For Lease in Pacific Heights

According to a reader, there is “an unofficial Landlord’s (sic) Strike” going on in San Francisco. And until San Francisco’s Supervisors change the City’s rent control rules, the “striking” landlords are no longer going to rent their properties on a long-term basis.

So how’s that unofficial strike working out for the landlords and affecting current rents?

Well, according to a query of over 1,500 listings for apartments in San Francisco, including one-off rentals and units in larger developments, the weighted average asking rent for an apartment in San Francisco is down over 4 percent versus the same time last year and has dropped nearly 9 percent from a peak in 2015.

And if the current trend holds, an empty apartment in San Francisco is likely to rent for less next month than the month before.

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Comments from “Plugged-In” Readers

  1. Posted by Hitman

    I love it! Did I mention it is also the perfect time for a buyout?

  2. Posted by Amewsed

    I think landlords who keep vacant units are in the financial situation to keep units off the market. It does not apply to those who leveraged their purchase of an investment property on the rental income stream.

    The point of not renting to long-term tenants is not dealing with the City’s myriad of rules and regulations.

    With rents decreasing rents, there is even less incentive to put the units back on the rental market.

    Who wants to deal with increasing regulations as well as higher maintenance costs of an occupied unit for less money? It makes more sense to rent if the market rents are high and an 1-2 yr. turnover of tenants.

  3. Posted by Stop Driving

    Typically stupid timing for these landlords to ‘strike.’ What a whinny group. Perhaps they should take their business to a less regulated city, like Dallas and see how they fare.

    • Posted by Medalist

      That’s exactly what we’ll do, and we will fare well with 7% CAP rates offered in red states. And when we sell we’ll be sure to TIC our buildings so you and you’re entitied class will continue to slowly diminish.

      • Posted by Stop Driving

        I love when simpletons make blanket judgments. Have fun in Texas…

      • Posted by Amewsed

        You can always 1031 exchange into a triple net investment out of state with a 7% cap rate. I have explored that option with the recent sale of one of my buildings. Ultimately I passed on it because triple net guarantees a good income stream, but appreciation of the asset is actually quite low.

        • Posted by SFrentier

          I’ve casually looked at these NNN’s too. The value is strictly derived form the income. So if they have long term leases in place, you’re limited to the usually small percent increase in income to derive your future value. OTOH if the lease is close to expiring, if the tenant doesn’t renew you may have a big problem on your hands getting it re-rented: who long will that take, who pays for rent Improvements, etc. Especially with the shifting landscape in small retail spaces, I find this to be risky. Guess it’s mostly good for those a few steps from the grave, want to pass a simple property onwards, and don’t want to pay cap gains.

          That’s my 2cents on it. Do you have other views, or thoughts on this?

          • Posted by Amewsed

            Agreed on your points. I didn’t want to own a Dollar General Store or a fast food eatery out in Ohio to get some kind of 6-8% income stream. Lots of things could go wrong in their market, high unemployment, no retail business, etc. If I needed to park money somewhere for a while, I rather just put it into a diversified ETF portfolio managed by a robot advisor with an average of 6% return. Not very exciting but takes me out of the real estate market all together.

            As for my capital gains from the property sale, I harvested the losses from my long-term stocks to offset some of my gains. As for retirement, I like to travel internationally so I am not wedded to staying in SF when there are a lot of nicer places for less money elsewhere.

        • Posted by Dave

          I did this more than a year ago. It’s true appreciation is a lot less than what has been seen in SF recently but there are metro areas with relatively decent appreciation and the promise of good appreciation ahead based on job and population growth projections.

  4. Posted by Sabbie

    Airbnb landlords are not landlords, they are short term speculators. They are not striking, they have been backed into a corner by the city, and will be crying uncle soon enough.

  5. Posted by S

    Yeah I don’t really get it. If you don’t want to be a landlord and your building is empty, why not just sell it?

    • Posted by Iolderpete

      Maybe you live there. Maybe you want to save it for family & friends. Maybe you don’t want to be put in the inferior position in any kind of LL-v-tenant spat (juries tend to side with tenants over LL, unless your facts are overwhelming and impeccable; something that’s not often possible in a ‘he-said-she-said’ spat).

      There’s certainly a good business reason to rent out – even for a declining income stream (rents rise < inflation). But if there are personal factors involved, the money is less important that the peace-of-mind.

