In a move that shouldn’t catch any plugged-in readers by surprise, the weighted average asking rent for an apartment in San Francisco has dropped another 4 percent over the past few weeks and is now down to $3,700 a month.

While $3,700 a month isn’t exactly “cheap,” it’s nearly 10 percent, or $400 per month, cheaper than just four months ago, 14 percent ($600) cheaper than at the same time last year and over 17 percent ($750) cheaper than a 2015-era peak of around $4,450 per month.  The average asking rent for a one-bedroom in the city is now back under $3,200 a month, having peaked at closer to $3,700, as well.

At the same time, offers of complimentary rent and cash concessions are on the rise, driving effective rents down even more.

And having jumped in April, ticked up in May, and then jumped again in June, the number of apartments being listed for rent in San Francisco has since spiked.  In fact, there are now over 150 percent more apartments being advertised for rent in the city, including one-off rentals as well as units in larger developments, than there were at the same time last year, all of which points to even more downward pressure on both asking and effective rents.

Comments from Plugged-In Readers

  1. Posted by two beers

    Speaking of which, the “3 months/12 weeks free” complimentary rent camel recently poked its nose under the concessions tent on craigslist..

    • Posted by EBGuy

      Wow, I almost did a spit take! Who ever heard of such a thing? Looks like REITnation is not going down without a fight.

      • Posted by Sierrajeff

        I’m surprised they can offer those terms under their loans – it’s possible that they got lender approval, but I don’t yet see lenders being that cooperative with / sympathetic to landlord borrowers. So my guess is a property manager is going a little outside the boundaries in an effort to try to fill the building…

        • Posted by James

          Lenders don’t have a say in rents. Landlords can adjust down all they want. If they don’t cover their monthly, they are on the hook for it but the lenders have nothing to do with it.

          • Posted by SocketSite

            That’s not entirely true. While lenders are certainly interested in timely payments, they’re even more concerned with the condition of the asset which secures the loan. And a covenant tied to leasing and/or rents could trigger a technical default.

          • Posted by Tony Timpa

            Editor, please give us an example of a lender declaring a loan into default because rents were lowered too much.

            Or just moderate my comment if you don’t like it.

          • Posted by Neighborhood Activist

            LenderS have no control over rents.

            But many commercial mortgages require the borrower to maintain a certain DSCR – Debt Service Coverage Ratio, which is basically a property’s net income (income minus expenses) divided by the cost of debt service (mortgage payments.)

            If a property dips below its required DSCR, lenders will usually put the borrower on warning, and monitor the financials closely. If the DSCR does not improve within a reasonable period of time (that depends on the lender and the circumstances, could be a few months to a year or maybe more) the loan can be declared to be in default and the lender can demand immediate repayment in full. This doesn’t happen often but it does happen, particularly when the borrower doesn’t show signs of improvement. Default can occur even if all debt service payments are being made.

            Landlords can do whatever they want with rents and specials to try to maximize revenue and occupancy, but the DSCR is what the lender cares about.

          • Posted by Sierrajeff

            Virtually every loan I do (8- and 9-figure) requires landlords to rent at agreed rates (albeit sometimes as an expression of “fair market”), absent lender approval.

          • Posted by AJ

            This is for commercial properties like retail or industrial. A single family home or conventional mortgage, A technical default provision doesn’t apply. Also, no lender wants to take a property back right now.

        • Posted by two beers

          Well, that’s interesting.

          And here all along I’ve believed, or have been led to believe, that the sole cause of the high cost of housing in San Francisco is an insufficient supply of luxury condo towers.

          Could it be that there are factors other than simple supply & demand that make landlords reluctant to lower their rates?

          It’s almost as if people of high economic classes promote a false rationale to justify economic activity that benefits them at the expense of people of lower economic classes.

          How curious!

          • Posted by Kyle S.

            You’re being a sophist and mischaracterizing the market-based argument. Lenders don’t impose a ceiling on rent. So if the luxury towers are full, the non-luxury towers are happy to soak up the excess demand. The lenders—if the property owners even have any—are happy to make the extra rent if they can.

