're not building enough market rate housing. And it's too expensive. to build right now in San Francisco. I want to see us build more housing across all income levels. I think that this is a small step that we can take right in front of us now to start to address the crisis that we're facing today. Thank you so much.

Good afternoon, Commissioner. My name is Jules Landry. I'm a resident of D5, and I've been a renter here for 10 years. I'm just here to express my support for this measure. I've been building a community for these 10 years, and I've seen many friends move out of state, move out of the city. And the places they move to have in common that they make housing affordable. We're talking about Texas, Tennessee, Colorado. As much as I want to see affordable housing being built, I think that it's fiscally impossible that we will dig ourselves out of this crisis without market rate housing, which is why I'm here to express my support for reducing the impact fee and taxes that we're effectively putting on new construction. We should not tax things that we want to see more of. We should tax things that we want to see less of. So let's tax AI billboards and not new construction. Thank you.

Good afternoon, commissioners and city staff. My name is Lori Droste. I'm the Housing and Planning Director at SPUR. Earlier this month, the Comptroller issued a feasibility report that should really change the way we think about housing policy in San Francisco. As you saw, they studied 80 different scenarios, and every single rental prototype was infeasible, even with no inclusionary requirements at all. So back in the day, some people used to say 20% of zero is zero. Even today, 10% of zero is still zero. That means we're confronting a basic economic reality. It's extraordinarily difficult to build housing in San Francisco and throughout the Bay Area. And this has real consequences for affordability and displacement. Over time, San Francisco has adopted inclusionary requirements, impact fees, and other policies intended to achieve really important public goals. But in today's economic environment, the combined effect of those costs and requirements are making these projects infeasible or impossible to finance. And according to your own pipeline report, More than 74,000 units are in the pipeline, but only 4% are under construction. The Technical Advisory Committee's recommendations to lower inclusionary rates, reduce impact fees, and exempt smaller projects, and align rental and condo requirements are sensible steps forward intended to restore feasibility. Now, of course, these recommendations will not solely solve the housing crisis in San Francisco on their own, but they are a meaningful step toward making it possible to build more homes, including affordable housing, especially in today's market conditions. I urge you to support fee and inclusionary reductions, simplifications, and small project exemptions, and help San Francisco build homes again. Thank you.

Good afternoon, commissioners and staff. Wood Turner on behalf of the Housing Action Coalition speaking in support of this legislation. We've heard the findings. And I think if you ask our members, every houser in the city knows what the data confirms is that the gap between what it costs to build and what the current inclusionary infrastructure demands has made housing production functionally impossible. That's not to say the inclusionary program isn't critical, but it only works when homes are actually getting built. Builders, affordable housers, labor, community organizations, they see this every day. So when projects pencil out, everyone benefits. This legislation gets projects moving again. We really love the companion charter amendment to more than double the housing trust fund, ensuring the city is investing in affordable production at a scale we've never seen before. And that's not a trade-off. That's how you build at all income levels. So I ask that we set the tone through June that San Francisco is ready to act, that we're going to build a city that is affordable and accessible to everyone, especially everyone who calls it home currently. We at HACC urge you to move this forward. And I kind of like that billboard idea. So I'd like to bring that back.

OK, last call for public comment. Again, you need to come forward. Seeing none, public comment is closed. This matter is now before you, commissioners. Again, this is purely informational.

Commissioner Braun.

I want to start by saying thank you to all the staff and also the members of the TAC who put so much work into this effort. It's not just an adjustment to the inclusionary housing policy and the fees, but so much more sweeping than that and has taken into consideration so many moving pieces. And I'll do my best to get through my questions with a pretty complex topic. Just to start off with some initial thoughts, this is a really straightforward and honest assessment of how development conditions have really changed a lot. I'd say the findings of the analysis performed for the TAC, the feasibility analysis, really are not very surprising. I'm currently working on my day job on, well, studies for 14 different jurisdictions in Santa Clara and San Mateo counties. It's a similar kind of effort with the feasibility analysis, scenario testing of inclusionary requirements, resetting in lieu fees, and supporting on policy development related to all of that. And in just about every jurisdiction for almost all of the development prototypes that we're looking at, the results are pretty similar at this time, just with the increase in construction costs that we've had across the region. One thing that wasn't mentioned is a really major increase in financing costs, and therefore the return developers have to achieve to actually move forward with projects at this point, and the rents and sales prices of these market rate units just haven't kept pace. So it's not an enjoyable result to see with these feasibility analyses. It's a lot of unfortunate news sometimes to have to share. But it's not surprising to see where this all landed as far as that analysis went. And of course, now the question is all about the policy decisions that are to be made. I'm going to get into a couple of sub-components of what's before us. I have a few questions in here, but I'm more just sharing some thoughts. The reduction to a 5% inclusionary requirement makes sense in light of the feasibility analysis findings. I can understand where the tack got there. Ordinarily, I do think that when development is able to proceed, it does need to do its part. Tools that rely on market rate development to produce affordable housing, are important in conditions when market rate housing is able to move forward. But as we saw, so much of the funding for affordable housing and its actual production is not through those tools, but rather through broader measures. I would still hesitate a little bit at 5% ordinarily, because there are always edge cases. There are always projects that have unique circumstances and are able to move forward. And when development does start to move forward more quickly, conditions change pretty quickly. And so it's important to still have an inclusionary requirement in place. However, what I see here is I was really I really enjoyed seeing the tax recommendation of actually 10% inclusionary unless the consensus ballot measure moves forward for creating that larger dedicated funding for affordable housing. And because of that ballot measure, I think that this is a really good balance. That ballot measure would ensure that there is still substantial affordable housing, that it's drawing from a very large tax base. in order to do that. It's not dependent on development activity that isn't even happening for the most part right now. And so I think that because of the ballot measure, the 5% inclusion requirement, it does make a lot of sense to me. And I agree with the tax recommendations there. And then the other thing that I think is really helpful is knowing that we do have this consistent process of updating these requirements three years ago. I joined the Commission about four years ago, and I remember the last time that we had one of these studies done. The results are much bleaker now, but that's the other good benefit here. Smaller jurisdictions don't have the ability to so readily restudy these requirements and adjust them on a regular basis, and we do. And so, you know, if next time around in three years we discover that conditions have really improved, I look forward to seeing an increase in these inclusionary rates. But for the time being, this just makes a lot of sense. Getting to the affordability level changes in this, it was covered during the presentation that for the new inclusionary or the recommended inclusionary requirements, There would be the removal of the middle income requirements. There would be simplification of some of the area median income targets for those inclusionary affordable units. I am curious to hear a little bit more about the thinking behind that happened at the tax recommendations and in legislation about the removal of the middle income requirements. why that was part of the approach. And I'm also curious to hear about sort of the considerations that were used to adjust the affordability levels, the AMI levels that are included in the 5% recommended changes to the inclusion requirements. So I don't know who can speak to that as a large team.

