Ordinance amending the Planning Code to allow the City to waive the Inclusionary Housing Fee and other requirements in certain residential and neighborhood commercial districts outside of the Priority Equity Geographies Special Use District (SUD) in exchange for a project sponsor’s agreement to subject all units in the project to rent control; and allow projects in certain residential and neighborhood commercial districts outside of the Priority Equity Geographies SUD to comply with the Inclusionary Housing Ordinance by dedicating land to the City; requiring periodic reports to the Planning Commission; affirming the Planning Department’s determination under the California Environmental Quality Act; making findings of consistency with the General Plan, and the eight priority policies of Planning Code Section, 101.1; and making public necessity, convenience, and welfare findings under Planning Code, Section 302.

This ordinance, File No. 250815, introduced by Supervisor Melgar on July 29, 2025, amends the Planning Code (adding Section 436) to address housing needs in San Francisco's "Well-Resourced Neighborhoods." These areas are defined as those outside the Priority Equity Geographies Special Use District (SUD), primarily on the city's western side. The goal is to increase housing, particularly rent-controlled units, in these areas which have historically seen low housing production (only 10% of new housing since 2005 despite covering 52% of residential zoned land).

1. Inclusionary Housing Waiver for Rent Control: For eligible housing projects in Residential – House (RH), Residential Mixed (RM), Neighborhood Commercial, or Named Neighborhood Commercial Districts with a height limit of 65 feet or less, the City can waive Inclusionary Housing requirements if the project sponsor agrees to subject all units to the San Francisco Rent Stabilization and Arbitration Ordinance (rent control) for the life of the project. This requires a Regulatory Agreement (reviewed by the City Attorney's Office) to be executed before the First Construction Document, ensuring units remain rental, are held in undivided ownership, cannot be subdivided, and are exempt from Costa-Hawkins due to the fee waiver as direct financial assistance.
2. Land Dedication Alternative: Projects in these same eligible districts can also comply with Inclusionary Housing requirements by dedicating land to the City for affordable housing. The dedicated land must be outside the Priority Equity Geographies SUD and capable of accommodating at least 35% of the units that could be provided on the principal development site.

The ordinance aligns with the 2022 Housing Element (plan for 2023-2031) and aims to meet the Regional Housing Needs Allocation (RHNA) of approximately 82,000 new residential units by 2031. The Planning Department determined the ordinance is exempt from CEQA and consistent with the General Plan and Planning Code Section 101.1 and 302. The Planning Commission adopted a recommendation for approval with modifications on October 9, 2025, which were largely incorporated into the ordinance during committee amendments on December 1, 2025. The Planning Department will report on approved units to the Planning Commission prior to December 31, 2026, and every 24 months thereafter. The ordinance becomes effective 30 days after enactment.

This ordinance aims to increase the availability of rent-controlled housing in "Well-Resourced Neighborhoods" (primarily western San Francisco), making these areas more accessible to a broader range of residents over time. While new units will initially be leased at market rates, rent control will cap annual increases (currently 1.4%), offering long-term rental stability and helping to prevent displacement. Additionally, the land dedication option could lead to more affordable housing being built by the City.

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