Around 7,500 units of housing have been built in San Francisco since January 1, 2010. Over the same five years, the number of employed residents has increased by 74,000. And in a nutshell, that ten-to-one ratio has been driving the trend in rents and property values.
With nearly 7,000 unit of housing currently under construction in the city, will the same trends hold in 2015? We’ll dive into that question and more, including a review of the City’s draft housing needs analysis and new goals, next week.
This analysis will be very useful. However, considering the commuting between counties and cities, it would also be helpful to get the same analysis for the 5 counties: San Francisco, San Mateo, Alameda, Santa Clara and Contra Costa.
I am interested to know what’s the ratio for these 5 counties combined.
Especially the Silicon Valley numbers. I’m not sure if this is typical, but I was on 280 late one afternoon on a weekday. Clear road heading south, bumper-to-bumper heading north. Seems like a TON of people have gotten new jobs in SV and choose to live in the more exciting environs of SF.
I am almost certain the numbers are far worse for the other counties.
I think you’d do well to read http://techcrunch.com/2014/04/14/sf-housing/
Thank you for the article link. Again, it was thought provoking and had an emotionally sensible element to the discourse. Also, it gave me an insight into SF real estate back in the late 70’s when I was too young to understand. My indirect tie to the late Mayor George Moscone — he came to my house for regular dinner parties back when his assistant owned the property. After Moscone was murdered and feeling his political potential diminished in SF, his assistant (w/ wife) decided to sell the house and moved to Sacramento, CA.
This is a really well reasoned, well researched, well balanced and well written article
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The chickens have come home to roost. The leftist policy of restricted building, in order to keep San Francisco just as it “always” was, has created the very situation that will produce a change in government to a moderate and modern polity. In years to come, there will be no more Mar, Campos, Agnos, Peskin, Daly but instead there will be a the political descendants of Feinstein among supervisors, and Dr Antonini on the planning commission.
We will have a sensible policy on building, an improved transit system, a means-tested and limited rent control, and respect for property rights. All this will be well funded by property taxes, from new condos and rising prices of existing buildings.
Is this just a dream?
I like your thoughts but man the growing pains sure do hurt….
Sounds good to me! Of course, the tenant unions will fight pretty hard against means testing rent control. Almost like they know something…
Again with the Santa Ana John Birch Society rant. Gratuitously so at that. Why not just address the issues facing the City?
Your revolution is over, Mr. Orland.
My revolution? Hardly. But, by the same token, I can’t help but laugh at the foolishly naive extolling of “property rights” polemics you can find only here.
“Only find here”???? Lol – you have to be hopelessly deep in the SF bubble for that thought to even cross your mind. To actually write it down? It boggles the mind. Whether you agree or not with the idea that someone who owns property has rights that are worth protecting, those rights are much stronger almost everywhere else in the U.S. Sorry to be the bearer of bad tidings.
@Orland: ha, ha, only in San Francisco could Conifer’s rather mild comments be linked to the John Birch Society. Leftists in SF are so out of the mainstream, they don’t even know where the center is.
They’re waiting for The Guardian to tell them where it is…oh, wait…
@Not Bashing: you make my point precisely — here (SF) you will only encounter even mention of “property rights” from some of the wackier contingent of SS.
You lost me – how does the fact that property rights are diminished in SF in comparison to the rest of the country make your point? I apologize if I mis-understood, but your statement appeared to suggest the opposite…?
Well, I guess it depends upon the meaning of what “here” is.
You mean what the definition of “is” is?
When the mainstream democrats are complaining the city is too generous with OP’sM (specifically rent control), it might be a good idea to take a step back and look at the policies that led to this Frankenstein housing market.
Anyone thinking SF is going to means test rent control is far outside the mainstream and deeply delusional.
And yes the American Revolution is long over. I for one welcome rule by the better half of the 0.01%. It’s the not better half of the 0.01% that worries me. How’s the surf at Martin’s Beach?
I also doubt rent control in San Francisco will ever be means tested. There are far too many subsidized, high income tenants who benefit from the status quo.
never say never. A better functioning market would have caused a steady replacement of some layers of SF economical layers. Any family making less than a certain $ amount would have had to move out or ask for city subsidy. This is “displacement” and this would have caused some shift in the electorate towards more moderate democrats.
Now this displacement IS happening, but at a much slower pace. Much much slower. But it is happening and politics in San Francisco will be different 20 years from now. The cool kids making good money today in tech will make up a more influential layer of society.
The problem is the moderates are not making it to the polls so the crazies are winning out. How do you mobilize moderates? Easy to mobilize the crazies
To mobilize moderates all you need is raise taxes. That would be a great scheme actually. People who want to get rid of rent control should split into 2 groups:
1 – A group that would collect signatures and motivate the troops to raise a special tax on property to a silly rate, like 5% of actual market valuation, to fund massive housing projects across town. To this proposition, you would add an extra 200% tax on all foods with gluten or High Fructose Corn Syrup.
2 – A group that would beat the drum to repeal rent control in SF.
The first proposition would be so outrageous that you’d get a great turnout, and all reasonable people voting no on the first proposition would have their say on the second.
SF tried to push stricter Ellis Act policies to the State and it was rejected by the mainstream democrats. In my opinion, mainstream democrats should have a statewide rent control prohibition act to avoid other cities to become second SF.
No other cities can afford SF’s rent control to destroy their economy. Watch out Oakland and East Palo Alto, I hope they do not adopt SF’s rent control policy to make their city permanently out of economic prosperity.
God you are so right, San Francisco is in such terrible state. I don’t know how we became the next Detroit but somehow we did it. Rent control has ruined our economy! :wails
NVJ,
Aside from the snark that was somewhat justified, I think there’s little doubt that SF is and will remain a wealthy city. Now there are many ways to be wealthy. Do we want to have a 2-speed city, with an entrenched rent controlled population (with all sorts of social levels) battling a conquering wealthy crowd and the former one slowly being kicked out kicking and screaming, or a city that accepts its status as a middle-class / upper-class start city. The problem with rent control is that the only new people that can move in today are the upper crust. With a relaxed rental market, the middle class would be able to regain its core position. Now some people couldn’t give a hoot about the middle class, but I think it would be short-sighted to throw them under the bus just because some people (often transplant use the old tired “I have mine, you can’t have yours” line.
Whatever theses folks invent should handle the employment peak-to-peak cycle from 2001 to now, not just the employment trough-to-peak of 2010 to now.
Since the previous employment peak for SF residents in 2001, San Francisco has added more housing units than employed residents. Yet, the inflation adjusted Case-Shiller for SF is still up about 10% since it peaked in 2001.
As Shiller himself has pointed out in detail: housing prices in a city or metro area are much more complex than to be determined by any one factor like employment or the ratio of employed to housing units.
2000 was a bit of a fluke, with everyone and their mothers claiming to be an internet genius. The sudden influx of opportunists was followed by a similar outflow in the following 3 years.
Actually, the big employment run-up was in the years preceding 2000. Once the NASDAQ crashed in early 2000 VC/investors pulled back, there were hiring freezes, followed by layoffs, and ….
How many people’s incomes today in SF are paid for by capital and not cashflow? Are they all just ‘opportunists’?
Nevertheless, any ‘theory’ to explain these facts had best be able to handle the economic cycles and not just be limited to some ‘fluke’ or cherry-picking a trough-to-peak like the blog post that heads this thread. For example, if you just go out to 2008, then SF has added nearly 16k housing units. And in the 5 years after 2000 SF added 10k housing units, while employment was declining nearly 100k. Plenty of interesting data points to fit into any theory, not just this rather curious selection.
If SF were an island where nobody came in from outside to work downtown, or left to work elsewhere, it would be easy to freak out about that ratio. But it’s not, many people commute to SF for those ‘new’ jobs from outside, and many previously unemployed SF residents have taken some of those jobs now, or perhaps they were employed but at an out-of-town job and have switched to in-town. Plus many people are cramming more roommates into existing units. And who knows how many “in-law units” have been crafted unofficially out of garages or whatever.
It might be easier to look at transit numbers – BART and the various bus systems, and if possible get a factor for how many private bus passengers get toted around town. Yes there are bikes and just walking, that’s harder to track – but driving should be fairly constant since there are probably almost no new ‘commuter’ parking spaces added anywhere near downtown for years now.
its not a direct relationship , BUT , SF needed to add about 50k over the last 20 years , that was all part of growth projections from more then 2 decades ago ,
Hopefully , the development that is still to be requested in the SOMA will not be stopped
I have units I am keeping off the market. I do so because they are in my house, and I have had bad tenants and do not want to risk renting once again to someone who will make my home life miserable. I’ve also had long term tenants who stay and stay, and end up paying only a pittance of what the apartment is worth. So I choose to forego the rent and live modestly so that I can continue to stay in my house.
Given how quickly and how much rents have gone up in recent years, and the negative effects occupied units at below market rent have on a buildings value, it seems my choice hasn’t been economically unjustified.
How many units do you think are being kept off the market for reasons similar to mine? How common is my situation?
I have no idea how many units are off the market in this fashion. I suspect that between empty in-laws, and AirBNB type situations it could be a substantial number. But recognize that you are in an extremely fortunate situation to be able to forego thousands of dollars a year (a month?) in rental income. Newer entrants to the market could not make this choice.
We have had a much easier time in recent years screening applicants for our SF rentals than we had a decade ago in another market. FB, twitter, linkedin, etc make for a pretty complete digital trail of your prospects, and if you couple that with selecting folks that are upwardly mobile you may have better luck with turnover and better neighbors.
