Where did starter homes go in San Mateo County?

But in a county known for its suburban atmosphere, brand-new single-family development is hardly existent by comparison, putting more pressure on the market. And the pressure will likely keep building as many tenants in the newly-built apartment buildings eventually seek out homes when they expand their families and earn more.

Between September 2019 to September 2025, the price of single-family residential homes in the county increased by 14%, compared to a 3% decrease in the condominium market over the same time period, according to Redfin data.

The result is that the developers who do build single-family homes in the area are doing so in the only way that is considered financially feasible — purchasing older homes, often no more than three bedrooms, demolishing them and building massive houses with up to five or six bedrooms. The homes usually sell in off-market transactions.

In many instances, the new houses are situated in neighborhoods that have traditionally comprised smaller homes, surfacing concern from some neighbors. For longtime Redwood City residents like Diana Reddy, a former councilmember, such developers, such as Thomas James, accelerate the displacement of those who may have otherwise been able to purchase a “starter home” — a smaller, modest house — but not nearly enough for a brand-new, 5,000-square-foot home.

“A two-salary family could have afforded that old home, and then over time they could remodel it themselves,” Reddy said. “But there is no way they could afford the monster house that replaced it at three times the original price.”

Several years ago, during her time on the council, the council discussed an ordinance that reduced the buildable footprint on a property, which she said was in large part to temper the effect of the large homes being built.

“We were trying to prevent developers like Thomas James from doing what they were doing, because we were getting so many complaints that they were practically building up to the sidewalk, so we were trying to at least reduce the size in some capacity,” Reddy said.

Meeting market demand

Adam Kates, division president for Northern California at Thomas James, said since 2019, the company has built about 50 to 60 homes each year from South Bay to San Mateo County. On the Peninsula, its presence is largely concentrated in Redwood City, Menlo Park, San Mateo and Burlingame.

“We realize we’re the guests in these neighborhoods, and we look to do repeat business in all those places, so it’s really important to us to maintain positive public relations and be part of the community fabric,” Kates said. “There are plenty of people doing very well in Silicon Valley, so we are providing housing for a segment of the market. It’s not particularly entry-level housing, but it’s housing that is very much in demand.”

Over half of Thomas James’ homes have accessory dwelling units, which Kates said caters to a heightened desire for multigenerational housing. ADU production has also been heavily incentivized at the state and local level over the last several years. For property owners who are interested in rebuilding a home, the company has a one-stop-shop approach, which eliminates the need for customers to go through complicated permitting and regulatory processes and hire architects and contractors. In about 75% of cases, however, it purchases the home from former owners, rebuilds and then sells to new buyers.

“I normally see it happen where it’ll be a probate sale or it’ll be a house that needs a decent amount of work and then Thomas James will work with the agent that is representing that home to purchase the property and then you’ll notice that that agent often sells the bigger property on the back end,” Mitch Speigle, Sequoia Real Estate Realtor, said.

‘Turbocharging inaccessibility’

Redwood City resident Tania Solé said such developers are turbocharging inaccessibility for the vast majority of area residents.

“Yes, there is a demand for them, but the reality is that the socioeconomic group that is buying those homes, for them, it’s their second or third home,” she said. “So we’re not solving the affordable housing problem. In fact, we’re exacerbating affordable housing problems.”

But without the construction of more brand-new single-family homes and neighborhoods, supply won’t keep up with demand, and only the top earners may be able to afford the homes.

Between the cost of land, construction, utilities, impact and permitting fees, Speigle said it only makes financial sense for developers to build a large home or multiunit development with higher density.

“It is basically impossible to build a starter home,” he said. “You can’t do a three-bedroom, two-bathroom with all those costs. The only way they pencil is for properties like Thomas James homes. ... I haven’t seen many Thomas James homes that are beneath five bedrooms, three bathrooms.”

Townhomes fit the bill

It’s possible more families will start transitioning from apartment to townhomes, rather than single-family homes as was previously the case. Townhomes are generally more financially viable for developers, and while they don’t offer the same amount of property as a house, they often have a similar number of bedrooms and bathrooms as an older home — much of which is older housing stock between the 1940s to 1960s. South San Francisco recently approved two separate townhome developments, totaling over 75 townhomes, and San Mateo has received multiple development applications this year that would add hundreds of townhomes to the city — though it will take years for all the plans to come to fruition.

While Thomas James homes may be expensive, they still satisfy a need in the area, Speigle said.

“You look at a house in San Carlos that’s $5 million, that looks like a house that should be $5 million. You look at a house that is $2 million in Palo Alto, you probably couldn’t even move into it,” Speigle said. “So we’re seeing that there is a split dynamic between the starter home market, from a supply perspective, and then the more luxury home, where we do have that buyer pool that wants to move into that.”

Would tax credits help?

Significantly upping new single-family housing stock in the next several years is unlikely, but Foster City Councilmember Patrick Sullivan, also a Realtor, said single-family housing supply could still increase with stronger incentives for seniors to sell their homes or tax credits to spur other types of housing other than apartment buildings.

“One way to keep the prices reasonable is maybe have state and federal tax credits so that we can build two-bedroom, two-bath and for sale,” Sullivan said. “If we don’t continue to do that, then more people can’t afford it and they’ll move out of the area.”

Still, some residents remain uneasy with the fact that massive homes are popping up in their once-modest neighborhoods, and other residents don’t ever have a chance to buy the home.

“I wish we had more of a housing stock for regular families,” Reddy said.

Speigle said it’s understandable that longtime community members raise their eyebrows over the new homes and an apparent lack of transparency.

“Is it predatory? No,” he said. “Can it feel unfair to retail buyers? Absolutely.”