Good morning, meeting um excuse me.

Good morning.

Meeting will come to order.

Welcome to the July 2nd 2026 regular meeting of the government audit and oversight committee of the San Francisco Board of Supervisors.

I'm Supervisor Stephen Sherrill, Chair of the Committee, joined by Vice Chair Supervisor Blahmakmood, and momentarily Supervisor Fielder.

Our clerk today is Monique Creighton, thanks to Clean Mendoza of SFGov TV.

Madam Clerk, do you have any announcements?

Yes.

Public comment will be taken on each item on this agenda.

When your item of interest comes up and public comment is called, please line up to speak on your right.

Alternatively, you may submit public comment in writing in either of the following ways.

Email them to me, the government audit and oversight committee clerk at M O N IQE.

C R A Y T O N at S F G-O V.org.

If you submit public comment via email, it will be forwarded to the supervisors and also included as part of the official file.

You may also send your written comments via U.S.

Postal Service to our office in City Hall.

Number one, Dr.

Carlton B.

Goodlit Place, room 244, San Francisco, California 94102.

If you have documents that you would like to be included as part of the file, please submit them to me before the end of the meeting.

Please make sure to silence all cell phones and electronic devices to prevent any interruptions to today's proceedings.

Finally, items acted upon today are expected to appear on the Board of Supervisors' agenda of July 14th, 2026, unless otherwise stated.

Thank you.

Could you please call it a number one?

Yes, item number one is a hearing to consider the city and county's compliance with assembly bill number 2561 in government code section 3502.3 regarding vacancies, recruitment, and retention efforts.

Thank you.

Today we are joined by Gigi Whitley, Director of Policy and External Affairs at Department of Human Resources.

Um we continued this item for the last meeting.

Um, and I'm now ready to file this item as my questions have been answered.

Um but colleagues, do you have any questions on this item before we do that?

Okay.

Um Madam Clerk, let's take public comment today.

I think we want to keep public comment at one minute.

Okay.

Yes, members of the public who wish to speak on this item should line up now along the side by the windows.

All speakers will have one minute.

Mr.

Chair, it appears we have no public comment for this item.

Great, seeing no one else making public comment.

Public comments now closed.

Uh and I'd like to move to file this hearing.

Yes, and on the motion that this hearing be heard and filed.

Member Fielder.

Member Fielder, aye.

Vice Chairman Mood?

Vice Chairman Mood, aye.

Chair Cheryl.

Aye.

Chair Sherrill, I have three ayes.

Thank you.

The motion passes.

Madam Clerk, please call item number two.

Yes, item number two is an ordinance amending the planning code to number one reduce inclusionary affordable housing program requirements for projects of 25 units or more.

Two, delete inclusionary affordable housing program requirements for projects under 25 units.

Three, allow all projects to dedicate land to the city as an alternative to payment of the inclusionary affordable housing program fee for adopt a process for projects to request a modification to conditions of approval related to affordable housing and development impact fees.

I'm sorry, five.

I'm sorry.

It's okay.

It's a long five.

It's a long one.

Five, delete certain Article 4 amendments to various sections of the planning code.

Affordable housing to develop impact fees, and six, adopt conforming amendments to various sections of the planning code, amending the building code to reduce planning code, article four development impact fees, and allow deferral of payment of such fees and amending the administrative code to adopt conforming amendments to the requirements of the citywide affordable housing fund, affirming the planning department's determination under the California Environmental Quality Act, making public necessity, convenience, and welfare findings under planning code section 302, and making findings of consistency with the general plan and the eight priority policies of planning called Section 101.1.

Great, thank you.

Um so before colleagues, we jump into the policy discussion.

Um, I'm just gonna lay out a roadmap for what to expect here.

This could be kind of complicated if that's okay.

Um, I'm gonna make some introductory remarks, then I'll turn the microphone over to either of you to make introductory remarks, as I know this has been a year-long process.

Um, then we're gonna hear from Jacob Bintliff and Ada Tan from the Office of Economic and Workforce Development who's in the chambers with us today.

Uh, they will provide the staff presentation.

After that presentation, I'm gonna ask Nicholas Menard from the budget and legislative analyst to provide a BLA report on the fiscal impact.

Um, before we do our questions for OEWD and BLA, I'd like to open this to public comment on this item.

Madam Clerk, we're gonna limit public comment to one minute today.

Um, after public comment, I have some non-substantive technical amendments to review, and then I was thinking then we dive into questions, substantive policy discussion.

Does that framework make sense?

Get the basics out of the way first, spend the bulk of the time on the substantive policy discussion.

Fair.

Okay, great.

Um let's jump into it.

Uh, first and foremost, I want to thank OEWD staff, namely Lee Latinsky, Jacob Bintliff, among many others, uh, who worked alongside the inclusionary housing TAC to develop the recommendations that led to this ordinance today.

Um, San Francisco is the fastest aging city with the fewest children per capita in the country, and it is not rocket science as to why.

The cost of living is simply too high.

Last year we passed the family zoning plan, which is a monumental reform to our city's zoning.

We passed that plan because we acknowledge a clear fact.

We are in a housing crisis.

But as we know, zoning only creates the opportunity for new housing.

We need more work to actually get shovels in the ground and to get more homes actually built for all San Franciscans.

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.

And I'm confident that this ordinance will get us closer to more homes being actually built and not just talked about in San Francisco.

I'm proud to support this ordinance and to deliver on the cost of living crisis in this city.

And now I'd like to, colleagues, any remarks you would like to make on this item.

I'll wait to watch.

Okay, great.

Um, I'd like to hear from uh Jacob Bintliff, OEWD.

Thank you for being here today.

Thank you.

Good morning, Chair Sheryl Supervisors, Jacob Bintliff with the Office of Economic and Workforce Development here on behalf of the mayor's office.

As Chair Sherrill said, the item before you is an ordinance to reduce the city's inclusionary housing and impact fee requirements following the controller's latest triennial economic feasibility study.

Since 2017, every three years, the controller has convened the inclusionary housing technical advisory committee or TAC to guide a data-driven process supported by economic consultants and recommend a level of inclusionary housing that maximizes affordable housing production without preventing the feasibility of market rate housing development.

In 2023, following the TAC recommendations, the city temporarily lowered the inclusionary housing and impact fee requirements by 33%.

These reductions are set to expire on November 1st of this year, after which the requirements will increase significantly.

The TAC began meeting last year, late last year, and the controller issued their report to the Board of Supervisors on April 30th.

This year the study found that there is no rate of inclusionary housing that is economically feasible under market conditions, and that the feasibility gap for projects has actually grown worse since the 2023 study due to increasing construction and financing cost.

Given this, the TAC unanimously recommended a significant reduction in the on-site inclusionary requirement to 5% citywide and a proportional reduction to other development impact fees.

I want to be clear that the TAC recognized that these requirements are still above what is financially feasible for most projects, but wanted to preserve some level of requirement to gain on-site affordable units and fee revenue for those projects that are able to move forward, or if conditions improve over the next three years before the TAC reconvenes.

Importantly, the TAC also discussed the critical need for funding to support development of affordable housing and recommended that this reduction in inclusionary requirements be paired with an additional source of recurring local funding for affordable housing production and preservation.

