415.7

SEC. 415.7. OFF-SITE AFFORDABLE HOUSING ALTERNATIVE. New Ordinance Notice Publisher's Note: This section has been AMENDED by new legislation (Ord. 187-23 , approved 9/14/2023, effective 10/15/2023, oper. 11/21/2026). The text of the amendment will be incorporated under the new section number when the amending legislation is effective. New Ordinance Notice Publisher's Note: This section has been AMENDED by new legislation (Ord. 201-23 , approved 10/12/2023, effective 11/12/2023, oper. 11/21/2026). The text of the amendment will be incorporated under the new section number when the amending legislation is effective. If the project sponsor elects pursuant to Section 415.5(g) to provide off-site units to satisfy the requirements of Sections 415.1 et seq., the project sponsor shall notify the Planning Department and MOHCD of its intent prior to approval of the project by the Planning Commission or Department. The Planning Department and MOHCD shall provide an evaluation of the project’s compliance with this Section 415.7 prior to approval by the Planning Commission or Planning Department. The development project shall meet the following requirements: (a) Number of Units: The number of units constructed off-site shall be as follows: (1) For any housing development that is located in an area or Special Use District with a specific affordable housing requirement, or in any other Planning Code provision, such as Section 419, the higher off-site housing requirement shall apply. (2) For housing development projects consisting of 10 units or more but less than 25 units, the number of Affordable Units constructed off-site shall be 20%, so that a project applicant shall construct .20 times the total number of units produced in the Principal Project. If the total number of units is not a whole number, the project applicant shall round up to the nearest whole number for any portion of .5 or above. In no case shall the total number of Affordable Units required exceed the number required as determined by the application of the applicable off-site requirement rate to the total project units. Owned Units shall be affordable to households earning up to 100% of Area Median Income, with an affordable sales price set at 80% of Area Median Income or less. Rental Units shall be affordable to households earning up to 65% of Area Median Income, with an affordable rent set at 55% of Area Median Income or less. (3) For any Ownership Housing Project consisting of 25 or more units, the number of Affordable Units constructed off-site shall be 33% of all units constructed on the project site, with a minimum of 18% of the units affordable to low-income households, 8% of the units affordable to moderate-income households, and 7% of the units affordable to middle income households. In no case shall the total number of Affordable Units required exceed the number required as determined by the application of the applicable off-site requirement rate to the total project units. Owned Units for low-income households shall have an affordable purchase price set at 80% of Area Median Income or less, with households earning up to 100% of Area Median Income eligible to apply for low-income units. Owned Units for moderate-income households shall have an affordable purchase price set at 105% of Area Median Income or less, with households earning from 95% to 120% of Area Median Income eligible to apply for moderate-income units. Owned Units for middle-income households shall have an affordable purchase price set at 130% of Area Median Income or less, with households earning from 120% to 150% of Area Median Income eligible to apply for middle-income units. For any Affordable Units with purchase prices set at 100% of Area Median Income or above, the units shall have a minimum occupancy of two persons. This unit requirement shall be outlined within the Mayor’s Office of Housing Preferences and Lottery Procedures Manual no later than February 26, 2018. MOHCD may reduce Area Median Income pricing and the minimum income required for eligibility in each rental category. (4) For any Rental Housing Project consisting of 25 or more Rental Units, the number of affordable units constructed off-site shall generally be 30% of all units constructed on the project site, with a minimum of 18% of the units affordable to low-income households, 6% of the units affordable to moderate-income households, and 6% of the units affordable to middle- income households. In no case shall the total number of affordable units required exceed the number required as determined by the application of the applicable off-site requirement rate to the total project units. Rental Units for low-income households shall have an affordable rent set at 55% of Area Median Income or less, with households earning up to 65% of Area Median Income eligible to apply for low-income units. Rental Units for moderate-income households shall have an affordable rent set at 80% of Area Median Income or less, with households earning from 65% to 90% of Area Median Income eligible to apply for moderate-income units. Rental