Proposition 33: What It Could Mean for Rent Control in San Francisco and the Impact on Small Property Owners

Hey San Francisco, let’s dive into something that could have a big impact on our City—California Proposition 33. This upcoming proposition could tighten statewide rent control measures, and while it sounds like a win for tenants, the reality is more complex, especially for small mom-and-pop investors who rely on rental income for their retirement. Let’s break down what this means and compare it to the current rent control measures in place in San Francisco.

What’s Proposition 33?

Proposition 33 aims to remove state-imposed limits on local rent control measures, giving cities like San Francisco more power to enforce stricter rent control without state interference. This could mean expanding rent control to newer buildings and tightening the limits on rent increases for existing rent-controlled units.

San Francisco’s Current Rent Control Landscape

San Francisco already has some of the most stringent rent control laws in the country. For buildings constructed before June 13, 1979, annual rent increases are capped at 60% of the increase in the Consumer Price Index (CPI). For example, the allowable increase for March 2023 to February 2024 is 3.6%, and it’s set to drop to just 1.7% for March 2024 to February 2025​.

While this may sound like a reasonable cap, it presents significant challenges for small landlords, especially when we consider the rising costs of maintaining properties in San Francisco.

The Impact on Small Property Owners

Many small landlords in San Francisco invested in real estate as a way to secure income for their retirement years. However, with rent increases tied to a small percentage of CPI, their income often doesn’t keep up with the rising costs of utilities, insurance, and general maintenance. Over the past few decades, while the cost of living has soared, the allowable rent increases under these caps have lagged far behind, making it increasingly difficult for these landlords to cover their expenses.

Consider this: while rent increases for a typical rent-controlled unit might only rise by 1.7% this coming year, costs for utilities, insurance, and general maintenance have risen significantly. For example, utility costs alone have seen spikes far beyond the CPI increases, not to mention the rapidly escalating costs of property insurance in the City.

The Broader Implications

For large investors, these challenges might be more manageable, but for a typical small landlord with a 4-unit building, the math often doesn’t add up. After covering all the costs, there might not be enough left to even make a dent in the costs of in-home healthcare or a skilled nursing facility for themselves or their loved ones, let alone maintain their livelihood.

Proposition 33, if passed, could exacerbate these issues by allowing even stricter rent controls. While it’s intended to protect tenants, we must consider the unintended consequences for small property owners who are already feeling the squeeze.

What’s at Stake?

Proposition 33 is about more than just rent control; it’s about the balance between protecting tenants and ensuring that housing remains a viable investment for small property owners. As we approach the vote, it’s crucial to stay informed and consider the broader implications for everyone involved in the San Francisco housing market.

If you have questions about how Proposition 33 could impact you, whether you’re a tenant or a property owner, don’t hesitate to reach out. Let’s navigate these changes together and ensure we’re prepared for whatever comes next.