Rents Decline In San Francisco, The Bay Area

In Bay Area cities like San Francisco, rent is dropping by record numbers, yet in other cities, people still struggle to pay rent. Not everyone is enjoying the benefits of the emerging “renter’s market.”

There’s the story of remote tech workers seeking cheaper and more spacious housing away from the once-bustling cities where the pandemic has now slowed activities.

College students, who would usually live around campus in cities like Berkeley, are moving back in with their parents.

Crystal Chen is marketing manager at Zumper, an online rental platform. “I was born and raised in San Francisco and it’s crazy to see,” Chen said. “All I’ve seen is rents go up and up. This is the first time I’ve ever seen rents go down this much.”

Chen said that some of the largest declines are in the tech-heavy Peninsula and the South Bay, in cities like Menlo Park, Mountain View, and Santa Clara.

“We’ve seen the pandemic shift the demand for rentals away from really expensive markets toward more affordable cities,” Chen said.

Zumper’s rental report for the San Francisco Bay Area metro showed that some of the cities with the most expensive rent — San Francisco, Mountain View, Cupertino, Palo Alto and Menlo Park — have seen huge declines compared to the same time last year.

Rents have been steadily declining in major cities during the pandemic. It’s a classic market economy: people are moving out, demand decreases, and rents go down. San Francisco joins other metropolitan hubs around the country where people are opting out of city life in search of suburban comforts.

“It seems like there’s an exodus of a significant portion of the population in big cities,” Chen said.

“If you’re going to be stuck at home all day you don’t want to be stuck in a shoebox.”

In other Bay Area cities, there’s the story of working-class people who cannot afford their rent despite the “renter’s market” that is creating vacancies and discounted rent.

In some places, people leave because they cannot afford their rent. Justin Accola, senior property manager with Altos Realty Advisors, said in an October interview that they were seeing double the number of vacancies.

Altos manages a range of properties in the Bay Area, from apartment complexes to single-family homes. Accola noticed that the vacancies are concentrated in tech-heavy cities, but said, “In East Palo Alto and unincorporated Menlo Park, the turnover rate has been super quiet over there.”

He’s also noticed more people moving in with family members, adding roommates to their lease, or downsizing to save costs.

In order to keep good tenants, Accola said landlords have been working with tenants by connecting them to rent relief resources, setting up payment plans, accepting portions of rent and sometimes even forgiving the difference that tenants can’t pay.

But not all landlords are willing to decrease their rent.

“A lot of owners aren’t doing that because they think it’s going to be harder to bring it back up if said tenants fall under a rent control category,” Accola said.

The Bay Area Equity Atlas, an online repository of data focused on inequality metrics in the region, found that 48 percent of San Mateo County renters are rent-burdened (spending more than 30 percent of their income on rent) and Latinx families — like Orellana’s — are especially at risk of being rent-burdened and economically insecure.

“We get our food at food banks and we live off of what we can get because the economic situation right now is very difficult for us,” Orellana said.

“In this country people do not talk about poverty, but right now there is very extreme poverty in this time of crisis.”

The pandemic has been especially difficult for undocumented communities, who are ineligible for federal assistance such as the stimulus check or unemployment benefits.

Gov. Gavin Newsom signed the Tenant Relief Act, officially known as California’s Assembly Bill 3088, at the end of August to protect renters like Orellana. The act prohibits residential evictions through January 2021 if renters cannot pay rent due to the pandemic. But they must pay 25 percent of their rent for September 2020 through January 2021.

Starting in February, landlords could collect owed rent through small claims court. Evictions may not be able to proceed, but tenants will still owe rent.

Orellana said she received rental assistance from the San Mateo nonprofit Samaritan House, which will cover 25 percent of her rent from October through December.

Her sister is back to work, but with fewer hours and reduced salary.

Some things are looking up, but the future still looks grim as Orellana wonders how they will repay the thousands of dollars of unpaid rent. “It’s a very uncertain future and one of more poverty that we’ll be living in,” Orellana said.

Even when the pandemic ends, she said, “You won’t immediately see jobs going back to hire employees like before. When the economy starts to go up it’s going to be very gradually, very slowly.”

East Palo Alto, like San Francisco and the rest of the Bay Area, saw some of its highest unemployment rates in years, but it appears that rents in East Palo Alto have not declined as much as in San Francisco, according to anecdotal evidence.

