Per San Francisco Building Code Section 1208.4, the smallest legal dwelling unit in San Francisco must have living room of at least 220 square feet (20.4 m2) in addition to a separate closet and bathroom.
As proposed and sponsored by Supervisor Wiener, Section 1208.4 would be re-written to reduce to the minimum legal living room in San Francisco from 220 to 150 square feet while restricting residency of said units to no more than two persons.
∙ Ordinance Redefining Efficiency Units [sfbos.org]
Is this an attack on SROs?
Strikes me that it would be more beneficial to Sros., less square feet per room, more units, more revenue.
Perhaps to facilitate renovation?
Unsure how the maximum occupancy plays out. Wouldn’t be negative for Sros unless average rooms have more than two tenants.
Is it a bone thrown to SRO owners? After all they are mandated by the city to house “Care not Cash” residents. Smaller legal footage means there are units these SRO properties that could now be rented. 2 occupants per room means SRO managers have enforceable rules to keep some of their more abusive tenants in check.
In any case, I wouldn’t want to be an SRO owner. Part of the people you house are mentally ill, have substance abuse. Your income is not going anywhere, the city is breathing down your neck ready to pounce at any sign of neglect, and your have no control over cost increases with little help again from the city. It’s like rent control except with more regulation, and you cannot even re-adjust rent when you have turn-over.
These new rules would bring a whiff of fresh air I think.
To be true, I think Care Not Cash is a great idea. 1 – Less homeless in the streets at night meaning most probably less crime. 2 – They get back their basic decency and can work on getting back on track. 3 – Assistance has to be paid anyway, therefore I am thrilled it goes to housing instead of booze or drugs.
I’d still want to see as much effort put into keeping the middle class here. Cancel all rent control and replace it with rental assistance based on income, so that the taxpayer will bear the cost of his bleeding heart votes instead of squeezing rent-controlled landlords again.
But that doesn’t solve the core problem: scores of people who land on our shores every spring, do not move on and slowly fall into the trap. We have the duty to handle our homegrown problem, but do we have to take care of everyone who decides to beach himself here as a last resort?
Or perhaps this is to accommodate those super-tiny 170 sq ft places that were just showcased in Oakland.
Regarding the 2 person limit: No baby for you! Good luck enforcing that one.
lol, why don’t you just come out and tell us you’re a landlord?
Sure, economic theory would have us believe that canceling rent control would increase the stock of available rental housing in the long term, but your proposal to replace it with rental assistance based on income wouldn’t accomplish much. All other things being equal, landlords, being rational revenue maximizers, would just raise rents to absorb the extra available money that tenants had to pay rent with due to the subsidy and there would be no net change.
Voters in San Francisco, even with no economic training, understand this, which is why every ballot initiative to change rent control fails. And most middle class people in San Francisco are renters.
No, the reason rent control is political suicide is because of the high percentage of people that rent and the professional tenant advocacy groups.
Rent control is a joke and those who are pro rent control are most likely people who don’t want to give up their 1000/mo apartment.
Rent control doesn’t protect the poor anyway. There are more tenants making an income of over 100,000/year in rent controlled apartments than there are tenants making under 35,000/year. Renters who can afford way more than they are paying lock themselves in to a rent controlled unit never ascending the properly ladder, keeping affordable units off the market.
Most landlords own only a few units. They have to pay a mortgage and pay maintenance on the building (ever wonder why landlords only do the min required improvements on a building? Whats their upside?). The landlords and any new tenants that move into the building are subsidizing the rent of the neighbors who have been living there for years and are making enough money to afford to pay more. How is that fair?
Rent control doesn’t keep rents down, it causes them to go up. Landlords have to overly inflate rents to make up for any losses from not being able to raise rents later. Some “mom and pop” landlords may see renting to be more trouble than its worth and take their apartments off the rental market causing further loss of supply.
If SF and its residents want to subsidize rents for the poor and the working class (which I support), then lets do that as a population through taxes and means testing. It shouldn’t be done on the backs of individual property owners and any newcomers into the rental market.
Seems like this is almost a private bill to enable ultra small units like those being built by Patrick Kennedy across the bay in Berkeley:
Emphasis added. If the current minimum legal living room in San Francisco is between 220 to 150 ft.² then you can’t really legally build a 160 ft.² total unit. Patrick Kennedy already has small unit projects underway in San Francisco (first link above), but this proposed legislation would allow him to build even smaller ones.
Tip of the hat to the socketsite editor for the link regarding Kennedy’s project at 38 Harriet St.