Units for middle-income households shall have an affordable rent set at 110% of Area Median Income or less, with households earning from 90% to 130% of Area Median Income eligible to apply for middle-income units. For any affordable units with rental rates set at 100% of Area Median Income or above, the units shall have a minimum occupancy of two persons. This unit requirement shall be outlined within the Mayor’s Office of Housing Preferences and Lottery Procedures Manual no later than 6 months following the effective date of the Ordinance contained in Board of Supervisors File No. 161351. MOHCD may reduce Area Median Income pricing and the minimum income required for eligibility in each rental category. MOHCD shall set forth in the Procedures Manual the administration of rental units within this range. (5) In the event that a Rental Housing project converts to an Ownership Housing project, the Project Sponsor shall either (A) reimburse the City the proportional amount of the Inclusionary Affordable Housing Fee, which would be equivalent to the then-current Inclusionary Affordable Housing Fee requirement for Ownership Housing Projects, or (B) provide additional on-site or off-site Affordable Units equivalent to the then-current inclusionary requirements for Ownership Housing Projects, apportioned among the required number of units at various income levels in compliance with the requirements in effect at the time of conversion. (6) The applicable amount of the percentage required for the off-site housing units shall be determined based upon the date that the project sponsor has submitted a complete

Environmental Evaluation application. Any development project that constructs off-site affordable housing units as set forth in this Section 415.6 shall diligently pursue completion of such units. In the event the project sponsor does not procure a building permit or site permit for construction of the principal project or the off-site affordable housing project within 30 months of the project’s approval, the development project shall comply with the inclusionary affordable housing requirements applicable thereafter at the time when the project sponsor procures a building permit. Such deadline shall be extended in the event of any litigation seeking to invalidate the City’s approval of the principal project or off-site affordable housing project for the duration of the litigation. (7) If the principal project or the off-site project has resulted in demolition of affordable housing units that are subject to a recorded covenant, ordinance, or law that restricts rents to levels affordable to persons and families of moderate-, low- or very low-income, or housing that is subject to any form of rent or price control through a public entity’s valid exercise of its police power and determined to be affordable housing, the project sponsor shall comply with Section 317.2. (b) Timing of Construction: The project sponsor shall ensure that the off-site units are constructed, completed, ready for occupancy, and marketed no later than the market rate units in the principal project. In no case shall the Principal Project receive its first certificate of occupancy until the off-site project has received its first certificate of occupancy. (c) Location of off-site housing: (1) Except as specified in subsection (ii) below, the off-site units shall be located within one mile of the principal project; (2) Projects within the Central SoMa SUD must be located within the area bounded by Market Street, the Embarcadero, King Street, Division Street, and South Van Ness Avenue. (d) Type of Housing: Nothing in this Section shall limit a project sponsor from meeting the requirements of this Section through the construction of units in a limited equity or land trust form of ownership if such units otherwise meet all of the requirements for off-site housing. In general, affordable units constructed or otherwise provided under this Section shall be comparable in number of bedrooms, exterior appearance and overall quality of construction to market rate units in the principal project. The total square footage of the off-site affordable units constructed or otherwise provided under this Section shall be no less than the calculation of the total square footage of the on-site market-rate units in the principal project multiplied by the relevant on-site percentage requirement for the project specified in this Section. The Notice of Special Restrictions or conditions of approval shall include a specific number of units at specified unit sizes – including number of bedrooms and minimum square footage – for affordable units. The interior features in affordable units should generally be the same as those of the market rate units in the principal project but need not be the same make, model, or type of such item as long as they are of new and good quality and are consistent with then-current standards for new housing and so long as they are consistent with the “Quality Standards for Off-Site Affordable Housing Units” found in the Procedures Manual. Where applicable, parking shall be offered to the affordable units subject to the terms and conditions of the Department’s policy on unbundled parking for affordable housing units as specified in the Procedures Manual and amended from time to time. If the residential units in the principal project are live/work units which do not contain bedrooms or are other types of units which do not contain bedrooms separated from the living space, the off-site units shall be comparable in size according to the following equivalency calculation between live/work and units with bedrooms:

