What Real Estate Agents WON'T Tell You About Living in SF’s Most Expensive Neighborhoods
In this solo video, lawyer‑turned‑real‑estate agent Austin Klar warns prospective buyers of San Francisco’s elite neighborhoods about hidden costs, restrictive regulations, and emerging market trends that can undermine the appeal of luxury homes. He explains the three‑tier historic designation system (Category A, B, C) and how a Category A status can severely limit exterior alterations, roof decks, window replacements, and garage expansions, turning seemingly simple renovations into costly, custom projects. Klar then details the dangers of unwarranted or unpermitted spaces—attics, basements, ADUs, and other built‑out areas that lack proper permits—highlighting structural, safety, insurance, and liability risks, especially for owners who intend to rent. He outlines the city’s aggressive housing mandate, noting that multi‑unit properties are unlikely to be merged into single‑family homes and that major expansions often require the creation of additional units, which can increase project costs and depress long‑term resale value. The video also points out the perpetual construction activity in affluent districts such as Billionaires Row, Pacific Heights, and Russian Hill, which brings noise, street closures, and dust, diminishing the expected serenity of these neighborhoods. Finally, Klar warns that these prestigious areas attract heavy tourist and foot‑traffic due to iconic landmarks and walking tours, a trend that is accelerating as tourism rebounds. Throughout, he urges buyers to conduct thorough due diligence—reviewing permit histories, consulting architects, contractors, and permit consultants—and offers his own services as a resource. The video concludes with a call to subscribe for more San Francisco real‑estate content and a plug for a related video on “old money” neighborhoods.
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San Francisco's elite neighborhoods are supposed to be the dream. Incredible views, iconic architecture, peaceful streets, and the prestige that comes with owning in an exclusive part of the city. But beneath the glam are a number of lesser-known risks and challenges that a lot of buyers and even some agents don't focus on enough in the diligence process that could wreck your dreams and ruin what you thought was the perfect home. This is Austin Klar, your lawyer turned real estate agent in San Francisco and Marin County. And in this video, I'm breaking down some hidden costs, absurd rules, and recent trends that are drastically impacting the real estate market in San Francisco right now. Now, obstacles owners face when renovating historic properties, risks associated with unwarranted or unpermitted spaces, the city's push to create more units, and other realities of living in some of San Francisco's most exclusive enclaves. Let's get right to it and start with the first bogey that I think does not get enough attention, something that you absolutely need to diligence before making an offer on a property, and it's the property's historic designation. There are hundreds, if not thousands, of homes in San Francisco either located in neighborhoods with rich architectural heritage, or themselves have been deemed worthy of historic designation because of their age, the architect, or some other characteristic the city has deemed worthy of preservation. But not all historic designations are created equal. There are 3 different levels of historic designation in the city. Category A Historic means that the building has been designated an historic resource either because the property itself warrants that designation, or because it's located in a district that warrants that designation or has that designation. Category B means that the the historic status of the property is unknown. So it might be, it might not be. And Category C means definitively there's been a conclusion that the property is not an historic resource. The majority of properties in the city are in that second category, an unknown designation. So they're not officially designated historic, which is great, but there is risk that even for a Category B property, if you are proposing a certain level of renovation, the city will actually undertake an historic resource review and could redesignate a Category B property into a Category A property, thereby triggering whole bunch of new regulations that you might not otherwise have been aware of. So just because the property you're looking at is currently a Category B doesn't mean it's going to stay a Category B. It could change and be elevated to that Category A historic status. Okay, so like, why do we care? What is so special or different about Category A? The point of these rules is to preserve designated landmarks and keep structures in conformity with their historic districts. So they can be quite restrictive. And what does that mean practically? One of the biggest restrictions to be aware of is that it is very difficult, if not it's not impossible to make changes to the exterior of your property that are visible from the public street. So what does that mean from a practical standpoint? Let's say, for example, you bought a 1,700-square-foot house. You are currently a family of 3, and you want to grow your family now or within the next couple of years at least. And you love your neighborhood, you love where you live, you don't want to leave, so you need to make your house bigger. Height limit for the neighborhood is 40 feet. So in theory, you know, you have a single-story home or a single-story home and a basement. You could easily add one, maybe even two stories to your existing -facing property. Then you could have your dream home and you could stay in the neighborhood you love, and you wouldn't have to go, you know, be on the open market and compete against all these other buyers for a potentially even bigger house. Except you have an historical A property, which means the stories that you add to the house can't be visible from the street. What does that mean practically? It means that the stories you add to your house have to be set back far enough from the front-facing elements and low enough such that somebody standing on the public street isn't going to be able to see those new stories. So you might think the house can support several thousand more square feet based on the lot size, based on how much, you know, you're allowed to build up based on the height limit. But in actuality, because of that designation, you're much more limited in the new square footage that you're allowed to add to the existing space. Or let's say your house is already the size that you need, but you just want more outdoor space. You want to add a roof deck so that you could take advantage of amazing views over the neighboring houses. That'll definitely add value to the property, but the roof deck has to be set back from anywhere that is visible from the public street such that