• Building up instead of out could play a role in the affordability of the Bay Area.
  • The average middle class is no longer able to get a home as they used to, often dealing with all cash buyers who overbid on a home.
  • San Francisco is already one of the nation's most dense cities.

San Francisco has long stood apart from other American cities in its iconic beauty, diversity of its population and its unique urban culture. However, with the last few years of a real estate market buoyed by a surging tech boom and a flood of foreign investment, San Francisco now stands apart from the rest of the country in a very specific way– its lack of affordability.

With home prices jumping more than 120 percent since the first quarter of 2012, the median property sales price currently stands at $1.16 million in San Francisco. In comparison, median incomes, though ranking among the highest for any urban area in the country, have not quite kept up, standing at a median household income of $77,734.

San Francisco housing affordability is at an all time low with only 10 percent of the city’s households being able to afford to buy a home.

The rest of the Bay Area does not fare much better in affordability, with only 20 percent of all households able to make the benchmark. The rental market is just as hot, with the average apartment now priced at $3,880 up from $2,595 just in 2011.

The average renter now spends 42 percent of their income on rent alone. These facts on the ground are contributing to increased gentrification of neighborhoods throughout the city and escalating tensions within communities.

As a Realtor who is working with buyers in this hyper competitive market, I am all too familiar with the discouraging realities that many buyers face when trying to purchase the right home in the face of overbidding and skyrocketing costs of living.

All of us who have represented buyers know we can craft the best purchase offer, write endearing letters and resourcefully get an insight into how competitive our offers need to be. But even with all that, our buyers may not be able to get their offers accepted when cash buyers  are bidding hundreds and thousands above the listing price of any given home.

Normal middle class families are continually being priced out of the city and the Bay Area in general. It is a pressing concern for all of us who live and do business here.

As San Francisco continues to draw tech investment once largely concentrated in Silicon Valley, the city will continue to experience population growth. However, as many developers and homebuilders can attest, combating San Francisco’s bureaucracy to provide more housing is a combat of wills.

San Francisco housing density and affordability issues

Much of the city’s laws regarding new construction and housing development are antiquated and do not meet the urgent challenges of today’s housing market.

The city is addressing this housing shortage with its Affordable Housing Bonus Program, which includes relaxed limitations on density and height restrictions and a requirement of roughly 20 percent of new units to be marketed as affordable units. This plan affects 30,850 parcels, including areas such as the Richmond and Sunset which have historically had much less housing density.

In recent years, the city has seen a boom in new construction and development, most recently illustrated with the planned Salesforce tower. Recent development has also overseen the dramatic transformation of entire neighborhoods such as the Mission, SOMA, Mission Bay, South Beach and Dogpatch.

But this is not enough.

To respond effectively to the urgent demand of more housing in the city, San Francisco needs to become denser. It must Manhattanize, there is no other choice to face the challenges of increasing lack of affordability.

The city has always been limited by its geographic confines, and the rest of the bay area, hemmed in by water and mountain, does not provide ample room to grow outwards either. 

Currently, San Francisco already ranks as one of the densest cities in the country at 17,246 persons per square mile. However, there is still ample room for more density when compared with Manhattan, which stands at 66,940 per square mile. The larger Bay Area as a whole stands at 12,145 persons per square mile, roughly equal to the Los Angeles metropolitan area. 

Without a doubt, the issue of increasing density is a political landmine, with many long term residents who are concerned about the impact of revised density regulations on a wide range of factors, including the razing of rent-controlled apartments to the aesthetic integrity of San Francisco.

Although it is crucial that San Francisco move forward with more development to meet drastic demands for housing, it is also imperative that citizens be involved at the local level in determining how to reconcile such plans with making sure that new construction will improve affordability and that the aesthetics of such construction are in line with the current housing stock.

Frederick Kuo is a San Francisco based real estate broker, consultant and published blogger. He is a graduate of UCLA and his writing is focused on current events, real estate trends and history. He covers projects throughout Northern California and can be reached at frederickkuo.com.

Show Comments Hide Comments
Sign up for Inman’s Morning Headlines
What you need to know to start your day with all the latest industry developments
By submitting your email address, you agree to receive marketing emails from Inman.
Thank you for subscribing to Morning Headlines.
Back to top
Only 3 days left to register for Inman Connect Las Vegas before prices go up! Don't miss the premier event for real estate pros.Register Now ×
Limited Time Offer: Get 1 year of Inman Select for $199SUBSCRIBE×
Log in
If you created your account with Google or Facebook
Don't have an account?
Forgot your password?
No Problem

Simply enter the email address you used to create your account and click "Reset Password". You will receive additional instructions via email.

Forgot your username? If so please contact customer support at (510) 658-9252

Password Reset Confirmation

Password Reset Instructions have been sent to

Subscribe to The Weekender
Get the week's leading headlines delivered straight to your inbox.
Top headlines from around the real estate industry. Breaking news as it happens.
15 stories covering tech, special reports, video and opinion.
Unique features from hacker profiles to portal watch and video interviews.
Unique features from hacker profiles to portal watch and video interviews.
It looks like you’re already a Select Member!
To subscribe to exclusive newsletters, visit your email preferences in the account settings.
Up-to-the-minute news and interviews in your inbox, ticket discounts for Inman events and more
1-Step CheckoutPay with a credit card
By continuing, you agree to Inman’s Terms of Use and Privacy Policy.

You will be charged . Your subscription will automatically renew for on . For more details on our payment terms and how to cancel, click here.

Interested in a group subscription?
Finish setting up your subscription