The rent control laws in SF aren’t even as bad as HN comments would have you believe.
Rent control doesn’t apply to new construction in SF. It also allows a regulated annual increase, and rent automatically jumps back up to market upon a number of different conditions - not the least of which is that the owner can push you out to renovate the building!
HN commenters are usually just repeating stuff they heard somewhere, and have no idea what the laws actually say.
Moreover, while there are indeed lots of publications on the theoretical impacts of rent control, few of those publications consider laws as they actually exist, or if they do, the scope of the impacts is rarely communicated when translated into HN talking points. Every study I’m aware of has shown, at worst, diffuse, long-term negative impacts to housing costs. Meanwhile, many of them do exactly what they set out to do: stabilize short-term prices for vulnerable populations.
These laws are simply not the boogeymen that comments here make them seem.
Rent control in SF really is that bad. Rent increase limits are 60% of CPI, so it can’t even match inflation. If your costs go up (utilities) or you want to do capital improvements, good luck getting the rent board to approve a pass through. Want to prevent other people than the tenant from moving into a 1 bedroom? Tough, can’t say no to that, it just has to be under 3 people. Want to move into your own house? Sure, just pay the tenant a few tens of thousands in “pay off”.
SF rent control is absolutely onerous and definitely shrinks the pool of potential landlords and thus potential units.
Because if it is uneconomical to rent out, there are few units available to rent and the few that are are super expensive. And the property won't be maintained properly. These unintended consequences ultimately hit tenants.
In Paris there is a similar impact of bad regulation. It has become so hard to expel a tenant that has stopped paying that landlords will demand extraordinary guaranties: bank credit lines, guaranties from relatives, sometimes even medical exam, etc and will be super picky. I knew of a foreign investment banker, high salary, not allowed to get in financial dispute because of his profession, who just couldn't find a place to rent in Paris because he couldn't provide some of those.
Because it is hurting the would-be renter group even more?
I personally know two people who are renting rent-controlled apartments in SF and don't live in them. Their lives have moved elsewhere and they don't need the place anymore. One uses it as a weekend getaway and the other one visits rarely.
Thanks to rent control their rent is so cheap that it's worth hanging on to it even though they don't live there.
So these two units are off the rental market effectively forever, sitting empty most of the time.
Because landlords start being unable to afford repairs, and you get a bunch of decrepit buildings falling apart all over the city (with all the dangers that implies, not just to occupants, but to nearby buildings as well). It happened in my home town, and it wasn't pretty.
Landlords are not social security. It's probably better for the city to forcefully buy them out and create a new management model of the buildings than to impose strangling limits on prices.
Rents are growing insanely fast in SF compare to anything else. The idea that landlords can't afford to make repairs because they aren't extracting maximum rent from the property is completely ludicrous on the face of it. Do you actually believe these arguments?
I know a few landlords and that’s exactly what’s happening. I’m not sure why you find it hard to believe.
When you have a 3 unit building and everyone is paying less than 1/3 the market rate, it’s not worthwhile in the least for a landlord to fix up the building beyond the absolute minimum. Contractor rates have skyrocketed in SF, so even just repainting the building might cost $15k, which might represent several years of profit.
The skyrocketing rates for services are directly tied to the skyrocketing rent increases. The cost of performing these services does not change substantially from city to city, or else landlords renting to people in cities with more reasonably priced units would not be able to repair them. The big difference is the cost of living for the contractors, which gets passed to the people paying for repairs--and by far the largest component of cost of living in SF is rent. Like I said in the other comment, this is a largely self-imposed problem.
Not sure how big an impact that is. There aren't many contractors moving into the area like tech workers. Most of them are locals who have lived here for decades, so either have a rent controlled place or bought a home when prices were more reasonable.
Yup, our three floor building was 40k to repaint and fix a few custom windows (with plastic instead of custom wrapped glass) . Hadn’t been painted in over 20 years though.
Property taxes in California are miniscule. Mortgages are only as high as they are because people assume they can extract ridiculous rents from tenants, so this is a self-made problem that should go away with sufficiently stringent rent control. The other bills do not vary significantly enough from city to city to justify the absurd rent differences between them.
So no, I'm not assuming anything of the sort. Beyond that, landlords are extremely notorious for spending much less money on repairs than they should and saddling their tenants with the bills.
Are you talking about all rents, or controlled ones? The post above wrote that rent control rules in SF limit increases to "60% of CPI, so it can’t even match inflation". If that's false, then my post doesn't apply, sure.
Rent is far above its CPI-inflated average right now, so saying that rent increases must match inflation makes no sense. The time to do that would've been long ago. But in any case I'm pretty sure rent increases are capped at much higher than inflation.
One possible scenario is if a landlord purchased property at a price factoring in assuming certain increases in rent, then they’re constrained by the debt payments.
According to https://www.curbed.com/2018/12/17/18144657/construction-home..., San Francisco's high construction cost is mainly driven by the high cost of construction labor. It is disproportionately driven by labor cost when compared to all other cities.
So we have some data now, rather than just pithy statements, and I don't think it agrees with what you want.
Because the result is that small landlords who can't deal with the fixed costs hassles simply sell out and consolidate into larger ones with more clout with politicians to weaken renter rights and legal resources to fight pesky tenants whom they simply don't want, or create shared blacklist databases like has been done in New York. If you're going to gird up for class warfare, realize that tenants are probably going to lose as long as zoning restricts your options
My experience has always been that dealing with a large PMC like IMT or Greystar is far preferable to dealing with some guy who's renting his property out.