somebody standing on the street isn't going to be able to see it. So you may end up having a much smaller rooftop than you otherwise thought you might be able to have. Or maybe you have century-old windows with really intricate stained glass and mullions that you want to replace with double-pane windows for energy efficiency and noise. Well, if you're a Historic A, you'll have to replace them with new windows that look exactly like the old ones, which would be a very expensive custom job. Or maybe you're looking at a house with a tiny garage opening, but you drive a Range Rover and you want to widen it a little bit to make getting in and out easier. Well, you might not be able to do that because it would change how the front facade looks. These are just some examples of the limitations that can apply because of one regulation in the planning code relating to Historical A properties. There are many other design standards and restrictions that could apply. It'll vary depending on the property type and the neighborhood. So it's important that if you are buying a house with the potential to do some serious renovations, you understand the historic designation and what the implications of that designation are. And make sure you talk to an architect, talk to a contractor, talk to a permit consultant. There are a ton of resources available to you to help you diligence that. If you ever need one of those contacts or are thinking about buying a home in the city and have questions about those issues or any other issues that I'm going to talk about later in this video, reach out to me. I was a lawyer at one of the biggest law firms in the world before getting into real estate, and I've helped numerous people relocate here from all over the country. I'd be happy to be a resource for you. I'll put my contact info in the description below. Reach out anytime. And if you like videos about San Francisco real estate, lifestyle, history, current events, or new developments, subscribe to my channel because I make videos about that stuff every single week. Now back to the next big item that you need to be on the lookout for, and it's unwarranted or unpermitted spaces. There are thousands of properties across the city with built-out attics, built-out basements, in-law units, bonus rooms, sunrooms, roof decks, or patios that have been created without the proper permits or zoning authorization. Why does that matter? Well, when you build out space with proper permits, there are steps in place, checks in place to make sure that it's done properly. If you're converting a giant basement or garage level into an additional like studio space, an ADU, there's going to be an engineer, an architect, there's gonna be electrical plans and plumbing plans, a lot of different plans to make sure that every facet of what you're building complies with code. And beyond just compliance on paper, there will be interim and a final inspection along the way to make sure that all the different steps have been done properly before walls are closed up, looking at the electrical, looking at the plumbing, looking at the structural, making sure everything was done in accordance to the plans that were approved in accordance with code. So you can imagine all the things that might go wrong with unpermitted spaces. There's no way to know anything was done in accordance with applicable code when there's not a permit in place. Maybe it was, maybe it wasn't. But as a buyer, you really have no way of knowing that. And that means you're buying risk, risk of structural issues or electrical, plumbing, fire safety, whatever it might be. And that's even more of a risk if you're buying a multi-unit property with the intent of renting out one of those potentially illegal units. Imagine you're renting out a space and a fire or a flood happens in that unit and it's discovered that it was caused by something that was installed without the proper permits. Imagine the liability you would face as an owner as a result of that. Imagine the fight that you'd be buying with your insurance company trying to get coverage for something caused by unpermitted space. It doesn't matter if it was the prior owner or 7 prior owners ago that built that. As the current owner, you're on the hook. Another risk presents itself when, let's say, you bought a house that had renovations that were done without permits. The house is now a bit dated. You've been living there for a while and you want to go and make renovations renovations potentially to other areas in the house. Well, when you get inspectors over to the property to examine the permitted work that's being done, they might notice unpermitted work that was previously done, and they might make you legalize that space before finally signing off on all these permits. And that could end up costing you tens or even hundreds of thousands of dollars. And for all these reasons, buyers who see unpermitted space might be scared off if you have that in your house. So how do you guard against it? You check the permit history, and if you have open questions, you dig in with the building department. Every single residential for sale in San Francisco will have a permit history provided. If there's an open question about the legality of space, you're not seeing any notation for its addition on the permit history, or permits might have been issued but never finalized, assume, you know, just to be conservative, that the space is unwarranted and understand the risks associated with that. The next risk or obstacle that you need to be aware of, and not a lot of people are aware of this, is how San Francisco's push for more units impacts your future plans with respect to your property. There are a lot of single-family homes in San Francisco that are really 2 units, a main unit and a lower level ADU, for example, or the building is a true duplex where both units are similar sized. And a lot of people don't need an ADU. They don't want 2 kitchens in their house. They don't want one level of the house to have separate access for the main house, or they just don't want a duplex and would rather have a single family, like a true single family, but they love the location. So are thinking of going after that property. Well, as we all know, San Francisco is in a housing crisis right now. We have way too many people pursuing too few homes that are available. We have a state housing mandate requires the city to build over 80,000 homes by 2031, and we are woefully behind on satisfying that mandate. There is no way the city is letting someone take what is legally two units and convert them into one. There are rules in the code that technically allow for the potential of unit merger, but realistically, they are dependent on a lot of different factors. And it's largely discretionary how those things are interpreted and applied. And the likelihood that you're going to get unit merger in this environment is incredibly low, if not zero. So that means