San Rafael Keeps Approving Apartments. Why Are So Few Breaking Ground?

"Substantial reduction in market rents, which only now have returned to 2019 levels."

Willis Polite Jr. of Seagate Properties included that line in a letter to the City of San Rafael. He was explaining why a 120-apartment building at 703 Third St., approved in 2019, still had not started construction. The Marin Independent Journal reported that the letter also cited rising interest rates, tighter construction financing, pandemic delays and higher construction costs, and concluded that the project had been "economically unfeasible to date." In February 2025 a city zoning administrator granted the project another two-year extension. That was its third round of extra time.

That letter explains San Rafael's apartment market better than any headline unit count. If you're weighing an existing building in town, you've seen the proposals pile up: Safeway's site on B Street, a United Markets parcel on Third Street, an eight-story building on E Street, a downtown tower plan. The natural reading is that a wave of new competition is coming. The city's own numbers point somewhere else. Approvals are piling up, construction isn't, and the reason is rent.

The Number Behind the Headlines

The Marin IJ counted 368 apartments under construction in San Rafael as of late June 2026, with another 1,945 approved. The second figure gets quoted. The city's annual housing report shows how little of it is moving.

San Rafael's 2025 Housing Element Annual Progress Report, presented to the City Council on March 16, 2026, tallies calendar-year 2025 activity by building type:

In 2025, 543 units in larger apartment projects received planning approval, and not one of them received a building permit. Backyard units and small projects moved from approval to permit almost one for one. The large projects stopped at the approval stage. The report gives one example: 188 units on Fifth Avenue were entitled in 2025 but had no building permit and had not started construction.

The 144 completions in 2025 came out of an earlier pipeline. The city separately noted that Aegis Living opened at 800 Mission St. in 2025 with 103 units for older adults.

Why Developers Keep Filing Anyway

If projects aren't getting built, why do new applications keep arriving? Part of the answer is what a filing actually secures.

When Mill Creek Residential proposed replacing the Safeway at 700 B St. with an eight-story, 331-apartment building, it filed a preliminary application on May 14, 2026, under Senate Bill 330. According to the Marin IJ, that filing "locked in its legal right to develop the property under current city specifications," and gave the developer 180 days to submit a full application. By that count, the full application is due around Nov. 10, 2026. A preliminary application holds a developer's place in line. It does not commit anyone to building.

The 2026 filings mostly sit at that same early stage:

• 515 Third St. Bayspring Real Estate Partners filed a preliminary application in August 2026 for 285 apartments, 24 of them affordable to low-income households. The owner of United Markets, the grocery on the site, expected to keep operating for at least a couple more years.
• 901 E St. Monahan Pacific Corp. filed on July 15, 2026, for 200 apartments, 16 of them very-low-income units. As of late August, detailed plans had not been submitted.
• 4th Street Market Hall and Residences. Goldstone Management Inc. cut its plan from 24 stories and 345 apartments to eight stories and 197 apartments restricted to residents 55 and older. The formal application went in on Oct. 5, and the plan was still under city review in late October.

Approvals continued at City Hall too. The Planning Commission approved 238 rentals at 4040 Civic Center Drive and a 17-story, 200-apartment tower at 700 Irwin St. In April 2026 it approved 555 Northgate Drive, where AMG Land Development plans 191 affordable apartments plus two manager units. None of these announcements came with a construction start date.

What Stalled Projects Have in Common

The projects that have stalled show where the economics break. The pattern runs back several years.

At 703 Third St., Seagate's letter laid out the reasons: interest rates, financing, costs and rents. The company said it was working with an international partner able to fund construction internally, which would bypass the construction-loan market altogether.

At 1100 Los Gamos Drive, a previously approved 192-unit market-rate project stalled after its lender, First Republic Bank, failed in May 2023. In August 2026 Community Development Partners filed a preliminary application for a redesigned 192-unit building with 190 affordable units and two manager units, funded through layered tax credits and gap financing. The unit count stayed the same. The product changed, from market-rate apartments to subsidized ones that don't compete for the same renters as a typical older building.

Northgate Town Square's 1,422 homes were approved in December 2024 as a two-phase redevelopment. A May 2025 Marin IJ report described the plan as an overhaul of the Northgate mall in Terra Linda over 20 years. Even on the developer's own schedule, most of that supply is a decade or more away.

When this pattern was taking shape in May 2025, Community Development Director Micah Hinkle told the Marin IJ that entitled projects are market-driven. The city can approve a building. It can't make one pencil.

The Market-Rate Building That Is Actually Rising

Mill Creek's Modera San Rafael at 930 Irwin St. is the clearest exception. In a Jan. 29, 2026 announcement, Mill Creek said construction was underway on the 210-home project, which first broke ground in October. The developer calls it a "top-of-market" option with studios through three-bedrooms and expects first move-ins in spring 2028.

For an existing-building owner, this is the comparison that matters. The new market-rate supply verified to be under construction amounts to one building, aimed at the top of the market, opening about a year and a half from now. A 1960s or 1970s walk-up competes with Modera only indirectly, through renters who might trade up.

What This Means When You Underwrite an Older Building

Put the pieces together and the risk looks different from the headlines. Over the next 18 months or so, new supply is unlikely to undercut rents at older San Rafael buildings much, because so little of it is under construction. The bigger question is the one Seagate raised: are rents high enough to keep rising?

Tom Monahan of Monahan Pacific put San Rafael's vacancy at about 3% to 4% in late August 2026 Marin IJ coverage. That's his estimate, not a published survey. HUD's fiscal 2027 Fair Market Rents took effect Oct. 1, 2026. They set $3,003 for a one-bedroom and $3,697 for a two-bedroom in the San Francisco HUD Metro FMR Area, up from $2,977 and $3,604 in fiscal 2026. That area combines Marin with San Francisco and San Mateo counties, so it works as a regional reference point. It isn't a San Rafael rent comp.

In practice, that leads to a few underwriting questions:

1. Is the pro forma pricing in a supply threat that isn't funded yet? A rent forecast that discounts for "thousands of units coming downtown" should separate the 368 units under construction from the approved total.
2. Does the rent-growth assumption clear the level developers say they need? If rents aren't high enough to fund new construction, they also cap how quickly an older building's rents can climb. The same number limits both.
3. Which approved projects could move first? Watch for building permits on 4040 Civic Center, 700 Irwin and the Fifth Avenue entitlement, and for Seagate's extension on 703 Third St., which runs into early 2027.
4. When does Modera lease up? Spring 2028 marks the first real test of how top-of-market rents compare with the rest of town.

Rules on tenancies are also being revised. A Sept. 22, 2026 city staff report notes that the Canal Opportunity Zone urgency ordinance expires on Dec. 31, 2026. The same report recommends changes to citywide eviction and relocation rules, which were still going through stakeholder feedback before any City Council action. This post is general information, not legal or financial advice. Confirm how any ordinance or development rule applies to a specific property with an attorney or another qualified professional.

If you're pricing a San Rafael apartment building and want to test its rent assumptions against what is actually permitted, under construction and leasing, Mershad Rezayati can walk through the rent roll, the expense picture and the nearby pipeline with you, project by project. Get in Touch.