New San Francisco Laws That are Changing Our Housing Landscape

San Francisco's in the middle of one of the most consequential periods of housing policy change in its history. The city is trying harder than it has in decades to solve a housing crisis that's 50 years in the making and curtail the environmental impacts of our ever-changing world. And depending on who you are, what you own or rent, and where you own or rent it, laws that have recently been passed or that are under consideration might be really good news, really bad news, or a combination of both. This is Austin Klar, your lawyer turned real estate agent in San Francisco, and in this video, I'm breaking down 5 laws Some of which have recently been passed and others that are still working their way through the system that are bound to reshape our neighborhoods and our homes across the city. These laws will have real measurable consequences for buyers, sellers, developers, and people who might one day eventually want to own property in the city. Let's get right to it and start with a law that's currently making its way through the system that potentially might unlock a whole new set of units for some San Francisco residents and cut off access to some of these new units to other residents. And that's a recent proposal from the Board of Supervisors to cut the percentage of affordable housing units that are required to be built on market rate projects permitted in San Francisco. San Francisco's inclusionary housing requirement, in my opinion, has done more damage than good in our current financial landscape and in our current economy. And I'm gonna explain how it works and why I think that right now. Under the program, which has been in effect for decades, new residential projects, depending on their size, have to either set aside a percentage of units being built as below market rate, meaning they're rented or sold at prices affordable low and middle income households, or pay what's called an in lieu fee into a city affordable housing fund. The concept is reasonable enough on its face. You want to build new units in the city, some of them need to be affordable. Everybody needs access to housing. So it's not that controversial in theory. But it becomes devastating in practice when you consider real-world consequences of a law like that and how it actually works in connection with potential projects. At one point, San Francisco had one of the highest inclusionary housing requirements in the entire country. Developers used to be required to set aside up to about a third of their units as affordable units depending on the project size. And in a city where construction costs are already among the highest in the country and where permitting times are among the longest in the country and the process is so unpredictable and is rife with delays, it's hard to make most new construction projects pencil out. And that's before you even consider the financial market that we're in right now with interest rates hovering near 7% and even higher than that for construction projects. The math just doesn't work for a lot of different housing projects in the city. And that's before you layer in an affordable housing— Minimum. And until relatively recently, you know, over the past 5+ years, especially since the onset of the pandemic, home prices and rents were falling. So it was an even riskier environment to build in than it is right now. So when developers consider all those factors, the math just wasn't mathing. And when projects don't pencil, they don't get built. Developers are in the business of making money. They're not charitable organizations. If a big multi-year project isn't going to make money for them, they're not going to spend the money to build it. And we have direct evidence of that playing out between 2020 and 2025, when less than 800 inclusionary affordable housing units were built citywide. In a city mandated to permit tens of thousands of new units by 2031, only 767 affordable units were permitted that 34,000 people applied to. And former Mayor Breed recognized that these strict inclusionary mandates were a roadblock and lowered them to between 12 to 22% instead of 22 to 33%. But it still didn't open the floodgates to new development. In 2024, only a little over 1,000 new homes were permitted and about 1,900 in 2025. And that's where the new law comes in. The current administration is trying to lower the affordable housing mandate even further in an effort to kickstart more development. In May 2026, the Inclusionary Housing Technical Advisory Committee unveiled a proposal to cut the inclusionary requirement from 15% down to just 5% for new projects with at least 25 units. That's a two-thirds reduction. And if the cut isn't approved, the inclusionary mandate is actually going to revert to 18% for new rentals and 20% for new condos. And in a city where the current mandates are already too onerous to get developers moving, that would be disastrous. So what does all this mean for home values? When the rules make building too expensive, fewer projects get started. And when fewer projects are going, it means there's less supply. and less supply means higher prices for everything that does happen to get built or anything already existing. So the very mandate that was supposed to make housing more accessible has actually ended up keeping the overall housing stock so constrained that market prices have stayed elevated for everyone, including the lower-income residents these rules were designed to help. So while everyone can be on board with the theory behind inclusionary housing mandates, the practical reality is that they need to be lowered in the current environment that we're in right now. The law's still making its way through the system, the full Board of Supervisors still has to consider and pass it for it to be enacted. We'll see what happens to it. I'll definitely be keeping my eye on it. And I would love to get your opinion about the law in the comments. And if you have questions relating to buying or selling new construction or any other type of housing in San Francisco, in light of all the recent changes we've been seeing across the city, reach out to me. I was a lawyer at one of the biggest law firms in the world before getting into real estate. And I've helped numerous people relocate here from all over the country. Happy to be a resource for you. My contact info's in the description below. Reach out anytime. And if you like videos about San Francisco real estate, lifestyle, current events, new developments, or its incredible history, subscribe to my channel because I make videos about that stuff every single week. Now onto the next big change under consideration, and it's another attempt by the city to undo something the city previously implemented at the voter's request. It's what the voters approved in 2020, and that's Proposition I. Prop I