Have San Francisco Rents Declined?

By the Small Property Owners Association of San Francisco

After reviewing all of the responses to this month’s question, it appears that San Francisco rents have declined generally in the 10-12% range overall, although some members have seen larger declines while others are weathering the storm fairly unscathed. Despite the pandemic and its impact on the city’s rental market, especially due to the work-at-home trend, we should keep in mind that housing is still in very short supply.

There’s no question that we currently have a greater-than-normal vacancy rate and a resulting decline in rental rates and an increase in the time required to re-rent units, but it’s likely that the rental downturn will normalize in the months ahead as COVID-19 hopefully slowly comes under control.

This perspective is bolstered by the fact that in San Francisco, the U.S. Census Bureau recorded a total of 45,122 permits for new housing units from 2010 to 2019, representing just a 7%  increase over the 2010 census base of 647,973. Yet the ratio of new jobs to new housing permits over the decade was over 6 to 1. That tells us that despite the downturn, the overall prospects for the San Francisco rental market still appear positive. Some small property owners experiencing vacancies are opting to wait it out, or even to sell their vacant units as TICs, lest they be locked into lower rental rates permanently, especially given the possibility that passage of Prop. 21

could introduce vacancy control to California for the first time.

 

Question:   Have you had a vacancy since the pandemic began? If so, how long was the unit vacant?   Did the former renter move due to COVID-related circumstances?   If you’ve re-rented the unit, how does the new rent compare to the previous rent?

 

Answers:

  • The unit was vacant for two months before I found a new tenant. I don’t know for sure, but I suspect my tenant moved out in order to find a cheaper place. I re-rented the unit for 20% less than the previous tenant.
  • The new tenants moved in right after the old tenants left, so I experienced no vacant days. The previous renters moved to a lower-rent area out of the city since they can now work from home. The new rent for that apartment is $400 less than before. I also had to reduce the rent on an adjacent apartment by $1,000 in order to retain those tenants.
  • Four tenants in my 6-unit building moved out from August 17 to September 9. One unit vacated due to marriage, two due to moving back in with parents, and one due to a home purchase. I’ve been advertising the units, but with no responses since August 18, despite

reducing the rent by $230 and repainting the units.

 

  • I’ve been a realtor for 40 years. I manage an 8-unit, 1950s Pacific Heights building for the owner/client. All the units are one-bedrooms in identical, very nice condition with a garage space. I had a vacancy in May and re-rented the unit for the same $3,300. In June, another $3,300 unit went vacant. It still sits vacant at $3,300 – no calls. The owner is willing to wait. I believe that rents have now settled at a 10% drop from a year ago. A year from now, they’ll be back up to where they were in July, 2019, as we will hopefully have all gone back to living, aided by a vaccine.
  • It’s been an apocalypse—all due to COVID-19. I have seven apartments. Four have had vacancies and I predict the other three will, too. My 2- and 3-bedroom units re-rented relatively quickly at less than 10% reduction in rent but the one-bedrooms are going nowhere, all for the same reason: two people can’t work at home in a one-bedroom. I predict my entire building of four one-bedroom units will be empty by the end of the year and will sit empty until work at home is over and people (especially tech) come back to the city. 2008-2010 was nothing compared to this!
  • My rental unit was vacant for four months. The tenants broke the lease because they worked in service industries and had no income. I tried to negotiate with them for deferment or lowering of rent, but they preferred to break the lease because they had no idea when they’d have a job again. I let them exit the lease early. I re-rented the unit in August at $4,000/month, down more than 20% from the previous rent of $4,900. We’ve had tenants moving out almost every month since April and face increasing difficulty filling the vacancies. The reasons vary but are mostly COVID-related as there is no need for tenants to stay in San Francisco when they can work remotely from anywhere. Some who had moved from out of state also stated that it doesn’t make financial sense to stay in an expensive city when you can’t even go out and enjoy what big cities usually offer! At first, the vacancy lasted about a month and increased to three months. The price drop also widened from 4.5% to 7.5%.
  • I had a tenant move out in June. There were two master tenants on the lease. One left due to a pre-planned move to another city at the behest of his employer. The other decided that since he didn’t have to go into an office that he would rent a camper van and tour the national parks while working. I actually had a lot of interest in the vacant unit—more so than the last time I had rented it about five years ago. I got a little more rent than I was previously charging. What was surprising was the number of potential tenants that came through who were looking to move to San Francisco. The typical scenario was a recent college grad who got a job in San Francisco. Their employers didn’t expect them to come into work, but they figured that at some point they’d be required to come into the office, so why move twice?
  • I‘ve had a 2-bedroom, one-bath flat vacant since the end of July. My tenants of eight years decided suddenly to purchase a home in the city. Indirectly, it was related to COVID-19 as they both were now working from home, which changed the dynamics of their living situation. Due to the pandemic, I’ve decided that this is not a good time to be seeking and interviewing perspective tenants, so I’ve not placed the unit on the market.
  • Our rental unit has been vacant for one month, the renter having moved due to a Covid-19-related work-at-home policy, and chose another city (Denver). In addition to lowering the rent by 10-12% for prospective tenants, we are offering four weeks free rent.
  • One of our tenants, who moved in April 2019, indicated that he might leave since rents were cheaper elsewhere. Fortunately, he decided to stay after we agreed to a 9.5% rent reduction, retroactive to April 2020.
  • I had a good experience. My tenants vacated because they needed to downsize. The unit was only vacant 10 days. I was able to charge the same rent as the prior renters. I had three qualified applicants and 3-4 others very interested to see the unit. I lucked out.
  • I’ve had two vacancies due to Covid-19-related job losses. In one, a tenant lost her job and the roommate couldn’t find a replacement, so had to vacant the unit even at a reduced rental rate. The average time vacant (excluding remodeling work) was about two months. Rental rates are about 10-12% below previous tenants.
  • I have one unit in San Francisco, vacant for one month. The previous tenant moved for non-COVID-19-related reasons. I re-rented the unit for about 10% less than the previous tenant.
  • My apartment has been vacant since August. The move-out was due to the fact that the tenant was working remotely, so felt no need to live in San Francisco. I have advertised the unit at a lower rent than before, but have not attracted any interested parties so far.
  • I’ve had no vacancies.
  • My previous tenants moved out due to the pandemic, and I have yet to re-rent the apartment, which will be renting for 30% below what it was before
  • Since the pandemic began, I’ve had two vacancies, both due to working from home and deciding to leave the city. When I re-rented the units, the rent on one dropped 6% and 3% on the other.
  • Since the pandemic started I’ve had a lot of turnover in my two 15-unit buildings. It’s taking at least two months to rent an apartment. I have seven apartments for rent out of 30. The rents are 20% lower than they were two years ago, yet prospective tenants are offering even less than the discounted price.
  • I’ve had no change in renters in my 4-unit building this year and no reductions in rent.

 

Reprinted with permission of the Small Property Owners of San Francisco Institute (SPOSFI) News.  For more information on becoming a member of SPOSFI or to send a tax-deductible donation, please visit their website at www.smallprop.org or call (415) 647-2419.