Round-and-Round

written by J. J. PANZER

The best career advice I never listened to came from my dad: “Don’t be a property manager. You can do better than this!” Having founded RMC in 1980, he managed some challenging assignments. He’d put in his time in the industry by the time I was starting to wonder what I’d realistically do when I grew up.

He managed buildings in the Tenderloin through court-appointed receiverships and dealt with drug dealers and gangs. My dad promised to send me to college to get a degree and allow me to do something, anything, different. He’d learned so many lessons the hard way and didn’t want to see me go through the same challenges he’d faced in our business. Thankfully his experience and teaching have prevented me from learning those lessons the hard way.

When I joined the company shortly after graduating from UC Berkeley in 2002, I had no idea I’d decide to stick around and buy the company, still running the show more than twenty years later and serving as your San Francisco Apartment Association President. It’s an honor and a privilege to have the support of the membership and my fellow board members, and to work closely with Janan, Vanessa, Charley, and the rest of our talented, dedicated staff who represent our interests in continuing to operate our businesses here in San Francisco.

I’ve served on the Board since 2013, and my time working with SFAA has always been worthwhile and rewarding, helping me to stay informed and represent my clients as their property manager.

In the coming year, I am looking forward to working with what promises to be a more moderate Board of Supervisors, including our newly elected supervisors Joel Engardio (District 4) and Matt Dorsey (District 6), as well as District Attorney Brooke Jenkins, to support initiatives that will hopefully improve conditions for all of us.

[SF Apartment Magazine sat down for a conversation with DA Brooke Jenkins. Turn to page 20 to read the full Q&A.]

We certainly have a lot of issues affecting our residents’ quality of life, such as crime, homelessness, open-air drug use, and shoplifting. We also desperately need sensible policies about building new housing. At the very least, I am hoping we won’t be facing as much punitive legislation that scapegoats all rental housing operators as a way of retaliating against certain bad actors who push the boundaries of what’s legal and ethical to increase their bottom lines. I hope our members will continue to educate themselves, stay informed on current events and legislation, and maintain their properties and relationships with their residents.

This year, I’m eager to see our rental market return to a “normal” cyclical demand pattern, which disappeared with COVID in 2020. The cycle felt pretty reliable for many years. Demand was fueled by two categories of people: newcomers and elective movers. The newcomers are people coming to San Francisco for work: corporate relocations, entrepreneurial types coming to seek their fortune in tech startups, and students of all levels. Elective movers are people already living here, undergoing life changes leading to a change in living situation: wanting different roommates, different neighborhoods, or just growing up. The “growing up” category usually includes people coupling up, breaking up, or having children.

Both categories of residents usually start moving in the spring, starting around March 1, with the demand remaining throughout the spring and early summer. Before COVID, residents were ready to sign aggressively priced leases starting ASAP. Newcomer demand usually dipped early to mid-June, but elective movers would continue their searches, sustaining the market during the summer. Demand from newcomers would resume in late August as employees at more prominent companies came to San Francisco in a final wave before the start of the school year and holidays.

By mid-October, we saw a final dip in demand, when it seemed newcomers had all settled and the students had started school. Elective movers thought, “Gee, Halloween is in two weeks, and then it will be Thanksgiving and Christmas. Maybe I will stick with my roommates for a while longer and look for a new place in the new year.” Then in January, faced with post-holiday credit card bills, they put off moving a little longer. And so, the annual cycle would begin again in March.

Every time I discuss this cycle with clients, I am reminded how the story is so very San Francisco: our markets rise and fall based on enterprising people coming here to seek their fortune, just like with the Gold Rush that first built this city almost two hundred years ago.

Rental property owners are just one of many businesses that serve the newcomers, just like the entrepreneurs who built their fortunes supplying the miners so many years ago. Our market forces are cyclical, rising and falling with the waves of newcomers coming here to seek their “gold” in our city.

COVID jumbled this in all the ways we’ve observed: working in an office is no longer mandatory, so companies don’t relocate employees nearly as often. People are rethinking their education plans, apartment amenities, and neighborhoods. During the pandemic, the only people expressing interest in our apartments were elective movers looking for the best deal; they had zero motivation to sign a lease unless it was a screaming deal. Instead of signing leases for an immediate move-in or even within two weeks, elective movers haggled asking prices down by $500 per month or more, asking for four to six weeks of lead time.

My clients rarely entertained these offers, but it was hard times waiting for the market to rebound through the first half of 2021 before vaccines were introduced, and businesses could reopen safely with necessary precautions.

In the years to come, we will all have an additional challenge to face when demand for rental housing declines: the vacancy tax. The clear intent is to prevent owners from holding properties until they find a tenant willing to pay a certain amount or until the market recovers.

During the pandemic, I spent so much energy trying to convince my clients with significant vacancies to have faith in the value of their apartments and not chase a crashing market. Unfortunately, now they will have to pay a tax for the right to hold pricing when the market is declining.

J. J. Panzer is the new president of the San Francisco Apartment Association. He’s the owner and president of Real Management Company, where he began working full time in 2002. His father, Joel, founded the company in 1980, and not too long after, J. J. spent his summers helping out in the office. J. J. can be reached at 415-821-3167.