Quoting an estimated average rent of $3,200 a month for a two-bedroom in San Francisco, or $2,550 for a one-bedroom, and “using the accepted standard that you should not spend more than 30% of your income on housing,” Supervisor Alvalos notes that a household salary of $128,000 would be needed to rent the average two-bedroom, an income of $102,000 to rent an average one.
Concerned that “even most professionals cannot afford the current rents, and those who are in rent-controlled housing are feeling very vulnerable to displacement with the increased pressure on their landlords to find some way to evict them and triple their rents,” Supervisor Alvalos has prepared these questions for Mayor Ed Lee who will prepare and provide answers next week:
Are you concerned that your administration’s policies to stimulate economic activity, especially supporting the tech industry, have created one-sided development and only jobs for high-income “appsters,” and have exacerbated the already extremely limited housing market? Do you have any plans to address the increasing rents, and increasing rate of evictions and displacement of long-time San Francisco renters?
As plugged-in people know, employment in San Francisco is currently up by 20,900 workers on a year-over-year basis, and up by 48,200 since 2010, but remains 9,600 workers below a December 2000 dot-com peak.
∙ Nearly 50,000 More Employed In San Francisco Since 2010 [SocketSite]
Wow – that question frames policies to stimulate economic activity and create jobs as a problem. Sounds backassward to me.
Those who are protected by rent control should feel vulnerable because they only live a temporary bliss in Bizarro world. Sooner or later they will be targets.
Solution = build more housing
no one has a right to live in the city even if theyve been in the city for 20+ yrs. i dont think more affordable housing is the answer. it is not so bad for people to move to cheaper areas.
economic development ultimately helps the vast majority of people, even those living outside the city.
I am a supporter of rent control per se, but more inclined to support rental increases based on general cost of living increases.
My friend who owns in a co-op in NY is subsidizing residents who are still renting in his building…some who have been there for 50+ years paying cents per month. Where’s the fairness here?
I see both sides, but the greater issue is how to add more affordable units to the housing stock in general.
I would rather live in a city full of highly educated creative folks – they are fun an stimulating to talk to — than live in a city full of poorly educated folks with nothing to talk about other than sports, TV, and family life.
more housing will help — and while not enough, there is some in the pipeline which should help ease rents a bit, though probably not that much.
I know more than a few “Appsters” and none of them have a household income of $128k. I also know people in the IT and software development industries who have household incomes in that range, and they all are what we used to call “managers” or “executives”. No need to invent another neologism, John Avalos.
One alternative explanation is that “Appsters” are routinely spending more than 30% of their household income on rent.
It would be great if Avalos had actual statistically defensible survey results instead of anecdotes.
“Cents per month?” Careful there, Donald.
“I would rather live in a city full of highly educated creative folks – they are fun an stimulating to talk to — than live in a city full of poorly educated folks with nothing to talk about other than sports, TV, and family life.”
Yes Mortimer, we wouldn’t want to have to live with THOSE people, would we. Them and their poorly educated “family life.” Can’t we just ship all of them out, they are getting in the way.
“I would rather live in a city full of highly educated creative folks – they are fun an stimulating to talk to — than live in a city full of poorly educated folks with nothing to talk about other than sports, TV, and family life.”
Not sure I agree. I think that theres always a danger when a city becomes too dependent on one industry that there becomes too much homogeneity – a similar look, attitude, feel..and I think thats really starting to happen in SF now re the tech industry – to the detriment of SFs once great diversity.
and, actually, I don;t happen to find people in tech *that* interesting or stimulating – but different strokes for different folks and all. But even if I did, I think I’d still feel the balance isn;t quite right at the moment from an interesting City point of view.
What kind of wackiness is this?
“There’s too many new high paying jobs in this city! Mayor, stop this blasted growth immediately!”
Avalos is becoming more of a joke every day.
Lies, damn lies, and statistics…
$3200 is not the average rent for a 2BR in SF, it’s the average quoted rent for a *vacant* 2BR. Big difference. People who can’t afford this have three choices:
1. Stay in their current home.
2. If they want to move to a new place in SF, move to one with below-average rent (that should be approx. 50% of them).
3. Move to Oakland or Daly City or another suburb – the 7×7 is an arbitrary definition of “the city”.
4. Buy – mortgage rates are still hilariously low.
High rents are not a bad thing. It shows the economy is healthy. Rents were low in 2009 – today is better.
Well, people live in groups. If the rent is 3200 for a 2 bedroom, its 1600 each to live there. Likewise, I know people who have rented out places in Bernal Heights with 4-5 rooms and their rent is less than that.
If you want people to afford their ‘own’ one bed room, we need to radically upzone places like the Mission.
I have lived in California my entire life and I have always spent more than 30% of my income on rent. Where does this “accepted standard” come from? Is it just conventional wisdom? I consider 50% reasonable and normal.
I think you need to distinguish between gross and net income. 50% of gross (before tax) income would be too much to spend on housing.
While possibly being the fastest growing industry in SF, tech is not that big a factor in the overall economy of SF.
Tourism is number 1, and I believe finance is number two. From what I’m able to find tech only makes up about 3% of the jobs in SF, so increasing the number of tech workers actually helps job diversity.
SFTechEntrepreneur and Sam are correct. This city has underbuilt housing for decades, a problem that is now exacerbated and highlighted by the strong local economy. Add to this distortions like prop 13 and rent control, and 15-20% of our available housing stock sits empty. Plus SF (especially Soma) seems to be turning into some kind of land bank for wealthy outsiders, who buy empty condos they use 3x a year. Meanwhile you have long-term renters in older places who own ski cabins in Tahoe.
