Why Is San Francisco So Expensive? (Top 10 Reasons)

 

San Francisco is one of the most popular areas in California.

If you like California and all that it has to offer, you will love San Francisco even more.

The diversity of entertainment, scenery, and unique housing make it one of the most popular places in the world to live.

The San Francisco area, with all the positives it has to offer, also has plenty of negatives.

The largest of those negatives is the price.

If you want to live in the San Francisco area, it is going to cost you a lot of money.

If you have some questions about why San Francisco is so expensive, we have some answers for you.

 

Why Is San Francisco So Expensive? (Top 10 Reasons)

 

1. Jobs

 

Potentially the biggest reason that San Francisco is so expensive is that there are high paying jobs.

People can get jobs that pay quite a bit higher than they do even in other areas of California.

These high paying jobs are a great benefit, and they lead to people having more money.

However, that money only goes so far in San Francisco.

Everything from real estate to food to entertainment is impacted by the money that people are making from their high paying jobs.

The problem with this is that, as time goes on, people are going to need to make more and more money to afford San Francisco.

Does it become a problem at some point that there is truly no affordable housing in the area?

With people starting to make money remotely, some are finding jobs in areas that are much easier to afford and working for a company in another state.

This is going to have an impact on both the job market and the real estate market in San Francisco.

However, if you are looking to get paid a high amount for your jobs, San Francisco is a great place to be.

If you are well qualified and have the experience, you will enjoy the thriving job market that San Francisco has to offer.

The jobs are often available, and they are good for those who have previously struggled to find work.

The only issue you will have is finding a place to live while you look for a job.

 

2. Peninsula

 

San Francisco is located on a peninsula.

There is only so much space in San Francisco.

Nothing can be done to grow the area, and therefore, the pricing continues to go up because the space is so limited.

This is a very small but very highly priced plot of land, and because of the fact that it will always be this size, you will likely not see prices drop.

The San Francisco area is very specific about the development that they allow.

We will get a bit more into that as we look into some of our other reasons.

Since this little section of California can sometimes feel like it is its own high-end state, they can almost charge whatever they would like.

The San Francisco area has always been known for being compact, fairly filled with people, and very high-end.

This is not going to change anytime soon, so those who want to be a part of it will have to pay for it.

 

3. Supply and Demand

 

The supply and demand issue in the San Francisco housing market makes it a very expensive place to live.

This applies not only when trying to purchase a home but for renting one as well.

In addition, because the wealthy can afford to live in San Francisco, there are other products that will be priced high as well.

There is not enough room in San Francisco for all who want to live there.

Even with the high costs associated with living in San Francisco, there are more and more people who want to move there.

The pricing is only going to matter to those who are borderline about being able to afford San Francisco.

Most who decide to move to this wealthy area have lots of wealth already accumulated.

One thing that has helped prices in San Francisco go even higher is the fact that the mortgage rates are quite low.

This means people can afford quite a bit more of an asking price without paying all that much more out of pocket.

The mortgage rates allow sellers to ask even more for their homes because buyers can qualify right now, even if the selling prices are high.

In the coming years, as the mortgage rates start to return to their original values, we may see these issues change a bit.

 

4. Desirable Place to Live

 

Overall, San Francisco is a desirable place to live.

There is plenty to do, plenty to see, and the weather is really nice all year round.

This makes it a place people want to visit and a place people want to live.

Typically, if a place is more desirable like this, the pricing is going to be quite a bit higher overall.

Even just staying in a hotel in San Francisco is going to cost you more than in other areas.

This is because you will have access to all that San Francisco has to offer, and there is a cost associated with that.

Trying to get more for your money in San Francisco is difficult.

The most challenging part about it is that the entire state of California is a bit expensive.

There are no little pockets you can live in just outside of San Francisco and live a completely affordable life.

You will still have plenty of high expenses to pay and need to bring in a fairly sizeable income as well.

This puts quite a bit of stress and pressure on people, but for a desirable place to live, some are willing to do it.

If you can’t afford the prices in San Francisco, there are still plenty of great areas across the country to live in.

 

5. Development Regulations

 

As we mentioned, there is a shortage of housing in San Francisco.

For developers and individual homeowners who want to build housing, the process is nearly impossible.

People find that they have to spend many years and thousands of dollars just to get any kind of approval in San Francisco.

There are not many areas left to build, but there are some spots that could be converted into different types of living.

These development regulations make the startup process of purchasing and building a home difficult, but they also make the overall pricing go up.

