In Armistead Maupin’s beloved novel “Tales of the City,” Anna Madrigal personified the archetypal San Francisco landlord — a caring, free-spirited matriarch to the colorful residents of a quirky, old building.
But the days of the Mrs. Madrigals are being replaced with a new
reality, according to many real estate experts: brokers and agents have
taken control of much of the city’s apartment rental market. The shift
has pushed home rentals toward a system that critics say would
ultimately be more expensive and less friendly to tenants.
And in a twist of unintended consequences, San Francisco’s forceful protections of tenants’ rights may be partially to blame.
The clearest evidence of the trend can be found on Craigslist,
the online classified Web site that for several years has been the
dominant listings service for home rentals in the city. Brokers and
agents now appear to control the majority of the site’s apartment
postings.
An analysis of the 591 listings in “apts/housing for rent” in the San Francisco section of Craigslist
on June 19 found that 315 rentals (53 percent) were clearly identified
as represented by brokers or agents. The remaining 276 postings did not
disclose whether a professional broker was involved.
In some neighborhoods, brokers had a virtual lock on listings: 72 percent in North Beach, and 82 percent in South of Market.
“The trend has gone to broker representation,” said a local real estate
firm associate who analyzes the San Francisco rental market on a weekly
basis but was not authorized to speak publicly. Interviews with several
other brokers and real estate experts confirmed the shift.
In a slow home sales market, managing apartment rentals has provided
agents with an expanded revenue stream — and they forge relationships
with prospective home buyers.
But with broker fees typically 6 percent of a year’s rent, why would
property owners start paying middlemen? After all, San Francisco is one
of the most expensive rental markets in the nation, and demand for
housing is considered steady.
Experts say the shift has to do with new buildings, the recession and the city’s pro-tenant environment.
¶Investors in new-construction condominiums tend to use agents, Gavin
Coombs, one of the city’s top leasing brokers, said. “These newer
owners’ inclination is to go with professional assistance, as compared
with the mom-and-pop type owners of the past who would take the
do-it-yourself approach,” Mr. Coombs said.
¶The recession caused a drop in prices in late 2008. Rents have since
rebounded in many neighborhoods, but the dip created a rare era of
uncertainty in pricing. Because the city’s strict rent control
ordinances limit annual increases, property owners feel the need to
secure the highest rents possible, and brokers claim to have the
expertise to get them.
¶Because most residents in the city are renters, San Francisco has
developed a tenants’ rights culture that makes it difficult for
landlords to evict. Brokers say they can help landlords navigate this
system and offer screening services that are more likely to avoid bad
tenants.
The switch to an apartment market largely run by third-party
professionals changes the tone for renters, Ted Gullickson, director of
the San Francisco Tenants Union,
said. “Property managers tend to be more aggressive — sometimes very
aggressive — at enforcing lease provisions,” Mr. Gullickson said.
Mr. Gullickson said professional managers were more likely to actively
search for lease violations as a pretext for removing long-term tenants
protected by rent control.
Brokers have also found ways to remove apartments completely from the traditional market.
In 2008 Andrew O. Dugas bought a studio apartment on Nob Hill as a
rental investment; it was in a building that Mr. Dugas, as a writer,
was thrilled to learn was once the home of the author Dashiell Hammett. He said he did not wish to pursue the risks involved with renting to a permanent, rent-control tenant, however, and turned the apartment over to a broker, who has leased it, short term, to vacationers.
“We get more money this way,” Mr. Dugas said. The apartment brings in
about $2,200 a month, he said, compared with the $1,400 a month a
studio traditionally rents for in the same neighborhood.
The only United States city where brokers already firmly control
apartment rentals is New York, especially Manhattan. It is hardly
nirvana for tenants.
Diane Ly, who rents in Noe Valley, has a naturally ebullient
personality, but ask her about renting in New York and she quickly
turns incredulous. Ms. Ly moved to Manhattan to work there for a year
and described the rental process as “highway robbery.” She said brokers
had a stranglehold on apartments and charged tenants large fees to move
in: 15 percent of the first year’s lease, which in her case was $4,500.
In San Francisco, landlords pay those fees for now, and leasing agents
are not nearly as powerful as they are in New York, but the recent
shifts indicate a step in that direction.
“Everyone in New York hates it,” Ms. Ly said of the broker-controlled
situation. “I can’t imagine that San Franciscans will be as tolerant,
especially when the market has been relatively open until now.”
Scott James is an Emmy-winning television journalist and novelist who lives in San Francisco.
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