As you all know, supervisors, the city's now moving forward with just such a measure.

That is the companion charter amendment to renew and expand the housing trust fund that Supervisor Melgar introduced with your co-sponsorship.

That measure would move to more than double the city's annual baseline funding for affordable housing from about $50 million to $125 million per year, using a formula based on the growth of the city's overall property tax base.

This will result in an additional $3 billion for affordable housing funding over the next 30 years.

That measure was recommended out of the rules committee on Monday and will be before the Board of Supervisors on July 14th for a vote.

The item before you today is the ordinance implementing the tax recommendations regarding the inclusionary and impact fee requirement reductions and is intended to advance three key goals.

Firstly, to meet our housing goals by making housing more feasible to build at the scale that we need to address our housing crisis.

Secondly, this is intended to incentivize development specifically through our family zoning plan and our local zoning that you all worked so hard on last year.

The ordinance would do this in a couple of ways.

Firstly, by exempting small projects of fewer than 25 units from inclusionary requirements, the ordinance would make it easier to build exactly the kind of small midscale infill development and the well-resourced neighborhoods that family zoning envisioned.

In fact, the planning department estimates that half of all the family zoning sites that were rezoned have a capacity of 25 or fewer units.

At the same time, these projects have only provided uh less than two percent of inclusionary units uh over the past 10 years.

Secondly, by setting the local inclusionary requirements to be lower than the amounts that are required to qualify for the state density bonus program or the various state ministerial approval programs, we will be providing a strong incentive to use our local zoning and our family zoning program and approval process.

Projects can certainly still use these state programs, but they would have to provide significantly more affordable housing to be able to access those programs per state law.

Finally, the ordinance is intended to significantly simplify and streamline the overall process by which planning and building departments implement these fee programs to provide greater transparency and predictability about how these programs are applied.

Finally, supervisors, as you consider this item today, I ask that you keep in mind the broader context of this program.

The inclusionary housing program has been a meaningful but small portion of our overall affordable housing supply of most CD's 35,000 affordable units, subsidized affordable housing units in their portfolio.

Fewer than 9% have come from the inclusionary program since 2002, and since 2020, that has actually been less than 6% of our total affordable housing supply coming from this program.

The fee revenue we get from inclusionary has had a similar uh trajectory.

We used to get about 20 million dollars a year in better economic times, and since the pandemic, that has been less than two million per year in inclusionary fee revenue, and there was actually a negative uh balance for that program due to refunding projects that canceled their building permits last year.

We've seen a similar pattern on the overall development impact fees, which in the last two years have brought in only about three million dollars on average for all citywide development impact fees in total.

This tracks the market conditions that we've seen, where we've seen a 70% reduction in market rate housing since the pandemic.

At the same time, providing these inclusionary units does impose costs on housing development of an additional 50 to 90,000 dollars per unit.

The cost of other development impact fees can increase this to be over a hundred and fifty thousand dollars per unit in additional cost that are ultimately paid by the renters of these units or buyers if they can be built at all.

So uh we stand uh little to lose from these reductions given that context, but a lot to gain in terms of overall housing production.

In summary, supervisors, we believe this is a legislation that strikes an appropriate balance and accomplishes what the TAC recommended.

Thank you very much, Supervisors Melgart and Cheryl for your co-sponsorship and to Jen Lowe and Lorenzo de Rosas on your staff.

With that, I'll hand it over to Ada Tan with the planning department to go over the details of the ordinance, and we'll be here for questions along with most CD and controller staff.

Thank you.

Thank you.

Good morning, committee members.

My name is Ada Tan with Planning department staff.

I'll provide an overview of the proposed ordinance.

On May 19th, 2026, Mayor Lurie and Supervisors Melgar, Dorsey, Sherrill, and Sauter introduced legislation to amend the inclusionary requirements and reduce development impact fees under board file number 260538.

On June 2nd, a substitute ordinance was introduced under the same board file number.

Many of the key changes proposed under the ordinance are consistent with the TAC recommendations.

The applicability threshold would increase from projects with 10 or more units to projects with 25 or more units.

Rather than having the on-site rates spring back up to 18% or 20% on November 1st, the rate would be 5%.

The three income tiers that are currently required would instead be split between the two lower tiers with 4% at low income and 1% at moderate income.

Additionally, the fee and offsite rates would be set to 10%.

The areas shown on this map currently have higher rates than citywide rates.

The ordinance proposes that projects in these areas be subject to the citywide on-site rate of 5%, with fee and offsite rates set to 15%.

The proposed ordinance expands the land dedication options citywide.

Projects in the specific areas shown on the previous map would still 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 the units.

The minimum site capacity would be 70 units, and MOCD must approve that site.

Dedicated sites would need to be located within one mile of the principal project.

However, projects located in the specific areas or within a well-resourced neighborhood could dedicate land anywhere within those areas.

The same location standards would apply to projects providing units off site.

The ordinance also establishes administrative processes for how projects can take advantage of the new rates, request extensions to their performance period, or modify the method of inclusionary compliance and project tenure.

Under the proposed ordinance, all Article 4 impact fees under the planning code, except for the inclusionary affordable housing fee would be reduced by 67%.

This reduction would not apply to other fees, such as school fees or PUC hookup capacity charges.

This reduction would apply to all projects, including non-residential projects that submit a complete development application and to pipeline projects that have been finally approved but have not been issued a first construction document.

The fee deferral program that was established or reinstated, I should say, in the 2023 ordinance would remain in place and would be amended to allow all projects to defer 85% of fees to the first certificate of occupancy, including inclusionary fees.

Currently, projects and area plans may only defer 80% of fees.

The areas shown on this map are required to pay additional affordable housing fees on top of the inclusionary fee.

This ordinance would eliminate the additional housing fees from these areas.

When impact fees are reduced or eliminated by legislation as proposed under this ordinance, pipeline projects would be able to modify their requirements to incorporate the reductions.

Any amount that's already been paid at building permit issuance would not be refunded, and the reduction would only apply to the remaining deferred balance due at occupancy.

For projects proposing a 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% in size or entitlement extensions will be fully reassessed using the fee types and rates in effect at the time of the request.

Projects must obtain first construction document within three years of final planning approval, and projects that expire or that request modifications of 20% or more are subject to the requirements in effect at the time the sponsor submits a complete application for the revised project.

So as Jacob mentioned earlier, the TAC did convene.

They starting in December 2025 and met four times through April.

The controller then published the economic feasibility report with the tax recommendations on April 30th of this year.

As for the legislative timeline, this ordinance and the ordinance initiating the housing trust fund expansion were introduced on May 19th.

The inclusionary and impact fee ordinance was presented to the planning commission for an informational hearing on May 28th and to the planning department's equity advisory council on June 9th.

City staff also presented to the building inspection commission on June 17th, where they unanimously approved the proposed changes under the ordinance that pertain to the building code, which relate to impact fee administration.

On June 18th, the planning commission heard this item and approved the planning code amendments.

Overall, this has been a very thorough and robust process with opportunities for the public to provide their comments.

After today's committee hearing, the goal is to get this item before the full board prior to the August recess.

So during the Planning Commission hearing, the commission approved two action items.

