This is absolutely incorrect. Pricing is based on what people will pay, not development costs. Developers have high loan costs, and can not afford to let units sit on the table simply because they'd be "losing money" when measured against a sunk cost. It is very common for developers to lose money by selling units under cost in a down market. While there may be some resistance to pricing under cost, developers are not idiots and understand that investment made is already made.

Further, any truth in your statement would argue against rent control. If owners could rent at discounted rates to fill their units, then raise rent to market, everyone would be better off. With rent control (in SF new units are not rent controlled) owners are incentivized to hold out for a higher initial rent.