More Common-Sense Housing Reforms Passed

The Facts

The Board of Supervisors just made it less financially risky to build new homes. On Tuesday, they passed legislation, sponsored by Supervisors Bilal Mahmood and Matt Dorsey, to postpone collection of development impact fees until a project receives its certificate of occupancy. This change lowers the cost of construction by reducing the risk premiums that developers must pay when financing new housing.

The ordinance brings San Francisco into compliance with state law. Only Supervisor Jackie Fielder voted against it, even though doing so would have put the city in violation of state law.

The Context

State law SB 937 took effect January 1, 2025, prohibiting local agencies from collecting development impact fees until a residential project is completed and occupied. The law aims to reduce upfront housing costs by eliminating the need for developers to finance these fees through expensive construction loans during the building process.

Previously, San Francisco collected these fees at or before building permit issuance, creating significant upfront costs that made housing development more expensive. The new timing aligns payment with project completion, when developers can pay the fees from sales or rental revenue, or from refinancing the property from its high-interest construction loan to a lower-interest permanent loan.

The GrowSF Take

Thank you to Supervisors Mahmood and Dorsey for sponsoring this legislation. It's always good to bring the city into compliance with state law, and even better that doing so makes building new homes easier.

Under the old system, developers had to front potentially millions in fees during the riskiest phase of construction, when projects could still fail or face delays. Now they pay only after reaching certificate of occupancy, when the building exists and can generate revenue. This shifts payment from the highest-risk moment to the lowest-risk moment in the development process.

It's deeply concerning that Supervisor Fielder voted against bringing San Francisco into compliance with mandatory state law. When the state passes housing reform legislation, local officials should implement it promptly—not resist measures designed to make housing development financially viable.