On July 25, the Board of Supervisors passed on first reading the “Housing Fee Reform Plan” legislation (see previous posts here and here). The Board is expected to hold a second reading and finally pass the legislation in September after returning from summer recess.

The legislation consists of two ordinances. To help jumpstart housing production in the City, the inclusionary housing ordinance reduces inclusionary housing percentages and fees for certain new and pipeline projects of 25 or more units, and provides a temporary 33% reduction in the amount of other development impact fees for new and pipeline projects that can meet certain timing deadlines. The impact fee reform legislation establishes a 2% fee escalation rate, locks in the types and rates of impact fees at project approval, and reactivates an expired fee deferral program.

As discussed at the Board, market factors such as construction costs and interest rates will largely determine whether the legislation can unlock new housing. Developers of both housing and commercial projects should take note of the impact fee reform legislation, which makes major changes to San Francisco’s fee regime, but has received less attention than the inclusionary housing ordinance.

The Planning Commission had recommended eliminating development impact fees for changes of use, and applying the inclusionary housing percentage reductions to smaller, 10-24 unit projects. These changes were not adopted by the Board, but the Land Use and Transportation Committee created a copy of the inclusionary housing ordinance by duplicating the file, allowing for further discussions and potential amendments to that ordinance in the fall.