Political machinations may have some effects at the margin, but the only real solution is to upzone large swaths of the city and build up. Another 5-story midrise on the corner of Nowhere and Who Cares has no impact. Line Golden Gate Park with 20-40 story towers and put a subway under Geary, and now we’re talking.
But on topic, what is the rationale behind Avalos’ questions? Just whining, or is there a proposed solution he has in mind? Kick the tech industry out of the city? I’m just unsure what he hopes to accomplish by going to the mayor with these questions.
$102,000 of income for an average apartment is 2 people earning $51k each. And since most new renters probably pay more than 30% of their income it means more like $40k each for minimum income.
Repealing rent control would solve this problem.
If they want to move to a new place in SF, move to one with below-average rent (that should be approx. 50% of them).
doer,
Do not confuse Median and Average. If it were median, you’d be correct. But if your options are
Rent1 = 2000
Rent1 = 3600
Rent1 = 3600
Rent1 = 3600
Your average rent will be 3200 but your options will be a (probably crappy) 2K place or 3 $3600 places.
If you want a decent location and a real living space, you’ll have to pay north of $3500 in general for a 2BR. Schucks.
The next question from Avalos:
Are you concerned that your administration’s policies to control violent crimes, drug dealing and gangster activities have created favorable environment to attract high-income “appsters,” and thus exacerbated the already extremely limited housing market?
“From what I’m able to find tech only makes up about 3% of the jobs in SF, so increasing the number of tech workers actually helps job diversity.”
seems low, so I’d be interested in source. But possibly really misleading as well, given how many live in SF but work in tech outside of The City….
Just today in the NYT op ed was a piece explaining who people don’t want to rent in sf and how many vacant apartments are available. If the moms and pops with the cute in law apartments that would appeal to young tech workers are afraid to rent them because of crazies, naturally the price should go up.
Here’s the source.
A little old, so maybe it’s like 4% now.
I found another article that’s a little more recent that suggests about 4%.
“given how many live in SF but work in tech outside of The City”
valid point, but there’s no policy that SF can take that affects that.
“… danger when a city becomes too dependent on one industry that there becomes too much homogeneity” as SF is nowhere near dependent on tech.
My point is that increasing tech employment in SF increases job diversity in SF.
[Editor’s Note: Tech Jobs Up By A Third In San Francisco, Filled Mostly By Commuters.]
Avalos’s question is a good one if it encourages debate. There are two ways of responding to the problem: boost supply, or reduce demand.
Supply of rental units could be boosted by (1) upzoning (not only relaxing height limits, but allowing more units in places currently zoned for fewer, reducing minimum unit size, open space requirements, etc.), (2) repeal of rent control, and/or (3) limiting protections of rent control to people who earn
Woops, look like I did have an error, total employment in SF city looks to be around 550,000, I was looking at the MSA which is about 1,000,000.
so it’s more like 8%
I believe my statement is still valid, but less strong.
lyqwyd
I might be mistaken, but no where on either of those sources are 3% or 4% quoted – where are you pulling your source for denominator from?
Snarky comment aside, I thing Avalos has a point, the mix of economy matters. Some industries, for example manufacturing and tourism, has broader base. Other industries, like finance and high tech, tend to narrowly based that benefit mostly elite and highly skilled workers. It is a matter of concern when the economy is highly tilted to a few industries, especially those narrowly based.
That say, good luck trying to tweak to economy to your desired mix. I’m of the opinion that the city government has limited knowledge in economy and has limited means to control it. The recent tech boom is one example. Ed Lee may like to show up in new company opening or expansion event and to take credit. But those companies would move in anyway irrespective of that Ed Lee has done. The tech industry has chosen San Francisco, not the other way round. They have chosen San Francisco despite the high real-estate and operation cost, despite the difficult parking, despite crime and other assorted problems. The favorable condition was fermented over the years and has little to do with the government. All the controversy over payroll tax is red herring and has little to do with why a tech company start in San Francisco or not.
If Avalos want to help the populist cause, do something positive. Build more houses. Promote tourism and other broad based economy. Don’t point the finger to the tech, which I’m a part of, or improving economy in general.
This is off topic a bit but this is part of why I find the tech company buses to be so vulgar. If you choose to live an hour away from your work then you should also absorb the social/societal impact of that choice. At the very least you could take CalTrain and pump money into a public good. These just make embracing a long commute far too easy, and the result is we all wind up subsidizing it with higher real estate prices.
Yeah, thought so. The 8% is likely a significant understatement of the % of SF employed that work in tech as well. As expect more to work in tech outside of City but live in it than work in City but live outside – though I’m guessing.
Of course, my anecdotal viewpoint is skewed as I live around the Noe/Mission axis, but have definitely seen this area becomome much more homogenous.
Either way, not seen stats for other indusries but consider 8% to be a considerable and growing chunk and not something thats adding to diversity, but I guess thats a matter of opinion rather than fact!
Actually the total jobs number may be much higher, wolfram alpha shows about 750,000 jobs in SF:
http://www.wolframalpha.com/input/?i=employment+numbers+san+francisco+county
so maybe it’s just around 6%…
but regardless, it’s irrelevant if people living in SF work in other cities and have tech jobs, as far as job diversity goes.
Increasing tech jobs in SF increases job diversity in SF, given that so few of the jobs in SF are tech related.
Those people going to other cities to work would probably work in SF if the jobs were available… who wants a long commute if not necessary?
I am certainly biased, but I think it’s nuts to want to try and drive away tech jobs / companies. It seems like Avalos wants make everybody equal by bringing everybody down to the lowest level, rather than bring people up.
