Housing prices on the SF peninsula once were in line with the rest of the country. Then came anti-development fervor, pushed in large part by existing homeowners who benefited from a rise in demand coupled by fixed supply.
That's one reason why, even though I have enough land to build a small guest cottage that I could then rent out on the SF peninsula, my local government makes it cost-prohibitive or impossible to do (can't cut down trees, can't disturb natural habitat, can't build within 40' of a stream, etc.). That's also why Facebook's massive new campus logically should be surrounded by high-density housing instead of ranch homes on quarter-acre lots, and isn't, and why no housing can be built within walking distance of the Googleplex in MV.
Thomas Sowell, an economist at Stanford's Hoover Institution, wrote about this back in April:
http://www.dallasnews.com/opinion/latest-columns/20140423-op... "There are people who claim that astronomical housing prices in places like Palo Alto and San Francisco are due to a scarcity of land. But there is enough vacant land (open space) on the other side of the Interstate 280 freeway that goes past Palo Alto to build another Palo Alto or two — except for laws and policies that make it impossible. As in San Francisco and other parts of the country where housing prices skyrocketed after building homes was prohibited or severely restricted, this began in Palo Alto in the 1970s. Housing prices in Palo Alto nearly quadrupled during that decade. This was not from expensive houses being built, because not a single new house was built in Palo Alto in the 1970s. The same old houses simply shot up in price. That is part of the unacknowledged cost of open space and just part of the high cost of liberalism."