The first was a recommendation for approval of the proposed ordinance with modifications that are administrative and non-substantive, which include amending the North of Market residential special use district to account for a conditional use approval process.

A height increase is already allowed in this SUD through a CUA.

The cleanup language is to clarify that the height increase may still be granted through that process, but without having to pay the additional affordable housing fee, which is proposed to be removed through this ordinance as was shown on a prior slide.

The second modification is to update Section 415.10E to correct a typo and state the correct code reference.

And the third is to correct the definition of development applications, specifically for projects that are subject to a development agreement.

The development application shall mean the an individual building's first site or building permit.

We understand that Chair Sherrill intends to move these amendments today.

The planning commission also adopted a recommendation to delegate authority to the planning director or their designee to administratively approve requests for projects seeking to amend conditions of approval related to inclusionary and vesting.

This concludes staff presentation.

Myself along with other city staff are available to respond to any questions.

Thank you.

Thank you.

We're gonna have a bunch of questions for you in a bit.

Nicholas Menard uh from the BLA.

Good morning, Supervisors Nick Menard from the BLA.

Item two is an ordinance that would reduce inclusionary fees and development impact fees.

We summarized the changes on exhibits one, two, and three of our report.

Um, and then in terms of fiscal impact, uh, we looked at the affordable housing fees that have been collected by the city in 2324.

Can you hear me now?

Yes, sir.

Okay, great.

Um, in terms of fiscal impact, uh in fiscal year 2324, the city collected 1.5 million dollars of affordable housing fees and 2.6 million dollars of development impact fees.

These are the kind of fees that the this ordinance would reduce.

Uh the scope of the reductions about 50 percent.

Um so that's basically the fiscal impact is about uh three million dollars a year based on development fees that are the city's collecting right now.

The city used to collect a bunch more development impact fees when there was more uh market rate development activity in San Francisco.

The fee losses would be offset by fees for um new new construction that this that these fee reductions unlock.

So as more buildings get built, they will pay more fees, and that will offset some of the fee loss.

Um, and they will also, to the extent that their market rate uh developments also provide property tax and other tax-paying residents in San Francisco that will offset um some of these fee losses.

Um, however, given that the feasibility gap uh for residential development in San Francisco is so large that waiving all of these fees even to zero would not close that gap.

Um, I don't think lowering the lowering these fees as the ordinance does now uh would unlock enough residential development to fully offset the fee loss.

Uh so that's why you know we issued a report uh a couple weeks ago about mechanisms for funding affordable housing that was heard of the land use committee on giant on June 5th.

But we repeat the last part.

Yeah, so we have a we have a separate report on this item that was issued June 5th and then heard at the land use committee that has many different options for the city.

We just couldn't hear you.

Oh, that has many different options for the city to consider uh options for funding affordable housing.

Happy to answer any other questions.

Great, thank you.

Um can we quickly dive into public comment?

And once again, Madam Clerk, let's limit public comment to one minute.

Yes, members of the public who wish to speak on this item shall I end up now along the side by the windows.

All speakers will have one minute.

Good morning, government uh and audit oversight committee.

Griffin Lee here representing connected SF.

Uh our members expressed support in both or this entire uh file.

Um, so we do support uh reducing inclusionary fees um and also eliminating all the impact fees.

Uh the one thing question we have though is based on the BLA report, um, it's still says that um there's still not financially feasible uh with these reductions.

So why aren't we going further?

Um I think that's a question that should be asked here today and and taken into consideration.

But we do support the overall reforms here.

Thanks so much.

Thank you.

Next speaker, please.

Good afternoon, Chair and Supervisors.

My name is Trevor Long, and I'm here with Glazer's Local 718 and a part of San Francisco San Francisco's building trades unions.

I want to focus on process.

The inclusionary requirement was not created casually and should not be changed casually, but that's not what's happening here.

The TAC exists for this exact purpose to bring technical expertise, housing finance experience, affordable housing voices, market rate housing experience, and city staff analysis together, so San Francisco can set a requirement that is ambitious but realistic.

That process has happened.

The conclusion is clear under today's conditions.

Many projects are unfeasible, and lowering the requirement improves feasibility.

For workers, delays has real consequences.

When housing project is stalled, a glazer is not working, an apprentice is not getting hours, and a painter is not urging earning wages, and a family is not getting a home, and the city is not receiving the public review revenue that comes from completing the house.

Thank you for your comments.

Please uh please consider approving.

Thank you.

Next speaker, please.

Uh good morning, uh supervisors and staff.

My name is Greg Hardeman with the Elevator Constructors Local 8, proud affiliate of the San Francisco Building Trades.

Um our members build the city, we build the homes, the infrastructure, but right now, too many um projects aren't penciling out uh because of the um current way things are.

Uh this measure, this means no new homes, no affordable units, it means no impact fees, and for our members, it means fewer paychecks and fewer apprentice hours.

Uh, this ordinance is not working.

Uh this important is not walking away from affordable housing, is keeping inclusion requirements for larger projects.

Well, right, sizing it for the today's market.

The TAC did their technical work, the controller's process looked at the numbers, the planning commission approved it, and the budget and legislative analysts confirms that this helps projects move.

The city can see offsetting revenue from fees and property taxes that otherwise would not exist.

We urge the we urge you to support the TAC recommendations.

Thank you.

Next speaker, please.

Hello, David Wu with Somo Filipinas.

Um, we are opposed to these cuts that reduce rates dramatically.

We are also opposed to the permanent removal of higher inclusionary rates that were determined through a community process as part of the increased upzoning in area plans, including in the SOMA Youth and Family SUD and Western Soma.

There is not a proportional reduction or time limit to these changes, but a complete removal.

These are area-specific higher inclusionary rates that were supposed to represent a trade-off between increased development capacity, meaning more profit for private developers, and mitigation of impacts to the community.

The area plan trade-offs were already heavily in favor of private developers, uh, with community having to carry the burden of increased gentrification and displacement pressures.

This removal signals that SOMA will not have land use agreements honored, and it will be hard to take any future community benefits tied to upzoning seriously when they can be so easily removed.

Thank you.

Thank you.

Next speaker.

Good morning, Chair Supervisors.

I'm Rebecca Foster, CEO of the Housing Accelerator Fund and a member of the inclusionary TAC.

The TAC, as we've heard, spent months reviewing the data and reached a unanimous conclusion that under today's economic conditions, current inclusionary requirements are unfortunately preventing new housing from being built.

And that's why we recommended a very important two-part package, lowering the on-site rate to 5% paired with a renewed and expanded housing trust fund.

These are really designed to work together.

We've made real progress streamlining housing approvals, but one of the biggest barriers that remains is financing certainty.

For affordable housing, the housing trust fund creates that stable, predictable source of funding for market rate housing certainty over a three-year period when the TAC would meet again, creates that certainty to be able to plan through entitlements and construction so that we can grow the overall funding base for the city together.

We need both affordable and market rate housing.

Thank you.

Next speaker, please.

Good morning, Chair and Supervisors.

My name is Lily Lou Haler.

I'm the COO of Mercy Housing California.

Mercy is a nonprofit affordable housing developer, and here in San Francisco, we own, manage, and provide services to 58 affordable apartment communities, and have just under 3,000 additional homes in our San Francisco development pipeline.