Good afternoon, commissioners. I'm Maria Benjamin, deputy director at the Mayor's Office of Housing and Community Development. The three tiers that we currently have, the higher tier, we did not see as much of demand for that higher tier. compared to the far greater demand for the lower tier. So with reducing those numbers, we were recommending in the taxis to increase the where the biggest demand is and eliminate that higher serving AMI. Keeping the middle tier, because there is a real use for the middle tier. One of the speakers earlier said now he doesn't qualify for affordable housing. now that he's making a certain amount of money. And so having that middle tier will cover those people that are just a little bit over the majority of the units, the 55% AMI.

OK, so this is sort of that middle tier you're referring to, the 80% of AMI for the rental requirements or 100% of AMI for owner. OK, and so that makes sense. And so I think there are some minor adjustments in these tiers, too. I mean, was this just a process of looking at, the income levels of the households that are applying for affordable housing? Absolutely.

Looking at the demand, the actual data, the actual numbers of people and who's applying. And also, in this recent downturn, some of those higher AMI units got pretty close to what the market rate was. So making sure that folks are motivated. If I'm going to pay $100 more and be in a market rate, Why should I apply for an affordable housing unit? Go through a lottery and all that stuff.

OK. Thank you for that. I appreciate it. Generally, on the affordability levels, I think that they make sense. It's good to hear they've been adjusted slightly to reflect the actual demand among applicants for affordable housing. And I also appreciate seeing, even though we're calling them low income and moderate income levels, there's actually a really big difference in the affordability levels that's for renter versus ownership with deeper levels of affordability for the rental housing. And I think that's appropriate. OK. As far as the conformity and the inclusionary rates that are included in the legislation, kind of making them pretty consistent across the city, I don't have any concerns with that. I think conditions are kind of weak right now across the city. I do have one thought. I'm going to tie this together with the impact fee reductions that are included in this legislation. This process is really providing a lot more conformity of requirements across the city in addition to reducing the inclusionary and impact fee requirements. And in general, I don't have concerns with that. Feasibility conditions, from that lens anyway, it's a pretty bleak picture no matter where you are in the city. However, the one thing I would kind of draw some attention to for when conditions do improve is that we have a lot of different submarkets in the city. It's not a consistent market area. My company did some analysis back in the early days of the housing element, new housing element, that was looking at these submarket conditions across San Francisco and how that affects development opportunity. At the time, there was actually some feasibility with projects in the city. But we do see these differences. And so we've done a lot of work over the years prior to this downturn of granting additional development rights in certain parts of the city, increasing the development rights, the amount of units can be built, the densities. And there was at that time, it made sense to have an exchange of asking for additional fees or affordability as part of those. And I get why that doesn't make sense under current conditions. But even so, I would just say I think that maybe next time around it will be important to look at how development opportunity is different for different product types across submarkets within the city as development proceeds. Otherwise, I just think we're going to miss out on a lot of opportunities to help fund really important things in the city, including affordable housing. Okay. I think I'm just going to pause there. The commissioners, we can ask questions, but that's all I have for now. Thank you.

Thank you. Commissioner McGarry.

