Accepting a new tenant is always risky, but a thorough background check—looking at credit reports, talking to past landlords and doing diligent research—conducted by a knowledgeable landlord can save money and prevent future headaches.

By: 

Jake Fowler

Issue Date: 

April 2010

Although property managers face constant pressure to fill vacant units, not taking the time to conduct thorough tenant screenings can have significant consequences. Bill Gray, consultant to property managers and business owners, says 4 to 5 percent of all screened tenants will end up owing money at the end of their lease, and the average-sized debt for these tenants is around $3,500. While accepting a new tenant always involves some risk, there are steps you can take to get quality tenants in your units:

Screen more effectively
Merrie Turner Lightner, vice president and CFO of Lightner Property Group in San Francisco, says her company qualifies applicants based on three main criteria: Can the applicant pay the rent? Will the applicant pay the rent? And will an applicant follow the terms of the rental agreement?

Determining whether an applicant can and will pay the rent comes down to looking at their background information as well as income and credit information. Although this information is important and needs to be considered carefully, PMs need to do more research than simply looking at numbers. Talking to past landlords can give important insight.

The American Apartment Owners Association recommends asking these questions to a potential tenant’s previous landlords:

1. What was the tenant’s payment history?
2. Did the tenant give sufficient notice according to the lease?
3. Did the tenant fulfill all of the terms of the lease?
4. Did the tenant give a reason for moving?
5. Were there any complaints from neighbors about the tenant?
6. Would you rent to this tenant again?

Gray also suggests obtaining a full credit report for all adults living in the unit as well as any co-signers. Screening for eviction and criminal reports, including sex offender and terrorist checks are also important. While credit checks are required by law, rental history and criminal background checks are not. Gray recommends including a statement at the end of the application that authorizes the rental company to do a credit check and any other checks on potential tenants to prevent future problems or complaints.

He adds that applications need to be legible and complete in case you need to collect debt down the road. This sounds simple, but it’s a costly mistake he has seen many landlords make.
 
Standard operating procedures protect your company
Standard operating procedures are beneficial when it comes to two laws involved with tenant screening, the Fair Credit Reporting Act and the Fair and Accurate Credit Transactions Act, especially as more applications move online.

For PMs, issues with these acts generally involve the need to safeguard consumer credit reports and a tenant’s confidential information. Lightner once again suggests having procedures not only about how to handle this sensitive information, but also how to react if there is a security breach. Though a breach has never occurred, Lightner has a system in place just in case. In her office, if two pieces of confidential information are exposed or potentially exposed to a third party, the person is notified and Lightner Property Group offers to pay for a year’s worth of credit monitoring.

While establishing thorough procedures will take some time initially, taking that step is worth it. “Defending a claim that you’ve discriminated against somebody or somebody has suffered an identity theft episode because of your lack of security measures is probably going to involve hiring a lawyer at $300 to $500 an hour for 10 to 30 hours,” Lightner says. “So the dollars add up quickly.”

Background checks are not just about saving money
The importance of due diligence cannot be overstated in background checks, and not just when it comes to monetary concerns. Gray says about three years ago he saw a case where an application question read: Have you ever been arrested? A particular applicant said yes, so the rental company did a criminal background check and found this man had a minor traffic violation on his record. Assuming this was what the applicant was referring to when he answered yes on the application, no more research was conducted and his application was accepted. It turns out this man was a registered sex offender, but it wasn’t discovered until the tenant already had moved in and nothing could be done until the lease was over. The other tenants in the community were upset and the situation created major problems for the PM.

“Take a little more time evaluating,” says Gray. “In this economy it’s even more critical, but so many landlords are just anxious to get some warm-blooded person in that unit.” As Gray has seen too many times, being complacent or lazy can lead to much more time, effort and money being spent, as opposed to being thorough in the first place.



http://customers.centraldesktop.com/property-management-group-workflow-solutions.html. 

In the Spolight

by Emily Landes

SFAA recently honored the best of the rental housing industry with a lavish dinner and awards ceremony at the Palace Hotel. Trophy Award participants were nominated by SFAA members, employers, friends (or even themselves). Each nominee was then sent a packet containing some specific questions. Nominees were encouraged to answer these questions fully and invited to include documents and other materials that might enhance their chances of winning. Judges carefully reviewed these submissions, selected finalists and then had the difficult task of choosing the winner in each category. The names of the winners were then sealed in envelopes that remained unopened until the event.

