Vicious Cycle: How Long Can SF’s Renters Continue To Live Beyond Their Means?

Nearly half of San Francisco’s renter population is living beyond their means, trying to stay afloat in an increasingly hostile rental market that shows only moderate signs of waning, according to industry experts and U.S. Census data.

38.7 percent of San Francisco’s rented units — or about 82,103 units, are occupied by renters forking over more than 35 percent of their income for housing, according to recently released Census data. An additional nine percent — 19,072 — of rented units are paying between 30 and 34.9 percent of their income toward rent.

Industry experts and city officials agree that paying more than 30 percent of gross income for rent is not an economically viable way to live, in the long run.

“San Francisco suffers from an affordability crisis,” District Nine supervisor David Campos said.

“We need to talk about this problem, which is not being discussed, right now.”

Rental vacancy rates too have reached “emergency” levels according to Ted Gullicksen of the San Francisco Tenants Union. Any number below four percent — the city’s rate is about 2.8 percent, according to Census data — make available renting options very expensive, and hard to find, he said.

What the vacancy numbers don’t account for is price of available units. The small number of units available could, theoretically, cost $3,000 or more — well out of many middle-income household’s price range, Gullicksen said. The realistic vacancy rate for a minimum wage earner is closer to zero, he said.

San Francisco’s Never Been Cheap

San Francisco has historically been an expensive place to own and rent property. Right around the turn of the century, about 28 percent of San Franciscans were paying more than 35 percent of their gross income for rent, according to Census data. Only seven years later, before the global recession began, that number increased by about four percent or 8,000 rented units.

Unlike the first dot-com boom, which was characterized by evictions in the rental market, this time, record rent increases are suffocating the market for low and middle income earners, Gullicksen said.

City officials recognize the complexity and urgency of the problem — and that the lack of affordable housing for low and middle income residents leads to other problems.

“The quality of housing is an important element to maintaining good health in the city,” Cyndy Comerford of the Department of Public Health said.

“Most of the things that keep us healthy aren’t health care.” Quality housing — meaning housing that doesn’t present immediate health risks from such factors as lead paint, or broken heating — is an important part of keeping city residents healthy.

“As people are becoming displaced because of high rents, it disturbs the social cohesion of communities,” Comerford said, “Stability of the home has a lot of positive effects on childhood health, community, and personal well being.”

The regional economy also is affected by the approximately $1.4 billion in cash that’s paid to property owners who live outside county lines. That’s money that would otherwise be spent on local businesses, Gullicksen said. Annually, the city’s rental property generates about $4.2 billion.

The market didn’t reach a fever pitch until 2012, said Laura Gray of Paragon Real Estate Group, when “all of a sudden on January first, rents skyrocketed.”

Throughout the first nine months of 2012, those seeking to rent experienced incredible competition for units, as well as competitive bidding on the few available, she said.

But, a few weeks after Labor Day, the market slowed down — noticeably, though nowhere near 2008 levels, Gray said.

“After that — and still — it’s very much an owners market,” Gray said, “And they’re still able to insist on favorable lease agreements including no pet policies and others considered favorable for landlords.”

Gray added that in 2012 she rented two identical units 20 feet apart — one in August, the second in September — with vastly different results. Renters in September would not pay the August prices, and Gray said she struggled to come within several hundred dollars of the August price, which she called “huge.”

At the height of the 2012 rental craze Gray noted that she was renting 400 square foot studio apartments — without parking — for $2,400 a month.

Officials Unsure — Or Silent — Regarding Solution

There isn’t a clear solution to the challenging housing question. Economic changes are one possibility, but industry experts and city officials weren’t sure what such changes would look like.

Judson True, spokesman for District Three supervisor David Chiu, said that creating affordable housing through the housing trust fund is one option, as well as increasing the viability of secondary rental inventory like in-law units — often plagued by legal and safety considerations. True also said that temporarily halting condo conversion would help.

Campos explained that — as a city — it’s a problem that needs to be discussed and acted on “right now.” Campos’ district includes the Mission, an area where five and a half minimum wage jobs are necessary to rent a two bedroom apartment, according to a recent DPH study.

Truly affordable projects need to be the city’s priority, Campos said, and it’s important that such developments are incentivized — and that the city works with the developers to do so.

Although many have criticized the recent spate of development projects as catering only to the very richest, the hope is that the projects will shift demand away from built out neighborhoods, said True.

Supervisors Chiu and Campos are currently rivals in the state assembly’s 17th district election in 2014.

Local legislation is the most viable route, according to Gullicksen. The state government is dominated by special interest groups, he said, and the real estate industry is one of the very largest contributors to elected official’s campaigns.

The SFTU and other tenant groups say they are developing a ballot measure for 2014 to protect the community — and there are several options on the table at the moment.

