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What is curious to me is that NYC rents haven't seen the same crater at all (link says 15% but anecdotally most of the desirable top of market neighborhoods are

What is curious to me is that NYC rents haven't seen the same crater at all (link says 15% but anecdotally most of the desirable top of market neighborhoods aren't budging). I don't buy the "SF is not very fun during the pandemic" rationale as more special than any other notable city, and NYC tends to have less space than SF. To me, that says the SF case has more complexity. IMO, the key factor here is that there appears to be a much higher ratio of people that were primarily there because work was best there, where many other cities have populations that tend to choose the city in question specifically more than happen upon it.

asdff 6y ago
I haven't seen rents really drop in LA either. Commercial landlords would rather let the building go half vacant and try offering 1-2 months of free rent before they drop the base rent.
- e9 6y ago
  Yeah it’s weird. I haven’t seen for rent signs before but now I see them on every single building but rents are same. It probably means landlords are basically charging too much and making too much money and not paying enough in taxes(1-2% tax increase per year is probably nothing compared to increases in rent prices)
  - MAGZine 6y ago
    if you do the math, it's expensive to let a unit sit for more than a couple months as opposed to offering a discount on the rent. This assumes your tenant will turnover in a couple years time, mind you. I did the math for SF and IIRC ~2mo was equal to a 15% discount. if it sits empty for longer than 2mo, you should have just given the 15% discount. if you let is sit for 2mo AND have to give a 15% discount, now you've really fucked your finances up.
    - cnst 6y ago
      You're ignoring the fact that SF has rent control; it resets only once a vacancy hits. If market rate was 3k a few months back, but is only 2k now, if you take a 15-year view, it's still cheaper to let your rent-controlled unit sit unrented for 12mo than rent it at just 2k for 15 years provided the 3k/mo rates recover in two years. Basically, that's one of the major reasons why rent-controlled units aren't going down in prices. Bundle in Prop 13, and you aren't even paying any real property taxes on those units to sting your finances.
      - MAGZine 6y ago
        No, I'm not forgetting that. In my experience, most market rate units turn over every 2 or 3 years. 15 years in sf apartment leases are unusual except for people who cannot afford to move out. If you assumption, as a landlord, is that the next person into your unit isn't moving for 15 years, then yes, the cost calculation moves. However, that calculation is very different from a 7 year calculation, which is very different from a 2 year calculation. So how much are you going to hedge against not losing money in the future, when you're losing concrete money right now?
        cnst 6y ago
        > 15 years in sf apartment leases are unusual except for people who cannot afford to move out. I'm a little confused here. If your rent is 1.2k for a 2bd in SF (because resident since 2000s), whereas market rate for a 2bd now is 3.9k in SF -- what is your determination -- is a person able or not able to move-out? Why would anyone move out every 2 to 3 years if they're rent-controlled, and they'd have to pay significantly more for any new place? Likewise, if you've been owning a property since the old times, and it's fully paid off, the property tax liability in Cali is tiny, and for older owners perhaps entirely a wash-off due to infamous Prop 13. Which is part of the reason that many owners don't even bother renting their properties.
    - asdff 6y ago
      I think properties are somehow valued based on the rent potential, so landlords are disincentivized to move base rent and would rather offer 1-2-3 months free and keep rent at standard rate.
  - asdff 6y ago
    Considering prices have surged over the last two decades, landlords are making money hand over fist. Tax is teensy thanks to prop 13.
- bigdollopenergy 6y ago
  From what I've read, in the case of commercial lets there's a good reason for this. The companies that manage these properties acquire/refinance loans based on the value of their assets and the value of their assets is mostly determined by the rent they ask for, much less the rent they are actually getting. This leads to commercial landlords refusing to budge on a ridiculous price that was determined in different market conditions and as a result will opt to leave it vacant. Taking the lower price would adversely affect their access to financing and could put them under water (they already were) on their loans. Why these agreement/loans don't take this problem into account to prevent this situation is a total mystery though.
