San Francisco 'Values' Pricing Poor Out of the City

Rent control is killing the city's stock of apartments.

SACRAMENTO — People use the term “San Francisco values” to refer, proudly or facetiously, to the occasionally oddball politics and culture in the City by the Bay. While many San Francisco debates—i.e., over Happy Meal bans or limits on nude dining—are unique, the latest brouhaha could have implications for the state.

With the area economy rebounding, San Francisco is in the midst of a housing crisis as many residents are evicted from their apartments. “It is a situation rooted in limited housing stock and surge in demand that has pushed the median rent up from $2,968 in 2010 to $3,414 this year…,” reported the San Francisco Chronicle.

The median home price has soared to nearly $900,000, which helps explain why nearly two-thirds of the city’s residents are renters. So the rent hikes are particularly acute—and have put the city’s tough rent-control laws in the spotlight. As property values have rebounded, an increasing number of San Francisco owners are getting out of the rental business and cashing out their properties to turn them into co-ops.

While the city’s rent-control ordinance places strict limits on the ability of landlords to increase rents, a state law called the Ellis Act allows property owners to take their property off the rental market after providing tenants with a 120-day notice (and much longer for elderly or disabled tenants).

Following a 170 percent increase in such evictions, some Bay Area legislators are calling for changes to the state law. And San Francisco tenant activists recently proposed new regulatory and financial burdens on property owners who want to sell or move into their own properties.

“Speculative investments in housing has resulted in the loss of thousands of affordable apartments through conversions and demolitions,” according to a recent statement from a tenants’ rights coalition. Yet landlords ask whether further regulating and even prosecuting them in some instances, as the tenant groups propose, is the best way to encourage more people to get into the rental-housing business, which is what’s needed to increase supply and reduce rents. It’s an old economic rule that you get less of whatever you punish.

“I’ve recently joined the ranks of San Francisco landlords who have decided that it’s better to keep an apartment empty than lease it to tenants,” wrote Scott James in a June column in the New York Times detailing his difficult time evicting a terrible tenant. “San Francisco’s anti-landlord housing laws and political climate make it untenable.” Frustrated landlords have left more than 10,000 units vacant, he argued. And Janan New, executive director of the San Francisco Apartment Association, told me the city has created 52,000 new jobs last year but has only build 126 new housing units.

Advocates for rent control say that these policies are necessary to keep landlords from raising prices beyond the ability of people to afford them. But rent-control critics note that the rules actually increase rent prices, especially over the long term, by dampening the supply of apartments.

In cities where the market reigns, people tend to be mobile, but in places such as San Francisco tenants stay put in their apartments given that they don’t want to leave their rent-controlled units. So few apartments become available. Restrictions on rent prices diminish the incentive of landlords to improve the buildings, thus leading to more substandard buildings, rent-control critics argue.

It’s not just conservatives who say so. “History has shown that the best intentioned plans of protecting tenants through rent control don’t necessarily help the low-income residents who need it most – and can actually aggravate a housing shortage, which drives up prices for those desperate to find a place to live,” opined the liberal-oriented San Francisco Chronicle.

San Francisco is a sought-after city on a tiny peninsula, which leads to a tight supply. “But the biggest problem with the Bay Area is 75 percent of the land area is off limits to development so you can’t build your way out of this,” said Lawrence McQuillan, senior fellow at the libertarian Independent Institute in Oakland. Even for cities without rent control, such as San Diego, these basic “supply and demand” lessons are useful for anyone whose “values” include affordable housing.

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  • James Anderson Merritt||

    Given your illustration, a better song lyric for the story would seem to come from Ian Thomas: "Ooh, ooh, feeling fine, mama. Painted Ladies and a bottle of wine, mama. Ooh, ooh, feeling good, mama. They took my money like I knew they would." For brevity, you could just use the last quoted sentence, and your hard-core pop-music fans in the audience would surely pick up on the reference.

  • Sevo||

    Scott James is correct.
    By count, 18 units have been removed from the rental market in the entire square block where I live. By estimate, that is 25-30% of the formerly available units.
    I acquainted with most of the owners; they are typically SF 'liberals', and most favor rent control, so long as they don't have to deal with it.

  • ||

    Hasn't this been the case in NYC since, like, forever?

