SF Weighs Prop. C $125M Housing Fund Amid $1M Apartment Build Costs

San Francisco's housing slowdown is being driven by construction economics that leave almost no large apartment or condominium developments financially viable under current costs, prompting civic researchers to focus on small-scale infill across 93,000 narrow residential lots while voters weigh a charter amendment to expand the city's Housing Trust Fund from $52 million to $125 million a year, according to reports in The San Francisco Standard and the San Francisco Examiner.

Why Conventional Projects Struggle to Pencil Out

Patrick Kennedy, owner of Panoramic Interests — which has built dozens of four- and five-story, 10-to-15-unit apartment buildings in Berkeley and San Francisco — told The San Francisco Standard that building a generic two-bedroom apartment in San Francisco now costs $1 million.

In May, San Francisco Chief Economist Ted Egan and real estate financing consultant Century Urban released a triennial inclusionary-housing feasibility report evaluating 30 development prototypes ranging from a 45-foot, 13-unit building to a 245-foot, 341-unit high-rise across affordable-housing mandates from 20% down to 0%. The study found that only 1 of 30 condominium scenarios — a 130-unit midrise at 100% market rate — was financially feasible, while 0 rental scenarios worked even at 100% market rate and even if land costs were zero.

Following that report, the Board of Supervisors voted in July to reduce the city's inclusionary affordable-housing mandate — which voters had set at roughly 25% under 2016's Proposition C — to 5% of units priced below market rate for developments with 25 or more units. David Garcia, deputy policy director at UC Berkeley's Terner Center for Housing Innovation, noted that affordable-housing developments in the Bay Area often require more than 10 separate subsidy sources, with each additional financing source adding $20,000 per unit in compliance and transaction costs.

Across all project types, 5 cost drivers have squeezed pro forma returns below the 20% return on cost (roughly 6% to 8% annually over a multiyear build, compared with the S&P 500's 14% annual return over the past decade) that lenders and outside investors typically require:

• Land & Hard Construction Costs: Developed property values hover around $1,000 per square foot (about 10% of total development cost), while hard costs represent two-thirds of expenses at $500 to $700 per square foot, according to Potrero Hill contractor Dan Leineweber of Trinity Building Co., as concrete and lumber prices sit 50% above 2016 levels and Bay Area trade wages run 50% above the national average.
• Permitting & Capital Costs: City performance metrics show an average of 119 days for Planning Department approval and 144 days to issue a building permit, while construction loan interest rates have climbed from around 4% five years ago to as high as 10%.

Modeling 28,000 Homes on 93,000 Narrow Lots

At Frontier Tower at Sixth and Market streets — a 16-floor building constructed in 1908 after the 1906 earthquake — MIT Media Lab-affiliated City Science Lab San Francisco (CS@SF), led by Executive Director Peter Hirshberg and co-founder Kate Connally, has built a real-time pro forma mapping tool covering all 230,000 parcels in San Francisco.

The model focuses on the city's 93,000 narrow residential lots (typically 25 by 100 feet, representing 40% of all city parcels) that were upzoned for four-story multifamily buildings under San Francisco's 2024 Family Zoning Plan. By toggling 6 policy interventions — including single-stairway multifamily building rules, preapproved over-the-counter floor plans (echoing the 48,000 Victorians built from standard plans between 1850 and 1915), eliminating parking minimums, and modular construction — Hirshberg estimates that developing just 3% of those 93,000 parcels (about 2,800 lots averaging 10 units each) could produce 25,000 to 28,000 missing-middle homes over the next few years, roughly 10 times the 2,700 units built in San Francisco last year. Community Planning Deputy Director Lisa Chen said the Planning Department has met with the CS@SF team to evaluate how preapproved plans could scale.

Proposition C Would Expand the Housing Trust Fund to $125 Million

On the November ballot, San Francisco voters are also deciding Proposition C, a charter amendment introduced in May by District 7 Supervisor Myrna Melgar and placed on the ballot unanimously by the Board of Supervisors in July.

Proposition C would gradually raise annual general-fund contributions to the city's Housing Trust Fund from $52 million to $125 million by allocating a share of future property-tax growth, and then grow the fund at the rate of general-fund discretionary revenue up to 3% per year through 2058. Alongside Melgar and Mayor Daniel Lurie's plan to issue $70 million in housing preservation revenue bonds next year and Melgar's September proposal to create a standalone Department of Housing Production and Preservation, the Housing Accelerator Fund estimates Proposition C would build or preserve at least 18,000 affordable units over 30 years toward the city's state-mandated goal of 46,000 affordable units by 2031.

Housing Accelerator Fund CEO Rebecca Foster, whose organization contributed $400,000 to the Yes on C campaign, Bay Area Council Chief Policy Officer Matt Regan, and YIMBY Action leaders Laura Foote and Brandon Powell backed the measure as a predictable local match to compete for state and federal grants — including state Proposition 1's $11.25 billion housing bond — while San Francisco Republican Party Chairman Nick Berg signed the official ballot opposition arguing against locking general-fund revenue into a charter set-aside through 2058.