However, , there isn’t a single solution to providing affordable housing, a concern obfuscating the city’s long term vision of itself. Affordable housing is an issue that continues to divide city residents along battle lines of power, money, and property — buttressed by an American dream couched in private buses, silicon, and software.

Mayor Edwin Lee did not return calls and emails requesting comment.

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  • cedichou

    There is something wrong with using the threshold “30% of income” to define sustainability (“Industry experts and city officials agree that paying more than 30 percent of gross income for rent is not an economically viable way to live, in the long run.”) What makes it viable in the long run is not what share of your income goes to renting, but how much is left of your income after paying rent. So if you rent at $3,000/mo and make $9,000/mo, then you pay 33% (unsustainable!) but you still take home $6,000/mo after rent, enough to play.

    So yeah, rents in SF are high. But this 30% metric is meaningless. Look at it this way: if it is not viable “in the long run,” then it will correct without taking any action. There’s no need to look to “officials” for a “solution.” If there is a rent boom that is not sustainable, then it will burst. Here’s a solution for you.

    The problem is that of increasing rents and how it displaces middle class. True’s claim that ‘halting condo conversion” is a solution is BS: there’s a moratorium to stop condo conversion for new TICs until 2024. The only thing that stop people from Ellis acting is the hope of condo conversion. Take condo conversion away, and you just get more Ellis, and fewer tenants’ units, and more upward rent pressure.

    Rent control is part of the problem, by the way. Why do people jack up rent as much as they can when a unit gets on the market? Because they won’t be able to later. So “unsustainable rents” are not a bug, they are a feature. Keep’em tenants moving. And the side effect is that there is a stronger upward pressure on rents: fewer units get on the market (tenants locked in a low rent won’t move) and the open units participate in a race to higher rents.

    Solution: building more units (on the supply side) and having the city subsidies rents for low income families. Ditch the rent control that has failed spectactularly at controlling rents and ends up protecting as many google employees in the mission as working class families. Quote: “The city’s last comprehensive research, undertaken in 2000, found that one-fourth of households in rent-controlled apartments earned more than $100,000 a year…” http://www.nytimes.com/2012/02/17/us/san-francisco-rent-control-and-unintended-consequences.html

    • disqus_e4qPyvtwW2

      i’m totally with you on many of these points but how do you think rent subsidies should work? different neighborhoods have different costs of renting, i.e. subsidy would no doubt be higher to keep someone in the mission vs excelsior. I’m not sure this would work to keep diversity of incomes in neighborhoods which is something the city is interested in doing

      • cedichou

        You just give a blanket $1,000/mo (or whatever is necessary to keep people in place, or some means tested amount) to those who qualify. It will go a longer way in some neighborhood than others, true, but not sure it’s a problem. Or if it is, you could use one of the many rent prices maps that are craigslist-based or trullia-based or whatever.

        Right now, rent control does not discriminate renters (everyone gets it, facebook employees or cab drivers) and hurts disproprtionally the 30% of mom-and-pop landlords (if you have two units and one of them is occupied by a long term tenants, you’re out of luck). So some landlords help out with keeping the city diverse, and some do not. I’d rather see some property tax that assessed to everyone and redistributed to low income tenants.

        • disqus_e4qPyvtwW2

          yeah it’s definitely tricky. I mean, people who view rent control as a way to stabilizing neighborhoods from aggressive change will probably not see this as a solution since it would still drive households away to less desirable places. On the other hand, maybe rent control being abolished might lessen those extremely high rents. not sure to be honest! manhattan has both limited rent control and is very pro-development but that doesn’t seem to have made that particular place any more affordable.

  • Max A. Cherney

    That’s cool you don’t get it. Here’s one research paper the Census Bureau released a few years ago that explains why it’s a useful threshold http://www.census.gov/hhes/www/housing/special-topics/files/who-can-afford.pdf

    • Hector P

      What didn’t he get? All that paper detailed was the institutional history of the 30% rule, and in particular how the rule was developed for low income families. Cedichou’s point stands.

    • cedichou

      Well, it shows that its a threshold that has been increasing over time (from 1/6 to 1/5 to 30% in 1981). My guess is that as productivity increase for other expenses (decreasing their cost) but as housing stock does not, this ratio will keep increasing. It also shows that this is a nationwide guideline, that may or may not apply to SF.

      Anyway, my point is just: if rents become too expensive in SF, then people won’t rent in SF. At some point a couple years back, real estate price became too expensive and people could not afford it. It crashed. There is no need for a “solution” for something that will fix itself by the way it is defined. if 38% of income is unsustainable, then it won’t sustain. What’s the problem?

  • Hector P

    and yet, SF had an average ABOVE the state-wide rate of unoccupied dwellings (http://tinyurl.com/m8o374k). Could it be rent control? Several articles in the NYT (http://tinyurl.com/lug4fse) detail this. Personally, I think the Upton Sinclair quote, “It is difficult to get a man to understand something, when his salary depends on his not understanding it,” should follow every quote by Ted Gullicksen ever printed. Actually, it should be tattooed on his forehead.

