Feature

San Francisco Property Owners Survey

by Bay Area Economics

The San Francisco Affordable Housing Study is a comprehensive analysis of current housing issues based on both published and primary data. It was commissioned by a resolution of the Board of Supervisors of the City and County of San Francisco in 2000 to be “neutral and fact-based” pursuant to Ordinance No. 55-00. The designated Study Moderator is Mr. Joe Grubb, Executive Director of the San Francisco Rent Arbitration and Stabilization Board. This study is composed of the following parts:

San Francisco Housing DataBook (published Spring 2002)
Citywide Tenant Survey (published Summer 2002)
Citywide Property Owners Survey

Note that this study focuses on a myriad of housing issues present in San Francisco and is not intended to be a study of rent control.

Survey Methodology
The Property Owners Survey (the “Survey”) was conducted by mail, with a random sample of owners of multifamily residential rental properties generated from County Assessor’s information. Surveys were mailed in January 2003, with responses coming in over the next few months. In total, 5,000 randomly selected owners were contacted, resulting in a total of 693 usable responses. Survey respondents represent about 6 percent of the total rental housing stock in the city.

Context for the responses to many Survey questions is provided by the Property Owners and Managers Survey (POMS), conducted by the U.S. Census Bureau in 1995 and 1996. The multifamily portion of this national survey included 5,754 respondents. Additionally, for key variables where data are available, comparisons to Census data from 2000, American Housing Survey data from 1998, County Assessor’s data, and the San Francisco Tenants Survey are presented.

Demographic Characteristics
Nearly two-thirds of the respondents of the San Francisco Property Owners Survey are male, comparable to similar findings from a nationwide survey. These respondents are older on average than all San Francisco householders. Few residential rental property owners in the city or nationally are under 35.

As this survey indicates, the nearly two-thirds of respondents reported above are white, in a proportion well above the city’s overall proportion of 44 percent of residents. Other major racial/ethnic groups are underrepresented relative to the general population.

The large majority of respondents live in San Francisco. Very few are renters of their own places of residence. A large minority live on the property that was the subject property of this survey, indicative of a high proportion of small property owners who live in buildings they own where they also rent out other units. This proportion of owner-occupants of rental buildings is much higher than reported nationally.

Most of the respondents are currently employed, and the large majority of those employed work in San Francisco (see Chart A). Survey respondents tend to be in executive or professional occupations. Most of the respondents are not working primarily as property owners or managers.

Survey respondents have relatively high household incomes in comparison to San Francisco tenants, all San Francisco households and property owners nationwide (see Chart B). For respondents of this survey, median annual household income is estimated at $90,920, while it is $44,811 for the San Francisco Tenant Survey respondents (see March 2003 of this magazine), $55,221 for San Francisco households overall and $47,371 for POMS respondents. Most respondents receive most of their income from sources other than their rental properties in the city, and only about one-fourth rely on these properties for half or more of their income (see Chart C). Less than one-fifth of respondents indicate they are only breaking even or are losing money on their San Francisco properties, nearly the same as nationwide statistics, where a far lower proportion of units are covered by rent control.

Subject Property Characteristics
Most of the subject properties are small. Three-quarters have four or less rental units on the property. Accounting by dwelling units rather than properties, 37 percent of subject property units are on properties of less than five rental units, 20 percent are on properties of five to nine rental units, with the remaining 43 percent on larger properties. These results are very similar to those found by the San Francisco Tenant Survey, but census data indicates that the results from both surveys might be somewhat biased toward smaller properties.

The POMS survey indicates that San Francisco has a high proportion of smaller multiunit properties. San Francisco property owners appear to hold their properties longer than those nationwide. Thirty-eight percent of respondents of the survey of San Francisco property owners have owned their subject properties since before 1980, approximately the date of the inception of rent control in the city. Only 10 percent of the survey’s respondents indicate that their subject properties had commercial space on the premises, slightly higher than the 6 percent nationwide. This is likely a function of San Francisco’s urban character, with many apartments above shops and offices.

Nearly half of respondents report their tenants as mostly middle income, with the remainder reporting a diverse range and mix of tenant incomes. The results indicate a higher income mix than found nationally, where just over half report their tenants as either low income or a mix of low and middle income.

Survey responses indicate a broad mix of reasons for acquisition, with no particular reason standing out. The most-stated reason focuses on the income from rents, which constitutes 25 percent of the responses, followed by the use of the property as a residence for the respondent or other family members at 21 percent and as retirement security at 20 percent. These results are similar to those nationally. When requested to prioritize their reasons for buying, the top-ranked reason given by respondents for purchase is as a residence for the owner or other family members, with 46 percent selecting this as the primary reason (see Chart D). Twenty percent list the income stream from rents and 16 percent list retirement security as their primary reason for acquiring the property. The responses here differ markedly from the national data.