Number of Bedrooms (or, for live/work units square foot equivalency) Number of Persons in Household 0 (Less than 600 square feet) 1 (601 to 850 square feet) 2 (851 to 1,100 square feet) 3 (1,101 to 1,300 square feet) 4 (More than 1,300 square feet)

(e) Marketing the Units: The Project Sponsor shall submit a proposed marketing plan to MOHCD to begin marketing the Affordable Units at least six months prior to the beginning of marketing for any unit in the Principal Project. MOHCD shall approve the marketing plan for the Affordable Units prior to the Project Sponsor marketing any unit in the Principal Project. Failure to comply shall be deemed a violation of the Planning Code subject to enforcement and penalties as set forth in Section 415.9. MOHCD shall be responsible for overseeing and monitoring the marketing of Affordable Units under this Section 415.7. In general, the marketing requirements and procedures shall be contained in the Procedures Manual as amended from time to time and shall apply to the Affordable Units in the project. MOHCD may develop occupancy standards for units of different bedroom sizes in the Procedures Manual in order to promote an efficient allocation of Affordable Units. MOHCD may require in the Procedures Manual that prospective purchasers complete homebuyer education training or fulfill other requirements. MOHCD shall develop a list of minimum qualifications for marketing firms that market Affordable Units under Section 415.1 et seq., referred to in the Procedures Manual as Below Market Rate (BMR units). No project sponsor marketing units under the Program shall be able to market BMR units except through a firm meeting all of the minimum qualifications. The Notice of Special Restrictions or conditions of approval shall specify that the marketing requirements and procedures contained in the Procedures Manual as amended from time to time, shall apply to the Affordable Units in the project. (1) Lottery: At the initial offering of affordable units in a housing project and when Affordable Units become available for resale or re-lease in any housing project subject to this Program after the initial offering, MOHCD must require the use of a public lottery approved by MOHCD to select purchasers or tenants. (2) Preferences: MOHCD shall create a lottery system that gives preference according to the provisions of Administrative Code Chapter 47. MOHCD shall propose policies and procedures for implementing these preferences to the Planning Commission for inclusion in the Procedures Manual. Otherwise, it is the policy of the City to treat all households equally in allocating affordable units under this Program. (f) Individual affordable units constructed as part of a larger off-site project under this Section 415.7 shall not receive development subsidies from any Federal, State or local program established for the purpose of providing affordable housing, and shall not be counted to satisfy any affordable housing requirement for the off-site development. Other units in the same off- site project may receive such subsidies. In addition, subsidies may be used, only with the express written permission by MOHCD, to deepen the affordability of an affordable unit beyond the level of affordability required by this Program. (g) Notwithstanding the provisions of Section 415.7(f) above, a project may use California Debt Limit Allocation Committee (CDLAC) tax-exempt bond financing and 4% credits under the Tax Credit Allocation Committee (TCAC) to help fund its obligations under this ordinance as long as the project provides at least 60% of the off-site affordable units as affordable at 55% of area median income and the balance of the off-site affordable units using these funds at affordability rates that comply with the requirements of TCAC, CDLAC, and this Section 415. The income table to be used for such projects when the units are priced at 55% of area median income is the income table used by MOHCD for the Inclusionary Housing Program, not that used by TCAC or CDLAC. Except as provided in this subsection (g), all units provided under this Section 415.7 must meet all of the requirements of the Inclusionary Affordable Housing Program and the Procedures Manual for off-site housing. (Added as Sec. 315.6 by Ord. 37-02, File No. 001262, App. 4/5/2002; amended by Ord. 76-03, File No. 020592, App. 5/2/2003; Ord. 213-06, File No. 051668, App. 8/2/2006; Ord. 219-06, File No. 051685, App. 8/10/2006; Ord. 101-07, File No. 060529, App. 5/4/2007; Ord. 198-07, File No. 