I do not think all airbnb situations can be qualified as being units that are “off the market”. There are many units that rent for more than one month (like I do) and these tenants are either looking for a stable rental or doing a short term deal for a limited time stay (like a contract job). One of my last guests was a guy looking to rent but who can’t find the right fit. He was clearly living in SF and this is the case where a unit wasn’t off the market but used as a temporary rental. Another of my last guests was in SF for a one month gig. Another one was there for a 2 months stint in the local performing arts. Airbnb is a perfect fit for this. It’s much safer than Craigslist.
however many, they aren’t affecting the rental vacancy rates much. They are at some of the lowest in history for San Francisco and neighboring counties. Paragon Realty has a breakdown with stats (namelink).
Very helpful and detailed analysis. Paragon Realty deserves kudos for spending the time and money to do this.
The paragon site is very interesting. Thanks for leading me to it.
But how are the vacancy rates computed? How does anyone know I am keeping my units off the market? I can’t believe there’s a reliable statistic on that???
Vacancy rates do not include units that are intentionally left unrented. The number is also generally computed from larger corporate buildings.
I don’t know what Paragon’s source Reis uses, but the US Census vacancy rates (namelink) are computed from survey of all properties for rent, not just larger buildings. Their data shows 2014Q3 rental vacancy rates in both SF and SJ MSAs are less than half what they were in 2010. Also, for all of Q1-Q3 2014 they are 3rd and 4th lowest among the 75 major MSA.
US Census is very different from professional sources. Having worked in real estate for years I can confidently state that most paid sources use large, commercially owned properties for sample data. Commercial owners are the ones that pay them, and they are more interested in what other commercial properties are doing reliable data. The data is also much more accurate, as mom-and pop owners often do not keep detailed records.
In both cases, they do not include properties that are intentionally vacant.
Makes sense that commercial data companies would gather data tuned to the needs of their clients, in your case owners of large, commercially owned rental properties. I would expect it would be more accurate in that they would breakdown the data by the relevant qualities or class of the properties and also that they would be more timely. The Census has only released their 2014Q3 housing vacancy estimates so far.
However, if you want to understand the total rental market in San Francisco you would need to survey more than just these ‘large’ properties. I don’t know how large a property has to be to be counted by the commercial firms, but in San Francisco 37% of rental units are in buildings of 4 units or less and two-thirds are in buildings with less than 20 units.
Landlords don’t need to keep any detailed records to answer the simple Census questions. When the Census wants to dig out more details they have access to the IRS data, not of individuals but of the relevant aggregates.
Very hard to imagine any survey of rental properties in San Francisco is more accurate than the decennial US Census. They go to great effort to count as many properties as possible, and then it sets the baseline for accurate sampling going forward. Besides, the US Census publishes their methods and the margin of error on their estimates so that informed readers can judge for themselves. Good luck getting that much transparency from a commercial data source.
“However, if you want to understand the total rental market in San Francisco you would need to survey more than just these ‘large’ properties”
I agree completely, my point is exactly that: much of the reported data is not a view of the total market, and therefore may be misleading for certain submarkets. It does not necessarily mean that the data is wrong, but people should understand.
The decennial census data is useful for many purposes, but it is quite out of date at this point. They do update it, but not with anywhere near the thoroughness, or detail, of the decennial census.
The data cited in this article is from REIS, which does not use census data:
“developed from property-level data collected by our team of real estate analysts during telephone interviews with building owners and managers.”
(https://www.reis.com/learn-more)
Great source, thanks Jake.
You made an excellent choice especially with your own home. It is one thing to own separate rental property and an entirely different animal if you have to rent out portions of your own home. I would never do the latter. I have clear and definite lines separating business and pleasure. Sooner or later you will feel disdain and contempt for your co-habitating tenants.
Wasn’t a statewide bid to repeal rent control defeated a few years ago? Not that they shouldn’t try again. Of course, you’d have to let current tenants keep their rent control.
Of course, you’d have to let current tenants keep their rent control.
And why is that? After all one of the main arguments to placate unlucky landlords is that “laws change, tough luck bro” when a new rule pushes a landlord deeper into the loser side. It should be able to work the other way. Rent control repealed: “laws change, tough luck bro”. After all any subsidy can be taken back.
Take a look at the repeal of rent control in Boston. There was a multi-year phase out. I think the change did include much higher annual increases during the years following the repeal.
Yes, and why is this a problem?
If I resume correctly:
1 – rent slowly becomes way less than market rent = good
2 – rent catches up with market rent = bad
And why would that be? Are people under rent control entitled some sort of leniency? If that’s the case, under what criteria? There is no means testing, which completely invalidates the social purpose of rent control. A billionaire can get it, just like a welfare recipient can.
Who gave a break to the landlord? Rules changed for many long term landlords and THAT was OK. Now if the rules change for rent controlled tenants for some obscure reason THAT is NOT OK.
Rent control advocates have no case. If they were pushing for means control + shared burden of the subsidy I would join their ranks. But asking one class of people to subsidize another class of people with no specific criteria to get this subsidy makes this look like an unjustified entitlement defended by people who do not deserve it.
AGREED, on all counts. I can think of no (legitimate) reason not to means test rent control and no reason for the burden of the subsidy not to be spread out.
Of course we have no data on who has rent control, but I know 10+ tenants who have it and don’t need it. I also know at least 5 people who would have to leave without it. I’m not saying that is a representative ratio, simply that we should find out what the ratio actually is. It seems likely that a fairly large cross section of the rent controlled population is getting a subsidy for no reason at all.
Even if data would be interesting, the debate we need to have is whether this City, which prides itself in being one of the richest as well as one of the most progressive, wants to have a coherent social housing policy. Who should be entitled rent subsidy? At what income levels? What will we do if the demand for subsidies is overwhelmingly more than what SF can afford? How do we decide who stays and who leaves? None of these questions have ever been asked because the City found a very convenient bypass by sticking the bill to landlords.
I estimated a while ago that rent control amounted to a $3 to $4 Billion annual subsidy from the landlord class to the tenant class. It gets higher any time market rents go up.
Most of us hang out with those in our own class. Of my friends, who are mostly couples 35-45, of 40 people, about half rent and at least 3/4 of that half are under rent control, so a total of 15. They are dinks or have 1 kid. Their average median income for the couples is probably 450k and 300k for the singles. Several of these people rent here but own in tahoe or Hawaii. I’m sure there are a lot of poor people utilizing rent control, but I don’t know them.
Similar non-representative sampling from my side. I have learned never to discuss whether they deserved their cheap place. It’s like confronting a guy finding a $100 bill on the sidewalk with a starving homeless guy 10 feet away. “why don’t you give this found money to this poor chap there?”. Nah, not even trying to ask. People are people. We all try to function within social standards but a freebie is a freebie.
SFS – I want rent control repealed. I didn’t intend for my information to indicate support for RC.
Sure, the data would be interesting. But beyond that I think it might sway many who are on the fence when it comes to rent control. Of course, that assumes there is in fact a large group benefitting from this subsidy that don’t need it. I can think of worse ways to get the moderates amongst us interested in the issue.
SFS – Where is this hypothetical $100 bill on the ground of which you speak? Careless people dropping money is exactly the place I like to be? Your “friends” aren’t really friends if they won’t share their findings w/ you. I will gladly split it with you 50%-50% if you find another $100 on the ground. As long as it isn’t on the grounds of my home.
anon, I found a wad of bills totaling almost $500 one day. I did look around for an obvious clue about who could have dropped it but didn’t run around asking “did you lose all that cash”? I’ll make sure to share it with you next time this happens.
In California, majority of the people do not rent in the rent controlled apartment. A statewide repeal of rent control is feasible, but the proposition needs to be written neatly and it should not be combined with any other controversial stuff.
It should be noted that new construction is exempt from rent control, so there is obviously a problem with not enough construction permits being issued.
Maybe also not even developers willing to take the jump, or not enough banks willing to take the risk. If you go back to 2008-2009 there were quite a few stories of developers with poor timing. Nobody wants to be the last one standing when the music stops. Plus these projects take a long time and depend on whatever land is available and at what cost.
Huge problem here, that many don’t understand. The “evil developers” actually have to take on a lot of risk in this city – it’s basically impossible to look out five years and know what your sales numbers will be.
Indeed. Hindsight is 20/20, but the truth is nobody knows what 2020 will look like (pun intended).
I think I am in love with you SanFronzi. You are a person of great intellect.
That’s what my mom keeps telling me. Mom, is that you? Tired of lolcats already?
This is not an argument in favor of rent control, but behaving as if means-testing it somehow would help effectuate its true purpose is naive. Landlords would simply refrain from renting to anyone who fell below the income limit so as to avoid rent control. The end result would be functionally identical to simply getting rid of rent control, and would not help poor people (other than perhaps those that are already grandfathered in).
I assume the idea would be to turn rent control into a sort of local section 8 type thing. So landlords get market rents, with those means tested paying a small portion and a subsidy from the city paying the remainder. That way there’s still an incentive for landlords to rent to poor folks, especially the very poor, as most of the rent would be guaranteed.
Where in SF are poor people finding new market rate rent controlled apartments? Where are working class people for that matter?
Um, they’re not. That’s the point. We’d abolish rent control and move to a system that I described above, that would be applicable to people, not individual units (the subsidies could be used for any apartment but would be financed by the citizenry at large).
how much do you think this would cost the “citizenry at large”?
20% of SF households have income less than $35k and rent housing. Presumably they would all qualify for your subsidy.
Are you willing to pay a tax to subsidize their residence in San Francisco for as long as they want to live here?
Within reason, I would prefer a tax that is borne by all of us to a direct forced subsidy from one party to another.
The housing subsidy should be a federal program. If a SF low income person needs housing subsidy, all the low income people in San Jose, Dallas, Miami and every city in the USA, should have access to the housing subsidy. Otherwise, all the low income folks will flock to SF and the burden will be unbearable to SF.
Currently SF’s rent control has trapped a high percentage of low income households. SF’s large low income population is the direct result of the rent control policy. If California state repeal rent control, low income population will redistribute and the burden will be spread among all the cities. This should be a reasonably good and working long term solution.