FartyMcFarter 6y ago
The article says NYC rents dropped by 15% which is still significant.
- adjkant 6y ago
  I just added a caveat about that, but many of the top of market neighborhoods people tend to go for here haven't dropped nearly that much (e.g West Village area, Chelsea, UES/UWS). NYC is huge and that drop is not spread equally. Guessing it isn't in SF either, but it seems 31% is going to hit every neighborhood at least a good deal. Edited to add to this, see the spread in June: https://www.renthop.com/studies/nyc/renthop-2020-subway-rent-map-rents-are-dropping-at-major-mta-stops https://www.renthop.com/studies/nyc/renthop-2020-subway-rent... West 4th = West Village, up 7% YOY mid pandemic, even as other neighborhoods saw more drops. Also see the trend here as editorialized around NYC on pace to overtake SF as the most expensive rent market: https://www.zumper.com/blog/rental-price-data/ https://www.zumper.com/blog/rental-price-data/ A better graph near the bottom of this article to show how small the dip is for rentals: https://streeteasy.com/blog/august-2020-market-reports/ https://streeteasy.com/blog/august-2020-market-reports/
  - deleted 6y ago
    [deleted]
  - bobthepanda 6y ago
    At least for the West Village, at least some of that is tempered by NYU. I’d imagine most of their overseas students are still renting.
  - MAGZine 6y ago
    IME, sf has falled 20-30% even in desirable neighbourhoods. You can get a recently renovated 3 bedroom with laundry and dishwasher, in a desirable area for $4500. Those bedrooms weren't going for less than $2k a year ago.
  - OkGoDoIt 6y ago
    From what I’ve seen in San Francisco, the biggest decreases in rents have been in the newer upscale construction in SOMA. There’s nothing to do in SOMA other than walking to your tech office job and most of the restaurants around there are specifically for business lunch so many of them aren’t open now with the offices are be closed. Given all that, I imagine that area has seen the biggest exodus in the city. Plus the rents were stratospheric to begin with, so even a 30% drop is still ridiculously expensive. In other parts of San Francisco prices have dropped but not nearly as much as in SOMA. This is all from my casual observations on craigslist and Zillow, I would love to see broader data and analysis if anyone has any
onecommentman 6y ago
Perhaps the phenomenon of “X months free rent” is more pervasive in NYC. E.g. https://www.cityrealty.com/nyc/market-insight/rental-building-offers/greenpoint/33-nyc-luxury-buildings-gyms-offering-months-free-rent/39761 https://www.cityrealty.com/nyc/market-insight/rental-buildin... What little I understand is if a landlord is leveraged (?) up the wazoo, the lending bank can make the landlord pay a lump sum if the revenue projections on which the loan is made shrink, since the risk is higher. Somehow, free months don’t count against these revenue projections (assumed a one-off?), through what I imagine is the magic of contract law. The higher end, nicer real estate is probably more highly leveraged. Someone in RE can probably clarify this better.
- adjkant 6y ago
  It is, but that was true pre-pandemic, so that won't mark a shift in prices either way. That's baked into last year and this year.
- rStar 6y ago
  our rent went down, total, a little more than a third. half was a price drop and half was the averaged value of 2 free months, which we will have to pay back if we leave before the lease is up. We had budgeted an increase, so it’s a covid windfall. Less traffic and one of the lowest covid numbers in the union atm are a bonus. The constant smoke in the air is the real problem. Haven’t had a blackout yet.
sharatvir 6y ago
Speaking anecdotally I think this has some truth in it. A lot of people I know seem to loathe San Francisco and only put up with it because they’re required to live here for a job. If that’s the true reason for an exodus, then I hope it benefits the city to have residents that want to live here.
- dkdk8283 6y ago
  I lived in SF for a year and hated it. I don’t belong there: it’s not for me.
saghm 6y ago
I recently moved from Manhattan to outside New York (for reasons mostly unrelated to the pandemic; my roommate decided to move in with his significant other, and I didn't want to pay for a 1 BR in Manhattan). The building we used to live in did officially originally say the rent would be increased for the next year, but when we told them we weren't staying, they pivoted and offered us three extra months for free if we signed on. I'm not sure if this is evidence for or against your statement that rent isn't falling much in New York, but I thought it was an interesting data point.
srtjstjsj 6y ago
SF is tiny compared to NYC. Much more of a buffer in NYC.

