At first glance, it looks like a gift from the gods: Last week, in the wake of a City Budget Analysis Office report that estimated the monthly income lost by San Francisco landlords since the beginning of the pandemic at between $13.6 and $32.7 million — monthly! — The City’s Board of Supervisors voted to create the Rent Resolution and Relief Fund. Provided they can jump through all of the Supes’ hoops (more on that later), landlords can receive up to 65 percent of their COVID-deleted rental income.
As a guy who’s been asking for months about relief for small landlords, I should be leading the victory parade that ends at City Hall, right?
Well, it’s not that simple. This being San Francisco, the resolution, like so much of local politics, comes with a catch: The relief has strings attached. And the strings, they just seem a little… cynical? Opportunistic? Icky?
“San Franciscans have a choice,” resolution author (and District 5 Supervisor) Dean Preston told SFist after last week’s unanimous vote. “(To) leave vulnerable tenants saddled with rent debt and small business owners at risk of default, or slightly increase taxes on billionaire real estate investors to help pay for our recovery efforts.”
What he’s saying here is that this particular shipment of manna arrives only if voters approve the Preston-authored Proposition I, which aims to double the transfer tax on the sale of San Francisco properties valued at $10 million or more, making it the country’s highest. The Chronicle calls Prop. I “the most contentious local measure on the ballot,” and SPUR, the San Francisco Bay Area Planning and Urban Research Association, says it could lead to “unintended consequences for needed housing construction and affordability.”
Now look, I’m not here to talk about whether or not you should vote for Proposition I. For one, by the time you read this you will already have voted. For another, it’s not the nuts and bolts of Prop. I that matter in this case — mostly — but instead the general slipperiness of making landlord and tenant relief contingent on passing a controversial tax bill, during a recession, whose original language, by the way, already has its proposed windfall earmarked for something else. In this case, it’s a Social Housing Program Fund designed to support city-funded affordable housing, which, it seems, would then be put on hold until The City’s rental market recovers from COVID.
Even assuming the Social Housing Program can be put on hold and maybe activated once the landlord crisis has passed, the numbers still don’t seem to work. The authors of Prop. I estimate an annual bounty of $196 million, which is enough to cover roughly nine months of the mean of the Budget Office’s estimate of lost income but only seven of the high end. And how real is that $196 million, given that the numbers were crunched pre-COVID? Property is still crazy valuable, but last year’s $10 million building is the $8.8 million building of 2020; $196 million in annual revenue, like charging $3,000 for a one-bedroom apartment in the Mission in 2020, seems like wishful thinking.
The “you pass Prop. I you get your money” relationship seems like a quid pro quo, in which much-needed relief is used as bait to get a controversial, poorly-timed proposition passed. While I’m no budget wonk — by far — it seems that even if I passes, it’s still not going to completely fund the Resolution Fund, setting up a scenario in which the operation is a success (Prop. I wins! Start paying that back rent!) But the patient dies. (Sorry, Prop. I didn’t generate as much revenue as we’d hoped. Maybe next year.)
In any scenario, funds will only be made available to landlords who agree to “waive back rent that became due during the COVID-19 state of emergency.” No big deal, right? I mean, come on, that rent is gone forever. But there’s a “now you’re going to play by our rules” message here that seems a tad opportunistic, especially when considered as a part of the larger message sent to landlords by The City — and by Preston, who since March has written the ordinance permanently banning evictions of non-paying tenants with COVID-related hardships and the one banning no-fault evictions until March, 2021.
And now a “deal” for landlords funded by a tax that largely impacts only them?
I get it. We all hate the landlord cartoon we have in our heads. All landlords are billionaires and doubling a tax is a “slight increase.” Remember, though, that if it becomes impossible to be a small landlord in San Francisco, the real billionaires will be ready and waiting, poised to snap up undervalued properties and wait out the recession for the next boom.
Help out the landlords, please. But don’t make them beg for their supper.
Larry Rosen is a San Francisco-based writer, editor, podcaster and recovering former Realtor. He is a guest columnist and his viewpoint is not necessarily that of the Examiner. The Market Musings real estate column appears every other week.