    • oorfenegro

      None of those 70,000 units that are under construction or will soon be open by the end of the year will be unoccupied, and none of those units are under rent control and most large apartments in SF have a 90 plus occupancy rate.

      • Hector P

        First, there are 4,000, not 70,000, units under construction (http://tinyurl.com/ldnymsc). But my point is that something in the neighborhood of 5 percent (the difference between the vacancy rate of 2.8 and the unoccupied rate of 8.26) of dwellings are empty and not in the rental market (and so not figured in vacancy rates). That’s around 19,000 units, year in and year out. At an average of $2,700/month in rent, that’s over $600 million that greedy landlords are losing every year. Why would they do that? What could it be?

    • oh you stop it

      I wonder how many of the vacant properties are tied up in REITs that went a little sour in the credit crisis?

    • verso2

      Hector: Do you know of any units held off the market by disgruntled landlords? I don’t, and, oddly enough, no one has to my knowledge, ever come forward to claim that they were doing so. If you look at the Census data on this stat, you’ll find that it’s likely that a lot of the units “vacant” are vacation housing rented via VRBO, Air BnB, and others–they are categorized as “vacant” by the Census Bureau (recent Chron articles have discussed thousands of units in the City that are rented to vacationers)–as are pied-à-terre units owned by the wealthy but rarely occupied (I know of a couple of these in North Beach myself). Others are currently for rent or sale, or have been rented or sold but not yet occupied. After all, it would be crazy for a landlord to forgo $30,000 a year income on a $2500 a month apartment (while paying all the expenses of upkeep, insurance, and taxes on it) just because it would be under rent control (with rent increases matching inflation, but no more) until the unit turned over again (as they often do in this town) and he/she could rent it at full market rate again.

      • Hector P

        1. Personally, I know of two, including my next door neighbor (empty 6 years).

        2. So I did look at the Census. From the 2012 ACS (http://factfinder2.census.gov/bkmk/table/1.0/en/ACS/12_1YR/B25004/0500000US06075) – it turns out my estimate of 18,000 was spot on (see below); just under half of these are the VRBO, etc., leaving 9689. I expect that were it not for rent control, some of those vacation rentals would reenter the normal rental market too. Anyway, check the link, they split out for sale, rented not occupied, and other categories. See http://tinyurl.com/owqn339 for a national analysis. It lists a number of reasons, but the fact remains that I know of two, a coworker knows of another, and the cited article further details another. Also, the “other” vacancy rate is higher proportionally in SF than other, non-rent controlled areas, and so it is difficult for me to conclude that it is unrelated to rent control. This is a real thing.

        3. “with rent increases matching inflation” Wrong. SF Rent Board only allows increases up to 60% of the CPI increase (Regulations Section 1.12)

        4. You’ve missed the mark on incentives and rent control where the tenant controls tenancy. Rent control reduces turnover.

        Rent control is a dumb, regressive policy; it is NOT progressive. It’s just that it benefits people who think of themselves as progressive.

        • verso2

          Hi Hector:
          I’d be interested in your assessment of your neighbor and his/her situation and why they decided to keep a unit vacant. When I’ve seen such situations in the past, they have been elderly owners with a vacant flat up- or downstairs, the owner has long paid the mortgage and so has low expenses, and doesn’t feel up to dealing with tenants and would rather forgo income. However, in this situation rent control doesn’t apply (to a unit in a 2-flat building with a landlord in the other flat). (I don’t see your cited stats on the 2012 ACS…) However, the pied-a-terre situation is important in all the luxo housing being built. Moreover, you neglect the fact that no rent control applies to any unit built after 1979. (And sorry, you’re about the Rent Board regs.) About point 4: Rent control does reduce turnover. That is its function. That doesn’t mean there isn’t turnover, however. In any case, the argument for rent control depends essentially on the same values as Prop. 13 for landlords–preventing market gyrations from destroying communities. Of course, the same market-loving arguments could be applied to Prop. 13–but, funny, I’ve not seen that happen. I think rent control is a reasonable response to the problem of housing and community in a highly impacted city. Like any other policy–Prop, 13 again as an example–it has shortcomings. Further, I would argue that too many community groups have pursued short-sighted attempts to get a very few of their members into homeownership rather than pursue more progressive plans to expand community-controlled rental housing.

          • verso2

            Further: I decided to look into the question of how the Census Bureau determines whether homes are vacant. My background here comes from looking closely into official stats for research purposes and finding that, when you push them, they are often shaky or based on good work that’s outdated and may no longer apply. So, no matter what your viewpoint, it makes sense not to just take them as real (as, sadly, journalists usually do). It turns out that the CB decides that a unit is vacant if no one responds to its surveys (the unit having been chosen by random); a certain proportion of these units are visited in some sense by a worker–although how they then determine occupancy the CB isn’t saying. It’s also worth noting that some people believe the CB is “massively” overstating the number of vacant homes in the US: see http://www.calculatedriskblog.com/2011/02/lawler-housing-vacancy-survey-appears.html. At any rate: I wouldn’t take nonresponse to a survey form to indicate much of anything–even if that’s all the CB can afford to do.

