Ended up taking an apartment there for $1400/month six months later, and it stayed at that level for 3 years. (And then shot up rapidly afterwards - I left when it hit $2400/month 5 years later, and it's currently renting for $2900/month.) It had gone down so rapidly that its price was underneath the less-swanky complex a block down the street which normally rented for ~$300/month less and had itself cut rents from about $1800/month to $1450/month over those 6 months.
Rents are sticky - landlords try to avoid cutting if they don't have to. But when there's a choice between letting the apartments go vacant and servicing your debt payments, they have to cut, and if there's a shortage of tenants at that time (because everybody's left and gone home) the cuts can be pretty drastic.
I wonder if house prices will also behave similarly. Right now, the "mainstream" market (i.e. the house that working professionals can afford on income and mortgage without being independently wealthy) tops out at about $2.8M-$3M in Mountain View or Los Altos, but there are a lot of houses selling in the $4-6M range that presumably are being bought with stock options. Could perhaps see a collapse of the top end of the market down to the mainstream real estate market if the stock market collapses.
Is this true in markets where people can legally squat for months? Or as in Seattle where landlords are required to indiscriminately house the first qualified applicant? $0 deposit would make this very exploitable.
Given Housing is now primarily an investment rather than a home for everybody. I would guess most government would likely not pass such proposal.
No one is going to click on a $2000 apartment with six months free when the listings are full of $1500 apartments.
Small mom and pop landlords play it differently. They will just rent you outright without these tricks.
- A month (or year) of time in the apartment for cost $x.
- An option on purchasing more time for cost $y/time unit.
What these "tricks" do is make $x less than $y. That makes sense in the short term when you expect to be able demand higher rent/unit time in the future. When that expectation is no longer likely, it makes sense to lower $y to $x because other landlords will, and they will have less turnover (costs) and the same amount of income.
I look at it like: the fair value for rent is x. The current rent is y > x. If the landlord nominally lowers the rent, they cannot raise it to as high a value next year, and they do not want to do this. Therefore they are incentivised to (effectively) give the tenant money along with the rent to decrease y without changing the nominal rent and giving up on the right to increase it.
Theoretically in a rent controlled market the landlord can't cancel the call option. In practice they might be able to by jumping through some (expensive) hoops, but it should be a reasonable approximation still.
I'm not quite sure what sf/Cali law looks like so I am just taking in generalities about rent controlled markets.
It maybe looks like the landlord is selling a years rent for x and buying a put for the next years rent at y (and recursively options for the later years), but it isn’t really like a put either because it’s really a right-to-try-to-sell rather than a right-to-sell.
More anecdata, but as a resident who IS moving I really disagree with your take - we're probably both right in different ways.
FWIW all private room + 2/3 roomate situations were in the range of $1200 - $1500 vs. my current 1 bed room apartment (no roomates) @ ~$2800 previously.
I worked in the TL for three years and went on a few dates with a girl who lived there. The people in actual apartments are fine. People in SROs not so much, people on the street can be a problem. The needles, urine, feces are real. The attendant at the lot I parked at said he thought he'd be dead within six weeks of taking the job, but in my time there, I think he was only assaulted once (it was more jarring than injuring). One coworker got slapped by one of the crazies, another assaulted. Oddly enough, my car did fine. I've street-parked it around Turk and Jones and picked it up at ~midnight with all my windows intact. As bad as the TL is, it isn't Bayview. I'm always amazed at walk from with Powell to Civic Center, Geary to Market, or west from Union Square; how quickly it changes is incredible. You also see scared, lost tourists a lot because of that.
There are some interesting restaurants there, and you're actually close to a lot of things. If you're living there in a secure building with a secure garage and can mostly avoid the street, it's tolerable. I wouldn't make a habit of casually walking around the block or stumbling home drunk. If you're paying attention and walking with intent, you're generally fine.
After being here for ~2 years I would not recommend the TL because the cost savings and walking commute to downtown are not enough given alternative choices.
If you need to save money you need to move further away to realize real savings, there are too many hidden fees living in the city.
If you have money you'll want to either live in 0-commute distance i.e. near the embarcadero or in literal downtown, or live in the Marina / Presidio / Anywhere else and have a 15 minute drive in.
