A friend owns a three-unit building in San Francisco, occupying the top floor himself. The two tenants underneath have fled. One lost a job and the other kept the job, but decided to lose the California tax rates and mask/shutdown protocols. Both units are now vacant.
I asked how much rents have fallen and he responded with “30 percent.” Why not rent the units out at the current market rate? “If you ever rent to someone in San Francisco,” he replied, “you can never raise their rent more than about 2 percent per year after that. You’re locked it at whatever rate you start with. So I am waiting until the shutdown ends, hoping that market rents will come back closer to what they were when I bought the building.”
(Why not turn the vacant units into AirBnBs? San Francisco limits AirBnB to 90 days per year, requires them to be part of the owner’s residence, requires a variety of registrations and taxes, etc.)
If his experience is typical, there are a lot of landlords withholding supply and therefore the true market rents should actually be lower than what we’ve heard.