The reason for the high cost of living in SF, Manhattan (where I live) and other cities is caused by politically induced market scarcity (also called economic rent by economists) through land use regulations in zoning that artificially regulates housing density to favor wealthy landlords so that rents and housing costs increase.
To make housing more affording, deregulate the zoning ordinances which artificially constrain housing supply.
To make housing more affording, deregulate the zoning ordinances which artificially constrain housing supply.
This article in today's NY Times is about finding the only apartment less than $600K in the West Village ($595K for 408 sq feet) http://www.nytimes.com/2013/07/09/nyregion/amid-housing-scar...
The issue is simply politics and nothing more.