Once again, SFAA is very proud of its Trophy winners, some of whom are well-known multiple winners from previous years and some of whom received their first awards this year. Read on to learn a bit more about these accomplished and well-respected members of our industry.

Property Management Company of the Year (1-500 Units): Property Management Systems
This is the second year that Property Management Systems has won in this category. Founder Michelle Horneff-Cohen says that the company will step out of the running next year so that other deserving firms can have a chance. Instead, the company will submit individual nominations for other categories.
Horneff-Cohen believes that her staff’s close relationship with their clients gave the company the edge this year. “I think our philosophy of partnering with our clients gives us an advantage and puts our clients at ease; we treat their investment as if it were our own,” she says. 

Property Management Company of the Year (500-plus units): Parkmerced
With more than 3,000 apartments spread out over 150 acres, Parkmerced is a lot to manage. So it’s no wonder the community took home the large-scale Property Management Company of the Year award.

But simply “managing” the massive property isn’t enough, says General Manager DiDi MacDonald. Instead, the staff at Parkmerced is always looking to raise the bar. “We are proud of the innovative systems that have been rolled
out over the past year that encourage unparalleled service to our 8,000 residents and provide transparent metrics that measure performance and level of satisfaction,” she says. And the results are obvious, based on the many positive testimonials residents have posted on the community’s website: www.parkmerced.com.

Resident Manager of the Year: Ed Milestone, Lightner Property Group
For Ed Milestone, reading the wonderful comments that his tenants and vendors submitted on his behalf was as good as winning the award. That being said, it’s nice to be a winner, too. “It meant that hard work does have its rewards,” relays Milestone, who manages a 1927 classic San Francisco apartment building with his wife, Therese.

Some of that hard work involved renovating almost 20 units over the past seven years, including a recent green-minded renovation that improved the heating system so that it won’t waste energy during warm weather. “This feature has improved the comfort of the tenants and saves natural gas,” he says.

Independent Owner of the Year: Ryan Steele
Ryan Steele never intended to be the owner of 35 units of rental property in San Francisco. In 2001, his girlfriend at the time, now his wife, just wanted to buy a condo. After going over the numbers repeatedly, he realized that buying a three-unit fixer made the most sense. The couple ended up living in the top floor and renting out the bottom two floors while renovating the building. “After completing the renovations, we refinanced and bought another building. I have built up our complete real-estate holdings by repeating this strategy,” Steele reveals.
That strategy has been tested recently with the clamp down on lending, but Steele is still making his business flourish: “Despite my rapid growth in the last eight years, and the difficult banking and tenant environment, I am cash positive, supporting my family with some beautiful properties.” Steele believes he can create the same returns for other owners in the city by providing consultation, acquisition, management and renovation services. “It’s a great time to invest in residential real estate and I am looking to repeat the last eight years on a bigger scale using my formula,” he says.

Best New Development of the Year; Maintenance Manager of the Year; Administrative Professional of the Year: Trinity Management
Angelo Sangiacomo believes the unique nature of his Mid-Market project, Trinity Place, is what made it the Best New Development of the Year. “It represents the first time that a new residential rental project was built under the auspices of rent control; hundreds of current residents of the existing plaza building will move into the new building at their current rents,” he says. The project stands out in other ways as well: it’s the first phase of the largest rental project to be built in SF in 50 years (since Parkmerced), and it’s only the second time (besides Mission Bay) that the city has entered into a development agreement with a project sponsor.

Given the lengthy development process, Sangiacomo doesn’t believe the next phase of the project will be ready in time for the 2010 Trophies, but he plans to keep this year’s award in a prominent spot in his office to remind him of all his accomplishments in 2009.

Sangiacomo wasn’t the only Trinity Management member to be honored at the awards. Mariusz Gajdka took home the Maintenance Manager Trophy for the second time. Unlike other repeat winners who have said they will take a break in 2010, Gajdka is out for a three-peat. “I will definitely enter next year and am hoping to continue a streak of excellent work. It always feels nice to be recognized for something you have done well,” he relays, adding, “I never expect to win this award, as I know there are a lot of very talented individuals vying for it every year.”