Many things should be but aren’t, such as a federal housing subsidy program adequate to replace rent control in California.
We can condemn the current rent control laws in CA and SF all we want and they certainly are a poor excuse for a lack of housing programs, but the reality is that without them many tens of thousands and possibly more than a hundred thousand residents of San Francisco would have to “redistribute” themselves out of their homes and communities. And the number for all of California could easily be a million people.
There is no political will to force them out by eliminating rent control like what happened in MA and there is certainly no political will to raise the taxes at the local, state, or national level to fund your alternatives.
Get that funding and you will have no problem getting the votes to remove rent control. Without it, any ballot initiative will be drowned in the real stories of a million “low income” people facing eviction.
Jake, to be clear, I’m not saying that we should do this.I’m just saying that it would be better than the current system, because then we could at least see the cost and weigh that cost against the benefits.
Much like BMR housing now, we could cap the “new and improved” rent control and let people apply for the limited spots. First in line would be the current residents benefiting from RC, possibly prioritized by the length of their residence. Those who could show need get the benefit first. This solves the “we are displacing long term residents who would have to leave the city without RC” problem, at least to an extent. The number of subsidized unit slots would be capped going forward by the turnover of the existing spots and funding source limitations. I’m certainly not suggesting we make SF a “poor mecca/magnet”, just that we find a middle ground between the current direct landlord to tenant subsidy and outright elimination of rent control. You seem to be assuming an unlimited program, which of course makes no sense.
With that said, if this is a binary decision with no middle ground I definitely come down on the no rent control at all side. I am open to compromise and would be willing to put my money where my mouth is via taxation…but it takes two to tango.
Check out the BMR program run by the Mayor’s office. I think this program is trying to provide housing for low and moderate income residents. There are income requirements associated with this program.
The BMR program can be gamed by the wealthy. If someone has passive income only and no active income, it is easy enough to shift assets to another entity, claim minimal “income,” and qualify for all sorts of government goodies ie. free/no cost telephone, low cost utilities via Lifeline service, food stamps, home care assistance, and Medicaid. I see so many people do this everyday. What they fail to see is in exchange for these “freebies,” the value of their life in terms of ambition/drive, quality of life, ability to produce a job for someone else, and ability to instill core values are diminished. Can you measure self-worth? Apparently you can.
For me, I like to measure my worth by the obstacles I overcome and my productivity.
Any subsidy should only be temporary and subject to testing and renewal each year. BMR has become a permanent home for most of the BMR folks even when their income has increased. I guess it is a human nature to take and keep freebies forever. Many wealthy people keep their rent controlled apartment since it is a freebie and it is not illegal to do so.
This is basically the defacto situation now. Nobody is renting newly available apartments to working middle class and poor people. Rand testing would just push out those with rent control now who don’t need it
I’ve said this here before, but the first step is to ask for an annual statement of information from everyone who benefits from rent control. With the data aggregated by the city to preserve anonymity, such a report would clarify for everyone who really is benefiting from rent control.
Next, if we determine the city in aggregate benefits from rent subsidized private housing, then the city could go on and support rent subsidized housing. Shared benefits should be supported by shared costs.
Once everyone had to pay up (5% of market rents, split 50/50 between renters and landlords?) then a consensus for means testing could emerge. Especially when backed with data describing the renter base.
Okay, soccermom. I’ll proffer a few of my rent controlled tenants’ financial profile:
1. RN nurse (mid-40’s, single) making $120K+ a year at a nearby hospital. Lives in a one bedroom flat w/ parking.
2. Two early 30’s guys (from the mid-west, friends for a long time) working in tech (peripherally), shares small two bedroom flat. Each makes between $40K-$50K a year
3. Section 8 tenants for decades. Upper level of a single family home. Household head is/was Taxi driver/roofer/farmer in Mexico/etc. No ambition to be successful at any one job. Owns home in native country.
4. Two pairs of young mid-twenty something folks working in start-ups, gaming companies in SF. Each earns about $50K.
All the tenants are pretty nice since I handpicked them and spent years cultivating a professional but mutually beneficial relationship in spite of political forces in SF.
Well well well
On second thought, I would be willing to keep rent control if the federal government overhauls its taxation code. I have wasted enough time preparing my taxes. Think about the number of cumulative hours and dollars spent by each individual, small business, and corporations to sort through the byzantine tax code. I would be more than happy to vote for a pro-business tax lawyer into office with a physician as a vice president so we can solve this Obamacare/Unaffordable Care mess.
I do not see any connections between rent control and taxation code. Rent control is a city policy and federal government can not care less about the rent control policies in a few liberal cities. In most of the American cities, people have not heard about rent control. If you tell SF’s rent control stories to normal American citizen, they would think that you are having some mentally illness.
OT, but Obamacare has nothing to do with what is making care unaffordable. The rate of increase in healthcare costs has in fact finally slowed down the last couple years. It was increasing by >10% annually for a decade.
Yes, thanks for the link, great article.
Means testing rent control is not feasible at all. First, what is the “ceiling” – an income or wealth test? Second, where do you set it? If you make it too low, you may as well just eliminate it altogether as people making under about $100k could not afford a market rent absent some trust fund. But if you make it reasonably high, say 100k income, you’re only going to remove a small percentage of rent-controlled tenants, so there is no point. Base it on some formula relative to the size of the unit and it gets even more unworkable. Third, and most important, it would take an enormous, and expensive, new bureaucracy to administer this. One would need to collect and verify financial income for tens of thousand of households, perhaps every year. Then there would have to be an appeal process for those deemed to no longer qualify for rent control. Who pays for all that? Landlords? They don’t want to. Tenants? Good luck with that. The voters? How? No way would they approve that. This is easy to propose in principle but could never work in practice.
As I’ve said before, this is all academic. Rent control isn’t going anywhere in our lifetime. Too many tenants think they benefit from it (in addition to the small percentage who actually do) and a large percentage of non-tenants also think it is a good policy. Best (and only reasonable) odds are a statewide voter initiative, but that is a real long shot. For anyone serious about this – e.g. big landlord groups – that is where efforts should be focused. But it would likely be throwing good money after bad. Better off to just use existing laws and Ellis places to get rid of low-paying tenants.
JR,
I have said it many times before, but France does all this things and does them with great success. Just look at how they implemented it. To be true, there’s a 2.5% “rental fee” applied to all rents to fund the management of the local rental boards.
There’s rent control in Paris. Someone can start a lease and keep the same rent adjusted for real inflation. Every 3 years the landlord is allowed a 10% extra adjustment, provided he can show 3 samples of similar places rented that show the rent disparity. This greatly helps keeping up with market rents.
There’s also means-tested rent subsidy in Paris as well. The goal is to keep the rent/income ratio under 1/3 of your net income. You can get up to around $350 a month in aid. All paid by taxes.
It’s not rocket science, and it’s done in many rich countries. Calling is “not feasible” is short-sighted when you only look at what is done right now. This is the social justice that San Franciscans claim they want, which is deeply ironical.
San FronziScheme, as you are well aware, the French love big bureaucracy, even more than SF government employees do. In addition, the French are more welcoming of government oversight of things like this. And they are also not as combative when government rulings go against them. Not dissing the French at all – I’m a francophile (whole family is fluent, except I’m just pidgin-fluent) and we are in Paris at least once a year. France is generally run much more reasonably than US govt. That something is in place in France doesn’t have a whole lot of relevance to this discussion.
I do agree with you that means testing could conceivably be set up. I also agree that the present system (forcing individual private landlords to subsidize individual private tenants with no regard for the means of the tenant or the landlord) is asinine. My point was based on the realpolitik implications. The whole reason rent control works here is that it is very easy to administer – just set some blanket rules and let the tenants enforce it. No way rational rent-control means testing will ever happen in SF for the reasons I note above. That is what I meant when I said it was not feasible here.
You also rightly point out the SF hypocrisy. SFers talk about social justice, but what they really want is “more for me” regardless of how that impacts anyone else.
That’s your view on how things work, but that’s not at all how France works.
Bureaucratic? Wrong! France has a higher productivity and therefore less waste! Their GDP output per hour worked is one the highest in the world, higher than us. What is a “common knowledge” factoid that everyone keeps repeating over and over is actually a misconception. For instance the single payer medical insurance system (which looks like a byzantine mess from the outside) is saving Billions a year by having a coherent health system. Compare that with the HMOs and such that are heaps of useless bureaucracy. All my friends in France work very hard. They produce a lot of value.
About the French accepting things easily, wrong again. Just show up in France for the “rentree sociale” in October and see the multiple demonstrations and protests for new taxes, changes in rules. The government wanted to apply a Diesel / pollution tax called “ecotaxe”, only to see 1000s of truck drivers blocking roads. The protest made the government back off. This happens all the time.
Now I am using France, not as a perfect example on how SF should run its rental housing policy, but as a way to show that a country that is loved by many SF-ers (an that loves SF back), and is often used as a counterpoint to conservative misrepresentations (see Irak war, healthcare reform, …) can do it right, without any side effects. I am against rent control, but for a coherent and just social policy. My comments about rent control could be interpreted by some (like Brahma or whoever he calls himself now) as an anti-poor fight, but the truth is I know SF can do better, cheaper, and more just.
The rent control system in SF is utterly corrupt. The people who fight for it care less about the poor than their own free lunch.
French productivity is high ($50.90/hr), but nonetheless still significantly lower than the US ($56.90/hr).
http://stats.oecd.org/Index.aspx?DataSetCode=PDB_LV
Yes, the last years of austerity-fueled stagnation coupled to the drop of the EUR from 1.50 to 1.20USD have contributed to this inversion. But the fact is that the perceived massive bureaucracy / overhead is not what is happening on the ground.
