Tenants see some landlords open to rent cuts
The coronavirus pandemic has ravaged San Francisco’s neighborhoods, leaving boardedup storefronts and empty apartments as thousands of workers vacate pricey apartments for less expensive cities with more spacious housing options from which to work from home.
But the news isn’t all bad for people willing and able to stick in out in the beleaguered city. Thousands of tenants across the city are using the deteriorating rental market as an opportunity to negotiate doubledigit rent reductions.
A new San Francisco Apartment Association survey found that while 14.3% percent of tenants have broken their leases since the start of the pandemic in March, 42.7% of landlords had received requests for rent reductions; 34.7% granted a request for either a permanent or temporary reduction. The association represents property owners.
The market softness does little to help the many renters who have lost their jobs. Congress and the president have been unable to reach a deal on extending all or a portion of the expired $600aweek federal unemployment insurance payments that allowed millions of Americans to continue to pay rent.
But those who have remained employed, and aren’t joining the exodus from the city, are discovering they suddenly have leverage. And many have not been shy about taking advantage.
A recent report from Zillow found that the inventory of available apartments is up 96% over a year ago. Some landlords are cutting rent by 10% to 20% and offering gift cards, months of free rent or cash in exchange for renters signing a yearlong lease.
“You are seeing a tremendous amount of downward pressure on rents in the city due to
rising vacancy,” said Zillow economist Joshua Clark. “There are some scary indicators if you are a landlord. The inventory chart is astonishing — it’s a straight line up. That is a huge clue that the exodus is happening — people are actually moving out of the city.”
The Chronicle heard from more than a dozen tenants who had gotten breaks from their landlords. Most said they were offered about a 10% reduction in exchange for signing a 12month lease. Others were also given a gift or cash card equivalent to one month or five weeks of rent. Some landlords initiated rent reduction talks, hoping to head off plans to leave. Others agreed to lower the rent only after the tenant threatened to pull up stakes. One Glen Park tenant gave notice to vacate but changed his mind after his landlord offered a 25% rent reduction.
One renter who took advantage of the market is Hayes Valley resident L.B. Hernandez. A few months into the pandemic, Hernandez was laid off from her recruiting job at Airbnb. She had been in her studio apartment for a few months.
Before approaching her landlord, she researched the market, getting a sense of how far rents had fallen and how desperate property owners were to attract or retain tenants. While Hernandez was inclined to stay in the city, she entertained the possibility of breaking her lease and returning to the East Coast, where she grew up.
She asked her landlord about both scenarios — a cut in rent or breaking the lease.
To her shock, her landlord offered two attractive options: an early, penaltyfree lease termination or a 20% reduction in rent, from $2,000 to $1,600, for signing a new lease. She decided to stay and became the lease negotiation expert among her friends.
“I was riding this high, giving everyone tips on how to approach their landlords,” she said. “It’s a renters’ economy. There are so many empty units. (Landlords) need us more than we need them.”
Mission District resident Megan Orpwood-Russell, a writer for the Yosemite Conservancy, also was pleasantly surprised by the response she got from her landlord. She and her roommate hung on to their jobs during the pandemic, but their salaries were cut. Their landlord immediately agreed to cut rent by 9%, from $2,920 to $2,700.
“It helped enormously. We both feel slightly less pinched,” she said. “I get 110 bucks a month back. That is not nothing over the course of a year.”
Landlord and property manager J.J. Panzer said a lot of tenants are on the fence about whether to leave the city and are approaching him with a mixed message: They want both the flexibility to break their lease as well as a reduction in rent if they decide to stay. That doesn’t work for him.
“If you are coming to me and asking me to meet the market, I’m happy to do that as long as you promise me you are not going to leave,” he said. “I’ll give it you, but you have to sign a lease and stay another year. If you are just going to leave, why should I reduce your rent?”
The vacancy rate among Apartment Association member properties is now 11.5%, four times what it was prior to the pandemic, said Charley Goss, government affairs manager for the organization. “People are having a tough time renting units out,” Goss said. “Our members are nervous. All eyes have been on Congress, hoping for a relief package.”
While the listing service Zumper has rents down about 11%, Panzer said the decline is closer to 20% in downtown spots like SoMa, Mission Bay, South Beach and Civic Center — neighborhoods that have seen a lot of recent development and are popular with the young tech workers most likely to be leaving. In contrast, he sees rents dropping between 5% and 10% in older, more established neighborhoods like Noe Valley, the Mission and the Castro.
But not everyone has been successful in getting a break on rent. Christen Alqueza, a designer, is a tenant at Bayside Village in South Beach. She and her roommates moved in in January, signing a lease for $4,600 for a twobedroom unit.
After the shelterinplace started in March, Alqueza found out that the owner, Brookfield Properties, had slashed rent on her unit type from $4,600 to $3,800, an 18% discount. In addition, new residents are being offered eight weeks of free rent. When she approached the landlord about receiving similar terms, she was rebuffed.
“They say that it’s not possible — this is the rate we signed at, and if they did it for one person they would have to do it for everyone,” she said.
Alqueza started organizing fellow tenants and researching what other buildings in the neighborhood were charging. She arranged a Zoom call with the property manager, joined by 67 tenants. She said the landlord’s representative “basically hung up on us.” Brookfield did not return a call and email seeking comment.
Everything that made Bayside Village appealing — the pool, gym, nearby nightlife and Giants games at Oracle Park — is shut down because of the pandemic. Meanwhile, tenants have been leaving in droves, and the property owner is renovating the vacant units.
“They are spending all our rent money on renovating units for future tenants,” Alqueza said. “It’s really noisy. It’s not suitable to work from home at Bayside Village.”
Alqueza plans to break her lease and move at the beginning of October.
It’s hard to feel sorry for property owners who over the last decade have banked millions as San Francisco’s housing market soared. Still, the situation has been a nightmare for some small landlords, said Janan New, executive director of the Apartment Association.
While broken leases and lowered rents are cutting revenue, just 3% of the group’s members have been granted mortgage forbearance by their lenders. Quite a few small owners are struggling to hold on to their buildings, as they still must pay taxes and fees.
“Until we get people back to work in San Francisco, we are not going to see any improvement,” New said.
Panzer, who manages more than 600 units across the city, said the past few months have been a rude awakening. “Being a landlord doesn’t mean you always win,” he said. “I have to remind my clients of that. That is part of the risk of our business.”
“It’s a renters’ economy. There are so many empty units. (Landlords) need us more than we need them.”
Hayes Valley renter L.B. Hernandez