Gajdka might have been surprised, but his coworker Jacky Lopez had a feeling that she was going to win this year’s Administrative Professional Trophy. “To be honest, I kind of felt like Charlie in the Chocolate Factory with my golden ticket. I just knew I was going to win because I’ve worked so hard and really opened up in my application,” she says. 

Like Gajdka, Lopez keeps her Trophy in her living room, where she can see it on her way to work to remind her to stay motivated throughout the day. Also like Gajdka, Lopez plans to apply every year that she is nominated. “I’m only getting better with age,” she jokes.

Industry Partner of the Year: Eviction Assistance
Industry Partner of the Year is a unique award at the Trophies in that it is the only one to recognize associate members who are particularly valuable to the SFAA. On awards night, Jo Biel Clark of Eviction Assistance was feeling the pressure. “The competition is fierce,” she says.

“There are so many valuable members of the San Francisco Apartment Association and we were so lucky to be selected the winner.”

Despite the competition, Clark believes that Eviction Assistance came out on top because it strives to make its services available to SFAA members, reviewing documents or answering questions at no cost. “Members really appreciate the quick, easy, available access to us when they have a question that the staff at SFAA cannot answer. We have taught classes, assisted with review of the new lease changes and contributed articles to the magazine,” she explains.

Maintenance Technician of the Year; Property Manager (1-500 Units): West Coast Property Management
This year, Victor Yeung and Marianne Wong of West Coast Property Management took home the trophies for Maintenance Tech and Property Manager, respectively. For more on these winners and West Coast Property Management, turn to page 30.

Green Building of the Year: The Fillmore Center
With major efforts underway to become LEED certified, the Fillmore Center is understandably proud of its Trophy for Green Building of the Year—and Fillmore Center General Manager Paul Hyams isn’t taking the win for granted. “We want to continue to challenge not only ourselves, but our peers, to become green,” he relays.

The Fillmore Center also spread the word at its first “Green Week” event, where residents learned how to live greener by composting, turning off lights when not in use, and using cold water to wash clothes. As Hyams explains, this green focus isn’t specific to The Fillmore Center: “Laramar encourages all of its properties to be green, with the Fillmore Center leading in this endeavor for our company.”

Leasing Agent of the Year: Jackie Tom, Rentals in SF
As a landlord herself, Jackie Tom knows firsthand the struggles that owners have to go through to manage rental properties in San Francisco. As a result, she feels that she can help owners in exactly the ways that they need. “My team and I provide local landlords with experienced agents who dedicate their full energies to residentialleasing. I am very proud of this specificity in the market, as it allows Rentals in SF to provide landlords with a professional, highly knowledgeable
and consultative-type service, thereby maximizing revenues, decreasing costs
and reducing vacancy rates.”

Although Tom was “overjoyed and extremely proud” to win her 2009 Trophy, she is hardly one to rest on her laurels.

Instead, she is already looking to the future. “With decreasing rental rates, 2010 will be a challenging year for our local landlords,” she posits. “As a landlord
advocate, I will be rolling out new initiatives to take this on directly and to provide property owners a means to maximize the return on their rentals.”

General Manager of the Year: Daniel Croley, Grosvenor Properties
Daniel Croley didn’t even know that he was in the running for the General Manager of the Year award until he got a call from SFAA saying that he had been nominated by an associate. The surprises just continued from there, including the big win in November. “Perhaps some slight measure of my surprise could be judged by the fact that I had not even figured out the pathway from our table to the podium,” he laughs.

In the months since the win, Croley has gotten over the shock of his unexpected Trophy and says that it only makes him want to work harder in the future. “Receiving this award was a pleasing affirmation that we are on the right course and has led to reconnecting with former associates and the establishment of new friends and relationships,” he explains. “Now, I will just have to raise the bar another notch or two to ensure that I continue to warrant the award.”  

The opinions expressed in this article are those of the author, and do not necessarily reflect the viewpoint of the SFAA or the SF Apartment Magazine. Emily Landes is the editor of SF Apartment Magazine. Copyright © 2010 by Black Point Press. All rights reserved.