Brahma,
People can vote for the wildest things if they know they do not have to pay for it. Rent control has outlived its use.
Yes I am a landlord (nope, it’s not an insult) and yes I have the experience of successful rental subsidies in another country. I have to agree subsidies do increase the renter pool and as a consequence have an effect on prices that landlords can charge. But it also helps maintain a healthy turnover as people are not locked into a property as with rent control and can scale up easily. As a consequence younger renters can find a place easily.
What it would do to SF can be debated in a city with such a dire need for rentals. Some people are ready to pay top $ anyway, but can’t because there’s simply no supply. Canceling rent control would free up some of that supply.
The big positive aspect I saw as a landlord with renter subsidies has been that I did accept entry-level renters who would not have qualified for the places I had. It helps maintain a very diverse society, contrary to SF where all people with median incomes with decent housing are either middle-aged or elderly and “locked in”.
In the mean time the average 20-y olds are struggling (how many homeless started off as poor young workers) or simply staying out. This compounds the rapid gentrification of the City.
Another downside of rent control: poorly maintained and dated properties. Not too many landlords are going to spend money maintaining and upgrading properties with the prospect of tenants staying for decades and only paying a fraction of what the apartment is worth.
One thing I never see mentioned in discussions of rent control/prop 13 is the ubiquity of illegal in-law apts in SF. Clearly, these exist in response to the shortage of inexpensive apts in the city. By definition, they’re not legal so tax collection and citizen safety suffers. And I would expect that potential entry-level renters aren’t pushed out by the lack of apts (since they migrate to the in-law market), as much as middle-class families are — since they have different expectations for their housing.
If that’s true then reducing rent control, curtailing in-laws, and restricting prop 13 transfers together ought to help SF’s housing situation, right? Good luck getting anyone to vote for that package…
I wasn’t seeing this story in relation to SRO’s, SF rent control, prop 13 or even specifically about San Francisco at all.
Rather just another metric showing how society is losing the demographic middle, in that perhaps the future ahead means lots of 250 SF homes and 5000 SF homes, but fewer of those 1500 SF homes many of us grew up in.
The house has such huge windows that it can be seen from space, and every other house around it can see every movement inside. The new unfortunate owner will spending a bundle on blinds.
More info here:
http://sfpublicpress.org/news/2012-07/developers-seek-to-legalize-tiny-apartments-in-san-francisco-citing-soaring-rents
People can vote for the wildest things if they know they do not have to pay for it. Rent control has outlived its use.
The use of rent control was to act as a counterbalance to prop 13. It was passed in response to prop 13. It is more useful than ever.
If you have an ice-cream stand and are charging excessively high prices for the quality of ice cream provided, then someone can put a stand up across the street and take business away from you.
But an incompetent landlord charging too much or providing too low of a quality experience is shielded from competition. Even if there is a landlord across the street, the zoning regulations are going to prevent him from expanding supply and taking business away from the incompetent landlord.
Appeals to a market response in which removing rent control would increase supply and decrease prices pre-suppose an efficient market at work.
But that isn’t the case with landowners, many of whom have no expertise or skills at being landowners and yet they continue to survive.
How long has the former site of Veteran’s liquor on Church street been boarded up? Prime real estate vacant for over two years because the incompetent owner refuses to rent at the market price.
And they continue to refuse to rent at the market price.
As long as they don’t need to pay high property taxes on that unit, they can afford to be incompetent without having the property taken away from them.
In 2011 we had an 8% vacancy rate in the city, combined with sky high marginal rental prices. The assumption that those prices would fall if landlords were allowed to charge more assumes rationality and competence on the part of SF landlords.
But as there is no mechanism enforcing that competence, our city is home to irrational, incoherent, self-entitled cesspool of landowners who would have been driven out long ago had they been forced to pay high property taxes.
As long as there is no market pressure on landlords that would force them out of business unless they optimally use their land, then rent control is the rational response. It continues to be the rational response.
In unconstrained areas, like Phoenix, rents remain low and landlords are forced to compete with each other, driving most of the incompetent actors out of business. But in constrained areas, you can’t appeal to the same market forces to rationalize rent prices.
For constrained areas, you need an environment of both high property taxes and regulation to offer a second best alternative when competition is not available.
