San Francisco Affordable Housing Policy: Government Programs and Goals

San Francisco's affordable housing policy operates through an interlocking system of local ordinances, state mandates, municipal funding tools, and interagency programs — making it one of the most structurally complex housing frameworks of any U.S. city. This page covers how the city defines affordable housing, what mechanisms produce and preserve it, which government bodies hold authority over different program types, and where genuine policy tensions exist. Understanding this framework is essential background for anyone seeking to navigate San Francisco's housing landscape.

Definition and scope

San Francisco defines affordable housing primarily through Area Median Income (AMI) thresholds published annually by the U.S. Department of Housing and Urban Development (HUD). A unit is considered affordable when a household spends no more than 30 percent of gross monthly income on housing costs, including utilities (HUD Income Limits Documentation System). In practice, San Francisco's programs stratify eligibility across multiple AMI bands — typically ranging from 20 percent AMI for deeply subsidized units to 120 percent AMI for moderate-income ownership programs.

The policy scope covers rental housing, ownership housing, and deed-restricted below-market-rate (BMR) units produced through private development. It spans units owned by the San Francisco Housing Authority, units financed through the San Francisco Office of Housing and Community Development, and units produced under inclusionary requirements attached to private construction permits administered by the San Francisco Planning Department.

Geographic and jurisdictional scope: This page covers affordable housing policy administered by the City and County of San Francisco — a consolidated municipal-county government. Policies of adjacent counties (Marin, San Mateo, Alameda, Contra Costa) are not covered here, nor are regional programs administered solely by the Association of Bay Area Governments (ABAG) or the Metropolitan Transportation Commission (MTC), except where those bodies intersect with San Francisco's local funding or planning obligations. State law — particularly the Housing Accountability Act, the Density Bonus Law (California Government Code §65915), and builder's remedy provisions — constrains local discretion and is referenced where it directly shapes city policy, but California state housing programs are not the subject of this page.

Core mechanics or structure

San Francisco's affordable housing system operates through five primary production and preservation mechanisms.

1. Inclusionary Housing Program. Private residential developments of 10 or more units must provide a share of units as BMR affordable housing. Under the city's current formula, developers of rental projects can satisfy the requirement by providing 21 percent of units on-site at rates affordable to households earning no more than 55 percent AMI, or by paying an in-lieu fee (SF Planning Department, Inclusionary Affordable Housing Program). For-sale projects trigger a 21 percent on-site requirement with units priced for households at or below 90 percent AMI.

2. 100% Affordable Development Financing. The city funds stand-alone affordable housing developments through loan programs administered by the Office of Housing and Community Development (MOHCD). Financing sources include federal Low Income Housing Tax Credit (LIHTC) equity, federal Community Development Block Grant (CDBG) funds, HOME Investment Partnerships funds, and locally authorized bond proceeds. The San Francisco Board of Supervisors authorizes general obligation bonds and Certificates of Participation used to capitalize this pipeline.

3. San Francisco Housing Authority (SFHA). The SFHA manages the city's public housing stock — approximately 6,000 federal public housing units — under Annual Contributions Contracts with HUD. The authority also administers the Housing Choice Voucher (Section 8) program, which subsidizes rent in the private market. Voucher holders pay 30 percent of their adjusted income toward rent, with federal subsidy covering the balance.

4. Small Sites Program. Launched in 2014, this program provides acquisition financing to nonprofit and community land trust buyers purchasing small rental buildings (typically 5 to 25 units) with existing low- and moderate-income tenants, preventing displacement by converting buildings to permanently affordable ownership structures. MOHCD administers the program.

5. Density Bonus and State Mandates. California's Density Bonus Law entitles developers who include a specified share of affordable units to additional market-rate units, reduced parking requirements, and other concessions — constraining the city's ability to deny qualifying projects (California Government Code §65915).

Causal relationships or drivers

San Francisco's affordability crisis is driven by a structural imbalance between housing supply and employment growth. The San Francisco Bay Area added over 700,000 jobs between 2010 and 2020 while producing far fewer housing units than necessary to absorb that workforce demand (California Department of Finance, Housing Element data). San Francisco's own Regional Housing Needs Allocation (RHNA) for the 2023–2031 cycle — set by the state through ABAG — requires the city to plan for approximately 82,069 new housing units, of which roughly 46,000 must be affordable to lower-income households (ABAG RHNA 2023–2031).

Land cost is the primary cost driver for new affordable development. In San Francisco, land can represent 20 to 35 percent of total development cost for affordable projects — a figure that distinguishes the city from lower-cost metros where land is a smaller share of the capital stack. Construction costs in the Bay Area routinely exceed $600,000 per unit for new affordable multifamily construction, based on data compiled by the California Housing Partnership (California Housing Partnership, Cost of Home report).

Rent control under the San Francisco Rent Ordinance (Administrative Code Chapter 37) covers most pre-1979 rental units, reducing landlord incentives to maintain small rental stock and creating a de facto preservation floor for existing low-rent units — while simultaneously suppressing new rental supply by making exit difficult.

Classification boundaries

Affordable housing programs in San Francisco fall into distinct administrative categories that determine funding source, regulatory authority, and tenant eligibility:

The San Francisco General Plan and San Francisco Zoning Laws establish the land use framework within which all of these programs operate, and the San Francisco Department of Building Inspection issues the permits that bring approved affordable projects into existence.