          • Hector P

            There are three census products I’m aware of that report a vacancy rate, and for the type of research I do (I’m an econometrician), I use ACS. The article you cite was mostly concerned with issues of CPS/HPV survey, a small sample quarterly survey. I use the ACS because it gives massively more reliable estimates at a county level (see https://www.census.gov/housing/vacanciesfactsheet.html for details). If you look at the ACS questionnaire you will see the various categories, and if you look at the results you’ll see that see that the majority of vacancies are tabulated from survey responses. Fyi, I’ve been using census data in research settings since 1980, so I have a better than average sense of how to use their data. I can’t see how you can conclude that the vacancy numbers “indicate much of anything” unless you’ve overlooked the fact that non-responses are only a minor part of vacancies.

          • verso2

            Hector: Thanks for the correction on the units covered (I thought later that I should have checked this again–a warning that I should have been more thorough, as I think this group was covered by rent control in the early 1980s through amendment after the original law was passed).

            I’m curious about your neighbor. How much income do you think he/she is giving up by not renting? And, of course, this strategy is available only to those owners who do not need the money, or who are willing to give up, say, $30,000 or $40,000 a year in rent because rent control could mean that they would get only, say, $30,000 a year in the third year of a lease, rather than $33,000. You say that his/her motivation is fear of “problem tenants”–but that would still be the case if rent control were repealed. After all, owners of post-1979 housing have to deal with problem tenants, too. In this most market-oriented of societies, the spectre of masses of rebel landlords forgoing hundreds of thousands of dollars in rental income (while still paying all expenses, keep in mind) is, frankly, absurd.

            As regards the ACS, my summation of its methodology comes from the summary page under “Data Collection Method”: “Most vacant units are not identified until the third month of data collection (the first personal visit). In that month, a 1-in-3 subsample of all addresses for which responses have not been obtained are visited by field representatives.” This method ids the universe of vacant housing, which is then divided further into categories based on assessment of the reasons for the vacancy. We do not know what “field representatives” actually do when they visit the sample of nonresponsive addresses. Peer in windows? Ask neighbors? How do they deal with interior units not visible from the street? Etc. One suspects that, frankly, a certain number of “non responsive” addresses are owned (or rented) by folks who, like your neighbor, just don’t wanna, and are not vacant at all.

            Actually, I recall that keeping families in communities was a Prop. 13 argument (don’t force Mom and Pop to move far away from family support because their home’s value has risen beyond their ability to pay property tax). I’d be happy to take a look at possible subsidation plans, but am considerably skeptical about them. Rent control in effect makes pre 1979 housing a species of public utility, and while landlords may grouse about it, and about the (real) problems that come with being a landlord (I’m sympathetic with them in many respects), it’s noteworthy that pre 1979 rental property sells just fine in San Francisco. Again, promarket advocates (as in, let all rents rise to market, and too bad if someone can’t afford it–I’m skeptical that subsidies would be adequate or would last long) always conveniently forget the massive tax subsidies that landlords receive as a group (Prop. 13, plus 15/30-year depreciation writeoffs on property that has actually been massively appreciating, etc.).

          • Hector P

            Rent control, because of the distortions it introduces, always includes provisions in addition to those that govern what rent can be charged. These typically increase the risk associated with a rental investment. My neighbor, who intends to sell his property (for three years he’s been saying he was going to sell it next year, but seems to be riding out this appreciation wave), said he doesn’t want to risk tens of thousands in legal and relocation fees, have to wait months for a vacant unit, in addition to the normal risk of a problem tenant. My sense is that because of the adversarial environment created by rent control, rent control drives tenants and landlords to do destructive things. Why is it that tenant/landlord horror stories are so much more common in SF than they are in, say, Santa Clara county? And I never said masses of landlords, because it clearly is a small percentage of people who, like my neighbor, are at the margin taking units off the market for limited periods of time

            No need to repeat what the reference I posted detailed. In addition, over the years I’ve found the Census professionals I’ve spoken with to be highly professional and competent. They would never do something like taking a non-response and calling it something else. In fact, for ACS they often conduct multiple interviews; they check with neighbors; they check with mail delivery; they check with phone records; they go to considerable lengths to identify type of vacancy. The overall non-response rate is something like 4 percent. If you’ve ever done a survey, then you know that is phenomenal. Not only that, the ACS is not an enumeration – it is a survey and an estimate, meaning those non-responses are modeled. To think that CB vacancy numbers don’t mean anything tells me you don’t really understand CB culture and methods.