Nearly all respondents contribute at least some time to the maintenance or management of the subject property (see Chart E). For those who spend time on maintenance or management of the subject property, most contribute eight hours or less weekly. Less than five percent contribute 25 hours or more per week on these tasks.

The majority of the survey’s respondents expect to own their subject properties for at least five more years; only 10 percent expect to own their properties for less than five years, with the remainder not sure how long they expect to own their properties. These percentages for San Francisco property owners are very similar to those from the national survey. Only 37 percent of the respondents would acquire the subject properties if they were available today, but only 28 percent would opt not to acquire theirs. The remaining 35 percent are unsure whether they would purchase the subject properties.

Nearly three-fourths of the respondents report that all maintenance is handled immediately, and preventive maintenance is practiced. The proportion of San Francisco property owners deferring maintenance, while low, is still slightly higher than nationally. Slightly over three-fourths of respondents report that there are currently no major repairs needed on their properties. The median amount of gross rental income spent on maintenance reported in San Francisco is 13 percent, about the same as for property owners nationwide (see Chart F).

Twenty-eight percent of respondents spend less than 25 percent of gross income on mortgage payments and property taxes, 26 percent spend 25 to 49 percent, 20 percent spend 50 to 74 percent, 15 percent spend 75 to 99 percent and 11 percent spend 100 percent or more on mortgage and
property tax payments (see Chart G). A majority of respondents report that their subject properties were profitable in 2002, just less than 20 percent report that they broke even and just below 30 percent report a loss. These numbers are very similar to those nationwide. Interestingly, far fewer San Francisco respondents are unsure of the profitability of their properties.

Most tenants in subject properties are timely in their rent payments, with 71 percent of respondents reporting that there were no tenants who were delinquent in rent payments in a typical month during the past year. Twelve percent of respondents report that one-fourth or more of their tenants have been delinquent recently. Of the survey respondents, slightly less than half report moderate or major cash flow problems due to delinquency. Even with the presence of rent control, which is typically seen as an incentive for tenants to remain in place, the local responses in this survey indicate a higher rate of turnover in San Francisco rental units than nationwide. Locally, 26 percent of all respondents report that the subject property has a turnover rate of 20 percent or higher, compared to 18 percent nationally. Conversely, 63 percent of San Francisco respondents report a turnover rate of less than 5 percent, compared to 72 percent nationally.

With respect to regulations, respondents rank rent control highest in creating difficulty in operating the subject properties, followed in order by eviction control, parking regulations (in and around their properties), lead paint abatement, the Americans with Disabilities Act, zoning and use restrictions and historic preservation. For all listed regulations with a comparable national category in POMS, San Francisco respondents are more likely than respondents nationally to see the regulation as causing difficulty in operating their properties.

Vandalism to common areas and the outside of buildings is the most commonly cited of a set of listed types of property damage or undesirable behavior by respondents, followed by loud or disruptive behavior, theft, drug usage, vandalism to the inside of units and violence. Vandalism to common areas/outside of buildings and loud or disruptive behavior appear to occur more often locally than nationally.

San Francisco Properties Owned by Respondents
Survey respondents represent about 6 percent of the total rental stock in the city. Most San Francisco respondents do not own large properties or large numbers of units, with just over half owning four or fewer residential rental units, and about three-fourths owning less than 10 units. Slightly under half own only one residential rental property in San Francisco. Approximately one-third of respondents own two to four properties. The large majority of respondents own properties either only or mostly in the city.

Half of the respondents own one to four rent-controlled units. Only four percent report no units subject to rent control. More than three-fourths of all San Francisco respondents report that all their rental units are subject to rent control. Rent-controlled units account for just below three-fourths of San Francisco units owned by respondents, paralleling the actual mix of the housing stock. Only 14 percent of the respondents report at least one Section 8 tenant in their San Francisco properties.

Slightly less than one-fourth of respondents report the presence of a relative in at least one of their San Francisco rental units. This echoes the results regarding reasons for acquisition of the subject properties discussed above, where a substantial percentage of respondents give use of their property as a residence for themselves or family members as a reason for acquisition.

San Francisco property owners appear to be more likely to manage their units than those nationwide. Overall, the respondents account for almost 13,000 San Francisco rental units, with somewhat less than half of those managed personally by the respondent. Nationally, only approximately one-third are managed by the owner. Fifty-eight percent of those who personally manage units are responsible for four or fewer units. Owners of properties with a larger number of units are more likely to employ management companies or employees to manage their properties. Relatives or tenants with rent reductions manage a small proportion of properties. A slight majority of the respondents report that they do not have properties in San Francisco with on-site managers (including owners living on-site themselves); but accounting for all properties owned by the respondents, nearly one-third of all properties have on-site management.

The prevalent ownership type in use by respondents of this survey is sole proprietorship, representing 68 percent of responses. The second most common form, partnerships, lags far behind at only 19 percent of responses. Interestingly, sole proprietorship is even more common nationally.