doubled the real property transfer tax on sales of properties valued at $10 million or more before before that proposition was passed, the rate on a sale between $10 and $25 million was about 2.75%, and after, it jumped to 5%, and on sales over $25 million, the rate went from 3% to 6%. So let's put some finer numbers on that. For example, a sale of $25 million, seller is paying $1.3 million in transfer tax. Before Prop I was passed, they were paying about half of that, about $680,000. So it added a huge expense, roughly $680,000 for a seller in a single transaction. Now you might say that's a $25 million deal. Who cares? Whoever's selling that is super wealthy. They can afford the extra money. But here's why it matters for our broader housing market and for people who will never be able to afford $10 and $25+ million houses. Aside from wealthy homeowners selling their San Francisco mansions, these laws also apply to developers that are selling very large buildings with a lot of units in them. In San Francisco, like in most jurisdictions, developers typically build a project, they stabilize it, meaning they lease it up, and then they sell it to a long-term investment operator. That sale, when it involves a large apartment building, for example, is exactly the transaction now taxed at these elevated rates. So when a large exit gets dramatically more expensive, it eats into the economics that a developer has to account for on the front end. Developers and lenders, they model out the returns before they ever break ground. If the tax at exit is higher, then the return on the project needs to be higher. And just like with higher affordable housing mandates, Higher transfer taxes means higher costs, harder to get a project to pencil, which potentially means less units overall actually get built. And for individual property owners, that transfer tax increase is a direct hit to their bottom line. When you're paying 5 or 6 points to the city before you even talk about other closing costs, it really eats away into the overall economics and makes you less likely to be willing to sell. And when less people are willing to sell, it leads to further constraints on inventory, which again, bolsters home prices for the rest of us. City officials are now explicitly acknowledging that Prop I has been strangling housing production. According to the Office of Economic Workforce and Development, San Francisco's transfer tax rates are among the highest in the country, and that sticker shock has been stifling investment in both new development and improvements to hotels, offices, and apartment buildings. To resolve this, in February of 2026, Mayor Lurie and Supervisor Mahmood introduced the BUILD Act, the Balanced Update to Incentivize Local Development. That law, if it passes, would roll the tax back to pre-2020 levels before Prop I passed. The Lurie administration estimates that that would save approximately $32,000 per unit built for developers and would unlock a lot of stalled housing projects across San Francisco. And when more units become available, rents and home prices don't rise as rapidly. More people can afford them. Again, all of this is about how to unlock more supply. How do we walk back some of the more onerous restrictions that the city's implemented over the past several years to get more housing units on the market? We're in the situation we are today in San Francisco with a significant housing shortage because we just don't We don't have enough building for the level of demand that we're seeing, and that's only going to get worse if these changes don't get made. Now, the next law I want to talk about isn't so much about housing supply specifically, but it's bound to impact the wallets of homeowners and is something that every buyer out there needs to be aware of. It's the All Electric Major Renovations Ordinance that was passed by the Board of Supervisors last year. San Francisco has had a rule since June of 2021 that natural gas was no longer allowed in new construction. Any new building had to be fully electric. No gas furnace, no gas ranges. None of that. All electrified. The new ordinance extends that ban to buildings undergoing what the city has called major renovations. If you significantly renovate a commercial or residential structure, like replacing or substantially modifying structural, mechanical, electrical, and plumbing systems, you now have to bring the entire project up to the all-electric standard. No more gas going forward, even if the building originally ran on gas and has gas infrastructure throughout. This matters enormously for property owners and can definitely impact home values. A huge portion of San Francisco's housing stock is older. Think about all the beautiful historic Victorian and Edwardian homes throughout the city. A lot of them run on natural gas. If you purchase one of these properties and you plan a significant renovation, you now have to factor in the full cost of electrical conversion as part of the project. New electrical panels, often requiring a complete service upgrade, heat pump HVAC systems, replacing gas furnaces, electric or heat pump water heaters, induction cooktops instead of gas ranges. This can add tens, if not hundreds of thousands of dollars to renovation. And for owners of larger multi-unit buildings, which are investor types, that added cost discourages bringing properties to modern standards. That's especially so when the added costs of conversion are less likely recoverable in a rent control scenario. So that change, which is in effect, needs to be on your radar. Whether you own a home right now and you're planning a remodel, or you're thinking about buying one with the intent of remodeling, you have to budget for that stuff. Now for the fourth law I want to discuss, I'm going to do a shortened version of that because I did a full deep dive Full breakdown on the law in a completely separate video, which I'll link in the description below, and you can go check it out if you want to learn more. But I want to cover it here too, because it belongs in this conversation. In December 2025, San Francisco passed the Family Zoning Plan, its biggest rezoning effort in over 4 decades, in response to California's state housing mandate. California mandated that San Francisco plan for more than 82,000 new units by 2031. Under existing zoning, the city could only accommodate about 58,000. So San Francisco had to upzone or face the loss of hundreds millions in state funding and risk something called the builder's remedy, which would effectively strip the city of its ability to enforce its own height and density restrictions. The area targets western and northern regions in the city, places like Sunset, Richmond, West Portal, Marina, areas that have traditionally been, you know, heavily dense with single-family zoning or low-density zoning. Under the new rules, many of these