  6. Posted by modernedwardian

    “unofficial strike”… what does that even mean? how is word of it spread? am i missing secret late night meetings? i guess with all my other secret meetings (with the liberal elite and the gay mafia) i might have misplaced an invite somewhere.

    yes rents are coming down. but to what? we just rented our 3BDR unit for $6000/month. it had been occupied by a family who paid $4750/month. so it might have gotten $6500/month last year if it had been empty? boo hoo.

    keeping a unit empty is a calculation between rental income and the costs of the inherent hassles of being a small time landlord, actual and perceived.

    actual: renters don’t “remember” things – to breakdown their boxes on garbage day, to text you when they block the driveway and head out for dinner, to not use the light switch that controls the automatic entry timer, how the thermostat works or the ceiling speaker connections – and one also has double the lights to change and double the appliances that breakdown and double the windows to maintain and clean.

    perceived: the risk of a bad tenant (be she criminal, nonpaying, loud, unresponsive, irresponsible, or just with a way of living that doesn’t mesh well with yours), the loss of control of your home and an inability to maintain and improve it or move between rooms, and ever changing rules about what being a landlord means. it is not for everyone.

    i find the newly proposed airbnb rule on hosted stays potentially bad for anyone stretched to make it work in this still very expensive city – homeowners with underused (but not unused) guest rooms and inlaw units, empty-nesters with college bills to pay, renters whose leases don’t preclude sublets – but i guess they can still all get in their cars and drive for uber or lyft.

  7. Posted by SF_Landlord

    The rental market is definitely cooling off now. I’ve had to slash the listing price on my soon to be vacant apartment a couple times now. It’s now listed for a couple hundred bucks less than what the current tenants are paying. It sucks when rents leave around the holidays.

    • Posted by Hitman

      Hold tight. I understand if you can’t refrain from renting but wait until March if you can. The cooldown in the market is nearing its end and is seasonal. You will get better rents in March as optimism returns.

      • Posted by SFrentier

        I agree. Renting in November-February really blows. I try to adjust my leases so they skirt these months. But there are still plenty of renters/movers out there. You just need to give it more time during the holidays.

  8. Posted by Dandywhatsoever

    Thank you Airbnb. This is a direct result.

  9. Posted by urbanist

    What Nonsense.

    Rents are coming down because more rental apartments have been built in San Francisco over the last 3 years then all apartments built over the prior 30 years. That’s what supply and demand does. The rents are still 45% higher then they were 5 years ago.

    Your urban myth of a Landlord’s strike is a ludicrous economically irrational idea.

    And the Fed is about to raise interest rates for only the 2nd time in 10 years because the economy is heating up, not because its slowing down.

    • Posted by SFRealist

      Exactly. When we build more housing, prices drop.

  10. Posted by Brian

    More like a Nonexistent Landlords Strike. It is not a real thing. This story is fiction. It’s like getting angry at characters on TV.

  11. Posted by mas

    Landlord strike? Someone didn’t send me the memo.

  12. Posted by around1905

    Running through my own friends and acquaintances… a few years ago I had four groups of friends who each owned and lived in 2-4 unit buildings.

    1. The fellow with the 4-unit building waited till 2 of the units were vacant, then bought out the third and is now living in the building alone.
    2. The fellow with the 3-unit building bought out one tenant, and is renting out only one unit.
    3. The woman with the 2-unit building filed legal action to have her absentee tenant deemed nonresident, regained possession of the unit, and has chosen to keep it vacant.
    4. Only the couple in a 3-unit building continue to rent out all their units.

    I also know of another couple who owned a 2-unit building but did not live there. They bought out the tenants and sold to a couple who put their extended family in the other unit.

    So if my observations are at all representative, there may be a large number of quietly vacant units. But I am unaware of any way to actually count them across the city and in any case these units are political ‘dark matter’ — they are of no use to pro-tenant politicians, since no voters live in them. The city doesn’t lose any money if they stay vacant (it makes its money only when new units are constructed and the new property taxes come online). Only the owners lose out from this — forgoing the income — but, if the rest of the ‘striking’ landlords are like my friends, they have owned for a number of years and don’t pay much property taxes anyways…

    • Posted by lemon obrien

      what happened to cash flow…

      • Posted by Dave

        Some investors in SF are willing to forego cash-flow, or accept minimal ROI, and bet on huge appreciation as the reason for buying. That does not make sense to me, but I know more than a few people who followed that reasoning in purchasing residential rental RE.

        • Posted by SF_Landlord

          The problem is once you get renters in it’s nearly impossible to get them back out if you need to sell.

          • Posted by Dave

            Absolutely. My rentals are not in SF and getting tenants out is not a problem. It’s not worth the grief, despite whatever appreciation one gets, to own rental RE in SF. IMO.

            Several homes on my street passed on to the children heirs recently. In all 3 cases the kids did not know if they wanted to sell in a few years, rent out to relatives in a year or two or maybe move in themselves. No decision would be made for a couple years. In all cases the homes are being left vacant despite 6K/month rents in the area, so as to avoid potential tenant problems when the owners made their decision on what to do.

    • Posted by Bad Egg

      To my right – vacant garden in-law in a 2 unit condo. Kitty-corner across the street – vacant full unit. Two more newly renovated ex-Victorians – required to be multi-unit by Planning, but occupied by a single family – three and four addresses up the street with vacant (RC) garden units.