Tech companies employ lots of non-tech people. There’s marketing, support, product development, management, HR, legal, etc. Every tech company I’ve ever worked at has had more non-engineers than engineers, except at the very early phases.
Interesting take on the techbus phenomenon here..
Dont agree with everytihng said in it, but liked it (especially the German tourist lines!).
http://www.lrb.co.uk/v35/n03/rebecca-solnit/diary
having observed the buses over the last 6 years have to say the lines for them seem to get a little longer and younger every day!
@jason,
Commuting is a fact of life. I am sorry that you find it vulgar.
I believe Google bus shuttle only a small fraction of commuters. Here is some 2010 census data I have found. Majority (77%) of San Francisco residents work in San Francisco. It is net positive to every other county except to Santa Clara county. About 47% of workers live outside of San Francisco.
http://www.mtc.ca.gov/maps_and_data/datamart/stats/cntycomm.htm
@wai- the long commutes, even if by private bus are really strange choices for a city trying to become “transit first”. While many here argue about increased bike paths, removal of parking both in new residential garages, and on public streets, we have a separate group of rather elite new homeowners playing by their own rules:
1.) Buy in high walk score neighborhood where cars are not needed and transit is available
2.) Make sure to buy home with private garage space for vehicle(s)
3.)Work over 40 miles away from city neighborhood which you call “home”
4.)Slip into skinny jeans on Saturday night for hipster pub crawl
5.)Use bike on Sunday afternoon to Blue Bottle
6.)Use car to take children to school, lessons, games, etc.
7.)Use MUNI only for baseball games
People have different life style. There are like 4% of people who make long commute to Santa Clara, many of them do it using ecologically conscious transportation. Can we live with that? After all they are hard working people who pay tax and support the government. Why is that we want to name an airport to honor LGBT but we can’t stand commuters? I say let’s name a train station to prominent commuter to honor their hard work.
There is nothing “ecological” about making the choice to live 40 miles from your job. While your “hardworking” private bus riders stare at their pads and phones 2 hours a day while stuck on a freeway, the teachers of their children ride a public bus one hour each way because they can no long afford to live in the city they work in.
I agree with Jason, there is something vulgar about the private bus fleet.
I think the tech buses are great, as what they are really doing is taking cars of the roads, which is tremendously ecologically sound.
People who live in SF and commute to the peninsula or south bay are doing it by choice, they could certainly afford to live in another city if they wanted. The tech buses are pure win from an ecological standpoint.
Just to start off on the wrong foot, some of these comments remind me of Mitt Romney’s 47% garbage.
With that behind me a couple of points: to illustrate and then finally propose a solution for the problem:
A lot of Silicon Valley people use SF for a second home. A lot of people from all around the world use SF as a second home. Upzoning is not the answer to providing more housing because it would be a battle royal with neighborhood preservation activists and some of that upzoning is counter to the City’s Housing Element in the Master Plan, plus it would take years to do and you can’t do it piecemeal. Plus we are seeing it piecemeal anyway with these blown up houses being remodeled out of little Victorians and Edwardians all over SF and those SIX story condo buildings on the main streets and it is still pushing all the prices up, rentals and purchases. Plus SF has been a suburb of Silicon Valley since the early 90s when 2 bedrooms starting hitting the $2k monthly mark, so this issue is unfortunately nothing new. That was when the whole live/work loft SOMA/Mission thing exploded. (Remember Joe O’Donnell?)
Here is a solution, not the solution, but a solution:
Develop McLaren Park. There is a lot of land there and it is adjacent to 280. It is underused compared to GG Park. The City owns it. The land would be cheaper and the land is what makes all this private development so expensive. The City would not have to develop all of it just parts of it. Turn it over to private developers with restrictions about price, etc. Then you will only have the open space people mad, the native plant people mad and the dog owners mad. Since the City owns the land, I would hope that would make the housing “affordable”. I’m just sayin’…
I know, lets upzone Noe Valley. 20 stories sounds about right, Ill start the ballot initiative tomorrow
lol, I am quite well aware of the difference between a mean and a median, thank you. Fact is, unless your distribution is significantly skewed it is true that “approx. 50%” of observations lie below the average. Is the distribution of rents skewed? If it is, I’d say it’s probably right-skewed, meaning that a few very high rents drag up the average, leaving more than 50% of rents below the average. That would only reinforce my point that the outcry about expensive average rents is hyperbolic.
doer,
I hear you. It would be indeed useful to have the distribution.
FWIW: I did a quick and dirty Craigslist search for all of SF.
2BR from 1 to 3199: 211
2BR right at 3200: 19
2BR from 3201 and up: 569
I removed the 3BR+ from the calculation, of course.
Many disclaimers: big difference between 2BR houses and flats, between furnished, non furnished. Also, these are “asking” rents, not necessarily the true market rent. Some overpriced places might linger there while cheaper ones will not stay long.
Again, fwiw.
From someone who owns property in both SF, and Chicago….Want to create more rental housing? Get rid of rent control! Chicago has more high rise affordable and luxury apartment/rental towers rising right now than any other larger city. The economy here is certainly not as strong as San Francisco, and people are not waiting in line to move here. The difference is NO RENT CONTROL. Builders here have to offer real amenities to compete including parking, indoor and outdoor pools, concierge, etc.
The restrictive rental laws in San Francisco are why we keep one of our two properties back in 94123 off the rental market. We have a legal “in-law” unit in the basement of our S.F. home that I would gladly rent out if rental laws there were similar to Chicago. (I do own an apartment building with my brother, inherited from my parents, so I am well aware of S.F. rental laws. About 80% of our tenants have remained in the building for over 8 years and are paying well below market rate. Two of our longest tenants have since married, bought homes on the Peninsula but keep these apartments for visits and friends. Since they are paying well below half the current market rate, who could blame them? These apartments could be rented to people who need to live in San Francisco if they were closer to market rate).
