What does rent control do to the SF market? Here’s a peek – On The Block

What does rent control do to the SF market? Here’s a peek – On The Block

1 of 26 | Rent control’s influence on rentals, ’17

Asking rents a brief history, courtesy Paragon.

Money on the line

Paragon notes when we compare the rent rate appreciation between an average San Francisco rent-controlled apartment leased in 2010 at market rate with a unit not subject to rent control leased at the same time (and thus increased by market rate each year) that, in a nutshell, “There is a lot of money at stake.”

For the owner, the picture is similarly dramatic: If the rent-controlled tenant moves out in 2017, there is not only the substantial increase in annual revenue for the owner, but, “at a conservative gross rent multiple valuation of 14, the property would be worth $155,000 more.”

Rent control and demand, on two levels

Logically, rent control is most often found where higher percentages of tenants make up the population. putting owner-occupier residents in the minority, which is the case in San Francisco, Oakland and Berkeley. Possibly these laws result both from city governments moving to protect the majority populace; and also from ballot initiatives championed by said majority (and remember, the majority is renting).

But despite the headaches rent control creates for multi-unit owners/landlords, the residential investment market in the northern Bay Area remained strong in 2016, with “consistent year-over-year appreciation across the board” in our local markets.

New apartments won’t be subject to rent control since in S.F. per the San Francisco Tenants Union (SFTU), you don’t enjoy rent control protection if you are a tenant living in a unit “with a certificate of occupancy after June 13, 1979, with a few exceptions. This ‘new construction exemption’ is the biggest exemption in San Francisco,” writes SFTU.

Examples: rent control’s impact

The apartments in the gallery are drawn from four different neighborhoods and include both one and two bedroom examples. We included those that would be in buildings both protected and not. These examples join Paragon statistics to give you a picture of what the average rent (which, according to Paragon, is currently $3,400 a month, weighted) buys you now, an average that– no matter where you stand on rent control– you must admit is a partial reaction/outgrowth of that control.

From Paragon’s data, you can also see something of these laws as they impact multi-unit building sales. Again, the data don’t pretend that the prices for such sales are solely the result of rent control; rather, rent control is one of many influencing factors.

Pro or con, or both?

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