Tradeoffs and tensions

Inclusionary rates vs. project feasibility. Higher inclusionary percentages produce more on-site affordable units but can reduce overall project feasibility — particularly for smaller infill sites where land and construction costs are least scalable. The city commissioned a nexus study in 2019 (updated analyses followed) to calibrate the maximum feasible inclusionary rate; setting it too high eliminates market-rate development entirely, reducing both affordable units and in-lieu fee revenue.

Voucher portability vs. local rent levels. HUD sets Payment Standard limits for Section 8 vouchers based on Fair Market Rents (FMRs) for each metro area. San Francisco's FMRs are among the highest in the nation, but voucher holders still face difficulty leasing units because market rents for desirable units frequently exceed FMR ceilings, and landlord participation is voluntary.

Displacement prevention vs. new supply. The Small Sites Program and rent control preserve existing affordable units but do not add net new units. Preserving the existing stock is less expensive per household than building new, but it cannot offset the gap created when no new supply is added.

State preemption vs. local control. Since 2017, California has enacted a sustained series of housing laws that reduce local discretionary authority — including SB 9 (2021), which permits duplexes on most single-family lots statewide, and AB 2011 (2022), which allows affordable housing by right in commercial zones. The San Francisco Planning Department must implement these mandates even when they conflict with local zoning preferences.

Common misconceptions

Misconception: All rent-controlled units are affordable housing. Rent-controlled units under Administrative Code Chapter 37 are regulated for annual rent increases but are not deed-restricted affordable housing. A rent-controlled unit may have a market rent of $4,000 per month and still be legally rent-controlled. Deed-restricted BMR units carry permanent affordability covenants recorded against the property.

Misconception: The inclusionary requirement applies to all new construction. Projects of fewer than 10 units are not subject to San Francisco's inclusionary requirement. Projects in specific redevelopment plan areas (such as the former Redevelopment Agency successor areas) may have different requirements negotiated through Development Agreements.

Misconception: SFHA manages all subsidized affordable units in San Francisco. The Housing Authority manages federal public housing and administers vouchers. The much larger universe of deed-restricted BMR units — estimated at over 30,000 units — is managed by nonprofit operators and monitored by MOHCD, not SFHA.

Misconception: Density bonus projects are simply approved automatically. The Density Bonus Law entitles applicants to waivers and concessions, but projects still require building permits, environmental review where applicable, and compliance with objective design standards. The city retains authority to apply objective (non-discretionary) standards.

Checklist or steps (non-advisory)

The following steps describe the standard sequence through which an inclusionary affordable housing unit is produced under a private development project in San Francisco:

  1. Developer submits a Planning Application for a project of 10 or more residential units to the San Francisco Planning Department.
  2. Planning staff determines the applicable inclusionary requirement — on-site units, off-site units, or in-lieu fee — based on project type, size, and applicable area plan.
  3. Developer selects a compliance method and executes a Planning Compliance Agreement specifying unit count, AMI targeting, and affordability term (typically 55 years for rental, 45 years for ownership).
  4. If on-site units are chosen, MOHCD reviews proposed unit mix, size, and AMI distribution for consistency with the city's Affordable Housing Design Standards.
  5. Developer records a Regulatory Agreement (deed restriction) against the property with the San Francisco Assessor-Recorder, creating the legal affordability covenant.
  6. Upon certificate of occupancy, MOHCD issues a marketing notice authorizing the developer or nonprofit manager to begin tenant selection through the DAHLIA Housing Portal, using lottery procedures governed by the Affirmative Marketing Plan.
  7. Eligible applicants are selected by lottery and undergo income certification by MOHCD or its agent; certified households execute leases at restricted rents.
  8. MOHCD conducts annual compliance monitoring, including unit inspections and rent roll audits, for the duration of the affordability covenant.

Reference table or matrix

San Francisco Affordable Housing Program Comparison

Program Administering Body Primary Funding Source AMI Range Served Unit Type Affordability Duration
Inclusionary BMR (on-site rental) SF Planning / MOHCD Private developer obligation ≤55% AMI Rental 55 years (minimum)
Inclusionary BMR (on-site ownership) SF Planning / MOHCD Private developer obligation ≤90% AMI Ownership 45 years (minimum)
In-Lieu Fee Fund projects MOHCD Developer fees + LIHTC 20%–80% AMI Rental 55 years (minimum)
Public Housing SF Housing Authority HUD (federal) ≤30% AMI typical Rental Ongoing (federal contract)
Housing Choice Vouchers (Section 8) SF Housing Authority HUD (federal) ≤50% AMI at admission Rental (private market) Annual renewal
Small Sites Program MOHCD City acquisition loans 80%–120% AMI Rental Permanent (land trust/nonprofit)
Teacher/Workforce Housing SFUSD / MOHCD City + employer funds ≤140% AMI Ownership/Rental Varies by program
Supportive Housing (SRO/PSH) Dept. of Homelessness City + HUD CoC grants Extremely Low (≤30% AMI) Rental Ongoing

AMI figures are based on HUD Income Limits for the San Francisco-Oakland-Hayward HUD Metro FMR Area (HUD FY2023 Income Limits).

References

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