The San Francisco Board of Supervisors voted 9-2 on Tuesday to cut to 5 percent the percentage of units that developers of market-rate housing must set aside for affordable units in their projects.
Up until today, the rate — called the “inclusionary housing” rate — was 15 percent citywide, with an exception for the Mission District, which stood at 17 percent.
The dissenting votes were from Supervisors Shamann Walton and Chyanne Chen.
District 9 Supervisor Jackie Fielder sought to again carve out the Mission, and succeeded: Her amendment calling for an 8 percent requirement for the Mission District narrowly passed in a 6-5 vote. Supervisors Matt Dorsey, Alan Wong, Stephen Sherrill, Danny Sauter, and Rafael Mandelman all voted against Fielder’s amendment.
The board also voted to exempt developers of properties with fewer than 24 units from the requirement entirely. Previously, any development of 10 units or more had to include a certain percentage of affordable housing, or to pay a fee that went into an affordable housing fund.
The ordinance was co-sponsored by Supervisors Myrna Melgar, Dorsey, Sherrill, Sauter, and Mayor Daniel Lurie.
The ordinance was part of a deal Melgar struck with the mayor and affordable-housing groups earlier this year. In return for the groups dropping opposition to reducing the inclusionary rate, Melgar introduced a fund for building and renovating affordable housing that could grow to nearly $4 billion.
That charter amendment also passed today in a 11-0 vote. The fund will allocate a percentage of future increases in the city’s property tax revenue, and would grow to $125 million a year. It will be on the November ballot.
The Inclusionary Housing Ordinance was first passed in 2002, and requires market-rate housing developers to provide some amount of affordable housing, either within a market-rate development, off-site, or through paying an in-lieu fee to fund other affordable-housing projects.
Every three years, the city controller’s office releases a report on the city’s inclusionary housing requirements.
The most recent, a memorandum released by Controller Greg Wagner in April 2026, concluded that market-rate housing development in San Francisco has slowed due to several factors — among them higher interest rates and increased cost of construction.
The memo concluded that, given these challenges, even a 5 percent requirement might be too high. “Requirements significantly above 0% would further threaten feasibility,” the memo reads,” and would not create additional affordable housing.”
In advance of the vote, Susana Rojas, the executive director for Calle 24, told Mission Local about the effect that the lowered rate would have on the Mission.
“Our compromise of having it be at 8 percent in the Mission is really not ideal, but it’s better than not having inclusionary housing at all,” Rojas said.
Dorsey said that he understood “the desire and the importance of having a number that’s greater than zero,” but added: “I don’t believe we should single out neighborhoods and freeze them out for new housing — market-rate or affordable.”
Supervisor Melgar, who co-sponsored Fielder’s amendment, disagreed with Dorsey’s take. “I just want to point out that 5 percent of 100 is five, and it’s more than zero,” Melgar said.
“This is a temporary moment,” Melgar continued, pointing out that the new percentages voted in today are, like the previous ones, set to expire in three years.
“In three years when our economy recovers, when we no longer have a Republican president making everything more expensive in our country, the rate will go back up,” she said. I have every expectation that the inclusionary rate will be reset higher by a future body of the Board of Supervisors.”
Supervisor Connie Chan also voiced support for Fielder’s amendment, saying she would not vote to pass the primary legislation unless Fielder’s amendment was passed as well.
Changes like these to citywide housing mandates are nothing new — the required percentages of inclusionary housing tend to rise when new construction is booming, and fall when housing development stalls.
The last round of changes, proposed by then-Board of Supervisors President Aaron Peskin and then-Mayor London Breed in 2023, also reduced requirements.
At that time, the requirement went from 22 percent to between 12 and 15 percent for inclusionary housing constructed on the site of a new market-rate development, and from 33 percent to 16-21 percent for inclusionary housing constructed off-site.
JFC. What’s next is the city is going to give money to developers to build luxury housing ???? We have THOUSANDS of EMPTY market and luxury rate housing units. We lack AFFORDABLE housing. How does this help anyone but developers!?!
JFC. What you are spouting is utter nonsense.
The current rental vacancy rate in San Francisco is an extremely low 2.2%, making it the tightest rental market of any major city in the United States
my yimby friends explained that if we increase the number of luxury condos then, years from now, the price of luxury condos will go down a little bit… and then the rich people that couldn’t aford the new luxury condos will move out of their super expensive homes and then move into the old luxury condos, and then wealthy people will move from their very expensive homes to the super expensive homes… etc.. etc.. until a few generations pass and you get to the guy renting a closet can afford a larger closet. To speed it up, all we need to do is get rid of saftey regulations, environmental regulation, affordability requirements, union regulations, etc… lol. It’s like Reagan came out of the grave to spread housing policy in SF.
It’s not generations from now, it happens within 6 months. There have been lots of studies on this. One of the best tracked the moving records of people in Honolulu who bought new luxury condos and all the people who moved into their old homes and on and on down the chain. Even within that contained group you could measure people saving on rent, leaving abusive relationships, getting more space for their kids, etc. Meanwhile in San Francisco the deed restricted teacher housing we built over the past 5 years has a 20% vacancy rate and above average maintenance costs. Housing is already overly bureaucratic. Adding more restrictions in the name of affordability only makes things worse.
