The main purpose of rent stabilization (also known as rent control) is to guarantee secure housing at reasonable rents, and to specifically protect tenants. Studies have proven that rent stabilization reduces displacement in low-income households and senior households. However, rent stabilization may in some circumstances have other unintended impacts including placing a burden on small property landlords or resulting in vacant units.
Background
What is Rent Stabilization?
Established in 1979 and administered by the Rent Board, the Rent Ordinance restricts annual rent increases, ensures tenants can only be evicted for “just causes,” and restricts evictions of tenants occupying a qualifying unit built prior to June 13, 1979. The San Francisco Rent Ordinance also applies just cause provisions to all rental units. Once tenants vacate the rent-stabilized unit, landlords can raise its rent to market rate (otherwise known as vacancy decontrol). Single-family homes and condominiums are not subject to rent stabilization due to Costa-Hawkins. Unless the single-family home or condominium meets Rent Ordinance requirements, it is not rent-stabilized. While residential hotels built before 1979 are rent-stabilized, residents who have not established tenancy (continuous 32 days of rent) are not protected by rent stabilization protections. Other building types such as dormitories, hospitals, monasteries, and nunneries are also not subject to rent stabilization.
Why is Rent Stabilization Important?
Due to limited annual rent increases, in San Francisco, rent-stabilized units offer an increased level of affordability for long term tenants and provide some additional protection against evictions without a just cause. Each year, landlords of a rent-stabilized unit can increase rent based on inflation. Additionally, landlords can pass on a portion of costs on to tenants through rent increases such as an increase in utility costs, recently adopted bond measures, the “Rent Board Fee,” capital improvements, pass-through operating and maintenance costs.
Costa-Hawkins Rental Housing Act
The Costa-Hawkins Rental Housing Act (“Costa-Hawkins”) is a 1995 California state law that prohibits municipal rent increase limitations on certain units, allows rent increases on subtenants following departure by tenants of rent-stabilized tenancies, and prohibits “vacancy control” — the regulation of rental rates on units that have been voluntarily vacated by the previous renters at an amount other (presumably lower) than what the open market would bear. The Act was amended in 2001 to close a loophole related to condominium conversion, where owners of apartment buildings obtained certificates for conversion, to avail themselves of the state law exemption for rent stabilization, without selling any of the erstwhile apartments as condominiums.
Case Study
The Rent Ordinance allows landlords to increase rent annually with a percent of inflation (which varies but is usually around 1.6 percent) but allows landlords to petition the Rent Board to increase rent above the rental cap if the cost of operations exceeds the amount. These petitions allow landlords to “pass-through” the increased cost onto tenants, legally increasing rent by more than the annual cap. In one case, Veritas Investments had purchased a building and passed on the cost of the payments they had to take on for the loan to buy the building and the increased property taxes based on the new purchase price. The loophole in pass-through legislation for tax charges and purchase debt will be closed by legislation introduced by Supervisor Sandra Lee Fewer and passed by the Board in June 2018.
Key Trends
Approximately 40 percent of all housing in San Francisco and more than half of the renter-occupied housing stock are rent-stabilized.
Rent-stabilized units make up approximately 170,000 units of the city’s total 392,038 housing units. 2, 3
The rent-stabilized housing stock serves a broad range of incomes.
In 2015, 29 percent of renters had tenure of 10 or more years in the same unit.
San Francisco’s older housing stock has higher vacancy rates than new construction housing,
with approximately 10 percent of San Francisco’s pre-1939 units vacant; compared to lower rates (7 percent) for units built between 1940 and 1979 and those built since 1980. 4
Why is Eviction Protection Important?
Eviction controls provide stability and security to tenants, particularly those most vulnerable, in rent-stabilized units and whose rents are regulated by a government agency.1 To evict a tenant from a rental unit covered by the Rent Ordinance, a landlord must have a "just cause" for the eviction. There are 16 specific “just causes” for eviction, and they fall into two categories: at-fault and no-fault. For rent-stabilized units, one of the most common no fault evictions is Owner Move-In (OMI) evictions. Landlords evicting tenants for no-fault reasons are required to pay relocation payments. Those payments can be higher for elderly, disabled of families with children in the household. Landlords may offer a buyout to tenants to voluntarily vacate a unit.
In recent years, two major amendments have further expanded the eviction controls: one allowing the addition of roommates as well as restricting rent increases for five years after certain evictions (such as OMI, capital improvements, among others); and a second adding reporting requirements for landlords after an OMI eviction and allowing tenants’ rights organizations to sue for wrongful evictions.
Key Definitions
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‘At-fault’ evictions cite the tenants’ actions (such as a breach of lease or creating a nuisance, etc.) as justification for their eviction.
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‘No-fault’ evictions allow landlords to take possession of their property from the tenant without any fault of the tenant. The two most common types of evictions under this broad category are the Ellis Act and the Owner Move-In (OMI).