I'd agree totally. I'd like to thank, it takes everything. And we're in a pickle here, and we've been in a pickle for quite some time. I lived in San Francisco since 1995, started off in D8, then D2, and now D1, never D5, as a couple of people here were. But every generation, I started here in my 20s. And it's decade after decade after decade, and it's the same thing. Friends that you have that you had that are gone, friends that you have right now that are about to leave. And it's all down to supply, no matter what decade it is. So we're not building enough. We haven't been building enough. The incentives, we've tried. Certain people, certain... We've tried to cater to everybody, but we wind up catering to nothing. As Spur said there, 20% of nothing is nothing. 10% of nothing is nothing. 5% of nothing will be nothing. I'd like to thank staff for all the work they did here. TAC, bipartisan, great. The Mayor's Office of Housing, but especially Supervisor Melgar for driving change. She wanted... She wanted funding. We've all wanted funding. We've been up here looking for funding, designated funding forever. $50 million doesn't cut it. Up to $125 million puts us in the ballpark of actually changing things, doing things, making a mark. But it can't be done alone. So the work that staff has done here with these changes I find fantastic. I can see the needle, the ability for the needle to move. And we should have done it years ago. Instead of trying to cater for everybody and basically not catering for anybody or a little sprinkle, this could actually make a change and basically get everything going. I represent men and women who build this city on a daily basis. We're into the sixth year of a savage construction, basically recession. We haven't been building market rate. The only thing that has been going in the last few years is affordable, keeping people to work. Yes, construction costs are up, but it's not the labor aspect of it. The labor aspect is basically it's all in materials. But the labor aspect of it are men and women who are basically unemployed, the next generation, the workforce, apprentices, that can't get in. I see the local hire aspect on this. The 70 units kicks in local hire, which actually gives our youth and the next generation of workers are basically a footing into the market, which is mainstream society. So anything we can do to just tick that needle, everything we can do, we have to, to get things started. So I look forward to hearing more about this in the future. And I agree with everything you said, and I look forward to hearing what everybody else has to say.

Thank you. Vice President Moore.

I first want to give a quick shout out to Commissioner Brown for thoughtfully taking this apart and asking the type of questions, which helped me broaden what my own questions are, but also feel that we share quite a few things in common relative to what you're asking and finding. First, thank you. I am delighted to see the depths and breadth of the city infrastructure being able to work as thoroughly on what's in front of us together with the experience, which is not just new, but basically looks back at years of trends and compare what happened in the influx of COVID and other issues brings us to today. We are indeed In a very complicated situation, we are not alone. And what's in front of us, I couldn't be clearer saying it is more than a complex issue for me. I am not working in this field. And even listening, even reading the package and listening attentively to what you said, it still remains complicated. I've prepared a couple of very practical and simple questions, and I wanted to ask Mr. Bintleff, who I have seen in various roles in his career, he has always been clear to understand and respond to simple questions. And if you need traffic direction, you'll find people who will be helping you to answer them. The first thing is I note that the text of our staff report states that the inclusion rate should be reduced to 5% if the board votes to replace the Affordable Housing Trust Fund Charter Amendment on the ballot in November 26. That's a statement of fact. We already see people lining up in front of large grocery stores and pharmacies to gather signatures. Unfortunately, those people who do that know little or nothing about what the issue are. They ask a simple question, are you for affordable housing? And when you ask, well, what do you mean by that, it gets very quiet. So I hope that we can layer in more knowledge in order to get the message across that we will need a vote in November, and we need something on the ballot that people can understand and vote for. I am asking you. Are there any guarantees and certainties that voters will support the establishment of a housing trust fund or any like measure?

Thank you, Commissioner Moore. Yes, so the staff report reiterated the TAC recommendation, which Ted also said, which was exactly that. There was this dial of if we can put the measure on the ballot, then we should move ahead with the 5%. So it was important that they specified putting it on the ballot rather than the election outcome in November. So in this case, this measure, which was introduced by Supervisor Melgar, It's going through the Board of Supervisors process. So this one would not be relying on signature gathering. This will be coming from the Board of Supervisors directly on the ballot. It's been introduced with seven co-sponsors. So that's the majority of the Board of Supervisors. And the mayor is, of course, in support as well. That's going to move through the legislative process roughly on the same time frame as this ordinance, but it'll probably be a little bit ahead because it doesn't have the planning commission phase. So we should be in a position to see how things are going with the housing trust fund moving through the board in advance of the board's final action on this ordinance. So it will give us time if we needed to to make any adjustments, but we don't foresee that happening given the broad support for putting it on the ballot. As far as November is concerned, of course, that's up to the voters. But at the same time, as you heard, the unanimous recommendation from the TAC did include the affordable housing community. And they are all in on board with the Housing Trust Fund measure. So a really broad swath of both the folks in the nonprofit affordable housing developers, as well as folks doing services, Preservation, there's a really large coalition in favor of that. So we like the prospects of it. But we'll absolutely be able to know whether it was placed on the ballot before this ordinance is passed.

MARTHA MINOWSKI- I'm delighted to hear that, because what are the odds that it will pass in November? There will be multiple charter amendments on the ballot. And I think that will make voters insecure. It's just a matter of fact. And so I want to make sure that we placing it on the ballot with a clear understanding what the up or what the downsides may be. Particularly, although I think staff report kind of reaffirms that charter amendments are a very secure way of doing things, as we see in the November ballot, charters can be amended, and so the security of this particular measure has its own relativity depending on its success and depending on its overall acceptance, to produce results that are indeed expressing the majority of what people want. And affordability is definitely one aspect of what people are hoping for. So I would say that timing is everything. And the next question actually goes into the issue of ballot approval. Would it be more prudent to only gradually reduce the inclusion rate from 10% and then further reduce it to 5% if indeed the trust fund charter amendment passes in November? Jumping directly from where we are to 5% is a major drop, is a gradual way, a more secure way for success.