^^^ I need to correct the occupied units data (my error). The 2011 estimates aren’t out yet. Here are recent estimates:
Year (total) vacant units/(total) units:
2010: 36,654/361,242 = 10.1%
2009: 40,765/376,777 = 10.8%
2008: 36,566/359,905 = 10.1%
2007: 35,886/357,833 = 10.0%
2006: 33,939/356,486 = 9.5%
2005: 32,564/354,963 = 9.2%
The point being that you cannot rely on market forces to bring land to its best use in constrained areas. In constrained areas, landlords are subject to much less market discipline and are more immune from competition. You need some mechanism to force landowners to sell their land to more competent owners if they are not maximizing the returns on their property by refusing to rent at the market price or by allowing their property to fall into disrepair. High property taxes are the primary means of doing this. Without this mechanism, you cannot rely on the market to deliver the gains in quality and reduction in rental prices promised from de-regulation of rents. A similar effect is in place for owner occupants. It was only when occupants were under financial distress in 2009 that they were forced to sell their houses at the market price, leading to a 1/3 or so reduction in prices. I believe that most people view the drop in prices as being a rational adjustment, but that adjustment only occurred when the owners were put under financial stress. When they are not under financial stress, a reduction in demand for housing merely reduces turnover and volume as owners keep their properties off the market, preventing the market from clearing.
So with land in constrained areas, it does not automatically follow that market clearing prices will be obtained all by themselves merely as a result of de-regulation. You need to subject landowners to financial pressure in order for the market mechanism to work.
Great comment Robert, I think I’ll just link to or quote from that next time one of the bellyaching landlords on here starts railing against rent control as a demon-spawned affront to all that is good and true and embodied in “The Free Market”, but simultaneously doesn’t want anything to happen to Prop. 13.
I’m not sure, history-wise, whether rent control in S.F. was in response to Prop. 13, however. I’ll have to look into that one.
But just so you know (this isn’t my own opinion, I’m just relaying what I’ve read here), many of the bellyaching landlords on ss will respond to your raising of the practice of continuing “to refuse to rent at the market price” as a kind of John Galtian strike against the irrationality of rent control, not as evidence of being a competent landlord. In that respect, keeping perfectly good units off the market is intentional.
In their mind, only when The City is rid of the evil of rent control, and replaced with complete and total respect of the untrammeled, unlimited private property rights of landlords (derived of course from the philosophy of Ayn Rand) will the good and true landlords of this once Great City then deign to rent their currently vacant units to the unwashed masses and return The City to its former glory before the unholy imposition of rent control.
They (the bellyaching landlords) are doing this for the good of the tenants of The City, you see.
Tenants have to be educated as to the error of their ways, and unless and until rent control is repealed, the strike by landlords will continue and the only people suffering will be those who want an apartment to rent, not the good and true landlords, who after all OWN their homes and most of whom live outside S.F. (probably in their primary homes located in that secret enclave known as “Galt’s Gulch”).
Since a repeal of rent control will be most easily accomplished by municipal referendum, voters who rent must be punished, by reduced access to rental units, until they reach the understanding that rent control only hurts tenants, and subsequently vote to repeal rent control.
Hope that helps.
Brahma,
From: http://bss.sfsu.edu/urbanaction/ua2007/articlesPDF/rentControl.pdf
Modern rent control in San Francisco stems from
Proposition 3 which passed in 1978. Proposition
3 dramatically altered property tax collection in
California by setting a state wide property tax rate
of % of assessed value with a maximum annual assessment increase of 2% until property sale at which
point the property would be reassessed (CA State
Constitution, 2006). It may seem odd that a proposition benefiting property owners would give impetus to legislation protecting renters, but in order to
get renter support, Prop 3 proponents made the following arguement: lower rents would follow lower
property taxes incurred by landlords because landlords would pass tax savings to their tenants.
The promised savings never materialized for most
renters as landlords elected to pocket the savings.
Only approximately 7,000 tenants in San Francisco received Proposition 3 rent reductions (Forbes, 1999). One large landlord, Angelo Sangiacomo, instead significantly increased rents for his tenants.
The increase, coupled with the high inflation rates which existed at the time, led to fear among San Francisco’s middle class renter population that they would be bombarded with rent increases which they
would not be able to afford. As two-thirds of the city’s
residents were renters, their dismay could not be ignored by San Francisco politicians (Byrne, 2000).
In response, the San Francisco Board of Supervisors enacted a temporary moratorium on rent increases in April of 979. While designed as a temporary 60 day ordinance, it led to a more permanent arrangement in June of 1979 with the passage of the Residential Rent Stabilization and Arbitration Ordinance, which created a board whose duties included
“setting forth guidelines for rent increases” (SF Code
37.). Rent control had begun in San Francisco.