The question shouldn’t be whether or not “Appsters” SHOULD be living in San Francisco.
What drives me crazy about this city is that the suggestions are less about progress, and more about making things shitty.
For example — the common argument (which I don’t think I agree with, but here you go) of “there are too many cars in this city”. The correct answer is, start investing in cleaning up/replacing Muni buses, making routes more efficient, and start a general plan for a fast moving underground subway. The answer SF seems to take is reduce parking spots and fine the shit out of people, and maybe they will get frustrated and take our aging buses then.
In this case, the anti-development lot has been screaming about units, height restrictions, etc for decades. But they also want SF to be affordable to teachers, plumbers, tradesmen, bartenders, artists, retirees. Here is the problem. SF does not magically exist outside of the economic principle of “Supply and Demand”. Given that real estate is a market, the highest priced tenants will get to live here.
TECH EMPLOYEES ARE NOT THE PROBLEM. THE PROBLEM IS THE LACK OF HOUSING. We can bemoan tech employees, try to make them subsidize CalTrain or whatever, drive to drive technology out of SF/Bay Area (the stupidest thing I’ve ever heard), and make it harder for them to live here. OR, we can take the rapid gentrification of the Mission as a warning that we NEED MORE HOUSING.
So you have two choices, in a real world. You can complain about tech employees destroying diversity in certain neighborhoods, which I don’t disagree with. OR you can stop fighting large scale developments on empty warehouses and parking lots. You get to choose one.
Upzone Geary to whatever you want. Upzone Lombard to 7-8 stories and start tearing down the sprawling motel parking lots. Stop chopping off the top 15 floors of SOMA high rises to protect the views of whoever is funding your campaign. Upzone corner buildings to 5-6 stories, like the new Castro development. Talk some sense into Sue Hestor. I’m not asking that you touch North Beach or Castro or whatever, I am actually firmly in the camp that the iconic neighborhoods of San Francisco should be preserved, as they add to the appeal of the city, and SF would not be the destination to live and visit without them. I AM saying look where we have the space and would not destroy an iconic neighborhood — Civic Center, SOMA, Geary/Lombard, Mission Bay, and start fixing it.
@AnonInLincolnPark: “homes on the Peninsula but keep these apartments for visits and friends” This is not legal under rent control law. You can raise their rents to market rate if you want. Rent Control only works for primary residences.
@R, this is true what you say, but my brother feels differently. There is more to the story but I don’t want to post this online. The tenants are very clever, are registered to vote in S.F., work in S.F.,and have done other things to make it not worth the trouble. It is more complicated than what I originally wrote above.
@AnonInLincolnPark
Do you have any units in SoMa, the mission or Bernal heights? My fiancee and I are actually in need of a decent place starting August 1st.
Yeah, while technically true that the rent could be raised, it could result in a lawsuit, which would be very expensive for the landlord, especially if you cannot prove they live in the house, which seems likely in this case.
@JWS
Preach!
My next door neighbor keep the rental unit mostly for himself. He have only rented it out for 1 year in the last 10 years. It could have fetch a neat 1500-2000, but he would rather keep it as his office. Make sense to me.
My other neighbor is screwed by his tenant who has ran into personal and financial trouble. The landlord has graciously reduced the already below market rent but he cannot afford even that. This has now become a long term problem. I don’t know why the landlord do not evict him. Probably he has reduced himself into a protected status and is essential occupying the unit for life paying whatever he can afford. This is a sad story as we know all of them fairly well personally.
I’m lucky so far. My cheap rental is continuously rented out without issue. Someday I would like to take it back as guess room tough. Right now, however, I’m not in the position to forgo this income.
If we are going to keep rent control it should be means tested.
I am okay w/ rent control for apartment buildings of > 2 units. But I think if the owner lives in a 2 unit building the restrictions should be relaxed.
We have a house in a hot tech neighborhood with a huge basement. The expense of adding a 2nd unit isn’t worth it because we would be stuck with a bad tenant. We live here! It’s not worth it. It has happened to friends of mine. And that is why one more unit won’t be added to the city.
Here’s the NYT op-ed by Scott James socketsiteaddict references above. I think it says a lot about rent control, Supervisor Avalos, noses, scissors, and faces…
*******************
The City by the Bay is going through one of its worst housing shortages in memory. With typical high demand intensified by a regional boom in tech jobs, apartment open houses are mob scenes of desperate applicants clutching their credit reports. The citywide median rental price for a one-bedroom is $2,764 a month, but jumps to $3,500 in trendy areas.
One reason for the shortage? Me.
I’ve recently joined the ranks of San Francisco landlords who have decided that it’s better to keep an apartment empty than to lease it to tenants. Together, we have left vacant about 10,600 rental units. That’s about five percent of the city’s total — or enough space to house up to 30,000 people in a city that barely tops 800,000.
I feel a twinge of guilt for those who want to settle in this glorious city but can’t find a flat. But after renting out a one-bedroom apartment in my home for several years, I will never do it again. San Francisco’s anti-landlord housing laws and political climate make it untenable.
My partner and I bought our home in the city’s Castro neighborhood in 2004. We live upstairs and there’s a smaller rental downstairs. At first we had wonderful tenants, and the income helped make our mortgage payments more affordable.
Then we rented to a man who began as a good neighbor, but who soon became a nuisance — and who eventually became destructive and dangerous. It started one night when the tenant forgot his keys and rang our doorbell at 2 a.m. until we let him in. Then it happened again and again and again.
