April 2022: Q1 San Francisco Apartment Insider
As we enter the second quarter of the year there is a lot of new momentum for apartment properties. This may not be the momentum of pre-COVID, but we are trending in the right direction! The Mayor has been actively “recruiting” large business owners to open their offices; primarily in the downtown / financial district / SOMA areas. The call back to offices – whether it’s a couple days a week or full time has really helped to absorb the current pool of available rentals. Let’s hope this continues and we do not see any new speed bumps (aka outbreaks) to hamper the progress or any new legislation that takes away an owners right to collect rent.
Speaking of a landlord’s ability to collect rent, there are several local and state measures that are in play; most provide a tenant additional protections. Locally, everyone’s favorite socialist, D5 supervisor Dean Preston, proposed extending the 3-day notice to 13 days. This new law was passed by the Board of Supervisors in January. The new law adds 10 days to the previous three-day notice tenants get to correct behavior before landlords can take them to court. The new law applies to rent that becomes due on or after April 1. Good news: San Francisco Apartment Association and the Small Property Owners of San Francisco Institute challenged the longer period in court and (on March 23rd) the judge granted a stay until there is a final resolution to the matter. Although the matter is not over, the stay is a positive step.
Also, the State passed AB 2179, which extends eviction protections to those who applied for rent relief before March 31, tenants will be able to stay in their homes until July 1.
As far as protections for tenants as it relates non-payment of rent due to COVID (statewide tenant protections under AB 832 addresses un-paid rent debt), the City of San Francisco (and Alameda County) took matters into its own hands and gave some (more) hope to tenants who fail to pay rent on or after April 1, 2022. Now tenants can use a “COVID-related hardship” as their defense in an eviction action. Under state law to date, the tenant merely had to state they suffered a “financial impact” because of COVID and this assertion could not be tested. A bit of optimism is in the San Francisco's ordinance; the burden of proof shifted to the tenant to actually document a substantial hardship. The sole word of the tenant (stating hardship) is no longer satisfactory. This is encouraging to landlords who have “tenants of means” refusing to pay rent.
In Sacramento, Assemblywoman Buffy Wicks is bringing AB 2469 back for afourth attempt to institute a statewide rent registry that would ask landlords to provide reams of information about their rental business. For owners who are not transparent and fail to register, they would be banned from increasing the rent or terminating a tenancy.
Looking at rent relief; where did all of the money go? California has so far assisted just 223,103 of the roughly 507,000 households that had applied for rent relief. A recent report showed that $101,000,000 has been paid to San Francisco applicants, representing slightly more than a third of the $289,000,000 requested.
42% of the 18,862 rent relief claims made in San Francisco have been paid.
About 6% percent await disbursement
51% of applications await review
Roughly 13 applications have been denied
On the office front, approximately 23% of San Francisco office space is vacant. Landlords are offering brokers big incentives to bring in prospective tenants. Per foot commissions for tenant representatives; which were a fairly standard $2 per foot pre-pandemic are now $3 per foot and some landlords are offering up to $5 per foot. There are plenty of incentives offered to tenant representatives to simply book tours; ranging from cash, vacations, cars and jewelry. Time will tell if it works but we still need employers to “need” space.
On to rents. As of March, San Francisco is still the second most expensive metro to rent in behind New York ($3,260), with median one-bedroom apartment costs at $2,910, up almost 10% year over year. The city's median price for a two-bedroom apartment was $4,000, higher than any other metro in the country, and up 14% year over year.
While overall rents in San Francisco rose over the past year, many cities nationwide also saw larger increases, including New York City (+34.4%), Phoenix (+26.7%) and Austin (+23.7%). Miami is the new rental hotspot where median rents for one-bedroom units have now reached $2,500 a month, a 38.9% increase from this time last year.
Nationally, the median rent for a single-bedroom unit increased 2.5% year-over-year to hit $1,400 a month. That outpaces the yearly growth from 2020 to 2021, which was 1.9%.
On to the numbers.