  • Swiss Servator, referendiffic!||

    WWII "emergency" legislation....still in effect.

  • EDG reppin' LBC||

    I'm going to San Francisco next week. I hope the poor are gone before I arrive. Wretched lot, they are.

  • Swiss Servator, referendiffic!||

    The poor are ever with us...

    Which is good, for where else would I go for sedan chair bearers and monocle polishers?

  • ||

    "The million lords of hell stand arrayed about you. Tell us, why should we let you leave? You have no power here, for what power have dreams in Hell?"
    "You say that I have no power? Perhaps you speak truly. But — you say that dreams have no power? Ask yourselves, all of you, what power would Hell have if those imprisoned here could not dream of Heaven?"

  • Jon Lester||

    More should be done to gentrify Oakland. After I visited the Bay area last year, I priced some rentals and found plenty of good deals in the nicer parts of town. It can be done.

  • bassjoe||

    Oakland is a great place to live (disclosure: I live there). Though most of the city still has a deserved "bad" rep, several neighborhoods -- Rockridge, Lake Merritt area, and Piedmont Ave -- always were islands of greatness and are just getting nicer. The city's eastern hills have always been filled with the filthy rich, too, for whatever that's worth.

    in the past 10 years, parts of North Oakland, downtown and the waterfront have been heavily invested in and gentrified, as well.

    I live in SF for a year before moving to Oakland. It's loud, smelly and way too expensive. The last straw was when I found out they regulated hookah dining out of the city. Fuck SF.

  • The Late P Brooks||

    I hope the poor are gone before I arrive. Wretched lot, they are.

    Are there no work houses?

  • Mokers||

    I've talked with people in the area. I mentioned that zoning is a problem and that if people were allowed to build there would be plenty of housing. The reply was something like "you can't just have people building houses anywhere".

    People have an idea that there is something artificially keeping supply down, but their answer is to blame twitter for moving in. The thought that the idiot politicians they vote for are responsible for all of their ills is completely lost on them .

  • Brian||

    The reply was something like "you can't just have people building houses anywhere".

    And, I'll be completely shocked if they own property and are quite damn skippy happy about the lack of building.

    Liberals are all for affordable housing, as long as the houses they own don't cost less.

  • ||

    “But the biggest problem with the Bay Area is 75 percent of the land area is off limits to development so you can’t build your way out of this,”

    I am not a fan of rent control (one might even call me an enemy of it)...but isn't this the problem and not rent control in and of itself?

    If housing builders could build without huge government constraints wouldn't rent control have little or no effect on the market?

  • Sevo||

    "I am not a fan of rent control (one might even call me an enemy of it)...but isn't this the problem and not rent control in and of itself?"

    It's additive, but rent control is the real driver.
    Imagine being a developer or a buyer of residential RE; would you build or buy something that stands a good chance of being under rent control as soon as the Supes hear from one more 'artist'? So what does get built is for sale or under gov't subsidies for 'affordable housing'. It's a scam, as you can imagine.
    There was a whacko claiming that high rents in Daily City (no rent control) shows the problem isn't rent control. Well, the limited supply in SF drives renters to Daly City, raising those rents. He wasn't going to give up his fantasy for mere fact.

  • Rrabbit||

    Rent control in SF applies only to buildings constructed June 1979 and earlier. Thus, I don't see how it can have such a huge impact on development.

  • Sevo||

    Rrabbit|11.29.13 @ 8:18PM|#
    "Rent control in SF applies only to buildings constructed June 1979 and earlier"

    CURRENTLY rent control applies to those units; you wanna bet millions of dollars it's going to stay that way?
    I didn't think so, and no one else does either when you can build on the Peninsula without the risk.

  • Rrabbit||

    Yes, but some older buildings went off the market because of rent control, thus reducing supply and leading to higher rent.

    Sure, there is some risk that idiots impose rent control on newer buildings. But there also is a relatively high profit to be made as long as rent control is not extended to newer buildings.

  • Sevo||

    "Sure, there is some risk that idiots impose rent control on newer buildings. But there also is a relatively high profit to be made as long as rent control is not extended to newer buildings."

    In which case, have a ball! Most people with that sort of money to invest aren't willing to take that risk.

  • C. S. P. Schofield||

    So, once again, the predictable cock-up caused by well intentioned city-planning has taken hard core Liberals completely by surprise.