One afternoon when he locked himself out, we weren’t home. But rather than contact a locksmith, he borrowed a ladder and a sledgehammer from a construction site next door, hopped the backyard fence and tried to smash his way into our building.
After he was discovered, midswing, he said that under San Francisco’s tenants’ rights laws, he was allowed to destroy our property, as long as he fixed it later.
That might sound crazy, but it is a widely held belief among renters here that laws are so tilted in favor of tenants (and against landlords) that renters can get away with any outrageous behavior. Indeed, in a city where 64 percent of residents are renters — and politicians court these voters — the rhetoric from some in City Hall and from tenants’ rights advocates is often vitriolic toward landlords.
Tensions over housing here are nothing new. From the city’s Gold Rush beginnings — and the many subsequent booms — demand has often exceeded supply. And constructing new residences is difficult because we’re nearly surrounded by water and few locals wish to alter the city’s low-rise charm by building skyward.
To stabilize rents and prevent eviction abuses that are typical when housing is scarce, the city developed some of the nation’s toughest housing policies. Rent-control ordinances, for example, sharply limit rent increases after the initial lease for most housing constructed before 1979. As a result, many leases morph into lower-rent tenancies for life, subsidized by landlords, even when the tenants are wealthy.
In addition, a complex legal structure has been created to make evictions for just cause extraordinarily difficult.
At first many of these rules governed only apartment complexes and larger properties with many units. But in 1994 the city applied the regulations to homes if they included just one rental on the property. In other cities, including New York City, such small-time landlords have far more rights over their own homes.
It’s no wonder that our tenant apparently believed he could act with impunity.
One day, after the sledgehammer incident, the tenant flooded his apartment and submerged a plugged-in appliance into an overflowing sink, shorting out the electrical system. We were lucky a fire didn’t start and burn down the block.
After countless sleepless nights, and worried for our safety, we hired a lawyer who specialized in tenant law. With more than a dozen serious incidents documented, we began eviction proceedings. Three days later, the tenant left on his own. (Destroying property, it turns out, is not actually a tenant’s right — even here.)
A few days later, I happened to receive a call from the city about our property-tax appraisal. Among the questions: was anyone renting our downstairs?
Not right now, I said.
Well, the clerk explained, because of the city’s troublesome rental laws, a tenant-free property is much more valuable.
A check of comparable recent sales in our neighborhood, in fact, shows that empty buildings are worth hundreds of thousands of dollars more than those with tenants, and with the current housing-price boom, that profit margin (on paper, anyway) increases each month.
That’s why we’ve joined the ranks of thousands of other small-time landlords here who will never rent again, adding to the city’s housing shortage.
That doesn’t mean the apartment sits empty. This is “Everybody’s Favorite City,” so we’ve had no shortage of visiting family and friends.
No, it doesn’t pay the mortgage. But then, not once have we worried that any of our houseguests would reach for a sledgehammer.
Scott James, a television journalist, is the author of the novel “SoMa,” written under the pen name Kemble Scott.
@ lark,
I may be wrong about this–you should check with a lawyer–but it’s my understanding that if you developed a new, legal unit in your basement, that unit would NOT be subject to rent control because it did not exist in 1979. State law (Costa-Hawkins) prevents SF from imposing rent control on most post-1979 units.
Soccermom’s NYTimes article says everything that needs to be said! Also regarding absentee tenants, this would not be a problem if the rental units were at market rates. To those who ask why we don’t hire lawyers and go to court, NO thank you! Going to court against a tenant is the worst thing you can do, as Soccermom’s article explains.
I actually feel that if rent control and other absurd tenant protection laws were removed a flood of units would hit the market and prices would drop from current levels by 25% minimum.
More new housing would be available in one instant than could be possibly built in 25 years.
Rent Control, when you really think about it, is really the ultimate form of NIMBY-ism!
sf rent control laws are warped, but there are ways to navigate them that only further aggravate the problems with both affordability and diversity.
we’re owners of a 2 unit edwardian in noe; live in one unit and rent the other.
we renovated our 3 bdrm rental to the standards of a boutique hotel. even though it was a “to the studs” renovation, our unit is classified be the year of original construction and not the year it was “reborn”. this explains why so much rental housing is in poor shape and protects the rent control inventory.
we charge top of the market rent. we rent storage and parking on separate leases so we can take then back if we run into a renter problem (which has not yet occurred). we update and microrenovate yearly and pass through these increases as rental laws permit.
we rent to what we like to call a “last renter”, someone who has made a lifestyle or career choice to rent, not someone who has to rent. (our current tenants are tech professionals who own a view house in the eastbay hills).
when we list the unit we’re flooded with DINKs, young professionals who haven’t accumulated down payments and cannot yet buy, newly weds forming first households, relocating foreign nationals and others new to the city. our proximity to the tech buses also gets us groups of young “appsters” hoping to form blended households.
we like the turnover this creates which in turn usually keeps us close to market rates. we use the same formula in our rental triplex in montreal, which also has retrictive tenant rights.
we’ve been approached by executive relocation firms which want to use our unit as a furnished executive space by don’t like the idea of giving up control in choosing our tenant neighbors.
being a landlord is not for everyone but we wouldn’t be in our home without our tenants. given that we live with our tenants choosing new renters is always important and stressful.
The solution to rent control is means testing, so that it does not benefit the rich or those who become rich, combined with a price limit on what is controlled.
So rent control would not apply to anyone who earns over, say, $250,000 annually or with a net worth over $2,500,000, or anyone paying initially more than, say, $5000 per month.
As the years pass, assuming inflation, this formula will decontrol a large number of units without harming any genuinely vulnerable person.
