Real Estate

There is no such thing as cheap

Do you have $100,000?

The headlines are depressing if you’re a renter and exciting if you’re a landlord. “New numbers show San Francisco has nation’s highest rents,” reported the Examiner in late 2013. “Rent At Dilapidated San Francisco Lower Haight Apartment Unit Raised To $6,200 A Month,” says CBS San Francisco Bay Area. And, in what might have been intended as a positive sign, Curbed SF wrote “SF Now Only the Fourth Least Affordable Rental Market in US.”

Nearly two-thirds of San Francisco housing units are occupied by renters. Compare that to the national figure that more than two-thirds of the country’s housing is owner-occupied.

When house purchase prices are sky-high, as they currently are in San Francisco, that generally means the rent versus own balance tips in favor of renting. Renters who want to buy are advised to stay put and bank their extra cash until housing prices deflate, then they can make their move. But when a market is as inventory-restricted as is San Francisco, where constrained and very costly development has led to a severe shortage of competing units, prices for both for-sale and for-rent units are sky-high.

And rent prices are high. As of April of this year, the average rent for apartments within 10 miles of San Francisco is $3,437, according to Rent Jungle; a one-bedroom in the city can cost $2,897 and two bedrooms average $3,898. Rent Jungle’s listing of the most expensive rents in the city by neighborhood has Presidio Heights at more than $4,500, with the Marina in second place. South of Market is the least expensive rental neighborhood tracked, and it is also well over $3,000.

Different sources will track different data, but whatever your source, San Francisco still pops up among the leaders in the nation in terms of high rents — and pain for both developers and renters. According to Rent.com, a three-bedroom unit in the city will cost $4,962 a month, less than number-one New York City but it still makes one wonder what was in that dilapidated Lower Haight apartment to corral $6,200 a month.

In late May, The New York Times reported:

In the San Francisco Bay Area, home of the sharpest recent price increases, the sale price of a home is about 20 times what it would cost to rent a home of the same size for a year. That ratio, based on an analysis of data from Zillow, is the same as in 2003, when the San Francisco real estate market had yet to become an out-of-control bubble but was well on its way there.

When low mortgage rates are taken into account, buying a home in San Francisco looks somewhat more attractive — but with a 10 percent down payment and prevailing interest rates, buying a home is 6 percent more expensive than renting a place of the same size, the same premium for buying as there was during the dot-com boom in 1999. Just two years ago, buying in the San Francisco area was 24 percent cheaper than renting an equivalent place.

Earlier this year, a San Francisco landlord caused much forehead slapping and exclamations of “He’s crazy” when he distributed a letter to his tenants of a rent-controlled apartment on Fillmore Street in the Lower Haight telling them they needed an income of at least $100,000 and a high credit score to rent. (The letter has reportedly since been rescinded — not surprising, considering that it was blatantly inappropriate if not illegal.)

The political effects of this sticker shock involve a never-ending tug-and-pull between people who say the city needs to build a lot more housing at all income levels and people who say the city has to focus on affordable housing. For now, Mayor Ed Lee is attempting to walk the line between the two, trying to speed up planning and increase production of units at all price points.

The urban advocacy group SPUR outlined its suggestions in a policy proposal called “8 Ways to Make San Francisco More Affordable.” Solutions in-clude retaining the city’s 172,000 rent-controlled units of housing; reinvesting in public housing; doubling the amount of subsidized affordable housing; increasing housing supply at all income levels; experimenting with new types of group housing; and using property taxes to improve growing neighborhoods.

But even the optimists at SPUR conclude that “the only solution that will actually benefit the vast majority of people who need help is to fix the supply problem. Most of the measures we can enact will take years, if not decades, to show results.”

So there’s no quick fix. The prices aren’t going to deflate significantly. And you can look forward to many more headlines like “Anti-eviction group publishes list of tech landlords with history of evictions in San Francisco” and “San Francisco artists struggle with rising cost of living” and “City employees say they can’t afford to live in S.F.”

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