lots can now accommodate 2 or 3 units Heights, height limits along major transit corridors like Geary, Mission, and Ocean Avenue are going up, in some cases from 40 feet to 65 or even 85 feet. And people on both sides of the aisle are up in arms about the law. On one side, you have pro-housing groups suing San Francisco, claiming that the family zoning plan doesn't actually provide the upzoning that's required. They're arguing that because the city's own economists found in a study that the upzoning that the family zoning plan provides would allow for about 14,600 new units, about half of what actually is required to meet the state housing mandate. Yimby Law, one of the groups suing, says the plan isn't even a real upzoning because the density bonus program has so many conditions and restrictions attached that it won't materially increase housing production in real life. On the other side, neighborhood groups and tenant advocates have sued, saying that the law could displace a number of residents and risk historic structures. So the plan is simultaneously too restrictive for some and too permissive for others. And it's a really tough needle for the city to thread. And what does this actually mean for property values in your neighborhood right now? Well, the real answer, the truth is uncertainty. If you own a single-family home in, for example, the Sunset or Richmond, your zoning has technically changed in a way that allows for additional use of your land. But not only does the lawsuit cloud over the plan and your ability to do that, or, or your neighbor's ability to do that, but when you combine it with practical constraints on actually developing in those neighborhoods, it means everyone is still trying to figure out what upzoning actually means in practice for a given parcel. I personally don't think the plan likely to produce a massive wave of new construction homes that dramatically increases supply and pushes home prices down. I go over some of those more practical considerations in the other video I did about the ins and outs of the family zoning plan. So you can go check it out if you want to learn more. You know, that's what I think about home values in some of those other neighborhoods like Sunset, Richmond, West Portal, Marina, you know, the western and northernmost, you know, more suburban residential neighborhoods that it's targeting. But I do think that along the more urban corridors, the transit-heavy commercial corridors, there will be an impact because bigger developers are more likely and now more able to get new and larger projects up in those areas. We'll see how things actually play out and who prevails. And if the law stands going forward, definitely a legal battle to keep your eyes on. And the last legal change I want to talk about sort of brings everything full circle because it's running in parallel with the family zoning plan. And it's an attempt to lock up some of the properties that the upzoning was designed to free up for development. When the family zoning plan was being debated throughout 2024 and 2025, one of One of the most consistent complaints from homeowners and neighborhood groups in the western and northern neighborhoods was, "We don't want our blocks to change character. We don't want our neighbors tearing down their Victorians and putting up 6-unit buildings. We don't want 65-foot apartment buildings on our street." And the response to that concern was to launch an accelerated landmark designation program, a program that is now seeking to add historic designations on more properties at a faster pace than we've seen in San Francisco in years. Under San Francisco's planning code, a designated landmark enjoys significant protections against demolition renovation. Any major alteration or demo requires approval from the Historic Preservation Commission and the San Francisco Planning Department. It adds layers of review, it adds time, it adds cost, and in many cases, it makes development of a property functionally impossible regardless of what the underlying zoning says. In a typical year, you know, going back decades, San Francisco typically designates maybe 5 to 10 landmarks a year. The program has designated a little over 300 buildings since its founding in the '60s, but since pushing for a more accelerated pace of landmarking property in areas in San Francisco There had been 75 new proposals on the table by the end of March of this year alone. Housing advocates have been sounding the alarm, claiming this is going to make it much more difficult to develop housing at a given site, and that this is just a workaround of the new family zoning plan. If a property gets landmark designated, the state planning rules that would otherwise force San Francisco to allow development on that site under the family zoning plan simply don't apply. Landmark status effectively means an exemption from upzoning. So you get credit for passing the family zoning plan while also shielding large swaths of property from its application that it was designed to free up for development. Again, all of this goes back to the battle of supply versus demand. If demand is going up, we need supply to go up even more if we want to cool the rate of growth or even potentially push prices down. We need to think through very carefully how to unlock more units and also preserve parts of San Francisco that make San Francisco San Francisco. It's not an all or nothing approach on either side. With all the great things happening in San Francisco right now, with improving office and retail vacancies, falling crime and homelessness, rising tourism, return to office, and all crazy things going on with AI, we have a huge surge in demand for housing and nowhere near enough in the pipeline to keep up. Reasonable minds can differ on the best approach. I prefer ways to make it cheaper and faster to build. Otherwise, we risk no new housing getting built at all, and that's the worst case scenario for everyone. But all of this is just what I think. I would love to get your opinions. Drop your comments below. And if you're thinking about buying or selling a place in San Francisco and want to learn more what all of this might mean for you, reach out to me. I've lived in the city for almost 14 years and I've helped numerous people relocate here from all over the country. How to be a resource for you. I'll put my contact info in the description below. Reach out anytime. And if you like videos about San Francisco real estate lifestyle, current events, new developments, or its incredible history, subscribe to my channel because I make videos about that stuff every single week. And remember, if you want to learn more about the family zoning plan, go check out the other video I made about it. I do a deep dive into all the ins and outs of the plan that was recently passed. I hope you enjoyed the video and I'll see you in the next one.