  • FreeToFear||

    "Advocates for rent control say that these policies are necessary to keep landlords from raising prices **beyond** the ability of people to afford them"

    Markets... how do they work???

  • Lord at War||

    +1 juggalo

  • Gorilla tactics||

    how many people made money charging their products "beyond" what their customers can afford?

    Progs are so fucking stupid, sometimes it downright scares the living shit out of me.

  • AdamJ||

    But what about teachers and cops and firemen?

  • Sevo||

    It's not a "market" in SF. The landlords get together, get drunk and decide to throw everybody out on the street.
    We used to do this once every six months, but now we can't 'cause rent control!

  • Harun||

    My little sister is a perpetual grad student. I love her, but if I could short her student loans, I would do so in a heartbeat.

    She used to live in SF, but then was forced by the "crazy rents" to move to Oakland.

    It appears she has survived that move, so I don't think rent control is needed. People apparently can find other places to live if they put their mind to it.

  • Tamfang||

    Ah but housing is different. If you build more, it will only attract more people, driving rents even higher.

    Or so I was patiently told when, about twenty years ago, I attended a so-called community meeting on Haight Street to discuss what might be done about the housing problems.

    I had already guessed from Hallinan's welcoming speech that the meeting's conclusions were predetermined.

  • Sevo||

    Tamfang|11.29.13 @ 9:14PM|#
    "Ah but housing is different."
    Strange how *every* good is different to the folks wanting control over *that* good.
    Fuel, housing, medical care, somehow each one is different, and each one needs top men to make the decisions.

  • Szumny||

    Who?

  • Car Scanner||

    Poor 'Values' is not a good thing.

  • Suellington||

    I could tell some tales about The SF housing situtation. Houses that have sat vacant for decades. Squatters getting paid tens of thousands of dollars to unsquat, payouts to tenants that owned another house. Truly bizarre here. I was born in the Sunset and here I own a home and a rental. I am not giving up so easily but it is friggin ridiculous. Luckily the beauty and my fam and friends distract from the leftist utopia.

  • kristenkristen||


    until I looked at the check which was of $4814, I be certain that...my... mom in-law could actually bringing home money in there spare time on-line.. there aunt started doing this for under 20 months and at present cleared the debts on their appartment and got a top of the range Ford Mustang. why not try this out

    ==============================
    http://www.fb49.com
    ==============================

  • Gorilla tactics||

    This is how lefties engage in stealth ethnic cleansing. They implement all these things that completely jack up the price of real estate, I would argue that zoning and open space laws might be worse than rent control in the long run, and poorer minorities get pushed out of the city. The black population of San Fran and New York has been dwindling because of this shit. Then they turn around and lecturing everyone else about how racist they are if we mention affirmative action or the destructive aspects of the welfare state. Methinks they protest too much.

  • John C. Randolph||

    Yeah, leftards see racists around every corner so that they don't have to confront the racist they see in the mirror.

    -jcr

  • AdamJ||

    My friends own a restaurant in SF and have to pay something like $11/hr to all employees, plus give them an hour paid time off for every 30 hours they work. I'm sure they can never fire anyone either. The reason? They have to pay a living wage to the career server because rent and food are so expensive there. When will this retarded dog stop chasing his own tail?

  • Sevo||

    Suffice to say an acquaintance ran two pretty successful restaurants. She closed the one which wasn't quite as successful as the other location when SF passed the last '50 employee benefits' package.
    22 people got to look for jobs.

  • thorax232||

    The only thing that's really needed is the removal of all government.

  • aliciaehopper||

    until I looked at the check which was of $4814, I be certain that...my... mom in-law could actually bringing home money in there spare time on-line.. there aunt started doing this for under 20 months and at present cleared the debts on their appartment and got a top of the range Ford Mustang. why not try this out

    ==============================
    http://www.JOBS83.com
    ==============================

  • Rwanda Sykes||

    The conservative/right wing blogosphere trafficks in intellectual dishonesty so often (this article's a good example) it is an essential part of it: the conservative blogosphere being intellectually dishonest and wrong. I don't expect you guys to notice it any more than a fish notices water.

  • Lar Gand||

    It's easy to say the right is wrong, but with no facts to back it up, I say you are just blowing smoke out your ass.

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