As someone who has been in the San Francisco residential rental market for 25 years, I have seen the rental market go up and go down, but overall the trend has been upward – with asking rents rising on vacant units.   Right now the San Francisco rental market is up, with asking rents for available rentals very high.  People often ask me why is rent so high in San Francisco. The answer is, to a certain extent, a political one.

Part of the reason San Francisco rents are so high has to do with the San Francisco Rent Control Ordinance. Once a tenant moves into a unit, you can only raise the rent a very small amount each year. For this reason, we don’t get normal turnover on apartments in San Francisco. Tenants who might otherwise move to a smaller or larger apartment can’t afford the new market rate rents after they have occupied a unit at a rent controlled rate for a number of years.   Many tenants have such a good deal on their apartment they don’t ever try to buy a home.   If a tenant has a rent controlled apartment, they often stay there for a very long time and take advantage of the rent control rules.  When a rental unit does become vacant the landlord can raise the rent to whatever the market will bear.  Once the unit is rented it then comes under rent control and the landlord will only get a small increase each year as long as the tenant occupies the unit.   So there is no incentive for the landlord to rent for less than top dollar as they could be stuck with that rent for a very long time.

Another reason for high rents is that the rent control ordinance has scared off developers. Across the country, other cities have been building new apartments at a rate that we have not seen in San Francisco. Even though new construction is exempt from San Francisco rent control laws, the idea of rent control and the political climate in San Francisco scares away a lot of developers.  And development of any kind in San Francisco is expensive.  Getting a new development constructed can often require a political fight. Neighbors are often against the construction of anything new and have the power to put up road blocks.  For these reasons, not a lot of property gets developed, and when it does get built, it can be quite expensive.

There is also a high demand for housing in San Francisco.  We have a well-educated and highly paid workforce in San Francisco. With companies like Twitter, Zynga and other high tech businesses setting up shop in the city, there are a lot of workers moving to San Francisco for jobs.   With lower than average supply of housing and lots of young people moving to San Francisco with good jobs and needing housing, the laws of supply and demand kick in and prices go up.

If you have any questions on rental rates in San Francisco, the rent control ordinance or anything pertaining to residential property management, please contact me. I would be happy to talk to you and answer any of your questions.