      This is in a prime neighborhood. No owner-occupant of means is rushing to cash in because the uncertainty is so great (and who wants to be vilified as a landlord in SF anyway)?

      • Posted by Another Bad Egg

        I also know MANY owner-occupants who do not rent their vacant units. The risk of having problem tenants in our homes is far too great. And from my experience, the constantly shifting laws only work to produce adversarial relationships. Fortunately there are alternatives to traditional, long term tenancies.

  13. Posted by Bad Egg

    I wish I could help – but the cost is just enormous.

    I own a 2-unit building in the Castro, and live in one of the units with my husband. The other one has been vacant for 3 years, since a trusted friend moved out. We haven’t rented it to anybody else not because we’re waiting for rents to increase – in fact, we’d be happy to rent to someone deserving at a significant discount to market rate – but because of the loss of control. For one, we eventually want to renovate – and it’s NOT EVEN POSSIBLE to create a fixed term lease with a tenant. For another, the building represents the lion’s share of our nest egg, and if we had to sell for some reason with a (lifetime) tenant in place, the value of our nest egg would take a major hit. Lastly, it’s primarily our home, not an investment – a tenant from hell isn’t an abstract reality, it would make our home life terrible. Y’all have seen the movie Pacific Heights, right?

    I know several other neighbors – 2-unit owner-occupied buildings with one vacant unit – in the same position. Enacting RC for 2-unit buildings (especially owner-occupied ones) was a major misstep.

    • Posted by lemon obrien

      not smart… this is a bubble, prices will come down; you’re losing out

      • Posted by Bad Egg

        Prices for what? Money isn’t our motivation, we just don’t want to lose control of our home.

        • Posted by Sabbie

          Sounds like you are in it for long term, but aren’t cut out to deal with tenants… seems like the best option would be sell off the other unit as a TIC. You can condo convert after a year, and with the profit you could buy a standalone rental in a cheaper city and hire someone to manage it.

          • Posted by Dave

            Exactly. The tenant/landlord situation in SF is exacerbated, in a negative way, by the situation here. The SF situation is not the norm from my experience as a landlord in other markets. Though bad tenants are not unique to SF.

          • Posted by Bad Egg

            Again, it’s a matter of control, not money. We love SF and our home. Why would we do any of that (TIC) if we can afford to keep it vacant? We basically have an SFH in a desirable area with very few SFHs. When family or friends visit they can stay in our spare unit. When we decide to renovate there’s nobody to negotiate with. The missed opportunity is that we would have made a different decision (renting at a reasonable amount) if we could retain control over the length of tenancy and had a straightforward way to non-renew or evict problem tenants. But that’s impossible so instead we’re contributing to the housing crisis by keeping the unit vacant.

          • Posted by Jake

            If you keep your rental unit off the market indefinitely or at least for a long time (~10 years), then the market should adjust and all you have done is create the incentive that got an additional unit built that wouldn’t have “penciled out” had you absorbed the demand with your perpetually vacancy. That’s if you believe in the iron clad laws of supply and demand. Reportedly, there are 63,700 apartments and condos in San Francisco’s Housing pipeline.

            SF hasn’t run out of land or building permits or self-importance, evidently.

          • Posted by Sabbie

            Bad Egg, your comments are irrelevant to this conversation, like Jake said you are not a “landlord’ in any real sense of the word. You’re just trying to fan the flames against rent laws. You qualify as an owner that just happens to have an extra unit at their primary residence, your demographic is not of concern to the local housing market.

          • Posted by Bad Egg

            Sure, we can play that game.

            If I’m not a landlord – I “just happen to have an extra unit at my primary residence” – then you won’t mind if I put that extra unit on Airbnb right? Because the market will “create the incentive that got an additional unit built.”

            The demographic is significant and growing. There are plenty of small owner-occupied RC buildings in SF. As the buildings turn over (to wealthier buyers, who are the only ones who can afford them) it’s less likely they need to rent out their spare unit – not worth the hassle for nonprofessional landlords.

          • Posted by Sabbie

            You knew about all of the tenant laws and problems before you bought, but you bought it anyways. So your unit was never part of the rental market *for all intents and purposes* because you never had any real honest intention of renting it out. Go ahead and rent Airbnb, within the limits of the law, doesn’t bother me.

          • Posted by Bad Egg

            Actually we did rent that unit out – to a friend we could trust. We would rent it out again if we had more control.

            Your assertion that our spare unit is “not part of the rental market” doesn’t make any sense. Our spare unit is a vacant unit and it’s in SF. It’s vacant because of existing policy. It would be housing someone with a relatively minor change in policy. The building has been housing people since the 1890s, and when we bought it in 2009 had been illegally divided into three units, with two of them recently vacant.

            Regardless, expanding the total number of available units in SF can happen by building more units or by getting existing units held vacant to be made available. (Maybe there are other ways, but I’m not aware of them.) Why not change policy to make more units available?

