San Diego’s inclusionary housing rules can change the budget and design of a residential project before construction starts. An August 2026 city bulletin confirms that the in-lieu fee for fiscal year 2026–27 remains $25.92 per square foot, but paying a fee is only one compliance option. The project size, coastal location, application date, and type of development all matter.
Which San Diego Projects Fall Under the Ordinance
The City of San Diego’s Information Bulletin 532 says the inclusionary ordinance applies to new residential projects with 10 or more dwelling units outside the Coastal Overlay Zone and five or more units within it. Condominium conversions with two or more units are also covered.
These are City of San Diego rules. A property with a San Diego mailing address may be in another city or in unincorporated San Diego County, where different requirements can apply. Confirm the jurisdiction and zoning before estimating the obligation.
The date an application is deemed complete can also determine which version of the rules and fee applies. A developer should keep the completeness notice and every later city determination in the permanent project file.
The 2026–27 In-Lieu Fee Stays at $25.92 Per Square Foot
For applications covered by the current schedule, the fiscal year 2026–27 in-lieu rate is $25.92 per square foot. The city calculates the fee using the net building area of unrestricted market-rate residential units, not every square foot shown on a plan.
Net building area generally excludes space outside a dwelling’s habitable area, including garages, carports, parking areas, porches, patios, open space, lobbies, common hallways, stairs, elevators, and equipment rooms. Because a small classification difference can change the fee substantially, the calculation should be reviewed with Development Services rather than based on a rough total.
The published rate remained the same as fiscal year 2025–26, but the municipal code provides for annual updates. A project that takes time to prepare should confirm the rate again when its application is ready.
Building Affordable Units Is Another Compliance Path
A covered project may satisfy the ordinance by providing inclusionary homes instead of paying the entire fee. The current bulletin describes a 10% set-aside and refers applicants to the San Diego Housing Commission’s procedures for income levels, restrictions, design, marketing, and monitoring.
Other possible methods include rehabilitating existing dwelling units or single-room-occupancy hotel rooms, converting guest rooms, donating qualifying land, or providing units off site. Not every option works in every location. For example, the rehabilitation and guest-room conversion path described by the city is not available in the Coastal Overlay Zone.
A variance or full waiver is not routine. The ordinance uses separate city review processes and requires specific findings. The practical comparison is usually between a fee, on-site units, or another expressly allowed method.
Coastal Projects and Condo Conversions Need Extra Attention
The coastal threshold is lower: five new homes rather than 10. That can bring a relatively small project under the ordinance. Coastal certification and other land-use rules can add another layer of review, so the parcel’s overlay maps should be checked early.
Condo conversions deserve the same care because the ordinance reaches conversions of two or more units. A conversion may involve existing tenants, subdivision documents, building conditions, and housing requirements at the same time. Buyers and investors can read our earlier look at the San Diego housing market for broader local context, but market data does not answer a project’s compliance question.
Check the Parcel and Project Record Before Choosing a Path
Before committing to a design or purchase, confirm the legal parcel, city jurisdiction, coastal status, zoning, existing unit count, proposed net increase, application history, and whether an earlier approval controls. Ask the city and Housing Commission to identify the applicable ordinance version and document the answer.
Property Records of California provides property history reports and related property information that may help a buyer or developer organize ownership, deed, and transaction background. Our overview of different property reports explains the available categories. Those materials do not replace zoning records, title review, permit research, or an official inclusionary determination.
The fee rate is the easy number to see. The more important work is deciding whether the ordinance applies and which compliance path fits the site before land, design, and financing decisions become expensive to change.
