Committee Advances Sweeping Cuts to Affordable Housing Requirements in Bid to Restart Construction

San Francisco's Government Audit and Oversight Committee voted 2-1 on July 2 to send the city's most aggressive housing production package since the pandemic to the full Board of Supervisors — slashing on-site affordable housing requirements from as high as 20% to just 5% and cutting development impact fees by two-thirds. The ordinance now heads to the full board on July 14 alongside a companion Housing Trust Fund ballot measure that would more than double annual affordable housing funding to $125 million, but the two measures are not formally linked — a gap that drew the lone dissenting vote and a pointed commitment to bring amendments.

• Inclusionary housing rate drops to 5% and impact fees cut 67% as committee forwards ordinance to full board on a 2-1 vote
• Building trades, developers and housing advocates line up behind the package, calling stalled construction an existential crisis for union jobs and housing supply alike
• Mission, SOMA, and Bayview community groups warn the ordinance breaks neighborhood bargains and eliminates affordable units with no guaranteed replacement funding
• Supervisor Fielder votes no, announcing she will bring amendments at the full board to restore higher rates in the Mission
• Vice Chair Mahmood secures verbal commitment: if the Housing Trust Fund ballot measure fails, the mayor's office will bring legislation to raise the rate back to 10%

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The Big Cut: 5% Inclusionary, 67% Fee Reductions, and a Pipeline on Life Support

The basics: File 260538 implements recommendations from the Inclusionary Housing Technical Advisory Committee, which met from December 2025 through April 2026 and concluded unanimously that no rate of inclusionary housing is currently economically feasible under market conditions. The ordinance drops the on-site inclusionary rate from 18–20% to 5% citywide (4% low-income, 1% moderate-income), exempts projects under 25 units entirely, slashes all Article 4 development impact fees except the inclusionary fee by 67%, eliminates area-specific affordable housing fees in neighborhoods like SOMA and Western SOMA, and allows developers to defer 85% of fees until their first certificate of occupancy.

Why it matters: Market-rate housing starts in San Francisco have fallen roughly 70% since the pandemic, and the controller has found that no inclusionary rate is currently feasible. Without new market-rate construction, the city also loses the affordable units, fee revenue, and union construction jobs that come with it. But opponents argue the ordinance strips away hard-won community protections in neighborhoods that have borne the brunt of displacement — without any guarantee the companion funding measure will pass.

Where things stand: Jacob Bittliff, a staffer with the Office of Economic and Workforce Development, framed the ordinance as one half of a two-part strategy paired with the Housing Trust Fund charter amendment, which would raise annual affordable housing funding from $50 million to $125 million through a broad property-tax base.

"We used to get about $20 million a year in better economic times. And since the pandemic, that has been less than 2 million per year in inclusionary fee revenue," said Jacob Bittliff, OEWD staffer. He added that inclusionary fees and impact fees together can add $50,000 to $170,000 per unit in costs depending on the neighborhood.

Budget and Legislative Analyst Nicholas Menard confirmed the ordinance's fiscal impact is approximately $3 million per year based on current collection levels — but cautioned against expecting the fee cuts alone to restart production. "I don't think lowering these fees as the ordinance does now would unlock enough residential development to fully offset the fee loss," said Nicholas Menard, Budget and Legislative Analyst.

Chair Stephen Sherrill, Supervisor, District 2, set the tone early: "Construction costs today are 50% higher than pre-pandemic and going up every day. We cannot wait for a hypothetical policy discussion. We need to start building and get shovels in the ground today."

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A Flood of Support — and a Sharp Counterpoint

More than 25 speakers testified, the overwhelming majority in support. The coalition backing the ordinance was unusually broad: building trades unions, pro-housing advocacy groups, nonprofit affordable housing developers, and private-market builders all urged passage.

Trevor Long, representing Glaziers Local 718 and the SF Building Trades, endorsed the TAC process and said stalled projects mean lost work for union members. Eddie Reyes of Ironworkers 377 and Tim R. of the North Coast States Carpenters Union echoed that support. Greg Hardman of Elevator Constructors Local 8 argued current requirements prevent both market-rate and affordable units from getting built.

On the development side, Mark Vapsson, President of Emerald Fund, pointed to a specific 24-unit project at 1900 Diamond in Upper Noe/Diamond Heights that the legislation would make feasible, warning that a six-month delay from waiting for the November election would jeopardize it. Eduardo Segues of March Capital Management, a small developer and 20-year San Francisco investor who has built more than 40 projects, said no projects have penciled in six years and that the city has been "redlined by the private market." Enrique Landa, a developer and TAC member preparing to break ground on 300 market-rate and 300 affordable units, testified that the TAC recommendation reflects economic reality, not values.

