How the Twitter Effect will Affect You

How the Twitter Effect will Affect You

SFAA General membership meeting 5/21/12

Last year, the city government created a commercial payroll tax exemption zone in the mid market area between 6th and 10th st to infuse some much needed life into an area long known for its blight. The catalyst for that policy change was the deal to retain Twitter, the social networking site, from moving to Brisbane and to keep SF as their corporate headquarters for the foreseeable future.

What happened thereafter and what continues today is what has been affectionately referred to by the media as the Twitter Effect. Ancillary businesses have followed suit and signed commercial office leases in an around the epicenter of 10th and Market St. reducing commercial vacancy and increasing demand for housing in adjacent neighborhoods …a positive result.

The net effect (no pun) is that the mid market payroll exemption policy has worked so well that the city leadership is strongly considering dropping the payroll tax all together and moving toward a commercial gross receipts tax that would affect all businesses in SF except Tech. While this is still very much in discussion, in its current incarnation… rental property owners would likely be subject to a per unit fee plus a tax on gross income.

The SFAA Board and especially Janan have been at the table with industry leaders and local govt representing your interests since the beginning of these discussions and will continue argue for the best possible outcome for housing providers.

What’s happening here politically is that there is and has been a great pressure at all levels of government to promote job creation. In this town, that means that you take a decidedly pro-Tech industry platform since the vast majority of jobs are created in this field.

When you become “pro-anything” in government it actually means that the policy is favoring one industry over all others or giving to one by taking from another. In this case, we will all subsidize the money lost from payroll tax revenue in the name of creating a more attractive employment climate in the city.

The immediate upside would be that more business growth results in new hires, putting more people in the rental pool which drives average rents upward.

This also has a downside effect…

When average rents rise so do the hackles of Pro Tenant advocacy groups. This translates to more challenges to the rights of property owners. In this town there is a perceived nexus between rental supply/demand equation and an increase in eviction filings. This becomes the battle cry of the pro tenant groups that feel more protections are needed against landlords who endeavor to create vacancies to in an effort to achieve higher market rents.

This cautious sentiment is also shared at the state level while I recently attended a CAA Board of directors meeting where CAA leadership warned of the probable challenges to our industry over the next 3 years…outlining the following concerns to name a few…

  • State and local governments will need to raise cash in the most expeditious way possible through various tax measures such as split roll, property tax increases, and the like.
  • Legislative challenges to Costa Hawkins “new construction exemption will become a priority for low income housing advocates”
  • A rise in renter population means advocacy groups will include white collar professionals as well as social justice advocates.
  • Elimination of Redevelopment agencies will place pressure on locals to find new ways to fund low income housing in cities. (Housing Trust)

The pending gross receipts tax measure is a manifestation of many of these concerns, so while this is on the horizon for others in the state, its happening here and now. Stay tuned, there will some ballot measures in Nov. that will affect us all; we will as usual keep you tuned in the nuances of them all.

Property management preventative maintenance: Maybe some of you heard this story.

  • 2 months ago, there was an accidental death of a tenant in a Nob Hill apartment building who allegedly fell through the back stairs of their building. In this particular case the condition was noted by residents for several years prior to the fatal accident, the ownership made some improvements in a piece meal fashion but obviously a solution with a wider scope was needed.
  • The problem appeared to be severe dry rot in the rear stair assembly that caused the failure. Its a shame that this happened because there was prior notice. The building department was allegedly never called to inspect the property which may have elicited a faster response from the ownership but is neither here nor there. Every couple of years something like this happens and pretty sad because most of the time, the evidence that the structure was comprised was obvious and either could have been prevented
  • The take away here is please walk your buildings periodically to inspect for termite/fungus or dry rot damage. Take a long screwdriver and poke at the joints where water accumulates, stairs, risers and stringers are where weight load is shouldered. Paint or sealer provides protection from the weather elements is highly recommend if you are not using pressure treated wood.
  • If you don’t know what to look for I would recommend getting a full property inspection (contractors report) every 6-7 years or so to assess any issues before they escalate. REMEMBER, your building is a breathing living thing that requires some nurturing while it ages.