You are using an older browser version. Please use a supported version for the best MSN experience.

$475,000 tenant buyout made headlines. Here’s what the average S.F. buyout looks like

San Francisco Chronicle logo San Francisco Chronicle 8/11/2021 Susie Neilson, Nami Sumida
a statue in front of a brick building: Noe Valley sees a large number of tenant buyouts. © Open Homes Photography

Noe Valley sees a large number of tenant buyouts.

This May, a San Francisco landlord paid two tenants $475,000 to vacate their luxury 7-bedroom apartment in Presidio Heights — the biggest single tenant buyout in city history.

The San Francisco Rent Board offers public data on tenant buyouts going back to 2015, when the city’s current buyout laws were established. The Chronicle analyzed this data and we found 14 other buyouts where landlords paid tenants $200,000 or more, including the previous record holder, a $325,000 sum in November 2019.

Despite these headline-making outliers, average tenant buyout sums in San Francisco have actually stayed pretty consistent. We found that the median buyout figure has hovered between $30,000 and $35,000 every year since 2015.

“(Buyout amounts are) almost more consistent than you’d expect it to be, given that rents are going up in the city,” Robert Collins, executive director of the San Francisco Rent Board, told The Chronicle.

Collins added that the number of buyouts yearly has also remained remarkably consistent despite other upheavals in San Francisco’s housing landscape during the pandemic. Landlords filed 334 buyout agreements in 2020, just a slight decrease from the 365 filed in 2019 and the same number as in 2017.

A tenant buyout occurs when a landlord pays their tenants to willingly vacate a unit. That could be either because they cannot legally evict them or because the costs of eviction are higher than the cost of buying them out, Joseph Tobener, a tenants’ rights attorney and partner at Tobener Ravenscroft LLP, told The Chronicle.

“You’ve gotta look at what the landlord stands to gain or lose,” Tobener said. “What are the consequences of the eviction, what are the minimum moving allowances, how much do they stand to gain if they do this buyout.”

Large buyouts, like the record-breaking Presidio Heights transaction, generally go to tenants of buildings in expensive neighborhoods paying well below market rate after having lived in a unit for decades.

In most cases, Tobener said, landlords can make tenants vacate through a no-fault eviction process, such as the Ellis Act, which allows property owners to evict tenants if they plan to move themselves or relatives in, sell the units or demolish the building. In such cases, landlords must pay each tenant about $7,500 for relocation expenses.

But in some instances — such as when the tenant is elderly, disabled or infirm — evicting someone through an Ellis Act makes the unit ineligible for conversion into a condominium, Tobener said. Thus, landlords usually prefer to pay those tenants to leave willingly.

In other cases, tenants have secured lifetime leases on units, making Ellis Act and other no-fault evictions illegal, Tobener said.

The data shows that buyouts are concentrated in certain parts of San Francisco. We found that from 2015 through this June, buyouts happen most commonly in the middle of the city, in neighborhoods including Noe Valley, the Castro and the Mission.

The concentration of buyouts in these neighborhoods makes sense, Tobener said; they are expensive, with high-value housing units.

“The nicer the neighborhood, the higher values of the home, the bigger the buyouts,” he said.

They also tend to have larger numbers of two-unit condominiums, which are the most common targets of tenant buyouts. That’s because S.F. currently has a moratorium on condominium conversions for all multi-unit buildings except for two-unit ones.

And since condo conversions can increase a building’s value by up to 30% — not to mention rid landlords of tenants paying below market-rate rents — two-unit buildings in expensive neighborhoods are “kind of like the holy grail for real estate developers,” Tobener said.

Single-family rental homes, on the other hand, are rarely targeted for buyouts because they don’t fall under San Francisco’s strict rent control laws, and thus landlords can keep home rentals at or near market rates, he said.

Susie Neilson is a San Francisco Chronicle staff writer, and Nami Sumida is a Chronicle data visualization developer. Email: susan.neilson@sfchronicle.com, nami.sumida@sfchronicle.com Twitter: @susieneilson, @namisumida

AdChoices

More from San Francisco Chronicle

San Francisco Chronicle
San Francisco Chronicle
AdChoices
image beaconimage beaconimage beacon