Zumper has limited data and listings for some cities like East Palo Alto.

That said, its latest rent report showed that East Palo Alto’s rent hadn’t changed compared to last year, and had dropped just 4 percent compared to the previous month.

Abisai Moreno, program counselor with East Palo Alto’s Rent Stabilization Program, said that earlier in the pandemic she even received calls about tenants getting invalid rent increases or receiving eviction threats, which she has had to rectify with landlords.

“For the most part they (landlords) ended up complying because they have to,” Moreno said.

While she received some calls from landlords concerned about rent, Moreno said, “they weren’t desperate calls like the ones I get from tenants.”

She’s taken a lot of calls where she’s just had to let the tenant vent and validate their experience.

“I had a call about a family who was renting a garage, and they were being charged $2,500. They had a family of three and were unable to pay their rent,” Moreno said. “There’s a desperation with people that are getting taken advantage of, even during this time.”

“Despite the moratorium, tenants are still very much stressed out and afraid they’re going to lose their housing,” Moreno said.

The Bay Area Equity Atlas warned that up to 7,900 households in San Mateo County could be at risk for eviction or homelessness if renter protections were to end.

Wayne Rowland, board president of the East Bay Rental Housing Association (EBRHA) said that landlords are more likely to want to work with tenants. “The rental property owner has only one customer: the renters,” Rowland said. The EBRHA provides education and advice to property owners and managers in Alameda and Contra Costa counties.

Even without the moratorium, Rowland said property owners may not have opted to evict tenants in the first place and were probably preparing to work with tenants. “If everybody’s out of work and you evict a tenant so that you can get another tenant who’s also out of work, that makes no sense,” Rowland said. He favors rent relief over the eviction moratorium. “(The eviction moratorium) is OK for something that’s temporary, but we’re talking about almost a year. That’s got to be financially exhausting for anyone who relies on the income stream of properties,” Rowland said.

During city and county meetings over the last several months, landlords and property owners have spoken up about the financial difficulties of lost rent. They worry about not being able to pay their mortgage, or losing their properties. Mom and pop landlords may lose out on rent that makes up their main source of income.

In July, UC Berkeley’s Terner Center for Housing Innovation and the National Association of Hispanic Real Estate Professionals surveyed 380 property owners and managers from various states (including 22 percent from California). Most responded that rent collections were down compared to the prior quarter and 1 in 4 had borrowed funds to cover operating costs. In San Mateo County, the Board of Supervisors responded by allocating $2 million of federal coronavirus relief funds toward a small property owner relief fund. Eligible property owners who lost rent during the pandemic could receive grants of up to $6,000.

Some landlords also face tenants who take advantage of the eviction moratorium to avoid paying rent, even if they’re financially able. In emails to the Law Offices of Todd Rothbard — a team of Bay Area evictions attorneys — property managers and landlords wrote about tenants who refused to pay rent and abused the eviction moratorium.

One property manager of a single-family home said that in April, their tenant — who they said was a young Facebook engineer — refused to pay rent because he thought the rent was too high. “I think he is abusing the system by using COVID-19 eviction restriction as an opportunity to extract rent concession from the landlord,” the manager wrote.

Todd Rothbard said that his office had seen a sharp decrease in evictions actions, from 300 to 400 a month before the pandemic to less than 100 a month. Rothbard does not support the statewide moratorium. “Let the market proceed,” Rothbard said. “There will not be an avalanche of evictions. Most landlords don’t want vacancies. Now you have a situation where Legislature is encouraging people not to pay rent. They’re creating a backlog that’s going to explode.”

Thomas Bannon, CEO of the California Apartment Association, supported the moratorium but thinks it’s time for the moratorium to be lifted.

“I think how it’s been handled so far is not going to encourage people and capital to go into the rental housing industry,” Bannon said. “That’s a problem because we haven’t been successful in public housing serving everybody.”

He said that the California Apartment Association encouraged its members to work with tenants instead of evicting them. Now he’s worried about the consequences if the federal government does not provide rent relief. “You’ve got to figure out a way that the landlord can either be made whole or pretty close to it. If not, they will probably sell their single-family rental units and walk away,” Bannon said. If single-family homes go from being a rental property to the housing market, somebody wins, Bannon said, “But the people that lose are the renters who have a difficult time paying,” he said.

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