The rising cost to build new housing in San Francisco is limiting residential construction and keeping housing prices high. While there’s not much the city can do about interest rates and inflation, one thing it can do is adjust affordability requirements. Like other California cities, San Francisco requires developers of market-rate housing with 10 or more units to provide some homes for lower income people, known as inclusionary housing. The percentage of below-market-rate units a new building must provide often determines whether developers can afford to build it.
In December, the city reconvened its Inclusionary Housing Technical Advisory Committee (TAC) to review the current percentages. Supporting the project is Leigh Lutenski, the director of Joint Development, a division within the City of San Francisco’s Office of Economic Workforce Development. Among other responsibilities, she oversees the city’s land uses from an economic development perspective, focusing on the fiscal conditions needed to enable new housing and support downtown recovery. We asked her about the mission of the TAC in creating those conditions, as well as about changes in the market and the feasibility and trade-offs of housing production in the context of the city’s inclusionary housing goals.
The Inclusionary Housing Technical Advisory Committee reconvened in December 2025. What is it tasked with evaluating?
By statute, the city convenes the Technical Advisory Committee every three years. The committee’s charge is to analyze and report to the controller on the current fiscal climate for housing development across the city. The aim is to produce a public report that determines the amount of inclusionary affordable housing that is supportable in the market and to provide data for policymakers to decide whether to change the city’s inclusionary affordable housing policies.
San Francisco last convened the TAC three years ago. What has changed in the housing development landscape since 2023?
The last time this committee met, we were in the midst of the COVID-19 pandemic, a time of tremendous uncertainty. Even back then, of course, not a lot was being built. Projects had been put on pause. At that point, there was a realization across the board that the city’s policies were unrealistic and infeasible. So the outcome back then was the creation of a three-year temporary program that lowered inclusionary rates for existing projects to 12%. For any projects completed by November 2026, the rate would be 15%. Legislation commensurately lowered all development impact fees by a third. All of these changes to stimulate development were put in place with the acknowledgment that we were in the depths of COVID and that no one knew what would happen.
I would say the biggest change is recognition that the market conditions of three years ago are more entrenched than we had hoped. I think there’s broad acknowledgement that it will take a while to fully recover from the bottom of this market cycle, and we are not anywhere near where we were, even pre-pandemic. Rents for multifamily housing have been increasing over the last 12 months, but they are not back to pre-COVID levels, and construction costs have risen tremendously since 2023. So, in some ways, I would say the outlook for new multifamily housing is worse than it was three years ago.
Feasibility is shaped by many factors. How is the city thinking about the cumulative impact of other development fees and requirements on housing production?
From a technical standpoint, part of the TAC process involves working with the controller’s fiscal consultant, Century Urban. It has created five or six typologies of multifamily housing, ranging from small to large. This model uses a residual land value approach to assess housing feasibility, which includes all development impact fees a project would owe to the city. Increasing or decreasing an inclusionary rate affects how much someone can pay in a development impact fee, and vice versa. So I think highlighting that relationship will be important in the TAC process. When we passed legislation two and a half years ago, we had two pieces of legislation, one that addressed our inclusionary rate and another that addressed impact fees. I think it's reasonable to say we would want to do something similar and to especially look at impact fees during the current process.
There are often trade-offs between maximizing affordability and ensuring projects are financially viable. Where do you anticipate the greatest challenges?
The city’s Inclusionary Affordable Housing Program has created many units since its creation in 2002. On the other hand, if inclusionary requirements are set too high and make new housing infeasible, even a 15% requirement produces no affordable units because nothing gets built. If we’re not actually creating the economic conditions for new housing, we’re also losing the opportunity to implement our inclusionary goals.
The TAC process was initiated in recognition that the economy changes. How can the city respond more nimbly to these changes to ensure we balance our dual goals of feasibility and inclusion? The TAC members, the Controller’s Office, and the Joint Development Division will work together to determine the economic outlook and recommend policy goals and rates accordingly. Our TAC process, which revisits economic conditions and inclusionary rates every three years, should reassure people that we can course-correct if needed.
Why is it important for the city to examine inclusionary housing requirements this year?
The TAC is convening following the Board of Supervisors’ approval of the Family Zoning Plan. A tremendous amount of community and constituent input shaped the plan to create more housing options in neighborhoods with access to economic opportunities and services that support housing growth. The plan represents a generational shift in how we expect our neighborhoods, especially those on the city’s west side, to be built out.
It’s incumbent on the city to create the economic conditions to ensure we are actually building housing for families now that we have the Family Zoning Plan. We want to create capacity under family zoning to build new housing across the city. We need to create the economic conditions that allow people, for example, to sell their single-family home in the Sunset and downsize into a three-unit flat in the same neighborhood, and for families to become first-time homeowners or renters.
What would a successful outcome look like, both for affordable housing goals and for overall housing production in San Francisco?
Balancing feasibility with maintaining our inclusionary policy is paramount. A huge threat to housing development is risk and uncertainty. So, how do we create policy changes to our Inclusionary Affordable Housing Program that are expansive and durable? We want developers to say, “Okay, I know what's going to be required of me tomorrow. And I know it's going to be required of me in three years when I'm trying to lock in my planning approvals.” That, to me, has tremendous value. Change that people can count on will actually have a fiscal benefit by creating a green light for development.
A likely equally important goal for our city staff is to streamline and simplify San Francisco Planning Code Section 415 — the Inclusionary Affordable Housing Program. With the introduction of our temporary reduction in inclusionary requirements three years ago, we added code sections that address the intersection of inclusionary requirements and state density bonus requirements. As a result, Section 415 has become complex. We want to make it clearer.
What happens once the TAC completes its work?
The TAC will have a series of meetings, which we expect will conclude by early April. The outcome will be a report issued by the Controller's Office. It will include the fiscal feasibility work that Century Urban has done, along with other findings and important policy items that arose during the TAC meetings. Formally, the TAC process concludes with this report. Then the legislative work begins. [The Board of Supervisors must approve changes to the inclusionary rate.] The TAC process does not automatically spur a legislative effort, but given that the TAC will likely make policy recommendations for the Inclusionary Affordable Housing Program, we are preparing for a legislative effort that would build on the TAC’s findings. We would expect to work with the Mayor's Office, the Board of Supervisors, and other stakeholders on this effort.