070444, App. 8/10/2007; Ord. 232-08, File No. 080521, App. 10/30/2008; Ord. 63-09, File No. 081249, App. 4/23/2009; redesignated and amended by Ord. 108-10, File No. 091275, App. 5/25/2010; amended by Ord. 312-10, File No. 100046, App. 12/23/2010; Ord. 62-13 , File No. 121162, App. 4/10/2013, Eff. 5/10/2013; Ord. 277-13, File No. 130968, App. 12/18/2013, Eff. 1/17/2014; Ord. 204-15 , File No. 150622, App. 12/3/2015, Eff. 1/2/2016; Ord. 76-16 , File No. 160255, App. 5/13/2016, Eff. 6/12/2016; Ord. 158-17, File No. 161351, App. 7/27/2017, Eff. 8/26/2017; Ord. 26-18, File No. 171193, App. 2/23/2018, Eff. 3/26/2018; Ord. 202-18, File No. 180557, App. 8/10/2018, Eff. 9/10/2018; Ord. 296-18, File No. 180184, App. 12/12/2018, Eff. 1/12/2019; Ord. 210-21, File No. 210868, App. 11/19/2021, Eff. 12/20/2021; Ord. 3-26, File No. 250926, App. 1/8/2026, Eff. 2/8/2026) AMENDMENT HISTORY Undesignated introductory paragraph and divisions (a)(1), (b), (d), and (f) amended; division (g) added; Ord. 62-13 , Eff. 5/10/2013. Undesignated introductory paragraph and division (e)(2) amended; references to "MOHCD" corrected throughout; Ord. 277-13, Eff. 1/17/2014. Division (e)(2) amended; Ord. 204-15 , Eff. 1/2/2016. Undesignated introductory paragraph amended; former division (a)(1)(A) redesignated as (a)(1) and amended; former divisions (a)(1)(B) and (C) deleted; new divisions (a)(2)-(4) added; divisions (b), (c), and (d) amended; Ord. 76-16 , Eff. 6/12/2016. Undesignated introductory paragraph and divisions (a)(1)-(3) amended; former division (a)(4) deleted; new divisions (a)(4)-(7) added; divisions (e), (f), and (g) amended; Ord. 158-17, Eff. 8/26/2017. Undesignated introductory paragraph and division (d) amended; Ord. 26-18, Eff. 3/26/2018. Undesignated introductory paragraph and division (g)1 amended; Ord. 202-18 , Eff. 9/10/2018. Division (c) redesignated as divisions (c) and (c)(1); division (c)(1) amended; division (c)(2) added; Ord. 296-18 , Eff. 1/12/2019. Undesignated introductory paragraph and divisions (a)(2), (a)(3), (a)(5), and (e)-(e)(1) amended; Ord. 210-21 , Eff. 12/20/2021. Division (a)(7) amended; Ord. 3-26 , Eff. 2/8/2026. CODIFICATION NOTE 1. This subsection (g) was amended by Ord. 208-17; however, because of formatting issues in Ord. 208-17, that text was not transposed into the Code. Amendments made by Ord. 202-18 have since superseded those made to subsection (g) by Ord. 208-17. SEC. 415.7-1. SMALL SITES AFFORDABLE HOUSING ALTERNATIVE. A project sponsor of a principal project comprised of 24 or fewer residential units may elect under Section 415.5(g) to meet its Inclusionary Affordable Housing requirement by designating its payment of the Affordable Housing Fee due under Section 415.5 for a Small Sites program that MOHCD shall establish for this purpose. Affordable Housing Fees designated for this program shall not be considered part of the designated funds specified by Section 415.5(f). MOHCD shall expend the program funds from a principal project on a Small Sites Project that meets the requirements set forth in Section 415.5(f)(2)(B) and that is within the same neighborhood as the principal project. The neighborhood of the principal project shall be determined by the Planning Department’s Neighborhood Groups Map. If MOHCD is unable to identify and apply the fee to a qualifying Small Sites Project within the same neighborhood as the principal project within two years of the payment of the fee, such fee shall be released into the Affordable Housing Fund to fund other qualifying Small Sites Projects

in San Francisco. (Added by Ord. 7-17, File No. 161157, App. 1/20/2017, Eff. 2/19/2017) SEC. 415.8. DURATION AND MONITORING OF AFFORDABILITY. (a) For any units permitted under the Program: (1) All units constructed pursuant to Sections 415.6 (On-site Affordable Housing Alternative) and 415.7 (Off-site Affordable Housing Alternative) must be owner-occupied, as defined in the Procedures Manual, in the case of Owned Units, or occupied by qualified households in the case of Rental Units. (2) Units shall not remain vacant for a period exceeding 60 days without the written consent of MOHCD. (3) All units constructed pursuant to Sections 415.6 and 415.7 must remain Affordable to Qualifying Households for the life of the project. (4) The income levels specified in the Notice of Special Restrictions and/or conditions of approval for the project shall be the required income percentages for the life of the project. Notwithstanding the foregoing sentence, if approved by MOHCD and as provided in the Procedures Manual, an exception to the required income percentage may be made in the following cases: (A) a rental unit that converts to an Owned Unit with Qualifying Income up to a maximum of 150% of AMI and a sales price established pursuant to Section 415.8(b)(5); (B) where there is an existing tenant who has undergone re-certification as defined in the Procedures Manual, the existing tenant’s household income may increase up to a maximum of 200% of AMI; (C) new Owned Units where the project sponsor has used good faith efforts to secure