asdff 6y ago

I haven't seen rents really drop in LA either. Commercial landlords would rather let the building go half vacant and try offering 1-2 months of free rent before they drop the base rent.

e9 6y ago
Yeah it’s weird. I haven’t seen for rent signs before but now I see them on every single building but rents are same. It probably means landlords are basically charging too much and making too much money and not paying enough in taxes(1-2% tax increase per year is probably nothing compared to increases in rent prices)
- MAGZine 6y ago
  if you do the math, it's expensive to let a unit sit for more than a couple months as opposed to offering a discount on the rent. This assumes your tenant will turnover in a couple years time, mind you. I did the math for SF and IIRC ~2mo was equal to a 15% discount. if it sits empty for longer than 2mo, you should have just given the 15% discount. if you let is sit for 2mo AND have to give a 15% discount, now you've really fucked your finances up.
  - cnst 6y ago
    You're ignoring the fact that SF has rent control; it resets only once a vacancy hits. If market rate was 3k a few months back, but is only 2k now, if you take a 15-year view, it's still cheaper to let your rent-controlled unit sit unrented for 12mo than rent it at just 2k for 15 years provided the 3k/mo rates recover in two years. Basically, that's one of the major reasons why rent-controlled units aren't going down in prices. Bundle in Prop 13, and you aren't even paying any real property taxes on those units to sting your finances.
    - MAGZine 6y ago
      No, I'm not forgetting that. In my experience, most market rate units turn over every 2 or 3 years. 15 years in sf apartment leases are unusual except for people who cannot afford to move out. If you assumption, as a landlord, is that the next person into your unit isn't moving for 15 years, then yes, the cost calculation moves. However, that calculation is very different from a 7 year calculation, which is very different from a 2 year calculation. So how much are you going to hedge against not losing money in the future, when you're losing concrete money right now?
      - cnst 6y ago
        > 15 years in sf apartment leases are unusual except for people who cannot afford to move out. I'm a little confused here. If your rent is 1.2k for a 2bd in SF (because resident since 2000s), whereas market rate for a 2bd now is 3.9k in SF -- what is your determination -- is a person able or not able to move-out? Why would anyone move out every 2 to 3 years if they're rent-controlled, and they'd have to pay significantly more for any new place? Likewise, if you've been owning a property since the old times, and it's fully paid off, the property tax liability in Cali is tiny, and for older owners perhaps entirely a wash-off due to infamous Prop 13. Which is part of the reason that many owners don't even bother renting their properties.
  - asdff 6y ago
    I think properties are somehow valued based on the rent potential, so landlords are disincentivized to move base rent and would rather offer 1-2-3 months free and keep rent at standard rate.
- asdff 6y ago
  Considering prices have surged over the last two decades, landlords are making money hand over fist. Tax is teensy thanks to prop 13.
bigdollopenergy 6y ago
From what I've read, in the case of commercial lets there's a good reason for this. The companies that manage these properties acquire/refinance loans based on the value of their assets and the value of their assets is mostly determined by the rent they ask for, much less the rent they are actually getting. This leads to commercial landlords refusing to budge on a ridiculous price that was determined in different market conditions and as a result will opt to leave it vacant. Taking the lower price would adversely affect their access to financing and could put them under water (they already were) on their loans. Why these agreement/loans don't take this problem into account to prevent this situation is a total mystery though.

