Why doesn't the San Francisco Bay Area have two-story houses?
Areas such as San Francisco Bay Area have very strict zoning laws. In fact as this source shows in San Francisco Bay Area many houses are restricted to be single family houses. The source focuses mainly on Berkeley and Oakland but discusses also the situation of the wider area.
Adding an extra story just for your own family might not be economical even if there is housing shortage. Furthermore, there might be further restrictions on any such buildings (e.g. neighbors complaining to the zoning board that second story blocks their view/sun). Lastly, the housing shortage and exorbitant housing prices in cities such as San Francisco can actually itself be attributed (among other things) to the zoning laws themselves in the first place (see for example The Impact of Zoning on Housing Affordability Edward L. Glaeser, Joseph Gyourko).