My landlord hasn't lowered rent, but to incentivize us to stay he replaced our washing machine and upgraded some stuff around the property. That being said if my company ends up going fully remote (which looks likely) I'll probably be leaving the bay area anyways.
You've been given bad info. The UC President said all campuses will be open in the fall, in a hybrid mode. Berkeley's Chancellor has said that labs will be open with restrictions, but most likely lectures will not.
That of course could change.
One of the properties I manage is in Berkeley. I just renewed the lease in May, but I put in a clause that allows the tenants to cancel if classes are cancelled. They wanted to make sure they had housing secured in case classes came back. I also told them we would reduce the rent in the Fall if necessary.
As a landlord, I'd much rather have renters at a reduced rate than none at all, even if that rent is near zero, just to keep the place occupied to reduce crime.
The UC President has said that they expect a hybrid mode of instruction, but it's not clear whether there will be in person classes. It seems like each school themselves have a say in the decision.
> Napolitano indicated that each UC campus would be required to “meet system-wide thresholds” for Covid-19 testing, contact tracing and isolation before being allowed to open.
> Once the standards are met, campuses “can consider whether to maintain fully remote instruction in the fall or return some portion of their students to campus.”
> A decision is expected in the middle of June. [2]
A Berkeley CS professor also posted that he thinks the fall term will (and should) be online-only: https://www.reddit.com/r/berkeley/comments/g9vxb0/why_i_thin...
[1] https://news.berkeley.edu/2020/05/06/an-update-on-uc-berkele... [2] https://www.mercurynews.com/2020/05/20/coronavirus-universit...
"Berkeley's Chancellor has said that labs will be open with restrictions, but most likely lectures will not."
So when I say "classes will be closed," I mean that labs will not be open.
[1] https://www.reddit.com/r/berkeley/comments/c3r8f0/what_happe...
She means the more standard definition of "places where there is equipment for students and professors to use for research".
She is saying that campus labs (rooms with special equipment for research) will most likely be open in the fall with extra precautions, and that classes may be remote only or they may offer both remote and in person options, but they haven't decided yet.
But she's pretty adamant that students and professors will have access to their equipment for research.
So no, campus will not be closed. Classes may be closed, which I said initially.
I'm not sure why you're arguing with me. We said the same thing. You just said it in a different way, and I'm not sure why.
So what he should have been doing anyway. Amazing.
The intrinsic value may in fact be down, but there is no way to know for sure without two parties in the transaction.
- 13 month rents for the price of 12
- $0 deposits
- etc
In practice, this meant that a lot of young people who were living in Brooklyn decided to move back into Manhattan. This was one of the main driving forces behind the transition of the Financial District (basically almost the southern tip of Manhattan) from an office only area to a residential area.
I actually knew someone who lived in an "apartment" building that had been converted from an office building. The layout was of an apartment but if you looked up you saw the classic perforated drop ceiling tiles of an office.
Obviously landlords are hoping that it's a temporary measure, but who knows what next year will bring.
Though I would certainly expect the number of transactions to decrease a lot.
So for the most part people just couldn't move, even if they wanted to.
I mean I personally hope that the government steps in and helps them stay where they are, but that will also keep rents artificially high and would be a transfer of wealth from the treasury to landlords. So pros and cons.
Realistically what seems to be happening is people are moving to lower cost areas within California or outside the state, or moving in with family.
What I'm actually saying is that you can't simultaneously agree that "people aren't moving to SF," and that "the market is fine, because it's a thin market and these prices reflect very few transactions." The latter is a consequence of the former, and the root cause of both is that people just don't have the money to move. This, in combination with the coronavirus eviction moratorium in California, leads me to believe that people aren't moving anywhere, not that they're moving to lower cost areas.
I hope I'm wrong, because unless the government steps in with something radical like a debt jubilee, those people staying in their SF apartments with no income and incurring debt are just going to suffer more down the road.
That's basically a fancy way of lowering the rate, right?
Our friends just bought a new house in a development and the builder did a similar game where they added in some bells and whistles instead of coming down on the price. Their reasoning was that they couldn't drop the price because that's public data and it would put pressure on them to accept lower prices from other buyers in the neighborhood.