People will say that the process they went through to be able to expand their home or rezone an area in San Francisco was incredibly difficult.

The difficulty is that these development regulations will not be something you can avoid.

Regardless of who you are and the size of your project, you will have to handle the development regulations and the effect that they will have.

In addition, there are some regulations in the San Francisco area regarding business and other areas of life.

It’s always a good idea to look into these things before moving to any area.

 

6. Insufficient Housing Production

 

For many years while the real estate market was kind of in a lull, there was not much building being done in San Francisco.

As we mentioned, the process to build is extensive and somewhat annoying for many people.

This leads to many builders deciding to stop with the building until there was some improvement or increase in the market.

The problem with this is that, when the increase came, these places were not ready for occupants.

This has created a very high demand with a very low supply.

Had the housing production increased over those years, this issue may have never come into play.

However, we are now dealing with the effects of it, and it is making San Francisco an even more expensive place to live.

Another major reason that San Francisco has not been able to lower any of its prices is the fact that people don’t want the city to grow.

There are large groups of people who feel there is no need for San Francisco to grow or expand.

 

7. Anti-Growth Culture

 

If you have never heard of the anti-growth movement in San Francisco, you may find it kind of interesting.

Those who have made it into the San Francisco area and own homes there do not really want to share.

They would like to keep the city the size that it is and not let it get developed in any way.

Although we can understand the importance of maintaining some character and only building cities to a capacity that they can handle, this goes a bit deeper.

The people who own high-end homes in San Francisco want to make sure that there are no lower end buyers in the general area.

They feel as though keeping the city as high income as possible is the best way to avoid any trouble or issues coming to San Francisco.

As we already know, trouble will come anywhere, regardless of the prices of the homes.

However, with the way San Francisco is run, when builders and companies try to expand to add some more affordable housing, they are almost always turned down.

Until the mindset about the growth of San Francisco changes, it is going to be hard to see any real changes.

In the meantime, these people who want the city to stay the same and not grow are fine with paying these astronomical numbers to own and live in San Francisco.

 

8. Preserving Character

 

San Francisco is expensive to live in because of the fact that they try to preserve the character of the city.

It is supposed to be a large city with a small-town feel, and many regulations and building codes are put into place to make sure of this.

These, of course, lead to increased costs.

There are also many people who enjoy this type of lifestyle and mindset, and they will move to the San Francisco area, regardless of the cost.

If you are interested in history, character, and culture, San Francisco can be a great place to live.

Unfortunately, the money you will pay to live there is incredibly high.

There are plenty of other areas across the country that can give you similar benefits for a lower price.

 

9. Access to Entertainment

 

One of the things that make people move to an area is entertainment.

They want to be entertained by the local events, eateries, and museums that they can visit.

If there is access to a good amount of entertainment, you can bet that an area is going to be more expensive.

San Francisco has entertainment for both visitors and residents, and it is one of the things that keeps the cost of living so high.

The San Francisco Museum of Modern Art, The Walt Disney Family Museum, the Entwined Lighted Forest, and the Palace of Fine Arts are all located in the San Francisco area.

Essentially, you are always going to be able to find something to do.

Not to mention the fact that the state of California overall has access to hundreds of miles of coastline, wineries, and even Disneyland.

Certainly, you will have more than enough to do in the San Francisco area.

People enjoy the fact that there is also plenty of outdoor entertainment and outdoor seating.

With the perfect climate, these activities tend to be very well received.

Should you decide that San Francisco is a good spot for you, be prepared to be busy with all that there is to do.

 

10. Expensive Labor

 

Last but certainly not least is the fact that in San Francisco, labor is expensive.

As you can imagine, if the cost of living is so high, how are labor workers expected to afford to live in the San Francisco area?

Chances are many of them are not able to afford it and need to commute in.

These commute times and costs are going to add to the overall amount of money that the labor worker has to make.

You will find that jobs that would typically pay minimum wage will need to have higher salaries for people to be able to afford to take them.

When labor is more costly, everything will increase in price, and from the food you purchase to the homes you buy, prices go way up when workers are paid more.

Most businesses will tell you that labor costs are the highest costs that they have.

 

Conclusion

By now, the pricing for the San Francisco area should make a bit more sense to you.

Although there is not much that we will be able to do to lower these prices, it helps to understand where they come from.

If you are planning a move to San Francisco, make sure you use a cost-of-living calculator before the move.

This will give you an idea of how much it will cost to live in a certain location and whether or not you can truly afford it.

Remember that, even though a salary looks high, it may not get you very far in San Francisco.