For all of those promising lower rents and higher quality, let’s not forget the market failures that created rent control in the first place. There is no reason to believe, IMO, that landowners since then have become more competitive. Rather, the reverse is true. Rising land prices allow landlords to let their units fall into disrepair (a type of “equity withdrawal) while still allowing the landlord’s total net-worth to not decline. If anything, the market for property is even more dysfunctional now than it was in 1979.
Obviously the first best solution is a competitive market. Repeal Prop 13, reduce the burden to increasing supply by changing the zoning laws to allow landowners to increase the quantity of structure, rationalize the difference in interest rates between construction and development loans vis-a-vis mortgage loans, apply large property ad valorem based property taxes to land values (but not to structure, or with tax credits for structural investments), and repeal rent control. A mix of all of the above would have a better chance of succeeding.
But, if after doing all of that, we still do not get the promised reduction in rental prices and increase in quality, then bring rent control back. We can’t rely on market tooth-fairies in an environment in which the market is not working.
^^^ sorry, the above is missing some ‘1s’ and the italicized text should continue as the article quote ends with “rent control had begun in San Francisco”
@Robert, fantastic posts! I am guilty of what you describe. I own a home (now empty) in a very desirable neighborhood in San Francisco (94123) while I work in another major American city where I was given a regional director position I could not pass up. I was one of those rare exceptions in that I was born in San Francisco and was raised in the city until my parents moved to Ross. I inherited a 8 unit rental property with my brother and we currently have 3 units sitting empty because the other five tenants are more than creating sufficient income for our family. My brother also owns a small condo on Russian Hill (empty, used for city visits) while he relocated his family to San Luis Obispo long ago. IF property taxes in San Francisco were as high as they were here in Chicago 2.65% minimum to be re-assessed every two years, I would have sold my home in San Francisco long ago, and would have 7 units occupied with me living in the 8th.
Worst of all is my beloved grandmother on my father’s side of the family who lives alone in a 5 bedroom house in Menlo Park because she could “not afford to move”. Her taxes are $3,200 a year! (I would guess the home is now worth 2.8 million) She is 84 years old and there are parts of the home she probably has not been to in a couple of months. It is a complete waste of housing but the home is paid off long ago and how can you argue that it is not “cheaper” for her to stay put? If she had to pay the taxes I pay back here she would have sold long ago and downsized to an appropriate condo type living situation.
Interesting. You guys are spot on but prop 13 is untouchable. It is only going to be reconsidered when the very last Cali baby boomer is either out of politics or power brokering. And then guess what? Gen Xers across party lines will be the ones loving their tax bases. I just don’t see it.
@anon1,
Well, the hope is that economics and reason will force the issue. The state has a budget gap as does the city. It is economically efficient to tax land values (there is no loss of output from doing so. Taxing land is “free”) but it is inefficient to impose sales taxes and income taxes. As the loss of revenue from Prop 13 continues to increase, sales taxes go up, fees go up, income taxes go up and city services decline. The city is now even taxing payrolls.
The point is that while there is nothing wrong with being a landlord and selling shelter and property management services, the problem arises when rents go up as a result of the increasing productivity of tenants, rather than as a result of the increasing quality of structure supplied. In that case, the landowner is effectively levying a tax on the income of the tenant, rather than providing a service for a fee.
The only reason the landowner can do this is because of rising land values. The landlord owns the space needed for shelter or productive work, and so can charge more when those using the shelter earn more or when the store or factory earns more.
Because the additional income is undeserved and not due to any effort on the part of the landlord, it can be fully taxed away in an efficient manner.
Those land rents represent income that should go to public good, to pay for muni, for schools, and for city services.
But when the income stream is diverted to the personal enrichment of rentiers, the city and state must either reduce services or increase other taxes. Then people are taxed twice, once by the rentier, who gets a cut of their productivity gains, and again by the state, who gets another cut of their productivity gains.
At some point, the pot isn’t big enough to both support the rentier classes and to support the state. One of the two has to diminish, and when push comes to shove, I hope the state will displace the rentiers rather than the other way around. if we don’t, then we turn into a banana republic with landed gentry and reduced productivity growth.
I think a balanced proposition that would eliminate all taxes on structure, impose larger taxes on land values as well as large taxes on capital gains of land values, and reduce income taxes as well as sales taxes would pass, if it was advocated well. And you can even add some sweetener to say, only re-assess the basis every few years, or do other things to smooth out land price volatility.
The efficiency of taxing land rents is agreed upon by every economist since Ricardo. It really is a no brainer; if it was marketed well, I think there is a chance it would pass. Most californians, even homeowners, would benefit from this arrangement. Certainly businesses would favor it.