Thank you. Yeah, I mean, a couple of things on that. The main issue is the timing, as you said, which is everything. So the code currently from the temporary reductions in 2023, all of that will expire on November 1 of this year. This year's election is on November 3. So we wouldn't know. And of course, elections don't get certified. It takes several weeks after that. the board would have to act, and then there would be 30 days after the mayor signs it. So if we were to wait until the election results, we'd be in a situation where we wouldn't be able to adjust inclusionary rates accordingly until something coming into effect perhaps at the end of the year or in the new year after the rates have already sprung back up. So we want to avoid the situation where There's a moment where developers are experiencing, OK, the rates are up. We don't know what's going to happen. We're trying to provide more certainty here and make sure that we are resetting this program well in advance of that November 1 deadline. So that's the primary issue. I think the other thing I would say as far as a gradual reduction, as Ted again mentioned, the results of this year's TAC report in 2026 show that feasibility has worsened since 2023. So three years ago, the TAC looked at a report that also showed there was very limited feasibility. The city moved more cautiously in response to that and made a modest reduction that we've had for the past three years. And now things have gotten worse. So I think we're trying to learn from that lesson and take the information provided by that technical report seriously and move well in advance of the deadline that's coming up to act on it.

Thank you for that explanation. My next question is, what is the wisdom behind the decrease of inclusion from 10 units to 25 units? What is special about these numbers? And I would like to clarify what I'm saying. Over the past several years, this commission and people before us have been confronted with projects where everybody very carefully avoids to hit that either 10 or 25 unit number. So there are eight units at the edge of Dolores Park, beautifully designed. The upper unit, commissioners ask, well, why is this unit so excessively large when indeed we could easily make two or three units out of it? Well, we did whatever. I'm not repeating your old history. But there was a noticeable intentional avoidance of hitting that sweet spot where indeed the affordable percentage would be reached and we would be getting something back. So what is the wisdom behind 10 versus 25 units?

Absolutely. And Commissioner Moore, you've seen it, so you know exactly. It used to be 10% or 10 units. The program started at 10 units. And everyone talked about, well, it's going to be a bunch of nine-unit projects. And in 2016, we introduced a higher rate for large projects starting at 25. And we said, well, OK, 24 is the new nine. And sure. And if we said 50, it would be 49, so on. So there's always going to be that element out there. The reason that the TAC recommended exempting the small projects was, firstly, they looked at the data. in the TAC report. And those projects are also not feasible. And in fact, in some cases, they are less feasible than the larger projects because there's economies of scale at play. These are smaller projects. They don't have the institutional investment. And so they're also not feasible. So they can't support any amount of inclusionary. Also, when you get into smaller projects, when it comes to inclusionary housing, it's interesting. You have to provide a whole unit. There's no half units or 0.4 units. So the planning code has said, and will continue to say, you round up at 0.5. So for example, if you take a 10-unit project and you have a 5% requirement, That's 0.5 units, which rounds up to one unit. So that project would provide 1 out of 10, which is actually a 10% inclusionary rate, which is not feasible and is twice as unfeasible as doing the 5% rate. So that's part of the problem. So they looked at that and they said, well, why don't we end Y25 and not 30 or 20? Because we already had this break point at 25, so it was just kind of a natural place to draw the line. We also are very interested in supporting the family zoning, as I said. And so supporting the smaller projects we really believe helps with that as well. We asked planning to look at the soft site analysis they did for family zoning and the median size unit of properties that were up zoned in the well-resourced neighborhoods happened to be 25 units. So we said, OK, great. So for basically half of the up zoning we did for family zoning, we'd be saying, all right, you would be exempt from inclusionary altogether. And starting at 25, it kicks in. So it's meant to really incentivize that infill, missing middle type of housing.

I don't want to sound tricky, but I would like to add a comment of encouragement that particularly in the lower range of 10-unit size, 10 units between 10 and 24, that we are seriously exploring alternative building types in order to lower the cost of construction that is the single-story access, which is, I think, going to make a major, major difference in terms of return for this new shift to the 25 count and find a way to incentivize it in some form or another, not just simply saying it goes to 25 units, but that we are indeed looking for an extra effort in that lower range to increase the units in order to justify why we're doing that. I have one additional question for you, and I'm going to open my staff report to page number seven. at what particular time would the Trust Fund effectively start funding affordable housing? The Charter Amendment starting in 2029 would. There's a sentence by which I don't quite understand. It's the first paragraph up there, third and fourth and fifth line down. What is implied by that? Do you have the reading in front of you? I see you do. Thank you.

This is your question, when the increases will take effect?

What is about 2029? That seems very far away.

Yes. Well, so first it needs to pass in November. Then it would become in effect after the election is certified. So we're basically in 2027 at that point. We have a very challenging budget environment this year. And so that was part of the balancing act of working out this housing trust fund. So one of the things that we said was we really are not in the position to change that formula. This is a charter amendment that's saying, you have to take a certain amount of money that would otherwise go to the general fund and put it into this special source. So we said, look, for the next two fiscal years, which are the two that the Board of Supervisors is acting on right now, we won't make any adjustments to the formula for those years. because we need to hold steady, you would have to accommodate for that in this year's budget. So we're holding the years 27 and 28 budgets constant. There will still be growth in the housing trust fund, because currently it grows by a percent of around 3% with the general fund. So it will continue to grow. The new growth formula that brings it up to $125 million would begin in 2029 for that reason. But to compensate for that time lag, we spent a lot of time making sure that we will be able to issue debt financing based off of this revenue stream. So the plan will be to begin issuing bonds for affordable housing production, actually beginning next year for preservation, that will use this money over time to pay back And then we'll continue doing that in the first several years of the ramp-up period for the housing trust funds so that we're essentially taking that 30 years of cash flow and front-loading it to provide for most CDs' needs in the near term. They also have funding for their current pipeline through roughly 2029, and that's when we are going to see effectively a fiscal cliff on their current funding level. So there were a lot of reasons why we structured it that way.