FartyMcFarter 6y ago

The article says NYC rents dropped by 15% which is still significant.

adjkant 6y ago
I just added a caveat about that, but many of the top of market neighborhoods people tend to go for here haven't dropped nearly that much (e.g West Village area, Chelsea, UES/UWS). NYC is huge and that drop is not spread equally. Guessing it isn't in SF either, but it seems 31% is going to hit every neighborhood at least a good deal. Edited to add to this, see the spread in June: https://www.renthop.com/studies/nyc/renthop-2020-subway-rent-map-rents-are-dropping-at-major-mta-stops https://www.renthop.com/studies/nyc/renthop-2020-subway-rent... West 4th = West Village, up 7% YOY mid pandemic, even as other neighborhoods saw more drops. Also see the trend here as editorialized around NYC on pace to overtake SF as the most expensive rent market: https://www.zumper.com/blog/rental-price-data/ https://www.zumper.com/blog/rental-price-data/ A better graph near the bottom of this article to show how small the dip is for rentals: https://streeteasy.com/blog/august-2020-market-reports/ https://streeteasy.com/blog/august-2020-market-reports/
- deleted 6y ago
  [deleted]
- bobthepanda 6y ago
  At least for the West Village, at least some of that is tempered by NYU. I’d imagine most of their overseas students are still renting.
- MAGZine 6y ago
  IME, sf has falled 20-30% even in desirable neighbourhoods. You can get a recently renovated 3 bedroom with laundry and dishwasher, in a desirable area for $4500. Those bedrooms weren't going for less than $2k a year ago.
- OkGoDoIt 6y ago
  From what I’ve seen in San Francisco, the biggest decreases in rents have been in the newer upscale construction in SOMA. There’s nothing to do in SOMA other than walking to your tech office job and most of the restaurants around there are specifically for business lunch so many of them aren’t open now with the offices are be closed. Given all that, I imagine that area has seen the biggest exodus in the city. Plus the rents were stratospheric to begin with, so even a 30% drop is still ridiculously expensive. In other parts of San Francisco prices have dropped but not nearly as much as in SOMA. This is all from my casual observations on craigslist and Zillow, I would love to see broader data and analysis if anyone has any

onecommentman 6y ago

Perhaps the phenomenon of “X months free rent” is more pervasive in NYC. E.g. https://www.cityrealty.com/nyc/market-insight/rental-building-offers/greenpoint/33-nyc-luxury-buildings-gyms-offering-months-free-rent/39761 https://www.cityrealty.com/nyc/market-insight/rental-buildin... What little I understand is if a landlord is leveraged (?) up the wazoo, the lending bank can make the landlord pay a lump sum if the revenue projections on which the loan is made shrink, since the risk is higher. Somehow, free months don’t count against these revenue projections (assumed a one-off?), through what I imagine is the magic of contract law. The higher end, nicer real estate is probably more highly leveraged. Someone in RE can probably clarify this better.

adjkant 6y ago
It is, but that was true pre-pandemic, so that won't mark a shift in prices either way. That's baked into last year and this year.
rStar 6y ago
our rent went down, total, a little more than a third. half was a price drop and half was the averaged value of 2 free months, which we will have to pay back if we leave before the lease is up. We had budgeted an increase, so it’s a covid windfall. Less traffic and one of the lowest covid numbers in the union atm are a bonus. The constant smoke in the air is the real problem. Haven’t had a blackout yet.

sharatvir 6y ago

Speaking anecdotally I think this has some truth in it. A lot of people I know seem to loathe San Francisco and only put up with it because they’re required to live here for a job. If that’s the true reason for an exodus, then I hope it benefits the city to have residents that want to live here.

dkdk8283 6y ago
I lived in SF for a year and hated it. I don’t belong there: it’s not for me.

saghm 6y ago

I recently moved from Manhattan to outside New York (for reasons mostly unrelated to the pandemic; my roommate decided to move in with his significant other, and I didn't want to pay for a 1 BR in Manhattan). The building we used to live in did officially originally say the rent would be increased for the next year, but when we told them we weren't staying, they pivoted and offered us three extra months for free if we signed on. I'm not sure if this is evidence for or against your statement that rent isn't falling much in New York, but I thought it was an interesting data point.

srtjstjsj 6y ago

SF is tiny compared to NYC. Much more of a buffer in NYC.