Fine – I had no intention of turning this into an anonymous internet debate about France. I do a lot of legal work there, and I’ve been astonished at the lack of due process in areas that Americans would never stand for – property seizures, wage garnishments, fines and penalties levied against companies, all with essentially no opportunity to provide a defense. That’s where I was coming from.
But let’s assume everything you say about French individualism is true, because it does not matter (and you certainly get no argument from me about the wildly more effective French healthcare system). Point is that the system you describe in France could never, in a million years, be implemented in SF. The 2.5% tax would never fly. The subsidy above 1/3 income, and the taxes that would require, would never fly. The bureaucratic intrusion into finances necessary to implement any of it would never fly. That is why I opined it was not feasible. Hey, if you think otherwise, it is pretty easy, and not that expensive, to put together a local ballot initiative. Even cheaper to lobby the Supes about this proposed replacement for rent control. But I submit that would be a 100% waste of time because I’m well aware of the interests at stake and their willingness to fight to keep theirs.
Point taken. Sorry I lashed out a bit. Yes the French government will take shortcuts with what we consider to be due process. Having moved quite a bit during these past 20 years, I know from experience that the French government does not care one bit if a vital piece of mail is returned to them. The guy didn’t receive this letter announcing we’ll freeze his accounts for a $150 property tax bill, who cares? They’ll still move ahead with it and the only notice you’ll get is from your banker…
But to my point and why I made it: there is a ton of “conventional wisdom” that is actuall detrimental to the debate and ends up showing up into policy.
One conventional wisdom is that France, and other European countries (that happen to not be called Germany), need to go through “necessary reforms”. The theory goes that France has an unsustainable deficit and that government spending needs to be cut by trimming all the fat. This is something that Brussels, Berlin, Wall Street and others keep repeating, and all the governments actually treat it as universal truth.
But looking at it ore closely there is no fat. Of course the “fat” eurocrats see is France’s generous social protection system, that was there 30, 20 or 10 years ago. The US has proven that the way out from high deficit was not by cutting spending but by motivating growth! Of course no-one in Brussels or Berlin seems to accept this obvious fact, and they keep asking for more cuts, which pushes the country into a downward spin and does nothing to solve the deficit.
To go back with ending rent control, it will happen one day. Probably not this decade, but the next one, why not? There has to be a debate on what will be the alternative. With a city that votes 80%+ democrat, the alternative has to be progressive. SF could borrow from progressive models and that’s my point. Showing such models that do work and that keep putting the human first can be a great selling point to people who want to phase out rent control.
i would be happy with $100K per household, and actually think that would get rid of >40% of people who are under rent control. this would include those untis being rented by multiple people whose income is more than $100K.
another change i would make is to tie rent control to CPI, but make the increases allowable equal to CPI instead of equal to 60% of CPI. i understand protecting people against large market fluctuations, but not keeping up with inflation just punishes the landlord. most people dont know the history of rent control, but it has changed several times. at one point, the max a landlord could raise RENT controlled units was 7%/yr, then it changed to 4% per year. and only in 1992, did it change to 60% of CPI, which has basically been <2% per year. the rent control laws keep getting worse for landlords not better. there are a few poster here who say landloards knew about rent control and chose to buy anyway so they should dtick to the rules. What about someone who bought in 1980, when they were allowed to raise 7% per year, and then the rules changes to <2% per year. That is a big financial hit. And even those who bought in 1991 expecting a 4% rise per year have been hit too.
if someone was charging $1000/mo in 1991 and expected a 4% annual increase, they would expect to get $2704/mo by 2014. instead, at 1.5% annual increase, they can only get $1452.
Meanwhile the market rate rent is more like $4500
All the rent controlled units are by definition years old. Many seem to have deferred maintenance. Won’t they eventually become uninhabitable?
You can’t leave your tenant in a dump. He can sue you and ask to be relocated at your expense. And he would be right to do so. You can be angry at the situation, but you cannot forgo your responsibility as a landlord simply because you see it as unfair.
Just to inject some reality into the numbers being cast about, for SF per the 2013 Census ACS:
– $61k median household income for renters
– less than a third of renters have household income of $100k or more
– nearly a third of renters have household income less than $35k
– 20% of all households in SF are renters with household income less than $35k
– more than a third of all SF households are renters with household income less than $75k
– $1491 median rental housing costs (rent plus utilities)
– less than 30% of renters pay more than $2k/month in housing costs (rent plus utilities)
If you want a system that enables “low income” and “middle class” people to rent in SF, then I think we have one. Just look at this data.
Yeah, I know the system has problems, is “unjust”, can’t last forever, we can and ought to do better, etc; but seriously, these prescriptions being offered on SS only work if you either boot more than a hundred thousand people out of town or find a huge amount of new tax revenue to shovel to owners of rent-controlled property.
And neither of those things are going to happen without a much larger social realignment than tweaking local rent control laws.
SF’s rent control can only be ended by statewide ballot. If leaving to SF voters, the city will become 100% low income in a few more decades.
Is it nice to have a city of 100% low income folks?
Jake, really good numbers.
These illustrate two key points. First, you can see why RC tenants are in a panic mode about Ellis and other trends. In the vast majority of cases, they would simply have to leave SF, and likely move pretty far away, were they to lose their RC rent. The stories about wealthy people sucking up a RC unit are fiction, or the rarest of anomalies at best. Second, the numbers show how intractable this is. It would be astoundingly disruptive to hundreds of thousands of people to enact any meaningful changes to RC. Not going to happen; not in a town where 2/3 rent.
True that a state ballot initiative is the only plausible procedure to change this. But there really isn’t anyone who would reasonably front the millions of dollars it would take to have a snowball’s chance in hell of getting it passed, and no smart money would front that kind of cash given the long odds of it passing in a state that leans heavily democrat. Like I said above, any landlord who doesn’t like this should just resort to Ellis’ing out his tenants – best you can do other than just living with it (and, let’s be honest, most landlords make a killing in SF not only despite RC, but because of it as it results in higher rents overall).
There is very little turnover in the rental market in SF. This is the main reason behind high prices. To give an analogy, in a market where 1 product is available to 5 potential buyers, the market will adjust to satisfy the top 1 buyer.
Anyone who moved more than 4 years ago has no interest in moving out whatsoever. Very few will do. This means that landlords who make a killing are mostly market-rate landlords. The others are just watching the train pass them by.
How many of those at the lower end are in housing not covered by normal rent control (SFHA, BMR units of the last 15 years, etc). I assume that number would be in the tens of thousands.
Well, yes I am well aware of this. Rent control amounts to an annual $3B to $4B direct subsidy for tenants by landlords. THREE BILLION DOLLARS means roughly $10,000 per family in SF. Probably more than the median property tax bill. Anything that will put this into question will create a TON of pain because there’s is no way any replacement system could come close to this scale.
Will there be displacement? Absolutely. Heart-breaking, unjust, with class / racial impact, a lot of resent, many many Chronicle articles, massive evictionfreeSF protests and many new homeless folks among low wage SF dwellers.
But the more we wait, the harder it will be. One day this dam will burst and do we want to do this when the dam is at 1/2 capacity or full capacity? We know it WILL burst, and doing nothing about it is irresponsible. Just like we can say today that people in 1990 or 2000 were crazy to keep this going, people in 2020 will say the thing of us today. We just do not have the guts.
Anon – here are the numbers for SF Housing Authority: total of 6532 public housing/HOPE units with about 12000 residents, and another 8,652 units housing 19,102 residents in privately owned housing subsidized by Section 8 vouchers and the Section 8 Moderate Rehabilitation program. So of the total 209,000 renter-occupied units in the City (2006-2010 ACS), only about 15,000 or 7% are in public housing/section 8. So all of Jake and JR’s comments are still relevant.
It’s good to see the myth of the freeloading RC rich guy get refuted with numbers. Sure, there are still some wealthy people under RC, but not as many as people think. And the data can’t distinguish when people came here – many of the wealthier renters could very well have moved here in the last 3-5 years, so they are still under rent control, but would be paying near-market rents.
There are plenty of well to do people under 80s-90s lease originating rent control. More than “some.” Those numbers show that yes, plenty of non-wealthy are under rent control. But the numbers do not obviate the wealthy who are under rent control. Less than 1/3? There could be quite a lot of gaming souls, there, within that less than 1/3. Enough to solve lots and lots of problems! And “– less than 30% of renters pay more than $2k/month in housing costs (rent plus utilities)” — that doesn’t necessarily obviate the well to do RC gamers either.
To add to this, the census also indicates that 15.9% of tenants pay gross rental payments of less than 15% of their Household Income, 13.3% pay from 15%-19.99% of their Household Income and 12.2% pay from 20% to 24.99% of their Household Income. While obviously many of these tenants are not rich, there are more than a handfull of “mythical” rich tenants subject to rent control.
agree. its much more than a handful of >1.5x above median households benefitting from rent control. At least 50,000 units. 50,000 units going market rate would have a huge impact on the market
You forgot to add BMR units under the city’s BMR program. I would assume that would be at least another 3-5% of units, which totaled with the other numbers that you threw out account for more than half of the low income folks in Jake’s numbers. So it looks to me like the VAST majority of folks benefiting for rent control are not the poor.
Let alone early 2000s -originating leases, which are also good as gold in numerous SF neighborhoods that weren’t as desirable 10-12 years ago.
Sorry, anon, but “plenty” and “more than some” don’t mean anything. Jake provided good numbers, from which we can surmise that most of those covered by RC are low to middle income. I also don’t understand the notion of “gamers’. Beneficiaries of RC – poor or rich – are not “gaming” anything – they are simply using a system that was set up to prevent displacement caused by rapidly inflating rents in the 1970s. There certainly are criminals who violate the Rent Code by charging sublettors more than what covers the rent (so they are gamers), but the rest are fine upstanding citizens 😉
More importantly, as some of the more cogent commentators pointed out, there is no easy way to extract money from the wealthy beneficiaries of RC to “solve lots of problems”, without possibly kicking out the families who rely on rent control to stay in their homes. That is the central problem with those who want to abolish rent control – they don’t provide any good ideas for mitigating the significant impact it will have on a large number of existing residents.
