California-Wide Rent Control Bill Passes
As of January 1st, 2020, the entire state of California will be rent-controlled. Assembly Bill 1482, signed by California Governor Gavin Newsom this week, mandates a 5% limit to rent increase year over year, in an attempt to decrease evictions and retain affordability throughout the state.
San Francisco has had rent control for years, previously being in place on property built prior to 1979. With the signing of the new state-wide legislation, significantly more of the city will fall under rent control.
Here’s what you need to know:
Begins January 1st, 2020
Applies to all leases beginning March 15th, 2019 or later
Does NOT apply to property under 15 years old OR single-family homes (unless corporation owned)
How this relates to district 9 in San Francisco (mostly Mission Bay, South Beach, SOMA, Yerba Buena):
The majority of buildings in our small neck of the city are post-2005 construction (15 years), so this bill does not apply. Of the 20 building’s Condo Weekly covers, only The Metropolitan (2004 construction) and 255 Berry (2004 construction) will fall under AB 1482.
The goal for California, especially cities like San Francisco with limited housing, increasing eviction rates and a homeless problem, is to incentivize developers to continue building in our state. Without construction, the problem will only increase.
What this bill does is swing the focus of investors to newer construction, becoming somewhat of an opportunity zone to capitalize on the long-tail of new construction rental values. As rents are theoretically un-capped so long as the neighborhood you own a home in continues appreciating.
The longer-term appreciation plays have typically resided in up and coming neighborhoods; think Bernal Heights, Glen Park, Dolores over the past 10 years, with the more recently appreciating neighborhoods like Dogpatch and Inner Mission leading the way for a Buy, Remodel, Rent strategy in 2018/2019.
Now, a buy and hold on any new construction across the south side of the city is looking like a smarter play; you can purchase below the cities typical market value (compared to Pacific Heights, North Beach, etc) and lock in a brand new home under general market value and hold for the long term.
Rendering courtesy of SF Planning
Neighborhoods in the south-east pocket of the city with new construction underway (or coming in the near future) that are still on the upward curve are Hunters Point, India Basin, Visitacion Valley and the south-slope of Potrero Hill. With the pre-established locational value of Potrero Hill, Bernal Heights & Glen Park surrounding these developments, as well as the ease of access to both downtown San Francisco, and the 101-south toward the Silicon Valley, these developments will see a heavy focus from budding investors in years to come.
For a list of new development on the way and some projection data, feel free to shoot me an email: