San Francisco Apartment Loans in 2026

The AI Boom and the San Francisco Apartment Market

Coming off a strong 2025, the San Francisco metro's apartment market was expected to level off in 2026. The forecast credited San Francisco's growing role in artificial intelligence and other technology with creating high-paying jobs and reinforcing renter demand, particularly downtown.

It was a cautious outlook in other respects. Job losses in 2026 were expected to be smaller than in any of the three years before, but cuts to white-collar roles were still projected to outweigh hiring in other sectors. New deliveries were set to shrink to the lowest level since 2012, with two-thirds of them opening in San Mateo and Redwood City rather than in the city. After a year of sharp tightening, vacancy was expected to drift up to 4.3% by December, which would still leave it 70 basis points under the long-term average.

For rents the forecast was steady gains, with average effective rent reaching $3,220 a month by year-end, up 3.4%.

The Forecast Versus the Rent Roll

The outlook above called for modest rent gains and vacancy near 4.3%. San Francisco ran far ahead of it. Apartment List's October 2026 report put the median across all unit sizes at $3,878, 25.7% above a year earlier; one-bedrooms ran $3,915 and two-bedrooms $4,640. The same firm's August 2026 research found vacancy in San Francisco proper down to about 2%, crediting the AI industry, whose growth has filled office buildings. RentCafe, which tracks buildings of 50 or more units, recorded an average rent of $4,027 on September 30, 2026, a 13.91% annual gain, and counts 62% of San Francisco households as renters.

For a lender the important point is that these are market figures. In a rent-controlled building the long-term tenants are not paying those numbers, so the loan is sized on the rents actually collected, and the market figures only matter for units that turn over.

San Francisco Neighborhoods and What They Rent For

Rents vary widely across a few miles here. RentCafe's September 2026 neighborhood figures range from about $2,341 in the Tenderloin to $5,773 in the Presidio, with Mission Bay at $5,299, Nob Hill at $5,055, Hayes Valley at $4,625, South of Market at $4,002, Pacific Heights at $3,963 and the Inner Mission at $3,629. An appraiser will pull comparables from the same pocket of San Francisco, so the neighborhood sets the ceiling on value as much as the building does.

The west side is a focus of the city's latest rezoning. The Family Zoning Plan adopted in December 2025 raised height limits along Geary Boulevard, Taraval Street and Judah Street and on commercial corridors such as California Street and Balboa Street, part of a plan meant to support 36,200 more housing units by 2031. Neighborhoods where we finance San Francisco buildings include:

• South of Market
• Mission District
• Noe Valley
• Marina
• Pacific Heights
• Hayes Valley
• Nob Hill
• Russian Hill
• Sunset
• Richmond
• Haight-Ashbury
• Castro
• North Beach
• Mission Bay
• Financial District
• Bernal Heights

Rent Control, Transfer Tax and Seismic Rules in San Francisco

Which buildings are covered. The city's Rent Ordinance limits increases on units whose first certificate of occupancy was issued before June 13, 1979. Newer units are exempt from the increase limits but not from the just-cause eviction rules, according to the San Francisco Rent Board. For covered units the allowable annual increase runs at 60% of the change in CPI, and the Rent Board set it at 1.6% for March 1, 2026 through February 28, 2027. Landlords may bank increases they did not take and add them to a later general increase.

Newer buildings under state law. Units outside the local ordinance generally fall under California's AB 1482 (Civil Code Section 1947.12), which allows a yearly increase of 5% plus inflation, never more than 10%. For the San Francisco area the state maximum is 8.8% for the year that began August 1, 2026. Buildings with a certificate of occupancy issued within the previous 15 years are exempt, and the statute runs until January 1, 2030. Under the state's Costa-Hawkins Act, a unit a tenant vacates voluntarily can generally be re-rented at market, which is where most of the upside in a controlled building comes from.

Reporting that affects the rent roll. Owners must file the city's Housing Inventory report by March 1 each year, and the Rent Board's notice is blunt: landlords will not receive a license to impose annual or banked increases until reporting is complete. The Rent Board fee for 2025-26 is $59 per unit, half of which may be passed to tenants. A lender will ask for proof of both.

Transfer tax and Prop 13. The San Francisco transfer tax climbs steeply with price: $7.50 per $1,000 on a sale from $1 million to $5 million, $22.50 from $5 million to $10 million, $55 from $10 million to $25 million and $60 above that, according to Chicago Title's 2026 California guide, with the seller customarily paying. Under Prop 13 the base property tax is 1% of assessed value, plus any bonds local voters approve, annual increases in assessed value are capped at 2%, and a change in ownership triggers reassessment, so a buyer's tax line resets at the purchase price.

Soft-story seismic retrofits. The mandatory program covers wood-frame buildings whose original construction permit was applied for before January 1, 1978, with five or more units and two or more stories over a basement or underfloor area with any portion above grade, about 5,000 San Francisco buildings in all. Lenders ask for evidence the retrofit was completed and signed off before they will close.

Refinancing a Rent-Controlled San Francisco Building

The refinance math on a controlled building is different from almost anywhere else in the country. Net operating income grows slowly because most tenants are capped at the annual allowable increase, so loan proceeds depend on how many units have turned over to market since the last loan and how well expenses have been held. We start with a unit-by-unit rent roll that separates controlled, market and vacant units, because that is exactly how the lender will read it.

Capital work can help, within limits. Under the Rent Board's capital improvement rules, buildings with six or more units can pass through only 50% of certified costs, capped at the greater of $30 or 10% of a tenant's base rent in any 12-month period, amortized over 7 or 10 years. Seismic work required by law is different: 100% of the cost may be passed through, over 20 years, subject to the same annual cap. If you are refinancing to fund a retrofit or a renovation, we show the lender both the cost and the passthrough the Rent Board will allow.

Agency Financing for San Francisco's Larger Buildings

Above the small-balance range, agency lenders compete hard for stabilized buildings in the city. A rent-controlled San Francisco apartment complex can qualify as long as the rent roll and the Rent Board history support the income, and the large-balance programs bring non-recourse execution, up to 80% leverage and 30-year fixed options, while HUD amortizes over an even longer schedule.

See San Francisco multifamily loans for program detail, plus our overviews of Fannie Mae and Freddie Mac lending.

San Francisco Multifamily Loan Rates
For larger balances, over $6 million

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