Also, feel free to drop the pedantic “sorry” when conversing. It has no place in this type of discussion. Sorry about what? Like, “sorry,” the Dutch use, meaning “excuse me” ? that’s sort of applicable. Otherwise, with the English meaning of the word, no, as you’re clearly not sorry but relishing an opportunity to tell me I’m wrong. But you are in fact incorrect as these margins remain wide, and your notion that wealthy RC utilizers are obviated with these figures remains unsupported.
But you are wrong and katdip is right.
no, i am not, as that less than 1/3 or so of the total rental pool who make over 100K contains many thousands. why is that difficult for you to understand, futurist?
Why do we need to mitigate again? People who signed leases from both sides were consenting adults. Landlords knew they could be trapped by more stringent renter protection rules (at least this is one of the arguments repeated many times here). Similarly tenants know a good situation doesn’t last forever. But what justifies wanting to shield one population vs the other against a change in the rules? Is one side of the lease co-signers a protected class? As I said they are adults and as adults do not need any special treatment.
landlords may have known about rent control, but they probably didnt know that the laws would get worse for them over time, with a continual decrease in the amount they could raise rents and being sued for trying to sell their buildings, ellis their buildings, do an owner move-in, etc
Yes, precisely. And it is highly hypocritical for rent control advocates to claim repealing RC as unfair. After all if laws can change one way, they can change the other way. But rent controlled is an entitlement and tenants are reacting pretty irrationally whenever the pendulum swings the other way (unfair!).
No one provided good ideas for mitigating the significant impact that abolishing slavery had on slave owners, but it was still the morally correct thing to do.
Yes, because wealthy landowners are just like slaves and renters unable to afford market rents are just like slave owners. Maybe you’d get traction with that in a Tea Party district somewhere in Kentucky but I don’t think you’ll find it’s a politically advantageous analogy here.
Just calling it like I see it.
do you often suffer these delusions?
besides, the morally correct thing to have done 150 years ago was to mitigate the significant impact of slavery on the slaves. Freeing them was a necessary first step on a very long road.
And many people from Jefferson to Lincoln proposed ideas for mitigating the impact of abolishing slavery on the slave owners. Most of the slave owners didn’t want to end their ‘peculiar institution’ and reform their ‘way of life’.
Property owners are like slaves? Perhaps the most absurd post I’ve ever read on this site.
Slavery is a bit excessive indeed…
But I agree the general idea that tenant entitlement amounts to an ownership interest in a property they do not actually own. And the latest laws the Supes tried to push went further into this direction. The Ellis eviction punishing compensation actually amounted to profit sharing: if the (greedy) landlord empties a unit for the purpose of selling, then tenant advocates said it was perfectly natural that tenants would be compensated through a massive windfall. That didn’t fly of course, but landlords still have to accept legalized extortion on many other levels.
At the same time, I know a lot of tenants that don’t work, airbnb, travel the world and enjoy a jet-setter bon-vivant lifestyle while there landlords work like dogs to support a losing investment. What’s that called?
That’s called a fabrication, but at least you took it over the top.
I said that. Jake provided numbers which could indicate that within this nearly third there are 10s of thousands of wealthy rent controlled renters. Whether or not you like my “gamer” term, as in “gaming the system” is irrelevant.
Your gamer reference indicated to me a value judgment about the beneficiaries of rent control, that somehow they are cheating the system. I was just trying to indicate that they are playing by the rules of the game. The more important question is what to do about them. Tax them? Make them register with the city? Abolish rent control and let the other 2/3 sink or swim? I don’t agree with SF Fronzi that we should ignore the ramifications of such a major policy change. I actually think time will actually make it easier – more old people on rent control will pass on, more non-RC housing will be built, and economic conditions may temper the rise of prices. Who knows, a good earthquake could do more to address housing prices than getting rid of RC!!! I’m not saying that there are no rich RC takers, but flushing the system entirely to address their alleged parasitism may not be worth the price.
i agree that flushing the system is not a good option as 2/3 may be in real need. However, means testing and flushing out 33%, or even 20% of more well to do RC tenants could have a big impact on tempering the increase of market rate rents as well as RE prices, or God Forbid, even help to lower them
The rental churn rate for SF is in the range of 12-16% rate per year over the past 25 years or so, according to the US Census data. On average nearly one percent of that is just population growth. If you pick a rented unit at random the odds of it being up for rent in the average year for a very long time has been 11-15%.
Here is the data for SF per the 2013 Census ACS:
– 49% of renters moved in 2010 or later
– 82% of renters moved in 2000 or later
– 94% of renters moved in 1990 or later
By comparison,
– 16% of homeowners moved in 2010 or later
– 48% of homeowners moved in 2000 or later
– 84% of homeowners moved in 1990 or later
The turnover or churn rate for renters is almost exactly three times the rate for homeowners on all three time intervals. All this data is from Table B25026: TOTAL POPULATION IN OCCUPIED HOUSING UNITS BY TENURE BY YEAR HOUSEHOLDER MOVED INTO UNIT.
The median rent paid by long term renters is generally lower than for more recent renters. Here is the data for SF from 2013 ACS Table B25113: MEDIAN GROSS RENT BY YEAR HOUSEHOLDER MOVED INTO UNIT.
$1,297 Moved in 2010 or later
$1,175 Moved in 2000 to 2009
$1,015 Moved in 1990 to 1999
$0,932 Moved in 1980 to 1989
$0,936 Moved in 1970 to 1979
$0,877 Moved in 1969 or earlier
For example, the difference between the most recent segment (Moved in 2010 or later) and the oldest (Moved in 1969 or earlier) is $420/month.
If we take these differences and multiply them by the size of the segments we can get a crude estimate of the total difference (insert qualifications about median vs average and propagating errors, wave hands).
Here is the data from the two tables combined:
48.9% $1,297 Moved in 2010 or later
33.3% $1,175 Moved in 2000 to 2009
11.7% $1,015 Moved in 1990 to 1999
03.7% $0,932 Moved in 1980 to 1989
01.9% $0,936 Moved in 1970 to 1979
00.5% $0,877 Moved in 1969 or earlier
The result is about $96/month-unit which is about $260 million per year. That is total for all rental units in SF. How much of this is due to rent control vs other causes? Who knows, but it is obvious that longer term renters are paying less, not that anyone needed all this data to believe that, but here it is.
One final thought: this doesn’t tell us that rent control is saving renters $260 million/year, but it does give us a good idea of the scale of the potential savings. I’ve done some additional sensitivity analysis calcs to gauge this which I won’t bother people with, but they give me confidence that this is a fair number give or take a factor of two plus. That means that I believe there is a savings being realized in the range of $100-700 million per year, but not billions.
It might be billions after you did something like what happened in Boston/Cambridge 20 years ago: quickly phase out rent control, investors come in with $ billions, evict many people, fix up properties, neighborhoods get wealthier, and rent goes up for everyone.
Can you post the source of your data? Maybe people can help you verify that no gross mistake was made.
SF median rent is $1,297 Moved in 2010 or later? How many believe your data?
SF median rent is $1,297 Moved in 2010 or later? Is this for SF metro area or the city of SF? We know that many cities in the SF bay area has no rent control and many non-rent controlled city has much lower market rent.
My apologies, I copied the CA rents instead of the SF rents. Here is the ‘correct’ data and the Census source at namelink. The rest of the data is correct. The power and danger of spreadsheets, quick to propagate bs, quick to clean it up.
48.9% $1,840 Moved in 2010 or later
33.3% $1,396 Moved in 2000 to 2009
11.7% $1,053 Moved in 1990 to 1999
3.7% $859 Moved in 1980 to 1989
1.9% $893 Moved in 1970 to 1979
0.5% $730 Moved in 1969 or earlier
The difference is that the amount is about $800 million instead of $260 million, or about $300/unit-month. So using a two-plus wag, I estimate between $300 million and $2 billion. So, maybe billions.
And this data is all for San Francisco County, not the metro area.
My old back-of-the envelope calculation brought me to 3 to 4 billion. In my calculation I also took into account the fact that removing rent control would lower MARKET rents, since the market is made at the margins and is distorted by ridiculously low turnover. Dwellings would redistribute between current SFers and a number of outsiders waiting for units to become available.
Another thing: how come the median rent for people here than less 4 years is less than 2000 when current median rent runs in the range of 3600-3800? Are these rents per capita or per unit? If you have 2 person per unit your range would change accordingly I think.
This Census ACS median rent data is per unit. You can follow the link if you want more detail about US Census methods. They have extensive disclosure in the pages linked from the table notes.
Notice that 49% of renters “Moved in 2010 or later”. That is huge number of rentals (>100,000) in the four years 2010-2013. You might want to rethink your claim that there is a “ridiculously low turnover” or at least recalibrate what that means. It is a lower turnover rate than say for all of California, but is a 12% annual turnover “ridiculously low”?
I am quite certain that you are wrong about the effect of removing rent control on the average and/or median rent. I and others have posted studies that explain why it will increase average rents for both rent-controlled and non rent-controlled units. You’ve been repeatedly challenged to refute those studies and never have.
1 – there is no detail on what portion of these 49% are market rate and which ones are rent controlled units. Landlords of newer dwellings have been cashing out big time lately. Big market rent increases create turnover, but freeze turnover in the rent control realm. That’s not proof of anything of course.
2 – the figures speak of householder but are these numbers per unit of householders in these units. I cannot reconcile the 1800 with the curent median market rent of 3600. Or have rents doubled in 4 years? I recall some softness in rents during the crisis, between 2008 and 2010, followed by a big ramp-up in rents from 2011 and 2014. A 1800 vs 3600 difference is still something that needs more analysis.
