San Francisco just rewrote the arithmetic of multi-family development. On July 21, 2026, the Board of Supervisors approved Mayor Lurie's housing legislation package, and the changes are structural: projects under 25 units no longer carry any inclusionary housing obligation, projects of 25 units or more see the on-site affordable rate drop to 5% citywide, and development impact fees other than in-lieu fees are cut by 67% — permanently, replacing the temporary 33% reduction that was scheduled to expire on November 1, 2026. Layer that on top of SB 423, which since June 2024 has given code-compliant mixed-income projects in San Francisco a ministerial approval path with hard deadlines, and the entitlement picture for small and mid-size multi-family projects looks better than it has in decades. This guide explains what changed, who benefits most, how the fee reform and the ministerial path stack together, and what it means practically if you own a lot or a building in San Francisco and have been waiting for the numbers to work.
What the July 2026 package actually changed
Three changes matter most, and each one reads like an answer to a specific reason projects have not penciled in San Francisco:
| Rule | Before (Nov 2023 – Jul 2026) | After the July 2026 package |
|---|---|---|
| Inclusionary requirement, under 25 units | Applied at 12–15% on-site once the project reached 10+ units | No inclusionary obligation at all |
| Inclusionary on-site rate, 25+ units | 15% on-site (temporary reduced rate) | 5% on-site citywide |
| In-lieu / off-site rate, 25+ units | 21% off-site or in-lieu (temporary reduced rate) | 10% |
| Development impact fees (non-in-lieu) | 33% reduction, temporary — set to expire November 1, 2026, and conditioned on pulling a first construction document within 30 months | 67% reduction, permanent, applied at time of fee collection |
| Affordable housing funding | Fee-dependent | Companion ballot measure proposes expanding the Affordable Housing Trust Fund to $125 million annually by 2036 |
The deadline pressure that shaped the last three years is gone. Under the 2023 Housing Stimulus and Fee Reform Plan, the reduced rates and the 33% fee cut were a limited-time window: you had to be approved in the window and pull your first construction document within 30 months to keep the discount. The July package removes the sunset and deepens the cut. That converts a sprint into a stable planning environment — which matters enormously for small developers who cannot compress predevelopment into an artificial deadline.
The under-25-unit exemption is the headline for small projects
For the small multi-family segment — the 6 to 24 unit infill buildings that used to be the backbone of San Francisco housing production — the inclusionary exemption is the single biggest change. Under the prior regime, crossing 10 units triggered the inclusionary program, which meant either giving up 12–15% of your units at below-market rents or paying a substantial in-lieu fee. On a 12-unit building, one to two BMR units frequently decided whether the project penciled at all. Under the new package, that obligation simply does not exist below 25 units.
Pair that with the 67% impact-fee cut and the effect compounds. Impact fees in San Francisco stack across categories — transportation, childcare, school district, area plan fees where applicable — and on a mid-size project the total routinely reached six figures. Cutting the non-in-lieu portion of that stack by two-thirds, permanently, moves real money back into project feasibility. Published analysis of San Francisco's development math has been blunt for years that fees and inclusionary costs were a primary reason the pipeline stalled; this package is the city's direct answer.
SB 423: the ministerial path that removes entitlement risk
Fee relief fixes the cost side. SB 423 fixes the time and risk side. San Francisco became the first city in California subject to SB 423 on June 28, 2024, after missing its state housing production benchmarks — which means code-compliant, mixed-income multi-family projects in the city qualify for ministerial approval: no discretionary hearings, no CEQA appeals on qualifying projects, and hard statutory deadlines the Planning Department must meet.
| SB 423 milestone | Projects up to 150 units | Projects over 150 units |
|---|---|---|
| Completeness determination | 60 days | 90 days |
| Planning plan-check letter | 60 days | 90 days |
| Final approval decision | 90 days | 180 days |
Qualifying is a checklist, not a negotiation. The project must be residential or mixed-use with at least two-thirds residential floor area, on a legal parcel where residential use is allowed, outside excluded areas such as designated historic districts and certain hazard zones, and it cannot demolish rent-controlled or tenant-occupied housing within the statutory lookback. On the affordability side, projects of 11 or more units generally include at least 10% affordable units, or may use the Bay Area alternative of 20% of units at moderate income levels. Labor standards apply as well: prevailing wage at 11-plus units, with additional workforce requirements on larger projects. And a pre-application notice with tribal consultation comes before the formal filing.