Homes we are eager to build.

As emission-driven developer, we know that reliable local funding is critical to preserving and producing affordable homes, and that predictability increases our ability to move housing forward.

We support the unanimous recommendations made by the TAC to improve San Francisco's housing ecosystem.

Namely, those recommendations were to place the Housing Trust Fund Charter Amendment on the ballot in November and to modify the inclusionary housing requirements and development fees to encourage the production of housing in the city.

We hope you will advance these well considered and unanimous recommendations.

Thank you.

Thank you for your comments.

Next speaker, please.

Supervisors, my name is Jesse Blout.

I'm with Strata Investment Group.

Uh, and I have been a member of the TAC for the last since the inception for the last three cycles here.

Proud of the work we've done.

Want to reiterate that this is a sort of global solution uh tied to the housing trust fund, but that these um inclusionary changes will make a material impact on feasibility.

We've built uh over a thousand units in San Francisco.

I think we're the most uh active developer right now in the last five, six five or six years.

We built over a thousand units.

We have fifteen hundred units in the pipeline, and this will make a huge impact on our ability to start construction.

So thank you very much.

Thank you for your comments.

Next speaker, please.

Good morning, supervisors.

My name is Eddie Reyes, and I live here in San Francisco and represent Iron Workers 377 in the building trades.

Our members understand the affordable housing crisis personally.

The people who wire plumb, frame, operate, finish, and maintain the city are also the people who raise families here.

We want affordable housing.

We want mixed income communities, and we want a city where working people can stay.

But the current math is not producing the results San Francisco needs.

The proposal before you is a balanced approach.

It lowers the inclusionary requirement at this time based on the tax technical analysis.

While the city also pursues a stronger housing trust fund to create a more stable source of affordable housing dollars.

That is exactly the kind of balanced policy San Francisco needs.

Keep a requirement in place.

Makes affordable makes projects feasible and the fund affordable housing in a way that does not depend on style stalled.

Thank you for private projects.

Please support the tax recommendation.

Thank you.

Next speaker, please.

Good morning, supervisors.

My name is Jugal Patel, resident of D8 here with Abundant San Francisco in support of the proposed changes to the inclusionary requirement and development impact fees, as is.

Over the last 15 years, I have lived every facet of housing insecurity in the city, from sleeping on its streets to shelters, rehabs, relying on housing subsidies, and now supporting myself in a rent controlled department.

As I work my way up, the line to support myself in the 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 am 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.

We need to pull every lever we have from reducing inclusionary rates, reducing impact fees, and increasing stable affordable housing financing.

Thank you.

Thank you for your comments.

Next speaker.

Good morning.

My name is Eduardo Sagues.

I'm a partner at March Capital Management.

I'm here to speak in support of the inclusionary ordinance as proposed with no amendments.

We've been real estate investors in San Francisco for 20 years.

We've built more than 40 projects here.

We're small developers.

And in fact, many of these buildings have built uh that we've built fall within that 10 to 24 unit range.

For the last six years, we have not been able to make any single project pencil here.

As Mr.

Blinty mentioned, these requirements are still above what's considered feasible, but it provides a great relief.

We all agree we need more housing.

Most of the housing production comes from private investment.

If projects are infeasible to build, no one builds.

There is no affordable housing if we cannot build any housing.

The city has essentially one tool to fix housing production, and that is reassuring the private markets that San Francisco is open for business again.

Let's be clear.

These 49 cents exactly the signal that we're next speaker, please.

Hi, supervisors.

My name is Ben Ewing, and I'm a D5 resident and volunteer with SFMB, and I urge you to please pass this legislation.

I've lived in SF for over eight years, and I love it here.

But as I think about starting a family, staying here is pretty daunting.

The rent is the highest it's ever been and it keeps climbing climbing.

As you know, enough housing is not being built right now, and we need it more than ever.

Please pass this legislation to uh make building housing more feasible so that families can afford to live here.

Thank you for your time.

Thank you for your comments.

Next speaker, please.

Hi, Eric Tao, housing developer in San Francisco.

I started my development career in 2002 when the inclusionary ordinance first passed.

Built my first project with 12% on site, and it worked, and it worked for a while.

We've built over a hundred on-site inclusionary housing units part of our projects.

Then in 2008, the Great Recession hit, and then this board and the mayor worked together with developers to reduce the inclusionary housing and create the housing trust fund.

That's the first time we did it, and it worked.

We were able to build more housing after getting stuck by the Great Recession.

And that housing and that increment tax that was created by I was able to fund the housing trust fund.

We haven't built since 2020, since the pandemic.

Good morning, supervisors and staff.

My name is Clayton Sanford, and I'm a resident of district six.

I'm here today with abundant SF and SF EMB to speak in favor of the amendments.

I grew up in the Bay Area, which means the housing crisis is personal to me.

Most of my peers and friends growing up would like to set down route routes here, but simply can't because of the inability to secure adequate housing.

I've seen people have to make wrenching decisions and have to leave the area because of this.

It doesn't have to be this way, however.

This amendment is a good step in the right direction.

Let's expand the city's affordable trust housing trust fund without um without uh discouraging the housing supply that we badly need as well.

Also, as someone who lives near Van Nessen Market, I would really like to see some of some more housing come up in my neighborhood specifically, so I'm excited about the provisions related to that.

Thank you for your time.

Thank you.

Next speaker, please.

Good morning, supervisors.

My name is Michael Handler.

I'm a resident of District 9 in the mission.

I'm a homeowner of 15 years, and I'm here with abundant SF and related organizations in support of the proposed amendments without changes.

Um I've been in living a resident of San Francisco since 2007 and uh fortunate homeowner since 2011.

And the overall overwhelming experience has been my friends and uh everyone else I know who cannot who does not already have a tech salary or fortunate enough to have uh a lot of money already, can't afford into the housing and is relocated themselves out of the city, and that's not the city I want to live in.

Uh I org the the opportunity costs are very real.

We need to reflect our changes on them, and we adopt the unanimous uh recommendations of the technical advisory committee to re meet the situation on the ground where it is and get more housing built.

Thank you very much.

Thank you.

Good morning, supervisors.

Tim right for North Coast States, Carpenters Union.

The carpenters are in support of this legislation to update San Francisco's inclusionary housing program and reduce development impact fees.

Our members know all too well the burdens of San Francisco's affordability crisis.

We know that to solve this affordability crisis, we need to build more homes across the city.

But unfortunately, for too long, we have watched residential projects language for years, projects that would have put thousands of union carpenters to work right here in San Francisco.

We have long supported inclusionary housing as a tool to build more affordable units.

But we also know that if an inclusionary rate is set too high, the projects won't be built.

No affordable units will be built and our members will remain out of work.

And unfortunately, right now, too few projects are being built.

So we commend the city for the thoughtful, fact-based approach to setting an inclusionary rate that works for San Francisco today.

We look forward to continue to work with the Board of Supervisors, the mayor, and all stakeholders as we implement this new policy, increase support for the housing trust fund and the members of our union.

Build new homes across the city.

Thanks, Speaker, please.

Dear supervisors, my name is Jules.