Does anyone have solid statistics on what share of the city’s rental housing stock is owned and leased by amateur landlords like Scott James vs. what is offered by professional property management firms and/or agents?
I realize the proportion of amateurs is higher than in most large west coast cities, but it’d be interesting to know how far the city would need to bend over to service the needs of two-bit landlords in order to meet their desire to end the Ayn Randian “strike” against tenants and move their units back into the market, if indeed rent control or other tenant protections is “the problem”.
why not use rental properties as short term rentals instead?
I guess this comes with its own trials, but will basicially guarantee a steady rental income (surely above that from long term rentals_ plus the ability to present the property empty when time to sell it.
Modernedwardian,
I am surprised that more people don’t recognize this as another problem with rent control. We have a similar set up to yours, and we also narrow our candidates to DINKs and up-and-coming types. This contributes further to the white-washing of the City, but what are you to do? Glad I own, b/c I’ll soon be north of 40 and would not want to try to rent a place in this town at that age.
“I am surprised that more people don’t recognize this as another problem with rent control.”
I think that intelligent people do observe this landlord strategy as a problem with rent control. I think the issue is that if you described that rental strategy any place other than a web site comment section, you would need to be very careful not to run afoul of Equal Housing Opportunity laws.
This is the part where people like Brahma and Supervisor Avalos call you a ‘Randian two-bit landlord.’
For clarity, I think you are proceeding logically and fairly in a weirdly-organized legal environment.
look let’s just end the price distortion policies in CA.
Renters will give up rent control and landlords give up Prop 13 protection.
Until then SF will continue to be Boston/Cambridge (pre rent control abolition). After wards it will just be Boston/Cambridge but with better weather.
@rabbits,
The problem is property owners aren’t a political force compares to renters. So there is no politician vouching for them.
I love Legacy Dude’s comment: “we need to upzone all across the city.” This is the answer! This does not mean tearing down Victorians or building skyscrapers next to Golden Gate Park. What it means is knocking down the ugly, non-historic low-rises (3-4 stores) and building up to 12-24 stories with modern buildings and greater space for families and young professionals. In addition, we HAVE TO INVEST in subways/public transportation. You are not a world-class city (NYC, London, Boston, D.C., Chicago) without sufficient public transportation (SF does not have this)
The increase in units and property taxes from them could pay for this public transportation infrastructure.
I wish that I could run for Mayor. I would up-zone, invest in subways, and clean-up the Tenderloin before you could blink an eye. (our downtown is a disgrace with the drug-dealing everywhere in plain daylight)
I was struck by the similarity of the situation (renting to a well-to-do tenant who has a home elsewhere) that ModernEdwardian describes as good and AnonInLincolnPark describes as bad. The key difference being how close the rent is to market value I presume.
That aside, has ModernEdwardian opened herself up to providing a nice rent-controlled pied a terre in perpetuity, or could one prove that the renter has their primary residence elsewhere, and thus raise rent as the market allowed?
Corollary: Could a landlord get a potential renter to sign an affidavit affirming that he/she would not be using the space as their primary residence and thus avoid rent control restrictions?
James wrote:
It’s more than conventional wisdom, but you will find that percentage referred to again and again in personal finance literature. I don’t consider 50% reasonable.
To answer your question, my understanding is that 30% is a rule of thumb that gets used by banks when they consider you for credit of various kinds.
If you’re spending much more than 30% of your income on rent, then you’re considered to be a bit more financially stressed than ‘normal’ people and hence your financial situation needs a bit more examination than most applicants when you’re being considered for credit.
For mortgage lending, banks call this the “front-end ratio”. Your front-end income ratio expresses as a percentage the amount of your gross monthly income that would go toward a mortgage payment (I’m not a mortgage broker, I’m going on what I’ve read about real estate finance).
Most non-subprime lenders, last I checked, will want a lot of extra documentation from an applicant in a situation where their ultimate mortgage payment exceeds 30 percent of their gross monthly income, if they’ll approve it at all. That documentation would have to show that the applicant had significant valuable assets other than the home that secures the mortgage.
Soccermom – owner-occupied buildings with under 4 units are exempt from some provisions of the Equal Housing laws. In a city with the building stock we have that could be a substantial number of dwelling units exempted.
But my original point was just to marvel at the unintended consequences of this particular form of gov’t regulation, which forces owners to filter out the very people the rent control ordinance was meant to protect.
@SFTechEntrepreneur you already have my vote for mayor. Although generally speaking, Mayor Lee is pretty good and reasonably moderate. It’s the Board of Supervisors that is a disgrace, with only a few good members (Wiener and Farrell are two good BOS members). The least we can do for now is remember to vote against the socialists in the next election (Campos, Avalos, Chiu, Kim, etc depending on what district you are in).
You’d need to be more than just mayor to make the sweeping changes that SFTechEntrepreneur proposes. Once again that confounded democracy gets in the way of implementing a centrally planned utopia.
J,
Thanks!
The Milkshake of Despair,
I would run SF like I run my own company: 100% transparency, 100% accountability, metric- and data-driven. The city should serve its people, which include residents and businesses. I realize there are some extreme views in the city, but people can’t argue with hard data and metrics. I would measure everything, such as “time to get a construction permit, time to ride the Muni from Golden Gate Park to Embarcadero”, etc. If numbers are not hit, people lose their jobs and are replaced by new employees (hopefully A+ players).
I would open up the data of every city department, so “the people” could hack together solutions and crowd-source new ideas. Some of the best ideas can come from the community, but the ENTIRE community. I believe the vocal minority gets there voice-heard, but not the hard-working residents, who don’t have time to attend a 10 am meeting, lol!
