John M. Lee: New Rent Control Proposal

On April 14, SF Board of Supervisors' President Matt Gonzalez proposed a package of changes to the city's rent control law that would expand the rights of tenants. The changes were debated and have been continued until a later date.

Gonzalez's proposals include the following:

1) Relocation fees paid by landlords to tenants for each person, including minors, would be increased to $2,000 for each tenant displaced;

2) Reversal of an earlier Rent Board decision, extending rent control to second homes or pied-a-terre apartments;

3) Total banked rent increases would be limited to eight percent per year;j

4) New landlords could be liable for illegal rent increases imposed under former owners;

5) Prohibit landlords from taking away storage, parking and yards from tenants without their consent;

6) Put residential hotel rooms under the city's rent control protection;

7) Restrict a landlord's ability to restrict the number of people living in a rental unit.

San Francisco has one of the toughest rent control laws in the country. But with renters making up about 70 percent of the City's population, they have a majority vote over any proposals, especially when members of the Board of Supervisors come up for election.

Thus, many supervisors bend over backwards to work with tenant groups in proposing and voting on any landlord-tenant issues. The proposals put forth this time by Gonzalez come at a time when the residential vacancy rate in San Francisco is at an all-time high. "For rent" signs are prevalent on just about every street.

The purpose of rent control when it was enacted in 1979 was to insure that renters would not be priced out of the housing market in San Francisco. Living in San Francisco is expensive, and so it is in any other world-class metropolitan area, but with tougher rent control rules, who will the laws be protecting?

It seems like the laws are protecting mostly tenants who have been renting their units for a long, long time at low rents. But with the passage of time, it is protecting fewer and fewer people. Those tenants will probably never move because they will not be able to live anywhere else for the same price.

My experience has shown that some tenants are abusing rent control benefits by purchasing homes, renting them out, and enjoying their rent control apartments at the landlord's expense. Others use their rent controlled apartments as storage facilities. Some owners are withholding their units from the rental market, opting to go without the rent rather than having to deal with landlord/tenant issues.

All these actions lead to a reduction in the housing supply and, with strong demand for housing in San Francisco, result in higher rents. Even with the high vacancy rates in residential housing in the current market, our rents are very high. Thus, one can conclude that the rent control laws are hurting renters in general rather than keeping the lid on rents.

The current Gonzalez' proposal will put more squeeze on landlords, some of which will withhold more units from the market. Some might hold out for higher rents before renting their units so they can be rewarded for taking bigger risks. There have been many rent control studies by leading scholars and other groups over the years, and the general conclusion has been that rent control does not work. It might work as a temporary measure, but in the long run, it hurts tenants and the people they were designed to help.

It would be better as a whole to let market forces work. With our economy down and the aftermath of the dot-com bust, our rents have been declining already. Do we really need more and stricter rent control laws?

John M. Lee was recently honored as Pacific Union's California Street Agent of the Year. If you have any questions regarding real estate, call him at (415) 447-6231 or e-mail him at johnlee@isellsf.com.