Key points:
- San Francisco’s housing crisis stalls progress despite approved plans for 20,000 new units.
- Developers cite high costs and low rents as major hurdles to new construction.
- “We have a deep need for more housing at all levels of affordability.” – Rachel Freeman, Los Angeles’ deputy mayor of business and economic development
- “All these new laws should help, but they take time.” – Darin Ranelletti, assistant director of housing and local planning at the Association of Bay Area Governments
San Francisco’s housing crisis is a case study in how dysfunction, high costs and political gridlock can combine to stall progress — even when the need is dire and the plans are already in place.
Approved plans for more than 20,000 new apartments and homes across the city have not broken ground, despite some receiving the green light more than a decade ago. Sites from South of Market to Bayview to Parkmerced remain silent, with no construction cranes in sight.
Developers say the math no longer works. Rents remain below 2019 levels, while inflation, high city fees, tariffs and skyrocketing material costs make San Francisco one of the most expensive places in the world to build.
“My gross revenue is still around 5% below 2019, while my expenses have climbed 30% in the past five years,” said Oz Erickson, chairman of the Emerald Fund. Financing is “extremely difficult” with typical returns now far below what is needed to justify new construction, he said.
San Francisco’s voter-approved real estate transfer tax — 6% for sales above $25 million — is the highest in the country and eats into profits. Combined with construction costs among the world’s highest, the city’s production has been anemic. In 2024, only 1,453 homes in new buildings were completed, less than a third of the over 5,000 finished in 2020.
That leaves the city far behind its state-mandated housing goal of 82,000 new units permitted by 2031.
Across the Bay Area, cities are falling well short of their housing goals under California’s Regional Housing Needs Allocation. Daly City, Walnut Creek, Oakland, San Jose and San Francisco have all permitted less than 10% of their required units two years into an eight-year cycle.
SB 423, which forces noncompliant cities to streamline approvals for certain projects, already applies to San Francisco and will hit much of the Bay Area in 2027.
“All these new laws should help, but they take time,” said Darin Ranelletti, assistant director of housing and local planning at the Association of Bay Area Governments. But economic conditions — high interest rates, weak job growth and lack of public funding for affordable housing — are limiting immediate impact.
Some cities are taking bold steps. In Santa Monica, the City Council recently passed an emergency zoning ordinance that allows up to 20 units on vacant single-family lots and three-story buildings where only single homes were allowed before. Supporters like Councilmember Jesse Zwick say it will create “missing middle” housing for young families. Opponents, including Mayor Lana Negrete, warn it will fuel speculation and displacement. “We can’t keep greenlighting projects that may meet numbers… but fail to meet the real needs of our residents,” she said.
The debate became heated when Councilmember Dan Hall cautioned Negrete against using terms like “character of neighborhoods,” calling them “the exact words that racists use to keep people of color low-income families and workers out of neighborhoods.” Negrete, who is Latina, objected strongly. “When I say character it means making it more unaffordable. A city I grew up in that I don’t recognize that I can’t afford to live in,” she said. “Don’t you dare say it’s about racism. I take deep offense to that.”
Elsewhere, policy innovation is focused on reimagining existing space. In Los Angeles, developers and city leaders are looking to convert underused office towers into housing.
A report by BAE Urban Economics warns that 54 downtown L.A. office buildings are at risk of losing nearly $70 billion in value over the next decade, potentially costing the city $353 million in tax revenue. Converting just 10 of them could add more than 3,800 housing units and $46 million in property taxes.
“We have a deep need for more housing at all levels of affordability,” said Rachel Freeman, the city’s deputy mayor of business and economic development. “Adaptive reuse has the potential to be a tool to help achieve our goals towards housing production and also the revitalization of our core urban centers.”
California’s public universities are also feeling the squeeze.
At California State University campuses, on-campus housing shortages are forcing thousands of students into long commutes or overpriced rentals. CSU has added 17,000 new beds in the past decade and is planning thousands more, but demand far exceeds supply at many campuses.
“There was nowhere I could live in my price range near campus,” said Sacramento State student Sofia Gonzalez, who now pays $800 a month to live half an hour away. Cal State Northridge had 2,000 students on its housing wait list last fall.
“Their stories are really, really heart-wrenching, because we can only do so much,” said Kevin Conn, executive director of student housing and residential life at Northridge.
Some campuses are experimenting with modular, factory-built housing that can be “stacked on top of each other like Legos,” said Mike McCormick, Cal Poly San Luis Obispo’s vice president of facilities management and development.
Others are seeking state bond funding to add beds, but face a $2.3 billion systemwide budget gap.
The solutions are there — streamline approvals, rethink zoning, repurpose unused buildings, invest in student housing — but they require political courage and public buy-in. The alternative is continued paralysis.
California’s housing crisis is not simply the product of market forces or construction delays. It is the predictable result of policies and local resistance that have made it too costly, too slow and too politically dangerous to build. The price of inaction is already showing up in rising rents, worsening homelessness and the steady departure of working- and middle-class families.
We can choose to treat housing production as a civic priority on par with public safety and education — or we can continue to talk about it while projects sit idle and communities stagnate. The question is whether our elected leaders, and the voters who put them there, are willing to break the logjam before it breaks California.
I see a very similar article in The Chronicle, today. Should that article be cited, in regard to this one?
In any case (from article above): “Across the Bay Area, cities are falling well short of their housing goals under California’s Regional Housing Needs Allocation (RHNA). Daly City, Walnut Creek, Oakland, San Jose and San Francisco have all permitted less than 10% of their required units two years into an eight-year cycle.”
To which I’d say, “good news, everyone”! (And the 10% is apparently/only “permitted”, and not necessarily moving forward.)
On the back end the links are showing up, but not on the front end. Not sure why.
From article: “We can choose to treat housing production as a civic priority on par with public safety and education — or we can continue to talk about it while projects sit idle and communities stagnate.”
I pick “stagnate”.
But it is interesting that you view helping private developers/developments to be a “civic duty”.
Governments working in partnerships with private enterprise to achieve civic goals has long been an American solution. We contract with private businesses to build our roads and other infrastructure. We should approach housing no differently.
“I pick “stagnate”.”
That says everything anyone needs to know about you, in your own words.
You do see, of course, that I was simply repeating the “choice” that David described. As such, I was pointing out the absurdity of framing it that way.