San Francisco tenants get big buyout to leave luxe unit
The $475,000 deal reflects the value of homes in a city with strict rent control.
SAN FRANCISCO — A wealthy couple notched a record $475,000 buyout to vacate their luxury apartment of three decades, an indication of what some landlords are willing to pay for tenants to give up their homes in a city with strict rent control and soaring market rents.
The buyout is considered to be the largest in city history and reflects the high value of the apartment.
The tenants, a couple in their 60s with teenage children, were paying $12,500 a month for a seven-bedroom, eight-bathroom apartment, consisting of two units, that takes up most of the top floor of a century-old building in Presidio Heights with expansive views of the bay, Golden Gate Bridge and the nearby Presidio park. The couple declined to be named.
San Francisco has among the strongest tenant protections in the country, a fact that encourages tenants to hang on to apartments as rents go up.
While California recently adopted rent control and other tenant protections, San Francisco approved its rent control ordinance in 1979 as a way to alleviate the city’s housing crisis. That means landlords can raise rent on some properties only a certain amount each year; the current increase is less than 1%. Landlords cannot evict tenants without just cause, such as nonpayment of rent.
The maximum amount tenants in one unit can receive to relocate is $22,000, with an extra $5,000 for households with minor children or seniors 60 and up. In the Presidio Heights case, relocation costs did not apply; the landlord and renters reached a voluntary deal.
The Financial Times was first to report the agreement.
Steven Adair MacDonald, the lawyer who represents the couple, said reaction has been divided to the six-figure buyout that is enough to purchase a home in most parts of the country.
“Landlord attorneys think it’s an outrage, and on the tenant side, everybody’s excited; they think it’s great,” he said. But MacDonald thinks the landlord is the winner, because he will be able to rent the apartment for $25,000 a month and recoup the buyout in just over three years.
“After that it will be gravy, so it’s a great investment,” MacDonald said.
MacDonald is also suing the landlord, Friedman Properties, on behalf of “fairly well-heeled” tenants in nine other units who have moved out of the Presidio Heights building since March, unable to bear the noise and dust from ongoing renovations.
Marty Friedman, who is listed as the company’s authorized agent, did not respond to a request for comment. But his attorney David Wasserman said it was inaccurate to say his client wanted to drive out the tenants. Building upgrades were planned before the pandemic hit, and the landlords felt they couldn’t put off the work, he said. The couple who took the $475,000 buyout offered to leave in return for money, he said.
The real issue in California, Wasserman said, is the prohibitive cost of building housing. “Until we address that problem, we’re going to have these rental challenges, as more and more people become renters,” he said.
More than 300 tenant buyouts were filed with the San Francisco Rent Board in 2020. MacDonald said the average buyout is $50,000.
Rents in San Francisco declined during the pandemic but remain among the highest in the country. The average rent for a onebedroom unit is $2,750, according to rental platform Zumper. The median sale price of a home is $1.5 million, according to Redfin.
Tenant groups say that without rent control, poor and working-class residents would be driven out of San Francisco.
Charley Goss, who handles government affairs for the San Francisco Apartment Assn., which represents about 4,500 landlords, said landlords accept that rent control is part of doing business in the city but there are situations in which wealthy tenants hang on to a rent-controlled apartment.
“Paying half a million dollars to a wealthy person who’s been keeping a rentcontrolled apartment in a city with a housing shortage and an affordability crisis kind of speaks to the way in which our local rent control distorts the market,” he said.