Source: SFAA: In the Spotlight (http://www.sfaa.org/feb2010/1002landes.html) by Emily Landes

(Fortune Small Business) — Looking for a business challenge? Try getting seven people in as many locations to sign a 45-page contract.

Merrie Turner Lightner faced that problem recently when her San Francisco-based real estate management company finally resolved a long-running dispute between tenants and their landlord.

Getting everyone to sign on the dotted line wasn’t easy. Pages kept going missing, and every party left out at least one signature. After a week of faxing, the Lightner Property Group’s nine-person staff found itself overwhelmed.

“We were all tearing our hair out,” Lightner recalls. “No matter what we did, we just couldn’t get it right.”

That’s when Lightner, 53, turned to e-signature software. Since 2000, when Congress passed the Electronic Signatures in Global and National Commerce Act (ESIGN) to bolster public trust in online commerce, digital signatures have been granted the same legal weight as the old-school ink variety.

At first e-signatures were used mostly by large organizations — usually financial or insurance companies — that could afford in-house software or expensive electronic pen-and-tablet solutions. But recently vendors such as AlphaTrust, EchoSign and Silanis Technology have started offering online signing technology at mass-market rates.

How it works: Clients log on to a secure site, enter a password and find their names in SIGN HERE boxes. They indicate consent by clicking a box. The document can then be downloaded as a PDF.

Lightner looked into services from AlphaTrust and AssureSign but found that both charged hefty startup fees — as much as $600 — plus $325 per contract. Then she found DocuSign, a Seattle company that charged no up-front fees and a flat $40 a month for unlimited signatures. Lightner estimates that the solution saves the company $1,000 on each large contract.

The move paid off in productivity too. Today the firm’s leasing agents choose from a selection of custom templates; enter a recipient’s name, e-mail address and contract details; drag and drop yellow “sticky notes” to indicate where to sign; and click SEND. By using e-signatures, Lightner has been able to reduce the average time needed to execute a contract by 80%, she says. A week of faxing has shrunk to five minutes of e-mailing.

Lightner’s agents can request that e-mail alerts be sent to them whenever a contract gets signed or forwarded. That allows them to focus on showing apartments to prospective clients. And the firm has been able to save an average of 100 pages of paper per contract — a boon for the environment and Lightner’s bottom line.

Concerns: There are drawbacks to digitizing your John Hancock.

“You lose the ability to sit down face-to-face,” Lightner says. “There’s a time saving but also a loss of relationship building.”

And some legal experts question the validity of e-signature technology — mostly because digital contracts require signatories to close each page before reviewing the next. That could give them grounds to claim that they weren’t able to understand the contract in its entirety — a loophole through which any good lawyer could drive a Mack truck.

“With a written signature, it may be a long contract, but it’s all right there in front of you,” says Ieuan Mahony, a partner with the law firm Holland & Knight in Boston. “With a digital signature, that connection between the signature and the terms of the contract may be tenuous.”

Users should also be wary of exceptions written into ESIGN. Cancellation or termination of health insurance, utility shutoffs, product recalls and eviction notices are all specifically excluded in the law; such documents must still be signed on paper. Fail to do your homework and you could wind up with a contract that isn’t legally binding.

Bottom Line: But Lightner, who trained as both an attorney and a real estate broker, says that e-signature software can also reduce a company’s liability. Last year she failed to catch a blank signature line on an expert-witness agreement. When it came time to settle the bill, the client refused to pay the full amount, arguing — correctly — that he hadn’t signed off on all the work. Lightner lost $2,500 on a $7,500 contract.

It was, she points out, an expensive mistake that couldn’t happen using DocuSign, which allows contracts to be filed only if every party has ticked off every box.

Source: Save $: Sign on the Virtual Line (http://money.cnn.com/2009/11/03/smallbusiness/esignatures.fsb/index.htm)

From the DocuSign Blog:

by An Bui, DocuSign Social Media on Tuesday May 26th, 2009

Lightner Property Group Wins

Continuing on the theme of award winning technology, one of our customers, Lightner Property Group (LPG), won the San Francisco Small Business Network (SBN) Technology Innovation Award. Lightner Property Group named DocuSign as one of the technology tools it uses:

LPG (http://www.lightnergroup.com) won the SBN technology innovation award for its use of Web-based tools including Central Desktop and DocuSign to streamline property management functions and for employing Web 2.0 services to engage the San Francisco community and provide convenient and responsive customer service to its residents, tenants and potential new residents.

