The foundation is structurally fine (home inspection passed, earthquake retrofitters didn't seem bothered by it even though in at least one spot a installing foundation bolt blew through the concrete), but it's noticeably disintegrating. I presume the previous owner attempted a parge coat on the internal walls to hide this. My motives are both esthetic and practical. Practical because, theoretically, a proper parge coat can act as a sacrificial layer, slowing the disintegration. Whether a parge coat would actually extend the useful life of the foundation as practical matter is something only someone with real in-depth experience and knowledge of SF construction would be able to tell me. I just don't know how to find such a person.
If you tour SF homes[1] you'll notice that most have remodeled the garage to include one or more bedrooms. The strip foundations are trapezoidal--slightly wider than the sill plate at the top (which is about a 1 or 2 feet above ground), expanding to much larger as it goes down 3 or 4 feet under the ground. Older remodels often parge and paint the foundation or box it behind wood molding; newer ones might actually hide it behind the refinished walls. But because of the awkward dimensions, whatever they do you can easily spot it if you pay attention.
What I find crazy about this is that they're enclosing foundations which are (or will be) nearing their useful life. (SF homes are technically detached, but usually only have a few inches of gap at the most so the side walls are inaccessible.) Moreover, the refinishing is probably wrong. Either it'll pop off, or if they used a chemical binder they're (theoretically) accelerating the disintegration (the moisture and salts will create pressure behind the binder, pulling on the face of the older concrete). Likewise for impermeable[2] paint. Yet you won't even notice any of this because it'll be completely hidden.
I'm happy that the home we found was (all things considered) both relatively well-maintained and unmolested. The garage was never refinished except for a parking slab poured circa 1970s. I'd like to keep it this way.
[1] Which typically sit over a garage with a parking slab poured decades (or even a century) after the foundation. The garages were serendipitous. Most of the homes were built before cars were so common; what are now invariably garages were unfinished first floors intended to be used and finished (if at all) however the owner wanted--storage, workshop, in-law, extra living space, etc. When cars exploded most were turned into garages. Now in-laws and extra bedrooms are becoming much more common, either replacing the garage or reducing it to a size that would barely fit a lawn mower. Occasionally you'll find the odd house where there's still just sand at the first floor.
[2] Permeability of paint is a whole 'nother can of worms. Like the foundation, the typical stucco finishes on homes on the west side of SF were designed to be semi-permeable. The external walls need to breath. But idiot painters (including whoever the previous homeowner hired) commonly use a low-permeability latex paint. (Latex comes in all kinds.) Moisture accumulates behind the stucco and the paint quickly bubbles and peels. In some cases (like ours) it can be bad enough to cause moisture damage inside the house because vapor barriers were either non-existent or primitive (our house was wrapped in tar paper), and in any event both the inner and outer walls were designed to be semi-permeable as compared to modern construction.
Of course, ask most painters about these permeability issues and many or most wouldn't really understand what you were talking about, even in SF. Contractors who do a good job often do so because they've inherited a workable process (proper types of paint, etc), not because they understand why. But often times you still need that deeper knowledge to be able to debug or solve certain issues. Good luck finding somebody capable of doing that. I think that, like with modern network security, the saving grace is that most people end up dodging bullets by replacing whole systems before the consequences are realized.