The 1960s Apartment Building Boom in the San Francisco Bay Area

Written By Alexander Wall

After spending over 10 years touring apartment buildings in the San Francisco Bay Area, one of the questions that has always nagged at me is what was so special about the 1960’s.  

Why did seemingly every apartment building built in the region, outside of the city of San Francisco, get constructed during that decade?

Below we explore the legislative, economic, and political landscape of this time period, and try to ascertain what would need to happen to create a similar environment again.

  • Population Growth

    • From 1950 to 1960 the Bay Area added 800k people increasing the population from 2.7 million to 3.5 million (29.6% increase)

    • This trend continued in the early 1960’s with 79k people per year being added to the local population, 59% of which were from net in-migration

    • By 1970 the population had reached 4.5 million people (66.7% increase over 1950 levels)

    • The 50’s were marked by more single family home construction.  With available land diminishing in the 60’s developers shifted to multifamily projects to accommodate the growing population within the limited urban and suburban space.

  • Zoning Laws, Land Use Policy, and Building Codes

    • In the 1960’s large parts of cities like San Francisco, Oakland, and San Jose had not yet imposed height limits, or strict density controls.

    • According to historian Richard Walker, 2-3 story apartment buildings (often built atop carports) were popular in Los Angeles at the time and were imitated by their neighbors to the north.

    • The priorities of the 1960s included building housing for growth and urban renewal programs and tearing down old structures to make way for new apartments and civic projects.

    • The advent of the 1968 Fair Housing Act resulted in some unfortunate decisions made by neighborhoods beginning the process of down-zoning, heavily prioritizing single family home uses, or outright banning multifamily development all together.  

    • Petaluma in the North Bay in 1972 was one of the first municipalities in the country to cap new housing development by law to 500 units approved per year (½ the prior year’s output).

    • New building codes and environmental regulations in the 1970’s increased construction costs and slowed development.  

    • On the building code side, seismic standards were tightened after the 1971 Sylmar earthquake and energy insulation requirements were imposed during the energy crisis.  

    • More specifically on the environmental regulation side, the California Environmental Quality Act (CEQA) of 1970, which passed in the wake of the 1969 Santa Barbara Oil Spill, layered in mandated extensive environmental impact reviews for new construction adding years of delay and expense for developers.

  • Construction Materials, Techniques, and Costs

    • In the 1960’s builders benefited from cheap lumber (especially redwood harvested from Northern CA forests).  During the 1950’s over 1 billion board feet of redwood lumber was being produced annually which increased throughout the 60’s.

    • This local supply of quality lumber made it economically feasible to construct the wood frame low rise apartments typical of the era.  Indeed, the “soft-story” apartment design - wooden upper floors over an open parking level was ubiquitous to the time period.  It was a cheap way to provide parking and housing - and at the time it met building codes.

    • Mass production and standardized designs in the 1960’s also helped cut costs.

    • The construction workforce was bolstered by returning veterans and migrants, and real wages had not yet been eroded by 1970’s inflation.  All these factors meant that per unit construction costs in the 1960’s were low enough to make large apartment buildings profitable without needing extraordinary “luxury” rents.

    • The 70’s were marred with high inflation coupled with the Oil Shocks of 1973 and 1979.  The combination of which drove up energy costs, transportation costs, the cost of operating construction equipment, and building material prices.  Additionally, global inflation went from the low single digits in the early 1960’s to over 10% annually by the late 1970’s which affected all key construction inputs (lumber, steel, concrete, labor).

    • The 1970’s gave rise to the advent of regulations around redwood logging (i.e. the creation of Redwood National Park in 1968) and old growth redwood was replaced with more expensive engineered wood products, often at a higher cost.

  • Capital Markets and Financing Conditions

    • Throughout most of the 1950’s and early 1960’s interest rates were moderate by historical standards.  The mid 1960’s were defined by 30-year fixed mortgages hovering in the 5-6% range, which only increased to 7.5% by 1971, but didn’t truly become untenable until 1979 when the average 30-year mortgage surpassed 11%.

    • Surprisingly I think the takeaway of this section is that the other categories were much more damaging to apartment construction than interest rates.  True orders of magnitude level shifts didn’t occur to the capital markets environment until the late 1970s.

  • Housing Policy Shifts at the Federal, State, and Local Levels

    • Federal policy in the 1960s actively encouraged apartment development through new subsidy programs and financing mechanisms. 

    • The Dept of Housing and Urban Development (HUD) was created in 1965 

    • HUD and Congress rolled out programs like Section 221(d)(3) Below Market Interest Rate (BMIR) loans (introduced 1961) and Section 236 (1968) which provided subsidized financing for private developers to build affordable apartments​.  These programs were quite successful in spurring construction: nationwide, roughly 700,000 affordable rental units were built through Section 221(d)(3) and 236 in the late 1960s and early 1970s​

    • By the 1970s, however, federal housing policy shifted gears. The late ’60s had also seen the passage of the Fair Housing Act (1968), addressing discrimination, but it was the early ’70s when a dramatic change occurred: in 1973, President Nixon declared a moratorium on most new federal housing construction programs, halting initiatives like 221(d)(3) and 236. Instead, the emphasis moved to housing allowances and later the Section 8 rent subsidy program (enacted in the Housing and Community Development Act of 1974)​.  The new philosophy was to subsidize tenants (through vouchers) rather than building new units. Consequently, the direct federal investment in apartment construction dropped sharply after the early 1970s.

In short, the 1960s stand out as the decade of dense development, when developers, government, and the public were relatively aligned in adding housing – especially apartments – to accommodate growth. The 1950s built the suburbs and some apartments, and the 1970s mostly built barriers (literal and figurative) to new housing. This historical context is crucial as the Bay Area today wrestles with a housing shortage and looks back to the mid-20th century output as something of a high-water mark.

Understanding the unique alignment of forces in the 1960s – a period when the Bay Area built apartments at a pace never since repeated – sheds light on today’s challenges. It took strong population pressures, public policies that incentivized construction, economic tailwinds, and a cultural acceptance of growth to produce the apartment boom of the 1960s. Recreating even a portion of that alignment will be key if the Bay Area hopes to address its current housing needs without the advantage of cheap land and laissez-faire zoning. The history shows that when growth and policy were in sync, the region was capable of adding tens of thousands of homes – and the skyline of aging 1960s apartments is the enduring evidence of that productive yet fleeting boom.

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Alexander Wall
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