We need ALL kinds of housing and not just subsidised housing.
THOUSANDS ! Where are these “thousands” of empty housing units?
Are they “owned”, are the owners paying property taxes? Are the taxes funding things you like? If we let more “luxury” housing units get built will there be more property taxes paid to support the programs you like?
“We actually have a lot of empty housing” has to be the weirdest take from the NIMBYs.
I don’t love the 8% carve-out from my supe, but it’s not a bad compromise. This is the kind of incrementalism that works out well for California.
Tax increment financing means that new revenues that would have gone to city services are now being diverted from the general fund into the affordable housing trust fund.
This means that already deficient city services will be even further starved of resources.
Hundreds of thousands of people will be stiffed so that a few thousand people can be housed. The needs of the many outweigh the needs of the few.
This shifts the burden of funding affordable housing from market rate developers to working San Franciscans in the form of continued deterioration in city services.
This deterioration will not happen evenly across the city. Nope, as we know the “nice” neighborhoods will continue to be kept at the level to which they’ve grown accustomed, while the east side neighborhoods will suffer even worse city services.
Going to these lengths to try to push on the housing string with revanchist policies like this overstates the importance of new housing, of market rate, of affordable, even the land trust.
This is the opposite of the kind of “sewer socialism” that is the only viable political class forward for progressive San Franciscans.
Based on your description, it sounds like we need to tax the rich, so that we aren’t building affordable housing on the backs of working and middle class tax payers, no?
Taxing the rich is kinda like the weather, everyone talks about it all of the time, but nobody ever does much about it.
Given Prop C 2018’s taxing of excessive CEO salaries and the lack of any tangible improvement in street conditions, I do not see how voters are going to throw good money after bad.
The only taxation I would support moving forward is redistributive, where the wealthy and high profits are taxed, the parasitic elements of government and nonprofit bureaucracy middle people are bypassed, and proceeds are paid directly to working people.
Why does Connie care for a carve out for the Mission but not her own district? What makes the Mission such a unique situation that immigrants/residents in other districts can be squeezed out?
And then of course, why does Calle 24 opinion even matter?
The Mission was upzoned in 2008, and the deal at the time was that value would be captured through inclusionary affordable.
The Mission has already build much more than its fair share of market rate housing since 2008. The Mission is not the impediment to entitling and building market rate housing.
the real problem with these policies is the definition of “affordable”. When you have a building where the HOA is $900/month and the average price of a condo is $1.5M, pulling 20% off of one of those condos doesn’t make it “affordable”. What’s worse is this “Below Market Value” (BMR) property is basically stained forever. It’s a terrible investment. Your first home should be something you can leverage and grow, not something where people home shopping walk in and say, “oh, I can never easily resell this or even rent it”. If we want affordable, we that’s “a place someone working as a waiter/nanny/artist can afford to rent”. Not, “here’s a 800k property with an HOA that’s a week’s pay.” You want affordable? Make it super cheap to build inexpensive, well built, rental apartment buildings. You want to just make money for luxury condo developers that literally make the entire city more expensive? Contantly pitch and negotiate this BMR stuff as if it really makes a difference.
I’m pretty sure the vote was 10-1 with only Walton voting no. But it was after a re-vote so maybe I’m wrong.
Does Walton ever vote for anything at all ever? can’t wait until he is gone. Bayview deserves better
Finally the board came to its senses on this. Affordable housing requirements were dragging the whole market down.
For a city with a bunch of millionaires, this place sure sucks.
Exactly what SF needs… less affordable housing. NOT. “5% of 100 is 5, which is more than 0” … WTF kinda statement is that ? Sounds to me like if the # cud be 0… it wud be 0.
Unfunded inclusionary zoning is proven to be a terrible idea and it’s simply a tax on housing. If we want low income subsidized housing we should use government funds to subsidize it, instead of asking apartment dwellers to pay for the cross subsidy with higher rents. The rate should have been set to zero.
Increasing the tax on Mission from 5% citywide to 8% is a shame. The only purpose of doing this is to make sure no new housing can pencil in Mission.
NIMBYs of Calle24 won this round. I am particularly disappointed in Supervisors Melgar and Mahmood for siding with this unfair amendment. Mission deserves housing too. Stop taxing us.
It’s essentially a tax on housing production. It’d be preferable to tax something we want to discourage instead of something we want to encourage.
Shame.
The Mayor should veto the legislation with Fielder’s asinine 8% “carve out” for the Mission and then have the Board — with the prevailing majority — pass the uniform reduced 5% inclusionary requirement citywide. Note: The inclusionary requirement should, in fact, be 0% as the TAC analysis clearly indicated that 0% should be the number if the City is at all serious about gettin any housing built at the scale required to mitigate soaring housing costs. If Fielder’s 8% housing killer remains, then the City should withheld subsidizing any further (so-called) “affordable” units.