A Rental Market Round Up
More Rental Units, More Rent Control, More Confusion
The Bay Area has the dubious distinction of being one of the most expensive rental and real estate markets in the country if not the world. Yet, despite having some of the most progressive public policies designed to promote housing (e.g., below market rate unit requirements, rent control laws, very active Rent Boards) rent and real estate remains very precious and expensive. Rather perversely, progressive housing policies contribute to pushing prices up. But it’s a heated topic and one that resonates with Bay Area voters as the numerous rent control initiatives this November demonstrates. (Take a read here about how passionate it can be when it comes to campaign mailers).
It’s Not Just Rent Control Laws Silly, It’s More
But expensive are also a result of public policy that slows development down (stringent environmental review standards, historic preservation and zoning considerations, infrastructure) while making it more expensive; climate
If You Build It, Prices Will Go Down… Ever So Slightly
With the stated objective of adding more housing units in San Francisco, public policy planners have streamlined the approval process to the extent they can. The result? More rental units have debutted in San Francisco over the past year. As such you can see some price easing (less than 5% on average from 2015). The chart to the right shows that progress has proven incremental but it’s still progress. But remember all of the units added are usually exempt from San Francisco’s Rent Ordinance meaning they’re exempt from rent control and eviction control regulations and protections.
More Rental Units, Less in Rents, Right?
Wait A Minute, Don’t You Guys SELL Real Estate?
Why talk about rentals in San Francisco? Well, it is an important part of the City’s economy but showing high rent prices highlights why renters should consider buying property instead of renting it because, on balance, monthly rents may equal or even exceed monthly mortgage payments especially when lenders like Citibank and SoFi can offer 10-percent-down loans without mortgage insurance on property purchases in the City.
Also, if you’re an investor, rent roll income (even from rent-controlled units) provides a more stable and constant revenue stream with tax benefits that the stock market cannot. Give it some thought!