SEC. 415.5. AFFORDABLE HOUSING FEE.

New Ordinance Notice

Publisher's Note: This section has been AMENDED by new legislation (Ord. 187-23 , approved 9/14/2023, effective 10/15/2023, oper. 11/21/2026). The text of the amendment will be incorporated under the new section number when the amending legislation is effective.

New Ordinance Notice

Publisher's Note: This section has been AMENDED by new legislation (Ord. 201-23 , approved 10/12/2023, effective 11/12/2023, oper. 11/21/2026). The text of the amendment will be incorporated under the new section number when the amending legislation is effective.

The fees set forth in this Section 415.5 will be reviewed when the City completes an Economic Feasibility Study. Except as provided in Section 415.5(g), all development projects subject to this Program shall be required to pay an Affordable Housing Fee subject to the following requirements:

(a) Timing of Fee Payments. The fee shall be paid to DBI for deposit into the Citywide Affordable Housing Fund at the time required by Section 402(d).

(b) Amount of Fee. The amount of the fee that may be paid by the project sponsor subject to this Program shall be determined by MOHCD utilizing the following factors:

(1) The number of units equivalent to the applicable off-site percentage of the number of units in the Principal Project.

(A) For housing development projects consisting of 10 units or more, but less than 25 units, the applicable percentage shall be 20%.

(B) For development projects consisting of 25 units or more, the applicable percentage shall be 33% if such units are Owned Units.

(C) For development projects consisting of 25 units or more, the applicable percentage shall be 30% if the development project is a Rental Housing Project. In the event a Rental Housing Project becomes an Ownership Housing Project, the Project Sponsor shall either (A) reimburse the City the proportional amount of the Inclusionary Affordable Housing Fee, which would be equivalent to the current Inclusionary Affordable Housing Fee requirement for Ownership Housing Projects, or (B) provide additional on-site or off-site Affordable Units equivalent to the current inclusionary requirements for Ownership Housing Units, apportioned among the required number of units at various income levels in compliance with the requirements in effect at the time of conversion. Any additional Affordable Units provided on-site or off-site shall comply with Section 415 and the Procedures Manual.

provide additional on-site or off-site Affordable Units equivalent to the current inclusionary requirements for Ownership Housing Units, apportioned among the required number of units at various income levels in compliance with the requirements in effect at the time of conversion. Any additional Affordable Units provided on-site or off-site shall comply with Section 415 and the Procedures Manual.

(2) The affordability gap, using data on MOHCD’s cost of construction of affordable residential housing. No later than January 31, 2018, the Controller, with the support of consultants as necessary, and in consultation with the Inclusionary Housing Technical Advisory Committee (TAC) established in Planning Code Section 415.10, shall conduct a study to develop an appropriate methodology for calculating, indexing, and applying the appropriate amount of the Inclusionary Affordable Housing Fee. To support the Controller’s study, and annually thereafter, MOHCD shall provide the following documentation: (1) schedules of sources and uses of funds and independent auditor’s reports (“Cost Certifications”) for all MOHCD-funded developments completed within three years of the date of reporting to the Controller; and, (2) for any MOHCD-funded development that commenced construction within three years of the reporting date to the Controller but for which no Cost Certification is yet complete, the sources and uses of funds approved by MOHCD and the construction lender as of the date of the development’s construction loan closing. Cost Certifications completed in years prior to the year of reporting to the Controller may be increased or decreased by the applicable annual Construction Cost Index percentage(s) for residential construction for San Francisco reported in the Engineering News Record. MOHCD, together with the Controller and TAC, shall evaluate the cost-to-construct data, including actual and appraised land costs, state and/or federal public subsidies available to MOHCD-funded projects, and determine MOHCD’s average costs. Following completion of this study, the Board of Supervisors, in its sole and absolute discretion, and within the legal allowances of the Residential Nexus Analysis, will review the analyses, methodology, fee application, and the proposed fee schedule; and may consider adopting legislation to revise the Inclusionary Affordable Housing fees. The method of calculating, indexing, and applying the fee shall be published in the Procedures Manual. The Department and MOHCD shall update the fee methodology and technical report every three years, with analysis from the Technical Advisory Committee, in order to ensure that the affordability gap remains current, consistent with the requirements set forth below in Section 415.5(b)(3) and Section 415.10.

d of calculating, indexing, and applying the fee shall be published in the Procedures Manual. The Department and MOHCD shall update the fee methodology and technical report every three years, with analysis from the Technical Advisory Committee, in order to ensure that the affordability gap remains current, consistent with the requirements set forth below in Section 415.5(b)(3) and Section 415.10.