3 – Please note that I have not said average rents would go down. I have said that MARKET rents would go down (in upper case precisely because it is a very important distinction). With low turnover, and 10 new people moving in for 1 unit created, the market is made at the upper crust. Now if you open the market overnight, people will pay what they can afford. A big chunk will leave (those making less than 70, 80, 90K?) while the pent-up demand will be satiated by the massive shuffling of people based on the trifecta that defines a market: location, quality and means. Yes, AVERAGE rents will mechanically increase mostly through the suppression of low rents, but the satisfied demand will lower market rents.
In any case, a very interesting discussion. Thanks for bringing all these numbers to the plate.
Yes…the laws of supply and demand do not apply because there is a study! Paid for by tenant advocacy groups! Performed by one of the mere 6% of economists who believe that rent control does not increase rents. It is clear to me now that this study has changed everything. When supply increases in a market and demand remains stable, OF COURSE prices will rise. How did we miss this?
Average vs Market. Today a big chunk of tenants pay less than market rate. if they have to pay this market rate, 1) these tenants will see their rents go up 2) market rate will go down because people will distribute according to pure demand/supply/means. Overall I think averages will go up due to the disappearance of cheap rent for 10,000s of tenants. This is a rent control critic speaking, btw.
I don’t disagree, but shouldn’t the entire point be to drive down market rents? Not speaking to San Fronzi, that is clearly their position.
This discussion boils down to perspectives. If you are a landlord with the relatively rare (<20%) tenant who has been in the unit for decades (or the even far more rare such tenant who is "wealthy"), then the situation rightly seems grossly unfair as applied to you as it so favors the tenant. If you are a new tenant paying $2-4000 for a modest unit in a building purchased long ago by a landlord paying a pittance in Prop 13 property taxes, then the situation rightly seems grossly unfair as applied to you as it so favors the landlord. The latter describes a greater proportion of rental situations, maybe 40-50%. The remaining 30% or so are fairly balanced with neither side really complaining about the equities.
So we have landlords of less than 20% of renters who desperately want to change RC and would have enough at stake to sink money into the effort, maybe 10,000 individuals in a city of 800,000. Don't see it happening.
Why is it grossly unfair to the $2-4,000 renter? They looked for a place to live, found it and agreed to pay the asking price. The landlord purchased the building, took on all the risk that entails (earthquakes and other property damage, possibility of a degrading neighborhood, possibility of rents falling instead of rising, new legislation changing their break even point, etc) and agreed to maintain the units. Tell me again why the landlord shouldn’t be compensated when they make a good investment? And why the renter is “screwed” when they pay the agreed upon sum to borrow a property?
its not unfair. the landloard is the owner and should be able to charge whatver he chooses and the market will bear. thats how pricing works in all goods and services markets, except healthcare (which is a mess)
I’m not saying that either side’s positions are objectively unfair. I was pointing out the subjective perspectives of the various interests. Main point is there are far, far more “aggrieved” tenants than there are “aggrieved” landlords, and with a pretty tiny slice of the population feeling “wronged” because of rent control, and a very sizable slice believing either that they benefit from it or that landlords are ripping them off, rent control isn’t going anywhere.
This seems exactly right to me. It is a minority interest issue. Moral or not, most people are not landlords (let alone landlords who are seriously damaged by rent control) or among those renters feeling especially squeezed by paying slightly artificially more than they would be in a free market. Contrary to Fronzi’s suggestion that regular homeowners all care deeply about this issue too out of some “don’t infringe on my inviolate property rights even in the abstract” sensibility, rent control is not a “voting issue” for me and I personally don’t care about it much at all, as a non-landlord and non-renter. (It’s even less relevant to me since Piedmont doesn’t have rent control or any non-negligible amount of non-SFH stock anyway.)
Prop 13 and the huge subsidy I pay to make up for the shortfall from people living in much bigger houses with much bigger wealth is something I have a much bigger personal interest in and that bothers me much more. But that, too, is probably a minority interest that is unlikely to get sufficient support from the electorate (hurts new owners; huge handout to longtime owners; renters largely don’t care except in the less direct sense of being unhappy with its withering — but indeterminate– effect on the tax base).
Your insertion of “rare” is not valid. why apply rare to tens of thousands, in a city of just under 900k?
Also your “maybe 10,000” number? Totally made up.
true. Jake’s numbers show that 1/2 of all tenants pay from 40 to 70% of the post-2010 rents. This is huge!
The goal of rent control apologists (rent control advocates dressed in economist clothes) is to minimize the impact of rent control. If the impact is minimal then there’s no victim and therefore RC is moral. A majority voting itself cheap rent to the detriment of a small minority is NOT moral. It might be legal, but you cannot claim the moral high ground when 1) there’s no means testing and 2) the burden is supported by a small minority that has no choice (getting out of a lease is harder and harder).
And morality is the battleground of RC advocates. The evictionfreeSF crowd will ride on a “wolf vs sheep” platform, trying to attach RC to the bandwagon of other progressive ideas. But if this morality is proven to be a fallacy, then they lose all credibility, which is the first step of a switch in opinion. Yes tenants vote to defend their right, but if we can show that THEY are the wolves in this story, many tenants will decide to sit out the next votes and give the upper hand to proponents of a more moderate balanced market.
No one believes that landlords have no choice. You can always sell the building and all landlords are sitting on huge profits. That is the fatal flaw in your argument.
And, of course, one can always Ellis the place too.
For those landlords with long-term RC tenants who are frustrated at the “subsidy” they are forced to provide, for the life of me I don’t understand why you don’t just Ellis and sell. Reap the big gains, and then if you want to stay in the landlord business w/o rent control, just buy a non-RC unit somewhere. Much more practical than hand-wringing over the social injustice of sitting on millions of dollars worth of real estate that you can’t rent out at market value.
he did make that up. its much higher than 10,000
10,000 is about right.
About 200,000 rental units in SF.
Per Jake’s numbers, about 20% have a very long-term tenant, thus paying way under market rent = 40,000 units.
Assume 4 units per landlord = 10,000 “aggrieved landlords.” (Probably lower as I’ve read that only about 30% of SF rental units are “mom and pop” owned, and I’m assuming 100% are).
Got a different number? Wouldn’t change the key point, which is that there is a tiny percentage of SF residents (i.e. voters) who would be highly motivated to change the status quo, and huge percentage of people who feel they benefit from the status quo. It’s not going anywhere.
Even landlords who have had a rent controlled tenant for 4 years are stuck with a rent at least 25% less than current market rate. Even the ones collecting market rent today know that they’ll be on the losing side on the next leg up. Long term (20years+), rent controlled landlords always lose out. Apart from the ones that do not need the money, no landlord in his right mind would let an occasion to repeal rent control pass. Also regular homeowners are very nervous at any rules that restrict what they can and cannot do with their place. Add to that the market-rate tenants who must be a bit angry to be the ones making up for the ones with cheap rent. Market rate apartments are open to the real demand and since supply is artificially restrained by RC, the price pressure is most painfully felt by this pool of tenants.
The potential pool of voters is not that small. It’s becoming larger every year with every new techie coming to the city.
RC needs to be repealed at the state level. It’ll be overly expensive if people need to forbid rent control city by city. We just need to study how Massachusetts did it and analyze California smartly.
Re: the pool of voters. I am not a landlord. I am also not an anomaly, plenty of local colleagues feel the same as I do. San Francisco is moving slowly back towards the center and many who are currently paying market rents are frustrated by the state of affairs. Rent control will be ripe for the picking at some point in the next decade, whether at the local or state level.
Oakland and Berkeley also have rent control. Some cities in southern California also have this historical baggage. There should be enough support from California voters to repeal rent control.
Right now, a super majority of the California voters do not know what is rent control. 80% of bay area resident do not understand how rent control works in San Francisco. Once educated, most folks will vote to repeal rent control. SF will be a perfect example to show people how terrible rent control can become.
maybe 10,000 landlords, but i was referring to number of tenants who probably shouldnt get RC due to their financial status. also,. long term for me would be anyone in a unit for over 5 years.
i know its not going to happen anyway, but small tweaks like making it 100% of CPI instead of 60% and means testing would go a long way to make it more ethically sound. right now, it is a transfer of wealth and an undue burden on the owner vs. the renter, especially when the renter makes more money than the owner
The easiest and most immediate fix for RC is 100% of CPI — it is difficult to fathom riots stemming from that. If so, I would be the first to organize a “Landlord Lives Matter” march. Frankly, I am pretty sure I can get my current RC tenants to march WITH me.
Painting, bathroom tile work being done today. Hardwood flrs. in by Thursday, custom moulding and millwork, handcrafted fireplace mantel, bar this week. Final install of home office cabinets this week or early next week. Still need to get gas fireplace insert. Replacement of electrical panel and prep rewire for entire house TBD by electrician availability in January.
no, JR Bob Dobbs. There are something like 172,000 rent controlled units in SF. I’ve seen that figure numerous times, I think SPUR had it? How many tenants exist within those units? Take that, and multiply it by Jake’s less than 1/3 of tenants make over 100K. What is that 32 percent? 30 percent? Regardless, even if you simply allot two tenants per 172000 units, you get 344K. Multiply that by 30 percent, you get 103K making over 100 grand a year.
Then take that 103K and apply it to the move in dates. You have your pre 2009 folks, 33.3 percent, paying enviable rents and 34K strong. You’ve got 11.7% 1990-1999 paying very little, certainly, and they’re 12K people. Then you’ve got your ’69-89 crowd, 5.6%, paying peanuts, and they’re 6K in number or so. All told you’ve got 52,000 people being substantially subsidized by small landlords. And I rounded down. I didn’t use your 200K units figure, rather SPUR’s 172K. I also took Jake’s “less than 1/3” and called it 30 percent, not 32 or whatever.