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Ellis Act evictions landlords have the unconditional right to evict tenants to “go out of business” by removing all the units in the building from the rental market by giving tenants a 120-days withdrawal notice and prohibits the unit from being rented for 10 years.
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Owner Move-In evictions allow owners to evict the tenant for the owner to live in the unit as their principal place of residence. It is restricted to one OMI per building.
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Relative Move-In evictions allow a landlord to evict a tenant if a relative is going to move in and live there. Landlords must already live in the building or seek simultaneous possession of a unit in the building. RMIs have no restrictions on number per building.
Key Trends
Between January 2016 and July 2019, 8,715 eviction notices were filed with the Rent Board. 5
In the same time frame, predominantly low-income census tracts received the highest number of eviction notices:
the Ingleside (including Park Merced), Richmond, Outer Mission, Visitacion Valley, and Mission Planning Districts experienced the highest number of no-fault eviction notices; Ingleside, Northeast, Downtown, and Mission Planning Districts experienced the highest number of at-fault evictions during that time period.
The Rent Board provides services for renters and community organizations including: answering approximately 30,000 calls for rent and eviction control information per year, 2,000 tenant petitions and 5,000 total filings.
Utility pass through, operating and maintenance, and capital improvement petitions increased from 2016-2017 fiscal year and 2017-2018. Capital improvement petitions were most frequent in the Tenderloin and Inner Richmond. 6
Reported and Measured Evictions
Most unlawful detainers, a special and expedited court proceeding to initiate an eviction, are for Nonpayment of Rent cases. 7
Eviction notices do not provide an in-depth analysis on evictions, since not all eviction notices result in evictions, not all eviction notices are filed with the Rent Board, and not all evictions are done lawfully.
Unreported and Unmeasured Evictions
Evictions from subsidized housing programs are not tracked by the Rent Board.
The most common type of “just cause” eviction is nonpayment of rent. However, nonpayment of rent cases are not required to be filed with the Rent Board, therefore these are undercounted. 8
Nonpayment of rent includes nonpayment of utilities when utilities are split across units based on a proportional share that is passed along to tenants and includes a fee (Ratio Utility Billing Systems, or RUBS). If the tenant does not pay the company’s fee, of which they are sometimes not aware, the property management company considers this nonpayment of rent and initiates a case. 9
What’s happening now to strengthen rent stabilization and eviction protections?
Assembly Bill 1482 was approved by the State legislature in September 2019 and signed into law by the Governor in October 2019. The law caps yearly rent increase at 5 percent plus the rate of inflation and includes just cause provisions. The law would not apply to housing built within the last 15 years, single-family homes not owned by corporations or trusts, and duplexes where the owner lives in one of the units. The law sunsets in 2030. On November 2018, a state ballot measure (Proposition 10) proposed to repeal the Costa-Hawkins Act, which restricts local rent control laws, was defeated despite strong support from many tenants’ rights organizations.
On June 5, 2018, the Board of Supervisors passed an ordinance amending the Administrative Code to prohibit landlords from seeking rent increases on existing tenants due to increases in debt service and property tax that have resulted from a change in ownership or from seeking rent increases due to increased management expenses unless they are reasonable and necessary. Prior to the passage of AB 1482, the Committee to House the Bay Area (CASA) proposed, among other recommendations, a region-wide rent cap that limits annual increases in rent to a reasonable amount.
In response to a request from Supervisor Fewer, the City’s Budget and Legislative Analyst prepared a policy analysis report to study the cost to creating, operating, and maintaining a rental registry in San Francisco. The report details the cost, opportunities, and resources needed to have a rental registry at multiple scales.
The Board of Supervisors is proposing placing a tax on vacant housing and storefronts on the November 2019 ballot. The City of Oakland is implementing a vacancy tax that applies to residential, commercial, and empty lots that are not in use for more than 50 days in a calendar year.
On August 7, 2019, Governor Gavin Newsom proposed to dedicate $331 million to fund eviction protection and foreclosure relief for renters.
Issues with Rent Stabilization and Eviction Protection
The City does not have a list of all rent-stabilized units. This creates issues with monitoring rent-stabilized units and makes communication about rights and services difficult.
The Rent Control Ordinance does not provide for permanently affordable housing. Units remain affordable if a tenant is living in the unit long-term, but the landlord can raise the rent to market value as soon as the unit becomes vacant. Over time given the high rents in San Francisco, there is a loss of affordable rent-stabilized units from the long-term housing market. The purpose of rent stabilization is to provide a certain amount of affordable housing for lower and middle-income residents. However, once a tenant moves into a rent-stabilized unit, the annual rent increase is capped for that unit regardless of any changes in the household’s income or the household’s needs.
