San Francisco Living

Planning to Move to the Bay Area?  Save Your Pennies, It’s Going to be Expensive

This article was originally posted on July 19, 2013, and has been edited

 

If you are planning on moving to the Bay Area in the next couple of months, be prepared to pay a premium for your rent.  San Francisco Bay Area rents rose around 7.8% in the second quarter of 2013, vs the national average of 3.1%. 

 

What does this mean?  In the San Francisco Bay Area your average rent is $2,498 per month, and in The City itself, the average rent is $3,295. 

 

What are some of the reasons for this massive increase in rents?  Well, the Bay Area’s booming tech sector has brought a large number of wealthy, individuals to the San Francisco, which has squeezed demand.  In fact vacancies in the city fell to below 4.1% compared to the national average of 7.4%.

 

San Francisco also has very tight development controls.  And although there are going to be a very large number of new apartment that will become available in the next 18 months, (14,377), it will do little to lower the average rental price.  There is still a massive influx of people moving to the Bay Area to take part in the tech boom.  In fact, the recently completed 22-story Trinity Place has preleased all 419 units, something that is virtually unheard of.

 

San Francisco City is not the only place in the Bay Area to see higher than average rent increases.  According to the Wall Street Journal, Oakland saw a rent increase of 6.9%, and San Jose saw rents increase 5%

 

The dramatic rise in rental costs has drawn a flock of buyers to the Bay Area.  Many homes are sold within two weeks, while in other areas around the country listing times can last months. Many multi-family unit buildings see fierce competition, and can attract more than 30 buyers all competing at a time.  Cash Buyers are able to scoop up a lot of great deals, and closing quick seems to be a preference for many sellers. 

 

For those of us that currently live in San Francisco, be aware that some landlords are finding any and every reason to evict tenants so they can find new tenants willing to pay a premium price to live in the Bay Area. 

 

What does all this information mean?  It’s very expensive to live in the Bay Area.  Mostly because the jobs the Bay Area offers support the lifestyle.  It is fair to expect that as long as the tech boom continues and salaries continue to rise, rent prices around the whole Bay Area will continue to rise.  As people move out of San Francisco to escape the very high rental rates, rentals rates around the Bay Area will also continue to rise.  Rents aren’t likely to come down until there is either a major increase in supple (unlikely in San Francisco) or a major decrease in demand (which could happen if the tech boom goes the way of the dotcom bubble).

 

All is not lost though.  Despite the high average prices of rents there is a lot of diversity in San Francisco around rents.  Western and Southern neighborhoods of San Francisco offer1 bedroom apartments with rents closer to $1600 on average, around half of the premium price paid in SOMA, South Beach, North Beach, and Financial district neighborhoods. 

 

These cheaper neighborhoods offer excellent housing options with the only downsides being longer bus rides to get down to work downtown.  And these neighborhoods (especially the Sunset and Richmond districts) are much safer than premium neighborhoods, especially areas in SOMA.

 

In conclusion, be prepared to pay much more than you expect when you move to San Francisco, and the trend is likely to continue.  Get into real estate investing if you can, but always be smart about it.

 

 

Rent Control in San Francisco

This article was initially posted on Mar 13, 2014, and has been updated


Rent Control!  Living in San Francisco, we all know at least one person who has a fantastic apartment in San Francisco and is paying less than half what everyone else is.  Depending on who you read, rent control is the only way to stop property owners from fleecing their tenants or is single-handedly responsible for any housing crisis because the market isn't able to solve the housing issue its own.  I'm going to try to avoid making a value judgment here, and simply discuss how rent control works in the city.  

 

However, I am NOT an attorney, and this post is not legal advice and should be used for informational purposes only, and is specific to the city of San Francisco

First, it’s important to understand what rent control is.  Rent control means landlords cannot raise rents for their buildings beyond a set amount that is tied to directly to inflation.  The rate varies each.  For the period March 1, 2013 – February 28, 2014, it was 1.9%.  This year (March 1, 2014 - February 28, 2015) it is set at 1%. (update - recent allowable increases: March 1, 2017 through February 28, 2018 is 2.2 %. The annual allowable increase amount effective March 1, 2016 through February 28, 2017 is 1.6 %.)

 

There are four basic guidelines on when rent control doesn’t apply:

  1. A building constructed after June 15, 1979 (if you are curious about the age of your building, visit the county assessor’s office by clicking here)
  2. If you lived in subsidized or HUD housing
  3. You live in a dormitory, monastery, hospital, nunnery, etc
  4. You live in a residential hotel and have lived there less than 28 days. 

 

The San Francisco Rent board has a comprehensive list of exempt property types, which you can find here, though the San Francisco Tenant’s Union highlights some cases where the law favors of the tenant.

 

There are specific reasons why a landlord can increase rent beyond the set amount by the rent board.  These reasons include any capital improvements made to the building.  “Capital improvements” include a new roof, new windows, exterior paint jobs, new appliances, etc.  In buildings with 5 or fewer units, the landlord can raise the rent up to 5% per year, until they recapture 100% of the cost.  In buildings with more than five units there are options, depending on a variety of factors. 

 

In both cases, the landlord must do all the work ahead of time, and then submit request for a hearing to raise the rents.  If the work was never done, tenants can appear at the hearings to contest the rent increase.  Also, once the capital improvement rent increase is not permanent, and once the cost of the improvements has been recaptured, the rents must return to what they would usually be, (their standard base plus any regular rent increases).

 

Another reason a landlord can increase the rent beyond the rent set by rent control is higher costs in operating and maintenance. Higher costs result from an increase in the expenses for a property management company, gardener, and general care and maintenance for the property.  However, before the tenants have to pick up the bill, the rate of increase must exceed the allowable increase set by the rent board.  And rents cannot be increased by more than 7% for operation and maintenance reasons.  Once again, these increases do not add to the overall base rent for your unit, and adjustments must happen after the landlord has incurred the additional cost.

 

Also, there is a practice called banking rent.  Banking rent is where a landlord can go back to the original date on your lease and apply each allowable rent increase per year to bring your current rent up to what it would be if they had raised your rent consistently each year.  This is entirely allowable as rent increases are not on a use it or lose it policy

 

I hope that this helps clear up and confusion related to rent control.  If you have any questions, please reach out to us at info@locatedsanfrancisco.com