a contract with a qualified buyer but is unable to secure such a contract in a timely manner from the initiation of marketing; (D) resale Owned Units where the owner has used good faith efforts to secure a contract with a qualified buyer but is unable to secure a buyer contract at a maximum resale price specified by MOHCD in a timely manner; (E) the Qualifying Income level for new or resale Owned Units may be set at 20% above the income level stated in the Notice of Special Restrictions or conditions of approval; or (F) resale Owned Units where the owner has requested an adjustment to the maximum income limit stated in the existing Notice of Special Restrictions or other document establishing affordability requirements for the unit and/or has requested an increase to the Qualifying Income level, pursuant to subsection (b)(9). (5) The Commission or the Department shall require all housing projects subject to Section 415.1 et seq. to record a Notice of Special Restrictions in the official records of the City and County of San Francisco. The Notice of Special Restrictions must incorporate the affordability restrictions. All projects described in Section 415.3(a) must incorporate all of the requirements of this Section 415.8 into the Notice for Special Restrictions, including any provisions required to be in the conditions of approval for housing projects described in Section 415.3(a). These Section 415.3(a) projects which are housing projects that go through the conditional use or planned unit development process shall have conditions of approval. The conditions of approval shall specify that project applicants shall adhere to the marketing, monitoring, and enforcement procedures outlined in the Procedures Manual, as amended from time to time, in effect at the time of project approval. The Commission shall file the Procedures Manual in the case file for each project requiring inclusionary housing pursuant to this Program. The Procedures Manual will be referenced in the Notice of Special Restrictions for each project. (b) For any units permitted to be Owned Units under the Program, the MOHCD shall: (1) Establish and implement a process for reselling an affordable unit in the Procedures Manual. (2) Provide that owners may not change title on the unit without review and approval by MOHCD and according to guidelines published in the Procedures Manual, as amended from time to time. (3) Provide that owners must comply with refinancing procedures and limitations as published in the Procedures Manual, as amended from time to time. (4) Provide that, in order to retain all units restricted as affordable under this Program within the City’s affordable housing stock, the specific procedures for passing an affordable unit through inheritance are contained in the Procedures Manual. All transfers through inheritance must be reviewed and approved by MOHCD and, in all cases, the heir must acknowledge and agree to the provisions of the Program. The following households may inherit the ability to occupy a unit restricted under this Program: (i) a spouse or registered domestic partner, regardless of income; or (ii) a child of the owner if the child is a qualifying household for the unit. If the heir qualifies under one of these categories, the heir must occupy the unit or the heir must market and sell the unit at the restricted price through a public lottery process and retain the proceeds from the sale. If the heir does not qualify to occupy the unit, the heir must market and sell the unit at the restricted price to a qualified buyer through a public lottery process. The heir would retain the proceeds of such sale. (5) Require that affordable Rental Units permitted by the Commission to be converted to Owned Units satisfy the requirements of the Procedures Manual, as amended from time to time, including that the units shall be sold at restricted sales prices to households meeting the income qualifications specified in the Notice of Special Restrictions or conditions of approval, with a right of first refusal for the occupant(s) of such units at the time of conversion. If the current tenant qualifies for and purchases the unit, the unit shall be sold at a sales price corresponding to the affordability level required for the unit as a Rental Unit as specified in the Notice of Special Restrictions or conditions of approval, with a maximum allowable Qualifying Income level up to 150% of AMI. If the unit is sold to a buyer who is not a current tenant, the sales price shall correspond to the affordability level required for the unit as an Owned Unit as specified in the Notice of Special Restrictions or conditions of approval. Upon conversion to ownership, the units are subject to the resale and other restrictions of this Program for the life of the project, as defined in the Notice of Special Restrictions or conditions of approval for the Project. (6) For Owned Units approved pursuant to Sections 415.6 or 415.7, the Notice of Special Restrictions or conditions of approval will include provisions restricting resale prices and purchaser income levels