The big picture
San Francisco's Board of Supervisors unanimously advanced the city's two-year budget on first reading and gave final approval to a significant reduction in affordable housing fees intended to spur more residential construction — a 9-2 vote that divided the Board. The session also saw final passage of a drug-free permanent supportive housing policy, establishment of the renewed Downtown Community Benefit District, and the collapse of a proposed grocery and pharmacy vacancy tax that will not appear on the November ballot.
Top items
IN PROGRESSCity adopts two-year budget and salary plan for fiscal years 2027 and 2028
The Board unanimously passed on first reading the city's main spending plan and accompanying salary ordinance covering fiscal years 2026-2027 and 2027-2028, setting appropriations for all city departments and enumerating all funded positions.
This two-year budget governs how San Francisco spends public money across every department — from public health to public safety — and locks in staffing levels and compensation for thousands of city employees through June 2028.
Passed on first reading, 11-0; final passage expected at the next meeting.
PASSEDInclusionary affordable housing rate slashed from 15% to 5% to spur construction
The Board gave final approval to an ordinance cutting the city's inclusionary affordable housing requirement — the share of units a developer must price below market rate for lower-income households — from 15% to 5% for projects of 25 units or more. The Mission District is carved out at 8% following an amendment by Supervisor Fielder. Projects under 25 units are now exempt entirely. Article 4 development impact fees (one-time charges developers pay to offset the strain new construction puts on city infrastructure) were also cut by 67%.
The city's bet: SF's 15% mandate was so costly that developers shelved projects rather than build. Lowering it to 5% should unlock stalled construction — meaning 5% of many more buildings may ultimately house more low-income residents than 15% of the few projects that were getting built. Supervisors Chen and Walton, who voted no, argued the city is giving away too much affordable housing for too little guaranteed in return.
Finally passed, 9-2; Supervisors Chen and Walton voted no.
PASSEDDrug-free permanent supportive housing becomes official city policy
The Board gave final approval to an ordinance making it city policy to expand drug-free permanent supportive housing options, requiring that new city-funded housing for people experiencing homelessness operate as drug-free facilities unless a legal or funding conflict prevents it, with limited exceptions for new construction or a Board waiver.
The measure reshapes how San Francisco funds and operates housing for homeless residents, directing future dollars toward drug-free sites and requiring the Department of Homelessness and Supportive Housing to survey residents and report on demand — a contested shift that divided the Board along ideological lines.
Finally passed, 7-4; Supervisors Chan, Chen, Fielder, and Walton voted no.
PASSEDDowntown Community Benefit District renewed and expanded for 10 years
Following a public hearing and a weighted property-owner ballot in which 85 percent of returned votes favored the measure, the Board established the Downtown Community Benefit District, authorizing a 10-year assessment on properties in the district beginning in fiscal year 2026-2027.
The district will collect assessments from downtown property owners to fund services such as street cleaning, safety ambassadors, and economic activation in San Francisco's central business core — a significant commitment to downtown recovery at a time when the area continues to face elevated vacancy rates.
Adopted, 10-0 (Supervisor Chan excused).
IN PROGRESSGrocery and pharmacy vacancy tax pulled from November ballot
A proposed initiative ordinance that would have imposed a graduated excise tax — $3 per square foot in year one, rising to $5 in year two and $10 in year three (capped at $250,000) — on large grocery chains and pharmacy operators (100+ stores nationally) who leave former sites vacant or convert them to other uses, was not sent to the Board floor after a procedural motion to call it from committee failed, blocking November 2026 ballot placement.
The proposal, backed by Supervisors Mahmood and Melgar, would have targeted chains like Safeway and Whole Foods that hold onto shuttered leases in SF neighborhoods rather than subleasing to new grocers. Revenue would have seeded an Affordable Grocery Fund — but the measure will not appear on the November 2026 ballot after the procedural vote fell short.
Not referred to the Board; hearing not held; measure did not advance.