San Francisco Bay Area multifamily investment guide

Two markets in this series have had state legislatures override local zoning. What California does is different in kind: it makes a city's own paperwork the condition of its authority.

Subdivision (d) of Section 65589.5 of the California Government Code, the Housing Accountability Act, provides that "For a housing development project for very low, low-, or moderate-income households, or an emergency shelter, a local agency shall not disapprove the housing development project or emergency shelter, or condition approval in a manner that renders the housing development project or emergency shelter infeasible, including through the use of design review standards, unless it makes written findings, based upon a preponderance of the evidence in the record, as to one of the following." A list of permitted grounds follows.³

Two of those grounds carry a condition that matters more than the grounds themselves. Paragraph (1) is available only where "the jurisdiction has adopted a housing element ... in substantial compliance with this article, and the jurisdiction has met or exceeded its share of the regional housing need allocation." Paragraph (5) is available only where, on the date the application was complete, "the jurisdiction had adopted a revised housing element that was in substantial compliance with this article." A city without a compliant housing element cannot make either finding, and so cannot use either ground to refuse the project.³

That is the mechanism commonly called the builder's remedy, and it is no longer an informal name. The statute now defines it. Subdivision (h)(11) provides that a "Builder's remedy project" means a project that provides housing for very low, low-, or moderate-income households, where "the jurisdiction did not have a housing element that was in substantial compliance with this article," and whose density falls within limits the same paragraph then sets out.³

Those limits are the part an investor should read twice. Under (h)(11)(C)(i) the density may reach the greatest of fifty percent above the statutory minimum density for that jurisdiction, "Three times the density allowed by the general plan, zoning ordinance, or state law, whichever is greater," or the density specified in the housing element. And under (C)(ii), that ceiling rises by a further "35 units per acre" where any portion of the site lies within half a mile of a major transit stop, within a very low vehicle travel area, or in a high or highest resource census tract on the state opportunity map.³

The affordability price of admission is lower than most people assume. Subdivision (h)(3) defines housing for mixed-income households as a project with at least "7 percent" of units for extremely low income households, or at least "10 percent" for very low income households, or at least "13 percent" for lower income households. Thirteen percent of the units, in a jurisdiction that is out of compliance, buys three times the zoned density and another thirty-five units to the acre near transit.³

We are deliberately not publishing a count of how many jurisdictions are currently out of compliance. A figure circulates, but the state page we were able to retrieve does not state it, and compliance status is a live thing that changes with every letter the Department of Housing and Community Development issues. The Housing Element Review and Compliance Report is the authoritative record, and the only responsible instruction we can give is to check the specific jurisdiction on it, on the date you are underwriting.⁴

• A city with no compliant housing element loses two of its grounds for refusing affordable housing.
• A builder’s remedy project may reach three times the zoned density.
• A further 35 units per acre applies near a major transit stop.
• Thirteen percent lower income units qualifies a project.

Thirteen percent of the units buys three times the zoned density, plus thirty-five to the acre near transit, in any city the state has not certified. Check the city, not the zoning.

The demand side here is the sharpest contradiction in this series. This region holds the highest incomes and the most expensive housing we have recorded, and three of its four counties have fewer people than in 2020.

San Francisco County fell 6.0 percent from its 2020 base, a loss of 52,471 residents. That is steeper than any county we have measured except St. Louis city, which we recorded at 7.7 percent in our St. Louis guide. Alameda County fell 2.7 percent, losing 45,616. San Mateo County also fell 2.7 percent, losing 20,940. Only Contra Costa grew, by 0.3 percent, adding 4,035. Across the four the net change is a loss of 114,992 residents on our arithmetic.²

The price data has not followed the people. San Mateo County records a median home value of $1,559,600 and San Francisco County $1,394,500, both above the $1,090,500 we recorded in New York County in our New York guide, which was the highest in our coverage before this one. Median gross rent in San Mateo is $2,922, also above New York County at $2,197.²

The incomes are why those prices clear. San Mateo County reports a median household income of $158,855 and San Francisco $140,970, both above the $130,847 we recorded in Middlesex County, Massachusetts, which held the highest figure in our coverage until this guide. On those incomes, rent absorbs about 22.1 percent of the median household in San Mateo and 21.1 percent in San Francisco on our arithmetic. The most expensive rents in our coverage sit on the least burdened households in our coverage.²

We cannot give a rent-versus-own comparison for the two most expensive counties, because Census reports monthly owner cost with a mortgage for both San Francisco and San Mateo only as "$4,000 or more," a capped value. Where the figure resolves, in Alameda County, owning costs $3,810 against a median rent of $2,357, a gap of $1,453 a month. In Contra Costa the gap is $1,060. Both are wide enough that the purchase option is not a near substitute for renting.²

Supply is not resolving any of this. San Francisco permitted 1,444 units in 2025 against 421,342 units of stock, about 0.34 percent. Contra Costa permitted 1,163 against 436,791, about 0.27 percent. Alameda managed 0.42 percent and San Mateo 0.76 percent. This is a region that has legislated one of the most aggressive supply mechanisms in the country and is building at a fraction of a percent of its stock a year.²

• Three of four counties lost population; the net is a loss of 114,992 residents.
• San Mateo records the highest home value, rent and household income in our coverage.
• Rent takes only about 21 to 22 percent of income across the region.
• Permitting runs 0.27 to 0.76 percent of stock.

The most expensive rents in our coverage sit on the least burdened households in our coverage. What is missing here is not affordability. It is people.

We are cautious on this region as a whole, and our caution is about direction rather than about quality.

We would not acquire in San Francisco County. It has lost 52,471 residents, its two signature employment sectors are both contracting, it permits at 0.34 percent of stock so there is no supply story to offset the demand story, and at 9.9 times income the housing is priced for a population that is leaving. The 61.8 percent renter share is genuinely deep, and it is not enough on its own.²¹

We would not acquire on the San Mateo peninsula either, for the same reasons in a more expensive form. It records the highest home value, the highest rent and the highest household income we have measured anywhere, and its population fell 2.7 percent. Paying the highest basis in our coverage into a shrinking county is not a trade we would make.²

The part of this region we would underwrite is Contra Costa County. It is the only one of the four that grew, it has the lightest new supply at about 0.27 percent of stock, its median household income of $127,229 is within ten percent of Alameda's on a materially lower housing basis at $866,800, and rent takes about 22.4 percent of income. Oakland and the Alameda County corridor we would watch rather than avoid, because the $1,453 rent-versus-own gap there is real and the basis is well below the peninsula.²

One diligence item is specific to this state and we would treat it as mandatory. Before acquiring anywhere in California, establish whether the jurisdiction holds a housing element in substantial compliance, and re-establish it before exit. A city that is out of compliance is a city where a competitor can build at three times the zoned density next door with thirteen percent affordable units, and no zoning map will tell you that. The state publishes the status; the risk is that most underwriting never looks at it.³⁴

Investors comparing overridden-zoning markets should read this alongside our Austin and Boston guides, and those weighing a high-income shrinking core against a lower-income growing one should read our Phoenix guide.

Establish the jurisdiction’s housing element status before you buy and again before you exit. No zoning map records the risk, and most underwriting never looks.