I'm a resident of D5.

San Francisco values of welcoming diversity and being a haven to immigrants like myself and to the LGBTQ community deeply resonates with me, as I believe it does with you.

But it is unarguable that we've failed these values.

When renting a one bedroom costs $4,000, we're a sanctuary to no one, and our city cannot strive when it's only affordable to the richest.

In my almost 10 years here, I've had close friends who work in the arts or education be forced to leave the city because of cost of living.

The fact that our central workers cannot afford to live here is a tragedy that we need to solve.

This is why I'm urging you to adopt, as is the recommendation of the TAC, to lower inclusionary rate to five percent and accept exempt projects with fjord and 25 units.

This would be a step in the right direction of unblocking our market rate housing pipeline, which is necessary to bring down housing costs in our city and make it livable again.

Thank you.

Thank you for your comments.

Next speaker, please.

Good morning, supervisors.

Uh my name is Alex Zerbel, I live in District 5, and I've lived in San Francisco for 12 years.

I'm here in support of this proposal.

Um over the past five years, I've already seen two pairs of friends move out of the city uh to the East Bay in order to start a family.

Uh the main reason they did that is for cheaper housing.

None of my current friend group can see themselves staying in the city to raise a family.

That's another five couples.

Um we love living in SF and we want to stay, but it's just too expensive.

Um it's really frustrating to see that and then look around and look at the data and see how little housing is getting built here.

I'm really happy that SF prioritizes subsidized housing, but we shouldn't be doing that by putting the cost burden on new housing.

I love that these changes are paired with a larger housing trust fund.

We should be building a lot more housing, and I hope if we do, myself and my friends can stay in the city to raise our families here.

Thank you.

Thank you.

Next speaker, please.

Hi, good morning.

Uh, my name is Lily, and I'm a proud resident of District 7, a homeowner and a parent.

I'm here with Abundant SF in support of the proposed amendments to the inclusionary affordable housing program.

So I'm raising my kids here, and they're quite young, uh, three years old and six months old.

Um, San Francisco is our whole world.

I want that to stay that way, but I look at the city that they're growing up in, and I'm doing the math on whether they'll be able to stay.

I have my home and I'm very grateful for it.

So I'm not here for myself.

I see that empty lots and projects proved on paper for years never break ground.

That's not scarcity by accident.

It's a system that's made housing too expensive and too uncertain to actually build.

Today's requirements and fees are blocking the very projects that would fund affordable homes.

No project means no uh no project built means no affordable homes either.

I want my kids to be able to stay in the city that raised them.

That takes homes at every income level.

I urge the committee to support these amendments.

More homes for a city, everyone can afford.

Thank you.

Thank you for your comments.

Next speaker, please.

Good morning, supervisors.

Mark Vapson.

I'm a 30-year resident of the mission and president of Emerald Fund.

We are longtime San Francisco housing developers, built over 3,000 units.

I commend you on legislation that actually is going to make a difference.

This will result in more housing.

In particular, I encourage you to pass this as soon as possible for projects of less than 25 units.

We have a real project, 1900 Diamond, Upper Nowy Diamond Heights, 24 family size homes.

This legislation makes it pencil, makes it work.

If we have to wait until after legislation, after the election is certified in November, that's six months of construction cross construction cost increases, the project would be in jeopardy.

I commend you and encourage you to pass this today.

Thank you.

Thank you for your comments.

Next speaker, please.

Hi, my name's Marie Sorens, and I'm a resident of D9, and I'm flabbergasted at the mean spiritedness of this proposal.

It wasn't enough when the wiener had the state cut affordability several years ago from 22 to 25 to 17.

Now you want five.

Why?

Because he afforded because the developers can't afford it.

It's greed.

There are 40 to 60,000 empty units in San Francisco right now.

What we need to build is affordable housing.

But the real message behind this is San Francisco doesn't want poor and working class anymore anymore.

The trumpification under Hair Lori needs to stop.

Trickle down didn't work with Reagan, and it certainly isn't gonna work here.

Please reject the whole thing.

Thank you.

Thank you.

Next speaker.

Good morning, supervisors.

My name is Lori Drosti, and I'm the housing and planning director at Spur.

I urge you to support the full inclusionary housing reform package.

The controllers' feasibility analysis showed that recalibrating local requirements is an essential part of making housing feasible to build again.

And this package is a thoughtful recalibration that will help restore feasibility.

We especially encourage you to retain the full exemption for smaller scale housing projects.

San Francisco has already legalized small multifamily homes through the family zoning plan.

Now we have to make sure that they actually can get built.

Removing these fees for small projects gives homeowners and small builders a real chance of out adding housing in high opportunity areas, helping implement the family zoning plan and affirmatively furthering fair housing.

Please support the full package and keep the small project exemption.

Thank you so much.

Thank you for your comments.

Next speaker, please.

Hello, supervisors.

My name is Prodon.

I am with SFMB, and I'm also on the board of directors of the Sierra Club for the San Francisco Bay Area chapter.

I've been a renter for seven years, and I live now in uh D 10.

I urge you to support the full package and also to follow the tax recommendations to further reduce uh the fees down to uh or the inclusion requirement uh to zero and to look at other options to uh increase the housing supply in San Francisco, like removing transfer fees and other requirements that make housing uh production expensive in the city.

I have lived here for seven years, and this is the first year where I might have to consider leaving the city because of the rent increase that my uh landlord is proposing.

Uh, he's not proposing that because of Crete, he's proposing it because there's many people that want to live in the city.

Yeah, we have not built enough housing in homes for those people to be able to afford here.

I urge you to accept uh to um uh to go for it with this package and consider other options as well.

Thank you so much.

Next speaker, please.

Good morning, Supervisors Whit Turner, on behalf of the Housing Action Coalition.

We are a member supported nonprofit that advocates for more homes at all income levels.

Um I think the reality here is that 15% of zero is zero, and that's what the data is showing.

At the current rate, um, we are not producing more affordable homes.

Sadly, we're just producing fewer homes than necessary of every kind.

But this legislation gives us path forward.

Um, this requirement applied to real housing starts paired with impact fee reductions and more, will deliver far more affordable units than the current rate in the building environment we are in.

Um now is the time to start seeing some cranes in the sky, some homes being built for all San Franciscans.

So we ask for your support today on this because it's critical we start getting shovels in the ground.

I also want to thank the TAC and the OEWD team for their work on bringing this recommendation forward and putting it all together.

Thank you.

Thank you.

Next speaker.

Good afternoon, supervisors.

My name is Paul Wormer.

Uh, I have one concern that I hope you will find a way to address.

There may indeed be good reasons for cutting the inclusionary housing because you're finding another way to provide money to do that to the housing trust fund.

However, the housing trust fund is not a sure thing, and I seem to recall some legislation introduced by uh in the assembly, as well as another ballot measure on the state level, that will significantly restrict um taxes, transfer taxes that can be charged.

Which means you're counting on three things, not two things not happening and one thing happening.

When the odds are possibly good that it goes the other way.

So, my question is: once you remove the inclusionary housing, where does the money come from if the housing trust fund doesn't pass?

And looking at Fed data.

Thank you for the comments.

Next speaker.

Uh good morning, supervisors.