I'm going to make one thank you for explaining that. I'm getting myself a little bit on a slippery slope here. There are people who are questioning why we are impacting Prop I. instead of having certain things work together for an extended period of time until the housing trust fund is really fully operational. Is this robbing Peter to pay Paul? I'm going to use this loosely. I've heard people make that comment quite clearly.

Yeah. The whole principle behind the way we've structured this housing trust fund renewal and expansion is to take advantage of growth in our overall property tax base in the city. So under Prop 13, that primarily grows when you have new development and new value coming in, which is how we raise revenue for the city in the general fund, which gives us the ability to put more of it to affordable housing. In order to achieve that, you have to have growth. So part of the rationale of the reductions here, as we've discussed, of the impact fees and inclusionary is to promote the feasibility of market rate housing development. The reforms that are being proposed to the transfer tax is another item to incentivize development of market rate housing and other types of projects in order to stimulate the growth of our general fund that we will then be able to use to pay for affordable housing. So the whole principle here, both on the inclusionary front and on that front, is to really shift the way that we fund affordable housing from putting it entirely on each new individual project that comes forward only, and instead to spread that cost broadly across our entire tax base. So they all fit together, and it's a strategic shift to promote growth and then take advantage of that growth to fund the affordable housing that we need.

OK. Thank you. Thank you.

Commissioner Williams.

Thank you, everyone who spoke. Thanks for the commissioners for their comments. To me, when I see the current state of market rate development and the infeasibility of it all, it just reminds me how important it is that we not rely on market rate housing for all our housing. And I want to step back for one minute and imagine that we actually looked at housing as a human right, something that is a necessity for everybody, for our society, and that we funded accordingly. Especially in times like this, when the market's not producing what we need, we need to still be building housing. We still need to be providing shelter homes for our low income community, for our senior community, for our working community. And what I've been hearing is just this is something, this isn't a new idea. A lot of other countries understand this and have made policy to make sure that there's plenty of money going to housing. I just kind of wanted to throw that out there, because I don't hear anyone really talking about that. I hear a lot of talk about we need to cut our inclusionary housing, we need to do this, we need to do that. But in all reality, we need to have enough funding to build housing, and the market just isn't getting it. I just want to throw that out there. And I have some questions that have to do with our affordable housing mandate. So how are the reductions in our inclusionary affordable housing as far as the state, our housing element? which states that we need to build 57% of all new housing be affordable. How is this reduction going to affect our housing element and our state mandate?

Hi, Sheila Nicolopoulos with MOCD. So the question is, how does this reduction impact our RENA goals for affordable housing production? So I think based on what we've been talking about today, we're not getting any very much inclusionary production. I don't think it would influence much what, there wouldn't be a change, right? Like if we've already got a low number, we would still be lowering it, but we're going to see more of the market rate production. But what it will, if we have this match with the housing trust fund, that that housing trust fund will allow us to have a consistent and stable funding for affordable housing so that we can keep moving forward with projects in the pipeline.

So we won't be in trouble with the state, is what you're saying.

Oh, would there be consequences from HCD? Mm-hmm.

Director? No.

No. The answer is no.

No.

The answer is no? Yeah.

Well, that's good. Thank you for that. So there's been a lot of discussion about lowering the requirements for inclusionary affordable housing. Has there been any conversation around gentrification, that lowering the requirements for inclusionary, especially in neighborhoods like the south of Market, the Mission, the Bayview, Hunters Point, and other areas of the city that contain our lower income residents? The inclusionary housing, supplied affordable housing, we all know that there has been a lot of gentrification, a lot of displacement. Has there been any conversation that lowering these rates might cause some more of that?

Thank you, Commissioner. So one item that I think you heard in the staff presentation, there are a number of areas throughout the city that over time have been called out with higher fees and requirements and inclusionary requirements based on the sensitivity within those communities. So those areas are retained in this ordinance. but we're trying to bring it in line with the overall citywide policy. So in those areas, you would have the same on-site rate, but there would be a slightly higher in lieu fee requirement of 15% instead of 10%. This is intended to be an incentive toward the on-site option in those areas where, per your comment, the affordable housing being in that area is really the top priority. As we've heard loud and clear for many years as we've done this work, So that was one way that we approached it. We're also working with planning staff to do outreach right now. We're going to be going to the Equity Council next week to discuss this, and so we'll have more input on that front before we come back to you for the action hearing.

I appreciate that. Thank you for that. And just to add that a lot of these inclusionary requirements came from community. came from people that organized themselves and wanted to make sure that there's affordable housing coming in to their neighborhoods. And so as we cut this inclusionary housing, we're actually dismantling a lot of the work that took decades to bring about here in our city. And that doesn't go unnoticed. So like Commissioner Braun mentioned, if things get better, I would hope that we would increase our goals back up. Because affordable housing is very important. I think that's exactly where the demand is, the most demand. And unfortunately, we haven't been able to satisfy that demand. We see that every day as we look out into the street and we see people sleeping in our streets. Something is wrong. This isn't working. And we need to come to terms with that as a city and as a society. We need to house folks, and we need to find another way. Has there been any studies on the effects of reducing impact fees that developers now contribute on transportation, parks, and other city services? Sorry to keep making you get up, but it's a valid question.