Somewhat over half of the respondents have at least once requested that a tenant move out of one of their San Francisco rental units (includes informal requests to move as well as formal eviction requests). The proportion of respondents who have undertaken a formal eviction is slightly lower than the proportion of total requests for tenants to move, and considerably lower than the response from the POMS national survey, where just over three-fourths of respondents indicate that they had started eviction proceedings in the past two years (on the subject property only). In the past five years, however, 72 percent of respondents have not evicted a tenant from a San Francisco unit. As a proportion, formal evictions are equivalent to 4 percent of all rental units represented in the survey.

Over two-thirds of the evictions reported are for non-payment of rent, with an additional 17 percent for other just causes such as nuisance or breach of contract. Three percent are Ellis Act evictions, 9 percent are for owner move-ins and 2 percent are for other reasons. Note that this does not match published eviction data for at least two reasons. First, regulations do not require the posting of non-payment notices with the Rent Board, so these evictions are likely underreported. Second, this survey only surveyed owners of currently rented properties, so those who have undertaken owner move-ins and Ellis Act evictions are not as likely to be reported in the survey as in Rent Board statistics.

Slightly less than one-fifth of respondents have recently used a third-party dispute resolution service in mediating a landlord-tenant dispute. While this may seem to be a limited use of this type of service, this finding should be placed in the context of total tenant-landlord disputes. As discussed above, the percentage of respondents who have actually evicted a tenant in the last five years is only 28 percent of respondents.

Nearly three-quarters of the respondents report that they have no vacant units available for lease or rent in their city properties, but 18 percent of respondents indicate that 10 percent or more of their units are available for rent or lease. The number of vacant units (recorded as a percentage of all units reported in this survey) indicates an overall rental vacancy rate of 4.5 percent. In April 2000, the census indicated a rental vacancy rate of 2.4 percent for San Francisco. The difference between the survey data (from early 2003) and data from the census is likely an indicator of the softening rental market due to the economic slowdown and dot-com collapse.

There is considerable controversy over both the extent to which rental housing in San Francisco is held off the market and the possible reasons why units are held off market. Survey results indicate that 18 percent of property owners are holding at least one rental unit off the market (see Chart H). Slightly over half of all survey respondents report holding only one unit off the market, with an additional 38 percent holding two to four units off the market and the remaining 9 percent of respondents keeping five or more units off the market. Calculated as a proportion of all units owned by respondents, 2.3 percent of rental units are not available for rent or lease (see Chart I). This is somewhat lower than comparable census data, which show 3.9 percent of units being kept off the market in April 2000.

Eviction controls, at 24 percent of responses, is the reason most often cited for units held off the market, with an additional 15 percent of responses citing other regulations of rental properties (see Chart J). Sixteen percent of responses indicate units are held off market for personal reasons, 12 percent of respondents point out they are waiting for the market to strengthen, 10 percent report the units are not habitable and need repairs, 7 percent specify their properties are under preparation for sale and 16 percent cite other reasons. Note that these are percentages of responses regarding particular reasons but are not tied to any particular number of units.

A large majority of respondents believe that rent control has made the maintenance of their rental units in San Francisco financially more difficult, with 73 percent stating that rent control has made it much more difficult and another 9 percent finding it slightly more difficult. Nine percent say that rent control has had no impact, while 7 percent think it has made the maintenance issue less difficult. The survey also asked property owners what percentage of their San Francisco tenants they thought would have to move if rent regulation ceased. Well over half, 58 percent, believe that none of their tenants would have to move, and 25 percent believe that less than one-quarter would have to move. Seventeen percent believe that 25 percent or more of their tenants would have to move.

AdditionalCommentsfrom Survey Respondents
This survey allowed respondents to list ideas for maintaining and increasing the affordable housing supply in the city, and also requested additional comments. Many respondentstooktheopportunityto comment.

The majority of property owners who made comments feel that rent control should be modified or eliminated. Rent control is perceived as overly bureaucratic, too complex and unfair to property owners. Small property owners in particular feel that rent control is too complex for them. Many feel that eviction controls should be eased in order to make it easier to evict bad tenants. Suggestions for fixing rent control include neighborhood-based rents, means-testing to determine eligibility for reduced rents, simpler procedures for increasing rents for making property improvements, increasing the annual rent adjustment and exempting small owner-occupied properties.

Other general suggestions for improving the housing situation in San Francisco include making the Planning Department more efficient and responsive, legalizing “in-laws” and other nonconforming units, easing restrictions on conversions from rental to ownership and multifamily to single-family, construction of more affordable housing and rezoning to allow higher densities.

Reprinted courtesy of the San Francisco Rent Board. Produced by Bay Area Economics. For a complete version, please visit www.sfgov.org/rentboard. The opinions expressed in this article are those of the authors and do not necessarily reflect the viewpoint of the SFAA or the San Francisco Apartment Magazine. Copyright © 2003.