Bill Barnes on behalf of MPH, the various proud voice of affordable housing.

Uh, we want to thank Mayor Lurry.

Uh we want to thank Supervisor Belgar, we want to thank Supervisor Makwood for bringing a room together of people who talked about how we could make a difference and build affordable housing.

Part of that is increasing our property tax base, and that means market rate housing needs to happen.

Uh we have Prop 13, so every time there's a new development, every time a blighted lot is turned into a new project, we get more money into the overall city's funds.

Uh and the reclusionary is too high.

There's a tack of diverse people, and they concluded unanimously across all ideological wise, across all backgrounds, that this is the recommendation.

And so uh we would struggle support uh the legislation as is and encourage you to pass it.

Thank you.

Thank you.

Next speaker, please.

Good morning, Supervisor Zach Weisenberger with Young Community Developers.

The impacts of market rate housing development are not uniform across neighborhoods.

And the city's priority equity geographies market rate development disproportionately increases displacement and speculation.

As an organization that works in Bayview, we are deeply concerned about exempting projects with fewer than 25 units.

The Third Street Corridor is characterized by historically lower land values, decades of public and private disinvestment, and predominantly small-scale development.

These conditions have created a substantial gap between current property values and the redevelopment potential, attracting speculative investment as market conditions improve.

Because the vast majority of projects along the Third Street corridor consist of projects with fewer than 25 units, this proposal would effectively eliminate inclusionary housing requirements, allowing market rate projects to move forward without any meaningful community benefits.

The stakes are especially high because Bayview is home to set to San Francisco's highest concentration of black residents and one of its last historically black neighborhoods and cultural centers.

With the city's black population already well below 4%, weakening affordability requirements risks, accelerating the displacement of black families and small businesses, and further eroding his vital communities.

Next speaker, please.

Good morning, Supervisors.

Peter Papadopoulos today speaking on behalf of United Save the Mission Community Development Committee and welcome back, Supervisor Fielder.

It's great to see you.

Market rate housing is now, as you just heard, directly linked by Karen Chapel to displacement unless directly tied to affordable housing.

So we need to directly tie these two together.

Easily done with simply instituting a clause that says we're reauthorizing today, and when it passes in November, then the 5% comes into effect.

But in the meantime, we think it's important to say that those neighborhoods that had higher inclusionary retain an 8% higher inclusionary.

We also think that we need to keep the 10 to 25 units unless the housing trust fund passes as well.

Thank you.

Thank you for your thank you.

Next speaker, please.

Good morning, Supervisor, Zachary Friel, Som.

According to a BLA report presented at land use last month, the reduction of inclusionary housing requirements three years ago had no impact on jump starting market rate development.

A separate BLA report presented to the budget committee in May revealed that fee reductions decrease potential city revenues by 34 million dollars.

Further reductions will result in the loss of even more potential revenue.

I spoke with a market rate developer at DM Development last month on their assessment of the housing market.

They told me with utmost confidence they believe the market will bounce back soon.

Whereas the high cost of construction has inhibited market development over the last couple years, rents have now risen to a point where projects can pencil.

If we are to take this developer at his word, the city will see a surge of new housing projects in the next three years.

This would mean that many projects will be built with little to no inclusionary housing.

With that said, we encourage this committee to vote down these recommendations and maintain inclusionary housing requirements at their current rates.

Thank you.

Thank you.

Next speaker.

Good morning, supervisors.

Only yesterday I spoke with multiple members of the community, and are clear that the housing that is built and will be built will not be affordable for working class families.

Many here today have told you that the only way to solve our housing crisis is to simply increase the supply of housing.

I'm standing here today representing an organization that comprises working-class families, has worked with working class families and has fought with developers to protect working class and immigrant families.

This is actively getting a source of affordable housing units.

I urge you to think about the families who are waiting for affordable housing and how this is affecting them.

I urge you to reconsider and look elsewhere.

Thank you.

Thank you for your comments.

Next speaker, please.

Morning, Georgia Shutish.

Um, there are two feasibility studies that considered lot size, but the study for this item did not consider lot size.

Shouldn't lot size always be considered a factor in figuring out financial feasibility.

Based on rising sales prices and rising rents, the market is improving, which shouldn't boost, which should boost financial feasibility due to the AI boom.

The city will wind up with a lot of luxury housing and little affordable housing.

Streamlining to facilitate luxury housing and build baby build has won.

This victory should be used to get rid of the Ellis Act.

This should be the goal of all the decision makers residing in this chamber and room 200.

As John King from the Chronicle wrote in his retirement column, blurring the of the blurring of the old boundaries between San Francisco and Silicon Valley unleashed demand pressures on housing that by 2019 had all but undermined one of the most important attributes that allow cities to truly prosper.

Room for people of all backgrounds and income levels to pursue the means.

Hi, my name is Dane Willette.

I'm a Coal Valley resident and I'm a volunteer lead with SFEMB.

Uh my wife and I moved to San Francisco a little over a year ago.

We came here from Texas.

Texas is not the safest or best place to be raising a family right now.

And so we came to San Francisco because we know the city represents the kinds of values and environment that we want to raise our family in.

And we already had family who was living here that we knew could be a support structure with us.

With the rising housing prices, it is very difficult for us to imagine being able to raise that family in a kind of nice livable space.

But these amendments, these proposals, I strongly support you guys passing forward because I think, as was mentioned, the family zoning plan unlocked the capacity, and these proposals will make sure that they can actually get built so that hopefully in the next few years we'll be able to have the kinds of affordable units for families like my wife and I, who are both able to now stay here and come here to escape places like Texas.

Thank you.

Thank you.

Next speaker.

Supervisors, my name is Enrique Landa.

I'm a developer in the city, and I was a member of the TAC.

What we have today is not an issue of values, it's an issue of numbers.

I've preparing a break ground next year on 300 units of market rate housing and 300 units of affordable housing, both hand in hand.

I can tell you that task is next to impossible.

The hundred units that we built and opened last year of affordable housing was one of the hardest things I've ever done.

The issue here is not one of San Francisco not wanting more housing or affordable housing.

It's that the math doesn't work.

Our construction costs are some of the highest in the country, and it makes it almost impossible to build.

So the recommendation of the TAC was a reflection of the reality.

It's not a reality I wish I could tell you.

I wish we could build housing for everyone.

Developers always want to build, and this one wants to build a lot of affordable housing, but right now the numbers don't work, and we're hoping to get to a point that they do.

This is an interim measure to hopefully get us to a better spot.

Thank you.

Thank you for your comments.

Do we have any additional public comment for this item?

Mr.

Chair, that concludes public comment.

Seeing else seeing no one else making public comment, public comments now closed.

Um, colleagues, I want to move to make uh the the non-substantive, they've been confirmed to be non-substantive technical amendments uh that were described by OEWD in their presentation.

Were there any comments or questions on those non-substantive technical amendments?

I'd just like to duplicate the file without those amendments.

Is that possible?

Uh it's possible.

I'm not sure I recommend it.

I think it might be simpler to duplicate it after, but I understand if you wish to do that.

Uh Madam Clerk, can I duplicate the file?

Yes, you can duplicate the file.

Thank you.

Great.