Yeah, there has been quite a bit, actually. And there was a BLA report a few weeks ago looking at some of the past fee waivers that we've done. The key issue as far as city services is that those fee revenues rely on development. So with the loss of development, we've also lost the fee revenue. To use inclusionary as an example, you saw the slide that MoCD presented we've gone from the ballpark of $20 to $30 million a year to $2 million a year. And we actually had a negative balance last year because we had to pay somebody back who canceled their permit. So there's not really a loss there in the context of no development. The idea of reducing the burden on the development coming in is to get more of it and then to get the fee revenue that comes with it. So currently there's a 67% reduction in the development impact fees, which is proportional to the reduction in inclusionary based on the tax report. To your point about keeping up with changing conditions, I want to be really clear that that's absolutely remains baked into the system that we have here in San Francisco. The TAC will continue to meet every three years, do their analysis, provide that report to the Board of Supervisors. And the ordinance is structured to clearly lay out how projects will keep up with those changes over time if they haven't yet gotten under construction. So we'll absolutely continue to adjust with the times as that goes on and get the revenue that comes with it.

I appreciate that. Thank you. I have a few more questions. Is there any concern by planning for the trigger of the inclusionary from 10 to 25 units? Much of the family zoning plan focuses on the west side and other areas of the city that were built up primarily by 25 to 100 foot lots, which would most likely result in projects in the 10 to 25 unit range, especially along the commercial corridors where developers might be able to find larger lots in these areas. We could end up with zero affordable units.

And yes, thank you. As I said, incentivizing those projects to move forward under the family zoning is one of the key priorities here. And so we believe this will absolutely help with that. By way of context, these projects being small, they don't provide a whole lot of the inclusionary housing that we do get. Over the past 10 years, 10 to 25 unit projects have provided 1.8% of the inclusionary units that the city has produced. So there's not a lot to lose there. There's a lot to gain in terms of those projects being built. And coupled with the housing trust fund, as I said, when those projects get built, we will see a significant bump in the property tax revenue that will recur every single year moving forward from those projects. And then we'll spend that money on affordable housing throughout the city.

Sounds good. Again, I'm concerned about the affordable housing production. And thank you for that. I just feel that going from 10 to 25, that's a big jump. And every unit that can be produced that's affordable is a win for our city. And so I just wanted to put that out there. On page 29 of the planning staff report, it says that the inclusionary rate should be reduced to 5% if the board votes to place the affordable housing trust fund charter amendment on the ballot for November 2026. Unfortunately, however, it is never a guarantee that the voters will approve any measure that's before them. In that scenario where the voters don't pass a charter amendment, how will we make up for our loss and inclusionary affordable housing?

Absolutely. Well, as I said, the trigger was for it to be placed on the ballot. So we'll keep an eye on that. And those things should move ahead along the same time frame. The Housing Trust Fund will continue to exist regardless and grow at the current pace that it's growing. And it's also not the only source of funding for affordable housing. There are other state and regional sources that are being worked on as well. And furthermore, I would say that if we're able to stimulate more development, that revenue is going to come to the city one way or the other. The Housing Trust Fund is locking in a certain minimum amount that the Board of Supervisors must appropriate to affordable housing every year, but it is not in any kind of way a maximum. So we would still be stimulating our overall resources we have to put to our needs. And the Board of Supervisors would be able to decide how to use those resources each year for affordable housing and other priorities.

And just to kind of follow up on Commissioner Moore's questioning around Prop I, that was a significant funding source. And I hope that doesn't go away. We need it. We need more funding sources. We need several streams of funding sources And again, taking one away and putting one in, as Commissioner Moore alluded to, borrowing from Peter to pay Paul, just doesn't seem like a smart way to go about it. You know, it just doesn't seem like that's really addressing the crisis that we're facing as far as affordability. So just wanted to say that. So I understand that there's a need to keep construction going, and I understand where this is all coming from. The numbers are the numbers. Obviously, there's been a lot of thought put into this report and all the actions that you guys are taking, or I should say that this legislation is trying to address. I would just say that... I'm still very concerned about affordability. I have my serious doubts that the market is going to really supply the affordability that's needed here in our city, that so many desire and so many need. And I just can't say that enough. And so I just leave you with that. Thank you for answering all the questions. Thank you for your work on this from the mayor's Office of Housing and everyone else. I know it's a challenging time. I know that trying to come up with solutions. I hope in time we look beyond. what's available for us right now, that we can imagine a different way to go about funding our housing because, again, and I'm not diminishing any of the work that you guys do, but we need something different. We need some different ideas if we really want to tackle this problem. Thank you very much. Thank you.

Commissioner So. Thank you, President.