            Finally, a couple of things.

            -85 percent of SF rental stock predates 1979, so the post 1979 units only have a minor impact on the market.
            - Prop 13 was in the first election I voted in (I voted no). If the communities argument was a part of it, perhaps I don’t remember because it is such a dumb argument. The initial impact of Prop 13 was simply a capital windfall to incumbent owners proportional to the house value. The net benefit to those who have purchased property since 1979 has likely been nil. (There is no annual subsidy to Prop 13). So the windfall gave wealthier households and businesses a greater benefit. Personally, I favor progressive tax policies, not regressive ones. Second, Prop 13 reduced mobility, not only allowing people who wanted to stay in their houses, but also leading people to stay in houses they would prefer to move from (counties that allow you to transfer your basis from another county are limited).
            -I don’t know where you get the idea that direct subsidies are fragile and temporary. Snap (nee foodstamps), Section 8, and on and on have been around for decades.

            I’m not some neo-liberal ideologue (I think that is what you mean by pro-market). It’s just that rent control is a wasteful and inefficient public policy. And worse, I think dumb such policies have contributed to the political shift right, actually encouraging the kind of naive libertarianism that seems to be on the rise.

          • verso2

            Hector, Thanks for taking the time to response. I do appreciate it.

            1. We started with assertions by some people that thousands of units were being held off the market due to rent control. I’ve argued that that’s unlikely, though there may be a few marginal cases of people doing so. Even in your neighbor’s example, he’s forgoing tens of thousands in income to possibly save a similar amount (or perhaps much less).

            2. Of course, where tenants have few or no rights to speak of, we don’t hear stories of conflict. Landlord interests roll over everything. But also, I sense that a lot of the conflict stems from the tsunami of money flooding San Francisco; if Wall Street is an ugly place, so is a highly impacted real estate market. Des Moines, not so much.

            3. I’m glad to hear that the CB is as thorough as you say. Since they don’t report these methods on the pages I looked at, I was frankly skeptical. Not all agencies and groups proffering stats are as righteous. Does the problem seem to be that others are imputing meaning to CB numbers that’s not given them by the Census Bureau? In this case, the vacant-rental-held-off-the market number seems to be units for which they can’t find a definitive explanation–an explanation for a residual, if you will. I’m reminded of a neighbor we had. She had lived in her flat since the 1940s, and went into a nursing home about 1982. She remained there 10 years before she died, but her (landlord) unit remained vacant because she insisted that she would return. After she died, the building was sold by her heirs. I wonder how the CB would have categorized it had it been part of their sample?

            4. I’m not sure what you mean by “(There is no annual subsidy to Prop 13).” Certainly those who have been able to hold onto property since 1976 or so have done well. But my old landlord bought a two-flat building in 1984 for $235K–and sold in 2007 for $1.3M. His property taxes were based on the $235 figure, plus some minor upward adjustments of course. That’s really quite a deal. It is true that Prop. 13 reduced mobility (that was part of the point, after all); as does rent control, as we’ve agreed.

            5. Are subsidies fragile? Section 8 housing has been massively cut since the early 1980s. The point about “community preservation” is that we’re not talking about just welfare for the poorest of the poor (ie, Section 8), but about much broader swathes of the city’s social structure. Any solution we consider needs to take into account the city’s role as a magnet for capital from around the world–and the potential for absolutely massive influxes of pied-a-terrre purchases by the world’s wealthy.

            6. I’m glad you’re not just a “neoliberal ideologue,” but I’m suggesting that housing in a city like San Francisco is a very messy business because of a constellation of difficult problems. Rent control keeps the lid on, but by itself is inadequate in an economic climate of rapidly accelerating inequality (if you happen to live in a city the world’s elites would like to “Aspenize”). Of course, many “naive libertarians” think they can ride of the coattails of the elites–and certainly a few can, but many will find out otherwise. (I know a number of folks from the earlier dot-com boom who felt that way–before they were kicked to the curb.) Meanwhile, it seems to be the reigning ideology among people on the make; but I don’t think it’s in the best interest of the vast majority of us, landlords and renters alike.

          • bippity

            keep the fight a flamin’ !

          • verso2

            bippity: Not a fight or a flame: Hector is a well-informed guy and it’s been interesting and worthwhile hearing his point of view. I’ve just been trying to keep up my end of the discussion as well.

          • Remy Marathe

            Stumbled onto this conversation. I don’t know Hector, but I am like his neighbor – I have a RC’ed 2 bedroom flat in my 2-unit building that I’ve kept off the market since my tenant moved out last year. (He makes about 5x what I do and he bought his own place).

            I expect I could be making $40k from it if I rented it. Yes, that is a lot of money to leave on the table. But I’m going to have to move my parents into that unit before too long, and I just don’t want to deal.