(3) Annual Fee Update. For all housing developments, no later than January 1 of each year, MOHCD shall adjust the fee based on the cost of constructing affordable housing, including development and land acquisition costs. MOHCD shall provide the Planning Department, DBI, and the Controller with current information on the adjustment to the fee so that it can be included in the Planning Department’s and DBI’s website notice of the fee adjustments and the Controller’s Citywide Development Fee and Development Impact Requirements Report described in Section 409(a). The method of indexing shall be published in the Procedures Manual.

(4) Specific Geographic Areas. For any housing development that is located in an area with a specific affordable housing requirement set forth in a Special Use District, or in any other section of the Code such as Section 419, the higher affordable housing requirement shall apply.

(5) The applicable amount of the inclusionary housing fee shall be determined based upon the date that the project sponsor has submitted a complete Environmental Evaluation application. In the event the project sponsor does

not procure a building permit or site permit for construction of the principal project within 30 months of the project’s approval, the development project shall comply with the inclusionary affordable housing requirements applicable thereafter at the time when the project sponsor does proceed with pursuing a building permit. Such time period shall be extended in the event of any litigation seeking to invalidate the City’s approval of such project, for the duration of the litigation.

(6) The fee shall be imposed on any additional units or square footage authorized and developed under California Government Code Sections 65915 et seq.

(7) If the principal project has resulted in demolition of affordable housing units that are subject to a recorded covenant, ordinance, or law that restricts rents to levels affordable to persons and families of moderate-, low- or very low-income, or housing that is subject to any form of rent or price control through a public entity’s valid exercise of its police power and determined to be affordable housing, the project sponsor shall comply with Section 317.2.

(c) Notice to Development Fee Collection Unit of Amount Owed. Prior to issuance of the first construction document for a development project subject to Section 415.5, the Planning Department shall notify the Development Fee Collection Unit at DBI electronically or in writing of its calculation of the amount of the fee owed.

(d) Lien Proceedings. If, for any reason, the Affordable Housing Fee imposed pursuant to Section 415.5 remains unpaid following issuance of the first Certificate of Occupancy, the Development Fee Collection Unit at DBI shall institute lien proceedings to make the entire unpaid balance of the fee, plus interest and any deferral surcharge, a lien against all parcels used for the development project in accordance with Section 408 of this Article and Section 107A.13.15 of the San Francisco Building Code.

(e) If a housing project is located in an Area Plan with an additional or specific affordable housing requirements such as those set forth in a special use district or Sections 416, 417, and 419 or elsewhere in this code, the higher housing requirement shall apply.

(f) Use of Fees. All monies contributed pursuant to the Inclusionary Affordable Housing Program shall be deposited in the Citywide Affordable Housing Fund (“Fund”), established in Administrative Code Section 10.100-49, except as specified below. MOHCD shall use the funds collected under this Section 415.5 in the following manner:

(1) Except as provided in subsection (2) below, the funds collected under this Section shall be used to:

(A) increase the supply of housing Affordable to Qualifying Households subject to the conditions of this Section; and

(B) provide assistance to low- and moderate-income homebuyers; and

(C) pay the expenses of MOHCD in connection with monitoring and administering compliance with the requirements of the Program. MOHCD is authorized to use funds in an amount not to exceed $200,000 every 5 years to conduct follow-up studies under Section 415.9(e) and to update the affordable housing fee amounts as described above in Section 415.5(b). All other monitoring and administrative expenses shall be appropriated through the annual budget process or supplemental appropriation for MOHCD.