Some property owners of rent-stabilized housing units may have limited resources to maintain properties that require substantial upgrades. Some may pass on the cost of improvements to tenants by way of rent increases. Tenants are sometimes unaware of their rights and the options available regarding evictions and renting a housing unit. The City relies on the support of community organizations to disseminate information and to support tenants. The current Rent Board is split evenly between appointed tenant advocates and landlord advocates, which provides a balanced representation, but it can create a political impasse when trying to take a stance on a controversial issue.
For Future Consideration
The ideas for future consideration that have the potential to increase community stability in San Francisco are described below. They provide a starting point for agencies, decision-makers, and community members to explore stabilization efforts and identify critical pathways forward. Based on preliminary information, staff is qualifying these ideas according to the type of task, scale of resources and level of complexity to underscore that any of these ideas would require time and additional resources not currently identified. These are not City commitments or recommendations, rather informed ideas that will require careful vetting and analysis as to their potential reach, resource needs, feasibility, unintended consequences, legal implications, and racial and social equity considerations.
Preserving Affordable Housing
Small Sites Program expansion
Additional information on this can be found in the Small Sites Program summary.
Housing inventory
In San Francisco, the Rent Board charges a fee to all rent control units and maintains a list of properties and levies the fee as part of the property tax. The City could build on this existing list to create a registry of rent controlled units and gain insights into rent and decontrol of the unit over time. Registry may also include and levy a fee on all rental units regardless of rent-stabilized status.
| Type of Response | Prevention, Mitigation |
|---|---|
| Type of Task | Data, Regulation, Policy Implementation
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| Resource | Extensive Funding (the kind typically required for capital investments, and staff time would be required)
|
| Complexity | Complex (generally major legislation, and/or new program required, and more than three agencies involved)
|
| Timing | Long Term (more than 5 years)
|
| Geographic Scale | Citywide |
| Partners | Planning Department, Mayor's Office of Housing and Community Development (MOHCD), Rent Board, Office of Short-Term Rentals, Assessor’s Office, community partners |
| Key Priority | Yes - Enhancements to Existing City Programs and Policies |
| Benefit | A registry could provide policy makers and advocacy organizations greater insight into tenant demographics, relationship to existing housing, and housing unit occupancy status. This additional data could give service providers the information needed to expand their tenant protections services. |
| Challenge | Requires substantial funding and resources, may be challenging to collect information and keep it up to date, and increases reliance on self-reported data. May potentially place added pressure on tenants to provide information every time they enter a new contract or renew an existing one. |
Improvement of rent control data collection
Rent stabilized unit data tracking
The City could track data in the housing inventory to help identify and proactively inspect rent-stabilized units with frequent complaints. Equipped with this information, the City could determine additional proactive measures to address habitability issues to help preserve rent-stabilized units, such as proactive inspection of units with a high number of complaints.
| Type of Response | Urgent/Immediate, Early Intervention |
|---|---|
| Type of Task | Data, Regulation
|
| Resource | Extensive Funding (the kind typically required for capital investments, and staff time would be required)
|
| Complexity | Complex (generally major legislation, and/or new program required, and more than three agencies involved)
|
| Timing | Long Term (more than 5 years)
|
| Geographic Scale | Citywide |
| Partners | Department of Building and Inspection (DBI), DPH, Fire Department, Rent Board, community partners |
| Benefit | Tracking these complaints to various City agencies in an integrated portal can help all agencies determine whether lack of maintenance in the unit could be counted as a code or public health violation. |
| Challenge | Would require significant funding and additional staff time, including expanding inspection teams across departments. The cost of maintenance and/or improvements may be passed onto the tenant through passthrough-related rent increases, which is currently legal in some cases but is a burden to tenants. |
Improvement of rent control data collection
Pass through data collection
With additional resources, the Rent Board could analyze pass through data collected. Tenant advocates reported that general bond pass throughs are increasing year over year. 9
| Type of Response | Mitigation and Prevention |
|---|---|
| Type of Task | Data
|
| Resource | Generally only staff time would be required
|
| Complexity | Less Complex (generally no or limited legislation and/or an existing program, and one agency involved)
|
| Timing | Long Term (more than 5 years)
|
| Geographic Scale | Citywide |
| Partners | Mayor's Office of Housing and Community Development (MOHCD), Rent Board, community partners |
| Benefit | Analyzing the dollar amount of pass throughs that cannot be waived by hardship petitions may help shed light on the impact of pass throughs on tenants. |
| Challenge | Requires funding and resources to collect the passthrough information and to analyze it. Passthrough-related rent increases help property owners afford to make improvements, and there may be some small property owners or mom-and-pop landlords who cannot afford to make these improvements otherwise if changes are made. |
Improvement of rent control data collection
Assistance for capital and operating expenses
Landlords could receive assistance for pass-throughs related to capital and operating expenses. Service providers mentioned the possibility of further limiting the amount of rent increase allowed due to pass throughs. If many cases of pass throughs and rent increases are attributed to necessary capital improvements, increased management expenses, or increase in property taxes, the City could explore developing financial assistance options or other alternatives to help landlords avoid resorting to passing all of the cost to tenants through rent increase.