          • Posted by Jake

            No, your unit is vacant because of a decision by the owner(s). If it stays vacant for a long enough time for the market to adapt to it being vacant (5-10 years) then it is effectively out of the market.

            There’s not much evidence that this is a “significant and growing demographic”, despite the frequency that similar comments have been made on SS. I’ve looked at the stats and don’t see it and haven’t found anyone else who has (y’all are welcome to provide actual stats to show otherwise; and no your hand count of your block doesn’t count much or for much). That doesn’t mean that your situation and/or feelings about it aren’t shared, just that in the scheme of an RE market on the scale of the Bay Area and with the churn rates of SF and SV, whatever effects it has are in the noise, despite the noisiness of the complainers.

            If every single 2-unit RC building in SF were to go owner-occupied plus vacant second unit, then that would remove at most 4% of the housing units in SF from the market. Has not happened. And if it did happen as those units gradually became vacant at the natural RC turnover rate, then the replacement market would include neighboring counties, as few people absolutely have to live in SF. Major impact to you, minor impact beyond you.

            FWIW, there is more evidence in SF that wealthy absent home owners have a bigger impact than small-timers that go Galt, but all politics is local, sometimes as local as upstairs v. downstairs.

          • Posted by Sabbie

            What changes do you propose exactly? Don’t tell me get rid of rent control, because if you’re not renting out your unit at today’s crazy high rates, then you’re not going to rent it. Unless you’re a short term speculator or really bad at math. And eviction controls exist to stop landlords from trying to get around rent controls.

            Your demographic is a tiny part of the rental market that has minimal impact sorry, you’re never going to leverage a so called “landlord strike” to change longstanding laws that protect millions of tenants.

          • Posted by Bad Egg

            I have the same data you do. The ACS study, the SF planning annual inventory breakdown, etc. You can also look at sales prices for 2-4 unit buildings and do your own math on whether these wind up as rentals or not.

            What’s the basis for your claim that vacancies in owner-occupied buildings aren’t happening? I’d genuinely love to see the stats – as far as I know the city doesn’t track vacancy on a unit basis. And 2-4 unit buildings are 21% of the housing stock, so I’m not sure how you get to only 4%.

            There’s no reason that the unit has to be “out of the market.” The basis of the owner’s decision is not some unknowable mystery – the “noisy complainers” like me are happy to tell you why. And regardless, what’s with the dismissive intransigence in considering a change? If the situation is as rare as you claim, then any potential damage would be limited as well.

          • Posted by Bad Egg

            I liked lolderpete’s proposal at the bottom of this thread – effectively vacancy control, or some sort of similar stabilization scheme like NYC. We don’t care about extracting the maximum amount from the unit, we just don’t want to be beholden to a nightmare tenant.

          • Posted by Sabbie

            Also, you could have easily avoided rent control by simply purchasing a building constructed post 1979.

          • Posted by SFrentier

            Sure sabbie…and how many post 79 buildings are avail for sale? About 0, because they are 99% sold as condos, and the rare one that isn’t is super expensive anyways.

          • Posted by Jake

            I did not “claim that vacancies in owner-occupied buildings aren’t happening”. I did claim that they are happening in SF but not enough to have a measurable effect on the market, at least not that anyone has been able to show.

            Look at your preferred “demographic” of 2-4 unit buildings, which are ~21% of the total SF housing untis, though the portion under RC is somewhat lower. Nevertheless, the vacancy rate in SF is at or near an all-time low. And about half of what it was at peak ~10 years ago. So, you are not alone, but you are well in the minority even among your chosen demographic. And previously on SS, I have published the ACS breakdown of SF vacancies and it showed SF looks a lot like CA generally, without any oversized effect from RC.

            Now, according to you, you own a multi-unit building in SF and are wealthy enough to keep one or more units vacant because you don’t like the RC laws that have been in place since before you bought your building. And now you ask why SF shouldn’t give you a handout in the form of a change in the RC laws that would substantially increase the value of your building. And yet you ask why others dismiss your request. Good luck with that. But yes our RC laws are abominable and have been for a long time. And over the longterm they say you get the gov’t you deserve.

          • Posted by Bad Egg

            None of your data so far directly addresses the number of units held vacant. And you’re making additional claims (“you are in the minority”) unsubstantiated by the data. The official vacancy rate only takes into account units that are listed as available for rent. I haven’t seen any uniform collection of vacancy data against the base of units that could be legally occupied. And the 2012 ACS study doesn’t break down vacancies by building type.

            Moreover, framing it as a handout is irrelevant and just baiting class resentment. Practically speaking, many policy changes impact property values. Prop I in 1994, for example, which enacted rent control for 2-4 unit buildings.