Then uh I'm gonna move to amend the file as described by OEWD.

Madam Clerk, can you please call the roll?

Yes, on the motion to amend the file as described by OEWD.

Member Fielder.

Aye, member filter, I flew.

Flash from I, Chair Sheryl, Chair Sheryl, I have three eyes.

Thank you.

The motion passes.

Um now I know my colleagues have a lot of questions.

Thank you for jumping up to the rostrum in advance.

Uh, Supervisor Fielder.

If I may, Chair Cheryl, I just wanted to confirm.

Are those amendments on the original file or on the duplicate?

Sorry, those are those amendments should be on the original file.

Yeah, those amendments are on the original file.

Thank you.

You probably can stay up there though.

I'll stay right there, Supervisor Filder.

Thank you.

Thanks, Chair.

Um, you know, if macroeconomics is the corporate, why are we reducing or eliminating inclusionary requirements?

Is my is my question.

The century urban prototypes show market rate housing doesn't pencil even at zero inclusionary.

And the controller's memo identified labor, materials, financing costs as a drivers.

So my question is what evidence supports cutting inclusionary as the way to unlock styled projects?

Thank you, supervisor.

Yeah, the um the TAC report does recognize those macroeconomic conditions where construction costs have increased by 50% since the pandemic.

Uh, interest rates have also increased by uh a similar share.

Um, as someone mentioned, rents have gone back up, although our chief economist has noted that when adjusted for inflation, rents are still 18% below uh pre-pandemic levels.

So those conditions are all real and they are all affecting the feasibility of projects.

What the TAC report indicated was that the inclusionary requirement alone adds between 40 and 90,000 of cost per unit.

Impact fees, citywide impact fees add another $20,000 per unit in certain areas of the city where there are additional fees that can add another $80,000 dollars per unit.

So in some cases, there are projects where there is a hundred and seventy thousand dollars of cost per unit that costs $700 to a million dollars to build, $700,000 to a million dollars to build, coming just from these fee programs.

That is a significant share of that feasibility gap that the report indicates.

To translate that, if you look at the gaps, the feasibility gap in the tech report, these programs together, these requirements account for between 20 and over 100% of the feasibility gap.

So there are some prototypes that they studied, mid-rise condo project, where actually these reductions would bring the project into feasibility just by making these reductions.

There are others where we might be only able to reduce half of the feasibility gap, but that's a significant increase in feasibility, which means that as other conditions, if they come into alignment, we will get to a point much sooner where the projects are able to be built.

Thank you.

And then having read the tax recommendations in the controller's memo, I want to flag that their recommendation was conditional.

They recommended reducing the on-site inclusionary requirement to 5% only if it was paired with a recurring affordable housing funding source, specifically the housing trust fund proposed for the November ballot.

But there's nothing in this legislation actually tying the passage of the housing trust fund to these rates.

So without that recurring funding source secured, the tax recommendation was 10%, not 5%.

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 tax fallback rate of 10% and stepping down only if the housing trust fund measure passes?

Thank you, supervisor.

Yes, the TEC did uh link the two items as we discussed.

They very specifically, though, uh recommended that the uh 5% inclusionary ordinance, which is the item before you should move ahead if the housing trust fund is placed on the ballot in July.

So that is an action taken by the Board of Supervisors to place the item on the ballot.

As I mentioned, that item is scheduled to go before the full board on July 14th.

If this item passes out of this committee today, it would also go to the full board on July 14th, and those items would be voted on uh on the same day, which is exactly what the TAC recommended that as far as the actions that we can take here in City Hall that those things be linked.

They did not recommend that it be linked to the outcome of the election in November.

At the same time, this topic has come up throughout this process, and a few things to keep in mind about the uh difficulties of trying to link these items directly.

First of all, all of the temporary reductions that we currently have from 2023 are set to expire on November 1st.

So the election, I believe, is on November 4th.

This year takes a few weeks to get certified.

So if we were to wait and see what happens with the election, you know, we wouldn't be in a position to update these fees until toward the end of the year, so another six months out from where we are today.

Um, and that comes in the context where, as I mentioned, the uh TAC reported controller actually found that three years ago projects were generally not feasible.

Um, we made a modest reduction at that time.

We're making a larger reduction this time because they found that the feasibility has actually gotten worse.

So, in other words, we're already really at least three years overdue for tackling this issue, and we didn't see any reason to wait any further.

Thank you.

It doesn't really make sense to me why it would be recommended to simply be placed as sufficient if they're recognizing that an affordable housing funding, affordable housing funding stream is necessary to actually move development.

But in any case, um, yeah, that's why I requested to duplicate the file because it's been talked about as a package that moves forward both the housing trust fund and these inclusionary changes, but that's not what's in this legislation.

I certainly hope that the housing trust Fund passes.

I'm a co-sponsor, but if it doesn't, it's important for this committee to revisit any inclusionary program changes.

Um I have questions specifically around the mission area plan as well.

So just to begin, I'm concerned that this ordinance only partially accounts for areas like the mission that were planned distinctly with greater protections built in specifically to address displacement.

The city has repeatedly affirmed these protections through the eastern neighborhoods rezoning, the mission area plan itself, the mission action plan most recently updated as MAP 2030.

And the mission remains one of the highest displacement risk neighborhoods in San Francisco by the city's own equity mapping.

We're talking a lot right now about high opportunity areas.

Well, we're talking about also high displacement areas too.

We have lost 12,000 Latino residents in the mission since 2000.

Reducing the on-site requirement here means fewer affordable units get built in the exact neighborhood where the need to keep long-term residents in place is most urgent at the same time that new market rate development continues to add pressure on housing costs.

And the mission area plan district was built on a clear bargain, increased height and density in exchange for deep affordability commitments.

They were developed through years of community process, specifically to counter displacement pressure on the missions' Latino residents and small businesses.

So lowering the on-site rate to a generic citywide 5% breaks that bargain while the added density and height developers receive stays fully in place.

And my questions as far as the mission area that's affected under this legislation.

Did the century urban model use mission and UMU specific data to arrive at the 5% on-site rate for those sensitive areas, or was that the number based on broader citywide prototypes?

Thank you.

The tech recommended numbers that were based on citywide averages, though they did look at 80 different prototypes.

So there was a lot of variability, small, large, different types of construction, rental, condo, did it use state density bonus, did it not?

So they did look at a full suite of costs and rents and other inputs to arrive at that.

And what they found is that projects are not feasible at the current rates, and they're also not feasible even at zero.

So there's no reason to believe that things would be any more feasible than that in any particular submarket where they did take that into account.

Yeah, that was that was what the TAC analysis indicated, and that's why they didn't comment on these areas because it was simply clear that in terms of the entire city, 5% is already above what's feasible.

And then did the TAC way displacement risk when setting the rate for the mission area plan, it has one of the highest displacement scores in the city's own equity mapping.

So did the TAC way displacement risk as a factor in setting the rate for this specific district, or was the 5% derived purely from the citywide financial feasibility modeling with no adjustment for party equity geographies.

That's right.

Yes, they did not specifically recommend differentiated rates for different areas.

They recommended a citywide rate.

We looked at that recommendation and we looked at what the current rates are in the mission area plan and these other areas where there are specific rates.