 

Congratulations to Lightner Property Group, which helps those looking for San Francisco apartments for rent. We’re pleased to be selected as LPG’s electronic signature and electronic contract execution provider. Driving award-winning results for our customers, increasing customer satisfaction and accelerating business motivates us here at DocuSign.

What motivates you?

 

http://www.docusign.com/blog/2009/05/26/lightner-property-group-wins/

http://cdblog.centraldesktop.com/2009/05/central-desktops-collaboration-software-helps-san-francisco-property-management-company-win.html

Economic backbone: San Francisco’s small businesses will receive some much-needed encouragement throughout the week. (Examiner file photo)

SAN FRANCISCO — Often overlooked amidst the mammoth skyscrapers of the Financial District’s long-established institutions, The City’s neighborhood merchants will soon receive some special treatment as part of San Francisco’s fifth annual Small Business Week.

In years past, Small Business Week has focused on encouraging bold entrepreneurs to start up businesses and explore new opportunities. But with the financial crisis still lingering, the 2009 edition will feature a series of events aimed at helping struggling companies cope with the difficult times, according to Gary Marshall of the Small Business Administration, a federal agency that helps stage the annual seminar.

“The theme of the event is ‘from survive to thrive,’” Marshall said. “We’re really trying to focus on how small businesses can control their expenses and find effective and cost-efficient ways of marketing themselves.”

The week-long event will kick off Saturday with a series of neighborhood sidewalk sales. Normally merchants have to pay a city fee for the special street closures, but in light of Small Business Week, those costs are waived.

“San Francisco takes great pride in being home to over 120,000 small and new startup businesses,” Mayor Gavin Newsom said. “Despite today’s economic challenges, San Francisco continues to be an ideal location for startup business ventures because we recognize the small business sector as the backbone of San Francisco’s economy. I encourage everyone to join the celebration, and to come out and shop.”

Read more about San Francisco small businesses and Lightner Property Group winning the Technology Innovation Award

Eminently Logical

Don’t be too concerned with the originators of Proposition 98. instead, look at what they might deliver.

By Matt Smith

published: May 28, 2008

• Jamie Soja

  

  Bill Lightner ran into numerous roadblocks in the Octavia plan.

Subject(s):

Matt Smith on Prop 98 If you’re an environmentalist, an antipoverty activist, or a member of any other well-meaning civic group, your fellow travelers have told you to vote no on Proposition 98, the so-called anti-eminent-domain initiative.

And well they might, given the devious and greedy intent of its property-rights-zealot backers. But just as I don’t buy tasty sausages because of my belief in the philosophies of meatpackers, voters on June 3 might ponder possible outcomes rather than ideological inputs when considering Proposition 98.

A cool-headed analysis of the measure’s potential real-life San Francisco consequences — effects that are separate and different from its backers’ misguided intent — point toward a potential cascade of unintended events that might help the environment and uplift the poor.

A measure conceived as a right-winger’s wet dream, in other words, could instead advance the goals of liberals.

First, the devious stuff. Proposition 98 is ostensibly about preventing governments’ use of eminent domain to unfairly seize property. But there’s no crisis of eminent-domain abuse in California. The measure’s truly meaningful effect lies in 20 vague words, out of a largely irrelevant 2,000-word total, that may undermine rent control, zoning, and other regulation of real estate.

Governments will pay compensation for actions “limiting the price a private owner may charge another person to purchase, occupy, or use his or her real property,” the measure says.

If Proposition 98 passes, for every rule that limits rent, stifles lucrative development, or inhibits profitable change of use on a property, governments might have to pay landowners the difference between what they could have otherwise collected.

This would make such rules prohibitively expensive to enforce, effectively banishing zoning, environmental restraints on development, and rent control. (To soften this last blow, the measure specifies that rents can’t be hiked until apartments are vacated. Incoming tenants would then see rents rise with market demand.)

Thanks to that 20-word sweet spot, the California Farm Bureau backs the measure, apparently so its members can cash out to developers at top dollar. Developers stand to benefit by paving wetlands and orchards. Landlords — the measure’s main financial sponsors — support it so they can jack up rents.