Not sure what your point is.
172,000 rather than 200,000. So the number of landlords who really have a reason to gripe about rent control is even smaller than I had estimated. Just strengthens the case that rent control is not going anywhere.
“Rent control is not going anywhere” is not what we were talking about. Funny internet arguing tactic, there. Didn’t think you were one of those “shift argument every time shown incorrect” type netizens. Oh well.
Anyway, apply it to units, not people. 172,000 units total. Even at just one person per unit, that’s 172000 units with 30 percent earning over 100K. So 51,600. Now you have 1/3 of those for 17,200 paying 2009 and earlier rents, 6000 people paying 1990-1999 cheap as heck rent, and 2900 folks paying 1989 and earlier peanuts.
That’s ~27000 units. Way more than your 10K, and everything rounded down. Come off it already.
And imagine those 27K units, those units alone, being marked to market. This is a separate thought, but of course it would. It’s a strong case for means testing of only those units. Fraught with problems, difficult as anything to pull off, but that 27K would dwarf the current the housing construction pipeline.
The only way I can see it getting done is something like, “PROP F: “F” THE RICH FROM TAKING HOUSING AWAY” — or similar.
Oh, I see. You’ve confused landlords and tenants. I had estimated that the owners of about 40,000 units would be in a situation where they would be really upset about rent control. Assuming 4 units per owner resulted in 10,000 mad landlords. Your number is 27,000 units (rather than 40,000) so the number is probably a little fewer than 10,000.
Yeah – more than 10,000 tenants live in the units, whether it is 40,000 or 27,000 units. Probably about 50,000 – 80,000. Thus, there are way more pro-RC voters than anti-RC voters. Which is why RC isn’t going anywhere.
by the way, I confused them too from your post.
My bad – I use shorthand sometimes to avoid having to write multi-paragraph legalese posts!
That was to say, “this is a separate thought, but of course it would be an argument against rent control”
OK. And agreed. In the context of “not enough to repeal rent control,” then yeah 10-15K landlords, who are losing out on even let’s say 1K a month for their 27000 units for a 324,000,000 annual subsidy — all totally dumbed down numbers, probably way higher than that — isn’t gonna do it.
All the landlords would have to vote as a bloc. And there would have to be a campaign that captures the rank and file newly arrived post 2009 renters too. Then they’d have to vote as a bloc.
That said, those are two groups who are righteously pissed off and maybe not that hard to reach. A message of, “Stop the WEALTHY from HOARDING HOUSING” could hypothetically fly. The rub would be the newly arrived. They’d mostly be young and not inclined to vote.
As housing price keep increasing, all the bay area cities are having the same affordability issues. Burlingame, an affluent suburb city, is now facing the threat of rent control policy. Fortunately their city council has concluded that rent control is a bad option.
This proves the need to have a statewide ban on rent control. Some people will try to copy SF rent control and export it to all the cities in California. I think rent control ban will have a good chance of California voter support.
With some Burlingame residents concerned rentals are growing too expensive in the city, the City Council held a study session and pubic forum on housing policy options to try to figure out solutions to some of these issues.
Councilmembers noted Monday night that rent stabilization, or rent control, that some have suggested might actually make matters worse. At the same time, the city is working on updating its housing element plan that hasn’t been touched since 1969, which can be considered a roadmap to future growth and development of the community, said Mayor Terry Nagel. Recently, as a means of promoting affordable housing policies contained within the Burlingame Downtown Specific Plan as well as the city’s housing element, the city recently issued a request for proposals seeking qualified developers interested in partnering with the city to develop city-owned parking lots F and N, located in the southern portion of downtown Burlingame, with affordable housing.
“This has been an issue that’s been around for some time,” said Vice Mayor Ann Keighran. “I think rent control is the issue — I’m very familiar with the issue in San Francisco. It will benefit the current people who are renting, but not the people who are trying to find a place. The economy there becomes stagnant in regards to rentals; it takes forever to build anything in San Francisco and people move down the Peninsula when they don’t have a place to live in San Francisco. … We are now in a cycle where the rents have increased; that’s the way economics works.”
Here is my political consultant advice to anyone wishing to eliminate rent control – worth every penny you are paying for it:
a) a statewide initiative is the only possible route. There are more voters who benefit from RC (at least in their minds) than not in any local RC jurisdiction. Not true statewide.
b) it would need to have a grandfather clause. Current RC tenancies are unaffected, but once they end, the unit is forever non-RC. This, of course, is BS policy, but it is the only way to secure passage as it blunts the “throwing grandma out of her home of 50 years” argument which is very effective to the 98% of voters who really have no dog in the hunt.
c) exempt units of, say, 20 or more units. That would blunt the “sponsored by fat-cat landlords” argument. [nb: may have a shot even without this clause, but it would make passage a lot less difficult]
d) position it as a “homeowners’ rights” initiative because most voters never read past the title
e) propose it on an off-cycle election, where a more conservative voter turnout is likely
Still need to find someone to pony up about $20 million to usher it through the election cycle. Good luck! I’m voting Yes.
In 2008, California Proposition 98 would have repealed rent control:
2,677,456 (61.6%) No
1,675,213 (38.4%) Yes
Lost by just over a million votes. CA has about a million rent control units.
Most people that do not live in locality with rent control don’t understand or care very much about it. Put another way, why should the residents of the central valley or San Diego or San Jose care if SF and LA want to have rent control? And how likely are they to dislike it enough to vote in the overwhelming numbers it would take to counterbalance the SF and LA vote and repeal rent control?
Massachusetts has done it. It is a state pretty similar to California.
Maybe people need to be educated about SF rent control so that both homeowners and renters can wake up to the fact that rent control hurt both homeowners and tenants. It is a huge threat to every city without a statewide ban on rent control.
OK, I’m ready to be educated on how rent control hurts homeowners who live in, and have no intention of ever renting out, their (only) home. (I’m hoping for something better than speculation about general economic spillover resulting from renters who are wealthier on average and trickle-down from more profitable landlords.)
Also, please explain how rent control in SF and LA causes sufficient harm to homeowners (and renters, for that matter) who do not live in SF and LA, such that they should vote for a statewide ban on rent control (which does not exist where they live) out of self-interest.
shza is right – it is a very, very hard sell to convince the homeowners that comprise the bulk of voters that RC is bad when it has zero effect on them. This worked in Mass. through a statewide ballot only because of good marketing and a combination of factors. First, 1994 was a very “get the government out” year in elections. Second, In Massachusetts, property tax receipts are shared, with high assessment areas sending money to low assessment areas. And rent-controlled units (mostly in Boston and Cambridge) were given lower property tax assessments because of the low rents they received. Thus, this was sold to Mass. voters that they were subsidizing wealthy Boston and Cambridge. It still passed only barely, 51-49.
Very clever. That is the kind of pitch you need to make. Very hard to do that in California because most just won’t care, so why change something that seems to result in older, poorer people being kicked out of their homes by wealthy landlord corporations. And with prop 13, there is nothing like the argument put forth in Mass. as wi why it does matter to everyone. A statewide initiative is the only possible route to eliminating rent control, and that would have very low odds of passing.
Massachusetts had about 42,500 units under rent control when they voted to end it. That was less than 2% of the residential units statewide and was all in the Boston metro area. CA has about a million rent control units, which is about 7% of residential units. The repeal of rent control barely passed in MA.
As much as I wish it were otherwise, I would agree that rent control is here to stay. Frankly, I think it’s more likely that the tenant activists will keep pushing more and more punitive provisions onto the ordinance until the whole thing gets bounced by the courts.
If I were to work towards any sort of “solution”, I would suggest a proposal to allow CPI annual increases and a 100% pass through of bond payments. In addition, the city could forgo property tax increases on sales so long as no OMI or Ellis evictions take place and the original tenants remain in place. Of course, this will likely never happen either.
Maybe the city can allow rent controlled property owners to pay zero property tax to compensate for the under-market rent? This will motivate owners to keep rent controlled property instead of condo conversions?
A tax rebate or voucher or discount sounds like a crazy idea but is exactly the sort of way that rent-controlled housing could be protected. Supervisors have tried every “stick” based approach to the issue, when what is obviously needed is a carrot. Having the city directly fund a subsidy to private landlords (a voucher payment) is unlikely to pass muster, so the compensation needs to be in some non-cash format that will not show up as a negative column in anyone’s budget.
Issuing a “tax-paid” voucher that would be fungible and able to be sold to a 3rd party would create this sort of non-cash payment to landlords.
Freakonomics 101. It’s a way for the costs shared more widely of having the city rely on privately-owned subsidized housing to maintain an economically diverse city population. And there are no new taxes, so no one can point any fingers. There are just fewer taxes for everything else.
My comment is not completely clear – I mean that for the city to issue checks, real dollar payments to landlords is unlikely to pass muster, but if they issue vouchers to use in lieu of tax payments, that would be a more politically plausible way to compensate landlords.
You gotta be kidding with this “no one pays” nonsense. What existing programs would you cut to fund this ‘carrot’?
Rent control has been around for decades. It is already priced into the affected properties, including their prop tax assessments. There is no economic or moral reason for the rest of society to pay these property owners to remain property owners. If they don’t like it, they can sell. Free market econ 1010101.
Rent-controlled housing is protected by the repeated votes of the citizens and the approval of the courts.
Yes, rent control is priced into the prices of affected properties. As is the ability to use the Ellis Act. So when tenants whine about being evicted, they have no one to blame but themselves. They knew what they were getting into when they first rented their unit.
However, if we really want to discourage evictions ( and I’m not completely sure that we do) then we need to think of some sort of alternative to the present situation. With or without rent control, SF will be an entirely different city within a generation.