(D) Funds from this fee collected from projects within the Central SoMa Special Use District shall be accounted for separately and expended only within the area bounded by Market Street, the Embarcadero, King Street, Division Street, and South Van Ness Avenue.

(2) "Small Sites Funds."

(A) Designation of Funds. MOHCD shall designate and separately account for 10% of all fees that it receives under Section 415.1 et seq. that are deposited into the Fund, excluding fees that are geographically targeted such as those referred to in Sections 249.78(e)(1), 415.5(b)(1), and 827(b)(1), to support acquisition and rehabilitation of Small Sites (“Small Sites Funds”). When the total amount of fees paid to the City under Section 415.1 et seq. totals is1 less than $10 million over the preceding 12-month period, MOHCD is authorized to temporarily divert funds from the Small Sites Funds for other purposes. MOHCD shall keep track of the diverted funds, however, such that when the

amount of fees paid to the City under Section 415.1 et seq. meets or exceeds $10 million over the preceding 12-month period, MOHCD shall commit all of the previously diverted funds and 10% of any new funds to the Small Sites Funds.

(B) Use of Small Sites Funds. The funds shall be used exclusively to acquire or rehabilitate “Small Sites” defined as properties consisting of 2-25 units. Units supported by monies from the fund shall be designated as housing affordable to qualified households for the life of the project. Properties supported by the Small Sites Funds must be:

(i) rental properties that will be maintained as rental properties;

(ii) vacant properties that were formerly rental properties as long as those properties have been vacant for a minimum of two years prior to the effective date of this legislation;

(iii) properties that have been the subject of foreclosure; or

(iv) a Limited Equity Housing Cooperative as defined in Subdivision Code Sections 1399.1 et seq. or a property owned or leased by a non-profit entity modeled as a Community Land Trust.

(C) Initial Funds. If, within 18 months from April 23, 2009, MOHCD dedicates an initial one-time contribution of other eligible funds to be used initially as Small Sites Funds, MOHCD may use the equivalent amount of Small Sites Funds received from fees for other purposes permitted by the Citywide Affordable Housing Fund until the amount of the initial one-time contribution is reached.

(D) Annual Report. At the end of each fiscal year, MOHCD shall issue a report to the Board of Supervisors regarding the amount of Small Sites Funds received from fees under this legislation, and a report of how those funds were used.

(E) Intent. In establishing guidelines for Small Sites Funds, the Board of Supervisors does not intend to preclude MOHCD from expending other eligible sources of funding on Small Sites as described in this Section 415.5.

(3) For all projects funded by the Citywide Affordable Housing Fund, MOHCD requires the project sponsor or its successor in interest to give preference as provided in Administrative Code Chapter 47.

(4) Pursuant to Section 249.78(e)(1), all monies contributed pursuant to the Inclusionary Affordable Housing Program and collected within the Central SoMa Special Use District shall be paid into the Citywide Affordable Housing Fund, but the funds shall be separately accounted for. Such funds shall be expended within the area bounded by Market Street, the Embarcadero, King Street, Division Street, and South Van Ness Avenue.

(g) Alternatives to Payment of Affordable Housing Fee.

(1) Eligibility: A project sponsor must pay the Affordable Housing Fee unless it chooses to meet the requirements of the Program though an Alternative provided in this subsection (g). The project sponsor may choose one of the following Alternatives:

(A) Alternative #1: On-Site Units. Project sponsors may elect to construct units Affordable to Qualifying Households on-site of the Principal Project pursuant to the requirements of Section 415.6.

(B) Alternative #2: Off-Site Units. Project sponsors may elect to construct units Affordable to Qualifying Households at an alternative site within the City and County of San Francisco pursuant to the requirements of Section 415.7.

(C) Alternative #3: Small Sites. Qualifying project sponsors may elect to fund buildings as set forth in Section 415.7-1.