How is it that Mission Bay apartments are not subject to these rent control regulations if this is state wide? Asking because when I lived in Mission Bay, UDR properties each year tried increasing my rent much higher than this.
So, if you rented before Jan 1, and your rental unit was built after 1979, it wasn't covered by any rent control. Landlords could raise rent as much as they wanted on those types of units.
Also there are a lot of exemptions, one big one being that the building needs to be 15 years old to be subject to the law.
Landlords don't want to accept that rents need to go down so they leave it up at the same price even if it means that places go vacant for multiple months. In a perfect market rents would be down 15/20% already.
This downturn may be different because of the shift to work-from-anywhere in tech, but it will be interesting to see. A lot of people like their tech offices, with their free lunches and snacks and gyms and coffee and so on.
God what a short-sighted policy. Not that I expect rent control to go well but that's nuts.
It certainly has its issues, but there are much worse market distorting policies that I would like to see be fixed before rent control gets put on the chopping block.
Rent control prevents rents from aggressively dropping because landlords know the rents can’t be increased later. This is during a time when rents really need to go down.
It is absolutely not in owner interests. But cities by and large have been built in accordance with owner interests.
" In determining the lowest gross rental amount pursuant to this section, any rent discounts, incentives, concessions, or credits offered by the owner of such unit of residential real property and accepted by the tenant shall be excluded. "
Civil code section 1947.12.
In a city like SF, vacancies is not a thing. Actually for that matter, in any market the market price is some equilibrium price that gives a certain vacancy rate.
"Affordable housing" is a completely separate issue.
As you mention, a significant percentage of tenants with rent control would be regarded as "high income" households.
Hell, I know a guy who has a rent control units for a couple decades. He can pay his monthly rent with one day's take-home pay.
It sounds outrageous, but I know someone like that too. Got a rent controlled box in Berkeley as a student, never left. Rent is only about $700 a month now. If you make $180,000 a year, that's a single day's pay.
Not to mention the homeless.
Don't get me started on the housing "market" and rent control impact on supply/demand. Housing is largely an adversarial game, not a win-win game.
Here is one of many papers: http://www.socsci.uci.edu/~jkbrueck/course%20readings/gyourk...
They've implemented a time-based stabilizing mechanism, instead of an arbitrary percentage-based cap. Moving is a huge cost for a tenant, so if a landlord raises rents every year, expecting people to be able to move every year to a fairly-priced place is insanity. But, I do think most people can handle a move every 5 years to a cheaper neighborhood if they need to.
Their adamant defense that the unit was already at "market price" was just such absolute bullshit that I nearly moved just on principle. Lucky for them, I hate moving even more than I hate the landlord.
The average monthly price on my extension is about 11% below my average monthly price on the old lease.
Forgetting about all the high paying jobs around together with the restrictions for building sounds too convenient to blame it on rent control.
We'll see where this takes us, but obviously if the population is dropping by 20% a year, keeping the theoretical option to charge a rent of 4k when the actual value is 2k won't matter.
Also, I'd like to add that landlords are incentivized to charge high rents anyway. Even without rent control there's not going to be $800 rents in San Francisco anytime soon, sorry.
This is just a holding pattern, right now. There's a slim chance that things could go back to normal, say with a quickly developed vaccine through decisive national leadership, and a lot of luck. In that case, those prices will look sensible again.
I think the odds of that are extremely low... but they're not 0%.
Probably, though, prices are going to crash. Some landlords will accept the inevitable and start charging less to rent out their rooms; if things are really caving in as people expect, landlords may be reluctant, but if it's that or lose money on empty rooms, they'll lower prices. And if things get that bad, then landlords will be lowering prices.
Think of all the AirBnB hosts making 0$, all the landlords with mortgages depending on some kind of rent to meet their bills. They'll lead the way, and others will follow, just to keep up.
Midwest real estate I’ve acquired offers cash flow you can’t find on the coasts but no hope of appreciation. To each their own.
I manage a couple of properties in the Bay Area, so I keep a close eye on these things. What I'm seeing is not a drop in rents, but an increase in $0 deposits and many weeks of free rent upon move in (sometimes 6+ weeks).
Landlords are very reluctant to lower rents, because with the statewide rent control that limits increases to 5% a year, we're incentivized to keep the rents high and give months of free rent, just so our base rate doesn't drop.