  2. Posted by Pablito

    $3,700 a month. So if you spend 1/2 your income on rent, you need to be taking home $7,400 a month.

    Figure Federal, State, local taxes eat up about half your check. That means you need to earn about $177,600 per year to afford the average apartment?

    • Posted by NOPAslut

      Not even in SF is half your income going to taxes. However, I don’t see any way a single person could afford a $3,700 apartment making less than 100k (and likely they need to be making much more.)

      With that said, isn’t scenario (which I call the Detroit affordable housing model) exactly what NIMBYs want?

      • Posted by jimbo

        i dont see how anyone making belwo $100K can afford more than a studio, or a room in a 3bdr house. $2000/mo seems like max affordability at $94K/yr salary *$8K/month) . of course there are those in long term rent control where its a differnt ballgame

      • Posted by jimbo

        for someone making >$150K/yr (assuming salary, not cap gains), almost 40% goes to taxes. I agree that you need above $150K/yr (pre-tax) to afford a $3500 apt at 50% of your income. But who the heck would pay 50% of their income on rent? why not just move to a cheaper neighborhood or daly city/SSF/ San Bruno or Oakland? or get roomates. Its completely financially ignorant to pay 50% on rent

        • Posted by Kyle S.

          Moving to any of those “neighborhoods” means spending more on car maintenance, gas, and taxi rides. In the city, I just walk or take Muni. And I don’t feel isolated in a suburban bubble.

          • Posted by jimbo

            i wouldnt want to live there either, but would prefer it than paying >40% on rent

          • Posted by Kyle S.

            Clearly enough people were willing to make the other choice to drive rents up to the levels they are now falling from.

        • Posted by Brahma (incensed renter)

          Someone making greater than $150K yearly has all kinds of opportunities (on top of taking compensation in ways that would be taxed as capital gains) to reduce their taxable income. Various think tanks publish studies all the time about this and the number of people who actually pay “almost 40%” to taxes is pretty small.

          • Posted by jimbo

            i clearly need a better accountant

          • Posted by Kyle S.

            By definition, all of the compensation relevant to this discussion (which is “percentage of income paid as rent”) would by definition be taxed as income. Short-term capital gains are taxed at marginal income tax rates, so anyone hoping to use stock-based compensation to pay their rent will pay the same taxes as if they has received straight cash.

    • Posted by SocketSite

      Keep in mind that the weighted average apartment has 2.4 bedrooms (when counting a studio as having one).

    • Posted by Neighborhood Activist

      Landlords typically won’t rent to you if the rent represents 50% of your gross income. The requirement used to usually be no more than ⅓ of your income could go to rent, but I think many landlords will go to 40% now. I don’t think too many would go much above that. I wouldn’t, that’s just too tight and creates too much risk of the tenant not being able to pay.

      Taxes usually end up being closer to a third of gross income, maybe 40% at high incomes. I don’t think anyone is paying 50%.

      • Posted by Brahma (incensed renter)

        I’ve been operating under the assumption that landlords won’t rent to you if you aren’t bringing in enough money to cover the rent with 30% to 40% of gross income as well. But when you look at the actual data (scroll down to the section “PERSISTENT AND GROWING AFFORDABILITY CHALLENGES”):

        Meanwhile, 10.9 million renters—or one in four—spent more than half their incomes on housing in 2018. After several years of modest declines, the number of severely burdened households increased in 2018, by 155,000, reducing the total improvement since the 2014 peak to just 483,000. Some 72 percent of renters earning less than $15,000 annually were severely burdened, along with 43 percent of those earning $15,000–29,999.

        Emphasis added. Those are nation-wide numbers.

  3. Posted by April Taylor

    It’s still obscenely high. 10 percent off of $4,000! If you are lucky for a tiny place. And a slumlord cause they feel robbed they are not getting the $5,200 they got before!

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