Prop. 98’s authors, meanwhile, hope to manifest their extremist philosophy of property rights at all costs. They’d have us believe that land once stolen from Native Americans by Spain, seized from Mexico by the United States, and subsequently made valuable through extralegal water wars should now be imbued with an inalienable right to a high resale price. Logically speaking, that’s piffle.

If Proposition 98 were to pass, its backers would be wise to delay counting their profits.

A market such as the one that has formed around California’s half-century of real-estate regulation is like water: It looks for the path of least resistance. Suddenly removing such a regulatory regime is like plowing up a riverbed; it’s difficult to know how the market will redirect itself.

Depending upon how courts interpret the aforementioned 20 words — and, if nothing else, this expansive and vaguely worded measure is a full-employment measure for attorneys and judges — a comprehensive nullification of controls upon development and rent could actually have the opposite effect from the one its backers desire.

Let’s start with the desire of greedy landlords to charge sky-high rents. While rent control is an untouchable third rail in San Francisco politics, and thus immune from local cost-benefit analysis, it has been thoroughly examined in academic studies, government reports, and in the SF Weekly feature “The Case for Ending Rent Control” [8/9/2000]. After reviewing piles of research and interviewing dozens of experts on both sides, reporter Peter Byrne summarized the situation: “San Francisco’s housing shortage, and the high residential rates it has created, are the result of two major factors: political impediments to housing construction and rent control itself.”

Proposition 98’s relevant words are phrased in a way that could erase both of these factors. As a result of rent control, landlords have withdrawn thousands of homes from the market by keeping them empty, occupying them, finding other uses for them, or selling them as condominiums and as tenancies in common. Tens of thousands of other apartments are kept off the market through “hoarding,” as individual tenants remain in cheap and cavernous three-bedrooms, hang on to their old $200-a-month apartments long after they’ve moved in with a spouse, or are otherwise motivated to cling to their leases.

Studies also show that rent control discourages construction of new rental apartments. New housing construction fell by one third in the seven years after San Francisco’s rent control law passed in 1979. During the 1990s, meanwhile, the number of rental units actually decreased by 7,500.

This squeezed supply, combined with the city’s steady recovery from the 2000 dot-com bust, has escalated current rents. Two-bedroom apartments that rented for $1,500 per month in my neighborhood five years ago now go for $2,500 to $4,000. Self-described S.F. housing activists have long insisted that this price hike is unrelated to the principles of supply and demand. The number of people wishing to live in San Francisco is infinite, they say, without citing evidence.

The fact is, though, that San Francisco apartments are not immune from the relationship between scarcity and price. And far from being a panacea for landlords, Proposition 98 could cause rents to slide back down by dramatically increasing the supply of apartments in cities.

An even more significant factor in Proposition 98’s potential to depress rents is the way the proposition could eliminate Byrne’s “political impediments to housing construction.”

After World War II, San Francisco imagined itself to be one of the world’s great cities. It was zoned to be a grand social, economic, and political metropolis, with tightly packed apartment housing in the Panhandle and the Richmond, around Golden Gate Park, on Potrero Hill, and along Ocean Beach. A half-century ago, in other words, San Franciscans envisioned an urban environmentalist’s dream where growth meant denser cities rather than paved-over fields and forests. But over time, the city reversed direction, with downzonings, building moratoria, and reams of largely forgotten ordinances that nonetheless succeeded in restraining infill construction. The effect has been dramatic. After growing vigorously during its first century, San Francisco’s total population decreased from 830,000 during the years following World War II to 765,000 in 2007, according to the U.S. Census Bureau.

In the process, the resulting scarcity of housing saw the city transform itself into an exclusive enclave for the wealthy, pushing development out to Central Valley farmland, which had far fewer restrictions on growth. Other Bay Area communities followed suit, enacting growth controls and pushing development further toward the region’s periphery.

This didn’t happen by accident. San Franciscans replaced what had been a metropolitan vision of the future with one best described as suburban. Rather than being a great city, it would instead be a tranquil place to live. Voters and city officials implemented downzoning after downzoning, creating dozens of rules inhibiting the construction of apartments, offices, and hotels. Today this pile of growth restrictions presents a maze that transforms what might be a few months of the process of building, permitting, and construction in rural communities into a typical half-decade slog in San Francisco.

