The tenant buyout market is at an all-time high this year, and we learn that two renters in Pacific Heights were paid $410,000 to vacate their unit, the third-largest ever such buyout in recorded SF history.
It was back in 2015 when the San Francisco Rent Board started forcing landlords to publicly disclose tenant buyout figures — the cash sums they pay tenants to move out of rent-controlled units — so that tenants can get a sense of what the going rate is for such buyouts. And 2022 has been an all-time high for buyouts (an all-time high since they started tracking such things in 2015, at least), with $13.6 million having been paid out citywide, and that’s only through the end of August, which is the last time such figures were updated.
From January to August of this year, $13.6 million have been paid out to San Francisco tenants in buyout agreements. Here are some reasons a landlord may be increasingly likely to buy out renters:https://t.co/h158bt9YaL— San Francisco Chronicle (@sfchronicle) December 12, 2022
But near the tail-end of that period, on August 20 this year, the Chronicle reports that two renters in Pacific Heights were paid $410,000 to vacate their unit near Jackson and Buchanan Streets. That's not the record, but it’s pretty close. Per the Chronicle, “This is the highest buyout agreement paid out to renters so far this year and the third highest of all-time.”
There may be a temptation to say that these were probably already-wealthy tenants in a tony neighborhood, and certainly payout sizes do track with average neighborhood incomes. But it doesn't necessarily mean that these two renters came in as wealthy people. The largest ever buyout of $475,000 in 2021 involved two tenants in their 60s who’d been living for 30 years in a rent-controlled, seven-bedroom, top-floor place with a view, also in Pac Heights. That said, these two latest Pac Heights renters likely had very good legal representation to bargain the landlord into such a sizable buyout.
Certainly the newer tenants (or owners) moving in will be well-off financially, otherwise the landlord would not bother with such a large buyout. “Landlords may be incentivized to buy out tenants in order to fill units with new tenants at current market rate rents,” SPUR housing policy researcher Sarah Karlinsky tells the Chronicle.
And it’s no coincidence that both of these eye-popping tenant buyouts in the half-million-dollar range were in the last two years. The buyout market collapsed during 2020 when rents plummeted, and has rebounded big-time in 2021 and 2022. The Chron lists the top ten tenant buyouts since 2016, the first full year for which we have such data, and seven of the top ten are from 2021 and 2022.
So if you’re considering leaving a unit, understand that the tenant payout market is sizzling right now. And retaining an attorney to negotiate your buyout might show an excellent return on your investment.
Related: SF Couple Lands $475,000 Buyout After Renting Presidio Heights Apartment for 30 Years [SFist]
Image: Google Street View