And if those markets were the same except for the rent control rules, we could conclude that rent control doesn't increase the vacancy rate. But they aren't.
Ok. Then care about the tenants. Do you have one shred of evidence that rent control, broadly, helps tenants? Because every economist I ever heard on this topic, left or right, argues rent control is bad for tenants.
Unless you have the capital to build your own house or apartment, you need landlords to put up their own capital to do that. It’s not like landlords are just assigned houses for free from the government to then lord over renter peons.
A lot of what you're saying in here is blatantly incorrect or misleading. Water is frequently covered in utilities, but other utilities generally are not. Leases are very specific on the number of people in a unit for rent controlled apartments and is one the few things a tenant can be evicted for. The board frequently approves pass throughs. Increases tend to be higher than inflation.
If you lease out your house and you want to take back ownership, yeah, you need to pay out the tenant and that's completely fair. You're upending another family's lives, and they may not be able to afford to stay. You're paying them moving costs and covering a period of time of adjustment for them. If you think this is unfair, you have poor morals.
SF introduced a new law a couple years ago that additional people can live in a unit even if they are not on the lease. They only instituted caps on how many. Google search it.
Plenty of apartments have not only water, but also heating included in the rent. If that goes up drastically, the rent board will likely tell the landlord “tough”.
And I’m not against buying out tenants. I am against them having to pay $100,000 or more.
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Sources:
This amount is based on 60% of the increase in the Consumer Price Index for All Urban Consumers in the Bay Area, which was 4.4% as posted in November 2018 by the Bureau of Labor Statistics.[1]
Legislation that went into effect November 9, 2015 allows tenants covered under rent control to add occupants, if reasonable, despite restrictions in the rental agreement.
The maximum rent increase rate is 60% of the trailing twelve months CPI in the bay area. But landlords’ costs do not scale with the CPI. Mortgage rates are fixed (if a landlord has a mortgage at all), taxes are independent of CPI, and principal+interest+taxes are the vast majority of a landlord’s expenses. Maintenance is typically a small fraction of that number.
Landlords are not obligated to pay your heat or water under rent control. Mine certainly never did.
The roommate law changes you mention are not rent control, but tenant protections applicable to all rentals in SF. The 2015 change brought rent controlled units up to par, because landlords were evicting people for doing things like getting married or switching roommates (horrors!) Basically: preventing predatory landlords from being scumbags.
I’m going to go with the GP on this and say that if you think people should have their rent hiked for getting married or changing roommates or having a kid, you have poor morals.
In essence, you don’t like being told what you can do, you have a theory that it hurts the housing market, and you’re inventing reasons to justify your theory of reality.
Exaggerate? I said it was 60% of CPI and it is. Yes, the mortgage is likely fixed, but expenses such as maintenance and other associated costs are not - renovation cost have gone through the roof the last 10 years. Maintenance is generally 1% of the value of the building, so in SF that can be tens of thousands per year.
No, landlords are not obligated to pay heat or water (I never said that!), but many buildings (all the ones I lived in) do not have separate meters for water and sometimes heating, the landlord just pays the bill. Rent to a single person and they have two other people move in and use 200% more water? Tough shit says the rent board!
And the other problem with allowing additional people to live there is that if those additional people can demonstrate that they were an "established tenant", then they get full rent control and tenancy even after the original tenant (only name on the lease!) leaves. Show the rent board the lease they signed? Tough shit says the rent board.
It sounds like you aren't that familiar with the tenant laws in SF, so I'm not surprised you don't think it's a problem. Suffice to say being a landlord in SF is not a very attractive proposition, so it shouldn't surprise anyone that we have a housing shortage.
Well, now that you’ve agreed with everything I wrote, you’re stuck with arguing trivialities: landlords are failing en masse because of maintenance, water, roommates, etc.
Math lesson: If my mortgage is $X (which I more than cover with my rents, since to do otherwise would indicate that I am a phenomenally stupid real estate investor), and I pay .05X per year in maintenance, the total annual increase in costs is currently CPI x .05 x X.
I don’t know if you noticed this while you were becoming an expert on SF landlord tenant laws, but 0.6 x CPI x X is bigger than that number. The annual increase in rent is literally 12x larger than the thing you’re complaining about. Room left over for taxes and evil, deadbeat babies, even.
In other words: as long as maintenance, water, taxes remain a small percentage of the mortgage+principal, the allowable rent increases more than cover the inflated costs. It’s almost like they designed the law that way!
Again: you’re just trying to find reasons to justify your opinion, and you’ve done a bang-up job of demonstrating what I originally wrote: people irrationally demonize rent control in SF.
... But Prop 13 guarentees every landlord in the state that they won’t have to pay their share, and they get it even on >1980 construction, unlike rent control.
It seems fair to me that if you’re going to protect landlords (and companies !) you need to protect tenants as well.
Rent control doesn’t apply to new construction in SF. It also allows a regulated annual increase, and rent automatically jumps back up to market upon a number of different conditions - not the least of which is that the owner can push you out to renovate the building!
HN commenters are usually just repeating stuff they heard somewhere, and have no idea what the laws actually say.
Moreover, while there are indeed lots of publications on the theoretical impacts of rent control, few of those publications consider laws as they actually exist, or if they do, the scope of the impacts is rarely communicated when translated into HN talking points. Every study I’m aware of has shown, at worst, diffuse, long-term negative impacts to housing costs. Meanwhile, many of them do exactly what they set out to do: stabilize short-term prices for vulnerable populations.
These laws are simply not the boogeymen that comments here make them seem.