I don't think the earth quake risk would have significant influence on prices. They occur too infrequently to be part of the markets psyche, just like the stock market ignores the last major crash(es). But (government) planners would (should) factor it in for things like zoning and disaster planning. If the Hetch Hetchy pipes are destroyed they better have a plan for how to get enough water to all the people in the peninsula for as long as it takes to fix the pipes, for example. If you add a million people the problem (for disaster planners, not for normal people) is much bigger, and they also have to consider some major roads and Bay bridges to be unusable for some time. Those are rare black swan events, that's not part of any normal person's planning, but in those areas still happen often enough for government to have to address those questions.

There also is the issue of how many people can actually be served from Hetch Hetchy (for the peninsula) and the various other places (various rivers) for the rest of the BA. Already Hetch Hetchy is being stretched. The water levels there also depend on the California drought situation. A headline from not that long ago: "Hetch Hetchy levels a major concern for water officials" (http://www.ktvu.com/news/4607391-story)

So adding a few hundred thousand or even more people to the Bay Area doesn't seem to be such an easy proposition and "purely political" to me? The politics sure also exist, but when I follow those discussions as an interested bystander - as someone who used to live there - I always hear the arguments about politics (which are of course true) but I never see things like water even mentioned. I'm not saying I know, I'm saying I wonder that it's not even mentioned. I would happily be educated and find out that those concerns have been solved or don't exist, but I'm suspicious because nobody even mentions them. Even if politics takes care of changing laws and starting construction, is it even feasible, especially the water question? And if I remember the climate model predictions right California will have more droughts than in the past decades (https://www.washingtonpost.com/news/energy-environment/wp/20...).

Predictions by a California government agency: http://www.water.ca.gov/climatechange/

Reading just the first few paragraphs on that page shows that they expect a negative impact on just the water sources the Bay Area depends on.