Tenants under Veritas Investments, SF’s largest owner of rent-controlled housing, are at the forefront of our city’s efforts to preserve rent-controlled apartments.
Together with Housing Rights Committee of San Francisco and other housing groups, Veritas tenants have uncovered how their landlord exploits passthrough rent increases to maximize profit. This practice goes against the original spirit of a passthrough: to allow small owners to recover costs and make a reasonable income. It also shows the real motivations of corporations like Veritas: to maximize profit while our city struggles with the worst economic inequality it has ever seen.
Veritas tenants call on SF’s largest landlord to (1) roll back all passthrough rent increases at all of their 250+ rent-controlled buildings citywide, and (2) commit to selling 76 buildings to The City, non-profit partners, or another path to permanent affordability. With a City Hall public hearing on the horizon to evaluate the impact of various passthrough rent increases — from capital improvements to bonds — tenants call on the Board of Supervisors to pass an emergency moratorium on all passthrough rent increases.
Veritas, now a statewide corporation with properties in Oakland, Alameda, and Los Angeles, holds hundreds of LLCs and is backed by some of the largest institutional investors in the world. As money pours into Veritas from around the world, renters question why corporate profit should be built on their backs.
One investor Ivanhoé Cambridge, the real estate investment arm for a Canadian pension fund, has doubled its profits in the last five years and ranks among the top 10 institutional investors in the world for real estate investments. Another investor is Boston-based hedge fund Baupost Group, which holds at least 62 rent-controlled properties in partnership with Veritas. Baupost also holds a huge chunk of Puerto Rico’s debt—and publicly opposed calls to forgive that debt even as the island struggled to recover from 2017’s Hurricane Maria.
Through operating & maintenance rent increases, capital improvement passthroughs, water bond passthroughs, and general bond passthroughs, Veritas is able to impose double-digit rent increases on rent-controlled tenants.
A February 2016 issue of Commercial Real Estate Direct Weekly featured an article on Veritas’ Baupost financing and rising neighborhood rents where Veritas acquired properties. The author boasts, “Monthly rents in the Haight Ashbury neighborhood […] in 2015 had climbed by nearly 11 percent from a year earlier, to an average of $2,604/unit. They’re now 34 percent greater than they were in 2011, when the Veritas/Baupost team bought the portfolio. The story’s much the same in the other neighborhoods represented in the portfolio.”
Bundled passthroughs — multiple passthroughs taking effect simultaneously — cause rents on rent- controlled properties to rise at this rate, and Veritas has mastered this practice.
The ability to impose passthroughs is baked into Veritas’ calculations around purchases and sales — and so is the promise of increased profit as long-term tenants leave.
In 2019, Veritas sold a number of properties, including 698 Bush St., a 45-unit building in Lower Nob Hill that houses a large number of long-term immigrant tenants. According to a 2018 Colliers International report on the building, Veritas made $404,540 in profit—on that building, and in one year alone.
But the same Colliers report states that the projected market income is $888,595, and that’s what Veritas wants the next owner to know. In this case, the next owner is notorious evictor Flynn Investments, who actually owned 698 Bush decades ago.
In early 2020, Veritas is set to put 76 buildings on the market. This move presents an opportunity for Veritas CEO Yat-Pang Au to make good on his November 10 open letter to San Franciscans. In the letter, he states that Veritas “preserves affordability” and “recognizes the burden” of passthrough rent increases.
In that spirit, Veritas tenants call on their landlord to start negotiations with the city to find a path for all 76 buildings to become permanently affordable and safe from speculative investors.
Rising inequality, concentration of rental housing in fewer and fewer hands, and real estate investment firms seeking to maximize profits are the conditions which led hundreds of tenants to march on
September 24, 2019 and shut down four blocks of traffic. Less than a month after the march, Veritas showed that it doesn’t actually rely on passthrough rent increases to make a fair rate of return when it rolled back excessive rent increases at 34 buildings. Large real estate firms drive up rents, and they can lower rents, too.
In our efforts to preserve rent-controlled housing — a goal that everyone agrees is important — let’s follow the lead of our city’s rent-controlled tenants. They know best.
Amina Rubio has lived in her rent-controlled building in Lower Nob Hill for 22 years. Veritas bought her home in September 2016. She is a member of the Veritas Tenant Association and an HRCSF volunteer researcher. Susan Marsh is a long-time HRCSF member, researcher, and tenant advocate.