            So, until then, I’m just using the space and doing an occasional VRBO. It’s way more than I need but hey.

          • verso2

            Remy, that’s interesting. You do know that under SF’s rent control laws you could move out a tenant in favor of your parents? I realize that it would cost some money to do that–and if you’re planning on having your parents move in within a few months a might not be worthwhile, especially when you factor in time/trouble, etc. In any case, many owners would not be in a position to do that–they need the income from all the units they own to make mortgage payments and pay other expenses. So again, we suspect that many of the “vacant” rental units are in fact in the VRBO/Air BnB market; I suspect that of the rest, most are being held off the market to deliver an empty building to new owners, or, as in your case, the owner has a plan to reposition the unit in the very near future.

          • Remy Marathe

            Yes, I know I can OMI. That’s going to cost me $20k minimum and be a huge PITA. And god help me if the tenant i’m trying to OMI is elderly, disabled, HIV-positive, pregnant, what have you.

            Also, my time horizon is not months – it is years. I don’t see my parents moving in for 5 years, minimum. For all they know, they might never move in.

            But I need to keep the option open, and the current rent control ordinance gives me no reliable way to do that.

            It’s crazy. One or two people could rent out that place happily for 5 years or more. It could all work out. But SF doesn’t want it to work out.

            Yes, you can come back with more “but you coulds” but the point is that is just isn’t worth the hassle and risk to me. I have a job (gasp). I have kids. I volunteer. I have a life and goals I want to achieve and the possibility that some jackass could move in downstairs and torpedo all of that is just not worth a few thousand dollars a year.

            I’ll just take the tax deductions and a little bit of VRBO income instead, thanks.

          • verso2

            Hey, good luck to you, Remy. I suspect that it would be more manageable than you seem to feel (other people in the same situation seem to cope, after all), but it’s your decision. Hope it works out as you would like.

          • Remy Marathe

            Sorry if I’m taking it the wrong way, but I detect a whiff of condescension in your reply that I don’t really appreciate. Given that you’ve already demonstrated substantial ignorance of the rent ordinance and to whom it applies, your assurances don’t carry much weight.

            I’ve had rental units in SF for three decades now; I know exactly what I’m doing and exactly which risks I’m managing. I already know that it will work out as I would like, thanks very much.

            To be clear, this isn’t about me; it’s about SF’s rental shortage that everyone is so upset about. I’m just here to give you a real example of someone who has made a very rational decision to pull a dwelling unit from the rental market due to SF’s punitive laws. And I’m not alone.

            My downstairs unit would be on craigslist tomorrow if SF would simply give me the option to remove the tenant from my property when their lease expires. I don’t even care if I had to submit it to vacancy control in that case; I just want the peace of mind of knowing that I can recover my property if I need it for other purposes or the tenant turns out to be a nuisance.

            Do you honestly think that it makes any sense whatsoever that I don’t have that option?

          • Lisa

            I’m totally with you Remy. Especially with a pair of flats. It’s your home, you own it — goodness help you if you got a renter you did not get along with! There is virtually nothing you can do, particularly if they became a protected class along the way. Worse yet, now if you do an OMI on your building [there are a bunch of new OMI rules as of 2006 I think], that unit becomes the only one you can ever do an OMI on. So if you went to sell it, that condition [the golden unit, something like that, I don't remember what they call it] would come with the building.

            And of course the Rent Board doesn’t even allow you to make a different arrangement with a tenant — say a limited stay. Tenants are not allowed to sign away ANY rights. San Francisco law succeeds any other agreements. Sure, a tenant can SAY they will only live there five years, but if they change their mind, you have no recourse.

          • verso2

            Remy, it certainly seemed from the wording of your previous post that you were not aware of all your options as a landlord in SF. The original discussion keyed on to what extent the vacant units in SF were vacant because they were being held off the market because of landlord dissatisfaction with rent control. I think it’s clear from the discussion and evidence cited that most are “vacant” because they have been made into vacation rentals, they are pied-a-terres, or the landlord would like to deliver them empty to new owners, or similar strategic reasons. That doesn’t mean that a few people like yourself are not in a position to decide to hold units vacant for the reasons you cite. However, the economic cost of doing so means that there cannot be very many—mostly they will be people who are longtime owners or inheritors who do not have a mortgage and have low Prop. 13 property taxes. And, by the way, according to my tenants’ rights attorney, you do have that option; though, yes, there are costs and time involved. Over a five-year time horizon, most people would, I think, conclude that the income from the unit would more than repay any such costs, but perhaps you place a higher economic value on the hassle involved than most would do.

          • Remy Marathe

            You aren’t answering my question. Do you think the laws are in any way sensible?

          • Remy Marathe

            Also, when you say that units are vacant because

            “they have been made into vacation rentals, they are pied-a-terres, or the landlord would like to deliver them empty to new owners, or similar strategic reasons”

            Why exactly do you think that those options are more appealing to owners than having a regular tenant?