I would love to start an independent party, b/c I believe both the dems and repubs are extreme with their views. I have liked what Mayor Ed Lee is doing and strongly support him. He just has never run a business or balanced a budget; revenue vs. expenses, or sat in the seat of trying to start a company in this city. I would like someone outside of politics with a fresh, real-world perspective.
SFTechEntrepreneur — I like your ideas. Have you heard of Plan C SF? Check out their website (http://www.plancsf.org/). It’s about the only reasonable political organization in SF — dedicated to politically moderate solutions. I myself am not a member, but I fully support their approach.
If you did what you propose, SFTechEntrepreneur, I think you’d be amazed to discover how many apparatchiks this “company” employs, many of whom have no (or minimal) tangible deliverables or performance benchmarks.
In fact, I’ve personally become convinced that the Board of Supervisors exists solely to pit those who can’t really afford to live here anymore against the rest of us.
Look forward for your TechEntrepreneur for major campaign.
For now I’d just say it is a lot easier to run a company than to run the government. The goal of a business fairly simple, maximum profit and/or share holder value. The management have a lot of authority to deploy resources and fire people at will.
No such luxury in the government. Some worthy goal, like improve the Muni performance from Golden Gate Park to Embarcadero, can be done by a seemingly straight forward method, like no stopping the bus at every street corner. Yet this can run into endless opposition where some people value the convenience more than the speed. Then it has the issue of allocating the limited street space to various use, like car, transit, bicycle, parking, etc, which incite endless bickering. It is really not about optimizing any particular metric but choosing what we value the most for the society.
As of your proposal of wholesale change in zoning, let’s say it still has a lot of work to do to get much buy in.
Legacy Dude,
You could be right that there are many people within the government just moving paper around and not executing any tangible benefits. That is a side effect of transparency–you easily see the high-performers and under-performers. At least, when you are let go of, you know why and it is in plain black-and-white.
I am also a big fan of training people with in-demand, real-world job skills. For instance, DevBootcamp trains people in 3-months to learn to code, etc. and construction firms have had apprenticeships for years and are BEGGING for people to learn a trade. I would encourage more of this: real-world skills for people out-of-work. Teach people how to fish.
J,
Thank you for the suggestion, plancsf.org. I will check it out, but tough to overall our 2-party system. We need to get back to solutions, instead of campaigns.
Everyone,
I am actually pretty hopeful that our political situation will improve. The rise of cloud-computing and online transparency will force government agencies to improve. The founder of 2 successful healthcare technology companies, Todd Park, is the new CTO of America and he is on a mission to open up all government data. He is opening up all of the Medicaid/Medicare cost data, which is already showing how big price differences there can be for a simple surgery (I spent 8 yrs in healthcare and left disgusted. Really a disgrace, since we are such a wealthy nation).
I am hopeful that the younger generation will become more politically involved with the rise of Reddit, Twitter, Facebook, and other social-networking solutions to connect busy people more easily. I think if more regular “joe’s” get involved, we will be better off. Career politicians are never a good idea and I wish we could get away from politics as a career.
I’m a positive person, so I just look for solutions. I wish more smart people would tackle the nation’s largest problems, such as healthcare, education, jobs, and government, and stay away from first-world problems, such as “photo-sharing.” LOL! I can tell you that my company is tackling a large problem and we have attracted top talent for that precise reason, but they are the slim minority. People are too easily attracted to easy riches.
Sorry for the long response, but I really enjoy this blog and it casts a light on how inefficient our construction development is in this city. From a recent construction symposium, “it takes 1-week to get a construction permit in Alabama, but the same permit takes 2-years in San Francisco.” That is why everything is so expensive in this town, too.
Sftech- I appreciate your enthusiasm, it’s cute 😉
But I’d just assume hell freezes over before SF politics gets anywhere near resembling a high start up wrt efficiency or actually addressing market needs. The bldg and planning depts are laced with 100+ year old legacy systems, plus cronyism, plus layers upon layers of politically motivated/cover my ass measures, It’d make Stalin proud.
As an active real estate investor in this city I’ve learned to understand that this reality creates tremendous inefficiencies, and inefficiencies can be exploited for profit. Rent control is a prime example: I ask you, what is better than owning non rent controlled units in a RC city?!? Answer: almost nothing. Even in lieu of that, we have seen examples above of saavy 2 unit owners who have learned how to carefully pick and manage their tenants.
The more the socialists push their agenda to try and control SF housing, the more the law of unintended consequences takes effect. I fully expect that in this coming RE boom period that TIC’s will gain further legitimacy. Bank of Marin recently announced that they are back to offering fractional TIC loans. And guess what? Try as they might, the city can’t regulate TIC creations- they can’t dictate that a building cannot be owned by multiple parties. (They tend to forget, but property rights are protected by the constitution, a somewhat more primary body of law than the bored of stupidvisors!) We will be seeing more large buildings getting ellised and sold as permanent fractional TIC interests. And more tenant buy outs as the free market rears its head. Buckle up kids cause it’s going to be an interesting ride over the next few years!
Eliminate rent control and the average rent will come down. Renters’ “rights” should be limited to holding the landlord accountable for living up to his lease requirements, maintaining the property and abiding by all fair housing laws. Renters don’t own the property, and they shouldn’t assume that just because they rent it, they control it. Unfortunately, in this city, they do.
Eliminate rent control and the average market rent will come down. Renters’ “rights” should be limited to holding the landlord accountable for living up to his lease requirements, maintaining the property and abiding by all fair housing laws. Renters don’t own the property, and they shouldn’t assume that just because they rent it, they control it. Unfortunately, in this city, they do.
