I have the good fortune to have made the good acquaintance of a New Zealand woman who long ago fell in love with San Francisco and a San Francisco gentleman (not necessarily in that order) and has lived in the city much longer than I have. Now retired, she performs accounting duties for one property management firm, manages her own rental properties, and prepares income tax returns on the side. Did I mention that she’s retired? Anyway, I’ve given you my perspective on the massive changes coming to/overwhelming San Francisco, and it seems fair that this renter give my readers a landlord’s perspective in return.
All of these photos come from only two of the probably hundreds of construction projects in San Francisco right now. My blogging colleague Franco over at Peach, Plum, Orange claims that Toronto has as many construction cranes in action in his home town as does San Francisco, a statement which if true is mind-boggling.
She feels a bit concerned about the stunning numbers of new rental units under construction right now in the city. Make no mistake, life does offer its bright spots for property managers and landlords in this town; after all, they can pretty much charge whatever they desire in the way of rents and still fill 100% of their apartments 200% of the time. But she wants to anticipate trends and changes before they happen, and from her perspective, she sees rents going down in a few years as the supply equals or even exceeds demand. Today the demand overwhelms the supply; indeed, opponents of government regulation and rent control should note that San Francisco has more than plenty of both and yet the rents are more than high enough to reward developers. Supply and demand rule the San Francisco markets, and today demand rules the supply as a South of Market dominant rules a submissive.
And yet my landlord friend has her concerns. She has the conviction that the supply of new housing will eventually surpass the demand and ultimately force rents downward. It happened a decade ago as people left their apartments by the hundreds to move into their first homes with the aid of Adjustable Rate Mortgages. I might have been the only person to check out the artist’s garret that I proudly call my home. She and I have agreed to disagree on her foreshadowing of the future. Personally, I feel that that at best rents will only stabilize at their current stunning heights.
There does exist one point upon which we do agree. Wholeheartedly.
San Francisco has always been not a boom-and-bust town, but a HUGE-boom-and-HUGE-bust town. San Francisco will have a huge bust commensurate with the current huge boom. There exist riskier predictions than this one–for example, the sun will rise tomorrow.
San Francisco will bust again. If you could extract DNA from a city, you would find bust DNA in this town. William Richardson, the British sailor who fell in love with a Spanish officer’s mixed-race daughter, jumped ship, and eventually founded Yerba Buena, the future San Francisco, once owned most of the land in what is now the City’s Financial District, plus vast tracts in the North Bay. Land worth a billion or two or three today, but who’s counting? He died broke, and no one knows where his grave lies in San Rafael–if indeed it lies there.
So when will the next bust come? No one can say.
People have their favorite guesses. My New Zealand friend fears the real estate boom might cause the bust, forcing rents downward before the construction projects have all been completed, perhaps leaving the city scarred with abandoned sites taken over by homeless squatters. I think our latest tech boom will go bust just as the last set of new apartments buildings open for business, right as the next great exodus from the city begins. She and I have each lived here long enough that we have seen busts happen before. And the booms, too; I moved here just as the city began to recover from the Seventies, its disastrous decade of murders, terrorism and assassinations.
But we don’t know when the next bust comes. No one does.
I suppose that might partially account for the intense international interest in the affairs of my “cool grey city of love.” Everyone can see the excitement of the new tech boom, the excitement of the new real estate boom, and the excitement of the 21st Century equivalent of the gold miners of 1849. The facts that the restaurants, the Giants, and the 49ers are all great at the same time is another bonus.
And everyone knows this will all go bust. Again.
Vonn Scott Bair