(D) Alternative #4: Combination. Project sponsors may elect any combination of payment of the Affordable Housing Fee as provided in Section 415.5, construction of on-site units as provided in Section 415.6, or construction of off-site units as provided in Section 415.7, provided that the project applicant constructs or pays the fee at the appropriate percentage or fee level required for that option. Development Projects that are providing on-site units under Section 415.6 and that qualify for and receive additional density under California Government Code Sections

65915 et seq. shall use Alternative #4 to pay the Affordable Housing Fee on any additional units or square footage authorized under Section 65915.

(2) A project sponsor who elects to satisfy Section 415.1 et seq 2 through one of the alternatives described in Section 415.5(g)(1), must provide written notice of their election 30 days prior to project approval by the Planning Commission or Department, as applicable. The Planning Commission or the Department may not require a project sponsor to select a specific Alternative. The Alternative will be a condition of project approval and recorded against the property in a Notice of Special Restrictions.

(3) Modification of Elected Alternative. Except as specified below, after project approval, any proposed change in the alternative elected by a project sponsor under Section 415.5(g)(1), or any proposed change from an Ownership Project to a Rental Project, or from a Rental Project to an Ownership Project, shall require public notice for a hearing and approval from the Planning Commission to amend the conditions of approval. Public notice shall be as required by the original entitlement.

(4) Notwithstanding subsection (g)(3), if such modification is requested prior to issuance of a first construction document, the Zoning Administrator or the Zoning Administrator’s designee may modify conditions of approval to allow a project that had elected to pay the Affordable Housing Fee to change from an Ownership Project to a Rental Project or a Rental Project to an Ownership Project, or to allow a project that had elected to pay the Affordable Housing Fee to provide on-site units under Section 415.6.

(5) If a project sponsor requests a modification to its conditions of approval for the sole purpose of complying with this Section 415.5(g)(3), the Planning Commission shall be limited to considering issues related to Section 415 et seq. in considering the request for modification. The Planning Commission shall approve such modification if it finds all of the following:

(A) The project sponsor complied with the applicable requirements for modification set forth in the Procedures Manual including protections for current occupants, if any, of Rental Units or Owned Units;

(B) The modification will not result in a delay in marketing any On-Site Units at the same time as the marketrate housing in the project;

(C) If a Rental Housing Project was granted a density bonus pursuant to Section 206, the change from a Rental Housing Project to an Ownership Housing Project provides On-Site Units in an amount such that the Ownership Housing Project qualifies for the same density bonus, waivers, and/or incentives and concessions that were granted to the Rental Housing Project;

(D) If a Rental Housing Project is converting to an Ownership Housing Project, the amount of Affordable Housing Fee or number of On-Site Units complies with Section 415.6(a)(7);

(E) For projects that chose to provide On-site or Off-site units and seek a modification of the conditions of approval to pay the Affordable Housing Fee prior to the issuance of the first construction permit, the project sponsor shall pay the Affordable Housing Fee equivalent to the loss of On-site or Off-site Affordable Housing units that were approved in the original conditions of approval; and

(F) For projects that chose to provide On-site or Off-site units and seek a modification of the conditions of approval to pay the Affordable Housing Fee after the issuance of the first construction document, the project sponsor or its successor shall pay the Affordable Housing Fee equivalent to the loss of On-site or Off-site Affordable Housing units that were approved in the original conditions of approval, plus interest and any applicable penalties provided for under this Code.

(Added by Ord. 108-10, File No. 091275, App. 5/25/2010; amended by Ord. 312-10, File No. 100046, App. 12/23/2010; Ord. 55-11, File No. 101523, App. 3/23/2011; Ord. 56-13 , File No. 130062, App. 3/28/2013, Eff. 4/27/2013; Ord. 62-13 , File No. 121162, App. 4/10/2013, Eff. 5/10/2013; Ord. 263-13, File No. 130549, App. 11/27/2013, Eff. 12/27/2013; Ord. 277-13, File No. 130968, App. 12/18/2013, Eff. 1/17/2014; Ord. 50-15 , File No.

