Tenant advocates and property managers in San Francisco's hyperactive real estate market are fretting about new earthquake safety rules that will spike the cost of repairing older buildings and ultimately increase monthly rents.
On the anniversary of the 1906 earthquake that killed hundreds of people and leveled much of San Francisco, the city approved a new law Thursday requiring thousands of apartment buildings to be upgraded to better withstand tremors.
Owners of about 3,000 multi-unit residential buildings sprinkled throughout the city will have to shoulder the sizeable costs of the seismic retrofits but will be allowed to pass on those costs to tenants, although some may qualify for an exemption.
In a city where a one-bedroom apartment rents for nearly $2,200 per month, any increase to the already sky-high cost of housing prompts a conversation.
"Tenants are struggling already, so paying even an extra $50 on top of that is pretty hard for most people,'' said Ted Gullicksen, the director of the nonprofit San Francisco Tenants' Union. "The heftiest rent increases will be in the smaller buildings, just because there are fewer tenants to share the costs.''
Mayor Ed Lee signed the bill Thursday, saying the measure would better protect the nearly 60,000 people who live or work in those buildings from potential disaster.
"This mandatory seismic retrofit program will protect San Franciscans, protect our housing stock and ensure San Francisco can rapidly recover from the next earthquake,'' Lee said in a statement. "We renew our commitment to making sure that disasters such as the 1906 earthquake and fire do not devastate our city again.''
The retrofitting legislation covers so-called soft-story multi-unit buildings built before building codes were changed in 1978 - that is, those with three or more stories that are wood-framed and have a garage or other similar opening on the ground floor.
Owners of suspected soft-story buildings will receive notices in the mail, which will give them a year to get an inspection to determine whether they need to retrofit.
Authorities estimate the upgrades could cost around $60,000 to $130,000 per building. Lee said banks are developing financing packages for owners to help pay for the work.
As part of a compromise with tenant advocates, the city also agreed to streamline its process for qualifying those who make less than $78,000 per year for a hardship exemption from the pass-through costs.
A separate, pending city ordinance would exempt single parents on welfare or senior citizens from the retrofitting-related rent increases.
While much of the city's real estate market is soaring thanks to a tech boom that has attracted giants such as Twitter to the city's downtown, many apartment owners are limited in what they can charge because most private units are rent controlled, said Charley Goss, government and community affairs coordinator of the San Francisco Apartment Association. That is often the case for owners of the buildings most likely to be affected in the Mission, Western Addition and Marina neighborhoods, he added.
"The owners that can best shoulder the costs probably would have rented their apartments recently, so would be getting their full market value,'' he said. ``Those who haven't will likely have to get a refinance on their building or get a second mortgage or a loan.''
Robert Link, who owns a small property management firm, said he would have to spend about $70,000 to retrofit an Edwardian multi-unit building he owns in the inner Richmond.
"The ultimate beneficiary here is not the property owners but San Francisco tenants, because doing these upgrades will preserve rent-controlled buildings,'' he said. ``Really what this requires is managing tenants' needs and expectations of the process, and giving them advance notice of as much as you can of the work to be done.''
San Francisco's rents have been climbing in the last several years, leveling off only recently as experts say the market has approached saturation.
Rents average $2,175 for a one-bedroom, one-bathroom apartment, according to RealFacts, a Novato consulting group that tracks apartment complexes with 50 or more units.
After the Loma Prieta earthquake in 1989, San Francisco mandated retrofitting of unreinforced masonry, or brick, buildings. But the effort to bolster soft-story apartment buildings was a tougher sell, and was opposed by owners and tenants rights advocates concerned over the rent increases.
Seismologists predict that a significant earthquake in the region - two to three times as strong as Loma Prieta - is likely to occur within the next 30 years.
"When an earthquake happens, these buildings will be vulnerable. If we're going to be able to recover, this is a necessary step,'' Goss said.