Two companion state laws complete the picture. AB 2234 and AB 1114 put post-entitlement permits — the building permit phase, historically San Francisco's slowest and least predictable stretch — on statutory shot clocks too, and AB 1114 was written specifically to reach San Francisco's practice of treating building permits as discretionary. Since January 2024, Planning issues its approval letter before DBI intake, which cleaned up the sequencing problem that used to strand applications between departments.
How the pieces stack: the 2026 window
Here is the practical read. A code-compliant 20-unit infill project in San Francisco today can: qualify for SB 423 ministerial review with a decision deadline measured in months rather than years; carry zero inclusionary obligation under the July package; pay roughly one-third of the impact fees it would have paid three years ago; and ride the post-entitlement shot clocks through the building permit. Each of those four things individually would have been significant. Together they dismantle most of the reasons the small multi-family pipeline went quiet.
For projects at 25 units and above, the math also improves sharply — a 5% on-site rate is the lowest San Francisco has offered in the modern inclusionary era, and the 67% fee cut applies at collection regardless of when the project was approved, which published analyses note can benefit already-entitled pipeline projects that stalled on cost. If you are holding an entitled but unbuilt project, the carrying math deserves a fresh look.
What this means if you own a lot or a small building
The owners best positioned for this window are not institutional developers. They are the people who already control land: owners of underbuilt commercial parcels on transit corridors, owners of single-story retail with air rights, families holding small apartment buildings with expansion potential, and small development partnerships that shelved projects in 2022 and 2023 when construction costs and fees outran rents. The feasibility conversation for those parcels has genuinely changed, and the right first step is a fresh feasibility study against the new rules: what the zoning allows, whether SB 423 applies, what the state density bonus adds on top, and what the fee stack now totals for your specific program.
It is also worth saying plainly: the density bonus program, HOME-SF, and the ministerial pathways interact, and choosing the right combination is project-specific. The architecture matters early here — unit count thresholds (24 versus 25, 10 versus 11) now carry real money, and program decisions made in the first feasibility pass determine which regulatory lane the project rides.
Frequently asked questions
Is the July 2026 package already in effect? The Board of Supervisors approved it on July 21, 2026. Ordinances take effect after final passage, the Mayor's signature, and a short statutory period, and a companion funding measure is headed to the ballot. Before making commitments, confirm the current status and effective date with SF Planning — and treat this article as a snapshot from late July 2026.
Does the 67% fee cut apply to projects already approved? Published analyses indicate the reduction applies at the time fees are collected rather than at approval, which would benefit entitled projects that have not yet pulled permits. Confirm how it applies to your project's timeline with SF Planning or counsel.
Do I need 25 units or more for this to matter? No — the opposite. The under-25 exemption makes the small infill segment the clearest winner. A 12-unit building that carried one to two BMR units last year carries none under the new package.
Does SB 423 apply to my project automatically? No. It is an eligibility framework: two-thirds residential floor area, allowed use, outside excluded areas, no demolition of rent-controlled or tenant-occupied housing within the lookback, and the affordability and labor standards that scale with unit count. A feasibility check tells you quickly whether your site qualifies.
Is now actually a good time, given construction costs? Costs are real, but the levers that just moved — inclusionary, impact fees, entitlement time, and entitlement risk — were the levers the city controls, and they moved a long way. Whether a specific project pencils still depends on rents, financing, and construction pricing. That is exactly what a current feasibility study is for, and running one now costs little compared to discovering in 2028 that the window was open in 2026.
Where an architect fits
Every advantage described above is claimed at the drawing and application stage: the unit count that sets your regulatory lane, the code compliance that makes SB 423 ministerial, the pre-application materials, the density bonus and program elections, and the complete submittal that starts the statutory clocks. If you own a San Francisco parcel or building and want an honest read on what the new rules make possible, we would love to take a look with you.