150149, App. 4/24/2015, Eff. 5/24/2015; Ord. 143-15 , File No. 150568, App. 8/6/2015, Eff. 9/5/2015; Ord. 204-15 , File No. 150622, App. 12/3/2015, Eff. 1/2/2016; Ord. 76-16 , File No. 160255, App. 5/13/2016, Eff. 6/12/2016; Ord. 7-17, File No. 161157, App. 1/20/2017, Eff. 2/19/2017; Ord. 158-17, File No. 161351, App. 7/27/2017, Eff. 8/26/2017; Ord. 26-18, File No. 171193, App. 2/23/2018, Eff. 3/26/2018; Ord. 296-18, File No. 180184, App. 12/12/2018, Eff. 1/12/2019; Ord. 70-19, File No. 181154, App. 4/19/2019, Eff. 5/20/2019; Ord. 251-19, File No. 190548, App. 11/15/2019, Eff. 12/16/2019; Ord. 63-20, File No. 200077, App. 4/24/2020, Eff. 5/25/2020; Ord. 47-21, File No. 201175, App. 4/16/2021, Eff. 5/17/2021; Ord. 210-21, File No. 210868, App. 11/19/2021, Eff. 12/20/2021; Ord. 3-26, File No. 250926, App. 1/8/2026, Eff. 2/8/2026)

AMENDMENT HISTORY

Division (b)(1) amended; Ord. 56-13 , Eff. 4/27/2013. Divisions (b)(1), (b)(2), (b)(3), (e), (g)(2)(i), and (g)(2)(ii) amended; former division (g)(2)(iii) deleted; division (g)(3) amended; Ord. 62-13 , Eff. 5/10/2013. Division (b)(3) amended; Ord. 263-13, Eff. 12/27/2013. Division (f) amended and references to "MOHCD" corrected throughout; former divisions (f)(1)(a)-(c) redesignated as (f)(1)(A)-(C); division (f)(3) added; Ord. 277-13, Eff. 1/17/2014. Division (a) amended; Ord. 50-15 , Eff. 5/24/2015. Divisions (f), (f)(1), and (f)(2)(A) amended; Ord. 143-15 , Eff. 9/5/2015. Divisions (f)(2)(C) and (f)(3) amended; Ord. 204-15 , Eff. 1/2/2016. Undesignated introductory paragraph and divisions (a) and (b)(1)-(3) amended; new division (b)(4) added; divisions (f)(2)(B) and (f)(2)(E) amended; Ord. 76-16 , Eff. 6/12/2016. Divisions (f), (f)(2)(A), (f)(2)(E), and (g)(1) amended; new division (g)(1)(C) added; former division (g)(1)(C) redesignated as (g)(1)(D); Ord. 7-17, Eff. 2/19/2017. Divisions (b)-(b)(4) amended; divisions (b)(1) (A)-(C) designated; divisions (b)(5)- (7) added; divisions (c), (e), (f)(1)(B), (f)(2)(A), (f)(2)(B), (g)(1)(D), (g)(2), (g) (2)(ii), (g)(3), and (g)(4) amended; Ord. 158-17, Eff. 8/26/2017. Division (g)(1) amended; former division (g)(2) deleted; former divisions (g)(3)-(4) redesignated as (g)(2)- (3) and amended; Ord. 26-18, Eff. 3/26/2018. Divisions (f) and (f)(2)(A) amended; division (f)(4) added; Ord. 296-18, Eff. 1/12/2019. Divisions (b)(6) and (g)(1)(D) amended; Ord. 70-19, Eff. 5/20/2019. Divisions (f), (f)(2)(A), and (f)(2)(E) amended; Ord. 251-19, Eff. 12/16/2019. Division (a) amended; Ord. 63-20, Eff. 5/25/2020. Division (f)(1)(D) added; Ord. 47-21, Eff. 5/17/2021. Divisions (b)(1)-(b)(1) (C), (f)(1)(A), (g)(1)(A)-(B), (g)(2) amended; former division (g)(3) deleted; divisions (g)(3)- (g)(5)(F) added; Ord. 210-21, Eff. 12/20/2021. Division (b)(7) amended; Ord. 3-26, Eff. 2/8/2026.

CODIFICATION NOTES

1. So in Ord. 251-19.

2. So in Ord. 210-21.