Include me as someone who will likely leave my rental unit vacant when my current tenant leaves, dies or is Ellised. I purchased a two unit building with a protected tenant several years ago and unfortunately the tenant is a smoker. But in spite of SF’s resolve when it comes to protecting people from the dangers of second hand smoke, “tenant’s rights” trump the ability of a landlord to restrict smoking in their building. I’ve tried reasoning with our tenant to no avail and the experience has taught me that in SF the law is designed solely to benefit tenants with little regard to the provider of housing services.
Oh well, I guess the city will have to deal with another VRBO unit albeit one that is rented in 31 day increments for a VERY high price.
@Jason (and others): I really don’t understand the dislike of the private buses. Suggesting people take CalTrain doesn’t make sense as Caltrain loses money — you are really suggesting the well-off people take a public subsidy.
It is inevitable that people are going to need to commute; people change jobs (or are hoping to in the future) or one spouse works one place and another somewhere else.
And people in San Francisco really can’t complain about southbound commuters increasing real estate prices. Imagine how much cheaper real estate outside of San Francisco would be, if everyone who worked in SF had to live here to.
It is true that we could increase the density of the City or we could just enjoy things the way they are. To a great extent, I think this is just a trumped up crisis.
This is always one of my favorite topics. Here in D7, when a home sells that has a unit in it, it’s almost invariably incorporated into the house. I can easily count 20 former apartments that have “disappeared” over the last, say, 8 years within a few blocks of my place.
Not terribly long ago, and older lady was walking along Pacific and she started complaining to me about how she couldn’t get an apartment even though she had a great credit score and was financial quite stable. I didn’t have the heart to tell her that she’s the exact opposite of what most small time landlords are looking for in a tenant. On my block, one unit gets turned over quite frequently because the owner only rents to young women in their 20s. Forget being over 60 and trying to find a place that’s not under professional management.
I certainly understand the desire to leave units vacant. In my own, brief experience as a small-time landlord, I found tenants to be a mixed bag. The weirdest issue was that twice a tenant’s SO “moved in” and brought their damn cat, which isn’t permitted on the lease. Twice! Cats can do terrible, terrible damage. When the last girl moved out the entire apartment was full of fleas. Jeez…
Rent Control.
The Telegraph newspaper, London, has this article today.
http://www.telegraph.co.uk/finance/newsbysector/constructionandproperty/10113582/Rent-controls-are-madness-we-need-to-build-more-homes.html
Didn’t Boston’s experience prove that eliminating rent control does NOT cause rents to fall? In fact, there are grumblings about bringing rent control back to Boston for all the same reasons rent control gets enacted in the first place. Rents may temporarily fall if lots of units came on the market all at once but it’s naive to think in SF rents would stay down for long given the demand to live here. Landlords would finally fix up units and then jack up the rent. I’m glad I own a non-rent controlled unit. Guarantees me tenant turnover as they pay market rate for a while then buy their own place. I would never buy a rent controlled apartment unless I was sure I would never want to rent it out.
mission: you’re on a site that attracts lots of self-righteous landlords, you can’t interrupt a good series of rants about the gawd-awful sin against the tin god of the free market that is rent control with historical facts! What are you trying to do?
Kidding aside, what you’re absolutely correct about is that the fact that rent control exists in S.F. for older properties is priced into such commercial property and semi-commercial property prices right now.
If rent control were to disappear tomorrow, current landlords (like Scott James) who purchased property that was (properly) discounted to take into account all of the things associated with rent control would realize a pretty hefty windfall, as values rose to price in the earning potential of all-market rate rental prices.
So there’s something in it for those here and in the op-ed pages of the NYT making other than economic theory-based arguments to convince readers that rent control will somehow result in lower rents.
That’s in the short-to-medium term, of course. Lots of people agree that in the long run, increased supply of rental housing may stabilize prices. But this long run is a misleading guide to current affairs. In the long run we are all dead.
Earlier, I wrote:
Lest anyone think that I’m basing that argument on logical deduction from assuming that real estate is an efficient market or from something else based on the EMH, let me support that point.
How much would prices rise if rent control were eliminated? If the experience of Cambridge is any guide, around 22%.
From Housing Market Spillovers: Evidence from the End of Rent Control in Cambridge, Massachusetts by David H. Autor, Christopher J. Palmer, and Parag A. Pathak (NBER Working Paper 18125):
Emphasis mine. I read this originally on dead trees, but you should be able to pick up the paper by using Google Scholar or something.
One interesting political thing about the November 1994 elimination of rent control in Cambridge was that Cambridge residents favored the continuation of rent control by a 60%-40% majority, but it was a statewide vote that passed on a 51%-49% majority.
So all the bellyaching landlords out there, there’s your battle plan: get an initiative on the state ballot and it’ll allow you to work around San Francisco voters who both rent and are informed enough to vote their interests.
Astroturf developer/realtor propganda, and an deliberate oversimplification and misconstruing of basic economics.
Building more housing doesn’t ipso facto lower housing costs. Building only expensive housing makes all housing more expensive, because it raises the average price to a new higher avergae, which landlords and developers will then target.
The only way to lower housing costs is to build more housing that is affordable, i.e. below the average cost. This requires government regulation and subsidization, best paid for by taxes on financial trading and capital gains, i.e. make the bloodsucking vampire capitalists who produce nothing of value and only leech off the productivity of workers pay for the devastation they cause.
two beers, I do not believe that is the way that economics works. But I think we should encourage more small and cheaply built housing so that what is left of the middle class can afford to stay here. I am sure we could get 2 bedroom/ 2 bath 800 sq ft apartments down to $500k if we tried hard enough. That would be cheap enough for a two teacher or two bus driver household. Too bad there is no political constituency for such a thing.