            You still don’t answer: if the goal is to increase the number of units available, why not make a change or compromise to the policy holding those units off the market? I’m not talking about abolishing RC entirely for 2-4 unit buildings, I’m talking about making allowances for the fact that some landlords live with their tenants.

          • Posted by Sabbie

            The reason these situations are rare, is because from everything you’ve described, you did not purchase the right building for your goals. You probably had ample capital and were not purchasing with an intent to maximize it. There are not that many people in a similar situation.

          • Posted by Bad Egg

            Again, it’s about control, not money.

            Ample capital doesn’t create more SFH housing stock in the neighborhood where we wanted to stay, so we made do when the opportunity arose. Non-optimal capital allocation for housing is not that rare because homeownership is still a life goal for many people, that decision tends to be more emotional than strictly seeking a return, and many choose to optimize for control of their home.

          • Posted by Jake

            I’ve previously published enough of the vacancy data to show that you are in the minority among small building (2-4 unit) owners and to show that there is no over-sized effect from RC on vacant housing in SF. If you don’t understand that then I am content to let you reside in your own vacancy of comprehension.

            BTW, you don’t have to go back to the 2012 ACS, the 2015 ACS is available for SF. And if you wanted to you could use the Census data to determine the vacancies by building type. If you don’t know how, then look up how the SF gov’t figured out the average SF RC unit tenancy is ~9 years vs ~6 years for non-RC. The Census doesn’t publish that but anyone with the time and stats background could compute it. Now I could do it for you, but I would rather go Galt wrt to this market opportunity.

            Be careful what you ask for, though. Calling attention to the abundance of rentable units in SF kept vacant by choice of the owner could just as easily get the stick as the carrot to assist you with your decision to return to the ranks of the landlorderlies. Economists including Dean Baker have described the potential of ‘vacancy taxes’ and at least one SF supervisor has toyed with the idea, though more directed at the pied-à-terrerists. Here’s a terrifying snippet from Dean Baker (namelink):

            “Unlike most taxes, all the side effects from this tax are positive. If property owners don’t want to pay the tax, then they can just rent out their property. Or they may sell the property off to someone else who actually plans to use it. Either outcome would push down residential and commercial rents. In some cases property owners may not be able to pay the tax and simply give up the property. That is unfortunate, but it is better that the property be in the hands of someone who can use it productively than have it just sit idle.”

            As you have written “if we can afford to keep it vacant?”

    • Posted by SFcitizen

      Prop. I passed in 1995 brought two to four unit buildings under the Rent Ordinance. I bought my two unit building in 1980. Yes, I have excellently low property taxes, but with Prop. I, my rental unit is under RC. Once my current tenant dies, I will go the corporate rental strategy.

      • Posted by Bad Egg

        It’s the obvious loophole to exploit if you’re a small-time landlord. Make it 30+ days, so technically rent control attaches (and you can list on Airbnb and VRBO without registering), furnish the unit, and charge more than a permanent tenant would pay (but less than 30 nights at a hotel).

  14. Posted by 2000

    Landlords must continue to take away units from our city’s control and put the control back into the owners hands. Until rent control laws change I will never rent again to a long term tenant in San Francisco. By placing a permanent tenant in one of my buildings the value of that building drops by hundreds of thousands of dollars, so many landlords don’t understand this. A one bedroom tenant gets me $36,000 a year but a vacant uses increases my buildings value by at least $100,000 a year.

    • Posted by Dave

      Yeah, but after 3 years of a vacant unit per your numbers you will be losing money.

      Frankly, it seems to me that it is a huge risk to own rental property in SF if one is a small time landlord. The draw seems to be expected uber appreciation, but that draw was not enough for me to take the risk.

      Rent control won’t change in SF. If anything, it will become more common throughout the Bay Area – MV passed a rent control ordinance on Nov. 8 and San Jose is moving that way..

      • Posted by SFrentier

        FYI San Jose a.ready has RC.

        As for the trend of enacting RC in other cities, thankfully most of those initiatives failed- in Alameda in Redwood City, etc. Plus I think this trend will blow over in the next election cycle, given that rents have stabilized.

  15. Posted by two beers

    Landlords Gone Galt!

    Keep fighting that good fight against gummint intervention. Be careful what you wish for….maybe we should revisit those other market-distorting government intrusions, such as Prop 13, the mortgage interest deduction, HELOC deductions, capital gains exclusions, capital improvement passthroughs…Get that government off your back!

  16. Posted by SocketSite

    Perhaps too subtle, but our reference to the “landlord’s strike” was (mostly) tongue in cheek.

    From a purely financial standpoint, keeping a unit vacant rarely pencils out. And while there are thousands of vacant units throughout the city, the number is typically misreported and radically misunderstood.

    • Posted by Amewsed

      Yes and no on the financial standpoint about vacant units. If your timeline is short 3-5 years for holding a property with an eye toward a sale, then rents received coupled with the risk of having a long-term tenant is less than the amount you receive from selling the property vacant. Prospective buyers will be looking at the potential tenant buyout costs, or OMI (statutory fees.)