The owner of a gasoline station can’t demolish it and build apartments or anything else on his property unless he proves “comparable automotive goods and services are available at other reasonably accessible locations,” according to the civic code. New buildings can’t cast shadows on parks and playgrounds, flophouses can’t be converted to tourist hotels, hotels can’t be built on the waterfront, and new buildings in most parts of the city require parking garages, meaning that in areas zoned for three-story buildings, this sometimes eliminates an entire story of housing. Developers must set aside and subsidize 12 percent of units for lower-income buyers. If they build the subsidized units offsite, the percentage climbs to 17 percent. Downtown office construction is capped thanks to a strict 1986 antigrowth measure designed to prevent “Manhattanization.”

Even more damaging than this tangle of rules, however, is the uncertainty that has been built into the development process during recent decades. City rules require that neighbors be notified of any new construction, which they can block at the Planning Commission. If the commission approves development, yet neighbors still want to see it stopped, it can be again be blocked at the Board of Supervisors.

The city is currently considering rules that would permanently block housing and office construction in its southeastern neighborhoods, blocks from downtown, in the name of “preserving” warehousing, auto repair, and other light-industrial-type buildings. This is preposterous from an economic or urban design perspective — blocking development of downtown-accessible housing and office space to preserve room for warehouses is a recipe for recession. Yet it’s in keeping with the ethos that guides present-day San Francisco.

It says: “Our best days are behind us. So don’t change anything.”

Even when well-meaning planners attempt to improve this condition, they fail. Along Octavia Boulevard, site of a torn-down freeway off-ramp, planners have tried to create a dense transit-friendly neighborhood by making it easier to approve apartment projects according to an area-wide plan amenable to neighbors.

Native San Franciscan Bill Lightner liked this idea, and bought two adjoined and defunct auto-body shops once belonging to S&C Ford on Dolores, near Market and Octavia. The property is surrounded by apartment buildings. Lightner planned to build 48 apartments on his site, with the expectation that the much-ballyhooed neighborhood plan would spare him nightmares of delay. The Octavia plan involved years of meetings with planners, neighbors, activist groups, and developers, in hopes of agreeing on restrictions that were, at the very least, predictable.

Not in San Francisco.

Supervisor Bevan Dufty, who ran for re-election in 2006, came up with the idea of a somewhat duplicative Upper Market Workshop Series and Urban Design Plan consisting of yet another series of community meetings that continues chugging along despite that election being long over. It’s uncertain what kind of enforcement powers this additional set of directives will carry. But in San Francisco terms, it’s a success just the same.

“Overall, hundreds of people have participated in the process,” the plan’s Web site boasts. More process. Less housing. Incrementally more expensive citywide rent. In San Francisco, that’s a political bonus.

Recently, Lightner was hit with another roadblock in the form of an S.F. Planning Department environmental review report. His abandoned body shops may become part of a yet-to-be-proposed “discontiguous automobile-themed district,” meaning the old S&C buildings might be subject to new historical preservation rules.

“We’re going to have to spend time and money to disprove the importance of these old buildings to a historic district that doesn’t exist yet,” Lightner says. “It’s irrational. What does it mean? Discontiguous in time? In space? Does it relate to Van Ness Avenue? To Market Street? What it does is provide another arrow in the quiver of those who don’t want to see development because it offends them.”

Proposition 98 would remove that entire quiver with a single swipe. The results would be largely unpredictable. It’s reasonable to surmise, however, that downtown apartment construction would accelerate. Rents would stabilize or decline. Hotel and office construction would take off. Businesses would flock to San Francisco, which would have ample new office space and more, cheaper homes for their employees. The city’s tax base would expand accordingly, making it possible to fortify our local public transportation, parks, and social services.

Proposition 98’s backers might find they haven’t sufficiently thought through their initiative’s possible effects. California Farm Bureau members would, ironically, find themselves with fewer opportunities to cash out to developers. Some landlords wouldn’t be able to charge as much rent. Property-rights ideologues would see cities, those fomenters of liberal thinking, expand at the expense of more conservative suburbs.

Are these benefits worth endorsing right-wing zealots’ misbegotten dream?

They just might be.

