Feature
by Matthew C. Sheridan
News Flash, San Francisco: Landlords in this fair city are by-and-large small property owners who purchased their property to create a home for themselves or family members.Most live on-site and are employed in San Francisco, with a majority earning less than $100,000 a year. Close to half either break even or lose money on their rentals.
The San Francisco Property Owners Survey, the third installment in a series of detailed reports and surveys of San Francisco’s housing conditions, should serve as a wake-upcallforpolicymakersand politicians in this city. Commissioned by the Board of Supervisors in 2000, the overall San Francisco Affordable Housing Study is the only comprehensive study on housing since rent control was first enacted 25 years ago. The figures stand in sharp contrast to the picture of landlords painted by politicians who have demonized owners of rental property and capitalized politically on the city’s large tenant population for years.
Conducted by Bay Area Economics (BAE), a real estate research business located in Berkeley, the survey is not intended to evaluate the Rent Ordinance, but serves to “present objective, factual information that may serve as the basis for futurepolicydiscussions.”Sadly,a comprehensive review of the data is highly unlikely. No one in San Francisco wants to look seriously at rent control to determine its failings or successes. Few wish even to address the lack of affordable housing options for middle-class San Franciscans—who, as the survey demonstrates, use multifamily buildings as a means to achieve home ownership.
When the final report is presented to the Board of Supervisors for their “consideration and action,” the question will be: willtheytakeaction? Doubtful. Unfortunately, finding a middle ground in San Francisco is close to impossible. Supervisor Ammiano is the only politician in recent memory to step up and reach a compromise between landlords and tenants (on capital improvement passthroughs), yet he was still roundly criticized for his efforts by elements from both sides.
So, despite the fact that no one seems to be listening, let’s review some of the more interesting survey results—you may even find some fun factoids you can use at holiday cocktail parties.
Throughout the 45-page survey, the studyconsultants,BAE,repeatedly compares local data to a national report by the U.S. Census Bureau called the Property Owners and Managers Survey (POMS). Although many of the comparisons to national numbers were enlightening, using the POMS study as barometer for San Francisco was odd. Our housing stock, renter and owner population, density, etc. are unique. Comparisons to the Bay Area, or California data may have been more appropriate; however since there were no previous studies, that was impossible. Interestingly, for the San Francisco Tenant Survey, the authors generally failed to compare most of the local tenant-based numbers to national figures.
Sex and Race
Males comprise almost two-thirds of Survey respondents.
Could this be a reflection of San Francisco’s
large gay population? Probably not. The national numbers
reveal that 71 percent of landlords are males. An examination
of race, however, is more revealing. Just less than
two-thirds of all San Francisco landlords are white
according to the survey. This number seems a bit high
when compared to an overall white population that is
just under 50 percent. However, the percentage of white
tenants benefiting from rent control stands at an even
higher 72 percent. Asians, meanwhile, constitute slightly
less than one-fourth of landlords, closely mirroring
their numbers in population (30 percent).
Dollars and Cents
The Income and Expense section of the survey also reveals
some fascinating data. A good portion of landlords work
(61 percent), just a hair less than the overall population
for the city (63 percent). It’s no surprise, then,
that a large majority, 73 percent, do not rely on their
properties for the bulk of their income. In fact, one-third
receives less than 10 percent of their income from their
properties. At the other end of the spectrum, however,
6 percent receive 100 percent of their income from their
properties, with another 7 percent earning between 75
- 99 percent. Only 11 percent of the survey participants
work full-time as property owners and managers.
The survey shows that San Francisco landlords have a median annual household income of $90,920. This appears relatively high when compared with both tenants’ household income ($44,811), and San Francisco households overall ($55,221). But it turns out that the median income for landlords is actually less than U.S. Department of Housing and Urban Development’s “Area Median Income” (AMI) for San Francisco, which is currently at $91,500. (Banks and nonprofits commonly use AMI to determine the eligibility of applicants for both federally and locally funded home-loan and rental programs.) While 55 percent of landlords earn less than $100,000, just under one-quarter earn over $150,000.
Almost half of the landlords surveyed spent 50 percent or more of their rental income on mortgage payments and property taxes, whereas the median percentage of rental income spent on maintenance stood at 13 percent. San Francisco rental property owners clearly hang on to their investments/homes: almost two-thirds have held their property since 1989. The survey, however, shows that only 37 percent would acquire the same subject property again, probably a reflection of the difficult rental-property terrain—fiscal, administrative, and political—that is a challenge to all San Francisco landlords.
There’s No Place Like
Home
The survey reveals that almost half of all landlords
purchased their property as means of acquiring a home
for themselves or family members. This should really
come as no surprise to people who know San Francisco
and the unique nature of our housing stock. With 2-4
unit buildings comprising 25 percent of our housing
stock, and 5-9 unit buildings another 10 percent the
apartment business becomes a viable way to own one’s
home. The survey also confirms that rental housing is
a means to house relatives, with 22 percent of respondents
confirming that relatives (plural) live in one of their
units.
Holding Units of the Market
Despite their attempt to avoid editorializing, the authors
of the survey do comment that, “There is considerable
controversy over the extent to which housing in San
Francisco is held off the market and possible reasons
why units are being held off market.” They then
go on to show that 18 percent of the respondents are
currently holding one or more units off the market.
The data becomes really intriguing when owners were
asked why. The pollsters broke down the reasons into
seven categories, with eviction control leading the
way at 24 percent. But three of the other categories
are closely related to rent control: regulation, preparation
for sale, and waiting for the market to strengthen.
When all four categories are combined, they add up to
58 percent. The survey goes on to calculate that 2.3
percent of rental units owned by survey participants
are held off the market (the U.S. Census reported this
number to be 3.9 percent in 2000).
That amounts to almost 3,000 rental units being held off the market due to rent control (58 percent of 2.3 percent of the city’s rental stock). If you take the Census number, it is even higher, almost 5,000. This unfortunate byproduct of the Rent Ordinance should cause some policy makers to rethink certain elements within the Ordinance. Can reasonable changes be implemented to encourage owners to rent units that are normally held off the market due to sale, a down market, or just outright fear of the Ordinance? Could the leasing of 3,000 - 5,000 housing units lessen the city’s housing crisis? The answers seem simple—but in this town, the probability of finding compromise is just a dream.
Threeyearsago,theBoardof Supervisorstookaboldstepin financing the San Francisco Affordable Housing Study. In creating the first-ever comprehensive housing study for San Francisco, they rejected complaints by tenant activists who feared the results, and embraced an objective and fact-based methodology in studying the city’s housing. There now exists a chance to carefully review the data, identify problems, and amend elements within the Rent Ordinance that could benefit tenants and landlords alike.
The opinions expressed in this article are those of the author and do not necessarily reflect the viewpoint of the SFAA or the San Francisco Apartment Magazine. For a complete version of the survey, please visit www.sfgov.org/rentboard. Matthew C. Sheridan is the editor of the San Francisco Apartment Magazine, PPMA News, and the Sheridan Report. He can be reached at 415-392-3770. Copyright©2003.