      • Posted by SocketSite

        At an average current rent of $3,500 per month, you’d collect over $125K in rent in three years. That’s three times an average reported buyout of $43,000 per unit, a number which is highly skewed by tenants with pre-boom rents. But even then, you could fully-fund a pre-sale buyout, or discount a sale by $100K a unit, and come out ahead. And yes, that’s back of the envelope and ignoring taxes, but also ignoring the return on that income stream as well.

        • Posted by Bad Egg

          Frankly average outcomes and financial models don’t matter at all when you have to live with your choice of tenant – literally 10 feet above or below your head – with little or no control for the rest of their life.

          Perhaps this makes sense if it’s purely an investment property but not when you’re living in close quarters.

        • Posted by parklife

          The buy out scenario is further complicated by the fact that $43k is average, some higher and some lower. And if you are the owner of a two unit building, the buy out will trigger the inability to condo convert which further reduces the potential market value of the property.

          • Posted by SocketSite

            There are always outliers and exceptions, but most arguments for not renting a vacant unit don’t make financial sense. That being said, being a landlord is a business, with associated risks and rewards, and certainly isn’t for everyone.

          • Posted by parklife

            “That being said, being a landlord is a business, with the associated risks and rewards, and certainly isn’t for everyone.”

            Very true, and one of the reasons you are seeing quite a few in-law units left vacant. The risks of a lifetime tenancy with a difficult tenant aren’t worth the associated rewards. In certain situations this same reasoning is used by owner occupiers of duplexes and triplexes.

          • Posted by Dave

            Being a landlord is indeed a business and, if one is a small time landlord, it does not pencil out in SF. Certainly not now and recently. Due diligence and a hundred times over for any small investor considering SF. Actually, it should take one time over to realize SF is not for the small investor – short of having an absolutely thorough knowledge of the market, mucho experience, good lawyers and not a faint heart. Even at that, IMO it’s crazy for the little guy or gal to go into the SF rental property quagmire.

          • Posted by Bad Egg

            Leaving a unit vacant makes plenty of financial sense for a small-time landlord. We’re not running Vornado Realty Trust here – our home is the lion’s share of our net worth. We don’t have a slush fund for buying out a tenant, which we’d now have to report and would damage the value of the property anyway. Plus, properly model the tail probabilities of a litigious tenant or one who suddenly becomes protected or some other new onerous city regulations, and the loss of enjoyment with a bad tenant, and it doesn’t pencil out at all.

            All of the reasons above is why it’s counterproductive to treat owner-occupant (“mom and pop”) landlords the same as large commercial operations.

          • Posted by Jake

            If you have removed your property from the rental market, then how can you be a landlord? You may own rentable property but that doesn’t make you a landlord anymore than if you bought a woodland and never logged it would you be a timber company.

          • Posted by Bad Egg

            OK. And if we lived somewhere with a lumber (housing) shortage, then one would expect the local authorities to set policy to encourage owners to start logging (leasing)?

          • Posted by Jake

            If you lived somewhere with a lumber shortage and you owned a woodland prime for logging but were unwilling to log it yourself, then I expect that more enterprising businesspersons would be willing to buy your land. And if you persistently refused to sell or log, then they would take advantage of your non-contribution to the economy to log another parcel or import lumber from another area. Big city, big country, big world, with plenty of space for small-timers to opt-out.

          • Posted by Bad Egg

            Oh, there’s no shortage of enterprising buyers interested. But I enjoy taking a walk through my woodland. Same with all of my neighbors – they enjoy their little patch, and they’d be happy to pitch in with the lumber shortage and wouldn’t mind a little logging, but if the lumberjacks keep them awake all night swearing and drinking they’d like to be able to ask them to leave. Oh and our woodlands are very special – there are only 46.87 square miles of them in the world.

            Seriously, why the resistance to making changes to RC for small owner-occupied buildings? If we’re in a shortage and marginal units matter, and given the expense and delay of building new units in SF, why not figure out how to bring existing vacant units online?

  17. Posted by Mutal Kudi

    Just once, I’d like to hear a landlord acknowledge how much they benefit from Prop 13. But I guess it’s easier to whine about how hard it is to own property in the wealthiest city in the country.

    • Posted by parklife

      I, like most homeowners, benefit from Prop 13. However, I would very much like to do away with both Prop 13 AND Rent Control.

      Happy now?

      • Posted by Another Bad Egg

        Agreed.

        • Posted by Hello SF

          Agreed. Prop 13 was put in place after RC, so do away w/ both. It would be equitable to all. Even if you bought in the last 10yrs Prop 13 is not that great.
          Better yet, have ALL San Franciscan’s pay a resident tax, so that every time the Ballot asks to raise taxes by passing it on to the 35% home owning population, the other 65% might think twice.