I think I'd like to begin by just giving a shout out to Mr. Ted Egan. I really appreciate you continuing to be here and educate all of us in the city inside and outside. I remember the first time I saw your astonishing slideshow and economic analysis, I was at SFMTA. That was a very interesting time and very insightful for how people choose to live and move around in our region. So now, today, I really appreciate you to be here, but I'm not really happy with what I see right now. But also, this is kind of happy in a way that this is actually real. Like, everybody's speculation of, nothing pencil out, things can't move, even though we cut down all the red tapes and we streamline a lot of things, we can move the needle legislatively in our policy at state level, local level, but yet if you count number of construction crane right now, It is very sad. I think half of the construction crane we have here is technically not under San Francisco County's jurisdiction. And we have less than fistful of construction crane we can count. So thank you, Mr. Egan. I wish I can see these data sooner than now, because you're comparing what we have been through from 2023 till now. It's the middle of 2026. And by the time that we set our policy right moving forward, it will be the last fiscal of the last quarter of this fiscal year, 2026. I don't know what to say, but there's a lot of anecdote depending on which side of the coin you're looking at the same situation. But number doesn't lie. If you see a spreadsheet that everything is in red, that's like something got to change, right? I don't know if you file your tax and everything is in red. I mean, it's just like numbers, right? We can all have feelings of certain things about community and feelings. But seriously, I don't think that these professional and experts dream about these numbers. These are coming from real sources. So I appreciate the professionals. I appreciate the experts that you hire to do what they do best. And under your leadership, Mr. Ted Egan, I'm so grateful that you haven't retired yet. So... So, okay, coming back here, and I also appreciate everyone sitting here today, my fellow commissioners, and also everyone that actually worked so hard to come up with this massive suggestions that we really need to do something. So OEWD's office and MOCD and also our planning staff and of course the mayor's office and with other outside city hall expertise, think tank like SPUR and a couple other advocacy group. Appreciate your spending the time here. This amendment proposal is really directly addresses the very economic reality that we have. So for too long, our inclusionary housing requirements and development impact fees, while rooted in the best intentions, have act as a financial brick on new construction. So by realigning these fees and inclusionary requirements with what actually pencil out in today's market, this amendment gives developer of all kinds the breathing room they need to secure financing, break ground, and get those construction cranes back into our skyline. We cannot expect to solve our housing crisis with mandates that look good on paper, but result in zero hammers hitting the nails. So this case file that you come in front of us for information hearing today only, so I'm going to share my feelings based on facts. This is a very pragmatic, necessary course correction. It ensures that we aren't letting the perfect be the enemy of the good. And it creates a viable economic runway to build housing for all incomes types. So coupled with sustainable long-term funding strategies like the family trust fund model, modifying these impact fees is exactly what we need to jumpstart San Francisco's housing economy. I really applaud everyone come forward today to support this. And needless to say, I am in full support of what come forward for us for information hearing today. Creating housing for all types from our workforce and the missing middle income families to those requiring deeply affordable supportive housing is what I'm here for. I want to see San Francisco moving forward have housing for all different types, different market segment and different lifestyle all over our city. So we must confront this dark economic reality facing our city today. I'm going to say this one more time. I do really want to see construction cranes on our skyline again, not just those that are from other jurisdictions, but from San Francisco, because construction cranes So my friend likes to hear that. Construction cranes signify jobs. They signify economic vitality. And most importantly, they signify new homes for our residents. I do want to see my child and some of my friend's children and grandchildren to be able to actually live here after they graduate from college. And then maybe myself can retire here still, and I got moved out to somewhere. So this ordinance helped us bridge that gap. By leaning into some innovative funding structures, like a family trust fund model, we are embracing a more reasonable and realistic way to sustainably fund housing for the long term. Relying solely on unpredictable market cycles, or overburdening developers does not work anymore. A dedicated sustainable trust funds provide us a predictable long-term capital necessary to get projects off the ground, ensuring that San Francisco can continuously to build housing across all income brackets. I think that Jacob had mentioned some kind financing of how we dedicated funding each year under this family trust fund. I'd like to actually further my question on this is that who managed this fund? Who will be eligible to receive these funds? Is this housing trust fund similar to LIHTC?

The Housing Trust Fund is one of about 32 different local funding categories that MOHCD uses when we piece together funding coming in for affordable housing development and preservation. So when we look at our funding stack for new construction, for example, about two-thirds of it comes from non-local sources and about one-third from local sources. So the first thing that developers do is they have to assemble their non-local stack, which is LIHTC, the tax credits. And there's usually some form of state grant funds that are applied for as well. And there's various state grant programs that are used. And then MOHCT is the last piece of money. That's the one third that steps in. And that's for the gap financing. And so when we look at that gap financing, we're looking at all of these different funding sources that we have, housing trust fund, all these other dedicated sources, subsidy programs, to help piece together how to complete the building financing. And there's a lot of factors taken into consideration of who the property is going to be serving, what is the unit types, what is the target AMIs for a unit. So it's a fairly complex and dynamic process where we work very closely with developers to piece together the funding for it. Did that answer your question?

Yeah, then who will be eligible to receive these funds?

Any of our affordable housing developers, depending on the scope of the project specifically. So MOHCD, we basically act as a bank for affordable housing development and preservation. The city will own the property, but then we have a long-term lease with the developer. And they actually own the building, and then they develop the property, and they take care of the property management for it. So things enter our pipeline through a couple of different ways. But for example, if we issue a NOFA, because we have funds available to acquire a property, developers will come forward and propose a project for a particular site. So they say, we want to buy. When we did one a few years ago, for example, we had 1234 Great Highway. It was a property that was for sale. There's a motel there now. And so our developers, TNDC and the other partners in that development, will come forward and say, we would like to buy this property, and this is how we envision developing it, and here's our proposal for it. And so we review those, and then we decide who scores best, who has the most viable package to move forward. And that begins the development process, which is about five to seven years to get the whole development process through. And then once they've assembled that other funding, that other two-thirds, then they come together We work with them throughout, and we will piece together. Ultimately, MOHCD will make the decision about who the housing trust fund dollars will go to.