Real Estate News February 12, 2008, 2:05PM EST

The Housing Bust Shakes Up Rentals

In most housing downturns, rental markets thrive. This time, a glut of properties has put the brakes on rent hikes in many cities

by Prashant Gopal

For many Americans, as property values sink and mortgage interest payments rise, the dream of homeownership has turned into a nightmare. In the past, however, one group of people who have tended to ride out real estate downturns are landlords, who can raise rents while potential buyers sit on the sidelines waiting for conditions to settle. But not this year. Rent growth in 2007 actually went flat in some metro areas hardest hit by the housing meltdown.

“What we will see is more of a return to where we were before the huge boom in homeownership,” says Rob Massey, vice-president of industry development for Rentals.com. “In cases where you don’t see the rental market rebounding, it’s because of an oversupply of properties.”

Saturated Metro Markets

It’s no surprise that rents are rocketing up in healthy urban job centers with limited room for new apartment construction such as San Francisco, San Jose, New York City, Seattle, and the District of Columbia. But other metro areas with slow job growth such as Denver, Boston, Dayton, Memphis, and Detroit experienced a continuing trend of weak rental growth, according to a ranking of effective rent increases in 2007 for large metro areas compiled for BusinessWeek.com by Manhattan-based real estate research firm Reis (REIS).

In many Florida metro areas, vacancies increased last year, and rents, following significant increases in 2005 and 2006, leveled off. That’s good news for people who might have lost their homes in a foreclosure; there are plenty of places for them to rent. The state, which has one of the highest foreclosure rates in the nation, is also dealing with a ballooning inventory of rental properties. Investors who found they couldn’t unload their condos after the housing bubble collapsed instead began scrambling to find tenants and started undercutting traditional apartment complex owners to fill units. Some landlords began offering one or two months of free rent to convince tenants to sign leases, says Robert Smith, president of Smith Equities Real Estate Investment Advisors in Orlando, Fla.

“It’s all negotiable,” Smith says. “A lot of people out there are trying to get your lease.”

Condo Conversions Revert to Rentals

Many rental homes were taken off the market during the housing boom when they were converted into more profitable condos. Investors paid a premium of up to 50% to buy apartment buildings because they expected to make a big profit by selling them as condos, Smith says. When the housing market collapsed, investors who had started conversions tried to lure tenants back or simply were forced into foreclosure, he says.

“There’s just more supply out there available for people to rent,” says Avery Klann, senior vice-president for Apartment Realty Advisers in Boca Raton, Fla. “Over time those houses will be sold, and you’ll start to see very strong rent growth in apartment communities as well.”

Phoenix and Las Vegas, two other slumping real estate markets with a heavy concentration of investment properties, have been relatively flat for the past couple years. Rent growth in Miami also slowed in 2007 despite relatively tight apartment vacancies. The vacancy rate in Miami was 4% last year, and the average effective rent increased 2%, to $1,063, according to Reis.

Coastal Cities Command a Premium

Miami has stronger job growth than other South Florida communities and a larger proportion of new luxury condos, which don’t compete with average apartment rentals, says Hessam Nadji, head of research for Marcus & Millichap Real Estate Investment Services.

In other coastal cities where the job market, housing market, and population growth have been robust, rent increases have accelerated. San Francisco was the top-ranked metro area for rent hikes last year. The effective rents jumped 10.3%, to $1,764, in 2007, compared with a 7.7% increase in 2006 and a 3.8% increase in 2005.

Art Swanson, chief operating officer for Lightner Property Group, which manages more than 300 apartments in San Francisco, says tenants in rent control apartments are unlikely to move out, so “a lot of people coming from out of town are paying the higher prices.” Swanson says there’s heavy demand for entry-level apartments, particularly studios, which are commanding higher rents.

“People are looking to take less to spend less,” Swanson says. “They’re being more budget-conscious.”

Sam Chandan, chief economist for Reis, says he expects rents throughout the nation to begin moderating. “When people’s pay is growing more slowly—like during an economic slowdown—renters become more price-sensitive,” Chandan says. “Rent gains will remain healthy and stable, but it’s unlikely that they will accelerate significantly.”

Check out the BusinessWeek.com slide show to find out which cities saw the highest and lowest apartment rent hikes in 2007.

Gopal writes about real estate for BusinessWeek.com in New York .