          • Posted by Rillion

            It is great if you bought at the bottom of the market. I grabbed a place in the mountains that has tripled in value since 2011. Meanwhile the property taxes on it have gone from ~790 a year to ~890. Thank you prop 13!

          • Posted by Iolderpete

            Actually Prop 13 (’78) passed before RC (’79) – at least in SF. Santa Monica and others maybe have passed earlier

          • Posted by Iolderpete

            Who was it that said 47% of the people don’t pay any taxes? Incorrect of course in many localities. But a good bit of truth there.

            Cost him an election. Just like “half his supports are a basket of deplorables”. One could quibble about the math, but they had a good point, IMHO.

  18. Posted by Bad Egg

    Prop 13 is a travesty and should be abolished, maybe in favor of means-tested exemptions for (boomer) seniors.

    But having purchased 7 years ago at the bottom of the last trough, it’s not that much help. 20-30% discount from assessed value.

  19. Posted by Bart Samsung

    this is almost as stupid as Trump supporters buying coffee at Starbucks and asking them to write “Trump” on their coffee cups to “stick it” to the coffee retailer. Nothing like giving money to a big company to show ’em who’s boss, or in this case “not renting” in one of the most expensive housing markets in the country.

  20. Posted by Conifer

    Many of these comments are related to the fact that San Francisco has an exceptionally large number of small apartment buildings, mostly two or three flats. For the first 100 years, it was possible and traditional to buy such a building and have a cordial relationship with tenants, often providing a young single or couple a chance to live in the city until they were ready to buy their own home. It was not high finance, and it was accomplished by people of good will on both sides.

    The building was bought by middle class people and they rented to similar people. Now “mom and pop” have a potentially adversarial relationship with the tenant from the start, so the investment is unwise.

    The problem is that these two or three-flat buildings are in a city hostile to providing single family houses or large apartments suitable for a family. The choice described by many posters here is to buy the building they can afford and use it as a single family home, leaving any additional units free of potentially hostile tenants.

    This situation will continue indefinitely in San Francisco. As I have observed before, most mom & pop investors do not have the emotional or financial strength to deal with residential real estate under rent control. Investing and leasing here require professionals with armies of lawyers and accountants.

    If you want a home, buy a house. If you want a small real estate investment, buy elsewhere. The time for buying one property for both purposes expired in this city about 25 years ago.

    • Posted by parklife

      That is a very succinct description of the small building rental issues in SF.

    • Posted by Bad Egg

      Yes, exactly the situation you describe, Conifer—except your last paragraph is kind of missing the point.

      Many have already purchased two or three unit buildings and made them into their homes, myself included. The city has fairly few SFHs in desirable neighborhoods and a vacant duplex might be as close as you can get. Those who can afford it will upgrade or expand one of the units, increasing the value of the property overall and making it less likely that a future buyer will see it as a rental property – harder to get higher end units to pencil out since investment buyers are competing with residential buyers for the same properties.

      Speaking for my husband and I, when we take a future assignment abroad we’ll probably leave both units vacant for all the reasons you mention.

    • Posted by modernedwardian

      yes there is a potential adversarial relationship. p-o-t-e-n-t-i-a-l. and one makes investments for potential gains. almost nothing is guaranteed in this world including most of your investments.

      there are any number of ways to try to avoid adversarial relationships and to maximize your return while minimizing your inconvenience. say, picking your tenants wisely or renovating ahead of the market so that you are a rental choice for someone with higher expectations and planning to buy. hiring a management company. having a well crafted lease and house rules. and good soundproofing.
      and even then there is a potential for a problem but rarely an actual one.

      being a small real estate investor/landlord occupant is not for everyone but it is hardly a bad idea or one that has “expired”.

      we own a 2 unit here and a 3 unit in canada (in a city with even stricter rent control than sf). our tenants tend to stay about 3 years on average. they leave to return to europe after their assignment ends or to go to graduate school or to buy a home or because their families grow or school needs change.

      yes. we have had to delay projects and had to start projects earlier than planned. cleaning and repainting and refreshing is almost always expensive and unexpected.

      our sf home is now financed by our rental on an accelerated mortgage. our cash outlay from 2010 is back in the bank. our other building has been serially remodeled and is now appraised for 12x our remaining mortgage.

  21. Posted by Iolderpete

    Sadly, you speak the truth.

    If SF (or CA, or the new Trump Admin) were smart, they would exempt o/o small props from Eviction Control – like most “affordable” or BMR units. I would even accept a form of Vacancy Control on my vacant units IF there were iron-clad guarantees of terminating a tenancy for whatever reason I wish (same rent would simply go to someone else; little incentive to evict-for-profit; lot of ability to get rid of bad eggs. (sorry, no offense)

    • Posted by Bad Egg

      Absolutely – that’s a really smart compromise in fact. We’re not interested in extracting maximum value from our spare unit, we just don’t want to have to live with any one specific tenant, and similarly we want to be able to return to a vacant state at the end of a lease.