The rates currently are generally 15%, which is exactly the same as the citywide rate.

So they have traditionally been significantly higher than the citywide rate when we did the temporary 2023 reductions last time around.

They actually were reduced in a way that brought them to be currently at parity with the city.

So this is the status quo.

We applied the same principle here to reduce citywide rates from 15 to 5 and in these areas from 15% to 5%.

However, in recognition of the concern, as you mentioned, supervisor, of really having a prioritization in these areas of getting the on-site units rather than the fee.

The ordinance proposes a higher fee out rate in these areas of 15% compared to the citywide 10%.

This is to encourage further encourage on-site units being developed in these areas.

Indeed, it does carve out a higher off-site and in-lue rate for the mission, proof that planning in the city already treat this area as distinct when it comes to value capture.

And the on-site rate should reflect that same distinction, not default to the citywide number.

Again, the mission remains one of the highest displacement risk neighborhoods in San Francisco by the city's own equity mapping.

And so lowering the on-site requirement to a citywide generic 5% breaks that bargain in my view without revisiting the density and height benefits developers still receive.

And if anything, continued development pressure on the mission strengthens the case for holding the line on that commitment, not weakening it.

So I've been working on amendments to address concerns about the missions on-site inclusionary rate.

However, due to time restrictions, the city attorney's office is not ready to submit these for introduction today.

I've been informed that they will be ready by the time this item is at the full board on July 14th, and I look forward to continuing this discussion at that time.

Given my concerns over this legislation that I hope to address with amendments at the full board, I am today voting no on recommending this to the full board at this time.

I'm open to supporting this legislation, pending those additional conversations.

But thank you so much for your questions.

Thank you, Supervisor.

Vice Chairman.

I thank you again for the presentation and I have a couple questions before I'll kind of render my decision.

The um a follow-up from Supervisor Fielder's question, correct me if I remember what you're saying that while this was intended to be coupled with the Housing Trust Fund, given the time that it will take to pass and there's projects pending in that context, you didn't want to face that delay.

There was a part of her question that I don't I don't believe was answered though, which was that if the housing trust fund doesn't pass, the tax said the rate should be 10%.

What is still the plan for that contingency if that happens?

Thank you, supervisor.

Yes, that's correct.

And as this item is an ordinance and is not part of the charter measure specifically, this obviously could be adjusted by the Board of Supervisors legislatively if that needed to happen, depending on the results of that uh ballot measure.

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 inclusion rate buckup back up to 10% in that context?

Yes, we will work with the board of supervisors to adjust the requirements accordingly.

Back to 10% if the housing trust fund doesn't pass.

Or any other number that we can all agree on.

Okay, good to know.

Thank you.

Um glad we have that on the record.

Um then second, just from a uh edification perspective, you mentioned still want to better understand why the rate of 5% was chosen.

Um, what you also said earlier was that MOHCD currently 9% of the affordable housing units came from inclusionary.

I understand it's an aggregate and not a per site component.

So, how was the number of 5% chosen if an aggregate technically, 9% of affordable housing units are coming from inclusionary fees?

Right.

Um, well, the the task before the TAC is to figure out what is workable with respect to this specific tool.

So talking about the context of inclusionary providing 9% and in recent years only 6% of the total portfolio is to put it in context that it's a small piece of all the different tools that we have to provide affordable housing.

The tax entire charge is with respect to that one piece of the puzzle, um, what can we actually charge in a way that will work and provide affordable housing from these projects getting built and not be so high that we don't get either the affordable housing or the market rate?

So the 5% is a feasibility conversation.

The feasibility result was frankly that 0%, as the controller indicated, is the only feasible number for these requirements.

However, the TAC also talked about the policy goals that we have and wanted to have some rate that's there to capture projects that are able to move forward.

There's always projects that are on the margin that are able to move forward when the average project is not.

It's also meant to kind of hedge against, you know, if conditions begin to improve faster than we expect over the next three years before the TAC reconvenes, that at least there is some level of inclusionary requirement there to apply to some of those projects.

But they tried to set something as close as possible to the feasible level of zero percent to really try to get the projects um out the ground.

I think seeing that things had gotten worse since 2023 when we only made a 33% reduction, really um focused the conversation there that we needed to go further this time.

But why five?

That specific number.

That was the subject of debate over the course of uh mini meetings.

There were uh different numbers that were thrown out.

Zero was suggested, 10% was suggested, five was, you know, there were other numbers that are between zero and ten, um, and they landed at five percent as a number that would generate a meaningful number of inclusionary units for projects that are over twenty-five, um, while being as close to what's feasible as possible.

Doesn't exactly answer the methodology, but appreciate the attempt.

Yeah, sure.

Um, uh I think based on all this, I just want to thank um JacobU OEWD.

I know this was a year-long process of going through this uh work, the inclusion of housing tack as well.

Uh the mayor's office and the staff planning department, I think a lot of folks were different involved.

Um, and I recognize that we have a serious housing crisis in our city, and we need to do all that we can to get homes built.

Um I know I we've heard many times today that the TAC has said that even 0% wouldn't move us forward.

Um, and we need to move around, do whatever we can to make sure that we're moving the needle on affordable housing and housing in general.

Um, and I think we heard a lot in public comment today about people who are trying to live here uh and are not able to find the homes that they can live in at any level.

Um, and so I think combination of increasing supply, like we did last year with the family zoning plan and the housing element and with the housing trust fund for affordable housing, um, that is important as well.

And but we also have to make room for market rate housing uh to um absorb all the new people who are coming to San Francisco and make sure they don't price out people who need affordable housing as well.

Um, and I think we all agree that an inclusionary holistically is imperfect um and the revenue stream is uneven and often dried up uh to trickle up over the last past few years.

Um but I do I appreciate the housing trust fund moving over.

I think like Supervisor Fielder, I do wish that this was coupled.

Um 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.

Um, but I appreciate that there's a commitment that if the housing trust fund does not pass, that we will revisit this and go to ten percent as the TAC recommended.

If the entire basis of this is a TAC recommendation.

So with that context and hopefully that commitment, um, I will be supporting today's measure um as it is today.

Thank you.

Great, thank you.

Colleagues, any other questions?

Okay, great.

Um, I'd like to make two motions.

First is uh to continue the duplicate file to the call of the chair.

Um, can we take call roll in that motion?

Repeat that, I'm sorry.

Can we continue the duplicate file to the call of the chair?

Yes.

And on the motion to continue the duplicate file to the call of the chair, member filter, member filter, I.

Fleischer Mahmood?

Fleischer Mahmood I, Chair Cheryl.

I Chair Cheryl, I have three ayes.

Thank you.

The motion passes.

And I'd like to move the original file uh as amended uh to the full board with a positive recommendation.

Yes, and on that motion to forward the original file as amended to the full board with a positive recommendation.

Member member filter.

Member filter, no.

Fisher Mahmood?

Fisher Mahmood, I chair Chair Cheryl.

Aye.

Chair Cheryl, aye.

I have two ayes and one no, with member filter voting no.

Motion passes.

Madam Clerk, is there any other business before us today?

That concludes our meeting agenda for the day.

Thank you.

Seeing over the business, we are adjourned.