San Francisco housing permits surged this summer to their highest level in months, the latest sign of renewed market momentum.

The jump was driven by 641 units authorized in June, led by two large affordable-housing projects: 425 units at 300 De Haro St. and 102 units at 1123 Sutter St.

"While it’s heartening to see an increase, it’s funny to see it described as a spike," said Jane Natoli of YIMBY Action. "While technically correct, it’s still just not enough."

Natoli said the city must permit at least four times its current pace to meet its housing needs.

Permits are a key gauge of housing supply, affordability pressures, and economic health. Before the pandemic, San Francisco averaged more than 300 units on a rolling three-month basis. It remains below that level.

San Francisco removing development obstacles

The recent spike comes as city leaders push to cut bureaucratic hurdles to ambitious housing targets, even as high-rise construction faces headwinds. Financing and construction costs have jumped, and most banks have tightened lending.

Early signs of a thaw in capital markets could help restart stalled projects, though new construction is initially forecast to cluster in suburban downtowns.

Mayor Daniel Lurie has called closing the housing gap essential to San Francisco’s postpandemic recovery. Nearly two years into the state’s regional housing cycle, the city has met just 5% of its 82,069-unit target for 2031.

Bay Area rents outpace U.S. market

Developers such as Emerald Fund are exploring policies from Manhattan designed to lower the cost of converting offices to housing. Emerald Fund chairman Oz Erickson believes the effort could bring thousands of new homes to the financial district and, over time, draw as many as 30,000 people back into the city’s core.

The city is also moving to ease development costs. The latest proposal — to waive impact fees in the Market-Octavia district — has backing from Lurie and Supervisors Matt Dorsey and Bilal Mahmood.

Meanwhile, the Bay Area rental market has turned sharply upward. In the second quarter, San Francisco posted the nation’s fastest year-over-year rent growth — 6.8%, Cushman & Wakefield reports. Vacancy fell 140 basis points to 6.2%, well below the U.S. rate of 9.2%. If momentum holds, the shift could spur more construction.