according to the formula specified in the Procedures Manual, as amended from time to time. All amenities and parking spaces that were purchased with the initial sale of the Owned Unit must be sold with the Owned Unit upon resale and shall be included in the resale price. In the event subordination of the Affordability Conditions contained in a recorded Notice of Special Restrictions may be necessary to ensure the project applicant’s receipt of adequate construction and/or permanent financing for the project, or to enable first-time home buyers to qualify for mortgages, the project applicant may follow the procedures for subordination of affordability restrictions as described in the Principal Project’s conditions of approval or in the Procedures Manual. A release following foreclosure or other transfer in lieu of foreclosure may be authorized if required as a condition to financing pursuant to the procedures set forth in the Procedures Manual. (7) Purchasers of Affordable Units shall secure the obligations contained in the Notice of Special Restrictions or conditions of approval by executing and delivering to the City a promissory note secured by a deed of trust encumbering the applicable affordable unit as described in the Procedures Manual or by an alternative means if so provided for in the Procedures Manual, as amended from time to time. (8) Procedures for Units Unable to Resell. The Board of Supervisors finds that certain requirements of this Program and the Procedures Manual may create hardship for owners of Affordable Units restricted under this Program. However, the Board also recognizes that the requirements of this Program are important to preserve the long-term affordability of units restricted under the Program. In order to allow some relief for owners of Affordable Units during a time of economic downturn, but to provide the maximum protection for the long-term affordability of the units, the Board directs MOHCD to analyze the following issues and, if it deems appropriate, to propose amendments to the Procedures Manual to address the issues: (A) Waiver of Resale Requirements and Maximum Qualifying Income Level for New Buyers of Resale BMR Units. The Board recognizes that the risk to low- and moderate- income homeowners during times of economic downturn can increase the risk of default and foreclosure of units restricted under this Program. The Board directs MOHCD to study ways to reduce such risks in the below market rate unit context and, if it deems appropriate, to make recommendations to the Planning Commission to amend the Procedures Manual to allow MOHCD discretion, in certain limited circumstances, to waive requirements for owners of Affordable Units who have used good faith efforts to secure a contract with a qualified buyer but are unable to resell their unit in a timely manner. Such amendments to the Procedures Manual may include, but are not limited to, authorizing MOHCD to make one or more allowances for owners of Affordable Units unable to resell, such as: (i) a one-time waiver of the first-time homebuyer rule for the purchasing household; (ii) a one-time waiver of qualifying household size requirements for the purchasing household; (iii) a one-time waiver of owner occupancy rules to allow a temporary rental; (iv) a one-time modification of the asset test for the new buyer household; and (v) allowing MOHCD discretion to increase the Qualifying Income level for the unit by up to 20% above the maximum income limit currently allowed by the Use Restrictions for the unit but at no time higher than 150% of AMI. MOHCD and the Commission shall set forth criteria for granting such allowances such as establishing a minimum time that the units must have been advertised by MOHCD without selling; establishing criteria related to unusual economic or personal circumstances of the owner; providing a maximum percentage for the increase above the maximum income limit currently allowed; providing that the increase may only be granted on a one-time basis; and requiring the owner to clearly establish that the BMR unit is being resold at the maximum resale price specified in the Procedures Manual, as amended from time to time. (B) Waiver of Maximum Qualifying Income Level for New Buyers of Initial Sale BMR Units. The Board of Supervisors recognizes that the current Program provides that the income of a new buyer of a below market rate household cannot exceed the maximum income stated in the Planning Approval or Notice of Special Restrictions for the BMR Unit. Due to less desirable developments or geographic areas, a project sponsor is sometimes unable to find a buyer for a BMR Unit within the maximum income stated in the Planning Approval or Notice of Special Restrictions for the unit. This situation makes it difficult, if not impossible, for certain current owners of below market rate units to resell their units. In order to minimize this situation, the Board of Supervisors directs MOHCD to study ways to address this issue and, if it deems appropriate, to make recommendations to the Planning Commission to amend