THIS IS A REALLY GREAT ANSWER. THANK YOU, SHEILA. THE LONG ANSWER. I THINK IT REALLY HELPS THE PUBLIC TO KNOW IF WE CREATED THESE HOUSING TRUST FUNDS AND WHO WILL BE ABLE TO USE THESE RESOURCES BECAUSE IT'S A VERY MASSIVE DEDICATION OF OVER, LIKE, YOU KNOW, $145 MILLION A YEAR TO to target with 10 years of $125 billion. So we can count our fingers, again, how many 100% affordable housing developer that actually can do anything in San Francisco, because the barrier to entry into this specific space is very high for 100% affordable housing development. So how, if this family trust fund is only going to be eligible to access by again, like a fistful housing developer, how can we actually massively encouraging other developers to actually who wanted to do good. There's a lot of social enterprise that are emerging in our space right now that they also wanted to do good and how can they actually be able to get, because just like anybody else, every single little help would be helpful, right? How can you make sure that your funding is increased now with a much more massive pool of money from the tax generated revenue from our city? How would you kind of help to strengthen up our pipeline, perhaps some private and public partnerships or motivate and incentivize the social enterprise who are technically not traditional 100% ginormous affordable housing developer, but they know how to build and to encourage them and incentivize them to enter into the space.

Such a great question. Thank you. I think that the core of your question is if we have more money for affordable housing, how do we increase our capacity to produce and preserve affordable housing, right?

By adding more players.

Yeah, adding more players to the field. So you're right. We have a handful of very well-established regulars that we work with all the time. It's TNDC, META, CCDC, those folks. And what we have seen successful is partnerships between those bigger, more established organizations and working with smaller development organizations as well. So they'll partner on buildings. Like 3300 Mission is an example of that. So that there's this partnership that then helps hand that expertise to these smaller organizations so that they can grow in their capacity to take on projects. And I also want to mention, because Maria was kind enough to remind me, that in the housing trust fund, there is funds that goes towards homeowner programs as well. So the examples I gave were around new construction. But MOHCD really has a portfolio of programs that we have to help produce affordable housing. So there's home ownership programs. There's inclusionary units. There's new construction. There's preservation.

So the home ownership program is to actually help people to actually be able to secure some of those affordable units. Here, I'll let Maria come describe their program. We kind of know each other on that really teary case, yeah.

We have several programs, home ownership programs, down payment assistance to purchase market rate, homes, also programs to sustain homeownership, rehab programs for seniors, emergency programs for when you're in a condo and the HOA says, OK, every unit has to pay $30,000. Well, what do you do when you're a low-income family? So providing assistance to our existing homeowners to come from the current housing trust fund model. Also, our first responder down payment assistance program, which is a program that incentivizes our first responder ambulance, police and fire, sheriff's department employees to stay in the city, which is beneficial to us all if they actually live in the city that they work in. And hopefully the idea is that as the Housing Trust Fund grows, there can be more funding for those other programs as well as new construction, affordable housing.

Thank you so much. That concludes my comment. Thank you.

Thanks, everyone, for all the thoughtful commentary. I don't know if I have a lot of new things to say other than to really echo a lot of the sentiments that have been expressed thanks to this across the departments for their hard work, to Supervisor Melgar and the mayor for putting the legislation forward, and to the public for coming out and having your voices heard. It's clear we're all worried about affordability. Everyone in this room, everyone in the city, it's top of mind. How do we get there? I really appreciate the data-forward report and presentation. And it's sobering, but as Commissioner So said, it's not surprising. That's evident in the lack of cranes in the sky. Even here at the commission, we've had many, many hearings canceled this year. Economic conditions are for sure part of that. And that's probably why we have this unanimous endorsement from the committee as to sort of what we can do to, as someone said from the public commentary, pull every lever that we have available to us. uh in terms of the data i think most of my questions have been answered there i also had questions about the housing trust fund and i do want to echo vice president's more sentiment around and this is not really our purview but supporting single stair building code changes it's something we talk about a lot here but i do really believe that that's going to unlock a lot of missing middle housing especially now that we're expanding some of those exemptions to 25 unit buildings i guess for me just one sobering piece of data in here was in the technical report, the RLV per unit, where we look at, by typologies, we are looking at this hypothetical 100% market rate. So that means no inclusionary housing requirement in that hypothetical. And we're still not seeing units pencil. So I guess for me, my concern is, does this go far enough? Time will tell. And maybe we'll be in a situation, like Commissioner Braun said, where it does. And it unlocks a lot of new development housing. And then we can revisit these numbers and maybe get more. We can revisit this in general. But that would be my only concern is, are we going far enough? But definitely appreciate everybody's hard work on this and excited to see where it takes us. And Vice President Moore, I think, has some additional comments.

Those are all my thoughts. I have only one brief comment. This is an extremely important and extremely insightful report, is it possible that there is a direct link on the department's website to be able to further read and really understand the subtleties of what's being implied here? I think it will be an eye opener for people who want to spend the time really understanding what's going on. That would be appreciated.

Thank you for that, Vice President Moore. I think that's all of our comments for today. Thank you for that very informative information session.

Thank you. Okay, we have nothing further. Commissioners, that concludes your hearing.