            HINT: It’s because of RC.

            In cities without RC, you don’t see nearly as much of this kind of behavior. Because it’s expensive and a pain in the ass.

            But RC tips the scale away from offering the units as regular rentals. Which ultimately hurts tenants. Which is the point that you don’t seem to get.

          • Remy Marathe

            I’m going to drop off this thread because arguing on internet forums is about the least productive use of my time I can imagine.

            You seem like a sort of reasonable and well-intentioned person, but honestly you have no idea what you’re talking about. It’s just incredibly annoying to be smugly told what my business is by someone who heard something from their lawyer friend.

            So, goodbye, then.

          • Hector P

            Sorry, but you are wrong, owner occupied two unit buildings are covered (assuming it was built prior to 79). If you’re going to defend SF rent control, you should probably be better informed about it.

            My neighbor has not rented because he does not want to “take a chance” – he’s afraid of problem tenants. It really is a combination of rent and ordinance issues.

            the original arguments for prop 13 had very little to say about community. They focused on poor and fixed income families. And prop 13 is bad policy for some of the same reasons rent control is. I’m not sure I know what you mean when you say “market loving arguments”.

            my larger point is that alternative subsidy policies could help more people for less money wasted in rent control.

      • ray

        I live in Noe and just there, every single homeowner I know – ones there for decades, mostly from moderate means, mostly retired – no one will rent their inlaws, or second apartments or even bedrooms. Even if they really need the money. The idea that they might not be able to get some crazy tenant out who lives with or adjacent to them, makes it not worth it. And, SF has laws like: one can rent to a master tenant who can rent out three other bedrooms in a four bedroom flat and get rid of any and all three roommates, with 30 days notice. No cause. But an owner with a four bed flat, if he rents more than one bedroom out, all roommates become tenants the landlord cannot evict remotely so easily: those tenants are under rent control. With laws like that, what owner would rent out a room or apt, if they can scrape together somehow their mortgage payment?

        • verso2

          Thanks, Ray, for the response. I’ve concluded from this discussion that withholding units from the market is more common than I would have thought. Even if we discount some of the withholding as being diverting potential rental units to more profitable markets such as tourist rentals (and thus they are not really “vacant” though they show up some accountings that way), it’s clear from the various responses that a number of people are worried abut the hassle of dealing with various tenant problems and conclude that they would rather not deal with it despite the potential income. Some of this has to do with non-rent-control protections, as you cite. And this makes sense from the examples: owners who themselves live on the property are understandably concerned about who they might be sharing their home with. I’d add, though, that this is not necessarily a San Francisco concern. Although SF tenant law is certainly tougher than many jurisdictions, there is usually some difficulty in officially evicting troublesome tenants, so in practice someone in, say, Des Moines, might well draw the same conclusion. Nevertheless, it’s clear that plenty of SF landlords draw a different conclusion–witness the proliferation of in-law units (and the recent discussion about legalizing them). The classic SF landlord position in, say, the Sunset or Richmond, is: “I want to rent out my in-law unit (to make some money): but I’m against my neighbors doing the same thing (because it would add more cars/parking problems, etc. to the block).”

    • PaxTayer

      Add to all this: rent control abuse. I know of people (first hand) who are subletting from others who have had their units for years under rent control. One couple rents a 2-BR in the Lower Haight for $1200/mo, because the wife’s friend used to live there, and they’ve been subletting from her…. for 6 years! This couple can afford to pay market price (both work in tech), but choose to hog the apartment.

      The City should have a reward system that rewards people who turn in rent control abusers.

      • mmathers

        1) A reward system for ppl who turn in rent control abusers would be great but at the end of the day, I’m pretty sure such shenanigans are a civil matter and not a legal one. The SFTU has no reason to track down these abusers so the only group that is being cheated directly here (and therefore willing to put up the reward money) would likely be the SF Landlords Association).

        2) Another way to fix this problem would be to transition rent control from an absolute gain to a means tested one (meaning that if you make over XXX/yr, you can’t enjoy the same rent control as an old lady on SS. SFTU should be happy here b/c it “protects the diversity of the neighborhoods” (whatever) and landlords would be happy b/c more units will be paying market rates. The catch is that you would need to prove your low income (privacy issues) to your landlord but over time, I could see this opening up more units as people wouldn’t “hoard” apartments as much.

        -mm

        • PaxTayer

          I like your means-based test idea. Have an upvote.

          Landlords check for means anyways when renting out the property; what’s wrong with an annual check?

          • verso2

            Other than massive bureaucracy?

            But in the first case cited, why doesn’t the landlord enforce the lease? It sounds like an illegal sublet, and it would be in the landlord’s interest to relet the unit at current market rates–which is the usual enforcement mechanism, and one I suspect that is generally quite effective.