Housing advocacy groups including SF YIMBY, Abundant SF, SPUR, and the Housing Action Coalition all testified in favor. Rebecca Foster, CEO of the Housing Accelerator Fund and a TAC member, endorsed the two-part package. Lily Lou Haller, COO of Mercy Housing California, a nonprofit affordable housing developer, supported the TAC's unanimous recommendations. Whit Turner of the Housing Action Coalition captured the supporters' argument succinctly: 15% of zero is zero — the current rate produces no affordable homes because nothing is being built.

The other side: Community organizations from SOMA, the Mission, and the Bayview mounted a forceful counterargument. David Wu of SOMA Filipinas opposed the ordinance, particularly the permanent removal of higher area-specific inclusionary rates from the SOMA Youth and Family Special Use District and Western SOMA, arguing it breaks community land use agreements.

Peter Papadopoulos of United Save the Mission argued the Mission has lost 12,000 Latinos in 25 years and requested an 8% rate for higher-inclusionary neighborhoods while keeping the 10–25 unit requirement until the Housing Trust Fund passes. Zach Weisenberger of Young Community Developers opposed the sub-25-unit exemption, arguing it would effectively eliminate inclusionary requirements along the Third Street corridor in the Bayview, accelerating displacement of Black families.

Zachary Freeal of SOMCAN cited BLA findings that the 2023 inclusionary reductions had no impact on jump-starting development and that fee reductions decreased potential revenue by $34 million. Lloyd Sarangan, also of SOMCAN, rejected the proposals, arguing the housing that will be built will not be affordable for working-class families.

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Fielder's Dissent: The Mission Bargain and the Missing Linkage

The sharpest debate among the supervisors centered on two questions: Should the ordinance be formally linked to the Housing Trust Fund? And should the Mission get a different rate?

Supervisor Jackie Fielder, Supervisor, District 9, challenged the 5% rate head-on: "Given that the TAC, the body specifically tasked with the feasibility analysis, recommended 10% absent secured recurring funding, why does the ordinance set the rate at 5% now, instead of starting at the fallback rate of 10% and stepping down only if the Housing Trust Fund measure passes?"

Fielder argued the Mission is different. The Eastern Neighborhoods rezoning gave developers added density and height in exchange for higher inclusionary rates — a community bargain she said the ordinance breaks unilaterally. "Lowering the on-site rate to a generic citywide 5% breaks that bargain while the added density and height developers received stays fully in place," said Supervisor Fielder.

She announced she is preparing amendments for the full board but said the City Attorney's office was not ready to submit them in time for the committee vote. "I've been working on amendments to address concerns about the Mission's on-site inclusionary rate. However, due to time restrictions, the City Attorney's office is not ready to submit these for introduction today," she said, and voted no.

Vice Chair Bilal Mahmood voted yes but pressed Bittliff on the contingency plan: "And is your office and the mayor's office supportive of if the Housing Trust Fund doesn't pass that, you will bring forth legislation to increase the inclusionary rate back up to 10%?"

Bittliff responded: "In that context, yes. We will work with the Board of Supervisors to adjust the requirements accordingly."

Mahmood accepted the commitment but made his discomfort clear: "I do wish that this was coupled. I feel that would have been more intellectually honest and consistent with what the public's perception is when you say two things go together."

Decisions: The committee adopted non-substantive technical amendments 3-0 (For: 3, Against: 0, Absent: 0 — Sherrill, Mahmood, Fielder all voting aye). A duplicate file was continued to the call of the chair, also 3-0. The original file, as amended, was forwarded to the full board with a positive recommendation on a 2-1 vote (For: 2, Against: 1, Absent: 0 — Sherrill aye, Mahmood aye, Fielder no).

What's next: Both the inclusionary ordinance and the Housing Trust Fund charter amendment are expected before the full Board of Supervisors on July 14. Supervisor Fielder's Mission-specific amendments will be the key variable. The underlying question — whether the city can restart its housing pipeline without abandoning neighborhood-level affordability commitments — will be fought out at that hearing and, if the Housing Trust Fund reaches the ballot, at the November election.

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Minor Items

• AB 2561 compliance hearing filed 3-0. A follow-up hearing on the city's compliance with state law regarding public employee vacancies and retention was filed without discussion after Chair Sherrill said his questions had been answered at a prior meeting. Gigi Whitley, Director of Policy and External Affairs at the Department of Human Resources, was present but was not called to testify.