San Francisco wasted no time implementing AB 1505, which authorizes localities to adopt ordinances requiring developers to provide on-site inclusionary affordable housing units in rental projects, provided that there is an alternative means of compliance such as in-lieu fees or off-site inclusionary rental units. As explained in our prior post on 2017’s 15-bill housing package, AB 1505 supersedes case law that deemed on-site inclusionary rental unit requirements an impermissible form of rent control under the state Costa-Hawkins Act.
Previously, project sponsors proposing on-site inclusionary units in rental projects were required to enter into Costa-Hawkins Agreements. Those agreements state that the inclusionary rental units are being provided in exchange for a development bonus, modification of zoning standards, or direct financial contribution from the City. Last month, the Board of Supervisors passed an ordinance sponsored by Supervisors Peskin and Kim to implement AB 1505, effectively eliminating Costa-Hawkins Agreements and simplifying the process for providing on-site inclusionary rental units in new development projects. Mayor Farrell signed the ordinance on February 23, and it becomes effective March 25.
According to the Planning Department’s January staff report to the Planning Commission, some code-compliant projects have been unable to provide on-site inclusionary rental units because they could not demonstrate the prerequisites for a Costa-Hawkins Agreement. Most large-scale development projects need one or more exceptions from Planning Code development standards and so meeting the prerequisites has not been an issue, but Costa-Hawkins Agreements added an extra step to the entitlement process. That step has been eliminated. As mandated by AB 1505, the legislation would still permit developers to elect the fee or off-site options for rental projects, and it would not require on-site rental units.