          • mmathers

            If I was a commercial, multi-unit landlord with lots of rent controlled units, I would totally offer a “snitches get dinero” to all of my tenants. Hell, I would open it up to any maids, the mailman, etc.

            I can’t find the citation right now but I do recall reading that most landlords in SF only have a few units… thereby making such an incentive program harder to justify economically..

            -mm

            As far as the beurocracy is concerned, the burden would be on the landlord… who has an incentive to make sure that the data is in. They send annual notices of rent increase anyway but instead of having a number, they could show 2 or 3 (one subsidized, one un-subsidized, or one number in between).

            Now that I think about it though, one complication would be that it’s far easier to cheat the system to prove you don’t make income than it is to prove that you DO make income.

            In the case of proving you are poor: nefarious ppl would just NOT show the income from all roommates or NOT supply all of their W2s (if they have multiple jobs). I guess requiring a 1040 from all listed tenants would work…. and then offering an reward for snitching on your neighbors to find out if someone has unlisted subletters.

            While lots of people are in an illegal sublet situation now because their landlords refuse to allow their roommates onto the rent controlled contract (wherein they might inherit it), perhaps a rule forcing landlords to recognize tenants would be acceptable to both parties (landlord and tenant) if the rule ALSO forced the new roommates to supply income data.

            -mm

          • verso2

            But the point about bureaucracy is: who would go through all the forms and decide who did, and who did not, qualify? Given the variety of types of proof of income, it would not be just one form (1040s, W2s, but also–what about people with trust funds? well-heeled students? Or not-well-heeled ones, come to that)? That’s one of the problems of means-testing rent control or some form of housing subsidy, as Hector proposed earlier). It requires considerable bureaucratic effort–but if you go light on that then people just game it and it’s a waste of time. In the current situation, it is in the landlord’s interest to ensure that those who are leasing the unit do not illegally sublet–and I suspect most of them are quite good at that. The problems more often lie with landlords who refuse to add qualified new tenants to a lease (in a multiple tenant households).

        • ray

          Last year the city allowed third parties to police landlords who rent out as corporate rentals. So, the idea that it interferes with privacy rights of tenants to require those getting a landlord based subsidy on their rent, to show they actually need to get it, should hardly be an infringement of privacy rights. section 8 requires it for govt subsidy of rent. and, it could test for all the other tenant abuses, which now the city even allows – tenants to own an unlimited of their own real estate, have huge assets, have high income. If you’re concerned with freeing up apts, this would open up tens of thousands of apts. for rental

        • Ukin

          Great idea on making it closer to fair for the land owner. I know a man who bought a house outside San Francisco. He no longer lives in his apartment but rents it out on AirBnB to cover the cost of his mortgage. He can charge as much as he wants to charge for his rental units but his landlord is restricted in what he can charge.

          Take into account a major repair needed to the building. If the property requires a new roof or new stairs, the landlord is often put into a negative income for the property. Until the rental agreement between land holder and tenet becomes more balanced this problem will only get worse.

  • Troy

    The SFTU is developing a new ballot measure? Great. Be prepared for more Ellis Act evictions and other unintended consequences.

  • 403main

    Hey…..sorry but you all voted for this mess by electing shortsighted tenant union whores to the BOS.

    The restrictions you impose on property owners under rent control have driven rents up.

    Your limits on residential development have driven rents up.

    Ted Gullicksen is responsible for single handily driving rents up beyond the means of the average person. He and the rest of the poverty pimps who live off of low income people should be run out of town.

    Not everyone can afford to live in SF……try Solano county.

    Duh…..and further more…as much as you all would like to think private property in SF is “Your rental stock” …it’s still private property the last time I checked. If a owner is sick and tired of dealing with Ted and his ilk he/they/she have every right to keep their property off the market.

    You all complain about the cost of rents going up…but what about the cost of living in SF. Minimum wage is what! $11 bucks an hour…..free health care….23,000 public employees with HUGE….HUGE pensions and retiree health care benefits. Hello!

    Every time you turn around there is another new tax…fee…rate hike. $7 bucks an hour to park on the street…new higher tax on registering a vehicle in SF. Talk of paying to fees to drive downtown.

    Who are you all kidding…everything cost more in SF. If you can’t afford to live there…… move.

    I spend time in Florida I can rent a new 1500 sq foot 3 Br 2Ba house for $600 bucks a month and pay $25 bucks for utilities.

    Maybe the solution is to give folks relocation payments and ship them off to other states where they can live happily ever after .

  • 1MarianneD

    What would it take to get landlords or their heirs to lower the rents?

  • nicola graves

    My lease is up December 1. I am paying 1800 a month for a studio. My lease renewal ‘offer’ was for 2100 a month for the studio I’m in now. I can’t afford to stay. I will be leaving everything I love. My friends. December 1. My mortgage in Portland Oregon will be 1200 a month for a four bedroom house : (
    I’m so sad.