| Type of Response | Mitigation and Prevention |
|---|---|
| Type of Task | Data
|
| Resource | Generally only staff time and some program funding would be required
|
| Complexity | Complex (generally major legislation, and/or new program required, and more than three agencies involved)
|
| Timing | Long Term (more than 5 years)
|
| Geographic Scale | Citywide |
| Partners | Mayor's Office of Housing and Community Development (MOHCD), Rent Board, community partners |
| Benefit | Financial assistance could help alleviate financial burden of capital improvements, maintenance, or operating costs being passed to tenants. |
| Challenge | Would require funding and resources to collect the passthrough information and to analyze it. Passthrough-related rent increases help property owners afford to make improvements, and there may be some small property owners or mom-and-pop landlords who cannot afford to make these improvements otherwise. |
Improvement of rent control data collection
Targeted tenant education and outreach
Additional information on this can be found in the Tenant Protection Services summary.
Strengthen local government authority to provide tenant protections
The City could work with other cities and State legislature to reform Costa Hawkins to allow local jurisdictions to adjust local rent control policies to meet their challenges.
| Type of Response | Mitigation and Prevention |
|---|---|
| Type of Task | Regulation, Policy Implementation
|
| Resource | Generally only staff time and some program funding would be required
|
| Complexity | Complex (generally major legislation, and/or new program required, and more than three agencies involved)
|
| Timing | Long Term (more than 5 years)
|
| Geographic Scale | Statewide |
| Partners | Planning, Rent Board, state senators, community partners |
| Key Priority | Yes - Enhancements to Existing City Programs and Policies |
| Benefit | This could allow San Francisco to expand its rent stabilization regulations to cover a broader proportion of the housing stock or implement regulations on vacancy control, where existing rent-stabilized units may be able to remain at an affordable rent despite vacancy of the unit. |
| Challenge | Proposition 10, on the California ballot in November 2018, proposed to repeal Costa-Hawkins and was defeated. Passing a similar reform or repeal soon may be difficult as well. While reforming Costa-Hawkins could help expand the number of rent-stabilized units in the city, it may not impact a significant number of vulnerable households or communities who have already left the City since rental prices have increased. |
Major structural changes to local rent stabilization policy
Vacancy fee on unoccupied rent-controlled units
To incentivize property owners to rent out vacant rooms, a fee could be charged on vacant properties or rooms that remain unoccupied for a period such as 90 days or more in a year.
| Type of Response | Mitigation |
|---|---|
| Type of Task | Data, Regulation
|
| Resource | More information required |
| Complexity | More information required |
| Timing | Long Term (more than 5 years)
|
| Geographic Scale | Citywide |
| Partners | Mayor's Office of Housing and Community Development (MOHCD), Rent Board, community partners |
| Other Sections | Single Resident Occupancy Hotel Room Protections |
| Benefit | A fee could encourage property owners to rent out rooms instead of leaving them vacant. |
| Challenge | Requires funding and resources, including expanding inspection or enforcement teams to find unreported vacancies. Small property owners demonstrating good faith efforts of finding renters may be negatively impacted. |
San Francisco Rent Ordinance
View Ordinance »Eviction Protection Resources
Learn More »FOOTNOTES:
1. Such as Section 8 vouchers, Section 8 certificate holders and the HOPWA program, which provides Housing Opportunities for Persons with AIDS.
2. Rent stabilized units are estimated using the American Community Survey (ACS) estimates for renter-occupied units in multifamily buildings constructed before 1980 (Housing Needs and Trends Report, 2018).
3. In addition to these units, there are an unknown number of units lacking a permit, plus units with partial controls such as those under Section 8 voucher programs that are not included in the 170,000-unit count.
4. Housing Needs and Trends Report, 2018
5. This number of total eviction notices is likely far below the total number as the Rent Board does not collect non-payment of rent eviction notices and illegal evictions (ones conducted without legal authority or an involved agency) are not captured.
6. Rent Board
7. An Unlawful Detainer action is a special and expedited court proceeding to evict someone from the place where they live. In San Francisco, a residential landlord must have a "just cause" reason as the dominant motive for pursuing an eviction. Prior to filing an Unlawful Detainer complaint with the court, the landlord must serve the tenant with a notice and wait for the notice to end without the tenant remedying the problem cited in the notice.
8. Eviction Defense Council (EDC)
9. MOHCD. San Francisco’s Unstudied Evictions: Community Reflections and Recommendations.
