Rent Increase Requirement

Being a rental property owner in San Francisco has become increasingly challenging each year.

In 2020, a new law was passed requiring owners of residential units to obtain a license before implementing a rent increase. This regulation became effective on July 1, 2022, for buildings with 10 or more units, and on March 1, 2023, for all other residential buildings, with updates required annually by March 1.

The City recently mailed out the 2025 Rent Board Fee Annual Notice, providing information on how to comply with this mandate. Owners or their representatives can log on to portal.sfrb.org to submit the necessary information, or they may mail in a paper form.

The requested information includes the usage of the unit – whether it is exclusively owner-occupied or occupied by a non-owner. For owner-occupied units, no additional information is needed. For non-owner-occupied units, details such as the number of bedrooms and bathrooms, approximate square footage, date of occupancy commencement or vacancy, rent paid by tenants and utilities included in the rent must be provided. Contact information is also required in case the City needs to reach someone regarding the building, along with a business registration number for properties with more than five units.

When registering the property, the site asks for the parcel number and a PIN included in the notice. If the notice was lost or not received, another PIN can be obtained by calling 311.

Failure to pay the $59 per unit fee and report this information to the Rent Board by March 1 incurs a 5% penalty each month with a maximum of 15% and renders the owner ineligible to increase the rent. If an owner attempts to raise the rent without obtaining a license, the tenant can contact the Rent Board, and any unauthorized increases will be disallowed.

The City’s rationale for imposing this housing inventory requirement is to compile an accurate list of all units subject to rent control. This data will aid the Board of Supervisors in making informed decisions regarding housing and rent control policies.

Furthermore, the Rent Board is using the collected data to create a housing inventory for purposes including inspecting and investigating housing services provided to tenants, analyzing rents and vacancies, monitoring compliance with the rent control ordinance, generating reports and surveys, and assisting landlords, tenants and other City departments as needed.

This requirement was also a preparatory measure for the vacancy tax instituted by Proposition M in the November 2022 election. The measure states that, beginning Jan. 1, 2024, property owners with at least three units vacant for more than 182 days will be taxed between $2,500 and $5,000 per empty unit. Prolonged vacancies can result in penalties of up to $20,000 per unit. The revenue generated will fund affordable housing initiatives.

However, after the proposition passed, landlord groups sued the City arguing that this is a taking of private property rights where an owner should have the right not to rent out properties they own without a penalty. Also, they argue that this is in direct conflict with the state’s Ellis Act, where the government cannot compel the owner of any residential real property to offer or continue to offer accommodations in the property for rent or lease, with certain exceptions. In October of 2004, the Superior Court agreed with the plaintiffs and Proposition M is thus nullified and not in effect.

Owning rental property in San Francisco remains challenging. This is the segment of the real estate market that is very slow. With rent increases capped at 60% of the Consumer Price Index (CPI), rising expenses such as insurance and utilities, increasing interest rates, and stringent rent control laws, many investors are choosing to exit the rental property market and buyers are few and far between, leading to a buyer’s market. How this market plays out this year is anyone’s guess at the moment.

John M. Lee is a broker with Compass specializing in the Richmond and Sunset districts. If you have any real estate questions, call him at 415-465-0505 or email johnlee@isellsf.com.