The Board of Supervisors unanimously approved legislation on December 13, 2016 to provide developers of market rate projects with 24 or fewer dwellings with the option of contributing the required fees for off-site affordable housing (under the Inclusionary Housing Program) to a Small Sites Fund administered by the Mayor's Office of Housing and Community Development ("MOHCD"). The MOHCD can use these funds to acquire or rehab "Small Sites," meaning properties with 2 – 25 units, to create affordable housing, as long as it is in the same neighborhood as the market rate development. The word "neighborhood" will mean those 37 areas that the Planning Department has listed in its Neighborhood Notification Map. Currently new 100 percent affordable housing projects built with City funds must be much larger (at least 45 units) for the per unit cost to be reasonable. This Small Sites Program will allow the City to acquire or help in the creation of much smaller sites.

As noted by the Planning Department, these Small Sites are typically rental properties of 2 to 6 units subject to the City’s Rent Ordinance that are occupied by long-term tenants at risk of eviction and displacement. Though this legislation does not alter the amount of fee required to be paid by the developer, it does respond to neighborhood activists' interest in retaining affordable units in their own neighborhood and not somewhere else. It does so by directing funds to be expended in the same neighborhood as the development, rather than city-wide through the general Inclusionary Housing fund. This is likely to be particularly important in areas of the City such as the Mission that have experienced displacement of long-time residents due to a flurry of development activity.

The Small Sites Fund currently receives 10% of all Inclusionary Housing fees except those directed to specific geographic areas. This new program will allow developers of qualifying projects to contribute all of their Inclusionary Housing Program fees to this program. The MOHCD will use these funds to acquire or rehab Small Sites, as long as those sites meet one or more of the following requirements:

(i) Rental properties that will be maintained as rental properties;

(ii) Vacant properties that were formerly rental properties as long as those properties have been vacant for a minimum of two years prior to the effective date of the legislation;

(iii) Properties that have been the subject of foreclosure; or

(iv) A Limited Equity Housing Cooperative or a property owned or leased by a non-profit entity modeled as a Community Land Trust.

Once funds have been expended to acquire or rehab the Small Site, it will be restricted to remain affordable for at least 55 years. If MOHCD is unable to find a suitable Small Site to apply the funds in the neighborhood within two years, it may release the funds into the city-wide Small Sites Fund.