You’re missing the point. My proposal would give landlords an incentive NOT to Ellis people NOT to buy people out, it would be a reason to stay in business and continue provide the benefits of subsidized housing to a non-means tested population of people selected by the length of their tenancy. My proposal is much better reason not to Ellis act tenants than a dubious new transfer tax or relocation payment scheme, which as has been observed, won’t hold up in court or at the ballot box.
Even without your handout there are only a few hundred Ellis evictions per year. That’s way below 1 in a hundred. Not much reason to spread the money out to reduce the already less than 1 in a hundred odds of an Ellis eviction instead of concentrating it to help the few hundred displaced.
A precise target to help needy people makes more sense and is more likely to get votes than for every landlord to line up for a small handout.
And where are we going to get this money? And how much money?
pity,
Good point on the relatively small number of Ellis evictions. How about helping those individuals with monies collected via a rent tax on rents paid in excess of some arbitrary amount. The rent tax would be paid by the landlords. This would help spread the burden amongst all landlords, not an unlucky few.
I don’t know why non-landlords would be any more likely to vote that than for repealing rent control. Additional tax subsidies to landlords (many of whom are already getting massive tax subsidies via Prop 13, and all of whom could just sell their properties for potentially huge gains or use Ellis) doesn’t sound like an easy proposition to sell. I wouldn’t vote for it.
Giving a Section 8-style subsidy to impoverished renters (as someone suggested above) seems like a fairer, even if the outcome is functionally the same.
If you’re a renter and your landlord gets a tax voucher, what does it change directly about your financial life?
Who has to pay for it? No one. Not directly. That’s why it works. It’s why our tax code is so huge and opaque to the average citizen, but it is how things get done in other industries…
Everyone who pays taxes is paying for it, obviously. It’s a subsidy from non-landlord owners to landlords. The proposed arrangement does not strike me as particularly opaque, particularly when juxtaposed against the status quo (as it would be in all the “vote no” materials).
It seems fairly obvious that to the extent anyone votes out of self-interest on this issue, only landlords would prefer for the public at large to pick up a tab that is currently borne by landlords of RC-restricted properties only.
My point is not about fairness, obviously; but the context of this latter part of the thread has been the unlikelihood of any political change, and I see no reason why a tax subsidy would fair any better with voters than a repeal of rent control. In fact, it is easier to characterize it as worse for the large number of people who would be totally unaffected by repeal of RC (e.g., other homeowners who did not opt to purchase and rent RC-restricted properties).
The reason it is politically viable is because Rent Control properties are gradually draining out of the market with conversions, Ellis Act evictions etc. The adult conversation that isn’t being had is that, as a city we rely on private landlords to maintain sub-market rents to maintain a certain amount of economic diversity which, apparently, is perceived as a good thing.
So, rather than demonizing landlords, the discusson should be, “We want and need to maintain rent controlled apartments in the city. How can we do that in a mutually beneficial way that allows tenants to remain where they are, without unfairly asking a few people to bear all of the costs, AND without creating a new direct tax that everyone has to pay?”
My plan is called the “Protect Rent Control Proposition” and would help do just that. Carrots, not sticks.
Everyone pays by accepting cuts to programs that actually benefit them. In exchange for those cuts, there would be no direct benefit to anyone who owns or rents properties not subject to rent control. To the extent people empathetically value whatever gains to economic diversity might be attributable to lowering the incentive to Ellis (query the statistical effect on diversity that would really have given the number of successful Ellis evictions that actually occur), I suppose it’s good and democratic to allow voters to weigh that against the quality of their kids’ education or whatever’s in exchange. So points for elegance there. Personally, however, this fairly marginal and speculative “benefit” isn’t something value enough to want to fund it with cuts to anything else — particularly if it is to be accomplished by means of insuring someone else’s assumed risk.
On that last point, I can’t help finding your appeal to “fairness” rather provocative. Why is it “unfair” to ask someone to bear the costs when that person (1) bought the property at a market discount precisely because of that encumbrance, (2) bore the risk of a further ratcheting up of that encumbrance, based on historical precedent of precisely that, and (3) has nonetheless — on average — profited substantially (on paper) on the value of the asset)?
The other way is for the city to pay tenants the difference between rent controlled rent and the market rent. Tenant will pay the market rent to landlord, but the city reimburse the tenant with the difference between rent controlled rent and the market rent.
I am sure that everyone will love this idea.
I think this would actually be better since in addition to what soccermom’s proposal seeks to achieve, it would have the effect of raising RC rentals to market, thereby (in theory) increasing market supply and lowering market rent to the benefit of those renting non-RC housing. Of course, it would equally harm the owners of those market-rate/non-RC properties.
It still has the same political problem of changing the status quo to put a new cost on everyone for the benefit of fewer than everyone.
We can add a means testing for city rent subsidy. Only lower income and SF residents and workers can qualify. This way, the total cost will be manageable.
This will benefit tenants as well. They will have mobility. Tenants will be free to move around to the house of their choice, government subsidy will be attached to the people and not to the property.
The city will pay tenants the difference between rent controlled rent and the market rent for qualified tenants. Tenant will pay the market rent to landlord, but the city reimburse the tenant with the difference between rent controlled rent and the market rent. Tenants will be in power and the subsidized low income tenants will beat high income tenants since the payment is guaranteed.
This will be a super popular proposition with the tenants.
Here’s the proposition ballot language. This gets votes:
“Shall the city provide a tax rebate voucher to landlords who preserve existing rent controlled tenants?”
YES
NO
Also, do you know how hard it is to Ellis a building? It’s really easy.
We can add a means testing for city rent subsidy. Only lower income and SF residents and workers can qualify. This way, the total cost will be manageable.
This will benefit tenants as well. They will have mobility. Tenants will be free to move around to the house of their choice, government subsidy will be attached to the people and not to the property.
The city will pay tenants the difference between rent controlled rent and the market rent for qualified tenants. Tenant will pay the market rent to landlord, but the city reimburse the tenant with the difference between rent controlled rent and the market rent. Tenants will be in power and the subsidized low income tenants will beat high income tenants since the payment is guaranteed.
This will be a super popular proposition with the tenants.
Currently tenants are trapped in the rent controlled units for the lifetime. If they move to a place better suit their needs, they will lose the low rent from many years of sacrifice to live in an undesirable rent controlled place. The 10 people family will not need to cramp into a 1-bedroom unit and suffer the below standard living for their lifetime. At the same time, wealthy rent controlled tenants will be required to pay market rent on their own fund and cede their low rent to the people in need.
This will solve the biggest misery of the rent controlled tenants. Please forward this proposition to every supervisors and the mayor. I think Campos will be the biggest supporter of this idea. It is a truly working solution that both progressives and moderates can accept.
We already have programs similar to what you describe. They don’t have enough money to handle all the people that qualify. There is no chance they will get the needed funding in the foreseeable future.
It is very easy to imagine better structured programs than our form of rent control.
Funding all these imaginations is very unpopular with voters and elected officials and that makes them little more than fantasies. Why indulge yourselves by thinking these will be “super popular” when they clearly are not?
I actually like the idea of the tax credit for landlords, as long as it is scaled to the length of ownership and tenancy. It makes no sense to subsidize someone whose either just bought a building (they knew the cash-flow possibilities when they bought it) or whose tenants turned over in the past 1-5 years – they are enjoying near-market rents and limited tax increases thanks to Prop 13, in addition to the increased value of the property. Longer term landlords with longer term tenants also enjoy the increased value of the property and long-term tax benefits, but they face the biggest difference in rents below market rate, and have the most to gain by selling or Ellising. It could be structured to incentivize long-term holds and stable rents, and discourage speculators and flippers – maybe by saying that you have to hold the building more than 5 years to get the break, and if you sell or Ellis within another 5 years you have to refund part of the tax break.
I have no idea what kind of budget hit this would make – the long-term holds on buildings means they are paying far less in taxes than more recent purchases. It essentially gives an incentive for landlords to hold on to properties and not be actively hostile to longer-term renters. It may be that there are only a relatively small number of properties affected. Of course, it doesn’t deal with the means-testing problem, but I don’t see a way to get at that other than scrapping RC for a direct government housing-subsidy program, which is never going to happen.
The length of ownership should be irrelevant. If we want to preserve rent controlled housing, the same tax treatment should be available to the new buyer and the long term holder. Especially the new buyer – if the alternative is an Ellis Act termination of tenancies. What should matter is the tenants rent compared to the market rents. As long as the low rents are preserved, the subsidy is being preserved, and the landlord deserves compensation. The city recently proffered its own formula for calculating the difference between historic rents and current rents in the Ellis Act relocation payment amendment that was recently shut down by the courts.
The point is to save Rent Controlled housing stock. It shouldn’t matter when or who bought if that rent controlled tenant gets to stay put at the same price.
How do the small number of Ellis evictions lead you to think we need to “save Rent Controlled housing stock”?
In the 30 years since the Ellis Act was passed San Francisco has never had more than 384 Ellis Act evictions in a calendar year. At that peak rate San Francisco would run out of rent controlled units around the year 2460.
The main societal and moral problems from Ellis Act evictions are that some truly needy people are evicted without sufficient support. The city, the state, and the federal government all have programs and funds to help, but they aren’t enough and there aren’t enough targeted specifically at Ellis act evictees. You want to solve some Ellis Act eviction problem, then get more money for housing and more of it targeted at truly need people, instead of the vast majority which goes to much wealthier home owners in the form of enormous tax breaks.
Is this just some scheme to shovel money to the lords of the land or are you actually interested in addressing the social problems?
The last thing that would ever happen in SF is a new tax credit for landlords. Never.
Might as well just put up a ballot initiative that reads: “Shall the City and County of SF write a check for $10 million annually to every residential landlord in SF?” Or “Shall the City and County of SF write a check to every residential landlord in SF for the market value of the building but let the landlord keep the building?” Those would have the same odds of passing as a tax credit for landlords. If you’re going to consider such things, go big!