      Has anyone tried advocating for this approach in SF? I imagine it could be phased in for vacant units in smaller buildings.

      • Posted by Hello SF

        Except that we’ve seen the BoS change the rules so many times, so even if they pass something to encourage these units back on the market most of us (2-6 unit owners) no longer trust them so we ARE keeping our units offline. Our sanity is worth more than the bank, and most often a multi-unit building costs less than a SFH in SF.

        What we would need is a guarantee that these are free from RC forever.

        • Posted by Bad Egg

          Your analysis differs from mine. As Jake says, SF RC laws are abominable. Vacancy decontrol plus sub-inflation allowable increases generates terrible adversarial pressure between landlords and tenants. If I were king:

          – some form of vacancy control, to reduce the incentive for landlords to evict and re-rent

          – higher allowable rent increases, to more closely track the market for most renters and reduce the value of incumbency, but in a controlled way

          – control/stabilization phase-out above some income level, with the delta from the market level not paid to landlords of rich tenants but dedicated to a subsidy for protected tenants and paid to their landlords, to encourage landlords to rent to protected classes (since the city makes up the shortfall)

          • Posted by Sabbie

            Shall we means test landlords on their 30 year fixed mortgages, Prop 13 tax rates, and interest deductions? You simply want to have your cake and eat it too. Again, you knew about all this stuff when you bought your property, yet you bought it anyways. You could have bought a newer building, you could have bought in a nearby city without rent control, you could have bought two condos since rent control does not apply to condos, or you could have bought a property here and a separate rental property in a nearby city. And now you’re sitting on massive price appreciation. Zero sympathy and zero concern for your “landlord strike”!

          • Posted by Bad Egg

            I never bought into the “landlord strike” idea and it’s both silly and inflammatory.

            And as you could read elsewhere on this thread I’m all in favor of getting rid of Prop 13 – another distortion that favors incumbency.

            The point is that we didn’t buy anything else, we bought our home and for good reasons. And we’re continuing to invest in our home and our community, and we’re not going anywhere, and we’d add to the housing stock without additional construction if RC didn’t so severely compromise control of our home and primary asset.

            Sympathy is irrelevant, again we don’t care about maximizing value extraction. What are your motivations exactly?

          • Posted by Sabbie

            Even though I am a landlord, I was a regular middle class San Franciscan and a renter for decades before that. And I believe that rent control, in cities with extremely constricted housing supply and boom and bust economies, must exist to maintain some sort of social stability.

            I do see some room for improvement in the law, but at the same time, landlords enter into this situation willingly unless they bought prior to 1979, are getting massive appreciation, and are able to more or less lock in their expenses for thirty years, so I have little patience for those who try to play the victim.

          • Posted by Bad Egg

            We’re not victims in any way, and your continued reference to sympathy and victimhood is baffling. I did not ask for sympathy and I don’t think the existing law puts us at any personal disadvantage. We were lucky to be able to afford to buy a home and stay in the neighborhood we love. Laws change all the time can impact one’s plans for the future. They did in 1994 for owners of 2-4 unit buildings whose tenants were suddenly protected by rent control, despite that not being the case when the leases were signed. That’s irrelevant too.

            What is relevant is how to achieve the twin policy goals of increasing the availability of housing, and stabilizing the cost of that housing to limit displacement.

            My point is that the current RC law has unintended consequences that are leading to a reduction in the availability of housing units. It’s the city’s stated policy to add 30,000 units of housing in the short term, and this aligns with other policy decisions like limiting Airbnb and preventing unit mergers. Applying RC does not achieve its ends among new owner-occupiers of small buildings.

            I agree with you insofar as some sort of rent stabilization scheme is valuable for preventing displacement in boom and bust cycles. The current system is broken and achieves stability for incumbent renters at great cost to new renters and to incumbents if they ever lose their tenancy.

  22. Posted by Willow

    I’m a landlord of a SFH in SF; I have a couple of other properties in Oakland but I am very much a minnow. I suspect my tenants are paying about 10 percent below market. If they left and I could not rent at what I thought was the prevailing market rate I would reduce the rent quickly until I found the right tenant or simply sell. Vacancy is a killer; leaving the property unrented is just not an option. I have a mortgage, property taxes & insurance that has to be paid.

    I find a lot of small time landlords underestimate the cost of ownership and overestimate expected appreciation. By doing your due diligence you can find a good fit for your situation. There are a lot of good people out there that are looking to rent.

    • Posted by modernedwardian

      agree with you…but a SFH in SF is not subject to rent control, and, as has been noted in many posts here and elsewhere, is easy to empty via a rent increase at any time on a month to month rental.

      so no rent control and a back door to evict. not the same story.

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