San Francisco needs tens of thousands of new homes to help relieve soaring housing costs. Ideally, a large swath of these homes would be affordable for lower-income renters.
But idealism has an eye-popping price tag, according to a new City Hall report. To meet affordable housing goals in its 2023 blueprint, San Francisco would have to spend nearly $3 billion a year for six years, and that scenario also requires other sources, such as private, state, and federal funds, pitching in the same amount.
The estimated $17.9 billion price tag to kickstart 40,000 new subsidized homes by 2031 is $1 billion more than Mayor Daniel Lurie’s proposed two-year budget for the entire city.
The analysis from the Budget and Legislative Analyst office, which conducts research at the request of the Board of Supervisors, adds to uncertainty about San Francisco’s housing future. Mired in a years-long housing drought, the city is seeing prices and rents spike. There’s little new supply but a lot more demand on the horizon from upcoming tech IPOs.
San Francisco often gets some affordable housing as a by-product of most market-rate construction, which must include or help fund a percentage of subsidized units. But that source has dwindled.
The city has added fewer than 10,000 units in the past four years combined, thousands fewer than planners hoped for as the pandemic receded and new rules to loosen regulations and encourage development began to kick in.
In other times, rising demand and prices for SF real estate have spurred developer interest in new construction. But construction costs and global financial uncertainty, all buffeted by war and tariffs, are blunting interest.
With market-rate construction in the doldrums, new affordable housing more than ever requires other mechanisms, such as grants, loans, and tax credits, that in the best of times are complicated to patch together.
Cash-strapped San Francisco has little hope of realizing its housing ambitions in the next several years without a radical shift in the economy or, in what seemed a pipe dream less than two years ago, a radical policy shift in Washington, DC.
Rather remarkably, Congress could soon pass bipartisan housing legislation, although it’s closer to helpful than radical.
“We can imagine a future where there’s a federal government that really invests in” affordable housing, Mayor’s Office of Housing and Community Development director Daniel Adams told the city’s Land Use Committee at a Monday hearing about the BLA report. But “it’s hard to imagine at this point,” he added.
A higher bar
The BLA analysis is based on an estimate required by state law every eight years. The latest tally went into effect in 2023 and produced the oft-repeated figure of 82,000 — the number of homes San Francisco needs to plan for by 2031 to keep up with growth.
In that 2023 blueprint for growth, city planners said about 46,000 of the total should be affordable.
Since then, state regulators have given SF credit for homes “in the pipeline” — that is, at various stages of approval but not yet built.
But the BLA analysis, noting that pipeline projects might not come to fruition, has set its bar at 40,000, close to the city’s original 2023 goal.
Mayor’s Office of Housing and Community Development director Daniel Adams, noting a “sea change” in SF’s building permit process.
I thought it would never happen, and then it happened.
It also estimates a construction cost of $900,000 per affordable unit, which brings the total to about $36 billion. Since the city typically finances about half those costs, the BLA’s estimate for SF’s share is “only” $17.9 billion.
If you want some kind of good news, there’s this: It is possible to build affordable units more cheaply. One recently completed project on Valencia Street cost just $525,000 per home.
There’s also this: MOHCD director Adams said yesterday that a “sea change” in SF’s permit process has in fact cut down delays and improved the financial outlook for some projects. “I thought it would never happen, and then it happened,” Adams told a committee of supervisors.
Adams’ view is backed up by the BLA in a different report last month: “The City’s tax and fee incentives have not successfully reversed the decline in building activity since 2022. […] However, without the fee waivers, the decline likely would have been worse.”
Even so, there are limits to dividends from cutting red tape. The White House’s policy decisions are adding more burden.
“One of the great gifts Trump has given California is an enormous escalation in the cost of construction,” Bay Area Council vice president of public policy Louis Mirante tells The Frisc, with more than a hint of sarcasm. “And that is holding back an enormous number of projects.”
The California Department of General Services estimates that the cost of housing construction in SF is up nearly 5 percent since January 2025.
Local ideas have limits
So where will the money for affordable housing come from?
The BLA analysts don’t just throw up their hands. Their report suggests a gamut of ways to potentially raise significant funds, including a higher city debt ceiling, a city-owned bank that puts profits toward housing, and a “revolving loan fund” to lend money to developers at a lower rate than private loans. (The report singles out a Maryland county that has created 6,000 new homes with such a fund and turned a profit to boot.)
But BLA director of policy analysis Fred Brousseau acknowledged to the committee yesterday that many of these strategies “include mixed-income housing.” In other words, the creative funding would help build market-rate homes, and those projects would include affordable homes or pay fees into the city’s affordable housing fund.
This so-called “inclusionary” system is about to produce a lot less affordable housing, however. The city shrank inclusionary requirements for developers three years ago in response to the anemic market, and it’s preparing to do so again this year.
To reduce that reliance, Sup. Myrna Melgar and Mayor Lurie want to shift more affordable funding to a dedicated annual stream, increasing it to $152 million a year, but it will require voter approval in November. In 2024-25, the city spent $234 million on affordable housing, including money from the general fund, voter-approved bonds, and more.
At the state level, California voters could find two housing bonds on the November ballot: $10 billion to shore up affordable housing construction and restoration, and $25 billion to help first-time “middle income” home buyers.
But votes are no guarantee. In 2024, an ambitious affordable housing bond for the Bay Area never made the ballot after backers saw grim poll numbers.
“The state and the city can’t do it alone,” says California Council for Affordable Housing director Jennifer Abbott.
Enter the feds?
That leaves the federal government. For decades, it was the primary financer and builder of affordable housing in the U.S. But in the latter half of the 20th century, public sentiment turned against housing projects, and since then the feds have favored indirect tools like tax cuts for developers and vouchers for renters.
But with the cost of housing (and everything else) up nationwide, there’s a new appetite for federal intervention. Both candidates to replace Nancy Pelosi say they’ll court federal dollars for SF’s housing needs and aim to overturn the federal cap on the number of public housing units in cities, a longtime crusade of Rep. Alexandra Ocasio-Cortez.
Other Democrats on Capitol Hill have proposed a $15 billion fund and more tax credits for developers.
There’s even a bipartisan bill making its way through Congress. The 21st Century ROAD to Housing Act would direct federal funds toward affordable housing development and emergency housing for the homeless.
President Donald Trump has indicated he will likely sign the final version. (Then again, Trump says a lot of things that he doesn’t mean or suddenly backs away from.)
Former California YIMBY policy director Ned Resnikoff, now at a think tank, tells The Frisc that “there’s a lot of good stuff” in the House version of the ROAD to Housing Act. He’s less enamored of the Senate version, which he says will stifle some new rental housing.
Even at its best, the bill won’t put a huge dent in the crisis on its own, but it could be a bellwether. “The affordability crisis has started to penetrate even into parts of the country that weren’t thought of as high-cost areas,” says Resnikoff. “A lot is going to hinge on what happens in November and maybe more importantly in 2028.”