if If you are buying something that is legally multi-unit housing, don't expect to be able to convert it into one unit. Similarly, there's a push from the city for homes undergoing major renovations that would create significant expansions to existing structures to do that expansion in a way that creates more units. So your site might support expansion of a 2,500-square-foot home into a 6,000-square-foot home, but getting through the planning process for an approval like that might require your agreement to create a second unit as part of that massive expansion. There's a lot of give and take in the planning process when it comes to those major projects. So you could expect to have to make some sacrifices along the way to get your plans through it and approved. Bottom line, if one day you might do a major renovation, you may face the necessity, or at least very strong encouragement, to convert your space into multi-unit housing or to prepare for some sort of subdivision. That can raise the cost of a project. It can complicate and lengthen a project. And ultimately, because multifamily properties tend to be worth less than single-family properties that are the same size, it could devalue your property long-term. So it's definitely something you need to be aware of. The next bogey to flag is that especially in San Francisco's most exclusive neighborhoods, like on Billionaires Row and Presidio Heights and Seacliff, Russian Hill, those kinds of neighborhoods, you should expect constant construction. Even if you have no intention of ever remodeling, maybe you bought a turnkey, like freshly renovated home, there is constant construction in these neighborhoods. And Billionaires Row and Pacific Heights is a great example. This is like the absolute peak of San Francisco homeownership, owning a mansion on the Gold Coast, the iconic north-facing views, massive lots, the giant courtyards, the cachet that comes with being on the most expensive street in the city. But you drive down that street right now, you will find homes on every single block under major renovation. Even Laurene Powell Jobs, who bought a 17,000+ square foot home for over $70 million that was in wonderful condition, one of the most beautiful houses ever sold in San Francisco, she's renovating. Even if a home is turnkey, everybody wants their home to look exactly how they want their home to look, and they have the money to do those projects, so they do them. So there is constant construction, there is constant noise, there are street closures and, you know, driving delays, there's scaffolding, there's dust, all the things attendant with major construction projects. And that's really a risk anywhere in the city. It's not really within your control, no matter what neighborhood you live in. You could buy a home and the very next day your neighbor who wasn't thinking of doing a renovation could decide now it's time to do a renovation. There's really nothing you can do about it, but I think you find it more often in these affluent areas areas where people have more money, they're able to go the distance on their renovations, even if their house is, you know, perfect from an objective standpoint. So beware that, you know, what you are expecting to buy into, a very serene, peaceful environment, might actually not be as serene and peaceful as you think. How do you guard against that? Well, at a minimum, you can check permit records for your neighbors, see if anyone's planning to do anything major. So at least you're prepared and know what you're getting into. Maybe at least that buys you some potential time before the next construction project. You know that something's coming in the next 1-year, 2-year, whatever it might be versus like the next day. But really at the end of the day, anybody can change their mind on a dime, like I said, and decide to do a reno. So it's hard to perfectly guard against. And the last thing I want you to make sure you're paying attention to is the risk of tourists and foot traffic. And this is especially unique for some of the more affluent areas of the city. When you're buying into one of those exclusive areas, you're buying into a tourist destination. Homes on Billionaires Row near the Lion Street Steps, tourists and locals there every single day. Homes near Lombard Street. Lombard Street. Street, tourists there every single day. Homes near the Presidio, homes near Coit Tower, tourists, locals every single day. Homes near Alta Plaza Park, Lafayette Park, the Marina Green, Dolores Park, Golden Gate Park, tourists and locals will be there every single day. And it's not just homes near tourist destinations. Some neighborhoods in and of themselves are the destination. There are architectural walking tours and sightseeing tours through a ton of these neighborhoods. Pacific Heights, Presidio Heights, Russian Hill, Seacliff, St. Francis Wood, Jordan Park, all of these awesome neighborhoods in San Francisco. People are coming in and out of them constantly just to look at the houses there. And that might actually be getting worse. Tourism is actually back on the rise in San Francisco because of the improved city conditions we've seen, at least over the past couple of years. Tourism rose from 23 million in 2024 to a projected 23.5 million in 2025, and it's expected to grow to over 24 million in 2026 as more conventions are booked, which generates a lot more business travel, and as retail and events come back, bringing more leisure travelers back to the city. And our population is rising as more and more companies call people back to the office and hire people. So it might sound glamorous to live on Billionaires Row or to live next to one of those iconic parks, but you need to be prepared for tourists. You need to be prepared for foot traffic, and you need to be prepared for it to get even busier. Well, there you have it. Those are some of the risks and obstacles you might face buying even the most luxurious homes in San Francisco. If you're thinking about buying a home in San Francisco and want to better understand these risks as applied to a particular property, or you want to better understand how the changes we're seeing across the city are impacting our local real estate market, reach out to me. I've lived in the city for over 13 years, and I've helped numerous people relocate here from all over the country. If you happen to be a resource for you, I'll put my contact info in the description below. Reach out anytime. And if you like videos about San Francisco real estate, lifestyle, history, current events, or new developments, make sure to subscribe to my channel because I make videos about that stuff every single week. And before you go, if you wanna learn more about some of these ultra-luxury neighborhoods, I've got a separate video on where the old money lives in San Francisco. I'll link that in the description below as well. Go check it out. Hope you enjoyed the video and I'll see you in the next one.
