SF housing market: Deals rise, construction lags

For all of the momentum coursing through San Francisco this year, one critical facet of its real estate market remains stuck in the mud: New housing projects.

The city is garnering renewed global interest, drawing plentiful venture capital money, and has an apparently pro-housing and development philosophy steering its political infrastructure. Yet none of that has led it to meet its goals on actually building housing.

More than 20,000 new housing units have been approved in San Francisco, but little dirt has moved. In 2024, the city greenlit plans for just over 2,400 new homes, a rounding error compared to the 82,000 homes the state has mandated San Francisco permit by 2031.

Tariffs, construction costs driven up by inflation, and the relatively high interest rates of recent years shoulder some of the blame, developers say.

Yet, San Francisco’s improvements from the low-point of the pandemic continue to spur interest in existing multifamily assets, with sales up 35 percent year-over-year according to data firm Avison Young. The trend is likely to hold until the market for new builds picks up, with more high-dollar trades of older residential buildings along the lines of a couple from the past week.

Bridge Capital Partners Inc., is under contract to buy the Sunset Towers, a two-building, 243-unit property in the Sunset neighborhood just south of Golden Gate Park. Sold by AvalonBay Communities, the property had listed earlier this summer and was reportedly drawing bids of more than $100 million, according to the San Francisco Business Times. The sides have not made the final sale price public. The deal is expected to close in January.

Veritas Investments, one of the largest landlords in San Francisco, has been dealing with financial troubles by offloading significant portions of its residential portfolio over the last two years. The latest update in the saga came earlier in the week, when the Canadian RBC Real Estate Capital Corporation sold a $570 million loan, backed by 66 apartment buildings owned by Veritas. The buyer, an affiliate of Revere Housing, will take control of the real estate, but retain Veritas as a property manager.

Veritas previously let go of 76 apartment buildings in San Francisco to a partnership between Ballast Investments and Brookfield through a foreclosure, after the companies bought a pair of troubled Veritas loans for $615 million in 2024. Earlier this year, Los Angeles-based investment firm PCCP acquired another 76 apartment buildings in Oakland and San Francisco from Veritas for just over $540 million.

A prominent single-family property in the Bay Area also had movement this week: the $6 million home of embattled Sonoma developer Ken Mattson, who is facing charges for an alleged $46 million Ponzi scheme. A judge late last week ordered that Mattson surrender the $6 million Piedmont home as part of his bail bond.

Mattson was cuffed in a Napa parking lot earlier this year on allegations that he sold fake ownership stakes in residential and commercial properties to investors, over a period of 15 years. During that time, he amassed a robust Sonoma County real estate portfolio worth upwards of $80 million.